Contributing employer to multiemployer pension plan could not sue plan trustees for negligent plan asset management under federal common law

An employer that contributed to a multiemployer pension plan did not have a cause of action against trustees for negligent plan asset management under the federal common law for ERISA pension plans because Congress has established a comprehensive statutory scheme and announced its intention to occupy the field and because the employer’s proposed negligence claim did not satisfy the requirements for the court to create a new right under federal common law, according to the U.S. Court of Appeals in Cincinnati (CA-6)

Employer sought new negligence claim

Trustees of a multiemployer union pension plan terminated the plan because substantially all of the plan’s contributing employers withdrew from the plan. After the trustees assessed withdrawal liability to a contributing employer, the employer sued the trustees under ERISA §4301(a), alleging that the trustees negligently managed the plan’s assets, causing harm to the employer in the form of increased withdrawal liability.

The trustees filed a motion to dismiss under Rule 12(b)(6), contending that the employer failed to state a viable claim for relief because ERISA §4301(a) did not provide substantive rights. The employer acknowledged that ERISA §4301(a) was a standing provision only and agreed that the statute did not, in and of itself, provide a legal basis for a negligence cause of action. However, the employer asked the district court to exercise its limited lawmaking authority under the federal common law of ERISA pension plans and recognize a new legal basis for its negligence claim. The district court refused and granted the trustees’ motion. The employer appealed.

The appellate court observed that the parties agreed that the employer did have statutory standing under ERISA §4301(a) and that ERISA §4301(a) did not confer any substantive rights, but only identified who could bring a civil action to enforce statutes governing multiemployer plans. However, the parties disputed the legal viability of the employer’s negligence claim. Although the employer knew that ERISA did not authorize such a negligence claim, the employer urged the court to use its lawmaking powers under federal common law to create a new negligence claim for contributing employers.

Three requirements for creating new claim not met

While Congress generally encouraged the courts to develop a federal common law of employee benefits when ERISA was enacted, the U.S. Supreme Court has stated that the power to create federal common law should be indulged “in a few and restricted instances.” The appellate court explained that it has held that its authority to create federal common law in this area is restricted to when “(1) ERISA is silent or ambiguous; (2) there is an awkward gap in the statutory scheme; or (3) federal common law is essential to the promotion of fundamental ERISA policies.”

The employer argued that its proposed negligence claim satisfied all three requirements. The appellate court disagreed. First, ERISA is not silent on who may sue trustees for negligent management of plan assets; participants and beneficiaries may bring such claims. By omission, employers may not. Because the remedy the employer sought was not expressly provided in ERISA, even after the enactment of the Multiemployer Pension Plan Amendment Act (MPPAA), and because ERISA and the MPPAA created a comprehensive statutory scheme governing contributing employers and multiemployer plans, the court found that a strong presumption existed that Congress deliberately omitted the availability of such a remedy.

Second, the court determined that there was no “awkward gap in the statutory scheme” to close by recognizing a new negligence cause of action. The employer argued that refusing to create the new negligence claim essentially gave the trustees immunity from their alleged mismanagement of plan assets, creating the “awkward gap.” The court disagreed, explaining that it presumed that Congress deliberately omitted this remedy from the statutory scheme because the trustees’ plan-management duties flowed to the participants and beneficiaries, not to the contributing employers.

Third, the court concluded that allowing contributing employers to sue trustees for negligent plan management was not “essential to the promotion of fundamental ERISA policies.” According to the court, holding that multiemployer plan trustees owe contributing employers a duty of reasonable care concerning plan management was not essential to promote the fundamental policy of ERISA (ensuring that private-sector workers will receive the pensions their employers have promised them). In addition, the same could be said about the fundamental policy of the MPPAA, according to the court.

The court held that, because Congress has established an extensive statutory network and expressly announced its intention to occupy the field, and because the court does not lightly create additional rights under federal common law in these circumstances, the contributing employer to the multiemployer pension plan did not have a cause of action against plan trustees for negligent management under the federal common law of ERISA pension plans. Thus, the appellate court affirmed the judgment of the district court.

Source: DiGeronimo Aggregates, LLC v. Zemla (CA-6)

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