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Breach of Fiduciary Duty Claims Don’t Automatically Create Individual Remedies

Posted in Court Cases, Plan Administration, Retirement Plans, Welfare Plans

When the Supreme Court decides not to take a case, that is generally not news.  But in the case of the Court’s decision to decline a review of Walker v. Federal Express Corp., there should be some mention of its impact on claims under ERISA.  Usually, when I am defending a claim made against a plan or a plan administrator, I see that the Plaintiff has thrown in a claim for "breach of fiduciary duty" as a sort of catch-all argument.  Frequently, this claims is is coupled with some type of claim for failing to provide documents or for having defective notices.  But these types of claims may survive under ERISA, as the underlying decision in Walker illustrates. 

Factually, the case involved a claim for benefits under a life insurance policy.  In addition to the claim for benefits under Section 502(a)(1), the plaintiff included a claim for breach of fiduciary duty under Section 502(a)(2) for either failing to provide a conversion notice, or in breaching a duty to the participant by not giving benefits.  The Sixth Circuit Court of Appeals affirmed the decision of the Court from the Western District of Tennessee, finding that the relief available under Section 502(a)(2) for breach of fiduciary duty is not relief available to an individual.  It is relief that should be limited to the plan as a whole.  By not hearing the case, the Supreme Court has effectively left the 6th Circuit’s decision intact. 

It is also important to note that this leaves intact the Appeals Court’s decision that nothing in ERISA requires a life insurance plan fiduciary to issue a separate conversion notice beyond what is contained in the summary plan description, but that is not what I focus on here.

Certainly, other jurisdictions have had similar decisions and much has been written about relief available under 502(a)(2) and equitable remedies available under 502(a)(3).  But my point here is that making a claim for "breach of fiduciary duty" means something more than just disagreeing with a plan administrator’s determination.  It has specific statutory and administrative limits.  So if you are a plan fiduciary facing an allegation that you have breached a fiduciary duty, your first consideration might be whether the requested remedy is even available.  I am not suggesting it is a good idea to engage in breaches of duty, but a claim for breach is not a blank check for a claimant.  It is a very specific claim that has very specific remedies and very specific limits.  Make sure that if you are a fiduciary, you are aware of your fiduciary obligations as well as the remedies so you don’t further compound problems with your plan administration by giving the wrong thing. 

For more information about being a well-informed fiduciary, or to arrange for fiduciary training, please contact your attorney at Fox Rothschild.