Before LaRue vs. DeWolff, Boberg & Associates ended up being heard by the Supreme Court, lower courts dealt with questions about which sections of ERISA would allow James LaRue to bring his case for an alleged breach of fiduciary duty.

Originally, he had tried to sue under Section 502(a)(3) of ERISA.

This section, however, limits recourse to “equitable relief” and excludes money damages, according to Gregory Braden, a defense attorney who is a partner with Morgan Lewis in its labor and employment practice in Washington, D.C.

The defendants argued that Mr. LaRue's claim was for monetary relief, which is not recoverable under Section 502(a)(3).

Mr. LaRue contended that he was not seeking a money award, but rather he wanted the plan to “properly reflect that which would be his interest in the plan, but for the breach of fiduciary duty.”

The district court sided with the defense, determining that the defendants did not possess the disputed funds, and therefore Mr. LaRue was seeking damages not recoverable under Section 502(a)(3) and not equitable relief.

On appeal to the Fourth Circuit Court of Appeals, Mr. LaRue said he had a claim for relief under a different section, Section 502(a)(2) of ERISA. This section does allow for lawsuits for money damages; however, a 1985 U.S. Supreme Court opinion in Massachusetts Mutual Life Ins. Co. vs. Russell held that the provisions in Section 502(a)(2) “protect the entire plan, rather than the rights of an individual beneficiary.”

Mr. LaRue was suing on behalf of an individual account within the plan rather than the plan as a whole, and so the appeals court cited the earlier Supreme Court opinion and rejected Mr. LaRue's claim.

This year, however, in its February opinion, the Supreme Court revised its 1985 position and stated that the appeals court “misread Section 502(a)(2).”

The majority opinion, written by Justice John Paul Stevens, notes, “Russell's emphasis on protecting the 'entire plan' from fiduciary misconduct reflects the former landscape of employee benefit plans. That landscape has changed.”

Mr. Braden explained this part of the Supreme Court opinion by noting that in the days of the Russell decision, defined benefits plans dominated the landscape. If a breach of fiduciary duty caused an investment loss, all plan participants would be affected in the same way.

Now, with self-directed 401(k) plans, people are invested in a variety of different options. It is rare to have all participants invested in one particular option, he said.

Mr. Braden noted that if the Supreme Court had determined that Mr. LaRue could not sue under Section 502(a)(2), “then as a practical matter, he can't recover money damages.”

Justice Stevens' opinion concluded, “We therefore hold that although Section 502(a)(2) does not provide a remedy for individual injuries distinct from plan injuries, that provision does authorize recovery for fiduciary breaches that impair the value of plan assets in a participant's individual account.”