Two recent federal district court decisions have come to opposite conclusions in addressing the question whether there is a right to jury trial with respect to fiduciary breach claims brought under ERISA Section 502(a)(2). That statutory provision authorizes actions for “appropriate relief” under ERISA Section 409(a), which in turn provides that a breaching plan fiduciary “shall be personally liable to make good to [the] plan any losses to the plan resulting from each . . . breach, and to restore to [the] plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary.” As discussed more fully below, the court in Hellman v. Cataldo, No 4:12-CV-02177 (E.D. Mo. August 20, 2013) found that there is a right to jury trial with respect to a Section 502(a)(2) claim, while the court in Bauer-Ramazani v. TIAA-CREF, No. 1:09-CV-190 (D. Vt. Nov. 27, 2013) held that there is no such right.
The Hellman Court’s Analysis
In Hellman, a participant in a defined contribution plan sued plan fiduciaries in a putative class action under ERISA Section 502(a)(2), alleging that the fiduciaries breached their duty of prudence by continuing to offer stock of the sponsoring employer as an investment option under the plan. The plaintiff sought (among other things) an order compelling the defendants to make the plan whole for losses resulting from their breaches. The plaintiff demanded trial by jury and the defendants moved to strike that demand.
In ruling on the motion, the court began its analysis by noting that the Seventh Amendment to the U.S. Constitution guarantees the right to jury trial in civil cases “only [in] lawsuits in which legal rights are adjudicated, and not to actions in which only equitable rights and remedies are decided.” The court observed that, under Supreme Court authority, the determination whether a claim involves a legal right or an equitable right turns on a two-pronged analysis: (i) whether the claim is analogous to 18th-century actions at law or claims in equity in England before the merger of the law and equity courts; and (ii) whether the remedy sought is legal or equitable. See Granfinanciera v. Nordberg, 492 U.S. 33 (1989).
With respect to the first prong, the Hellman court concluded that claims for breach of fiduciary duty were traditionally within the jurisdiction of courts of equity, which would support a conclusion that there is no right to jury trial with regard to Section 502(a)(2) claims. However, with respect to the second prong – which the court identified as the “weightier prong” of the analysis – the court found that the complaint requested legal relief, and on that basis concluded that the plaintiffs were entitled to a jury trial.
In addressing the second prong, the Hellman court relied on the Supreme Court’s decision in Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002), which involved a claim under ERISA Section 502(a)(3) by an ERISA health plan for reimbursement from a plan beneficiary who had received medical benefits from the plan following an accident and who subsequently obtained recovery for her injuries from a third-party tortfeasor. In this regard, Section 502(a)(3) authorizes actions for “appropriate equitable relief” to redress violations of ERISA or to enforce plan terms. Great-West held that the remedy sought in that case did not constitute “equitable relief” available under Section 502(a)(3), because a “judgment imposing merely personal liability upon a defendant to pay a sum of money” in return for “some benefit that defendant had received from him” constituted legal (not equitable) relief.
In the view of the Hellman court, the Great-West analysis led to the conclusion that the remedy requested by the plaintiff in Hellman – i.e., monetary compensation for losses resulting from his plan’s continued, imprudent investment in employer stock – constituted legal relief, because the plaintiff sought to hold the defendants liable for monetary damages for their fiduciary breach. Because the “more important prong” of the test indicated the case sought to adjudicate legal (rather than equitable) rights, the court held that the plaintiff was entitled to jury trial on his Section 502(a)(2) claim and denied the defendants’ motion to strike.
The Bauer-Ramazani Court’s Analysis
In Bauer-Ramazani participants in a defined contribution plan sued a plan service provider under Section 502(a)(2), alleging that the defendant had breached the fiduciary duty of loyalty by delaying investment transfers directed by the participants and retaining the investment returns earned during the delay. The plaintiffs sought “restitution of the value of the investment gains on their accounts” from the date they contended the investment transfers should have been made to the date of the actual transfer. The plaintiffs demanded a jury trial and the defendants moved to strike. The Bauer-Ramazani court applied the same two-prong test as the Hellman court, but reached a different result. With respect to the first prong, Bauer-Ramazani concluded (like Hellman) that ERISA fiduciary claims are equitable (as opposed to legal) in nature, which indicates no right to jury trial.
With regard to the second prong, the plaintiffs contended that, under Great-West, the remedy they requested should be considered legal relief, since they sought to impose on the defendant a personal obligation to pay money to the plan based on the earnings it had received on delayed transfers. The Bauer-Ramazani court rejected this argument, noting that, subsequent to Great-West, the Supreme Court had decided CIGNA Corp. v. Amara, 131 S.Ct. 1866 (2011), which clarified further the meaning of “equitable relief” under ERISA Section 502(a)(3). Unlike Great-West, the CIGNA case involved claims against fiduciaries, and the Supreme Court explained that monetary remedies requiring breaching fiduciaries to make the plan whole or to disgorge profits constitute “equitable relief” because they are analogous to remedies available traditionally in equity courts against trustees who had breached fiduciary duties. Because the claims in Bauer-Ramazani were for breach of fiduciary duty, the court determined that the relief requested was equitable under CIGNA, and granted the defendant’s motion to strike the plaintiffs’ jury demand.
Hellman is an example of a case decided after Great-West that relied on the Supreme Court’s analysis in that case (dealing with the scope of “equitable relief” under ERISA Section 502(a)(3)) to conclude that types of make-whole and disgorgement monetary relief authorized by ERISA 409(a) are legal remedies, and therefore that plaintiffs are entitled to a jury trial with respect to claims enforcing Section 409(a) in actions under Section 502(a)(2). See, e.g., Bona v. Barash, No. 01 Civ. 2289 (S.D.N.Y. March 18, 2003).
Even before the Supreme Court’s decision in CIGNA, there were cases that rejected the argument that Great-West’s analysis of Section 502(a)(3) claims against a beneficiary requires the recognition of a jury trial right for claims against fiduciaries under Section 502(a)(2). See, e.g., George v. Kraft Foods Global Inc., Nos. 07 C1713, 07 C1954 (N.D.Il. March 20, 2008). After CIGNA, the Hellman analysis is even more questionable, as the Bauer-Ramazani court determined. Notably, cases like Hellman – which rely on Great-West even after CIGNA to find a jury trial right for Section 502(a)(2) claims – do not discuss, or cite, CIGNA. See also Healthcare Strategies, Inc. v. ING Life Ins. Co., No. 3:11-ev-282 (D. Conn. Jan. 19, 2012).