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Court Agrees That Surcharge is Available to Remedy Pension Rights

A panel of the U. S. Court of Appeals for the Ninth Circuit agreed with AARP, and revised its decision to find that the remedy of surcharge is available if a participant can prove a breach of fiduciary duty.

Background

Gregory Gabriel began receiving monthly pension benefits from the Alaska Electrical Pension Fund in 1997. Seven years later, during a dispute regarding Gabriel's prohibited postretirement employment, the Fund determined that Gabriel never satisfied the plan's vesting requirements and had received benefits in error. The Fund terminated Gabriel's benefits and threatened to seek reimbursement for benefits previously paid. Gabriel filed suit under the federal Employee Retirement Income Security Act (ERISA) in 2006, bringing claims for benefits and for equitable relief to remedy the Fund's fiduciary breach. A trial court found for the Fund, a decision upheld by a vote of 2-1 on appeal.

Gabriel filed a petition for rehearing arguing that monetary relief was available to him in the form of equitable surcharge. AARP’s friend-of-the-court brief filed jointly by attorneys with AARP Foundation Litigation and the National Employment Lawyers Association argued that ERISA was designed to provide remedies for plan participants and beneficiaries who are harmed by breaches of fiduciary duty and the ninth circuit panel majority incorrectly limited those remedies. In particular, AARP argued that the panel majority erred by holding that surcharge includes only unjust enrichment and losses to the trust estate, which conflicts with Supreme Court precedent and also narrowed the availability of reformation as an equitable remedy in conflict with its own precedent.

In its revised decision, the ninth circuit held that the district court overlooked the issue of whether Gabriel could be entitled to equitable surcharge. Moreover, it said the district court had not determined whether Gabriel’s allegations of fiduciary breach were sufficiently pled. Thus, the ninth circuit sent the case back to the district court to address these issues.

What’s At Stake

The ninth circuit’s decision is now consistent with the Supreme Court’s recent decision interpreting equitable remedies, four other circuit courts of appeals, and its own district courts. It provides the potential for meaningful relief in what is unfortunately an all too common situation.

Case Status

Gabriel v. Alaska Electrical Pension Fund was decided by the U.S. Court of Appeals for the Ninth Circuit.