Should Trust Law’s “Make-Whole” Relief Be Available Under ERISA § 502(A)(3)?
The following is taken from the introduction to the article:
In June 2008, the Supreme Court denied a petition for writ of certiorari in the case of Amschwand v. Spherion Corp. Amschwand involved a recurring remedial issue under ERISA-whether a participant or beneficiary in an employee welfare benefit plan is entitled to individualized monetary relief for losses caused by a fiduciary breach. The controversy stems from ERISA’s detailed remedial scheme, which requires participants and beneficiaries to squeeze their request for relief into one of the statutorily defined categories. Participants and beneficiaries like the plaintiff in Amschwand are relegated to obtaining only “appropriate equitable relief” under ERISA section 502(a)(3), which the Supreme Court has interpreted so narrowly as to effectively preclude relief in many instances where a fiduciary breach has clearly caused a loss. . . .
Part I provides an overview of the Amschwand case, which frames the litigation posture in this sub-set of breach of duty to inform cases. Part II reviews the pertinent provisions of ERISA’s regulatory scheme. Part III summarizes the major Supreme Court decisions that forced ERISA commentators and litigants into the pre-fusion trust world and examines how make-whole relief fits into this emerging jurisprudence. Parts IV and V line up the arguments for and against the availability of make-whole relief under ERISA section 502(a)(3) and analyze the viability of these competing views by digging more deeply into traditional trust law using the only tools available, the major trust law treatises and pre-fusion trust law cases that addressed individualized remedies for analogous fiduciary breaches. The Article first concludes that equity courts recognized two types of make-whole relief, one of which contemplated recovery to the trust and is echoed in ERISA section 502(a)(2) and one which contemplated recovery to the aggrieved beneficiary and is echoed in ERISA section 502(a)(3). The Article also concludes with the argument that make-whole relief’s required harm to the trust corpus is irrelevant. The traditional trust law corpus finds its analogue in the present day employee welfare benefit plan context in the promised benefit, such as Mr. Amschwand’s life insurance proceeds. Thus, to the extent that harm to the corpus is required, such harm exists in the loss or depreciation of the benefit. And, in any event, make-whole relief in the traditional trust law context was available even where there was no trust corpus, usually because it had ceased to exist, or there was no harm to the trust corpus itself.
This Article concludes, therefore, that make-whole relief was an equitable remedy available to individual beneficiaries to redress breaches of fiduciary duty, even in the absence of harm to the trust corpus. Under the Supreme Court’s precedents, such relief should be available to Mrs. Amschwand.