The District of Massachusetts court struck the plaintiffs’ jury-trial demand in their ERISA complaint for damages and equitable relief against 401(k) plan fiduciaries. The court followed the “great weight of authority” in ruling that there is no right to trial by jury in ERISA actions for breach of fiduciary duty.

IN DEPTH

Defense counsel have long understood that ERISA claims must be decided by bench trial and not jury trial, yet in recent years plaintiffs have sought to erode that precedent. Buoyed by a recent outlier decision, plaintiffs in ERISA 401(k) and 403(b) cases have included jury demands in their complaints and vigorously opposed motions to strike those demands. Despite repeated losses on the jury-trial issue, plaintiffs continue to try to convince courts to permit the claims to be heard by a jury, whom plaintiffs believe would be more favorable.

In Tracey v. Massachusetts Institute of Technology, No. 16-11620 (D. Mass. Feb. 28, 2019), the district court rejected another effort by plan participants to have ERISA fiduciary-duty claims decided by a jury. In this case, the plaintiffs sued alleged plan fiduciaries for “breach of fiduciary duties and prohibited transactions” under ERISA. Plaintiffs alleged that the defendants permitted one of MIT’s alleged “conflicted” donors to serve as the plan’s recordkeeper and investment provider, to wrongfully put hundreds of the recordkeeper’s proprietary investment funds in the plan, and to collect unreasonable and excessive fees. The second amended complaint asserted four counts, all under ERISA: (1) unreasonable investment management fees and performance losses, (2) unreasonable administrative fees, (3) prohibited transactions between the plan and a party in interest and (4) failure to monitor other fiduciaries. The plaintiffs requested a trial by jury.

According to the Supreme Court, when a statute is silent on the right to a jury trial (as ERISA is) the Seventh Amendment to the Constitution must confer that right. The Seventh Amendment, however, creates a right to a jury trial only “[i]n [s]uits at common law” and “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.” Therefore, if “the nature of the rights and remedies sought is legal rather than equitable in nature,” then the Constitution grants the right to a jury trial. But if the nature of the rights and remedies are equitable in nature, then there is no Seventh Amendment right to a jury trial.

With respect to claims created by statute, the court must examine both the “nature of the action and of the remedy sought” to determine whether they are legal or equitable in nature. The second part of that test—the remedy—is the most important. The defendants in MIT argued that ERISA fiduciary-duty claims are equitable and not “legal” in nature. Plaintiffs countered that because they were seeking compensatory damages (i.e., monetary damages) from the fiduciaries for the losses to the plan, they sought legal relief and not a traditional equitable remedy.

The court noted the “great weight of authority” holding that there is no right to trial by jury in actions for breach of fiduciary duty under ERISA. In fact, until recently, there was consensus on this issue, but plaintiffs’ counsel thought that some recent Supreme Court decisions cast doubt on that consensus. See Great-West Life & Annuity Co. v. Knudson, 534 US 204, 216 (2002); Montanile v. Bd. of Trs. of the Nat’l Elevator Indus. Health Benefit Plan, 136 S. Ct. 651, 657-61 (2016). Furthermore, a district court in Cunningham v. Cornell University, No. 16-6525 (S.D.N.Y. Sept. 6, 2018) held that plaintiffs’ request to hold the defendants “personally liable to make good to the Plans all losses to the Plans resulting from each breach of fiduciary duty” sought legal relief entitling plaintiffs to a jury trial.

The MIT court, however, determined that the traditional jury-trial analysis required by CIGNA Corp. v. Amara, 563 US 421, 439 (2011) characterized ERISA fiduciary-breach claims as equitable, not legal, in nature. The fact that a plaintiff seeks monetary relief does not mean that the action is legal rather than equitable in nature, and the cases the plaintiffs relied upon were ERISA actions akin to breach-of-contract actions. However, ERISA’s trust-law roots demonstrate that ERISA fiduciaries are akin to trustees, and the plans are akin to trusts. A plan participant’s lawsuit against a plan fiduciary is equivalent to a suit by a trust beneficiary against a trustee, which historically was heard only in a court of equity. In addition, plaintiffs’ claims to have the ERISA plan fiduciaries restore to the plan losses resulting from the breach of duty is equivalent to restoring a beneficiary’s equitable interest in a traditional trust estate. Thus, the court held that “claims under ERISA for recovery of benefits allegedly due and for breach of fiduciary duties are analogous not to legal actions for breach of contract but to actions by a beneficiary against a trustee under the law of trusts,” and are equitable in nature with no right to a jury trial.

The MIT decision is notable because it may seal the small crack plaintiffs made in the wall of cases rejecting a jury-trial right in ERISA fiduciary-breach cases. The courts remain near unanimous that ERISA fiduciary-breach claims against ERISA fiduciaries do not provide a right to a jury trial.