In a prior post (please click here), we advised that the U.S. Supreme Court unanimously held that individual participants in 401(k) retirement plans can sue plan fiduciaries to recover losses resulting from mishandling of their individual retirement accounts. Until the decision in LaRue v. DeWolff, Boberg & Associates, Inc., No. 06-856, (Feb. 20, 2008), courts and commentators disagreed over whether an individual account holder could bring an ERISA action against plan fiduciaries or whether only the plan itself had standing to bring those lawsuits.
But the question remains as to whether the LaRue decision will pave the way for an increase in individual accountholder litigation where plan participants' investment instructions are ignored or their accounts are otherwise mishandled. The answer according to LaRue may be no. Despite his victory before the U.S. Supreme Court, Mr. LaRue recently requested to voluntarily dismiss his suit.
According to an Order in the case (please click here), after beginning discovery, Mr. LaRue determined that it was not financially feasible to continue to pursue his claim. Unlike ERISA class actions where plaintiffs' law firms largely fund the litigation costs on a contingency basis, individual actions are often be funded by the individuals themselves, due to the smaller amounts at issue. Because the cost of discovery in ERISA cases can potentially exceed the total amount of the individual investor losses, an individual lawsuit may not be an efficient process for recovery. Accordingly, while the LaRue decision allows for individuals to bring ERISA actions, the cost of funding the actions on an individual basis is likely to significantly limit the number of individual claims ultimately brought.