Opinion
Civil Action No. 3:98CV-734-S
October 5, 1999
MEMORANDUM OPINION
This matter is before the court on motion of the defendant, PNC Bank, Kentucky, Inc. ("PNC"), to dismiss for failure to state a claim upon which relief can be granted or, alternatively, for summary judgment in this action brought under sections 1132(a)(2) and (3) and 1132(a)(1)(B) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq.
The complaint contains a claim brought under 29 U.S.C. § 1140 alleging discrimination and interference with protected rights. The complaint is bereft of any facts which would support such a claim, and the plaintiff's brief in opposition to the motion to dismiss does not respond PNC's argument for the claim's dismissal. For these reasons, Count III of the complaint will be dismissed without further discussion.
PNC was a directed trustee of the Bulk Distribution Centers, Inc. 401(k) Profit Sharing Plan ("the plan") in which the plaintiff, Kenneth G. Helfrich ("Helfrich"), was a participant. In the Spring of 1996, Donald L. Stump ("Stump") was owner and president of the company and the individual authorized to issue instructions to PNC regarding management of the plan assets. In April of 1996, Helfrich executed certain forms in order to facilitate the rollover of the major portion of his plan benefits to certain designated IRA mutual funds, with the balance of his benefits to be distributed to him. On May 1, 1996, Stump sent a letter to the attention of Brenda Higgins ("Higgins"), Employee Benefits at PNC, authorizing the transactions desired by Helfrich. Helfrich alleges that he was assured by Higgins that the transfers would be accomplished according to his instructions during the month of June. On June 28, 1996, Stump sent another letter to Higgins notifying PNC that it would no longer be trustee for the plan as of July 1, 1996. The letter directed PNC to liquidate the plan assets as soon as administratively practicable after June 30, 1996 and to wire transfer the proceeds to Lincoln National Life Insurance Company, the new trustee and investment manager for the plan. Apparently the June transfers of Helfrich's plan benefits were not made. The plan assets, including Helfrich's portion, were transferred to Lincoln National on or about July 11, 1996, and Helfrich's funds were placed in a money market account and remained there until Helfrich discovered the purported omission by PNC. Helfrich alleges that he sustained considerable loss, as the appreciation on the mutual funds was greater than that of the money market account. PNC played no role in the selection of Lincoln National as successor trustee or in the investment of the plan assets after the July transfer.
PNC has moved to dismiss or, alternatively, for summary judgment on the ground that Helfrich has failed to state a claim against PNC upon which relief may be granted. When a motion to dismiss is made, the court must take the allegations of the complaint as true and grant dismissal only when it is beyond doubt that the plaintiffs can prove no set of facts entitling them to relief. Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). In considering the briefs of the parties on the motion, this court concluded that the memoranda were insufficient to fully evaluate the legal issues raised by PNC. While PNC submitted a well-written brief, it failed to include an analysis of some of the more recent caselaw. PNC offered an argument supporting dismissal of all the ERISA claims, asserting that a plan participant in Helfrich's circumstance has no means of redress under ERISA for conduct such as is alleged against PNC in this case. We do not agree that the caselaw dictates such a result, nor would we find that result in keeping with the carefully integrated enforcement scheme of ERISA designed to protect the interests of plan participants. The brief of Helfrich offered little of assistance to the court in its six pages. It failed to discuss the fiduciary duty issue at all, and was unavailing in its analysis of the wrongful denial of benefits question. The court will therefore engage in some amplification of the issues and application of the law to the undisputed facts as they have been presented.
I.
PNC claims that, as a directed trustee, it was not a "fiduciary" of the plan and, therefore, may not be held liable for breach of fiduciary duties under ERISA, 29 U.S.C. § 1132(a)(2) and (3), citing Grindstaff v. Green, 133 F.3d 416 (6th Cir. 1998). In that case, the plaintiff sought to "ascribe to Defendant First American National Bank, the directed ESOP trustee, a duty to investigate the merits of any directives given to it by the ESOP Administrative Committee." Grindstaff, 133 F.3d at 425-26. The court held that as a directed trustee, the bank was not a fiduciary to the extent that it did not control the management or disposition of the ESOP stock it held in trust. First American had "no discretion pertaining to voting the ESOP stock." Id. The court noted that "[a] person is a fiduciary only with respect to those aspects of the plan over which he exercises authority or control." Id., quoting, Sommers Drug Stores v. Corrigan Enterprises, Inc., 793 F.2d 1456, 1459-60 (5th Cir. 1986), cert. denied, 479 U.S. 1034, 107 S.Ct. 884, 93 L.Ed.2d 837 (1987). By contrast, Helfrich claims in this case that PNC failed to carry out the directives with which it was charged and as to which it was specifically authorized by Stump. Thus the allegation here is that PNC failed to carry out its duties in matters over which it had authority and control. We find therefore that Grindstaff is inapposite.
We conclude that Smith v. Provident Bank, 170 F.3d 609 (6th Cir. 1999) is controlling on this point. In that case, the plan participant claimed that Provident Bank failed to comply with his instructions to purchase 1,000 shares of stock for his account. The court held that the bank was an ERISA fiduciary stating
Provident was an ERISA fiduciary as long as it exercised control over plan assets. Stauter argues that as of May 1, 1991, Provident retained no discretionary authority over the plan and was charged only with the "ministerial" task of transferring the assets to [the successor trustee]. However, the definition of a fiduciary under ERISA is a functional one, is intended to be broader than the common law definition, and does not turn on formal designations such as who is the trustee. See Brock v. Hendershott, 840 F.2d 339, 342 (6th Cir. 1988) (describing breadth of fiduciary status under ERISA); Custer v. Pan American Life Ins. Co., 12 F.3d 410, 418 n. 3 (4th Cir. 1993) (stating that ERISA definition of fiduciary is "broader than the common law definition of a trustee"). It includes anyone who "exercises any discretionary authority or discretionary control respecting management of [the] plan or exercises any authority or control respecting management or disposition of assets." 29 U.S.C. § 1002(21)(A)(i) (emphasis added). Because Provident controlled Plan assets, it is liable under ERISA as a fiduciary. See Blatt v. Marshall Lassman, 812 F.2d 810, 813 (2d Cir. 1987); see also Hendershott, 840 F.2d at 342.Smith, 170 F.3d at 613. We conclude that PNC was a fiduciary with respect to its purported obligation to transfer Helfrich's funds according to his directions and the authority granted to it for that purpose.
II.
Count I of the complaint must be dismissed to the extent that it seeks to hold PNC liable under 29 U.S.C. § 1132(a)(2). The law is clear in the Sixth Circuit that "a cause of action under § 1132(a)(2) permits recovery to inure only to the ERISA plan, not to individual beneficiaries." Adcox v. Teledyne, Inc., 21 F.3d 1381, 1390 (6th Cir.), cert. denied, 513 U.S. 871, 115 S.Ct. 193, 130 L.Ed.2d 126 (1994), citing, Tregoning v. American Community Mutual Insurance Co., 12 F.3d 79, 83 (6th Cir. 1993). As in Adcox, Helfrich seeks recovery on his own behalf, not on behalf of the plan. That portion of Count I brought under § 1132(a)(2) must therefore be dismissed.
III. a.
PNC contends that the remainder of Count I must be dismissed, as it does not seek a remedy which is available under § 1132(a)(3). Section § 1132(a)(3) provides:
A civil action may be brought —
(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter 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 subchapter or the terms of the plan.
Citing the case of Mertens v. Hewitt Associates, 508 U.S. 248, 113 S.Ct. 2063, 124 L.Ed.2d 2063 (1993), PNC urges that the "equitable relief" authorized by § 1132(a)(3)(B) does not include Helfrich's purported lost earnings on his retirement funds. It contends that what Helfrich seeks are traditional compensatory damages, rather than a form of equitable relief. In Mertens, a class of participants in a defunct plan brought suit against a nonfiduciary, the plan's actuary, alleging that his conduct caused the plan to be under-funded and eventually terminated. The Supreme Court addressed the narrow issue of whether ERISA authorizes suits for money damages against nonfiduciaries who knowingly participate in a fiduciary's breach of fiduciary duty. Mertens, 113 S.Ct. at 2066. The court noted that the participants sought what they couched as "appropriate equitable relief," but that they were not, in actuality, seeking a remedy traditionally viewed as equitable, such as injunction or restitution. The participants apparently conceded that they sought compensatory damages, but stressed that "equitable relief" at common law included compensatory damage awards for breach of trust. The court noted in the opinion that the Court of Appeals had held that restitution was unavailable, and that the petitioners had not challenged that ruling. The court the held that the "equitable relief" authorized by § 1132(a)(3)(B) encompasses "those categories of relief that were typically available in equity (such as injunction, mandamus, and restitution, but not compensatory damages)." id. at 2069. This court finds, however, that our inquiry does not end with the Mertens case.
b.
In 1990, some three years before the Supreme Court's Mertens decision, the Sixth Circuit was faced with an action remarkably similar to the one presently before us. In Warren v. Society National Bank, 905 F.2d 975 (6th Cir. 1990), a plan participant sought redress under § 1132(a)(3), claiming that the bank breached its fiduciary duty to him under the plan:
Dr. Warren claims that, although the bank distributed all the plan assets to which he was entitled, the bank distributed them contrary to his instructions, directly causing a severe diminution in their value. Thus, he charges that by its negligence or for an impermissible purpose, it acted in such a way as to deprive him of a benefit to which he was entitled under the plans, thereby violating the provisions of the plans and of ERISA. The "carefully integrated civil enforcement provisions" of section 502(a)(3) should be held to provide an avenue of redress.Warren, 905 F.2d at 982. The court embraced the language in Justice Brennan's concurring opinion in Massachusetts Mutual Life Insurance Co. v. Russell, 473 U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985), stating
We believe Justice Brennan's conclusion is correct that under the law of trusts, a beneficiary is entitled to a remedy that will put him in the position he would have been in if the fiduciary had not committed a breach of trust, and that such a remedy includes monetary damages . . . The term "other appropriate equitable relief" implies a broad range of remedies. We adhere to the principle "endorsed repeatedly . . . by the federal judiciary," that "when Congress uses broad generalized language in a remedial statute, and that language is not contravened by authoritative legislative history, a court should interpret the provision generously so as to effectuate the important congressional goals." Cia Petrolera Caribe, Inc. v. Arco Carribean, Inc., 754 F.2d 404, 428 (1st Cir. 1985) (footnote omitted). One of the important goals of ERISA is to make certain that participants and beneficiaries not be deprived of the full value of their plan benefits by a fiduciary's breach of a contractual duty.Warren, 905 F.2d at 982.
In the wake of the Mertens decision three years after Warren, and Varity Corporation v. Howe, 516 U.S. 489, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996) three years after Mertens, there has been considerable controversy over the question of what constitutes "appropriate equitable relief" under § 1132(a)(3)(B).
In Fraser v. Lintas: Campbell-Ewald, 56 F.3d 722 (6th Cir.), cert. denied, 516 U.S. 975, 116 S.Ct. 477, 133 L.Ed.2d 405 (1995), a panel of the Sixth Circuit concluded that the Supreme Court decision in Mertens foreclosed the § 1132(a)(3) avenue for recovery of monetary damages offered by the Circuit in Warren, noting that "In our view, Mertens effectively overrules Warren." Fraser, 56 F.3d at 724. The court went on to note, however, that the plaintiff premised her right to monetary recovery not on § 1132(a)(3), but rather on § 1132(a)(1)(B), claiming that she was denied a benefit under the plan. The court stated that "it strains the overall structure of ERISA to characterize the right to timely notice of the rollover option or the tax advantages associated with that option as benefits due under the plan . . . While we understand plaintiff's reluctance to bring her claim pursuant to [§ 1132(a)(3)(B)] in light of Mertens, . . . that is the appropriate ERISA provision for an equitable claim such as hers." Fraser, 56 F.3d at 725-26. The panel in Fraser held that because of the Mertens decision, there would be no available remedy for the plaintiff's claim under § 1132(a)(3), nor under any other ERISA provision. This court finds that such a result is unjust, and that we need not reach the same conclusion, at least under the facts of this case.
We find that the Fraser case mandates the dismissal of Count II of the complaint which seeks recovery under § 1132(a)(1)(B). We conclude that the sums claimed to be lost as a result of PNC's purported failure to follow directions cannot be fairly characterized as benefits due under the plan. Count II of the complaint will therefore be dismissed.
It bears noting that the Mertens majority opinion was roundly criticized in a dissent authored by Justice White, with whom Chief Justice Stevens and Justice O'Connor joined. The soundness of the Mertens decision has been questioned recently by two panels of the Sixth Circuit as well.
In Allinder v. Inter-City Products Corporation, 152 F.3d 544 (6th Cir.), cert. denied, ___ U.S. ___, 119 S.Ct. 1115, 143 L.Ed.2d 110 (1999), the panel's cogent comments, while lengthy, are worth restating here in full:
Allinder asserts that compensatory damages fall within the term "equitable relief" because such relief traditionally has been allowed in courts of equity where the claim involves a breach of trust. For support, Allinder relies upon Justice Brennan's concurring opinion in Massachusetts Mut. Life Ins. Co. v. Russell, where he noted that "while a given form of monetary relief may be unavailable under ERISA [when it would significantly conflict with some other aspect of the statutory scheme,] it cannot be withheld simply because a beneficiary's remedies under ERISA are denominated `equitable.' " 473 U.S. 134, 154 n. 10 (1985). Whatever persuasiveness Justice Brennan's opinion may once have had on this question, it has since been squarely rejected by the Supreme Court's decision in Mertens . . . Accordingly, although Allinder may bring a claim for breach of fiduciary duty in her individual capacity, we nonetheless hold that the district court properly dismissed Allinder's action because the form of remedy sought is not available to her as a matter of law . . . [B]ut for the impediment that the Mertens decision placed on Allinder's ability to pursue her claim for monetary damages under § 1132(a)(3), the district court's grant of summary judgment for ICP on the fiduciary duty claim would have been inappropriate at this stage in the litigation.
Many commentators have noted that the Supreme Court's 5-4 decision in Mertens has resulted in a "betrayal without a remedy" for employees who pursue ERISA claims beyond the simple recovery of benefits. [citations omitted]. The outcome of this case lends support to such criticism. Allinder would have been entitled to monetary damages under the state-law claims she originally filed. These claims, however, were extinguished by ERISA's "ever-expanding preemptive black hole." Zanglein, Closing the Gap, 72 Wn.L.Q. at 674. ERISA, in turn, provides infertile soil for an employee to cultivate a meaningful remedy for anything beyond the recovery of basic benefits. Employees may seek monetary damages on behalf of the plan for an employer's breach of fiduciary duty [citation omitted]. They may not, however, seek similar relief for their own benefit when an employer breaches its fiduciary duty . . . "In this way, the combination [of the employee's] state cause of action [being] preempted by ERISA even while ERISA denies him any alternative remedy . . . is disappointingly pernicious to the very goal and desires that motivated Congress to enact [ERISA} in the first place." Sanson v. General Motors Corp., 966 F.2d 618, 625 (11th Cir. 1992) (Birch, J., dissenting). Constrained as we are by both ERISA's statutory provisions and the Supreme Court's construction of that language, this case provides no opportunity for us to redress the problems that employees face when pursuing a remedy under ERISA for an employer's or insurer's misdeeds beyond the recovery of the basic benefits to which they are entitled."Allinder, 152 F.3d at 552-53. In Allinder, the participant sought compensatory and punitive damages for alleged intentional misrepresentations designed to delay payment of disability benefits to her. She had already received the full amount of benefits to which she was entitled under the plan. Allinder, 152 F.3d at 545-46. Rather, she sought damages for the delay in receiving the benefits — consequential damages which the court found were not recoverable.
In Gerbec v. United States, 164 F.3d 1015 (6th Cir. 1999), a different panel of the Sixth Circuit again discussed, albeit in dictum, the problems for aggrieved ERISA participants inherent in the Mertens decision.
Although we find that Mertens is not applicable to the instant case, we hasten to note that while Mertens and its progeny [see Varity Corp. v. Howe, 516 U.S. 489, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996)] are currently the law of the land, as a matter of public policy, academics and legal commentators have been extremely critical of the holding espoused in Mertens because of its narrow scope and unjust result. [footnote 12 containing citations omitted]. In fact, the Sixth Circuit has expressed its displeasure with the apparent inequity Mertens provides to aggrieved parties seeking remedies under ERISA. [Citing Allinder] . . . Mertens restricts plan beneficiaries to remedies such as mandamus, injunction, constructive trust, and restitution, even if those beneficiaries suffer harms that can only be properly rectified through compensatory damages . . . Under Mertens, it is dubious whether a plan beneficiary would get "appropriate remedies," as Congress intended. See H.R. REP. NO. 101-247, at 55-56 (1989), reprinted in 1989 U.S.C.C.A.N. 1906, 1948. [footnote 13 containing legislative history omitted].Gerbec, 164 F.3d at 1024.
In 1996, the United States Supreme Court decided Varity Corporation v. Howe, 516 U.S. 489, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996). Varity involved claims by former plan participants against their employer and plan administrator, alleging that they were induced through trickery to withdraw from the plan and forfeit their plan benefits. The Supreme Court determined, among other issues, that § 1132(a)(3) authorized these plaintiffs to seek relief for their individual harm caused by the administrator's breach of fiduciary obligations. Varity Corp., 516 U.S. at 492. In the Varity decision the court did not abrogate its holding in Mertens, as there was no issue respecting the availability of compensatory damages raised in the petition for certiorari. The district court in Varity had determined that the participants were entitled to "appropriate equitable relief," and included both an order to reinstate them into the plan and an award of monetary relief. On appeal, the United States Court of Appeals for the Eighth Circuit stated
The relief awarded includes payments of money that plaintiffs would have received if they had remained member of the M-F Plan, but we do not think these payments can properly be characterized as "damages," and thus unavailable under Section [1132(a)(3)]. Rather we view the payments as restitution. Equity will treat that as done which ought to have been done. Or, to put it in words that fit the present case more precisely, equity will disregard that which ought not to have been done . . . The payments we are ordering are exactly what they would have gotten if they had remained at M-F. They are restored to their rightful position. This is restitution, and the Supreme Court in Mertens twice listed "restitution" as a type of equitable relief available under Section 502(a)(3).Howe v. Varity Corporation, 36 F.3d 746, 756-57 (8th Cir. 1994). The court explained
Mertens simply holds that only "equitable relief" is available under Section 502(a)(3), 29 U.S.C. § 1132(a)(3), and that this phrase does not include the collection of damages from persons who are not fiduciaries but act in concert with those who are fiduciaries. Nothing in Mertens precludes an award of traditional equitable relief, including an injunction, restitution, and the like. As plaintiffs now concede, Brief or Plaintiffs-Appellees p. 30, after Mertens, compensatory damages are not recoverable under Section 1132(a)(3). But the case by no means bars equitable relief for individual participants who have suffered a breach of trust.Howe, 36 F.3d at 755. No challenge was raised to this portion of the appellate opinion. Thus the Supreme Court did not revisit the issue of the damage award, nor was the court invited to further clarify the Mertens decision.
The Varity decision did, however, more clearly delineate the distinction between legal (ie. compensatory and punitive damages) and equitable relief. The court distinguished the case before it from the Russell case in which the participant sought compensatory and punitive damages for emotional distress and aggravation of a back ailment allegedly caused by an improper refusal to pay disability benefits. The participant had in fact received the benefits due her under the disability plan and sought only the consequential damages for pain and suffering and personal injury allegedly arising from the withholding of benefits for the period during which they had been withheld. The damages sought were clearly extra-contractual legal damages. By contrast, equitable relief in the form of an order of reinstatement of the participants into the benefit plan was before the Supreme Court on certiorari in Varity. The court noted the factual distinction between the two cases, and found that Russell was not controlling. The court then went on at length to discuss the purpose behind the inclusion of the catch-all provision § 1132(a)(3), noting that
The statute itself says that it seeks "to protect . . . the interest of participants . . . and . . . beneficiaries . . . by establishing standards of conduct, responsibility, and obligation for fiduciaries . . . and . . . providing for appropriate remedies . . . and ready access to the Federal courts." ERISA § 2(b). Section 404(a), in furtherance of this general objective, requires fiduciaries to discharge their duties "solely in the interest of the participants and beneficiaries." Given these objectives, it is hard to imagine why Congress would want to immunize breaches of fiduciary obligation that harm individuals by denying injured beneficiaries a remedy.Varity, 516 U.S. at 513. The court looked at the structure of the ERISA provisions:
Four of [1332's] section's six subsections focus upon specific areas, i.e., the first (wrongful denial of benefits and information), the second (fiduciary obligations related to the plan's financial integrity), the fourth (tax registration), and the sixth (civil penalties). The language of the other two subsections, the third and the fifth, creates two "catchalls," providing "appropriate equitable relief" for "any" statutory violation. This structure suggests that these "catchall" provisions act as a safety net, offering appropriate equitable relief for injuries caused by violations that [§ 1332] does not elsewhere adequately remedy. And, contrary to Varity's argument, there is nothing in the legislative history that conflicts with this interpretation. See S.Rep. No. 93-127, p. 35 (1973), 1 Leg. Hist. 621 (describing Senate version of enforcement provisions as intended to "provide both the Secretary and participants and beneficiaries with broad remedies for redressing or preventing violations of [ERISA}"); H.R. Rep. No. 93-533, at 17, Leg. Hist. 2364 (describing House version in identical terms).Varity, Id. at 512. The court noted that the participants could not avail themselves of any other ERISA provision to obtain appropriate relief.
c.
It is the opinion of this court that the remedy available to Helfrich is restitution, an equitable remedy, rather than a legal claim for damages. The Sixth Circuit panel in Warren found, on facts virtually identical to those before us, that a monetary award for a fiduciary's breach of his contractual duty under the plan to transfer plan assets at the participant's direction was available under § 1132(a)(3) to make the plan participant whole. In reaching this conclusion, the court noted that "[i]n many cases in which the recovery of "extracontractual" compensatory damages under [§ 1132(a)(3)] has been denied, the plaintiffs sought compensatory damages for emotional distress." Warren, 905 F.2d at 980. The court also drew a distinction between the facts before it and those in Russell. The court found that Russell was not dispositive of the issue on the grounds that (1) the nature of the alleged injuries and the relief sought differed from that in Russell, and (2) the statutory basis for the claim in Russell was § 1132(a)(2) rather than (a)(3). The court explained
With regard to the nature of the claims, Dr. Warren claimed that the bank violated a contractual duty under the retirement plans to distribute his plan assets in accordance with his instructions . . . The fiduciary has a contractual duty to abide by the participant's election of the type of distribution he desires . . . Also, the injuries alleged by Dr. Warren — tax and tax interest liability and loss of investment earnings — are direct injuries resulting from the bank's failure to follow his instructions. In contrast, the plaintiff in Russell made no claim that the fiduciary of her disability plan violated a contractual duty. In fact, the plaintiff had received all the benefits to which she was contractually entitled. Also, rather than seeking damages for direct injuries, the plaintiff sought punitive damages and damages for the consequential injuries of emotional distress and the necessity of cashing out her husband's retirement savings.Warren, 905 F.2d at 980. In finding that Warren sought an appropriate equitable remedy, the court quoted from Justice Brennan's concurrence in Russell, concluding that "[w]e believe Justice Brennan's conclusion is correct that under the law of trusts, a beneficiary is entitled to a remedy that will put him in the position he would have been in if the fiduciary had not committed a breach of trust, and that such a remedy includes monetary damages." Warren, 905 F.2d at 982.
We find that in the case before us PNC as a fiduciary has allegedly breached its contractual duty under the plan. The plan document states:
§ 11.2 Trustee/Custodian The Trustee/Custodian shall be responsible for the administration of investments held in the Fund. These duties shall include:
. . . (b) making distributions from the Fund in accordance with written instructions received from an authorized representative of the employer . . .
§ 11.4 Division of Duties and Indemnification
. . . (b) The Trustee/Custodian shall not be liable for the making, retention or sale of any investment or reinvestment made by it, as herein provided, or for any loss to, or diminution of the Fund, or from any other loss or damage which may result from the discharge of its duties hereunder except to the extent it is judicially determined that the Trustee/Custodian has failed to exercise the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character with like aims.
As in Warren, Helfrich seeks only to be placed in the position he would have been in had PNC not committed the purported breach of trust. The monetary award he seeks arises from PNC's purported failure to fulfill its fiduciary duty under the plan. He does not seek any extra-contractual damages, such as in Russell and Allinder, nor does he seek a remedy from someone other that the fiduciary, as in Mertens.
PNC has cited Green v. AIM Executive, Inc., 897 F. Supp. 342 (N.D.Ohio 1995) to support its characterization of the remedy sought by Hilfrich as legal damages rather than restitution. We do not find Green to be persuasive on this point, nor is it binding precedent for this court.
The court in Green noted that, in light of Mertens, the question in determining whether a remedy is available under § 1132(a)(3) is whether the relief requested is an equitable or legal remedy. Green, 897 F. Supp. at 347. The court concluded, however, offering no analysis, that as the benefits sought were not required by the plan, they could not be characterized as restitution. This conclusory statement is of little use to the court. Additionally, the facts in Green differ from those in this case.
As an aside, we would note that the court stated accurately that "the Sixth Circuit's reliance on the common law of trusts and the role of the courts in equity in finding compensatory damages recoverable in Warren is no longer valid." Green, 897 F. Supp. 346-47. The basis for the availability of a monetary award under § 1132(a)(3) is not a wholesale acceptance of compensatory damages under the rubric of "equitable relief," but rather a proper characterization in a given case of the particular monetary award sought as restitution. As noted in Warren extracontractual consequential damages do not arise directly from a breach of fiduciary duty under a plan, and are therefore precluded as a legal claim for damages unavailable under § 1132(a)(3). The Sixth Circuit made clear in Warren that it believed the remedy sought by Warren to be restitutionary; that is, that the remedy sought to place Warren in the position he would have been in but for the bank's failure to follow his directions. Thus we conclude that Warren's remedy would be still be available to him under § 1132(a)(3) under the Mertens/Varity standard addressing the characterization of an § 1132(a)(3) remedy.
Helfrich can identify with precision that which was taken from him when PNC allegedly failed to follow his directions. He gave specific written directives that certain amounts be invested in certain funds at a given time. The peculiar facts of this case arguably would permit restoration of Helfrich to the position he should have occupied but for the alleged breach.
In the case of Schwartz v. Gregori, M.D., 45 F.3d 1017 (6th Cir.), cert. denied, 516 U.S. 819, 116 S.Ct. 77, 133 L.Ed.2d 36 (1995), the United States Court of Appeals for the Sixth Circuit upheld a judgment in favor of a plan participant which consisted of a monetary award and prejudgment interest for breach of fiduciary duty, back and front pay for retaliation for seeking to enforce her rights under the plan, and attorney's fees. In relation to the back and front pay awards, the court discussed the characterization of remedies, noting that it is the nature of the remedy sought which is key. The court cited Chauffeurs Local 391 v. Terry, 494 U.S. 558, 110 S.Ct. 1339, 108 L.Ed.2d 519 (1990), noting that the Supreme Court had emphasized there that not all monetary relief is necessarily legal in nature:
The Court's discussion [in Terry] of the attributes which justify the characterization of a money award as equitable is dispositive here. The Court stated that damages can be characterized as equitable where they are restitutionary . . . Like in Mitchell [ v. Robert DeMario Jewelry, Inc., 361 U.S. 288, 80 S.Ct. 332, 4 L.Ed.2d 323 (1960)], the back pay at issue in this case was awarded against the employer rather than a third party, and thus operates to restore to the plaintiff that to which she would have enjoyed but for the employer's illegal retaliation. While restitution generally is awarded to prevent unjust enrichment to the defendant, that is not required in every case. Restatement of Restitution § 1 cmt. e (1936). Nor is it necessary that restitution be made in kind, for a court may restore the plaintiff to the position he formerly occupied "either by the return of something which he formerly had or by the receipt of its equivalent in money." [footnote omitted] 66 Am.Jur.2d Restitution and Implied Contracts § 1 at 942 (1973).Schwartz, 45 F.3d at 1022-23.
In citing the Schwartz case, we do not attempt to liken the remedy sought by Helfrich to an award of back pay. Rather, we cite the case for the propositions recognized in the Sixth Circuit that (1) not all monetary relief in necessarily legal in nature, and (2) unjust enrichment to the defendant is not required in every case to award restitution. Schwartz, 45 F.3d at 1022.
In Jackson v. Truck Drivers' Union, Local 42 Health and Welfare Fund, 933 F. Supp. 1124 (D.Mass. 1996), the district court held that a restitutionary money award was available to a plan participant for breach of fiduciary duty under § 1132(a)(3) in light of Varity and despite Mertens:
Jackson also requests personal restitution on his own behalf for lost benefits. Here, plaintiff stands on shakier ground as the remedy he seeks — essentially monetary relief for unpaid medical claims — appears at first blush to have been foreclosed by the Supreme Court. See Mertens, 508 U.S. at 255, 113 S.Ct. at 2067-68 (monetary relief for losses sustained is not available under ERISA § 502(a)(3) as "appropriate equitable relief").
In a very recent opinion, Varity Corp. v. Howe, supra., the Supreme Court cleared this obstacle. There, fiduciaries of an ERISA plan had misled a group of employees as to the financial health of a new plan to which they were fraudulently induced to transfer. When the new plan failed, the employees sought reinstatement to their former plan as an equitable remedy under [§ 1132(a)(3)]. 516 U.S. at ___, 116 S.Ct. at 1067-69. Distinguishing prior precedents, the Court held that "[t]he words of [§ 1332(a)(3)] — `appropriate equitable relief' to `redress' any `act or practice which violates any provision of this title' — are broad enough to cover individual relief for breach of a fiduciary obligation." Id. at ___, 116 S.Ct. at 1076. Thus, individual participants may sue directly for breach of a fiduciary duty so long as they seek an equitable remedy. Id. at ___, 116 S.Ct. at 1079. Of course, restitution is an equitable remedy. Mertens, 508 U.S. at 248, 113 S.Ct. at 2064-65 . . . In the ERISA context, the equitable remedy of restitution includes compelling trustees to pay benefits due. Indeed, in reasoning later upheld by the Supreme Court in Varity, the Eighth Circuit held that restitution included paying benefits to retirees who wrongfully were lured away from the solvent benefit plan:
The relief awarded includes the payment of money that plaintiffs would have received if they had remained members of the [former plan], but we do not think these payments can properly be characterized as `damages,' and thus unavailable under Section [§ 1132(a)(3)]. Rather we view the payments as restitution. Equity will treat that as done which ought to have been done.
Conclusion
This court concludes that Helfrich's claim under § 1132(a)(3) is in the nature of restitution — he seeks to be placed in the position he would have been had not PNC allegedly failed to follow his directions with respect to his plan benefits. The court cannot turn back the hands of time, should he prevail on his claim. However, the court can seek to fashion an award to duplicate the benefit as he would have obtained had his directions been followed. We do not find that the holding in the Mertens case requires us to alter our analysis, inasmuch as the nature of the claim and the remedy sought there differ from that sought in the case before us. We agree with the district court in Jackson, that Varity has paved the way for the success of restitutionary claims. The comprehensive scheme of ERISA must certainly afford Helfrich a remedy under § 1132(a)(3) for a breach of fiduciary duty in failing to administer plan assets in accordance with contractual obligations under the benefit plan.For the reasons set forth herein above the motion of the defendant, PNC Bank, Kentucky, Inc., to dismiss will be granted in part and denied in part. A separate order will be entered herein this date in accordance with this opinion.