Lead Opinion
OPINION OF THE COURT
Plaintiff Connie Edmonson was a beneficiary of a life insurance plan established by her employer and governed by the Employee Retirement Income Security Act of 1974 (ERISA). Defendant Lincoln National Life Insurance Co. chose to pay her benefits using a retained asset account, which allowed it to hold onto the benefits and invest them for its own profit until Edmonson affirmatively chose to withdraw them from the account.
Edmonson claims Lincoln breached its fiduciary duty of loyalty under ERISA and seeks disgorgement of the profit Lincoln earned by investing the benefits owed to her. The District Court granted summary judgment in Lincoln’s favor, concluding Lincoln was not acting in a fiduciary capacity when it took the actions subject to complaint. We will affirm.
I. Background
Connie Edmonson’s husband was insured under a group life insurance policy issued by Lincoln. The policy was established under an ERISA employee benefit plan sponsored by Edmonson’s employer, Schurz Communications. When her husband died, Edmonson was entitled to $10,000 in benefits. The policy states, “[u]pon receipt of satisfactory proof of a Dependent’s death while insured under this Policy, the Company will pay the amount of the Dependents [sic] Life Insurance in effect on the date of such death,” and that “[a]ny benefits payable under this Policy will be paid immediately after the Company receives complete proof of claim.” The policy does not state that Lincoln will pay the benefits using a retained asset account and does not otherwise specify how Lincoln was to pay Edmonson the benefits.
Edmonson submitted a claim form to Lincoln for payment. The form stated that when the benefits are greater than $5,000, Lincoln’s usual method of payment is to open a SecureLine Account in the beneficiary’s name. After Lincoln approved Edmonson’s claim, it set up a SecureLine Account in her name in the amount of $10,000, and sent her a checkbook from which she could draw checks on the account. Lincoln explained to Edmonson that she would receive interest on the account in the amount of the Bloomberg national average rate for interest-bearing checking accounts plus 1%. Lincoln also explained that if Edmonson wanted the entire proceeds immediately, all she had to do was write one check for the entire balance.
The SecureLine Account was a retained asset account. When distributing benefits using retained asset accounts, an insurance company does not deposit any funds into the account. Rather, it merely credits the account with the benefits, and when a ben
Three months after Lincoln set up the SecureLine Account, Edmonson withdrew the full amount of the insurance proceeds. Lincoln wrote her a check for $52.33 of interest. Edmonson contends that the profit Lincoln earned from investing the retained assets was greater than the amount of interest paid to her, and that Lincoln made approximately $5 million in profit in 2009 by investing retained assets credited to her account and the accounts of other beneficiaries.
Edmonson brought an ERISA claim contending Lincoln violated its fiduciary duties under ERISA by choosing to pay her using a retained asset account and by investing the retained assets for its own profit. She contends ERISA’s fiduciary duties were implicated because both acts involved exercising “discretionary authority or discretionary control respecting management” or “administration” of an ERISA plan and exercising “authority or control respecting management or disposition of [plan] assets.” 29 U.S.C. § 1002(21)(A) (setting forth the various functions that trigger ERISA fiduciary duties). She argues Lincoln’s acts breached its fiduciary duties because these actions were not taken for her exclusive benefit and because they involved self-dealing. See id. § 1104(a)(1) (“[A] fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and ... for the exclusive purpose of ... providing benefits to participants and their beneficiaries.”); id. § 1106(b)(1) (“A fiduciary with respect to a plan shall not ... deal with the assets of the plan in his own interest or for his own account.”). Edmonson seeks disgorgement of the profits earned by Lincoln from the investment of the retained assets under 29 U.S.C. § 1132(a)(3), which allows a participant, beneficiary, or fiduciary to obtain equitable relief to redress violations of ERISA.
Lincoln moved to dismiss, arguing Edmonson lacked both constitutional and statutory standing to bring her claim. It also argued it was not acting as a fiduciary under ERISA when it took the actions subject to complaint and, even if it were, it did not breach any fiduciary duty by taking these actions. See Edmonson v. Lincoln Natl Life Ins. Co.,
Following discovery, Lincoln moved for summary judgment on the ground that it was not a fiduciary under ERISA when it took the contested actions. Edmonson moved for partial summary judgment on the same issue. Edmonson also moved to certify a class of individuals who were paid ERISA benefits by Lincoln via a retained asset account. The court granted Lincoln’s motion for summary judgment, denied Edmonson’s motion for partial summary judgment, and dismissed as moot
II. ERISA’s Fiduciary Principles
“ ‘ERISA is a comprehensive statute designed to promote the interests of employees and their beneficiaries in employee benefit plans.’ ” Ingersoll-Rand Co. v. McClendon,
Under ERISA,
a person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.
29 U.S.C. § 1002(21)(A). “ ‘ERISA ... defines ‘fiduciary
Among other duties, ERISA requires that a fiduciary “discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and ... for the exclusive purpose of ... providing benefits to participants and their beneficiaries.” 29 U.S.C. § 1104(a)(1). ERISA further requires that “[a] fiduciary with respect to a plan shall not ... deal with the assets of the plan in his own interest or for his own account.” Id. § 1106(b). At least in one respect, these duties can be characterized as a fiduciary’s duty of loyalty-
ERISA provides for private enforcement of its duties by creating causes of action available to participants, beneficiaries, and fiduciaries. Edmonson brings her disgorgement claim under 29 U.S.C. § 1182(a)(3), which allows a participant, beneficiary, or fiduciary to bring a cause of action “(A) to enjoin any act or practice which violates any provision of [ERISA] 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 [ERISA] or the terms of the plan.” The Supreme Court has described § 1132(a)(3) as a “catchall” provision which “act[s] as a safety net, offering appropriate equitable relief for injuries caused by violations that § [1132] does not elsewhere adequately remedy.” Varity Corp. v. Howe,
III. Standing
On appeal, amicus American Council of Life Insurers argues Edmonson lacks standing to bring her claim because she suffered no injury-in-fact, as she received all the benefits owed to her under the policy, plus interest. The District Court rejected this argument, concluding Lincoln’s failure to pay Edmonson the full amount of the profit it earned from investing the retained assets constituted for standing purposes an injury-in-fact. The court concluded Edmonson’s injury was the “spread” between the interest Lincoln earned by investing the retained assets and the interest it paid to her. Edmonson, 111 F.Supp.2d at 881. The court rejected Lincoln’s argument that Edmonson suffered no injury merely because she received all she was entitled to under the plan and policy. See id.
Although Lincoln did not appeal this ruling, “federal courts have an independent obligation to ensure that they do not exceed the scope of their jurisdiction, and therefore they must raise and decide jurisdictional questions that the parties either overlook or elect not to press.” Henderson ex rel. Henderson v. Shinseki, — U.S. -,
Article III of the United States Constitution “limits the jurisdiction of federal courts to ‘Cases’ and ‘Controversies.’ ” Lujan v. Defenders of Wildlife,
“[T]he irreducible constitutional minimum of standing contains three elements.” Lujan,
We begin with the first requirement, injury-in-fact. Generally, disgorgement claims for breach of fiduciary duty do not require that a plaintiff suffer a financial loss, as relief in a disgorgement claim “is measured by the defendant’s profits.” Restatement (Third) on Restitution and Unjust Enrichment § 51 cmt. a (2011); see also id. § 43 cmt. d (stating a claim based on a breach of the duty of loyalty may be brought “without regard to economic injury”); id. (providing examples where fiduciary is liable for gains even though plaintiff suffered no loss). This is because disgorgement claims seek not to compensate for a loss, but to “deprive[] wrongdoers of ill-gotten gains.” Commodity Futures Trading Comm’n v. Am. Metals Exchange Corp.,
The principles of ERISA provide further support for this conclusion. ERISA’s duty of loyalty bars a fiduciary from profiting even if no loss to the plan occurs. Under 29 U.S.C. § 1109(a), ERISA provides that plans can recover that profit whether or not the plan suffered a financial loss. See Leigh v. Engle,
Notwithstanding these principles, the amicus contends our decision in Horvath v. Keystone Health Plan East, Inc.,
Our decision in Horvath did not revolve around whether the plaintiff suffered a financial loss. The Horvath plaintiff never contended she suffered a financial loss, as
Rather, the question in Horvath was whether the plaintiff could bring individual claims for restitution and disgorgement or whether any relief had to be sought by the plan.
Therefore, we conclude a financial loss is not a prerequisite for standing to bring a disgorgement claim under ERISA. As discussed, such a rule would be contrary to the nature of a disgorgement claim, principles of trust law, and principles of ERISA. Edmonson is seeking recovery based on Lincoln’s use of assets that belonged to her. Unlike in Horvath, any right to recover belongs to her, not to the plan, and there has been no suggestion to the contrary. Accordingly, we agree with the District Court that, for standing purposes, Edmonson incurred an injury-in-fact because she “suffered an individual loss, measured as the ‘spread’ or difference” between the profit Lincoln earned by investing the retained assets and the interest it paid to her. Edmonson,
To summarize, an ERISA beneficiary suffers an injury-in-fact sufficient to bring a disgorgement claim when a defendant allegedly breaches its fiduciary duty, profits from the breach, and the beneficiary, as opposed to the plan, has an individual right to the profit.
The second requirement of Article III standing, causation, requires that “the alleged injury-in-fact is causally connected and traceable to an action of the defendant ].” The Pitt News v. Fisher,
The final element of constitutional standing is redressability, which requires that “it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.” Lujan,
IV. Statutory Standing
In addition to having Article III standing, an ERISA plaintiff must also have statutory standing. Graden v. Conexant Sys. Inc.,
Lincoln argues that not all disgorgement is necessarily equitable in nature, relying on Great-West Life & Annuity Ins. Co. v. Knudson,
The Court noted, however, that “an accounting for profits, a form of equitable restitution,” is a “limited exception” to its rule defining the nature of equitable remedies. Id. at 214 n. 2,
V. Merits
We now turn to the merits of Edmonson’s claim that Lincoln breached its ERISA duty of loyalty. The trial court concluded Lincoln was not acting as a fiduciary when it took the actions subject to complaint and granted Lincoln’s motion for summary judgment.
To recapitulate, Edmonson contends Lincoln violated ERISA when it selected the SecureLine Account as the method of payment and again when it invested the retained assets for its own profit. She argues both of these acts triggered ERISA fiduciary duties because they involved the management or administration of the plan, or alternatively, an exercise of authority or control over plan assets. Lincoln acted as a fiduciary if either of the two challenged actions involved either type of conduct.
Whether the use of retained asset accounts runs afoul of ERISA is a question of first impression in this circuit. Two of our sister circuits have considered this question, but have come to different conclusions. See Faber v. Metro. Life Ins. Co.,
In Mogel, the policies at issue provided that “ ‘all benefits payable ... will be paid as soon as the Insurance Company receives proof of claim acceptable to it’ and ‘[u]nless otherwise elected, payment for loss of life will be made in one lump sum.’ ”
In Faber, the plan documents for one of the policies at issue stated, “[p]ayment of a death benefit of $7,500 or more is made under MetLife’s Total Control Account [i.e., a retained asset account]. The death benefit amount is deposited in an interest bearing money market account and your beneficiary is provided with a checkbook to use for writing checks to withdraw funds.”
MetLife discharged its fiduciary obligations as a claims administrator and ceased to be an ERISA fiduciary when, in accordance with the Plans, it created Plaintiffs’ [retained asset accounts], credited them with the amount of benefits due, and issued checkbooks enabling Plaintiffs to withdraw their proceeds at any time. Thus, MetLife was not acting in a fiduciary capacity when it invested the funds backing Plaintiffs’ [retained asset accounts].
Id. at 104. The court then determined that the retained assets were not plan assets, because the plan had no ownership interest in them at the time defendant invested them. Id. at 106. Accordingly, the defendant was not acting in a fiduciary capacity when it invested the retained assets, and plaintiffs’ ERISA claim failed.
A. Selection of the Method of Payment
Edmonson argues Lincoln breached its fiduciary duty when it selected the Secure-Line Account as the method of paying her benefits. She argues Lincoln was acting as a fiduciary when it took this action because this act involved the management or administration of the plan or, alternatively, because this act involved exercising authority or control over plan assets. See 29 U.S.C. § 1002(21)(A). We hold that Lincoln was acting as a fiduciary when it chose to pay her via the SecureLine Account and, to this extent, we depart from the thoughtful analysis of the trial court. We conclude, however, as we later explain, that Lincoln did not breach its fiduciary duty when it selected this form of payment.
1.
Edmonson contends that the selection of the SecureLine Account as the method of payment triggered ERISA fiduciary duties because it involved the “management” or “administration” of the plan. 29 U.S.C. § 1002(21)(A) (“[A] person is a fiduciary with respect to a plan to the extent ... he exercises any discretionary authority or discretionary control respecting management of such plan or ... has any discretionary authority or discretionary responsibility in the administration of such plan....”). Only discretionary acts
To define the terms “management” and “administration” of a plan under ERISA, we “look to the common law, which, over the years, has given to terms such as ‘fiduciary’ and trust ‘administration’ a legal meaning to which, we normally presume, Congress meant to refer.” Varity Corp.,
Although Lincoln initially contended the selection of the method of payment was neither discretionary nor an act of plan administration or management, it conceded at oral argument that this act was governed by ERISA’s fiduciary duties.
Lincoln’s selection of the method of payment was an act of plan administration or management. Lincoln’s “disposition to the beneficiaries of benefits under the plan falls comfortably within the scope of ERISA’s definition of fiduciary duties with respect to plan administration.” Mogel,
2.
We now address whether the selection of the SecureLine Account as the method of payment was a breach of Lincoln’s fiduciary duty. Edmonson contends the selection of the SecureLine Account as the method of payment breached Lincoln’s duty of loyalty. ERISA provides that “a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and—(A) for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan.” 29 U.S.C. § 1104(a)(1). ERISA also prohibits a fiduciary from “deal[ing] with the assets of the plan in his own interest or for his own account.” Id. § 1106(b)(1).
Lincoln and the amicus present several arguments for why payment via a retained asset account advances the interests of the beneficiary. For example, they argue some beneficiaries are grieving the loss of a close relative, and thus not in an ideal position to determine what to do with a large lump sum of money. But these arguments miss the mark. The issue is not whether the retained asset account is in the interest of the beneficiary; rather, the issue is whether Lincoln’s selection of the retained asset account was “solely in the interest” of Edmonson and “for the exclusive purpose” of providing benefits to her. See id. § 1104(a)(1)(A).
The purpose of establishing the Secure-Line Account was to pay Edmonson benefits. Lincoln did not directly gain any financial benefit from this decision. Nevertheless, Edmonson contends this decision was not solely in her interest because it put Lincoln in a position where it might profit by investing the retained assets. When compared to payment via a check, Edmonson asserts, payment via a retained asset account was better for Lincoln because it created the potential for profit. This increased potential for profit, a potential that is wholly dependent on Edmonson’s actions, is insufficient to result in a breach of Lincoln’s fiduciary duties.
‘ERISA does not mandate any specific mode of payment for ... benefits.’ ” Woolsey v. Marion Labs., Inc.,
Finally, even assuming there was a breach, Edmonson is not entitled to relief because the breach did not directly cause the injury for which she seeks relief, Lincoln’s investment for its own profit. ERISA requires a plaintiff to show that the injury was a proximate cause of the breach of duty. Willett v. Blue Cross and Blue Shield of Ala.,
B. Investment of the Retained Assets
Edmonson also argues that Lincoln breached its fiduciary duties when it invested the retained assets for its own benefit. She contends this act is governed by ERISA because it involved the management or administration of a plan or, alternatively, the exercise of authority or control over plan assets. She argues Lincoln’s decision to invest the retained assets for its own profit violated its duty of loyalty.
1.
As noted, Edmonson contends the investment of the retained assets involved the management or administration of the plan. Lincoln argues that it was no longer
Nothing in the plan or policy provides that Lincoln had any duty with respect to managing or administering the plan beyond its payment of benefits to Edmonson. Nor has Edmonson argued that anything in the plan or policy required Lincoln to perform any act of plan management or administration once it paid her the benefits. Rather, she contends Lincoln failed to “pay” her as required under the policy, arguing that the establishment of the SecureLine Account did not constitute payment of the benefits.
Edmonson directs our attention to Mo-gel, in which the court stated “when UNUM says that plaintiffs had been paid, referring to the sums already deemed to belong to Plaintiffs, it obscures reality.”
Edmonson contends that, like in Mogel, Lincoln failed to fulfill its obligation to “pay” her, and thus was still managing or administering the plan when it invested the retained assets. But the terms of the policy in Mogel required an immediate lump sum payment upon receipt of proof of a claim. Because the policy here is silent as to the form of payment, Lincoln had discretion as to how to comply with its requirements, under its contractual obligations and, as we concluded above, under ERISA. Accordingly, Lincoln fulfilled its obligation to pay Edmonson when it established the SecureLine Account.
Lincoln, relying on Faber, argues that once it satisfied its obligation to pay the benefits, it was no longer managing or administering the plan. In Faber, the Court of Appeals for the Second Circuit held
MetLife discharged its fiduciary obligations as a claims administrator and ceased to be an ERISA fiduciary when, in accordance with the Plans, it created Plaintiffs’ [retained asset accounts], credited them with the amount of benefits due, and issued checkbooks enabling Plaintiffs to withdraw their proceeds at any time. Thus, MetLife was not acting in a fiduciary capacity when it invested the funds backing Plaintiffs’ [retained asset accounts].
Faber,
Nonetheless, Edmonson contends Lincoln’s fiduciary duties over management and administration of the plan continued after it established the SecureLine Account even if Lincoln had fulfilled its obligations to her under the plan. She relies largely on the following quote from Varity Corp. v. Howe:
There is more to plan (or trust) administration than simply complying with the specific duties imposed by the plan documents or statutory regime; it also includes the activities that are ‘ordinary and natural means’ of achieving the ‘objective’ of the plan. Indeed, the primary function of the fiduciary duty is to constrain the exercise of discretionary powers which are controlled by no other specific duty imposed by the trust instrument or the legal regime. If the fiduciary duty applied to nothing more than activities already controlled by other specific legal duties, it would serve no purpose.
Edmonson takes the Supreme Court’s quotation from Varity Corp. out of context. In Varity Corp., the relevant issue was whether Varity, who acted as both the employer and the benefits plan administrator, was managing or administering the plan when it made misrepresentations to the employees about the viability of the plan. Id. at 494-95,
Varity Corp. does not suggest that Lincoln’s fiduciary duty to administer the plan continued after it satisfied its contractual duty to pay Edmonson her benefits, nor did it implicate a fiduciary’s obligation to manage or administer a plan. We find Faber’s rationale persuasive and conclude Lincoln had completed its obligations with respect to managing or administering the plan once it established the SecureLine Account. Accordingly, Lincoln was not managing or administering the plan when it invested the retained assets.
2.
Edmonson alternatively argues that Lincoln was acting as a fiduciary when it invested the retained assets because that act involved exercising authority or control over plan assets. See 29 U.S.C. § 1002(21)(A) (“[A] person is a fiduciary with respect to a plan to the extent (i) he ... exercises any authority or control respecting management or disposition of its assets.... ”). Lincoln contends the retained assets were not plan assets. We agree.
The Faber court applied this approach and concluded the “ ‘retained assets’ are not ‘plan assets’ because the Plans do not have an ownership interest—beneficial or otherwise—in them.” Faber,
In reaching its conclusion, the Faber court relied in part on an amicus brief/opinion letter submitted by the Secretary of Labor, in which the Secretary argued, inter alia, that the retained assets were not plan assets. The Secretary posited that the ordinary notions of property rights determine whether an asset is a plan asset, and considered whether anything in the plan documents or elsewhere gave the plans an ownership interest in the retained assets, noting that “whether a particular asset is a ‘plan asset’ requires a factual inquiry into the parties’ representations and understandings.” Brief of U.S. Dep’t of Labor at 12, Faber v. Metro. Life Ins. Co.,
Lincoln urges us to pay deference to the Secretary’s opinion under Skidmore v. Swift & Co.,
Edmonson has not identified anything in the plan or policy documents that supports a conclusion the plan retained an ownership interest in the retained assets after Lincoln established the SecureLine Account. Edmonson argues the plan had an ownership interest in the retained assets because Lincoln kept the money in its general account until a draft was presented for payment, rather than depositing the funds in the bank backing the SecureLine Account, and if Lincoln failed to pay them over to her, the plan would be liable. But Edmonson cites to no authority for this proposition, and does not point to any provision in the plan or policy to support it. Even if the plan could be compelled to enforce its rights against Lincoln, that right is not equivalent to an ownership stake in Lincoln’s general account funds.
Edmonson contends we should follow Mogel and conclude the retained assets were plan assets because payment via a retained asset account failed to satisfy Lincoln’s duty to pay her. As discussed, we disagree that Lincoln failed to fulfill its obligation to pay Edmonson. Moreover, we do not read Mogel as holding the retained assets were plan assets. The Mogel court, after finding the insurance company had not discharged its contractual duties under the policy to pay a lump sum, concluded “the sums due plaintiffs remain plan assets subject to UNUM’s fiduciary obligations until actual payment.” Mogel,
Alternatively, Edmonson urges us to apply the “functional approach” to determining whether an asset is a plan asset, as set forth by the Court of Appeals for the
Doyle suggests that we should not apply the Acosta approach, as the assets in question are cash or financial instruments. Cf. Acosta,
We conclude the retained assets were not plan assets. In short, once Lincoln set up the SecureLine Account, the plan no longer had an interest in the assets and, under ordinary notions of property rights, Lincoln and Edmonson were in a creditor-debtor relationship. Accordingly, Lincoln’s conduct was not constrained by ERISA’s duty of loyalty.
VI. Conclusion
We conclude Lincoln did not breach its fiduciary duties under ERISA when it chose to pay Edmonson with a retained asset account and then invested the retained assets for its own profit. The decision to pay Edmonson with the retained asset account did not breach Lincoln’s duty of loyalty to her. And when Lincoln then invested the retained assets, it was not acting in a fiduciary capacity. Accordingly, we will affirm the judgment of the District Court.
Notes
. The District Court had jurisdiction under 28 U.S.C. § 1331 and 29 U.S.C. § 1132(e)(2). We have jurisdiction under 28 U.S.C. § 1291.
. Based on the language of § 1132, "[t]he Supreme Court has reasoned that '[elquitable relief must mean something less than all relief,' and therefore it has explained that § 1132(a)(3) authorizes only 'those categories of relief that were typically available in equity,’ ” i.e., not claims available at law. Pell v. E.I. DuPont de Nemours & Co.,
. In contrast, a claim for restitution seeks to compensate a plaintiff for a loss, so a financial loss is required to bring such a claim. As the Court of Appeals for the Fifth Circuit has explained, "disgorgement is not precisely restitution. Disgorgement wrests ill-gotten gains from the hands of a wrongdoer. It is an equitable remedy meant to prevent the wrongdoer from enriching himself by his wrongs. Disgorgement does not aim to compensate the victims of the wrongful acts, as restitution does.” Huffman,
. Nothing in the text of ERISA suggests a beneficiary must suffer a financial loss in order to bring a suit against a fiduciary for breach of the duty of loyalty. The duty of loyalty is unqualified, as ERISA provides that a fiduciary “shall ... discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and ... for the exclusive purpose of ... providing benefits to participants and their beneficiaries” and that the fiduciary “shall not ... deal with the assets of the plan in his own interest or for his own account.” 29 U.S.C. §§ 1104(a)(1), 1106(b) (emphases added).
. These principles are consistent with the law of trusts, which "often will inform, but will not necessarily determine the outcome of, an effort to interpret ERISA's fiduciary duties.” Varity Corp.,
. Notably, for the proposition that an "individual loss” is required, the Horvath court cited to In re Unisys Savings Plan Litigation,
. Although the Court of Appeals for the Second Circuit affirmed the district court in Faber v. Metropolitan Life Ins. Co.,
. As Horvath demonstrates, not every breach of duty will cause beneficiaries to suffer an injury-in-fact sufficient to bring a disgorgement claim. In cases like Horvath, when the right to a defendant's profit belongs to the plan, a beneficiary has not suffered a constitutional injury.
. For standing purposes, we assume without deciding that Edmonson is correct that ERISA’s disgorgement remedy would entitle her to Lincoln's profit even though it complied with its contractual requirement to pay her interest at an agreed-upon rate.
. When we distinguished restitution from disgorgement above, we were using the term restitution to refer to a particular remedy. Restitution, however, can also be used more generally “as a metonym for the class of remedies particularly identified” with unjust enrichment. See F.T.C. v. Bronson Partners, LLC,
. The dissent concludes Edmonson lacks statutory standing because she cannot demonstrate she would be entitled to a constructive trust over the retained assets, as the dissent contends Edmonson had legal title over the assets (we question whether Edmonson had legal title over $10,000 that had not been segregated from Lincoln’s general asset pool and over which Lincoln had complete control). More importantly, whether Edmonson could have asserted a constructive trust over the retained assets goes to the merits of her claim, not to statutory standing.
. "We review a district court's grant of summary judgment de novo, applying the same standard the district court applied.” Viera v. Life Ins. Co. of N. Am.,
. The able District Court did not have the benefit of this concession when ruling on the motions for summary judgment.
. Edmonson also challenged the amount of interest ultimately paid to her, but we do not consider this challenge to relate to Lincoln's initial decision to create and set the terms for the SecureLine Account. The minimum interest rate Lincoln would pay, as set forth in the SecureLine Account's Terms and Conditions, was 1% above the average rate published by Bloomberg for interest-bearing checking accounts. Edmonson does not argue that this initial decision on what minimum interest rate to pay her violated ERISA.
Rather, Edmonson argues that Lincoln chose not to pay her above that minimum rate, thereby profiting from its investment of the retained assets. Axiomatically, Lincoln's decision not to pay her a higher interest rate allowed it to profit from the investment of the retained assets. Accordingly, we do not consider Lincoln's decision on the interest ultimately paid to Edmonson to constitute an independent discretionary act. Instead, we treat Lincoln's decision not to pay Edmonson more interest as identical to its decision to profit from the investment of the retained assets.
. This conclusion does not conflict with our earlier conclusion that the decision to invest the retained assets was "fairly traceable” to the establishment of the SecureLine Account for purposes of Article III standing. The “fairly traceable” requirement for constitutional standing sets a lower bar than the showing of causation required on the merits. See The Pitt News,
. Edmonson cites to several authorities for the proposition that debts must be paid in cash or check unless otherwise agreed upon, and thus Lincoln violated the plain terms of the plan by not paying her with a check. But these cases are inapposite. They only hold that forms of payment such as a security or a mortgage cannot be used to pay a debt. See, e.g., In re WestPoint Stevens, Inc.,
. Lincoln also argues that it did not have authority or control over the retained assets
. The parties agree the assets held by Lincoln before Edmonson submitted her claim were not plan assets, under the guaranteed benefit policy exemption of ERISA. This provision provides, "[i]n the case of a plan to which a guaranteed benefit policy is issued by an insurer, the assets of such plan shall be deemed to include such policy, but shall not, solely by reason of the issuance of such policy, be deemed to include any assets of such insurer.” 29 U.S.C. § 1101(b)(2). The parties also appear to agree that this exemption no longer applied once Lincoln established the retained asset account for Edmonson. While the amicus finds the guaranteed benefit exemption to be significant, arguing that the assets would not "suddenly” turn into plan assets, we, like the parties, do not place much emphasis on it.
. Edmonson urges us to disregard the analysis in the letter brief because the recent decision in Christopher v. SmithKline Beecham Corp., - U.S. --,
. In Jackson, the Court vacated the lower court’s decision in light of the Solicitor General's brief, which argued for the application of the ordinary notions of property rights approach. See Doyle, 675 F.3d at 204 n. 34.
Dissenting Opinion
Dissenting.
I agree with the Majority and the District Court that Lincoln should win this case, but I would vacate and remand for dismissal of the complaint because Edmonson lacks both constitutional and statutory standing, since she abandoned her claim for injunctive relief under ERISA and seeks only the payment of funds she claims that Lincoln wrongfully retained. I would not reach the issue of the alleged breach of Lincoln’s fiduciary duty under ERISA.
“To bring a civil action under ERISA, a plaintiff must have constitutional, prudential, and statutory standing.” Leuthner v. Blue Cross & Blue Shield of Ne. Pa.,
The Majority seems to treat a plaintiff demanding disgorgement as a special case
That conclusion, however, runs counter to our holding in Horvath v. Keystone Health Plan East, Inc.,
It is true, as the Majority insists, that Horvath is different from the present case. The plaintiffs claim there was “premised on her argument that her firm overpaid for the healthcare she received,” id., and there was no other evidence of individual harm. In this case, by contrast, as the District Court observed, “Plaintiff alleged that she suffered an individual loss, measured as the ‘spread’ or difference between the interest that Defendant allegedly earned on the benefits in Plaintiffs SecureLine account, and the interest that Defendant paid to Plaintiff.” Edmonson v. Lincoln Nat’l Life Ins. Co.,
The Majority correctly observes that “[o]ur decision in Horvath did not revolve around whether the plaintiff suffered a financial loss.” (Majority Op. at 416.) It did, however, turn on the question of whether the plaintiff had demonstrated an individual loss, i.e., an actual injury to that particular plaintiff. That showing is required when a plaintiff is seeking individual relief under ERISA. See In re Unisys Sav. Plan Litig.,
The Majority believes the meaning of Horvath to be that either “a plan has the right to the profit, [and] the individual plaintiff has not suffered a constitutional injury,” or else the plaintiff “has an individual right to the defendant’s profit” and she has suffered an injury-in-fact. (Majority Op. at 417.) That, however, presupposes that there are only two possibilities when a breach of an ERISA fiduciary duty is alleged. There is, however, a third possibility: that neither the plan nor the individual is entitled to the defendant’s profit. That would be the case when a plan permitted the fiduciary to retain and invest funds pending the payment of a benefit, and the plaintiff received the fixed amount to which she was entitled, as is argued to be the case here. And in such a case, neither the plan nor the individual can rightly allege an injury-in-fact based on not having received something to which neither was entitled, regardless of whether the defendant breached its fiduciary duty.
In other words, any right to the profit generated with plan assets, the loss of which is now said to be an injury-in-fact, does not automatically follow from the alleged breach, at least not in a defined benefit plan of the type at issue here. Cf. Harley v. Minn. Min. & Mfg. Co.,
In this case, the defined amount to which Edmonson was entitled was her $10,000 death benefit—a fixed entitlement that remained in place after her Secure-Line Account was established, even if Lincoln had lost money investing the funds backing that account. Having no claim on the profits, she cannot claim an individual loss—or even that she was “personally affected”—by not receiving a share of those profits. And “the limits on judicial power imposed by Article III counsel against permitting participants or beneficiaries who have suffered no injury in fact from suing to enforce ERISA fiduciary duties on behalf of the Plan.” Harley,
Notwithstanding the requirements of Article III, and worried that imposing a loss requirement would mean that fiduciaries could “retain ill-gotten profit ... so long as the breaches of fiduciary duty do not harm the plan or beneficiaries” (Majority Op. at 415), the Majority treats an action for disgorgement as sui generis. The Majority says that an ERISA plaintiff
In addition to constitutional standing, “[t]o bring a civil action under ERISA, a plaintiff must have ... statutory standing.” Leuthner,
The statutory standing problem for Edmonson is that, as we said in Horvath, “claims for restitution and disgorgement [under ERISA 502(a)(3) ] are likely barred by the Supreme Court’s ... decision in Great-West [Life & Annuity Insurance Co. v. Knudson,
The “disgorgement” Edmonson seeks is nothing more than compensation for an alleged loss allegedly caused by an alleged breach of Lincoln’s fiduciary duty. In other words, it is precisely the type of relief that Great-West Life said was legal, not equitable. The Majority’s discussion of disgorgement in support of its conclusion that Edmonson has constitutional standing makes that clear. The Majority says that the purpose of an action seeking disgorgement, at least in the ERISA context, is “to deter the fiduciary from engaging in disloyal conduct by denying him the profits of his breach” (Majority Op. at 416), and that the fiduciary “is liable for any profits he has made through his breach of trust,” {id. at 416 n. 5 (internal quotation marks omitted)). If that is the case, then it is difficult to see how Edmonson’s claim for “disgorgement” is anything other than an attempt to “impose personal liability on the defendant,” Great-West Life,
Perhaps in an effort the avoid that problem, the Majority recasts disgorgement as an “accounting for profits” for purposes of statutory standing, so that it falls within an exception to Great-West Life’s bar on § 502(a)(3) actions that seek to impose personal liability on a defendant. See Great-West Life,
As the Supreme Court has explained, in the context of claims arising under ERISA § 502(a)(3), “[ejquitable relief must mean something less than all relief.” Mertens,
With all respect to my colleagues in the Majority, I would vacate the summary judgment for Lincoln and remand to the District Court with instructions to dismiss the complaint, based on Edmonson’s lack of standing.
. The Majority finds support for that conclusion in the "principles of ERISA” whose "duty of loyalty bars a fiduciary from profiting even if no loss to the plan occurs.” (Majority Op. at 415.) That approach conflates constitutional and statutory standing in a manner that is particularly inapt in this case. Although "[t]he actual or threatened injury required by Art. Ill may exist solely by virtue of statutes creating legal rights, the invasion of which creates standing,” that is only true "with regard to injunctive relief.” Horvath v. Keystone Health Plan East, Inc.,
. The District Court concluded that that was “a sufficient allegation of injury in fact, caused by defendant’s conduct” to establish Article III standing. Edmonson v. Lincoln Nat’l Life Ins. Co., 777 F.Supp.2d 869, 881 (E.D.Pa.2011). The Court, however, considered standing only in response to Lincoln’s motion to dismiss. The Court declined to follow a case cited by Lincoln in support of its argument that Edmonson lacked standing because, in the Court’s view, it "imposed too high a burden on a plaintiff with respect to the jurisdictional allegations on a Rule 12(b)(1) motion,” id., but the Court did not revisit the issue at the summary judgment stage, even though Edmonson had provided no further evidence of an injury-in-fact.
. That is also the conclusion that the United States District Court for the Southern District of New York reached in Faber v. Metro. Life Ins. Co., No. 10588(HB),
. As discussed infra, the remedy for a fiduciary breach in such circumstances is not damages, but rather an injunction or "other appropriate equitable relief,” i.e., the remedy provided under ERISA § 502(a)(3).
. Relying on our reasoning in Horvath, the Second Circuit has come to the same standing conclusion in two cases closely resembling this one. First, in Kendall v. Employees Retirement Plan of Avon Products,
Second, in Faber v. Metropolitan Life Insurance Co.,
. In its analysis of statutory standing, the District Court focused only on whether Edmonson was a "beneficiary” within the meaning of ERISA § 502(a)(3) when she commenced this lawsuit, given that her claim had already been paid in full. The Court concluded that she was, because “plaintiff's status [is] measured at the time the breach of fiduciary duty occurred, rather than the time of the appeal.” Edmonson,
.We recognized an equitable restitution claim under ERISA in Plucinski v. I.A.M. National Pension Fund,
. The Supreme Court explicitly characterized an accounting for profits, requiring entitlement to a constructive trust, as a "limited exception” to what it concluded was ERISA’s bar on standing to seek certain types of restitutionary relief. Great-West Life,
. The Majority cites Skretvedt v. E.I. DuPont De Nemours,
. Although I would not reach the merits of Edmonson's appeal, it strikes me that the Majority's merits decision is at odds with its conclusions as to her constitutional and statutory standing. Constitutional standing requires, in addition to an injury-in-fact, “a causal connection between the injury and the conduct complained of—the injury has to be fairly ... tracefable] to the challenged action of the defendant, and not ... th[e] result [of] the independent action of some third party....” Lujan v. Defenders of Wildlife,
Similarly, in order to claim statutory standing based on Great-West Life’s exception for an accounting for profits, Edmonson must demonstrate that those profits are “attributable to the underlying wrong.” Restatement of Restitution § 51 cmt. e. Because the majority concludes that Lincoln has not breached its fiduciary duty, there is no “underlying wrong” that can be the subject of a restitutionary remedy. That further undercuts the Majority’s conclusion that her claim for disgorgement is really an equitable claim for an accounting, and suggests that she lacks standing under ERISA § 502(a)(3).