Insights From Encore Fiduciary on Fiduciary Liability & Other Risk Exposures of Employee Benefit Plans


Insights From Encore Fiduciary on Fiduciary Liability & Other Risk Exposures of Employee Benefit Plans

The Right to a Jury Trial in ERISA Excess Fee Cases

jury pool

By Daniel Aronowitz


It sounds crazy, but the first jury trial in an ERISA excessive fee case is scheduled for next month.  That’s right – barring a last-minute settlement and inevitable scheduling delays, a jury of ordinary citizens from Hartford, Connecticut is going to decide if the Yale University plan fiduciaries committed fiduciary malpractice in choosing the investments and monitoring the fees of its retirement plan.  Even sophisticated federal judges handling cases with similar fact patterns have been unable to arrive at consistent rulings in these cases.  As just one recent example, compare the recent Hughes v. Northwestern decision in the Seventh Circuit upholding an excess fee complaint to the dismissal in the District of Columbia District Court in the Wilcox v. Georgetown University excess fee case.  Both cases involve the same essential fiduciary decisions with respect to plan administration and investment choices, but the courts arrived at completely different conclusions.  But now a jury is going to decide an ERISA excess fee imprudence case for the first time.  This is a new chapter in the confounding world of ERISA jurisprudence.

It seems incomprehensible that ordinary citizens without ERISA or large plan investment experience are somehow qualified to decide whether large retirement plan fiduciaries are guilty of fiduciary malpractice.  And they are without question not qualified.  Applying arcane Eighteenth-Century law-versus-equity tests to decide the issue, the majority of courts still deny a right to a jury trial in ERISA fiduciary breach claims.  But there is an increasing split as to whether ERISA fiduciary breach claims can be tried before a jury, particularly in the Second Circuit.  And most recently, plaintiff law firms have found an opening in Connecticut district courts with two rulings in the Yale and Eversource Energy excess fee cases rejecting motions to strike jury demands.  The prejudice to plan sponsors is obvious, as a substantial $15m settlement was announced in the Eversource case shortly after the denial of the motion to strike the jury demand.

As we note below, the most striking aspect of the Eversource settlement is that the complaint in that case is nearly identical to the excess fee complaint dismissed in CommonSpirit.  Both cases involve plans with $3B+ in assets and the same plaintiff’s law firm alleging imprudence with respect to the same exact Fidelity Freedom target date funds.  Yet in the wacky world of ERISA jurisprudence, the Ohio court dismissed the case against the CommonSpirit plan fiduciaries, which was upheld on appeal, but the plan in Connecticut sued on identical grounds is forced to settle for fifteen million dollars to avoid a jury trial.  These results are impossible to reconcile.  The best we can do is to point out the disparities and hope someone at the Department of Labor or in Congress wants to instill some fairness into ERISA fiduciary law.

The following examines the law analyzing the right to jury trials for ERISA fiduciary breach claims, and how jury trials prejudice plan fiduciaries.


The Right to a Jury Trial Legal Standard

The Seventh Amendment to the Constitution, which was ratified on December 15, 1791, provides the following right to a jury trial for lawsuits brought under the “common law”:  “In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any court of the United States, than according to the rules of the common law.”  The Seventh Amendment protects the right of citizens to have a jury in federal courts for common law civil cases in which the claim exceeds a certain dollar value.  It also prohibits judges in these trials from overruling facts revealed by the jury.

The granting of a jury trial as a right makes the United States an anomaly in most countries, but reflects the concerns of anti-federalists at the constitutional convention that jury trials would be an effective defense against overreach and corruption from the legislative, executive, and judicial branches of the federal government.  This concern won out over federalist concerns of civil jury trials defending debtors and nullifying the law of contract.

While the two clauses of the Seventh Amendment are understood with little ambiguity, the key phrase “common law” took many years to be clarified.  As the Supreme Court has explained, “the phrase ‘suits at common law’ refers to ‘suits in which legal rights [are] to be ascertained and determined, in contradistinction to those where equitable rights alone [are] recognized, and equitable remedies are administered.’”[i]  In other words, the Supreme Court has held that “common law” refers to the law as interpreted by judges in courts, rather than the statutory laws that are created by legislative bodies.  In addition, the Seventh Amendment’s civil jury trial provisions are derived from England’s common law in the year 1791 in which the constitutional amendment was ratified.  In sum, there is a right to a jury trial for legal claims enforcing common law statutory rights, but no right to a jury trial for equitable claims.

The Granfinanciera Two-Step Test:  As a starting point, ERISA does not provide an explicit jury trial right.  The question then is whether excess fee breach of fiduciary duty claims are enforcing common law legal rights (for which the right to a jury applies), or whether the relief sought is equitable (and must be tried before a judge).  In determining whether a particular action is a suit at law that triggers the jury trial right under the Seventh Amendment, the court must apply a two-step test from the Supreme Court’s decision in Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 42 (1989):  “To determine whether a particular action will resolve legal rights” such that the plaintiff is entitled to a jury trial, the court must “examine both the nature of the issues involved and the remedy sought.”  First, the court “compare[s] the statutory action to 18th century actions brought in courts of England prior the merger of the courts of law and equity.”  Second, the court “examine[s] the remedy sought and determine[s] whether it is legal or equitable in nature.

STEP #1:  The Nature of the Issues Involved:  The primary argument of plan sponsors in moving to strike jury demands is that plan participants have no right to a jury because ERISA is derived from the common law of trusts, which was within the exclusive jurisdiction of the courts of equity.  This argument is supported by historical analysis.  As a general rule, and as plan sponsors assert in motions to strike jury demands, claims arising from breach of fiduciary duty were historically within the jurisdiction of the equity courts.  To assess if the “general rule” applies in a particular case, courts look to the “nature of the issues” and whether the breach of fiduciary duty claim “actually sound[s] in a traditional legal theory such as breach of contract or negligence.”[ii]

Fighting uphill on this first prong of the analysis, plaintiff law firms argue that the basis of their excess fee breach-of-fiduciary duty claims is compensatory relief, seeking compensation for losses to the plan.  They argue that they are seeking to restore losses to the plan as a result of a breach of fiduciary duty, and that plan fiduciaries are personally liable to these losses under ERISA.  Specifically, they contend that they are not seeking the return of specifically identifiable property in the defendants’ possession, but rather are demanding compensation from the general assets of defendants.

Most courts nevertheless find that claims of breach of fiduciary duty for excessive fees are analogous to breach of fiduciary duty claims under the law of trusts, which would have been equitable in the 18th century England.  Thus, the first step of the Granfinanciera analysis usually weighs against a jury trial.  As one court has summarized, “ERISA is a complex statutory scheme which has no precursor in common law.”[iii]  Even the Supreme Court has recognized that fiduciary breach claims asserted by plaintiffs have been deemed equitable in nature, and actions “against a trustee for breach of fiduciary duty . . . were within the exclusive jurisdiction of courts of equity.”[iv]  To buttress this point, courts have held that ERISA “abounds with the language and terminology of trust law,” and the statute’s legislative history confirms that the Act’s fiduciary responsibility provisions “codify and make applicable to ERISA fiduciaries certain principles developed in the evolution of the law of trusts.”[v]

Consequently, the first step in determining whether a jury-trial right attaches to ERISA claims almost always rules in favor of plan sponsors and striking jury trial demands.  But it is the second and more critical step involving remedies that causes problems for plan sponsors because of the complexity of ERISA precedent involving equitable relief claims in the Supreme Court.

STEP #2:  The Nature of the Remedy InvolvedCourts have held that the second factor is the more “consequential” step in the jury-trial analysis.  The second factor turns on the evaluation of the remedy requested as either legal or equitable:  i.e, whether the remedies sought in the lawsuit are fundamentally legal or equitable in nature.  In the Eversource lawsuit, for example, defendants sought “to restore the Plan the losses that have been suffered as a direct result of Defendants’ breaches of fiduciary duty.”  The complaint also calls for restoration “to the Plan [of] any profits made through use of Plan assets, in addition to seeking “any other available equitable or remedial relief, including prospective injunctive and declaratory relief,” including enjoin[ing] [Defendants] from further participating in a knowing breach of trust.”  These remedies are typical of excessive fee lawsuits.  While the explicit claims for equitable relief are obviously not entitled to a jury trial, the harder question is whether the “make whole” relief is a legal or equitable remedy.

Historically, most courts held that benefits due and breach of fiduciary duty claims under 502(a)(2) of ERISA did not entitle plaintiffs to a jury trial because ERISA remedies are equitable in nature.[vi]  But some courts, especially in the Second Circuit, have held that the Supreme Court’s decision in Great-West Life & Annuity Ins. v. Knudson (“Great-West), 534 U.S. 2004 (2002) “reconfigured the legal landscape of restitution.”[vii]  In Great-West, the plan sued a participant in a subrogation lawsuit to offset plan benefits paid against a participant’s recovery in a civil lawsuit.  Although a very complex case to distill into a quick summary, the Great-West Court decision held that the plan’s subrogation claim against a participant to recover from the participant’s settlement of an accident claim was a legal claim and not an equitable claim.  The deciding factor that the claim was legal and not equitable was based on tracing the assets to a particular fund controlled by the defendant.  As one court has described, “Great-West held that the key factor in that examination is whether a claimant was seeking restitution from a defendant’s general funds, in which case the claim was legal, or whether a claimant was seeking to recover money that could be traced to a particular fund held by a defendant, in which case the claim was equitable,” and that “any relaxation of the tracing rules” was limited.

Based on the Great-West decision, plaintiff law firms now argue that excess fee claims do not meet the Great-West test for equitable relief because, unlike the Great-West subrogation claim seeking recovery from settlement proceeds, plan participants in excess fee cases are not seeking identifiable property in the hands of defendants.  In other words, the Great West tracing requirement is not met, which they argue means that their compensatory relief claims are legal and not equitable claims.

In response, plan sponsors invoke the Supreme Court’s equitable relief decision in CIGNA v. Amara, 563 U.S. 421 (2011), to characterize the relief sought as equitable and not legal.  Like Great West, Amara addressed the availability of monetary relief under ERISA 502(a)(3), which authorizes a “participant, beneficiary, or fiduciary” to bring an action for “appropriate equitable relief” to enforce or redress violations of ERISA or the terms of a plan.  In contrast to Great-West, plan sponsors argue that Amara involved an ERISA action brought by a participant against a fiduciary [like an excess-fee case], whereas Great-West by contrast involved an action brought by a fiduciary against a non-fiduciary participant.  The Amara court found the distinction critical in determining whether monetary “make whole” relief is available as “appropriate equitable relief” under ERISA §502(a)(3).  Plan sponsors argue that Amara made clear that, prior to the merger of law and equity courts, an award of monetary relief against a trustee for losses resulting from a breach of fiduciary duty, “sometimes called a ‘surcharge,’ was ‘exclusively equitable.’”[viii]

Plaintiff lawyers argue that Amara should not change the analysis because Amara involved claims of misrepresentation of plan benefits, and the remedy was reformation of the plan to meet participant expectations.  Accordingly, plaintiffs argue that the Great-West tracing requirement still applies, namely that “specifically identifiable property in the hands of the defendant” is what separates equitable from legal relief.[ix]  As the Second Circuit has ruled in the Pereira case after the Amara decision, recovering “specifically identifiable property” in defendant’s control would be impossible, as the excessive recordkeeping and administrative fees at issue were paid to third-party recordkeepers, and fees associated with the challenged investments were paid to investment managers.  As shown below, the Connecticut courts in both the Yale University and Eversource Energy cases agreed with this counter-argument that Amara does not change the Great-West tracing analysis, and both courts found that the “make good” remedy in excess fee cases can be tried before a jury.


The Garthwait v. Eversource Decision Granting a Right to a Jury Trial for the “Make Good” Claims (decided December 7, 2022)

In Garthwait v. Eversource Energy Company, No. 3:20-CV-00902 (JCH), the amended complaint followed the familiar excessive fee template in which plan participants commonly sue for:  (a) breach of fiduciary duty under section 409(a) and 502(a) of ERISA; (b) failure to monitor fiduciaries and co-fiduciary breaches pursuant to sections 405(a), 409(a) and 502(a)(2) of ERISA; and (c) in the alternative, liability for knowing breach of trust, pursuant to section 502(a)(3) of ERISA.  As is also typical, the amended complaint sought generalized relief to have defendants “restore to the Plan the losses that have been suffered as a direct result of defendants’ breaches of fiduciary duty,” as well as “other available equitable or remedial relief, including prospective injunctive and declaratory relief.”  In other words, the complaint sought both (1) to “restore plan losses” relating to fees and expenses, and (2) other equitable or remedial relief.

The court found that the first step of the Granfinanciera analysis weighed against a jury trial.  To begin, as a “general rule,” claims arising from breach of fiduciary duty “were historically within the jurisdiction of the equity courts.”  To assess whether the general rule applies to the case at bar, courts look to the “nature of the issues” and whether the breach of fiduciary duty claim “actually sound[s] in a traditional legal theory such as breach of contract or negligence.”  The court noted that the fiduciary duties under ERISA “draw much of their content from the common law of trusts,” with the Plan typically treated as a trust and the Plan’s fiduciaries as trustees.  The court reasoned that the plaintiff’s breach of fiduciary duty claims are analogous to breach of fiduciary duty claims under the law of trusts, which would have been equitable in 18th century England.  The court cited to Restatement (First) of Trusts § 174, which provides that a “trustee is under a duty to the beneficiary in administering the trust to exercise such care and skill as a man of ordinary prudence would exercise in dealing with his own property . . .”  Thus, the first step indicated that a jury trial was not appropriate.

The more consequential step of the Granfinanciera analysis hinges on the evaluation of the remedy requested as either legal or equitable.  In Count One, the plaintiffs sought to have defendants “restore to the Plan the losses that have been suffered as a direct result of defendants’ breaches of fiduciary duty,” as well as “any other available equitable or remedial relief, including prospective injunctive and declaratory relief . . .”  The relief in Count Two similarly requests defendants’ “make good to the Plan any losses to the Plan resulting from the breaches of fiduciary duties alleged in this Count,” but also calls for restoration “to the Plan [of] any profits made through use of Plan assets,” in addition to “other equitable or remedial relief as appropriate.”  The alternative claim in Count Three calls for each defendant to be “enjoined or otherwise subject to equitable relief as a non-fiduciary from further participating in a knowing breach of trust.”

The court found the relief contemplated in Count Three was “clearly and explicitly equitable in nature,” but the “make good” remedies in Counts One and Two “are not as straightforward.”  The court based its reasoning on the Supreme Court’s decision in Great-West Life & Annuity Ins. Co. v. Knudson, in which the Court determined that “not all relief falling under the rubric of restitution is available in equity.”[x]  In a decision that “reconfigured the legal landscape for restitution,” the Great-West Court held that “for restitution to lie in equity, the action generally must seek not to impose personal liability on the defendant, but to restore to the plaintiff particular funds or property in the defendant’s possession.”  Accordingly, under the Great-West tracing test for equitable restitution, the key is identifiable property in the hands of the defendants.  The Eversource court applied a “broad reading” of Great-West, finding that the Second Circuit in previous cases had extended the reasoning to the second-step of the Seventh Amendment analysis under Granfinanciera.  Consequently, the restoration of losses to the plan requested in first two counts of the complaint “would not be equitable restitution as the defendants are not alleged to have possessed those funds.”  And thus, the Great-West analysis would suggest that plaintiffs are entitled to a jury trial for “make good” claims in counts one and two of the complaint.

As expected, the Eversource plan fiduciaries argued that the intervening Supreme Court decision in Amara should change the court’s analysis and not apply the Great-West tracing requirement.  Defendants argued that in Amara, the Supreme Court emphasized that “[e]quity courts possessed the power to provide relief in the form of monetary compensation for a loss resulting from a trustee’s breach of duty . . .”[xi]  This monetary remedy, known as a surcharge, was “exclusively equitable” and “extended to a breach of trust committed by a fiduciary encompassing any violation of a duty imposed upon that fiduciary.”[xii]  Moreover, defendants argued that the Amara Court distinguished Great-West, where the action was brought by a fiduciary against a beneficiary from the more typical context in which Amara arose (and the same context as excess fee cases), which was a beneficiary suing a plan fiduciary.  Prior to the merger of law and equity in 1938, beneficiaries could only bring this type of claim against a plan fiduciary or trustee in a court of equity and not a court of law.

The court rejected the reliance on Amara for two reasons.  First, both Amara and Great-West discussed “equitable relief” in the context of section 502(a)(3) of ERISA, which was “implicitly premised upon consideration of 18th century practice in courts of equity as it informed the Seventh Amendment right to trial by jury.”  The court found this “germane” because the 1938 merger of law and equity occurred after the Seventh Amendment was adopted.  Second, prior to the merger of law and equity courts, courts of equity began awarding legal relief – “an occurrence that did not transform ‘legal relief into equitable relief.’”  To this point, in Mertens v. Hewitt Assocs, 508 U.S. 248, 256 (1993), the Supreme Court held that “[a]t common law, however, there were many situations – not limited to those involving enforcement of a trust – in which an equity court could ‘establish purely legal rights and grant legal remedies which could otherwise be beyond the scope of its authority.’”  Accordingly, the court found that, despite the split of decisions as to whether “make good” relief is equitable or legal in the Second Circuit, it was nevertheless constrained to follow Second Circuit authority in Pereira v. Ferace,[xiii] that a jury trial was available for this type of remedy.


Vellali v. Yale Univ., No. 3:16-cv-1345 (AWT) (decided Mar. 17, 2023) – Jury Trial Granted for “Compensatory Damages”

Like the Eversource court, the Connecticut District Court in Yale Univ. followed the Granfinanciera two-step analysis that was applied in the Second Circuit Pereira v. Farace case and came to an identical conclusion that a jury trial was appropriate for the compensatory damages claims in the complaint.  The first step in the analysis weighed against a jury trial because breach of fiduciary duty claims were historically within the jurisdiction of equity courts.  But the second step that focused on analyzing whether the remedy was equitable or legal in nature weighed in favor of a jury trial, because the restitution sought was not in the hands of the defendant fiduciaries.

The Yale court provided a clearer analysis as to how Great-West influences the analysis.  Specifically, in Great-West, the Supreme Court stated that “for restitution to lie in equity, the action generally must seek not to impose personal liability on the defendant, but to restore to the plaintiff particular funds or property in the defendant’s possession.”[xiv]  The Second Circuit in Pereira observed that “[n]or can we ignore the Supreme Court’s inclusion of footnote 2, highlighting a single exception to its rule that a defendant must possess the funds at issue for the remedy of equitable restitution to lie against him.”[xv]  The Second Circuit was further persuaded by Justice Ginsberg’s dissent in Great-West in which she pointed out that the restitution is measured by a defendant’s unjust gain, rather than by a plaintiff’s loss.  Consequently, the court held that the characterization of the damages as restitution is improper, because plaintiffs’ claim is for compensatory damages, which is a legal claim.

The prayer for relief in the Amended Complaint included requests that are clearly requests for equitable relief, but it also included a request that the court find and adjudge that the defendants “are personally liable to make good to the Plan all losses to the Plan resulting from each breach of fiduciary duty . . .”  The court thus held that the particular “make good” remedy was compensatory damages for which the defendants would be personally liable, as opposed to restoring to the plaintiffs’ particular funds or property that is in the defendants’ possession and legal in nature.  “Because greater weight is accorded to the second step of the Granfinanciera test, and the plaintiffs seek a remedy that is legal in nature,” the court concluded that the plaintiffs have the right to a jury trial in this case on their claims for money damages.

The Yale court rejected both arguments by the defense supporting the contention that the compensatory damage remedies were equitable in nature.  First, defendants argued that Great-West is not applicable in a case brought against a fiduciary for breach of fiduciary duty, because Great-West involved a completely different type of ERISA claim:  a claim by a fiduciary against a beneficiary for what is essentially a breach of contract.  But the court held that argument had been rejected by the Second Circuit in the Pereira case, and also by the Tenth Circuit in Gallery v. U.S. Life Ins. Co. in City of New York, 392 F.3d 401, 409 (2004), a case upon which the Pereira court had relied.

Second, defendants argued that “[i]n Amara, the Supreme Court explained that ‘the fact that the defendant in this case . . . is analogous to a trustee’ made a critical difference to whether ‘make-whole’ monetary relief was equitable or legal in nature.”  But the court rejected this argument based on its reading of language in Amara regarding Mertens v. Hewitt Associates.  The Mertens case involved a claim seeking money damages brought by a beneficiary against a private firm that provided a trustee with actuarial services.  The Yale court reasoned that the Amara Court “found that the plaintiff sought nothing other than compensatory damages against a nonfiduciary,” which was “legal, not equitable in nature.”  While there is more to the analysis, in the end, the court concluded that the “critical distinction” is whether the plaintiff is seeking recovery out of the defendants’ general assets.


How Courts Outside the Second Circuit Address the Jury Trial Issue

There is an entrenched divide within the Second Circuit, where both the Eversource and Yale cases were filed, over the availability of jury trials in ERISA breach-of-fiduciary duty cases.  In Yale’s memorandum seeking interlocutory appeal of the court’s denial of the motion to strike, Yale cites three decisions in the District of Connecticut since Amara:  two judges decided that jury trials are available in excess fee cases [Gairthwait v. Eversource Energy Co., 2022 WL 17484817 (D. Conn. Dec. 7, 2022) and Healthcare Strategies, Inc. v. ING Life Ins. & Annuity Co., 2012 WL 162361 (D. Conn. Jan. 19, 2012)], whereas another judge denied a motion to strike [Acosta v. Bridgeport Health Care Ctr., Inc., 2018 WL 11446779 (D. Conn. Sept. 5, 2018).  In other Districts within the Second Circuit, courts are highly divided on the availability of a jury trial in ERISA cases.  For example, the motion to strike the jury demand was denied in Cunningham v. Cornell Univ.[xvi], but upheld in Cates v. Columbia University.[xvii]

Outside the Second Circuit, courts overwhelmingly hold that ERISA breach-of-fiduciary duty cases are not triable to a jury.  For example, courts struck similar jury demands in breach-of-fiduciary duty cases in five other university cases against Northwestern University, Emory University, MIT, USC and Duke University.[xviii]  Likewise, in the last six months, courts in two excess fee cases have struck identical jury demands in the Shell Oil and NFP/Wood Group excess fee cases.[xix]  Nevertheless, the trend in the Second Circuit is concerning given the prejudice to plan sponsors if unqualified juries will decide fiduciary imprudence cases.


The Euclid Perspective

As this legal summary demonstrates, the legal test for whether the “make whole” legal remedies sought in excessive fee cases constitute a legal or equitable claim under English common law is complex.  We think courts are understandably split on the issue because persuasive arguments are being made on both sides.  But we are concerned about relying on the Amara case as support for the proposition that excess fee damage remedies are equitable.  Amara participants sought reformation of the plan.  To us, the relief granted provided benefits that were not covered under the plan document, and the claim was based on promissory estoppel – clearly an equitable relief claim.  We think that is different than a standard damages claim for purported fee or investment losses.

After the Amara decision, we amended our fiduciary policy to offer express coverage for claims under section 502(a)(3) to ensure that our insured plan sponsors were covered for Amara equitable relief claims when the remedy is something not found in the original plan document [and not a covered benefit].  We never viewed reformation relief as a benefit, legal or contractual claim under the plan document.  Chubb now offers limited failure to enroll coverage in its new fiduciary policy.  That too would cover a promissory estoppel claim that constitutes a benefit not available under the plan document.  But failure to enroll coverage is just one possible equitable relief claim, which is why Euclid provides broader equitable relief coverage.  This is a nuanced coverage issue, but we believe that our coverage is a superior and more comprehensive solution for this type of claim that cannot be paid out of plan assets (before reforming the plan).  But back to the right to a jury trial, we have never thought that excess fee damage claims are somehow akin to the reformation of the plan remedy in the Amara case, and excess fee compensatory damages are not covered under the equitable relief coverage in Euclid’s fiduciary policy.  For this reason, we are concerned that more courts over time will follow the jury trial analysis developing in the Second Circuit.

What is completely missing from the legal analysis in the jury trial cases, however, is any consideration of the serious prejudice to plan sponsors if courts are going to allow jury trials in excessive fee cases.  Courts are making no effort to go beyond the arcane legal-versus-equitable test from the common law in England.  But the prejudice is real.  The Memorandum in support of the Emergency Motion to Certify Interlocutory Appeal in the Yale case filed on March 20, 2023, by the Mayer Brown law firm does an excellent job in highlighting the significant prejudice to plan sponsors if unsophisticated juries will decide fiduciary imprudence cases.

To start, jury trials are more complex and expensive to defend.  Jury trials also require more time spent on the presentation of evidence.  As Judge Posner has observed in a law review article quoted by Mayer Brown lawyers, “[b]ecause the jury is an ad hoc tribunal, a significant amount of time is consumed at the outset of trail in the selection of the members of the tribunal.  And because it is inexperienced, a professional judge is needed to guide it, and the pace of the trial is slowed down by the need to educate the jurors in the rudiments of their job.”[xx]  Judge Posner further stated in that same law review article that civil jury trials in federal court are “on average more than twice as long as civil bench” or judge trials.  The higher cost of a jury trial only adds to the settlement extortion of ERISA excess fee cases, allowing plaintiff law firms to leverage the high defense costs to seek cost-of-defense settlements, which can average millions of dollars.  The Eversource settlement proves the settlement extortion leverage.

But even more important is what the Mayer Brown lawyers cannot state in a motion to strike, and that is ordinary citizens are not qualified to serve as a panel second-guessing the investment and other fiduciary decisions relating to complex retirement plans.  Based on the inconsistent case law to date, most federal judges are unqualified to second-guess plan fiduciaries.  But a panel of local citizens is definitely unqualified.

To prove the point, we will end where we started, by comparing the Eversource case to the Smith v. CommonSpirit case that was dismissed in Ohio, a dismissal that was affirmed by the Sixth Circuit Courts of Appeals last year.  The Eversource plan is alleged to have had 11,484 and $3B in plan assets.  This is less participants than the CommonSpirit Health plan, but that plan had a similar $3B+ asset size.  But more importantly, both plans were sued by the same Miller Shah law firm in complaints that have the same claims, with many paragraphs verbatim in alleging purported imprudence in selecting and maintaining the K shares of Fidelity Freedom target-date funds.  There are different ancillary investments alleged to be imprudent in the respective lawsuits, but the core imprudence claim in both cases involves the same Fidelity Freedom funds, which served as the QDIA for both plans.  Eversource and CommonSpirit Health are the same basic fiduciary breach case, but there is a $15m difference in outcomes.

We cannot reconcile these disparate outcomes.  The Miller Shah law firm just walked away with a $5m legal fee – more money to invest in their quixotic fiduciary malpractice claims against plans invested in top-rated BlackRock LifePath funds.  The numerous imprudence claims against Fidelity Freedom funds are also unjust.  But the plaintiff firm that lost the CommonSpirit case just had the last laugh – all the way to the bank.




[i] Chauffers, Teamsters & Helpers, Local No. 391 v. Terry, 494 U.S. 558, 564-65 (1990) (quoting Parsons v. Bedford, 28 U.S. (3 Pet.) 433, 447 (1830)).[ii] Cunningham v. Cornell Univ., 2018 U.S. Dist. LEXIS 152972 (S.D.N.Y. Sept. 6, 2018).

[iii] Morgan v. Ameritech, 26 F. Supp. 2d 1087, 1091 (C.D. Ill. 1998).

[iv] Terry, 494 U.S. at 567.

[v] Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 110 (1989).

[vi] The following are the cases cited in Yale University’s motion to strike supporting the proposition that there is no right to a jury trial on claims for breach of fiduciary duty under ERISA. See Acument Glob. Techs., Inc. v. Towers Watson & Co., 998 F. Supp. 2d 111, 114 (S.D.N.Y. 2014) (granting motion to strike jury demand in ERISA case because “[t]he remedy sought is the classic remedy against a fiduciary: surcharge to repair the damage his breach of duty inflicted upon the corpus he was charged to protect”); Bauer-Ramazani, 2013 WL 6189802, at **9-11 (granting motion to strike jury demand in ERISA case because “the remedy Plaintiffs seek—‘the value of Case 3:20-cv-00902-JCH Document 158-1 Filed 08/29/22 Page 7 of 12 7 the use of the plan assets’ and ‘disgorgement of any investment profits made through the use of [Plaintiffs’] funds’—for Defendants’ alleged breach of fiduciary duty is equitable in nature” (citation omitted)); Carver v. Bank of N.Y. Mellon, No. 15-CV-10180 (JPO), 2017 WL 1208598, *11 (S.D.N.Y. Mar. 31, 2017) (“[C]ourts have held that no jury trial right exists under ERISA because claims under ERISA are equitable in nature.” (quotations omitted)). Many courts have agreed that ERISA has no right to a jury trial.  See, e.g., Divane v. Nw. Univ., 953 F.3d 980, 993-94 (7th Cir. 2020) (“The Supreme Court has held there is no right to a jury trial on this type of claim. . . . We follow binding precedent and conclude no right to a jury trial exists in this ERISA case.” (citing Amara)), cert. granted sub nom. Hughes v. Nw. Univ., 141 S. Ct. 2882 (2021), and vacated and remanded on other grounds sub nom. Hughes v. Nw. Univ., 142 S. Ct. 737 (2022); Perez v. Silva, 185 F. Supp. 3d 698, 703-04 (D. Md. 2016) (“[T]he Supreme Court acknowledged in Amara that courts of equity possessed the power to provide relief in the form of monetary compensation.” (quotations omitted)); In re 2014 Radioshack ERISA Litig., 165 F. Supp. 3d 492, 506 (N.D. Tex. 2016) (“[T]here is no right to jury trial under ERISA.”); Solis v. Tomco Auto Prods., Inc., No. CV 12-00618 SJO (AGRx), 2012 WL 12920838, **2-3 (C.D. Cal. July 10, 2012) (agreeing with “several federal courts” which “have held that [t]here is no right to a jury trial in claims under ERISA for breach of fiduciary duty” (citation and internal quotation marks omitted); In Re First Am. Corp. ERISA Litig., No. 07-01357, 2009 WL 536254, at *2 (C.D. Cal. Feb. 9, 2009) (“[T]he overwhelming weight of authority in the federal courts holds that actions under ERISA § 502(a)(2) by participant-beneficiaries and fiduciaries to remedy … alleged violations of ERISA § 409(a) are equitable in nature for purposes of the Seventh Amendment jury trial right.”); Smith v. State Farm Grp. Long Term Disability Plan for U.S. Emps., No. 12 C 9210, 2013 WL 4538516, at *2 (N.D. Ill. Aug. 27, 2013) (granting motion to strike jury demand for ERISA claim because the suit was equitable in nature); Broadnax Mills, Inc. v. Blue Cross and Blue Shield of Virginia, 876 F. Supp. 809, 816 (E.D. Va. 1995) (monetary relief under ERISA § 502(a)(2) did not provide for right to jury trial because “any relief sought is necessarily intertwined with the equitable process of resolving the ultimate issue—whether or not there has been a breach of fiduciary duty”); Johnson v. Lend Lease Real Est. Invs., No. 4:04-CV-10501 (RAW)(REL), 2005 WL 8157994, at *3 (S.D. Iowa Sept. 16, 2005) (“[T]he settled law in this circuit is that there is no statutory or Seventh Amendment right to a jury trial of an ERISA claim for relief under [ERISA § 502(a)] regardless of the subsection on which it is based.”).

[vii] Healthcare Strategies, Inc. v. ING Life Ins. & Annuity Co., 11-cv-282 (JCH), 2012 WL 162361 at *6 (D. Conn. Jan. 19, 2012).

[viii] Amara, 563 U.S. at 442 (“[I]nsofar as an award of make-whole relief is concerned, the fact that the defendant in this case . . . is analogous to a trustee makes a critical difference.”).

[ix] See Pereira, 413 F.3d at 340-41.

[x] 534 U.S. 204, 212 (2002).

[xi] Amara, 563 U.S. at 441.

[xii] Amara, 562 U.S. at 442.

[xiii] 413 F.3d 330 (2d Cir. 2005).

[xiv] Great-West, 534 U.S. at 214.

[xv] Pereira, 413 F.3d at 214 (quoting Great-West, 534 U.S. at 214 n.2 (That “limited exception” is for “an accounting of profits”).

[xvi] 2018 WL 4279466, at *4 (S.D.N.Y. Sept. 6, 2018)

[xvii] No. 16-cv-06524 (S.D.N.Y. Jan. 25, 2018) (finding it “quite clear” that the case was triable to the court).

[xviii] See Divane v. Nw. Univ., 953 F.3d 980, 993 (7th Cir. 2020), vacated on other grounds sub nom. Hughes v. Nw. Univ., 142 S. Ct. 737 (2022); Henderson v. Emory Univ., 2018 WL 11350441, at *6 (N.D. Ga. Feb. 28, 2018); Tracey v. Mass. Inst. of Tech., 395 F. Supp. 3d 150, 154 (D. Mass. 2019); Munro v. Univ. of S. Cal., 2019 WL  4543115, at *5 (C.D. Cal. Aug. 27, 2019); Order, Clark v. Duke Univ., No. 16-cv-1044, (M.D.N.C. June 11, 2018), ECF No. 107.

[xix] Harmon v. Shell Oil Co., 2023 WL 2474503, at *4 (S.D. Tex. Mar. 13, 2023) (“Given the equitable nature of the claims and relief that Plaintiffs seek and the weight of authority consistently striking jury demands in cases like the one before me, I grant Shell’s Motion to Strike.”); Lauderdale v. NFP Ret., Inc., 2022 WL 17259050, at *5 (C.D. Cal. Nov. 17, 2022) (“Amara controls the characterization of the remedies at issue as opposed to Great-West . . .”).

[xx] Richard A. Posner, An Economic Approach to the Law of Evidence, 51 Stan. L. Rev. 1477, 1491 (1999).

Disclaimer:  The Fid Guru Blog is intended to provide fiduciary thought leadership and advocacy for the plan sponsor community in areas of complex fiduciary litigation.   The views expressed on The Fid Guru Blog are exclusively those of the author, and all of the content has been created solely in the author’s individual capacity.  It is not affiliated with any other company, and is not intended to represent the views or positions of any policyholder of Encore Fiduciary, or any insurance company to which Encore Fiduciary is affiliated.  Quotations from this site should credit The Fid Guru Blog.  However, this site may not be quoted in any legal brief or any other document to be filed with any Court unless the author has given his written consent in advance.  This blog does not intend to provide legal advice.  You should consult your own attorney in connection with matters affecting your legal interests.

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