United States: Ohio Federal Court Rejects Attempt To Certify Class Against Third-Party Plan Administrator Under ERISA § 502(a)(3)

Employee Retirement Income Security Act (ERISA) claims can potentially involve significant amounts in controversy, and in an effort to broaden the pool of potential defendants, ERISA plaintiffs are often fond of arguing that the Supreme Court's Harris Trust decision makes a party's status as an ERISA fiduciary or nonfiduciary irrelevant in determining liability under ERISA § 502(a)(3). The recent case of Duggan v. Towne Properties Group Health Plan, et al, 1:15-cv-623 (S.D. Ohio, Mar. 31, 2019), provides a reminder that fiduciary status can and does still matter and may be a defendant's ticket out of an ERISA class action.

In Duggan, the plaintiff filed a class action under ERISA § 502(a)(3), alleging that his former employer failed to provide certain plan documents to participants as required by ERISA. The plaintiff also alleged that the Plan's third-party administrator, which was responsible for various ministerial functions on behalf of the Plan, failed to provide ERISA-compliant notice of its adverse benefit determinations to participants. The court denied the plaintiff's motion for class certification as to the third-party administrator based on its finding that the third-party administrator was not an ERISA fiduciary. The plaintiff filed a motion to reconsider, arguing that whether the third-party administrator was an ERISA fiduciary was irrelevant in deciding liability under ERISA § 502(a)(3).

In affirming its denial of class certification, the court recognized that ERISA § 502(a)(3) does not address which parties may be sued under the statute and "admits of no limits . . . on the universe of possible defendants." However, the court recognized that there are limits on a plaintiff's ability to bring a § 502(a)(3) claim against a nonfiduciary. For instance, any claim against a nonfiduciary under § 502(a)(3) is limited to "appropriate equitable relief." Moreover, nonfiduciaries can be liable only for a "knowing participation" in a fiduciary's breach.

The court ultimately found that the appropriate equitable relief requirement doomed the plaintiff's class claims against the third-party administrator. Specifically, the plaintiff's claims were based on a regulation that required the Plan Administrator to provide participants with certain adverse benefit determinations. The court found that enforcing this provision against a nonfiduciary that was not the Plan Administrator would not constitute appropriate equitable relief under 502(a)(3). Therefore, the court denied the plaintiff's motion to reconsider its order denying class certification to the third-party administrator.

The bottom line:

Fiduciary status still matters in many cases under ERISA § 502(a)(3), particularly when those claims are asserted against a third-party administrator or other relative strangers to the at-issue ERISA plan.

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