:: The Continuing Controversy Over Standing To Sue Under ERISA
In our view, the term “participant†is naturally read to mean either “employees in, or reasonably expected to be in, currently covered employment,†Saladino v. I.L.G.W.U. National Retirement Fund, 754 F.2d 473, 476 (CA2 1985), or former employees who “have … a reasonable expectation of returning to covered employment†or who have “a colorable claim†to vested benefits, Kuntz v. Reese, 785 F.2d 1410, 1411 (CA9) (per curiam), cert. denied, 479 U.S. 916, 107 S.Ct. 318, 93 L.Ed.2d 291 (1986). In order to establish that he or she “may become eligible†for benefits, a claimant must have a colorable claim that (1) he or she will prevail in a suit for benefits, or that (2) eligibility requirements*118 will be fulfilled in the future. “This view attributes conventional meanings to the statutory language since all employees in covered employment and former employees with a colorable claim to vested benefits ‘may become eligible.’ A former employee who has neither a reasonable expectation of returning to covered employment nor a colorable claim to vested benefits, however, simply does not fit within the [phrase] ‘may become eligible.’ †Saladino v. I.L.G.W.U. National Retirement Fund, supra, at 476. Firestone Tire & Rubber v. Bruch, 489 U.S. 101, 117, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989)
ERISA creates a right of action only for participants, beneficiaries, and fiduciaries of benefits plans. 29 U.S.C. § 1132(a)(3). Thus, the courts have held that, if a plaintiff does not fit within these categories, he or she lacks standing to sue under ERISA.
The standing concept has been refined as an effective defense to ERISA claims and may be rightfully regarded as one of the current hot topics in the ERISA field. The notion of standing is so fundamental that it can be overlooked, and its contours sufficiently vague to allow for a division of judicial opinion as to its application.
As one of the most effective tools for dispatching an ERISA case, however, the question of standing should be considered in every case by both plaintiff and defendant alike. The filing of briefs by the Solicitor General’s Office in two recent cases, cited in the commentary note below, underscores the differences of opinion on the proper approach to the issue.
Article III Standing
Even where statutory standing under ERISA is satisfied, the elements of Article III standing must still be met. Article III of the United States Constitution limits the jurisdiction of federal courts to “cases” and “controversies”. Thus, a party that invokes federal jurisdiction must satisfy the elements of Article III standing. See, Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992).
The elements of Article III standing are (1) an injury in fact, (2) that is causally connected to the defendant, and (3) that is redressable by the court. Id. at 560-61, 112 S.Ct. 2130. The elements are conjunctive, so that a failure of any of the three elements deprives a plaintiff of standing to maintain an action in federal court. “If plaintiffs lack Article III standing, a court has no subject matter jurisdiction to hear their claim.†See, Cent. States Se. & Sw. Areas Health & Welfare Fund v. Merck-Medco Managed Care, 433 F.3d 181, 198 (2d Cir.2005).
Article III standing questions often accompany issues of ERISA statutory standing.
ERISA Statutory Standing
ERISA defines a participant means “any employee or former employee of an employer … who is or may become eligible to receive a benefit of any type from an employee benefit plan….†See, 29 U.S.C. § 1002(7).
The definition has proven inadequate and the Supreme court has attempted to clarify. The Court has held that “the term participant is naturally read to mean either employees in, or reasonably expected to be in, currently covered employment, or former employees who have … a reasonable expectation of returning to covered employment or who have a colorable claim to vested benefits.†See, Firestone Tire & Rubber v. Bruch, 489 U.S. 101, 117 (1989) Conversely, a former employee who has neither a reasonable expectation of returning to covered employment nor a colorable claim to vested benefits does not fit within the phrase “may become eligible”.
That definition has proven inadequate as well. Consider the participant who is duped into retirement before an augmentation of benefits. Would this individual now have no standing to sue under ERISA? Clearly, the former participant would normally have not expectation of returning to covered employment.
To remedy this definitional inadequacy some courts have added an additional gloss that standing may be accorded those in the “zone of interests” ERISA was intended to protect. See, Mullins v. Pfizer, 23 F.3d 663, 668 (2d Cir.1994); see also, Vartanian v. Monsanto Co., 14 F.3d 697, 702 (1st Cir.1994); Christopher v. Mobil Oil Corp., 950 F.2d 1209, 1220-23 (5th Cir.), cert. denied, 506 U.S. 820, 113 S.Ct. 68, 121 L.Ed.2d 35 (1992).
The Former Participant Standing Issue
The standing controversy that has drawn the interest of the Solicitor General arises when a plan participant attempts to sue plan fiduciaries after terminating participation in a plan.
In Dickerson v. Feldman, 426 F.Supp.2d 130, (S.D.N.Y.) (March 30, 2006), the district court faced the issue of whether a former participant in an employee stock ownership plan had standing to bring an action under ERISA against various officers, directors, employees, and committees of his former employer. The plaintiff alleged losses to the plan as a result of its investment in employer’s common stock. At the time he filed the suit,however, the former participant had taken a final distribution of vested benefits and was no longer covered under the plan.
The district court held that the plaintiff had no standing under Article III:
As a former participant, Plaintiff is unable to demonstrate that he has an injury that is redressable by this Court because he fails to show either “a reasonable expectation of returning to covered employment or … a colorable claim to vested benefits.†(citing Firestone, 489 U.S. at 117)
Nor did the plaintiff had statutory standing in the opinion of the court:
Firestone adopted in part the definition of “participant†set out in Kuntz v. Reese, 785 F.2d 1410, 1411 (9th Cir.1986), which denied standing to “former employees whose vested benefits under the plan [had] already been distributed in a lump sum.†Kuntz reasoned that to allow such former plan participants to bring suit would, in effect, create suits for money damages not authorized by ERISA. Id. For breaches of fiduciary duties, relief under ERISA is limited to recovery “that inures to the benefit of the plan as a whole,†not to the benefit of individual participants. Russell, 473 U.S. at 140, 105 S.Ct. 3085; Lee v. Burkhart, 991 F.2d 1004, 1009 (2d Cir.1993).
Additional Authority On the Issue
In addition to Feldman, the following courts have held that a plaintiff lacks standing to sue under ERISA where the plaintiff has taken a final distribution of vested benefits:
Jiannetto v. Washington Mut. Bank, 2007 WL 952062 (E.D.N.Y.) ( Mar 28, 2007);
Register v. Cameron & Barkley Co. — F.Supp.2d —-, 2007 WL 541593 (2007)
Caltagirone v. New York Community Bancorp, 457 F.Supp.2d 145 (E.D.N.Y.2006);
Graden v. Conexant Systems, Inc., Slip Copy, 2006 WL 1098233 (D.N.J.) (2006)
Crawford v. Lamantia, 34 F.3d 28, 32-33 (1st Cir.1994);
LaLonde v. Textron, 418 F.Supp.2d 16 (D.R.I.2006); Hargrave v. TXU Corp., 392 F.Supp.2d 785 (N.D.Tex.2005);
Carpenter v. Carroll Pinto, 374 F.Supp.2d 487, 493-94 (E.D.Va.2005);
Clair v. Harris Trust & Sav. Bank, No. 96 Civ. 7311, 1998 WL 246482, 1998 U.S. Dist. LEXIS 7123 (N.D.Ill. Apr. 27, 1998), aff’d, 190 F.3d 495 (7th Cir.1999);
Flynn v. Ballinger, No. 94 Civ. 0190, 1994 WL 758662, 1994 U.S. Dist. LEXIS 19689 (N.D.Cal. May 9, 1994);
Gilquist v. Becklin, 675 F.Supp. 1168, 1171 (D.Minn.1987), aff’d mem., 871 F.2d 1093 (8th Cir.1988).
Contrary Authority
On the other hand, see In re Polaroid Erisa Litigation, 240 F.R.D. 65, 71, 39 Employee Benefits Cas. 1974, 1974 (S.D.N.Y. 2006) where plaintiff was held to be in protected “zone of interests”. The court stated:
The Second Circuit has declined to apply the Firestone standard rigidly in the context of defining a “participant.” See Mullins v. Pfizer, Inc., 23 F.3d 663 (2d Cir.1994). While acknowledging a circuit split on the issue of whether former employees qualify as “participants,” Mullins suggested that “the basic standing issue is whether the plaintiff is ‘within the zone of interests ERISA was intended to protect.’ ” Mullins, 23 F.3d at 668 (emphasis in original) (quoting Vartanian v. Monsanto Co., 14 F.3d 697, 701 (1st Cir.1994)). Applying the “zone of interests” standard, the Court of Appeals concluded that a former employee had standing as a plan participant because he alleged that “but for the fact that [the defendant] misled him, he would have been a participant.” . . . The court reasoned that it would reap an “anomalous effect” to “allow[ ] a fiduciary through its own malfeasance to defeat the employee’s standing.” Mullins, 23 F.3d at 668.
The district court in that case collected the following authorities:
Christopher v. Mobil Oil Corp., 950 F.2d 1209, 1221 (5th Cir.1992) (allowing former employee to maintain a claim where he alleged that but for defendant’s misconduct, he would still be an employee)
Gray v. Briggs, No. 97 Civ. 6252(DLC), 1998 WL 386177 (S.D.N.Y. July 7, 1998) (concluding in the context of a claim under § 1132(a)(1) that a former employee who alleged that distributions received under a defined contribution plan were reduced because of defendants’ breach of fiduciary duty was a “participant” for purposes of ERISA, and noting approvingly the breadth of the Second Circuit’s holding in Mullins.
Richards v. FleetBoston Fin. Corp., 235 F.R.D. 165 (D.Conn.2006) (finding that former employees who had liquidated their plan accounts but who sought benefits to which they would have been entitled prior to retirement were “participants”)
O’Connell v. Kenney, No. 03 Civ. 0845(DJS), 2003 WL 22991732 (D.Conn. Dec.15, 2003) (holding that the beneficiary of a former account-holder had standing where the account-holder had received a lump sum payment but alleged that the amount of the payment had been miscalculated)
The district also noted:
Moreover, although the Second Circuit recently declined to address the issue of whether former employees have standing to sue under § 1132(a)(2), see Coan v. Kaufman, 457 F.3d 250, 255 (2d Cir.2006), in doing so it noted in dicta that a former employee’s claim that a lump sum distribution of a defined contribution account balance would have been greater absent the defendants’ breach of fiduciary duty is “[a]rguably … [a claim] for benefits– which, if colorable, means that she may become eligible for benefits and thus qualif[y] as a participant under ERISA.” Coan, 457 F.3d at 255-256 (internal citations and quotation marks omitted); see also Gray, 1998 WL 386177
Note: The Solicitor General’s brief in Dickerson v. Feldman may be viewed here. The Solicitor General has filed a brief in Graden v. Conexant Systems, Inc., Slip Copy, 2006 WL 1098233 (D.N.J.) (2006) which may be viewed here.
Vested Benefits Versus Damages - A subsidiary issue, summed up in the recent case, Register v. Cameron & Barkley Co. — F.Supp.2d —-, 2007 WL 541593 (2007), is the distinction between vested benefits and damages:
The Supreme Court has elaborated on [the ERISA participant] definition by explaining that former employees may be participants if they have (1) a reasonable expectation of returning to covered employment, or (2) a colorable claim to vested benefits. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). Thus, if a plaintiff has a legitimate claim for vested benefits, he has standing irrespective of having received his full distribution from the ERISA-based Plan. . . . In Sommers Drug Stores Co. Employee Profit Sharing Trust v. Corrigan, which is cited by both Plaintiffs and Defendants, the Fifth Circuit explained that the line between “vested benefits†and “damages†is not always clear. 883 F.2d 345, 347-50 (5th Cir.1989). The Court attempted to articulate the distinction as follows: an allegation that benefits were wrongly computed clearly states a claim for vested benefits; on the other hand, a claim for an unascertainable amount, with no demonstration that recovery would directly effect payments to the plaintiff, states a claim for damages. Id. at 349-50.
Welfare Benefit Plans – Rarely will the former participant in welfare benefit plans have a claim to vested benefits. Thus, the standing possibilities are narrowed further for former participants. It would appear that some claim to reinstatement would normally be advantageous though not decisive for the plaintiff in such cases.
For a recent case involving standing in the welfare benefit plan context, see Glanton ex rel. ALCOA Prescription Drug Plan v. AdvancePCS Inc., 465 F.3d 1123 (9th Cir. 2006):
There is no redressability, and thus no standing, where (as is the case here) any prospective benefits depend on an independent actor who retains “broad and legitimate discretion the courts cannot presume either to control or to predict.†ASARCO, Inc. v. Kadish, 490 U.S. 605, 615, 109 S.Ct. 2037, 104 L.Ed.2d 696 (1989) (opinion of Kennedy, J.); see also Fernandez v. Brock, 840 F.2d 622, 627 (9th Cir.1988). Other circuits that have considered this issue have reached the same conclusion. See Cent. States Se. & Sw. Areas Health & Welfare Fund v. Merck-Medco Managed Care, 433 F.3d 181, 201 (2d Cir.2005); Horvath v. Keystone Health Plan E., 333 F.3d 450, 455 (3d Cir.2003); Harley v. Minnesota Mining & Mfg., 284 F.3d 901, 906 (8th Cir.2002).
See also: :: PEO Has No Standing To Sue For Recovery Of Losses
