Amicus Curiae Brief — Massachusetts Mutual Life Insurance v. Russell

No. 84-9

IN THE

Supreme Court of the United States

OCTOBER TERM, 1984

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,

and CELIA STEVENSON,

m Petitioners,

DoRIs RUSSELL,

Respondent.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

MOTION FOR LEAVE TO FILE BRIEF AMICI CURIAE

AND

BRIEF AMICI CURIAE FOR AMERICAN COUNCIL OF

LIFE INSURANCE AND HEALTH INSURANCE

ASSOCIATION OF AMERICA

IN SUPPORT OF THE PETITION

Of Counsel: ERWIN N. GRISWOLD

LINWooD HOLTON (Counsel of Record)

Vice President and PATRICIA A. DUNN

General Counsel JONES, DAY, REAVIS & POGUE

JACK H. BLAINE 655 Fifteenth Street, N.W.

Chief Counsel, State Washington, D.C. 20005-5701

EDWARD J. ZIMMERMAN (202) 879-3898

Associate General Counsel Counsel for the Amici

AMERICAN COUNCIL OF

LIFE INSURANCE

1850 K Street, N.W.

Washington, D.C. 20006-2284

(202) 862-4000

JOE W. PEEL

Vice President and

General Counsel

RITA M. THEISEN

Counsel

HEALTH INSURANCE ASSOCIATION °

OF AMERICA

1750 K Street, N.W.

Washington, D.C. 20006-2284

(202) 331-1386

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

- r: VD i 2)

|

IN THE

Supreme Court of the United States

OCTOBER TERM, 1984

No. 84-9

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,

and CELIA STEVENSON,

Petitioners,

Vv.

DorIs RUSSELL,

Respondent.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

MOTION FOR LEAVE TO FILE BRIEF AMICI CURIAE

FOR AMERICAN COUNCIL OF LIFE INSURANCE AND

HEALTH INSURANCE ASSOCIATION OF AMERICA

IN SUPPORT OF THE PETITION

The American Council of Life Insurance (“Council”)

and the Health Insurance Association of America

(“HIAA”) hereby move, pursuant to Rule 36.1 of the

Rules of this Court, for leave to file the attached brief

as amici curiae. Consent to the filing of this brief has

been obtained from counsel for the Petitioners. Counsel

for the Respondent has refused consent.

2

The Council is the largest life insurance trade associ-

tion in the United States, representing the interests of

611 member life insurance companies including most of

the major life insurers in the country. The Council’s

members currently hold more than ninety-five percent of

the life insurance in force in legal reserve life insurance

companies in the United States. Member coinpanies also

account for ninety-nine percent of the insured private

pension plan business in the United States. The HIAA

represents the interests of 327 member companies which

write over eighty-five percent of the health insurance

written by insurance companies in the United States, and

the combined memberships of the HIAA and the Council

represent over ninety percent of the health insurance

written by insurance companies in the U:ited States.

The life insurance and health insurance industries

affect many individuals in our nation’s work force. Over

60 million Americans in 1981 held some form of short-

term disability income protection, and 21.6 million indi-

viduais were protected by long-term disability programs

sponsored by insurance companies. See Source Book of

Health Insurance Data 1982-83, Health Insurance As-

sociation of America. Moreover, during 1980, 500,000

private pension plans, 6,600 state and local government

pension plans, and 38 federal workers retirement plans

were in existence in the United States. See Ghysels,

“The Role of Insurers in Group Pensions,” Best’s Re-

view, Vol. 81, p. 20 (Dec. 1980). These plans represented

more than $550 billion in assets. Jd. More specifically,

at the end of 1980, private pension plans administered

by U.S. legal reserve life insurance companies provided

coverage to 26.1 million Americans. See American Coun-

cil of Life Insurance, 1982 Pension Facts. Assets backing

those plans totaled $165.8 billion, an increase of 19 per-

cent over the immediately preceding year. Jd. By 1982,

the number of Americans covered by private pension

3

plans administered by U.S. legal reserve life insurance

companies had risen to 30.5 million, with assets totaling

$228.9 billion. Id.

Many members of the Council and the HIAA provide

benefits to their employees under plans governed by the

Employee Retirement Income Security Act of 1974

(“ERISA”), 29 U.S.C. §§ 1001 et seg. Because the Coun-

cil and the HIAA have nationwide constituencies, they

are peculiarly able to present to the Court the views of

the life insurance and health insurance industries on the

importance of this Court’s review of the issue in this

case: whether ERISA permits a plan beneficiary or

participant to recover extra-contractual and punitive dam-

ages from a plan fiduciary for a breach of its statutory

duties. The Council and the HIAA are genuinely con-

cerned that the substantial confusion among the lower

federal courts regarding the role of punitive damages in

ERISA actions will result in a haphazard and inconsistent

enforcement of ERISA’s comprehensive statutory scheme

on a nationwide basis.

Because of the Ninth Circuit’s opinion in particular

and the uncertainty in the law of punitive damages in

general, members of the Council and the HIAA who vol-

untarily establish employee benefit plans are confronted

with the possibility that the processing of a benefit claim

will be accompanied by a substantial, yet wholly un-

predictable, punitive award. The prospect of incurring

substantial punitive damages awards for mishandling

benefit claims will have a detrimental impact on the will-

ingness and the ability of members of the Council and

the HIAA to establish future, or increase contributions

to, employee benefit plans.

4

For these reasons, the motion for leave to file the

attached brief of amici curiae in support of the Petition

should be granted.

Of Counsel:

LINWOOD HOLTON

Vice President and

Genera! Counsel

JACK H. BLAINE

Chief Counsel, State

EDWARD J. ZIMMERMAN

Associate General Counsel

AMERICAN COUNCIL OF

LIFE INSURANCE

1850 K Street, N.W.

Washington, D.C. 20006-2284

(202) 862-4000

JOE W. PEEL

Vice President and

Genera! Counsel

RITA M. THEISEN

Counsel

HEALTH INSURANCE ASSOCIATION

OF AMERICA

1750 K Street, N.W.

Washington, D.C. 20006-2284

(202) 331-1336

AUGUST, 1984

Respectfully submitted,

ERWIN N. GRISWOLD

PATRICIA A. DUNN

JONES, DAY, REAVIS & POGUE

655 Fifteenth Street, N.W.

Washington, D.C. 20005-5701

(202) 879-3898

Counsel for the Amici

BRIEF FOR AMICI CURIAE

QUESTION PRESENTED

Whether the Employee Retirement Income Security Act

permits an employee benefit plan participant or bene-

ficiary to recover punitive damages or extra-contractual

compensatory relief from a plan fiduciary for improper

or untimely processing of benefit claims?

(i)

TABLE OF CONTENTS

Page

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ee I III oi sisiisctsenisicircschenseiinsiesiinanicansiin iv

PEERED PET TED GRIT docstcvncccscccainsscensconcnnnnisenineni 1

icin inca uric acest coentinionicimmilivionijadiin 2

EATER Re SNC ae ED Ee oe 3

EERE lente en en Ree Oe 3

EER a OT SS ni ene Pa 4

REASONS FOR GRANTING THE WRIT... 7

1. The Current Confusion among the Lower Fed-

eral Courts Concerning the Availability of Puni-

tive Damages under ERISA Can Only Be Re-

Pe ee ee 7

2. The Ninth Circuit’s Determination that ERISA

Permits a Beneficiary or Participant to Recover

Punitive Damages and Extra-contractual Relief

from a Plan Fiduciary Is Inconsistent with the

Act’s Express Language and with the Policies

Us UU 9

3. No Workable Standards for Assessing Punitive

Damages Exist and Current Practices Provide

No Basis for Consistency or Predictability in

Punitive Damages Awards ......000 13

TET <<icicsenruiijuniieiicsntinscistainetihdaiguapitaanciiiishinadilaleinasinases 20

(iii)

iv

TABLE OF AUTHORITIES

CASES:

Airco Inc. v. Simmons First National Bank, 276

Ark. 486, 638 S.W. 2d 660 (Ark. 1982) —..........

Bittner v. Sadoff and Rudoy Industries, 490

F. Supp. 634 (E.D. Wis. 1960) .............................

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

I, I cantata

Day v. Woodworth, 13 Howard 363 (1851) -............

Dempsey v. Auto Owners Insurance Co., 717 F.2d

RSIS A a ee

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

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

EASE eae Re Ta nO ara

Diano v. Central States, 551 F. Supp. 861 (N.D.

TLD SRR en ena eee ae ea eRe Cc ee a

Dorsey v. Honda Motor Co., 655 F.2d 650 (5th Cir.

1981), modified on other grounds, 670 F.2d 21

(5th Cir.), cert. denied, 459 U.S. 880 (1982)...

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

RE ERS GSR ENF Sect AUP mS Ee

Egan v. Mutual of Omaha, 24 Cal. 3d 809, 157 Cal.

Rptr. 482, 598 P.2d 452 (Cal. 1979), appeal dis-

misses, 445 U.S. 912 (1960) .................-...............

First Bank (N.A.)-Billings v. Transamerica In-

surance Co., 679 P.2d 1217 (Mont. 1984) _.........

Ford Motor Company v. Nowak, 638 S.W. 2d 582

I I I onto

Frazier v. Metropolitan Insurance Co., No. C233-

971, L.A. Super. Ct. (March 14, 1983) ...............

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

CHCA) BORD CHCE. Tis TOEP cnncnccccecs0s...s..........

Garvey v. State Farm and Casualty Co., No. 760226,

S.F. Super. Ct. (Feb. 18, 1962)..............................

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

Grimshaw v. Ford Motor Company, 119 Cal. App.

3d 757, 174 Cal. Rptr. 348 (1981) .........................

Gryc v. Dayton-Hudson Corp., 297 N.W. 2d 727

(Minn.), cert. deried, 449 U.S. 921 (1980) ........

Haskins v. Retirement Plan, No. 78C3670 (N.D.

CRESS O05) 7 REN aalen te ea aOR

Page

v

TABLE OF AUTHORITIF5—Continued

Page

Hawkins v. Allstate Insurance Company ................. 15

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

Sn te i sdaeebbilaneadine 8

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

I I I i 8

International Brotherhood of Electrical Workers

o. Foust, 666 U.S. 4 (is7e) ........-....................... 10, 18

Jackson v. Johns-Manville Sales Corp., 727 F.2d

SO I a acoissbinempadeah 16

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

= NE es &

Leichtamer v. American Motors Corp., 67 Ohio St.

2d 456, 424 N.E. 2d 568 (1981) ~............00000000..... 15

Linthicum v. Nationwide Life Ins. Co., No. 446562,

Maricopa County (Dec. 15, 1982) _..........000000000.... 15

Maxey v. Freightliner Corporation, 450 F. Supp.

955 (N.D. Tex. 1978), aff'd, 623 F.2d 395 (5th

Cir. 1980). vacated and remanded upon rehear-

ing, 665 F.2d 1367 (5th Cir. 1982), vacated in

part and affirmed in part, 722 F.2d 1238 (5th

I I hi adios ctctinieaiaeniea ssi esti cgihbeh tie catia cin 15

Maxfield v. Central States, 559 F. Supp. 158 (N.D.

MTEC er Oe ean ee ee ot ca 8

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

EEE RET i ae 8

Neal v. Farmers Insurance Exchange, 21 Cal. 3d

910, 148 Cal. Rptr. 389 (Cal. 1978) —....00000000.... 14

Palmer v. A. H. Robins Co., No. 81SA149 (Colo.

i TI ictieicdh ciepntstansintndatniiaisecsidapiatiiaienmeniibbinneines 16

Rosenbloom v. Metromedia, Inc., 403 U.S. 29

SED ieccniediliains SE eed AIL EPS A NS 18

San Jose Production Credit Association v. Old Re-

public Life Insurance Company, 723 F.2d 700

I i a etal 14

Smith v. Wade, 103 Sup. Ct. 1625 (1983) _........ 12, 18, 19

Sparks v. Republic National Life Ins. Co., 182 Ariz.

529, 647 P.2d 1127 (Ariz.), cert. denied, 459

U.S. 1070 (1982) ....... Pe SO ee WS IN RY SOR EN 14

Sturm, Ruger & Co. v. Day, 594 P.2d 38 (Alaska

1979), cert. denied, 454 U.S. 894 (1981) ............. 15

vi

TABLE OF AUTHORITIES—Continued

Toole v. Richardson-Merrill, Inc., 251 Cal. App.

2d 689, 60 Cal. Rptr. 398 (1967) _.......................

Trus Joist Corp. . Safeco Insurance Co., No.

C366678, Maricc»a County (March 21, 1983)...

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

ASSERTS, CER SEE Caer ena SNe ee

Winterrowd v. David Freedman and Company, 724

ee I I oii ssdecramsptbecssensecns

Zittrouer v. UARCO Incorporated Group Benefit

Plan, 582 F. Supp. 1471 (N.D. Ga. 1984) _..........

STATUTES:

Civil Rights Act of 1968, § 812, 42 U.S.C. § 3612(c)

a siemens

Clayton Act § 4, 15 U.S.C. § 15 (1976) -....................

Consumer Credit Protection Act § 616, 15 U.S.C.

RT TE Se ee a

Employee Retirement Income Security Act of 1974

(“ERISA”), 29 U.S.C. §§ 1001 et seq. -...............

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

ERISA § 409(a), 29 U.S.C. § 1109(a) (1982) __.....

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

ERISA § 502, 29 U.S.C. § 1182 (1982)

ERISA § 502(a), 29 U.S.C. § 1182(a) (1982) __.....

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

ERENCE Se a ars Se eee

ERISA § 510, 29 U.S.C. § 1140 (1982) _........-....

ERISA § 514, 29 U.S.C. § 1144 (1982) ~....-....

Omnibus Crime Control and Safe Streets Act of

1968 § 802, 18 U.S.C. § 2520(b) (1982) —...........

CONGRESSIONAL MATERIALS:

H.R. REP. No. 93-533, 93d Cong., 2d Sess., reprinted

in 1974 U.S. CoDE Conc. & AD. NEWs 4639 _......

Senate Consideration of Conference Report to Ac-

company H.R. 2, reprinted in 3 Legislative His-

tory of the Employee Retirement Income Secu-

rity Act of 1974, 4733 (1976) —..........--e...

Page

15

11

11

vii

TABLE OF AUTHORITIES—Continued

OTHER AUTHORITIES:

Bernstein, “Dread Singularities” (Book Review),

New York Times Book Review, April 25, 1982...

Ellis, Fairness and Efficiency in the Law of Puni-

tive Damages, 56 S. Cal. L. Rev. 1 (1982)...

Kovri and Barrett, Punitive Damages-Update,

egal Section Proceedings of the American

Council of Life Insurance 685 (1979) —...............

Nelson, Punishment for Profit: An Examination

of the Punitive Damage Award in Strict Lia-

bility, 18 Forum 377 (1983) —....0000000000020--

Owen, Problems in Assessing Punitive Damages

Against Manufacturers of Defective Products,

49 U. of Chi. L. Rev. 1 (1982) ............................

Seltzer, Punitive Damages in Mass Tort Litigation:

Addressing the Problems of Fairness, Efficiency

and Control, 52 Fordham L. Rev. 37 (1983) _....

Smith, Annual Review of Litigation, Legal Section

Proceedings of the American Council of Life In-

I

Wheeler, The Constituiional Case for Reforming

Punitive Damages Procedures, 69 Va. L. Rev.

ST Se eae x SETI S NOY Ske RTE

Wilson, Punitive Damages, Legal Section Proceed-

ings of the American Council of Life Insurance

a MES Se Me RE a SE PA Pe Raise

Page

14

13

12

14

16

16

17

18

16

IN THE

Supreme Court of the United States

OCTOBER TERM, 1984

No. 84-9

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,

and CELIA STEVENSON,

‘ Petitioners,

DorRIS RUSSELL,

Respondent.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

BRIEF AMICI CURIAE FOR AMERICAN COUNCIL OF

LIFE INSURANCE AND HEALTH INSURANCE

ASSOCIATION OF AMERICA

IN SUPPORT OF THE PETITION

+

This brief is filed on behalf of the American Council

of Life Insurance and the Health Insurance Association

of America, as ami~ curiae, in support of the petition

for certiorari.

INTERESTS OF THE AMICI

As indicated in the Motion accompanying this Brief,

the American Council of Life Insurance (‘Council’’) is

the largest life insurance trade association in the United

States, and the Health Insurance Association of America

(“HIAA”) represents the interests of 327 member com-

panies which write over eighty-five percent of the health

insurance written by insurance companies in the United

2

States. The combined memberships of the HIAA and the

Council are responsible for more than ninety percent of

the health insurance written by insurance companies in

the United States.

The prospect of incurring substantial punitive dam-

ages awards for mishandling benefit claims—a prospect

made a reality by the Ninth Circuit’s opinion below—is

a matter of grave concern to members of the Council and

the HIAA. As with any form of insurance, a predictable

allocation of risks and costs, based upon historical pat-

terns of benefit payments, is essential to the financial

integrity of these benefit plans. Because the opinion be-

low creates the possibility that the processing of a bene-

fit claim may be accompanied by a substantial, yet un-

predictable, punitive award, the stability of the plans

administered by members of the Council ard the HIAA

is seriously threatened. Members will be forced to incur

the increased costs of defending actions seeking punitive

relief and of making payment of unmeritorious claims

to avoid such actions in the future. Faced with large

and unpredictable punitive awards, employers may be

unwilling, or unable, to increase contributions to em-

ployee benefit plans. Moreover, given the voluntary na-

ture of such plans, employers may be discouraged from

establishing new plans due to the increased liabilities

associated with such plans. Because the decision of the

Ninth Circuit portends serious adverse effects on the in-

surance industry and the benefit plans its members ad-

minister, the Council and the HIAA have a direct and

immediate interest in the question presented in this case.

In addition, members who provide benefits to their own

employees have the same concern as any other employers

offering employee welfare benefit plans to their employees.

OPINIONS BELOW

The opinion of the United States Court of Appeais for

the Ninth Circuit is reported at 722 F.2d 482 (Pet. App.

la-25a). The opinion of the United States District Court

3

for the Central District of California is not reported. It

is set forth at pp. 26a-30a in the Appendix to the Peti-

tion.

JURISDICTION

The judgment below was entered on December 16,

1983. A petition for rehearing and suggestion for re-

hearing en banc, filed by the petitioners, was denied on

April 6, 1984 (Pet. App. 34a). The Petition for Cer-

tiorari was filed on July 5, 1984. This Court’s jurisdic-

tion is invoked under 28 U.S.C. § 1254(1).

STATUTE INVOLVED

Section 502(a) of the Employee Retirement Income

Security Act of 1974 (“ERISA”) provides, in pertinent

part, that:

(a) A civil action may be brought—

(1) by a participant or beneficiary—

(A) for the relief provided for in subsec-

tion (c) of this section, or

(B) to recover his benefits due to him un-

der the terms of his plan, to enforce his rights under

the terms of the plan, or to clarify his rights to fu-

ture benefits under the terms of the plan;

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

eficiary or fiduciary for appropriate relief under

section 1109 of this title;

(3) by a participant, beneficiary, or fiduciary

(A) to enjoin any act or practice which violates any

provision of this subchapter or the terms of the plan,

or (B) to obtain other appropriate equitable relief

(i) to redress such violations or (ii) to enforce any

—" of this subchapter or the terms of the

plan.

29 U.S.C. § 1132(a) (1982).

4

Section 409(a) of ERISA provides, in relevant part,

that:

(a) 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 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 re-

medial relief as the court may deem appropriate,

including removal of such fiduciary.

29 U.S.C. § 1109(a) (1982).

STATEMENT

Massachusetts Mutual Life Insurance Company (“Mu-

tual”) provides disability benefits to its employees under

two plans: the Employee Salary Continuance Plan

(“ESCP”) and the Employee Disability Plan (“EDP”),

both of which are funded by company assets. The ESCP

provides benefits based upon a percentage of an employ-

ee’s salary. The EDP provides disability benefits when

all benefits under ESCP are exhausted, and when an em-

ployee is disabled for a minimum of eight weeks. Both

plans are benefit plans subject to the Employee Retire-

ment Income Security Act of 1974 (“ERISA” or “Act’’),

29 U.S.C. §§ 1001 et seq.

The respondent here, an employee of Mutual, took a

leave of absence in May, 1979, due to a back ailment.

Respondent submitted a claim for disability benefits, and

Mutual began paying salary continuance benefits under

its plan. Payment of these benefits, however, was termi-

nated in October, 1979. The reason for the termination

5

was an orthopedic specialist’s report that respondent was

not physically disabled.

Respondent took an internal appeal of Mutual’s de-

cision to terminate her salary continuance benefits. Re-

spondent also underwent an independent psychiatric ex-

amination, after which the examining physician concluded

that respondent was temporarily disabled due to psy-

chiatric illness. Based upon this information, Mutual in

March, 1980, resumed paying her salary continuance

benefits. All accrued salary continuance benefits owed io

the respondent were paid by Mutual, and respondent con-

tinues to receive long-term disability benefits under Mu-

tual’s disability plan.

Respondent initiated this action in a California Su-

perior Court to recover damages which she claims were

caused by Mutual’s alleged improper handling of her

claim for disability benefits. In her complaint, re-

spondent asserted various state law causes of action, in-

cluding breach of the covenant of good faith and fair

dealing under California law, breach of fiduciarv duty,

breach of her employment contract, and inteni’..al and

negligent infliction of emotional distress. Respondent

sought both compensatory and punitive damages. Mutual

removed the action to the United States District Court

for the Central District of California on grounds that

respondent’s causes of action “related to” her benefits and

were thus preempted by ERISA. See 29 U.S.C. § 1144.

The Proceedings Below

After removal to the district court, Mutual moved for

summary judgment, which the district court granted in

favor of Mutual as to all claims. The court found that

ERISA preempted respondent’s claims relating to plan

benefits, including her claims for intentional and negli-

6

gent infliction of emotional distress and breach of fi-

duciary duties. In concluding that the respondent was

entitled to neither compensatory nor punitive damages,

the court ruled that extra-contractual damages arising

out of a denial of benefit claims were not recoverable

under ERISA.

On appeal, a panel of the Ninth Circuit agreed with

the district court that ERISA preempted the state iaw

causes of action based upon Mutual’s alleged mishandling

of respondent’s disability claims. The court of appeals

ruled, however, that the respondent had alleged a federal

cause of action which was cognizable under ERISA. Spe-

cifically, the appellate court held that section 502(a) (2)

and 409(a) of ERISA afford plan beneficiaries the right

to bring an action against plan fiduciaries for a breach

of their duties based upon an alleged improper handling

of benefit claims. Emphasizing the remedial nature of

the Act, the court ruled that Congress intended this fed-

eral cause of action to extend not only to conduct relat-

ing to the management of plan assets but also to the

handling and processing of benefit claims.

Extrapolating from this implied federal cause of ac-

tion, the court of appeals determined that ERISA permits

plan beneficiaries to recover compensatory damages vroxi-

mately caused by a breach of fiduciary uuty and that

such damages are not limited to the amount of any benefit

loss. To support its holding that ERISA permits recovery

of extra-contractual damages, the court of appeals cited

section 409 as a broad provision giving courts “wide

discretion” to award any appropriate equitable or re-

medial relief. Russell v. Massachusetts Mutual Life In-

surance Company, 722 F.2d 482, 490 (9th Cir. 1983).

On this basis, the court found extra-contractual damages

to be appropriate relief under ERISA. Such relief, the

court determined, was necessary to make aggrieved par-

7

ties whole and to discourage fiduciaries from ignoring

their duties under the Act.

Further expanding the relief available to parties pur-

suing this cause of action, the court of appeals held that

punitive damages are also recoverable under ERISA.

The court reiterated its conclusion that section 409 con-

fers broad discretion upon courts fashioning appropriate

relief and stated that Congress did not intend to exclude

the imposition of sanctions against fiduciaries who fail to

meet their duties. The court nevertheless added that an

award of punitive damages would only be appropriate

where the fiduciary acted with “actual malice or wanton

indifference to the rights of a participant or beneficiary.”

Id. at 497.

REASONS FOR GRANTING THE WRIT

1. The Current Confusion among the Lower Federal

Courts Concerning the Availability of Punitive Dam-

ages under ERISA Can Only Be Resolved by This

Court.

This case presents a critical issue of federal law which

has generated substantial confusion among the lower

federal courts: whether the Employee Retirement Income

Security Act permits a plan participant or beneficiary to

recover punitive damages from a fiduciary for a breach

of its duties under the Act. The court below concluded

that ERISA does permit an award of punitive damages.’

The Eighth Circuit, however, has voiced serious doubts

1 The Ninth Circuit has twice held that punitive damages are

recoverable under ERISA. In addition to the instant case, the

Ninth Circuit held in Winterrowd v. David Freedman and Company,

724 F.2d 823 (9th Cir. 1984), that punitive dimages are available

in an action under ERISA for the willful failure of an employer

to make pension fund contributions.

8

that ERISA contemplates such awards.* Moreover, the

decisions of the federal district courts addressing this

issue reflect a lack of unanimity and inconsistent reason-

ing concerning this important subject.*

Only this Court can effectively resolve the uncertainty

among the lower federal courts as to the rc'e, if any,

that punitive damages play in the enforcement scheme

of ERISA. Without guidance from this Court, the lower

federal courts will be unable to enforce the civil liability

provisions of ERISA in a consistent and predictable man-

2In Dependahl v. Falstaff Brewing Corp., 653 F.2d 1208 (8th

Cir.), cert. denied, 454 U.S. 968 and 1084 (1981), the Eighth

Circuit refused to uphold an award of punitive damages, totaling

$150,000, in an action under ERISA arising from a termination of

plan benefits and from an alleged interference with a benefit plan.

In reversing the district court’s award of punitive damages, the

Court stated (653 F.2d at 1216):

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

Ccagress had desired to provide for punitive damages, it

could have easily so stated, as it has in other acts. However,

we need not decide this issue, because we find that punitive

damages are inappropriate in this case under either 29 U.S.C.

§ 1132(a) or § 1140.

3 Included among the cases refusing to permit awards of punitive

damages in actions brought for ERISA violations are: Zittrouer v.

UARCO Incorporated Group Benefit Plan, 582 F. Supp. 1471 (N.D.

Ga. 1984) ; Meyer v. Phillip Morris, Inc., 575 F. Supp. 1232 (E.D.

Mo. 1983) ; Hechenberger v. Western Electric Co., 570 F. Supp. 820

(E.D. Mo. 1983) ; Whitaker v. Texaco, 566 F. Supp. 745 (N.D. Ga.

1983); Mazfield v. Central States, 559 F. Supp. 158 (N.D. II.

1982) ; Diano v. Central States, 551 F. Supp. 861 (N.D. Ohio 1982) ;

Haskins v. Retirement Plan, No. 78C3670 (N.D. Ill. 1982) ; Calhoun

v. Falstaff Brewing Corp., 478 F. Supp. 357 (E.D. Mo. 1979); and

Hurn v. Retirement Fund Trust, 424 F. Supp. 80 (C.D. Cal. 1976).

Cases reaching a contrary result include: Jiminez v. Pioneer Die-

casters, 549 F. Supp. 677 (C.D. Cal. 1982); Free v. Gilbert Hodg-

man, Inc., 3 Empl. Ben. Cas. (BNA) 1010 (N.D. Ill. 1982); Eaton

v. D’Amato, 581 F. Supp. 743 (D.D.C. 1980) ; and Bittner v. Sadoff

and Ruday Industries, 490 F. Supp. 534 (E.D. Wisc. 1980).

9

ner; and fiduciaries who are governed by this compre-

hensive federal statute (many of whom operate in many

states) will be confronted with the anomalous result of

being subjected to punitive damages awards in one ju-

dicial district yet not in another. Moreover, in the dis-

tricts permitting such awards, the vagueness of judicial

tests and factors for determining whether, and in what

amount, punitive damages should be awarded poses a

substantial threat of haphazard and potentially excessive

punitive damages awards. Such an inconsistent and un-

predictable enforcement of this comprehensive statutory

scheme can only thwart, rather than promote, the pur-

poses and policies underlying the Act.

2. The Ninth Circuit’s Determination that ERISA Per-

mits a Beneficiary or Participant to Recover Punitive

Damages and Extra-contractual Relief from a Plan

Fiduciary Is Inconsistent with the Act’s Express Lan-

guage and with the Policies Embodied in the Act.

The Ninth Circuit misconstrued the statute when it

endorsed the use of punitive and extra-contractual dam-

ages in ERISA enforcement actions, despite the con-

spicuous absence of statutory language permitting such

awards. Moreover, the court of appeals misinterpreted

the Act when it allowed such damages to be awarded to

plaintiffs who pursue a cause of action which is not

expressly provided for in the statute.*

* Section 502(a) of the Act accords the Secretary of Labor,

plan participants, beneficiaries, and fiduciaries the right to bring a

civil action for “appropriate relief” under section 409. See 29 U.S.C.

§ 1132(a) (2). Section 409 provides that plan fiduciaries may be

held personally liable “to such plan,” and may be “subject to such

other equitable or remedial relief as the court may deem appro-

priate, including removal of such fiduciary.” 29 U.S.C. § 1109(a).

In accordance with the plain terms of the statute, therefore, fidu-

ciary liability runs directly to the plan, and not to plan bene

ficiaries. Moreover, the type of “other” relief contemplated, e.g.,

removal of a fiduciary, appears not to encompass awards of puni-

tive and extra-contractual relief directly to plan beneficiaries.

10

This Court has hesitated to award punitive damages

where clear congressional guidance is absent. See /nter-

national Brotherhood of Electrical Workers v. Foust, 1:2

U.S. 42 (1979). In Foust, the Court addressed the ques-

tion whether punitive damages could be assessed under

the Railway Labor Act against a union for a breach of

its duty of fair representation. The cause of action in

Foust was judicially implied, and, accordingly, Congress

had not specified the type of remedial relief available in

fair representation suits. In the absence of clear con-

gressional guidance, this Court refused to permit punitive

damages to be awarded, noting that the benefits of in-

creasing a union’s willingness to pursue individual com-

plaints due to the threat of punitive damages were offset

by the possibility that punitive awards would upset the

balance of individual and collective interests and could

impair the financial stability of unions. Further, the

court viewed punitive damages awards to be incompatible

with the “essentially remedial” purpose of the Railway

Labor Act. Id. at 52.

ERISA, like the Railway Labor Act, is essentially

remedial in nature. Congress specifically provided a com-

prehensive enforcement scheme designed to protect em-

ployee rights and the integrity of employee benefit plans.*

N« * re in this scheme, however, did Congress mention

or imply that punitive damages would be available to

beneficiaries seeking relief under the statute.®

5In addition to the detailed remedies provided in ERISA’s

civil enforcement section, see 29 U.S.C. § 1132, the Act imposes

criminal penalties, including imprisonment and fines up to $100,000,

upon those who willfully violate ERISA’s reporting and disclosure

provisions. See 29 U.S.C. § 1131.

® Congress knows how to provide for punitive damages where it

deems such relief to be appropriate. Congress has explicitly in-

corporated punitive damages provisions into various federal stat-

utes. Seu, e.g., Clayton Act § 4, 15 U.S.C. § 15 (1976) (treble dam-

ages) ; Consumer Credit Protection Act § 616, 15 U.S.C. § 1681(n)

11

Construing this silence to permit punitive damages to

be assessed personally against a fiduciary also runs

counter to the policies embodied in the Act. In enacting

ERISA, Congress carefully weighed the rights and in-

terests of plan beneficiaries against the interests of em-

ployers in administering effective and cost-efficient plans.

Congress was “constrained to recognize the voluntary

nature of private” plans and accordingly weighed “[t]he

relative improvements required by this Act .. . against

the additional burdens to be placed on the system.” H.R.

Rep. No. 93-533, 938d Cong., 2d Sess., reprinted in 1974

U.S. Code Cong. & Ad. News 4639. Acknowledging con-

gressional concern about the impact of increased costs

upon the pension industry, Senator Nelson, during floor

debate on the Conference Report, stated:

In all its deliberations and decisions, Congress was

acutely aware that under our voluntary pension sys-

tem the cost of financing pension plans is an im-

portant factor in determining whether a pension plan

vill Se adopted. Unduly large increases in cost can

impede the progress of the private pension system.

For this reason, . . . Congress tried to adopt provi-

sions which strike a balance between providing a

meaningful protection for the employees and keeping

costs within reasonable limits for employers.

Senate Comm. on Labor and Public Welfare, Senate Con-

sideration of Conference Report to Accompany H.R. 2,

reprinted in 3 Legislative History of the Employee Re-

tirement Income Security Act of 1974, 4733 at 4800

(1976).

The Ninth Circuit’s decision unsettles this delicate bal-

ance of costs and benefits. The decision exposes employers,

who voluntarily establish employee benefit plans, to sig-

(1982) (punitive damages); Omnibus Crime Control and Safe

Streets Act of 1968 § 802, 18 U.S.C. § 2520 (1982) (punitive dam-

ages); Civil Rights Act of 1968 §812(c), 42 U.S.C. § 3612(c)

(1976) (punitive damages).

12

nificant costs associated with unpredictable and poten-

tially excessive punitive damages awards. The direct

costs of punitive damages to employers and insurers in-

clude increased costs in handling benefit claims, in paying

out unmeritorious claims to avoid punitive awards, and

in defending against suits which threaten wholly un-

predictable results. See Kouri and Barrett, Punitive

Damages—Update, Legal Section Proceedings of the

American Council of Life Insurance 685, 696 (1979).’

The decision of the court below invites frivolous litiga-

tion by disgruntled participants and beneficiaries seeking

to recover substantial punitive and extra-contractual re-

lief, as well as “strike suits” in which the plaintiff seeks

a settlement motivated by the defendant’s need to avoid

the risk of unpredictable punitive damages, and the ex-

pense and time of its officers involved in a suit. See

Smith v. Wade, 103 Sup. Ct. 1625, 1642 (1983) (dissent-

ing opinion).

The imposition of punitive damages against plan fidu-

ciaries would thus significantly increase the costs Congress

carefully sought to minimize when it enacted ERISA.

While the threat of punitive damages awards may deter

breaches of fiduciary obligations, the detrimental impact

of such awards on the continuing viability of employee

benefit plans far offsets the benefits to be gained from

deterrence. Because this case presents an important ques-

tion of federal law, this Court should grant the Petition

and clarify the critical statutory and policy issues

presented. '

7 The indirect costs of exposing these employers and insurers to

punitiv2 and extra-contractual damages are also substantial. Such

exposure would initiate a reversal of the trend witnessing the ex-

pansion of the number of benefit plans and the number of individ-

uals covered by those plans. The proliseration of substantial and

unpredictable punitive damages awards would discourage the future

establishment of employee benefit plans. Moreover, exposure to

punitive damages claims would deter employers from increasing

their contributions to existing ,lans and thus the benefits available

under those plans.

13

3. No Workable Standards for Assessing Punitive Dam-

ages Exist and Current Practices Provide No Basis for

Consistency or Predictability in Punitive Damages

Awards.

The criminal law concept of punishment as an adjunct

to the civil law is not new. Roots in the common law for

extending criminal law notions of punishment to the civil

law may be found in a few cases in eighteenth century

England, where juries awarded small amounts of damages

unrelated to tangible losses in order to punish conduct

resulting in affronts to the honor and dignity of victims.*®

The doctrine of punitive damages found its way to Amer-

ican law, and in 1851, was recognized by this Court in a

modest way in Day v. Woodworth, 18 Howard 363

(1851).° Consistent with their English counterparts, the

8 See Ellis, Fairness and Efficiency in the Law of Punitive Dam-

ages, 56 S. Cal. L. Rev. 1, 12-20 (1982). Types of cases in which

punitive awards were made included slander, trespass to land in

certain cases, seduction, criminal conversation and false imprison-

ment.

®In Day v. Woodworth, the plaintiff brought an action for tres-

pass quare clausum fregit after defendant and its agents removed

a portion of the plaintiff's dam which was interfering with the

proper functioning of the defendant’s upstream dam. The case was

tried to a jury, which awarded damages of $200. On a writ of error,

this Court rejected plaintiff’s argument that its recovery was not

limited to actual damages, and affirmed the judgment of the lower

court. Nevertheless, in a passage considered to be the foundation

of punitive damages in American law, Justice Grier, writing for

the Court, stated (13 Howard at 371):

It is a well-established principle of the common law, that in

actions of trespass and all actions on the case for torts, a

jury may inflict what are called exemplary, punitive or vin-

dictive damages upon a defendant, having in view the enormity

of his offence rather than the measure of compensation to the

plaintiff. . . . In many civil actions, such as libel, slander,

seduction, &c., the wrong done to the plaintiff is incapable of

being measured by a money standard; and the damages assessed

depend on the circumstances, showing the degree of moral

turpitude or atrocity of the defendant’s conduct, and may

properly be termed exemplary or vindictive rather than com-

pensatory.

14

early American courts apparently confined the doctrine

to tortious conduct, such as libel or slander, where actual

damages for humiliation or an affront to dignity were

essentially unascertainable. See Day v. Woodworth, 13

Howard at 371; Nelson, Punishment for Profit: An

Examination of the Punitive Damage Award in Strict

Liability, 18 Forum 377, 380-81 (1983).

In the 130 years following the Day decision, and par-

ticularly in the last decade, the doctrine of punitive dam-

ages has grown far beyond its origins in insult torts and

has been stretched beyond the limits of its validity.’

Punitive damages awards have become commonpiace in

insurance litigation™ as well as in product liability

10 As has been well said in another context, “these laws are being

extrapolated to places where they no longer apply.” Bernstein,

“Dread Singularities” (Book Review), New York Times Book Re-

view, April 25, 1982, p. 10.

11 Juries have exhibited a tendency to award substantial sums

as punitive damages in insurance cases. These awards present

serious problems in the insurance industry, even though many of

them have not fully survived judicial scrutiny. See, e.g., San Jose

Production Credit Association v. Old Republic Life Insurance Co.,

723 F.2d 700 (9th Cir. 1984) (court reversed jury award of

$500,000 in punitive damages for breach of implied covenant of

good faith and fair dealing); Dempsey v. Auto Owners Insurance

Co., 717 F.2d 556 (11th Cir. 1983) (in action seeking recovery of

fire loss under a policy, for bad faith refusal to pay, and for puni-

tive damages, court held jury award of $3.1 million to be excessive

and remanded with directions to require a remittitur to $1.5 mil-

lion) ; Sparks v. Republic National Life Ins. Co., 1382 Ariz. 529, 647

P.2d 1127, cert. denied, 459 U.S. 1070 (1982) ($3 million award of

punitive damages for insurer’s tortious termination of insurance

benefits upheld); Egan v. Mutual of Omaha, 24 Cal. 3d 809, 157

Cal. Rptr. 482, 598 P.2d 452 (1979), appeal dismissed, 445 US.

912 (1980) (jury award of $5 million in punitive damages against

insurer for failure to conduct proper investigatio~ of its insured’s

claim held to be excessive in that award was 40 times larger than

the compensatory damages award and represented two and one-half

months of the insurer’s net income in 1973 as well as more than

seven months of its income in 1974); Neal v. Farmers Insurance

Exchange, 21 Cal.3d 910, 148 Cal. Rptr. 389 (Cal. 1978) (court

upheld jury award of punitive damages, as reduced to $740,000 by

15

cases,” and prayers for punitive relief in mass tort

the trial court, for insurer’s “bad faith” refusal to settle). More

over, at the trial level in state courts, particularly those in California

and Arizona, staggering sums have been awarded as punitive dam-

ages against insurers. Juries in California have awarded substan-

tial punitive damages against insurance companies in amounts up

to $8 million. See Frazier v. Metropolitan Insurance Co., No. C233-

971, L.A. Super. Ct. (March 14, 1983) ($8 million punitive award) ;

Garvey v. State Farm and Casualty Co., No. 760226, S.F. Super. Ct.

(Feb. 18, 1982) ($1 million punitive award in “bad faith” case).

Juries in the Arizona courts have exhibited a similar willingness

to assess exorbitant punitive awards against insurers, as evi-

denced by a $2 million punitive award in Linthicum v. Nationwide

Life Ins. Co., No. 446562, Maricopa County (Dec. 15, 1982), a $3.5

million award in Hawkins v. Allstate Insurance Company, and a $10

million punitive award in Trus Joist Corp. v. Safeco Insurance Co.,

No. C366678, Maricopa County (March 21, 1983).

12 Prior to 1970, apparently only one reported appellate court de-

cision had upheld an award of punitive damages in a products

liability case. That decision, Toole v. Richardson-Merrill, Inc., 251

Cal.App.2d 689, 60 Cal. Rptr. 398 (1967), involved a jury award of

$250,000 for a drug company’s failure to conduct proper tests and

to provide adequate warnings on a cholesterol-inhibiting drug. Since

the Toole decision, however, cases in which juries have awarded

punitive damages in excess of $1 million have abounded. See, e.g.,

Dorsey v. Honda Motor Co., 655 F.2d 650 (5th Cir. 1981) (court

reinstated jury award for $5 million in punitive damages), modified

on other grounds, 670 F.2d 21 (5th Cir.), cert. denied, 459 U.S. 880

(1982) ; Airco Inc. v. Simmons First National Bank, 276 Ark. 486,

638 S.W.2d 660 (Ark. 1982) (court affirmed jury award of $3

million in punitive damages); Gryc v. Dayton-Hudson Corp., 297

N.W.2d 727 (Minn.), cert. denied, 449 U.S. 921 (1980) (jury award

of $1 million in punitive damages upheld) ; Leichtamer v. American

Motors Corp., 67 Ohio St. 2d 456, 424 N.E.2d 568 (1981) (award of

$1.1 million in punitive damages upheld); Mazey v. Freightliner

Corporation, 450 F. Supp. 955 (N.D. Tex. 1978) (jury award of

$10 million in punitive damages overturned), aff'd, 623 F.2d 395

(5th Cir. 1980), vacated and remanded upon rehearing, 665 F.2d

1367 (5th Cir. 1982), vacated in part and affirmed in part, 722 F.2d

1238 (5th Cir. 1984); Sturm, Ruger & Co. v. Day, 594 P.2d 38

(Alaska 1979), cert. denied, 454 US. 894 (1981) (court held jury

award of $2,895,000 in punitive damages to be excessive); Ford

Motor Company v. Nowak, 638 S.W.2d 582 (Tex. Ct. App. 1982)

(court affirmed jury award of $4 million in punitive damages).

16

litigation are not uncommon.* Concurrent with the ex-

pansion of punitive damages beyond the traditional tort

areas, the size and frequency of punitive damages awards

have grown significantly..* In 1977, an informal survey

by the American Council of Life Insurance revealed that

nearly half of the 202 members in California who partic-

ipated in the survey had extra-contractual or punitive

damages actions pending against them, many with

prayers exceeding $1 million. See Wilson, Punitive Dam-

ages, Legal Section Proceedings of the American Council

of Life Insurance 13 (1977). Five years later, a member

of the Council, having witnessed the proliferation of

multi-million dollar punitive damages awards against in-

surers, stated:

The imposing specter of extra-contractual damages

pending over the life and health insurance industry

13 See, e.g., Jackson v. Johns-Manville Sales Corp., 727 F.2d 506

(5th Cir. 1984) (court disallowed jury award of punitive damages,

totaling $625,000, in a strict liability action initiated by a shipyard

worker for injuries allegedly caused by exposure to asbestos prod-

ucts); Palmer v. A.H. Robins Co., No. 81SA149 (Colo. June 4,

1984) (court upheld jury award of $6.2 million in punitive damages

against the producer of a contraceptive device which was marketed

despite the serious adverse effects associated with the product’s

use). See Seltzer, Punitive Damages in Mass Tort Litigation:

Addressing the Problems of Fairness, Efficiency and Control, 52

Fordham L. Rev. 37 (1983).

14 See notes 11, 12, and 13, supra. A report of the Ford Motor

Company revealed that, prior to 1970, less than 0.5% of the products

liability complaints filed against the company contained prayers for

punitive damages. By 1980, punitive damages counts were appear-

ing in over 27% of all such actions filed against Ford. See Owen,

Problems in Assessing Punitive Damages Against Manufacturers

of Defective Products, 49 U. of Chi. L. Rev. 1, 54 n.258 (1982).

The impact of the increasing demands for punitive relief became

clear in Grimshaw v. Ford Motor Co., 119 Cal. App.3d 757, 174 Cal.

Rptr. 348 (1981), where a jury awarded $125 million in punitive

damages against Ford Motor Company after a car it had marketed

with a fuel system found to be defective exploded as a result of a

collision. The trial court remitted the award to $3.5 million, using

standards no less indefinite than those used by the jury.

17

developed in quantum proportions in the past year.

What had been a threat became a reality. The

sizable ad damna recited in many filed pleadings

were translated into million-dollar payouts and multi-

million dollar final awards.

Smith, Annual Review of Litigation, Legal Section Pro-

ceedings of the American Council of Life Insurance 349,

350 (1982).

Despite the phenomenal growth in the size and num-

ber of punitive damages awards, there has been no con-

current development of standards to guide courts and

juries in assessing these awards. Examination of the

cases shows that the standard of “maliciousness” has been

lowered continuously over the past several years, and

there is in fact little judicial control over it."* Even as-

suming that the requisite malicious or willful conduct

exists to warrant an award of punitive damages, there

are no standards to facilitate the determination of the

appropriate measure of punitive damages. The broad

discretion accorded to trial courts to award punitive

damages significantly increases the risk that punitive

damages awards will be arbitrary or excessive and al-

together inappropriate based on the circumstances of the

The Supreme Court of Montana (in an opinion certifying

Montana law to a Federal district court) recognized the uncer-

tainty of standards in the area of punitive damages. First Bank

(N.A.)-Billings v. Transamerica Insurance Co., 670 P.2d 1217

(Mont. 1984). In holding that insurance coverage of punitive

damages does not violate Montana’s public policy, the court noted

that “juries and judges typically award punitives for a broad

range of conduct not often described as willful or wanton, but as

merely reckless or unjustifiable.” Jd. at 1222. Refusing to preclude

such insurance coverage in light of the uncertainty in the area

of punitive damages, the court further stated that “fact-finders

... wrestle with concepts like recklessness and reasonableness, such

that defendants may not know that their conduct constituted pre-

sumed malice until after trial, and that a defendant in one case may

never know the sting of punitive damages while another defendant

in a similar case may be faced with financing a sizeable award.” Jd.

at 1222.

18

case.** This unbridled discretion inevitably results in in-

consistency and unpredictability—concepts foreign to our

system of justice, and particularly hard to deal with in

providing adequate premiums and reserves for an impor-

tant type of insurance which is essentially funded by the

accretion of small amounts based on recurrent wages.

The total lack of standards for awarding punitive

damages in civil actions has prompted questions as to

the constitutionality of the procedures for awarding these

damages. See Wheeler, The Constitutional Case for Re-

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

269 (1983). Because due process mandates fairness of

procedures in civil cases, the absence of standards to de-

termine the appropriate measure of punitive damages

arguably conflicts with the Fifth and Fourteenth Amend-

ments to the Constitution. Moreover, even though puni-

tive damages actions are nominally civil, they exemplify

characteristics which are inherently criminal. Unlike

criminal actions, however, civil actions seeking punitive

awards boast none of the constitutional protections ac-

corded to criminal defendants, including indictment by a

grand jury and proof beyond a reasonable doubt. See

16 Members of this Court on several occasions have commented

on the arbitrariness of punitive damages awards. See, e.g., Inter-

national Brotherhood of Electrical Workers v. Foust, 442 U.S. 42,

50 (1979) (“Because juries are accorded broad discretion both as to

the imposition and amount of punitive damages, . . . the impact of

these windfall recoveries is unpredictable and potentially substan-

tial”). Cf. Rosenbloom v. Metromedia, Inc., 403 U.S. 29 (1971)

(dissenting opinion of Justice Marshall). In Gertz v. Robert

Welch Inc., 418 U.S. 328, 350 (1974), Justice Powell wrote:

In most jurisdictions jury discretion over the amounts awarded

is limited only by the gentle rule that they not be excessive.

Consequently, juries assess punitive damages in wholly un-

predictable amounts bearing no necessary relation to the actual

harm caused.

See also the dissenting opinion of Justice O’Connor in Smith v.

Wade, 103 Sup. Ct. at 1658-59, which seems especially applicable to

this case.

19

Smith v. Wade, 103 Sup. Ct. 1625, 1641 (1983) (dis-

senting opinion). Further, the vagueness of standards

precludes the provision of fair warning to potential de-

fendants as to what conduct justifies punishment.

These constitutional infirmities inhere in the Ninth

Circuit’s decision in the instant case. As with the law of

punitive damages in general, the Ninth Circuit’s opin-

ion establishes no workable standards for assessing puni-

tive damages in ERISA actions. This absence of stand-

ards deprives fiduciaries under the Act of the procedural

safeguards necessary to protect them from the vagaries

of punitive damages law. This case thus affords this

Court an opportunity to eliminate the expansion of this

unfair and unworkable doctrine in the field of employee

benefits—an area that directly aTects millions of Amer-

icans in our nation’s work force. By granting the Pe-

tition and sustaining the position of the Petitioners, this

Court can establish a constitutionally sound and adminis-

tratively feasible rule which would eliminate arbitrari-

ness and unpredictability in ERISA civil enforcement

actions to the great benefit of the great mass of the

beneficiaries of these plans.

20

CONCLUSION

For the reasons set forth above and for the additional

reasons advanced in the Petition, the writ of certiorari

should be granted.

Respectfully submitted,

ERWiN N. GRISWOLD

PATRICIA A. DUNN

JONES, DAY, REAVIS & POGUE

655 Fifteenth Street, N.W.

Washington, D.C. 20005-5701

(202) 879-3898

Counsel for the Amici

Of Counsel:

LINWo0OD HOLTON

Vice President and

General Counsel

JACK H. BLAINE

Chief Counsel, State

EDWARD J. ZIMMERMAN

Associate General Counsel

AMERICAN COUNCIL OF

LIFE INSURANCE

1850 K Street, N.W.

Washington, D.C. 20006-2284

(202) 862-4000

JOE W. PEEL

Vice President and

General Counsel

RITA M. THEISEN

Counsel

HEALTH INSURANCE ASSOCIATION

OF AMERICA

1750 K Street, N.W.

Washington, D.C. 20006-2284

(202) 331-1336

AUGUST, 1984