2nd Circuit Dismisses ERISA Fiduciary Claim Because Not Brought in Representative Capacity

Thanks to Ross Runkel's Employment Law Memo for bringing this interesting 2nd Circuit case concerning ERISA fiduciary remedies and their intersection with class action requirements to my attention.

Rather than reinvent the wheel on this one, here is Ross' summary of the case, Coan v. Kaufman, 04-5173 (2nd Cir. Sept. 11, 2006):

Coan sued her employer's retirement plan, individually and on behalf of the plan, under the Employee Retirement Income Security Act (ERISA). The trial court granted summary judgment in favor of the plan. The 2nd Circuit affirmed.

Coan asserted a breach of fiduciary duty claim on behalf of the plan under ERISA Sections 502(a)(2) and 409. The trial court dismissed this claim based in part on its conclusion that Coan "failed to do anything to demonstrate that her action was intended to benefit former plan participants other than Karen Coan[,]" and that Coan's claim was thus not actually brought in a representative capacity. The court agreed.

ERISA is silent as to the procedures that a plan participant must follow in order to bring suit on behalf of a benefit plan. Commenting on that silence, the court stated, "[i]t seems to us ... that Congress was content to leave the procedures necessary to protect absent parties, and to prevent redundant suits, to be worked out by parties and judges according to the circumstances on a case by case basis." The court opined, "[w]e think it neither necessary nor helpful to delineate minimum procedural safeguards that section 502(a)(2) requires in all cases. But, in our view, although plan participants need not always comply with [FedRCivP] Rule 23 to act as a representative of other plan participants or beneficiaries, those who do will likely be proceeding in a 'representative capacity' properly for purposes of section 502(a)(2)." The court concluded however, that "[u]ltimately ... the requirement is only that the plaintiff take adequate steps under the circumstances properly to act in a 'representative capacity on behalf of the plan.'"

A very interesting case, which appears to be rightly decided. 

But it leaves open the question of whether ERISA should be amended to require that a class action device be utilized for 502(a)(2) claims given that individuals suing the Plan under this section are doing so in a representative capacity.

Such a bright line might not only prevent prejudice to absent parties and redundant suits, but also would avoid the administrative expense and delay and unpredictability that would inevitably flow from case-by-case determinations.

PS