Thursday, March 2, 2006

En Banc Fifth Circuit Vacates ERISA Standing Decision

Sitting en banc, the Fifth Circuit today took on the issue of standing under ERISA in the case of Milofsky v. American Airlines, No. 03-11087 (5th Cir., March 2, 2006).

At issue in the case was whether a subset of plan participants in a $uper $aver-A 401K Capital Accumulation Plan could sue plan fiduciaries under Section 502(a)(2) to recover losses to the $uper $aver Plan for breach of fiduciary duty. 

Specifically, plaintiffs alleged that these losses arose from the “fail[ure] to effectuate the timely transfer of plaintiffs’ account balances from the BEX [401(k)] Plan to the $uper $aver Plan as promised in numerous representations to plaintiffs . . . .”

In a remarkably short per curiam opinion, the Fifth Circuit disagreed with the district court (which had dismissed the case for failure to state a claim) that the plaintiffs did not meet notice pleading standards and also disapproved of the district court's conclusion that the plaintiff had to exhaust their administrative remedies under ERISA since "the plaintiffs do not seek the distribution of any benefits, but instead assert fiduciary breach claims not requiring exhaustion of administrative remedies."

Consequently, the court vacated and remanded the case to allow plaintiffs a chance to more fully develop their claims.

And although not directly mentioned in the en banc decision, the full Fifth Circuit disagreed with the panel opinion below not only on the notice pleading issue concerning fiduciary status, but more importantly on the issue of plaintiff's standing to bring a Section 502(a)(2).

Under the standing requirement established by Russell,  suits under ERISA § 502(a)(2) must inure to the benefit of the plan as a whole.  The panel opinion had found that, "this suit concerns individualized relief for the particularized harm suffered by a subset of plan participants and does not seek to vindicate the rights or interests of the plan as a whole."   

By finding that plaintiffs' claims were not Section 502(a)(1)(B) claims for benefits requiring exhaustion of  administrative remedies, the en banc Fifth Circuit emphatically disagreed with the panel holding regarding ERISA standing.

Hat Tip: Appellate Law & Practice


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