John H. Langbein
Sterling Professor of Law and Legal History
Yale University.
16 January 2003 Draft
Social Science Research Network Electronic Paper Collection at:
http:// papers. ssrn. com/ abstract= 371104
Yale Law School Center for Law, Economics, and Public Policy
Research Paper No. 269
This paper can be downloaded without charge from: John H. Langbein
This paper has benefitted from the research assistance of Umut Ergun and from comments on prepublication drafts by Ethan Lipsig, Daniel Meltzer, and Judith Resnik.
Preface
I. Introduction: The Meaning of "Equitable"
II. ERISA's Regime of Federal Trust Law
Does ERISA 1 remedy law intend that the victim of a breach of ERISA-proscribed wrongdoing should be made whole? In three 5-4 opinions, the Supreme Court has held not.
In Massachusetts Mutual Life Ins. Co. v. Russell 2 the Court cast doubt on whether victims of ERISA-prohibited conduct may be compensated for consequential injury.
In Mertens v. Hewitt Associates, 3 the Court read ERISA's
authorization of "appropriate equitable relief" 4 to have disinterred
the law/ equity division from the era before the two systems were
fused in the 1930s, and the Court mistakenly treated equity as not
having awarded monetary relief.
In the 2002 opinion in Great-West Life & Annuity Insurance Co. v. Knudson, 5 the Court continued this antiquarian vein of interpretation, holding that Congress's
authorization of "equitable relief" in ERISA was meant to disaggregate the American law of restitution into its archaic origins in quasi-contract and constructive trust.
The result was to allow the beneficiary of an ERISA health plan to dishonor the plan's subrogation clause, which obliged her, in the event of a tort
recovery, to reimburse the plan for the medical expenses arising from
the injury that the plan paid on her behalf. 6
Attempting to obey the holdings of these Supreme Court cases, lower courts have read ERISA to preclude remedy in a host of situations in which wrongful plan
administration (almost always in violation of ERISA's fiduciary rules) has caused expense, physical harm, or other suffering. 7
I. Introduction: The Meaning of "Equitable"
Mertens rested its prohibition against recompense for consequential injury on an implausible reading of a single word, "equitable," as Congress used it in one provision of a 110,000-word statute. 8 Section 502(a)(3) of ERISA authorizes a plan participant or beneficiary 9 to "obtain ... appropriate equitable relief ... to redress ... violations ... of [ERISA] or the terms of the plan ...." 10 Justice Scalia's opinion for the Court in Mertens holds that Congress used the word "equitable" in this provision to "refer to those categories of relief that were typically available in equity (such as injunction, mandamus, and restitution, but not compensatory damages)." 11
The decisions in Russell, Mertens and Great-West were issued over strong dissents, 12 signalling that the outcome in these cases is not stable. The cases have been greeted with despair in the scholarly and practitioner literature. 13 As the toll of injustice worked under these rulings mounts, and as the membership of the Court changes, the question of the proper construction of Congress's grant of "equitable relief" in ERISA § 502(a)(3)(B) will return to the Court's agenda.
This article explains how the Court's interpretation of ERISA remedy law went wrong. My main theme is that the reach of trust-law principles in ERISA is far deeper and more controlling than the opinions in Russell, Mertens and Great-West allow. When federalizing the administration of pension and employee benefit plans in ERISA, Congress made a deliberate choice to subject these plans to the pre-existing regime of trust law rather than to invent a new regulatory structure. In its most important dimension, ERISA is federal trust law. ERISA imposes a requirement of mandatory trusteeship on pension and employee benefit plans, 14 and the statute extends the core fiduciary duties of the trust relationship to govern all aspects of plan administration. 15 ERISA's duties of loyalty and prudence, discussed below, require ERISA-covered fiduciaries not to inflict consequential as well as other injury upon plan participants and beneficiaries. Justice Scalia, the author of the Court's opinions in Mertens and Great-West, was unable to explain in either case 16 why Congress would have wanted in the remedy sections of the statute to undermine the very fiduciary duties that Congress was creating in ERISA's substantive law.
Congress intended ERISA remedy law to replicate the core principles of trust remedy law in the regulation of pension and benefit plans, including the long-familiar make-whole standard of trust remedy law. It will be seen that the three remedy provisions of ERISA that allow participants and beneficiaries to recover for ERISA violations, sections 502(a)(1)-(3), track trust remedy law, which routinely provides just that sort of make-whole compensatory relief for consequential injury 17 that the Court refused in Mertens and Great-West. This trust remedy tradition grew up in equity and remains, in the words of the Restatement of Trusts, "exclusively equitable." 18 When transposing trust remedy law to the sphere of pension and benefit plans, the drafters of ERISA were evoking the relief routinely obtainable for breach of trust. By authorizing "appropriate equitable relief ... to redress ... violations" 19 of ERISA, Congress meant relief "appropriate" to the trust-based principles of ERISA substantive law.
It is more than a little ironic that the term "equitable," which the Supreme Court is interpreting to deny routine make-whole relief from the victims of ERISA-proscribed wrongdoing, is a term so long associated with an opposite policy: the ancient maxim that "Equity suffers not a Right to be without a Remedy." 20
In Mertens Justice Scalia dismissed--as "vague notions of [the] statute's 'basic purpose'" 21 --the trust-law context in which ERISA's authorization of "appropriate equitable relief" is embedded. He highlighted the word "equitable" and dismissed Congress's other word, "appropriate." He read "equitable" to intend a contrast between equity and common law as the two had been practiced before fusion, even while admitting that it seemed "unlikely" 22 that Congress would want to do such a silly thing. Moreover, in the name of fidelity to this ancient distinction, Justice Scalia devised a wholly novel (and unworkable) standard for what was "equitable." Congress, he said, must have been "refer[ring] to those categories of relief that were typically available" in pre-fusion equity practice, "such as injunction, mandamus, and restitution ...." 23 Exhuming dead law can be an unruly exercise, as Justice Scalia would discover in Great-West, where he had to extricate the law of restitution from the category of "typically" equitable in which he had placed it in Mertens.
Part II of this article examines the purposes and main features of ERISA, including the remedy provisions, with particular attention to the pervasiveness of the trust model in the congressional design. I then turn to the three Supreme Court decisions that have contorted ERISA remedy law. Much of the mischief in Mertens and Great-West traces to dicta in Russell. I examine Russell in Part III and Mertens and Great-West in Part IV. Part V concludes.
II. ERISA's Regime of Federal Trust Law
The enactment of ERISA in 1974 was the culmination of more than a decade of investigations into the affairs of pension and employee benefit plans conducted by Congress, presidential commissions, and the Departments of Labor, Justice and Treasury. 24 ERISA was primarily designed to protect pension plan participants and beneficiaries against two hazards, default risk and administration risk, that had revealed themselves spectacularly in pre-ERISA practice.
Default risk inheres in a the structure of a defined benefit 25 pension plan, because the plan promises today's worker to pay pension benefits far in the future. The danger is that the employer (or other plan sponsor) may become insolvent in the interval or renege in other ways on that pension promise. The movement that led to ERISA effectively commenced in 1963, when the financially troubled automaker, Studebaker, defaulted on its pension plan, 26 frustrating the support expectations of several thousand workers and retirees, many of them already elderly. Congress responded in ERISA by devising a set of measures that has largely eliminated default risk. Funding rules require the sponsor to contribute enough to pay for the plan's promises on an actuarially sound basis. 27 Vesting and anti-reduction rules restrict the ability of a plan to impose benefit forfeitures. 28 Most importantly, Title IV of ERISA instituted a system of plan termination insurance (modelled to some extent on the federal deposit insurance program that had rescued the banking system in the 1930s). All defined benefit plans must pay a premium per covered participant into a fund administered by an ERISA-created government agency, the Pension Benefit Guarantee Corporation, which guarantees the payment of most benefits promised under defined benefit plans. 29
By administration risk, I refer to the danger that the persons responsible for managing and investing plan assets and paying claims may abuse their authority--that they may do the job badly, 30 or misuse plan assets for personal gain, 31 or improperly refuse to pay promised benefits. 32 Unlike the default risk associated with defined benefit pension plans (a hazard largely peculiar to the decades-long gap between initial employment and final payment under such plans 33 ), administration risk is common to all benefit plans, including the so-called welfare benefit plans 34 that provide health, disability, and other nonpension benefits. which is a main reason why Congress determined to subject these nonpension plans to ERISA fiduciary law.
II-A. Congress Adopts the Trust Model
In the late 1950s and 1960s congressional committees conducted repeated investigations into the affairs of pension and benefit plans dominated by corrupt labor unions, especially the Teamsters. These investigations, most notably that of the Senate's McClellan Committee, led by its chief counsel, Robert F. Kennedy, 35 found widespread looting of plan funds through sweetheart deals, kickbacks, and various forms of cronyism. 36
Congress responded to these discoveries with the enactment of ERISA fiduciary and remedy law. When instituting the funding, vesting, anti-reduction and insurance provisions of ERISA to combat default risk, Congress had been forced to devise a new regulatory regime. By contrast, when confronting abuse in plan administration, Congress was able to adopt and adapt the long-familiar trust model as the regulatory regime. ERISA subjected ERISA-covered 37 plans to a double dose of trust law. The statute imposes a rule of mandatory trusteeship, requiring that "all assets of an employee benefit plan shall be held in trust by one or more trustees," 38 who are subject to the strict fiduciary duties discussed below. Furthermore, ERISA extends the ambit of fiduciary duty far beyond the plan's trustees. ERISA requires every plan to "provide for one or more named fiduciaries" who are "to control and manage the operation and administration of the plan," 39 and the statute treats anyone as a fiduciary to the extent that person exercises material discretion over the plan or its assets. 40 Accordingly, ERISA subjected all significant aspects of plan administration to fiduciary duties and remedies derived from trust law, and hence exclusively from equity 41 .
There are two great principles of trust fiduciary law, the rules of loyalty and of prudence. ERISA codifies both. The loyalty rule forbids self-serving behavior. ERISA's version, patterned on the Restatement of Trusts, 42 requires that "a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and ... for the exclusive purpose of ... providing benefits to participants and their beneficiaries." 43 The prudence rule imposes an objective standard of care, comparable to the reasonable person rule of tort law, holding trustees to the standard of conduct expected of similarly situated decisionmakers. 44 ERISA's prudence rule tracks this standard, 45 obliging the ERISA fiduciary to exercise "the care, skill, prudence, and diligence" of a "prudent man acting in like capacity ...." 46
In transposing the trust model as the regulatory regime for this new field of federal law, Congress chose not to replicate much of the detail of traditional trust law. 47 Rather, the drafters of ERISA propounded the two grand principles of loyalty and prudence, leaving most of the details to be worked out in fiduciary practice under regulatory and judicial oversight. As the Supreme Court said in a pre-Mertens case, "Congress intended that the courts would look to the settled experience of the common law in giving shape to a "'federal common law of rights and obligations under ERISA-regulated plans. '" 48 Congress also lodged extensive regulatory authority over ERISA fiduciary law in the Department of Labor, which has produced an important body of regulations interpreting the Act. 49 The drafters doubtless decided to be skeletal on the understanding that the courts would apply the subordinate rules of trust fiduciary law that ERISA omitted to spell out as manifestations of the core norms of loyalty and prudence that ERISA preserved. Thus, many familiar rules of trust administration did not find their way into the text of ERISA-- for example, the duty to inform beneficiaries about significant aspects of trust administration; 50 the duties to collect, 51 segregate and earmark 52 and protect 53 trust property; and the duties to enforce and defend claims; 54 but the courts, including the Supreme Court, 55 have understood to import these principles as appropriate in the course of applying ERISA's duties of loyalty and prudence.
ERISA also omits large swaths of traditional trust law that are structurally inapplicable to pension and employee benefit trusts. For example, having originated as a branch of the law of donative transfers, the law of trusts has been particularly attuned to the problems associated with successive (usually life and remainder) estates. 56 By contrast, pension and employee benefit plan trusts are commercial arrangements arising from the employment relationship. 57 Congress had no need in ERISA to carry over doctrines of trust law that are oriented to intrafamilial wealth transfer.
It is a measure of the attractiveness of trust fiduciary law and its attendant remedy tradition that Congress would choose to base its regulatory regime for pension and benefit plans on a model so distant from the prototypical intrafamilial donative trust. Proceeding in this way spared Congress from having to invent and nurture a new regulatory regime, as Congress had been forced to do in the 1930s when it propounded the Securities Acts. Instead, by appropriating the trust model, Congress was able to adapt and absorb a mature body of pre-existing norms and remedies for a new regulatory mission. To treat ERISA's calculatedly skeletal trust law as evidencing a weakened congressional commitment to the trust model is, therefore, a serious error. In Russell, for example (which will be discussed extensively below in other respects), a plan participant sought recompense for the consequences of the plan's severe delay in paying plan benefits. One strand of Justice Stevens' opinion refusing remedy was the argument that the text of ERISA does not explicitly regulate "the possible consequences of delay in the plan administrators' processing of a disputed claim." 58 Untoward delay in making distribution from a trust fund is a transparent breach of the trust-law duties of loyalty and prudent administration, long recognized in the case law. 59
To expect express statutory regulation in ERISA concerning such details of sound fiduciary practice in trust administration misconceives how Congress constructed ERISA. What Congress did in ERISA was to mandate the trust device for all plan assets, and to mandate the core principles of trust fiduciary law, loyalty and prudence, to govern all aspects of plan administration. Congress had no need to spell out the details, and considerable reason not to do so for a field whose contours were not yet known. The Supreme Court's failure to recognize the breadth and inclusiveness of ERISA's loyalty and prudence norms, as well as the intimate functional connection between those rules and the remedy provisions of ERISA, has been a serious error (to some extent remarked by the dissenters in Russell and Mertens 60 ). The consequence has been that the Court has been treating routine applications of traditional fiduciary and remedy law as impermissible extensions of the statute.
II-A-2. Benefit determinations.
ERISA also subjects the process of benefit determination, that is, deciding whether benefit claims fall within plan terms, to the trust-based fiduciary model. ERISA plans make millions of such determinations every year. Most are routine matters of administration, easily resolved, but inevitably some benefit denials become contentious. 61 ERISA section 503 requires covered plans to follow written claims procedures, to give reasons for denials, and to provide for review of denials "by the appropriate named fiduciary," 62 who is subject to ERISA's duties of loyalty and prudence. ERISA did not, however, address the question of what standard of review the courts should apply when a dissatisfied claimant seeks judicial review of the plan fiduciary's decision. Because pension and employee benefit plans arise from the contract of employment and commonly entail further service contracts with providers such as insurance companies, a contract-based analysis would have been highly plausible. 63 Nevertheless, in 1989 in the prominent case of Firestone Tire & Rubber Co. v. Bruch, 64 the Supreme Court resolved to be "guided by principles of trust law," 65 holding that "[t] he trust law de novo standard of review" (giving no presumption of correctness to the fiduciary) was appropriate. 66
The question of what standard of review the courts should apply to such plan decisionmaking when a participant challenges a benefit denial is a matter quite distinguishable in function from the fiduciary rules that govern plan administration. Fiduciary decisionmaking is perforce governed by fiduciary duties, but the standards for judicial review of fiduciary decisionmaking need not have been. The Supreme Court's determination to be "guided by principles of trust law" even on this question evidences the Court's understanding of just how suffused with trust law ERISA is. 67 Accordingly, it has been especially puzzling that in interpreting ERISA remedy law in the subsequent opinions in Mertens and Great-West, the Scalia-led majorities gave so little weight to the principles of trust remedy law that the drafters of ERISA meant to put in place.
II-B. Federalizing Trust Remedy Law
In enacting ERISA Congress not only mandated a trust-law-based regime of fiduciary law to govern pension and employee benefit plans, Congress also insisted on federalizing the field by means of a preemption clause of unprecedented breadth, displacing state law remedy in favor of ERISA's regime of federalized trust law. The Conference Committee explained that the drafters wanted to "apply rules and remedies similar to those under traditional trust law to govern the conduct of fiduciaries." 68 This linkage of ERISA fiduciary law and ERISA remedy law is the congressional lodestar that the Supreme Court has lost sight of in Russell, Mertens, and Great-West.
ERISA's preemption clause, section 514(a), "supersede[s] any and all State laws insofar as they ... relate to any employee benefit plan ...." 69 This provision "sweeps as broadly as the English language allows." 70 The Supreme Court has produced a tangled preemption case law, which for a decade and a half emphasized literal construction of the key term (" relate to"), 71 but finally retreated from literalism to a more purposive standard in the landmark 1995 Travelers case. 72 Oddly, Justice Scalia, author of the majority opinions in Mertens and Great-West, which rest on the importance of supposed fidelity to the congressional language in ERISA section 502(a)(3) even when the result is "unlikely," 73 has strongly endorsed this departure from fidelity to the statutory text of ERISA section 514(a). In a later case, Justice Scalia lamented that the Court was not emphatic enough in Travelers in announcing its abandonment of the literalism of the former cases. "[A] pplying the 'relate to' provision according to its terms was a project doomed to failure," he wrote. "The statutory text provides an illusory test, unless the Court is willing to decree a degree of pre-emption that no sensible person could have intended--which it is not." 74 I find it a puzzle to understand why Justice Scalia thinks it appropriate to disregard Congress' preemption language on purposive grounds, while insisting on a nonintuitive reading of ERISA's remedy language so destructive of the purposes of ERISA that the justice himself has candidly conceded that it is "unlikely" that Congress intended the result he ascribed to the congressional language.
Into the state law remedial void left by ERISA preemption, Congress inserted the ERISA remedy law that the Court has so restricted in Russell, Mertens, and Great-West. In thinking about the proper scope of ERISA remedy law, it is important to bear in mind the devastating effect of ERISA preemption on pre-existing remedies. Because ERISA extinguishes state law in a field in which the dominant purpose of federal intervention was to protect plan participants and beneficiaries, 75 courts that interpret ERISA should be hesitant to conclude that remedies routinely available in pre-ERISA trust law fall outside the meaning of Congress' authorization of "equitable relief" under ERISA. Dissenting in Mertens, Justice White lamented "the anomaly of interpreting ERISA so as to leave those Congress set out to protect--the participants in ERISA-governed plans and their beneficiaries--with 'less protection than they enjoyed before ERISA was enacted." 76 He described it as "perverse" to construe "ERISA so as to deprive beneficiaries of remedies they enjoyed prior to the statute's enactment." 77
Section 502(a) authorizes ERISA participants and beneficiaries to bring civil actions to enforce ERISA rights. Sections 502(e)-(f) reserve exclusive federal jurisdiction for enforcement cases, except that Congress allowed 78 concurrent jurisdiction over claims under section 502(a)(1)(B), the provision that provides for suits to obtain "benefits due" or to enforce or clarify rights under the terms of the plan. Thus, ERISA allows a [beneficiary] to bring a routine benefit collection case or plan construction dispute in a state court, while, in the words of the Conference Committee, reserving "exclusive jurisdiction with respect to actions involving breach of fiduciary responsibility" to the federal courts. 79
In this jurisdictional allocation we see again the congressional concern to construct a federal fiduciary law under ERISA, and to support it with an appropriate federal remedial structure. It seems improbable that Congress would have so emphasized the importance of vindicating ERISA fiduciary law in the federal courts while simultaneously working the radical diminution of the trust remedy tradition that Justice Scalia has read into the congressional grant of "equitable relief." It is even more improbable that, had Congress actually intended so significant a departure from the trust tradition, Congress would have chosen to achieve that objective by stealth, smuggling it into the seemingly benign term "appropriate equitable relief" in ERISA section 502(a)(3). In a similar vein, Michael Gordon, a pivotal figure in the drafting of ERISA, has commented on Justice Scalia's treatment of the word "equitable" as evincing congressional intent to restore pre-fusion law to the interpretation of ERISA. Gordon "find[s] it preposterous to think that the ERISA conferees or the ERISA Congress intended to repudiate the law-equity fusion in an ERISA context, and yet would never say a word about it." 80
II-B-3. ERISA remedy law tracks trust remedy law.
For cases in which trustees breach their fiduciary duties, the law of trusts has developed a three-part remedial system, which ERISA adapts and absorbs. 81 An aggrieved trust beneficiary may sue, depending upon the circumstances of the case, either in his or her own right or on behalf of the trust. He or she may recover (1) for loss incurred, (2) for any profits that the trustee made in breach of trust, and (3) for any gains that would have accrued but for the breach. 82 Thus, in capsule form, trust remedy law allows (1) recovery for loss, (2) restitution of profits, and (3) recovery for foregone gains. The consequential (or "extracontractual" 83 ) damages that Russell and Mertens have refused to countenance sometimes reflect recovery for loss, when the loss exceeds "benefits due" under ERISA section 502(a)(1). 84 In other cases the Court's misreading of section 502(a(3) prevents recovery for foregone gains, for example, when culpable maladministration causes appropriate investments not to be made. 85
The Uniform Trust Code, which is declaratory of the common law, 86 identifies among the remedies appropriate for breach of trust not only the specific and restitutionary relief that Justice Scalia characterized in Mertens as "typically equitable," 87 but also money damages, the make-whole remedy that Justice Scalia treated as precluded when Congress authorized "other appropriate equitable relief" in ERISA section 502(a)(3). The Code says: "[T]he court may ... compel the trustee to redress a breach of trust by paying money ...." 88 Bogert's treatise summarizes the case law, saying that "[f]or breach of trust the trustee may be directed by the chancellor to make a payment of damages to the beneficiary." 89 Acts of "negligence or misconduct in the making or retaining of investments may give rise to a right in favor of the beneficiaries to recover money damages from the trustee." 90 In such cases "the general rule [is] that the object of damages is to make the injured party whole ... [and] both direct and consequential damages may be awarded." 91
In the leading modern case on the duty of loyalty, in which the heirs of the artist Mark Rothko sued his estate's executors for self- dealing in the sale of paintings belonging to the estate, the New York Court of Appeals found the executors liable for what it called "appreciation damages." Following the Restatement of Trusts, the court said that "since the paintings cannot be returned, the estate is therefore entitled to their value at the time of the decree [some years after the loss, when the value had materially increased], i. e., appreciation damages." 92 Compare the result reached under the Mertens-driven interpretation of ERISA in a recent case in which a plan administrator wrongfully failed to carry out the participant's investment instructions to transfer money in a defined contribution pension plan account to certain mutual funds, which subsequently performed better than the money market fund into which the administrator placed the funds. The Sixth Circuit held that Mertens precluded comparable make-whole relief for the foregone gain. 93
Cases awarding money damages for consequential injury, either to the trust or to the beneficiary, exist in profusion in trust remedy law. 94 Accordingly, money damages were and are as much an equitable remedy as a legal remedy. Justice Scalia was correct to say that "[m]oney damages are ... the classic form of legal relief," 95 but flatly wrong to assert that money damages are not equally characteristic of equity when it enforces equity-based causes of action such as those arising from the administration of trusts and estates.
What does ERISA remedy law actually provide? Section 502(a), authorizing civil actions, contains a six-part list of remedies, of which the final three (subsections (4)-(6)) are peripheral. 96 Subsections (1)-(3), reproduced in the margin, 97 constitute the three remedy provisions upon which virtually all claims by ERISA participants and beneficiaries are brought.
(a) "Benefits due." Section 502(a)(1) is the workhorse of ERISA remedy law, the provision under which routine benefit denial and other ERISA claims proceed. It authorizes a participant or beneficiary to bring an action "to recover benefits due" or to enforce or clarify rights under the plan.
(b) Relief to the plan. Section 502(a)(2), the measure construed in Russell and discussed below in that context, is restricted by its terms to actions invoking fiduciary liability under ERISA § 409(a). Section 409(a) provides for recovery by the plan, not the participant or beneficiary who brings suit. (The participant or beneficiary benefits indirectly, through the enhanced value of the plan.) Section 409 authorizes recovery for "any losses" and "any profits," and it further subjects the breaching fiduciary to "such other equitable or remedial relief as the court may deem appropriate ...." 98 Compared to the remedy structure of the law of trusts, (epitomized, we have seen, as recovery for loss, recovery of profits, and recovery for foregone gains or consequential injury), ERISA section 409(a) replicates the first two and expresses the third as "such other equitable or remedial relief as the court may deem appropriate ...." The drafters worded this third option for appropriate "equitable or remedial relief" more broadly than the comparable trust standard, probably in order to facilitate adaptation to any new problems that might be encountered as ERISA transposed trust remedy law to the novel terrain of pension and benefit plans.
(c) Catchall. Section 502(a)(3), the measure construed in Mertens and Great-West, has two subsections. Subsection (A) authorizes injunctive relief against "any act or practice which violates any provision [of ERISA's Title I, which contains ERISA fiduciary law] or the terms of the plan ...." Subsection (B), which continues the same sentence, contains the language that was in dispute in Mertens and Great-West, authorizing "other appropriate equitable relief ... to redress such violations ...." In another ERISA case, the Supreme Court called this section the "catchall" provision, in the sense that section 502(a)(3) "act[s] as a safety net, offering appropriate equitable relief for injuries caused by violations that [section] 502 does not elsewhere adequately remedy." 99
This grant of "other appropriate equitable relief" completes ERISA's absorption of trust remedy law for cases in which a participant or beneficiary seeks an individual recovery, by providing remedy for ERISA violations not remedied under section 502(a)(1)(B) (benefits due) or section 502(a)(2) (relief to the plan for loss or profits or otherwise). The language of this provision should have been sufficient to convey to the courts Congress's design to remedy ERISA wrongs of the sort commonly remedied under trust law, especially foregone gains and other sorts of consequential injury. As with the similar language of section 409(a) (referenced through section 502(a)(2)), this measure is worded more broadly than the comparable standard in trust law--probably, as I have suggested above with regard to the comparable provision under sections 409(a) and 502(a)(2), to enhance the adaptability of trust remedy law to any novelties of pension and benefit plans. So understood, the catchall provision vindicates the core principle of trust remedy law, the make-whole standard, restoring the victim to the position that he or she would have had "had there been no breach of trust." 100
To conclude: I began this discussion of ERISA's federalized trust remedy law by noticing the Conference Committee's determination that ERISA should "apply rules and remedies similar to those under traditional trust law to govern the conduct of fiduciaries." 101 Congress presupposed when authorizing "equitable relief" in ERISA the long familiar practice, recently codified in the Uniform Trust Code, that "the court may ... compel the trustee to redress a breach of trust by paying money ...." 102 ERISA's three participant remedy provisions are expressed in order of complexity from the simplest (" benefits due") to the more nuanced (" other appropriate equitable relief"), replicating the three-part remedy scheme of the law of trusts. Because trust remedy law routinely allows consequential damages, 103 and because Congress meant for ERISA to apply trust remedy law, the grant of "appropriate equitable relief ... to redress ... violations" in the sequence in which the drafters placed it in section 502(a) of ERISA should have been understood to include make-whole monetary relief for consequential injury as well as specific relief, contrary to the decisions in Mertens and Great-West.
The Supreme Court's engagement with ERISA remedy law got off to a bad start in 1985 on account of unwise dicta in Massachusetts Mutual Life Insurance Co. v. Russell. 104 Like several of the Court's more troubled ERISA opinions, whose facts made them awkward vehicles for certiorari, 105 Russell instanced a case whose skewed procedural history made it poor choice for giving initial guidance about the field. The plaintiff was a participant in an ERISA-covered disability plan. 106 She suffered a back ailment. The plan paid benefits for some months, then terminated benefit payments on the report of an orthopedic surgeon. The plaintiff demanded internal review of the denial of her benefits. Six months later, after a pair of further medical examinations, the plan administrator reinstated her benefits retroactively to the date of termination. Although this decision caused her benefits to be paid in full for the entire period of her disability, the plaintiff alleged that the interruption in payment resulted in financial, physical, and emotional injury, for which she sought consequential damages.
Russell claimed that the plan's denial was wrongful because the medical evidence at the time of the denial established her disability, and because the plan deliberately took six months to reinstate her benefits. She sued the plan fiduciaries, seeking both compensatory and punitive damages for these consequential injuries. The federal district court 107 dismissed the case on the defendants' motion for summary judgment, holding that ERISA did not permit claims either for what it called "extra-contractual" damages or for punitive damages. The Ninth Circuit reversed, holding that Russell's complaint stated a cause of action under ERISA for breach of "the fiduciary's obligation to process claims in good faith and in a fair and diligent manner" 108 (a responsibility 109 deriving from ERISA's duties of prudence and loyalty.)
The quirk that has made Russell such an awkward precedent is that the Ninth Circuit decided to recognize the cause of action exclusively on the basis of the second of ERISA's three participant remedial provisions, section 502(a)(2), which is directed to recovering damages that run to the plan rather than to the participant. The plaintiff, in seeking certiorari, limited herself to defending the victory that the Ninth Circuit, using the wrong remedy section, had handed her. Crucially, she did not ask the Supreme Court, as an alternative ground, to rest her case on the more suitable foundation of "appropriate equitable relief" under section 502(a)(3). Accordingly, the case as pleaded did not squarely present the question of whether section 502(a)(3) afforded her a remedy.
The Supreme Court unanimously reversed the Ninth Circuit's misuse of section 502(a)(2). Russell would be a precedent of scant consequence had it stopped there. Instead, Justice Stevens uttered broad dicta that helped mislead the Court in Mertens and Great-West. These dicta provoked a concurrence by Justice Brennan (joined by Justices White, Marshall, and Blackmun), which is functionally a dissent. Consequently, the important parts of Russell, like the holdings in Mertens and Great-West, rest on the narrowest 5-4 majority.
The Ninth Circuit in Russell constructed an individual remedy for the plaintiff under section 502(a)(2) by emphasizing the language about equitable relief contained in the linked section 409(a). We have seen that section 502(a)(2) allows the participant or beneficiary to sue "for appropriate relief under section 409(a) ...." The latter section, which makes a breaching fiduciary liable to the plan both for losses caused and for any profits made, concludes by subjecting the breaching fiduciary "to such other equitable or remedial relief as the court may deem appropriate ...." The Ninth Circuit read this concluding language as providing the basis for allowing the plaintiff to obtain individual relief. Justice Stevens, for a unanimous Supreme Court, held this maneuver impermissible, pointing out that the Ninth Circuit opinion "skipp[ed] over" the relevant language of section 502(a)(2), which unambiguously limits relief under that section solely to the plan. 110
The dicta in Justice Stevens' opinion that split the court concerned two topics: He suggested that ERISA was not much interested in providing individual relief, and he argued that remedying consequential injury even under the authorization for "appropriate equitable relief" in section 502(a)(3) would entail the creation of an implied cause of action, violating the Court's established constraints on the implication of causes of action under federal statutes.
III-A. Deprecating Individual Relief
Justice Stevens asserted that ERISA was not much interested in enforcing the rights of individual plan participants and beneficiaries. ERISA's drafters "were primarily concerned with the possible misuse of plan assets, and with remedies that would protect the entire plan, rather than with the rights of an individual beneficiary." 111 Although Justice Stevens admitted that ERISA fiduciary law explicitly created rights in the participants and beneficiaries, he insisted that "the principal statutory duties imposed on the trustees relate to the proper management, administration, and investment of fund assets, the maintenance of proper records, the disclosure of specified information, and the avoidance of conflicts of interest." 112
This claim was transparently wrong. ERISA's duties of loyalty and prudence are expressed to run "solely in the interest of the participants and beneficiaries," 113 and ERISA expressly authorizes a participant or beneficiary to bring a civil action for benefits due under section 502(a)(1), and for injunctive or "other appropriate equitable relief" under section 502(a)(3). 114 Justice Brennan's minority opinion pointed squarely to the duties of loyalty and prudence set forth in ERISA section 404(a), which supply "[t]he legislative history demonstrat[ing] that Congress intended ... to incorporate the fiduciary standards of trust law into ERISA, and it is black-letter trust law that fiduciaries owe strict duties running directly to beneficiaries in the administration and payment of trust benefits." 115 But Brennan's was the minority opinion. The majority in Russell gave comfort to the idea that ERISA meant to protect plans, not participants, deemphasizing the achievement of federal fiduciary law that lies at the core of ERISA, and thus making it easier to refuse relief for consequential injury.
In refusing to remedy consequential injury under section 502(a)(2) and the linked section 409(a), the Court in Russell disapproved relief under language nearly identical to that in section 502(a)(3), the more suitable remedy provision that was not before the Court in the case. The language of section 409(a) that the Ninth Circuit wrenched out of its context of plan-only relief (" such other equitable or remedial relief as the court may deem appropriate") closely resembles the language of section 502(a)(3), authorizing "other appropriate equitable relief ... to redress ... violations ...." Russell had the effect of predisposing the Court in Mertens and Great-West to disapprove relief for consequential injury under 502(a)(3), even though the holding in Russell rejected the plaintiff's claim for such relief on account of its inconsistency with the plan-only remedial objective of section 502(a)(2), the provision under which she mistakenly framed it.
III-B. The "Specificity Myth" 116 : Treating Relief for Consequential Injury as an Implied Cause of Action
The other strand of dicta in Justice Stevens' opinion in Russell that would prove influential in Mertens and Great-West was the concern not to imply a cause of action--in this case a remedy for consequential injury--that Congress may have deliberately omitted. Hostility to implied causes of action has been an important theme in the Supreme Court's interpretation of a variety of federal regulatory acts across recent decades. 117 Using language that would resurface in Justice Scalia's opinions in Mertens and Great-West, Justice Stevens argued that ERISA remedy law was so carefully and comprehensively drafted that if ERISA did not expressly provide remedy for consequential injury, the omission should be treated as deliberate. "The six carefully integrated civil enforcement provisions found in § 502(a) of the statute as finally enacted ... provide strong evidence that Congress did not intend to authorize other remedies that it simply forgot to incorporate expressly." 118 Justice Stevens concluded that "[w]e are reluctant to tamper with an enforcement scheme crafted with such evident care as the one in ERISA." 119
Justice Brennan's concurrence dismissed this line of reasoning as "both unnecessary and to some extent completely erroneous." 120 Pointing to the issue that the Court would confront a decade later in Mertens, Justice Brennan observed that in sections 502(a)(1) and (2) "Congress already had instructed that beneficiaries could recover benefits, [and] obtain broad injunctive and declaratory relief for their own personal benefit or for the benefit of their plans ...." Accordingly, section 502(a)(3) "can only be read precisely as authorizing federal courts to 'fine-tune' ERISA's remedial scheme." 121 Generalities about "not find[ing] implied remedies in ERISA," he said, "have little bearing on how courts are to go about construing the private remedy that Congress explicitly provided in [section] 502(a)(3)." 122
The message of the Brennan opinion was that when a case better pleaded than Russell succeeded in raising the question of the scope of remedy under section 502(a)(3), relief for consequential injury might still be determined to be express (as "appropriate equitable relief") rather than implied. He noticed that "[t]he legislative history demonstrates that Congress intended federal courts to develop federal common law in fashioning the additional 'appropriate equitable relief'" under section 502(a)(3). 123 He pointed to the remarks of Senator Jacob Javits, a main architect of ERISA, 124 when presenting the Conference Committee report to the Senate, that the drafters "intended that a body of Federal substantive law will be developed by the courts to deal with issues involving rights and obligations under private welfare and pension plans." 125 Accordingly, by authorizing "appropriate equitable relief," Congress meant for the courts to work out what was appropriate in the light of the purposes of the statute.
The legislative history to which Justice Brennan referred, anticipating the growth of a case law applying ERISA, bears importantly upon the relatively skeletal fiduciary and remedy law that Congress supplied in ERISA. As I have explained above, 126 when enacting ERISA Congress was transposing the trust model into regulatory law for the newly federalized field of pension and employee benefit plans. Both in specifying the fiduciary norms of ERISA section 404(a) (loyalty and prudence) and in the "catchall" remedy provision of section 502(a)(3) (" other appropriate equitable relief ... to redress violations"), Congress worked at a level of some generality. Interpreting Congress's term "appropriate equitable relief" to cover so predictable and recurrent a case as fiduciary breach resulting in consequential injury entails applying the cause of action Congress created, not implying a cause of action that Congress omitted. The core fallacy of the majority opinion in Russell, which has carried over to Mertens and Great-West, is that it confuses applying with implying.
Justice Brennan's concurrence did not directly challenge one underlying premise of the majority's reasoning on this question, the idea that ERISA remedy law is so comprehensive that the Court is justified in inferring that details that Congress left unexpressed must have been deliberately omitted. Justice Stevens argued: "The assumption of inadvertent omission is rendered especially suspect upon close consideration of ERISA's interlocking, interrelated, and interdependent remedial scheme, which is in turn part of a 'comprehensive and reticulated statute. '" 127 Justice Scalia would return to this theme in Mertens 128 and Great-West. 129
Professor George Flint has disparaged this argument from ERISA's supposed comprehensiveness as "the specificity myth." 130 Flint directed attention to the cumbersome duplication of language in the six subsections of section 502(a). Other evidence reinforces his point. The Court's claim in these ERISA remedy cases that ERISA is so perfectly drafted that it already expresses every detail of its intended coverage conflicts with the incessant emphasis about ERISA's bad drafting in the Court's preemption cases. 131 Moreover, ERISA's drafters made major omissions from their procedure and remedy provisions. To mention some prominent examples, they neglected to provide a statute of limitations for most ERISA matters. 132 They did not specify whether they wanted jury trial to pertain to any aspect of ERISA litigation. 133 ERISA did not identify the standard for judicial review of plan decisionmaking, causing the Supreme Court to have to supply it in Bruch. 134 The statute provided for the award of attorney fees in ERISA litigation but did not identify the principles for when to make such awards and in what amounts. 135 Nor did the drafters address whether punitive damages would be allowed in ERISA actions (an issue raised in Russell and discussed below). 136 Accordingly, the premise is deeply suspect that ERISA is so "comprehensive" that Congress meant to omit any detail not explicitly articulated in the statutory text.
The phrase invoked in Justice Stevens' opinion in Russell, that ERISA is a "comprehensive and reticulated statute," derives from the Supreme Court's first ERISA case, Nachman Corp. v. Pension Benefit Guaranty Corporation. 137 The phrase has often been quoted in support of the idea that ERISA's remedy provisions are so well drafted that they require no supplementation, especially no use of remedial steps not itemized in the text of ERISA. 138 In truth, when the Court coined the phrase in Nachman, it was referring to the entire substantive agenda of ERISA's four titles and made no mention of the remedy provisions of ERISA § 502(a). 139
III-C. "Extracontractual" and Punitive Damages
I have described the issue in Russell as whether the term "equitable relief" as used in ERISA's provisions for relief to the plan (sections 502(a)(2) and 409(a)) authorizes damages for consequential injury, that is, damages for financial loss and for physical and other suffering resulting from ERISA-proscribed conduct. A troubling feature of the opinion is that it does not speak the neutral parlance of consequential damages, but rather uses a pejorative, "extracontractual damages." The first sentence of Justice Stevens' opinion frames "[t]he question presented for decision" as whether the plaintiff plan participant can recover "extracontractual compensatory or punitive damages" under ERISA. 140 The Supreme Court did not invent the term "extracontractual," it was already in the case at the district court level 141 , but the Supreme Court bears responsibility for giving it broad currency in ERISA caselaw.
III-C-1. "Extracontractual" damages
Both parts of the word "extracontractual" are misleading. "Extra," meaning "outside of," is a word that suggests a bonus, something to which one is not entitled. That attitude infects the Court's framing of the question in Russell: "Although [she] has been paid all benefits to which she is contractually entitled, she claims to have been injured by the improper refusal to pay benefits ...." 142 Furthermore, the language of contract in the term "extracontractual" is a misemphasis in the setting of ERISA remedy law. 143 As I have explained in Part I of this article, ERISA's central policy decision was to impose a regime of mandatory trusteeship and fiduciary law on pension and employee benefit plans, even though such plans arise from the contract of employment. ERISA subordinates contract to trust 144 by subjecting the process of plan administration, including the investment of plan assets and the payment of plan benefits, to nonwaivable 145 fiduciary duties of loyalty and prudence. As was true of the claim in Russell, most ERISA cases brought by a participant or beneficiary for consequential injury (that is, for damages beyond the "benefits due" recoverable under section 502(a)(1)) are based on a claim of breach of fiduciary duty. Characterizing the damages issue in such cases as contractual (in the sense of "extracontractual") rather than fiduciary further underscores the great failing in the Supreme Court's handling of ERISA remedy issues in Russell, Mertens, and Great-West: the Court's neglect of the trust law basis of ERISA remedy law in interpreting the authorizations for equitable relief in section 502(a).
In addition to consequential damages, the plaintiff in Russell also sought punitive damages. The Ninth Circuit held that she might be able to recover punitive damages. 146 Justice Stevens' opinion linked these radically different kinds of damages in framing the case, describing "[t] he question presented for decision" as whether remedy lay under ERISA "for extracontractual compensatory or punitive damages ...." 147 This linkage prejudiced the Court's handling of consequential damages. Precisely because punitive damages do not compensate, a claim for punitive damages turns on considerations quite remote from the make-whole basis of recovery for consequential damages.
Russell is widely regarded as having rid ERISA remedy law of punitive damages, 148 although the opinion contains no discussion of the traits or merits of punitive damages. The opinion merely observes that "there really is nothing at all in the statutory text [of ERISA § 502(a)(2)] to support the conclusion that [the conduct complained of] gives rise to a private right of action for compensatory or punitive relief." 149 Russell reasoned that punitive damages fell with consequential damages. 150
Although, for the reasons I have explained, the arguments that the Court advanced against consequential damages are deeply problematic, certain of those arguments may be quite sound as applied to punitive damages. Whereas consequential damages have been an endemic feature of make-whole relief in trust law, 151 punitive damages had no place among the trust-law remedies that Congress meant to emulate in ERISA. To the contrary, equity exhibited a long tradition of hostility to penalties. 152 As Justice Scalia would observe in Mertens in 1993, the edition of Scott's treatise on trusts current at the time of ERISA "cites no pre-ERISA case on the issue of punitive damages," and the 1982 edition of Bogert's treatise cites only two. 153 The Restatement of Trusts, 154 the most authoritative source for American trust law at the time of the enactment of ERISA, contains no authorization or recognition of punitive damages. Only in the decades after ERISA did some American states begin to admit punitive damages into trust law. 155 As Justice Scalia pointed out in Mertens, "the availability of punitive damages ... was not [a major issue] in 1974, when ERISA was enacted. 156 Accordingly, it seems quite sound to think that Congress in 1974 had no reason to think of punitive damages as "appropriate equitable relief."
By treating make-whole consequential damages as a common category with punitive damages, Justice Stevens' opinion in Russell used the undeveloped but instinctively powerful case against remedying punitive damages under ERISA to help carry his much weaker case against remedying consequential damages under ERISA.
III-D. Neglecting the Trust-Law Basis of ERISA
Justice Brennan concluded his concurrence in Russell by emphasizing the primacy of the trust law tradition in correctly resolving ERISA remedy questions. The way to decide whether section 503(a)(3) provides a remedy for consequential damages or other relief is to "ascertain[] the extent to which trust and pension law as developed by state 157 and federal courts provide for [such relief] ..., given that Congress intended to incorporate trust law into ERISA's equitable remedies." 158 Had the Court heeded that advice, it could have spared itself the mistake in Mertens and the embarrassment of Great-West.
In Mertens v. Hewitt Associates, 159 decided in 1993, the Supreme Court construed the language of "appropriate equitable relief" in ERISA section 502(a)(3). Justice Scalia's 5-4 opinion held that this provision excluded "compensatory damages," 160 even though "money damages were available in [equity] courts against the trustee" 161 in actions to recover for breach of trust. Accordingly, the state of the present law regarding recompense the breach of fiduciary duty or other ERISA-proscribed wrongdoing is that the injured plan participant or beneficiary may recover monetarily for "benefits due" under section 502(a)(1), but not for consequential injury under either section 502(a)(2) (per Russell) or section 502(a)(3) (per Mertens).
Mertens arose from a case in which a defined benefit pension plan sponsor became insolvent and defaulted on some promised benefits. The plaintiffs were plan participants whose promised benefit levels were so high that a portion of the benefits were above the amounts guaranteed under the plan termination insurance program operated by the Pension Benefit Guaranty Corporation. 162 The plaintiffs brought several suits, including one against Hewitt, an actuarial firm, alleging that Hewitt's deficient actuarial work and concealment of the plan's underfunding facilitated the sponsor's default. As an external service provider, Hewitt was not a plan fiduciary under ERISA. 163 The issue on certiorari was "whether ERISA authorizes suits for money damages against nonfiduciaries who knowingly participate in a fiduciary's breach of fiduciary duty." 164 The circuits had been divided on the question, 165 which produced a lively debate within ERISA circles about whether the statute allowed recovery against a party who was not an ERISA fiduciary but who assisted or joined with a fiduciary in the commission of a breach of ERISA fiduciary duty. Trust law has long made such a party liable for breach of trust. It was assumed that the Supreme Court took certiorari on the case to resolve this prominent circuit split. Instead, to the astonishment of the ERISA bar, the Supreme Court avoided deciding the question of nonfiduciary liability. The Court rested its decision on the ground that even if there were such liability, section 502(a)(3) 166 did not authorize the plaintiffs to recover consequential damages for Hewitt's conduct. In dicta the Court expressed strong doubt that nonfiduciary liability could lie, 167 but several years later the Court unanimously held in favor of such liability. 168
Justice Scalia's main contention is that because the plaintiffs sued for compensatory damages, they were necessary seeking legal as opposed to equitable relief. "[W] hat petitioners in fact seek is nothing other than compensatory damages--monetary relief for all losses their plan sustained as a result of the alleged breach of fiduciary duties. Money damages are, of course, the classic form of legal relief," 169 hence not to be allowed as "equitable relief" under ERISA section 502(a)(3). But how could Justice Scalia reconcile that assertion with his recognition that "money damages were available in [equity] courts against the trustee ..."? 170 His answer rested on the further assertion that in pre-fusion practice when equity courts awarded money damages, they were awarding legal rather than equitable relief. Citing the 1941 edition of Pomeroy's treatise on equity, Justice Scalia wrote that "there were many situations--not limited to those involving enforcement of a trust--in which an equity court could 'establish purely legal rights and grant legal remedies which would otherwise be beyond the scope of its authority. '" 171 The passage in Pomeroy cited for this claim actually identifies only one such doctrine, today known as the equitable clean-up jurisdiction, 172 under which the court of equity would resolve legal issues that arose in a case in which the court had some other basis for the exercise of equitable jurisdiction.
This claim that the award of money damages in equity always entailed legal relief allowed Justice Scalia to set up the contrast that he used to decide the case. He reasoned that there were only two possible meanings to ERISA's term, "equitable relief," although he gave no reason for positing that those two meanings, one overinclusive and the other underinclusive, were the only choices before the court. Money damages could be awarded if the term "equitable relief" were read to mean "whatever relief a court of equity is empowered to provide in the particular case ...." The second alternative, and the one that Justice Scalia preferred, was to read the term "to refer to those categories of relief that were typically available in equity (such as injunction, mandamus, and restitution, but not compensatory damages)." 173
The possibility that Justice Scalia neglected to consider is that an award of money damages is not only a "classic form of legal relief," 174 but also a standard mode of equitable relief, especially for breach of trust.
Choosing between the two meanings he constructed was, according to Justice Scalia, "a question of interpretation" 175 of congressional intent. Reasoning that "'[e]quitable' relief must mean something less than all relief," 176 Justice Scalia insisted that what Congress meant was relief "typically" equitable in his asserted sense of excluding monetary relief. Under this reading of ERISA, monetary relief would still be available to a plaintiff participant or beneficiary in a claim for "benefits due" under section 502(a)(1), but not as "equitable relief" under section 502(a)(3), hence not for consequential injury beyond "benefits due." In support of this outcome, Justice Scalia invoked Russell's strictures against implying ERISA causes of action. 177 He dismissed the dissenters' emphasis on the importance of the ERISA trust model, 178 saying that "vague notions of a statute's 'basic purpose' are nonetheless inadequate to overcome the words of its text ...." 179
There are three profound flaws in Justice Scalia's reasoning in Mertens:
IV-B-1. Money damages in equity.
The premise is wrong that when pre-fusion equity courts awarded money damages they were awarding legal rather than equitable relief. The award of money damages is an endemic form of equitable relief. There were indeed circumstances in which a pre-fusion equity court would award legal damages (that is, damages for a common law claim), but it is not true that all damage awards in equity courts had that character. Most damage awards in equity were and are issued to remedy equitable as opposed to legal causes of action. In particular, as I have emphasized above, 180 equity courts have constantly awarded money damages to remedy breach of trust, which is why the Uniform Trust Code of 2000 has recently codified the practice. 181 At the time of the enactment of ERISA, the Restatement of Trusts made a breaching fiduciary "chargeable with the amount required to restore the values of the trust estate and trust distributions to what they would have been if the trust had been properly administered." 182 Thus, while Justice Scalia was correct to say that "[m]oney damages are ... the classic form of legal relief," 183 he was wrong to infer that money damages were not also a classic form of equitable relief.
Part of what may have misled Justice Scalia is a terminological oddity. Damages in equity, especially for breach of trust, are sometimes called "surcharge" rather than "damages." The concept, evoking the days when English lawyers still spoke law French, is that the Chancellor grants monetary relief by a charge on (sur) the account filed by the breaching trustee. Thus, it may once have been technically correct to say that damages were exclusively a common law remedy, but only because damages in equity were called surcharge. The two terms are synonyms for monetary relief. 184 Although the equity parlance has largely (but by no means entirely 185 ) fallen into disuse in the United States, equity's ancient practice of awarding money damages to remedy breach of trust and other equitable causes of action abides.
IV-B-2. The concept of "typically" equitable is indeterminate.
Justice Scalia's notion of identifying certain "typically" equitable remedies that exhaust the congressional meaning has no basis either in the text of ERISA or its legislative history. Not only was Justice Scalia wrong to exclude money damages from the meaning of "equitable relief," he was also wrong to suggest that that term had a more comprehensible meaning in "those categories of relief that were typically available in equity ... such as injunction, mandamus, and restitution ...." 186 In truth, the concept of "typically equitable" has no ascertainable meaning.
One of Justice Scalia's three examples, mandamus, was a common law bench writ having nothing to do with the Court of Chancery or the lesser equity courts. "In England at the time of the American Revolution the use of the writ of mandamus as a remedy was as much a part of the common law as any other action." 187
Beyond injunction and mandamus, Justice Scalia's remaining example of a category typically equitable was restitution. In Great-West he would be forced to squirm out of that pronouncement and recharacterize some restitution as legal rather than equitable. 188 Only an action seeking to fasten a constructive trust upon particular property was truly restitutionary, he would say. (That saga is discussed below. 189 ) Thus, two of the three categories of relief that Justice Scalia initially designated as "typically" equitable turn out to be wholly or partially atypical.
Remarkably, Justice Scalia conceded that his preferred category of "typically" equity in the pre-fusion sense was "unlikely." He said: "As memories of the divided bench, and familiarity with its technical refinements, recede further into the past, the [Scalia-preferred meaning of remedies 'typically' equitable] becomes, perhaps, increasingly unlikely; but it remains a question of interpretation in each case which meaning is intended." 190
I have previously discussed how the Court in Russell fell victim to what has been called the "specificity myth," the notion ERISA is so comprehensively and exhaustively drafted that details of practice not spelled out in the text should be treated as purposefully excluded by Congress. 191 Justice Scalia returned to this well in Mertens (and in Great-West, discussed below.) In Mertens he repeated Nachman's paean to this "'comprehensive and reticulated statute, '" 192 and Russell's depiction of the "six carefully integrated civil enforcement provisions" 193 of ERISA remedy law. From this premise, Justice Scalia then followed Russell in confusing the routine work of applying the statute with the suspect activity of implying a cause of action. "In Russell we emphasized our unwillingness to infer causes of action in the ERISA context, since that statute's carefully crafted and detailed enforcement scheme provides 'strong evidence that Congress did not intend to authorize remedies that it simply forgot to incorporate expressly. '" 194
Positing the comprehensiveness of ERISA remedy law also allowed Justice Scalia to justify his inattention to ERISA's remedial purpose. "[V]ague notions of a statute's 'basic purpose' are nonetheless inadequate to overcome the words of its text regarding the specific issue under consideration.... This is especially true with legislation such as ERISA, an enormously complex and detailed statute that resolved innumerable disputes between powerful competing interests --not all in favor of potential plaintiffs." 195 In discussing Russell's version of the specificity myth, I have pointed out why both the premise and the conclusion are misguided. 196 ERISA's procedure and remedy sections are riddled with major omissions that the courts have had to fill in, such as whether jury trial pertains, and what statute of limitations to use. 197 ERISA's remedy provisions are not particularly well-drafted, which is why the Court has found itself wrestling with these cases about the interpretation of section 502. The Court has often complained about the bad drafting of ERISA's preemption provisions, 198 and Justice Scalia in Mertens called the drafting of the disputed remedy sections "artless." 199
By treating relief for consequential injury as an excluded category that Congress must have disapproved by not specifically scheduling it, Justice Scalia closed the Court off from the trust law tradition on which ERISA's drafters relied to give meaning to their grant of "other appropriate equitable relief." Because both the substantive and the remedial provisions of ERISA arise from trust law, the likely meaning of "equitable relief" in ERISA is the panoply of remedies, specific and monetary, including make-whole damages for consequential injury, which courts of equity have for centuries had available to correct breaches of trust, and which are "other" than the "benefits due" and injunctive relief that the statute expressly authorizes earlier in section 502(a).
In Great-West Life & Annuity Insurance Co. v. Knudson, 200 decided in 2002, the confessedly "unlikely" 201 category of "typically equitable" that Justice Scalia invented in Mertens unravelled in his hands. We have seen that this supposed category was premised on two profoundly mistaken ideas: (1) that when Congress enacted ERISA remedy law in 1974, it meant to revive the law-equity distinction of the era before the Federal Rules fused them in the 1930s; and (2) that in pre-fusion times there was a determinate category of remedies "that were typically available in equity (such as injunction, mandamus, and restitution, but not compensatory damages)," 202 hence that monetary recovery for consquential injury would fall outside the ambit of equitable relief.
Great-West confronted Justice Scalia with a claim for a monetary recovery brought as a restitution action under section 502(a)(3). The case arose from an ERISA-covered health plan, under which the defendant, Janet Knudson, was a beneficiary. The plan contracted for health insurance with Great-West. The plan, as is common, 203 contained a subrogation clause, conditioning the payment of benefits upon the beneficiary's granting to the plan "a first lien upon any recovery" 204 that the beneficiary might obtain from a third party for the sums paid under the plan. The plan assigned its rights under this provision to Great-West (a cost-reduction factor that Great-West would have taken into account when pricing the health insurance policy). Knudson suffered severe injuries in an automobile accident, for which the plan paid $411,157 in expenses. 205 Knudson subsequently settled a tort action arising from the accident for $650,000, which her attorney negotiated in such a fashion that only $13,828 was paid to Great-West. Great-West sued under ERISA section 502(a)(3) to enforce the subrogation agreement, seeking injunctive relief to enforce restitutuion of the $411,157. The Ninth Circuit, 206 attempting to obey Mertens, held that an action to recover benefit payments made under an ERISA plan "is not equitable relief and is not therefore authorized by § 502(a)(3)." 207 The Supreme Court affirmed in a 5-4 opinion by Justice Scalia.
Attempting to fit its case within the meaining of "equitable" that the Court had given in Mertens, Great-West contended that its subrogation claim "equitable" on two distinct grounds. First, Great-West sought injunctive relief to enforce the subrogation claim, and injunction was a remedy that the Court in Mertens had declared to be "typically equitable." Justice Scalia brushed aside this aspect of the case, saying that "an injunction to compel the payment of money past due under a contract, or specific performance of a past due monetary obligation, was not typically available in equity." 208
The other dimension of Great-West's case that matched up with Justice Scalia's category of "typically equitable" is that the case was brought in restitution, to remedy the unjust enrichment consequent to Knudson's behavior in dishonoring her subrogation obligation. Restitution was the third form of relief that Justice Scalia in Mertens had announced to be "typically equitable" (the others were injunction and mandamus).
The American Law Institute effectively created the modern law of restitution in the 1930s. The Restatement of Restitution (1936) integrated functionally overlapping rules that had grown up under the law of constructive trusts in equity and under the law of quasi-contract at common law. The fusion of law and equity made the law of restitution possible. The driving insight was that both quasi-contract and constructive trust rested on a common principle, remedying unjust enrichment. Procedural unification (fusion) animated doctrinal consolidation (restitution). 209 Thus, it was nearly as mistaken for Justice Scalia in Mertens to have placed restitution in his category of pre-fusion remedies that were "typically equitable" before fusion as it was for him to include mandamus, which had never had an equitable component. There was no law of restitution before fusion, only quasi-contract and constructive trust.
Continuing his insistence on denying monetary compensation as equitable relief under ERISA, Justice Scalia in Great-West had to backtrack 210 on his position in Mertens. He now declared that "not all relief falling under the rubric of restitution is available in equity. In the days of the divided bench, restitution was available in certain cases at law, and in certain others in equity." 211 Because Great-West was seeking "to impose personal liability on [Knudson] for a contractual obligation to pay money," 212 its claim was "'quintessentially an action at law. '" 213 Pre-fusion the claim would have been "considered legal because [it] sought 'to obtain a judgment imposing a merely personal liability upon the defendant to pay a sum of money. '" 214 Thus, Justice Scalia resurrected the pre-fusion distinction between the sources of restitution, buried since the 1930s, in the name of congressional intent.
There is reason to think that Justice Scalia's disentangling of the legal and equitable strands of restitution may have been not only antiquarian but also wrong as applied to subrogation. The leading English treatise on restitution reviews the authorities, noticing that "subrogation was known to the Chancellor in the seventeenth century" before the development of the law of quasi-contract at common law; 215 and that the cases establish that subrogation arises independently of, and 'not by force of, ' the contract and will be granted if it is just and equitable to do so." 216 The Restatement takes that position on functional grounds, characterizing relief in subrogation cases as equitable: "A court of equity may give restitution ... to prevent unjust enrichment ...." 217
Another basis for characterizing relief for subrogation as equitable under a pre-fusion standard is that it is directed to the prevention of fraud. "[I]n cases of fraud the court of equity has a concurrent jurisdiction with the common law ...." 218 Knudson and her lawyer were defrauding the ERISA plan (and its assignee Great-West) when they structured the tort settlement to escape her obligation under the plan's subrogation clause to reimburse the plan from their recovery. Justice Scalia did not confront the irony that his interpretation of "equitable" in ERISA section 502(a)(3) allowed Knudson to contravene the ancient maxim that equity will not allow a statute to be used as an instrument of fraud. 219 Because Great-West allowed the fraud, the danger for the future is that ERISA remedy law will be treated as providing no relief even against fraud. 220
IV-D-3. Persisting with the "specificity myth."
Drawing on the familiar language from Nachman, Russell, and his own opinion in Mertens, Justice Scalia premised his opinion in Great-West on the assertion that ERISA is so comprehensively drafted that the Court should treat the omission to deal with some detail of remedial practice as congressionally intended. "We have therefore been especially 'reluctant to tamper with [the] enforcement scheme' embodied in the statute by extending remedies not specifically authorized by its text.... Indeed, we have noted that ERISA's 'carefully crafted and detailed enforcement scheme provides "strong evidence that Congress did not intend to authorize other remedies that it simply forgot to incorporate expressly." '" 221
Great-West was a particularly weak case in which to employ this line of reasoning, because the subrogation clause in issue, although integral to benefit plan funding and cost assumptions, was so remote from the aspects of pension and benefit plan administration that commanded congressional attention at the time of ERISA's enactment. The court's suggestion in Great-West that ERISA's omission of precise instructions for dealing with the consequences of a subrogation clause in an employee benefit plan should be treated as an intentional omission has been addressed in an article by Professor Daniel Meltzer. He points out that "[i]t is not only plausible but almost certain" 222 that Congress, in Justice Scalia's words, "simply forgot to incorporate expressly" provisions for dealing with the enforcement of such clauses. Since there is no evidence from the briefs or other sources that nonenforcement of plan subrogation clauses was a subject of discussion or interest group struggle at the time of the enactment of ERISA, Meltzer notes, there is no reason to think enforcement of the plan term under ERISA would upset some significant interest-group accommodation embedded in the statute. 223 Hence, "it is farfetched to claim that [refusing enforcement of the subrogation clause under ERISA] was intended by Congress, or furthers the purpose of Congress when it enacted the remedies it did in ERISA and preempted others; it is equally farfetched to claim that the result is desirable." 224
IV-D-4. "Typically equitable."
What is left of Justice Scalia's category of "typically equitable" after Great-West turns out to be injunction, for which Congress did not need to provide "other appropriate equitable relief" in section 502(a)(3), having already expressly authorized it earlier in the same sentence; and restitution for cases that might have been brought as constructive trust actions pre-fusion. If ERISA's drafters had meant to say constructive trust, one would think they would have said it directly, rather than calling it "other appropriate equitable relief."
Another way to give meaning to the category of "typically equitable," since both constructive trust and injunction are forms of specific remedy, would be to treat the category as meaning to authorize only specific relief. Again the problem arises that if the drafters had meant specific relief, they would have used that more precise term rather than authorizing "other appropriate equitable relief." Congress in fact said no such thing, because limiting relief to the specific remedies would have had the senseless effect (now achieved in Mertens and Great-West) of denying make-whole monetary relief to the victims of ERISA-proscribed wrongdoing. Such a suggestion is further unlikely because it would contravene the trend of American law across the twentieth century, which strongly deemphasized the distinction between damages and specific relief. 225
Justice Scalia's reasoning in Great-West is at its weakest in defending the disinterring of pre-fusion distinctions. Congress mandated that pension plans take the form of trusts, and Congress intended to "apply rules and remedies similar to those under traditional trust law to govern the conduct of fiduciaries." 226 Yet under Justice Scalia's reasoning, merely by using the term "appropriate equitable relief" Congress devised a remedial law for ERISA that would not allow make-whole monetary relief for consequential injury of the sort characteristic of trust law. Justice Ginsburg's dissent (in which Justices Breyer, Stevens, and Souter joined) observes that "it is plain that Congress made no such 'choice' ...." 227 She points out that the historic law/ equity distinctions "were hardly at the fingertips of those who enacted § 502(a)(3)." 228 To the contrary "[b]y 1974, when ERISA became law, the 'days of the divided bench' were a fading memory, for that era had ended nearly 40 years earlier with the advent of the Federal Rules of Civil Procedure." 229 Justice Scalia's answer was to reiterate his error in Mertens, insisting that fidelity to the statutory text requires "adverting to the differences between law and equity to which the statute refers." 230 I have explained above 231 why the statute's reference to "equitable relief" ought not to be read to dictate this "unlikely" 232 result. To Justice Stevens' objection in a separate dissent that it was hard to understand why Congress would have wanted to unwind the fusion of law and equity in ERISA remedy matters, Justice Scalia responded with the soldier's lament 233 that it was not the Supreme Court's job to wonder why: "It is ... not our job to find reasons for what Congress has plainly done ...." 234 But as I have shown in Part I of this article, what Congress was doing when it authorized "appropriate equitable relief" for a regime of federalized trust law was tracking trust remedy law, which routinely gives the monetary relief for consequential injury that the majority in Great-West refused. Justice Scalia, not Congress, gave the term the dysfunctional meaning propounded in Mertens and Great-West.
Until Great-West, some courts had squirmed to grant consequential relief despite the holding in Mertens by characterizing the relief as restitution--for example, by treating as restitutionary the recovery of interest on a benefit payment long delayed. 235 Great-West will probably foreclose that sort of labeling exercise, but the newly endorsed distinction between quasi-contract and constructive trust has already begun to invite moves that remind us of the pleading maneuvers of the days before the Federal Rules--for example, in a case much like Great-West, obtaining an injunction directing the participant to hold the settlement proceeds in a separate fund, in order to facilitate equitable tracing and thus a claim for constructive trust. 236
The Supreme Court's mishandling of ERISA remedy law has rendered the protections of ERISA illusory in any case in which the victim of ERISA-proscribed wrongdoing needs damages for consequential injury in order to be made whole. Such cases usually involve the wrongdoer's breach of ERISA's trust-based fiduciary law. Consistent with the congressional design to "apply rules and remedies similar to those under traditional trust law to govern the conduct of fiduciaries," 237 the drafters of ERISA replicated the main principles of trust remedy law in section 502(a)(1)-(3). According to the Scalia-led majorities in Mertens and Great-West, however, the drafters suffered what seems to have been a fairly advanced case of legislative schizophrenia. Congress really wanted to disaffirm the core principle of make-whole relief that characterizes trust remedy law, but to do it surreptitiously, by creating a remedy law that authorizes what a normal reader would think to be the opposite, namely, "appropriate equitable relief." In this article I have explained why this "unlikely" 238 reading of ERISA section 502(a)(3) is mistaken, and why the trust-law principles embodied in ERISA substantive law were also meant to shape ERISA remedy law.
I have located the beginnings of the Supreme Court's trail of error in Russell, where the Court asserted the premise, reiterated in Mertens and Great-West, that ERISA's remedy provisions were so comprehensive that any feature of remedy law not expressly detailed in the statutory text should be treated as one that Congress deliberately omitted. This line of reasoning treats the normal work of applying statutory terms as though it were an effort to import extra-statutory terms. In contrast to the remedy provisions of ERISA that authorize the precise step of injunction, ERISA's authorization of "other appropriate equitable relief" (the term construed in Russell, Mertens, and Great-West) does not describe a particular remedy. When Congress uses such conceptual language, Congress necessarily intends for the courts to interpret it--the supply the specifics. Interpreting is applying, not implying.
Russell originated the Court's practice of referring to consequential damages by the pejorative "extracontractual." This term causes make-whole relief, which was routine in trust law, to sound undeserved (" extra"). Because Congress subjected plan administration to a statutory version of trust fiduciary law, the label of "contract" mischaracterizes the legal relations arising from ERISA, which sound in trust. Thus, the Court's neglect of the trust principles that should be guiding it is evident in the very language that the court is using to frame the problem.
Russell further prejudiced the issue of whether to allow consequential damages by treating it in common with whether to allow punitive damages. In truth, these two issues are radically different. Relief for consequential injury is compensatory, punitive damages by definition are not. At the time of the enactment of ERISA, relief for consequential injury was a staple of equity practice, but punitive damages (which are deeply contrary to the equitable tradition of relieving against penalties) were virtually unknown. Accordingly, allowing make-whole relief for consequential injury under ERISA's grant of "appropriate equitable relief" should have no material bearing on whether to allow punitive damages in ERISA cases. The Court could reverse itself and allow monetary relief for consequential injury while still concluding that ERISA does not authorize punitive damages.
The main damage to ERISA remedy law was done in the Court's decision in Mertens, which construed "appropriate equitable relief" in section 502(a)(3) to preclude monetary damages for consequential injury on the ground that such relief was not "typical" of pre-fusion equity. I have explained why this holding entails a triple error:
The blunder that invited these errors was Justice Scalia's confusion in Mertens about the distinction between equitable jurisdiction and equitable relief. He rightly noted that equity courts had jurisdiction in some circumstances to award money damages in common law cases. His mistake was to infer that since "[m]oney damages are ... the classic form of legal relief," 239 when equity courts awarded money damages they were always awarding legal relief. That point is flatly wrong. Equity courts also awarded damages (sometimes called surcharge) as equitable relief in cases that were exclusively equitable, above all in breach of trust cases. The Uniform Trust Code, codifying the Restatement of Trusts, confirms this tradition for the modern law, providing that "the court may ... compel the trustee to redress a breach of trust by paying money ...." 240
Great-West revealed the futility of Justice Scalia's attempt in Mertens to identify a category of "typically equitable" remedies that could be attributed to congressional intent. His list of such remedies consisted of injunction, mandamus, and restitution. Mandamus was wrong from the beginning, and in Great-West he had to subject restitution to the judicial equivalent of a manufacturer's recall. For no reason other than fidelity to a confessedly "unlikely" interpretation of Congress' grant of "appropriate equitable relief," he found himself attempting to unravel one of the great American achievements of private law, the unification of the law of unjust enrichment. According to Justice Scalia, Congress meant its grant of "other appropriate equitable relief" to revive the vanished distinction between quasi-contract and constructive trust, a senseless result that underscores his inability to answer the question raised in Mertens, of why Congress should have wanted to restore the pre-fusion law/ equity distinction. In truth, the category of "typically equitable," Justice Scalia's invention in Mertens, is neither found in nor fairly derived from the statutory text. To blame Congress, as Justice Scalia did 241 for interpretive choices that are the work of the Court is disingenuous. The Supreme Court's job is to give reasons for what the Court does, and better reasons than were given in Russell, Mertens, and Great-West.
The best solution would be for the Court to confess its error in ERISA remedy law as effectively and wisely as it confronted its early mishandling of ERISA preemption in Travelers, 242 and to realign ERISA remedy law with the trust remedial tradition that Congress intended in its grant of "appropriate equitable relief." Congress federalized the law of pension and benefit plan administration for the primary purpose of protecting plan participants and beneficiaries through a triple regime of mandatory trusteeship, extensive fiduciary duties, and commensurate remedies. Those remedies, all derived from the make-whole tradition of the law of trusts and including money damages for consequential injury, sound exclusively in equity.
1 Employee Retirement Income Security Act, 29 U. S. C. §§ 1000 et seq. All citation in this article is to ERISA section numbers rather than to U. S. C. numbers.
4 ERISA § 502(a)(3).
5 534 U. S. 204, 122 S. Ct. 708 (2002).
6
7 See cases cited infra notes ___.
8 Employee Retirement Income Security Act of 1974, Pub. L. No.
93-406, 88 Stat. 829 (codified as amended at 29 U. S. C. §§ 1001-1461 (1997)).
9 In ERISA parlance the covered worker is the participant, his
spouse or other covered dependent or successor is a beneficiary. See ERISA §§ 3(7)-(8).
10 The full text of ERISA § 502(a)(1-(3) is reprinted infra note
___.
11 508 U. S. at 256 (emphasis original).
12 As explained, infra text at note ___, Justice Brennan's
opinion in Russell, although styled as a concurrence, was
functionally a dissent. He and the three justices who joined him supported the majority's holding on a narrow ground but opposed the
dicta that have made Russell important.
13 E. g.,
14 ERISA § 403(a).
15 Infra text at notes ___, discussing ERISA §§ 402(a) and
3(21)(A).
16 Discussed infra text at notes __.
17 Speaking of cases remedying breach of the trustee's duties
respecting the investment of trust assets, Bogert's treatise explains that the "the general rule" of the case law is "that the object of
damages is to make the injured party whole ... [and that] both direct and consequential damages may be awarded." G. Bogert & G. Bogert, The
Laws of Trusts and Trustees § 701, at ___ (rev. 2d ed. 1982). The point is further discussed, infra text at notes ___.
18 "Except as stated in § 198, the remedies of the beneficiary
against the trustee are exclusively equitable." Restatement (Second) of Trusts § 197, comment b (1959). Section 198 gives the
beneficiary a concurrent right to maintain an action at law in cases in which the trustee is under a duty to the beneficiary to pay money
or to transfer a chattel immediately and unconditionally, the theory being that such a formerly equitable right has become a matured legal
obligation.
19 ERISA § 502(a)(3)(B).
20 Richard Francis, Maxims of Equity 24 (London 1728).
21 Mertens, 508 U. S. at 261.
22 508 U. S. at 257.
23 508 U. S. at 256 (emphasis original).
24 For a succinct account of the origins of ERISA, see Michael S.
Gordon, Overview: Why Was ERISA Enacted?, in The Employee Retirement Income Security Act of 1974: The First Decade 6-24 (U. S. Senate,
Special Com. on Aging) (1984). For exceptional detail on the enactment process, with particular attention to the role of organized
labor, see James A. Wooten, Regulating the "Unseen Revolution": A Political History of the Employee Retirement Income Security Act of
1974 (unpublished Ph. D. thesis, Yale Univ. 2003).
25 A defined benefit plan promises to pay a fixed (" defined")
retirement benefit, usually monthly, for the lives of the participant and his or her spouse. The benefit is usually expressed as a formula
taking into account years of service and compensation. See Employee Benefit Research Institute, Fundamentals of Employee Benefit Programs
56 (5th ed. 1997) (describing defined benefit plans); Dan McGill et al., Fundamentals of Private Pensions 27-28; 201-46 (7th ed. 1996)
(discussing varieties and features of defined benefit plans); Peter T. Scott, A National Retirement Income Policy, 44 Tax Notes 913, 919
(1989) (same).
26 The events and the issues are succinctly recounted in Michael
Allen, "The Studebaker Incident and Its Influence on the Private Pension Plan Reform Movement" (1985), in John H. Langbein & Bruce
Wolk, Pension and Employee Benefit Law (3d ed. 2000). The role of the United Auto Workers in negotiating the failed Studebaker plan and
then in using the default to press for enactment of ERISA's plan termination insurance system is explored in James A. Wooten, "The
Most Glorious Story of Failure in the Business"--The Studebaker-Packard Corporation and the Origins of ERISA, N. Y. U. Review of
Employee Benefits and Executive Compensation, ch. 12, at 12-1/ 59 (2002).
27 ERISA §§ 302-05; see generally D. McGill, supra note __, at
27-28, 201-46.
28 ERISA §§ 20304, discussed in J. Langbein & B. Wolk, supra note
__, at 132-40, 160-69.
29 ERISA §§ 4001 et seq. Regarding the law and practice under
this regime, see E. Thomas Veal & Edward R. Mackiewicz, Pension Plan Terminations (2d ed. 1998); for an important scholarly examination,
see Richard A. Ippolito, The Economics of Pension Insurance (1989).
30 Hence ERISA's duty of prudence, ERISA § 404(a)(1)(B).
31 Proscribed by ERISA's noninurement and loyalty rules, ERISA §§
403(c)(1) and 404(a)(1)(A); and by the prohibited transactions regime of ERISA § 406(a)-(b).
32 ERISA § 404(a)(1)(D) requires plan fiduciaries to act "in
accordance with the documents and instruments governing the plan ...." Section 503, discussed infra text at note ___, requires the
plan to institute written claims procedures, to give reasons for benefit denials, and to provide for review of benefit denials "by the
appropriate named fiduciary ...."
33 Retiree-health plans also entail default risk, because of the
long-term nature of the promise (typically, health care for life). The point is discussed in J. Langbein & B. Wolk, supra note __, at
176-77, 187-88, 210-12.
34 See ERISA § 3(1) (defining "employee welfare benefit plan" to
include plans that provide medical, accident, disability, death, unemployment, child care, training, and vacation benefits, among
others. See generally J. Langbein & B. Wolk, supra note __, at 175-218.
35 See Robert F. Kennedy, The Enemy Within (describing Kennedy's
work with the McClellan Committee) (1960); other works discussing the point include James W. Hilty, Robert Kennedy: Brother Protector 99-
132 (1997) and Arthur M. Schlesinger, Jr., Robert Kennedy and His Times 143-89 (1978). 36 See Michael S. Gordon, supra note __, at 10-11.
37 ERISA § 4(a) covers plans operated by employers or unions in
interstate commerce; § 4(b) exempts a few categories, most importantly, governmental and church plans.
38 ERISA § 403(a). A proviso to the quoted language excuses a
few sorts of plans regulated in other ways, such as those funded with insurance policies.
39 ERISA § 402(a).
40 ERISA § 3(21)(A). Regarding the case law and regulations
interpreting this standard to the panoply of service providers who have contact with ERISA plans, see J. Langbein & B. Wolk, supra note
__, at __.
41 See supra note __, on the characterization of trust remedies
as "exclusively equitable."
42 "The trustee is under a duty to administer the trust solely in
the interest of the beneficiaries." Restatement (Second) of Trusts § 170(1) (1959).
43 ERISA § 404(a)(1)(A).
44 The official comment to the Uniform Prudent Investor Act
describes the prudence norm as "essentially relational or comparative. It resembles in this respect the 'reasonable person'
rule of tort law. A prudent trustee behaves as other trustees similarly situated would behave. The standard is, therefore,
objective rather than subjective." Uniform Prudent Investor Act § 1, comment (1994). 45 Also derived from the Restatement rule: "The trustee is under
a duty to the beneficiary in administering the trust to exercise such care and skill as a man of ordinary prudence would exercise in
dealing with his own property ...." Restatement (Second) of Trusts § 174 (1959).
46 ERISA § 404(a)(1)(B).
47 Speaking of ERISA's version of the law of trustees' powers,
the Supreme Court has noticed that "rather than explicitly enumerating all of the powers and duties of trustees and other
fiduciaries, Congress invoked the common law of trusts to define the general scope of their authority and responsibility. Central States,
Southeast & Southwest Areas Pension Fund v. Central Transport Inc., 472 U. S. 559, 570 (1985) (citation omitted, emphasis original).
48 Firestone Tire & Rubber Co. v. Bruch, 489 U. S. 101, 110
(1989), discussed infra text at notes __.
49 Both the Department of Labor (DoL) and the Internal Revenue
Service (IRS) issue regulations interpreting ERISA. DoL has primary responsibility for ERISA fiduciary law, including prohibited
transactions. The IRS oversees ERISA's funding, participation, benefit accrual, and vesting rules, as well as the pension and
benefit provisions of the Internal Revenue Code. The Pension Benefit Guarantee Corporation also exercises regulatory authority over Title
IV of ERISA. The regulatory law of the three so-called ERISA agencies is conveniently collected in CHH Pension and Employee
Benefits: Code, ERISA, Regulations (2002 ed.) (2 vols.). Regarding the division of authority among the ERISA agencies, see J. Langbein &
B. Wolk, supra note __, at 91-92.
50 See Restatement (Second) of Trusts § 173 (1959). The duty of
disclosure has been adopted and augmented as ERISA fiduciary law with respect to the disclosure of pending benefit enhancements in the
leading case of Fischer v. Philadelphia Electric Co., 994 F. 2d 130 (3d. Cir.), cert. denied, 510 U. S. 1020 (1993), same case, 96 F. 3d
(3d Cir. 1996). For discussion of the expansive disclosure standards that the courts have developed under ERISA, see J. Langbein & B.
Wolk, supra note __, at 697-701; Ethan Lipsig & Mary C. Dollarhide, Downsizing 310-13 (1999 Supp.).
51 See Restatement (Second) of Trusts § 175 (1959). For
application of the duty under ERISA, see e. g., Central States, Southeast & Southwest Areas Pension Fund v. Central Transport Inc.,
472 U. S. 559, 571-72 & n. 13 (1985); New York State Teamsters Conference Pension & Ret. Fund v. Boening Bros. Inc., 92 F. 3d 127,
132 (2d Cir. 1996).
52 See Restatement (Second) of Trusts § 179 & comment d (1959).
For application of the duty under ERISA, see e. g., Rodrigues v. Herman, 121 F. 3d 1352, 1356 (9th Cir. 1997).
53 See Restatement (Second) of Trusts § 176 (1959). For
application of the duty under ERISA, see e. g., Oscar A. Samos, M. D., Inc. v. Dean Witter Reynolds, Inc., 772 F. Supp. 715, 719 (D. R. I.
1991).
54 See Restatement (Second) of Trusts §§ 177-78 (1959). For
application of the duty to enforce claims under ERISA, see e. g., New York State Teamsters Conference Pension & Ret. Fund v. Boening Bros.
Inc., 92 F. 3d at 132; Anita Foundations Inc. v. Ilgwu Nat'l Ret. Fund, 902 F. 2d 185, 188-90 (2d. Cir. 1990).
55 E. g., in Firestone Tire & Rubber Co. v. Bruch, 489 U. S. 101
(1989), discussed text at notes __, the Court purported to derive its interpretation of the proper scope of review of fiduciary
decisionmaking under ERISA § 503 from an understanding of Restatement (Second) of Trusts § 187 (1959) (control of discretionary powers). I
have elsewhere explained that I think the Court misapplied the trust-law rule, see John H. Langbein, The Supreme Court Flunks Trusts,
[1990] Sup. Ct. Rev. 207 (1991); the present point is simply that the Court correctly understood that the congressional intent required it
to be "guided by principles of trust law" when interpreting ERISA. 489 U. S. at 111, citing Central States, Southeast & Southwest Areas
Pension Fund v. Central Transport, Inc., 472 U. S. 559, 570 (1985).
56 See Restatement (Second) of Trusts §§ 232-41
57 I have discussed the relationship between personal and
commercial trusts in John H. Langbein, The Secret Life of the Trust: The Trust as an Instrument of Commerce, 107 Yale L. J. 165 (1997).
58 473 U. S. at 144.
59 See Restatement (Second) of Trusts § 181, comment e (trustee
liable for unreasonable delay in investing trust funds); id. § 209 comment b (trustee liable for unreasonable delay in selling trust
property); id. § 345, comment f (trustee liable for unreasonable delay in making distribution); see also In re Jurgensmeier's Estate,
145 Neb. 459, 463, 17 N. W. 2d 155, 157 (Neb. 1945) (" It is the duty of an executor to administer the estate promptly and to distribute the
property to those entitled thereto without unnecessary delay"); Ward v. Tinkham, 65 Mich. 695, 698, 32 N. W. 901, 902 (Mich. 1887). For
application of the duty under ERISA, see e. g., Richard B. Roush, Inc. v. New England Mut. Life Ins. Co., 166 F. Supp. 2d 187, 198-99 (M. D.
Pa. 2001) (ERISA fiduciary breached duties of loyalty and prudence by failing promptly to allocate plan assets in accordance with
participant instructions).
60 Russell, 473 U. S. at 151-53, 155-57 (Brennan, J. dissenting);
Mertens, 508 U. S. at 264-65, 274 (White, J. dissenting)
61 E. g, how blind must a worker be in order to qualify under a
disability plan? Pokratz v. Jones Dairy Farm, 771 F. 2d 206 (7th Cir. 1985); LeFebre v. Westinghouse Electric Corp., 747 F. 2d 197 (4th
Cir. 1984). Does a worker who is injured in the elevator on her way to a scheduled coffee break qualify for disability benefits under a
plan that recompenses injury suffered "during and in direct connection with the performance of duties" of employment? Recupero
v. New England Telephone & Telegraph Co., 118 F. 3d 820 (1st. Cir. 1997). When a health care insurance plan excludes coverage for
injury incurred in "voluntary participation in a felony," does that justify the plan's refusal to pay medical expenses arising from an
automobile collision in which the plan participant was driving drunk and for which he was convicted of manslaughter for the death of the
other driver? Baker v. Provident Life & Accident Ins. Co., 171 F. 3d 939 (4th Cir. 1999).
62 ERISA § 503(2).
63 "Actions challenging an employer's denial of benefits before
enactment of ERISA were governed by principles of contract law." Firestone Tire & Rubber Co. v. Bruch, 489 U. S. 101, 112 (1989).
64 489 U. S. 101 (1989).
65 Id. at 111.
66 Id. at 112 (emphasis original).
67 Discussed supra note ___.
68 H. R. Conference Report No. 1280, 93d (1974) (emphasis
supplied), reprinted in 1974 U. S. Code Cong. & Admin. News 5038, 5076.
69 ERISA § 514(a).
70 Leon E. Irish & Harrison J. Cohen, ERISA Preemption: Judicial
Flexibility and Statutory Rigidity, 19 U. Michigan J. L. Reform 109, 110 (1985).
71 See, e. g., Ingersoll-Rand Co. v. McClendon, 498 U. S. 133, 139
(1990) (citations omitted) (emphasizing preemption "even if the [state] law is not specifically designed to affect [ERISA] plans, or
the effect is only indirect").
72 New York State Conference of Blue Cross & Blue Shield Plans v.
Travelers Ins. Co., 514 U. S. 645 (1995).
73 508 U. S. at 257 (per Scalia, J.).
74 California Div. of Labor Standards Enforcement v. Dillingham
Construction, N. A., Inc., 519 U. S. 316 (1997) (Scalia, J. concurring).
75 ERISA's preamble repeatedly emphasizes this protective
purpose. ERISA § 2(a)-(c).
76 508 U. S. at 267, quoting Bruch, 489 U. S. at 114.
77 508 U. S. at 274 (emphasis original). See also Russell, 473
U. S. at 158, n. 17 (Brennan, J., concurring).
78 In ERISA § 502(e)(1).
79 H. R. Conf. Rep. No. 1280, 93rd Cong., 2d Sess., reprinted in
1974 U. S. Code Cong. & Admin. News 5038, 5107.
80 Michael S. Gordon to the author, letter of June 14, 2002, at
1. Regarding Gordon, see supra note __.
81 In ERISA § 502(a)(1)-(3), discussed infra text at notes ___.
82 Scott summarizes the case law as providing that the
beneficiaries "can charge the trustee with any loss that resulted from the breach of trust, or with any profit made through the breach
of trust, or with any profit that would have accrued had there been no breach of trust." 3 A. Scott & W. Fratcher, The Law of Trusts §
205, at 237. Scott is glossing Restatement (Second) of Trusts § 205 (1959), which makes the breaching fiduciary "(a) accountable for any
profit accruing to the trust through the breach of trust; or (b) chargeable with the amount required to restore the values of the
trust estate and trust distributions to what they would have been if the trust had been properly administered."
83 I discuss the origin and pejorative quality of this term in
the ERISA remedy cases, infra text at note ___.
84 E. g.,
85 E. g., Helfrich v. PNC Bank, Kentucky, Inc, 267 F. 3d 477 (6th
Cir. 2001), discussed infra text at note __.
86 Accordingly, "[t] he common law of trusts and principles of
equity supplement" the Code. Unif. Trust Code § 106 (2000) [hereafter UTC], 7C Unif. L. Ann. (Supp. 2002) at 43.
87 508 U. S. at 256 (emphasis original).
88 UTC § 1001(b)(3) (2000), 7C Unif. L. Ann. (Supp. 2002) at 119.
89 G. Bogert & G. Bogert, The Laws of Trusts and Trustees §862,
at 27 (rev. 2d ed. 1982).
90 Id. § 862, at 30-31.
91 Id. § 701, at ___. [CITATION: SUPPLY jump page.]
92 In re Rothko, 43 N. Y. 2d 305, 322, 372 N. E. 2d 291, 298
(1977). Rothko involved executors rather than trustees, but the law governing executors and trustees is in almost all respects identical,
which is why the Court of Appeals relied upon Restatement (Second) of Trusts §§ 205, 208 (1959), and upon trust case law in deciding the
appropriate remedy in the case.
93 Helfrich v. PNC Bank, Kentucky, Inc, 267 F. 3d 477 (6th Cir.
2001).
94 Discussed supra note __.
95 508 U. S. at 255 (emphasis original).
96 Section 502(a)(4) authorizes actions in respect of ERISA's
reporting and disclosure rules; sections 502(a)(5) and (6) provide the authority for certain enforcement actions by the Secretary of
Labor, which do not bear on the present topic of civil actions brought by participants and beneficiaries.
97 Section 502(a) provides in relevant part:
A civil action may be brought --
(1) by a participant or beneficiary ... 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 [of Labor], or by a participant, beneficiary or fiduciary for appropriate relief under section 409 .... (3) by a participant, beneficiary, or fiduciary (A) to
enjoin any act or practice which violates any provision of this title 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 title or the terms of
the plan ....
ERISA § 502(a)(1)-(3).
98 ERISA § 409(a).
99 Varity Corp. v. Howe, 516 U. S. 489, 512 (1996). The term is
also used in Russell to describe the parallel language about equitable relief in section 409(a).
100 3 A. Scott & W. Fratcher, supra note __, § 205, at 237.
101 H. R. Conference Report No. 1280, 93d (1974) (emphasis
supplied), reprinted in 1974 U. S. Code Cong. & Admin. News 5038, 5076.
102 Uniform Trust Code § 1001(b)(3) (2000), 7C Unif. L. Ann.
(Supp. 2002) at 119.
103 Supra text at note __ and note __.
105 For example,
106 There were in fact two plans, see 473 U. S. at 136, but they
were administered as one, see, e. g., id. at 137.
107 The case was brought in state court, the defendants removed it
to federal district court. In addition to the ERISA claims discussed above, the plaintiff pleaded various state law causes of action. The district court dismissed them as preempted by ERISA, and the Ninth Circuit affirmed. See 473 U. S. at 137. The plaintiff did not appeal
the preemption ruling in her petition for certiorari. Id. at 138, n. 4.
108 Id. at 137, citing Russell v. Massachusetts. Mut. Life. Ins.
Co., 722 F. 2d 482, 488 (1983).
109 Trustees owe a duty of good faith in all aspects of trust
administration, see UTC § 801, 7C Unif. L. Ann. (Supp. 2002), at ___, but the prohibition on consequential damages arising from Russell and
Mertens has kept the lower courts from imposing liability under ERISA even in egregious cases of willful delay in making benefit payments,
e. g., Kerr v. Charles F. Vatterott & Co. 184 F. 3d 938 (8th Cir. 1999), Harsch v. Eisenberg, 956 F. 2d 651 (7th Cir. 1992); but see
Dunnigan v. Metropolitan Life Ins. Co., 277 F. 3d 223, 229-30 (2d Cir. 2002), discussed infra text at note ___.
110 473 U. S. at 141-42.
111 473 U. S. at 142.
112 473 U. S. at 142-43.
113 ERISA § 404(a)(1).
114 The text of these three sections, which I have been calling in
this article ERISA's participant remedy provisions, is set forth supra note __.
115 473 U. S. at 152-53 (citations omitted).
116 This term, further discussed infra, is from George L. Flint,
Jr., ERISA: Extracontractual Damages Mandated for Benefit Claims Actions, 36 Ariz. L. Rev. 611, 638 (1994).
117 "Since [Cannon v. University of Chicago, 441 U. S. 677 (1979)],
the [Supreme] Court has generally rejected claims of implied federal remedies." Richard H. Fallon et al., Hart & Wechsler's The Federal
Courts and the Federal System 840 (4th ed. 1996); see generally id. at 839-46 (reviewing case law and literature).
118 473 U. S. at 146 (emphasis original).
119 Id. at 147.
120 Id. at 155.
121 Id.
122 Id.
123 Id. at 156.
124 Javits' role is discussed in M. Gordon, supra note ___, at 11-25.
125 473 U. S. at 156, quoting Javits in 120 Cong. Rec. 29942
(1974).
126 Supra text at note ___.
127 473 U. S. at 146, citing Nachman Corp. v. Pension Benefit
Guaranty Corporation, 446 U. S. 359, 361 (1980). This phrase from Nachman, that ERISA is a "comprehensive and reticulated statute," has
often been quoted, as in Justice Stevens' opinion in Russell, in support of the idea that ERISA's remedy provisions are so well
drafted that they require no supplementation, especially no use of remedial steps not itemized in the text of ERISA. See, e. g.,
Mertens, 508 U. S. at 251; Great-West, 122 S. Ct. at 712. In truth, when the Court coined this phrase in Nachman, it was referring to the
entire substantive agenda of ERISA's four titles and did not mention the remedy provisions of ERISA § 502(a). Nachman, 446 U. S. at 361 &
n. 1. Nachman was the Court's first ERISA case. It involved transitional matters of "little consequence beyond the resolution of
[that] case." Id. at 397 (Powell J., dissenting).
128 508 U. S. at 251. Justice Scalia's opinion mixed in some
public choice theory to buttress the supposedly literalist inference, remarking that ERISA was "an enormously complex and detailed statute
that resolved innumerable disputes between powerful competing interests--not all in favor of potential plaintiffs," id. at 262. He
concluded that "[w] e will not attempt to adjust the balance between those competing goals that the text adopted by Congress has struck."
Id. at 263.
[Leg. History of ERISA, vol.III part II, p. 4277, ]
Similar remarks were made in the House by Congressman Al
Ullman, ranking majority member of the Ways and Means Committee.
Introducing the Conference Committee Report, he told the House that
Title I of ERISA provides "rules and remedies similar to those under traditional trust law to govern the conduct of fiduciaries."
120 Cong. Rec. H 8701 (Aug. 20, 1974), reprinted in 1974 U. S. Code Cong. & Admin. News 5171.
Explaining the proposed ERISA fiduciary law to the Senate, Sen. Harrison A. Williams, Jr., Chair of the Senate Committee on Labor and Public Welfare, said:
"The objectives of these provisions are to make applicable the law of trusts ... and to provide effective remedies for breaches of trust."
120 Cong. Rec. S 15737 (August 22, 1974), reprinted in 1974 U. S. Code Cong. & Admin. News 5185.