Like most such cases, the plaintiff, a putative class representative, alleged that the defendant fiduciaries should not have allowed participants in the 401(k) plan at issue to continue to invest their employer’s matching contributions in company stock. The plaintiff demanded a jury trial in the complaint and the defendants moved to strike that demand.
As the court recognized, there is longstanding precedent that an exception to the Seventh Amendment right to trial-by-jury exists for equitable actions. See Chauffers, Teamsters & Helpers Local No. 391 v. Terry, 494 U.S. 558, 564 (1990). It is that distinction which has traditionally eliminated the right to jury trials under ERISA, as ERISA claims are generally viewed as equitable in nature.
The court found a distinction in the Supreme Court’s decision in Great West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204 (2002). In Knudson, the Court distinguished between restitution claims available in law in which “the plaintiff’s claim was considered legal because he sought to obtain a judgment imposing a merely personal liability upon the defendant to pay a sum of money,” and restitution claims in equity “where money or property identified as belonging in good conscience to the plaintiff could clearly be traced to particular funds or property in the defendant’s possession.” Id. at 213 (citations omitted). However, the Knudson decision addressed whether a particular claim could be sustained under ERISA § 502(a)(3), and not whether a particular ERISA claim created a right to a jury trial. Nevertheless, the district court used Knudson as a basis to distinguish between types of ERISA claims.
Although the relevant court of appeals, the Eighth Circuit, had previously held that there was no right to a jury trial for claims arising under ERISA §§ 502(a)(1)(B) and (a)(3) (see In re Vorpahl, 695 F.2d 318 (8th Cir. 1982)), the district court found that there was no binding precedent for a claim seeking restitution to the plan for losses incurred as a result of a breach of a fiduciary duty under ERISA § 502(a)(2). In this regard, the court noted a split in authority among Eighth Circuit district courts as to whether a Section 502(a)(2) claim was legal in nature, thereby creating a right to a trial-by-jury.
Ultimately, the district court concluded that the plaintiff’s claim was legal rather than equitable because: (1) the plaintiff sought compensation for a loss resulting from a breach of legal duty; and (2) the plaintiff were seeking to recover an award of liability rather than for particular funds or property in the defendant’s possession. The court held that while the plaintiff also sought equitable relief under ERISA § 502(a)(3), that could not preclude a jury trial on the purportedly “legal,” rather than equitable, claims.
Although, as the district court noted, there have been occasional grants of jury trials in such cases, the district court’s holding is strongly against the overall weight of authority. In the Supreme Court’s recent decision in Cigna Corp. v. Amara, 131 S. Ct. 1866, 1879 (2011), the Court held that “a suit by a beneficiary against a plan fiduciary (whom ERISA typically treats as a trustee) about the terms of a plan (which ERISA typically treats as a trust) . . . is the kind of lawsuit that, before the merger of law and equity, respondents could have brought only in a court of equity, not a court of law,” and that “the remedies available to those courts of equity were traditionally considered equitable remedies.”
Moreover, the district court does not seem to have considered that Section 502(a)(2) claims can only be brought to recover assets to the plan and not directly to a participant or beneficiary. It seems highly dubious that a claim can be legal, rather than equitable, in nature where a plaintiff cannot directly recover any damages allegedly incurred.
Thus, while it remains to be seen whether the district court’s decision will be appealed, it is unlikely that the decision could survive appellate review. However, this will be an important issue to follow as the creation of a right to a jury trial could fundamentally alter the nature of ERISA litigation.
The case is Hellmann v. Cataldo, No. 4:12-cv-02177-AGF (E.D. Mo. Aug. 20, 2013).