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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1985
- **Citation:** 473 U.S. 134

## Text

IN THE

Supreme Court of the United States

OCTOBER TERM, 1983

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,
and CECILIA STEVENSON,
Petitioners,
V.

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)

ii

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

a
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--

I.

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-
Ce

LSS

(iii)

13

14

18

iv

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-

18
Gilliam v. Edwards, 492 F. Supp. 1255 (D.N.J.
1980) ..... 1l

v

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

vi

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

ix
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,
v.

DoRIS RUSSELL,
Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

l

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-

2

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.

3

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.

4

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).

5

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

6

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).

7

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),

8

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

9

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.

10

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

11

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).

12

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).

13

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

14

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).

15

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

16

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.

17

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

18

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).

19

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).

20

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

la
APPENDIX

UNITED STATES COURT OF APPEALS
NINTH CIRCUIT

No. 81-5879
DorIS RUSSELL,
Plaintiff-A ppellant,

v

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

2a

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.

3a

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.

4a

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).

5a

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).

6a

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,

4

7a

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)

8a

(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).

9a

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

oe

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,

a

|
|
|

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.

(c) Any administrator who fails or refuses to
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,
(C) an amount equal to the greater of—

(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 naragra

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0403%3A02. Public record. Not legal advice.