Background
Five former employees of Inland Fresh Seafood Corporation sued on behalf of the company’s employee stock ownership plan and a proposed class of its 578 participants. They alleged that the plan used proceeds from a $92 million loan in 2016 to buy all outstanding Inland Fresh common stock from four company officers and directors at an inflated price that exceeded the company’s fair market value by tens of millions of dollars. Their claims under ERISA §§ 502(a)(2) and (a)(3) alleged fiduciary breaches, including the trustee’s failure to conduct adequate due diligence.
The district court dismissed the complaint because the plaintiffs had not pursued the plan’s administrative remedies, relying on Mason v. Continental Group, Inc. and later Eleventh Circuit decisions requiring exhaustion for statutory ERISA claims. A three-judge panel affirmed because Mason bound it. In a separate concurrence, two panel members said Mason was wrongly decided and should be overruled en banc. The Eleventh Circuit then vacated the panel opinion and granted rehearing en banc.
The Court’s Holding
The en banc court overruled Mason and its progeny to the extent they held that ERISA itself requires administrative exhaustion of statutory claims, including fiduciary-duty claims. ERISA’s text contains no such requirement, the court explained, and Mason improperly created one from policy considerations. The court also noted that seven sister circuits reject exhaustion for statutory ERISA claims and that overruling Mason would not alter ERISA’s substantive duties, claims, or remedies.
The court applied its holding retroactively to the plaintiffs and separately concluded that this plan did not mandate exhaustion of statutory claims. Its claims provisions used permissive terms such as “may” and “need not,” while the summary plan description said participants could file a federal suit if fiduciaries misused plan money. Although an arbitration clause referenced exhaustion of applicable claims procedures, no party had moved to compel arbitration. The court expressly declined to decide whether an ERISA plan may validly require exhaustion of statutory claims by contract.
Because neither ERISA nor the plan required these plaintiffs to exhaust administrative remedies before suing, the court reversed the dismissal and remanded the case to the panel for any further necessary proceedings.
Key Takeaways
- ERISA does not itself require participants or beneficiaries to exhaust plan procedures before asserting statutory claims, including claims for breach of fiduciary duty.
- The decision does not disturb Eleventh Circuit precedent generally requiring exhaustion when a plaintiff challenges the denial of benefits under an ERISA plan’s terms.
- The court found this plan’s review process voluntary but left unresolved whether a plan can validly impose contractual exhaustion on statutory ERISA claims.
Why It Matters
The decision removes a procedural barrier that had made the Eleventh Circuit an outlier for statutory ERISA litigation. Plaintiffs alleging fiduciary misconduct may no longer be dismissed merely because they failed to satisfy the judicially created exhaustion rule established by Mason.
The ruling is narrower than a rejection of all ERISA exhaustion requirements. Benefit-denial cases remain subject to existing exhaustion precedent, and the enforceability of an express plan term requiring exhaustion of statutory claims awaits another case.