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Dismissal of granted ERISA case urged

Attorneys for a nationwide management consulting firm involved in a case the Supreme Court is scheduled to hear at its next Term have urged the Justices to dismiss the case as moot. In a motion filed on Monday, counsel for DeWolff, Boberg & Associates Inc. said that the individual who took the case to the Supreme Court has withdrawn all of his funds from his pension plan account, leaving him “with no legally cognizable interest in the outcome of the case.” The motion, re-filed with redactions to protect privacy interests, can be found here. The individual involved has a right to respond.

The case is LaRue v. DeWolff, Boberg & Associates, et al. (docket 06-856). The Court agreed on June 18 to hear the case after seeking the views of the U.S. Solicitor General, who urged the Court to hear and decide both issues raised by James LaRue, a Texan who worked for DeWolff Boberg until 2001.

Thomas P. Gies, a Washington attorney for DeWolff Boberg, told the Court that, in assembling materials for a merits brief in the case, his office “discovered that on July 22, 2006, while the case was still pending before the Fourth Circuit,” LaRue withdraw all of his funds from his account.

In LaRue’s petition, filed last Nov. 6, he raised two issues: whether the Employee Retirement Income Security Act allows a pension plan participant to sue a plan manager or administrator to recover losses that the worker suffered in a personal pension account because of actions by the plan operator, and whether ERISA allows monetary relief, in the form of a court-ordered payback, as a remedy for alleged wrongs by a plan operator. (The formal statement of the Questions Presented can be found at this link.)

The Fourth Circuit Court ruled on June 19 last year that LaRue could not assert a claim under ERISA because recovery must benefit the plan as a whole, not a particular plan participant.

Solicitor General Paul D. Clement, in urging the Court to decide the two questions, said they were “important and recurring” issues regarding civil enforcement of ERISA.

DeWolff Boberg’s dismissal motion, however, noted that neither of the two legal claims involves a live controversy, because of LaRue’s withdrawal from the plan. The ERISA provision at issue in the first question raised allows a lawsuit by “a participant, beneficiary, or fiduciary,” the motion said. There is no legal basis, the motion contended, for allowing a former participant in a defined contribution plan to bring a lawsuit under that section to recover damages measured by lost profits. The Supreme Court, it noted, has not addressed the issue.

The provision at issue in the second legal claim, according to the motion, also makes that issue moot. The claim LaRue made under that section, it noted, was that he was only seeking to have the plan reflect what would have been his interest in it. Now that he is a former plan participant, the motion contended, he has no legally cognizable interest in a recovery by the plan.

The Supreme Court, it added, “has recognized that when a petitioner voluntarily changes his status…while litigation is pending, that change may render the matter moot by eliminating the petitioner’s legally cognizable interest in his claim.”

Although recommending that the case be dismissed, the motion did suggest that the Court “may wish to consider” deciding now another question that LaRue did not raise in his petition — that is, whether a worker who is no longer a particpant in an ERISA plan has a right to sue for damages measured by lost value in his plan. That is an issue on which the lower courts are divided, the motion said.

Submitted along with the motion to dismiss was a sworn declaration by a vice president of DeWolff Boberg, Morgan Buffington, saying that he had learned just this month that LaRue had withdrawn all of his funds and ceased to be a plan participant in July 2006. A statement about his account for the third quarter of 2006, Buffington said, showed a zero balance and a withdrawal of $119,009.13.

At the time of his withdrawal of the funds in July 2006, the declaration said, LaRue “was no longer employed [by the firm] and received no other income” from it, so he “could not make any additional contributions to the plan following his decision to close out his account.”

Forms included with the motion indicated that LaRue has an address in Southlake, Texas.