ERISA-Third Circuit Rules That Plaintiff Must Show Individual Harm To Have Standing To Seek Equitable Relief Under Section 502(a)(3) of ERISA
In Perelman v. Perelman, Nos. 14-1663 and 14-2742 (Third Circuit 2015), the Third Circuit Court of Appeals (the "Court") faced a matter arising under section 502(a)(3) of ERISA, which authorizes suits by, among others, a pension plan beneficiary to enjoin any act or practice that violates ERISA, "to obtain other appropriate equitable relief . . . to redress such violations," or to enforce any provision of ERISA or the terms of a pension plan.
In this case, the plaintiff, Jeffrey Perelman, is a participant in the defined employee pension benefit plan (the "Plan") of the defendant, General Refractories Company ("GRC"). Jeffrey alleges that his father, Raymond Perelman, as trustee of the Plan, breached his fiduciary duties by covertly investing Plan assets in the corporate bonds of struggling companies owned and controlled by Jeffrey's brother, defendant Ronald Perelman. Jeffrey contends that these transactions were not properly reported; depleted Plan assets; and increased the risk of default, such that his own defined benefits are in jeopardy. The district court dismissed several of Jeffrey's claims for lack of constitutional standing, later granted summary judgment against him on all remaining claims, and denied his application for attorneys' fees and costs. Jeffrey appealed, but the Court affirmed the district court's rulings.
Jeffrey raised two issues pertaining to section 502(a)(3) on appeal. First, he contends that he has standing to seek monetary equitable relief such as disgorgement or restitution under section 502(a)(3), since he did in fact suffer individual harm, in the form of an increased risk of Plan default with respect to his defined benefits. The Court rejected this contention, saying that Jeffrey has not suffered individual harm, since at this point the Plan-a defined benefit plan- remains adequately funded and able to pay Jeffery's benefit, and any risk of nonpayment is too speculative.
Jeffrey's second issue is whether, insofar as Jeffrey seeks relief on behalf of the Plan under section 502(a)(3), no showing of individual harm is necessary to obtain monetary equitable remedies. As to this issue, the Court said that its own case law provides no support for this theory, and other federal appellate courts have unanimously rejected it. As such, the Court concludes that -since Jeffrey did not show individual harm-he lacks standing to sue under section 502(a)(3) even purely as a Plan representative, insofar as he seeks monetary equitable relief.