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Remedies outlined in the Employee Retirement Income Security Act are exclusive and leave no room for judicially created remedies, the 2nd U.S. Circuit Court of Appeals has ruled. Saying recent U.S. Supreme Court decisions have undermined a leading 2nd Circuit case on the issue, the circuit said “the limited text of ERISA’s civil remedies is inconsistent with judicial discovery of new liabilities.” The court, in Gerosa v. Savasta & Co. Inc., 02-9005, found that the trustees of a local union pension fund could not seek consequential damages under the act. The trustees had sought to hold an actuary responsible for the underfunding of the pension fund. In the same decision, the court said it was joining a number of other Courts of Appeals in ruling “that ERISA does not preempt ‘run-of-the-mill’ state-law professional negligence claims against non-fiduciaries.” The trustees of the Cement Masons’ Local 780 Pension Fund had sought recovery under both ERISA, 29 U.S.C. �1132(a)(3)(2000), and state-law theories of liability. But Southern District of New York Judge Alvin K. Hellerstein found the trustees’ state law claims were preempted. However, the judge also denied the defendant’s motion to dismiss the ERISA claim, finding that 2nd Circuit case law allowed the recovery of damages. The 2nd Circuit reversed both rulings. Judge Robert Katzmann said Judge Hellerstein’s decision relied “in large part” on the 2nd Circuit case of Diduck v. Kaszycki & Sons Contractors Inc., 974 F.2d 270 (2d Cir. 1992). In Diduck, the circuit recognized a federal common law right of action for plan participants against a non-fiduciary who allegedly participated in the plan fiduciary’s breach of duty. “We acknowledged that ERISA does not expressly or even impliedly create a right of action in those circumstances,” Judge Katzmann said. “We found however, that the underlying purposes of ERISA would be frustrated in the absence of such liability.” But the holding in Diduck, he said, “has not survived subsequent Supreme Court determinations.” In Mertens v. Hewitt Assocs., 508 U.S. 248 (1993), the Supreme Court found that non-fiduciaries who take part in a breach cannot be held liable for ordinary money damages. The Supreme Court said there was “strong evidence that Congress did not intend to authorize other remedies that it simply forgot to incorporate expressly.” And Katzmann said the Supreme Court “repeated its belief that ERISA’s express remedies … should remain exclusive” in Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002), and Rush Prudential HMO Inc. v. Moran, 536 U.S. 355 (2002). It was now clear, Katzmann said,that “the Supreme Court has instructed that it is not for us to decide the best ERISA remedial scheme.” LIMITED HOLDING Katzmann emphasized that the circuit was “limiting its holding to ERISA’s civil remedial provisions.” “In other respects, we continue to carry out Congress’s intent that we develop a federal common law of ERISA based on principles developed in evolution of the law of trusts,” Katzmann said. Turning to the pre-emption issue, Katzmann said the Diduck court had concluded that because ERISA provided equitable relief where a non-fiduciary participated in the fiduciary’s breach of duty, a state-law damages remedy is pre-empted. But the court’s pre-emption analysis in Diduck, he said, “is no longer consistent with prevailing Supreme Court precedent,” and “to the extent that Diduck is not distinguishable here, it has, in any event, been superseded.” Therefore, he said, the question remaining was whether Congress intended, through ERISA, to displace state law governing the regulation of actuaries. “We see relatively little in the central purposes of ERISA that would weigh in favor of preempting the Plaintiffs’ claims,” he said. And effectively immunizing actuaries by preempting state-law claims, he said, “could actually harm the financial integrity of the plans Congress intended to protect.” “As the allegations here illustrate, careless actuarial work can cause plans serious financial damage,” he said. “Our earlier discussion also demonstrates that ERISA’s equitable remedies often do not provide make-whole relief, so that the result urged by Savasta would leave the affected plan with no means for making up such shortfalls.” Judges Barrington D. Parker Jr. and Reena Raggi joined in the opinion. Mark J. Alonso of Alonso, Andalkar & Kahn represented Savasta. Richard H. Markowitz and Nancy A. Walker of Markowitz & Richman in Philadelphia represented the trustees. The U.S. Department of Labor filed amicus curiae.

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