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holding that there is no right to jury trial under § 1132 where the plan sues a fiduciary for breach of duty in liquidating plan assets
Summary of this case from Hellman v. CataldoOpinion
Civil No. 99-1447 (JRT/FLN)
April 12, 2002
Steven E. Rau, FLYNN, GASKINS BENNETT, L.L.P., 333 South Seventh Street, 29th Floor, Minneapolis, MN 55402, and Matthew B. Newman, NEWMAN LAW OFFICE, P.O. Box 97, Savage, MN 55378, for plaintiff.
Mark G. Ohnstad, THOMSEN NYBECK, P.A., Edinborough Corporate Center East, Suite 600, 330 Edinborough Way, Edina, MN 55435, for defendant.
MEMORANDUM OPINION AND ORDER ON MOTION FOR JURY TRIAL
This matter is before the Court on defendant Madeline Martin's ("Martin") Motion for Jury Trial. For the reasons discussed herein, the Court now denies Martin's motion.
BACKGROUND
Plaintiff Bradley White ("White") is suing individually and in a derivative capacity on behalf of all the participants of the Bob Martin Trucking, Inc. Profit Sharing Plan ("Plan"). He is alleging breach of fiduciary duty under §§ 502(a)(2) and (a)(3) of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132(a)(2), (3). White also seeks statutory penalties under § 502(c), alleging that Martin was the actual or de facto administrator of the plan, and that she failed to provide certain documents that White requested. Martin argues that both the Seventh Amendment and § 502(a)(2) provide for her right to a trial by jury in the present case. White, however, contends that neither ERISA nor the Seventh Amendment provide for a jury trial in the present circumstances.
ANALYSIS
White alleges fiduciary breach and seeks to make Martin repay losses to the Plan. Martin claims that because White is seeking monetary relief, the case is legal rather than equitable, and she is entitled to a trial by jury. White argues, however, that the mere fact he is seeking monetary relief does not entitle Martin to a jury trial. Specifically, White contends that his ERISA claims are equitable ones because a victory would not yield an immediate payment to him. Rather, any recovery from Martin would go to the Plan's trust, which would be apportioned by the court-appointed Administrator to the Plan's participants. Thus, White claims that the present action is equitable in nature because plaintiffs would not be entitled to "immediate and unconditional payment of money." See In re Vorphal, 695 F.2d 318, 321 (8th Cir. 1982).
Eighth Circuit case law has established that there is no right to jury trial of ERISA claims. Langlie v. Onan Corp., 192 F.3d 1137, 1141 (8th Cir. 1999); Houghton v. SIPCO, Inc., 38 F.3d 953, 957 (8th Cir. 1994); In re Vorphal, 695 F.2d 318, 322 (8th Cir. 1982). Martin claims, however, that a recent decision by the U.S. Supreme Court, Great-West Life Annuity Ins. Co. v. Knudson, 122 S.Ct. 708 (2002), eclipses this established Eighth Circuit precedent and entitles her to a jury trial under both § 502(a)(2) and the Seventh Amendment to the Constitution.
The right to a jury trial in statutory actions such as this is derived from two sources: congressional intent, either explicit or implicit, and the Seventh Amendment. Kahnke v. Herter, 579 F. Supp. 1523, 1527 (D.Minn. 1984).
In Vorphal, the Eighth Circuit concluded that § 502 of ERISA does not provide for trial by jury. 695 F.2d at 322. Martin concedes that Vorphal applies to subsections (a)(1) and (a)(3), but argues that it did not address subsection (a)(2). Thus, this Court's statutory inquiry is limited to whether § 502(a)(2) permits trial by jury.
Section 502 of ERISA provides in relevant part:
(a) Persons empowered to bring a civil action
A civil action may be brought —
(1) by a participant or beneficiary —
(A) for the relief provided in subsection (c) of this section, or
(B) 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;
(2) by the Secretary, or by a participant, beneficiary or fiduciary for appropriate relief under section 1109 of this title;
(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter 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 subchapter or the terms of the plan; . . .29 U.S.C. § 1132.
This question was squarely addressed in Kahnke v. Herter. In that case, the court noted that Congress did not expressly state whether actions under § 502 may receive jury trials. Kahnke, 579 F. Supp. at 1527. Kahnke noted that while subsection (a)(3) clearly provides only equitable relief, "two schools of thought" had emerged on whether other portions of § 502 permit trial by jury. Id. Some courts have held that subsection (a)(1)(B) must provide legal relief, otherwise subsection (a)(3) would be superfluous. See, e.g., Stamps v. Michigan Teamsters Joint Council No. 43, 431 F. Supp. 745 (E.D. Mich. 1977). Other courts, including the Eighth Circuit, have explained that the two sections have different purposes. See, e.g., Wardle v. Central States, Southeast Southwest Areas Pension Fund, 627 F.2d 820 (7th Cir. 1980). See also Utilicorp United Inc. v. Kemper Financial Serv., Inc., 741 F. Supp. 1363, 1367 (W.D.Mo. 1989) (citing cases on each side of the issue). The court in Kahnke approvingly cited commentary that "absent any affirmative evidence of an intent to create the jury trial right in ERISA actions, no such right should be judicially provided." Kahnke, 695 F. Supp. at 1527 (citing Comment, The Right to a Civil Jury Trial in ERISA Section 502(a)(1)(B) Actions: Wardle v. Central States, Southeast Southwest Areas Pension Fund, 65 Minn. L. Rev. 1208, 1213 (1981)). Thus, Kahnke concluded that analysis of congressional intent provided "little guidance" to whether subsection (a)(2) provides for jury trials. Id.
In Vorphal, the Eighth Circuit embraced Wardle's reasoning, holding that subsection (a)(1)(B) does not provide for a trial by jury. In re Vorphal, 695 F.2d 318, 322 (8th Cir. 1982).
This Court agrees that there is no evidence Congress intended for § 502(a)(2) to provide a right to trial by jury. Although the Vorphal court did not discuss subsection (a)(2), it explicitly adopted Wardle's reasoning that "Congress' silence on the jury right issue reflects an intention that suits for pension benefits by disappointed applicants are equitable." Wardle, 627 F.2d at 830. Thus, Vorphal held that jury trials are not required under portion of ERISA's enforcement scheme. Mathis v. American Group Life Ins. Co., 873 F. Supp. 1348, 1361 (E.D.Mo. 1994).
Martin argues that in the absence of explicit authorization from Congress, courts should defer to "the strong federal policy favoring jury trials." (Def. Mem. at 10.) This Court, however, finds it more appropriate to interpret subsection (a)(2) consistently with the rest of ERISA. The Supreme Court has observed that ERISA is an "enormously complex and detailed statute that resolved innumerable disputes between powerful competing interests." Mertens v. Hewitt Assoc., 508 U.S. 248, 251 (1993). Therefore, federal courts should be reluctant to tamper with ERISA's "carefully crafted and detailed enforcement scheme." Great-West, 122 S.Ct. at 712. This scheme "provides strong evidence that Congress did not intend to authorize other remedies that it simply forgot to incorporate expressly." Id. (emphasis original). As discussed above, the other relevant subsections of § 502(a) have been held to provide equitable relief only, not jury trials. See, e.g., Vorphal, 695 F.2d at 322. Accordingly, even discounting the Eighth Circuit's holding in Vorphal, in the absence of clear Congressional intent to permit jury trials under subsection (a)(2), this Court determines that it should not infer a new remedy but should interpret the subsection consistently with other ERISA provisions that provide equitable relief only. The Court therefore finds that Martin is not entitled to a trial by jury under ERISA § 502(a)(2).
Even though there is no statutory authorization for jury trials under ERISA § 502, Martin may still receive a trial by jury if it is permitted by the Seventh Amendment. The right to a jury trial under the Seventh Amendment depends upon the nature of the issue to be tried. Ross v. Berhnard, 396 U.S. 531, 538 (1970). Martin claims that because White seeks monetary damages, the suit must be characterized as legal and therefore may be tried before a jury. This question has also been clearly addressed by the Eighth Circuit, which determined that the mere fact White seeks monetary relief does not require this case to be characterized as legal rather than equitable. Vorphal, 695 F.2d at 322; Kahnke, 579 F. Supp. at 1527. See Curtis v. Loether, 415 U.S. 189, 196 (1974).
In Vorphal, the Eighth Circuit concluded that because the monetary relief sought in that case turned upon a determination of the plaintiffs' entitlement to benefits, such relief was an integral part of an equitable action. Vorphal, 695 F.2d at 322. See also Kahnke, 579 F. Supp. at 1527-28. This case presents similar facts. Here, any recovery against Martin would not go directly to White or to any members of the Plan. Rather, it would to go the Plan's trust, which would be administered so that funds would eventually be paid to members in the appropriate amounts. Although this case involves a dispute over money, it is not like a simple tort or contract case where the prevailing party would be entitled to an immediate award of money. As in Vorphal, White's claim for pension benefits "actually seeks both an order (in the nature of restitution of funds paid into the [Plan]) and, in effect, an affirmative injunction compelling future payment of benefits." Comment, 65 Minn. L. Rev. at 1217, quoted in Kahnke, 579 F. Supp. at 1528. These underlying actions are clearly equitable. Therefore, White's remedy under ERISA is equitable even though he seeks money damages. See Mathis, 873 F. Supp. at 1361-62 ("the type of relief demanded in an ERISA action does not make the nature of the action legal.").
Although Eighth Circuit law on this matter was affirmed as recently as 1999, see Langlie, 192 F.3d 1137, Martin claims that several Supreme Court cases, most notably Great-West, overturns this precedent. This Court disagrees.
Great-West involved an ERISA plan provision that required beneficiaries to reimburse the plan if they recovered any money from a third party. Great-West, 122 S.Ct. at 711. Knudson, the defendant, was injured in a car accident, and her medical expenses were covered by Great-West on behalf of her husband's health and welfare plan. Id. Knudson sued the car company in tort and recovered an additional sum of money in a settlement agreement. Id. Great-West then sued Knudson under ERISA § 502(a)(3) when she refused to pay the plan monies she recovered from her settlement.
Great-West claimed that its suit was for restitution and was therefore an equitable action permitted under ERISA. The Supreme Court disagreed, noting that restitution actions are not necessarily equitable, but the characterization depends upon the nature of the underlying remedy. Id. at 714. The Court stated that restitution actions are "legal" when the plaintiff seeks to impose "merely personal liability upon the defendant to pay a sum of money," such as in a breach of contract case. Id. (quoting Restatement of Restitution § 160, Comment A (1936)). Actions are "equitable" when they seek "to restore to the plaintiff particular funds or property in the defendant's possession." Id. The Court concluded that Great-West's suit to recover "money due and owing under a contract" from a third party was legal, not equitable, because Great-West was merely trying to hold Knudson personally liable for benefits Great-West had conferred upon her. Therefore, the Court held that the action could not be brought under ERISA § 502(a)(3), which permits only equitable relief.
Martin maintains here that because White sued for money, the case is legal and must be decided by a jury. She claims support from Great-West, contending that the "reason for [its] ruling was that the [plaintiff] was seeking money damages, which was [sic] stated to be the classic form of legal relief." (Def. Mem. at 4.) This mischaracterizes the holding in Great-West; that case did not rest on the fact that Great-West was seeking money damages. Rather, the Court found that the case was legal and therefore impermissible under § 502(a)(3) because the plaintiff sought "no more than compensation for loss resulting from the defendant's breach of legal duty." Great-West, 122 S.Ct. at 713. In other words, Great-West was not seeking to restore particular funds to its possession through an equitable mechanism like a constructive trust, but merely trying to impose liability on Knudson for money Great-West felt it was due. See id. at 714-15.
Great-West approvingly cited Harris Trust Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238, 250-51 (2000) which held that when "the legal title to property is obtained . . . under circumstances which render it unconscientious for the holder . . . to retain and enjoy the beneficial interest, equity impresses a constructive trust on the property . . . in favor of the one who is truly and equitably entitled to the same." See Great-West Life Annuity Ins. Co. v. Knudson, 122 S.Ct. 708, 715 (2002).
The Court noted that the funds sought by Great-West (Knudson's tort settlement) were not even in Knudson's possession, but were committed to trust accounts for her medical care and attorney's fees. Great-West, 122 S.Ct. at 716. Because the funds were not in Knudson's possession, it would be impossible to impose a constructive trust upon them for Great-West's benefit.
In the present case, unlike Great-West, the lawsuit is not over a contract to pay money separate from plan benefits. Rather, White is suing Martin for precisely the type of restitution that Great-West held is equitable — White accuses Martin of "hold[ing] particular funds that, in good conscience, belong" to him and other members of the Plan. Id. at 714-15. Therefore, Great-West does not change this Court's conclusion that White's action is equitable, and does not merit a jury trial.
Martin also claims that two other Supreme Court cases affect Eighth Circuit law on the right to a jury trial under ERISA. The first of these is Mertens v. Hewitt Associates, 508 U.S. 248. According to Martin, Mertens holds that § 409 of ERISA, under which White sues, grants "the classic form of legal relief, compensatory damages." (Def. Mem. at 5.) This, however, was not Mertens's holding. In that case, members of a retirement plan sued the plan's actuary, claiming that it was responsible for losses to the plan. Id. at 251. Martin is correct that in Mertens, the plaintiffs sought "nothing other than compensatory damages — monetary relief for all the losses their plan sustained as a result of the alleged breach of fiduciary duties." Id. at 255. Martin does not mention, however, that Mertens's reference to "breach of fiduciary duties" means breaches which was not a party to the lawsuit. Martin relies upon this quote from Mertens, interpreting it to mean that all suits for breach of fiduciary duty seek only compensatory damages and are therefore not equitable actions. (Def. Mem. at 2.) This interpretation is incorrect. A thorough reading of Mertens shows the quote means only that plaintiffs sought compensatory damages from the non-fiduciary defendants. Id. at 253-54. The plaintiffs were not suing to recover benefits; they sought to hold the defendant responsible for its role in the fiduciary breach committed by another. Id. at 262. Because the action sought "no more than compensation for loss resulting from the defendant's breach of legal duty," the remedy could be nothing other than simple compensatory damages. See Great West, 122 S.Ct. at 713. This bears little resemblance to the breach of fiduciary action brought by White. Here, White alleges that Martin, a fiduciary, breached her fiduciary duty to the Plan and must restore benefits that are due. This straightforward ERISA case is not affected by the holding in Mertens, and the Court does not agree that Mertens requires the present action to be characterized as legal.
The plaintiffs in Mertens brought a separate lawsuit against the plan's fiduciary. See Mertens v. Hewitt Assoc., 508 U.S. 248, 250 (1993).
Martin also claims support from Lorillard v. Pons, 434 U.S. 575 (1978), arguing that its discussion of the term "legal relief" sanctions a right to jury trial under ERISA. Lorillard is also inapposite. That case dealt with a completely different statute, the Age Discrimination in Employment Act ("ADEA"), and its discussion of "legal relief" and the right to a jury trial is tied to that statute. Id. at 583-84. Lorillard discusses "legal relief" only because the ADEA explicitly provides for "legal or equitable relief." Lorillard, 434 U.S. at 583; 29 U.S.C. § 626(b), (c). The relevant statute in this case, ERISA § 409(a), provides only for "equitable or remedial relief." 29 U.S.C. § 1109(a). Moreover, Lorillard bases its conclusion that ADEA actions should receive jury trials on the fact that the ADEA's enforcement provisions are "directly analogous" to those of yet another statute, the Fair Labor Standards Act. Lorillard, 434 U.S. at 582-83. Unlike the ADEA, however, "ERISA does not incorporate the enforcement provisions of the FLSA." Miller v. General Motors Corp., 1988 WL 38965 at *6 (6th Cir. Apr. 27, 1988). Thus, because Lorillard relies on a different statute and different lines of interpretative cases, the Court concludes that it is inapplicable to the present case. The Court further determines that Eighth Circuit law is undisturbed by the cases Martin cites, and Martin is not entitled to a jury trial on her actions under the Seventh Amendment.
29 U.S.C. § 621 et seq.
29 U.S.C. § 201 et seq.
Finally, Martin claims that issues surrounding whether to assess statutory penalties under ERISA § 502(c) should be presented to a jury. Of course, assessment of penalties themselves may be done at the Court's discretion. 29 U.S.C. § 1132(c)(1). Even if Martin is correct, however, that it must be proven whether she is the plan administrator, this factual matter can certainly be determined by the Court. See Kerr v. Charles F. Vatterott Co., 184 F.3d 938, 946-48 (8th Cir. 1999) (discussing factual findings of district court on a § 502(c) matter); Wilson v. Moog Automotive, Inc. Pension Plan, 193 F.3d 1004, 1010 (8th Cir. 1999) (same).
Based on the foregoing, all the records, files, and proceedings herein, that defendant's Motion for Jury Trial [Docket No. 79] is hereby DENIED.