:: Revisiting The Concept Of Standing As A Defense To ERISA Actions After LaRue

Finally, we should note that while the LaRue Court only decided statutory standing in its opinion, it did not ignore constitutional standing, nor could it have ruled on statutory standing had the requirements of constitutional standing not been satisfied.

Wangberger v. Janus Capital Group (In re Mut. Funds Inv. Litig.), 2008 U.S. App. LEXIS 12690 (4th Cir. Md. June 16, 2008)

One of the less noticeable casualties of the LaRue decision may be the erstwhile vaunted role of standing as a defense to ERISA actions. Wanberger provides a small hint of this possibility, but that decision does not necessarily measure the high watermark of this influence. (I say that because Wangberger involved a cashed out plan participant which was similar to the situation before the Court in LaRue.) By following the Supreme Court’s footnote to the ruminating opinion of Judge Posner in Harzewski v. Guidant Corp., 489 F.3d 799, 804 (7th Cir. Ind. 2007), however, one can find reason to question whether the Supreme Court has signaled an inclination to a more generous view of standing than has hitherto been the rule in such cases.

The Harzewski Opinion

In Harzewski, Posner states the standing issue as follows:

Obviously the named plaintiffs have standing to sue in the sense of being entitled to ask for an exercise of the judicial power of the United States as that term in Article III of the Constitution has been interpreted, because if they win they will obtain a tangible benefit.

But there is also a nonconstitutional doctrine of standing to sue, one aspect of which is the requirement that the plaintiff be within the “zone of interests” of the statute or other source of rights under which he is suing. See, e.g., Air Courier Conference of America v. American Postal Workers Union, 498 U.S. 517, 523-26, 111 S. Ct. 913, 112 L. Ed. 2d 1125 (1991); Clarke v. Securities Industry Ass’n, 479 U.S. 388, 395-400, 107 S. Ct. 750, 93 L. Ed. 2d 757 (1987).

The requirement has been used to bar some ERISA suits. E.g., Miller v. Rite Aid Corp., 334 F.3d 335, 340-41 (3d Cir. 2003). If someone brought a suit for ERISA benefits who had no possible legally protected interest in the pension plan (suppose he was merely a creditor of a plan participant), he would be outside the statute’s domain, and the court would dismiss the case for want of jurisdiction even if the defendant had made no issue of the remoteness of the plaintiff’s interest from the interests that ERISA protects, namely the interests of plan participants and beneficiaries. See, e.g., Western Shoshone Business Council v. Babbitt, 1 F.3d 1052, 1055-56 (10th Cir. 1993); Waits v. Frito-Lay, Inc., 978 F.2d 1093, 1109 (9th Cir. 1992); National Union of Hospital & Health Care Employees v. Carey, 557 F.2d 278, 280-81 (2d Cir. 1977).

He opines that the zone of interests test must not be interpreted too broadly, stating:

. . . if “zone of interests” were interpreted too broadly, standing and merits would merge, since any time a plaintiff failed to prove that the statute under which he was suing entitled him to relief, thus revealing that he was not someone whose interests the statute had been intended to protect, his suit would be dismissed for want of standing. Both Coan v. Kaufman, 457 F.3d 250, 256 and n. 3 (2d Cir. 2006); and Miller v. Rite Aid Corp., supra, express misgivings about the merger of standing and merits that “zone of interest” analysis, unguardedly applied to the question whether an ERISA plaintiff is a “participant,” might produce.

Except in extreme cases illustrated by our example of the attempt of the plan participant’s creditor to enforce a claim to ERISA benefits, the question whether an ERISA plaintiff is a “participant” entitled to recover benefits under the Act should be treated as a question of statutory interpretation fundamental to the merits of the suit rather than as a question of the plaintiff’s right to bring the suit. Vartanian v. Monsanto Co., 14 F.3d 697, 701-02 (1st Cir. 1994); cf. NCUA v. First Nat’l Bank & Trust Co., 522 U.S. 479, 492-94, 118 S. Ct. 927, 140 L. Ed. 2d 1 (1998); American Federation of Government Employees, Local 2119 v. Cohen, 171 F.3d 460, 469 (7th Cir. 1999).

And then he expands on this point by observing:

Some courts have had trouble seeing this [that cashed out participants can have standing] because they strain to distinguish between “benefits” and “damages.” ERISA does not say that a plan participant has the right to sue a plan fiduciary for damages, and the Supreme Court, noting the high level of detail in the Act’s provisions for civil enforcement, 29 U.S.C. § 1132(a), has refused to allow courts to read such a right into the statute. Mertens v. Hewitt Associates, 508 U.S. 248, 255-56, 113 S. Ct. 2063, 124 L. Ed. 2d 161 (1993); Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 146-47, 105 S. Ct. 3085, 87 L. Ed. 2d 96 (1985).

Not that monetary relief is excluded, but it must be relief to which the plan documents themselves entitle the participant. The statute authorizes suits for benefits, just not for damages separate from those benefits; so only “extracontractual damages are prohibited.” Glencoe v. Teachers Ins. & Annuity Ass’n, No. 99-2417, 2000 U.S. App. LEXIS 26046, 2000 WL 1578478, at *1 (4th Cir. Oct. 19, 2000) (per curiam); see also Powell v. Chesapeake & Potomac Tel. Co., 780 F.2d 419, 424 (4th Cir. 1985).

LaRue Cites Posner’s Opinion . . .

Now the connection to the Supreme Court decision is this. In footnote 6, the Court states:

After our grant of certiorari respondents filed a motion to dismiss the writ, contending that the case is moot because petitioner is no longer a participant in the Plan. While his withdrawal of funds from the Plan may have relevance to the proceedings on remand, we denied their motion because the case is not moot. A plan “participant,” as [***15] defined by § 3(7) of ERISA, 29 U.S.C. § 1002(7), may include a former employee with a colorable claim for benefits. See, e.g., Harzewski v. Guidant Corp., 489 F.3d 799 (CA7 2007).

And So Does The Fourth Circuit

And that footnote was heeded by the Fourth Circuit in Wangberger:

In responding to this argument, the Supreme Court stated that while the plaintiff’s “withdrawal of funds from the Plan may have relevance to the proceedings on remand, we denied [the defendants’] motion because the case is not moot,” LaRue, 128 S. Ct. at 1026 n.6 (emphasis added), noting that “[a] plan ‘participant,’ as defined by § 3(7) of ERISA, 29 U.S.C. § 1002(7), may include a former employee with a colorable claim for benefits,” id. (citing Harzewski, 489 F.3d at 799, with approval).

Thus, even though the Court did not decide constitutional standing in its published opinion, it clearly manifested its belief that the plaintiff there — a cashed-out former employee — had suffered an injury that could be redressed by the court. This was necessary, since “such a jurisdictional defect [as the lack of constitutional standing] deprives not only the initial court but also the appellate court of its power over the case or controversy.” Freytag v. Commissioner, 501 U.S. 868, 896, 111 S. Ct. 2631, 115 L. Ed. 2d 764 (1991) (Scalia, J., concurring).

Note: Does LaRue indicate a preference for a more generous “zone of interests” test for standing? To the extent the decision condones the opinion in Harzewski, one can argue that it should.

Zone Of Interests Versus Merits Of The Case – Posner stated that “. . . if “zone of interests” were interpreted too broadly, standing and merits would merge, since any time a plaintiff failed to prove that the statute under which he was suing entitled him to relief, thus revealing that he was not someone whose interests the statute had been intended to protect, his suit would be dismissed for want of standing.” One should not be surprised to find this distinction emerge as a new counterargument to defenses based upon lack of standing.

Jurisprudential Note – Judge Ripple dissented from Posner’s opinion. Had his (probably correct) view prevailed, the potential for mischief arising from Harzewski, would have been circumscribed. His dissent:

Ripple, Circuit Judge. I am pleased to join that part of the panel’s fine opinion that holds that the district court erred in dismissing this case for lack of standing. In my view, it would be far better, as a prudential matter, to refrain from commentary on the merits at this time. Therefore, I respectfully decline to join that part of the panel’s opinion that addresses the merits of the case.

Overview Of Standing Requirements – Standing issues can arise in a variety of settings.

Here’s an overview of the dual standing requirements which is excerpted from a previous post on this subject (see :: Fourth Circuit Holds Plaintiff Has Standing To Sue, State Law Claims ERISA Preempted (commenting on . Wilmington Shipping Co. v. New England Life Ins. Co., — F.3d —-, 2007 WL 2216008, (C.A.4 (N.C.)) (August 3 2007)):

  • Plaintiff Had Article III Standing To Sue

The Fourth Circuit addressed the standing issue first in view of the potential jurisdictional defect in the plaintiff’s case. The court rejected the defendant’s arguments, however, holding that the plaintiff had standing under Article III and under ERISA.

[The elements of Article III standing are (1) an injury in fact, (2) that is causally connected to the defendant, and (3) that is redressable by the court. Id. at 560-61, 112 S.Ct. 2130. The elements are conjunctive, so that a failure of any of the three elements deprives a plaintiff of standing to maintain an action in federal court. “If plaintiffs lack Article III standing, a court has no subject matter jurisdiction to hear their claim.” See, Cent. States Se. & Sw. Areas Health & Welfare Fund v. Merck-Medco Managed Care, 433 F.3d 181, 198 (2d Cir.2005).]

Suffice it to say that, in ruling on the “injury in fact” aspect of the Article III issue, the representative capacity of the plaintiff was no impediment to Article III standing. The court stated:

That Ruffin is suing on behalf of the Plan does not alter this conclusion, for a plan participant may not sue under ERISA § 502(a)(2) unless he seeks recovery on behalf of the plan. See Mass. Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 140 (1985) (holding that a participant’s action filed pursuant to ERISA § 502(a)(2) must seek remedies that provide a “benefit [to] the plan as a whole”); Horan v. Kaiser Steel Ret. Plan, 947 F.2d 1412, 1417 (9th Cir.1991)(“An individual beneficiary may bring a fiduciary breach claim [under ERISA § 502(a)(2) ], but must do so for the benefit of the plan.”). Ruffin’s injury is no less concrete because the benefit to him from a favorable outcome in this litigation would derive from the restored financial health of the Plan.

  • Plaintiff Had ERISA Standing To Sue

The Court’s decision on ERISA standing was presaged by the opening comment that:

It is perhaps a massive understatement to say that the plain language of ERISA § 502(a)(2) favors Ruffin. The statute grants plan participants the right to sue for breach of fiduciary duty without qualification. It does not say that a plan participant can sue for breach of fiduciary duty “until plan termination” or “before plan termination,” just that a participant can sue for breach of fiduciary duty.

The Court further observed that “[o]ur review of ERISA reveals, and NEL concedes, that there is no provision in the statutory scheme that expressly revokes participants’ standing upon termination of the plan.” Thus, “NEL’s various arguments do not overcome the plain language of ERISA § 502(a)(2), which in no uncertain terms grants plan participants standing to sue for fiduciary breaches.”