Seyfarth Synopsis: In a significant en banc decision, Bolton v. Inland Fresh Seafood Corporation of America, Inc., No. 24-10084, the United States Court of Appeals for the Eleventh Circuit overruled its four-decade-old precedent in Mason v. Continental Group, Inc., 763 F.2d 1219 (11th Cir. 1985), and found that ERISA does not require plaintiffs to exhaust administrative remedies before bringing statutory claims—including claims for breach of fiduciary duty.
Background
The case arose from an employee stock ownership plan (ESOP) created by Inland Fresh Seafood Corporation. In November 2016, the plan used proceeds from a $92 million loan to purchase all outstanding shares of Inland’s stock from four officers and directors. Five former employees, on behalf of the plan’s 578 participants, sued under ERISA § 502(a)(2) and (a)(3), alleging that the defendants breached their fiduciary duties by causing the plan to overpay for the stock by tens of millions of dollars based on inflated, false financial projections. The district court dismissed the complaint, holding that it was bound by Mason and its progeny to require administrative exhaustion, and a panel of the Eleventh Circuit affirmed.
The En Banc Court’s Reasoning
Writing for the en banc court, Judge Jordan explained that Mason‘s exhaustion requirement “was an atextual product of judicial creation based solely on policy reasons.” The court emphasized that ERISA, despite its comprehensive scope, “does not contain an exhaustion requirement for statutory claims,” and that courts “are not at liberty to add to or take from the language of [a] statute.” The court noted that Mason itself had acknowledged ERISA does not require exhaustion had advocated for the requirement anyway for policy reasons.
The court underscored that the Eleventh Circuit’s Mason decision “stand[s] alone in requiring mandatory exhaustion for fiduciary-breach and statutory claims under ERISA,” noting that seven sister circuits—the Third, Fourth, Fifth, Sixth, Ninth, Tenth, and D.C. Circuits—hold that no exhaustion is required, with only the Seventh Circuit aligned with Mason (and even then on a discretionary rather than mandatory basis). The Court found that the quality of Mason‘s reasoning, its conflict with sister circuits, and minimal reliance interests all weighed in favor of overruling. The Court applied the holding retroactively.
Inland argued that even if ERISA did not require exhaustion, the plan did. However, the Court rejected that argument, finding the plan’s “Claims and Review Procedures” were permissive rather than mandatory, as they stated a participant “need not file a claim” but “may submit a written claim.” The Department of Labor, appearing as amicus, agreed that the plan’s internal review process “is voluntary, not mandatory.” Having found the plan language to be permissive, the Court did not decide whether a plan can impose an exhaustion requirement that ERISA does not contain. Moreover, while the case did not involve a benefit claim, the Court’s discussion of the permissive plan language flags a potential way for plaintiffs in benefit claim cases to avoid the exhaustion requirement.
Key Takeaways for Plan Sponsors and Fiduciaries
- Easier access to court. Participants in the Eleventh Circuit may now bring statutory ERISA claims—particularly fiduciary-breach claims—directly in federal court without first exhausting internal plan procedures.
- Review plan documents. Sponsors who wish to require participants to exhaust administrative remedies should revisit plan and SPD language to ensure the claim and appeal language is mandatory, not permissive.
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