Mertens et al. v. Hewitt Associates
508 U.S. 248 (1993)
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Rule of Law:
Monetary damages for losses suffered by a pension plan are not available as 'other appropriate equitable relief' under Section 502(a)(3) of the Employee Retirement Income Security Act of 1974 (ERISA) against a non-fiduciary who knowingly participates in a fiduciary's breach of duty.
Facts:
- Hewitt Associates (Respondent) served as the actuary for the Kaiser Steel Retirement Plan.
- In 1980, Kaiser Steel Corporation began phasing out its steelmaking operations, which led a large number of employees to take early retirement.
- Hewitt Associates did not adjust the plan's actuarial assumptions to reflect the significant additional costs imposed by the wave of early retirements.
- Consequently, Kaiser did not contribute sufficient funds to the pension plan.
- The plan's assets eventually became insufficient to meet its benefit obligations to retirees.
- The Pension Benefit Guaranty Corporation (PBGC), a federal agency, terminated the plan due to underfunding.
- Former employees (Petitioners), represented by Mertens, began receiving benefits guaranteed by ERISA, which were substantially lower than the fully vested pensions they were originally due under the plan.
Procedural Posture:
- Petitioners, representing a class of former Kaiser Steel employees, sued Respondent, Hewitt Associates, in the U.S. District Court for the Northern District of California.
- The complaint alleged that Hewitt, as a non-fiduciary, knowingly participated in a breach of fiduciary duty and sought monetary relief for the plan's losses.
- The District Court granted Hewitt's motion to dismiss the complaint.
- Petitioners appealed the dismissal to the U.S. Court of Appeals for the Ninth Circuit.
- The Court of Appeals affirmed the District Court's judgment, holding that ERISA does not authorize suits for money damages against non-fiduciaries.
- Petitioners filed a petition for a writ of certiorari with the U.S. Supreme Court, which was granted.
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Issue:
Does Section 502(a)(3) of ERISA, which authorizes suits for 'other appropriate equitable relief,' permit an award of compensatory monetary damages against a non-fiduciary who knowingly participates in a fiduciary's breach of duty?
Opinions:
Majority - Justice Scalia
No. Section 502(a)(3) of ERISA, authorizing suits for 'other appropriate equitable relief,' does not permit an award of compensatory monetary damages because such damages are a classic form of legal, not equitable, relief. The Court's reasoning is that the term 'equitable relief' in the statute refers to those categories of relief traditionally available in courts of equity, such as injunction or restitution, not all relief that a court of equity could ever provide. To interpret 'equitable relief' as including compensatory damages would render the word 'equitable' superfluous, as nearly all common-law trust remedies were historically available in equity courts. ERISA is a 'comprehensive and reticulated statute,' and its detailed enforcement scheme provides strong evidence that Congress did not intend to authorize remedies it did not expressly include. Since other sections of ERISA specifically distinguish between 'legal' and 'equitable' relief, the distinction must be given meaning, and vague notions of the statute's broad purpose cannot override its specific text.
Dissenting - Justice White
Yes. Section 502(a)(3) of ERISA should be interpreted to allow for compensatory monetary awards against non-fiduciaries, as such relief was traditionally available in courts of equity for a breach of trust. The dissent argues that ERISA is grounded in the common law of trusts, where compensatory damages were a routine equitable remedy to make beneficiaries whole. By denying this remedy, the majority's interpretation affords employees less protection than they had before ERISA was enacted, contrary to the statute's primary purpose. The distinction between 'equitable' and 'legal' relief can be preserved without excluding make-whole damages; 'equitable relief' historically excluded punitive damages, which were a form of legal relief, thus giving the term 'equitable' a meaningful limitation. The majority's narrow textual reading leads to the perverse result of stripping beneficiaries of a crucial, long-standing remedy.
Analysis:
This decision significantly narrowed the scope of liability for non-fiduciary service providers to ERISA plans, such as actuaries, accountants, and attorneys. By holding that compensatory damages are not 'equitable relief' under § 502(a)(3), the Court insulated these professionals from liability for a plan's financial losses, even if they knowingly participated in a fiduciary's breach. This ruling prioritizes a strict textualist interpretation of the statute over its broader remedial goals, reinforcing the principle that courts should not create remedies Congress did not explicitly provide in a complex statute like ERISA. The decision created a potential 'gap' in the law, as state-law claims against non-fiduciaries are generally preempted by ERISA, leaving beneficiaries with limited recourse (like injunction or restitution) that may not fully compensate for their losses.
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