# Amicus Curiae Brief — Massachusetts Mutual Life Insurance v. Russell > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0403%3A05 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 1985 - **Citation:** 473 U.S. 134 ## Text MOTION FILED ANG a 3 No. 84-9 SS IN THE Supreme Court of the United States OCTOBER TERM, 1984 MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, and CECILIA STEVENSON, y. 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 A BRIEF AMICI CURIAE AND BRIEF FOR ALASKA FISHERMEN’S UNION— SALMON CANNERS PENSION TRUST, ALASKA FISHERMEN’S UNION— SALMON CANNERS WELFARE TRUST, ALASKA PLUMBING & PIPEFITTING INDUSTRY PENSION TRUST FUND, MONTANA TEAMSTER EMPLOYERS TRUST, NATIONAL SHOPMEN PENSION FUND, NORTHWEST METAL CRAFTS TRUST FUND, OREGON TEAMSTER EMPLOYERS TRUST, PRINTING SPECIALTIES AND PAPER PRODUCTS JOINT EMPLOYER AND UNION HEALTH AND WELFARE FUND, RETAIL CLERKS PENSION TRUST, RETAIL CLERKS WELFARE TRUST, SOUTHERN CALIFORNIA LUMBER INDUSTRY HEALTH AND WELFARE FUND, SOUTHERN CALIFORNIA LUMBER INDUSTRY RETIREMENT FUND, AND SPOKANE AREA HOTEL AND RESTAURANT EMPLOYEES TRUST FUND [Counsel listed on inside cover ] WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001 @ > THOMAS J. HART (Counsel of Record) LENA §S. ZEZULIN THOMAS Hart & ASSOCIATES Suite 302 1625 Massachusetts Ave., N.W. Washington, D.C. 20036 (202) 797-8700 RICHARD P. DONALDSON DONALDSON & ROBERTS 2716 Fifth Avenue San Diego, California 92103 (619) 297-7062 IN THE Supreme Court of the initrd States OCTOBER TERM, 1984 No. 84-9 MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, and CECILIA STEVENSON, v. 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 A BRIEF AMICI CURIAE FOR ALASKA FISHERMEN’S UNION— SALMON CANNERS PENSION TRUST, ALASKA FISHERMEN’S UNION— SALMON CANNERS WELFARE TRUST, ALASKA PLUMBING & PIPEFITTING INDUSTRY PENSION TRUST FUND, MONTANA TEAMSTER EMPLOYERS TRUST, NATIONAL SHOPMEN PENSION FUND, NORTHWEST METAL CRAFTS TRUST FUND, OREGON TEAMSTER EMPLOYERS TRUST, PRINTING SPECIALTIES AND PAPER PRODUCTS JOINT EMPLOYER AND UNION HEALTH AND WELFARE FUND, RETAIL CLERKS PENSION TRUST, RETAIL CLERKS WELFARE TRUST, SOUTHERN CALIFORNIA LUMBER INDUSTRY HEALTH AND WELFARE FUND, SOUTHERN CALIFORNIA LUMBER INDUSTRY RETIREMENT FUND, AND SPOKANE AREA HOTEL AND RESTAURANT EMPLOYEES TRUST FUND The above-captioned movants hereby respectfully move this Court, pursuant to Rule 36.1 of the Supreme Court Rules, for leave to file the attached brief amici curiae in this case. The consent of the attorney for the petitioner has been obtained. The consent of the attorney for the respondent was requested but refused. The interest of the movants arises because they are multiemployer pension and health and welfare plans organized under the authority of the Taft-Hartley Act and the Employee Retirement Income Security Act (ERISA). The Alaska Fishermen’s Union—Salmon Canners Pen- sion Trust is a pension plan with 1,191 participants and 13 contributing employers. It received 40 claims during its last reporting year. The Alaska Fishermen’s Union— Salmon Canners Welfare Trust is a health and welfare plan with 1,122 participants and 13 contributing employ- ers. It received 893 claims during its last reporting year. The Alaska Plumbing & Pipefitting Industry Pension Trust Fund is a pension plan with 1,357 participants and 200 contributing employers. It received 49 claims during its last reporting year. The Montana Teamster Employ- ers Trust is a health and welfare plan with 1,904 partici- pants and 179 contributing employers. It received 28,600 claims during its last reporting year. The National Shopmen Pension Fund is a pension plan with 17,000 participants and 283 contributing employers. It received 480 claims during its last reporting year. The North- west Metal Crafts Trust Fund is a health and welfare plan with 5,695 participants and 139 contributing em- ployers. It received 20,000 claims during its last report- ing year. The Oregon Teamster Employers Trust is a health and welfare plan with 17,600 participants and 993 contributing employers. It received 58,200 claims during its last reporting year. The Printing Specialties and Paper Products Joint Employer and Union Health and Welfare Fund is a health and welfare plan with 8,400 participants and 126 contributing employers. It received 102,000 claims during its last reporting year. The Retail Clerks Pension Trust is a pension plan with 25,153 participants and 738 contributing employers. It received 258 claims during its last reporting year. The Retail Clerks Welfare Trust is a welfare plan with 17,100 participants and 667 contributing employers. It received 222,672 claims during its last reporting year. The Southern California Lumber Industry Health and Welfare Fund is a health and welfare plan with 8,200 participants and 560 contributing employers. It received 42,000 claims during its last reporting year. The South- ern California Lumber Industry Retirement Fund is a pension plan with 7,600 participants and 460 contribut- ing employers. It received 420 claims during its last reporting year. The Spokane Area Hotel and Restaurant Employees Trust Fund is a health and welfare plan with 659 participants and 25 contributing employers. It re- ceived 4,263 claims during its last reporting year. To- gether, these plans processed 479,775 claims during their last reporting year. The movants seek to file a brief in this matter because of the important public issues that are raised by the peti- tion. This case has extraordinarily severe implications for the administration and financial well-being of all employee benefit plans. Petitioners, who are a single em- ployer plan and an employee of the plan spensor, have raised these issues from the perspective of single employer plans. The movants seek leave to inform the court of the particularly severe consequences which the Ninth Cir- cuit’s ruling wi!l have for multiemployer employee bene- fit plans. The Ninth Circuit ruled that fiduciaries of employee benefit plans may, under ERISA, be personally liable to a plan participant or beneficiary for punitive or com- pensatory damages for improper or untimely processing of claims. This ruling, if not reversed, will profoundly alter the administration of multiemployer plans. The ruling is inconsistent with the plain language of ERISA and with the holdings of other circuits. Respectfully submitted, THOMAS J HART (Counsel of Record) LENA S. ZEZULIN THOMAS HART & ASSOCIATES Suite 302 1625 Massachusetts Ave., N.W. Washington, D.C. 20036 (202) 797-8700 RICHARD P. DONALDSON DONALDSON & ROBERTS 2716 Fifth Avenue San Diego, California 92103 (619) 297-7062 QUESTION PRESENTED Whether, under the Employee Retirement Income Se- curity Act a fiduciary of an employee benefit plan may be held personally liable to a plan participant or bene- ficiary for punitive or compensatory damages for im- proper or untimely processing of claims? (i) ii TABLE OF CONTENTS PARTIES TO THE PROCEEDING Page Massachusetts Mutual Life Insurance Company* QUESTION PRESENTED ....o......-----:-----cosscecessceeseoees i Cecilia Stevenson : PARTIES TO THE PROCEEDING ..........................--.-. ii Doris Russell TABLE OF AUTHORITIES ....................----.------cceseeeeee+s Vv OPINIONS BELOW ............ SE ey SUE Be ea 2 JURISDICTIONAL STATEMENT ...........................-.... 2 STATUTES AND REGULATIONS INVOLVED ......... 2 STATEMENT OF THE CASE ..............2222------0--c00e-20--000++ 2 REASONS FOR GRANTING THE WRIT ..................... 6 I. The Ninth Circuit’s Ruling that Punitive Dam- ages are Available to Plan Participants and Ben- eficiaries Conflicts with Rulings of the Eighth Circuit and Numerous District Courts ................ 6 II. The Ninth Circuit’s Ruling is Inconsistent with the Statutory Scheme and Language of ERISA oli and Gives a Windfall Reward to Participants... 6 * The following are non-wholly owned subsidiaries of the Massa- . * sate? . . . pert gs Life Insurance Company as well as companies that ann chant ee egg dy eatige ma ed affiliates thereof: : . ee ee 5% Multiemployer Benefit Plans and their Partici- MML Blend Investment Company, Inc. a auibiind 10 MML Equity Investment Company, Inc. A. The Nat al f Multi MML M . e Nature and Importance o ultiem- ARGS SER SERENE SPOR, Has. ployer Benefit Plans to the Retirement Se- MML Money Market Investment Company, Inc. curity and to the Health and Welfare Ben- MML Bay State Life Insurance Company fits of Millions of Employees .....................-..--- 10 MassMutual Corporate Investors, Inc. B. The Ninth Circuit’s Ruling will Severely In- MassMutual Income Investors, Inc. jure Multiemployer Benefit Plans and their MassMutual Mortgage and Realty Investors Participants because it will Deter the Pru- MassMutual Liquid Assets Trust “9 and Careful Administration of Such ‘ Maslif One & Co. ocean ea oe aummrea acme aneaemeanaaeaala lV TABLE OF CONTENTS—Continued Page C. The Ninth Circuit’s Ruling will Deter Quali- fied Persons from Serving as Fund Trustees Om Ty I i in 14 D. The Ninth Circuit’s Ruling is Injurious to the Dispute Resolution Process Favored by IR cedsdicdsinnteediiphedas PRES Ra AN ERs Art 16 E. Compensatory and Punitive Damages are not Uniformly Awarded and are Frequently Large and Inconsistent ......... Te ee a Ce 19 CONCLUSION ............... sate < -necslidiseacaceeadpainiatiaispaniicasdieliniiae 20 Vv TABLE OF AUTHORITIES CASES Page Bayles v. Central States, Southeast, Etc., 602 F.2d 97 (5th Cir. 1979) . oh 14 Bittner v. Sadoff & Rudoy Dadiuetrice. 728 FP. 2d 920 o£ 0 ere eae 6 Brime wv. Morse, 475 F.2d 858 (th Cir. 1973) 14 Depe ndahl v. Falstaff Brewing Corp., 653 F.2d 1208 (8th Cir. 1981) __. 6 Mlectrical Workers v. Foust, 442 U.S 42 (1979) 9 Feathers v. U.M.W. Health and Retire ment Funds, 99 L.R.R.M. 2287 (D.D.C. 1978) . ae 14 Kross v. Western Electric Co., Inc., 701 F.2d 1288 (7th Cir. 1983) 17 Lucas v. Warner & Swasey Compony, 475 F.Supp. 1071 (E.D. Pa. 1979) . | 17 Moglia v. Geogheghan, 403 F.2d 110 (2d Cir. eh a a rs a’ 14 Nachman Corp. v. PBGC, 446 US. 356 (1980), reh. denied, 448 U.S. 908 (1980) pr Onde 7 N.L.R.B. v. Amar Coal Co., 453 U.S. 322 (1981)... 12 Russell v. Mass. Mut. Life Ins. Co., 722 F.2d 482 (9th Cir. 1983). RE NG a, Winterrowd v. Freedom & Ca. 724 F.2d 823 (9th RIT is ak fe. re ak eS 6 STATUTES 26 U.S.C. $ 4975 (ERISA § 2003) Sinead 7 I A el i Sse ptacccnthcmveseussecsas cesta 2 | eee ee 4 ye Le BL | ena aedeiad > 4 29 U.S.C. § 186(c) (5) and (6) ................000 12 29 U.S.C. § 1104, (ERISA § 404) 8 29 U.S.C. § 1106, (ERISA § 406)... 7 29 U.S.C. § 1108, (ERISA § 468 (a) (2) ) . 9,15 29 U.S.C. § 11098, (ERISA § 409) Px. passim 29 U.S.C. § 1131, (ERISA § 501) : TPES 2 29 U.S.C. § 11382, (ERISA § 502) eae piwbe: passiin 29 U.S.C. § 1132(a) (1) (B), (ERISA § 502(a) (1) RMR acti s EGTE Seca at Se 6, 8, 14 29 U.S.C. § 1132(e) (1), (ERISA § 502(e) (1)) _.. 4 29 U.S.C. § 1133, (ERISA § 508) ............................... passim vi TABLE OF AUTHORITIES—-Continued IN THE Supreme Court of the United States Page OCTOBER TERM, 1984 AEA A ALE OT TE 9 Pub. L. No. 96-364, 94 Stat. 1208- 1311 (1980) 11 No. 84-9 REGULATIONS ere eee 2, 16 MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, i co cceceseceonceeosesemsensesee 5 and CECILIA STEVENSON, 29 C.F.R. § 2650.508-1 (h) (4) ..............2.2..2.... 2.2 5 4 Petitioners. LEGISLATIVE HISTORY DoRIS RUSSELL, H. Conf. Rep. No. 1280, 93d Cong., 2d Sess. 320 Respondent. (1974) n-ne ennereeeeee cence cence , 8 On Petition for a Writ of Certiorari to the United States S. Rep. No. 127, 93d Cong., ‘Ist Sess. 33 (1973) . nee 8 Court of Appeals for the Ninth Circuit House Labor Committee Report on H.R. 3904 (Rept. 96-869, Part I, April 2, 1980) .......0000000..... 11 BRIEF AMICI CURIAE OF House Ways and Means Committee Report on H.R. IN SUPPORT OF PETITIONER Senate Labor Committee Summary and Analysis SALMON CANNERS PENSION TRUST, of Consideration of S$.1076 (April 1980) U.S. ALASKA FISHERMEN’S UNION— Code Cong. & Admin. News, p. 2985 ................ 11 SALMON CANNERS WELFARE TRUST, ALASKA PLUMBING & DOGRS AND TERRENC ALS PIPEFITTING INDUSTRY PENSION TRUST FUND, 22 Am. Jur. 2d, Damages § 11, n.12 _...... seeeeeeeenecees 19 MONTANA TEAMSTER EMPLOYERS TRUST, 22 Am. Jur. 2d, Damages §§ 109, 195, 198, 236, 237, NATIONAL SHOPMEN PENSION FUND, ene noveneunvnnavovoensovovoneensevvnnveseceneessesennsnnnoneene 19 NORTHWEST METAL CRAFTS TRUST FUND, 38 Am. Jur. 2d, Fright, Shock, and Mental Dis- OREGON TEAMSTER EMPLOYERS TRUST, turbance, § 45 —...........-------ecesssvseesseeeeeeeecessseeeeee 19 PRINTING SPECIALTIES AND Cooper, Robert D., Pension Fund Operations and PAPER PRODUCTS JOINT EMPLOYER AND Expenses (1980) International Foundation of UNION HEALTH AND WELFARE FUND, Employee Benefit Plans, Inc. Brookfield, Wis- RETAIL CLERKS PENSION TRUST, COMBI. ---nannan-----vnnnnnvennvssssseseeeeeeecncncnssceeeeeeeececntee 12 RETAIL CLERKS WELFARE TRUST, Cooper, Robert D., Multiemployer Health and Wel- SOUTHERN CALIFORNIA LUMBER INDUSTRY fare Plan Operations and Expenses (1983) In- HEALTH AND WELFARE FUND, ternational Foundation of Employee Benefit SOUTHERN CALIFORNIA LUMBER Plans, Inc. Brookfield, Wisconsin —...................... 12 INDUSTRY RETIREMENT FUND. Jury Verdicts Weekly, Vols. (26) (1982), (27) AND SPOKANE AREA HOTEL (1983), and (28) (1984) Jury Verdicts, Inc. AND RESTAURANT EMPLOYEES TRUST FUND SN III, RINNE co cas csisttccascdecstonnsenpeendsis 19 The amici curiae respectfully submit this brief in sup- port of the petition filed for a writ of certiorari in the above-captioned case. 2 OPINIONS BELOW The opinion of the Court of Appeals is reported at 722 F.2d 482 (9th Cir. 1983), and appears in the Ap- pendix to the petition at pages la to 25a. The order of the United States District Court for the Central District of California granting petitioner’s motion for summary judgment, as well as the findings of fact and conclusions of law issued in connection therewith, are unreported and appear in the Appendix to the petition at pages 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 that Court on April 6, 1984. Appen- dix to petition at page 34a. The petition for writ of certiorari was docketed on July 5, 1984. The jurisdiction of this Court is invoked by petitioners pursuant to 28 U.S.C. § 1254(1). STATUTES AND REGULATIONS INVOLVED This case involves Sectiens 409, 501, 502 and 503 of the Employee Retirement Income Security Act of 1974, as amended (ERISA), 29 U.S.C. $$ 1109, 1131, 1132, and 1133, and 29 C.F.R. § 2560.503-1 promulgated pur- suant to ERISA Section 503. These provisions are re- produced in the Appendix to the petition at pages 35a to 84a. STATEMENT OF THE CASE Respondent, Doris Russell (Russell), was an employee of a California office of the petitioner, Massachusetts Mutual Life Insurance Company (Mass Mutual). Mass Mutual sponsors two employee benefit plans which pro- vide disability benefits to eligible employees. Both plans are provided at no cost to employees and are funded by 3 the general assets of the company. Both plans are cov- ered by ERISA.! Russell filed a disability claim under the salary con- tinuance plan in May, 1979, asserting that she could not work because of a back problem. Mass Mutual began payment of benefits. In August, 1979, the claim was reviewed by Mass Mutual’s Disability Committee. The Disability Commit- tee referred Russell to an orthopedic surgeon. In Sep- tember, 1979, this specialist examined Russell and con- cluded that, from an orthopedic perspective, she was not physically disabled. On October 17, 1979, Russell was notified that disability payments would be discontinued upon the recommendation of the Disability Committee. Russell was aso advised of her right to appeal that de- cision to the Plan Administrator. On October 22, 1979, Russell wrote to the Director of Group Claims (not to the Plan Administrator) and asked for additional information regarding the termination of her benefits and for an application for long-term dis- ability benefits. She also stated her intention to appeal the termination of her disability benefits and to submit additional medical information. On November 27, 1979, Russell wrote to the Plan Ad- ministrator concerning her appeal and submitted addi- tional evidence, including a report from her psychiatrist which indicated that she was suffering from a psycho- somatic disability with physical manifestations rather than an orthopedic disability. The Mass Mutual Plan Administrator treated Rus- sell’s letter of November 27, 1979 as a formal appeal and referred it to the Disability Committee. Russell was ex- amined by an independent psychiatrist, who confirmed ' Petitioner Cecilia Stevenson, an employee of Mass Mutual, was Russell’s supervisor at Mass Mutual. Amici Curiae accept peti- tioner’s statement of the case, but provide a synopsis of it herein. * Other employment-related claims were also asserted: the only claim addressed herein by the amici curiae is Russell's claim with respect to her disability benefits. 4 that Russell suffered from a psychiatric disability in a report dated February 15, 1980. On the basis of this re- port, the Disability Committee recommended that Rus- sell’s benefits be reinstated retroactively. The Plan Ad- ministrator adopted this recommendation and informed Russell of his decision on March 11, 1980. Payment of all benefits due was made two days later. Although she received full benefits from both plans, Russell sued Mass Mutual in California Superior Court on December 9, 1980 for compensatory and punitive dam- ages for the untimely and improper handling of her benefit claim,” which allegedly resulted in economic loss and mental 2nguish.* After removal of the case to the United States Dis- trict Court for the Central District of California on the ground that the case was governed by ERISA,‘ the Dis- trict Court granted a motion by Mass Mutual for sum- mary judgment. The court first held that all of Russell’s state law claims arising from the processing of her claim for disability benefits were pre-empted by ERISA. The court then concluded that, as a matter of law, punitive and compensatory damages are not available to plan par- ticipants under ERISA. By so ruling, the court tacitly acknowledged that a plan participant only has a claim against the plan for non-payment of benefits and costs of litigation, including fees. Because Russell had been paid benefits in full, she was not entitled to any addi- tional relief. The court found that Russell’s appeal was filed on November 27, 1979 and rejected her contention 3 Russell claimed, inter alia, that Mass Mutual’s delay forced her husband, who was also unemployed on the grounds of disability, to cash out his retirement savings plan. Russell alleged that she and her husband lost the security of lifetime benefits. Russell also sought damages for emotional distress and claimed that her pre- existing psychosomatic illness was aggravated as a result of the improper and untimely handling of her claim. *Mass Mutual removed this action pursuant to 28 U.S.C. § 1441(a), alleging the existence of federal jurisdiction under 29 U.S.C. § 11382(e) (1) and 28 U.S.C. § 1831 (a). 5 that she was entitled to damages because her claim had not been processed in 120 days, as required by regulations promulgated under ERISA Section 503, 29 U.S.C. § 1133. See 29 C.F.R. $ 2560.503-1(h) (1983).° The Ninth Circuit affirmed the District Court’s holding that Russell’s state law claims were pre-empted by ERISA. However, the Ninth Circuit reversed the Dis- trict Court’s grant of summary judgment. The appel- late court held that Russell’s complaint had stated a claim under ERISA for breach of fiduciary duty based on the allegedly improper or untimely handling of her appeal. The Court of Appeals determined that Russell’s appeal began with her initial letter of October 22, 1979 and that Mass Mutual, therefore rendered its final deter- mination twelve days beyond the 120-day limit. The Court of Appeals went on to hold that such a claim could support an award of both compensatory and punitive damages. The appellate court based its opinion on an interpretation of ERISA Section 409, 29 U.S.C. $1109. It held that Section 409, which expressly im- poses personal liability to the plan for fiduciary breaches, also make fiduciaries personally liable to individual par- ticipants with respect to benefit claims. The Ninth Cir- cuit is the only appellate court to have held that Section 409 authorizes punitive damages against plan fiduciaries by individual participants for denial of a benefit claim. 5 The regulations which require benefit claims to be decided within 120 days do not provide affirmative relief. These regulations simply provide that, in the event of the plan’s failure to render a decision within that time, “the claim shall be deemed denied on review.” 29 C.F.R. § 2560.503-1(h) (4). The participant can then file suit under ERISA Section 502 without fear that a defense of failure to exhaust remedies can be raised. 6 REASONS FOR GRANTING THE WRIT I. The Ninth Circuit’s Ruling that Punitive Damages are Available to Plan Participants and Beneficiaries Con- flicts with Rulings of the Eighth Circuit and Numerous District Courts The Ninth Circuit’s holding in Russell v. Mass, Mu- tual Life Ins. Co., 722 F.2d 482 (9th Cir. 1983) that awards of punitive damages are permissible under ERISA was subsequently restated in Winterrowd v. Freedom & Co., 724 F.2d 823 (9th Cir. 1984). In the latter case, the Court affirmed an award of punitive damages against a contributing employer to a multi- employer fund. Russell and Winterrowd directly con- flict with the Eighth Circuit’s reasoning in Dependhal v. Falstaff Brewing Corp., 653 F.2d 1208 (8th Cir. 1981), cert. denied, 454 U.S. 968 (1981), in which that court stated: We do not think that 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 desired to provide for punitive damages; it could have easily so stated, as it had in other acts. 653 F.2d at 1216; see also Bittner v. Sadoff & Rudoy Industries, 728 F.2d 820, 825-26 (7th Cir. 1984), which held that punitive damages are not available in an action for plan benefits under ERISA Section 502(a) (1) (B). In addition to this conflict between Circuit courts, there is sharp conflict among the numerous district court decisions that address the availability of punitive dam- ages under ERISA. These decisions are comprehensively listed at pages 7-8 of the petition, and we respectfully refer the Court to those citations. II. The Ninth Circuit’s Ruling is Inconsistent with the Statutory Scheme and Language of ERISA and Gives a Windfall Reward to Participants ERISA specifically differentiates between remedies available to plans as a whole and to individual par- 7 ticipants and beneficiaries. The Ninth Circuit has com- pletely ignored these distinctions and, in effect, has re- written the remedial provisions of the Act. As this court has observed, ERISA is a “comprehensive and reticulated statute” in which Congress established many detailed rules to further “the well-being and secu- rity of millions of employees and their dependents” and to remedy the nuinerous flaws in the private pension plan system. Nachman Corp. v. PBGC, 446 U.S. 356, 361 (1980), reh. denied 448 U.S. 908 (1980). Among the most significant changes wrought by ERISA were the strict rules for fiduciary behavior and the personal lia- bility imposed upon fiduciaries for any breach of their duties. The rules of fiduciary behavior are extensive, and include the following: a rule which prohibits sales or exchanges between the plan and “parties in interest” and “disqualified persons” (ERISA Section 406; ERISA Section 2003) ; a prudent person rule which provides a standard by which fiduciaries’ investment and other asset dis- position decisions are judged (ERISA Section 404 (a) (1) (B)); an “exclusive purpose” rule, which requires that a plan be administered with the exclusive purpose of providing benefits (ERISA Section 404(a) (1) (A)); a prohibition agairst compensation for fiduciaries who are full time employees of unions or employers (ERISA Section 408(a) (2)); and a prohibition against any self-dealing by fiduciaries (ERISA Section 406(b)). These fiduciary rules have one thing in common: they are obligations to the plan as a whole, rather than simply to individual participants. All breaches of the fiduciary rules are grounds for an enforcement action against plan fiduciaries, even if the breaches do not cause monetary damage to the plan. Fiduciaries are “personally liable to make good to [the] 8 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.” ERISA Section 409(a), 29 U.S.C. $1109(a). Fiduciaries are subject to removal for fiduciary breaches and to “other equitable or remedial relief” deemed appropriate by the court. It is important to note that ERISA Section 409 pro- vides equitable and remedial relief for fiduciary breaches only to plans as a whole, not to individual participants.® Relief for individual participants and beneficiaries who have been denied benefits is exclusively pursuant to ERISA Section 502(a)(1)(B), 29 U.S.C. $ 1182(a) (1) (B). This provision does not permit the imposition of personal liability upon fiduciaries for any compensatory or punitive damages to individual participants or bene- ficiaries. It limits benefit claimants to recovery of bene- fits due from the plan and costs of litigation, including attorneys’ fees. The different remedial provisions of Section 409 and 502 reflect the delicate balance struck by Congress among the significant purposes served by ERISA: (1) the deter- rence of fiduciary malfeasance; (2) the promotion of the expansion of the private pension plan system; and (3) the securing of benefits due to individual participants and beneficiaries. Congress balanced the prophylactic effect of the imposition of personal liability upon fiduciaries as a deterrence for malfeasance against the need to promote expansion of pension plans. Congress determined that personal liability to the plan for fiduciary breaches would deter malfeasance, but that excessive imposition of per- ERISA’s legislative history confirms that any recovery under Section 409 necessarily benefits the plan as a whole. See, e.g. H. Conf. Rep. No. 1280, 938d Cong., 2nd Sess. 320 (1974) (personal liability of fiduciary for losses to the plan resulting from fiduciary breach) and S. Rep. No. 127, 938d Cong., Ist Sess. 33 (1973) (per- sonal liability of fiduciary to reimburse fund for losses resulting from fiduciary breach and to turn over any profits obtained by use of fund assets). 9 sonal liability (such as was created by the Ninth Circuit) would hamper creation of new plans, the expansion of ex- isting ones, and the recruitment of plan trustees. Congress, in balancing competing concerns clearly felt that the prophylactic measures (of personal liability) de- signed to deter abuses of plan resources were not an appro- priate way of dealing with errors made in the processing of individual claims. Balancing the need for encouraging accuracy in individual claim processing against its pol- icy of promoting pension plan expansion, Congress au- thorized full recovery of benefits due to individuals from plans as well as costs of litigation (including attorneys’ fees), but did not go so far as to impose personal lia- bility upon plan fiduciaries for either compensatory or punitive damages. Thus, ERISA deters malfeasance in the management of plans, provides remedies to individual claimants, and yet does not set up barriers to the expan- sion of the private pension system. This Court has previ- ously affirmed, in similar sorts of statutes, the need for a “careful balance of individual and collective interests.” Electrical Workers v. Foust, 442 U.S. 42, 48 (1979) ‘which case holds that punitive damages are not available for claims of breach of duty of fair representation under the Railway Labor Act, 45 U.S.C. §§ 151 et seq.). The Ninth Circuit upset the careful balance struck by ERISA without any justification. The imposition of per- sonal liability upon plan fiduciaries for prior errors in claims processing does not significantly add to the pro- phylactie effect of the measures expressly provided by Congress to deter fiduciary malfeasance. Neither does it add to the ability of individual participants to secure benefits. Benefits are already well secured under the bene- fit recovery provisions of Section 502.7 But, the Ninth Circuit’s ruling has extremely deleterious effects on plans. It adversely alters the decision-making procedures of plan trustees and, by discouraging responsible persons from ‘Indeed, an award of punitive damages would be a windfall to a benefit claimant. 10 serving as trustees, discourages the expansion of the pri- vate pension plan system. The amici curiae now turn to a discussion of these consequences as they apply to multi- employer plans. Ill. The Ninth Circuit’s Ruling is of Great Public Im- portance Because it has a Severe Adverse Impact on Multiemployer Benefit Plans and their Participants Multiemployer plans are integral to the financial secu- rity of millions of Americans. The Ninth C irecuit’s rul- ing will injure multiemployer plan administration, deter qualified individuals from serving as plan fiduciaries, discourage the process of dispute resolution established by ERISA, and expose fiduciaries to liabilities that they cannot estimate and against which they may be unable to insure themselves. The cumulative effect of this is to un- determine the stability of multiemployer plans and thereby effectively halt their expansion. A. The Nature and Importance of Multiemployer Benefit Plans to the Retirement Security and to the Health and Welfare Benefits of Millions of Employees Multiemployer employee benefit plans play a vital role in the financial well-being of millions of individual work- ers. They enable the employees of small and medium sized companies to obtain the level of pension and health and welfare benefits only available from large plans. They permit employees who work for more than one em- ployer in the same industry to accumulate meaningful pension benefits. They also protect pension benefits when an employer leaves the plan. Multiemployer plans sup- port two important features of the American economy: small businesses and a mobile workforce. Small and medium sized companies often cannot afford sophisticated and generous employee benefits such as those provided by large corporate plans. Large employee benefit plans can profit from substantial economies of scale and can also accurately reflect the science of “aver- ages,” which forms the basis of actuarial predictions. An 11 increase in plan size considerably reduces the risk that a plan may suffer financial adversity because its benefit claims experience does not accurately mirror statistical predictions. Of similar importance is the need to provide a fem of “portable” pension benefits. Because multiemployer pen- sion plans generally include many employers in an in- dustry, an employee moving from one employer in the plan to another continues to accumulate benefits without interruption. Multiemployer plans also protect pension benefits because they provide benefits to an employee even though his or her employer leaves the plan. Congress has recognized that multiemployer ,.ans “typically provide workers with greater retirement secu- rity than single employer plans.” Senate Labor Commit- tee Summary and Analysis of Consideration of S.1076 (April 1980) U.S. Code Cong. & Admin. News, p. 2985. Accordingly, Congress has repeatedly passed legislation to strengthen multiemployer plans. The most compre- hensive effort in this regard was the Multiemployer Pen- sion Plan Amendments Act of 1980, which amended ERISA by imposing withdrawal liability upon employers who withdraw from multiemployer pension plans. See- tion 3 of the Act explicitly states that it is Congressional policy to encourage the maintenance and growth of multi- employer pension plans.* Multiemployer benefit plans are established through collective bargaining agreements. The Taft-Hartley Act of 1947 specifically provided for the formation of trusts to administer health and welfare and pension funds for *The 1980 Amendments to ERISA were enacted by Pub. L. No. 96-364, 94 Stat. 1208-1311 (1980). For further discussion of Con- gressional policy to encourage the maintenance and growth of multiemployer pension plans, see House Ways and Means Commit- tee Report on H.R. 3904 (Rept. 96-869. Part II, April 23, 1980) and House Labor Committee Report on H.R. 3904 (Rept. 96-869 Part I, April 2, 1980). 12 employees represented by labor unions in collective bar- gaining with management, 29 U.S.C. § 186(c) (5) and (6). The law also required such plans to be managed by trustee boards equally divided between representatives of management and of labor organizations. See NLRB v. Amax Coal Co., 453 U.S. 322 (1981) for a description of the functioning of such trustees. Multiemployer trust- ees are familiar with the particular needs of their indus- try and are best able to design plans to fit those needs. Multiemployer benefit plans cover millions of Ameri- ean workers. Multiemployer pension plans are primarily defined benefit plans While multiemployer pension plans represent only 3.2% ef all defined benefit pension plans, they provide coverage to 20-26% of all American non- farm workers covered by such plans.® In 1980, there were 1,826 multiemployer pension plans in the country, vith a total of 10 million active and retired partici- pants." There were also 4,500 multiemployer health and welfare funds, of which 3,040 provided basic hos- pitalization and other health benefits to 8.1 million par- ticipants." Multiemployer pension plans process hun- dreds of thousands of benefit claims each year. Multi- employer health and welfare plans process millions of claims annually.