Mertens v. Hewitt Associates

PETITIONER: Mertens et al.
RESPONDENT: Hewitt Associates
LOCATION: Superior Court of the District of Columbia

DOCKET NO.: 91-1671
DECIDED BY: Rehnquist Court (1991-1993)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 508 US 248 (1993)
ARGUED: Feb 22, 1993
DECIDED: Jun 01, 1993

Alfred H. Sigman - on behalf of the Petitioners
Ronald J. Mann - as amicus curiae, supporting the petitioners
Steven H. Frankel - on behalf of the Respondent

Facts of the case


Media for Mertens v. Hewitt Associates

Audio Transcription for Oral Argument - February 22, 1993 in Mertens v. Hewitt Associates

William H. Rehnquist:

We'll hear argument next in number 91-1671, William J. Mertens v. Hewitt Associates.

Mr. Sigman.

Alfred H. Sigman:

Mr. Chief Justice, and may it please the Court:

This case presents the Court with the issue of whether a person who knowingly participates in a breach of fiduciary duty under ERISA is liable to restore losses suffered by a retirement plan.

In 1987, the Pension Benefit Guaranty Corporation imposed a distress termination on the Kaiser Steel retirement plan because of what it described at the time as its gross underfunding.

Petitioners, and all other retirees similarly situated, suffered substantial losses in their retirement income.

Mr. Mertens, for example, suffered a reduction in his monthly benefit from $2,000 to $500.

Petitioners brought this action to recover all losses to the plan.

Petitioners sued the plan's fiduciaries, officials of Kaiser, for allegedly breaching their fiduciary duties to the plan, and also sued the plan's actuary, in a separate action which the district court consolidated, for allegedly knowingly participating in that fiduciary breach.

Essentially, plaintiffs allege that the Kaiser fiduciaries and Hewitt acted together to purposefully underfund the plan by failing to change the plan's actuarial assumptions to reflect Kaiser's decision to essential terminate its steel-making operations.

As a consequence of that decision, a great number of Kaiser employees were... were forced to take full early retirement benefits, which in turn greatly increased the funding costs to the plan.

Because Kaiser did not fund the plan in a manner to pay for the increased retirements caused by the closing down of its steel operations, the plan became insolvent.

I'd like to argue three points to the Court today, the first being that under ERISA section 502(a)(3), which provides for all appropriate equitable relief to redress violations of the act, that that statute is broad enough to encompass redress against a person who knowingly participates in a breach of fiduciary duty.

And that principle also is a fundamental principle of the common law of trusts, which should be incorporated into ERISA.

Secondly, I'd like to argue that when Congress in 1989 enacted the so-called OBRA amendment to ERISA, it made... which had explicitly referred to a preexisting underlying cause of action under section 502 for recovery of losses to a plan caused by any person who knowingly participates in a breach of fiduciary duty, that that amendment had confirmed that the right on the part of participants and beneficiaries to sue knowing participants in fiduciary breaches had always existed under section 502.

Finally, Your Honors, I would like to argue that the liability that we argue for here today is essential in order to further the remedial purposes of the statute, the primary function being to deter fiduciary breaches in the first place, so as to secure the interests of retirees in their pension benefits.

Anthony M. Kennedy:

If there were a suit under State law... and I think this question relates on all three of the points you want to bring up, or at least it... it gives me an initial grasp of the case.

If there were a suit under State law, what would your position be on whether or not there's preemption?

Alfred H. Sigman:

Well, in fact we did raise a claim under State law.

We sued Hewitt for malpractice under State law.

And after this Court granted certiorari, the district court denied Hewitt's motion to mission on preemption grounds.

I think that the answer to that question in part's going to depend on the resolution of this case.

I would point out to the Court, however, that ERISA does provide specifically that plans can be sued and can sue.

And there are many instances where district courts have held that malpractice actions against attorneys, against other service providers to plans, are not preempted.

But, once again, that issue is not presented by this case because Hewitt did not raise it until after the cert petition had been granted.

Sandra Day O'Connor:

Mr. Sigman, what provision of ERISA did the respondent violate?

Alfred H. Sigman:

We contend that the respondent, Hewitt, violated... that... that the violation involved was the violation of the fiduciaries to adequately fund the plan.

And we contend that 502(a)(3) is broad enough, because it is an open-ended provision, to provide relief against Hewitt for aiding and abetting the fiduciaries in that violation.

Sandra Day O'Connor:

And what's the section of ERISA that the fiduciary violated?

What would we look to?