Petition for Writ of Certiorari — Goeres v. Charles Charles Schwabab & Co Co., Inc. (No. 06-1521)

No.

Sn The

Supreme Court of the Anited States

¢

LOUIS GERARD GOERES,

Petitioner.

V.

CHARLES SCHWAB & CO., INC., SCHWAB

RETIREMENT PLAN SERVICES, INC.,

and ADMINISTRATIVE COMMITTEE OF

THE SCHWABPLAN RETIREMENT

SAVINGS AND INVESTMENT PLAN,

Respondents.

7

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

¢

PETITION FOR WRIT OF CERTIORARI

«

TERESA S. RENAKER

JEFFREY GREG LEWIS

Counsel of Record

MARGARET E. HASSELMAN

LEWIS, FEINBERG, LEE,

RENAKER & JACKSON, P.C.

1330 Broadway, Suite L800

Oakland, CA 94612

(510) 839-6824

Attorneys for Petitioner

t*e ALE LAW BRIEF PRINTING eee.) ea oe |

ORC ALL COLL ES wi 342 2851

QUESTION PRESENTED

Section 502(a)(3) of the Employee Retirement Income

Security Act of 1974 (“ERISA”) authorizes suit by a plan

participant or beneficiary for “equitable relief” from a

violation of the statute. Petitioner Goeres sought monetary

relief to make him whole for losses he suffered in the

retirement plan account of which he was the beneficiary,

allegedly due to a sixteen-month delay by the plan’s

fiduciaries in recognizing him as the beneficiary. The

courts below held that even if Mr. Goeres proved that the

plan’s fiduciaries breached the duties they owed him under

ERISA, the statute would afford him no remedy for the

breach. The question presented affects the rights of all

participants in ERISA-governed plans who are injured by

breaches of fiduciary duty that harm them personally but

do not harm the plans in which they participate.

The Question Presented is:

Does “equitable relief” under ERISA § 502(a)(3), 29

U.S.C. § 1132(a)(3), include make-whole monetary relief

against an ERISA plan fiduciary to remedy individual

harm suffered by a plan participant or beneficiary due to

the fiduciary’s breach of obligations imposed by ERISA?

TABLE OF CONTENTS

Page

QU GST IIIN Fee aD eithstnntiscensnieesecancecescescesocscncnns i

ASE IE GI entice sskensks wittnssenesevesserscescescnses il

"TABLES OP AU TE eee 6 Base siccnsccevncccsccssssesiccssssesccencccees iii

PIR a ies Rar Weeks edidlibncilens chatsnnisscssvennscssoecsessazeees 1

STATEMENT OF JURISDICTION ............ccsceeeeesseesnes 1

RELEVANT STATUTORY PROVISION .................00008 1

STATEMENT OF THE CASE ...........cessscssesssossesssccsseees 2

REASONS FOR GRANTING THE WRIT................008 7

I. The Nature of “Equitable Relief” Available

Against a Breaching Fiduciary Is a Significant

and Recurring Remedial Issue That Has Gen-

erated Pervasive Confusion and Conflicting

Results in the Lower Courts ................s:ecseeceeeeee 7

II. In Analyzing the Relief Available Against

Breaching Fiduciaries, the Lower Courts Have

Persistently Failed to Apply the Historical In-

quiry Mandated by This Court, Resulting in

Erroneous Denial of Relief That Was Typically

Av alii Ti Te ibaa bineachebiahansys ctnesscvessccees 13

III. Alternatively, the Mertens Standard Requiring

That Relief Have Been “Typically Available in

Equity” Is Incorrect and Unworkable; Cor-

rectly Interpreted, Section 502(a)(3) Author-

izes All Relief Available Against a Fiduciary for

EOPOURRA: GE Fe Ne capes ance se acaba adanchessicecseccesceseesss 19

COIN CLASES itessthersiinsiea edie adtiaeakinistrexaencencessveseen 22

ill

TABLE OF AUTHORITIES

Page

CASES

Aetna Health Inc. v. Davila, 542 U.S. 200 (2004)......... 9,10

Allinder v. Inter-City Prods. Corp. (USA), 152 F.3d

IN I HII cis cnccssncuiscimbasavnbuienadnehieoaialobadsenihuucves 9

Armstrong v. Jefferson Smurfit Corp., 30 F.3d 11

CURIE: SIMD asics dicnitts wccdesepacnasianhcaioncewnatpheieneengeiiiesloietingien 12, 16

Bast v. Prudential Ins. Co. of Am., 150 F.3d 1003

PRE aE: IEEE anvndediscavncnsinsdenevavilistessnaleetigeidaasbiccebehants 12

Bowerman v. Wal-Mart Stores, Inc., 226 F.3d 574

SE SI, UID ientichsitncsarpnsihassigcimardoraihavnibhanns sccksccmsaincudaiaANsaioiiahnte 10

Brosted v. Unum Life Ins. Co. of Am., 421 F.3d 459

URN NI BIIIEIED std ichaaidaissnnaicsasnesniaienbdaaiacabseianteaunbiatendmnsieinie 22

Brown v. Aventis Pharmaceuticals, Inc., 341 F.3d

ee ee ts SO Ridipaiithicnstnsnacinnsinecsee cin osnniaenanedinannabdaekabnens 11

Calhoon v. Trans World Airlines, Inc., 400 F.3d 593

CR RD hihi baleikiiicassetiaicaisctinicinits <ubiniinihiapatipiintabinnndiencnieis 10

Callery v. United States Life Ins. Co. in the City of

New York, 392 F.3d 401 (10th Cir. 2004) ........ ee. 16

Central States, Southeast & Southwest Areas

Pension Fund v. Central Transport, Inc., 472 U.S.

| MERRIE EeE a Cuenta Raat en epee Le Oe 20

Cicio v. Does, 321 F.3d 83 (2d Cir. 2003)...............ceccccceeseeee 9

Crosby v. Bowater Inc. Retirement Plan for Salaried

Employees of Great Northern Paper Inc., 382 F.3d

Se Ce Es IR Aaahiir siticathhsiacsihsks keriphcdacaaiaaibuuniviies 17

DiFelice v. Aetna U.S. Healthcare, 346 F.3d 442 (3d

A FEUD siscionsckccitscmsnanbichpeeababunliesbcacanimeailaaaiaiiieabkda Sumauuiaacabin nei 9

Donovan v. Bierwirth, 680 F.2d 263 (2d Cir. 1982) ............ 2

iv

TABLE OF AUTHORITIES - Continued

Page

Farr v. U.S. West Communications, Inc., 151 F.3d

I aah crac cisco ink sconuahabcaeeisinainene 12

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101

CIT cil nbskidies ditaiidiidinlinaisiabbinsacdumsiadssdbinbeenbpizaaaibbaiieebanlecave 20

FMC Medical Plan v. Owens, 122 F.3d 1258 (9th

SI, MIE PF ichisiiiethcinnduascchuieninceceinuacenmathdaldulstamubbiananoriessss 4

Gerbec v. United States, 164 F.3d 1015 (6th Cir.

RR i addeiiiniges ch ciekasiccalidiadsasa as anni cnghaaiebaunsanatdcdableaaginncis 19

Great-West Life & Annuity Ins. Co. v. Knudson, 534

SAAR ee APE Rikatincesennoninictincyiiebanbinbinekebeabcubveeansiocs passim

Harris Trust & Sav. Bank v. Salomon Smith

Barney, Inc. , 530 U.S. 238 (2000)...........ccccssssssocccveserses 20

Krohn v. Huron Memorial Hosp., 173 F.3d 542 (6th

GR SEEDS EERE RGR CO tent en Oe Phlpe per oe Rar Roe ONT ema 10

LaRue v. DeWolff, Boberg & Assocs., 450 F.3d 570

EAI: GRP Sis Siinncorcnctiicnannncobecjanbendvensusibnidunddain 12, 17, 21

LaRue v. DeWolff, Boberg & Assocs., Inc., 127 S. Ct.

IIE Poti hth ss andciininn sicapasesciiunicacabcinsubclumbimiitbiacaiiainess 2,9

Mass. Mutual Life. Ins. Co. v. Russell, 473 U.S. 134

SE UUNIIINITTN. insta ps ia hci psd tel acolo ian telson 20

Mathews v. Chevron Corp., 362 F.3d 1172 (9th Cir.

SD icinknicesnaoiisisicibaincach sis ciastunaribusslaibiaside ahcannaiadaauanie aavedeAwalebaaandaks 21

McDonald v. Househoid Intern., Inc., 425 F.3d 424

be 5 E.R eAaRRRE eP- vom en mere mmc ary ek cen meme 9

McDonald v. HSBC Finance Corp., 2006 WL

DEBIT Ae. TH: Rete, 9, BOGGS iv ccecsccvcsccscsvasssccessscscnsees 9

McLeod v. Oregon Lithoprint Inc., 102 F.3d 376 (9th

Oe TR a ea 7, 10, 16

TABLE OF AUTHORITIES — Continued

Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545

(1928)

Mertens v. Hewitt Assocs., 508 U.S. 248 (1993)

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

Peralta v. Hispanic Business, Inc., 419 F.3d 1064

(9th Cir. 2005)

Pereira v. Farace, 413 F.3d 330 (2d Cir. 2005)

Qualchoice, Inc. v. Rowland, 367 F.3d 638 (6th Cir.

Sereboff v. Mid Atlantic Medical Services, Inc., 126

S. Ct. 1869 (2006)

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983)

Slice v. Sons of Norway, 34 F.3d 630 (8th Cir. 1994)

Varity Corp. v. Howe, 516 U.S. 489 (1996)

Westaff (USA) Inc. v. Arce, 298 F.3d 1164 (9th Cir.

STATUTES

ERISA § 2(b), 29 U.S.C. § 1001(b)

ERISA § 404(a), 29 U.S.C. § 1104(a)

ERISA § 404(a)(1), 29 U.S.C. § 1104(a)(1)

ERISA § 502, 29 U.S.C. § 1132

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

TABLE OF AUTHORITIES - Continued

Page

OTHER AUTHORITIES

DAN B. Dosss, HANDBOOK ON THE LAW OF REMEDIES

fh RRO SERS ie ae NRT AC OEY LoS Te AP eR 15

John H. Langbein, What ERISA Means by “Equita-

ble”: The Supreme Court’s Trail of Error in Rus-

sell, Mertens, and Great-West, 103 COLUMBIA L.

BRN cee eR cciianiitihsimidinsticeniancanuiaieten 10, 18, 19, 20, 21

Dana M. Muir, Fiduciary Status as an Employer’s

Shield: The Perversity of ERISA Fiduciary Law,

2 U. Pa. J. OF LABOR & EMPLOYMENT LAW 391

FI Libis oh cieichdhstns dausnia hannicstohcanleh cane entcbanbatdnashankiehaeuannath 10

JOHN NORTON POMEROY, A TREATISE ON EQUITY

JURISPRUDENCE (5th ed. 1941) ....... cee ecece eens 13, 14, 15

RESTATEMENT (SECOND) OF TRUSTS (1959).......0.2-+- 14, 15, 18

APPENDIX

Opinion of the United States Court of Appeals for

the Ninth Circuit, Decided February 14, 2007....... App. 1

Memorandum Opinion and Order of the United

States District Court for the Northern District of

California, Filed September 28, 2004..................... App. 3

PETITION FOR WRIT OF CERTIORARI

Petitioner Louis Gerard Goeres respectfully petitions

for a writ of certiorari to review the decision of the U.S.

Court of Appeals for the Ninth Circuit in this case.

ae

_

OPINIONS BELOW

The order of the U.S. Court of Appeals for the Ninth

Circuit (Pet. App. 1-2) is found at 2007 WL 495191 (9th

Cir. Feb. 14, 2007). The order of the district court (Pet.

App. 3-14) is found at 2004 WL 2203474, 33 Employee

Benefits Cas. 2302 (N.D. Cal. Sept. 28, 2004).

¢

STATEMENT OF JURISDICTION

The U.S. Court of Appeals for the Ninth Circuit issued

its order on February 14, 2007. This Court has jurisdiction

under 28 U.S.C. § 1254(1).

RELEVANT STATUTORY PROVISION

Section 502 of the Employee Retirement Income

Security Act of 1974 (“ERISA”), 29 U.S.C. § 1132, as

amended, provides in relevant part:

(a) Acivil action may be brought —

* * *

(3) by a participant, beneficiary, or fiduci-

ary (A) to enjoin any act or practice

which violates any provision of this title

or the terms of the plan, or (B) to obtain

2

other appropriate equitable relief (i) to

redress such violations or (ii) to enforce

any provisions of this title or the terms

of the plan.

STATEMENT OF THE CASE

1. This case raises the frequently litigated but

unresolved issue of whether monetary relief may be

equitable relief available for breach of the fiduciary obliga-

tions imposed by ERISA on persons who administer

employee benefit plans.' ERISA comprehensively regulates

employee benefit plans sponsored by private employers.

Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90 (1983). A

primary goal of the statute is to protect “the interests of

participants in employee benefit plans and their benefici-

aries ... by establishing standards of conduct, responsibil-

ity, and obligation for fiduciaries of employee benefit plans,

and by providing for appropriate remedies, sanctions, and

ready access to the Federal courts.” ERISA § 2(b), 29

U.S.C. § 1001(b).

The obligations of a plan fiduciary to the participants

and beneficiaries of the plan “are those of trustees of an

express trust — the highest known to the law.” Donovan v.

Bierwirth, 680 F.2d 263, 272 n.8 (2d Cir.), cert. denied, 459

U.S. 1069 (1982). In particular, ERISA requires that a

plan fiduciary act solely in the interest of the plan’s

participants and beneficiaries. ERISA § 404(a)(1), 29

* This Court recently invited the Solicitor General to file a brief

expressing the views of the United States in a case presenting the same

question. LaRue v. DeWolff, Boberg & Assocs., Inc., 127 S. Ct. 1393

(2007).

U.S.C. § 1104(a)(1). This duty of loyalty is “[t]he most

fundamental duty owed by the trustee to the beneficiaries

of the trust,” Pegram v. Herdrich, 530 U.S. 211, 224 (2000)

(internal quotation marks omitted), demanding “(nJot

honesty alone, but the punctilio of an honor the most

sensitive,” Meinhard v. Salmon, 249 N.Y. 458, 464, 164

N.E. 545, 546 (1928) (Cardozo, J.).

2. ERISA establishes not only standards of fiduciary

conduct but, equally importantly, a mechanism for enforc-

ing those standards. Section 502, ERISA’s enforcement

mechanism, provides the exclusive means of enforcing

rights and obligations under the statute. 29 U.S.C. § 1132.

Section 502(a)(3) authorizes an action by an individual

participant or beneficiary (1) to enjoin an act or practice

that violates ERISA, or (2) to obtain other appropriate

equitable relief to redress the violation or to enforce

ERISA. 29 U.S.C. § 1132(a)(3). Section 502(a)(3) permits

an action for breach of fiduciary duty where the relief

flows to the participant or beneficiary individually, rather

than to the plan as a whole. Varity Corp. v. Howe, 516 U.S.

489, 512 (1996). This Court has denominated Section

502(a)(3) ERISA’s “catchall” provision, meant to “act as

a safety net, offering appropriate equitable relief for

injuries caused by violations that § 502 does not elsewhere

adequately remedy.” Id. Section 502(a)(3) gives force to

ERISA’s objective of protecting the interests of plan

participants and beneficiaries, because “it is hard to

imagine why Congress would want to immunize breaches

of fiduciary obligation that harm individuals by denying

injured ‘<i2ficiaries a remedy.” Jd. at 513.

3. This Court has three times taken up the meaning

of “equitable relief” in Section 502(a)(3), but only in the

context of relief against nonfiduciaries, unlike the relief

4

against fiduciaries sought in this case. In Mertens uv.

Hewitt Assocs., 508 U.S. 248 (1993), this Court first

addressed the nature of the “equitable relief” available

under Section 502(a)(3) for violations of ERISA, holding

that “equitable relief” is the relief that was typically

available in equity in the days of the divided bench. Id. at

256. The Court held that monetary relief against a nonfi-

duciary for knowing participation in a fiduciary breach,

rather than being typically equitable, was legal relief, and

therefore unavailable under Section 502(a)(3). Id. at 255.

Mertens led some courts to mis-cast the inquiry into

the equitable nature of requested relief as an inquiry into

“the substance of the remedy sought” and to hold that

where the substance was money, the relief was not avail-

able. FMC Medical Plan v. Owens, 122 F.3d 1258, 1261

(9th Cir. 1997) (holding that “monetary relief is not avail-

able under” Section 502(a)(3) where plan fiduciary sought

to enforce plan reimbursement provision against partici-

pant); accord Slice v. Sons of Norway, 34 F.3d 630, 633

(8th Cir. 1994) (holding that monetary relief was not

available where participant relied on fiduciary’s misstate-

ment of pension benefit amount in deciding to retire).

This Court rejected the “substance of the remedy”

approach in Great-West Life & Annuity Ins. Co. v.

Knudson, 534 U.S. 204, 216 (2002), another case involving

relief against a nonfiduciary. Great-West Life instructs

instead that relief “typically available in equity” be identi-

fied by “the conditions that equity attached to its provi-

sion.” Id. The proper sources of information about the

conditions for equitable relief are “standard current works

such as Dobbs, Palmer, Corbin, and the Restatements,

which make the answer clear.” Jd. at 217. As the Secretary

of Labor explained in the court below,

5

Great-West thus significantly clarified the

Court’s earlier decision in Mertens. Like Mertens,

Great-West also did not involve a suit to recover

monetary damages from a fiduciary. But while

Mertens was ambiguous on the availability of

such relief in equity, Great-West makes it abun-

dantly clear that examination of the historical

practice of the equity courts is required to deter-

mine whether monetary relief against a fiduciary

was “typically available.”

Brief of the Secretary of Labor as Amicus Curiae in Sup-

port of the Appellant and Requesting Reversal in Goeres v.

Charles Schwab & Co., Inc., et al. (9th Cir. No. 05-15282),

at 11-12 (hereinafter “DOL Goeres Brief ”).’

Despite this clarification, after Great-West, some

courts continued to reject claims for monetary relief under

Section 502(a)(3) because the substance of the relief was

monetary. See, e.g., Westaff (USA) Inc. v. Arce, 298 F.3d

1164, 1166 (9th Cir. 2002), cert. denied, 537 U.S. 1111

(2003); Qualchoice, Inc. v. Rowland, 367 F.3d 638, 646, 650

(6th Cir. 2004), cert. denied, 544 U.S. 942 (2005). In

Sereboff v. Mid Atlantic Medical Services, Inc., 126 S. Ct.

1869 (2006), another decision arising from a Section

502(a)(3) claim against a nonfiduciary, this Court abro-

gated these decisions, emphasizing that monetary relief

may be available where “the basis for [the] claim is equi-

table.” Jd. at 1874. Sereboff authorized monetary relief on

the be «is of an equitable lien by agreement. Jd. at 1875.

4. Mr. Goeres’ case presents a paradigmatic example

of a clai»» for which the basis is equitable and on which

* Available at http/Avww.dol.gov/sol/media/briefs/goeres(A)-07- 11-2005.

pdf (last visited May 13, 2007).

6

monetary relief was typically available in equity, as well as

a fact pattern that is repeated over and over in litigation

involving employee benefit plans. According to the allega-

tions of the complaint, which were accepted as true by the

courts below, Mr. Goeres was designated as a beneficiary

under the SchwabPlan Retirement Savings and Invest-

ment Plan (“Plan”) by his domestic partner, Stephen M.

Ward. Pet. App. 3. Mr. Ward executed the beneficiary

designatien in 1992 and it was countersigned by a Plan

representative. Pet. App. 3-4. In January 2000, Mr. Goeres

notified the Plan’s fiduciaries of Mr. Ward’s death. Pet.

App. 4. The fiduciaries incorrectly informed Mr. Goeres

that he was not Mr. Ward’s beneficiary. Jd.

Sixteen months later, in May 2001, the fiduciaries

corrected their position, informing Mr. Goeres that he was

the beneficiary and providing him with an application for

distribution of Mr. Ward’s Plan account. Id. However, the

fiduciaries failed to adequately explain Mr. Goeres’ distri-

bution options as a non-spouse beneficiary. Pet. App. 5. By

the time Mr. Goeres finally received his distribution, the

Plan account had lost more than 50% of its value. Jd.

Mr. Goeres filed suit, asserting that the Plan’s fiduci-

aries had violated their duties to him under ERISA

§ 404(a), 29 U.S.C. §1104(a) and seeking relief under

Section 502(a)(3). Looking to the “substance of the remedy

sought,” Judge Breyer of the Northern District of Califor-

nia determined that Mr. Goeres’ claim was one for money

damages unavailable under Section 502(a)(3). Pet. App. 8-

9. The district court specifically relied on the Ninth Cir-

cuit’s pre-Great-West holding that “‘the status of a defen-

dant, whether fiduciary or nonfiduciary, does not affect the

question of whether damages constitute “appropriate

equitable relief” under’” Section 502(a)(3). Pet. App. 10

(quoting McLeod v. Oregon Lithoprint Inc., 102 F.3d 376,

378 (9th Cir. 1996), cert. denied, 520 U.S. 1230 (1997)).

The district court concluded,

No matter how he characterizes it, plaintiff

seeks to recover for the loss of the value of the

Retirement Plan due to defendants’ negligence.

This claim for relief is legal, not equitable. Un-

fortunately, the Supreme Court has held that le-

gal relief is not available under ERISA section

1132(a)(3). Therefore, plaintiff’s claim fails as a

matter of law.

Id. The Ninth Circuit affirmed for the reasons stated by

the district court, concluding that this Court’s intervening

Sereboff decision did not undermine the district court’s

reasoning and that the reasoning was supported by the

Ninth Circuit’s intervening decision in Peralta v. Hispanic

Business, Inc., 419 F.3d 1064, 1076 (9th Cir. 2005). Pet.

App. 1-2. This petition follows.

¢

REASONS FOR GRANTING THE WRIT

I. The Nature of “Equitable Relief” Available

Against a Breaching Fiduciary Is a Significant

and Recurring Remedial Issue That Has Gen-

erated Pervasive Confusion and Conflicting

Results in the Lower Courts.

The Government, judges (including members of this

Court), and respected commentators agree that the ques-

tion presented in this case is one of major significance for

the nation’s private employee benefits system, the system

on which most Americans rely for their retirement income,

health care, and other necessities of economic and physical

8

well-being.” This Court should grant the writ to resolve

this important and recurring question.

1. The Secretary of Labor has already expressed in

the court below her view that “{t]his case presents a

significant and recurring remedial issue: whether section

502(aX(3) of ERISA, 29 U.S.C. § 1132(a)(3), permits benefi-

ciaries to recover monetary losses from fiduciaries who

have breached their duties and caused harm to the benefi-

ciaries.” DOL Goeres Brief, at 1. In addition to the brief in

the court below, the Secretary of Labor has presented the

same view on this question in this Court and many lower

courts over several years.‘ As noted above, this Court

recently invited the United States to present its views on

* According to the United States Department of Labor’s Employee

Benefits Security Administration, 150 million Americans are covered by

more than 700,000 private retirement plans, 2.5 million health plans,

and similar numbers of other welfare benefit plans. http://www.dol.

gov/ebsa/aboutebsa/main.html (last visited May 13, 2007).

* See, e.g., Brief for the United States as Amicus Curiae Supporting

Petitioners in Aetna Health Inc. v. Davila, 2003 WL 23011479, at *27

n.13 (Dec. 18, 2003); Brief for the Secretary of Labor as Amicus Curiae

Supporting Appellant’s Petition for Panel and En Banc Rehearing in

Pereira v. Farace (2d Cir. Nos. 03-5035, 03-5055) (July 25, 2005),

available at http://www.dol.gov/sol/media/briefs/pereirabrief.htm (last

visited May 13, 2007); Brief of the Secretary of Labor as Amicus Curiae

in Support of Plaintiff-Appellant Urging Reversal in Coan v. Kaufman

(2d Cir. No. 04-5173), 2005 WL 5071038, at *18-26 (Mar. 25, 2005);

Brief of the Secretary of Labor As Amicus Curiae in Support of the

Appellant and Reversal of the District Court in Callery v. United States

Life Ins. Co. in the City of New York (10th Cir. No. 03-4097), 2003 WL

24309395 (Aug. 21, 2003); Amended Brief of the Secretary of Labor as

Amicus Curiae Opposing the Motions to Dismiss in Tittle v. Enron (S.D.

Tex. No. H-01-3913), 2002 WL 32157092, at 51 (Sept. 3, 2002); Brief of

the Secretary of Labor as Amicus Curiae in Support of the Appellant in

Ostler v. OCE-USA, Inc. (7th Cir. No. 01-8301) (Feb. 8, 2002), available

at http://www.dol.gov/sol/media/briefs/ostlervOCE(A)-2-8-2002. htm (last

visited May 13, 2007).

9

the petition for a writ of certiorari in another case present-

ing this question. LaRue, 127 S. Ct. at 1393.

2. Justice Ginsburg has “join[ed] ‘the rising judicial

chorus urging that Congress and [this] Court revisit what

is an unjust and increasingly tangled ERISA regime.’”

Aetna Health Inc. v. Davila, 542 U.S. 200, 222 (2004)

(Ginsburg, J., concurring) (quoting DiFelice v. Aetna U.S.

Healthcare, 346 F.3d 442, 453 (3d Cir. 2003) (Becker, J.,

concurring)) (alteration in original). In the current “unten-

able” situation, broad preemption of state-law claims

couples with a cramped interpretation of Section 502(a)(3)

to produce rights without remedies. Jd.°

As recognized in the Davila concurrence, this situa-

tion can be ameliorated by recognizing that make-whole

monetary relief against a breaching fiduciary was typically

available in equity at the time of the divided bench — the

position taken by the United States in Davila, this case,

and many other cases — or by “fresh consideration of the

availability of consequential damages under § 502(a)(3)”

consistent with traditional trust-law remedies. See §§ II,

III, infra; see also Cicio v. Does, 321 F.3d 83, 106—07 (2d

Cir. 2003) (Calabresi, J., dissenting in part) (calling for

this Court to “start over” in its analysis of the availability

of consequential damages under ERISA), vacated, 542 U.S.

933 (2004); see also McDonald v. Household Intern., Inc.,

* Dismissal of state-law claims on preemption grounds followed by

dismissal of ERISA claims for lack of a remedy creates a “Catch 22” for

plan participants. McDonald v. HSBC Finance Corp., 2006 WL 2193072

at *1(S.D. Ind. Aug. 1, 2006), motion to certify appeal granted, 2006 WL

2669950 (S.D. Ind. Sept. 18, 2006), cert. denied, 127 S. Ct. 1380 (2007).

Other courts have termed this situation “betrayal without a remedy.”

See, e.g., Allinder v. Inter-City Prods. Corp. (USA), 152 F.3d 544, 553

(6th Cir. 1998), cert. denied, 525 U.S. 1178 (1999).

10

425 F.3d 424, 430 (7th Cir. 2005) (suggesting that plain-

tiffs “take note” of Davila concurrence in framing ERISA

claims on remand).

3. Scholars likewise have expounded on the signifi-

cance of the question whether monetary relief is available

against breaching fiduciaries under Section 502(a)(3) and

have called upon this Court to examine the question. See

John H. Langbein, What ERISA Means by “Equitable”:

The Supreme Court’s Trail of Error in Russell, Mertens,

and Great-West, 103 COLUMBIA L. REV. 1317, 1365 (2003)

(hereinafter Langbein); Dana M. Muir, Fiduciary Status as

an Employer’s Shield: The Perversity of ERISA Fiduciary

Law, 2 U. PA. J. OF LABOR & EMPLOYMENT L. 391, 461-62

(2000).

4. In the absence of guidance from this Court, the

lower courts have reached inconsistent results regarding

the availability of make-whole monetary relief in cases of

breach of fiduciary duty under ERISA. For example, in

McLeod, the court held that there was no remedy available

under Section 502(a)(3) where the employer-fiduciary

failed to inform the employee of her eligibility to partici-

pate in a benefit plan. 102 F.3d at 378. In contrast, in

Krohn v. Huron Memorial Hosp., 173 F.3d 542 (6th Cir.

1999), the court remanded for issuance of an order that a

fiduciary pay the benefits that the participant would have

received had the fiduciary provided her with correct

information about her benefits. Jd. at 552. In Calhoon v.

Trans World Airlines, Inc., 400 F.3d 593, 598 (8th Cir.

2005), medical plan participants on COBRA continuation

coverage could not recover for medical expenses they

incurred when their coverage lapsed due to a fiduciary’s

failure to process an address change. Yet in Bowerman v.

Wal-Mart Stores, Inc., 226 F.3d 574, 592 (7th Cir. 2000), a

11

medical plan participant was permitted to tender the

COBRA premium that she would have paid but for misin-

formation provided by a fiduciary, upon which she would

receive reimbursement for medical expenses she had

incurred as a result of the loss in coverage, and in Brown

v. Aventis Pharmaceuticals, Inc., 341 F.3d 822, 827-28 (8th

Cir. 2003), the court affirmed an order for an employer to

purchase life insurance for a former employee to place her

in the position that she would have occupied but for the

employer’s failure to notify her of her right to convert her

group life insurance coverage.

5. In an attempt to ameliorate the situation created

by its own and other circuits” erroneous readings of this

Court’s decisions, the Ninth Circuit opined in Peralta that

the availability of monetary relief in fiduciary breach cases

turns not on an examination of the historical practice of

equity as directed by this Court, but on the perceived

extent of the fiduciary’s wrongdoing:

There seems to be little problem in providing

an avenue for the payment of benefits if serious

procedural errors result in the denial of benefits;

and in a case such as Varity, where fraud is in-

volved, the courts will go to great lengths to find

a vehicle for reinstatement of benefits. via a

§ 1132(aX3) equitable remedy. ...

* *

Individual substantive relief under ERISA is

available where an employer actively and delib-

erately misleads its employees to their detri-

ment. In such cases, wrongs will be undone and

means found to make benefits available, as in

Varity, Blau |v. Del Monte Corp., 748 F.2d 1348

(9th Cir. 1984)] and Hozier {v. Midwest Fasteners,

12

Inc., 908 F.2d 1155 (3d Cir. 1990)]. Even where

benefits are not available under the applicable

plan, “appropriate” equitable relief may be

awarded. See, e.g., Varity, 516 U.S. at 515.

Peralta, 419 F.3d at 1074-75 (footnote omitted). The

Peralta court opined that Congress provided a remedy in

Section 502(a)(3) for “egregious behavior” but not for

“merely negligent administration.” Jd. at 1076.

While appealing in its promise that Section 502(a)(3)

can be manipulated to find remedies for egregious wrongs,

this reasoning finds no support in Section 502(a)(3),

Mertens, Great-West, Sereboff, or even the Ninth Circuit’s

own precedents. For example, in one case, the employer

breached its fiduciary duty by deliberately misleading plan

participants regarding the taxability of distributions

under an early retirement program, causing losses to the

participants, but the court held that no remedy was

available under Section 502(a)(3). Farr v. U.S. West Com-

munications, Inc., 151 F.3d 908, 915-16 (9th Cir. 1998),

amended by 179 F.3d 1252 (9th Cir. 1999), cert. denied, 528

U.S. 1116 (2000). Farr, numerous other decisions,’ and this

case all demonstrate that the lack of guidance on the

meaning of “equitable relief” in the fiduciary context

* See, e.g., Armstrong v. Jefferson Smurfit Corp., 30 F.3d 11, 12~13

(Ist Cir. 1994) (allegation that employer intentionally withheld

information regarding taxability of lump-sum payments to disabled

retirees failed to state a claim because no relief available under Section

502(a\3)); Bast v. Prudential Ins. Co. of Am., 150 F.3d 1003, 1009 (9th

Cir. 1998), cert. denied, 528 U.S. 870 (1999) (no remedy where fiduciary

breached its duty by delaying approval of medical benefits, resulting in

beneficiary's death); LaRue uv. DeWolff, Boberg & Assocs., 450 F.3d 570,

575 (4th Cir. 2006), cert. pending, No. 06-856 (no remedy for losses to

retirement savings resulting from fiduciary’s failure to follow invest-

ment instructions).

13

frequently leaves plan participants and beneficiaries

without a remedy even for egregious breaches of fiduciary

duty. As the Secretary of Labor pointed out below, the

restrictive reading of “equitable relief” applied by the

courts in this case “leave[s] beneficiaries without any

remedy for serious violations of ERISA’s fiduciary provi-

sions, in conflict with the statutory scheme.” DOL Goeres

Brief, at 22—23.

6. This case is the ideal vehicle for this Court to

answer the pressing need to examine Section 502(a)(3) and

provide guidance to the lower courts on the recurring,

unresolved question of the availability of make-whole

monetary relief against breaching fiduciaries.

Il. In Analyzing the Relief Available Against

Breaching Fiduciaries, the Lower Courts Have

Persistently Failed to Apply the Historical In-

quiry Mandated by This Court, Resulting in

Erroneous Denial of Relief That Was Typically

Available in Equity.

The historical inquiry mandated by Great-West has

rarely been touched on, let alone conducted, by the lower

courts. That inquiry demonstrates that monetary relief

against a breaching fiduciary and in favor of an injured

beneficiary was typically available in courts of equity. Yet in

this case and many others, the courts have failed to exam-

ine the “conditions that equity attached to the provision” of

the requested relief. See Great-West, 534 U.S. at 216.

1. Historically, the remedies of a trust beneficiary

against a trustee were uniquely and exclusively equitable.

See DOL Goeres Brief, at 5-6, 12-16; 1 JOHN NORTON

POMEROY, A TREATISE ON EQUITY JURISPRUDENCE, § 150a, pp.

14

204-05 (5th ed. 1941) (hereinafter “POMEROY”); RESTATE-

MENT (SECOND) OF TRUSTS, § 197 (1959) (hereinafter “REST.

2b”). A trust beneficiary has no legal remedies against a

trustee because the beneficiary has no legal interest in the

subject matter of the trust. REST. 2D, §§ 2, 197.

In cases within equity’s exclusive jurisdiction, arising

out of express trusts, equity courts awarded remedies that

in a non-trust case might be viewed as legal in nature: “It

often happens that the final relief to be obtained by the

cestui que trust consists in the recovery of money. This

remedy the courts of equity will always decree when

necessary.” Jd. at § 158, p. 215. According to Pomeroy, a

trust beneficiary “has the following equitable remedies:

‘The beneficiary of a trust can maintain a suit ... to

compel the trustee to redress a breach of trust.’” POMEROY

at § 1080, p. 229, n.15 (quoting RESTATEMENT OF TRUSTS,

§ 199) (emphasis added). The trustee’s liability on such a

claim “is always sufficient for the complete indemnifica-

tion and compensation of the beneficiary.” Jd. at p. 229.

Thus, by definition, a remedy decreed in favor of a benefi-

ciary against a breaching trustee was a non-legal remedy,

because it came within the exclusive jurisdiction of equity,

and law courts entirely lacked the power to award such

relief.

2. In Mertens, this Court focused not on remedies

against a breaching fiduciary, which were exclusively

equitable, but on legal remedies available in equity courts

under their concurrent jurisdiction. Mertens, 508 U.S. at

256. The Court quoted from the following passage of

Pomeroy:

[Wlhen a court of equity has jurisdiction over

a cause for any purpose, it may retain the cause

15

for all purposes, and proceed to a final determi-

nation of all the matters at issue.... For this

reason, if the controversy contains any equitable

feature or requires any purely equitable relief

which would belong to the exclusive jurisdiction

... the court may go on to a complete adjudica-

tion, and may thus establish purely legal rights

and grant legal remedies which would otherwise

be beyond the scope of its authority.

POMEROY at § 181, p. 257; see Mertens, 508 U.S. at 256.

This principle is known as the “clean-up doctrine.” Dan B.

DOBBS, HANDBOOK ON THE LAW OF REMEDIES: DAMAGES —

EQUITY — RESTITUTION, § 2.7, p. 83 (1973) (citing POMEROY,

§§ 231-42) (hereinafter “DoBBs”). Thus, Mertens explained

that historically, “there were many situations — not limited

to those involving enforcement of a trust — in which an

equity court could ‘establish purely legal rights and grant

legal remedies which would otherwise be beyond the scope

of its authority.’” Mertens, 508 U.S. at 256; see Great- West,

534 U.S. at 210 (stating that Mertens “rejected a reading of

the statute that would extend the relief obtainable under

§ 502(a)(3) to whatever relief a court of equity is empow-

ered to provide in the particular case at issue (which could

include legal remedies that would otherwise be beyond the

scope of the equity court’s authority).”).

In short, Mertens and Great-West clearly exclude from

“appropriate equitable relief” any remedies borrowed

from law courts pursuant to the clean-up doctrine. Reme-

dies decreed against breaching fiduciaries, however,

originated in and were exclusive to equity. There were no

such remedies to be borrowed from the law courts, because

the law courts lacked the power to grant any remedy for a

breach of trust due to the equitable nature of the fiduciary

relationship. REST. 2D, § 197. In Great-West’s terms, the

16

existence of the fiduciary relationship was a “condition

that equity attached” to the provision of monetary relief

for breach of trust; in Sereboff’s terms, “the basis for [the]

claim is equitable” because a claim for breach of trust is an

equitable claim. Great-West, 534 U.S. at 216; Sereboff, 126

S. Ct. at 1874.

3. Because they have failed to conduct the historical

inquiry required by Great-West, the lower courts, including

the courts in this case, have mistakenly concluded that the

fiduciary status of the defendant does not affect the

availability of make-whole monetary relief under Section

502(a)(3). For example, before Great- West, the First Circuit

wrote that “the status of the defendant (i.e., fiduciary or

nonfiduciary) does not affect the question of whether

compensatory legal damages constitute ‘appropriate

equitable relief’ under the statute.” Armstrong, 30 F.3d at

13 (cited in McLeod, 102 F.3d at 378).

This notion, which was not supported by Mertens, has

carried over into post-Great-West decisions, including the

decision in this case. See, e.g., Pereira v. Farace, 413 F.3d

330, 340 (2d Cir. 2005), cert. denied, 126 S.Ct. 2286

(2006); Callery v. United States Life Ins. Co. in the City of

New York, 392 F.3d 401, 409 (10th Cir. 2004), cert. denied,

126 S. Ct. 333 (2005). The historical inquiry mandated by

Great-West demonstrates that the status of the defendant

“affects the question” whether “compensatory damages”

are legal or equitable relief, because such relief against a

breaching fiduciary was exclusively equitable.

4. Some lower courts have seized on the Great-West

Court’s statement that “[iJn Mertens, we rejected the claim

that the special equity-court powers applicable to trusts

define the reach of § 502(a)(3)” as demonstrating that the

17

fiduciary status of the defendant does not affect the

available relief. See Great-West, 534 U.S. at 219; see also

LaRue, 450 F.3d at 576; Crosby v. Bowater Inc. Retirement

Plan for Salaried Employees of Great Northern Paper Inc.,

382 F.3d 587, 596 (6th Cir. 2004), cert. denied, 544 U.S.

976 (2005). But the special equity-court powers deemed

non-typical in Mertens were the powers to award legal

remedies under the clean-up doctrine. See Mertens, 508

U.S. at 256. Beneficiaries, such as Mr. Goeres, suing

fiduciaries for breach of trust had no need of the clean-up

doctrine because relief in such cases was exclusively

equitable. Lower courts, including the courts in this case,

have failed to recognize that fiduciary status is a condition

that equity attached to the provision of make-whole

monetary relief.

As the Mertens Court explained, “All that ERISA has

eliminated ... is the common law’s joint and several

liability, for all direct and consequential damages suffered

by the plan, on the part of persons who had no real power

to control what the plan did” — that is, nonfiduciaries. Id.

at 262. The Court noted that limiting liability in this way

would protect nonfiduciary service providers from high

insurance costs that would be passed on to plans, thus

balancing the goals of protecting plan participants and

containing pension costs. Jd. at 262-63.

5. This case exemplifies the situation in which an

equity court, and only an equity court, could and would

have granted equitable relief to place the beneficiary in

the position he would have occupied but for the breach.

Mr. Goeres seeks to recover only his direct economic loss

from the breach, that is, the difference between the value

of the Plan account on the date he would have received his

18

distribution but for the breach, and the decreased value on

the date he received it due to the fiduciaries’ delay.

“If the trustee commits a breach of trust, he is charge-

able with ... any loss or depreciation in value of the trust

estate resulting from the breach of trust.” REST. 2D, § 205.’

The illustrations to Restatement § 205 repeatedly demon-

strate that the trustee is liable for any depreciation in the

value of the trust that results from his negligence, even

where he is not enriched. In this case, the value of the

trust declined between the time that Mr. Goeres should

have received his distribution and the time when, as a

result of the fiduciaries’ negligence, he did receive it. The

fiduciaries are liable for the difference, and this remedy is

exclusively equitable. Equity courts had the power to

award monetary relief to make a beneficiary whole for

breach of trust. This remedy was not borrowed from the

law courts but originated in equity, and this remedy

depended on the fiduciary status of the defendant because

the claim arose out of the fiduciary relationship.

6. As the Secretary of Labor explained below, exclud-

ing make-whole monetary relief from the “equitable

relief” available under Section 502(a)(3) in the fiduciary

context “is neither consistent with ERISA’s remedial

purpose, nor compelled by Mertens or Great-West. What-

ever ambiguity Mertens left on the matter, Great-West

clarifies by referring the courts to the historical practice of

the equity courts at the time of the divided bench.” DOL

Goeres Brief, at 23. This Court should grant certiorari in

” As Professor Langbein points out, the phrase “chargeable with”

derives from the equitable term for damages, “surcharge.” Langbein, at

1352-53 & n.208.

19

this case to clarify that such make-whole relief against

breaching fiduciaries was typically available in equity and

is “equitable relief” within the meaning of Section

502(a)(3).

Ill. Alternatively, the Mertens Standard Requiring

That Relief Have Been “Typically Available in

Equity” Is Incorrect and Unworkable; Cor-

rectly Interpreted, Section 502(a)(3) Authorizes

All Relief Available Against a Fiduciary for

Breach of Trust.

The trust-law origins of ERISA dictate that equitable

relief under Section 502(a)(3) incorporates the well-

established, traditional remedies of a beneficiary against a

breaching fiduciary, including make-whole monetary

relief. If Mertens, as clarified by Great-West and Sereboff,

cannot be interpreted to allow make-whole monetary relief

against a breaching fiduciary as described above, then the

question presented in this case provides the Court with an

opportunity to revisit Mertens and return Section 502(a)(3)

remedies to the trust-law framework that Congress

intended. As Professor Langbein has demonstrated in his

frequently cited article on Section 502(a)(3), this Court’s

departure from the trust-law basis of ERISA in its seminal

remedies cases has profoundly frustrated Congress’s

objective of coupling the fiduciary obligations of the

trustee of an express trust with effective remedies to

enforce those duties. Langbein, at 1318-54."

* In general, “academics and legal commentators have been

extremely critical of the holding espoused in Mertens because of its

narrow scope and unjust result.” Gerbec v. United States, 164 F.3d 1015,

1024 (6th Cir. 1999) (collecting commentaries).

20

1. This Court has emphasized that in interpreting

ERISA it will be “guided by principles of trust law” due to

the clear legislative history stating Congress’s intent to

incorporate these principles into the statute. Firestone Tire

& Rubber Co. v. Bruch, 489 U.S. 101, 111 (1989); see

Central States, Southeast & Southwest Areas Pension

Fund v. Central Transport, Inc., 472 U.S. 559, 570 (1985);

Varity, 516 U.S. at 496 (recognizing that fiduciary duties

under ERISA “draw much of their content from the com-

mon law of trusts, the law that governed most benefit

plans before ERISA’s enactment”); Mass. Mutual Life. Ins.

Co. v. Russell, 473 U.S. 134, 152-53 (1985) (Brennan, J.,

concurring) (“Congress intended by § 404(a) to incorporate

the fiduciary standards of trust law into ERISA.”).

Thus, this Court has recognized that “[w]hen federal-

izing the administration of pension and employee benefit

plans in ERISA, Congress made a deliberate choice to

subject these plans to the pre-existing regime of trust law

rather than to invent a new regulatory structure.” Lang-

bein, at 1319. Accordingly, trust law provides the starting

point for the analysis of “appropriate equitable relief” in

§ 502(a)(3) claims. Harris Trust & Sav. Bank v. Salomon

Smith Barney, Inc., 530 U.S. 238, 250 (2000).

2. The Mertens majority departed from this trust-law

framework. Mertens “rejected the claim that the special

equity-court powers applicable to trusts define the reach of

§ 502(aX(3).” Great-West, 534 U.S. at 219. In place of well-

established, traditional trust-law remedies, Mertens

substituted the novel category of “relief typically available

in equity,” a standard that the majority acknowledged

represented an “unlikely” interpretation of ERISA.

Mertens, 508 U.S. at 257. The category of relief “typically

21

available in equity” exists nowhere outside of Mertens. It

has “no ascertainable meaning.” Langbein, at 1353.

The Mertens majority failed to populate this category

with any meaningful exemplars. As Professor, Langbein

has demonstrated, none of the majority’s three examples —

injunction, mandamus, and restitution — explains what

relief is “equitable relief” within the meaning of Section

502(a)(3). Jd. at 1353-54. Injunction is separately provided

for in Section 502(a)(3), mandamus is a legal remedy, and

restitution, as this Court subsequently recognized in

Great-West, can be legal or equitable depending on the

underlying cause of action. Jd. at 1353-58; Great-West, 534

U.S. at 214-15. Yet the lower courts have clung to these

three examples as “archetypes,” LaRue, 450 F.3d at 575,

because the concept of relief “typically available in equity”

gives no guidance in deciding what relief is “appropriate

equitable relief” and what is not.

3. Great-West, Sereboff, and the profusion of conflict-

ing lower-court decisions pre- and post-dating them

demonstrate the imprudence of the Mertens Court’s

departure from the trust-law paradigm. The ahistorical

distinction between equitable relief and money damages,”

the artificial characterization of monetary relief as “in-

statement” or reinstatement into a plan,” and the confu-

sion of equitable with legal restitution have created what

* “(I]t may once have been technically correct to say that damages

were exclusively a common law remedy, but only because damages in

equity were called surcharge.” Langbein, at 1353.

* See Mathews v. Chevron Corp., 362 F.3d 1172, 1185-87 (9th Cir.

2004) (ordering that employer pay plaintiffs “‘sums of money’ equiva-

lent to the ... benefits they lost because of [employer’s] breach,”

through vehicle of “instatement” of plaintiffs into benefits plan).

22

the Seventh Circuit has called a “morass” for courts and

parties attempting to apply Section 502(a)X(3). See Brosted

v. Unum Life Ins. Co. of Am., 421 F.3d 459, 466 (7th Cir.

2005). As demonstrated above in Section I, the lower

courts’ attempts to follow Mertens are a dismal catalogue

of inconsistent reasoning and unpredictable outcomes.

4. The trust-law tradition that Congress invoked in

drafting ERISA unquestionably provided for make-whole

monetary relief against breaching fiduciaries, as demon-

strated above in Section II and as the Mertens court

acknowledged. Mertens, 508 U.S. at 256. Nothing suggests

that Congress intended to depart from this tradition in

creating ERISA’s enforcement scheme. Certiorari should

be granted in this case so that the Court may bring its

interpretation of Section 502(a)(3) in line with Congres-

sional intent and all other areas of ERISA jurisprudence,

which acknowledge the trust-law basis of the statute.

¢

CONCLUSION

For the foregoing reasons, the petition for writ of

certiorari should be granted.

Respectfully submitted,

TERESA S. RENAKER

JEFFREY GREG LEWIS

Counsel of Record

MARGARET E.. HASSELMAN

LEWIS, FEINBERG, LEE,

RENAKER & JACKSON, P.C.

1330 Broadway, Suite 1800

Oakland, CA 94612

(510) 839-6824

Attorneys for Petitioner

App. 1

2007 WL 495191

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

LOUIS GERARD GOERES,

Plaintiff-Appellant, No. 05-15282

- D.C. No. CV-04-01917-CRB

CHARLES SCHWAB & CO., | MEMORANDUM*

INC.; et al., (Filed Feb. 14, 2007)

Defendants-Appellees,

Appeal from the United States District Court

for the Northern District of California

Charles R. Breyer, District Judge, Presiding

Argued and Submitted February 12, 2007

San Francisco, California

Before: REINHARDT, RYMER, and SILVERMAN,

Circuit Judges.

We affirm for the reasons stated by the district court

in its order granting the motion to dismiss pursuant to

Fed. R. Civ. P. 12(b)(6). The Supreme Court’s recent

decision in Sereboff v. Mid Atlantic Med. Servs., Inc., 126

S.Ct. 1869, 1875 (2006), does not undermine the district

* This disposition is not appropriate for publication and is not

precedent except as provided by 9th Cir. R. 36-3.

&

App. 2

court’s reasoning and Peralta v. Hispanic Business, Inc.,

419 F.3d 1064, 1076 (9th Cir. 2005), supports it.

AFFIRMED.

App. 3

2004 WL 2203474

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

LOUIS GERARD GOERES, No. C 04-01917 CRB

Plaintiff, MEMORANDUM AND

ORDER

Vv.

CHARLES SCHWAB & CO.,

INC., et al.,

Defendants. /

This is an action pursuant to section 502(a)(3) of the

Employee Retirement Income Security Act of 1974 (“ER-

ISA”). Now before the Court is defendants’ motion to

dismiss for failure to state a claim upon which relief can

be granted (Fed. R. Civ. Proc. 12(b)(6)). After carefully

considering the parties’ submissions, and having had the

benefit of oral argument, defendants’ motion to dismiss is

GRANTED.

ALLEGATIONS OF THE COMPLAINT

Plaintiff Louis Gerard Goeres was a beneficiary of a

SchwabPlan Retirement Savings and Investment Plan

(“Retirement Plan”). Plaintiff was designated as a benefi-

ciary by his late domestic partner, Stephen M. Ward, who

was a Schwab employee and participant in the Retirement

Plan. Complaint J 4.

Plaintiff and Mr. Ward were domestic partners from

November 1988 until Mr. Ward’s death in December 1999.

Id. J 8. On September 18, 1992, Mr. Ward designated

plaintiff as his primary beneficiary under the Retirement

App. 4

Plan. Complaint 7 12. The beneficiary designation form

was countersigned by a Schwab benefits representative on

that same date. Jd. Plaintiff did not have a copy of the

1992 beneficiary designation form until Schwab provided

one to him in August 2003. Jd. J 14.

In January 2000, plaintiff informed Schwab’s human

resources department of Mr. Ward’s death. Jd. J 16. At this

time, plaintiff was receiving benefits as Mr. Ward’s domes-

tic partner under Schwab’s employee welfare benefit

plans, including medical, dental, and vision care plans. Jd.

¥ 15. Plaintiff was told that he would be contacted about

Mr. Ward’s Retirement Plan after he submitted Mr. Ward’s

death certificate. Jd. ¥ 16. Plaintiff submitted the death

certificate but was never contacted about the Retirement

Plan. Jd. § 17. In January or February 2000, plaintiff

contacted Schwab Retirement Plan Services and was told

that he was not the designated beneficiary on Mr. Ward’s

Retirement Plan account. Jd. 918. Mr. Ward’s sister

contacted Schwab Retirement Plan Services in “early

2000,” and was also told that plaintiff was not the desig-

nated beneficiary of Mr. Ward’s Retirement Plan account.

Id. J 19.

On May 15, 2001, Schwab Retirement Plan Services

contacted plaintiff because it had “recently learned of Mr.

Ward’s death and that plaintiff was the designated benefi-

ciary of Mr. Ward’s Retirement Plan account.” Id. J 22.

This occurred about sixteen months after plaintiff first

notified Schwab of Mr. Ward’s death. Schwab Retirement

Plan Services sent plaintiff the application for Plan bene-

fits and other materials at this time. Jd. J] 21. Plaintiff

claims that these materials failed to adequately inform

him of his distribution options as a non-spouse beneficiary.

Id. J 24.

App. 5

On December 31, 1999, which was around the time of

Mr. Ward’s death, Mr. Ward’s retirement account was

valued at approximately $1.2 million. Jd. | 27. On June

30, 2000, Mr. Ward’s retirement account was valued at

approximately $1.6 million. Jd. J 28. Plaintiff collected the

proceeds of the Retirement Plan in 2004, when it was

valued at approximately $565,000. Id. J 30.

Plaintiff claims that he received significantly less

money than he would have received had defendants

promptly notified him of his beneficiary status and ade-

quately informed him of his benefit distribution options.

The drop in the stock market coupled with the failure to

timely notify plaintiff of his beneficiary status resulted in

a loss to plaintiff of more than $500,000.

Plaintiff brought suit against three defendants: (1)

Schwab; (2) Schwab Retirement Plan Services, Inc.

(“Schwab Retirement Plan Services”); and (3) the Adminis-

trative Committee of the SchwabPlan Retirement Savings

and Investment Plan (the “Administrative Committee”).

Plaintiff claims that all three defendants were fiduciaries

of the Retirement Plan within the meaning of ERISA, and

all three breached their fiduciary duties by failing to notify

plaintiff that he was the beneficiary of an ERISA retire-

ment p’n. Complaint { 36. Plaintiff claims that he is

entitled to equitable relief pursuant to ERISA section

502(aX(3), 29 U.S.C. § 1132(a)(3) (hereinafter “section

1132(aX3)”). Namely, plaintiff wants the Retirement Plan’s

records modified to reflect plaintiff’s entitlement to a

distribution of Mr. Ward’s retirement account as of a date

no later than June 30, 2000. Complaint at 7.

App. 6

DISCUSSION

1. Legal Standard

A motion to dismiss should be granted where the

complaint fails to allege sufficient facts to constitute a

cognizable claim or legal theory of recovery. See Fed. R.

Civ. P. 12(b)(6). A court cannot grant a motion to dismiss

pursuant to Rule 12(b)(6) unless “it appears beyond doubt

that the plaintiff can prove no set of facts in support of his

claim which would entitle him to relief.” Conley v. Gibson,

355 U.S. 41, 45-46 (1957). In evaluating a Rule 12(b)(6)

motion, a complaint is construed in the light most favor-

able to the plaintiff. See Firoozye v. Earthlink Network,

153 F.Supp.2d 1115, 1119 (N.D. Cal. 2001). The court must

accept as true all material allegations in the complaint as

well as the reasonable inferences to be drawn from them.

See Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th

Cir. 1987). Dismissal is disfavored and should be granted

only in “extraordinary” cases. See United States v. Red-

wood City, 640 F.2d 963, 966 (9th Cir. 1981).

2. No Relief can be Granted on Plaintiff’s Principal

Claim as a Matter of Law

A. The Relief Plaintiff Seeks is Legal, not Equi-

table

Plaintiff seeks to modify the Retirement Plan’s records

to reflect plaintiff’s entitlement to a distribution of Mr.

Ward’s retirement account as of a date no later than June

30, 2000. Plaintiff maintains that such relief is permissible

under section 1132(a)(3). Defendants argue that this claim

fails as a matter of law because only equitable relief is

available under ERISA and the relief plaintiff seeks is

legal.

App. 7

Section 1132(a)(3) provides:

A civil action may be brought by a participant,

beneficiary, or fiduciary (A) to enjoin any act or

practice which violates any provision of this title

or the terms of the plan, or (B) to obtain other

appropriate equitable relief (i) to redress

such violations or (ii) to enforce any provisions of

this title or the terms of the plan.

29 U.S.C. §1132(aX(3) (2004) (emphasis added). The

meaning and scope of the “equitable relief” allowed under

this section is the chief issue here.

A recent Supreme Court decision addressed the

meaning of “equitable relief” in section 1132(a)(3). The

plaintiff in Great-West Life & Annuity Insurance Co. v.

Knudson, 534 U.S. 204 (2002), was an ERISA health-plan

(“Plan”) beneficiary who became paralyzed in a car acci-

dent. Plan provisions required the Plan to be reimbursed

by third-party tortfeasors. Id. at 207. The Plan also as-

signed its right to litigate any claims under the reim-

bursement provisions to Great-West. Jd. The plaintiff

received a settlement from a third party tortfeasor. Id.

Thereafter, Great-West sued the plaintiff (hereinafter

“respondent”) to require her to reimburse Great-West the

sum it spent on her medical care. Jd. at 208.

Upon review, the Supreme Court discussed the equi-

table remedies available under section 1132(a)(3). First,

the Court recognized its own precedent declaring “equita-

ble relief” in section 1132(a)(3) as “‘those categories of

relief that were typically available in equity.’” Jd. at 210

(quoting Mertens v. Hewitt Assocs., 508 U.S. 248 (1993)).

The Court acknowledged that Great-West was seeking

to impose personal liability on the respondent for a

App. 8

contractual obligation to pay money, which is relief that

was not typically available in equity. Knudson, 534 USS. at

210. Money damages, the Court explained, is the classic

form of legal relief. Jd. (emphasis in original) (citation

omitted).

Great-West also argued that it was seeking equitable

relief because it sought to “enjoin an act or practice” that

violated the terms of the Plan, i.e., the respondent’s failure

to reimburse the Plan. Jd. at 210 (internal citations

omitted). The Court, however, pointed out that an injunc-

tion to compel the payment of money or specific perform-

ance of a contract to pay money was not typically available

in equity. Jd. at 211.

Plaintiff here asserts that he seeks equitable relief

because he is requesting an order that defendants (1)

“take all steps necessary” to place plaintiff in the position

he would have been in but for the breach of fiduciary duty

and (2) to “modify” the records to reflect plaintiff’s enti-

tlement to a distribution of Mr. Ward’s account at a higher

value. See Complaint at 7. That plaintiff asks to be re-

stored to a previous status, i.e., his June 2000 beneficiary

status, rather than an order compelling the payment of

money, does not make the relief he seeks equitable. “In

determining whether an action for equitable relief is

properly brought under ERISA, we look to the substance of

the remedy sought... rather than the label placed on that

remedy.” Westaff Inc., v. Arce, 298 F.3d 1164, 1166 (9th Cir.

2002) (citation omitted). A court order modifying the

Retirement Plan records to reflect that plaintiff was entitled

to a distribution of benefits no later than June 30, 2000

would be meaningless unless it meant that defendants must

pay plaintiff the value of the account on that date. Thus,

what plaintiff is actually seeking is his monetary damages

App. 9

arising from defendants’ failure to timely notify him of his

beneficiary status.

Plaintiff cannot make his legal remedy “equitable” by

splitting it into two actions. At the hearing on this motion,

plaintiff characterized his request for equitable relief as

the first step in a two-step process. Plaintiff argued that

placing him back into the Retirement Plan as of a certain

date is equitable relief, regardless of what flows from such

relief. Once in his desired position, plaintiff would bring

suit under ERISA section 501(a)(1) to recover benefits due

to him under the terms of the Retirement Plan. See 29

U.S.C. § 501(a)(1). Bifurcating this process, however, does

not make the requested relief equitable; the substance of

the remedy plaintiff seeks remains monetary compensa-

tion. See Arce, 298 F.3d at 1166.

B. Even if Defendants Breached a Fiduciary

Duty, Plaintiff has no Viable Claim upon

which Relief can be Granted

Plaintiff distinguishes his case from Knudson by

focusing on defendants’ breach of fiduciary duty. Plaintiff

argues that even if his claim may be characterized as a

claim for monetary relief, compensating a beneficiary for

losses sustained as a result of a breach of fiduciary duty

was typically available in equity. Opposition at 6-7.

The allegation that defendants breached a fiduciary

duty is irrelevant under controlling case law. For example,

in one Ninth Circuit case, an employee sued her em-

ployer’s ERISA plan administrator for failing to notify her

that she had become eligible for coverage under a cancer

insurance policy. McLeod v. Oregon Lithoprint Inc., 102

F.3d 376, 377 (9th Cir. 1996). The employee developed

App. 10

cancer and sued under section 1132(a)(3) for the amount

that would have been paid on her behalf had she been

properly notified of her eligibility for the cancer coverage.

Id. McLeod found that the employee was not seeking

equitable relief but rather “to be made whole through an

award of money damages equal in amount to the benefits

that she would have been paid ...” Jd. at 378. McLeod

rejected the employee’s argument that “appropriate

equitable relief” should include monetary relief because

without monetary relief she had no adequate remedy. Id.

at 378. Instead, McLeod declared that “the status of a

defendant, whether fiduciary or nonfiduciary, does not

affect the question of whether damages constitute ‘appro-

priate equitable relief’ under [§ 1132(a)(3)].” Id. See also

Farr v. U.S. West Communs., Inc., 151 F.3d 908, 916 (9th

Cir. 1998), amended by 179 F.3d 1252 (9th Cir. 1999)

(holding that even though defendant employers breached

their fiduciary duties by failing to notify pension benefit

recipients of the tax consequences of an early retirement

incentive, the damages sought by the plaintiffs - monetary

reimbursements equal to the amount they paid in taxes —

were not recoverable as “other appropriate equitable

relief” under ERISA section 1132(a)(3)). McLeod and Farr

clarify that suing a fiduciary does not transform monetary

damages into “appropriate equitable relief” under ERISA.

C. Plaintiff’s Situation is Materially Different

from Mathews

Plaintiff relies heavily on a case where an employer

(“Chevron”) breached its fiduciary duty under ERISA by

“actively misinforming” certain employees of their retirement

options. Mathews v. Chevron Corp., 362 F.3d 1172, 1183-1185

(9th Cir. 2004). Mathews confirmed that ordering Chevron to

App. 11

modify the employeés’-retirement-plan records to give

them the retirement benefits they would have received

had Chevron not actively misinformed them was appropri-

ate equitable relief pursuant to section 1132(a)(3). See id.

at 1186. Chevron argued that because modifying the plan

records would result in paying the employees sums of

money, such relief was precluded by section 1132(a)(3). Id.

at 1185-86. Mathews disagreed and decided that such

relief was appropriate.

On its face, an order to modify plan records

is not an award of monetary damages. More im-

portantly, the relief granted by the district court

here is also equitable in substance. To instate the

[employees] retroactively into [the retirement

plan] simply puts them in the position they

would have been had Chevron not breached its

fiduciary duty. .. Although in this instance the []

remedy will result in Chevron paying [] sums of

money equivalent to the [] benefits they lost be-

cause of Chevron’s breach, the mere payment of

money does not necessarily render the award

compensatory monetary damages.

Id. at 1186.

Plaintiff similarly argues that modifying the Retire-

ment Plan records to place him in the [financial] position

he would have been in had defendants not breached their

fiduciary duty is still equitable relief, even if it may

result in defendants paying plaintiff money. Mathews is

materially distinguishable from the facts alleged here.

The relief the Mathews plaintiffs received was in state-

ment into a retirement plan to which they should have

been notified. This relief rendered them participants of a

particular retirement plan — a plan that existed at that

time. Incidently, instating the Mathews plaintiffs into the

App. 12

retirement plan resulted in their receiving sums of money

from Chevron, but it was money Chevron should have paid

the plaintiffs in the first place.

In contrast, there is no plan into which plaintiff can be

“instated.” Plaintiff collected his partner’s Retirement

Plan proceeds in May 2004 and there is nothing left to

distribute. Moreover, unlike the Mathews plaintiffs,

plaintiff here does not seek benefits that defendants

should have paid him but for their breach of fiduciary

duty. Rather, the Retirement Plan required defendants to

pay plaintiff the value of the retirement account, and this

is what they paid him. Plaintiff now seeks to recover for

the loss of the value of that account caused by defendants’

negligence, but such a claim is legal.

3. The Appropriate Defendants

Plaintiff brought his claim against (1) Schwab; (2)

Schwab Retirement Plan Services; and (3) the Administra-

tive Committee. Plaintiff alleges that all three defendants

were fiduciaries of the Retirement Plan within the mean-

ing of ERISA, and all three defendants breached their

fiduciary duties. Complaint J 36.

Defendants argue that plaintiff states no claim suffi-

cient to give rise to liability against both Schwab and the

Administrative Committee. Motion at 8:16-17. Defendants

also argue that plaintiff’s complaint does not provide “fair

notice” of his claims against these defendants and the

ground on which they rest. Therefore, defendants argue

that plaintiff’s claims against both Schwab and the

Administrative Committee should be dismissed. Motion at

9-10.

App. 13

It is not necessary to determine which are the appro-

priate defendants at this juncture. As discussed above,

plaintiff states no claim upon which relief may be granted,

and the claim fails regardless of who the appropriate

defendants are.

CONCLUSION

Plaintiff brought this action pursuant only to ERISA

section 1132(a)(3), which provides for “appropriate equita-

ble relief.” No matter how he characterizes it, plaintiff

seeks to recover for the loss of the value of the Retirement

Plan due to defendants’ negligence. This claim for relief is

legal, not equitable. Unfortunately, the Supreme Court has

held that legal relief is not available under ERISA section

1132(a\(3). Therefore, plaintiff’s claim fails as a matter of

law. Accordingly, the Court GRANTS defendants’ motion to

dismiss for failure to state a claim upon which relief can

be granted.

Plaintiff also asks for “an injunction compelling

defendants to establish and maintain a reasonable claims

procedure for the Retirement Plan that ensures that non-

spouse beneficiaries timely receive applications for Re-

tirement Plan benefits.” Complaint at 7. This Order does

not dismiss the request for such injunctive relief. A case

management conference will be held on October 22, 2004

at 8:30 a.m.

App. 14

IT IS SO ORDERED.

Dated: September 28, 2004 /s/

CHARLES R. BREYER

UNITED STATES

DISTRICT JUDGE