Graden v. Conexant Systems Inc.

Summary

The Third Circuit held that a former employee who had cashed out of a defined-contribution 401(k) plan could qualify as an ERISA participant when alleging that fiduciary misconduct reduced the value of his benefits. The court concluded that Graden had statutory standing under 29 U.S.C. § 1132(a)(2) to sue plan fiduciaries on behalf of the plan and vacated the district court’s dismissal for lack of standing.

Holdings

1. A former employee who alleges a colorable claim that fiduciary misconduct caused his benefit payment to be deficient on the day it was paid qualifies as an ERISA participant and has statutory standing to sue under 29 U.S.C. § 1132(a)(2).
2. The Court rejected the benefits-versus-damages dichotomy as the governing test for participant standing. The proper inquiry is whether the plaintiff colorably claims that the benefit payment was deficient under the plan and ERISA when paid, rather than whether the requested monetary relief could also be described as damages.
3. A benefit need not be a liquidated amount to be recoverable or to support participant standing. The alleged loss may be measured by what the affected accounts would have earned through prudent alternative investments.

Questions Presented

1. Whether a former employee who voluntarily cashed out of a defined-contribution ERISA plan may qualify as a plan participant with statutory standing when he alleges that fiduciary misconduct caused his benefit payment to be less than the amount due under the plan and ERISA.
2. Whether the plaintiff's claim is for ERISA benefits rather than extracontractual damages merely because it is brought under 29 U.S.C. § 1132(a)(2) against plan fiduciaries.
3. Whether the alleged amount of the deficient benefit is too speculative or difficult to calculate to support participant standing.

Disposition

reversed_and_remanded