William Pender v. Bank of America Corporation
788 F.3d 354
| 4th Cir. | 2015Background
- In 1998 NationsBank (later Bank of America) allowed 401(k) participants to transfer balances into a defined‑benefit Pension Plan that credited hypothetical investment returns rather than actual investment performance, but included a Transfer Guarantee (minimum value equal to pre‑transfer 401(k) balance).
- The Bank actually invested transferred assets in its own portfolio; when the Bank’s actual returns exceeded participants’ hypothetical credits, the Bank retained the spread (profit).
- An IRS audit concluded the transfers eliminated the 401(k) separate‑account feature and violated I.R.C. § 411(d)(6) and Treasury regulations; the Bank entered a closing agreement (paid fines, restored accounts, and made remedial transfers/payments by 2009).
- Plaintiffs (former transferees) sued under ERISA, ultimately pursuing a single remaining claim under ERISA § 204(g)(1) (anti‑cutback) and seeking disgorgement/accounting for profits under ERISA § 502(a)(3).
- The district court dismissed for lack of statutory and Article III standing and on statute‑of‑limitations grounds; the Fourth Circuit reversed, holding plaintiffs have statutory and Article III standing and their claims are timely.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs have statutory standing under ERISA to seek disgorgement of profits | Pender: §502(a)(3) (equitable ‘‘safety‑net’’) authorizes accounting for profits because other ERISA remedies are inadequate; §204(g)(1) (anti‑cutback) was violated | Bank: Relief must come under §502(a)(1)(B) or §502(a)(2); Amara/Pegram limit equitable relief and fiduciary claims | Held: Statutory standing exists under §502(a)(3); §204(g)(1) protects the separate‑account feature and disgorgement/accounting for profits is appropriate equitable relief (Amara and Pegram preclude (a)(1)(B) and (a)(2) theories here) |
| Whether plaintiffs have Article III standing (injury‑in‑fact, causation, redressability) | Pender: Loss of separate‑account feature and retention of spread/profits is a legally protected injury even if plan beneficiaries suffered no net monetary loss | Bank: No individual financial loss; IRS remediation restored accounts and mooted injury | Held: Article III standing exists — injury is invasion of legally protected interest (equitable interest in profits), causation and redressability satisfied; IRS remediation does not automatically moot claim absent proof Bank retained no profit |
| Whether Amara or Pegram bar plaintiffs’ chosen statutory theories | Pender: §502(a)(3) remains available for equitable remedies like accounting for profits | Bank: Amara precludes using (a)(1)(B) to reform plans; Pegram limits (a)(2) fiduciary claims | Held: Court follows Amara and Pegram: (a)(1)(B) and (a)(2) not available for plaintiffs’ requested relief but (a)(3) is available for equitable disgorgement |
| Whether plaintiffs’ claims are time‑barred | Pender: Equitable disgorgement akin to constructive trust; look to most analogous state limitations and applicable choice‑of‑law rules; transferor (Illinois) choice‑of‑law applies but North Carolina has significant connection | Bank: Illinois limitations or accrual arguments bar claims | Held: Apply Seventh Circuit/transferor rules; North Carolina law governs and its ten‑year limitations period applies; claims filed within that period and are timely |
Key Cases Cited
- CIGNA Corp. v. Amara, 563 U.S. 421 (2011) (limits use of §502(a)(1)(B) to enforce plan as written; equitable remedies addressed under §502(a)(3))
- Pegram v. Herdrich, 530 U.S. 211 (2000) (ERISA fiduciary status turns on whether defendant acted in a fiduciary capacity for the challenged conduct)
- Great‑West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002) (disgorgement/accounting for profits is an equitable restitutionary remedy; distinguishes remedies at law and in equity)
- Varity Corp. v. Howe, 516 U.S. 489 (1996) (§502(a)(3) serves as a ‘‘safety‑net’’ for equitable relief not available elsewhere under ERISA)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (Article III standing requires concrete, particularized injury; injury can be statutory)
- Edmonson v. Lincoln Nat. Life Ins. Co., 725 F.3d 406 (3d Cir. 2013) (holding financial loss not required for Article III standing for ERISA disgorgement claims)
- McCravy v. Metropolitan Life Ins. Co., 690 F.3d 176 (4th Cir. 2012) (discussing availability of equitable remedies post‑Amara to prevent fiduciaries profiting from violations)