McCullough v. AEGON USA, INC.

585 F.3d 1082, 47 Employee Benefits Cas. (BNA) 2761, 2009 U.S. App. LEXIS 24049, 2009 WL 3575518

• Court: Court of Appeals for the Eighth Circuit
• Decided: November 3, 2009
• Docket: 08-1952
• Status: Published

Opinions

COLLOTON, Circuit Judge.

Randal McCullough, a participant in a defined-benefit pension plan sponsored and administered by AEGON USA, Inc. (“AEGON”), brought suit under section 502(a)(2) of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1132(a)(2). He alleged that various plan fiduciaries breached their fiduciary duties to the plan and engaged in prohibited transactions in violation of ERISA. The district court² granted summary judgment for the defendants, holding that McCullough lacked Article III standing to assert his claims. We affirm on an alternative ground, following the circuit precedent of Harley v. Minnesota Mining & Manufacturing Co., 284 F.3d 901 (8th Cir.2002), and its construction of § 1132(a)(2).

I.

As a result of his former employment with one of AEGON’s subsidiaries, McCullough is a participant in the AEGON USA, Inc. Pension Plan (“the Plan”), which is sponsored and administered by AEGON and covered by ERISA. The Plan is a defined-benefit plan, which provides participants fixed periodic payments upon retirement from a general pool of plan assets. See Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 439-41, 119 S.Ct. 755, 142 L.Ed.2d 881 (1999).

In October 2005, McCullough filed this action against AEGON and various other defendants in the United States District Court for the Central District of California. In his first amended complaint, McCullough alleged that the defendants breached their fiduciary duties under ERISA. See 29 U.S.C. § 1104. ' He asserted that the defendants caused the Plan to invest in funds offered by AEGON subsidiaries and affiliates and to purchase products and services from such affiliates and subsidiaries, resulting in the payment of fees “that were higher than the norm.” McCullough also alleged that this conduct violated 29 U.S.C. § 1106, which prohibits certain transactions between the Plan and fiduciaries and between the Plan and parties in interest. In addition, McCullough asserted the same claims against defendants relating to the management of a defined-contribution plan.

McCullough sought a refund to the Plan of “all fees paid to AEGON Subsidiaries and Affiliates by the Plan[ ], including disgorgement of profits,” as well as “equitable restitution and other appropriate equitable monetary relief.” He also sought an injunction against defendants prohibiting “further violations of their ERISA fiduciary responsibilities, obligations, and duties,” and any other appropriate equitable relief, “including the permanent removal of the Defendants from any positions of trust with respect to the Plan[ ] and the appointment of independent fiduciaries to administer the Plan[ ].”

AEGON successfully requested transfer of the case to the Northern District of Iowa, and then moved for partial summary judgment. The parties agreed that at the time McCullough filed his complaint, and at all times from 2001 to 2006, the Plan was “substantially overfunded,” according to actuarial valuation reports of the Plan’s assets and liabilities. The parties also agreed that Plan never failed to pay benefits owed to participants or beneficiaries, and that AEGON had no intention to terminate the Plan. In light of these facts, AEGON argued that under Harley, 284 F.3d 901, McCullough lacked standing to assert his claims against the Plan. The district court agreed that Harley controlled, and granted AEGON’s motion for summary judgment. See McCullough v. Aegon USA, Inc., 521 F.Supp.2d 879, 894 (N.D.Iowa 2007). The parties subsequently filed a joint stipulation of dismissal, see Fed.R.Civ.P. 41(a)(1)(A)(ii), dismissing with prejudice McCullough’s claims relating to the defined-contribution plan, and the district court entered final judgment. McCullough now appeals the grant of summary judgment, and we review de novo.

II.

ERISA provides that the Secretary of Labor and participants, beneficiaries, and fiduciaries of an employee benefit plan may bring an action “for appropriate relief under section 1109 of this title.” 29 U.S.C. § 1132(a)(2). Section 1109 makes fiduciaries of a plan personally liable to the plan for any losses resulting from their breaches of “any of the responsibilities, obligations, or duties imposed upon fiduciaries” by ERISA. Id. § 1109(a). It also empowers the court to award “such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary.” As relevant here, ERISA imposes certain duties on plan fiduciaries in 29 U.S.C. § 1104, including the duty to act “solely in the interest of the participants and beneficiaries” of the plan, and to act “with the care, skill, prudence, and diligence” of “a prudent man acting in a like capacity and familiar with such matters.” Id. § 1104(a)(1). Fiduciaries are also prohibited by 29 U.S.C. § 1106 from engaging in certain transactions with the plan or causing the plan to engage in certain transactions with a “party in interest.” Id. § 1106(a)-(b).

In Harley, this court concluded that § 1132(a)(2) does not permit a participant in a defined-benefit plan to bring suit claiming liability under § 1109 for alleged breaches of fiduciary duties when the plan is overfunded. 284 F.3d at 905-07. The Harley plaintiffs alleged that fiduciaries of the defined-benefit plan in which they participated breached fiduciary duties by failing to investigate adequately and monitor properly a $20 million investment in a hedge fund, resulting in a complete loss of the investment. The plaintiffs also alleged that the plan fiduciaries breached their fiduciary duties by allowing the Plan to enter into a prohibited transaction under § 1 106(b)(1) when it paid a $1.17 million fee to the hedge fund’s investment advisor. See id. at 903-04, 908.

On appeal, this court affirmed the district court’s grant of summary judgment for the defendants. With respect to the failure-to-investigate and failure-to-monitor claims, the court held that § 1132(a)(2) did not permit the plaintiffs to bring suit because the plan’s surplus was sufficiently large that the “investment loss did not cause actual injury to plaintiffs’ interests in the Plan.” Id. at 907. The court explained that “a contrary construction [of § 1132(a)(2) ] would raise serious Article III case or controversy concerns,” because it would “permit[ ] participants or beneficiaries who have suffered no injury in fact” to bring an action “to enforce ERISA fiduciary duties on behalf of the Plan.” Id. at 906. The court also reasoned that “the purposes underlying ERISA’s imposition of strict fiduciary duties” — namely, “the protection of individual pension rights”— “are not furthered by granting plaintiffs standing,” because the plaintiffs’ individual pension rights are “fully protected,” and “would if anything be adversely affected by subjecting the Plan and its fiduciaries to costly litigation.” Id. at 907. Although the court did not identify the precise text of § 1132(a)(2) that it was construing, we presume the court determined that the suit would not be one “for appropriate relief’ under the circumstances. On the prohibited-transaction claim, the court did not discuss whether § 1132(a)(2) permitted the suit, but dismissed the claim on the merits instead. See id. at 908-09.

McCullough, like the Harley plaintiffs, brought this action under § 1132(a)(2) and asserts that the defendants are liable to the Plan under § 1109 for breaching their fiduciary duties to the Plan under § 1104. As in Harley, the Plan is a defined-benefit plan, and McCullough does not dispute that the Plan was “substantially overfunded” at the time he brought suit. Unless there is a basis for this panel to disregard Harley, therefore, McCullough may not bring his § 1104 claim under § 1132(a)(2). See Drake v. Scott, 812 F.2d 395, 400 (8th Cir.1987) (“One panel of this Court is not at liberty to disregard a precedent handed down by another panel. Only the Court en banc can take such action.”).

McCullough also asserts a claim that the defendants were liable to the Plan under § 1109 because they caused the Plan to engage in prohibited transactions in violation of § 1106. The court in Harley skipped to the merits of a claim involving § 1106 without addressing whether a participant may bring such a claim under § 1132(a)(2) against a “substantially over-funded” defined-benefit plan. 284 F.3d at 908-09. McCullough does not argue, however, that a claim alleging a violation of § 1106 should be treated differently than one alleging a violation of § 1104, and like the district court, 521 F.Supp.2d at 892, we see no logical basis for a distinction.

McCullough makes two principal arguments why Harley does not preclude his action. First, although acknowledging that Harley was decided on statutory grounds, he argues that the Supreme Court’s intervening decision regarding Article III standing in Sprint Communications Co. v. APCC Services, Inc., — U.S. -, 128 S.Ct. 2531, 171 L.Ed.2d 424 (2008), undermines Harley. A limited exception to the prior panel rule permits us to revisit an opinion of a prior panel if an intervening Supreme Court decision is inconsistent with the prior opinion. Young v. Hayes, 218 F.3d 850, 853 (8th Cir.2000). McCullough argues that Sprint is such an intervening decision.

In Sprint, the Supreme Court held that “an assignee of a legal claim for money owed has standing to pursue that claim in federal court, even when the assignee has promised to remit the proceeds of the litigation to the assignor.” 128 S.Ct. at 2533. The Court found the “history and precedent” of allowing assignees to bring suit, particularly the “strong tradition ... of suits by assignees for collection,” to be “well nigh conclusive” in deciding the case, id. at 2541-42 (internal quotation omitted), but also held that assignees “satisfy the Article III standing requirements articulated in more modern decisions of [the] Court.” Id. at 2542. In considering whether the assignees suffered an injury in fact, the Court acknowledged that the assignees “did not originally suffer any injury,” but explained that the assignors “assigned their claims to the [assignees] lock, stock, and barrel.” Id.

Sprint also relied on the Court’s prior decision in Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000), which held that a relator possesses standing to bring a qui tarn action under the False Claims Act “because the Act ‘effect[s] a partial assignment of the Government’s damages claim’ and that assignment of the ‘United States’ injury in fact suffices to confer standing on [the relator].’ ” Sprint, 128 S.Ct. at 2542 (quoting Vermont Agency, 529 U.S. at 773, 774, 120 S.Ct. 1858) (alteration in original). The Court noted that in Vermont Agency, it had “stated quite unequivocally that ‘the assignee of a claim has standing to assert the injury in fact suffered by the assign- or.’ ” Id. (quoting Vermont Agency, 529 U.S. at 773, 120 S.Ct. 1858).

McCullough contends that after Sprint, there is no constitutional concern with interpreting § 1132(a) to permit a participant in an overfunded ERISA plan to sue fiduciaries based on an injury to the plan. He acknowledges that unlike the assignees in Sprint, a plan participant has not received a contractual assignment of the plan’s claim, but he asserts that Congress has conferred an analogous right to sue in § 1132(a)(2). McCullough therefore contends that Sprint is inconsistent with the holding of Harley that a plan participant may not bring an action under § 1132(a)(2) when the plan is overfunded.

We are not convinced that Sprint sweeps as broadly as McCullough suggests. Sprint and Vermont Agency both involved plaintiffs who were assigned claims by parties who were originally injured. See Sprint, 128 S.Ct. at 2542; Vermont Agency, 529 U.S. at 773, 120 S.Ct. 1858. Sprint also relied on the historical recognition of an assignee’s ability to sue, 128 S.Ct. at 2536-42, and Vermont Agency relied on the “long tradition of qui tam actions.” 529 U.S. at 775, 120 S.Ct. 1858. Here, however, there is neither a long history of recognizing suits by ERISA plan participants to sue on behalf of a plan, see Harley, 284 F.3d at 907, nor any assignment by the Plan to McCullough to sue on its behalf. Nor does McCullough assert that § 1132(a)(2) “assigns” a claim belonging to the government, as did the qui tam statute at issue in Vermont Agency. See 529 U.S. at 773, 120 S.Ct. 1858.

McCullough suggests instead that Congress assigned a claim of one private party (the ERISA plan) to another private party (a participant in the plan). This court in Harley was reluctant to ascribe that intention to Congress, believing that such an interpretation of § 1132(a)(2) raised serious constitutional concerns. If Congress could assign an ERISA plan’s claim to a participant who is not injured, the court wondered, then what principled reason would preclude Congress from assigning the claim to any stranger? See 284 F.3d at 906-07 (“If the statute authorized any stranger to the plan to bring such an action, would that suffice to confer standing? Surely not, for ‘Article III forecloses the conversion of courts of the United States into judicial versions of college debating forums.’ ”) (quoting Valley Forge Christian Coll. v. Ams. United for Separation of Church & State, 454 U.S. 464, 473, 102 S.Ct. 752, 70 L.Ed.2d 700 (1982)). Sprint does not purport to revolutionize the law of standing by authorizing Congress to “assign” claims from one private party to another and thereby to create a constitutionally sufficient injury in fact. To the contrary, the Court in Sprint thought it was the dissenting opinion that advocated “a sea change in the law,” 128 S.Ct. at 2543, and suggested that its holding merely assured continuity — citing, for example, that “[tjrustees bring suits to benefit their trusts; guardians ad litem bring suits to benefit their wards; receivers bring suit to benefit their receiver-ships; assignees in bankruptcy bring suit to benefit bankrupt estates; executors bring suit to benefit testator estates; and so forth.” Id. Without more specific guidance from the Supreme Court that it has expanded Article III standing as broadly as McCullough suggests — and beyond the historically grounded examples cited in Sprint — we do not feel at liberty to disregard this court’s more circumspect view in Harley.3

There is another reason why Sprint does not compel us to disregard Harley. The statutory holding of Harley did not rest solely on constitutional avoidance. The court also reasoned that allowing participants in an overfunded plan to bring an action under § 1132(a)(2) would not advance ERISA’s primary purpose of protecting individual pension rights, because the pension rights of such plaintiffs are “fully protected,” and “would if anything be adversely affected by subjecting the Plan and its fiduciaries to costly litigation.” Harley, 284 F.3d at 907. This aspect of the prior panel’s rationale survives, no matter how broadly one interprets Sprint and its discussion of Article III standing.

McCullough’s second bid to avoid circuit precedent is based on a factual distinction between this case and Harley. He contends that because this action seeks to enjoin ongoing and future violations of ERISA, rather than just to recover losses to a plan from a single investment transaction that allegedly violated ERISA, he should be permitted to bring suit under § 1132(a)(2). McCullough’s factual distinction, however, is not material to the reasoning of the prior panel. Harley reasoned that a breach of a fiduciary duty causes no harm to a participant when the plan is overfunded, and that allowing costly litigation would run counter to ERISA’s purpose of protecting individual pension rights. That logic applies whether an action alleges a single breach or a series of breaches.

Harley addressed only claims for monetary relief, and McCullough also seeks injunctive relief under § 1132(a)(2). Given Harley’s holding that a participant suffers no injury as long as the plan is substantially overfunded, however, we see no basis to construe § 1132(a)(2) to authorize an action against fiduciaries of an overfunded plan for injunctive relief, but not for the monetary relief sought in Harley. McCullough points to cases from other circuits concluding that a plan participant may seek injunctive relief under § 1132(a)(3), see Loren v. Blue Cross & Blue Shield of Mich., 505 F.3d 598, 607-10 (6th Cir.2007); Horvath v. Keystone Health Plan E., Inc., 333 F.3d 450, 455-56 (3d Cir.2003), but he has not relied on that section. See McCullough, 521 F.Supp.2d at 892 n. 8. As to § 1132(a)(2), we are bound by circuit precedent.

The balance of McCullough’s brief is a frontal assault on the reasoning of Harley. He contends that Harley takes too narrow a view of a plan participant’s injuries, misapplies the Supreme Court’s standing jurisprudence, e.g., Gollust v. Mendell, 501 U.S. 115, 125-27, 111 S.Ct. 2173, 115 L.Ed.2d 109 (1991), and undermines the enforcement mechanism created by Congress in ERISA. These points echo arguments raised by the Secretary of Labor in support of a petition for rehearing en banc in Harley. Whatever the merit of these contentions, they challenge the decision of a prior panel, and must therefore be addressed to the court en banc.

* * *

The judgment of the district court is affirmed.

2 . The Honorable Linda R. Reade, Chief Judge, United States District Court for the Northern District of Iowa.

3 . Nor do we think that Sprint stands for the more general proposition urged by McCullough that a party who suffers no injury has standing to bring an action as a representative of an injured third-party, so long as "the party bringing suit is legally authorized to sue.” Sprint made clear that it did not involve representational or third-party standing, because the plaintiffs were asserting their own legal rights under a contractual assignment. See 128 S.Ct. at 2544.