Petition for Writ of Certiorari — Massachusetts Mutual Life Insurance v. Russell

Supreme Court brief1985

Ask Donna

What actually matters in this document.

Text

IN THE

Supreme Court of the United States

OCTOBER TERM, 1983

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,

and CECILIA STEVENSON,

Petitioners,

DorIs RUSSELL,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

JOHN E. NOLAN

(Counsel of Record)

PAUL J. ONDRASIK, JR.

ANTONIA B. IANNIELLO

STEPTOE & JOHNSON

CHARTERED

1250 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 862-2000

Attorneys for Petitioners

July 3, 1984

WILSON - EPES PRINTING Co.. INC. - 789-0096 - WASHINGTON. D.C. 20001

QUESTION PRESENTED

Whether, under the Employee Retirement Income Se-

curity Act, a fiduciary to an employee benefit plan may

be held personally liable to a plan participant or bene-

ficiary for punitive damages or extra-contractual com-

pensatory relief for improper or untimely processing of

benefit claims?

(i)

PARTIES TO THE PROCEEDING

Massachusetts Mutual Life Insurance Company *

Cecilia Stevenson

Doris Russell

* The following are non-wholly owned subsidiaries of the Massa-

chusetts Mutual Life Insurance Company as well as companies that

may be deemed affiliates thereof:

MML Blend Investment Company, Inc.

MML Equity Investment Company, Inc.

MML Managed Bond Investment Company, Inc.

MML Money Market Investment Company, Inc.

MML Bay State Life Insurance Company

MassMutual Corporate Investors Inc.

MassMutual Income Investors Inc.

MassMutual Mortgage and Realty Investors

MassMutual Liquid Assets Trust

Maslif One & Co.

TABLE OF CONTENTS

PARTIES TO THE PROCEEDING ..........................

TABLE OF AUTHORITIES .............................. icles

Tee ncesscanaces

STATUTES AND REGULATIONS INVOLVED........

STATEMENT OF THE CASE .....WW..2.2.......2.-.0--c000-000--

Il.

ITI.

IV.

The Ninth Circuit’s Punitive Damages Ruling

Conflicts with Decisions of the Eighth Circuit

and Numerous District Courts ........000000...

The Decision Below Is Inconsistent with

ERISA’s Plain Language and Legislative His-

tory, Prior Rulings of this Court and Decisions

Interpreting Analogous Statutes

The Ninth Circuit’s Decision to Imply a Puni-

tive Damages Remedy as an Addition to the

Specific Remedies Set Forth in ERISA Contra-

venes the Teachings of this Court ........

The Question Presented by this Petition Holds

Important Implications for Employee Benefit

Plans and the Federal Courts

For the Same Reasons, the Court Should Re

view the Ninth Circuit’s Holding on Extra-

LSS

(iii)

TABLE OF AUTHORITIES

CASES

Page

Bell v. Southern Oregon Log Scaling Bureau, 1

Empl. Ben. Cas. (BNA) 1439 (D. Or. 1976)... 8

Bittner v. Sadoff & Rudoy Industries, 490 F. Supp.

oe 7

Bittner v. Sadoff & Rudoy Industries, 728 F.2d 820

PO ha scene nisenaotedd 7, 17, 18-19

Bobo v. 1950 Pension Plan, 548 F. Supp. 623

I aa ccstmepennsiinanaian 7

Calamia v. Spivey, 632 F.2d 1235 (5th Cir. 1980).. 12

Calhoun v. Falstaff Brewing Corp., 478 F. Supp.

ff, 2 6 CE 3

California v. Sierra Club, 451 U.S. 287 (1981)...... 13

Chastain v. Delta Air Lines, Inc., 496 F. Supp. 979

8 RE a a a ee ee 12

Curtis v. Loether, 415 U.S. 189 (1974) .................. 11

Dean v. American Security Insurance Co., 559 F.2d

1036 (5th Cir. 1977), cert. denied, 434 U.S. 1066

lal dla lth ddl eeceadimaceil 12

DeGrace v. Rumsfeld, 614 F.2d 796 (1st Cir.

RISER enc ae ee ST Cee a a 12

Dependahl v. Falstaff Brewing Corp., 653 F.2d

1208 (8th Cir.), cert. denied, 454 U.S. 968

CUTIE. <nissetucsisieiicheikindipdiniiamdalindaiamn tewiitaiceedisatiaiiiaindlintiacaenin 7

Diano v. Central States Health, Welfare & Pension

Funds, 551 F. Supp. 861 (N.D. Ohio 1982) ........... 8

Donovan v. Bierwith, 680 F.2d 263 (2d Cir.), cert.

denied, 459 U.S. 1069 (1982) ............................... 11

Donovan v. Mazzola, 2 Empl. Ben. Cas. (BNA)

SR Gk Te NN Cede tectsttntcvecincenvctierenne 11

Eaton v. D’Amato, 581 F. Supp. 743 (D.D.C.

DD ecisicnrcesesieiiniicinsieteiibadiihciu aii iis 7

Eaves v. Penn, 587 F.2d 453 (10th Cir. 1978) _...... 11

Free v. Gilbert Hodgman, Inc., 3 Empl. Ben. Cas.

$F NR Bs 8 ee eee 7

Gertz v. Robert Welch, Inc., 418 U.S. 323 (1974).. 10, 17-

Gilliam v. Edwards, 492 F. Supp. 1255 (D.N.J.

1980) ..... 1l

TABLE OF AUTHORITIES—Continued

Page

Harrington v. Vandalia-Butler Board of Education,

585 F.2d 192 (6th Cir. 1978), cert. denied, 441

ST aS i leeeienmoetioneds 12

Hechenberger v. Western Electric Co., 570 F. Supp.

EE SL eee noe 7

Heine v. Clark Equipment Co., No. 82-C1286 (N.D.

Se ca leanne 8

Hurn v. Retirement Fund Trust of Plumbing In-

dustry, 424 F. Supp. 80 (C.D. Cal. 1976) —........... 8, 19

International Brotherhood of Electrical Workers v.

PN, Ge Ss Te GD onntrecttetntcctaniccsetinereiness 10, 15, 17

Jackson v. Occidental Life Insurance Co., No. C-

80-4288 SW (N.D. Cal. Mar. 2, 1981) —.............. 8

Jiminez v. Pioneer Diecasters, 549 F. Supp. 677

SG I I semis ibeaduaians 7

Kann v. Keystone Resources, Inc., 575 F. Supp.

I a 8

Local 127, United Shoe Workers v. ‘Brooke Shoe

Manufacturing Co., 298 F.2d 277 (3d Cir. 1962).. 12

Local 20, Teamsters Union v. Morton, 377 U.S. 252

ENS ES NDS = AR a OORT TION OT 12

Marshall v. Carroll, 2Empl. Ben. Cas. (BNA) 2491

ASIST LF EN OS Se ON li

Marshall v. Snyder, 430 F. Supp. 1224 (E.D.N.Y.

1977), aff'd in part and remanded in part, 572

ee Rg EE ee 10

Marfield v. Central State. Health, Welfare & Pen-

sion Funds, 559 F. Supp. 158 (N.D. Ill. 1982).... 7

Meyer v. Phillip Morris, Inc., 569 F. Supp. 1510

I es 7

Meyer v. Phillip Morris, Inc., 575 F. Supp. 1232

ER AE a a Pe aT ee 7

Middlesex County Sewerage Authority v. National

Sea Clammers Association, 453 U.S. 1 (1981)... 13,14

Pearson v. Western Electric Co., 542 F.2d 1150

i ee 11, 12

Pfeiffer v. Essex Wire Corp., 682 F.2d 684 (7th

Cir.), cert. denied, 489 U.S. 1039 (1982)... 12

TABLE OF AUTHORITIES—Continued

Page

Pollock v. Castrovinci, 476 F. Supp. 606 (S.D.N.Y.

1979), aff'd mem., 662 F.2d 575 (2d Cir. 1980) .... 12

Republic Steel Corp. v. NLRB, 311 U.S. 7 (1940).. 10

Richerson v. Jones, 551 F.2d 918 (3d Cir. 1977).... 11, 12

Rogers v. Northern California Retail Clerks Trust

Fund, No. C-77-1904 (N.D. Cal. June 8, 1978)... 8

Scheirer v. NMU Pension & Welfare Plan, No. 82

Civ. 5544 (S.D.N.Y. Sept. 15, 1983) —........ 8

Shah v. Mt. Zion Hospital & Medical Center, 642

5 4 EEE eeeneeneeaae 12

Smith v. Wade, 103 S. Ct. 1625 (19838) ......--2.. 17, 18

Texas Industries, Inc. v. Radcliff Materials, Inc.,

I cilibommenenie 13

Transamerica Mortgage Advisors, Inc. v. Lewis,

Ea: 2 a a 14

UAW v. Federal Forge, Inc., No. G&83-330 (W.D.

gE en eR 8

Vasquez v. Eastern Air Lines, Inc., 579 F.2d 107

TS Be a PR Te eR 12

Walker v. Ford Motor Co., 684 F.2d 1355 (11th

RATE SIRI PE SRR oe a on NC oe Pn TCS 11, 12

Wardle v. Central States Pension Fund, 627 F.2d

820 (7th Cir. 1980), cert. denied, 449 U.S. 1112

IE Sacesibiciila tiie alah ati aaa a 12

Whitaker v. Texaco, Inc., 566 F. Supp. 745 (N.D.

i ee 8

Williams v. Pacific Maritime Association, 421 F.2d

a 12

Winterrowd v. Freedman & Co., 724 F.2d 823 (9th

EES Se etch rere cere eT Wea 6

Zink v. Heiser, 109 Misc. 2d 354, 488 N.Y.S.2d 209

RAE, Sees aa 9

Ziskind v. Retail Clerks International Association,

38 Empl. Ben. Cas. (BN4.) 1012 (E.D. Cal.

TTI: itiintectacisenentnisitteersinnstebitiinepiagiiseninnnianine tia. 8

Zittrouer v. UARCO, 582 F. Supp. 1471 (N.D. Ga.

1984)

vii

TABLE OF AUTHORITIES—Continued

STATUTES Page

Civil Rights Act of 1968 §812(c), 42 U.S.C.

DE x, 14

Comprehensive Environmental Response, Compen-

sation, and Liability Act of 1980 § 107(c) (3), 42

U.S.C. § 9607 (c) (3) (Supp. V 1981) -.................. 14

Consumer Credit Protection Act §§ 616, 706, 15

U.S.C. §§ 1681n, 169le(b) (1982) ........................ 14

Deepwater Port Act of 1974 §15(c), 33 U.S.C.

I A a acscamancigaiionn 14

Financial institutions Regulatory and Interest Rate

Control Act of 1978 § 1117(a), 12 U.S.C. § 3417

laine 14

Foreign Intelligence Surveillance Act of 1978 § 110,

50 U.S.C. § 1810 (Supp. V 1981) ~......................... 14

Jewelers Liability Act §5(c), 15 U.S.C. § 298(c)

i ae a ee eee ye Ore 14

Natural Gas Pipeline Safety Act of 1968 §12(a),

49 U.S.C. § 1679b(a) (Supp. V 1981) ................... 14

Omnibus Crime Control and Safe Streets Act of

1968 § 802, 18 U.S.C. § 2520 (1982) _.......... 14

Pipeline Safety Act of 1979 § 209(a), 49 U.S.C.

+S lh Sh 14

Railroad Revitalization and Regulatory Reform Act

of 1976 § 511(j), 45 U.S.c. § 831(j) (1982)... 14

Securities Exchange Act of 1934 § 21, 15 U.S.C.

REAR Oe or a eee ee 14

Tax Equity and Fiscal Responsibility Act of 1982

§ 357(a) (c), 26 U.S.C. § 7431 (c) (1982) ...... 14

Transportation Safety Act of 1974 §111(a), 49

8 TR 1 |. Aaa en eee 14

ERISA § 2(a), 29 U.S.C. §1001(a) (1982) _........ 16

ERISA § 404, 29 U.S.C. § 1104 (1982) -..... 15

ERISA § 408(c)(2), 29 U.S.C. §1108(c) (2)

a inedatnniien 15

ERISA § 409, 29 U.S.C. § 1109 (1982) _..... ae passim

ERISA § 501, 29 U.S.C. § 1181 (1982) 13

ERISA § 502(a) (1) (A), (a) (4), (c), 29 U.S.C.

§ 1182(a) (1) (A), (a) (4), (ce) (1982) 0. 13

ERISA § 502(a) (1) (A), (a) (3), (a) (4), 29 U.S.C.

§ 1132(a) (1) (A), (a) (3), (a) (4) (1982)........ 6

viii

TABLE OF AUTHORITIES—Continued

Page

ERISA § 502(a) (1) (B), 29 U.S.C. § 1132(a) (1)

SE IIE - sisi ccsscsnsstosteridtadnsdesnenebedianagerceneniadiinoeyeenes 6, 10

ERISA §502(a)(2), 29 U.S.C. §1132(a) (2)

la easiceensesisensiinaiibdeiiaiipsentieiaapes 9

ERISA §502(a)(3), 29 U.S.C. § 1132(a) (3)

I 5 5s sibs ath atctenecigthindnniemenernsensshbeeshinsonnliinitiaeiieomie 11

ERISA §502(e)(1), 29 U.S.C. §1132(e) (1)

RE A eos eo ee ET I 16, 17, 19

ERISA §502(z)(1), 29 U.S.C. §1132(g) (1)

a cntieneieioinaieenienis 13

ERISA § 5038, 29 U.S.C. § 1133 (1982) ..................... 5, 16

I ic aecnetnclnninvndemnsnnense -eteies 2

| __; nese rE eran EnIE 4

EE ET ON); CE 4

REGULATIONS

29 C.F.R. § 2560.508-1 (1983) -.............2.22...----eeeeeeeeees 2,16

29 C.F.R. § 2560.503-1(h) (1983) -...........................-. 5

CONGRESSIONAL MATERIALS

H. Conf. Rep. No. 1280, 93d Cong., 2d Sess.

Ee RN eee nen A a 9

S. Rep. No. 127, 93d Cong., Ist Sess. (1973) .......... 9,11

BOOKS AND PERIODICALS

Flaskamp & Jamar, Insurability of Punitive Dam-

ages—E ffect on Strategies and Tactics of Coun-

sel, in ABA, Extracontractual Damages (1983)... 16

Restatement (Second) of Trusts 2d (1959) —.......... 1l

3 A.W. Scott, The Law of Trusts (3d ed. 1967) ...... 1l

Wheeler, The Constitutional Case for Reforming

Punitive Damages Procedures, 69 Va. L. Rev. 269

I a i ai Nid intial cetensitnniniiliaininobesniintintes 18

MISCELLANEOUS

U.S. Dep’t of Labor, Labor Management Services

Admin., Pension and Welfare Benefits Programs,

Estimates of Participant and Financial Charac-

teristics of Private Pension Plans (1983) ........... 14

TABLE OF AUTHORITIES—Continued

4 Health and Population Study Center, Battelle

Human Affairs Research Centers, Employee

Welfare Benefit Plans and Plan Sponsors in the

Private Nonfarm Sector in the United States,

1978-79 (1980)

Oe Re EEO EE EEE REESE E EEE EET ORES Hee

Page

IN THE

Supreme Court of the United States

OCTOBER TERM, 1983

No.

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,

and CECILIA STEVENSON,

Petitioners,

DoRIS RUSSELL,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

The Petitioners, Massachusetts Mutual Life Insurance

Company, and Cecilia Stevenson, respectfully pray that a

writ of certiorari issue to review the judginent and opin-

ion of the United States Court of Appeals for the Ninth

Circuit entered in this proceeding on December 16, 1983.

OPINIONS BELOW

The opinion of the Court of Appeals is reported at 722

F.2d 482 (9th Cir. 1983), and appears in the Appendix

at la to 25a. The order of the United States District

Court for the Central District of California granting

petitioners’ motion for summary judgment, as well as the

findings of fact and conclusions of law issued in con-

nection therewith, are unreported and appear in the

Appendix at 26a to 32a.

JURISDICTIONAL STATEMENT

The judgment of the Court of Appeals for the Ninth

Circuit was entered on December 16, 1983. A timely

petition for rehearing and suggestion for rehearing en

bane was denied by the Court of Appeals on April 6,

1984. Appendix (“App.”) at 34a. The jurisdiction of

this Court is invoked pursuant to 28 U.S.C. § 1254(1).

STATUTES AND REGULATIONS INVOLVED

This case involves sections 409, 501, 502, and 503 of

the Employee Retirement Income Security Act df 1974

(“ERISA”), as amended, 29 U.S.C. §§ 1109, 1131, 1132,

and 1133 (1982), and 29 C.F.R. § 2560.503-1 (1983)

promulgated under ERISA section 503. These provisions

are reprcduced in the Appendix at 35a to 48a.

STATEMENT OF THE CASE

Petitioner, Massachusetts Mutual Life Insurance Com-

pany (“Mass Mutual’), sponsors two ERISA-covexed

employee benefit plans which provide disability benefits

to eligible employees. The Employee Salary Continuance

Plan is a sick pay plan which provides short-term salary

continuation payments for employees. The Employee Dis-

ability Plan provides long-term disability benefits to

totally disabled employees who have exhausted their

Salary Continuance Plan benefits. Both plans are pro-

vided at no cost to employees and are funded from the

general assets of the company.’

Respondent, Doris Russell, worked as a group claims

examiner in Mass Mutual’s Los Angeles office until May,

1979 when she became disabled with a back problem.

1 Petitioner Cecilia S evenson, an employee of Mass Mutual, was

Respondent’s supervisor at the company.

Shortly thereafter, Respondent began receiving benefits

under the Employee Salary Continuance Plan. These

benefits were discontinued by the plan in October, 1979

upon the recommendation of Mass Mutual’s Disability

Committee.2 This recommendation was based on an ex-

amination report from an independent orthopedic surgeon

which concluded that Russell was not physically disabled

from performing her usual occupation and that no perma-

nent disability was anticipated.

Russell was advised both of this decision and her right

to appeai to the Plan Administrator by letter dated

October 17, 1979. App. at 49a. Thereafter, by letter

dated October 22, 1979 to the Director of Group Claims

rather than the Plan Administrator, Russell requested

additional information regarding the termination of her

benefits and an application for long-term disability bene-

fits. App. at 50a. She also indicated that she would

appeal the termination and submit additional medical

evidence confirming her disability. Jd. Such additional

evidence was presented to the Plan Administrator in a

letter dated November 27, 1979, and included a report

from Russell’s psychiatrist which indicatei that she was

suffering from a psychosomatic disability with physical

manifestations rather than an orthopedic disability. App.

at 54a.

Russell’s November 27, 1979 letter was treated as a

formal appeal and referred to the Disability Committee.

Thereafter, at the Disability Committee’s request, Russell

was examined by an independent psychiatrist, who con-

firmed Russell’s temporary psychiatric disability in a

report dated February 15, 1980. Based on this report,

the Disability Committee recommended that Russell’s dis-

2 The Disability Committee is composed of Mass Mutual’s Chief

Medical Officer, and four other employees of the company. These

employees are appointed by the Chief Executive Officer and receive

no special compensation for serving on the Committee, above their

normal salary.

ability benefits be reinstated retroactively, which recom-

mendation was adopted. Russell was notified of this de-

cision by letter dated March 11, 1980, App. at 56a, and

payment of all benefits due her was made two days later.

App. at 57a-58a. In addition, Russell subsequently sub-

mitted an application for long-term disability benefits

which was approved.*

Despite the award of all plan benefits to which she was

entitled, Russell brought this action against Petitioners

on December 9, 1980 in California Superior Court. Her

complaint, which purportedly was predicated on state law,

alleged several causes of action arising from her initial

suspension of benefits, including breach of a duty of good

faith and fair dealing, breach of fiduciary duty, and in-

tentional and negligent infliction of emotional distress.*

As relief, Russell sought compensatory damages for eco-

nomic losses and mental anguish and an award of puni-

tive damages.*

Following removal of the action,* the United States

District Court for the Central District of California

granted Petitioners’ motion for summary judgment. The

court first held that ERISA preempted all state law

causes of actions relating to the processing of Russell’s

%In contrast, Russell submitted a claim to the Social Security

Administration for disability benefits which was denied.

* Russell’s complaint also included a claim for wrongful discharge

under state law which is not involved in this petition.

5 Among other things, Russell alleged that the suspension of

benefits forced her husband, who also was disabled and without

income, to cash out his retirement savings plan in December, 1979.

Further, Russell contended that her preexisting psychosomatic

illness was aggravated as a result of the alleged improper and

untimely processing of her benefit claim, and sought damages for

mental and emotional distress.

6 Petitioners removed this action pursuant to 28 U.S.C. § 1441(a)

(1982), alleging the existence of federal jurisdiction under 29

U.S.C. § 1132(e) (1) (1982) and 28 U.S.C. §1331(a) (1982).

claim for disability benefits. App. at 29a-30a. It then

concluded that, as a matter of law, punitive damages

and extra-contractual compensatory damages were not

available under ERISA. App. at 30a. The court thus

accepted, sub silentio, Petitioners’ contention that, in the

benefits claim context, ERISA extends a plan participant

a cause of action solely for recovery of benefits due under

a plan, vhich benefits Russell had been paid in full.

Finally, the court rejected Russell’s argument, raised for

the first time in opposition to Petitioners’ motion, that

Petitioners had violated ERISA by failing to process her

appeal within 120 days, as required by regulations pro-

mulgated under ERISA section 503, 29 U.S.C. § 1133.

See 29 C.F.R. § 2560.503-1(h) (1983). App. at 30a. In

this regard, the court accepted Petitioners’ contentions

that Russell’s appeal began upon receipt of her November

27, 1979 letter, and that Petitioners’ disposition of that

appeal on March 11, 1980 was well within the 120-day

time limit. Id.

The Ninth Circuit afiirwed the district court’s ruling

that Russell’s state law causes of action were preempted

by ERISA. App. at 8a. It held, however, that Russell

had stated a cavse of action under ERISA for breach of

fiduciary duty, based on the alleged improper or untimely

handling of her appeal. App. at 10a. In this regard, the

Court of Appeals peremptorily rejected the district court’s

finding that the Plan Administrator had processed her

appeal in a timely manner, determining that Russell’s

appeal had commenced with her initial letter of October

22, 1979, and that the final determination, accordingly,

was rendered at least twelve days beyond the 120-day

limit. App. at 1la-12a. The Court went on to hold that

such a cause of action could support an award of both

extra-contractual compensatory relief, including damages

for mental or emotional distress, and punitive damages,

reversing the district court’s conclusion that such relief

was unavailable under ERISA in the benefit claims con-

text. App. at 13a-18a. In so holding, the Court relied upon

language in ERISA section 409 which subjects errant

fiduciaries to, among other things, “such other equitable

or remedial relief as the court may deem appropriate.”

App. at 13a, 16a. In the Court’s view, such language was

broad enough to encompass both punitive and compensa-

tory damages notwithstanding that: (a) section 409 by

its terms authorizes recovery only on behalf of a plan and

not on behalf of individual plan participants; (b) puni-

tive damages traditionally have been viewed as neither

remedial nor equitable forms of relief; and (c) Congress

expressly provided a cause of action to plan participants

and beneficiaries in the benefit claims context limited to

the recovery of plan benefits and the enforcement and

clarificaticn of their rights under the plan, ERISA sec-

tion 502(a) (1) (B), 29 U.S.C. § 1182(a) (1) (B) (1982)."

It therefore remanded the case to the district court for

further proceedings.

REASONS FOR GRANTING THE WRIT

I. The Ninth Circuit’s Punitive Damages Ruling Conflicts

with Decisions of the Eighth Circuit and Numerous

District Courts

Review of the lower court’s ruling on punitive damages

is essential to resolve a conflict both between the Ninth

and Eighth Circuits and among the district courts. That

the Ninth Circuit has authorized an award of punitive

damages under ERISA is plain both from Russell and

its subsequent decision in Winterrowd v. Freedman &

Co., 724 F.2d 823 (9th Cir. 1984), affirming an ERISA

award of punitive damages against a contributing em-

ployer to a multiemployer plan. The Ninth Circuit’s

holding, however, squarely conflicts with the reasoning of

7 The other causes of action extended to participants and bene-

ficiaries under ERISA § 502 likewise make no mention of punitive

or compensatory damages, but instead are limited to non-legal

forms of relief. See ERISA § 502(a)(1)(A), (a) (8), (a) (4), 29

U.S.C. § 1132(a) (1) (A), (a) (3), (a) (4) (1982).

the Eighth Circuit in Dependahl v. Falstaff Brewing

Corp., €53 F.2d 1208 (8th Cir.), cert. denied, 454 U.S.

968 (1981), in which the Court stated:

We do not think punitive damages are provided for

in ERISA. Ordinarily punitive damages are not

presumed; they are not the norm; and nowhere in

ERISA are they mentioned. If Congress had de-

sired to provide for punitive damages, it could have

easily so stated, as it has in other acts.

653 F.2d at 1216 (dictum); see also Bittner v. Sadoff &

Rudoy Industries, 728 F.2d 820, 825-26 (7th Cir. 1984)

‘ yunitive damages not available in action for pian bene-

fits under ERISA section 502(a)(1)(B)). This reason-

ing has been followed by district courts both in the

Eighth Circuit and elsewhere. See, e.g., Meyer v. Phillip

Morris, Inc., 575 F. Supp. 1232 (E.D. Mo. 1983) (puni-

tive damages not available against fiduciary for violation

of section 104(b) (1) & (3)); Hechenberger v. Western

Electric Co., 570 F. Supp. 820 (E.D. Mo. 1983) (punitive

damages not available under ERISA); Meyer v. Phillip

Morris, Inc., 569 F. Supp. 1510 (E.D. Mo. 1983) (puni-

tive damages not available for violation of section 104 (b)

(3) & (4)); Maxfield v. Central States Health, Welfare

& Pension Funds, 559 F. Supp. 158 (N.D. Ill. 1982)

(punitive damages not available under ERISA).

Other district courts across the country likewise are

sharply divided on the availability of punitive damages

under ERISA as well as the legal rationale therefor.

Compare Eaton v. D’Amato, 581 F. Supp. 743 (D.D.C.

1980) (punitive damages available against fiduciary un-

der section 409); Jiminez v. Pioneer Diecasters, 549 F.

Supp. 677 (C.D. Cal. 1982) (same); Bobo v. 1950 Pen-

sion Plan, 548 F. Supp. 623 (W.D.N.Y. 1982) (same) ;

Free v. Gilbert Hodgman, Inc., 3 Empl. Ben. Cas. (BNA)

1010 (N.D. Ill. 1982) (same); and Bittner v. Sadoff &

Rudoy Industries, 490 F. Supp. 534 (E.D. Wis. 1980)

(punitive damages available for violation of section 440),

with Zittrouer v. UARCO, 582 F. Supp. 1471 (N.D. Ga.

1984) (punitive damages not available under ERISA) ;

Whitaker v. Texaco, Inc., 566 F. Supp. 745 (N.D. Ga.

1983) (punitive damages not available against fiduciary

under section 409); Diano v. Central States Health,

Welfare & Pension Funds, 551 F. Supp. 861 (N.D.

Ohio 1982) (punitive damages not available under

ERISA); Calhoun v. Falstaff Brewing Corp., 478 F.

Supp. 357 (E.D. Mo. 1979) (same); Hurn v. Retirement

Fund Trust of Plumbing Industry, 424 F. Supp. 80

(C.D. Cal. 1976) (same); UAW v. Federal Forge, Inc.,

No. G83-330 (W.D. Mich. Apr. 5, 1984) (same) ; Heine

v. Clark Equipment Co., No. 82-C-1286 (N.D. Ill. Dec.

21, 1983) (same); Scheirer v. NMU Pension & Welfare

Plan, No. 82 Civ. 5544 (S.D.N.Y. Sept. 15, 1983)

(same); Jackson v. Occidental Life Insurance Co., No.

C-80-4288 SW ‘N.D. Cal. Mar. 2, 1981) (same) ; Ziskind

v. Retail Clerks International Association, 3 Empl. Ben.

Cas. (BNA) 1012 (E.D. Cal. 1982) (punitive damages.

not available against fiduciary under section 409);

Rogers v. Northern California Retail Clerks Trust Fund,

No. C-77-1904 (N.D. Cal. June 8, 1978) (punitive dam-

ages not available under ERISA); and Bell v. Southern

Oregon Log Scaling Bureau, 1 Empl. Ben. Cas. (BNA)

1439 (D. Or. 1976) (same). See also Kann v. Keystone

Resources, Inc., 575 F. Supp. 1084 (W.D. Pa. 1983)

(court implied punitive damages allowable against fiduci-

ary under ERISA). The confusion created by these rul-

ings, which already has affected employee benefit plans

and their fiduciaries across the country, provides suffi-

cient grounds for reviewing the lower court’s decision.

II. The Decision Below Is Inconsistent with ERISA’s

Plain Language and Legislative History, Prior Rul-

ings of this Court and Decisions Interpreting Analo-

gous Statutes

The Ninth Circuit’s ruling not only has exacerbated

the confusion existing in the lower courts, but also rests

on a fundamental misconstruction of ERISA. Even a

cursory review of ERISA demonstrates that section 409

by its terms authorizes recovery of appropriate equitable

and remedial relief solely on behalf of the plan itself, and

not on behalf of individual participants.* This fact is

confirmed, moreover, by ERISA’s legislative history

which repeatedly emphasizes that any recovery under

section 409 necessarily inures to the benefit of the plan

as a whole. See, e.g., H. Conf. Rep. No. 1280, 93d Cong.,

2d Sess. 320 (1974) (fiduciary personally liable for losses

sustained by plan that result from violation of rules) ;

S. Rep. No. 127, 93d Cong., Ist Sess. 33 (1973) (fidu-

ciary personally liable to reimburse fund for losses re-

sulting from breach and to pay over personal profit real-

ized through use of fund assets) ; see also Zink v. Heiser,

109 Mise. 2d 354, 438 N.Y.S.2d 209 (Sup. Ct. 1981)

(recovery against fiduciary under section 409 available

only to plan and not to participants or beneficiaries) .*

8 Section 409(a) provides in pertinent part:

Any person who is a fiduciary with respect to a plan who

breaches any of the responsibilities, obligations, or duties im-

posed upon fiduciaries by this subchapter shall be personally

liable to make good to such plan any losses to the plan resulting

from each such breach, and to restore to such plan any profits

of such fiduciary which have been made through use of assets

of the plan by the fiduciary, and shall be subject to such other

equitable or remedial relief as the court may deem appropriate,

including removal of such fiduciary.

29 U.S.C. § 1109(a) (1982) (emphasis added).

® That § 409 provides recovery only on behalf of the plan itself is

further evident from § 502(a) (2), the ERISA civil enforcement

provision which sets forth the statutory basis for bringing suit

against fiduciaries. That section authorizes four categories of indi-

viduals to seek relief under § 409: (1) the Secretary of Labor;

(2) participants; (3) beneficiaries; or (4) other fiduciaries. ERISA

§ 502(a) (2), 29 U.S.C. § 1182(a) (2) (1982). The common interest

shared by these parties is to protect the financial soundness and

integrity of the plan as a whole, and not to redress particular indi-

vidualized injury suffered by a single participant or beneficiary.

Such matters must be resolved by recourse to the other provisions

of § 502.

In sharp contrast, Congress specifically extended partici-

pants and beneficiaries a cause of action in ERISA sec-

tion 502(a) (1) (B), 29 U.S.C. 1132(a)(1)(B) (1982),

to recover any plan benefits due them as well as to en-

force or clarify their rights under a plan. Thus, contrary

to the Ninth Circuit’s ruling, neither ERISA’s plain lan-

guage, nor its legislative history, supports the proposition

that a fiduciary may be held personally liable for dam-

ages to an individual under section 409, much less, for

punitive damages.

Moreover, in concluding that punitive damages are en-

compassed within the “equitable or remedial relief” au-

thorized by section 409, the Court of Appeals ignored

this Court’s prior rulings that statutory provisions aimed

at providing remedial relief do not allow for such awards.

See, e.g., International Brotherhood of Electrical Workers

v. Foust, 442 U.S. 42, 52 (1979); Republic Steel Corp.

v. NLRB, 311 U.S. 7, 10-12 (1940). As the Court ob-

served in International Brotherhood of Electrical Work-

ers v. Foust, supra, punitive damages by their very na-

ture are not remedial, but rather are “private fines

levied . . . to punish reprehensible conduct and to deter

its future occurrence.” 442 U.S. at 48 (quoting Gertz v.

Robert Welch, Inc., 418 U.S. 323, 350 (1974) ).2° Accord-

ingly, statutory provisions, like section 409, which refer

solely to equitable and remedial relief, cannot support an

award of punitive damages.”

10 Indeed, despite its ruling, the Ninth Circuit recognized as

much:

The primary role of punitive damages is not to compensate

the victim ... , but to punish the wrongdoer and deter others

from similar misconduct.

App. at 16a.

11 The types of remedies imposed by courts under § 409 have

included removal of the fiduciary, see Marshall v. Snyder, 430 F.

Supp. 1224, 1233 (E.D.N.Y. 1977), aff'd in part and remanded in

part, 572 F.2d 894 (2d Cir. 1978), appointment of independent

In much the same vein, the Ninth Circuit’s holding

disregards the principle, firmly rooted in American juris-

prudence, that punitive damages are not an equitable

remedy, but a traditional form of legal relief offered

only in courts of law. See Curtis v. Loether, 415 U.S.

189, 196 (1974); Walker v. Ford Motor Co., 684 F.2d

1355, 1364 (11th Cir. 1982); Richardson v. Jones, 551

F.2d 918, 927 (3d Cir. 1977): Pearson v. Western Elec-

tric Co., 542 F.2d 1150, 1152 (10th Cir. 1976). That

the remedies contemplated by section 409 and, indeed,

ERISA as a whole are essentially equitable in nature is

apparent not only from the statute’s express language,”

but also from ERISA’s legislative history. That history

evidences Congress’ intent to construe ERISA in accord-

ance with the law of trusts, see S. Rep. No. 127, 93d

Cong., 1st Sess. 29 (1973); Donovan v. Bierwith, 680

F.2d 263, 271 (2d Cir.), cert. denied, 459 U.S. 1069

(1982), an area generally considered to be within the

exclusive province of equity courts, see 3 A.W. Scott, The

Law of Trusts § 197, at 1625 (3d ed. 1967) ; Restatement

(Second) of Trusts 2d § 197 (1959). Indeed, based upon

the characterization of ERISA’s remedies as distinctly

equitable, the courts have concluded with near univer-

sality that a jury trial is not available to participants

managers to invest the plan’s assets, see Donovan v. Mazzola, 2

Empl. Ben. Cas. (BNA) 2115, 2138 (N.D. Cal. 1981), injunctions

against, and rescission of transactions violative of the statute, see

Eaves v. Penn, 587 F.2d 453, 463 (10th Cir. 1978); Gilliam v.

Edwards, 492 F. Supp. 1255 (D.N.J. 1980), and prohibitions

against future transactions between employee benefit plans and

fiduciaries found guilty of misconduct, see Marshall v. Carroll, 2

Empl. Ben. Cas. (BNA) 2491, 2500 (N.D. Cal. 1980).

12 For example, under the civil enforcement provisions of ERISA,

participants may sue alternatively “to recover benefits,” to “en-

force” or “clarify” rights under the plan, to redress breaches of

fiduciary duty on behalf of the plan, to “enjoin” any act or prac-

tice which violates either ERISA or the terms of the plan or

“to obtain other appropriate equitable relief.” ERISA §§ 409(a),

502(a)(1)(B), (a) (2), (a) (3); 29 U.S.C. §§1109(a), 1132(a)

(1)(B), (a) (2), (a) (8) (1982).

seeking relief under the statute. See, e.g., Calamia v.

Spivey, 632 F.2d 1235 (5th Cir. 1980); Wardle v. Cen-

tral States Pension Fund, 627 F.2d 820 (7th Cir. 1980),

cert. denied, 449 U.S. 1112 (1981); Chastain v. Delta

Air Lines, Inc., 496 F. Supp. 979 (N.D. Ga. 1980) ;

Pollock v. Castrovinci, 476 F. Supp. 606 (S.D.N.Y. 1979),

aff'd mem., 662 F.2d 575 (2d Cir. 1980).

Finally, the Ninth Circuit’s ruling is inconsistent with

decisions interpreting analogous federal statutes which

routinely have barred awards of punitive damages.

Courts construing Title VII of the Civil Rights Act of

1964,"* the Age Discrimination in Employment Act,"*

and the Labor Management Relations Act,” which are

similar in both purpose and structure to ERISA, have

concluded that punitive damages are not authorized by

these statutes. A dispositive decision by this Court is

necessary then both to reconcile the conflict presented by

these decisions and to provide practical guidance to lower

courts faced with application of these statutes.

13 See, e.g., Walker v. Ford Motor “o., 684 F.2d 1354 (11th Cir.

1982); Shah v. Mt. Zion Hospital & Medical Center, 642 F.2d 268

(9th Cir. 1981); DeGrace v. Rumsfeld, 614 F.2d 796 (1st Cir.

1980); Harrington v. Vandalia-Butler Board of Education, 585

F.2d 192 (6th Cir. 1978), cert. denied, 441 U.S. 932 (1979) ; Richer-

son v. Jones, 551 F.2d 918 (3d Cir. 1977); Pearson v. Western

Electric Co., 542 F.2d 1150 (10th Cir. 1976).

14 See, e.g., Pfeiffer v. Essex Wire Corp., 682 F.2d 684 (7th

Cir.), cert. denied, 489 U.S. 1089 (1982); Vazquez v. Eastern Air

Lines, Inc., 579 F.2d 107 (1st Cir. 1978); Dean v. American Secu-

rity Insurance Co., 559 F.2d 1036 (5th Cir. 1977), cert. denied,

434 U.S. 1066 (1978).

15 See, e.g., Local 20, Teamsters Union v. Morton, 377 U.S. 252

(1964) (punitive damages not available under § 303 of LMRA) ;

Williams v. Pacific Maritime Ass’n, 421 F.2d 1287 (9th Cir. 1970)

(punitive damages not available under § 301 of LMRA) ; Local 127,

United Shoe Workers v. Brooks Shoe Manufacturing Co., 298 F.2d

277 (3d Cir. 1962) (same).

ill. The Ninth Circuit’s Decision to Imply a Punitive

Damages Remedy as an Addition to the Specific

Remedies Set Forth in ERISA Contravenes the Teach-

ings of this Court

The Ninth Circuit’s approval of punitive damage

awards under ERISA contravenes this Courts general

proscription against implying additional remedies where

specific limited relief is provided by statute. See, e.g.,

Middlesex County Sewerage Authority v. National Sea

Clammers Association, 453 U.S. 1 (1981); Texas Indus-

tries, Inc. v. Radci:ff Materials, Inc., 451 U.S. 630

(1981) ; California v. Sierra Club, 451 U.S. 287 (1981);

Trensamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S.

11 (1979). ERISA contains unusually detailed and par-

ticularized enforcement provisions which do not provide

for an award of punitive damages. Besides the many

remedies noted earlier, participants and beneficiaries may

file suit to enforce the disclosure and reporting provisions

of the Act, and, in appropriate cases, courts may assess a

penalty of $100 a day against administrators who fail to

comply with a proper request for information. See ERISA

section 502(a)(1)(A), (a)(4), (ec), 29 U.S.C. § 1132

(a) (1) (A), (a) (4), (ce) (1982). Similarly, ERISA pro-

vides for an award of reasonable attorneys’ fees and

costs to participants, beneficiaries or fiduciaries in in-

stances where the court determines that such fees are

warranted. ERISA section 502(g) (1), 29 U.S.C. § 1132

(g) (1). Finally, the Act provides criminal penalties for

willful violations of ERISA’s reporting and disclosure

provisions under which imprisonment and fines up to

$100,000 may be imposed. ERISA section 5014, 29 U.S.C.

§ 1131 (1982). In view of these elaborate enforcement

provisions, it is highly improbable that Congress intended

to authorize by implication additional punitive damage

awards against fiduciaries. Middlesex County Sewerage

Authority v. National Sea Clammers Association, 453

U.S. at 14: Transamerica Mortgage Advisors, Inc. v.

Lewis, 444 U.S. at 20."°

IV. The Question Presented by this Petition Holds Im-

portant Implications for Employee Benefit Plans and

the Federal Courts

Unless reversed, the Ninth Circuit’s punitive damages

ruling will have significant and adverse implicati.ns both

for the proper administration of employee benefit plans

and the federal courts. The Department of Labor’s most

recent studies indicate that in the United States there

are approximately 500,000 private pension plans, which

alone cover over 50 million individuals, as well as an

estimated 1.7 million sponsors of private employee wel-

fare benefit plans. See U.S. Dep’t of Labor, Labor Man-

agement Services Admin., Pension and Welfare Benefits

Programs, Estimates of Participant and Financial Char-

acteristics of Private Pension Plans at 1 (1983); 4

Health and Population Study Center, Battelle Human

Affairs Resesrch Centers, Employee Welfare Benefit

16 Inzeed, where Congress has desired to allow for punitive relief,

it has not hesitated to do so. At least 14 federal statutes expressly

provide for an award of punitive damages in appropriate cases.

See Financial Institutions, Regulatory and Interest Rate Control

Act of 1978 § 1117(a), 12 U.S.C. § 3417(a) (1982); Securities Ex-

change Act of 1934 §21, 15 U.S.C. §$78u(h) (1982); Jewelers’

Liability Act §5(c), 15 U.S.C. § 298(c) (1982); Consumer Credit

Protection Act $§ 616, 706, 15 U.S.C. §§ 1681n, 1691ie(b) (1982) ;

Omnibus Crime Control and Safe Streets Act of 1968 § 802, 18

U.S.C. § 2520 (1982); Tax Equity and Fiscal Responsibility Act

of 1982 § 357(a) (c), 26 U.S.C. § 7431(c) (1982); Deepwater Port

Act of 1974 § 15(c), 33 U.S.C. § 1514(c) (1982); Civil Rights Act

of 1968 § 812(c), 42 U.S.C. § 3612(c) (1976); Comprehensive En-

vironmental Response, Compensation, and Liability Act of 1980

§ 107(c) (3), 42 U.S.C. § 9607(c) (3) (Supp. V 1981); Railroad

Revitalization and Regulatory Reform Act of 1976 §511(j), 45

U.S.C. § 831(j) (1982); Natural Gas Pipeline Safety Act of 1968

§$12(a), 49 U.S.C. §1679b(a) (Supp. V 1981); Transportation

Safety Act of 1974 § 111(a), 43 U.S.C. §1810(a) (1976); Pipeline

Safety Act of 1979 § 209(a), 49 U.S.C. § 2008(a) (Supp. V 1981) ;

and Foreign Intelligence Surveillance Act of 1978 § 110, 50 U.S.C.

§ 1810 (Supp. V 1981).

Plans and Plan Sponsors in the Private Nonfarm Sector

in the United States, 1978-79 at 24 (1980). Administra-

tois and other fiduciaries to these plans process literally

millions of claims for disability, pension and health bene-

fits on a yearly basis. The Ninth Circuit’s decision, thus,

can be expected to have widespread impact on the conduct

of plan fiduciaries across the country. Moreove™, this im-

pact likely will have deleterious consequences which far

outweigh any marginal benefit which might be achieved

by permitting punitive damages awards.

As an initial matter, the threat of personal liability

for punitive damages could well disrupt the reasoned

decisionmaking on the part of plan fiduciaries which Con-

gress considered so essential to ERISA. See International

Brotherhood of Electrical Workers v. Foust, 442 U.S.

at 51-52. Faced with the spectre of punitive awar 's of

“unforeseeable magnitude,” fiduciaries may feel com-

pelled to process unjustified claims or to settle suits for

benefits which they would resist under ordinary circum-

stances. Id. at 52. Thus, far from detering fiduciaries

from violating their ERISA responsibilities, an award of

punitive damages could well force them to transgress the

very principles of prudence and reasonableness which

ERISA obligates them to observe, to the financial detri-

ment of the plan as a whole. See ERISA section 404,

29 U.S.C. § 1104 (1982). Moreover, the possibility of such

unpredictable persona! liability will deter many qualified

individuals from serving as fiduciaries to employee bene-

fit plans, particularly since insurance against punitive

damage awards is unavailable in many jurisdictions.”

17 ERISA expressly prohibits individuals who ‘are employed by a

participating employer, association of employers or employee or-

ganization from receiving any compensation from the plan for their

additional service as plan fiduciaries. See ERISA § 408(c) (2), 29

U.S.C. § 1108(c) (2) (1982). As a result, many individuals receive

no compensation for serving as plan fiduciaries beyond their

normal salaries. Moreover, as noted above, these individuals often

cannot be insured against the risk of punitive damage awards and,

accordingly, would be forced to pay such awards out of their personal

Similarly, the availability of punitive damages in the

benefit claims context will frustrate the orderly internal

resolution of benefit claims disputes. Under ERISA sec

tion 503 and regulations promulgated thereunder, em-

ployee benefit plans are obligated to establish a reason-

able claims procedure which provides for full, fair and

prompt internal review of any claims initially denied by

a plan. ERISA section 503, 29 U.S.C. § 1133 (1982);

29 C.F.R. § 2560.503-1 (1981). The obvious intent of)

this requirement is to afford both plan participants and

plans alike a quick, effective and largely informal means

of resolving their differences, thereby avoiding lengthy

and expensive litigation. If participants may resort to

litigation despite the proper functioning of these review

procedures, and, indeed, obtain an award of punitive

damages based on initial decisions which are later rem-

edied, this goal will be effectively negated.

Not only will the prospect of internal resolution of

disputes be sharply diminished, but the proliferation of

litigation which will result from the Ninth Circuit’s

ruling will be substantial. Lured by the prospect of large

punitive damage awards, or, at the least, the prospect of

extracting a favorable settlement from fiduciaries, dis-

gruntled participants and beneficiaries will be encour-

ag»! to litigate even the most frivolous of claims. The

cosio of defending the resulting flood of unnecessary liti-

gation will be felt most, not by errant fiduciaries, but

by the plans, and ultimately their participants and bene-

ficiaries, in contravention of Congress’ goal of minimiz-

ing costs and protecting the fiscal integrity of employee

benefit plans. See ERISA section 2(a), 29 U.S.C.

§1001(a) (1982).

resources. See Flaskamp & Jamar, Jnsurability of Punitive Dam-

ages—Effect on Strategies and Tactics of Counsel, in ABA, Extra-

contractual Damages at 121, 124 (1983). Faced with the prospect

of such heavy financial penalties, with virtually no commensurate

benefits, many competent individu als will have no incentive to serve

as fiduciaries to employee benefit plans.

Moreover, the Ninth Circuit’s decision will have the

necessary effect of unleashing this torrent of litigation

in the federal courts. Under ERISA section 502(e) (1),

29 U.S.C. §$1132(e)(1) (1982), the state and federal

courts share concurrent jurisdiction over benefit claims

actions brought by participants and beneficiaries under

section 502(a)(1)(B). All other ERISA actions, includ-

ing section 502(a) (2) actions for appropriate relief un-

der section 409—the statutory predicate for punitive

damages established by the Ninth Circuit—are committed

by section 502(e) (1) to the exclusive jurisdiction of the

federal courts. Because punitive damages may not be

awarded under section 502(a)(1)(B), see Bittner v.

Sadoff & Rudoy Industries, 728 F.2d 820, 825-26 (7th

Cir. 1984), the inevitable consequence of the Ninth Cir-

cuit’s decision will be the joinder of a claim for punitive

damages under section 409 in even the most mundane

benefit claims case, thereby insuring that all such actions

will be litigated in the federal courts. This displace-

ment of state court jurisdiction not only is contrary to

Congress’ design in fashioning ERISA’s enforcement and

jurisdictional provisions, but also will further tax limited

federal judicial resources which might be used more ef-

ficiently in other matters.

When viewed in this context, the advisability of puni- |

tive awards pales considerably. Such awards, of course,

serve no compensatory purpose, but represent mere wind-

falls to prevailing plaintiffs. See International Brother-

hood o° Electrical Workers v. Foust, 142 U.S. at 50;

Smith v. Wade, 103 S. Ct. 1625, 1641 (1983) (Rehnquist,

J., dissenting). Moreover, these awards historically have

rested on standards which are both ill-defined and un-

evenly applied, see Smith v. Wade, 103 S. Ct. at 1642

(Rehnquist, J., dissenting), and often are assessed in

“wholly unpredictable amounts bearing no necessary re-

lation to the actual harm caused.” Gertz v. Robert

Welch, Inc., 418 U.S. 328, 350 (1974)..* The benefits

served by inflicting this risk on individual fiduciaries,

whose aacministration of employee benefit plans already

is subject to a full panoply of statutory and regulatory

provisions, including criminal penalties, simply are too

insubstantial to justify the severe disruption of orderly

employee benefit plan administration that inevitably will

follow.

V. For the Same Reasons, the Court Should Review

the Ninth Circuit’s Holding on Extra-Contractual

Damages

If the Court determines that review of the Ninth Cir-

cuit’s punitive damage holding is appropriate, it likewise

should review the lower court’s conclusion that section

409 of ERISA authorizes an award of extra-contractual

compensatory damages in the benefits claims context. As

in the case of punitive damages, the Ninth Circuit’s rul-

ing on this issue squarely contradicts the plain language

of section 409 which authorizes relief only on behalf of

the plan itself, and not on behalf of plan participants or

beneficiaries. Moreover, it conflicts in principle with the

holdings of other courts that extra-contractual relief, such

as damages for mental anguish, are not available under

ERISA. See, e.g., Bittner v. Sadoff & Rudoy Industries,

18 For just these reasons, any imposition of punitive damages

raises grave due process concerns. As Justice Rehnquist has noted:

[A]lthough punitive damages are “quasicriminal,” their im-

position is unaccompanied by the types of safeguards present

in criminal proceedings. This absence of safeguards is exacer-

bated by the fact that punitive damages are frequently based

upon the caprice and prejudice of jurors ....f{and] “may be

employed to punish unpopular defendants.”

Smith v. Wade, 103 S. Ct. at 1641 (citations omitted) (quoting

International Brotherhood of Electrical Workers v. Foust, 442

U.S. at 50-51 n.14); see also Wheeler, The Constitutional Case for

Reforming Punitive Damages Procedures, 69 Va. L. Rev. 269

(1983).

728 F.2d 820 (7th Cir. 1984, (damages for pain and

suffering not available under ERISA section 502(.+) (1)

(B)); Hurn v. Retirement Fund Trust of Plumbing In-

dustry, 424 F. Supp. 80 (C.D. Cal. 1976) (damages for

emotional distress not available under ERISA). Finally,

the Ninth Circuit’s ruling on this issue carries with it

many of the same deleterious consequences for plan ad-

ministration described in connection with punitive dam-

ages. In this regard, the same disruption of orderly plan

decisionmaking and the same proliferation of litigation in

general, and federal court litigation in particular,’® can

be anticipated if the decision below is permitted to stand.

Accordingly, just as the availability of punitive damages

under ERISA is in need of urgent clarification by this

Court, so too should the related issue of extra-contractual

damages be conclusively resolved.

19 As in the case of punitive damages, claims for extra-contractual

damages under § 409 cannot be pursued by a participant or benefi-

ciary in a action pursuant to § 502(a)(1)(B), the only type of

ERISA action that may be brought in state court. Rather, they

must be pursued under ERISA § 502(a) (2) over which the federal

courts have exclusive jurisdiction. ERISA § 502(e) (1), 29 U.S.C.

§ 1182(e) (1) (1982).

CONCLUSION

For the foregoing reasons, a writ of certiorari should

issue to review the judgment and opinion of the Court of

Appeals for the Ninth Circuit.

Respectfully submitted,

JOHN E. NOLAN

(Counsel of Record)

PAUL J. ONDRASIK, JR.

ANTONIA B. IANNIELLO

STEPTOE & JOHNSON

CHARTERED

1250 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 862-2000

Attorneys for Petitioners

July 3, 1984

APPENDIX

UNITED STATES COURT OF APPEALS

NINTH CIRCUIT

No. 81-5879

DorIS RUSSELL,

Plaintiff-A ppellant,

MASSASCHUSETTS MUTUAL LIFE INSURANCE COMPANY,

CECILIA STEVENSON,

Defendants-A ppellees.

Argued and Submitted May 6, 1982

Decided Dec. 16, 1983

Brad N. Baker, Baker & Burton, Hermosa Beach, Cal.,

for plaintiff-appellant.

Richard T. Davis, Adams, Duque & Hazeltine, Pasa-

dena, Cal., for defendants-appellees.

Appeal from the United States District Court

for the Central District of California

Before FLETCHER, PREGERSON, and REINHARDT,

Circuit Judges.

REINHARDT, Circuit Judge.

Doris Russell sued in California Superior Court to re-

cover damages allegedly resulting from the termination

of her employment with Massachusetts Mutual Life In-

surance Company (Mutual). She also sought damages

allegedly resulting from the improper processing of her

claim for employee disability benefits. Russell’s complaint

asserted several causes of action based on Mutual’s han-

dling of her disability benefits, including claims for

breach of the statutory covenant of good faith and fair

dealing under Cal. Ins. Code § 790.03(h) (5) (West Supp.

1982), and breach of fiduciary duty. Russell also as-

serted a claim for breach of her employment contract

and of the implied contractual covenant of good faith and

fair dealing. Finally, she alleged the intentional and

negligent infliction of emotional distress in connection

with both the handling of her disability benefits and the

termination of her employment. The relief sought by

Russell included both compensatory and punitive damages.

Mutual removed the action to federal district court,

alleging that Russell’s disability cases of action relat-

ing to her benefits were preempted by the Employee Re-

tirement Income Security Act of 1974 (ERISA), 29

U.S.C. § 1001 et seg.2 Mutual then moved for summary

judgment as to all claims. Russell opposed the motion,

contending that the state causes of action relating to her

disability payments were not preempted by ERISA. She

also argued that if ERISA preemption applied, her

causes of action could be brought under ERISA, and that

compensatory and punitive damages were available under

that statute. She contended that compensatory damages

were not limited to any claimed loss of benefits. Russell

maintained that material questions of fact existed both

as to the claims based on the disability payments and

those related to the termination of her employment. Fi-

1 § 790.03(h) (5) prohibits, as an unfair and deceptive practice

in the business of insurance, a failure to attempt “in good faith

to effectuate prompt, fair and equitable settlements of claims in

which liability has become reasonably clear.”

2 Both parties acknowledge that the plan under which Russell

seeks benefits is an ERISA regulated plan. See 29 U.S.C. §§ 1002,

1008.

nally, she urged that her claims for the infliction of

emotional distress were not preempted under either

ERISA or the California Workers’ Compensation statute.

Cal. Lab. Code §§ 3600-3601 (West Supp. 1982). Russell

also expressed a desire to amend her complaint to add

causes of action under 29 U.S.C. § 1132(c) (1976) and

29 C.F.R. § 2560.503-1(h) (1981), alleging that her dis-

ability claim had not been reviewed in a timely manner.’

The district court granted summary judgment in favor

of Mutual as to all claims.‘ In determining that Russell

829 U.S.C. §1132(c) requires a plan administrator to comply

with a request by a participant for certain information within

30 days of such request. 29 C.F.R. § 2560.503-1(h) requires a

fiduciary to “promptly” render a decision on a claim for benefits,

setting a 60 day limit or, under special circumstances, 120 days

from the plan’s receipt of the request for review in which to render

its decision.

* Because no motion or other objection to removal was ever made

by any party, we need not consider the question that would other-

wise be presented here: whether this case was properly removed

pursuant to 28 U.S.C. § 1441. The rule governing an appellate

court’s inquiry subsequent to removal was stated by an unani-

mous Court in Grubbs v. General Elec. Credit Corp., 405 U.S. 699,

702, 92 S.Ct. 1844, 1347, 31 L.Ed.2d 612 (1972): “. .. [where

after removal a case is tried on the merits without objection and

the federal court enters judgment, the issue in subsequent pro-

ceedings on appeal is not whether the case was properly removed,

but whether the federal district court would have had original

jurisdiction of the case had it been filed in that court.” While we

acknowledge that Grubbs differs from the case before us because

there the state court’s original exercise of jurisdiction wes proper,

that distinction is not controlling; the principle announced by the

Supreme Court in Grubbs, applies regardless of whether the state

court had jurisdiction over the matter when it was originally filed.

The Grubbs rule has been specifically adopted by this circuit in

cases where the merits are reached and determined on a motion

for summary judgment. Stone v. Stone, 632 F.2d 740 (9th Cir.

1980) (citing cases). See also Lockwood Corp. v. Black, 669 F.2d

324 (5th Cir. 1982). Because we hold infra that appellant stated

a valid cause of action under ERISA, the district court would have

had original jurisdiction over appellant’s claim had it originally

been filed in that court.

was uot entitled to relief, the court ruled, as a matter

of law, that ERISA governed Russell’s claims relating

to the benefit plan and preempted all state actions re-

lating to those claims. In addition, the court concluded

(1) that Russell’s claim for extracontractual damages

and punitive damages arising out of the denial of her

disability claim was barred under ERISA; (2) that Mu-

tual complied with the provisions for review of ERISA

claims pursuant te 29 C.F.R. § 2560.503-1(h) and ren-

dered a timely decision on Russell’s appeal; (3) that

Mutual did not breach the employment contract of any

covenant of good faith and fair dealing in connection

with the termination of Russell’s employment; and (4)

that Cal. Lab. Code §$§ 3600-3601 (West Supp. 1982)

provided the exclusive remedy for intentional or negli-

gent infliction of emotional distress arising out of the

termination of employment.

We agree with the district court that Russell’s state

law causes of action based on Mutual’s handling of her

disability claim are preempted by ERISA. We hold,

however, that a cause of action exists under ERISA for

a breach of fiduciary duty based on an alleged improper

or untimely handling of benefit claims. We also hold that

ERISA permits the award of compensatory damages

prox mately caused by such a breach of fiduciary duty

and that such damages are not limited to the amount

of any benefit loss. We further hold that, in appropriate

circumstances, the statute allows the granting of puni-

tive damages. Next we hold that summary judgment was

improper both as to Russell’s claims regarding the bene-

fits plan and her pendent state claims regarding the ter-

mination of her employment. Finally, we reverse the

district court’s holding that Russell’s exclusive remedy

for the intentional infliction of emotional distress result-

ing from her termination of employment is under the

California Workers’ Compensation statute, Cal. Lab.

Code §§ 3600-3601 (1982).

BACKGROUND

Russell was employed by Mutual for 15 years as a

group claims examiner in Mutual’s Los Angeles office.

In May 1979, she took a leave of absence because of a

disabling back ailment allegedly caused by stress. Russell

submitted a report from her chiropractor, Dr. Allred, in

support of her claim for disability benefits under Mu-

tual’s Employee Salary Continuance Plan (ESCP), and

Mutual started to pay benefits under two plans, the

ESCP and the Employee Disability Plan (EDP). The

ESCP is funded from the assets of the company and

provides disability benefits based upon a percentage of

the employee’s salary. The EDP provides benefits only

if the employee is disabled for at least eight weeks and

has exhausted all benefits under ESCP. Neither plan

involves an insurance policy. Both plans qualify as bene-

fit plans under ERISA. See supra note 2.

In August 1979, Russell’s claim for disability was

taken before Mutual’s Disability Committee, composed of

Mutnal’s chief medical director and four other officers of

the company.’ Noting that Russell had taken leaves of

absence in 1967 and 1977 due to psychiatric and psy-

chosomatic illnesses causing back pain, the Comuinittee

recommended that an independent medical examination

be performed by an orthopedic specialist, Dr. Rosco, to

verify Russell’s injury. On September 18, 1979, Dr. Rosco

examined Russell and concluded that she was not, from

an orthopedic standpoint, physically disabled. Based

5 We note that Russell has claimed, and Mutual does not deny,

that Mutual is a fiduciary under ERISA and thus subject to the

fiduciary duties and responsibilities imposed by the Act. Under

29 U.S.C. § 1002(21)(A) (1976), a person is a fiduciary to the

extent that “(i) he exercises any discretionary authority or dis-

cretionary control respecting management of such plan or exercises

any authority or control respecting management or disposition

of its assets ... or (iii) he has any discretionary authority or

discretionary responsibility in the administration of such pian... .

(Emphasis added).

solely on this report, the Committee determined that

Russell’s disability salary benefits should be terminated.

Mutual also decided to fire Russell. Mutual argues

that this decision was based on an understanding by

Cecilia Stevenson, Russell’s supervisor, that Russell was

unwilling to relocate to the new group claims department

in Hacienda Heights, California. Russell contends that

she was never asked directly about her intentions re-

garding the new cffice, and that she never stated that she

definitely would not relocate. On October 17, 1979, Rus-

sell was advised by letter that both her salary continu-

ance benefits and her employment would be terminated.

On October 22, 1979, Russell sent a letter to Mutual

requesting an appeal of the decision as to salary con-

tinuance benefits. She maintained that her benefits claim

shoui' be reviewed on the basis of her entire medical

record, psychological as well as physical. The request for

appeal was received by the plan administrator, Robert

Johnson, sometime between October 25 and October 30,

1979. Mutual requested additional information with re-

spect to Russell’s allegations of psychosomatic illness.

Prior to and during this appeal process Russell’s hus-

band, Ronald, who worked for a different employer, was

also disabled and without salary. Russell contends that,

because of the financial duress, she and her husband were

forced to cash out his retirement savings plan. The eco-

nomic loss of lifetime benefits from the retirement plan,

Russell argues, is a result of Mutval’s wrongful denial

of her disability claim.

On Noven.ber 27, 1979, Russell produced tne additional

information regarding her appeal, including a report

from Russell’s psychiatrist, Dr. Ziferstein, who had de-

termined that Russell’s back pains were caused by psy-

chological problems. Johnson submitted this new evidence

to the Committee for review. The committee then sched-

uled another independent medical examination of Russell,

this time with Dr. Faerstein, a psychiatrist. Faerstein

also concluded that Russell was temporarily disabled be-

cause of a psychiatric illness.

Based on this additional information, Russell’s employ-

went status and salary continuance benefits were rein-

stated as of March 11, 1980. Russell has since been paid

all salary continuance benefits due and is presently re-

ceiving long-term disability benefits under Mutual’s dis-

ability plan. Russell filed this action to recover damages

she claims to have suffered as a direct result of Mutual’s

alleged untimely und improper handling of her disability

claim and its alleged wrongful termination of her em-

ployment.

I. ERISA PREEMPTION OF STATE LAW CLAIMS

Recognizing the increasing growth, scope and com-

plexity of private employee benefit plans throughout the

United States and the inadequacy of the existing stand-

ards governing these plans, Congress determined that it

was necessary to enact a comprehensive legislative scheme

to remedy the problems and afford security, stability, and

uniformity in the area. 29 U.S.C. §1001(a). To pro-

vide for the financial soundness and the fair and equi-

table administration of such plans, ERISA was enacted

in 1974. 29 U.S.C. § 1001(a) (1982).

Our inquiry here is whether Russell’s state law causes

of action based on Mutual’s processing of her disability

claim under an ERISA regulated benefit plan are pre-

empted and, if so, whether ERISA provides Russell with

an actionable claim against Mutual, as a fiduciary.

The broad statutory language offers considerable guid-

ance as to the preemptive scope of ERISA. Section 1144

provides that ERISA “shall supersede any and all State

laws insofar as they may now or hereafter relate to any

employee benefit plan... .” 29 U.S.C. §1144(a) (1982)

(emphasis added).* The legislative history of ERISA in-

dicates that the Act was intended as a comprehensive reg-

ulatory scheme, with the broad preemptive language of

section 1144 intentionally designed to provide complete

protection to plan funds and participants by establish-

ing national uniformity in the regulation of employee

benefit plans. In short, “[t]he emergence of a compre-

hensive and ” -rvasive Federal interest and the interests

of uniform’.y with respect to interstate plans required

. . . the displacement of State action in the field of pri-

vate employee benefit programs.” 120 Cong. Rec. 29,942

(1974) (Statement of Senator Javits). See also 120

Cong. Rec. 29,933 (1974) (statement of Senator Wil-

liams).

Noting the breadth of federal preemption permitted

by ERISA, the Supreme Court recently held that a state

law “relates to” an employment benefit plan “if it has a

connection with or reference to such a plan.” Shaw v.

Delta Airlines, Inc. —— USS. . , 103 S.Ct.

2890, 2900 (1983). Since the state laws here involved

authorize state causes of action for the improper han-

dling of claims under benefit plans, there is a direct

connection between the state laws and the employment

benefit plan. See also Alessi v. Raybestos-Manhattan,

Inc., 451 U.S. 504, 523, 101 S.Ct. 1895, 1906, 68 L.Ed.2d

402 (1981). We therefore hold that Russell’s state causes

of action relating to her disability claim are preempted.

SERISA sets forth several specific exceptions to the broad

preemptive scope of section 1144(a). Section 1144(b) (2) (A) pro-

vides that ERISA does not exempt or relieve “any person from

any law of any State which regulates insurance, banking, or

securities.” ERISA also preserves state regulation of “generally

applicable criminal laws of a State.” Section 1144(b) (4). Fnally,

ERISA does not supersede state regulation in other areas, (e.g.

antidiscrimination laws) where the state law is coextensive with

federal law, see Shaw v. Delta Airlines, -—— U.S. ——, 103 S.Ct.

2890, 77 L.Ed.2d 490 (1983) (state employme.:t laws which provide

a means to enforce Title VII are not preempted).

II. ERISA CAUSE OF ACTION

ERISA, though preempting Russell’s state causes of

action, provides a federal cause of action for the breach

of certain fiduciary duties by those administering benefit

plans. The question, then, is whether Mutual’s alleged

mishandling of Russell’s claim for disability benefits

would constitute a breach of fiduciary duty under the

Act and, if so, whether it is the type of breach that gives

rise to a cause of action by a plan beneficiary.

Section 1132 is the civil enforcement portion of ERISA.

Section 1132 provides in relevant part that:

(a) A civil action may be brought—

(2) by the Secretary, or by a participant, benefici-

ary or fiduciary for appropriate relief under § 409

[29 U.S.C. § 1109];

Section 1109(a) provides in part:

Any person who is a fiduciary with respect to a plan

who breaches any of the responsibilities, obligations,

or duties imposed upon fiduciaries by this title. . .

shall be subject to such other equitable or remedial

relief as the court may deem appropriate. .. .

Thus a beneficiary or participant may, pursuant to sec-

tion 1132(a) (2), bring a cause of action under section

1109(a) for the breach by a fiduciary of any responsi-

bility, duty or obligation imposed by the Act, assuming,

of course, that the breach causes him some injury.

ERISA is a remedial statute enacted “to protect .. .

the interests of participants in employee benefit plans

and their beneficiaries . . . by establishing standards of

conduct, responsibility, and obligation for fiduciaries of

employee benefit plans, and by providing for appropriate

remedies, sanctions and ready access to the Federal

courts.” 29 U.S.C. §1001(b). The Act imposes a com-

prehensive scheme of fiduciary duties and responsibilities

10a

for managing and administering plan funds that “pro-

vid[e] benefits to participants and their beneficiaries.”

29 U.S.C. §1104(a) (A) (i). Protection from fiduciary

conduct that violates these duties is necessary to imple-

ment Congress’ express policy of imposing “strict fidu-

ciary obligations upon those who exercise management

or control over the assets or administration of an em-

ployee pension or welfare plan,” 3 U.S. Code Cong. &

Ad. News at 5177-78 (1974) (emphasis added), and

“providing for appropriate remedies and sanctions” for

the breach of such duties. 29 U.S.C. § 1001(b).

In light of this explicit congressional policy, we find

that ERISA icgulates fiduciary conduct not only in the

care and management of plan assets, but also in the

handling and disposition of claims. It would be unrea-

sonable to conclude that Congress provided a comprehen-

sive fiduciary scheme designed to “occupy the field” with

respect to protecting the interests of participants and

their beneficiaries under pension and benefit plans with-

out also providing for the fair and proper handling of

claims. Moreover, ERISA was intended to serve as a

substitute for various existing state protective laws and

regulations. See supra at 5889, at 487. It would be

anomalous if Congress eliminated the protections offered

by state law without providing comparable federal pro-

tections. We therefore believe that Congress intended to

provide a comprehensive scheme of fiduciary responsibili-

ties and duties encompassing both the management of

plan assets and the handling and processing of partici-

pant’s claims and to afford remedies for violation of those

responsibilities, obligations and duties.

Under the standard of conduct required by ERISA,

a fiduciary must process claims in good faith, and in a

fair and diligent manner. A failure to render a decision

on a benefit claim “promptly” and within the time periods

prescribed by the Secretary of Labor constitutes a breach

of duty. See 29 U.S.C. § 1135, 29 C.F.R. § 2560.503-1(h).

lla

ERISA sets forth rules governing the handling of

claims that must be followed by the fiduciaries of each

covered plan. The plan must, in accordance with regula-

tions to be adopted by the Secretary of Labor,

(1) provide adequate notice in writing to any par-

ticipant or beneficiary whose claim for benefits un-

der the plan has been denied, setting forth the spe-

cific reasons for such denial, written in a manner

calculated to be understood by the participant, and

(2) afford a reasonable opportunity to any- partici-

pant whose claim for benefits has been denied for a

full and fair review by the appropriate named fi-

duciary of the decision denying the claim.

29 U.S.C. § 11338.

Pursuant to section 1135, the Secretary has issued im-

plementing regulations imposing strict obligations on

those responsible for the handling of benefit claims. 29

C.F.R. § 2560.503-1(h) requires that a decision be made

“promptly,” and not later than 60 days or, under special

circumstances, up to 120 days from “receipt of a request

for review.” A violation of this obligation would, in our

opinion, give. rise to a section 1109(a) cause of action by

a beneficiary or participant, pursuant to the provisions of

section 1132(a) (2).

The record shows that the plan administrator received

Russell’s “request” for review around October 25, 1979

and acknowledged receipt in a letter to Russell dated Oc-

tober 30. Russell’s claim was not resolved until ’March

11, 1980, at least 182 days after the acknowledged re-

ceipt of the request for review. Even assuming that

“special circumstances” existed, this exceeds the 120 day

limit.

Mutua! argues that the time period started when Rus-

sell submitted all of the medical information requested

by the plan administrator. However, the time period

under the provision runs from the time of “receipt of a

12a

request for review,” not the time when all information

requested has been forwarded. Otherwise the administra-

tor could always extend the statutory deadline by request-

ing additional information. Moreover, Mutual has not al-

leged that Russell failed to act reasonably or diligently

in forwarding information to the plan administrator.

We do not know whether there are other arguments

that Mutual can make in an attempt to show that it did

not violate the timeliness requirement, and we need not

make a final determination. On remand, the district

court should consider the preceding analysis in deciding

whether Mutual handled Russell’s claim in a timely man-

ner. Moreover, adherence to the specific time require-

ments is not the only obligation imposed by ERISA in

connection with the handling of benefit claims. We also

hold that processing claims in a perfunctory or arbitrary

manner or in bad faith, or without the exercise of rea-

sonable care, constitutes a breach of fiduciary duty under

ERISA, and that such breaches, like a timeliness breach,

give rise to a cause of action under the statute.’ On re-

mand, the district court should further consider here the

extent to which Mutual knew or should have known per-

tinent facts concerning Russell’s medical history and

whether Mutual should have considered any of those

facts before denying her benefit claim; nor need we con-

sider whether Mutual failed in any other way to process

7 Although some parts of the standard are identical to those used

in breach of the duty of fair representation cases, (Vaca v. Sipes,

386 U.S. 171, 192, 87 S.Ct. 903, 918, 17 L.Ed.2d 842 (1967);

Robesky v. Qantas Empire Airways Ltd., 573 F.2d 1082, 1089-90

(9th Cir. 1978)), we do not suggest that the standard in its

entirety should be the same. There are significant differences

between the role of a union official who is attempting to decide

whether an individual’s grievance should be taken to arbitration

under a collective bargaining agreement, or who may even be

attempting to handle a complex arbitration proceeding himself,

and the role of a fiduciary who is required to provide benefits under

a pension or disability plan. Accordingly, we believe ERISA may

require a stricter standard.

13a

Russell’s claims in a manner consistent with its statu-

tory obligations.

III. COMPENSATORY DAMAGES

The district court determined that ERISA precluded

extracontractual damages for breach of fiduciary duty

under the Act. We disagree. In our view, ERISA al-

lows beneficiaries to sue for compensatory damages proxi-

mately caused by a breach of fiduciary duty. Such dam-

ages are not limited to the amount of any benefit loss.

We have held, supra at p. 488, that under section

1132(a) (2) a participant or beneficiary may institute

a section 1109(a) action as the result of a fiduciary’s

breach of a responsibility, duty or obligation imposed by

the statute. Section 1109 provides that a court may

award any “equitable or remedial relief as [it] may deem

appropriate” against a fiduciary who breaches its duties.*

The damage provision is extremely broad, and the court

is given wide discretion as to the damages to be awarded.

It may award any equitable or remedial relief it deems

appropriate.

We believe it clear that ERISA permits an award of

compensatory damages that will remedy the wrong and

make the aggrieved individual whole. Such a reading has

found nearly unanimous support in recent decisions which

hold that section 1109 provides courts with substantial

discretion to fashion appropriate relief, including com-

pensatory damages. Jiminez v. Pioneer Diecasters, 549

F.Supp. 677, 681 (C.D.Cal. 1982); Free v. Gilbert Hodg-

man, Inc., 3 Emp.Ben.Cas. (BNA) 1010, 1012 (N.D.IIl.

1982); Bobo v. 1950 Pension Plan, 548 F.Supp. 623, 626

(W.D.N.Y. 1982); Eaton v. D’Amato, 3 Emp.Ben.Cas.

(BNA) at 1007; Pension Plan and Trust, 317 Pension

8 Liability under § 1109 is against the fiduciary personally, not

the plan. However, we note that ERISA does allow for certain

forms of fiduciary indemnification under section 1110.

l4a

Rep. (BNA) A-13, A-17 (C.D.Cal. 1980); Bittner v.

Sandoff and Rudoy Industries, 490 F.Supp. 534, 536

(E.D.Wis. 1980). Support for the allowance of com-

pensatory damages is also found in the legislative history

of ERISA. See H.R.Rep. No. 93-533, 93d Cong., Ist

Sess. 17, reprinted in 1974 U.S.Code Cong. & Ad.News

4639, 4655; S.Rep. No. 93-127, 93d Cong., Ist Sess. 35,

reprinted in 1974 U.S.Cong. & Ad.News 4838, 4871.

In referring to compensatory damages necessary to

make a party whole, we are not referring merely to con-

tractual damages for loss of plan benefits. Rather, sec-

tion 1199 provides for relief that will compensate the

injured party for all losses and injuries sustained as a

direct and proximate cause of the breach of the fiduciary

duty. A contrary reading would conflict with the lan-

guage of the statute and provide little encouragement

to fiduciaries to abide by the Act, since the most that

could be forfeited in the event of misconduct would be

benefits already owed by the plan. More important, a

fiduciary could ignore or unreasonably perform its duties

and responsibilities with respect to the disposition of

claims with virtual impunity and at the sole cost of the

participant who has suffered harm as a result of such

misconduct. We believe that Congress did not intend to

afford such fiduciary immunity. Rather, by giving courts

broad discretion to grant relief, Congress intended to

provide adequate redress to participants who are injured

as a result of a fiduciary’s breach of its obligations.

Although we find it unnecessary to fashion a more

specific rule on compensatory damages, we add that

damages for mental or emotional distress accompanied by

some physical manifestation are recoverable under sec-

tion 1109. Here, Russell contends that her pre-existing

back problem, which had been originally caused by psy-

chosomatic illness, was aggravated as a result of the

emotional distress caused by the improper and untimely

handling of her benefit claim. Thus, we need no* con-

lda

sider whether the absence of a physical effect would in

any way affect our conclusion. We also hold, however,

that ERISA does not give rise to a separate cause of

action for negligent or intentional infliction of emotional

distress. There is no mention in the statute or the legis-

lative history of any such cause of action, and we do not

believe that Congress intended to provide one.

IV. PUNITIVE DAMAGES

The district court also decided that ERISA does not

authorize the award of punitive damages for the breach

of fiduciary duty under the Act. We reverse and hold

that it does, under appropriate circumstances. We note

that the question whether punitive damages are author-

ized by ERISA has provoked much controversy and a

split in the published decisions. Compare Jiminez v.

Pioneer Diecasters, 549 F.Supp. at 689 (punitive dam-

ages allowed against fiduciary under section 1109); Free

v. Gilbert Hodgman, Inc., 3 Emp. Ben. Cas. (BNA) at

1010, 1012 (punitive damages recoverable against fidu-

ciaries under section 1109); Short v. Junior Steel Co.

Employees Pension Plan and Trust, 317 Pension Rep.

(BNA) at A-17 (punitive damages recoverable against

fiduciary under section 1109; Eaton v. D’Amato 3 Emp.

Ben. Cas. (BNA) 1003, 1007 (punitive damages recov-

erable against fiduciary under section 1109(a)); Bittner

v. Sadoff & Rudoy Industries, 490 F.Supp. at 536 (puni-

tive damages not excluded under section 1140 and 1132)

with Dependahl v. Falstaff Brewing Corp., 653 F.2d

1208, 1216 (8th Cir. 1981), cert. denied, 454 U.S. 968

and 1084, 102 S.Ct. 512 and 641, 70 L.Ed.2d 384 and

619 (punitive damages not provided for in ERISA (dic-

tum) ); Hoskins v. Retirement Plan of Standard Oil, 78-

C3670 (N.D. Ill. 1962) (punitive damages not recover-

able against fiduciary under section 1132(a) (3) (B));

Hurn v. Retirement Fund Trust, 424 F.Supp. 80, 82

(C.D. Cal. 1976) (section 1132 does not authorize puni-

tive damages; Bell v. Southern Oregon Log Scaling and

16a

Grading Bureau, 130 Pension Rep. (BNA) D-6 (D. Or.

1976) (punitive damages not recoverable against fidu-

ciary under section 1132(a) (3) (B)); Wardle v. South-

east and Southwest Areas Pension Fund, No. 77-144-C,

239 Pension Rep. (BNA) D012 (S.D. Ind. 1979) (puni-

tive damages not recoverable under section 1132(a) (3)

(B)).

The primary role of punitive damages is not to com-

pensate the victim of intentional wrongdoing, but to

punish the wrongdoer and deter others from similar mis-

conduct. Nevertheless, much of what we said earlier in

our discussion of compensatory damages is applicable as

well to the question whether the Act permits an award of

punitive damages, particularly our comments concerning

the broad discretion given to the courts under section

1109(a) to fashion appropriate relief.

One of the methods that Congress selected to ensure

compliance with the Act was to provide for the imposi-

tion of “sanctions” against those violating their fiduciary

duties. 29 U.S.C. § 1001(b). Moreover, according to both

the Senate and House Committee reports, Congress in-

tended the Act to provide “the full range of legal and

equitable remedies available in both state and federal

courts.” H.R. Rep. No. 93-533, 93d Cong., 1st Sess. 17,

reprinted in 1974 U.S. Code Cong. & Ad. News 4639,

4655, Sen. Rep. No. 93-127, 93d Cong., 1st Sess. 35, re-

printed in 1974 U.S. Code Cong. & Ad. News 4838, 4871.

We see no reason for believing that Congress intended

to exclude the sanction of punitive damages from this

full range of legal and equitable relief. Furthermore,

those same two reports tell us that the Act’s “enforce-

ment provisions have been designed specifically to provide

both the Secretary and participants and beneficiaries with

broad remedies for redressing or preventing violations of

the Act.” H.R. Rep. No. 93-533, 93d Cong., 1st Sess. 17,

reprinted in 1974 U.S. Code Cong. & Ad. News 4639,

4655, Sen. Rep. No. 127, 93d Cong., Ist Sess. 35, re-

printed in 1974 U.S. Code Cong. & Ad. News 4838, 4871

eee

ee o

ee ee

17a

(emphasis added). The availability of punitive damages

serves a deterrent or preventive purpose. Violations are

less likely to occur if those handling the funds know that

they may be subject to heavy financial penalties when

their conduct warrants it.

We also reach our conclusion, in part, because of the

analysis we applied in resolving an identical question

with respect to an analogous statute, the Landrum-

Griffin Act, 29 U.S.C. § 412 (1976). We held that the

Landrum-Griffith Act authorizes the award of punitive

damages in appropriate circumstances because such

awards “would serve [as] ‘a deterrent to those abuses

which Congress sought to prevent.’” Cooke v. Orange

Belt District Council of Painters, 529 F.2d 815, 820 (9th

Cir. 1976) (citation omitted). Landrum-Griffith like

ERISA does not specifically mention punitive damages.

In the case of Landrum-Griffin we held that the statute

authorizes the award of punitive damages even though

“the legislative history of the Landrum-Griffin Act is

not all that clear (and is probably inconclusive).” Bise

v. International Brotherhood of Electrical Workers, 618

F.2d 1299, 1305 n. 6 (9th Cir. 1979), cert. denied, 449

U.S. 904, 101 S.Ct. 279, 66 L.Ed.2d 136 (1980). We

found such damages to be authorized because “it may be

said that the overall thrust of the Act was to protect

the individual rights of union members and to deter abuse

and denial thereof by union officers. The awarding of

punitive damages will, in proper cases, serve this pur-

pose.” Id. at 1305 n. 6. We think that the reasoning of

Cooke and Bise is equally applicable here.

Although we hold that punitive damages may be

awarded for a breach of duty by a plan fiduciary, such

awards may be made in only very limited circumstances.

These circumstances require a showing that the fiduciary,

in carrying out its duties and responsibilities under the

Act, acted with actual malice or wanton indifference to

the rights of a participant or beneficiary. See, e.g., Bise,

18a

618 F.2d at 1405. We intimate no view here as to Rus-

sell’s right to recover punitive damages based on any

specific allegations in her complaint in its present form,

or as it may be amended.

V. EMPLOYMENT CONTRACT

Russell contends that she was wrongfully terminated

by Mutual because an implied contract existed between

the parties, and Mutual violated its duty of good faith

and fair dealing by firing Russell without good cause.°

The district court found that no implied employment con-

tract existed and that there was no lack of good faith

and fair dealing. Thus, it granted Mutual’s motion for

summary judgment. We find that summary judgment

as to these issues was inappropriate.

Section 2922 of the California Labor Code provides, in

pertinent part, that “employment, having no specified

term, may be terminated at the will of either party on

notice to the other.” Russell concedes that no express or

written employment contract existed here. She argues

instead that an implied coutract existed and thus that

Mutual could not discharge her except for good or just

cause. In Pugh v. See’s Candies, Inc., 116 Cal. App.3d

311, 171 Cal. Rptr. 917 (1981), the California court of

appeals held that although no written contract existed,

the plaintiff had established a prima facie case of wrong-

ful discharge based on an implied contract of employ-

ment. The employer was thus required to show “good

cause” for the termination of the plaintiff’s employment.

® We have pendent jurisdiction over Russell’s common law claims

for wrongful discharge, breach of implied covenant of good faith

and fair dealing and damages. With respect to these claims,

Mutual! ard Russell’s immediate supervisor, Stevenson, were named

as defendants. However, Russell alleges Stevenson was working

within the scope of her employment with Mutual. Hence, for pur-

poses of this apppeal we will refer to the collective defendants as

“Mutual.”

ee a a eee PO ——————

ee aes

19a

In making its determination, the court reviewed the to-

tality of the parties’ relationship, including “the dura-

tion of [plaintiff’s] employment, the commendations and

promotions he received, the apparent lack of any direct

criticism of his work, the assurances he was given, and

the employer’s acknowledged policies.” Jd. at 329, 171

Cal. Rptr. 917."

The allegations and affidavit submited b; Russell con-

tend that she was employed by Mutual for 15 years as

a claims examiner. Russell had allegedly been one of the

top producers in the office for the last eight years and

top in sales from 1973-1977. Moreover, she claim: that

she was commended for her work on several occasions and

received no written or formal criticism during the en-

tire course of her employment with Mutual.

The record before us suggests that Mutual’s decision

to fire Russell was based on Russell’s alleged refusal to

relocate. However, there is conflicting evidence as to

whether Russell ever actually refused to relocate or even

gave Mutual such an impression.

Whee there is any issue of material fact to be tried,

summary judgment must be denied. Hepp v. Lockheed-

California Co., 86 Cal. App.3d 714, 717, 150 Cal. Rptr.

408 (1978). Under Pugh, an implied promise that Mu-

tual would not act arbitrarily with its long-time em-

In Cleary v. American Airlines, Inc., 111 Cal.App.3d 443, 168

Cal.Rptr. 722 (1980) the court, focusing on the 18 years of satis-

factory employment performed by the plaintiff, stated that termi-

nation “of employment without legal cause after such a period of

time offends the implied in law covenant of good faith and fair

dealing contained in all contracts, including employment con-

tracts.” Id. at 455, 168 Cal.Rptr. 722. Though the court in Pugh

did not rest its finding on an implied covenant of good faith and

fair dealing, it did consider the duration of satisfactory employ-

ment as a factor in determining whether an “employer’s conduct

gave rise to an implied promise that it would not act arbitrarily”

in dealing with its employee. Pugh . See’s Candies at 329, 171

Cal.Rptr. 917.

20a

ployee may be “shown by the acts and conduct of the

parties, interpreted in light of the subject matter and of

the surrounding circumstances.” Pugh v. See’s Candies,

116 Cal. App.3d at 329, 171 Cal. Rptr. 917. Viewing the

evidence in a light most favorable to Russell, we find

that a material question of fact exists as to whether

there was such an implied promise from Mutual to Rus-

sel, and, if so, whether there was good cause for the

latter’s termination. It is for the trier of fact to make

these determinations. Hence. suinmary judgment was in-

appropriate.

V. CALIFORNIA WORKER’S COMPENSATION

LAWS

Russell alleges causes of action for negligent and in-

tentional infliction of emotional distress arising both from

Mutual’s handling of her claim for disability benefits and

from the termination of her employment. The district

court found that the claims were preempted—those relat-

ing to disability benefits by ERISA and those relating to

termination by the California Workers’ Compensation

Law, Cal. Lab. Code §§ 3600-01 (West 1983).

As to Russell’s claims for negligent and intentional in-

flicticn of emotional distress arising from the handling

of her disability benefits, we affirm. Those claims are

preempted by ERISA and there is no parallel federal

cause of action under the statute.

The district court correctly held that Russell’s claims

for negligent infliction of emotional distress arising from

the termination of her employment are barred by the

California Workers’ Compensation Laws. We disagree,

however, with the district court’s holding that Russell’s

claims for intentional infliction of emotional distress are

similarly barred.

Russell maintains that the claim for intentional in-

fliction of emotional distress arising out of the termina-

i he a ee ee ee oe wg

Ne eet hei ibis

2la

tion of her employment is not preempted by the Workers’

Compensation laws because the injuries alleged—emo-

tional anguish, anger, humiliation and feelings of be-

trayal—did not arise out of the course and scope of em-

ployment, are non-physical and thus non-compensable un-

der the Act, and are the result of Mutual’s intentional

tortious acts.

For purposes of workers’ compensation preemption, we

must first determine whether the injuries alleged arose

out of and in the course of Russell’s employment relation-

ship with Mutual. See generally Renteria v. County of

Orange, 82 Cal. App.3d 833, 835, 147 Cal. Rptr. 447

(1978). California’s courts have held that an injury in

the form of emotional distress caus*d by termination of

employment is within the course 41d scope of an em-

pleyment relationship even when the emotional distress

occurs subsequent to the date of termination. Ankeny v.

Lockheed Missiles and Space Co., 88 Cal. App.3d 531,

534, 151 Cal. Rptr. 828 (1979); Gates v. Trans Video

Corp., 93 Cal. App.3d 196, 201-03, 155 Cal. Rtpr. 486

(1979). We thus find that Russell’s alleged injuries

arose out of and in the <ourse of her employment re-

lationship with Mutual.

However, finding that the activity was within the

scope of the employment relationship for purposes of the

Workers’ Compensation statute does not end our inquiry.

For, as Russell correctly points out, mental anguish ab-

sent any physical injury is not a compensable injury un-

der California’s Workmen’s Compensation laws. Thus,

she argues, because Workers’ Compensation does not pro-

vide a remedy for suct an injury, she is not precluded

from bringing an action for damages. Here, however,

Russell claims a physical injury, aggravation of her

pre-existing back condition. Therefore, this ars7umen.:

is of no assistance to her. Finally, Russell says, unde.

California law injured persons are afforded the right to

institute civil actions for intentional infliction of emo-

22a

tional distress, regardless of whether they are also en-

titled to proceed under the Workers’ Compensation stat-

ute. We decide only that she is correct in at least one

part of her argument—under California law, tort ac-

tions lie for intentional infliction of emotional distress,

and such actions are not preempted by the Workers’ Com-

pensation statute.

In Renteria v. County of Orange, 82 Cal. App.3d 833,

147 Cal. Rptr. 447 (1978) an employee filed an action

for intentional and negligent infliction of emotional dis-

tress, claiming that he had been tormented and harassed

by his employer and fellow employees. The trial court

sustained the defendant’s demurrer on the ground that

the Workers’ Compensation Board had exclusive jurisdic-

tion over the matter. The court of appeal reversed, hold-

ing that “an employee’s cause of action for intentional

infliction of emotional distress constitutes an implied ex-

ception to the exclusive remedy provisions of Labor

Code section 3601.” Id. at 842, 147 Cal. Rptr. 447. In

reaching its holding, the court of appeals emphasized the

fact that the deterrent function of the law would not be

properly served by limiting recovery to an award under

the essentially “no fault” Workers’ Compensation sys-

tem. The court suggested that imposing civil liability for

intentional wrongdoing furthers the objective of deter-

ring such acts.

In Gates v. Trans Video Corp., 93 Cal. App.3d 196,

201-203, 155 Cal.Rptr. 486 (1979) (and in Ankeny v.

Lockheed Missiles & Space Company, 88 Cal. App.3d 531,

534-36, 151 Cal. Rptr. 828 (1979), two cases relied on

by Mutual, the California Courts of Appeals held that

Workers’ Compensation is the exclusive remedy when a

plaintiff's injury involves both emotional and physical

components, thereby narrowly construing Renteria as ap-

plicable only to injuries of an exclusively emotional na-

ture that result in no physical manifestations.

—s

ne ee ee

hed te test

Mate Pom Aly 2. celle et BAR CT Sere, wR fame ot

23a

Here, Russell alleges not only emotional stress but

physical injury in the form of aggravated back prob-

lems." Thus, if Gatee and Ankeny accurately reflect the

law of California as the state Supreme Court would

apply it, Russell’s claim for damages for emotional dis-

tress would be preempted by the Workers’ Compensation

statute. We do not believe, however, that the Gates-

Ankeny reading of Renteria is correct, or that it would

be adopted by the California Supreme Court.

Two later state appeals court decisions have substan-

tially undermined the Gates-Ankeny reading of Renteria.

In Lagies v. Copley, 110 Cal. App.3d 958, 168 Cal. Rptr.

368 (1980), the court of appeals refused to confine

Renteria’s application to cases involving only emotional

injury. Instead, taking its lead from pronouncements

by the California Suprem, Court, it rejected the artificial

distinction between physical and psychological injury, cit-

ing Molien v. Kaiser Foundation Hospital, 27 Cal.3d 916,

616 P.2d 813, 167 Cal.Rptr. 831 (1980). It held Renteria

applicable, even though the plaintiff alleged “accompany-

ing physical disability,” 110 Cal. App.3d at 971, 168

Cal. Rptr. 368.

In McGee v. McNally, 119 Cal. App. 3d 895, 174 Cal.

Rptr. 253, (1981), another court of appeals, in a decision

joined by Justice Grodin, now of the California Supreme

Court, also minimized the Ankeny-Gates distinction be-

tween emotional injury and emotional injury accompanied

11 Pre-existing physical conditions, such as Russell’s psychoso-

matic disability and accompanying back pains, which are aggravated

by activities within the course of employment have been held to be

compensable under California’s Workers’ Compensation statute.

The California Supreme Court held that “[a] disability that is in

part attributable to a pre-existing disease is nonetheless compen-

sable so long as a worker’s employment played any contributing

role in either aggravating the progressive [condition] or in

hastening [its] occurrence.” City & County of San Francisco v.

Workers’ Compensation App. Bd., 22 Cal.3d 108, 115, 583 P.2d

151, 148 Cal.Rptr. 626 (1978). (Emphasis added).

244

by physical effects. The court of appeals in McGee re

stated the Renteria holding, verbatim, and adopted the

essential reasoning underlying the holding..

Although there is language in Renteria and McGee,

such as the reference to “make weight” injuries, that

makes the analysis somewhat less than crystal clear, we

think it evident that the Renteria-McGee courts were

saying in essence that where the primary injury is emo-

tional distress, and that is the gist of the complaint, a

cause of action in intentional tort lies, regardless of

whether the emotional distress also manifests itself physi-

cally in some way or causes some physical disability.

Of equal importance, the conrt of appeals in McGee

echoed the policy concern voiced in Renteria, that emo-

tional injuries resulting from deliberate wrongdoing must

be actionable at civil law—outside the confines of Work-

ers’ Compensation—if the deterrent function of the law

is to be served. McGee pointed to the California Su-

preme Court’s discussion in Johns-Manviile Products

Corp. v. Superior Court, 27 Cal. 3d 465, 612 P.2d 948,

165 Cal. Rptr. 858 (2980), of “a trend toward allowing

an action at law for injuries suffered in the employment

if the employer acts deliberately for the purpose of in-

juring the employee ... .” McGee, 119 Cal. App. 3d at

895, 174 Cal. Rptr. 253. McGee also stressed the fact

that both the majority and dissenting opinions in Johns-

Manville expressed approval of Renteria.

In an effort to strengthen the deterrent function of

liability rules, the trend towards increasing the sanc-

tions imposed on wrongdoers is gaining favor in a variety

of contexts as courts recognize that compensation of

victims is only part of the purpose of tort liability. See,

e.g., Hartford Accident & Indemnity Co. v. Village of

Hempstead, 48 N.Y.2d 218, 228, 397 N.E.2d 737, 744,

422 N.Y.S.2d 47, 53-54 (1979), (New York public policy

prohibits insurance coverage of punitive damages awarded

against municipal officers under 42 U.S.C. § 1983 to

25a

foster deterrent objective). See generally, G. Calabresi,

The Cost of Accidents 39-40 (1970); Stone, The Place of

Enterprise Liability in the Control of Corporate Con-

duct, 90 Yale L.J. 1 (1980).

It is significant that McGee, which substantially under-

mines the reasoning of Ankeny and Gates, was decided by

the same district court of appeals that decided Ankeny.

Thus, in only one of California’s five appellate districts

is there currently a controlling decision that purports to

limit the Renteria holding. We believe that Renteria

reflects the law as the California Supreme Court would

find it; we restate its holding verbatim, and adopt it

here: “An employee’s cause of action for intentional

infliction of emotional distress constitutes an implied ex-

ception to the exclusive remedy provision of Labor Code

Section 3601.” Renter 147 Cal. Rptr. at 452. We

therefore hold that California’s Workers’ Compensation

laws do not constitute Russell’s exclusive remedy for che

alleged intentional infliction of emotional distress by her

employer.”

Affirmed in part; reversed in part; remanded for fur-

ther proceedings consistent with this opinion. Upon re-

mand, plaintiff should be allowed to amend her complaint

to plead such causes of action as may be appropriate in

light of this opinion.

12 Ordinarily we would give some deference to the district court’s

judgment as to how the California Supreme Court would interpret

the California statute. See, e.g., Major v. Arizona State Prison,

642 F.2d 311, 313 (9th Cir. 1981); United States v. County of

Humboldt, 628 F.2d 549, 551 (9th Cir. 1980). Here, however, we

give the district court’s conclusions little, if any, weight. The

district court cited no cases, California or otherwise, to support

its conclusions. Nor did the district court prepare those conclu-

sions itself, a practice we have previously expressed our disapproval

of.

26a

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

No. CV-81-116-R

DorRIS RUSSELL AND RONALD RUSSELL,

Plaintiffs,

vs.

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,

CECILIA STEVENSON and Dogs 1 through 50, inclusive,

Defendants.

Date: August 17, 1981

Time: 10:00 a.m.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

[Filed Aug. 24, 1981]

The Motion for Summary Judgment of defendants

Massachusetts Mutual Life Insurance Company (‘Massa-

chusetts Mutual’) and Cecilia Stevenson (“Stevenson”)

came on regularly for hearing on August 17, 1981, be-

fore the Honorable Manuel L. Real, United States Dis-

trict Judge. Plaintiff Doris Russell appeared by her

attorneys of record, Baker & Burton, by Brad N. Baker,

-Esq. Massachusetts Mutual and Stevenson appeared by

their attorneys of record, Adams, Duque & Hazeltine,

Richard T. Davis, Jr., Esq. and David L. Bacon, Esq.

The Court, having heard oral argument and having duly

considered the memoranda submitted by the parties, the

affidavits submitted by Massachusetts Mutual and Steven-

son, the deposition of plaintiff, Doris Russell, and all of

the records and files herein, to which there is no ma-

terial issue, now makes its Findings of Fact and Con-

clusions of Law as follows:

Se haat + lati le Bate ieee eT Oh ti eA thy DA, en ds ~

27a

1. Plaintiff was employed by defendant Massachusetts

Mutual as a group claims examiner in its Los Angeles

office.

2. Massachusetts Mutual has created two employee

benefit plans, the “Employee Salary Continuance Plan”

and the “Employee Disability Plan,” providing disability

benefits to certain of its employees. The Salary Continu-

ance Plan is funded from the general assets of the Com-

pany and there is no insurance policy, either internally

or with a third party, involved whatsoever. Both plans

qualify as benefit plans under the Employee Retirement

Income Security Act of 1974 (“ERISA”) and copies of

both of the plans were filed with the United States De-

partment of Labor as required by ERISA.

3. In May 1979, plaintiff became ill and unable to

work, and has never returned to work. Plaintiff sub-

mitted claims for benefits under the Employee Salary

Continuance Plan and Massachusetts Mutual commenced

paying benefits.

4. On October 17, 1979, based on a report dated Sep-

tember 18, 1979, by Dr. Michael E. Rosco, Massachusetts

Mutual determined that plaintiff was not disabled from

performing her duties as a claims examiner. Further-

more, based upon reports received from plaintiff’s im-

mediate supervisor, Cecilia Stevenson, Massachusetts Mu-

tual had an understanding that plaintiff was unwilling to

relocate to the new group claims office in Hacienda

Heights. On October 17, 1979, plaintiff was advised in

a letter from Charles Dole that her salary continuance

benefits were being discontinued and her employment was

being terminated.

5. Shortly thereafter, plaintiff wrote to Massachusetts

Mutual and advised that she intended to appeal the de-

cisions and that she would submit additional medical

evidence. By letter dated November 27, 1979, plaintiff

submitted further evidence concerning her disability

28a

status, including a report from Dr. Ziferstein, a psy-

chiatrist, who certified that plaintiff was suffering from

a psychiatric disability which manifested itself with

pain.

6. Plaintiff’s request for review was treated as an

ERISA appeal by Robert Allison Johnson, the Plan Ad-

ministrator. At his request, plaintiff was examined by

Dr. Saul Faerstein, a psychiatrist, on January 15, 1980.

Dr. Faerstein sent Massachusetts Mutual a report dated

February 15, 1980, which concluded that plaintiff was

temporarily disabled because of a psychiatric illness.

7. Upon receipt of the report, Mr. Johnson decided

to grant plaintiff's ERISA appeal, reinstate her salary

continuance benefits and reinstate her employment. By

letter dated March 11, 1980, Mr. Johnson advised plain-

tiff of his decision. On March 13, 1980, Massachusetts

Mutual’s field representative, Denis Hunady, personally

deferred payment of all accrued benefits to plaintiff’s

then attorney, G. Dana Hobart.

8. Massachusetts Mutual has now paid al] salary con-

tinuance benefits and long-term disability benefits to

plaintiff.

CONCLUSIONS OF LAW

From the foregoing Findings of Fact, the Court con-

cludes as follows:

1. The Court has jurisdiction of the parties and of

the subject matter of plaintiff’s claim by virtue of the

Employee Retirement Income Security Act of 1974

(“ERISA”).

2. Massachusetts Mutual’s Salary Continuance Plan

is an employee benefit plan as defined in ERISA and is

subject to ERISA.

3. ERISA governs plaintiff’s claims for disability ben-

efits and preempts all state laws relating to her claims

under Massachusetts Mutual’s Salary Continuance Plan,

29a

including any state law claims for breach of statutory

duties under California Insurance Code, Section 790.03,

intentional infliction of emotional distress, negligent in-

fliction of emotional distress and breach of fiduciary

duties.

4. Federal law developed under ERISA bars any

claims for extra-contractual damages and punitive dam-

ages arising out of the original denial of plaintiff’s claims

for benefits under the Salary Continuance Plan and the

subsequent review thereof.

5. Massachusetts Mutual’s Plan Administrator com-

plied with the provisions for review of ERISA claims

in 29 C.F.R. § 2560.503-1(h) and timely rendered his

decision regarding his review of plaintiff’s claim.

6. Massachusetts Mutual did not breach the employ-

ment contract nor any covenant of good faith and fair

dealing in connection with the termination of plaintiffs’

employment.

7. Plaintiff did not suffer any financial loss as a proxi-

mate result of the termination of her employment.

8. Plaintiff's claims for intentional or negligent dis-

tress arising out of the termination of employment are

barred by the exclusive re.nedy provisions of California

Labor Code, Sections 3600-3601.

9. The relief prayed for in plaintiff's Complaint re-

lating to each of the seven causes of action should be

denied, and plaintiff should take nothing by reason of the

claims in her Complaint.

10. Plaintiff's Complaint is hereby dismissed with

prejudice.

11. Defendants are entitled to their costs in the

amount of $-

If any of the foregoing Findings of Fact are con-

strued to be Conclusions of Law, the same shall be deemed

30a

to be Conclusions of Law. If any of the foregoing Con-

clusions of Law are construed to be Findings of Fact,

the same shall be deemed to be Findings of Fact.

LET SUMMARY JUDGMENT BE ENTERED AC-

CORDINGLY.

Dated: Aug. 24, 1981

/s/ Manuel L. Real

United States District Judge

8la

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

No. CV-81-116-R

Doris RUSSELL AND RONALD RUSSELL,

- Plaintiffs,

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,

CECILIA STEVENSON and Dogs 1 through 50, inclusive,

Defendants.

Date: August 3, 1981

Time: 10:00 a.m.

SUMMARY JUDGMENT

[Filed Aug. 24, 1981]

The Motion for Summary Judgment of defendants

Massachusetts Mutual Life Insurance Company (‘Massa-

chusestts Mutual”) and Cecilia Stevenson (“Stevenson’’)

came on regularly for hearing on August 17, 1981 be-

fore the Honorable Manuel Real, Judge presiding. Plain-

tiff Doris Russell appeared by her attorneys of record,

Baker & Burton, by Brad N. Baker, Esq. Defendants

appeared by their attorneys of record, Adams, Duque &

Hazeltine, Richard T. Davis, Jr., Esq. and David L.

Bacon, Esq. The Court, having heard oral argument and

having duly considered the memoranda submitted by the

parties, the affidavits submitted by Massachusetts Mutual

and Stevenson, and all of the records and files herein,

and having made its Findings of Fact and Conclusions

of Law, and good cause appearing therefor,

IT IS HEREBY ORDERED, ADJUDGED AND DE-

CREED:

1, That this Court has jurisdiction over the parties

and of the subject matter of plaintiff’s Complaint.

324

9 Defendants’ Motion for Summary J udgment in their

favor on each of the seven claims in plaintiff's Complaint

be and it hereby is granted.

3. That plaintiff take nothing by reason of said claims

in her Complaint; that the Complaint and the action be

dismissed with prejudice; and that the relief prayed for

therein be and it hereby is denied.

DATED: Aug. 24, 1981

/s/ Manuel L. Real

United States District Judge

ee ee ee 6 ee

33a

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

No. 81-5879

DC# CV 81-0116 R (Central California)

DorIs RUSSELL,

Plaintiff-Appellant,

vs.

MASSACHUSETTS MUTUAL LIFE INSURANCE

CoMPANY, et al.,

Defendants-A ppellees.

[Filed Jan. 13, 1984]

ORDER

Before: REINHARDT, Circuit Judge.

Appellees’ motion for an extension of time to file a

petition for rehearing is granted. The petition shall be

filed within 21 days of the date of this order.

84a

UNITED STATES COURT OF APPEALS

FOR THE NiNTH CIRCUIT

No. 81-5879

D.C. No. 81-0116

(Central District, California )

DorIS RUSSELL,

Plaintiff-A ppellant,

vs.

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,

CELIA STEVENSON,

Defendants-A ppellees.

Before: FLETCHER, PREGERSON, and REINHARDT, Circuit

Judges.

ORDER

[Filed Apr. 6, 1984]

The panel as constituted in the above has voted unani-

mously to deny the petition for rehearing and to reject

the suggestion for rehearing en bane.

The full court has been advised of the suggestion for

en banc hearing, and no judge of the court has requested

a vote on the suggestion. Fed. R. App. P. 35(b).

The petition for rehearing is denied and the suggestion

for rehearing en banc is rejected.

rr ee ee ‘.

35a

STATUTORY PROVISIONS

Employee Retirement Income Security Act of 1974, as

amended.

1. Section 409, 29 U.S.C. § 1109 (1982). Liability for

Breach of Fiduciary Duty.

(a) Any person who is a fiduciary with respect

to a plan who breaches any of the responsibilities,

oLligations, or duties imposed upon fiduciaries by this

title shall be personally liable to make good ~o such

plan any losses to the plan resulting from each such

breach, and to restore to.such plan any profits of

such fiduciary which have been made through use of

assets of the plan by the fiduciary, and shall be sub-

ject to such other equitabie or remedial relief as the

court may deem appropriate, including removal of

such fiduciary. A fiduciary may aiso be removed for

a viclation of section 411 of this Act.

(b) No fiduciary shall be liable with respect to a

breach of fiduciary duty under ‘his title if such

breach was committed before he vecame a fiduciary

or after he ceased to be a fiduciary.

2. Section 501, 29 U.S.C. § 1131 (1982). Criminal

Penalties.

Any person who willfully violates any portion of

part 1 of this subtitle, or any regulation or order

issued under any such provision, shall upon convic-

tion be fined not more than $5,000 or imprisoned not

more than one year, or both; except that in the case

of such violation by a person not an indi-idual, the

fine imposed upon such person shall be a fine not

exceeding $100,000.

8. Section 502, 29 U.S.C. § 1132 ( 1982). Civil En-

forremen<t.

(a) A civil action may be brought—

(1) by a participant or beneficiary—

36a

(A) for the relief provided for in sub-

section (c) of this section, or

(B) to recover benefits due to him under

the terms of his plan, to enforce his rights

under the terms of the plan, or to clarify

his rights to future benefits under the terms

of the plan;

(2) by the Secretary, or by a participant,

peneficisry or fiduciary for appropriate relief

under seciion 409;

(3) by a participant, beneficiary, or fiduciary

(A) to enjoin any act or practice which violates

any provision of this title or the terms of the

plan, or (B) to obtain other apprepriate equl-

table relief (i) to redress such violations or (ii)

to enforce any provisions of this title or the

terms of the plan;

(4) by the Secretary, or by a participant, or

beneficiary for appropriate relief in the case of

a violation of [section] 195 (c);

(5) except as otherwise provided in subsec-

tion (b), by the Secretary (A) to enjoin any

act or practice which violates any provision of

this title, or (B) to obtain other appropriate

equitable relief (i) to redress such violation or

(ii) to enforce any provisicn of this title; or

(6) by tke Secretary to collect any civil pen-

alty under subsection (i).

(b) (1) "In the case of a plan which is qualified

under section 401(a), 403(a), or 405(a) of the In-

which an application to so qualify has been filed and

has not been finally determined) the Secretary may

exercise his authority under subsection (a) (5) with

respect to a violation of or the enforcement of, parts

37a

2 and 8 of this subtitle (relating to participation,

vesting, and funding) , only if—

(A) requested by the Secretary of the

Treasury, or

(B) one or more participants, benefici-

aries, or fiduciaries, of such plan request in

writing (in such manner as the Secretary

shall prescribe by regulation) that he exer-

cise such authority on their behalf. In the

case of such a request under this paragraph

he may exercise such authority only if he

determines that such violation affects, or

such enforcement is necessary to protect,

claims of participants or beneficiaries to

benefits under the plan.

(2) The Secretary shall not initiate an action

to enforce section 515.

comply with a request for any information which

such administrator is required by this title to fur-

nish to a participant or beneficiary (unless such

failure or refusal results from matters reasonably

beyond the control of the administrator) by mailing

the material requested to the last known address of

the requesting participant or beneficiary within 30

days after such request may in the court’s discre-

tion be : ersonally liable to such participant or bene-

ficiary in the amount of up to $100 a day from the

date of such failure or refusal, and the court may

in its discretion order such other relief as it deems

proper.

(d) (1) An employee benefit plan ma; sue or be

sued under this title 1s an entity. Service of sum-

mons, subpena, or other legal process of a court

upon a trustee or an administrator of an «.mployee

benefit plan in his capacity as such shall constitute

38a

service upon the employee benefit plan. In a case

where a plan has not designated in the summary

plan description of the plan an individual as agent

for the service of legal process, service upon the

Secretary shall constitute such service. The Secre-

tary, not later than 15 days after receipt of service

under the preceding sentence, shall notify the ad-

ministrator or any trustee of the plan of receipt of

such service.

(2) Any money judgment under this title

against an employee benefit plan shall be en-

forceable only against the plan as an entity and

shall not be enforceable against any other per-

son unless liability against such person is estab-

lished in his individual capacity under this title.

(e) (1) Except for actions under subsection (a)

(1) (B) of this section, the district courts of the

United States shall have exclusive jurisdiction of

civil actions under this title brought by the Secre-

tary or by a participant, beneficiary, or fiduciary.

State courts of competent jurisdiction and district

courts of the United States shall have concurrent

jurisdiction of actions under subsection (a) (1) (B)

of this section.

(2) Where an action under this title is

brought in a district court of the United States,

it may be brought in the district where the

plan is administered, where the breach took

place, or where a defendant resides or may be

found, and process may be served in any other

district where a defendant resides or may be

found.

(f) The district courts of the United States shall

have jurisdiction, without reg:rd to the amount in

controversy or the citizenship of ‘he parties, to grant

the relief provided for in subseciion (a) of this sec-

tion in any action.

39a

(g) (1) In any action under this title by a par-

ticipant, beneficiary, or fiduciary, the court in its

discretion may allow a reasonable attorney’s fee and

costs of action to either party.

(2) In any action under this title by a fiduci-

ary for or on behalf of a plan to enforce section

15 in which a judgment in favor of the plan

is awarded, the court shall award the plan—

(A) the unpaid contributions,

(B) interest on the unpaid contributions,

(i) interest on the unpaid contribu-

tions, or

(ii) liquidated damages provided for

under the plan in an amount not in

excess of 20 percent (or such higher

percentage as may be permitted under

Federal or i tate law) of the amount

determined py the court under sub-

paragraph (A),

(D) reasonable attorney’s fees and costs

of the action, to be paid by the defendant,

and

(E) such other legal or equitable relief

as the court deems appropriate.

For purposes of this paragraph, interest on un-

paid contributions shall be determined by using

the rate provided under the plan, or, if none,

the rate prescribed under section 6621 of the

Internal Revenue Code of 1954.

(h) A copy of the complaint in any action under

this title by participant, beneficiary, or fiduciary

(other than an action brought by one or more par-

ticipants or beneficiaries under subsection (a) (1)

40a

(B) which is solely for the purpose of recovering

benefits due such participants under the terms of

the plan) shall be served upon the Secretary and

the Secretary of the Treasury by certified mail.

Either Secretary shall have the right in his discre-

tion to intervene in any action, except that the Sec-

retary of the Treasury may not intervene in any

action under part 4 of this subtitle. If the Secre-

tary brings an action under subsection (a) on behalf

of a participant or beneficiary, he shall notify the

Secretary of the Treasury.

(i) In the case of a transaction prohibited by sec-

tion 406 by a party in interest with respect to a plan

to which this part applies, the Secretary may assess

a civil penalty against such party in interest. The

amount of such penalty may not exceed 5 percent

of the amount involved (as defined in section 4975

(f) (4) of the Internal Revenue Code of 1954); ex-

cept that if the transaction is not corrected (in such

manner as the Secretary shall prescribe by regula-

tion, which regulations shall be consistent with sec-

tion 4975 (f) (5) of such Code) within 90 days after

notice from the Secretary (or such longer period as

the Secretary may permit), such penalty may be in

an amount not more than 100 percent of the amount

snvolved. This subsection shall not apply to a trans-

action with respect to a plan described in section

4975 (e) (1) of such Code.

(j) In ail civil actions under this title, attorneys

appointed by the Secretary may represent the Sec-

retary (except as provided in section 518(a) of title

28, United States Code), but all such litigation shall

be subject to the direction and control of the Attor-

ney General.

(k) Suits by an administrator, fiduciary, partici-

pant, or beneficiary of an employee benefit plan to

review a final order of the Secretary, to restrain the

i hatch tt ined ate

4la

Secretary from taking any action contrary to the

provisions of this Act, or to compel him to take ac-

tion required under this title, may be brought in the

district court of the United States for the district

where the plan has its principal office, or in the

United States District Court for the District of

Columbia.

4. Section 503, 29 U.S.C. § 1133 (1982). Claims Pro-

cedure.

In accordance with regulations of the Secretary,

every employee benefit plan shall—

(1) provide adequate notice in writing to any

participant or beneficiary whose claim for bene-

fits under the plan has been denied, setting forth

the specific reasons for such denial, written in a

manner calculated to be understood by the par-

ticipant, and

(2) afford a reasonable opportunity to any

participant whose claim for benefits has been

denied for a full and fair review by the ap-

propriate named fiduciary of the decision deny-

ing the claim.

Regulations promulgated under Section 503 of ERISA,

29 U.S.C. 1133 (1982).

Section 256( 5038-1, 29 C.F.R. § 2560.503-1 (1983). °

Claims Procedure.

(a) Scope and purpose—(1) This section sets out

certain minimum requirements for employee benefit

plan procedures pertaining to claims by participants

and beneficiaries (claimants) for plan benefits, con-

sideration of such claims, and review of claim de-

nials, hereinafter referred to in the aggregate as

“claims procedures.” Except as otherwise noted,

these requirements apply to every employee benefit

plan described in section 4(a) and not exempted

under section 4(b) of the Employee Retirement In-

come Security Act of 1974 (the Act).

42a

(b) Obligation to establish a reasonable claims

procedure. Every employee benefit plan shall estab-

lish and maintain reasonable claims procedures.

(1) A claims procedure will be deemed to be rea-

sonable only if it:

(i) Complies with the provisions of paragraphs

(d) through (h) of this section, except to the ex-

tent that it is deemed to comply with some or all of

such provisions under the authority of paragraph

(b) (2) or paragraph (j) of this section. [Amended

by 46 FR 5882, originally scheduled to be effective

February 20, 1981. However, the effective date was

delayed under the President’s regulation freeze at

least until March 30, 1981 (46 FR 11253) J

(ii) Is described in the summary plan description,

as required by § 2520.102-3,

(iii) Does not contain any provision, and is not

administered in a way, which unduly inhibits or

hampers the initiation or processing of plan claims,

and

(iv) Provides for informing participants in writ-

ing, in a timely fashion, of the time limits set forth

in paragraphs (e) (3) and (g)(3) and subsection

(h).

(2) In the case of a plan established and main-

tained pursuant to a collective bargaining agreement

(other than a plan subject to the provisions of sec-

tion 302(c) (5) of the Labor Management Relations

Act, 1947 concerning joint representaticn on the

board of trustees) :

(i) Such plan will be deemed to comply with the

provisions of naragraphs (d) through (h) of this

section if the collective bargaining agreement pur-

suant to which the plan is established or maintained

sets forth or incorporates by specific reference

43a

(A) Provisions concerning the filing of benefit

claims and the initial disposition of benefit claims,

and

(B) A grievance and arbitration procedure to

which denied claims are subject.

(ii) Such plan will be deemed to comply with the

provisions of paragraphs (g) and (h) of this section

(but will not be deemed to comply with paragraphs

(d) through (f)) if the collective bargaining agree-

ment pursuant to which the plan is established or

maintained sets forth or incorporates by specific ref-

erence a grievance and arbitration procedure to

which denied claims are subject (but not provisions

concerning the final and initial disposition of benefit

claims).

pension plan.—(1) To the extent that benefits under

an employee benefit plan are provided or adminis-

tered by an insurance company, insurance service,

or other similar organization which is subject to

regulation under the insurance laws of one or more

States, the claims procedure pertaining to such bene-

fits may provide for filing of a claim for benefits

with and notice of decision by such company, service

or organization.

(2) See paragraph (g) regarding review and fi-

nal decision on denied claims by insurance companies,

insurance services and similar organizations.

(d) Filing of a claim for benefits. For purposes

of this section, a claim is a request for a pian bene-

fit by a participant or beneficiary. A claim is filed

when the requirements of a reasonable claim filing

procedure of a-plan have been met. If a reasonable

procedure for filing claims has not been established

by the plan, a claim shall be deemed filed when a

written or oral communication is made by the claim-

44a

ant or the claimant’s authorized representative which

is reasonably calculated to bring the claim to the

attention of:

(1) In the case of a single employer plan, either

the organizational unit which has customarily han-

dled employee benefits matters of the employer, or

any officer of the employer.

(2) In the case of a plan to which more than one

unaffiliated employer contributes, or which is estab-

lished or maintained by an employee organization,

either the joint board, association, committee or other

similar group (or any member of any such group)

administering the plan, or the person or organiza-

tional unit to which claims for benefits under the

plan customarily have been referred.

(3) In the ease of a plan the benefits of which

are provided or administered by an insurance com-

pany, insurance service, or other similar organiza-

tion, which is subject to reguiation under the insur-

ance laws of one or more states, the person or or-

ganizational unit which handles claims for benefits

under the plan or any officer of the insurance com-

pany, insurance service, or similar organization.

(4) For purposes of paragraphs (d (1), (2),

and (3) of this section, a communication shall be

deemed to have been brought to the attention of an

organizational unit if it is received by any person

employed in such unit.

(e) Notification to claimant of decision.—(1) If

a claim is wholly or partially denied, notice of the

decision, meeting the requirements of paragraph (f)

of this section, shall be furnished to the claimant

within a reasonable period of time after receipt of

the claim by the plan.

(2) If notice of the denial of a claim is not fur-

nished in accordance with paragraph (e) (1) of this

45a

section within a reasonable period of time, the claim

shall be deemed denied and the claimant shall be

permitted to proceed to the review stage described in

paragraph (g) of this section.

(3) For purposes of paragraphs (e) (1) and (2),

of this section, a period of time will be deemed to be

unreasonable if it exceeds 9¢ days after receipt of

the claim by the plan, unless special circumstances

require an extension of time for processing the claim.

If such an extension of time for processing is re-

quired, written notice of the extension shail be fur-

nished to the claimant prior to the termination of

the initial 90-day period. In no event shall such ex-

tension exceed a period of 90 days from the end of

such initial period. The extension notice shall in-

dicate the speciai circumstances requiring an exten-

sion of time and the date by which the plan expects

to render the final decision.

(f) Content of notice. A plan administrator or,

if paragraph (c) of this section is applicable, the

insurance company, insurance service, or other simi-

lar organization, shall provide to every claimant who

is denied a claim for benefits written notice setting

forth in a manner calculated to be understood by the

ciaimant;

(1) The specific reason or reasons for the denial;

(2) Specific reference to pertinent plan provisions

on which the denial is based ;

(3) A description of any additional material or

information necessary for the claimant to perfect the

claim and an explanation of why such material or

information is necessary; and

(4) Appropriate information as to the steps to be

taken if the participant or beneficiary wishes to sub-

mit his or her claim for review.

46a

(g) Review procedure. (1) Every plan shall es-

tablish and maintain a procedure by which a claim-

ant or his duly authorized representative has a rea-

sonable opportunity to appeal a denied claim to an

appropriate named fiduciary or to a person desig-

nated by such fiduciary, and under which a full and

fair review of the claim and its denial may be ob-

tained. Every such procedure shall include but not

be limited to provisions that a claimant or his duly

authorized representative may:

(i) Request a review upon written application to

the plan;

(ii) Review pertinent documents; and

(iii) Submit issues and comments in writing.

(2) To the extent that benefits under an employee

benefit plan are provided or administered hy an in-

surance company, ir surance service, or other similar

organization which is subject to regulation under the

insurance laws of one or more States, the claims pro-

cedure pertaining to such benefits may provide for

review of and decision upon denied claims by such

company, service or organization. In each case, that

company, service, or organization shall be the “ap-

propriate named fiduciary” for purposes of this sec-

tion. In all other cases, the “appropriate named fi-

duciary” for purposes of this section may be the plan

administrator or any other person designated by the

plan, provided that such plan administrator or other

person is either named in the plan instrument or is

identified pursuant to a procedure set forth in the

plan as the person who reviews and makes decisions

on claim denials.

(3) A plan may establish a limited period within

which a claimant must file any request for review

of a denied claim. Such time limits must be reason-

able and related to the nature of the benefit which

natn ath 6

~ ore

47a

is the subject of the claim and to other attendant

circumstances. In no event may such a period expire

less than 60 days after receipt by the claimant of

written notification of denial of a claim.

(h) Decision on review.—(1) (i) A decision by an

appropriate named fiduciary shall be made promptly,

and shall not ordinarily be made later than 60 days

after the plan’s receipt of a request for review, un-

less special circumstances (such as the need to hold

a hearing, if the plan procedure provides for a hear-

ing) require an extension of time for processing, in

which vase a decision shall be rendered as soon as

possible, but not later than 120 days after receipt

of a request for review.

(ii) In the case of a plan with a committee or

board of trustees designated as the appropriate

named fiduciary, which holds regularly scheduled

meetings at least quarterly, a decision on review

shall be made by no later than the date of the meet-

ing of the committee or board which immediately fol-

lows the plan’s receipt of a request for review, unless

the request for review is filed within 30 days pre-

ceding the date of such meeting. In such case, a

decision may be made by no later than the date of

the second meeting following the plan’s receipt of

the request for review. If special circumstances

(such as the need to hold a hearing, if the plan pro-

cedure provides for a hearing) require a further

extension of time for processing, a decision shall be

rendered not later than the third meeting of the

committee or board following the plan’s receipt of

the request for review.

(2) If such an extension of time for review is

required because of special circumstances, written

notice of the extension shall be furnished to the

claimant prior to the commencement of the ex-

tension.

48a

(3) The decision on review shall be in writing

and shall include specific reasons for the decision,

written in a manner calculated to be understood by

the claimant, as well as specific references to the

pertinent plan provisions on which the decision is

based.

(4) The decision on review shall be furnished to

the claimant within the appropriate time described

in paragraph (h) (1) of this section. If the decision

on review is not furnished within such time, the

claim shall be deemed denied on review.

(i) Apprenticeship plans. This section does not

apply to employee benefit plans which provide solely

apprenticesnip training benefits.

Effective date: This section becomes effective for

claims filed on or after October 1, 1977.

(j) Qualified Health Maintenance Organizations.

Claims procedures with respect to any benefits pro-

vided through membership in a qualified health

maintenance organization, as defined in section 1310

(d) of the Public Health Service Act, as amended,

42 U.S.C. § 300e-9(d), shall be deemed to satisfy the

requirements of this section with respect to the pro-

vision of such benefits to persons who are members

of such qualified health maintenance organization,

provided those procedures meet the requirements o1

section 1301 of the Public Health Service Act, as

amended 42 U.S.C. § 300e and the regulations there-

under. [Added by 46 FR 5882, originally scheduled

to be effective February 20, 1981. However, the ef-

fective date was delayed under the President’s regu-

lation freeze until March 30, 1981 (46 FR 11253).]

re at anne re

49a

MASSACHUSETTS MUTUAL LIFE

INSURANCE COMPANY

Springfield, Massachusetts 01111/ (413) 788-8411

October 17, 1979

Mrs. Doris Russell

1967 N. Avenue 52

Los Angeles, California 90042

Dear Mrs. Russell:

This is to inform you that effective October 17, 1979,

your Salary Continuance benefits are terminated. Our

decision to terminate benefits is based on Dr. Michael

D Rosco’s opinion that you are not disabled in any way

which prevents you from performing your usual duties

for the Massachusetts Mutual. Our acticn is in accord-

ance with Article III. Benefits and Claim Procedures as

shown in the Employee Salary Continuance booklet.

As you had indicated to your Manager in June, 1979,

that you did not wish to relocate when the office was

moved, your employment with the Massachusetts Mutual

is terminated also effective October 17, 1979.

If you wish to appeal the discontinuance of Salary Con-

tinuance benefits, you may do so by contacting the Plan

Administrator within sixty days. You may review any

documents related to the discontinuance of benefits and

submit in writing further information and comments.

The Plan Administrator will make a final decision on a

review of your claim within sixty days. He will give

specific reasons and references to the plan provision on

which his decision is based. The sixty days may be ex-

tended for another sixty days if the Plan Administrator

feels that special circumstances exist which require an

extension of time. The Plan Administrator’s address is:

50a

Plan Administrator, Salary Continuance Plan

c/o Payroll Section

Employee Services Department

Massachusetts Mutual Life Insurance Company

1295 State Street

Springfield, MA 01111

Sincerely,

/s/ Charles 8. Dole

CHARLES S. DOLE

Director of Group Claims

CSD:sla

L.A., Ca.

5la

90042

22 October 79

Mass. Mutual Life Insurance Co.

Springfield, Mass.

Charles S. Dole

Dear Mr. Dole:

Thank you for your letter of October 17. The informa-

tion contained therein opens the door to a thorough house-

cleaning

of Paypoint G-213, and an exposé of its man-

agement practices.

Point 1.

Point 2.

Your decision to terminate my Salary Continu-

ance benefits was influenced by an orthopedist.

My own orthopedist clearly states that my prob-

lem is not orthopedic in nature—but, he agrees

that the problem exists and prevents my per-

forming any of the duties of my regular occupa-

tion. Further information on this will be forth-

oming.

Your decision to terminate my employment is

based on inaccurate information. In no way,

either verbally or in writing, did I inform Mrs.

Stevenson of any intention not to make the move

to the new location. Another of Mrs. Steven-

son’s many errors in judgment, and/or misin-

terpretation of another’s statement to suit her

purposes . . . and this one will not be over-

looked in the final exposure.

I definitely wish to appeal the discontinuance of Salary

Continuance, and I also wish to apply for Long Term

Disability. I phoned the Plan Administrator and spoke

to Peter Feige(?), who asked that I send a written re-

52a

quest for documents mentioned in Par. 3 of your letter.

Perhaps you will be kind enough to convey this request

to him.

In addition, I am requesting: 1. A copy of LTD plan,

and application for benefits. 2. The name and address of

Mass. Mutual’s Workmen’s Compensation carrier.

Your prompt cooperation in getting these items will be

appreciated.

Sincerely,

/s/ Doris Russell

DorIS RUSSELL

DR/sf

PS. I still have 8 days vacation time due for this

year. I trust that compensation for this will be

included with my final check (Per State of Calif.

Labor Code Sect. 201), as you have contended

that I am not ill, and have terminated me for

nebulous reasons without notice or compensatory

salary. (2 weeks notice or severance pay.)

53a

October 25, 1979

Mrs. Doris Russell

1967 N. Avenue 52

Los Angeles, CA 90042

Dear Mrs. Russell:

This letter acknowledges your October 22, 1979 request to

Mr. Dole for an appeal of the decision to discontinue

Salary Continuance benefits. Until I receive the further

information to which you refer in “Point 1” of your let-

ter, I do not feel that i can complete a fair examination

of the facts. You can be assured that I will give your

appeal prompt attention upon receipt of that information.

I have been informed that Mr. Feige has provided the

documents which you requested, i.e. Dr. Rosco’s report

and a copy of the Salary Continuance booklet, and that

Mr. Demchuck has provided you with information con-

cerning our Workers’ Compensation carrier. I have also

been informed that Mrs. Emery is processing your final

pay, which will include payment for unused vacation per

our standard procedures. If you desire further informa-

tion in any of these areas, feel free to write directly

to me.

I have enclosed a copy of our employee Long Term Dis-

ability Plan booklet. A complete copy of the Plan docu-

ment can be purchased for $1.00 by sending a check pay-

able to Massachusetts Mutual to Mr. Feige. I have not

enclosed an application for LTD benefits because your

eligibility for benefits ceased upon termination of em-

ployment.

Sincerely,

/s/ R. Allison Johnson

Plan Administrator

Salary Continuance Plan

54a

RAJ :rfl

C:Dole

Doris Russell

1967 N. Avenue 52

Los Angeles, CA 90042

November 27, 1979

R. Allison Johnson, C.L.U.

Plan Administrator

Salary Continuance Plan

Mass. Mutual Life Ins. Co.

Re: Appeal for reinstatement of

Salary Continuance Benefits

Dear Mr. Johnson:

Enclosed are copies of the following:

1. Dr. Ziferstein’s report (also being used in connection

with my Workmen’s Compensation claim), which out-

lines the true nature of my disabling illness.

29 Medical claim form submitted by Dr. Ziferstein di-

rect to Mass. Mutual Employee Services.

3 Dr. Rosco’s reply to my rebuttal of his report.

4. Questionnaire which | completed in Dr. Rosco’s office

prior to examination of 9/18/79. (1 have made nota-

tions on this to clarify certain answers. Circled items

are Dr. Rosco’s notations, not mine. )

5. X-ray reports from two chiropractic roentgenologists.

Note that the x-rays were taken two years apart, in

1977 and 1979. Both indicate muscular spasms. My

symptoms prior to and during those two years indi-

eate that the spasms were continuous, and not two

separate incidents.

The enclosed items, together with a thorough and careful

review of my personal medical claim file (at Spring-

ee ee

55a

field), should enable any unbiased committee to accurately

evaluate my claim and arrive at a fair decision.

Very truly yours,

/s/ Doris Russell

DorISs RUSSELL

DR/sf

COPY: State of California

Department of Insurance

P. S. Would you kindly instruct Employee Services

to send any medical claim payments and/or correspond-

ence direct to me? My final paycheck was forwarded to

me from the Hacienda Heights office in an unsealed en-

velope. I’m surprised the check wasn’t lost in transit.

Furthermore, as I am no longer an employee of PP G

213, I do not wish to have confidential information passed

through that office.

56a

March 11, 1980

Mrs. Doris Russell

1967 N. Ave. 52

Los Angeles, CA 90042

Dear Mrs. Russell:

I have completed my review of your appeal of our denial

of Salary Continuance benefits. Based on the additional

information which you provided, it is my opinion that you

are entitled to receive benefits for a temporary period.

I have instructed Mr. Denis Hunady to discuss with you

the details of my decision.

Sincerely,

/s/ R. Allison Johnson

RAJ :rfi

April 1, 1980

Mrs. Doris Russell

1967 N. Avenue 52

Los Angeles, CA 90042

Dear Mrs. Russell:

The attached worksheet provides an explanation of the

payment of $4,106.55 made to you. As you will see in

that worksheet, appropriate taxes and Group Insurance

contributions have been withheld. Disability benefits,

when approved, will be retroactive to coincide with the

exhaustion of Salary Continuance benefits. As I men-

tioned the other day, we will process your claim as soon

as we receive the claim forms.

You had asked for information concerning reports from

Dr. Allred. The only report we received prior to the

October 17, 1979, termination of benefits was dated July

1979. Subsequent to the termination of benefits, we re-

ceived a report from Dr. Allred dated October 16, 1979.

Sincerely yours,

Peter A. Feige

Associate Director of Employee Benefits

58a

Salary Continuance: 10 days @ full pay

681! days @ 2/3 pay

15 days @ 1/3 pay

Holiday pay: 6 days @ full pay

Additional accrued vacation: 10 days @ full pay

Gross Pay

Less: FICA (on vacation and holiday only)

Federal Tax

State Tax

State Disability (on vacation and holiday only)

Group Insurance

Net Pay

$ 618.70

2,824.94

309.30

371.22

618.70

$4,742.86

— 60.68

— 420.58

— 48.60

— 9.90

— 96.55

$4,106.55

;

}

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.