Willam L. Pender v. Bank of America Corporation

Filing

PUBLISHED AUTHORED OPINION filed. Originating case number: 3:05-cv-00238-GCM. [999597614]. [14-1011]

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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 14-1011

WILLIAM L. PENDER; DAVID L. MCCORKLE,
Plaintiffs – Appellants,
and
ANITA POTHIER; KATHY L. JIMENEZ; MARIELA ARIAS; RONALD R.
WRIGHT; JAMES C. FABER, JR., On behalf of themselves and on
behalf of all others similarly situated,
Plaintiffs,
v.
BANK OF AMERICA CORPORATION; BANK OF AMERICA, NA; BANK OF
AMERICAN PENSION PLAN; BANK OF AMERICA 401(K) PLAN; BANK OF
AMERICA CORPORATION CORPORATE BENEFITS COMMITTEE; BANK OF
AMERICA TRANSFERRED SAVINGS ACCOUNT PLAN,
Defendants – Appellees,
and
UNKNOWN PARTY, John and Jane Does #1-50, Former Directors
of NationsBank Corporation and Current and Former Directors
of Bank of America Corporation & John & Jane Does #51-100,
Current/Former Members of the Bank of America Corporation
Corporate Benefit; CHARLES K. GIFFORD; JAMES H. HANCE, JR.;
KENNETH D. LEWIS; CHARLES W. COKER; PAUL FULTON; DONALD E.
GUINN; WILLIAM BARNETT, III; JOHN T. COLLINS; GARY L.
COUNTRYMAN; WALTER E. MASSEY; THOMAS J. MAY; C. STEVEN
MCMILLAN; EUGENE M. MCQUADE; PATRICIA E. MITCHELL; EDWARD
L. ROMERO; THOMAS M. RYAN; O. TEMPLE SLOAN, JR.; MEREDITH
R. SPANGLER; HUGH L. MCCOLL; ALAN T. DICKSON; FRANK DOWD,
IV; KATHLEEN F. FELDSTEIN; C. RAY HOLMAN; W. W. JOHNSON;
RONALD TOWNSEND; SOLOMON D. TRUJILLO; VIRGIL R. WILLIAMS;
CHARLES E. RICE; RAY C. ANDERSON; RITA BORNSTEIN; B. A.
BRIDGEWATER, JR.; THOMAS E. CAPPS; ALVIN R. CARPENTER;

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DAVID COULTER; THOMAS G. COUSINS; ANDREW G. CRAIG; RUSSELL
W. MEYER-, JR.; RICHARD B. PRIORY; JOHN C. SLANE; ALBERT E.
SUTER; JOHN A. WILLIAMS; JOHN R. BELK; TIM F. CRULL;
RICHARD M. ROSENBERG; PETER V. UEBERROTH; SHIRLEY YOUNG; J.
STEELE ALPHIN; AMY WOODS BRINKLEY; EDWARD J. BROWN, III;
CHARLES J. COOLEY; ALVARO G. DE MOLINA; RICHARD M.
DEMARTINI; BARBARA J. DESOER; LIAM E. MCGEE; MICHAEL E.
O'NEILL; OWEN G. SHELL, JR.; A. MICHAEL SPENCE; R. EUGENE
TAYLOR; F. WILLIAM VANDIVER, JR.; JACKIE M. WARD; BRADFORD
H. WARNER; PRICEWATERHOUSE COOPERS, LLP,
Defendants.

Appeal from the United States District Court for the
Western District of North Carolina, at Charlotte.
Graham
C. Mullen, Senior District Judge. (3:05−cv−00238−GCM)

Argued:

January 27, 2015

Decided:

June 8, 2015

Before KEENAN, WYNN, and FLOYD, Circuit Judges.

Reversed in part, vacated in part, and remanded by
published opinion. Judge Wynn wrote the opinion, in which
Judge Keenan and Judge Floyd joined.

ARGUED: Eli Gottesdiener, GOTTESDIENER LAW FIRM, PLLC,
Brooklyn, New York, for Appellants.
Carter Glasgow
Phillips,
SIDLEY
AUSTIN,
LLP,
Washington,
D.C.,
for
Appellees. ON BRIEF: Thomas D. Garlitz, THOMAS D. GARLITZ,
PLLC, Charlotte, North Carolina, for Appellants. Irving M.
Brenner, MCGUIREWOODS LLP, Charlotte, North Carolina; Anne
E. Rea, Christopher K. Meyer, Chicago, Illinois, Michelle
B. Goodman, David R. Carpenter, SIDLEY AUSTIN LLP, Los
Angeles, California, for Appellees.

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WYNN, Circuit Judge:
In this Employee Retirement Income Security Act of 1974
(“ERISA”)

case,

an

employer

was

deemed

to

have

wrongly

transferred assets from a pension plan that enjoyed a separate
account feature to a pension plan that lacked one.

Although the

transfers were voluntary and the employer guaranteed that the
value of the transferred assets would not fall below the pretransfer amount, an Internal Revenue Service audit resulted in a
determination that the transfers nonetheless violated the law.
Plaintiffs, who held such separate accounts and agreed to
the transfers, brought suit under ERISA and sought disgorgement
of,

i.e.,

employer

an

accounting

retained

from

for

the

profits

as

transaction.

to,

any

gains

The

district

the

court

dismissed their case, holding that they lacked statutory and
Article III standing.

For the reasons that follow, we disagree

and hold that Plaintiffs have both statutory and Article III
standing.
barred.

Further, we hold that Plaintiffs’ claim is not timeAccordingly,

we

reverse

further proceedings.

I.
A.

3

and

remand

the

matter

for

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In

1998,

contribution

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NationsBank 1
plan

(“the

Pg: 4 of 34

(“the
401(k)

Bank”)

amended

Plan”)

to

its

give

definedeligible

participants a one-time opportunity to transfer their account
balances to its defined-benefit plan (“the Pension Plan”).

The

Pension Plan provided that participants who transferred their
account balances would have the same menu of investment options
that they did in the 401(k) Plan.
Pension

Plan

to

provide

the

Further, the Bank amended the

guarantee

that

participants

who

elected to make the transfer would receive, at a minimum, the
value

of

the

original

balance

of

their

401(k)

Plan

accounts

(“the Transfer Guarantee”).
The 401(k) Plan participants’ accounts reflected the actual
gains and losses of their investment options.

In other words,

the money that 401(k) Plan participants directed to be invested
in particular investment options was actually invested in those
investment

options,

and

401(k)

Plan

participants’

accounts

reflected the investment options’ net performance.
By contrast, Pension Plan participants’ accounts reflected
the hypothetical gains and losses of their investment options.
Although Pension Plan participants selected investment options,

1

In September 1998, NationsBank merged with BankAmerica
Corporation.
The resulting entity was named Bank of America
Corporation. Here, “the Bank” collectively refers to the
defendants.

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this investment was purely notional.

By design, Pension Plan

participants’ selected investment options had no bearing on how
Pension Plan assets were actually invested.

Instead, the Bank

invested Pension Plan assets in investments of its choosing, 2
periodically crediting each Pension Plan participant’s account
with

the

greater

of

(1)

the

hypothetical

performance

of

the

participant’s selected investment option, or (2) the Transfer
Guarantee.
Plaintiffs William Pender and David McCorkle (collectively
with

those

eligible
balances.

similarly

participants

situated,
who

“Plaintiffs”)

elected

to

transfer

are

among

their

the

account

Participants who elected to transfer their 401(k)

Plan balances to the Pension Plan may not have appreciated the
difference between the plans, particularly if they maintained
their

original

investment

options.

But

for

the

transfer represented an opportunity to make money. 3

Bank,

each

As long as

2

The record does not state precisely what the Bank invested
in, but nothing in the Pension Plan documents required the Bank
to invest in the menu of investment options available to the
401(k) and Pension Plan participants.
3

In communications to 401(k) Plan participants leading up
to the transfers, the Bank explained that “[e]xcess proceeds
would decrease plan costs, saving money for the company.” J.A.
364.
See also J.A. 375 (“What’s in it for the Company? . . .
When associates take advantage of the one-time 401(k) Plan
transfer option, there is a potential savings to the company—the
more money transferred, the greater the savings potential.”).
Although the Bank characterized the primary effect of the
(Continued)
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the Bank’s actual investments provided a higher rate of return
than

Pension

Plan

participants’

hypothetical

investments,

the

Bank would retain the spread.

And although the spread generated

by

been

each

account

might

have

relatively

small,

in

the

aggregate and over time, this strategy could yield substantial
gains for the Bank. 4
B.
To

illustrate

by

way

participants Jack and Jill.
$100,000,

and

each

has

of

example,

consider

401(k)

Plan

They each have account balances of

selected

the

same

investment

option,

which generates a 60-percent return over a 10-year period.

Jack

decides to keep his 401(k) Plan account, and Jill decides to
make the transfer to the Pension Plan.
When Jill transfers her assets to the Pension Plan, she
selects the same 60-percent-return investment option she had in
the 401(k) Plan.

But instead of actually investing the $100,000

Jill transferred to the Pension Plan according to her selected
investment option, the Bank periodically notes the value that

transfer option as generating “savings,” the difference between
savings and profit in this context is merely semantic.
Regardless of which term is used, the Bank made money.
4

The Bank expressly noted this in its communication to
transfer-eligible plan participants.
J.A. 375 (“[T]he more
money transferred, the greater the savings potential.”)

6

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her assets would have gained on her selected investment options
but

actually

invests

it

in

an

investment

portfolio

that

generates a 70-percent return over 10 years.
Fast forward ten years:

Jack’s actual investment of the

initial $100,000 generates $60,000 in actual returns.

Jill’s

hypothetical investment of the $100,000 she transferred from the
401(k) Plan to the Pension Plan generates $60,000 in investment
credits.

The accounts are both valued at $160,000.

Jack’s $160,000 401(k) Plan account balance represents the
full value of the initial balance plus his actual investment
performance.

But the $160,000 balance of Jill’s Pension Plan

account does not represent the full value of the $100,000 that
she transferred from the 401(k) Plan and the actual investment
performance of that money.

Because the Bank actually invested

that money in investment options with a 70-percent return over
the

ten-year

period,

it

generated

$70,000.

Due

to

the

difference between the Bank’s actual rate of return and the rate
of return of Jill’s selected investment option, the Bank retains
$10,000 after it credits her Pension Plan account with $60,000.
The spread between the actual investment returns ($70,000) and
the

hypothetical

individual
account).

account

returns
level

($60,000)
($10,000

may
for

be
Jill’s

small

on

Pension

the
Plan

But it is greater than the amount of money the Bank

stands to gain from Jack’s account ($0).
7

And with the thousands

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of Jills working for a large employer like the Bank, it has the
potential to add up.
C.
In the wake of a June 2000 Wall Street Journal article
covering these types of retirement plan transfers, 5 the Internal
Revenue Service opened an audit of the Bank’s plans.
the

IRS

issued

a

technical

advice

memorandum,

in

In 2005,
which

it

concluded that the transfers of 401(k) Plan participants’ assets
to

the

Pension

Plan

between

1998

and

2001

violated

Internal

Revenue Code § 411(d)(6) and Treasury Regulation § 1-411(d)-4,
Q&A-3(a)(2).
eliminated
feature,”

According to the IRS, the transfers impermissibly
the

401(k)

meaning

that

Plan

participants’

participants

“separate

were

no

longer

account
being

credited with the actual gains and losses “generated by funds
contributed on the participant[s’] behalf.”

J.A. 518.

In May 2008, the Bank and the IRS entered into a closing
agreement.

Under the terms of the agreement, the Bank (1) paid

a $10 million fine to the U.S. Treasury, (2) set up a specialpurpose 401(k) plan, (3) and transferred Pension Plan assets
that

were

initially

transferred

special-purpose 401(k) plan.

from

the

401(k)

Plan

to

the

The Bank also agreed to make an

5

Ellen E. Schultz, Firms Expand Uses of Retirement Funds:
Bank of America Offers Staff Rollovers Into Pension Plan, Wall
St. Journal, June 19, 2000, at A2.

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additional payment to participants who had elected to transfer
their assets from the 401(k) Plan to the Pension Plan if the
cumulative total return of their hypothetical investments was
less than a certain amount. 6

All settlement-related transfers

were finalized by 2009.
D.
Plaintiffs filed their original complaint against the Bank
in the U.S. District Court for the Southern District of Illinois
in 2004, alleging several ERISA violations stemming from plan
amendments

and

transfers.

The

Bank

moved

under

28

U.S.C.

§ 1404(a) to change venue, and the case was transferred to the
Western District of North Carolina.

There, the district court

dismissed three of the four counts contained in the complaint.
See McCorkle v. Bank of America Corp., 688 F.3d 164, 169 n.4,
177 (4th Cir. 2012).
Plaintiffs’

lone

remaining

claim

alleges

a

violation

of

ERISA § 204(g)(1), 29 U.S.C. § 1054(g)(1), 7 which states that an
ERISA-plan participant’s “accrued benefit” “may not be decreased
by an amendment of the plan” unless specifically provided for in
6

For a more detailed discussion of how the Bank determined
whether participants qualified for this additional payment, see
Pender, 2013 WL 4495153, at *4.
7

This opinion uses a parallel citation to the United States
Code and the ERISA code the first time a statute is cited and
thereafter refers only to the ERISA code citation.

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ERISA or regulations promulgated pursuant to ERISA.

According

to Plaintiffs, the Bank improperly decreased the accrued benefit
of the separate account feature.

Relying, at least in part,

upon the IRS’s declaration that the transfers from the 401(k)
Plan

to

the

Pension

Plan

violated

both

Treasury

Regulation

§ 1.411(d)-4, Q&A-3(a)(2) and the statute it implements, I.R.C.
§ 411(d)(6)(A) 8,

Plaintiffs

sought

to

use

ERISA’s

civil

enforcement provision, ERISA § 502(a), 29 U.S.C. § 1132(a), to
recover the profits the Bank retained after it transferred the
effected

Pension

Plan

accounts

to

the

special-purpose

401(k)

plan.
At the hearing on the parties’ cross-motions for summary
judgment, the Bank argued that (1) its closing agreement with
the IRS stripped Plaintiffs of Article III standing because it
restored the separate account feature, and (2) the statute of
limitations

barred

Plaintiffs’

claims.

Plaintiffs

countered

with a request for declarations that (1) they are entitled to
any spread between what they were paid and the actual investment
gains of the assets that were originally in the 401(k) Plan, and
(2)

the

agreement

between

the

extinguish their ERISA claims.

8

I.R.C. § 411(d)(6)(A)
analogue to ERISA § 204(g)(1).

Bank

and

the

IRS

did

not

The district court granted the

is

10

the

Internal

Revenue

Code

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Bank’s motion, denied Plaintiffs’ motion, and dismissed the case
on the basis that Plaintiffs lacked standing.

Pender v. Bank of

Am.

4495153,

Corp.,

No.

3:05-CV-00238-GCM,

(W.D.N.C. Aug. 19, 2013).

2013

WL

at

*11

Plaintiffs appealed.

II.
We review a district court’s disposition of cross-motions
for summary judgment de novo, examining each motion seriatim.
Libertarian Party of Virginia v. Judd, 718 F.3d 308, 312 (4th
Cir.), cert. denied, 134 S. Ct. 681 (2013).

We view the facts

and inferences arising therefrom in the light most favorable to
the

non-moving

genuine

dispute

party
of

to

determine

material

fact

whether
or

there

whether

entitled to judgment as a matter of law.
legal questions regarding standing de novo.

Id.

the

exists
movant

any
is

And we review

David v. Alphin,

704 F.3d 327, 333 (4th Cir. 2013).

III.
On appeal, Plaintiffs contend that they are entitled to the
full value of the investment gains the Bank realized using the
assets transferred to the Pension Plan.

To assert such a claim

under ERISA, Plaintiffs must possess both statutory and Article
III standing, David, 704 F.3d at 333, which we now respectively
address.
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A.
To show statutory standing, Plaintiffs must identify the
portion of ERISA that entitles them to bring the claim for the
relief they seek.

Plaintiffs argue that ERISA § 502(a)(1)(B),

which allows a beneficiary to recover benefits due under the
terms of the plan, enables them to bring their claim.
alternative,

they

argue

that

Sections 502(a)(2)

also entitle them to the relief they seek.

and

In the

502(a)(3)

We consider each.

1.
Under

ERISA

§

502(a)(1)(B),

“[a]

civil

action

may

be

brought by a participant or a beneficiary to recover benefits
due to him under the terms of his plan, to enforce his rights
under the terms of the plan, or to clarify his rights to future
benefits

under

the

terms

of

the

plan.”

(emphases

added).

Plaintiffs argue that ERISA § 502(a)(1)(B) is the proper section
under

which

misapplied
formula”

to

bring

formula

when

it

a

and

failed

claim
that
to

for
the

benefits
Bank

administer

Ct.

1866

(2011),

based

on

“‘misapplied’

the

“consistent with ERISA’s minimum standards.”
45-46 (emphasis omitted).

due

plan

in

a

a

[the]
manner

Appellants’ Br. at

However, CIGNA Corp. v. Amara, 131 S.

explicitly

precludes

them

from

using

this

provision to recover the relief they seek.
In Amara, as here, the plaintiffs sought to enforce the
plan not as written, but as it should properly be enforced under
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ERISA.

The

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district

court

Pg: 13 of 34

ordered

the

terms

“reformed” and then enforced the changed plan.

of

the

plan

Id. at 1866.

But as the Supreme Court underscored, “[t]he statutory language
speaks

of

them.”

enforcing

the

terms

of

the

plan,

not

of

changing

Id. at 1876-77 (internal quotation marks, citation, and

emphasis

omitted).

Indeed,

“nothing

suggest[ed]

that

[Section 502(a)(1)(B)] authorizes a court to alter those terms .
. . where that change, akin to the reform of a contract, seems
less like the simple enforcement of a contract as written and
more like an equitable remedy.”
Here,

as

in

Amara,

Id. at 1877.

Plaintiffs’

requested

remedy

would

require the court to do more than simply enforce a contract as
written.
in equity.

Rather, as we will soon discuss, what they ask sounds
Accordingly, Section 502(a)(1)(B) provides no avenue

for bringing their claim.
2.
Under ERISA § 502(a)(2), a plan beneficiary may bring a
civil

action

for

“appropriate

relief”

when

a

plan

fiduciary

breaches its statutorily imposed “responsibilities, obligations,
or duties,” ERISA § 409, 29 U.S.C. § 1109.

Plaintiffs argue

that they may seek relief under Section 502(a)(2) because the
Bank breached a fiduciary obligation by failing to “act with the
best interest of participants in mind” and by “ignor[ing] the
terms

of

the

amendments

to

the
13

extent

the

amendments

were

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inconsistent with ERISA.”

Pg: 14 of 34

J.A. 236.

However, again Plaintiffs’

claim is precluded by Supreme Court precedent because Pegram v.
Herdrich,

530

U.S.

211

(2000),

bars

recovery

under

this

provision.
Unlike traditional trustees who are bound by the duty of
loyalty to trust beneficiaries, ERISA fiduciaries may wear two
hats.

“Employers, for example, can be ERISA fiduciaries and

still

take

actions

beneficiaries,

when

to

they

the
act

as

disadvantage
employers

of

(e.g.,

employee
firing

a

beneficiary for reasons unrelated to the ERISA plan), or even as
plan sponsors (e.g., modifying the terms of a plan as allowed by
ERISA to provide less generous benefits).”
225.

Pegram, 530 U.S. at

Thus, the “threshold question” we must ask here is whether

the Bank acted as a fiduciary when “taking the action subject to
complaint.”

Id. at 226.

Under ERISA, a person is a fiduciary vis-à-vis a plan “to
the extent” that he (1) “exercises any discretionary authority
or discretionary control respecting management of such plan or .
. . its assets,” (2) “renders investment advice for a fee or
other compensation,” or (3) “has any discretionary authority or
discretionary
plan.”

responsibility

in

the

administration

ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A).

of

such

Accordingly,

the Bank is a fiduciary only to the extent that it acts in one
of these three capacities.
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As

we

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read

Count

IV

Pg: 15 of 34

of

Plaintiffs’

Fourth

Amended

Complaint, i.e., Plaintiffs’ one remaining claim, they assert
two fiduciary breaches: (1) the Bank breached a fiduciary duty
when it amended the 401(k) Plan and Pension Plan to permit the
transfers; and (2) the Bank breached a fiduciary duty when it
permitted the voluntary transfers between the plans.

Neither

holds water.
The first claim fails because “[p]lan sponsors who alter
the

terms

of

fiduciaries.”
(1996).

a

plan

do

Lockheed

not

Corp.

fall
v.

into

Spink,

the

517

category

U.S.

882,

of
890

Instead, these actions are analogous to those of trust

settlors.

Id.

The second claim fails for the simple reason that the Bank
did

not

exercise

discretion

regarding

the

transfers.

The

transfers between the 401(k) Plan and the Pension Plan occurred
only

for

voluntarily

those

plan

directed

participants

the

Bank

to

take

who
such

affirmatively
action.

and

Because

following participants’ directives did not involve discretionary
plan

administration

so

as

to

trigger

fiduciary

liability

as

required under ERISA § 3(21)(A), that action cannot support an
ERISA § 502(a)(2) claim.
3.
Finally,

under

Section 502(a)(3),

a

plan

beneficiary

may

obtain “appropriate equitable relief” to redress “any act or
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practice which violates” ERISA provisions contained in a certain
subchapter

of

the

United

States

Code.

To

determine

whether

Section 502(a)(3) applies to these facts, we must answer two
questions:

(1)

provision?

Did

And

if

the

transfers

so,

(2)

does

violate
the

a

relief

covered

ERISA

Plaintiffs

seek

constitute “appropriate equitable relief” within the meaning of
the statute?

The answer to both questions is yes.
i.

ERISA § 204(g)(1), which is also known as the anti-cutback
provision, is a covered provision under Section 502(a)(3).

It

provides that a plan amendment may not decrease a participant’s
“accrued benefit.”

ERISA § 3(23)(B), 29 U.S.C. § 1002(23)(B),

defines the accrued benefit in a 401(k) plan as “the balance of
the individual’s account.”

In the technical advice memorandum,

the IRS concluded that the transfers between the 401(k) Plan and
the

Pension

Plan

violated

I.R.C.

Regulation

§ 1.411(d)-4,

Q&A-3.

§ 411(d)(6)

provides—in

language

§

§ 204(g)(1)—that
participant’s
1.411(d)-4,
further

a

“accrued

benefit

that

See

amendment

which
the

under

a

J.A.

nearly

benefit.”

Q&A-3(a)(2),

provides

employee’s

plan

411(d)(6)

may

defined

identical
not

I.R.C.
to

a

Regulation

§

§ 411(d)(6),

feature

contribution

plan”

protected benefit within the meaning of I.R.C. § 411(d)(6).
16

ERISA

decrease

I.R.C.

account

Treasury

519.

Treasury

implements

“separate

and

of
is

an
a

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According

to

the

IRS’s

Pg: 17 of 34

interpretation

of

the

relevant

statutes and regulations, “‘separate account feature’ describes
the mechanism by which a [defined contribution plan] accounts
for contributions and actual earnings/losses thereon allocated
to a specific defined contribution plan participant with the
risk of investment experience being borne by the participant.”
J.A. 517.

In a defined contribution plan like the 401(k) Plan,

assets are actually invested in participants’ chosen investment.
401(k) Plan participants bear the investment risk, but this is
unproblematic because their account balances are identical to
the actual performance of their actual investments.
By

contrast,

“investments”
correlation

because

are

Pension

hypothetical,

between

their

Plan

there

account

is

balances

available to cover Pension Plan liabilities.

participants’
no
and

guaranteed
the

assets

Depending on the

success of the Bank’s actual investments, the Pension Plan’s
assets

may

lack

sufficient

funds

to

satisfy

all

insert

the

of

its

liabilities (or may run a surplus).
Turning
language

to

from

a

textual

analysis,

Section 3(23)(B)

into

we

relevant

Section 204(g)(1):

“The

[balance of the individual’s account] may not be decreased by an
amendment of the plan . . . .”
assurances

that

individuals

The Transfer Guarantee provides

will

receive

no

less

than

the

monetary value of their 401(k) Plan accounts at the time of
17

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transfer.

Filed: 06/08/2015

But

the

Bank’s

Pg: 18 of 34

promise

that

the

value

of

the

transferred funds will not decrease below a certain threshold—
even if, for example, it invests Pension Plan assets poorly and
loses the money—is not the same as actually not decreasing the
account balance.
distinguishable)

It brings to mind the (instructive, even if
difference

between

making

a

loan

that

the

borrower promises to repay and leaving your money in your bank
account.

Assuming all goes well, the end result may well be the

same; but they plainly are not the same thing.
In

essence,

Section 204(g)(1)’s

prohibition

against

amendments that decrease defined contribution plan participants’
account balances is a variation on a trustee’s duty to preserve
trust property.
ERISA

plan

See Restatement (Second) of Trusts § 176.

sponsor

contribution

plan

is

under

no

participants

duty

do

not

balances through their own actions.

to

ensure

decrease

An

that

defined

their

account

But the plan sponsor cannot

take actions that decrease participant account balances.
For these reasons, and in light of the similarities between
I.R.C.

§

411(d)(6)

and

ERISA

§ 204(g)(1),

and

the

IRS’s

persuasive analysis, we hold that a defined contribution plan’s
separate account feature constitutes an “accrued benefit” that
“may not be decreased by amendment of the plan” under Section
204(g)(1).

The transfers at issue here resulted in a loss of

18

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the

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separate

account

Pg: 19 of 34

feature

and

thus

violated

Section 204(g)(1).
ii.
Although
necessary

the

Bank’s

component

of

violation
Plaintiff’s

Section 502(a)(3),

that

confer

standing.

statutory

violation

Supreme

Court

has

Section 204(g)(1)

claim
alone

for
is

Plaintiffs

“appropriate equitable relief.”
The

of

relief

is

under

insufficient
must

a

also

to
seek

This, they do.

interpreted

the

term

“appropriate

equitable relief,” as used in Section 502(a)(3), to refer to
“those categories of relief that, traditionally speaking (i.e.,
prior to the merger of law and equity) were typically available
in equity.”
Atl.

Med.

Amara, 131 S. Ct. at 1878 (quoting Sereboff v. Mid
Servs.,

Inc.,

547

quotation marks omitted).
functions

as

a

“safety

U.S.

356,

361

(2006))

(internal

Further, because Section 502(a)(3)
net,

offering

appropriate

equitable

relief for injuries caused by violations that § 502 does not
elsewhere adequately remedy,” Varity Corp. v. Howe, 516 U.S.
489,

512

(1996),

equitable

relief

will

not

normally

be

“appropriate” if relief is available under another subsection of
Section 502(a).

Id. at 515.

Here, Plaintiffs seek the difference between (1) the actual
investment gains the Bank realized using the assets transferred
to

the

Pension

Plan,

and

(2)
19

the

transferred

assets’

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hypothetical investment performance, which the Bank has already
paid Pension Plan participants.
the

profit

the

Bank

made

In other words, Plaintiffs seek

using

their

assets.

This

is

the

hornbook definition of an accounting for profits.
An accounting for profits “is a restitutionary remedy based
upon avoiding unjust enrichment.”

1 D. Dobbs, Law of Remedies

§ 4.3(5), p. 608 (2d ed. 1993) (hereinafter Dobbs).
the

disgorgement

of

“profits

produced

by

It requires

property

which

in

Id.

It

equity and good conscience belonged to the plaintiff.”

is akin to a constructive trust, but lacks the requirement that
plaintiffs

“identify

a

sought to be recovered.”

particular

res

containing

the

profits

Great-W. Life & Annuity Ins. Co. v.

Knudson, 534 U.S. 204, 214 n.2 (2002) (citing 1 Dobbs § 4.3(1),
at 588; id., § 4.3(5), at 608).
In Knudson, the Supreme Court expressly noted that, unlike
other restitutionary remedies, an accounting for profits is an
equitable

remedy.

534

U.S.

at

214

n.2.

The

Court

also

suggested that an accounting for profits would support a claim
under Section 502(a)(3) in the appropriate circumstances.

See

id. (noting that the petitioners did not claim profits produced
by certain proceeds and were not entitled to those proceeds).
This case presents those appropriate circumstances.
Unlike the petitioners in Knudson, Plaintiffs seek profits
generated using assets that belonged to them.
20

And, as explained

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above,

Filed: 06/08/2015

Section

Plaintiffs

any

502(a)’s

Pg: 21 of 34

other

relief.

If

subsections

do

Section 204(g)(1)’s

not

afford

proscription

against decreasing accrued benefits is to have any teeth, the
available remedies must be able to reach situations like the one
this case presents, i.e., where a plan sponsor benefits from an
ERISA violation, but plan participants—perhaps through luck or
agency intervention—suffer no monetary loss.
Met.

Life

Co.,

Amara,

(“[W]ith

Ins.

the

equitable]

remedies

690

F.3d

Supreme
.

.

.

176,
Court

are

182–83

See McCravy v.
(4th

clarified

indeed

Cir.

that

available

2012)

[various
to

ERISA

plaintiffs . . . . [O]therwise, the stifled state of the law
interpreting

[Section 502(a)(3)]

would

encourage

abuse.”).

Because it “holds the defendant liable for his profits, not for
damages,” 1 Dobbs § 4.3(5), at 611, the equitable remedy of
accounting for profits adequately addresses this concern.
Amalgamated

Clothing

&

Textile

Workers

Union,

Cf.

AFL-CIO

v.

Murdock, 861 F.2d 1406, 1413–14 (9th Cir. 1988) (holding that a
constructive

trust

was

an

“important,

appropriate,

and

available” remedy under Section 502(a)(3) for breach of trust,
even when plaintiffs had “received their actuarially vested plan
benefits”).
In

sum,

Plaintiffs

have

statutory

Section 502(a)(3) to bring their claim.
B.
21

standing

under

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The Bank argues that even if it violated certain provisions
of ERISA, the district court properly granted summary judgment
because Plaintiffs lack Article III standing.

The Bank argues

that the transfers from the Pension Plan to the special-purpose
401(k) plan mooted any injury.
For
must

the

possess

Constitution.

federal

courts

standing

to

have

under

jurisdiction,

Article

III,

See David, 704 F.3d at 333.

§ 2

plaintiffs
of

the

There exist three

“irreducible minimum requirements” for Article III:
(1) an injury in fact (i.e., a ‘concrete and
particularized’ invasion of a ‘legally protected
interest’);
(2) causation (i.e., a ‘fairly . . .
trace[able]’
connection between the alleged injury in fact and the
alleged conduct of the defendant); and
(3) redressability (i.e., it is ‘likely’ and not
merely ‘speculative’ that the plaintiff's injury will
be remedied by the relief plaintiff seeks in bringing
suit).

Sprint Commc’ns Co., L.P. v. APCC Serv., Inc., 554 U.S. 269,
273–74 (2008) (citing Lujan v. Defenders of Wildlife, 504 U.S.
555, 560–61 (1992)).
1.
Our

analysis

first

focuses

demonstrated an injury in fact.

on

whether

Plaintiffs

have

The crux of the Bank’s standing

argument is that Plaintiffs have not suffered a financial loss.
We, however, agree with the Third Circuit that “a financial loss
22

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is not a prerequisite for [Article III] standing to bring a
disgorgement claim under ERISA.”

Edmonson v. Lincoln Nat. Life

Ins. Co., 725 F.3d 406, 417 (3d Cir. 2013), cert. denied, 134 S.
Ct. 2291 (2014); see also Vander Luitgaren v. Sun Life Ins. Co.
of Canada, No. 09–CV–11410, 2010 WL 4722269, at *1 (D.Mass. Nov.
18, 2010) (rejecting argument that plaintiff lacked standing to
sue

for

disgorgement

of

profit

earned

via

a

retained

asset

account). 9
As

an

initial

matter,

it

goes

without

saying

that

the

Supreme Court has never limited the injury-in-fact requirement
to

financial

losses

(otherwise

even

grievous

constitutional

rights violations may well not qualify as an injury).
an

injury

refers

to

the

invasion

of

some

“legally

Instead,
protected

interest” arising from constitutional, statutory, or common law.
Lujan

v.

Defenders

of

Wildlife,

504

U.S.

555,

578

(1992).

Indeed, the interest may exist “solely by virtue of statutes
creating legal rights, the invasion of which creates standing.”

9

But see Kendall v. Employees Ret. Plan of Avon. Prods.,
561 F.3d 112, 119 (2d Cir. 2009).
In Kendall, the Second
Circuit articulated the requirement that ERISA plaintiffs
seeking disgorgement must show individual loss.
561 F.3d 112.
But such a limitation would foreclose an action for breach of
fiduciary duty in cases where the fiduciary profits from the
breach but the plan or plan beneficiaries incur no financial
loss.
ERISA, however, provides for a recovery in such cases,
and we reject such “perverse incentives.” McCravy, 690 F.3d at
183. We thus similarly reject the Second Circuit’s view.

23

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Id.

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(internal

quotation

Pg: 24 of 34

marks

and

citation

omitted).

Thus,

“standing is gauged by the specific common-law, statutory or
constitutional

claims

that

a

party

presents.”

Int’l

Primate

Prot. League v. Adm’rs of Tulane Educ. Fund, 500 U.S. 72, 77
(1991).

We

Plaintiffs’

therefore
claim

for

examine
an

the

accounting

principles
for

that

profits

underlie

under

ERISA

§ 502(a)(3) to discern whether there exists a legally protected
interest.
It

is

blackletter

law

that

a

plaintiff

seeking

accounting for profits need not suffer a financial loss.

an

See 1

Dobbs § 4.3(5), at 611 (“Accounting holds the defendant liable
for his profits, not damages.”); see also Restatement (Third) on
Restitution and Unjust Enrichment § 51 cmt. a (2011) (noting
that the object of an accounting “is to strip the defendant of a
wrongful gain”).
claims

would

Requiring a financial loss for disgorgement

effectively

ensure

that

wrongdoers

could

profit

from their unlawful acts as long as the wronged party suffers no
financial loss.

We reject that notion.

Edmonson, 725 F.3d at

415. 10

10

The district court supported its ruling that Plaintiffs
failed to satisfy Article III’s injury-in-fact requirement with
a citation to Horvath v. Keystone Health Plan East, Inc., 333
F.3d 450, 456 (2003), which it said stood for the proposition
that
an
ERISA
plaintiff
seeking
disgorgement
must
show
individual loss. Pender, 2013 WL 4495153, at *9. Yet the Third
Circuit itself has made plain that “[n]othing in Horvath . . .
(Continued)
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As the Third Circuit recently underscored—in a fiduciary
breach case that, while distinguishable, we nevertheless find
instructive—requiring

a

plaintiff

seeking

an

accounting

for

profits to demonstrate a financial loss would allow those with
obligations under ERISA to profit from their ERISA violations,
so long as the plan and plan beneficiaries suffer no financial
loss.
to

Edmonson, 725 F.3d at 415.

square

with

the

overall

tenor

Such a result would be hard
of

ERISA,

“a

comprehensive

statute designed to promote the interests of employees and their
beneficiaries in employee benefit plans.”

Ingersoll–Rand Co. v.

McClendon, 498 U.S. 133, 137 (1990) (internal quotation marks
omitted).

In addition, it would directly contradict ERISA’s

provision covering liability for breach of fiduciary duty, which
requires a fiduciary who breaches “any of [his or her statutory]
responsibilities,

obligations,

profits” to the plan.
Finally,

we

or

duties”

to

restore

borrows

heavily

“any

ERISA § 409(a).

note

that

ERISA

language and the law of trusts.

from

the

See Firestone Tire & Rubber Co.

v. Bruch, 489 U.S. 101, 110 (1989) (“ERISA abounds with the

states or implies that a net financial loss is required for
standing to bring a disgorgement claim.” Edmonson, 725 F.3d at
417.

25

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language and terminology of trust law.”). 11

Under traditional

trust law principles, when a trustee commits a breach of trust,
he is accountable for the profit regardless of the harm to the
beneficiary.

See Restatement (Second) of Trusts § 205, cmt. h;

see also 4 Scott & Ascher on Trusts § 24.7, at 1682(5th ed.
2006) (“It is certainly true that a trustee who makes a profit
through a breach of trust is accountable for the profit.
is

also

true

that

a

trustee

is

accountable

for

all

But it
profits

arising out of the administration of the trust, regardless of
whether there has been a breach of trust.”).
By

proscribing

participants’
existing

accrued

rights—ERISA

principles.

Here,

plan

amendments

that

benefits—i.e.,

harm

functionally
these

imports

principles

decrease

plan

beneficiaries’

traditional

dictate

that

trust
plan

beneficiaries have an equitable interest in profits arrived at
by way of a decrease in their benefits. 12
11

Courts have also looked to trust principles to answer
questions regarding Article III standing in appropriate cases.
E.g., Scanlan, 669 F.3d at 845 (“[W]e see no reason why
canonical principles of trust law should not be employed when
determining
the
nature
and
extent
of
a
discretionary
beneficiary’s interest for purposes of an Article III standing
analysis.”).
12

Accord United States v. $4,224,958.57, 392 F.3d 1002,
1005 (9th Cir. 2004) (holding that if claimants proved their
constructive trust claim they would have an equitable interest
in the defendant property, which would provide them with Article
III standing).

26

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In
injury

sum,
in

Filed: 06/08/2015

for

fact,

standing
i.e.,

Pg: 27 of 34

an

purposes,
invasion

Plaintiffs
of

a

incurred

legally

an

protected

interest, because they “suffered an individual loss, measured as
the ‘spread’ or difference between the profit the [Bank] earned
by investing the retained assets and the [amount] it paid to
[them].”

Edmonson, 725 F.3d at 417.
2.

Continuing

the

Article

III

standing

analysis,

Plaintiffs

satisfy the causation and redressability requirements.

But for

the Bank’s improper retention of profits, Plaintiffs would not
have suffered an injury in fact.

And the relief Plaintiffs seek

is not speculative in nature; the Bank invested those assets,
and

the

profits

made

by

those

investments

should

be

readily

ascertainable.
3.
The Bank argues that even if Plaintiffs had Article III
standing at the time they filed the suit, its closing agreement
with the IRS restored any loss of the separate account feature
and mooted Plaintiffs’ claims.

Here, too, we disagree.

The Supreme Court has repeatedly referred to mootness as
“the doctrine of standing set in a time frame.” Friends of the
Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167,
170 (2000) (quoting Arizonans for Official English v. Arizona,
520 U.S. 43, 68 (1997)).

If a live case or controversy ceases
27

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to exist after a suit has been filed, the case will be deemed
moot and dismissed for lack of standing.
Corp., 494 U.S. 472, 477 (1990).

Lewis v. Cont’l Bank

But “[a] case becomes moot

only when it is impossible for a court to grant any effectual
relief

whatever

to

the

prevailing

party.”

Knox

v.

Serv.

Employees Int’l Union, Local 1000, 132 S. Ct. 2277, 2287 (2012)
(quoting Erie v. Pap’s A.M., 529 U.S. 277, 287 (2000) (internal
quotation marks omitted)) (emphasis added).
The Bank rightly notes that its closing agreement with the
IRS

restored

Plaintiffs’

separate

account

restoration, however, did not moot the case.

feature.

That

Plaintiffs contend

that the Bank retained a profit, even after it restored the
separate account feature to Plaintiffs and paid a $10 million
fine to the IRS.

Defendants do not rebut this argument, noting

only that there has been no discovery to this effect.

If an

accounting ultimately shows that the Bank retained no profit,
the case may well then become moot.

“But as long as the parties

have a concrete interest, however small, in the outcome of the
litigation,

the

Airline

S.S.

&

Employees,

466

case

is

not

Clerks,
U.S.

435,

moot.”

Freight
442

Ellis

Handlers,
(1984)

v.

Bhd.

Exp.

(citing

&

of

Ry.,

Station

Powell

v.

McCormack, 395 U.S. 486, 496–98 (1969)).
In sum, we hold that Plaintiffs have Article III standing
to bring their claims.
28

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IV.
The
their

Bank

claims

limitations.

argues
are
To

that

even

time-barred

if

Plaintiffs

have

standing,

the

applicable

statute

of

what

determine

by

the

applicable

statute

of

limitations is, we engage in a three-part analysis.

First, we

identify the statute of limitations for the state claim most
analogous to the ERISA claim at issue here.

Second, because of

the 28 U.S.C. § 1404(a) transfer, we must determine whether the
Fourth Circuit’s or the Seventh Circuit’s choice-of-law rules
apply. And third, we apply the relevant choice-of-law rules to
determine which state’s statute of limitations applies.
A.
“Statutes

of

limitations

establish

the

period

of

time

within which a claimant must bring an action.” Heimeshoff v.
Hartford Life & Acc. Ins. Co., 134 S. Ct. 604, 610 (2013).

When

ERISA does not prescribe a statute of limitations, courts apply
the most analogous state-law statute of limitations.
Sun

Life

Assur.

Co.,

488

F.3d

240,

244

(4th

White v.

Cir.

2007),

abrogated on other grounds by Heimeshoff, 134 S. Ct. 604.
Although the parties have suggested that the statute of
limitations for contract claims is most analogous, we disagree.
It would be incongruous to hold that Plaintiffs are unable to
pursue

relief

under

Section 502(a)(1)(B)
29

because

their

claim

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sounds in equity instead of contract, and then apply the statute
of limitations for a breach of contract claim.
In our view, the most analogous statute of limitations is
that for imposing a constructive trust.
equitable

remedy

of

constructive trust.

an

accounting

for

As noted above, the
profits

is

akin

to

a

Knudson, 534 U.S. at 214 n.2.

Both North Carolina and Illinois recognize such remedies.
In

North

Carolina,

a

constructive

trust

may

be

“imposed

by

courts of equity to prevent the unjust enrichment of the holder
of title to, or of an interest in, property which such holder
acquired through . . . circumstance[s] making it inequitable for
him to retain it against the claim of the beneficiary of the
constructive

trust.”

Variety

Wholesalers,

Inc.

v.

Salem

Logistics Traffic Servs., LLC, 723 S.E.2d 744, 751 (N.C. 2012)
(quoting Wilson v. Crab Orchard Dev. Co., 171 S.E.2d 873, 882
(N.C. 1970)).

Likewise, Illinois’s highest court has stated

that “[w]hen a person has obtained money to which he is not
entitled,

under

such

circumstances

that

in

equity

and

good

conscience he ought not retain it, a constructive trust can be
imposed to avoid unjust enrichment.”
Ret.

Fund,

neither
trust.

735

state

N.E.2d
requires

560,

565

wrongdoing

Smithberg v. Illinois Mun.

(Ill.
to

2000).
impose

Furthermore,
a

constructive

See id. (citing several cases); Houston v. Tillman, 760

30

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18,

Filed: 06/08/2015

21–22

(N.C.

Ct.

Pg: 31 of 34

App.

2014)

(citing

Variety

Wholesalers, Inc., 723 S.E.2d at 751–52).
In Illinois, the applicable statute of limitations is five
years.

Frederickson v. Blumenthal, 648 N.E.2d 1060, 1063 (Ill.

App. Ct. 1995) (citing 735 Ill. Comp. Stat. 5/13-205; Chicago
Park District v. Kenroy, Inc., 374 N.E.2d 670 (Ill. App. Ct.
1978), aff’d in part, rev’d in part by 402 N.E.2d 181 (Ill.
1980)).

In North Carolina, a ten-year statute of limitations

applies to “[a]ctions seeking to impose a constructive trust or
to obtain an accounting.”

Tyson v. N. Carolina Nat. Bank, 286

S.E.2d 561, 564 (N.C. 1982).
B.
We next turn to the question of which circuit’s choice-oflaw rules apply.

Plaintiffs initially filed this case in the

District Court for the Southern District of Illinois.

The Bank

moved, pursuant to 28 U.S.C. § 1404(a), to change the venue of
the case by having it transferred to the District Court for the
Western District of North Carolina.

We must therefore determine

whether the choice-of-law rules of the transferor court or those
of the transferee court apply.
The majority of circuits to consider the issue apply the
transferor court’s choice-of-law rules.

See, e.g., Hooper v.

Lockheed Martin Corp., 688 F.3d 1037, 1046 (9th Cir. 2001); In
re Ford Motor Co., 591 F.3d 406, 413 n.15 (5th Cir. 2009);
31

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Olcott v. Delaware Flood Co., 76 F.3d 1538, 1546-47 (10th Cir.
1996; Eckstein v. Balcor Film Investors, 8 F.3d 1121, 1127 (7th
Cir. 1993). 13
history

of

This conclusion makes sense:

[Section]

1404(a)

certainly

“The legislative

does

not

justify

the

rather startling conclusion that one might get a change of law
as a bonus for a change of venue.”

Van Dusen v. Barrack, 376

U.S. 612, 635-36 (1964) (internal quotation marks omitted).
join

the

majority

of

our

sister

circuits

and

hold

that

We
the

transferor court’s choice-of-law rules apply when a case has
been transferred pursuant to 28 U.S.C. § 1404(a).

Accordingly,

the Seventh Circuit’s choice-of-law rules apply here.
C.
Under the Seventh Circuit’s choice-of-law rules, we look to
the forum state “as the starting point.”
LLC, 459 F.3d 804, 813 (7th Cir. 2006).
with

a

significant

connection

to

the

Berger v. AXA Network
But “[i]f another state
parties

and

to

the

transaction has a limitations period that is more compatible
with

the

action,

federal
that

policies

state’s

underlying

limitations

13

law

the
ought

federal
to

be

cause

of

employed

But see Lanfear v. Home Depot, Inc., 536 F.3d 1217, 1223
(11th Cir. 2008) (holding that the transferee court may apply
its own choice-of-law rules when the case involves interpreting
federal law); Menowitz v. Brown, 991 F.2d 36, 41 (2d Cir. 1993)
(same).

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because it furthers, more than any other option, the intent of
Congress when it created the underlying right.”

Id.

Here, although Illinois may be the forum state, see Atl.
Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, 134
S. Ct. 568, 582-83 (2013) (noting that the “state law applicable
in the original court also appl[ies] in the transferee court”
unless a Section 1404(a) motion is “premised on the enforcement
of a valid forum-selection clause”); J.A. 462-64 (memorandum and
order

discussing

reasons

for

granting

the

Bank’s

motion

to

change venue), it is clear to us that North Carolina has a
“significant connection” to the dispute for the same reasons for
which

the

district

court

granted

the

Bank’s

Section

1404(a)

motion: “the decision to ‘permit’ the ‘voluntary’ transfer of
401(k) Plan assets to the converted cash balance plan took place
in the Western District of North Carolina” and “virtually all
the relevant witnesses reside in the Western District of North
Carolina.”

J.A. 462-64.

Further,

the

Pension

Plan

contains

a

choice-of-law

provision applying North Carolina law when federal law does not
apply.

See Berger, 459 F.3d at 813–14 (considering a choice-of-

law clause as a non-controlling but relevant factor in selecting
a

limitations

limitations

period).

period

is

Finally,
“more

North

compatible

Carolina’s
with

the

ten-year
federal

policies” underlying ERISA than Illinois’s five-year limitations
33

Appeal: 14-1011

Doc: 55

period;

the

Filed: 06/08/2015

longer

period

Pg: 34 of 34

provides

aggrieved

plaintiffs

with

more opportunities to advance one of ERISA’s core policies: “to
protect . . . the interests of participants in employee benefit
plans and their beneficiaries . . . by providing for appropriate
remedies, sanctions, and ready access to the Federal courts.”
29 U.S.C. § 1001(b).
The first of the transfers in question took place in 1998.
Plaintiffs filed suit in 2004, a full four years before the tenyear

statute

of

limitations

would

have

run.

Accordingly,

Plaintiffs’ claims are not time-barred by the applicable tenyear limitations period.

The statute of limitations therefore

cannot serve as a basis for affirming the district court’s grant
of summary judgment to the Bank.

V.
For the foregoing reasons, we reverse the district court’s
grant of summary judgment in favor of the Bank, vacate that
portion of the district court’s order denying Plaintiffs’ motion
for

summary

judgment

based

on

its

erroneous

standing

determination, and remand for further proceedings.

REVERSED IN PART,
VACATED IN PART,
AND REMANDED

34