Amicus Curiae Brief — Massachusetts Mutual Life Insurance v. Russell

" MROTION FILED

- AUG - 3 1984 ((

No. 84-9

In The Supreme Court

OF THE

United States

Ocroszr TERM, 1983

-Massacuusetts Murvat Lirz Insurance Company,

and Crcruia STEVENSON,

Petitioners,

v.

Dozis Russz11,

Respondent.

MOTION FOR LEAVE TO FILE

BRIEF OF AMICI CURIAE

AND

BRIEF OF AMICI CURIAE PIPE TRUST,

IBEW-NECA TRUST, AIRCONDITIONING TRUST

AND FLOOR COVERING TRUST IN SUPPORT

OF PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Srvuart H. Youns, Jr.

(Counsel of Record)

Hi, Farrer & Burr.

34th Floor - Union Bank Square

445 South Figueroa Street

Los Angeles, California 90071

Telephone : (213) 620-0460

Attorneys for Amici Curiae

August 3, 1984

Bowne of Los Angeles, Inc., Law Printers. (213) 742-6600.

mee BEST AVAILABLE COPY

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TABLE OF CONTENTS

Interest of Amici

Summary of Argument

Argument

I

The Court of Appeals’ Holding is Inconsistent With

The Federal Regulatory Scheme Governing Multi-

employer, Taft-Hartley Trust Funds

II

Exposing Individual Fiduciaries to Punitive Damages

In Benefit Claims Cases Will Jeopardize The Entire

Field of Trust Funds, Since Such Damages Are Un-

insurable In Many Jurisdictions

ITI

A Court Should Not Imply A Congressional Intent To

Permit The Recovery of Punitive Damages, Where

Such Relief Will Impact Disparately Among the

Several States

IV

The Judiciary Should Not Fashion New Remedies In

The Face of A Comprehensive Legislative Scheme

Conclusion

10

19

li

TABLE OF AUTHORITIES CITED

Cases

Page

Abbie Uriquen Oldsmobile Buick, Inc. v. United States

Fire Ins. Co., 95 Idaho 501, 511 P.2d 783 (1973) 16

Amato v. Bernard, 618 F.2d 559 (9th Cir. 1980) 9

American Ins. Co. v. Saulnier, 242 F.Supp. 257 (D.C.

Conn. 1965) 16

American Surety Co. v. Gold, 375 F.2d 523 (10th Cir.

1966) 16

Anthony v. :“rith, 394 S.2d 867 (1981) 16

Beaver v. Country Mutual Ins. Co., 95 Ill. App.3d 1122,

420 N.E.2d 1058 (1981) 16

California Union Ins. Co. v. Arkansas Louisiana Gas

Co., 264 Ark. 449, 572 S.W.2d 393 (1978) 16

Cedar Rapids v. Northwestern Nat. Ins. Co., 304 N.W.

2d 228 (1981) 16

Chemical Workers Local 1 v. Pittsburg Plate Glass Co.,

404 U.S. 157 10, 11

City Products Corp. v. Globe Indemnity Co., 88 Cal.

App.3d 31 (1979) 14, 15

Continental Ins. Co. v. Hancock, 507 S.W.2d 146 (1973) 16

Crull v. Gleb, 382 S.W.2d 17 (1964) 16, 17

Dorsey v. Honda Motor Co., 655 F.2d 650 (5th Cir. 1981) 16

Electrical Workers v. Foust, 442 U.S. 60 (1979) 11, 12

Esmond v. Liscio, 209 Pa. Super. 200, 224 A.2d 793

(1966) 17

Fagot v. Ciravola, 445 F. Supp. 342 (E.D. La. 1978) 16

First National Bank v. Fidelity & Deposit Co., 283 Md.

228, 389 A.2d 359 (1978) | 16

Ford Motor Co. v. Home In urance Co., 116 Cal. App.3d

374 (1981) 14

@ @ e @ ~~ «~ s

ill

TABLE OF AUTHORITIES CITED

Cases

Page

Grant v. North River Ins. Co., 453 F.Supp. 1361 (N.D.

Ind. 1978) 16

Greenwood Cemetery, Inc. v. Travelers Indemn. Co.,

238 Ga. 313, 232, S.F.2d 910 (1977) 16

Harrell v. Travelers Indemn. Co., 279 Or. 199, 567 P.2d

1013 (1977) 16

Hensley v. Erie Ins. Co., 283 S.E.2d 227 (1981) 16

Hurn v. Retirement Fund Trust, 803 F.2d 386 (9th Cir.

1983) 11

Lazenby v. Universal Underwriters Ins. Co., 214 Tenn.

639, 383 S.W.2d 1 (1964) 16

Louis Moot v. Retirement Fund Trust, ete., et al., Civ.

No. 84-3411 HLH (C.D. Cal.) 8

NLREB v. Amax Coal Co., 453 U.S. 322 (1981) 2 é4:%,

Northwest Airlines v. Transport Workers Union, 451

U.S. 77 (1981) 18

Northwestern National Casualty Co., 307 F.2d 432 (5th

Cir. 1962) 15, 17

Parker v. Agricultural Ins. Co., 109 Mise.2d 678, 440

N.Y.S.2d 964 (1981) 17

Peterson v. Superior Court, 31 Cal.App.3d 147 (1982) 14

Price v. Hartford Accident & Indemnity Co., 108 Ariz.

485, 502 P.2d 522 (1972) 16

Rehmar v. Smith, 555 F.2d 1362 (9th Cir. 1976) 11

Ridgway v. Gulf Life Ins. Co., 578 F.2d 1026 (5th Cir.

1978) 16

Russell v. Massachusetts Mutual Life Insurance Com-

pany, 722 F.2d 482 (9th Cir. 1983) 8, 9, 10, 12, 13

Scheider v. United States Steel Corp., 486 F.Supp. 211

(W.D. Pa. 1980) 9

iv

TABLE OF AUTHORITIES CITED

CASES

State v. Glens Falls Ins. Co., 137 Vt. 313, 404 A.2d 101

(1979)

Texas Industries v. Radcliffe, 451 U.S. 630 (1981)

UMW Health & Retirement Funds v. Robinson, 455

U.S. 562 (1982)

Universal Indem. Ins. Co. v. Tenery, 96 Colo. 10, 39 P.2d

776 (1934)

Vaca v. Sipes, 386 U.S. 171 (1967)

Variety Farms, Ine. v. New Jersey Mfrs. Ins. Co., 172

N.J. Super. 10, 410 A.2d 696 (1980)

Williams v. Pacific Marine Association, 421 F.2d 1287

(9th Cir. 1970)

Wojciak v. Northern Package Corp., 310 N.W.2d 675

(1981)

Miscellaneous

Comptroller General of the United States, Report to the

Congress, GAO/HRD-84-1, at 8 (1984)

Rules

Rules of the United States Supreme Court, Rule 36.1

Regulations ~

Code of Federal Regulations, Title 29, Sec. 2569.503-

1(h) |

Code of Federal Regulations, Title 29, See. 2560.503-

1(h) (4)

Page

Vv

TABLE OF AUTHORITIES CITED

Statutes

_

California Civil Code, See. 1668 14

California Insurance Code, Sec. 533 14

Employee Retirement Income Security Act of 1974, See.

3(3) (29 U.S.C. See. 1002(3)) 2

Employee Retirement Income Security Act of 1974, See.

3(21)(A) (29 U.S.C. See. 1002(21)(A)) 2

Employee Retirement Income Security Act of 1974, See.

409 (29 U.S.C. See. 1109) 12

Employee Retirement Income Security Act of 1974, See.

410 (29 U.S.C. See. 1110) 13

Employee Retirement Income Security Act of 1974, Sec.

502(a)(1)(B) (29 U.S.C. See. 1132(a) (1) (B)) 12

Employee Retirement Income Security Act of 1974, Sec.

502(a)(2) (29 U.S.C. See. 1132(a)(2)) 12

Employee Retirement Income Security Act of 1974, See.

503 (29 U.S.C. See. 1133) 9

Labor-Management Relations Act, Sec. 301 (29 U.S.C.

See. 185) | 10, 11

Labor-Management Relations Act, See. 302(¢)(5) (29

U.S.C. See. 186(¢) (5)) 2, 3, 6, 9, 10, 11, 18

United States Code, Title 29, See. 1001 s

No. 84-9

In The Supreme Court

OF THE

United States

Octoser TERM, 1983

Massacuusetts Murvat Lire Insurance Company,

and Ceciuia STEVENSON,

Petitioners,

Vv.

Doris RussE LL,

Respondent.

MOTION FOR LEAVE TO FILE

BRIEF OF AMICI CURIAE

COMES NOW The Southern California Pipe Trades

Trust Funds (“Pipe Trust”), the Southern California

IBEW-NECA Trust Funds (“IBEW-NECA Trust”), the

Airconditioning and Refrigeration Industry Trust Funds

(“Airconditioning Trust”), and the Southern California

Floor Covering Trust Funds (“Floor Covering Trust”),

hereinafter sometimes referred to collectively as the “Trust

Funds” and, pursuant to Rule 36.1 of the Rules of this

Court, hereby respectfully request that this Court grant

leave to file the accompanying Brief of Amici Curiae Pipe

Trust, IBEW-NECA Trust, Airconditioning Trust and

Floor Covering Trust in support of Petition for Writ of

Certiorari ‘to the United States Court of Appeals for the

Ninth Cireuit. The Petitioners, Massachusetts Mutual Life

Insurance Company and Cecilia Stevenson, have consented

to the filing of this Brief, whereas Respondent Doris Russell

2

has declined to grant permission. The basis for this Motion

is as follows:

1. Amici Curiae Trust Funds are so-called “Taft Hart-

ley” Trust Funds, meaning they were created pursuant to

collective bargaining between management and labor, and

operate under Section 302(c)(5) of the Labor-Management

Relations Act, 29 U.S.C. § 186(¢) (5). In addition, The Amici

Curiae Trust Funds are multiemployer trust funds with

numerous employer contributors and covering a broad geo-

graphical area. As more fully described in the accompany-

ing Brief, the individual Trustees of these Trust Funds are

representatives of either labor or management, as required

by Section 302(c)(5). NLRB vs. Amax Coal Co., 453 U.S.

322, 329 (1981).

2. In addition to being regulated by Section 302(c) (5),

each of the Trust Funds is also an “employee benefit plan”

within the meaning of Section 3(3) of the Employee Retire-

ment Income Security Act of 1974 (“ERISA”), 29 U.S.C.

§ 1002(3), and is, therefore, regulated by ERISA. Each

Trustee of the Amici Curiae Trust Funds, and there are

‘presently 40 such trustees, is a fiduciary within the meaning

of Section 3(21)(A) of ERISA, 29 U.S.C. § 1002(21)(A).

3. As more fully described in the Petition for Writ of

Certiorari, the Court of Appeals held that, under ERISA,

a fiduciary is personally liable for punitive damages and

extra-contractual compensatory relief in actions brought by

plan participants arising out of claims for benefits. These

Amici Curiae are vitally interested in the outcome of this

matter, since their respective trustees are ultimately re-

sponsible for the processing of hundred of thousands of

claims for benefits annually. As fiduciaries, these trustees

are therefore exposed to a multitude of situations giving

rise to personal liability in the event of error. This repeated

exposure exists under the ruling of the Court of Appeals,

3

notwithstanding the fact that these trustees sere without

compensation and on a volunteer basis.

4. The plan of benefits involved in the instant case is not

a multiemployer plan regulated by Section 302(¢)(5). Even

though the decision of the Court of Appeals applies with

equal force to individual fiduciaries serving as trustees

on a multiemployer Section 302(¢c)(5) Trust Fund, there is

no mention of Section 302(c)(5) in the decision and no

indication that the Court of Appeals took into account the

unique posture of a Section 302(c)(5) Trust Fund. Unless

these Amici Curiae are permitted to be heard, there is a

serious prospect that insufficient account will be taken of

the unique circumstances of a multiemployer Section 302(c)

(5) Trust Fund, and that inadequate consideration will be

given to the interplay between Section 302(c)(5) and

ERISA.

5. This Court has recently made note of the “express

congressional policy favoring multiemployer trusts” and

chastised a Court of Appeals for failing to take into account

that Congressional policy. Jd. at 338, n. 22. As argued more

fully in the annexed Brief of Amici Curiae, there is a sub-

stantial chance that the Court of Appeals’ decision wil!

radically alter the character of such trusts, if not eliminate

them altogether. There are 1,924 multiemployer trusts with

100 or more participants nationwide, which cover 8,337,000

participants. Comp'‘roller General of the United States,

Report to the Congress, GAO/HRD-84-1, at 8 (1984). The

Amici Curiae Trust Funds submit that no decision impact-

ing on such a broad class should be rendered without the

opportunity for an appropriate repre»entative of that class

to be heard.

4

Accordingly, these Amici Curiae Trust Funds respect-

fully request that leave be granted as requested and the ac-

companying Brief of Amici Curiae filed and considered by

the Court.

Respectfully submitted,

Stuart H. Youngs, Jr.

Counsel of Record

Hinz, Farrer & Burriny

445 South Figueroa Street

34th Floor-Union Bank Square

Los Angeles, California 90071

(213) 620-0460

Attorneys for Amici Curiae

5)

No. 84-9

In The Supreme Court

OF THE

United States

OctroBEerR TERM, 1983

Massacuusetts Mutua Lire Insurance CoMPany,

and Cectuia STEVENSON,

Petitioners,

Vv.

Doris RussELt,

Respondent.

BRIEF OF AMICI CURIAE PIPE TRUST,

IBEW-NECA TRUST, AIRCONDITIONING TRUST

AND FLOOR COVERING TRUST IN SUPPORT

OF PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

INTEREST OF AMICI CURIAE

It is, undoubtedly, common practice for litigants to sound

alarums before this Court in hope of persuading the Court

that their cause, among all other causes, is worthy of the

Court’s attention. We refuse to dissemble this Court by

urging that lives may hang in the balance upon the instant

cause, or that it rises to the level of eliciting some grave

constitutional pronouncement. At the same time, and at

the risk of being classed with those who would cry wolf,

this Court should not remain unsuspecting about the grave

consequences which will surely attend the ruling of the

Court of Appeals: An enterprise carefully nurtured since

6

its infancy with Congressional succor, and just now achiev-

ing its maturity, will cease to be in any form remotely ap-

proaching its historical persona. The Amici Curiae have

been and hope to remain a part of that enterprise.

This Brief is being filed jointly on behalf of four Trust

Funds: The Southern California Pipe Trades Trust Funds

(“Pipe Trust”), The Southern California IBEW-NECA

Trust Funds (“IBEW-NECA Trust”), The Airconditioning

and Refrigeration Industry Trust Funds (“Airconditioning

Trust”), and The Southern California Floor Covering

Trust Funds (“Floor Covering Trust”). Each of these

Trust Funds is situated in California and was created as a

result of collective bargaining on a multiemployer basis

between labor and management. Thus, for example, the

Pipe Trust was created in about 1957 as a result of collec-

tive bargaining between the Southern California Pipe

Trades District Council No. 16 of the United Association for

and on behalf of its affiliated local unions and the precessor

multiemployer association to the Plumbing & Piping In-

dustry Council. The IBEW-NECA Trust, as another ex-

ample, was created in about 1964 as a result of collective

bargaining between Local Union No. 11 International Bro-

therhood of Electrical Workers, AFL-CIO, and the Los

Angeles County Chapter of National Electrical Contractors

Association. Each of these Trust Funds, under separate

trust indentures, provides both health and welfare benefits

and pension benefits to tens of thousands of eligible partici-

pants. Each ~ these Trust Funds is a so-called “Taft-

Hartley” trus. tund, meaning that each was created un-

der the aegis of Section 302(c)(5) of the Labor-Manage-

ment Relations Act, 29 U.S.C. Section 186(¢c)(5). Section

302(c)(5), among other things, requires, and has always re-

quired, that “employees and employers [be] equally repre-

sented in the administration” of Taft-Hartley pension and

health and welfare funds. NLRB v. Amazx Coal Co., 453

7

U.S. 322, 329 (1981). Pursuant to this statutory mandate,

the labor organizations and employers who created the in-

stant Trusts have historically appointed tneir respective re-

presentatives to serve as trustees on these Trusts.

There are, and have been, 14 such Trustee representa-

tives on the Pipe Trust, 14 on the IBEW-NECA Trust

(pension), 6 on the Airconditioning Trust, and 6 on the

Floor Covering Trust. These Trustee representatives are

not professionals, in the sense of receiving compensation

for serving in the capacity of Trustee or even in the sense

of devoting a full-time effort to the position of Trustee. On

the contrary, almost all Trustees are employed full-time

elsewhere, either by a participating labor organization or

by a contributing employer. Accordingly, their service to

the respective Trust Funds as Trustee is on a volunteer

basis and arises out of their personal commitment to better

the industry. The position of Trustee, is, by its nature, a

part-iime position, carried out in addition to duties and re-

sponsibilities elsewhere. While the position is part-time, the

Trustees nonetheless carve out of their working life an

enormous amount of time and energy to devote to this vol-

unteer effort. Thus, each Trustee devotes in excess of 40

hours per month to the affairs of the Trust Funds, prepar-

ing for and attending meetings of the Trustees as a whole,

as well as various committee meetings such as administra-

tive, delinquency, appeals, investment (or finance), and

building committees.

Under the direction of the Trustees, the Trust Funds

annually handle hundreds of thousands of claims for bene-

fits by participants and their dependents. During the 1985

calendar year, the Pipe Trust received 259,328 health and

welfare claims and 339 pension applications; the Aircondi-

tioning Trust received 45,844 health and welfare claims and

35 pension applications; and the Floor Covering Trust re-

ceived 8,751 health and welfare claims and 45 pension appli-

8

cations. During the 1983-4 fiscal year, the IBEW-NECA

Trust received 141,909 health and welfare claims and 304

pension applications. Therefore, during a 12-month period,

tnese four Trust Funds alone processed a total of 455,832

health and welfare claims and received 723 pension applica-

tions. Not all of these applicants and claimants, of course,

are happy with the manner in which their claim or applica-

tion is processed. There can be no doubt that the promise

of punitive damages and extra-contractual compensatory

relief held out by the Court below will inspire or induce a

greater proportion of these unhappy claimants to seek judi-

cial relief, most likely in federal court. If only one-tenth of

one percent of these claims give rise to litigation, the courts

will be flooded with over 450 suits per year with respect to

these four Trust Funds alone. Moreover, the personal

assets of volunteer trustees will be exposed many times

over. This is not by any means an idle fear: Following on

the heels of the publication of the Court of Appeals opinion,

the Pipe Trust was served with a summons and complaint

in a case encaptioned Louis Moot v. Retirement Fund

Trust, etc., et al., CIV No. 84 3411 HLH (C.D. Cal.) in which

13 of the Pipe Trust’s Trustees are named as individual de-

fendants. The plaintiff, who alleges that he was improperly

denied certain benefits, seeks damages for “physical and

mental pain and suffering” in the sum of $125,000 and puni-

tive damages “in a sum equal to 25% of the net worth of

each defendant.” The Amici Curiae, therefore, have a plain

and immediate interest in the outcome of the instant Peti-

tion.

SUMMARY OF ARGUMENT

The Court of Appeals, in Russell v. Massachusetts

Mutual Life Insurance Company, 722 F.2d 482 (9th Cir.

1983), held that individual fiduciaries are personally liable

to plan participants for punitive and extra-contractual

compensatory damages under the Employee Retirement In-

come Security Aci of 1974 (ERISA), 29 U.S.C. 4 1001 et

9

seq., in cases arising out of the untime y handling of benefit

claims. The Court of Appeals found tLe timeliness require-

ment in the provisions of Section 503 of ERISA, 29 U.S.C.

S. ection 1133, and, in particular, in the regulation promul-

gated by the Secretary of Labor at 29 CFR Section

2560.503-1(h). This regulation, as the Court of Appeals

notes, requires that benefit decisions be made “promptly,”

but in any event no later than 120 days from the “receipt of

a request for review.” Jd. at 489. Failure to meet this time

deadline, so the Court held, is a breach of fiduciary duty and

exposes individual fiduciaries to the spectre of potentially

enormous personal liability. The Court reached this con-

clusion notwithstanding the fact that the very same regula-

tions issued by the Secretary of Labor provide that if a

benefit decision is not rendered within the time required,

“the claim shall be deemed denied.” 29 CFR § 2560.503-1

(h)(4). This is the only remedy the Secretary of Labor con-

templated for untimely action upon a benefit claim, and was

undoubtedly drafted so as to permit participants to avoid a

contention that they failed to exhaust their administrative

remedies in the event they bring suit after the passage of

120 days. Amato v. Bernard, 618 F.2d 559 (9th Cir. 1980) ;

Scheider v. United States Steel Corp., 486 F.Supp. 211

(W.D. Pa 1980).

Amici Curiae contend that in reaching its decision, the

Court of Appeals failed to take into account the require-

ments of Section 302(c)(5) of the Labor-Management Re-

lations Act and the expressed Congressional policy favoring

multiemployers trusts. Moreover, by implying new reme-

dies into a comprehensive statutory scheme, the Court of

Appeals ignored the disparate impact its ruling would have

among the several states, despite the clear Congressional

purpose of achieving uniformity in the regulation of Taft-

Hartley Trust Funds and contrary to prior rulings of this

Court in analogous circumstances.

10

ARGUMENT

I

THE COURT OF APPEALS’ HOLDING IS INCON.

SISTENT WITH THE FEDERAL REGULATORY

SCHEME GOVERNING MULTIEMPLOYER, TAFT.

HARTLEY TRUST FUNDS.

As stated in the accompanying Motion, there is no men-

tion of Section 302(¢)(5) of the Labor-Management Rela-

tions Act in the opinion of the Court of Appeals. Similarly,

there is no mention of multiemployer trust funds. Yet, it is

clear that the ruling of the Court of Appeals applies to fidu-

ciary —trustees of multiemployer Taft Hartley funds,

such as these Amici Curiae. ,

The failure to consider the relationship of Section 302(c)

(5) to ERISA leads to some anomalous results: For exam-

ple, the Court of Appeals noted that “ERISA was intended

to serve as a substitute for various existing state protective

laws and regulations ... It would be anomalous if Congress

eliminated the protections offered by state law without pro-

viding comparable federal protections.” Russell v. Mas-

sachusetts Mutual, 722 F.2d at 488.

However, it is clear that multiemployer Taft-Hartley

trust funds were regulated by federal law, to the exclusion

of state law, long prior to the passage of ERISA. More-

over, this regulation by federal laws other than ERISA has

not been supplanted by ERISA. On the contrary, it contin-

ues to date and must, therefore, must be reconciled with

ERISA.

Some thirteen years ago, this Court observed that under

Section 301 of the Labor-Management Relations Act, 29

U.S.C. Section 185, retirees have a cause of action in the

context of a Taft-Hartley Trust Fund for breach of the

obligation to pay pension benefits. Chemical Workers Local

1 v. Pittsburg Plate Glass Co., 404 U.S. 157, at 176-77n.

11

17. Yet, the Ninth Circuit has itself held that punitive dam-

ages are not available under Section 301. Williams v. Pact-

fic Marine Association, 421 F.2d 1287 (9th Cir. 1970). In

addition, this Court and the Ninth Circuit have both stated

that ERISA does not supplant Section 302(¢c)(5). UMW

Health & Retirement Funds v. Robinson, 455 U.S. 562, 575

(1982) ; Hurn v. Retirement Fund Trust, 803 F.2d 386, 391

(9th Cir. 1983). As the Court in Hurn put it, “ERISA was

not to affect any federal laws not specifically mentioned.”

Id. Ina pre-ERISA suit seeking benefits from a Taft-Hart-

ley trust fund the Ninth Circuit has held that state laws

pertaining to commercial insurance contracts are “not

consistent with the federal policy of treating parties to

collective bargaining contracts as parties of equal strength.”

Rehmar v. Smith, 555 F.2d 1362, 1369 (9th Cir. 1976). Last-

ly, as this Court has opined, and as noted in the accompany-

ing Motion, Congress has an express policy of favoring mul-

tiemployer trusts. NLRB v. Amaz Coal Co., 453 U.S. at

338 n. 22.

In view of this on-going federal regulation of multiem-

ployer trust funds, and the solicitious attitude of Congress

towards these funds, it is peculiar that the Court of Appeals

should adopt a rule at this late date which may ultimately

lead to the demise of such funds. The imposition of punitive

damages upon individual trustees of these funds is, it is

submitted, plainly at odds with Section 301 and Section

302(c)(2) and the decisions of this Court thereunder. This

conflict created by the decision of the Court of Appeals is

exacerbated by the Court’s discussion of the duties imposed

by ERISA regarding the processing of benefit claims. The

Court notes that these duties are in part identical to stan-

dards imposed upon labor organizations under Vaca v.

Sipes, 386 U.S. 171 (1967) and its progeny. Yet this court

has unequivocally held that punitive damages are unavail-

able in breach of fair representation cases. Electrical

12

Workers v. Foust, 442 U.S. 60 (1979). It is difficult to ima-

gine that Congress intended individual fiduciaries to pro-

cess claims with the same or similar standard of care ob-

taining in fair representation cases, and at the same time

intended that disgruntled benefit claimants could secure

punitive relief against individual Taft-Hartley trustees.

Therefore, these Amici Curiae urge the court to accept

certiorari in order to reconcile this conflict created by the

Court of Appeals.

II

EXPOSING INDIVIDUAL FIDUCIARIES TO PUNITIVE

DAMAGES IN BENEFIT CLAIMS CASES WILL JEO.

PARDIZE THE ENTIRE FIELD OF TRUST FUNDS,

SINCE SUCH DAMAGES ARE UNINSURABLE IN

MANY JURISDICTIONS.

Notwithstanding an express statutory provision govern-

ing suits by participants arising out of claims for benefits

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

(1)(B)], the Court of Appeals held that a participant may

also characterize a denial of a claim for benefits as a breach

of fiduciary duty. As such, so the Court of Appeals held,

the participant may sue under ERISA Section 502(a) (2),

29 U.S.C. Section 1132(a)(2) and obtain for his or her own

account the “remedial relief” against fiduciaries referred to

in ERISA Section 409, 29 U.S.C. Section 1109. The Court of

Appeals further concluded that this “remedial relief” en-

compassed both compensatory damages (such as damages

for mental and emotional distress) and punitive damages.

In finding that the “remedial relief” available to benefit

claimants encompassed compensatory damages, the Court of

Appeals noted that such damages were recoverable against

the fiduciary personally, and not as against the benefit plan

itself. Russell v. Massachusetts Mutual, 722 F.2d at 490,

n. 8. Of course, in this case, the only fiduciary sued was

13

Massac’»» .ts Mutual Life Insurance Company, as distin-

guished trom the individual members of the company’s

disability committee. Accordingly, the only “personal”

liability which might attach in the instant case will be borne

by an entity, as distinguished from any individual. Never-

theless, the Court of Appeals’ rationale applies equally to

individuals, such as the Trustees of These Trust funds,

where they occupy fiduciary positions and are named de-

fendants. Apparently, in the belief that it was softening

the blow behind its holding, the Court of Appeals observed

that “ERISA does allow for certain forms of fiduciary in-

demnification under Section 1110.” 7d.

Section 410 of ERISA, 29 U.S.C. Section 1110, however,

does not in fact provide for “fiduciary indemnification” in

the traditional sense of the phrase. On the contrary, ERISA

made unlawful exculpatory clauses historically employed in

trust indentures, designed to insulate trustees from per-

sonal liability. Thus, Section 410 expressly provides, in

relevant part, that “any provision in an agreement or in-

strument which purports to relieve a fiduciary from respon-

sibility or liability for any responsibility, obligation, or

duty under this part [Part 4 of ERISA, entitled “Fiduciary

Responsibility”) shall be void as against public policy.”

Section 410 does go on to provide that a plan may purchase

insurance for itself or for its fiduciaries, so long as such

insurance “permits recourse by the insurer against the fidu-

ciary in case of a breach of a fiduciary obligation by such

fiduciary.” In addition, under Section 410, fiduciaries are

permitted to buy their own insurance, or employers or

unions are permitted to buy insurance for the fiduciary. In

short, pursuant to Section 410, a fiduciary is permitted to

obtain liability insurance, so long as someone other than the

plan pays the premium. Insurance may be available to pro-

tect an individual trustee against claims by participants for

compensatory damages. However, it will be noted that the

Court of Appeals did not drop any such palliative footnote

14

Wuen it concluded that individual fiduciaries were also ex-

posed to punitive damages in benefit claims cases. This is

so because, at least in the State of California where the in-

stant case arose, an insurance carrier is barred by both

statutory and decisional law from providing insurance

against punitive damages.

Thus, California Civil Code § 1668 provides as follows:

Ҥ 1668. Contracts contrary to policy of law.

CERTAIN CONTRACTS UNLAWFUL. All con-

tracts which have for their object, directly or indirectly,

to exempt anyone from responsibility for his own fraud,

or wilful inju.y to the person or property of another,

or violation of law, whether wilful or negligent, are

against the policy of law.”

§ 533 of the California Insurance Code similarly provides

as follows:

§533. Wiful act of insured; negligence.

An insurer is not liable for a loss caused by the wil-

ful act of the insured; but he is not exonerated by the

negligence of the insured, or the insured’s agent or

others.”

The California courts have concluded that these two code

sections prevent an individual from insuring against puni-

tive damages. City Products Corp. v. Globe Indemnity Co.,

88 Cal.App.3d 31 (1979); Ford Motor Co. v. Home Insur-

ance Co., 116 Cal.App.3d 374 (1981); Peterson v. Superior

Court, 31 Cal.App.3d 147 (1982). Moreover, even if a policy

of insurance by its terms expressly includes coverage for

punitive damages, an insurance carrier is still not liable

to indemify an insured against a judgment for punitive

damages. Thus, in the City Products case, for example, the

policy in dispute covered “all sums the insured shall become

legally obligated to pay as damages.” [Emphasis supplied]

15

Id. at 33. Notwithstanding the breadth of coverage con-

tained in the contract of insurance, the court in City Prod-

ucts reasoned as follows:

“The policy considerations in a state where . . . punitive

damages are awarded for punishment and deterrence,

would seem to require that the damages rest ultimately

as well as nominally on the party actually responsible

for the wrong. If that person were permitted to shift

the burden to an insurance company, punitive damages

would serve no useful purpose. Such damages do not

compensate the plaintiff for his injury, as compensa-

tory damages already have made the plaintiff whole.”

City Products, 88 Cal.App.3d 31, 39, quoting Northwestern

National Casualty Co., 307 F.2d 432 (5th Cir. 1962).

Accordingly, in California, punitive damages imposed

under the standard enunciated by the Court of Appeals

will rest ultimately as well as nominally on the individual

Taft-Hartley trustees who have volunteered their time

for the betterment of the industry. The mm terrorem effect

of being exposed to such personal financial jeopardy, in

the face of ultimate responsibility for processing hundreds

of thousands of claims, will deter all bnt the most doughty

—or the most foolhardy — from serving a trusteeship.

III

A COURT SHOULD NOT IMPLY A CONGRESSIONAL

INTENT TO PERMIT THE RECOVERY OF PUNI.-

TIVE DAMAGES, WHERE SUCH RELIEF WILL

IMPACT DISPARATELY AMONG THE SEVERAL

STATES.

While California will leave Taft-Hartley trustees per-

sonally exposed to punitive damages, in other jurisdictions

individual fiduciaries will not function under such a spectre.

Thus, at least 14 states have concluded that an individual

16

may insure against punitive damages: (1) Arizona, Price

v. Hartford Accident & Indemnity Co., 108 Ariz. 485, 502

P.2d 522 (1972) ; (2) Arkansas, California Union Ins. Co. r.

Arkansas Louisiana Gas Co., 264 Ark. 449, 572 S.W.2d 393

(1978) ; (3) Georgia, Greenwood Cemetery, Inc. v. Trav-l-

ers Indem, Co., 238 Ga. 313, 232 S.E.2d 910 (1977); (4)

Idaho, Abbie Uriquen Oldsmobile Buick, Inc. v. United

States Fire Ins. Co., 95 Idaho 501, 511 P.2d 783 (1973):

(5) lowa, Cedar Rapids v. Northwestern Nat. Ins. Co., 304

N.W.2d 228 (1981); (6) Kentucky, Continental Ins. Co. v.

Hancock, 507 S.W.2d 146 (1973); (7) Louisiana, Fagot v.

Ciravola, 445 F.Supp. 342 (ED La 1978); (8) Maryland,

First National Bunk v. Fidelity & Deposit Co., 283 Md. 228,

889 A.2d 359 (1978); (9) Mississippi, Anthony v. Frith,

394 S.2d 867 (1981); (10) Oregon, Harrell v. Travelers

Indemn. Co., 279 Or. 199, 567 P.2d 1013 (1977); (11) Ten-

nessee, Lazenby v. Universal Underwriters Ins. Co., 214

Tenn. 639, 383 S.W.2d 1 (1964); (12) Texas, Ridgway r.

Gulf Life Ins. Co., 578 F.2d 1026 (5th Cir. 1978); (13)

Vermont, State v. Glens Falls ins. Co., 137 Vt. 313, 404

A.2d 101 (1979) ; (14) West Virginia, Hensley v. Erie Ins.

('o., 283 S.E.2d 227 (1981).

On the other hand, and in addition to California, at least

12 states have concluded that liability insurance coverage

for an award of punitive damages is void as against public

policy: (1) Colorado, Universal Indem. Ins. Co. v. Tenery,

96 Colo. 10, 39 P.2d 776 (1934) ; (2) Connecticut, American

Ins. Co. v. Saulmer, 242 F.Supp. 257 (D.C. Conn. 1965) ;

(3) Florida, Dorsey v. Honda Motor Co., 655 F.2d 650 (5th

Cir. 1981) ; (4) Illinois, Beaver v. Country Mutual Ins. Co..,

95 Ill. App.3d 1122, 420 N.E.2d 1058 (1981); (5) Indiana,

Grant v. North River Ins. Co., 453 F.Supp. 1361 (N.D. Ind.

1978) ; (6) Kansas, American Surety Co. v. Gold, 375 F.2d

523 (10th Cir. 1966); (7) Minnesota, Wojciak v. Northern

Package Corp., 310 N.W.2d 675 (1981) ; (8) Missouri, Crull

17

v. Gleb, 382 S.W.2d 17 (1964); (9) New Jersey, Variety

Farms, Inc. v. New Jersey Mfrs. Ins. Co., 172 N.J-Super 10,

410 A.2d 696 (1980) ; (10) New York, Parker v. Agricultural

Ins. Co., 109 Mise.2d 678, 440 N.Y.S.2d 964 (1981); (11)

Pennsylvania, Esmond v. Liscio, 209 Pa. Super. 200, 224

A.2d 793 (1966); (12) Virginia, Northwestern Nat. Cas-

ualty Co. v. McNulty, 307 F.2d 432 (Sth Cir. 1962).

\ Based on the foregoing, it is clear that the rule adopted by

the Court of Appeals, were it to be embraced by other Cir-

cuits (which it has not), would fall unevenly upon individual

fiduciaries, depending on the fortuity of which state law

governed the terms of any contract of insurance. The Court

of Appeals ruling will even have a disparate impact within

the Ninth Circuit, for it will be noted from the foregoing

that the states of Arizona, Idaho and Oregon each permit

insurance against punitive damages, whereas California

does not.

It may be urged that the argument herein cuts too far, for

if adopted it would preclude Congress from ever enacting a

statute calling for punitive relief because of the disparate

impact such a statute may have among the several states.

However, such a broad proposition is not advocated herein.

Rather, because of the disparate impact among the several

states, it should not lightly be presumed that Congress in-

tended punitive relief be available, particularly where, as

in the instant case, there is scanty evidence of any such

Congressional intention.

IV

THE JUDICIARY SHOULD NOT FASHION NEW REM.

EDIES IN THE FACE OF A COMPREHENSIVE LEG.

ISLATIVE SCHEME

As set forth in the Petition for Certiorari (at p. 13),

ERISA describes a comprehensive and elaborate scheme for

enforcement, which nowhere mentions punitive damages.

18

In an analogous context, this Court recently had occasion

to pass upon the propriety of implying an additional remedy

into a comprehensive legislative scheme. Northwest Air-

lines v. Transport Workers Union, 451 U.S. 77 (1981); see

also, Texas Industries v. Radcliffe, 451 U.S. 630 (1981). In

Northwest Airlines, the issue was whether the Equal Pay

Act or Title VII of the 1964 Civil Rights Act would permit

a defendant to seek indemnification or contribution from a

third party. In holding that these statutes would not permit

such a remedy, this Court opined as follows:

“The presumption that a remedy was deliberately

omitted from a statute is strongest when Congress has

enacted a comprehensive legislative scheme including

an integrated system of procedures for enforcement.

Both the Equal Pay Act and Title VII of the Civil

Rights Act of 1964 are such statutes. The judiciary

may not, in the face of such comprehensive legislative

schemes, fashion new remedies that might upset care-

fully considered legislative programs.”

Id., 451 U.S. at 97.

It is hard to imagine a more comprehensive legislative

scheme than ERISA. When the requirements of § 302(c) (5)

are added to those of ERISA, it becomes even clearer that

judicially crafted remedies are unwarranted.

19

CONCLUSION

Based on the foregoing, together with the arguments ad-

vanced in the Petition for Writ of Certiorari, a writ of

certiorari should issue to review the judgment and opinion

of the Court of Appeals.

Respectfully submitted,

Sruart H. Younes, JR.

Hutt, Farrer & BurRiLu

Atto» neys for Amict Curiae

Southern California Pipe

Trades Trust Funds,

Southern California IBEW-

NECA Trust Funds, Air

Conditioning and Refrigera-

tion Industry Trust Funds,

and Southern Califorma

Floor Covering Trust

Funds

August 3, 1984