Karla Grossenbacher Published in The National Law Journal "'LaRue' Lets Individuals Sue Plans"

Karla Grossenbacher’s article, “‘LaRue’ lets individuals sue plans,” published in the May 19, 2008 issue of The National Law Journal, examined the historic U.S. Supreme Court decision in LaRue v. DeWolff, Boberg & Associates Inc., 128 S. Ct. 1020 (2008). “In LaRue, the high court held that § 502(a)(2) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1132(a)(2), authorizes a participant in a defined contribution plan, such as a 401(k) plan, to recover money damages for fiduciary breaches that decrease the plan assets in his or her individual account. Karla noted that prior to LaRue, many employees (and their lawyers) had assumed that an individual had to be seeking relief on behalf of the entire plan at issue—not just on behalf of his or her own interest in the plan—in order to obtain monetary relief under § 502(a)(2), which allows a participant to sue plan fiduciaries for breaching their fiduciary duties.”

Karla further noted that, “Employers and benefit plan administrators, as well as those who insure them, fear that the decision in LaRue will result in an onslaught of lawsuits by individual participants in defined contribution plans that will prove quite costly to defend. This could have the undesirable effect of causing employers to stop sponsoring pension plans (and perhaps other kinds of plans) and putting at risk the ability of the average American to save for retirement.”

Additionally, Karla pointed out, “The first signs of the proliferation of LaRue-type claims have already appeared. A U.S. district court in California recently granted a motion filed by plaintiffs in a class action for leave to add a request for money damages to the § 502(a)(2) claim already set forth in their complaint. Karla notes that there is some doubt, however, as to whether these new claims ultimately will prove meritorious. The Supreme Court did not express any opinion on the merits of LaRue's claim. DeWolff and others facing LaRue-type claims under § 502(a)(2) have a number of procedural and substantive defenses available to them.”

In conclusion, Karla observed that, “Although the Supreme Court answered the question of whether LaRue could assert a claim under § 502(a)(2) of ERISA for losses to his individual account in a defined contribution plan, it left many questions unanswered. As LaRue-type claims are asserted in the coming months and years, the effect of this landmark decision on the ability of the American worker to save and plan for retirement will become clear. Were DeWolff and its amici simply crying wolf? Only time will tell, but the better prepared employers and fiduciaries are to defend against LaRue-type claims, the less chance there is that the defined contribution plan will go the way of the dinosaur, like defined benefit plans.”