Lewis v. Pension Benefit Guaranty Corporation , 197 F. Supp. 3d 16 ( 2016 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
____________________________________
)
K. WENDELL LEWIS, et al., )
)
Plaintiffs, )
)
v. ) Civil Action No. 15-1328 (RBW)
)
PENSION BENEFIT GUARANTY )
CORPORATION, )
)
Defendant. )
____________________________________)
MEMORANDUM OPINION
The plaintiffs, approximately 1700 former airline pilots, initiated this action against
defendant Pension Benefit Guaranty Corporation (“Corporation”) under the Employment
Retirement Income Security Act, 29 U.S.C. §§ 1001–1461 (2012) (“ERISA”), asserting claims
of breach of fiduciary duty, denial of benefits, and violations of the Administrative Procedure
Act (“APA”), and seeking certain declaratory and injunctive relief. See generally First Amended
Complaint (“Am. Compl.”) ¶¶ 1–13, 63–156. Currently pending before the Court is the Pension
Benefit Guaranty Corporation’s Motion To Dismiss and To Strike (“Def.’s Mot.”), in which the
Corporation seeks to dismiss the plaintiffs’ breach of fiduciary duty claim (Claim One), and to
strike the plaintiffs’ demands for attorney’s fees and for a jury trial. 1 Def.’s Mot. at 1. Upon
consideration of the parties’ submissions, the Court concludes that the Corporation’s motion to
1
Although the Corporation’s motion also included a motion to strike the plaintiffs’ demand for a jury trial, the
plaintiffs have abandoned this demand, Plaintiffs’ Opposition to Defendant’s Motion To Dismiss and To Strike at 1
n.1 (“While the [Corporation] did not initially appear to object to the demand [for a jury trial], having now objected,
there is no further reason to consider the demand or to address whether to strike it.”), and the Court therefore need
not address the substance of that initial challenge in this Memorandum Opinion.
dismiss Claim One of the Amended Complaint must be denied. However, the Court will grant
the Corporation’s motions to strike the attorney’s fees and jury trial demands. 2
I. BACKGROUND
A. The Corporation’s Duties Under the ERISA
The ERISA was enacted in part to “ensure that employees and their beneficiaries would
not be deprived of anticipated retirement benefits by the termination of pension plans before
sufficient funds [had] been accumulated in the plans.” Pension Benefit Guar. Corp. v. R.A. Gray
& Co., 467 U.S. 717, 720 (1984). As part of this statutory goal, the ERISA created the
Corporation—a component within the Department of Labor—to, inter alia, “provide for the
timely and uninterrupted payment of pension benefits to participants and beneficiaries under
plans to which this subchapter applies.” 29 U.S.C. § 1302(a)(2). The Corporation “administers
and enforces Title IV of [the] ERISA.” Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S.
633, 637 (1990). As the Supreme Court explained:
When a plan covered under Title IV terminates with insufficient assets to satisfy its
pension obligations to the employees, the [Corporation] becomes trustee of the
plan, taking over the plan’s assets and liabilities. The [Corporation] then uses the
plan’s assets to cover what it can of the benefit obligations. The [Corporation] then
must add its own funds to ensure payment of most of the remaining “nonforfeitable”
benefits, i.e., those benefits to which participants have earned entitlement under the
plan terms as of the date of termination.
LTV Corp., 496 U.S. at 637 (citing 29 U.S.C. §§ 1301, 1322, 1344).
2
In addition to the filings already identified, the Court considered the following submissions in rendering its
decision: (1) the Pension Benefit Guaranty Corporation’s Memorandum in Support of Its Motion To Dismiss and To
Strike (“Def.’s Mem.”); (2) the Plaintiffs’ Opposition to Defendant’s Motion To Dismiss and Strike (“Pls.’ Opp’n”);
(3) the Pension Benefit Guaranty Corporation’s Reply in Support of Its Motion To Dismiss and To Strike (“Def.’s
Reply”); (4) the Plaintiffs’ Notice of Supplemental Authority Regarding Defendant’s Motion To Dismiss Claim One
(“Pls.’ Notice”); and (5) the PBGC’s Response to Plaintiffs’ Notice of Supplemental Authority Regarding
Defendant’s Motion To Dismiss Claim One (“Def.’s Response to Pls.’ Notice”).
2
B. Factual Background
This dispute originated with a September 2005 voluntary petition for bankruptcy filed by
Delta Airlines, Inc. (“Delta”), which thereafter resulted in Delta not making contributions to the
Delta Pilots Retirement Plan (“Plan”), a tax-qualified deferred benefit plan under the ERISA and
the Internal Revenue Code. Am. Compl. ¶¶ 28, 30, 33. The plaintiffs, former Delta pilots (or
their spouses or estate executors) are participants and beneficiaries under the Plan. Id. ¶¶ 2, 29.
Delta’s post-bankruptcy negotiations with the pilots’ union 3 regarding the Plan’s termination, id.
¶ 33, yielded an agreement in which the union “would receive $650 million in notes and a $2.1
billion allowed general non-priority unsecured claim . . . , which Delta and [the union] intended
to be used to ‘replace unfunded benefits under the . . . Plan by using the proceeds to fund follow-
on retirement plans and other payments or distributions to [active] pilots,” id. ¶ 34 (second
alteration in original) (quoting Am. Compl., Exhibit (“Ex.”) A, at 2).
The Corporation objected to the proposed agreement between Delta and the pilots’ union,
asserting that it was “designed in substantial part to skirt [ERISA’s] safeguards.” Id. ¶ 35(quoting Am. Compl., Ex. A, at 14). These safeguards are achieved through a six-tiered
allocation scheme, in which benefits under a plan such as the Plan here are paid in order of
statutory priority, which the Court will refer to as Categories 1 through 6. See id. ¶ 19; see also
29 U.S.C. § 1344(a)(1)–(6) (setting forth the order of priority a plan administrator is required to
apply when allocating to participants the value of assets in a single-employer plan). Under the
circumstances present here, “[Category 3] is the highest priority category . . . [under which]
benefits are reserved for those participants who were retirement-eligible at least three years prior
to a plan’s termination, under the plan provisions as they existed five years prior to plan
3
The pilots were represented by the Air Line Pilots Association. See Am. Compl. ¶ 27.
3
termination.” Am. Compl. ¶ 19. The proposed agreement between Delta and the pilots’ union
allegedly would have “improperly allowed funds which should properly go to the [Corporation]
in connection with [the] ERISA’s priority allocation scheme to leave the control of the plan
sponsor/control group and thereby to fund pension benefits outside of [the] ERISA’s asset
allocation scheme[] . . . .” Id. ¶ 35 (citing Am. Compl., Ex. A, at 14–15). “In essence, the
[proposed agreement] would allow Delta and [the pilots’ union] to turn the asset allocation
scheme on its head, putting younger active workers to the front of the line while relegating
retirees living on a fixed income to the back.” Id.Over the Corporation’s objections, the bankruptcy court approved the agreement between
Delta and the pilots’ union, and the Corporation “appealed [that] ruling to the district court.” Id.
¶ 36. However, the Corporation later “withdrew” the appeal following the December 4, 2006
execution of a settlement agreement between Delta and the Corporation. Id. ¶ 39. Under the
settlement agreement, the Corporation “received $225 million in notes, and a $2.2 billion
unsecured bankruptcy claim.” Id. On December 20, 2006, the bankruptcy court approved the
settlement agreement between Delta and the Corporation. Id. ¶ 41. The Plan “was retroactively
terminated as of September 2, 2006 . . . , and the [Corporation] became the [Retirement] Plan’s
Trustee as of December 31, 2006.” Id. (italics omitted). The Corporation “obtained additional
recoveries from Delta, which the [Corporation] initially valued as being worth $1,279,423.” Id.
¶ 45. The plaintiffs allege that they should have received a portion of these recoveries before
active pilots, but represent that this did not occur because
by placing the benefits of active pilots (not yet in pay status) ahead of [Category 3]
retirees (already in pay status)[,] the [Corporation] was able to corrupt the statutory
recovery ratio by ensuring that hundreds of millions of dollars remained, undiluted,
within the agency’s trust fund in order to maximize the [Corporation’s] investment
returns.
4
Id.As trustee of the trust fund that held the Plan’s assets, the Corporation initially valued
those assets at approximately $1.984 billion and calculated that the Plan’s Category 3 liabilities
were approximately $2.13 billion, “such that [Category 3] liabilities were 93% funded by the
[Retirement] Plan’s assets.” Id. ¶¶ 42–43. The Corporation also determined that the Plan’s
“PC4” or Category 4 liabilities were $761,904,660. Id. ¶ 44. The Corporation started making
benefits payments under the Plan, but “[t]hose benefits were significantly less than the vested
pension benefits the [plaintiffs] had been entitled to receive under the Plan and [the] ERISA.”
Id. ¶ 46. In making its benefits determinations, the Corporation was allegedly motivated by
strong incentives to minimize and delay payments to participants from the trust
fund, and to allocate assets away from retirement eligible participants towards
younger participants, all in an effort to manipulate the asset allocation scheme in
order to maximize investment returns on the trust fund and further its own financial
wellbeing.
Id. ¶ 23.
The Corporation “maintained that Plan participants were unable to challenge [its] benefit
determinations until the [Corporation] issued its final benefit determinations.” Id. Between
2010 and 2012,
the [Corporation] began mailing final benefit determination letters to Plan
participants, informing them of the [Corporation’s] final determinations (as insurer
and trustee) of any guarantee funds they were entitled to under ERISA § 4022, any
asset allocation payments they were entitled to under ERISA § 4044, and any
recovery allocation they were entitled to under ERISA § 4022(c).
Id. ¶ 47.
Each plaintiff had forty-five days to appeal the Corporation’s final benefit determination.
Id. ¶ 49. The plaintiffs allege that the Corporation refused to extend the forty-five-day deadline
“until its own internal records confirmed that a final benefit determination had issued.” Id. ¶ 51.
5
“Consequently, over 300 Plan participants who appealed the [Corporation’s] determinations
were later deemed ‘untimely,’ many missing the [Corporation]’s . . . 45-day deadline by a matter
of days,” id., although some of these “untimely” designations were reversed for “good cause,”
id. n.13.
In addition, although the plaintiffs in May 2010 requested all information relied upon by
the Corporation in reaching its final benefit determinations, only a “fraction” of that information
had been produced by October 2011, prompting “a group of 1,784 participant, most of whom are
[the plaintiffs] in this action, [to] file[] a consolidated appeal of the [Corporation’s] benefit
determinations under the Plan. Id. ¶ 53. That appeal was resolved by a September 2013 decision
issued by the Corporation’s Appeals Board that largely upheld the Corporation’s final
determinations. Id. ¶ 55; see generally id., Ex. H (Appeals Board decision) at 6 (summarizing
the Appeals Board’s conclusions). The Appeals Board decision constituted final agency action,
id., Ex. H (Appeals Board decision) at 6, and this lawsuit was then initiated.
II. STANDARD OF REVIEW
For a complaint to survive a motion to dismiss under Federal Rule of Civil Procedure
12(b)(6), the allegations in the complaint must state a facially plausible claim for recovery.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007). To satisfy this requirement, the court must find that the complaint is sufficient to “raise a
right to relief above the speculative level.” Twombly, 550 U.S. at 555; see Iqbal, 556 U.S. at
678 (“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’”) (quoting Twombly, 550
U.S. at 570)). “The plausibility standard is not akin to a ‘probability requirement,’ but it asks for
6
more than a sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678(quoting Twombly, 550 U.S. at 556).
“In evaluating a Rule 12(b)(6) motion to dismiss for failure to state a claim, the court
must construe the complaint in a light most favorable to the non-moving party and must accept
as true all reasonable factual inferences drawn from well-pleaded factual allegations.” Armenian
Assembly of Am., Inc. v. Cafesjian, 597 F. Supp. 2d 128, 133–34 (D.D.C. 2009). However,
legal conclusions masquerading as factual allegations are not enough to survive a motion to
dismiss. Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002). Although the Court must, in
general, limit its review to the allegations in the complaint, it may consider “documents upon
which the complaint necessarily relies even if the document is produced not by the plaintiff in
the . . . complaint but by the defendant in a motion to dismiss.” Ward v. D.C. Dep’t of Youth
Rehab. Servs., 768 F. Supp. 2d 117, 119 (D.D.C. 2011) (quoting Hinton v. Corr. Corp. of Am.,
624 F. Supp. 2d 45, 46 (D.D.C. 2009)).
III. ANALYSIS
A. The Breach of Fiduciary Duty Claim (Claim One)
1. Whether the Fiduciary Breach Claim Is Impermissibly Duplicative
The Corporation argues that the plaintiffs’ breach of fiduciary duty claim under the
ERISA is impermissibly duplicative of their claim for re-allocation of Plan benefits elsewhere in
the Amended Complaint. Def.’s Mem. at 18. Claim One of the Amended Complaint alleges that
the Corporation breached its fiduciary obligations under the ERISA by: (1) seeking to withhold
or delay the production of information critical to the understanding of the [Corporation’s] benefit
determination and asset allocation choices,” Am. Compl. ¶ 66; (2) denying the plaintiffs an
opportunity to lodge an informed appeal of the Corporation’s final determination, id. ¶ 67; (3)
7
“allowing its agency litigation counsel to advise its [A]ppeals [B]oard, and refusing to disclose
the contacts between the two groups,” id. ¶ 68; (4) outsourcing “many of its trustee
responsibilities to independent contractors who lack[ed] the requisite competence or experience”
to perform those duties adequately, then failing to monitor and remedy their inadequate
performance, see id. ¶¶ 69–70; and (5) “manipulat[ing] the asset allocation process in such a
manner as to create hundreds of millions of dollars of investment returns to itself, at [the
plaintiffs’] expense,” id. ¶ 71. As a result of these alleged fiduciary breaches, the plaintiffs
contend that “the [Corporation] has unjustly earned massive investment returns off of assets that
should have been timely allocated to [the p]laintiffs, and the [Corporation] should be required to
disgorge itself of this unjust enrichment.” Id. ¶ 72. But in addition to asserting these breaches of
fiduciary duty, the Corporation notes that the plaintiffs have also pleaded, in Claims Two
through Five of the Amended Complaint, various challenges to the Corporation’s asset allocation
and benefits determinations under the ERISA. See generally id. ¶¶ 73–150 (challenging the
Corporation’s prioritization and allocation of benefits due to the plaintiffs).
In support of its argument that the plaintiffs’ fiduciary breach claim is impermissibly
duplicative, the Corporation relies on this Court’s observation in Wright v. Metropolitan Life
Insurance Co. that the majority of Circuits presented with a claim for breach of fiduciary duty
and a separate claim for benefits under the ERISA “have held that a breach of fiduciary duty
claim cannot stand where a plaintiff has an adequate remedy through a claim for benefits under
§ [1132](a)(1)(B).” 618 F. Supp. 2d 43, 55 (D.D.C. 2009) (Walton, J.) (quoting Clark v. Feder
Semo & Bard, P.C., 527 F. Supp. 2d 112, 116 (D.D.C. 2007)). To date, no judge in this district
court has deviated from that conclusion. See Boster v. Reliance Standard Life Ins. Co., 959 F.
Supp. 2d 9, 31 (D.D.C. 2013) (denying amendment of the plaintiff’s complaint to add a breach of
8
fiduciary duty claim as futile because the only alleged injury resulting from the alleged breach
was a loss of benefits, and “[t]he Court ha[d already] provided an adequate remedy for [the
plaintiff’s] loss of benefits” pursuant to the plaintiff’s claim for benefits under 29 U.S.C.
§ 1132(a)(1), rendering “[a]ny further equitable relief . . . inappropriate”); Zalduondo v. Aetna
Life Ins. Co., 845 F. Supp. 2d 146, 155 (D.D.C. 2012) (concluding that equitable relief pursuant
to § 1132(a)(3) was not appropriate because “[t]he only harm alleged in [the complaint]—that is,
the harm suffered by [the plaintiff] through Aetna’s allegedly improper denial of her [benefits]
request . . . is adequately provided for in the denial-of-benefits claim brought pursuant to
§ 1132(a)(1)(B)); Clark v. Feder, Semo & Bard, P.C., 808 F. Supp. 2d 219, 225–26 (D.D.C.
2011) (holding that the plaintiff “must choose” whether to proceed under a claim for benefits
§ 1132(a)(1)(B) or under a fiduciary breach claim under § 1132(a)(3)); Kifafi v. Hilton Hotels
Ret. Plan, 616 F. Supp. 2d 7, 39 (D.D.C. 2009) (the plaintiff’s breach of fiduciary duty claim
“must be dismissed because a plan participant cannot proceed with a breach of fiduciary duty
claim under [§ 1132](a)(3) when relief is available under other remedial sections of ERISA.”
(citing, inter alia, Varity Corp. v. Howe, 516 U.S. 489, 515 (1996)). But see Moyle v. Liberty
Mut. Ret. Benefit Plan, ___ F.3d ___, 2016 WL 2946271, at *10–11 (9th Cir. May 20, 2016)
(recognizing that litigants may plead alternative theories of relief under 29 U.S.C.
§ 1132(a)(1)(B) and 1132(a)(3) so long as they do not obtain duplicate recoveries); Silva v.
Metro. Life Ins. Co., 762 F.3d 711, 726 (8th Cir. 2014) (“We do not read Varity . . . to stand for
the proposition that [the plaintiff] may only plead one cause of action to seek recovery of his
son’s supplemental life insurance benefits. Rather, we conclude [that] those cases prohibit
duplicate recoveries when a more specific section of the [ERISA] . . . provides a remedy similar
9
to what the plaintiff seeks under the equitable catchall provision, § 1132(a)(3).”). The District of
Columbia Circuit has not addressed the issue.
In opposition, the plaintiffs assert that they are pursuing their fiduciary breach claim
under a different provision of the ERISA, 29 U.S.C. § 1303(f), not under § 1132(a), and
therefore the cases cited by the Corporation are inapposite. Pls.’ Opp’n at 22. The Court agrees
that there are sufficient textual differences between the civil enforcement provisions of
§ 1132(a), which are applicable to ERISA fiduciaries other than the Corporation, as compared to
§ 1303(f), which is “the exclusive means for bringing actions against the [C]orporation,”
rendering analyses based on cases analyzing the former provision distinguishable from this case.
In relevant part, § 1132(a) enumerates several avenues of relief, including a claim “to recover
benefits due to [a plaintiff] under the terms of his plan, to enforce his rights under the terms of
the plan, or to clarify his rights to future benefits under the terms of the plan” pursuant to
§ 1132(a)(1)(B), or “other appropriate equitable relief” under § 1132(a)(3). See 29 U.S.C.
§ 1132(a). The Supreme Court’s decision in Varity Corp. allowed an individual claim for breach
of fiduciary duty to proceed under § 1132(a)(3) because no other civil enforcement remedy under
§ 1132(a) was available based on the circumstances presented in that case. 516 U.S. at 515(“The plaintiffs in this case could not proceed under the first subsection [of § 1132(a)] because
they were longer members of the . . . plan [at issue] and, therefore, had no ‘benefits due [them]
under the terms of [the] plan.’ § [1132](a)(1)(B). They could not proceed under the second
subsection because that provision, tied to § [1109], does not provide a remedy for individual
beneficiaries. . . . They must rely on the third subsection or they have no remedy at all. We are
not aware of any ERISA-related purpose that denial of a remedy would serve. Rather, we
believe that granting a remedy is consistent with the literal language of the statute, the [ERISA]’s
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purposes, and pre-existing trust law.”) (third and fourth alterations in original) (citation
omitted)). In stark contrast, § 1303(f) is devoid of the several subparagraphs contained in
§ 1132(a), and instead authorizes only “any person . . . who is a participant or beneficiary, and is
adversely affected by any action of the [C]orporation with respect to a plan in which such person
has an interest . . . [to] bring an action against the [C]orporation for appropriate equitable
relief . . . .” 29 U.S.C. § 1303(f)(1).
The plaintiffs assert that they “brought their case pursuant to § [1303](f),” and that “they
could not even sue the [Corporation] under the provisions of § [1132] whatsoever.” Pls.’ Opp’n
at 24. Thus, the plaintiffs themselves pursue their entire case—not merely their fiduciary breach
claims—outside of the civil enforcement realm of § 1132, upon which the Corporation’s
“duplicative” argument relies. See id. Indeed, the Court’s review of the allegations contained in
Claims Two through Five reveals that the plaintiffs focus those claims on the Corporation’s
alleged failure to properly prioritize and calculate the allocation of assets in the terminated Plan
in violation of 29 U.S.C. §§ 1322 and 1344, which are contained in Title IV of the ERISA and
form part of the same ERISA subchapter that includes § 1303, cf. § 1303(f)(4) (“This subsection
shall be the exclusive means for bringing actions against the corporation under this
subchapter . . . .” (emphasis added)), and not upon any benefit allocation provision contained in
Title I of the ERISA, wherein the separate civil enforcement provisions of § 1132 are found.
See, e.g., Am. Compl. ¶ 76 (alleging in Claim Two that the Corporation’s actions resulted in
“Delta Pilots who were entitled to priority in the allocation of Plan assets – those in [Category] 3
– were deprived of pension benefits ERISA mandates that they receive, while those whom
Congress placed further to the back of the line – those outside of [Category] 3 – received over
$1.8 billion from Delta before the asset allocation process even began.”); id. ¶¶ 86–101 (alleging
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in Claim Three that the Corporation misapplied § 1344 by failing to account for congressionally-
mandated increases to the limit of compensation that may be used to calculate benefits); id.
¶¶ 113–27 (alleging in Claim Four that the Corporation misapplied § 1344 by failing to account
for congressionally-mandated increases in the amount of benefits that may be paid to plan
participants in a given year); id. ¶¶ 131–49 (alleging in Claim Five that the Corporation, pursuant
to its authority under 29 U.S.C. § 1362, incorrectly determined the ratio of recovered liabilities to
be distributed to Plan participants and beneficiaries, as required by § 1322(c)). Because of the
textual differences between § 1303(f) and § 1132(a), the Court agrees with the plaintiffs that the
Corporation’s challenge to the plaintiffs’ fiduciary breach claims as duplicative of their other
claims lacks merit.
2. Whether the Relief Sought by The Plaintiffs in Claim One Is “Appropriate
Equitable Relief” Under § 1303(f)
Having concluded that the plaintiffs’ fiduciary breach claim is not impermissibly
duplicative of the plaintiffs’ other ERISA claims, the Court now addresses whether the relief
sought in Claim One of the Amended Complaint is “appropriate equitable relief” as required by
§ 1303(f). The plaintiffs allege that as a result of the breaches alleged in Claim One, the
Corporation earned investment returns on undistributed benefits that should be disgorged. Am.
Compl. ¶ 72. Further, the plaintiffs assert that, contrary to the Corporation’s contention, any
recovery on their breach of fiduciary duty claim may inure to them individually as opposed to the
Plan at large. Pls.’ Opp’n at 23–25. The threshold question for the Court to answer is whether
the relief the plaintiffs seek, i.e., to recoup from the Corporation its alleged ill-gotten investment
returns on assets that should have been distributed to the plaintiffs, constitutes a claim for
compensatory damages or one for equitable relief. In resolving this question, the Court is
“‘reluctant to tamper with [the] enforcement scheme’ embodied in the statute by extending
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remedies not specifically authorized by its text.” Great-West Life & Annuity Ins. Co. v.
Knudson, 534 U.S. 204, 209 (2002) (alteration in original) (quoting Mass. Mut. Life Ins. Co. v.
Russell, 437 U.S. 134, 147 (1985)).
The Supreme Court in Mertens v. Hewitt Associates grappled with the legal-versus-
equitable remedy distinction in its analysis of the phrase “appropriate equitable relief” in
§ 1132(a)(3). 4 See 508 U.S. 248, 255 (1993) (“Money damages are, of course, the classic form
of legal relief. . . . And though we have never interpreted the precise phrase ‘other appropriate
equitable relief,’ we have construed similar language . . . to preclude ‘awards for compensatory
or punitive damages.’” (citations omitted)). The Mertens decision established that “appropriate
equitable relief” refers to “those categories of relief that were typically available in equity (such
as injunction, mandamus, and restitution, but not compensatory damages).” 508 U.S. at 256; see
also CIGNA Corp. v. Amara, 563 U.S. 421, 439 (2011) (“We have interpreted the term
‘appropriate equitable relief’ in § [1132](a)(3) as referring to those ‘categories of relief’ that,
traditionally speaking (i.e., prior to the merger of law and equity), ‘were typically available in
equity.’” (quoting Sereboff v. Mid Atl. Med. Servs., Inc., 547 U.S. 356, 361 (2006), and
Mertens, 508 U.S. at 256)). And, the Supreme Court in Harris Trust & Savings Bank v. Salomon
Smith Barney, Inc. recognized that both restitution and disgorgement were remedies typically
available in equity. 530 U.S. 238, 250 (2000) (“[I]t has long been settled that when a trustee in
breach of his fiduciary duty to the beneficiaries transfers trust property to a third person, . . . “the
beneficiaries may then maintain an action for restitution of the property (if not already disposed
4
As the Supreme Court generally “assume[s] that the same terms have the same meaning in different sections of the
same statute,” Barnhill v. Johnson, 503 U.S. 393, 406 (1992), the Court is persuaded that cases interpreting the
meaning of the terms “appropriate equitable relief” in § 1132(a)(3)(B) may weigh heavily in the Court’s analysis of
the meaning of the same terms in § 1303(f). See also IBP, Inc. v. Alvarez, 546 U.S. 21, 33–34 (2005) (noting “the
normal rule of statutory interpretation that identical words used in different parts of the same statute are generally
presumed to have the same meaning”).
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of) or disgorgement of the proceeds (if already disposed of) . . . .” (citing, inter alia, Restatement
(Second) of Trusts §§ 284, 291, 294, 295, 297)).
Moreover, the Supreme Court in Amara stated that a district court’s
injunctions requir[ing] the plan administrator to pay to already retired beneficiaries
money owed to them under the plan . . . [in] the form of a money payment does not
remove [the remedy] from the category of traditionally equitable relief. Equity
courts possessed the power to provide relief in the form of monetary
“compensation” for a loss resulting from a trustee’s breach of duty, or to prevent
the trustee’s unjust enrichment. Indeed, prior to the merger of law and equity this
type of monetary remedy against a trustee, sometimes called a “surcharge,” was
“exclusively equitable.”
563 U.S. at 441–42 (emphasis added) (quoting Princess Lida of Thurn & Taxis v. Thompson,
305 U.S. 456, 464 (1939)). Following the Amara decision, the Seventh Circuit in Kenseth v.
Dean Health Plan, Inc. recognized that a plaintiff’s claim for “make-whole relief in the form of
monetary compensation for a breach of fiduciary duty” could qualify as a form of “appropriate
equitable relief” under 29 U.S.C. § 1132(a)(3). 722 F.3d 869, 891–92 (7th Cir. 2013).
Here, the plaintiffs’ breach of fiduciary duty claim alleges that, as a result of the
Corporation’s alleged breaches, see Am. Compl. ¶¶ 64–71, it earned investment returns from
Plan assets that should have been distributed to the plaintiffs, and that the Corporation should be
required to disgorge those proceeds, id. ¶ 72. Consistent with the Supreme Court’s holding in
Amara, the Court concludes that the relief sought by the plaintiffs here is fairly characterized as
“appropriate equitable relief” under § 1303. See also Moore v. CapitalCare, Inc., 461 F.3d 1, 13
(D.C. Cir. 2006) (“An accounting for profits ‘is a restitutionary remedy based upon avoiding
unjust enrichment’ and its purpose is to ‘disgorge gains received from improper use of the
plaintiff’s property or entitlements.’” (emphasis added) (quoting 1 Dan B. Bobbs, Law of
Remedies § 4.3(5) (2d ed. 1993))); Foltz v. U.S. News & World Report, Inc., 627 F. Supp. 1143,
1167 (D.D.C. 1986) (allowing a claim for monetary compensation for a breach of fiduciary duty
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to proceed under § 1132(a)(3) because “the remedies traditionally afforded beneficiaries by the
common law of trusts include the recoupment from a breaching fiduciary of money damages, so
that the beneficiary may be made whole.” (citing Restatement (Second) of Trusts §§ 199(c), 205
(1959); G. Bogert & G. Bogert, The Law of Trusts and Trustees § 862 (2d rev. ed. 1982); III A.
Scott, The Law of Trusts §§ 199.3, 205 (3d ed. 1967))). Thus, even if the plaintiffs’ claim for
disgorgement takes the form of a monetary payment for the breach of fiduciary duty they allege
against the Corporation, such a remedy is not precluded under the ERISA.
To support its assertion that the ERISA precludes the disgorgement sought by the
plaintiffs, the Corporation first argues that the plaintiffs “seek the purported increase in the value
of the Plan’s assets after termination,” Def.’s Mem. at 14, a result it claims is prohibited by
§ 1344(c), which states that “[a]ny increase or decrease in the value of the assets of a single-
employer plan occurring after the date on which the plan is terminated shall be credited to, or
suffered by, the [C]orporation.” Construing the allegations in the Amended Complaint in the
light most favorable to the non-moving party, Cafesjian, 597 F. Supp. 2d at 133–34, the Court
notes that the plaintiffs’ fiduciary breach claim does nothing of the sort. Rather, Claim One
seeks to recoup the alleged ill-gotten investment returns on Plan benefits that the plaintiffs claim
should have been distributed to them, Am. Compl. ¶ 72, not, as the Corporation characterizes the
claim, to divert from the Corporation any gains (or losses) from assets properly held in the Plan.
The Court therefore rejects the Corporation’s first argument.
The Corporation also argues that “the Sixth Circuit specifically rejected a claim for
disgorgement of profits in a case where the plaintiff sought to recover ERISA plan benefits.”
Def.’s Mem. at 15 (citing Rochow v. Life Ins. Co. of N. Am., 780 F.3d 364 (6th Cir. 2015)).
Even if the Rochow case were binding precedent on this Court, the Corporation’s reliance on it
15
would be unavailing. The issue before the Rochow court was whether an equitable recovery
under § 1132(a)(3) was impermissibly duplicative of the plaintiff’s recovery of unpaid benefits
under § 1132(a)(1)(B). That opinion said nothing about the question of whether disgorgement is
“appropriate equitable relief,” and the Corporation’s reliance on Rochow therefore misses the
mark. Having already concluded that the plaintiffs’ request for an equitable remedy in the form
of disgorgement qualifies as “appropriate equitable relief” under § 1303(f), the Court rejects the
Corporation’s assertions that Claim One must be dismissed on this ground.
3. Whether the Plaintiffs May Recover Individually for the Alleged Fiduciary
Breach
Related to the question of whether the type of relief (disgorgement) sought by the
plaintiffs constitutes “appropriate equitable relief” is the question of whether any remedy may
inure to the plaintiffs individually as opposed to the Plan at large. The Corporation asserts that
any recovery inuring to the plaintiffs individually, as opposed to recoveries going to the Plan at
large, is impermissible relief under the ERISA. See Def.’s Mem. at 11–14. In support of this
argument, the Corporation relies on 29 U.S.C. § 1342, which states that the Corporation’s
fiduciary obligations are governed by Title I of the ERISA, except where inconsistent with Title
IV, see 29 U.S.C. § 1342(d)(3), and the Supreme Court’s holding in Russell, which held that any
recoveries under Title I’s fiduciary duty provision, § 1109, inure only to the plan as a whole.
Def.’s Mem. at 14.
Beginning, as the Court must, with the statutory language, Harris Trust, 530 U.S. at 254,
the Court observes at the outset that nothing in § 1303(f) suggests that the appropriate equitable
relief allowed by that provision must inure only to the plan as a whole. It states, in relevant part
that, “any person who is a . . . participant or beneficiary, and is adversely affected by any action
of the corporation with respect to a plan in which such person has an interest, . . . may bring an
16
action against the [C]orporation for appropriate equitable relief in the appropriate court.” 29
U.S.C. § 1303(f)(1). The Court discerns nothing in this language suggesting that any equitable
relief awarded by a Court should not inure to the person “with an interest in the plan,” id., who is
authorized to bring suit against the Corporation, and the Corporation has cited no authority that
supports its proposition. The Court also observes that the language of § 1109 and § 1303(f)(1)
are hardly identical, compare § 1109 (“Any person who is a fiduciary with respect to a plan who
breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this
subchapter shall be personally liable to make good to such plan any losses to the plan . . . and to
restore to such plan any profits of such fiduciary which have been made through use of assets of
the plan by the fiduciary, and shall be subject to such other equitable or remedial relief as the
court may deem appropriate.” (emphases added)) with § 1303(f)(1) (quoted above), rendering
arguments arising from an analysis of remedies available under § 1109 less persuasive.
Further, the cases upon which the Corporation relies, see Def.’s Mem. at 12, do little to
support its position, because none of them address the equitable remedies made available under
§ 1303(f), see Varity Corp., 516 U.S. at 515 (plaintiffs “could not proceed under [§ 1132(a)(2)]
because that provision, tied to [§ 1109], does not provide a remedy for individual beneficiaries”);
Russell, 473 U.S. at 141–48 (concluding that § 1109 provides only plan-wide relief); Murchison
v. Murchison, 180 F. App’x 163, 265 (D.C. Cir. 2006) (remanding fiduciary breach claims
against individual defendant pursuant to § 1109 to district court for the entry of an order
requiring the fiduciary to distribute misappropriated funds to the plan); Repass v. AT&T Pension
Benefit Plan, No. 3:14-CV-2686-L, 2015 WL 5021405, at *4 n.2 (N.D. Tex. Aug. 25, 2015)
(noting that the plaintiff could not bring a fiduciary breach claim against the defendant pension
benefit plan under § 1132(a)(2) because that provision provides only plan-wide relief); Wallace
17
v. Blue Cross & Blue Shield of Ala., No. 14-0119-CG-C, 2014 WL 5335823, at *4 (S.D. Ala.
Oct. 20, 2014) (dismissing plaintiffs’ fiduciary breach claims against health insurance company
because the plaintiffs impermissibly sought individual relief under § 1132(a)(2)); Zalduondo,
845 F. Supp. 2d at 154 (dismissing plaintiff’s claim against health insurance company because
the plaintiff sought individual relief under § 1132(a)(2)); Harris v. Koenig, 602 F. Supp. 2d 39,
50 (D.D.C. 2009) (holding that the plaintiffs’ breach of fiduciary claims against individual
defendants properly sought plan-wide relief under § 1132(a)(2)).
As the plaintiffs note, the Supreme Court recognized in Varity Corp., albeit in analyzing
whether equitable relief was available to the plaintiffs for alleged fiduciary breaches under 29
U.S.C. § 1132(a)(3), that § 1109 is not the only provision in the ERISA that provides a remedy
for fiduciary breach. Pls.’ Opp’n at 24; see Varity Corp., 516 U.S. at 511–12 (“[W]hy should
one believe that Congress intended the specific remedies in § [1109] as a limitation? . . . . To the
contrary, one can read § [1109] as reflecting a special congressional concern about plan asset
management without also finding that Congress intended that section to contain the exclusive set
of remedies for every kind of fiduciary breach. After all, ERISA makes clear that a fiduciary has
obligations other than, and in addition to, managing plan assets. . . . Why should we not
conclude that Congress has provided yet other remedies for yet other breaches of other sorts of
fiduciary obligation in another ‘catchall’ remedial section?”). The Court agrees that the
Corporation’s reliance on Russell, which limited the § 1109 remedies to plan-wide relief, is
misplaced. Absent authority indicating that § 1303(f) does not provide an avenue for individual
relief as an equitable remedy, the Court rejects the Corporation’s arguments that the Amended
Complaint fails to state a claim upon which relief may be granted on this ground.
18
4. The Corporation’s Remaining Arguments
The Corporation’s remaining arguments can be addressed with limited discussion. First,
it asserts that the plaintiffs’ breach of fiduciary duty claim fails because the plaintiffs can recover
no more than their statutory benefits, Defs.’ Mem. at 15–17, relying primarily on Bechtel v.
Pension Benefit Guaranty Corp., 781 F.2d 906 (D.C. Cir. 1986), and Dumas v. Pension Benefit
Guaranty Corp., 253 F. App’x 602 (7th Cir. 2007), as support for this argument. In Bechtel, this
Circuit affirmed the district’s court’s ruling that the Corporation had properly determined that it
had previously allowed the distribution of plan benefits above the maximum benefit level
guaranteed pursuant to 29 U.S.C. § 1322 and could thereafter recapture these overpayments by
downwardly adjusting the level of future payments. 781 F.2d at 906. And in Dumas, the
Seventh Circuit rejected the plaintiffs’ claim that the Corporation had promised, by way of
representations on an informational brochure, that they would be entitled to over $3000 in
monthly pension benefits, not the roughly $400 monthly payments they had been receiving,
which the Corporation had determined was all the plaintiffs were entitled to receive, based on
their prior contributions into the pension plan. 253 F. App’x at 604. The plaintiffs argue that
these cases are inapposite because neither involves a claim for breach of fiduciary duty, Pls.’
Opp’n at 30, and the Court agrees. The Court finds no support in Bechtel or Dumas, which
address what statutory benefits the Corporation is permitted to distribute under the ERISA, for
the Corporation’s argument that the plaintiffs’ are barred from pursuing a claim of fiduciary
breach.
The Corporation also argues that Claim One is implausible on its face because it alleges
that the Corporation’s breach of fiduciary duty was intended to inflate its own coffers, a
motivation the Corporation asserts is impossible given the Corporation’s structure and purpose.
19
See Def.’s Mem. at 23–24. The plaintiffs challenge this argument through several additional
factual assertions in their opposing brief regarding the Corporation’s funding and operations.
See Pls.’ Opp’n at 37–39. But all that is required by Rule 12(b)(6) is that the allegations in the
Amended Complaint, which the Court must treat as true, Cafesjian, 597 F. Supp. 2d at 133–34,
state a plausible claim for relief, Twombly, 550 U.S. at 570. The Corporation acts as a fiduciary
in its role as statutory trustee of a terminated ERISA plan. See 29 U.S.C. § 1342(d)(3) (“Except
to the extent inconsistent with the provisions of this chapter, or as may be otherwise ordered by
the court, a trustee appointed under this section . . . shall be, with respect to a plan, a fiduciary
within the meaning of [29 U.S.C. § 1002(21)] . . . .”). And the “ERISA requires a trust fund
fiduciary to act ‘solely in the interest’ of a plan’s participants and beneficiaries . . . .” Fink v.
Nat’l Sav. & Trust Co., 772 F.2d 951, 955 (D.C. Cir. 1985) (quoting 29 U.S.C. § 1104(a)(1)(B)).
Claim One alleges that the Corporation, in its capacity as trustee, engaged in various conduct, see
generally Am. Compl. ¶¶ 63–71, that resulted in the Corporation “earn[ing] massive investment
returns off of assets that should have been timely allocated” to the plaintiffs, id. ¶ 72. At this
early stage in the case, the Court deems these allegations sufficient to state a plausible claim of
fiduciary breach against the Corporation as trustee of the Plan. The Court will therefore allow
the plaintiffs to proceed with Claim One of the Amended Complaint.
B. The Plaintiffs’ Demand for Attorney’s Fees
As the plaintiffs concede, their demand for attorney’s fees must fail. See Am. Compl. at
126; Pls.’ Opp’n at 1 n.1 (“Plaintiffs do not dispute that Stephens precludes an award of
attorney’s fees in this action . . . .”). It is settled law in this Circuit that the ERISA does not
authorize the recovery of attorney’s fees in an action against the Corporation under 29 U.S.C.
20
§ 1303(f). Stephens v. U.S. Airways Grp., Inc., 644 F.3d 437, 442 (D.C. Cir. 2011). 5 Further,
because the plaintiffs failed to respond to the Corporation’s arguments with respect to the
availability of attorney’s fees under the Equal Access to Justice Act, 5 U.S.C. § 502(a)(2) (2012),
see generally Pls.’ Opp’n, the Court shall deem the argument conceded by the plaintiffs, Hopkins
v. Gen. Bd. of Global Ministries, 284 F. Supp. 2d 15, 25 (D.D.C. 2003) (“It is well understood in
this Circuit that when a plaintiff files an opposition to a dispositive motion and addresses only
certain arguments raised by the defendant, a court may treat those arguments that the plaintiff
failed to address as conceded.”), aff'd, 98 F. App’x 8 (D.C. Cir. 2004). The Court therefore
grants the Corporation’s motion to strike the plaintiffs’ demand for attorney’s fees.
IV. CONCLUSION
For the foregoing reasons, the Corporation’s motion to dismiss Claim One of the
Amended Complaint will be denied. However, the Corporation’s motion to strike the plaintiffs’
demand for attorney’s fees and for a jury trial will be granted. 6
SO ORDERED this 6th day of July, 2016.
REGGIE B. WALTON
United States District Judge
5
This concession notwithstanding, the plaintiffs indicate that they wish to preserve the question of whether an
attorney’s fees demand under 29 U.S.C. § 1303(f)(3) may be permitted for potential en banc review by the Circuit.
Pls.’ Opp’n at 1 n.1.
6
The Court will contemporaneously issue an Order consistent with this Memorandum Opinion.
21