Petition for Writ of Certiorari — McLeod v. Oregon Lithoprint, Inc.

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95° 296 JUN 50,10

Qéficé GE THE CLERIC

In the

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1994

Pamela J. McLeod, Petitioner

Vv.

OREGON LITHOPRINT, INC., dba

News-Register Publishing Co.; and

NEWS-REGISTER EMPLOYEES’ INSURANCE

PLAN, Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

PETITION FOR A WRIT OF CERTIORARI

Leslie L. Wellman, Esq.

Counsel of Record

140 S.W. Arthur Street

Suite #200

Portland, Oregon 97201-4766

Telephone: (503) 228-5020

October 1994 Counsei for Petitioner

STION S D

[he Employee Retirement Income Security Act of

1974 (ERISA) provides that a civil action may be brought

to obtain appropriate equitable relief to redress violations

of ERISA. 29 U.S.C. § 1132(a)(3).

Petitioner hereby petitions for a Writ of Certiorari

with respect to the following issues:

1. May an individual plan participant

obtain appropriate equitable relief under 29 U.S.C.

§ 1132(a)(3) to redress violations of the ERISA

fiduciary standards?

2. Does "appropriate equitable relief"

available under 29 U.S.C. § 1132(a) include

surcharging a negligent fiduciary to recover losses

resulting from the breach to the extent such relief

has typically been available in equity cases?

3. Once equitable jurisdiction has been

exercised over a matter, does the court of equity

have the authority under 29 U.S.C. § 1132(a)(3)

and the “equitable clean-up" doctrine to grant

complete relief, including “legal relief" in the form

of compensatory and emotional distress damages,

to remedy the wrong?

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES .................. i

ny ha Pa tera e 6 6 60 ab 00 60 6 0.0 04 1

rr. 25.5 o> bees 66% Cbd hres OC ees 1

STATUTORY PROVISION INVOLVED ........ 2

Ee 2

A Statement of the Case ............. 2

B. Statement of Facts ..........0ec00- 3

C Proceedings Below ............++. 3

D. Basis of Federal Court Jurisdiction .... 3

REASONS FOR GRANTING THE PETITION .... 4

4 Reasons for Granting a Writ of Certiorari ... 4

A. Dt ela eCeveseesiscdevess +

B. Conflicts Among the Circuits ........ 5

C. The Importance of the Issue ........ 7

D. The Ninth Circuit Decision is Wrong . . 9

E. Unanswered Questions Remain

Following Mertens v. Hewitt

ye ie ee ae ee 15

Table of Contents (continued) Page

F. The Need for a Uniform Test ...... 16

F.(1) Contractual v. Extra-

Contractual Relief.......... 17

F.(2) Legal Relief v. Equitable

ese o 68 17

SARE HA ere iar 23

G. The Federal Courts Must Guard

Their Constitutionally-Granted

Power to Grant Equitable Relief .... 27

CONCLUSION ...ccccccccccccccccscceces 29

APPENDIX A - Court of Appeals Order Denying

Rehearing ......--ceeecrcccccerrescceces la

APPENDIX B - Court of Appeals Opinion ....... 2a

APPENDIX C - District Court Opinion .......-. 15a

APPENDIX D - District Court Order .....-.-.-. 27a

APPENDIX E - District Court Judgment ....... 29a

[oo OP OR AMENSTE<? SCPee I ou

TABLE OF AUTHORITIES

Cases: Page

Albermarle Paper Co. v. Moody, 422 U.S. 405,

95 S.Ct. 2362, 45 L.Ed2d 28 (1975) ............ 19

weiler v. erican Electric er Service Corp.

cee e Fe ere 5

ixler v. Central Penn Teamste ealth &

Welfare Fund, 12 F.3d 1292 (3rd Cir. 1993) ....... 6

ard of Com’rs. of Jackso unty, Kan. v.

United States, 308 U.S. 343, 60 S.Ct. 285, 288

PRE «ORE bak oe PRP eae deo ieee cd 19

Boland v. Chrysler Corp., 13 EBC 2456

ee Sear es ae a nee 6

Cannon v. University of Chicago, 441 U.S. 677,

99 S.Ct. 1946, 1958, 60 L.Ed.2d 560 (1979) ....... 29

Clews v. Jamieson, 182 U.S. 461, 21 S.Ct. 845,

So dg GF Es. SE, Bh eee eee kaee eo ao 25

Corcoran v. United Healthcare, Inc., 965 F.2d

ret oo Fp reer ir een 6

Davis v. Passman, 442 U.S. 228, 246, 99 S.Ct.

2264, 2277, 60 L.Ed.2d 846 (1979) ............. 28

Eddy v. Colonial Life Ins. Co., 919 F.2d 747

CEP. CAE SD ci often np dice eae AON MARES a 6

Cases (continued): Page

irest i Vv Cc

498 U.S. 101, 109 S.Ct. 948, 954,

263 1.000.200 OR inant osbewancias: 12, 13

Franklin v. Gwinnett County Public Schools,

112 S.¢t. 1028, 1035 (1992) ......-- eee e nese 28

Goldberg v. Medtronic, Inc., 686 F.2d 219, 1229

(Me Ch. 1962). . « tivnepnne tinaeherenne sss 19

oelzer v. Ci tanford nnecticut, 972 F.2d

495, 406 (ind Cle, SOD. «4.0009 sted Cones ees 19

Howe v. Varity Corp., 36 F.3d 746 (8th Cir. 1994)... 6

Ingersoll-Rand Co. v. McClendon, 498 U.S.

113, 111 S.Ct. 478 112 L.Ed.2d 474 (1990) .. 13, 14, 15

J.1. Case Co. v. Borak, 377 U.S. 426, 433,

84 S.Ct. 1555, 1560, 12 L.Ed.2d 423 (1964) ....... 28

McRae v. Seafarers’ Welfare Plan, 920 F.2d

819, 821, fn. 7 (1991)... ee eee cere c ere eeee 13

Massachusetts Mutual Life Ins. Co. v. Russell,

473 U.S. 134, 149, 105 S.Ct. 3085,

87 L.Ed.2d 96 (1985) .......... 6, 10, 11, 12, 13, 17

McLeod v. Oregon Lithoprint, Inc.,

46 F.3d 956 (9th Cir. 1995) .......- eee ee Passim

Mertens v. Hewitt Associates, 508 U.S. __,

113 S.Ct. 2063, 2068-2069, 124 L.Ed.2d

161 (1998) 0c cueecscceusesee veesens Passim

Cases (continued): Page

i ari wel C.

361 U.S. 288, 80 S.Ct. 332 SR S34 icc cco 19, 26

Mullins v. Pfizer, 23 F.3d 663 (2nd Cir. 1994) ...... 6

Novak v. Andersen Corp., 962 F.2d 8th Cir. 1992)... 6

Olson v. General Dynamics, 951 F.2d 1123

SI ies croc cs oe wes. Chi; de. 8, 10

Porter v. Warner Co., 328 U.S. 395, 66 S.Ct.

1086, 90 L.Ed.1332 (1946) ............... 19, 26

Schwartz v. Gregori, 45 F.3d 1017 (6th Cir. so) ee

Sokol v. Bernstein, 803 F.2d 536 (9th Cir. 1986) . 8, 10

Varity Corp. v. Howe, US. __, 115 S.Ct.

1792, 131 L.Ed.2d 720 (1995) er eee Oe 4,6

Vartanian v. Monsanto Co., 14 F.3d 697

fo % SERIE RS ee 6

Walters v. Marathon Oil Co., 642 F.2d 1098,

iy fo 8, Biappa Sita lon a aa 19

Warren v. Society Nat. Bank, 905 F.2d 975

| ES a ee ee 6

Watkins v. Westinghouse Hanford Co.,

12 F.3d 1517 (9th Cir. ES ee baie oes 8, 10

iil

aii iis

Statutes and Rules: Page

2B U.S.C. § 12SAT) . 0 ccc ccc ccccccewcvcves 2

29 U.S.C. § 1024(b)(4) 1. cee ee eee ee eens 2

29 U.S.C. § 1104(a)(1) 0. eee eee eee ee eee 3

29 U.S.C. § 1109(a) . 0... cece eee e eee ccee 11, 17

29 US.C. § UUSZal) .. cc ccccccecvcesees 13

29 U.S.C. § 1132(a)(2) ce eee eee eee 11, 17

29 U.S.C. § 1132(a)(3) «eee eee ee eee ees Passim

29 U.S.C. § L1S2feH{1) ccc ere recccceves 3

y pis Too) PPP rerrererer renee re eae 7

Treatises:

Bogert, Trusts and Trustees, § 862 ...........-. 12

D. Dobbs, Remedies, § 2.5, p. 57 .......--+-0-- 21

D. Dobbs, Remedies, § 2.7, p. 83 (1973) ......... 21

D. Dobbs, Remedies, § 2.8, p. 92 (1973) ......... 20

1 Pom. Eq. Jur., § 100 (Sth Ed. 1941)........... 21

1 Pom. Eg. Jur., § 112 (Sth Ed. 1941)........ 23, 24

1 Pom. Eg. Jur., § 130 (Sth Ed. 1941)........... 21

1 Pom. Eg. Jur., § 158 (Sth Ed. 1941) ........... 25

1 Pom. Eg. Jur., § 181, p. 257 (Sth Ed. 1941) ..... 18

3 Pom. Ea. Jur., § 1080, p. 229-230 (Sth Ed. 1941) . 20

3 Pom. Eq. Jur., § 1298, p. 863 (Sth Ed. 1941) .... 20

Treatises (continued): Page

Restatement (Second) of Trusts, § 197 (1959) .. 19, 24

Restatement (Second) of Trusts, § 199,

ES ee 19, 25

Restatement (Second) of Trusts, § 205,

eR Se 19, 25

Restatement (Second) of Torts, § 874,

ee CCT erie Seis ccdaces 21

3 A. Scott, Law of Trusts, § 199, p. 1638 (1967) ... 12

Periodicals:

Eccles and Gordon, ERISA Litigation Reporter,

"Betrayal Without Remedy” ................... 7

Carr and Liebross, 4 Stan L. & Pol’y Rev., 221,

4H i. § Giri. ei 7

Zanglein, 7 Wash. Univ. L.Q., 671 (1994),

"Closing the Gap: Safeguarding Participants’

Rights by Expanding the Federal Common Law of

Ns bE ee a yn OR iii adc ox Eh eo acd S60 7

Miscellaneous:

Federal Rules of Equity Practice, Rules 22 and

oa, We UB. S75, SOO CISA) nk ciccccess 22, 26

Federal Rules of Equity Practice, Rules 8

and 92, 210 U.S. 441, 490, 511, 540-41

(Rta oe POON SE EEOODD fcc c ir ecacvcccececs 27

Miscellaneous (continued):

Rules of the United States Supreme Court,

Rule 30, 306 U.S. 685 (1939)

iad OER =

a —

IN THE SUPREME COURT OF THE

UNITED STATES

OCTOBER TERM, 1994

PAMELA J. MCLEOD, Petitioner,

OREGON LITHOPRINT, INC., dba

News-Register Publishing Co.; and

NEWS-REGISTER EMPLOYEES’ INSURANCE

PLAN, Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Pamela J. McLeod respectfully petitions for a writ

of certiorari to review the judgment of the United States

Court of Appeals for the Ninth Circuit in this case.

OPINIONS BELOW

The opinion of the Ninth Circuit Court of Appeals

in McLeod v. Oregon Lithoprint, Inc. (App., infra 2a-14a)

is reported at 46 F.3d 956 (1995). The opinion of the

District Court (App., infra, 15a-26a) is reported at 815

F.Supp. 1364 (D.Or. 1992).

JURISDICTION

The Ninth Circuit Court of Appeals entered its

judgment on February 1, 1995 (App., infra, 2a).

McLeod’s Petition for Rehearing was denied by the Ninth

Circuit Court of Appeals on April 3, 1995 (App., infra,

la). The jurisdiction of this Court is invoked under 28

U.S.C. § 1254(1).

STATUTORY PROVISION INVOLVED

McLeod seeks relief under 29 U.S.C. § 1132(a)(3)

which reads, in pertinent part, as follows:

"§ 1132 Civil Enforcement. (a) Persons

empowered to bring a civil action. A civil action

may be brought . . . (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

provision of this subchapter or the terms of the

plan... ."

STATEMENT

A. Stat t of the

In the United States District Court for the District

of Oregon, District Judge Malcolm Marsh granted

summary judgment for the Respondents, Oregon

Lithoprint, Inc. Petitioner McLeod appealed to the Ninth

Circuit Court of Appeals.

The Ninth Circuit affirmed the District Court’s

decision granting summary judgment tor the Respondents

and reversed, the District Court in part, with the case

being remanded for trial on the claim of statutory

penalties for failure to provide documents requested

pursuant to 29 U.S.C. § 1024(b)(4). This Petition for a

iJ SRR

Writ of Certiorari only relates to the portion of the Ninth

Circuit decision which affirmed the District Court’s

granting of summary judgment on Petitioner’s claims for

individual relief under 29 U.S.C. § 1132(a)(3).

On April 2, 1995, the Ninth Circuit denied

McLeod’s Petition for Rehearing.

B. Statement of Facts.

McLeod was a participant in an employee benefit

plan sponsored by her employer, Oregon Lithoprint, Inc.

McLeod has alleged that Oregon Lithoprint, Inc., a plan

fiduciary, breached its fiduciary duty by failing to timely

notify her of her eligibility to apply for cancer insurance

coverage under the plan. McLeod seeks to surcharge the

fiduciary for breach of trust in the amount of the benefits

she would have been entitled to receive had she been able

to enroll in the cancer insurance coverage. McLeod also

seeks damages for emotional distress.

C. Proceedings Below.

The Ninth Circuits’ decision herein held that an

individual plan participant could not seek individual relief

under § 1132(a)(3) for violations of ERISA fiduciary

duties under 29 US.C. § 1104(a)(1) and that

compensatory damages were unavailable as a category of

appropriate equitable relief under ERISA for breach of

fiduciary duty.

D. Basis of Federal Court Jurisdiction.

This action was brought under 29 U.S.C. §

1132(a)(3). The Federal Courts have exclusive jurisdiction

of civil actions brought under ERISA. 29 US.C. §

1132(e)(1).

REASONS FOR GRANTING THE PETITION

I. Reasons For Granting a Writ of Certiorari.

A. Introduction.

On April 24, 1995, this court granted a writ of

certiorari in Varity Corp. v. Howe, _U.S.___ 115 S.Ct.

1792, 131 L.Ed2d 720 (1995). One of the questions

accepted for review in Varity Corp. was whether an

individual claim for relief may be brought under 29 U.S.C.

§ 1132(a)(3) for a violation of ERISA fiduciary duties

under 29 U.S.C. § 1104(a) with respect to an employee

benefit plan. McLeod v. Oregon Lithoprint, Inc., 46 F.3d

956 (9th Cir. 1995) presents the identical question, plus

two additional issues involving the interpretation of the

phrase “other appropriate equitable relief" in 29 U.S.C. §

1132(a)(3). The Courts’ decision in Varity Corp., will be

dispositive of one of the issues in McLeod. (See Question

No. 1, supra). The Petition for a Writ of Certiorari

should be granted with respect to Question No. 1 and the

first issue in the McLeod case decided by this court

simultaneously with its decision in Varity Corp.

In addition, the Petition in McLeod should be

granted with respect to Questions Nos. 2 and 3 because it

presents additional related questions involving the same

statutory provisions but which will not be decided in

Varity Corp. The Court should grant the Petition and

impose an accelerated briefing schedule so that McLeod

and Varity Corp., may be argued and decided as

companion cases. Such treatment would allow the Court

to address several related questions which arise under the

statute as a single matter and reduce future litigation in

the lower courts.

This case provides the opportunity for the Court to

formulate a test or standard to determine whether the

relief requested in this and future cases is available as

"appropriate equitable relief’ under 29 U.S.C. §

1132(a)(3). A more definitive test than is presently

available is necessary to resolve a conflict in the Circuit

Courts on an important issue which potentially impacts

the employee pension and welfare plans of millions of

employees.

The United States Supreme Court should hear this

case because the circuit courts of appeal have split on the

questions of whether (1) a plan participant may bring a

claim under 29 U.S.C. § 1132(a)(3) for individual relief,

and (2) the types of relief available under the statutory

provision which permits "appropriate equitable relief."

B. Conflicts Among the Circuits.

The Ninth Circuit held in McLeod v. Oregon

Lithoprint, Inc., 46 F.3d 956 (9th Cir. 1995) that

participants in employee benefit plans may not seek

individual relief for breach of fiduciary duty under 29

U.S.C. § 1132(a)(3). Other Circuits have allowed

individual claims for relief under § 1132(a)(3) and have

specifically allowed monetary relief as a form of

appropriate equitable relief.

The Seventh Circuit in

Electric Power Service Corp., 3 F 3d 986 (ith Cir. 1993)

interpreted the U.S. Supreme Court’s decision in Mertens

v. Hewitt Associates, 113 S.Ct. 2063 (1993) as permitting

individual plan participants to bring claims for individual

relief pursuant to § 1132(a)(3). The Seventh Circuit’s

decision followed the interpretation urged by the U.S.

Secretary of Labor in an amicus curiae brief filed with the

Court. Since Mertens, other circuits have also held or

permitted participants to bring individual claims under §

1132(a)(3). See Vartanian v. Monsanto Co., 14 F.3d 697

(1st Cir. 1994); Mullins v. Pfizer, 23 F.3d 663 (2nd Cir.

1994); Bixler _v. tral n_ Teamsters Healt

Welfare Fund, 12 F.3d 1292 (3rd Cir. 1993) and Howe v.

Varity Corp., 36 F.3d 746, cert. granted sub. nom., Varity

Corp. v. Howe, 115 S.Ct. 1792, 131 L.Ed.2d 720 (1995)

(8th Cir. 1994).

Prior to Mertens, the Fifth, Sixth and D.C. Circuits

permitted claims by individual participants under §

1132(a)(3) for breach of fiduciary duty. See Corcoran v.

United Healthcare, Inc., 965 F.2d 1321 (Sth Cir. 1992);

Warren v. Society Nat. Bank, 905 F.2d 975 (6th Cir. 1990)

and Eddy v. Colonial Life Ins. Co., 919 F.2d 747 (D.C.

Cir. 1990).

In addition to excluding individual claims for relief,

the Ninth Circuit, in McLeod, held that "appropriate

equitable relief" under 29 U.S.C. § 1132 does not include

monetary or compensatory relief for losses resulting from

a breach of fiduciary duty or emotional distress damages.

The Third and Sixth Circuits have followed the

opposite approach which was suggested in Justice

Brennan’s concurring opinion in Massachusetts Mutual

Life Ins. Co. v. Russell, 473 U.S. 134, 149, 105 S.Ct. 3085,

87 L.Ed.2d 96 (1985), and specifically allowed monetary

relief as "appropriate equitable relief" under § 1132(a)(3):

See Bixler v. Cent. Pa Teamsters Health-Welfare Fund, 12

F.3d 1292 (3rd Cir. 1993); Warren v. Society Nat. Bank,

905 F.2d 975 (6th Cir. 1990) and ‘Boland v. Chrysler

Corp., 13 .EBC 2456 (6th Cir. 1991). Contra: Novak v.

Andersen Corp., 962 F.2d 757 (8th Cir., 1992).

The Sixth Circuit has recently held that monetary

relief in the form of front and back pay under §

1132(a)(3) are "appropriate equitable relief’ under §

1132(a)(3), to compensate an employee for a retaliatory

discharge in violation of § 1140. Schwartz v. Gregori, 45

F.3d 1017 (6th Cir. 1995).

G The Importance of the Issue.

Serious problems exist with ERISA when it is

possible for a plan fiduciary, whose duty it is to protect

participants and safeguard benefits, to engage in

fraudulent, bad faith or negligent conduct without any

remedy existing for wronged participants.’ The thought

that an employer-fiduciary could intentionally deceive an

employee about his or her benefits, an insurance company

could in bad faith deny coverage for potentially life saving

medical benefits, or that administrator’s errors could cause

losses of coverage or benefits to individual employees

without any remedy under either state law or ERISA is

astonishing. However, individuai workers in the Ninth

Circuit do not have any means of bringing a claim or

making themselves whole through monetary relief under

ERISA or state law claims because of the following

decisions:

(1) In McLeod v. Oregon Lithoprint,

Inc., 46 F.3d 956 (9th Cir. 1995), the Ninth Circuit

held that a participant deprived of benefits because

This problem has been well documented in a series of

articles entitled "Betrayal without Remedy” by Robert Eccles

and David Gordon in the ERISA Litigation Reporter. See also

Zanglein, "Closing the Gap: Safeguarding Participants’ Rights

by Expanding the Federal Common Law of ERISA." 7 Wash.

Univ. LQ 671 (1994); and William Carr and Robert Liebross,

"Wrongs Without Rights." 4 Stan. L & Pol’y Rev. 221

(1992/1993).

of an ERISA fiduciary’s negligence has no remedy

under ERISA. State law claims were preempted.

(2) In Watkins v. Westinghouse Hanford

Co., 12 F.3d 1517 (9th Cir. 1993), the Ninth Circuit

held that an individual participant had no remedy

under ERISA when a fiduciary knowingly

misrepresented the terms of the plan to a

participant. State law claims were preempted.

(3) In Sokol v. Bernstein, 803 F.2d 536

(9th Cir. 1986), the Ninth Circuit held have

individual claims for violations of ERISA fiduciary

duties could not be brought under 29 U.S.C. §

1132(a)(3). State law claims were preempted.

(4) In Olson v. General Dynamics, 951

F.2d 1123 (9th Cir. 1991) (state law fraud claim

preempted by ERISA) Ninth Circuit held that any

"gap" created by the preemption of all state law

claims and the absence of remedies under ERISA

is the fault of Congress.

Because tens of millions of American workers

depend upon ERISA to safeguard their benefits under

welfare and benefit claim plans, it is extremely important

that the question of whether any "gap" exists between the

preemption of state law claims and the absence of

traditional remedies against breaching fiduciaries be

addressed head-on by the Supreme Court. Only with

additional clarification will individual participants and

fiduciaries alike know where they stand and be able to

enforce and/or administer the law. Either a major

problem exists with the language of the statute itself, or

the statute is not being interpreted as intended by

Congress. If ERISA is not interpreted to effectively

safeguard employee benefits, then Congress has created

a law which permits ERISA fiduciaries to completely

escape liability for fraud, knowing misrepresentations and

negligent conduct via preemption of state law claims.

On the other hand, if McLeod is correct in arguing

that the proper interpretation of § 1132(a)(3) substantially

narrows or eliminates any gap between the preemption of

state law claims and the relief provided by ERISA, then

this Court needs to reverse the Ninth Circuit decisions.

By interpreting § 1132(a)(3) to permit the federal courts

to use their full equitable powers typically available in

breach of trust cases, to the extent appropriate, this Court

can restore the Court of Equity’s traditional role in the

conduct of fiduciary relationships and preserve the

safeguards intended by Congress.

If this Court holds that individual participants may

not bring claims for monetary relief resulting from

breaches of fiduciary duty under ERISA, fiduciaries will

be permitted and possibly encouraged to ignore the

fiduciary standards in ERISA when dealing with individual

participants. It is naive to believe that large employers,

institutional fiduciaries and professional administrators are

unaware that no remedies exist in the Ninth Circuit for

individual participants to challenge their conduct. While

most fiduciaries undertake their duties seriously and in

good faith, others may have serious conflicts of interest

which need closer review. It is impossible to assure full

disclosure, fair claims adjustment and good faith conduct

by fiduciaries without adequate remedies.

D. The Ninth Circuit Decision is Wrong.

The Ninth Circuit improperly interpreted §

1132(a)(3) to exclude individual claims for the benefit of

seen

a participant and all forms of compensatory damages.’

The position of the Ninth Circuit is not based upon

any reasonable construction of the statutory language in

§ 1132(a)(3). The court followed Sokol v. Bernstein, 803

F.2d 536 (9th Cir. 1986) which simply applied this court’s

analysis of §§ 1109(a) and 1132(a)(2) in Massachusetts

Mutual _v. Russell, to § 1132(a)(3) without any

independent analysis of the differences in the statutory

language. There would be no need for § 1132(a)(3) to

exist if its only purpose was to duplicate another provision

in the same statute. Also, the Ninth Circuit has made no

attempt to determine the proper scope of the phrase

"appropriate equitable relief" but has simply relied on the

assumption that all "extra-contractual” and all "monetary"

relief are excluded by the statute. As discussed below,

such blanket exclusions of compensatory or monetary

damages have never defined the limits of the types of

relief which a court of equity might find appropriate in a

particular case.

An analysis of the statutory language of §

1132(a)(3) and the principles of equitable jurisdiction

demonstrate that the Ninth Circuit erred in affirming the

District Court’s granting of the Defendant’s motion for

summary judgment with respect to Plaintiffs ERISA

claims.

As the basis for its holding, the court in McLeod relied upon Sokol

vy. Bernstein, 803 F.2d 536, 558 (9th Cir. 1986) (‘ERISA grants no private

right of action by a beneficiary qua beneficiary’); v. i

Corp,, 960 F.2d 1418, 1424 (9th Cir. 1991) (ERISA plaintiffs may not

recover extra-contractual damages”) and Watkins v. Westinghouse Hanford

Co,, 12 F.3d 1517, 1528 (9th Cir. 1993 (‘equitable relief in the form of the

recovery of compensatory damages is not an available remedy under 29

US.C. § 1132(a)(3)").

eg er ee

LL RR PCLT LT NE a

The following opinions of this court are instructive

in interpreting § 1132(a)(3) and suggest that the decision

of the Ninth Circuit is erroneous.

(1) In Massachusetts Mutual Life Ins. Co. v.

Russell, 471 U.S. 724, 105 S.Ct. 3085 85 L.Ed.2d 96

(1985), the opinion of the Court (Justice Ste» =ns) held

that an individual claim for extracontractual relief could

not be brought under § 1132(a)(2) and § 1109(a). The

Court expressly disclaimed any consideration of §

1132(a)(3) in reaching its decision. Russell, supra, 105

S.Ct. at 3088 N.S.

In a concurring opinion in Russell, Justice Brennan

(joined by Justices White, Marshall and Blackman)

outlined an approach for the courts to take in construing

the "appropriate equitable relief" provision of ERISA.

Justice Brennan noted that:

"Trust-law remedies are equitable in nature

and include provisions of monetary damages. .. .

Thus while a given form of monetary relief may be

unavailable under ERISA for other reasons . . . it

cannot be withheld simply because a beneficiary’s

remedies under ERISA are denominated as

‘equitable."” Russell, supra, 105 S.Ct. at 3097

(1985) N.10 (Citations omitted).

To answer the question of whether extra-

contractual damages might be one form of "other

appropriate equitable relief" under § 1132(a)(3), Justice

Brennan suggested that:

", . . [CJourts should begin by ascertaining

the extent to which trust and pension law as

developed by state and federal courts provide for

recovery by the beneficiary above and beyond the

benefits that have been withheld; this is the logical

first step, given that Congress intended to

incorporate trust law into ERISA’s equitable

remedies. * * *" Russell, supra, 105 S.Ct. at 3098.

Under the common law of trusts, a beneficiary is

entitled to a make-whole type of remedy “which will put

him in a position in which he would have been if the

trustee had not committed the breach of trust."

Restatement (Second) of Trusts, § 205 and Comment a.

(1959). See also 3 A. Scott, Law of Trusts, § 199, p. 1638

(1967) and Bogert, Trusts and Trustees, § 862.’

(2) In Firestone Tire & Rubber Co. v. Bruch,

498 U.S. 101, 109 S.Ct. 948, 954, 103 L.Ed.2d 80 (1989),

the U.S. Supreme Court reiterated that Congress intended

to codify and make applicable to ERISA fiduciaries

principles developed in the evolution of the common law

of trusts. In determining the appropriate standard for

review of actions under § 1132(a)(1)(B), the Court stated

that it was guided by the principles of trust law and it

rejected an interpretation of the statute which would have

provided less protection to employees and beneficiaries

than was available before ERISA was enacted. Firestone,

supra, 109 S.Ct. at 954-956. The principles of trust law

should be applied to determine the scope of the types of

“appropriate equitable relief" available under ERISA to

remedy a breach of fiduciary duty.

Bogert, § 862 states: “in suits to collect money from a trustee

for breach of trust, the direct damages will usually be measured by

the difference between the value of the beneficiary's rights to

principal and income before and after the breach, but consequential

damages may also be awarded and exemplary or punitive damages

may be awarded where malice or fraud is involved.” (Emphasis

added).

(3) In Ingersoll-Rand Co. v. McClendon, 498

U.S. 113, 111 S.Ct. 478 112 L.Ed.2d 474 (1990). the Court

determined that a state common law claim for unlawful

discharge to prevent the attainment of benefits under an

ERISA plan was preempted by ERISA. The plaintiff,

McClendon, sought compensatory damages for future icst

wages and mental anguish and punitive damages under

the state law tort claim. In determining that the state law

claims were preempted, the Court noted with "particular

relevance" that a civil action could be brought by a

participant to obtain other appropriate equitable relief to

redress violations of ERISA under § 1132(a)(3) and that

the federal courts had exclusive jurisdiction of such civil

actions under § 1132(a)(1). Justice O’Conner, for the

unanimous court,’ then noted that:

. . . [T]here is no basis in § 502(a)’s [29

U.S.C. § 1132(a)] language for limiting ERISA

actions to only those which seek pension benefits.

It is clear that the relief requested here is well

within the power of federal courts to provide."

McClendon, supra, 111 S.Ct. at 486.

The relief requested was future lost wages, plus

mental anguish and punitive damages. The statement that

the compensatory and punitive relief requested in

McClendon is within the power of the federal courts to

provide is consistent with the results and reasoning in the

Russell, Firestone and Mertens decisions. In Russell, the

Court did not decide what claims could be brought or

what relief is available under § 1132(a)(3). In Firestone,

The Eleventh Circuit has refused to interpret Justice O’Conner’s

statements for the court to mean that the remedies of lost future wages,

mental anguish and punitive damages were necessarily available under

ERISA. McRae v. Seafarers’ Welfare Plan, 920 F.2d 819, 821. Fn. 7 (1991).

the Court recognized the protections provided by the

common law of trusts. In Mertens, the Court limited the

types of available claims by holding that joint and several

liability was not available against a nonfiduciary who acted

with a fiduciary in breach of its duties. The Court

indicated that a broader interpretation of the available

remedies could be available under other circumstances to

be determined in each case. In McClendon, the Court

indicated that compensatory and punitive damages could

be available under ERISA for statutory violations.

Thus, in determining the scope of "appropriate

equitable relief" the first question should be whether-a

court of equity would traditionally have granted relief

under the circumstances presented. If so, then the same

types of "appropriate equitable relief" should also be

available under § 1132(a)(3). Equitable relief would not

be available to the extent a plain, adequate and complete

remedy at law existed.

Once equitable jurisdiction has attached, courts of

equity have endeavored to provide complete relief.’ In

this instance, complete relief for Petitioner would include

a remedy of compensatory damages which are not

available at law because of the preemptive effect of

ERISA and because of the traditional jurisdiction over

trust relationships. The Supreme Court in Mertens stated

that the types of relief typically available in courts of

equity continue to be available. There is nothing in

Two of the fundamental principles or maxims of equity are

that:

(1) Equity regards that as done which ought to

be done; and

(2) Equity will not suffer a wrong without a

remedy.

ERISA or its statutory history to indicate that Congress

intended that the Federal Court’s equitable jurisdiction or

power to grant equitable relief should be abdicated in any

way. The traditional equitable principle of providing

complete relief should also apply. To this end, the

Supreme Court has indicated that damages for mental

anguish are available under § 1132(a)(3). Ingersoll-Rand

v. McClendon, 498 U.S. 113, 111 S.Ct. 478, 112 L.Ed.2d

474 (1990). The Court’s decision in Mertens did nothing

to retract the previous statements.

E. a estions Remain Followin

Mertens v. Hewitt Associates.

In Mertens v. Hewitt Associates, 508 U.S.__, 113

S.Ct. 2063, 2068-2069, 124 L.Ed:2d 161 (1993), this is Court

in a 5-4 decision held that a nonfiduciary could not be

joint and severally liable under ERISA for participating in

a breach of a fiduciary duty because monetary relief was

unavailable against a nonfiduciary under 29 U.S.C. §

1132(a)(3). The question remains whether the result and

the types of relief available under § 1132(a)(3) would be

different if the defendant is a fiduciary in breach of its

duty.

In the case of a professional negligence action

against a nonfiduciary, "equitable relief can also refer to

those categories of relief that were typically available in

equity (such as injunction, mandamus, and restitution, but

not compensatory damages)." However, the phrase

“appropriate equitable relief" in § 1132(a)(3) may be

interpreted either broadly or narrowly "but it remains a

question of interpretation in each case which is intended."

Mertens, supra 113 S.Ct. at 2068-2069. (Emphasis in

original).

The question of whether “appropriate equitable

relief" includes those categories of relief that were

"typically available in equity" for a fiduciary’s breach of

duty (such as "make-whole" types of compensatory relief

and other relief under the “equitable clean-up" doctrine)

was left unanswered in Mertens.

This Court should now grant a Writ of Certiorari

to provide a uniform answer to whether "appropriate

equitable relief" includes surcharging a negligent fiduciary

to recover losses resulting from the breach and

compensatory emotional distress damages under the

"equitable clean-up" doctrine.

F. The Need for a Uniform Test.

The courts have used a variety of terms and tests

to attempt to formulate a workable standard for

determining whether relief requested in a particular case

is within the scope of "appropriate equitable relief"

available under 29 U.S.C. § 1132(a)(3). This court, in

Mertens stated that: "equitable relief" can mean whatever

relief a court of equity is empowered to provide or it can

also refer to those categories of relief that are typically

available in equity, but it remains a question of

interpretation in each case which is intended. The court

went on to hold that nonfiduciaries are not joint and

severally liable for breaches of fiduciary duty under

ERISA. Additional clarification of the phrase

“appropriate equitable relief" is necessary for the lower

courts to determine whether or not the type of relief

requested in a particular case is available under the

statutory language.

Previous cases have suggested a number of

different approaches or tests, but no test has been

uniformally adopted and none are without significant

problems. A need exists for a uniform standard which can

be applied by all of the lower courts to analyze the

requested relief in a particular case and determine

whether or not it is available under § 1132(a)(3). The

existing tests which have been suggested or applied by

various courts and some of their respective weaknesses

include the following:

F.(1) Contractual _v. Extra-Contractual Relief.

Extra-contractual relief is the terminology used in Russell

v. Massachusetts Mutual Life Ins., Co., 473 U.S. 134, 105

S.Ct. 3085, 87 L.Ed.2d 96 (1985) to analyze whether

emotional distress damages were available under 29

US.C. § 1109(a) and § 1132(a)(2). This Court

determined that the relief available under §§ 1109(a) and

1132(a)(2) was limited to relief which benefits the plan

and not individual participants. The court expressly

disclaimed any determination of the types of relief

available under § 1132(a)(3).°

The contractual v. extra-contractual terminology

should be abandoned because it does not address the

statutory standard and does not provide a meaningful

framework to provide assistance to litigants or the lower

courts in future cases.

F.(2) Legal Relief v. Equitable Relief. "Legal" v.

"equitable" relief is the basic distinction which was used by

this Court in Mertens to determine that nonfiduciaries

could not be held joint and severally liable under ERISA.

However, the court in Mertens recognized that courts of

Massachusetts Mutual Life Ins. Co. v. Russell, 471 U.S. 724, 105

S.Ct. 3085, 3088, 85 L-Ed.2d 96 (1985). Note 5 states: "Because respondent

relies entirely on § [1109(a)], and expressly disclaims reliance on §

[1132(a)(3)}, we have no occasion to consider whether any other provision of

ERISA authorizes recovery of extracontractual damages.”

equity can sometimes grant "legal relief" and that a

determination would have to be made in each particular

case. The Court recognized the broad range of possible

interpretations of the term "equitable relief" in the

following statement:

"At common law, however, there were many

situations - not limited to those involving

enforcement of a trust -- in which an equity court

‘could establish purely legal rights and grant legal

remedies which would otherwise be beyond the

scope of its authority.” 1 J. Pomeroy, Equity

Jurisprudence, § 181 p. 257 (Sth ed. 1941). The

term ’equitable relief can assuredly mean, as

petitioners and Solicitor General would have it,

whatever relief a court of equity is empowered to

provide in the particular case at issue. But as

indicated by the foregoing quotation -- which

speaks of ‘legal remedies’ granted by an equity

court -- ’equitable relief can also refer to those

categories of relief that are typically available in

equity (such as injunction, mandamas, and

restitution, but not compensatory damages). As

memories of the divided bench, and familiarity

with its technical refinements, recede further into

the past, the former meaning becomes, perhaps,

increasingly unlikely; but it remains a question of

interpretation in each case which is intended."

Mertens, supra, 113 S.Ct. at 2068-2069 (emphasis

in original).

Because the types of remedies available to a court

of equity have traditionally been those remedies necessary

to provide complete relief and correct the wrong, it is not

historically correct to simply assume or state that

equitable relief does not include types of relief which we

now consider to be "legal relief". The federal courts have

ee ew see -

frequently recognized the ability of a court of equity to

grant monetary relief.’

Courts of equity have traditionally granted

monetary relief to recover losses resulting from a breach

by a trustee. See Restatement (Second) of Trusts, §§ 197,

199, and 205. Technically, the equitable remedy for

surcharging a breaching fiduciary is called an "equitable

debt" which may be enforced by the exercise of the

Albermarle Paper Co. v. Moody, 422 US. 405, 418, 95 S.Ct. 2362,

2372, 45 L.Ed.2d 28 (1975); Board of Com’rs. of Jackson County, Kan. v.

United States, 308 U.S. 343, 60 S.Ct. 285, 288 (1939) (‘In ordinary suits

where the government seeks .. . to enforce a money claim ultimately derived

from a federal law * * * the court has drawn upon those flexible

considerations of equity which are established sources for judicial law-

making.); Porter v. Warner Co., 328 U.S. 395, 66 S.Ct. 1086, 90 L_Ed. 1332

(1946) (‘Where . . . the equitable jurisdiction of the court has properly been

invoked . . . the court has the power to decide all relevant maticrs in dispute

and to award complete relief even though the decree includes that which

might be conferred by a court of law."); Mitchell v. Robert De Mario Jewelry,

Inc, 361 U.S. 288, 80 S.Ct. 332 (1960) (Monetary recovery permitted

pursuant to the power of equity to provide complete relief.); Goldberg v.

Medtronic, Inc,, 686 F.2d 1219, 1229 (7th Cir. 1982) (‘The District Court,

acting in equity, has the discretionary power to fashion a remedy to do

complete justice, including a monetary award if necessary."); Hoelzer v. City

of Stanford, Connecticut, 972 F.2d 495, 498 (2nd Cir. 1992) (Affirming the

award of $557,200.00 damages as “equitable relief"); Walters v. Marathon Oil

Co., 642 F.2d 1098, 1100 (7th Cir. 1981).

The existence of an equitable debt as a remedy for breach of trust

has long been recognized. Pomeroy describes the personal liability of a

trustee as follows:

"* * © [t]he trustee incurs a personal liability for a breach

of trust by way of compensation or indemnification which becomes

the only remedy whenever the trust property has been lost or put

ests A axle Brea secant option ener rT

enforced by a suit in equity against the erustee himeolf The amount

liabi t ete indemnification

court’s personal jurisdiction over the trustee and the

court’s contempt powers.”

The courts of equity have traditionally exercised

jurisdiction over trust matters because the trust

relationship is considered to be a primary right subject to

equitable jurisdiction and not simply because of any

unique remedy available only in the courts of equity."

and compensation of the beneficiary.” 1 J. Pomeroy, Equity

Jurisprudence, § 1080, p. 229-230 (Sth ed. 1941) (emphasis added).

Pomeroy further distinguishes between a legal debt and an equitable debt as

follows:

"A debt, in its most general conception, is a personal

liability for a definite sum of money, arising out of contract, express

or implied, or obligation in the nature of contract. The debtor is

one who is personally liable for the payment of such sum, and from

whom payment can be enforced by means of a personal pecuniary

judgment. If the debt is recognized by the law, and can be

recovered by an action at law, it is a legal debt; if it is only

recognized by equity, and not by the law, and can only be recovered

in a suit of equity, the debt is equitable. * * *.". 3 J. Pomeroy,

Equity Jurisprudence, § 1298, p. 863 (Sth ed. 1941) (emphasis in

original).

One year prior to the enactment of ERISA, Professor Dobbs in his

treatise on remedies specifically observed that "sometimes equity courts have

occasion to issue money decrees” and that they may be enforced as in

persona orders in contrast to judgments of law. D Dobbs, Remedies, § 2.8,

p. 92 (1973).

Equity is not simply a system of remedies but rather both a system

of primary rights and duties and a system of remedies:

"In order that a cause may come within the scope of the

equity jurisdiction, one of two alternatives is essential; either the

primary right, estate, or interest to be maintained, or the violation

which furnishes the cause of action, must be equitable rather than

legal; or the remedy granted must be in its nature purely equitable,

or if it be a remedy which may also be given by a court of law, it

Once a court of equity has assumed jurisdiction

over a matter, it has traditionally granted any type of

relief which is necessary to provide complete relief to

remedy the wrongs.""

must be one which, under the facts and circumstances of the case,

can only be made complete and adequate through the equitable

rules of procedure.” 1 Pome ity Jurisprudence, Section 130

(Sth Ed. 1941). (Emphasis in original).

"* * * The traditional view is that equitable relief is denied

unless the matter is one in which equity historically developed the

substantive law (as in the case of trusts), or the matter is one in

which the plaintiff's remedy at law is inadequate. * * *." D. Dobbs,

Remedies, § 2.5, p. 57 (1973). (Emphasis added).

Jurisdiction over trusts and trustees has always been regarded as equitable:

"The rights and duties of the parties growing out of

contracts, and especially those growing out of certain determinate

relations not based upon contract, but directly concerned with the

property, such as trustee and cestui que trust and all its forms...

constitute a large and important part of the primary rights falling

under the equitable jurisdiction." 1 Pomeroy’s Equity Jurisdiction,

Section 100.

While a court of equity would not normally entertain a suit for

compensatory damages, such relief is appropriate when no adequate remedy

at law exists and the plaintiff is entitled to other equitable relief. Professor

Dobbs refers to this as the "equitable clean up” doctrine because it allowed

equity to dispose of the entire matter, including the legal issues. D. Dobbs,

Remedies, § 2.7, p. 83 (1973) (*. . . the chancellor who granted equitable

relief had jurisdiction to go on and grant damages as well, as a matter of

economy of litigation”).

While compensatory damages for emotional distress are the classic

form of legal relief, they may also become appropriate equitable relief when

no adequate remedy at law exists to provide complete relief. See D. Dobbs,

Remedies, § 2.5, p. 57 (1973) (if plaintiff would be required to bring both a

legal claim and an equitable claim to obtain complete relief equity will hear

both claims to avoid a multiplicity of suits).

See also Restatement (Second) of Torts, § 874, Comment b (1979)

(‘Violation of Fiduciary Duty’), although [t]he remedy of a beneficiary

The statutory language in § 1132(a)(3) limits the

types of equitable relief available to "appropriate equitable

relief". The court in Mertens noted that the phrase

"equitable relief" had to mean something less than all

relief in order to give meaning to the use of the word

"equitable" in the statute. However, it must be noted that

only "appropriate" equitable relief may be provided. By

placing emphasis on the word "appropriate", the types of

available relief are adequately limited without having to

place any artificial or inaccurate limitations or the types

of relief which could be granted by a court of equity.

The entire phrase "appropriate equitable relief"

should be limited to those categories of relief which a

court of equity would consider appropriate to provide

complete relief to remedy a wrong in a particular case.

Such an interpretation would then permit the parties and

the courts to utilize the extensive common law which

defines and limits equitable jurisdiction to determine types

of relief which are appropriate. If a court of equity would

not have exercised jurisdiction or provided relief in a

particular case, then it would not be available under

ERISA as "appropriate equitable relief." For example:

against a defaulting or negligent trustee is ordinarily in equity,’ the

beneficiary is entitled to all redress ‘for harm caused by the breach of a duty

arising from the relation’).

The rules of equity practice for the federal courts recognized that

while equity would not hear cases which have originally been brought by the

law side of the court, once equity acquired jurisdiction, complete relief would

be provided. Compare: Federa! Fquity Rule 22 ("If at any time it appears

that a suit commenced in equity should have been brought as an action on

the law side of the court, it should be forthwith transferred to the law side

and be there preceded with, with only such alteration in the pleadings as shall

be essential."); with Federal Equity Rule 23 (‘If in any suit in equity a matter

ordinarily determinable at law arises, such matters may be determined in

that suit according to the principles applicable, without sending the case or

question to the law side of the court.") See Federal Rules of Equity

Practices, 108 U.S. 573, 586 (1884).

(a) A court of equity would not have exercised jurisdiction

to award damages in Mertens because it was a

professional malpractice action involving a nonfiduciary

and an adequate remedy at law already existed; and (b) A

court of equity could exercise jurisdiction and order a

trustee in breach of its duties to pay damages resulting

from the breach because the fiduciary relationship

involves a primary right traditionally supervised by the

equity courts.

F.(3) Monetary v. Non-Monetary Relief.

Some courts have tried to define "equitable relief"

based upon whether or not the requested relief is

"monetary" relief. While some equitable remedies (i.c.,

constructive trusts, injunction and mandamas) were only

available in courts of equity, equitable relief has never

been limited to these non-monetary forms of relief.”

Whether the type of relief is referred to as monetary,

pecuniary or compensatory, courts of equity have

traditionally provided for the payment of money as a form

of equitable relief.”

Pomeroy provides a non-exclusive list of ten classes of remedies

(including "pecuniary compensation") which can be provided by courts of

equity. See 1 J. Pomeroy, Equity Jurisprudence, § 112 (Sth ed. 1941).

Assuming these "classes" are the equivalent of "categories of relief typically

available in equity,” mentioned in the Mertens decision, there should be no

argument that remedies of pecuniary compensation are available in equity

and courts need only determine which, if any, of the classes of remedies are

“appropriate” for the circumstances of a particular case.

Pomeroy describes the equitable “remedies of pecuniary

compensation” as follows:

"7. Remedies of pecuniary compensation, are those in

which the relief consists in the award of a sum of money. These

remedies, whose final object is the recovery of money, are of three

distinct species, which differ considerably in their external form and

In addition to being a system which provides

unique remedies, the equity courts have also defined and

supervised primary rights, such as the trust relationships.”

When a breach of trust occurs, it was traditionally the

court of equity which supervised the conduct of the

trustee and had the ability to surcharge the trustee for

losses resulting from any breach.” The fact that courts of

incidence, but which agree in their substance, - in the intrinsic

nature of the final relief. They are the following: First. Those in

which the relief consists simply in the recovery of a general

pecuniary judement; that is, a judgment to be enforced or collected

out of the debtor’s property generally, - any property which he may

own is liable to be taken in satisfaction. This simple pecuniary

recovery is, in the vast majority of cases, legal, and not equitable,

but it is not unknown in equity. A court of equity occasionally

grants the relief of compensatory damages in connection with some

other specific relief (see Section 237), and under very peculiar

circumstances it decrees the payment of damages alone. Several

kinds of equitable suits are only pecuniary in their relief, as those

for contribution and exoneration. Secondly. Those cases in which

the relief is not a general pecuniary judgment, but is a decree of

money to be obtained and paid out of some particular fund or

funds. The equitable remedies of this species are many in number

and various in their external forms and incidents. * * * Thirdly.

There is also another species of pecuniary remedies, closely

analogous to the last, and differing from it only in the additional

element of a distribution of a final pecuniary award among two or

more parties having claims either upon one common fund or upon

several funds. The final relief in all these cases is simply pecuniary;

the amounts to which the different parties are entitled are

ascertained, and are obtained by distribution of the fund or funds

upon which they are chargeable. * * *" 1, Pomeroy’s Equity

Jurisprudence, Section 112 (Sth Ed. 1941).

See footnote 10, supra.

See Restatement (Second) of Trusts, §§ 197, 199 and 205 which read

as follows:

"§ 197. ture of Remedies of Beneficiaries. Except as

stated in § 198, the remedies of the beneficiary against the trustee

are exclusively equitable.”

——— gg

equity may provide monetary relief has been frequently

recognized by this court both in its decisions and its

rules."®

"§ 199. Equitable Remedies of Beneficiary. The

beneficiary of a trust can maintain a suit

(a) to compel the trustee to perform his

duties as trustee;

(b) to enjoin the trustee from committing a

breach of trust;

(d) to appoint a receiver to take possession

of the trust property and administer the trust;

(e) to remove the trustee.”

"§ 205. Liability in Case of Breach of Trust. If the trustee

commits a breach of trust, he is chargeable with

(a) any loss or depreciation in value of the

trust estate resulting from the breach of trust; or

(b) any profits made by him through the

breach of trust; or

the trust estate if there had been no breach of trust.”

The following are examples of this Court’s recognition that a decree

in equity may be for the payment of money:

(1) In Clews v. Jamieson, 182 U.S. 461, 21 S.Ct. 845,

852, 45 L.Ed. 1183 (1901), the Court adopted the views of Pomeroy

in describing both the scope of equitable jurisdiction over fiduciaries

and the scope of equitable relief which includes monetary relief:

"* * © The fact that the relief demanded is a

recovery of money only is not important in deciding the

question as to the jurisdiction of equity. The remedies

which such a court may give "depend upon the nature and

object of the trust; sometimes they are specific in their

character, and of a kind which the law courts cannot

administer, but often they are of the same general kind as

those obtained in legal actions, but being merely

°°" 1 Pom. Eq. Jur, § 158.

(Emphasis added).

The Federal Rules of Equity Practice specifically

contemplated the payment of money as part of an equity

decree."”

(2) See also Porter v. Warner Co., 328 U.S. 395, 66

S.Ct. 1086, 90 L.Ed. 1332 (1946) (‘Where . . . the equitable

jurisdiction of the court has properly been invoked . . . the court has

the power to decide all relevant matters in dispute and to award

complete relief even though the decree includes that which might

be conferred by # court of law."); Mitchell v. Robert De Mario

Jewelry, Inc, 361 U.S. 288, 80 S.Ct. 332 (1960) (Monetary recovery

permitted pursuant to the power of equity to provide complete

relief).

(3) The United States Supreme Court’s rules prior to

1954 recognized the appropriateness of monetary relief as part of

an equity decree prior to the merger of the law and equity courts.

Rule 30 of the Revised Rules of the Supreme Court of the United

States, 306 U.S. 685 (1939), provided:

"Rule 30. INTEREST AND DAMAGES

"1. Where judgments for the payment of money

are affirmed and interest is properly allowable, it shall be

calculated from the date of the judgment below until the

same is paid, at the same rate that similar judgments bear

interest in the courts of the State where such judgment

was rendered.

2. *e-e

3. Paragraphs 1 and 2 of this rule shall be

applicable to

in equity, unless otherwise specially ordered by this court.

***." (Emphasis added).

(4) Substantially similar language which specifically

referred to “the payment of money in cases of equity’ existed as

Rule 23 in the Rules of the Supreme Court of the United States

from 1884 until 1939. 108 U.S. 573 (1884). For prior versions of

the rule referring to “the payment of money in cases of equity . . .”

see 210 US. 441, 490 (1873) and 21 How. xiii (1858).

The Rules of Federal Equity Practice stated, in part:

EN I ER Se

Any attempt to limit "appropriate equitable relief"

to non-monetary forms of relief fails to recognize the

historical realities of the types of relief available to a court

of equity. In addition, any artificial distinction will only

raise new issues concerning whether forms of restitution,

constructive trusts, equitable liens, equitable debts, etc.,

are monetary or non-monetary forms of relief. The courts

of equity did not historically make this type of distinction

and lower courts will need to start over from a clean slate,

rather than having the ability to rely on the existing

common law to determine whether a particular form of

relief requested in a specific case is available under

ERISA.

G. The Federal Courts Must Guard Their

Constitutionally-Granted Power to Grant Equitable Relief.

There is no indication that Congress intended to

limit the federal courts’ power to apply the full scope of

the remedies available pursuant to the equitable powers

of the court:

"The general rule is that absent clear

direction to the contrary by Congress, the federal

"Rule 8. Final process to execute any decree may, if the

decree be solely for the payment of money, be by a writ of

execution, in the form used in the Circuit Court in suits at common

law in actions of assumpsit. * * *.” 210 U.S. at 511 (1884).

(Emphasis added).

"Rule 92. That in suits in equity for the foreclosure of

mortgages in the Circuit Courts of the United States, or in any

court of the Territories having jurisdiction of the same, a decree

may be rendered for any balance that may be found due to the

complainant over and above the proceeds of the sale or sales, and

execution may issue for the collection of the same, as is provided in

the eighth rule of this Court regulating the equity practice, where

the decree is solely for the payment of money.” 210 U.S. at 540-

541. (Emphasis added).

courts have the power to award any appropriate

relief in a cognizable cause of action brought

pursuant to a federal statute." Franklin _v

Gwinnett County Public Schools, 112 S.Ct. 1028,

1035 (1992).

In the absence of a clear congressional mandate,

this Court should not selectively abdicate any of the

court’s equitable powers to grant relief.

", .. [S]elective abdication . . . would harm

separation of powers principals in another way, by

giving judges the power to render futile causes of

action authorized by Congress through a decision

that no remedy is available." Franklin, supra, 112

S.Ct. at 1037. (Emphasis added).

To avoid rendering the fiduciary duties of ERISA

futile when applied to individual participants, courts must

"resume the availability of all appropriate remedies unless

Congress has expressly indicated otherwise." Davis _v.

Passman, 442 U.S. 228, 246, 99 S.Ct. 2264, 2277, 60

L.Ed.2d 846 (1979); Franklin v. Gwinnett County Public

Schools, 112 S.Ct. 1028, 1032 (1992). It is the duty of the

courts to be alert to provide such remedies as are

necessary to make effective the legislative purpose.” J.1.

Case Co. v. Borak, 377 U.S. 426, 433, 84 S.Ct. 1555, 1560,

12 L.Ed.2d 423 (1964).

Under § 1132(a)(3), Congress expressly provided a

cause of action to participants to redress violations of

ERISA. Congress also provided for "appropriate

equitable relief." It must be assumed that Congress was

familiar with the common law of trusts and the principles

of equity jurisdiction and with the existing precedent

regarding the types of relief which could be awarded by

courts of equity."®

Failure by the Courts to utilize their full equitable

powers granted by Congress to redress violations of

ERISA by fiduciaries may violate the separation of powers

by rendering causes of action authorized by Congress

futile through decisions that no remedy is available.

CONCLUSION

The Petition for a Writ of Certiorari should be

granted.

DATED this 24). day of June, 1995.

Respectfully submitted,

LESLIE L. WELLMAN, ATTORNEY AT LAW:

By: 7

Leslie L. Wellman, Esq.

Counsel of Record

140 S.W. Arthur Street

Suite #200

Portland, Oregon 97201-4766

Telephone: (503) 228-5020

Counsel for Petitioner

October 1994

See, Cannon v. University of Chicago, 441 U.S. 677, 99 S.Ct.

1946, 1958, 60 L.Ed.2d 560 (1979) (“It is not only appropriate but also

realistic to presume that Congress was thoroughly familiar with these

unusually important precedence from this and other federal courts in

that it expected its enactment to be interpreted in conformity with

that.”).

TABLE OF APPENDICES

Page

APPENDIX A - Court of Appeals Order Denying

ee wi chee HEU eRe debe ee 06.448 6005 la

APPENDIX B - Court of Appeals Opinion ....... 2a

APPENDIX C - District Court Opinion ........ 15a

APPENDIX D - District Court Order ......... 27a

APPENDIX E - District Court Judgment ....... 29a

FILED

APR - 3 1995

CATHY A. CATTERSON, CLERK

U.S. COURT OF APPEALS

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

PAMELA J. McLEOD, )

) No. 92-36928

Plaintiff-Appellant, )

) D.C. No. CV-92-00450-MFM

v. )

)

OREGON LITHOPRINT, INC., ) ORDER

an Oregon corporation,

dba News-Register

Publishing Co.; and NEWS-

INSURANCE PLAN;

Defendants-Appellees.

Before: ALARCON, NORRIS, and LEAVY, Circuit

Judges.

The panel has voted to deny the petition for

rehearing. Judge Leavy has voted to reject the suggestion

for rehearing en banc, and Judges Alarcon and Norris

have so recommended.

The full court has been advised of the en banc

suggestion and no judge of the court has requested a vote

on it.

The petition for rehearing is DENIED and the

suggestion for rehearing en banc is REJECTED.

Page la - Appendix A

ere

ee eee

KREUK ow FEO eS RN

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

PAMELA J. McLeop,

Plaintiff-Appellant,

v. No. 92-36928

OREGON LiTHOPRINT INC., an . D.C. No.

Oregon corporation, dba CV-92-00450-MFM

News-Register Publishing Co.; and )

News-REGISTER EMPLOYEES’ —

INSURANCE PLAN;

Defendants-Appellees.

Appeal from the United States District Court

for the District of Oregon

Malcolm F. Marsh, District Judge, Presiding

Argued and Submitted

May 3, 1994—Portland, Oregon

Filed February 1, 1995

Before: Arthur L. Alarcon, William A. Mors,

and Edward Leavy, Circuit Judges.

Opinion by Judge Leavy

SUMMARY

Labor and Empioyment/ERISA/Health Care Coverage

The court of appeals affirmed in part a district court judg-

ment, reversed in part and remanded. The court held that an

1347

Page 2a - Appendix B

1348 McLegop v. OREGON LITHOPRINT INC.

employee was precluded from recovering damages for her

claim that an Employee Retirement and Income Security Act

(ERISA) plan administrator breached a fiduciary duty by fail-

ing to timely notify her of her eligibility to apply for cancer

coverage.

Appellant Pamela McLeod worked for appellee Oregon

Lithoprint Inc, which was doing business as New-Register

Publishing Co. After her physician told her she had cancer on

July 19, 1990, McLeod applied for cancer insurance coverage

under appellee the News-Register Employees’ Insurance Plan.

Such coverage was available from American Family Life

Insurance Co. (AFLAC). She was denied coverage after

AFLAC discovered she had a previous cancer diagnosis.

McLeod brought claims against Oregon Lithoprint and the

Plan under the ERISA. She claimed that the ERISA plan

administrator breached a fiduciary duty under 29 U.S.C.

§ 1104(a) by failing to notify her that effective May 1, 1990,

she had become eligible to apply for cancer insurance cover-

age from AFLAC. She argued that the News-Register did not

inform her of the opportunity to apply for the coverage until

July 1990. She sought compensatory damages equal to the

benefits that would have been paid to her had she elected cov-

erage under the cancer policy. She also sought compensatory

damages for emotional distress and statutory damages for the

defendants’ alleged failure to respond to her previous request

for plan documentation. Oregon Lithoprint and the Plan

argued that even if they failed to notify McLeod timely about

the existence of a cancer insurance policy, she could not

recover monetary damages under the ERISA because she was

not a plan “participant.”

The district court held that McLeod was not a “participant”

or “beneficiary” with respect to the cancer coverage and

therefore lacked standing to bring an ERISA claim against her

employer for breach of fiduciary duties or failure to provide

Page 3a - Appendix B

iN DGS baat Sa canta gitlalatllll

McLeop v. Orecon LrrHoprint INc. 1349

plan documents. The court granted the defendants’ motion for

summary judgment. McLeod appealed.

[1] In determining whether McLeod is a “participant,” the

analysis focused on her status of employment, not whether

cancer coverage was a distinct plan or a benefit program. The

fact that she was not issued an actual policy did not preclude

her from being a participant. [2] McLeod argued that she was

eligible to apply for benefits on May 1, 1990, and that she was

eligible to receive benefits, had she applied for them by the

time she was diagnosed with cancer. Thus, her employment

status clearly rendered her a participant. She presented a

“colorable claim” that she would prevail in a suit for benefits

resulting from an alleged breach of fiduciary duty. She had

standing.

[3] The Supreme Court has held that recovery for breach of

fiduciary duty under 29 U.S.C. § 1109(a) must inure to the

benefit of the plan as a whole. [4] In addition, the Ninth Cir-

cuit previously held that where a fiduciary breaches the plan’s

terms, the ERISA accords beneficiaries the right to sue “on

behalf of the entire plan.” [5] In this case, McLeod did not

seek to recover for the plan as a whole. Instead, she requested

money damages for herself as the potential beneficiary.

Therefore, she was precluded from recovering damages for

the claim that the defendants breached a fiduciary duty pursu-

ant to § 1104(a)(B).

[6] Because McLeod was a participant, she may be entitled

to receive statutory damages for the administrator’s alleged

failure to provide the required plan documentation. [7] The

issue of whether she is entitled to statutory damages for the

administrator’s failure to provide her with “plan” documents

was remanded.

COUNSEL

Leslie L. Wellman, Wellman & Murray, Portland, Oregon, for

the plaintiff-appellant.

Page 4a - Appendix B

1350 McLeop v. OreGon LrrHoprinT INc.

Wade R. Keenon and William H. Mitchell, Mitchell, Lang &

Smith, Portland, Oregon, for the defendants-appellees.

OPINION

LEAVY, Circuit Judge:

The appellant, Pamela J. McLeod (“McLeod”), appeals

from summary judgment on her claims pursuant to the

Employee Retirement Income Security Act (“ERISA”), 29

U.S.C. §§ 1001-1371 (West Supp. 1994). McLeod argued

before the district court that the ERISA plan administrator

breached a fiduciary duty under 29 U.S.C. § 1104(a)' by fail-

ing to notify her that effective May 1, 1990, she had become

eligible to apply for cancer insurance coverage from Ameri-

can Family Life Insurance Company (“AFLAC”). She con-

tends that her employer, the News-Register of McMinnville,

Oregon, did not inform her of this opportunity until July 1990.

On July 19, 1990, before she was notified of the opportunity

to obtain cancer coverage, McLeod’s physician told her she

had cancer. McLeod applied for cancer coverage on July 24,

1990. The application was granted but later rescinded when

the insurance company discovered that McLeod had a previ-

ous cancer diagnosis. McLeod seeks an award of compensa-

tory damages equal to the benefits that would have been paid

to her had she elected coverage under the cancer policy. McL-

eod prays for compensatory damages for emotional distress in

"In relevant part, section 1104(a)(1)(B) provides for a “prudent man”

standard of care:

Subject to sections 1103(c) and (d), 1342, and 1344 of this

tide, a fiduciary shall discharge his duties with respect to a plan

solely in the interest of the participants and beneficiaries . . . with

the care, skill, prudence, and diligence under the circumstances

then prevailing that a prudent man acting in a like capacity and

familiar with such matters would use in the conduct of an enter-

prise of a like character and with like aims[.]

Page 5a - Appendix B

McLeop v. OreGon LrtHoprint Inc. 1351

the amount of $100,000. She also seeks statutory damages for

the appellees’ failure to respond to her request for the plan

documentation.

Oregon Lithoprint Inc., dba News-Register Publishing

Company, and the News-Register Employees’ Insurance Plan

argued that, as a matter of law, even if they failed to notify

McLeod timely about the existence of a cancer insurance pol-

icy, she could not recover monetary damages under ERISA

because she was not a plan “participant.” Both parties agreed

that the issue of whether McLeod was a plan “participant” as

defined by ERISA was a legal question for the district court

to resolve.

The district court held that McLeod was not a “participant”

or “beneficiary” with respect to the cancer coverage and

therefore that she “lacks standing to maintain an ERISA claim

against her employer for breach of fiduciary duties or failure

to provide AFLAC plan documents.” The court also held that,

even if McLeod had standing, she could not recover compen-

satory damages. The court granted defendant’s motion for

summary judgment. McLeod appealed.

DISCUSSION

I. Whether McLeod Is a “Participant” Under an

“Employee Benefit Plan” Subject to ERISA

A major issue is whether McLeod was a “participant” in the

cancer policy. Whether an employee is a participant in an

ERISA plan is critical because it involves both standing and

subject matter jurisdiction. Stanton v. Gulf Oil Corp., 792

F.2d 432, 434 (4th Cir. 1986). The district court found that

McLeod had no standing because she was not a participant.’

*The district court found that McLeod was not a “participant” or

“beneficiary” with respect to the AFLAC cancer coverage and therefore,

she “‘lack[ed] standing to maintain an ERISA claim against her employer

Page 6a - Appendix B

1352 McLeop v. Orecon LiTHoprint INc.

The appellees argue that McLeod is not a participant

because, under the cancer plan, “it is a legal and factual

impossibility for an employee to receive a plan benefit, or to

be eligible for a plan benefit, unless there is an individual pol-

icy of insurance issued to that employee.” The statutory defi-

nition of participation in an Erisa plan contradicts the

appellee’s conclusion:

A civil action may be brought . . . by a participant

. . . to recover benefits due to [her] under the terms

of [her] plan, to enforce [her] rights under the terms

of the plan, or to clarify [her] rights to future benefits

under the terms of the plan.” 29 U.S.C.

§ 1132(aX1\(B). A “participant” is defined as “any

employee . . . who is or may become eligible to

receive a benefit of any type from an employee ben-

efit plan which covers employees of such employer.”

29 U.S.C. § 1002(7).

[1} In determining whether McLeod is a “participant,” the

analysis focuses on her status of employment, not whether

cancer coverage was 4 distinct plan or a benefit program. The

fact that McLeod was not issued an actual policy does not

preclude her from being a participant. “[TJhe term ‘partici-

pant’ is naturally read to mean either employees in, or reason-

ably expected to be in, currently covered employment.”

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117

(1989) (quotation omitted). In construing the phrase “may

become eligible” in section 1002(7), the Supreme Court

for breach of fiduciary duties or the failure w provide AFLAC plan

documents.” The district court based its decision on the following factors:

(1) “parucipant” does not include potential claimants; (2) no cases were

found in which a plaintiff premised an ERISA case on the failure to dis-

close the existence of an available policy; (3) the cancer policy was not

part of the same plan under which McLeod received disability insurance;

and (4) nothing in ERISA extends liability to a claim for coverage under

a policy that was never validly issued.

ee AD ON Cee. *

McLeop v. Orecon Lrrxoprint INc. 1353

states: “In order to establish that he or she ‘may become eligi-

ble’ for benefits, a claimant must have a colorable claim that

(1) he or she will prevail in a suit for benefits, or that (2) eligi-

bility requirements will be fulfilled in the future.” /d. at

117-18.

[2] McLeod’s argument is that she was eligible to apply for

benefits on May 1, 1990, and that she was eligible to receive

benefits, had she applied for them by the time she was diag-

nosed with cancer. Thus, her employment status clearly ren-

ders her a participant. McLeod presents a “colorable claim”

that she would prevail in a suit for benefits resulting from an

alleged breach of fiduciary duty.* Because one of the two

Firestone tests is met, McLeod is a participant and has stand-

ing. We reverse the district court on this issue.

*The Sixth Circuit has held that:

In determining who is a “participant,” for purposes of standing,

the definition found in 29 U.S.C. § 1002(7) must be read in the

context of traditional concepts of standing, not in the context of

adjudicating the ultimate issue of the merits of plaintiffs’ claim

that they are not receiving the full extent of the benefits to which

they are entitled from the employee benefit plan . . . . The doc-

trine of standing is concerned with whether a person is the proper

party to request adjudication of a particular issue, whether a per-

son has alleged such a personal stake in the outcome of a justicia-

ble controversy that [she] should be entitled to obtain its judicial

resolution. Standing focuses on a person’s effort to get [her] com-

plaint before a court and not on the issue [she] wishes to have

adjudicated.

Astor v. International Business Machs. Corp., 7 F.3d 533, 538 (6th Cir.

1993) (quoting Hughes v. General Motors Corp., 852 F.2d 568 (6th Cir.

1988) (unpublished) (citations omitted), cert. denied, 489 U.S. 1081

(1989)); accord Vartarian v. Monsanto Co., 14 F.3d 697, 701-02 (ist Cir.

1994).

Page 8a - Appendix B

1354 McLeop v. OREGON LiTHOPRINT INC.

Il. Whether McLeod May Recover for Breach of Fiduciary

Duty Where No Recovery Is Sought for the Plan

as a Whole

McLeod argues there was a breach of fiduciary duty under

section 404(a), 29 U.S.C. § 1104(a), which requires a fidu-

Ciary to exercise the standard of care a prudent person would

exercise. See n.1, supra. For the appellees’ alleged breach of

fiduciary duty in failing to inform her of the cancer coverage,

McLeod requests the following “equitable or remedial relief”:

(A) Surcharge of the Defendants as fiduciaries of

the Plan in the amount of her unreimbursed expenses

and other benefits which would have been reim-

bursed or provided under the Cancer Insurance Pol-

icy with prejudgment interest thereon;

(B) An order requiring defendant to reimburse

Plaintiff all further expenses of benefits which would

have been provided under the Cancer Coverage; and/

ered as an insured with Cancer Coverage under the

Cancer Insurance Policy issued by Defendant

AFLAC.

[3] The Supreme Court has held that a recovery for breach

of fiduciary duty under section 404(a), 29 U.S.C. § 1109(a),*

*29 U.S.C. § 1109(a) states:

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 remedial relief as the court may deem appropriate, including

removal of such fiduciary.

(Emphasis added.)

Page 9a - Appendix B

McLeop v. OreGon LrrHoprint INc. 1355

must inure to the benefit of the plan as a whole. Russell, 473

U.S. at 142. We have followed Russell to strictly limit the

remedies available under ERISA. Watkins v. Westinghouse

Hanford Co., 12 F.3d 1517, 1528 (9th Cir. 1993); Sokol v.

Bernstein, 803 F.2d 532, 536, 538 (9th Cir. 1986).

[4] In Sokol, we held: “ERISA grants no private right of

action by a beneficiary gua beneficiary; rather, it accords ben-

eficiaries the right to sue on behalf of the entire plan if a fidu-

ciary breaches the plan’s terms.” Jd. In doing so, we extended

the Supreme Court’s holding in Russell, which was limited to

section 409(a), 29 U.S.C. § 110%a) only, see Russell, 473

U.S. at 139 n.5, to section 503(a)(3), 29 U.S.C. § 1132(a)(3),*

as well. We stated:

Russell held that the fiduciary duties set forth in

§ 409 run only to the plan, and not to individual ben-

eficiaries. In so holding, the Russell Court used lan-

guage implying that all of the statute’s provisions

relating to fiduciary duties run only to plans, and not

to. . . individuals.

Sokol, 803 F.2d at 535 (citation omitted).

McLeod argues that our decision in Sokol conflicts with the

Supreme Court’s opinion in Mertens v. Hewitt Assocs., 113 S.

Ct. 2063 (1993). We disagree. After Mertens was decided, we

"Section 503(aX3), 29 U.S.C. § 1132(a)(3), states:

(a) Persons empowered io bring a civil action

A civil action may be brought —

(3) by a participant, beneficiary, or fiduciary (A) to enjoin

any act or practice which violates any provision of this subchap-

ter or the terms of the plan, or (B) to obtain other appropriate

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

provisions of this subchapter or the terms of the plan[.]

Page 10a - Appendix B

1356 McLeop v. Orecon LitHoprint INc.

reiterated that section 409(a) precludes claims unless they

inure to the benefit of the plan as a whole rather than tc an

individual. Watkins, 12 F.3d at 1528. We are bound by that

decision.®

[5] McLeod does not seek to recover for the plan as a

whole. Instead, she requests money damages pursuant to sec-

tion 502(a)(3) for herself as the potential beneficiary. Conse-

quently, McLeod is precluded from recovering damages for

the claim that the appellees breached a fiduciary duty pursu-

ant to section 1104(a)(B) for the failure to act with “the care,

skill, diligence and prudence required of a fiduciary under

ERISA.”’ See Olson v. General Dynamics Corp., 960 F.2d

1418, 1424 (9th Cir. 1991) (Reinhardt, J. concurring) (“[Tjhe

federal courts have consistently ruled that ERISA plaintiffs

may not recover extracontractual damages.”), cert. denied,

112 S. Ct. 2968 (1992); Johnson v. District 2 Marine Eng’rs

Beneficial Ass'n, — Associated Maritime Officers, Medical

Plan, 857 F.2d 514, 518 (9th Cir. 1988) (finding no need to

reexamine the holding of Sokol unless the Supreme Court

indicates otherwise). We affirm the district court on this issue.

III. Whether McLeod May Receive Compensatory

Damages Under 29 U.S.C. § 1132(aX3)

McLeod argues that section 502(a)(3) of ERISA, 29 U.S.C.

§ 1132(a\(3), authorizes a participant to bring a civil action to

obtain “appropriate equitable relief” to redress violations of

the fiduciary responsibility provisions of ERISA. She argues

that the district court erroneousl:; held that the compensatory

*We are unpersuaded by McLeod’s citation of decisions from other cir-

cuits. Such decisions do not constitute a change in the law of this circuit.

See Montana v. Johnson, 738 F.2d 1074, 1077 (9th Cir. 1984) (only en

banc decisions of this court, Supreme Court decisions, or subsequent legis-

lation constitute changes in the law).

"The district court found: “Finally, I note that the remedy plaintiff seeks

would be contrary to the overriding purpose of ERISA to protect plans as

a whole, rather than individual participants.”

Page lla - Appendix B

Beet

McLeop v. Orecon LrTHoprint INc. 1357

damages that she requested in her first amended complaint

were unavailable under ERISA. She also argues that, pursuant

to 29 U.S.C. § 1132(a)(3), she is entitled to recover $100,000

in extra-contractual damages for emotional distress resulting

from the failure to obtain cancer coverage.

Recent decisions by the Supreme Court and this circuit

foreclose McLeod’s arguments. “As the Supreme Court has

recently held [in Mertens v. Hewitt Assocs., 113 S. Ct. 2063,

2068-70 (1993)}, equitable relief in the form of the recovery

of compensatory damages is not an available remedy under 20

U.S.C. § 1132(a)(3).” Watkins, 12 F.3d at 1520.

IV. Whether Summary Judgment Was Proper on the

Claim for Relief for Failure to Furnish Copies of the Plan

Instruments

McLeod claims that, notwithstanding whether she is enti-

tled to compensatory damages, she is entitled to statutory

damages.

ERISA provides in relevant part that:

The administrator shall, upon written request of

any participant or beneficiary, furnish a copy of the

latest updated summary plan description, plan

description, and the latest annual report, any terminal

report, the bargaining agreement, trust agreement,

contract, or other instruments under which the plan

is established or operated.

29 U.S.C. § 1024(b\(4). McLeod alleges that the appellee

failed to comply with this section:

On October 17, 1991, Plaintiff, through her attor-

neys, requested the following information from

Defendant News-Register pursuant to 29 U.S.C.

§ 1024(b)(4):

Page 12a - Appendix B

1358 McLeop v. Orecon LrrHoprinT INc.

(A) the Plan document,

(B) the Summary Plan Description;

(D) any other instruments in effect

under which the Plan was established or

operated.

Defendant News-Registet responded to Plaintiff's

request for information on November 12, 1991, in a

letter signed by Joyce Morrow, News-Register Con-

troller. Morrow informed Plaintiff that Defendant

News-Register did not have a Plan document, Plan

description or an annual report for the Plan.

No. 92-450MA, First Amended Complaint, at 4, paras. 16 &

ST,

[6] Because we conclude that McLeod was a participant,

she may be entitled to receive statutory damages for the

administrator’s alleged failure to provide the required plan

documentation:

Any administrator who fails or refuses to comply

with a request for any information which such

administrator is required by this subchapter to fur-

nish to a participant or beneficiary . . . by mailing the

material requested to the last known address of the

requesting participant or beneficiary within 30 days

after such request may in the court’s discretion be

personally liable to such participant or beneficiary in

the amount of up to $100 a day from the date of such

failure or refusal, and the court may in its discretion

order such other relief as it deems proper.

29 U.S.C. § 1132(c).

Page 13a - Appendix B

McLgop v. OrEGON LitHoprRiNT INc. 1359

[7] The appellees note that McLeod was provided an

employee handbook. The administrator also testified that it

was their practice to notify participants of the cancer cover-

age. Both of these events are alleged to have taken place on

April 24, 1990. In October 1991 McLeod asked for the plan

in writing and was informed that none existed because the

“plan” was represented exclusively by the AFLAC represen-

tatives. Both parties use the term “plan” and “policy” inter-

changeably to discuss the cancer coverage, which confuses

the issue as to whether a plan document exists and was pro-

vided or not. We do not reach the subissue of whether the

cancer coverage was a distinct plan or individual benefit pro-

gram, as the facts are disputed as to whether the delivery of

materials McLeod received constitutes compliance with the

Statutory requirements. We remand on the issue of whether

the appellant is entitled to statutory damages for the adminis-

trator’s failure to provide her with “plan” documents. See

Pullman-Standard v. Swint, 456 U.S. 273, 291-92 (1982) (the

court of appeals may resolve the issue only if the record per-

mits but one resolution).

AFFIRMED in part and REVERSED in part. REMANDED

for trial on the claim of failure to provide requested docu-

ments pursuant to 29 U.S.C. § 1024(b)(4). The parties shall

bear their own costs on appeal.

Page l4a - Appendix B

4 > ae ee ee

it peat et Sg ode? EX acinar ey aT “ > ™ BAe Par pote: 7 ee (eee i ~ geen ae &. mame se

FILED

92 OCT 29 PM 3:41

CLERK, US DISTRICT COURT

DISTRICTCOURTOPOREGON

PORTLAND, OREGON

IN THE UNITED STATES DiSTRICT COURT

FOR THE DISTRICT OF OREGON

PAMELA J. McLEOD, )

) Civil No. 92-450-MA

Plaintiff,

Vv.

OREGON LITHOPRINT, INC.,

an Oregon corporation,

dba News-Register

Publishing Co., et al.

OPINION

ee ee oe ee

Defendants.

Leslie Wellman

Shari Clark

Wellman & Murray

1001 S.W. Fifth Ave., Suite 1950

Portland, OR 97204

Attorneys for Plaintiff

; Wm. Kelly Olson

Wade Keenon

, Mitchell, Lang & Smith

101 S.W. Main, Suite 2000

Portland, OR 97204

1 - OPINION

Page 15a - Appendix C

Attorneys for Defendants Oregon Lithoprint, Inc.

and News-Register Employees’ Insurance Plan

MARSH, Judge.

Plaintiff, a full time employee of defendant News

U.S.C. § 1132 et seq., alleging that her employer breached

a fiduciary duty when it failed to timely notify her of her

right to apply for cancer insurance.’ Plaintiff became

eligible, by reason of her length of employment, to apply

for coverage on May 1, 1990, but contends that she was

not informed of this opportunity until late July,

approximately two weeks after she was diagnosed as

having cancer. Plaintiff submitted an application for

cancer coverage on July 24, 1990 which was granted and

later rescinded when the insurance company discovered

the previous cancer diagnosis. In addition, plaintiff asserts

a claim for statutory damages under 29 U.S.C. §

1024(b)(4) alleging that defendants failed to respond to

discovery requests for the cancer plan documentation.

Plaintiff now moves for summary judgment on her

claims of breach of fiduciary duty and failure to provide

requested plan information.’ Plaintiff seeks an award of

compensatory damages equal to benefits that would have

been paid had she elected coverage under the cancer

policy, submitted an application, been accepted and paid

the premiums. Defendants contend that material issues

There is no dispute that the employer, News Register, is an ERISA

plan administrator and a “fiduciary” under ERISA.

Piaintiff’s claims against AFLAC, the insurance company which

made the cancer policy available to News Register employees, and Bret

Runolfson, AFLAC’s agent, have been settled.

2 - OPINION

Page 16a - Appendix C

of fact exist regarding timely notice of the right to pursue

cancer coverage and whether they adequately complied

with discovery requests. However, defendants seek

summary judgment against plaintiffs ERISA claims

arguing that, as a matter of law, even if they failed to

notify plaintiff about the existence of cancer coverage in

a timely manner, plaintiff cannot recover the monetary

damages under ERISA because she is not a plan

"participant" and is guilty of unclean hands.

Both parties agree that the issue of whether

plaintiff is a plan "participant" as defined by ERISA is a

legal question which should be resolved by the court with

their submissions on these motions. For the reasons

which follow, plaintiffs motion for summary judgment is

denied and defendants’ motion for summary judgment is

granted.

DISCUSSION

1 e o " * . 9"

Section 1451(1) of title 29, the jurisdictional basis

for an action under ERISA, provides that a "plan

fiduciary, employer, plan participant or beneficiary who is

adversely affected by the act or omission of any party

under this subtitle . . . may bring an action for appropriate

legal or equitable relief." Section 1132(a) outlines

available civil remedies and provides that "[a] civil action

may be brought -- (1) by a participant . . . -- (B) to

recover benefits due to him under the terms of his plan,

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

clarify his rights to future benefits under the terms of the

plan.”

Section 1002(7) defines a "participant" as "any employee

or former employee of an employer .. who is or may

3 - OPINION

Page 17a - Appendix C

become-eligible to receive a benefit of any type from any

employee benefit plan which covers employees of such

employer."

In Firestone Tire & Rubber Co. v. Bruch, 109 S.Ct.

948 (1989), plaintiffs sought updated plan summary

descriptions pursuant to 29 U.S.C. § 1024 against their

former employer, Firestone, following the sale of

Firestone’s plastics division to another company. The

district court denied the requested relief finding that

plaintiffs were no longer plan "participants." The Third

Circuit Court of Appeals reversed, holding that the right

to request and receive information "extends both to

people who are in fact entitled to a benefit under the plan

and to those who claim to be but in fact are not.” Id., at

952, citing 828 F.2d 134, at 153. The Supreme Court

reversed the Third Circuit’s holding, finding that the

court’s interpretation of the term participant to include

potential claimants, "strays too far from the statutory

language.” Id., at 957. Under the Supreme Court’s

formulation, "participants" are only those employees for

former employees who have a "colorable claim that (1) he

or she will prevail in a suit for benefits, or that (2)

eligibility requirements will be fulfilled in the future.” Id.,

at 958. In a concurrence, Justice Scalia took this

definition one step further:

"I think that, properly read, the definition of

participant’ embraces those whose benefits have vested,

and those who (by reason of former employment) have

some potential to receive the vesting of benefits in the

future, but not to those who have a good argument that

benefits have vested even though they have not."

Id., at 959 (emphasis added).

4 - OPINION

Page 18a - Appendix C

Prior to the Supreme Court’s decision in Firestone,

the Ninth Circuit made a similar holding in a case filed by

former employees who had already received their vested

benefits in a lump sum payment who filed an action

against the plan administrator for breach of fiduciary

duties and failure to disclose relevant plan documents.

Kuntz v. Reese, 785 F.2d 1410 (9th Cir. 1986). In Reese,

the court held that plaintiffs were not "participants" as

defined by § 1002(7) because "if successful, the plaintiffs’

claim would result in a damage award, not in an increase

of vested benefits." Id., at 1411. The court reasoned that

Congress did not intend to convert claims of all types into

"potential benefits” within the meaning of ERISA. Id., at

1412.

Section 1104 governs duties owed by a fiduciary to

“participants and beneficiaries” and directs that fiduciaries

act with care in providing benefits, diversifying

investments and defraying all reasonable expenses in

administering the plan. Section 1021 mandates that the

plan administrator provide a summary plan description to

"each participant covered under the plan and to each

beneficiary who is receiving benefits under the plan."

Thus, if plaintiff is a "participant" or plan "beneficiary,"

defendants had a duty to provide her with a description of

the plan "with care." Conversely, there is no authority

imposing a duty of care upon fiduciaries with respect to

any person who is neither a plan participant nor

beneficiary. See e.g. Alton Memorial v. Metropolitan Life

Ins., 656 F.2d 245, 249 (7th Cir. 1981) (employer owes no

duty to plan actuary).

The parties have not cited, nor have I been able to

find, any case in which a plaintiff has premised an ERISA

claim on a failure to disclose the existence of an available

policy. Decisions under ERISA for non-disclosure usually

address issues related to claims filed by persons who elect

5 - OPINION

Page 19a - Appendix C

coverage and thereafter contend that a fiduciary failed to

disclose a change in benefits or an aspect of the benefit

package which resulted in a reduction in anticipated

benefits. For example, in Olson v. General Dynamics

Corp., 960 F.2d 1418 (9th Cir. 1992), plaintiff claimed he

was misled about the amount of benefits he would receive

following the change of ownership of his employer. The

court noted that “at the time he filed this suit, Olson was

receiving benefits from all three companies [and]. . . w

therefore a participant in each company’s employee

benefit plan..." Id. at 1422. See also Greany v.

Western Farm, No. 91-35098, slip op. 10519, at 10530 (9th

Cir. Sept. 1, 1992) (plaintiffs must have received health

benefits under policy to state claim for mistakes re date of

termination for conversion _ policy) and National Co.’s

Vv 929 F.2d 1558 (11th Cir.

1991) (failure to notify employee about continuation

coverage).

The undisputed evidence regarding the various

benefit programs offered by defendants is that defendants

offered three different health policies to all full time

employees: a medical insurance policy with Blue Cross,

a disability policy with Standard Insurance and the cancer

policy with AFLAC. Each policy was optional and, if the

employee elected coverage under one or all three policies,

premiums were paid for by contributions from both the

employee and the employer and were deducted from

payroll. The AFLAC cancer coverage option was a

separate individual policy issued to the employee.

The “personal choice account” was clearly a

"benefit plan" and is described as a benefit plan in the

The parties and the plan summary also describe the personal choice

account as a “cafeteria” or “flexible spending account plan.”

6 - OPINION

Page 20a - Appendix C

summary plan description. However, the personal choice

account did not offer medical benefits-- it was not a

separate benefit program, but an optional method of

payment. Employees who wished to pay for their share of

the medical insurance premiums or cancer insurance

premiums from before tax dollars could elect to make

those payments via a "personal choice account." The

personal choice account could not be used to pay for

Standard’s disability insurance premiums. The parties also

do not dispute that plaintiff elected to apply and did

obtain coverage under the Standard Insurance disability

policy and declined Blue Cross medical coverage. Thus,

plaintiffs "membership" in the personal choice account is

limited to the brief period in which she obtained cancer

coverage under the AFLAC policy.‘

Plaintiff contends that she was a participant in the

"plan" because, as a full time employee who had been

working for 90 days as of May 1, 1990, she was eligible to

elect coverage under any of the three different policies

offered through her employer.’ In addition, plaintiff

It is undisputed that, at the time she filled out the application for

cancer insurance with AFLAC, plaintiff omitted her recent cancer diagnosis

from the application form. Once AFLAC discovered the omission, it

immediately terminated the policy and returned the premiums to the plaintiff.

Plaintiff contends that she withheld the information on the advice of Morrow.

Regardiess of the “unclean hands" of either party with respect to the

disclosure to AFLAC, plaintiff's theory is that had she known about the

AFLAC policy in May of 1990, she would have exercised the option, obtained

the policy and would have been validly covered under the policy in July when

she discovered she had cancer.

If plaintiff is inferring that the employee handbook was a “plan” this

theory also must fail. Although the handbook describes each of the available

benefit options for qualified full-time employees, it was an merely overview

and not a summary plan description under ERISA. See Gridley v. Cleveland

Pneumatic Co., 924 F.2d 1310 (3rd Cir. 1991) (plaintiff could not rely on

overview brochure to contradict provision in policy enrollment card).

7 - OPINION

Page 2la - Appendix C

contends that she was a participant in a "personal choice

account" which includes payment of premiums for the

AFLAC cancer policy as a component of the plan.

Defendants argue that each benefit insurance policy

constitutes a separate "plan" for the purpose of

determining whether plaintiff is a plan "participant."

Thus, the issue presented is whether plaintiff’ eligibility

for participation in any of the defendants’ proffered policy

options is sufficient to give her "participant" standing for

the purposes of this ERISA claim.

The ERISA statute which defines a "welfare benefit

plan" sheds little light on the dispute in this case. A

"plan" is simply any program established or maintained by

an employer "for the purpose of providing for its

participants or their beneficiaries, through the purchase of

insurance or otherwise . . . benefits in the event of

sickness.” 29 U.S.C. § 1002(1). I agree with plaintiff that

the fact that an employer offers more than one benefit

option package to its employees does not alter the fact

that a plan is a "plan" for the purposes of ERISA. See

Brundage-Peterson v. Compcare Health Services, 877 F.2d

509, 511 (7th Cir. 1989). However, plaintiffs contention

that the decision in Brundage necessarily ends the issue of

whether plaintiff is a plan participant is ill-founded. In

Brundage, the plaintiff filed a state breach of contract

action directly against the insurance company which issued

her policy for a denial of benefits for medical expenses

incurred when she suffered an “unusual illness." The

insurance company removed the case to federal court on

the basis of ERISA preemption because plaintiff had

obtained the policy through her employer and the

employer contributed premiums and collected and

remitted premium payments via payroll withholding. The

court held that the contractual arrangements between the

insurance company and the employer, the eligibility

requirement of being an employee for a certain period of

8 - OPINION

Page 22a - Appendix C -

time and the employer's contributions were sufficient to

find that the coverage was part of a “plan” under ERISA.

Id., at 510-511. There was no dispute that Brundage was

a participant in the plan at issue because she had elected

coverage under defendant’s policy and been denied

benefits thereunder.

What cases like Brundage and Firestone, Reese

and Olson demonstrate however, is that “participant”

status depends upon a plaintiffs claim for benefits or

other rights under the terms of an existing and valid

policy. Thus, regardless of whether we view defendants’

plan as a group of policies or we view the policies as a

group of separate plans, liability under ERISA is governed

by the express provision of § 1132(a) which provides for

a civil action by a participant to recover, clarify or enforce

benefit provisions. Like the claim in Reese, if successful,

plaintiffs claim would result in a damage award, not a

payment of "benefits" under the any plan provision. There

is simply nothing in the statute which would extend

liability to a claim for coverage under a policy that was

never validly issued.

An additional justification for limiting ERISA’s

remedial scope to claims related to benefits, as opposed

to a claim for coverage, becomes clear when I consider

the possible remedies available against the employer even

if I found plaintiff could establish a breach of an ERISA

fiduciary duty. In this case, plaintiff seeks monetary

compensation against the employer for damages equal to

medical benefits that would have been paid had she been

notified about the availability of cancer insurance in May

of 1990 and exercised her option to obtain such a policy.

Plaintiff does not dispute that so-called "extra-contractual

damages" such as punitive damages or emotional distress

damages may not be recovered under ERISA. See Olson,

960 F.2d at 1424, Reinhardt, J. concurring, citing Sokol v.

9 - OPINION

Page 23a - Appendix C

Bernstein, 803 F.2d 532 (9th Cir. 1986) (other citations

omitted). Instead, plaintiff labels her prayer as “equitable”

in nature and, thus, permissible as "such other appropriate

equitable relief" permitted under 1132(a).

While plaintiff may label her prayer as "equitable"

in nature, I find that she is in essence seeking extra-

contractual compensatory damages which are unavailable

under ERISA. For example, in Sokol, the Ninth Circuit

rejected a similar argument against a plan fiduciary for

emotional distress damages. The plaintiff, a named

beneficiary in a pension plan policy, claimed that a trustee

distributed trust funds without her authorization. The

court rejected the claim and held that the “equitable

relief" referenced in § 1132 was meant to provide

declaratory or injunctive relief. In so holding, the court

noted that “where a statute expressly provides a particular

remedy, a court must be chary of reading others into it.”

Id., at 536, citing Massachusetts Mutual Life Ins. Co. v.

Russell, 105 S.Ct. 3085, at 3093 (1985).° Thus, because

ERISA does not provide for a cause of action for failure

to notify an eligible employee about coverage options (as

opposed to benefits available after coverage is obtained),

I will not read as such an expansion into the statute.

Finally, I note that the remedy plaintiff seeks

would be contrary to the overriding purpose of ERISA to

protect plans as a whole, rather than individual

participants. See Williams v. Caterp*'lar, Inc., 944 F.2d

658, 665 (9th Cir. 1991) (dismissal of claims by plan

participants for oral misrepresentations which had no

Even if plaintiff established a violation of a fiduciary duty against

defendants, the “breach” by the employer would be the loss of the empioyer’s

premium contributions for the period of coverage. This was not a self-funded

plan and, thus, the employer-defendants were never contractually obligated

to provide medical] benefit coverage.

10 - OPINION

Page 24a - Appendix C

impact upon plan itself); compare Amalgamated Clothing

& Textile Workers v. Murdock, 861 F.2d 1406, 1411 (9th

Cir. 1988) (plaintiffs had standing to seek constructive

trust against plan fiduciary for alleged misuse of plan

assets). Because the remedy plaintiff seeks in this case is

personal to her and would have no direct effect on any

aspect of the "plan" or defendants’ administration of the

health insurance options available to employees, her claim

for benefits she would have received under the cancer

policy if it had been issued must fail under ERISA.’

Based on the foregoing, I find that plaintiff is not

a “participant” or "beneficiary" with respect to the AFLAC

cancer coverage, and, thus, lacks standing to maintain an

ERISA claim against her employer for breach of fiduciary

duties or failure to provide AFLAC plan documents.

Further, I find that, even if plaintiff had standing, she

could not recover the type of compensatory damages

sought in this case. | am fully cognizant of the fact that,

with my earlier dismissal of plaintiff's common law claim

for negligence against defendants on the basis that such

claims are preempted by ERISA, plaintiff is now,

essentially, without a remedy against her employer.

However, the courts have recognized that ERISA has

created a "gap," but that such a gap does not undermine

the reasoning behind ERISA’s broad preemptive reach.

Olson, 960 F.2d at 1423. I find that this is one of those

cases that falls within that "gap." Accordingly, defendants’

motion for summary judgment #40 is granted and

Given the limited equitable relief available under ERISA, even if

plaintiff could maintain an action for breach of a fiduciary duty, her relief

would be an order that she be given notice of the cancer coverage, which was

satisfied in July of 1990, mooting any potential claim for injunctive relief.

11 - OPINION

Page 25a - Appendix C

plaintiffs cross-motion for summary judgment #36 is

DENIED.

DATED this _29_ day of October, 1992.

[S/_ Malcolm F. Marsh

Malcolm F. Marsh

United States District Judge

12 - OPINION

Page 26a - Appendix C

FILED

92 OCT 29 PM 3:41

CLERK, US DISTRICT COURT

DISTRICTCOURTOFOREGON

PORTLAND, OREGON

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

PAMELA J. McLEOD, )

) Civil No. 92-450-MA

Plaintiff,

Vv.

OREGON LITHOPRINT, INC.,

an Oregon corporation,

dba News-Register

Publishing Co., et al.

Defendants.

Ne ee ie ee Se ce ee ee See See”

Leslie Wellman

Shari Clark

Wellman & Murray

1001 S.W. Fifth Ave., Suite 1950

Portland, OR 97204

Attorneys for Plaintiff

Wm. Kelly Olson

Wade Keenon

Mitchell, Lang & Smith

101 S.W. Main, Suite 2000

Portland, OR 97204

1 - ORDER

Page 27a - Appendix D

Attorneys for Defendants Oregon Lithoprint, Inc.

and News-Register Employees’ Insurance Plan

MARSH, Judge.

Based upon my opinion filed herein this date,

defendants’ motion for summary judgment #40 is

GRANTED and plaintiffs cross-motion for summary

judgment #36 is DENIED.

DATED this _29_ day of October, 1992.

alcolm F. Mars

Malcolm F. Marsh

United States District Judge

2 - ORDER

Page 28a - Appendix D

! FILED

i : 92 OCT 29 PM 3:41

| CLERK, US DISTRICT COURT

DISTRICTCOURTOFOREGON

PORTLAND, OREGON

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

PAMELA J. McLEOD, )

) Civil No. 92-450-MA

Plaintiff,

OREGON LITHOPRINT, INC.,

an Oregon corporation,

dba News-Register

Publishing Co., et al.

Defendants.

Leslie Wellman

Shari Clark

Wellman & Murray

1001 S.W. Fifth Ave., Suite 1950

Portland, OR 97204

Attomeys for Plaintiff

Wm. Kelly Olson

Wade Keenon

Mitchell, Lang & Smith

101 S.W. Main, Suite 2000

Portland, OR 97204

1 - JUDGMENT

Page 29a - Appendix E

Attorneys for Defendants Oregon Lithoprint, Inc.

and News-Register Employees’ Insurance Plan

MARSH, Judge.

IT IS ORDERED AND ADJUDGED this action

is dismissed.

DATED this 29 day of October, 1992.

Malcolm F. Marsh

United States District Judge

a ne POET a IOP IE LAELIA PE Me

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.