|Retirement Plan Fiduciaries May Be Liable for Allowing Losses to Occur to Plan Benefits|
Appeals court held that if the beneficiaries of a retirement plan exhaust administrative remedies provided by ERISA, they have the right to sue their employer and plan administrators for breach of fiduciary duties if they allowed losses to be incurred in company stock they knew was being manipulated. Suit is for recovery of benefits.
Fiduciary Duty; Retirement Benefits; ERISA
|C A S E S U M M A R Y|
Home Depot (HD) offers employees a retirement plan in which assets are allocated to the account of each participant. The board of directors of HD appoints both the investment committee and the administrative committee for the plan. A formula was used to define the level of contributions from each employee and the employees are entitled to the value of the assets in their individual accounts. Some former employees sued, contenting that HD violated its fiduciary duty by allowing the plan to invest in HD stock even though corporate officers were backdating stock options and making fraudulent transactions that artificially inflated the value of HD stock. Named as defendants in the suit were HD, current and former members of the investment and the administrative committees of the retirement plan, and current and former members of the HD board. They sought to recover losses caused by the backdated stock options and other financial problems that came to light. The district court dismissed the suit; plaintiffs appealed.
Reversed in part and remanded. The former employees’ claim against HD and its officials alleging a decrease in the value of their retirement accounts due to a breach of fiduciary duty was for benefits, and not for damages, because it was limited to the difference between the benefits actually received and the benefits that would have been received if the plan management had fulfilled its statutory obligations under the Employee Retirement Income Security Act (ERISA). The former employees qualified as plan participants who are entitled to sue for breach of fiduciary duty under ERISA. The statute allows the recovery of benefits, but does not allow suits for extra-contractual damages. Before such a suit can proceed, the employees must exhaust administrative remedies provided by ERISA. A majority of other federal circuit courts that have ruled on this issue are in agreement with this view of the law.
Lanfear v. Home Depot, Inc., ---F.3d--- (2008 WL 2916390, 11th Cir., 2008)
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