Jeffrey Perelman v. Raymond Perelman
793 F.3d 368
3rd Cir.2015Background
- Jeffrey Perelman, a participant in General Refractories Co.’s defined-benefit Plan, sued trustees and related parties alleging fiduciary breaches by covertly investing Plan assets in Ronald Perelman–controlled Revlon securities and related transactions that depleted assets and were misreported.
- Raymond Perelman (trustee) directed purchases/conversions of Revlon bonds/stock and related lending arrangements; Ronald acquired control over Plan-held Revlon voting shares and was alleged to be a fiduciary and party-in-interest.
- Jeffrey sought equitable monetary relief (restitution/disgorgement/surcharge) for Plan losses, injunctive relief (removal of trustee, independent trustee, audit, bar from future fiduciary roles), and attorneys’ fees under ERISA § 502(g)(1).
- District Court dismissed Jeffrey’s claims for monetary equitable relief for lack of Article III standing (no individualized injury), allowed limited injunctive claims, then granted summary judgment for defendants after finding the Plan adequately funded under statutorily approved accounting methods; denied attorneys’ fees.
- On appeal, the Third Circuit affirmed: (1) Jeffrey lacked standing to pursue monetary equitable relief (individually or as a representative) because the Plan was funded under Congress-approved valuation methods and alleged injury was speculative, and (2) the denial of attorneys’ fees was within the district court’s discretion under Ursic factors.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to seek monetary equitable relief under ERISA § 502(a)(3) | Jeffrey: plan investments reduced assets and increased risk of default, creating individualized injury that supports restitution/disgorgement/surcharge | Defendants: diminution alone in a defined-benefit plan is not individualized injury; Plan was funded under statutory valuation so injury is speculative | No standing; diminution without individualized harm insufficient; Plan was funded under Congress-approved method, so risk-of-default allegation speculative |
| Standing to seek disgorgement (individual right to profits) | Jeffrey: disgorgement does not require financial loss; he claims an individual right to defendants’ profits | Defendants: plaintiff must show an individual right to the profit; Jeffrey failed to allege such a right | No standing; Jeffrey did not show an individual right to the profits |
| Representative (derivative) suit for monetary equitable relief on behalf of the Plan | Jeffrey: as representative he can pursue relief for the Plan without individualized injury | Defendants: Article III requires plaintiff to have individualized injury; courts reject unharmed participants suing on behalf of plan | No representative standing for monetary equitable relief; Third Circuit follows consensus of other circuits |
| Award of attorneys’ fees under ERISA § 502(g)(1) | Jeffrey: litigation was catalyst for defendant concessions (trustee resignation, independent trustee, reimbursements, record changes), so he achieved "some degree of success on the merits" justifying fees | Defendants: even if some changes occurred, Ursic factors weigh against awarding fees; plaintiffs’ theory on standing was flawed | Affirmed denial of fees; court found some successes but district court did not abuse discretion applying Ursic factors (culpability, benefit to plan members, relative merits) |
Key Cases Cited
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (standing doctrine requirements)
- Hughes Aircraft Co. v. Jacobson, 525 U.S. 432 (diminution of plan assets insufficient alone for individualized injury in defined-benefit plans)
- LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248 (equitable relief for fiduciary breaches; risk-of-default theory)
- Ruckelshaus v. Sierra Club, 463 U.S. 680 ("some degree of success on the merits" standard for fee awards)
- Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242 (clarifying fee-award standard under ERISA)
- Edmonson v. Lincoln Nat'l Life Ins. Co., 725 F.3d 406 (3d Cir.) (disgorgement requires individual right to profits)
- Horvath v. Keystone Health Plan E., Inc., 333 F.3d 450 (3d Cir.) (standing distinctions for injunctive vs. monetary equitable relief under ERISA)
- Ursic v. Bethlehem Mines, 719 F.2d 670 (3d Cir.) (five-factor test for awarding fees under ERISA)