Amicus Curiae Brief — LaRue v. DeWolff, Boberg & Associates, Inc.

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NO. 06-856

IN THE

Supreme Court of the Hnited States

JAMES LARUE,

Petitioner,

Vv.

DEWOLFF, BOBERG & ASSOCIATES, INC.; AND

DEWOLFF, BOBERG & ASSOCIATES, INC. EMPLOYEES’

SAVINGS PLAN,

Respondents.

On Writ of Certiorari

to the United States Court of Appeals

for the Fourth Circuit

BRIEF OF THE ERISA INDUSTRY COMMITTEE AS

AMICUS CURIAE SUPPORTING RESPONDENTS

JOMUN M. VINE

Counsel of Record

ROBERT A. LONG, JR.

JEFFREY G. HUVELLE

THOMAS L. CUBBAGE III

CHRISTIAN J. PISTILLI

COVINGTON & BURLING LLP

1201 Pennsylvania Ave., N.W.

Washington, D.C. 20044

SEPTEMBER 11, 2007 (202° 662-6000

TABLE OF CONTENTS

Page

Ta en Ee iv

INTEREST OF AMICUS CURIAE.........................cccseeeseees 1

HE TEER GSES ee aL LOL ne TE ae ERS Oa 3

I GI I sic sccneleseninsmniloneneniedonaninnineintion 6

a lca ali 8

I. ERISA’s Interlocking, Interrelated And

Interdependent Remedial Provisions

Encourage Employers To Establish

Employee Benefit Plans And Require

Such Plans To Establish Prompt, Fair,

And Effective Benefit Claim Procedures................ 8

Il. Participants In A Defined Contribution

Plan May Direct Plan Investments Only

If The Terms Of The Plan Permit Them

i cieiratiisisicincsianeae areal ialdiadidiaiidideianinetininwitia 11

III. Because Petitioner Could Have Brought

This Suit Under § 502(a)(1)(B), He Is Not

Entitled To Bring It Under § 502(a)/2)

RNASE EE RO yeaeio Cicer ae ee SA a ee 13

A. A Participant May Sue Under § 502(a)(2)

Or (3) Only For Appropriate Relief For

Injuries That Are Not Adequately

Remedied By Other ERISA Provisions..... 13

A Participant May Sue Under

§ 502(a)(1)(B) For Individualized Relief

Regarding The Participant’s Current Or

Future Benefits Or Rights Under The

Terms Of An Employee Beneiit Plan

Because Petitioner Seeks Individualized

Relief Regarding His Current Or Future

Benefits Or Rights Under The Terms Of

An Employee Benefit Plan, He Could

Have Sued Under § 502(a)(1)(B)

1.

Petitioner Seeks

Individualized Relief. ...............

Petitioner Seeks

Individualized Relief

Regarding His Current Or

Future Benefits Or Rights........

Petitioner Seeks

Individualized Relief

Regarding His Current Or

Future Benefits Or Rights

Under The Terms Of An

Employee Benefit Plan. ............

Section 502(a)(1)(B)

Authorizes The Relief

Petitioner Seeks........................

Because § 502(a)(1)(B) Offered

Adequate Relief For Petitioner's

Alleged Injury, Petitioner Was Not

Entitled To Bring This Suit Under

a i saiusuiliiicumeian 25

— 21

non 22

IV. Allowing Benefit Claim Suits To Be

Brought Under § 502(a)(2) Or (3) Would

Undermine ERISA’s Benefit Claim

SERRE TESTE a Rat sn 26

A. Participants Could Circumvent The

Exhaustion Requirement And The

Abuse Of Discretion Standard Of

EE ER ane UREN Ee SON aan TE 26

1. a 27

2. Standard Of Review. ..................... 28

B. Courts Would Be Required To Review

Benefit Claims Without An

Administrative Record. .....................cec0000 29

C. Plan Costs Would Increase, Harming

Employees And Benefit Plans................... 29

I ia ee 30

TABLE OF AUTHORITIES

FEDERAL CASES

Aetna Health Inc. v. Davila, 542 U.S. 200

Alessi v. Raybestos-Manhattan, Inc., 451 U.S.

I epiiicccdiecaiininbabncnntnmunduptinianatiinminiatide

Babcock v. Computer Associates

International, Inc., 186 F. Supp. 2d 253

REESE, a

Barnhill v. Johnson, 503 U.S. 393 (1992)...........

Beddall v. State Street Bank & Trust Co., 137

if f |. % SERRE eeeernanenn ne

Black & Decker Disability Plan v. Nord, 538

Be EE incctedbciaticcnstiscncceveutanetapentenciecs

Carrabba v. Randalls Food Markets, 252

Fae FEE GEE CDs TEED vettinesevecccconcansssnvensenecs

Cooper v. IBM Personal Pension Plan, 457

F.3d 636 (7th Cir. 2006) .............ssssrssesssreseoes

Coyne & Delaney Co. v. Blue Cross & Blue

Shield of Virginia, Inc., 102 F.3d 712 (4th

BIG SEE cesincedstonnnitsnininssendenncinensntpiavitnnedneniens

Crummett v. Metropolitan Life Insurance Co.,

No. 06-01450(HHK), 2007 U.S. Dist.

LEXIS 50956 (D.D.C. July 16, 2007) ............

Curtiss-Wright Corp. v. Schoonejongen, 514

SP PIII cn corwssocendecnensinsisecneiinerensnmuscoverses

-1V-

Dobson v. Hartford Financial Services Group,

Inc., 389 F.3d 386 (2d Cir. 2004).................ccsseeeereeeees 24

Drinkwater v. Metropolitan Life Insurance

Co., 846 F.2d 821 (1st Cir. 1988)..............0........... 15-16

Fallick v. Nationwide Mutual Insurance Co.,

fb T: ) |. “Xp SpE nen NOTES 27

Firestone Tire & Rubber Co. v. Bruch, 489

I eerie 1, 21, 28

General Dynamics Land System v. Cline, 540

i SIT nssstieid cctiensniameteisciniatenniaasissiansicdiiianbiblonal ]

Graden v. Conexant Systems inc., No. 06-

2337, 2007 U.S. App. LEXIS 18179 (3d

hs Ci SE ici shdchiatinatininictathinkiabitinniimarmdennbideial 17

Haberern v. Kaupp Vascular Surgeons Ltd.

Defined Benefit Pension Plan, 24 F.3d

I SII i susccrcdihdnnaindietinadainniatinnitiodinemndaile 20

Harzewski v. Guidant Corp., 489 F.3d 799

i ar 17

Heffner v. Blue Cross & Blue Shield of

Alabama, Inc., 443 F.3d 1330 (11th Cir.

Hess v. Reg-Ellen Machine Tool Corp., 423

a NI, HID sicitsicusiscnciersencitnnestenlinnciasssttideadiiiinailaals 23

Hughes Aircraft Co. v. Jacobson, 525 U.S.

SF ETI vcsnrsesnncnociniimseinesiusesipbicunensuidedonsieseechtiteaeliaeiainaeaicaieaidiies 1, 11

Janeiro v. Urological Surgery Professional

Association, 457 F.3d 130 (1st Cir. 2006)................... 24

Jenkins v. Yager, 444 F.3d 916 (7th Cir.

ETI avccoccncesucstnsnotncnatisandeiumiindediaadaaneaaadaa aaa 12

Johnson v. Buckley, 356 F.3d 1067 (9th Cir.

EE ESE LESS ES ern Se a a 14

Jones v. American General Life & Accident

Insurance Co., 370 F.3d 1065 (11th Cir.

EE Ae 26

Kennedy v. Empire Blue Cross & Blue Shield,

ee 27

Kennedy v. Plan Administrator for DuPont

Savings & Investment Plan, No. 05-

41851, 2007 U.S. App. LEXIS 19336 (5th

a. cneetnnemsensssnminunes 24

Kinek v. Paramount Communications, Inc.

Pension Plan, 22 F.3d 503 (2d Cir. 1994)................... 24

Krackow v. Dr. Jack Kern Profit Sharing

Plan, No. 00 CV 2550 (NG), 2002 U.S.

Dist. LEXIS 20524 (E.D.N.Y. May 29,

EEE Sn 24

LaRocca v. Borden, Inc., 276 F.3d 22 (ist Cir.

EE SE, ee a ee 14

Lee v. California Butchers’ Pension Trust

Fund, 154 F.3d 1075 (9th Cir. 1998)................00....0... 27

Liston v. UNUM Corp. Officer Severance

Plan, 330 F.3d 19 (1st Cir. 2003) ...............0ccccceceeeeeee 29

Lockheed Corp. v. Spink, 517 U.S. 882 (1996)............... 1,9

Makar v. Heath Care Corp., 872 F.2d 80 (4th

EAA a aR 27

Massachusetts Mutual Life Insurance Co. v.

Russell, 473 U.S. 134 (198)............cccccccccssseccees passim

Matassarin v. Lynch, 174 F.3d 549 (5th Cir.

ITT siaasthihcncatehtteiateascillaatehteaarieesiniitaraa lad neiitaincitanlaminientanianiimiaian 21

Metropolitan Life Insurance Co. v. Taylor,

EEE TED aren ae 1,19

Montgomery v. United States, 18 F.3d 500

ESSE AE Sere ae eee an 11

Nelson v. EG&G Energy Measurements

Group, Inc., 37 F.3d 1384 (9th Cir. 1994) .................. 24

Paese v. Hartford Life & Accident Insurance

Co., 449 F.3d 435 (2d Cir. 2006).................cccccscercereres 27

Pegram v. Herdrich, 530 U.S. 211 (2000)....................04 22

Pilot Life Insurance Co. v. Dedeaux, 481 U.S.

EE TTT OLE ee a eras ARE RRC RT TED 10, 19

Rego v. Westvaco Cérp., 319 F.3d 140 (4th

aes ES a EO OE 24

Republic Steel Corp. v. Maddox, 379 U.S. 650

EERE een 26

Rhorer v. Raytheon Engineers &

Constructors, Inc., 181 F.3d 634 (5th Cir.

Ross v. Rail Car America Group Disability,

Inc. Plan, 285 F.3d 735 (8th Cir. 2002).................0.. 20

Rush Prudential HMO, Inc. v. Moran, 536

I I ee ee eT 10

Saylor v. Retirement Committee, No.

4:05CV 138, 2007 U.S. Dist. LEXIS 54399

(E.D. Ark. July 25, 2007)................... SSP RR a IN ON 23

- Vu -

Simmons v. Willcox, 911 F.2d 1077 (5th Cir.

I atest ii i aial 16

Smith v. Sydnor, 184 F.3d 356 (4th Cir. 1999)................ 16

Todisco v. Verizon Communications, Inc., No.

06-1957, 2007 U.S. App. LEXIS 18621

A a I I iat ca cceeteatlaninenialtinas 20

Varity Corp v. Howe, 516 U.S. 489 (1996) .............. 7, 13-15

Vizcaino v. Microsoft Corp., 120 F.3d 1006

ETI TIE ontnniinseitiemtaniestsidtinteaundniitatinieiisisinneiidinindecedien 24

Wald v. Southwestern Bell Corp. Customcare

Medical Plan, 83 F.3d 1002 (8th Cir.

i kiaiidiad cect 14

OTHER FEDERAL MATERIALS

I I 0 I a scsicisiees sient .

ERISA § 3, 29 U.S.C. § 1002 .......ccccccecssecesesseeeesee 11, 12, 21

ERISA § 101, 29 U.S.C. § 102] .o.....ecccccccssessssessssssesseseessven 9

ERISA § 102, 29 U.S.C. § 1022 .0......cccccesscessssesssssvesseevessee 9

ERISA § 104, 29 U.S.C. § 1024 ooo... eccccecssccsssseessseesssseceseee 9

ERISA § 204, 29 U.S.C. § 1054 oo..c.cccccccccsscsssesssssveessvessen 13

ERISA § 401, 29 U.S.C. § 1101 ......ceeccccssssecsscecssseecsseeesseess 9

ERISA § 402, 29 U.S.C. § 1102 .0........ccccccssesssseesssseeeseneeee 12

ERISA § 404, 29 U.S.C. § 1104 oo....ccccccccescsseesesseesssseen 5, 13

ERISA § 405, 29, U.S.C. § 1105 .00.....ccccsscssscsscessssessssseeseees 13

ERISA § 406, 29 U.S.C. § 1106 ......cccccccccsssssecsseessssseessvees 13

SE es BP ME: TO MOOD cicncsececninncisctinsincsicnmsstiniennion 13

Ue Oy I, OP Ce 0b BD occcccccccecccsencnvcsveccsccscsononcie 13

ERISA § 408, 29 U.S.C. § 110B............cccccscsccsorscsrsecseeeseres 15

BISA § GOB, 20 U.S.C. § LIBB..........cc.ccccccsccsscccsecees passim

ERISA § 503, 29 U.S.C. § 1133...................cccccscecreeeees 10, 25

Pub. L. No. 109-280, 120 Stat. 780 (2006)....................... 13

29 C.F .R. § 2550.404c-1 (2007) ...........0:.cccccccossseorreceseseess 13

SP re ite Op Ee GIN ccerenecssccccanecsscsntpesstocoscensiense 10

I ll eeiniieiaaeney 22

57 Fed. Reg. 46,906 (Oct. 13, 1992) 00.0.0... eseeeeeeereeeeee 13

65 Fed. Reg. 70,246 (Nov. 21, 2000)............0..0...... 10, 11, 27

H.R. Conf. Rep. No. 93-1280 (1974) .........cccccseceeeeeeneeeeees 18

Se I Se, CE EEN cxtetitiocunercenenssesennsisonesssninnssonsnes 9

Rev. Proc. 2006-27, 2006-1 C.B. 945.000.0000... eee 25

Rev. Rul. 70-370, 1970-2 C.B. 84 0.0.0... eceeesseseeeeeee 22

ae 22

Mov. Bul. 73-BSB, 1973-3 C.B. O97 ........cccrccccccccorsseeescoeeses 22

Beey. Tied. GO-0EG, BGGD-1 C.BB. B6 .....ccccccccecesscccsvcsseoeseceees 25

Rev. Rul. 2002-45, 2002-1 C.B. 116.0000... 25

- ix -

OTHER AUTHORITIES

John H. Langbein et al. Pension and

Employee Benefit Law 756 (4th ed. 2006)

oreo ee

INTEREST OF AMICUS CURIAE!

The ERISA Industry Committee (“ERIC”) is a

nonprofit organization representing America’s largest

private employers sponsoring pension, savings,

healthcare, disability, and other employee benefit plans,

providing benefits to millions of active workers, retired

persons, and their families nationwide. Many of these

plans are “401(k) plans” that allow eligible employees to

elect whether to participate, how much to contribute, and

how their accounts should be allocated among the plan’s

investment options.

ERIC frequently participates as amicus curiae in

cases with the potential for far-reaching effects on

employee benefit plan design or administration.” This is

such a case.

Petitioner has illegitimately recast a claim for plan

benefits as a claim for breach of fiduciary duty. A

participant in an employee benefit plan is permitted to

file a civil action to enforce a benefits claim under

§ 502(a)(1)(B) of the Employee Retirement Income

Security Act of 1974 (“ERISA”):

A civil action may be brought — (1) by a

participant or beneficiary — ... (B) to

recover benefits due to him under the

! The parties have consented to the filing of this brief. No counsel for a

party authored this bref in whole or in part, and no counsel or party

made a monetary contribution intended to fund the preparation or

submission of this bref. No person other than amicus curiae, its

members, or its counsel made a monetary contribution to its

preparation or submission.

2 See, e.g., General Dynamics Land Sys. v. Cline, 540 U.S. 581 (2004);

Black & Decker Disability Plan v. Nord, 538 U.S. 822 (2003); Hughes

Aircraft Co. v. Jacobson, 525 U.S. 432 (1999); Lockheed Corp. v. Spink,

517 U.S. 882 (1996); Firestone Tire & Rubber Co. v. Bruch, 489 U.S.

101 (1989); Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58 (1987).

sts

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.

29 U.S.C. § 1132(a). Because petitioner seeks “to recover

benefits due to him under the terms of his plan,” “to

enforce his rights under the terms of the vlan,” and “to

clarify his rights to future benefits under.» terms of the

plan,” his claim falls within the scope of § 502(a)(1)(B).

Many plan participants and beneficiaries, with claims

similar or analogous to petitioner’s claim, have filed civil

actions under § 502(a)(1)(B) to enforce their claims.

Where a claimant has established that he or she has not

received the benefits or been afforded the rights to which

the claimant was entitled under the terms of the plan,

courts have awarded relief, including monetary relief, to

make up for the plan’s failure to provide the benefits or

rights to which the claimant was entitled under the terms

of the plan.

This reality belies any claim that an amendment to

ERISA is needed to authorize courts to grant the kind of

relief petitioner that seeks here. Such relief would have

been available if petitioner had proven his case under

§ 502(a)(1)(B). Petitioner’s decision to embark on a

different path — not the path charted by Congress in

ERISA and followed by countless individuals ~ does not

alter what § 502(a)(1)(B) provides.

Moreover, if petitioner’s new path is available to

participants and beneficiaries with claims for benefits

under the terms of a plan, those individuals can easily

circumvent the procedures that ERISA prescribes for

benefit claims simply by recasting their benefit claims as

fiduciary breach claims. This will cause employee benefit

litigation and litigation costs to escalate even more than

they already have.

Additional litigation over benefit claims arising under

employee benefit plans would harm employers and

employees by discouraging the formation of new plans,

encouraging the termination of existing plans and, for the

plans that remain, requiring the allocation of a greater

percentage of plan resources to legal fees and costs rather

than to providing benefits.

Because of the importance of the issues presented by

this case, ERIC respectfully urges the Court to affirm the

decision below and make clear that a plan participant

cannot file an action to recover benefits under § 502(a)(2)

or (3) of ERISA merely by recasting a benefit claim as a

fiduciary breach claim.

STATEMENT

Petitioner participated in an ERISA-governed 401(k)

plan (the “DeWolff Plan” or the “Plan”) sponsored by his

employer, DeWolff, Boberg & Associates, Inc. (“DeWolff’).

The Plan designated DeWolff as the administrator of the

Plan (the “Administrator”).%

The Plan allowed each eligible employee to elect to

forgo receiving a percentage of compensation and to have

an amount equal to the forgone compensation contributed

to the Plan for the employee’s benefit. In addition, the

Pian stated that each year DeWolff would make a

“qualified non-elective contribution” equal to a percentage

of compensation to be determined by DeWolff and might

also make a discretionary profit-sharing contribution. Br.

in Opp. App. 10a, 12a-18a.

3 Although petitioner's complaint stated that the Plan document was

attached to his complaint, only a copy of the summary plan description

(“SPD”) was attached. See Br. in Opp. App. 2a, 6a-42a. For purposes of

ruling on respondents’ motion for judgment on the pleadings, the

courts below accepted petitioner's allegations as pled. Pet. App. 2a-3a,

15a-16a. Accordingly, this description of the Plan is based solely on the

allegations in the complaint and the SPD.

- F

The Plan provided that each participant’s benefits

would be based on the participant's vested interest in the

balance in an account maintained for the participant,

that amounts equal to the contributions made by or for

each participant would be added tu that account, and that

the participant's account balance would be adjusted to

reflect the investment returns on the amounts

attributable to those contributions. Br. in Opp. App. 13a,

14a, 17a, 19a. The Plan provided that a participant’s

interest in the portion of the account attributable to

DeWolffs profit-sharing contributions would vest on a

graduated schedule. Br. in Opp. App. 21a.

The Plan stated that each participant could direct the

investment of the participant’s interest in the Plan, that

the Administrater would inform the participant of the

available investment choices, the frequency with which a

participant could change investments, and other matters.

The Plan also stated that to the extent that the

participant did not direct investments, the Trustee or

another designated person would be responsible for

making investment decisions. Br. in Opp. App. 19a.

The Plan included a benefit claim procedure that

allowed a participant to submit a claim for benefits under

the Plan. The Plan stated that if a claim for benefits was

denied in whole or in part, the Administrator would

explain the reasons for the denial in writing, and that if

the participant wanted the denial of a claim to be

reviewed, the participant had to submit a written request

for review to the Administrator within 60 days after the

claim was denied. The Plan provided that if the claim was

denied upon review, the participant could file suit in state

or federal court. Br. in Opp. App. 37a-40a.

Without exercising his rights under the Plan’s benefit

claim procedure, petitioner filed a complaint against

DeWolff and the Plan on June 2, 2004, in the US.

District Court for the District of South Carolina. He

alleged that, in 2001 and 2002, he directed that “his

cin

money” be invested in a certain way, but that the Plan

did not follow his direction, and that as a result his

interest in the Plan was depleted by about $150,000. He

alleged that De Wolff was a Plan fiduciary responsible for

the Plan’s operations and that it had breached its

fiduciary duties under § 404 of ERISA. Petitioner asked

the court to grant him “make whole” or other equitable

relief under § 502(a)(3) of ERISA. Br. in Opp. App. la-4a.4

Petitioner did not allege that the persons responsible

for investing Plan assets had breached ERISA’s fiduciary

duties in any way other than by failing to invest “his

money” in accordance with his directions. He did not

allege that the fiduciaries had made misrepresentations

to Plan participants or otherwise acted disloyally, that

Plan assets had been invested imprudently, that the

Plan’s investments had not been diversified, that the

fiduciaries had engaged in self-dealing or directed

transactions that ERISA prohibits, or that the Plan’s

investments violated any provision of the Plan other than

the participant-direction requirement. See ERISA §§ 404-

408, 29 U.S.C. §§ 1104-1108. Petitioner asked the district

court to grant “make whole” relief to him, rather than to

the Plan or to other Plan participants. Br. in Opp. App.

la-4a.

The district court granted respondents’ motion for

judgment on the pleadings and dismissed the case on the

ground that § 502(a)(3) did not authorize the relief

petitioner seeks. The Court of Appeals for the Fourth

Circuit affirmed the district court's decision on the

ground that neither § 502(a)(2) nor § 502(a)(3) authorizes

such relief.

4 During proceedings in the court of appeals, petitioner also asserted

that he was entitled to relief under § 502(a)(2).

eS

SUMMARY OF ARGUMENT

Although the questions presented in this case refer to

ERISA’s second and third civil enforcement provisions

(ERISA § 502(a)(2) & (3), 29 U.S.C. § 1132(a)(2) & (3)),

the scope of the second and third provisions depends on

the scope of the first civil enforcement provision, ERISA

§ 502(a)(1), 29 U.S.C. §1132(a)(1). Section 502(a)(1)

authorizes a plan participant or beneficiary to bring a

civil action to “recover benefits due to him 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.”

Section 502(a)(1) “was specifically enacted by

Congress to permit the recovery of plan benefits by a

participant or beneficiary.” Pet. Br. at 25 n.17. Petitioner

chose not to make a claim under § 502(a)(1), however, and

instead based his claim entirely on § 502(a)(2) and (3).

Petitioner has not explained why he did not make a claim

under § 502(a)(1). He has asserted only that § 502(a)(1)

“is not involved in this case.” Pet. at 5 n.11.

Contrary to petitioner's assertion, § 502(a)(1) is

involved in this case. Section 502(a)(1) authorizes a

participant to bring an action to recover benefits due to

him 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. That is

precisely what petitioner seeks: to recover benefits he

believes are due to him under the terms of the Plan, to

enforce his rights under the terms of the Plan, and to

clarify his rights to future benefits under the terms of the

Plan. An amendment to ERISA is thus not needed to

authorize the kind of relief that petitioner seeks here.

Petitioner claims that, contrary to the terms of the

Plan, the Plan did not base the amount of his benefit on

the performance of the investments he specified in his

investment directions. His complaint recognizes that the

-6-

terms of the Plan gave him the right to issue such

directions. ERISA did not give him that right. Petitioner

does not allege that the Plan’s fiduciaries violated their

fiduciary duties regarding the investment of the Plan’s

assets in any way other than by failing to follow his

directions. His complaint addresses neither the prudence

of the fiduciaries’ decision-making process nor the

prudence of their investment decisions. He does not allege

that the fiduciaries made misrepresentations regarding

the Plan’s terms. Petitioner seeks relief only for himself.

He does not seek relief either for other participants or for

the Plan as an entity. In fact, he named the Plan as a

defendant.

Section 502(a)(2) and (3) offer relief only if relief

under those provisions is “appropriate.” The Court has

emphasized that because § 502(a)(3) authorizes only

“appropriate” relief, § 502(a)(3) does not normally provide

relief if another provision of ERISA, such as § 502(a)(1),

provides an adequate remedy. Varity Corp v. Howe, 516

U.S. 489, 515 (1996). Likewise, because § 502(a)(2)

authorizes only “appropriate” relief, and provides relief

only to the plan itself, § 502(a)(2) does not apply to

benefit claims that fall within the scope of § 502(a)(1).

The courts long ago concluded that participants cannot

circumvent § 502(a)(1) by recasting benefit claims as

fiduciary breach claims.

If plan participants were allowed to recast benefit

claims as fiduciary breach claims, participants could

easily circumvent the claim procedures, the exhaustion

requirement, and the abuse of discretion standard of

review that apply to most benefit claims under ERISA.

ERISA’s benefit claim and exhaustion requirements

foster efficient and nonadversarial dispute resolution and

consistent decision-making by experienced = and

knowledgeable plan administrators. They reduce the need

for litigation and develop a record that a court can review

in the event there is litigation. The abuse of discretion

9.

standard of review assures the employer that a benefit

plan will be administered consistently and in accordance

with the employer's purpose in establishing the plan.

There is a high risk of serious damage to employee

benefit plans, employees, and their families if benefits

claimants are allowed to opt out of the benefit claim

procedure, the exhaustion requirement, and the abuse of

discretion standard of review. Plans will suffer financially

under the burden of mounting litigation costs -

necessitating reductions in benefits, increases in required

employee con¢ributions, or both, and employer interest in

sponsoring employee benefit plans will decline.

ARGUMENT

I. ERISA’s_ Interlocking, Inmterrelated And

Interdependent Remedial Provisions

Encourage Employers To Establish

Employee Benefit Plans And Require Such

Plans To Establish Prompt, Fair, And

Effective Benefit Claim Procedures.

In enacting ERISA, Congress sought to encourage

employers to maintain employee benefit plans and to

ensure that plan participants would receive the benefits

that their plans were intended to provide. ERISA’s

remedial provisions in particular were designed to ensure

that benefit commitments expressed in the terms of

employee benefit plans would be honored, but to avoid

imposing obligations that would discourage employers

from adopting such plans. See Massachusetts Mut. Life

Ins. Co. v. Russell, 473 U.S. 134, 148 (1985).

Voluntary Regime. ERISA was designed to encourage

and protect “the establishment, operation, and

administration” of employee benefit plans by setting

“minimum standards .. . assuring the equitable character

of such plans and their financial soundness.” ERISA

§ 2(a), 29 U.S.C. §1001(a). ERISA does rot require

ye

employers to establish employee benefit plans, nor does it

specify the benefits that such plans must provide. See

Lockheed Corp. v. Spink, 517 U.S. 882, 887 (1996); Alessi

v. Raybestos-Manhattan, Inc., 451 U.S. 504, 511 (1981)

(“{P]rivate parties, not the Government, control the level

of benefits.”).

Flexibility. Recognizing that the freedom to adopt and

design their own pension plans was “vital” to the

willingness of employers to provide such plans, Congress

preserved “flexibility in the design and operation of...

pension programs.” H.R. Rep. No. 93-533 (1973),

reprinted in 1974 U.S.C.C.A.N. 4639, 4647. ERISA

imposes “outer bounds” on permissible pension practices,

but it does not “impos[e] mandatory pension levels or

methods for calculating benefits.” Alessi, 451 U.S. at 512.

Documentation. ERISA requires each benefit plan to

be maintained pursuant to a written instrument that,

among other things, “speciffies} the basis on which

payments are made to and from the plan” and requires

the plan administrator to make the plan’s written

instrument available for examination and to distribute a

summary of the plan as well. ERISA § 401(a) & (b)(4), 29

U.S.C. § 1101(a) & (b)(4); see ERISA §§ 101(a), 102(a),

104(b)(1), (2) & (4), 29 U.S.C. §§ 1021(a), 1022(a),

1024(b)(1), (2) & (4). Compliance with these requirements

enables participants to learn what benefits their plans

provide and how to obtain them. The plan documents also

provide guidance to plan administrators. See Curtiss-

Wright Corp. v. Schoonejongen, 514 U.S. 73, 82 (1995).

Interlocking, Interrelated Remedy Provisions. ERISA’s

“comprehensive legislative scheme” includes “an

integrated system of procedures for enforcement.”

Russell, 473 U.S. at 147 (citation omitted) (internal

quotation marks omitted). Set forth in ERISA § 502(a), 29

U.S.C. § 1132(a), this integrated enforcement scheme is

essential to accomplish Congress's purpose. of

. '*

comprehensively regulating employee benefit plans. The

Court has recognized

one example of ... overpowering federal

policy in [ERISA’s] civil enforcement

provisions. 29 U.S.C. § 1132(a), authorizing

civil actions for six [now nine] specific types

of relief. In (Russell, 473 U.S. at 147], we

said that these provisions amounted to “an

interlocking, interrelated, and

interdependent remedial scheme,” which

Pilot Life [Insurance Co. v. Dedeaux, 481

U.S. 41, 54 (1987)] described as

“represent[ing] a careful balancing of the

need for prompt and fair settlement

procedures against the public interest in

encouraging the formation of employee

benefit plans.”

Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 376

(2002).

Procedural Safeguards. ERISA requires each plan to

“afford a reasonable opportunity to any participant whose

claim for benefits has been denied for a full and fair

review by the appropriate named fiduciary of the decision

denying the claim.” ERISA § 503(2), 29 U.S.C. § 1133(2).

The Labor Department regulation implementing § 503

strives to reconcile “the need for procedural protections

with the purely voluntary nature of the system through

which these vital benefits are delivered.” 65 Fed. Reg.

70,246, 70,246 (Nov. 21, 2000). The regulation requires a

designated plan fiduciary to review benefit claims and

safeguards to ensure that benefit claims are resolved

promptly, fairly, consistently, and in accordance with the

terms and objectives of the plan, without imposing

excessive costs on the plan, the plan’s participants and

beneficiaries, and the sponsoring employer. /d. at 70,246,

70,250, 70,253, 70,256-57; 29 C.F.R. § 2560.503-1 (2007).

ERISA’s benefit claim procedures have been very

-10-

successful in resolving the vast majority of benefit claims

without litigation. 65 Fed. Reg. at 70,263, tbl. 4, ll. 1-6.

Il. Participants In A Defined Contribution Plan

May Direct Plan Investments Only If The

Terms Of The Plan Permit Them To Do So.

Defined Contribution Plans. ERISA recognizes two

basic types of retirement plans: “defined contribution

plans” and “defined benefit plans.” ERISA §§ 3(34)-(35),

29 U.S.C. §§ 1002(34)-(35); Hughes Aircraft Co. v.

Jacobson, 525 U.S. 432, 438 (1999).

The DeWolff Plan was a defined contribution plan.

Under a defined contribution plan, each participant's

benefit is based solely on the balance recorded in a

bookkeeping account that the plan maintains for that

participant. The participant's account balance is based on

(1)the amount of any employer and employee

contributions that are allocated to the account, (2) the

amount of any changes in the value of the plan's

investments (i.e., income, expenses, gains, and losses) to

which the participant's account balance is allocated, and

(3) any amounts forfeited by other participants and

reallocated to the participant's account. ERISA, § 3(34),

29 U.S.C. § 1002(34). A participant's account balance

thus reflects any decline in the total value of the

investments to which the participant’s account balance is

allocated. See Montgomery v. United States, 18 F.3d 500,

501-02 (7th Cir. 1994).5

Managing Plan Assets. Typically, all of the assets of a

defined contribution plan are held in a single trust, and

the trustee is the legal owner of the plan’s assets.

Participants’ account balances are bookkeeping entries

5 ERISA classifies all retirement plans other than defined

contribution plans as defined benefit plans. See ERISA § 3(35), 29

U.S.C. § 1002(35).

-}]-

that reflect the participants’ beneficial interests in the

trust, rather than ownership interests in trust assets.

Participant-Directed Plans. Many defined contribution

plans allow individual participants to allocate their

account balances to one or more investments that are

listed on a menu of investment options that the plan

presents. (Some plans give participants the right to

designate investments that are not listed on the menu.)

Under such plans, the plan’s investment experience does

not affect all participants’ benefits uniformly. The effect

of an investment’s performance on a participant's account

balance depends on the participant’s investment

allocation decisions. See, e.g., Jenkins v. Yager, 444 F.3d

916, 919-23 (7th Cir. 2006).

ERISA does not require a defined contribution plan to

give participants the right to direct the allocation of their

accounts. In general, ERISA provides that the plan’s

trustee is responsible for managing the plan’s assets

except to the extent that the plan provides that the

trustee is subject to the direction of an investment

manager or a named fiduciary. ERISA §§ 402(a) & (c),

403(a), 29 U.S.C. §§ 1102(a) & (c), 1103(a). The party

responsible for managing the assets is required to do so in

accordance with ERISA’s standards of fiduciary

responsibility, including the duty of loyalty, the duty of

prudence, and the obligation to avoid violations of

ERISA’s prohibited transaction provisions. ERISA

§§ 3(21)(A), 404-408, 29 U.S.C. §§ 1002(21)(A), 1104-08;

see Jenkins, 444 F.3d at 923-24.

Any rights that participants have to allocate their

account balances among investments are conferred by the

terms of the plan, not by ERISA. See id. at 923-24.

® The Pension Protection Act of 2006 amended ERISA to provide that,

beginning in 2007, certain defined contnbution plans that invest in

employer securnties must allow certain participants to direct the plan

to divest any employer securties allocated to their accounts and to

-12-

Although § 404(c) of ERISA, 29 U.S.C. § 1104(c), can limit

fiduciary liability under a participant-directed plan,

§ 404(c) does not give plan participants the right to issue

investment directions. Section 404(c) provides only that if

certain conditions are met, the participant's exercise of

investment control will not cause the participant to be

treated as a fiduciary, and no person who is otherwise a

fiduciary will be liable for any loss, or by reason of any

breach, caused by the participant’s exercise of investment

control. One of those conditions is that, “/uj/nder the terms

of the plan, the participant has a reasonable opportunity

to give investment instructions ... to an identified plan

fiduciary who is obligated to comply with such

instructions.” 29 C.F.R. § 2550.404c-1(b)(2)(A) (2007)

(emphasis added); see id. § 2550.404c-1(a)(2); 57 Fed. Reg.

46,906, 46,907 (Oct. 13, 1992).

III. Because Petitioner Could Have Brought This

Suit Under § 502(a)(1)(B), He Is Not Entitled

To Bring It Under § 502(a)(2) Or (3).

A. A Participant May Sue Under

§ 502(a)(2) Or (3) Only For Appropriate

Relief For Injuries That Are Not

Adequately Remedied By Other ERISA

Provisions.

In Varity, 516 U.S. at 512, the Court observed that

§ 502(a)(3) is a “catchall” provision that “act[s] as a safety

net, offering appropriate equitable relief for injuries

caused by violations that §502 does not elsewhere

adequately remedy.” The Court emphasized:

reinvest the proceeds in another investment. Pub. L. No. 109-280,

§ 901(b) & (c), 120 Stat. 780, 782 (2006), creating ERISA § 204(j), 29

U.S,C. § 1054G). There is no suggestion in the record that the DeWolff

Plan invested in employer securities. In any event, this case concerns

events alleged to have occurred in 2001 and 2002, before ERISA

§ 204) became effective.

- 13-

[T]he statute authorizes “appropriate”

equitable relief. We should expect that

courts, in fashioning “appropriate”

equitable relief, will keep in mind the

“special nature and purpose of employee

benefit plans,” and will respect the “policy

choices reflected in the inclusion of certain

remedies and the exclusion of others.”

Thus, we should expect that where

Congress elsewhere provided adequate relief

for a beneficiary’s injury, there will likely be

no need for further equitable relief, in which

case such relief normally would not be

“appropriate.”

Id. at 515 (emphasis added) (citations omitted).

Consistent with Varity, the circuit courts have

uniformly held that a participant may not assert a claim

under § 502(a)(3) when the participant can obtain

adequate relief by asserting a claim for benefits under

§ 502(a)(1)(B). See, e.g., LaRocca v. Borden, Inc., 276 F.3d

22, 28 (1st Cir. 2002) (“[Fljederal courts have uniformly

concluded that, if a plaintiff can pursue benefits under

the plan pursuant to Section [502(a)(1)], there is an

adequate remedy under the plan which bars a further

remedy under Section [502(a)(3)].”).?

Section 502(a)(2) provides for “appropriate relief’

under § 409 — just as § 502(a)(3) provides for “appropriate

equitable relief.” There are good reasons to believe that

Congress intended “appropriate” to have the same

* See also Johnson v. Buckley, 356 F.3d 1067, 1077-78 (9th Cir. 2004)

(§ 502(a)(3) claim is not appropriate where plaintiff can assert a

§ 502(a)(1)(B) claim); Rhorer v. Raytheon Eng’rs & Constructors, Inc.,

181 F.3d 634, 639 (5th Cir. 1999) (same); Wald v. Southwestern Bell

Corp. Customcare Med. Plan, 83 F.3d 1002, 1006 (8th Cir. 1996)

(same).

i.

meaning in both § 502(a)(2) and § 502(a)(3). The two

provisions are in adjacent paragraphs of the same

subsection of the same statute. See Barnhill v. Johnson,

503 U.S. 393, 406 (1992) (“Normally, we assume that the

same terms have the same meaning in different sections

of the same statute.”). Thus, Congress presumably

intended “appropriate relief’ in § 502(a)(2) to have the

same meaning as “appropriate . . . relief’ in § 502(a)(3).

More importantly, in addressing the type of relief that

would normally not be “appropriate” under § 502(a)(3),

the Court in Varity referred to the views expressed in

Russell regarding the relief available under § 502(a)(2).

Russell stated that §502(a)(1)(B) - rather than

§ 502(a)(2) — authorizes individual beneficiaries to enforce

their rights under the plan, that § 502(a)(2) is concerned

with providing relief to the plan itself, and that the Court

was “reluctant to tamper with an enforcement scheme

crafted with such evident care as the one in ERISA.”

Russell, 473 U.S. at 144, 147.

Consistent with Varity and Russell, the lower courts

have repeatedly held that benefit claim actions must be

brought under § 502(a)(1)(B) and cannot be brought

under § 502(a)(2) by recasting or repackaging the benefit

claim as a fiduciary breach claim; otherwise, any benefit

claim could be recast as a fiduciary breach claim and

enforced under § 502(a)(2). See, eg., Drinkwater v.

Metropolitan Life Ins. Co., 846 F.2d 821, 826 (ist Cir.

1988) (stating that plaintiffs claim is a benefit claim

“artfully dressed in statutory clothing” and that if

claimants were allowed to play the “characterization

game, then the exhaustion requirement would be

rendered meaningless”); Coyne & Delaney Co. v. Blue

Cross & Blue Shield of Va., Inc., 102 F.3d 712, 714 (4th

Cir. 1996) (“To permit” a suit seeking medical benefits “to

proceed as a breach of fiduciary duty action would

encourage parties to avoid the implications of section

502(a)(1)(B) by artful pleading; indeed every wrongful

denial of benefits could be characterized as a breach of

1

fiduciary duty under [this] theory.”); Crummett v.

Metropolitan Life Ins. Co., No. 06-01450(HHK), 2007 U.S.

Dist. LEXIS 50956, at *4-*9 (D.D.C. July 16, 2007) (citing

cases); John H. Langbein et al., Pension and Employee

Benefit Law 756 (4th ed. 2006) (“Plaintiffs somevimes try

to recast benefit denial claims as fiduciary claims in order

to avoid exhaustion, and courts have been vigilant in not

allowing such artful pleading.”).

In Smith v. Sydnor, 184 F.3d 356 (4th Cir. 1999), the

Fourth Circuit emphasized that claims based on the

terms of the plan are subject to § 502(a)(1)(B), while

claims based on the terms of ERISA are not:

Simmons [v. Willcox, 911 F.2d 1077, 1081

(5th Cir. 1990)], Drinkwater, and Coyne &

Delaney instruct us that a claim for breach

of fiduciary duty is actually a claim for

benefits where the resolution of the claim

turns on an interpretation and application

of an ERISA-regulated pian rather than

upon an interpretation and application of

ERISA.

Sydnor, 184 F.3d at 362-63.

Here, petitioner alleges a loss of benefits based on a

claim that turns on the application and interpretation of

the terms of the Plan, rather than ERISA. He claims

that, contrary to the Plan’s terms, the amount of his

benefit under the Plan was not based on the performance

of the investments he specified in the directions he gave

in accordance with the Plan’s terms. His complaint

addresses neither the prudence of the Plan fiduciaries’

investment decision-making process nor whether their

investment decisions were prudent. It focuses solely on

how his benefit under the Plan was determined.

Petitioner's complaint thus makes a claim for Plan-based

benefits that is actionable solely under § 502(a)(1)(B).

- 16-

If plan participants could recast benefit claims as

fiduciary breach claims, they could easily circumvent the

procedures that Congress designed for benefit claims and

thereby undermine Congress’s efforts in ERISA to

encourage employers to sponsor employee benefit plans

and to ensure that participants receive the benefits that

the plan is intended to provide.

Dicta in two circuit court decisions can be read to

suggest that where a participant in a defined contribution

plan alleges fiduciary mismanagement of plan assets, the

participant can sue for relief under both § 502(a)(1)(B)

and § 502(a)(2). See Graden v. Conexant Sys. Inc., No. 06-

2337, 2007 U.S. App. LEXIS 18179, at *8-9 (3d Cir. July

31, 2007); Harzewski v. Guidant Corp., 489 F.3d 799, 804-

07 (7th Cir. 2007). The opinions in these cases suggest

that the terms of the plan should be deemed to

incorporate ERISA and that therefore a suit alleging

breach of fiduciary duty can be brought under

} 502(a)(1)(B). In neither case, however, did the plaintiffs

sue under § 502(a)(1)(B), and neither court decided that

plaintiffs could do so. In any event, that issue is not

presented by this case, and the Court need not address it.

If the Court were to address this issue, however, it

should reject the view that ERISA can be regarded as one

of the terms of a plan for purposes of § 502(a)(1)(B).

Treating ERISA as a term of the plan would be

inconsistent with the distinctions that Congress carefully

drew in the text of § 502(a), which refers to “the terms of

the plan” in § 502(a)(1)(B), but to “this title” (Title I of

ERISA) in § 502(a)(3) and § 502(a)(5) and to “section 409”

in § 502(a)(2).

Moreover, treating ERISA as a term of the plan would

be inconsistent with Congress's objective of giving federal

courts exclusive jurisdiction over the construction and

application of ERISA. ERISA vests state and federal

courts with concurrent jurisdiction only over

§ 502(a)(1)(B) and § 502(a)(7) suits (relating to the terms

o 37 -

of the plan and state actions to enforce medical child

support orders). See ERISA § 502(e)(1), 29 U.S.C.

§ 1132(e)(1); H.R. Conf. Rep. No. 93-1280 (1974),

reprinted in 1974 U.S.C.C.A.N. 5038, 5107. If ERISA

were treated as a term of a plan, state courts would, by

reason of § 502(a)(1)(B), have concurrent jurisdiction to

decide statutory ERISA issues rather than merely to

interpret and enforce plan terms — contrary to Congress's

intent.

B. A Participant May Sue Under

§ 502(a)(1)(B) For Individualized Relief

“ Regarding The Participant’s Current

Or Future Benefits Or Rights Under

The Terms Of An Employee Benefit

Plan.

In Aetna Health Inc. v. Davila, 542 U.S. 200 (2004),

this Court summarized § 502(a)(1)(B) as follows:

This provision is relatively straightforward.

If a participant or beneficiary believes that

benefits promised to him under the terms

of the plan are not provided, he can bring

suit seeking provision of those benefits. A

participant or beneficiary can also bring

suit generically to “enforce his rights”

under the plan, or to clarify any of his

rights to future benefits. Any dispute over

the precise terms of the plan is resolved by

@ court under a de novo review standard,

unless the terms of the plan “givie] the

administrator or fiduciary discretionary

authority to determine eligibility for

benefits or to construe the terms of the

plan.”

Id. at 210 (citations omitted).

- 18-

The Court has addressed the scope of § 502(a)(1)(B) on

several occasions.

In Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41

(1987), the Court ruled that ERISA § 514 preempted a

state common-law action for improper processing of a

claim for disability benefits on the ground that the state

law related to an employee benefit plan.

In Metropolitan Life Insurance Co. v. Taylor, 481 U.S.

58 (1987), the Court held that a state common-law claim

alleging an improper denial of medical care coverage to

which the plaintiff was entitled solely because of the

terms of an ERISA-regulated benefit plan was

automatically converted into a federal claim. Jd. at 65-68.

The Court explained that “causes of action within the

scope of the civil enforcement provisions of 502(a) [are]

removable to federal court.” Jd. at 65-66 (emphasis

added).

In both Pilot Life and Taylor, the Court concluded

that the state-law claims fell within the scope of

§ 502(a)(1)(B) and therefore were preempted because the

asserted state-law claims required the plaintiffs to show,

at a minimum, that they were entitled to the benefits in

question under the terms of their ERISA-governed plans.

More recently, relying on Taylor and Pilot Life, the

Court ruled in Aetna Health that § 502(a) preempted

state-law causes of action that fell “within the scope of

§ 502(a)(1)(B)”:

(I]f an individual brings suit complaining of

a denial of coverage for medical care, where

the individual is entitled to such coverage

only because of the terms of an ERISA-

regulated employee benefit plan, and where

no legal duty (state or federal) independent

of ERISA or the plan terms is violated then

-19-

the suit falls within the scope of ERISA

§ 502(a)(1)(B).

Aetna Health, 542 U.S. at 210 (internal quotation

marks omitted).

Taylor, Pilot Life, and Aetna Health establish that a

claim falls “within the scope of § 502(a)(1)(B)” if the claim

seeks to remedy what the claimant regards as a wrongful

denial of benefits offered by an ERISA-regulated plan,

l.e., to vindicate the claimant’s right to present or future

benefits under the terms of the plan, rather than to

vindicate a right that is independent of the terms of the

plan, such as a right under ERISA or any other statute.

Here, because petitioner's complaint seeks to vindicate

his right to benefits under the terms of the Plan, his

claim falls “within the scope of § 502(a)(1)(B).”8

C. Because Petitioner Seeks

Individualized Relief Regarding His

Current Or Future Benefits Or Rights

Under The Terms Of An Employee

Benefit Plan, He Could Have Sued

Under § 502(a)(1)(B).

Section 502(a)(1)(B) addresses Congress’s primary

concern regarding individual plan participants and

beneficiaries: that they receive the benefits and rights to

which they are entitled under their plans. To this end,

8 Consistent with the text of § 502(a)(1)(B) and Pilot Life, Taylor, and

Aetna Health, courts have held that § 502(a)(1)(B) provides a cause of

action only for benefits due under the terms of the plan, and not for

ERISA statutory claims. See, e.g., Todisco v. Verizon Commce'ns, Inc.,

No. 06-1957, 2007 U.S. App. LEXIS 18621 (1st Cir. Aug. 6, 2007); Ross

v. Rail Car Am. Group Disability, Inc. Plan, 285 F.3d 735, 740, 742

(8th Cir. 2002); Carrabba v. Randalls Food Mkts., 252 F.3d 721 (5th

Cir. 2001), affg 145 F. Supp. 2d 763 (N.D. Tex. 2000); Haberern v.

Kaupp Vascular Surgeons Lid. Defined Benefit Pension Plan, 24 F.3d

1491, 1500-01 (3d Cir. 1994).

- 20-

§ 502(a)(1)(B) makes available a variety of remedies,

including declaratory judgment, injunctions and

monetary relief. See Russell, 473 U.S. at 147; Firestone

Tire & Rubber Co. v. Bruch, 489 U.S. 101, 108 (1989).

1. Petitioner Seeks

Individualized Relief.

Petitioner seeks relief only for himself. His complaint

asks the court to award “make whole relief’ to “Plaintiff.”

He does not seek relief for other participants or for the

Pian itself. In fact, the Plan is one of the defendants that

petitioner sued. The complaint refers to the Plan’s failure

to follow petitioner's directions regarding the investment

of “his money,” but it neither asserts that other

participants had been treated in the same way nor claims

that the Plan is an intended beneficiary of the suit in

which the Plan is a defendant.?

The relief that petitioner seeks is the amount by

which, he alleges, the value of his interest in the Plan has

been depleted, not the amount of a loss that the Plan has

incurred. The complaint does not even allege that the

Plan has incurred a loss. See Matassarin v. Lynch, 174

F.3d 549, 566 (5th Cir. 1999) (no cause of action under

§ 502(a)(2) unless a loss to the plan).!°

9 See Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 146-47

(1985) (“To recover the benefits due her, she could have filed an action

pursuant to § 502(a)(1)(B).... If the plan administrator's refusal to

pay contractually authorized benefits had been willful and part of a

larger systematic breach of fiduciary obligations, respondent in this

hypothetical could have asked for removal of the fiduciary pursuant to

§§ 502(a)(2) and 409.”).

10 The complaint named only DeWolff and the Plan as defendants and

did not allege facts sufficient to establish that the alleged failure to

follow petitioner's directions was caused by a fiduciary'’s breach of

fiduciary duty rather than by a clerical error. See ERISA § 3(21)(A), 29

U.S.C. § 1002(21)(A) (person is a fiduciary only “to the extent”

performing or responsible for performing fiduciary functions); 29

-2]-

2. Petitioner Seeks Individualized

Relief Regarding His Current Or

Future Benefits Or Rights.

Petitioner seeks relief relating to both his current and

future benefits and his current and future rights. He

requests relief directly related to the amount of his

benefit under the Plan: the balance in his account.

Petitioner alleges that the Plan’s failure to follow his

investment directions caused his account balance to be

depleted by approximately $150,000. Petitioner thus

seeks relief relating to both his current and future

benefits and his current and future rights to give

investment directions.!!

3. Petitioner Seeks Individualized

Relief Regarding His Current Or

Future Benefits Or Rights

Under The Terms Of An

Employee Benefit Plan.

The basis for petitioner’s complaint is that the Plan’s

failure to follow his directions regarding the investments

allocable to his account reduced the size of his account

C.F.R. § 2509.75-8, D-2 (clerical functions are not fiduciary functions)

(2007); Pegram v. Herdrich, 530 U.S. 211, 225-26 (2000) (“threshold

question is ... whether that person was acting as a fiduciary (that is,

was performing a fiduciary function) when taking the action”); Beddall

v. State St. Bank & Trust Co., 137 F.3d 12, 18-21 (1st Cir. 1998)

(mechanical administrative responsibilities are not fiduciary

responsibilities).

'! Investments allocable to a participant's account and a participant's

nght to direct such investments are treated as plan benefits for

purposes of applying § 401(a)(4) of the Internal Revenue Code, which

provides that a tax-qualified plan may not provide discriminatory

benefits. See, e.g., Treas. Reg. § 1.401(a)(4)-1(a), -1(b)(3), -4(a), -4(b), -4

(c), -4(e)(3)(in)(B); Rev. Rul. 93-87, 1993-2 C.B. 125, superseding Rev.

Rul. 73-383, 1973-2 C.B. 137, Rev. Rul. 71-93, 1971-1 C.B. 122, and

Rev. Rul. 70-370, 1970-2 C.B. 84 (rules in effect when ERISA was

enacted).

- 22.

balance, which determined the size of his benefit under

the Plan. Because ERISA does not give participants the

right to direct investments, the relief that petitioner

seeks is necessarily based on the terms of the Plan.

4. Section 502(a)(1)(B) Authorizes

The Relief Petitioner Seeks.

Many participants and beneficiaries in other plans,

with claims similar or analogous to petitioner’s claim,

have filed civil actions under § 502(a)(1)(B) to enforce

their claims. Where a claimant has established that he or

she has not received the benefits or been afforded the

rights to which the claimant was entitled under the terms

of the plan, courts have ordered relief, including

monetary relief, to make up for the plan’s failure to

provide the benefits or rights to which the claimant was

entitled under the terms of the plan.

Illustrative claims for which relief has been sought

under § 502(a)(1)(B) are listed below. The claimants

obtained the relief they sought in some cases, but not in

others. This is because the courts did not consider every

claim to be meritorious, rather than because relief under

§ 502(a)(1)(B) was unavailable. See generally Aetna

Health, 542 U.S. at 210-11 (“Upon the denial of benefits,

respondents could have paid for the treatment

themselves and then sought a reimbursement through a

§ 502(a)(1)(B) action. . . .”).

e Alleged failure to implement investment directions in

accordance with the terms of the plan: Hess v. Reg-

Ellen Mach. Tool Corp., 423 F. 3d 653, 657 (7th Cir.

2005); Babcock v. Computer Assocs. Int'l, Inc., 186 F.

Supp. 2d 253, 261 (E.D.N.Y. 2002).

e Alleged failure to make rollover from 401(k) plan to

IRA on the date required by the plan: Saylor v. Ret.

Comm., No. 4:05CV138, 2007 U.S. Dist. LEXIS 54399

(E.D. Ark. July 25, 2007).

- 23.

Failure to allow employees allegedly eligible

employees to participate in defined contribution plan:

Vizcaino v. Microsoft Corp., 120 F.3d 1006, 1013 (9th

Cir. 1997); Krackow v. Dr. Jack Kern Profit Sharing

Plan, No. 00 CV 2550 (NG) (RLM), 2002 U.S. Dist.

LEXIS 20524, at *11 (E.D.N.Y. May 29, 2002).

Alleged failure to value benefits on the date specified

by the plan: Janeiro v. Urological Surgery Prof'l Ass'n,

457 F.3d 130, 136-37, 142-43 (1st Cir. 2006); Nelson v.

EG&G Energy Measurements Group, Inc., 37 F.3d

1384 (9th Cir. 1994).

Alleged failure to distribute benefits on the date

specified by the plan: Dobson v. Hartford Fin. Servs.

Group, Inc., 389 F.3d 386, 396-400 (2d Cir. 2004);

Rego v. Westvaco Corp., 319 F.3d 140, 148 (4th Cir.

2003).

Alleged failure to fund benefits at time of plan spin-off

in accordance with the terms of the plan: Kinek v.

Paramount Commce'ns, Inc. Pension Plan, 22 F.3d 503,

512-13 (2d Cir. 1994).

Alleged failure to provide health insurance coverage

required by terms of the plan: Heffner v. Blue Cross &

Blue Shield of Ala., Inc., 443 F.3d 1330 (11th Cir.

2006) (citing cases).

Payment of death benefit to person alleged not to be

the beneficiary designated in accordance with the

plan: Kennedy v. Plan Adm’ for DuPont Sav. & Inv.

Plan, No. 05-41851, 2007 U.S. App. LEXIS 19336, at

*3-*8 (5th Cir. Aug. 15, 2007).

These cases demonstrate that § 502(a)(1)(B) authorizes

the grant of monetary relief to participants who establish

that they have not received the benefits to which they are

entitled under the terms of the plan. The cases belie any

24.

claim that ERISA must be amended to authorize a court

to grant such relief. !?

D. Because § 502(a)(1)(B) Offered

Adequate Relief For Petitioner’s

Alleged Injury, Petitioner Was Not

Entitled To Bring This Suit Under

§ 502(a)(2) Or (3).

As explained in Section III.C, petitioner had the right

to seek the benefits he claimed by exercising his rights

under ERISA §503 and the Plan’s benefit claim

procedure, and if his claim was denied initially, and

denied again on review, he had the right to sue under

§ 502(a)(1)(B). Because petitioner failed to do this, he

gave up his right under ERISA to claim the benefits he

believes he is due under the terms of the Plan.

The relief that petitioner seeks under § 502(a)(2) and

(3) — an award equal to the benefits he claims to have lost

— is the same relief that he could have sought under

2 Contrary to petitioner's assertion (Pet. Br. at 17-18), by drawing on

the funds in an unallocated suspense account, a defined contribution

plan can make a payment to a participant, or allocate funds to a

participant's account, without reducing other participants’ account

balances. The funds in such suspense accounts come from a variety of

sources, such as employer contributions made early in the year and

forfeitures (typically created by participants who terminate

employment before being fully vested). Such contributions and

forfeitures can be allocated initially to a suspense account and then

allocated to individual participants’ accounts, or used to pay plan

expenses, later in the year. See Rev. Rul. 80-155, 1980-1 C.B. 84

(permitting plan to hold unallocated funds until year end). Suspense

accounts also can be created for a vanety of other reasons. See, e.g.,

Rev. Proc. 2006-27, App. A § .08, App. B. § 2.04(2)(a), 2006-1 C.B. 945.

If a plan lacks sufficient unallocated funds to make a payment or

allocation, the shortfall can be funded by future employer

contributions or, if a breach of fiduciary duty caused the plan to incur

a loss, by “restorative payments” that the plan collects from the

responsible fiduciary pursuant to a separate action agaist the

fiduciary under § 502(a)(2). See Rev. Rul. 2002-45, 2002-1 C.B. 116.

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§ 502(a)(1)(B). The relief that petitioner seeks under

§ 502(a)(2) and (3) is not “appropriate” both because it is

unnecessary and because it improperly converts a benefit

claim into a fiduciary breach claim.

It is irrelevant that, by suing only under § 502(a)(2)

and (3), petitioner gave up his right to sue under

§ 502(a)(1)(B). See Jones v. American Gen. Life &

Accident Ins. Co., 370 F.3d 1065, 1073 (11th Cir. 2004)

(“The relief that the plaintiffs sought in their complaint

was not relevant to this inquiry.”), ERISA’s remedial

provisions allow a participant in an existing plan to make

a claim for benefits under the terms of the plan only

under § 502(a)(1)(B). Given ERISA’s detailed remedial

provisions, it defies common sense to think that Congress

intended to allow a participant with a claim for benefits

under the terms of the plan to evade the rules that

Congress designed for such claims and to invoke instead

rules designed for other types of claims. Cf. Republic Steel

Corp. v. Maddox, 379 U.S. 650, 653 (1965) (“A ... rule

which would permit an individual employee to completely

sidestep available grievance procedures in favor of a

lawsuit has little to commend it.”).

IV. Allowing Benefit Claim Suits To Be Brought

Under §502(a)(2) Or (3) Would Undermine

ERISA’s Benefit Claim Procedures.

A. Participants Could Circumvent The

Exhaustion Requirement And The

Abuse Of Discretion Standard Of

Review.

If participants were allowed to recast benefit claims

as fiduciary breach claims, and to pursue benefit claims

outside of the procedures that ERISA prescribes for

benefit claims, participants could readily circumvent the

benefit claim process, including the exhaustion

requirement and the abuse of discretion standard of

review that apply to most benefit claims under ERISA.

. 26 -

1. Exhaustion.

ERISA’s benefit claim procedures and the exhaustion

requirement help to avoid unnecessary lawsuits and to

foster efficient, nonadversarial dispute resolution and

consistent decision-making by experienced and

knowledgeable plan administrators. They also develop a

record for a court to review in the event of litigation. See

Makar v. Heath Care Corp., 872 F.2d 80, 82-83 (4th Cir.

1989). If petitioner's position is upheld, benefit claimants

will be able to circumvent plans’ benefit claim procedures

and deprive plans and plan participants of the benefit of

the exhaustion requirement.

The courts of appeals agree that, in general, ERISA’s

remedial scheme implicitly requires that, in order to state

a claim for benefits under § 502(a)(1)(B), a participant

must first exhaust the plan’s administrative remedies.

See Fallick v. Nationwide Mut. Ins. Co., 162 F.3d 410, 418

n.4 (6th Cir. 1998) (citing cases); Kennedy v. Empire Blue

Cross & Blue Shield, 989 F.2d 588, 594-95 (2d Cir.

1993).'° The vast majority of benefit claims are resolved

through this process. See 65 Fed. Reg. at 70,263, tbl. 4, ll.

1-6 (Nov. 21, 2000).

Although we do not know what issues would have

been raised if petitioner had followed the Plan’s benefit

claim procedure, the Plan’s administrators might have

questioned whether petitioner's directions were

(1) received by the Plan, (2) timely and unambiguous,

(3) consistent with the Plan’s requirements regarding the

procedure for giving investment directions, or

'8 Courts have excused failure to comply with the exhaustion

requirement in some cases, such as where the court has found that

resorting to the plan's procedures would be futile or that the plan had

thwarted the proper operation of the claium procedures. See, e.g., Paese

v. Hartford Life & Accident Ins. Co. 449 F.3d 435, 443-49 (2d Cir.

2006); Lee v. California Butchers’ Pension Trust Fund, 154 F.3d 1075,

1079-81 (9th Cir. 1998).

- 27.

(4) unlawful, inconsistent with Plan rules, or impossible

or impractical to implement. Analogous issues arise

under other plans, and plan administrators are typically

well-positioned to resolve them.

2. Standard Of Review.

In Bruch, 489 U.S. at 115, the Court held that, if a

plan administrator or other fiduciary has been granted

discretion to construe the terms of the plan and a plan

participant challenges the administrator or fiduciary’s

decision to deny a claim for benefits in an action under

ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), the court

should apply the abuse of discretion standard in

reviewing the benefit denial decision. The Court stated

that “if a benefit plan gives discretion to an administrator

or fiduciary who is operating under a conflict of interest,

that conflict must be weighed as a ‘facto{r] in determining

whether there is an abuse of discretion.” Jd. (quoting

Restatement (Second) of Trusts § 187 cmt. d (1959)).

The abuse of discretion standard of review assures the

employer that if its plan grants discretion to a plan

fiduciary to interpret the terms of the plan, the plan will

be administered consistently and in accordance with the

employer's purpose in establishing the plan. In Black &

Decker Disability Plan v. Nord, the Court contrasted

statutory claims, where benefit entitlement is based on

uniform federal criteria, with plan-based claims under

voluntary ERISA plans where employers have great

leeway to design benefits:

“(T]he validity of a claim to benefits under

an ERISA plan,” on the other hand, “is

likely to turn,” in large part, “on the

interpretation of terms in the plan at

issue.” It is the Secretary of Labor's view

that ERISA is best served by “presev[ing]

the greatest flexibility possible for ..

operating claims processing systems

- 28 -

re

consistent with the prudent administration

of a plan.” Deference is due that view.

538 U.S. 822, 833-34 (2003) (citations omitted).

If petitioner's position is upheld, benefit claimants

will be able to circumvent plans’ benefit claim procedures,

and plans will lose the benefit of the abuse of discretion

standard of review.

B. Courts Would Be Required To Review

Benefit Claims Without An

Administrative Record.

In general, a plan administrator's decision to deny a

claim for benefits under the plan is reviewed solely on the

basis of the record before the administrator. See, e.g.,

Liston v. UNUM Corp. Officer Severance Plan, 330 F.3d

19, 23-25 (1st Cir. 2003) (citing cases). If claimants can

evade plans’ benefit claim procedures by recasting their

benefit claims as fiduciary breach claims, courts will often

have no record to review and will therefore be required to

assume decision-making responsibilities that Congress

assigned to plan administrators.

C. Plan Costs Would Increase, Harming

Employees And Benefit Plans.

If participants with benefit claims believe that

litigation will improve their prospeets for recovery, plans’

litigation costs will increase, and plans will be required to

allocate a higher percentage of their resources to

litigation and a smaller percentage to benefits. Mounting

litigation expenses will also increase the pressure on

fiduciaries to resolve benefit claims by settling on terms

that are more favorable to claimants than the merits of

the claims would justify — diverting plan assets to provide

benefits that the plan was not designed to provide.

Moreover, permitting benefit suits to be brought outside

of ERISA’s benefit claim procedures will, contrary to

- 29 -

Congress's intent, result in more benefit claim decisions

being made in the first instance by judges and fewer by

fiduciaries familiar with the operation, history, and

purposes of the plan.

These consequences will discourage employers from

establishing new benefit plans, encourage employers to

terminate existing plans, and require plan fiduciaries to

increase the perceritage of plan resources devoted to legal

fees and costs and to reduce the percentage devoted to

providing benefits. See Cooper v. IBM Pers. Pension Plan,

457 F.3d 636, 642 (7th Cir. 2006) (“It is possible ... for

litigation about pension plans to make everyone worse

off.”), cert. denied, 127 S. Ct. 1143 (2007). This is hardly

the vision that Congress had when it enacted ERISA.

CONCLUSION

For all of these reasons, as well as those set forth in

the brief for respondents, amicus curiae respectfully

urges the Court to affirm the decision below.

Respectfully submitted,

JOHN M. VINE

Counsel of Record

ROBERT A. LONG, JR.

JEFFREY G. HUVELLE

THOMAS L. CUBBAGE III

CHRISTIAN J. PISTILLI

Covington & Burling LLP

1201 Pennsylvania Ave., N.W.

Washington, D.C. 20004

September 11, 2007 (202) 662-6000

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