Opposition Brief — Audet ex rel. Audet v. Prudential Health Care Plan, Inc.

Supreme Court, U.S,

ra. kh & DD

98 s 1 3 G a MAR 24 1999

No. 98-3167

nor ee Le

In The

Supreme Court of the United States

October Term, 1998

4

ELLEN AUDET AS NATURAL MOTHER,

GUARDIAN AND NEXT BEST FRIEND OF

ASHLEY AUDET, A MINOR,

Petitioner,

PRUDENTIAL HEALTH CARE PLAN, INC.,

Respondent.

4

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Eleventh Circuit

+

RESPONDENT'S BRIEF IN OPPOSITION

+

Nancy W. GrReEGoIRE*

W. Epwarp McIntyre

Grecc A. Toomey

BUNNELL, WouLFre, KirSCHBAUM,

KELLER, COHEN & McIntyre, P.A.

888 East Las Olas Boulevard

4th Floor

Fort Lauderdale, Florida 33301

(954) 761-8600

Counsel for Respondent

Prudential Health Care Plan, Inc.

*Counsel of Record

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

ee anaes

QUESTION PRESENTED

Does the decision of the United States Court of

Appeals for the Eleventh Circuit that punitive damages

are not available under the Employee Retirement Income

Security Act of 1974, as amended, 29 U.S.C. §§ 1001 et

seq., create a conflict with decisions of other federal cir-

cuit courts or state courts of last resort sufficient to call

for an exercise of this Court’s supervisory power?

li

TABLE OF CONTENTS

Page

OCuestion PAOSRNIGG i on cccs kek doce tees meee i

Fable of Comets isco es awed keane pees ii

Table OF AWUUhOriies o.oo és eb bens Shane yewnewreies iii

Statement? of the Cae0 oo sss i eee mee ea ee 1

A. The Proceedings Baw .06ceissaby Geskccaees 1

BS. Statement of the Fact ii cu Ae x

1. The Custodial Care fssae. oo. 065 Geek e ss 3

2. The Punitive Damages Issue ............. 4

Reasons for Denying the Writ ..................... 5

I. The Court has held that punitive damages are

not available under ERISA.................... ~)

II. There is no conflict among the federal circuit

courts or with any valid decision of the highest

COUR OF & ORNlO, iene ere en eieeeees bas 8

III. Neither Mertens nor the decisions of the federal

circuit courts conflict with Congressional intent.. 11

IV. Ms. Audet’s remaining arguments are for Con-

gress aru fet thia Cotert. 665 ip deccievsa ek cece 12

C OSU . . 6 on edd ei ae ee 14

;

lll

TABLE OF AUTHORITIES

Page

Cases

Blue Cross and Blue Shield of Alabama v. Lewis, 753 F.

cE ER 9 AS RG 0) Ra ae ee 9

Diduck v. Kaszycki & Sons Contractors, Inc., 974 F.2d

SE EOE Si ys eS et Se. ek 11

Ex parte Metropolitan Life Ins. Co., 679 So. 2d 686

SpE SaaS 2 mie pe a 9

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

NEED FR d a oh gs rs 6 cis’) ocd s vacc on. 6

Harsch v. Eisenberg, 956 F.2d 651 (7th Cir.), cert.

See ne ae LO 41900)... ccs... ee |

Haywood v. Russell Corp., 584 So. 2d 1291 (Ala.

Ne CS SPE SINGS Or eo i 9, 11

Hemelt v. U.S., 122 F.3d 204 (4th Cir. 1997).......... 11

Herdrich v. Pegram, 154 F.3d 362 (7th Cir. 1997)...... 13

Ingersoll-Rand Co. v. McClendon, 498 U.S. 133

SORES PIPERS Say RO oS Hae Ara ee 3, 8, 9, 10, 11

Landwehr v. DuPree, 72 F.3d 726 (9th Cir. ts 3) pate 11

Marbury v. Madison, 5 U.S. (1 Cranch) 137 (1803) ....13

McRae v. Seafarers’ Welfare Plan, 920 F.2d 819 (11th

EE MN gk akc s's cieis les ss ois vo ve ec. 5 12

Medina v. Anthem Life Ins. Co., 983 F.2d 29 (5th

Cir.), cert. denied, 510 U.S. 816 (1993).............. 11

Mertens v. Hewitt Associates, 508 U.S. 248 (1993)..... passim

iV-

TABLE OF AUTHORITIES - Continued

Page

Turner v. Fallon Community Health Plan, Inc., 127

F.3d 196 (1st Cir. 1997), cert. denied, U.S. __,

425 S04. TORS eee as cakas bide cceaeeuetor ue 11

U.S. 0. BUIAE, SOG Aiab.. AA COTO) 5 ike ees weer eee 5

US. 0, Care, doe Us. 482 23929). 062 eS 9

Weems v. Jefferson-Pilot Life Ins. Co., Inc., 663 So. 2d

WD. CASAS UFR) veh ne 0540 e eek bs oes ee 8, 9, 10

Zimmerman v. Sloss Equipment, Inc., 72 F.3d 822

(JORN Cie, TOSS) ves. hci aebeae ee bes ceenatentees 11

STATUTES

Employee Retirement Income Security Act of

1974, 29 USSG BR TOG OF ORs bike oa eee 1

oP WA BRE Res pshncsens seek Cees caemaees passim

Title VII of the Civil Rights Act of 1964, 42 U.S.C.

DERM sa ra « Kae aie de pak bas bunk eben eae oe 5

OTHER AUTHORITIES

PLR. ROD. Mig. 16247 IGG) i. is vie nes swansea Cewek 11

supreme Coutt Rute 2000) 0.6 «ise ccnwiaws deanna 10

BRIEF IN OPPOSITION

Respondent Prudential Health Care Plan, Inc. (“Pru-

dential”) believes that the Court has already decided the

question presented in the Petition and that there is nei-

ther confusion nor conflict among the federal circuit

courts. The few contrary pronouncements of Alabama

state and federal courts are not reliable authority. There-

fore, Prudential respectfully requests denial of the Peti-

tion.

STATEMENT OF THE CASE

A. The Proceedings Below:

Petitioner Ellen Audet as Natural Mother, Guardian

and Next Best Friend of Ashley Audet, a Minor (“Ms.

Audet”), filed a breach of contract action against Pruden-

tial in state court, alleging that Prudential failed to pay

insurance benefits under her employer-sponsored health

care plan (“Plan”) for professional chest physiotherapy

for her daughter Ashley, who suffers from cystic fibrosis.

Prudential removed the action to federal court on the

basis of ERISA! preemption and defended on the basis

that the questioned bills were for custodial care excluded

by the Plan.

Ms. Audet filed her Second Amended Complaint,

alleging a wrongful denial of benefits under 29 U.S.C.

1 Employee Retirement Income Security Act of 1974, as

amended, 29 U.S.C. §§ 1001 et seq.

§ 1132(a)(1)(B)? from May 30, 1995 to September 15, 1995.

Prudential offered to pay the claimed amount, which the

parties stipulated was $2,415, but Ms. Audet rejected the

offer. Instead, she twice moved to amend her pleadings to

seek punitive damages and jury trial, claiming that Pru-

dential had altered records to support its denial of cover-

age. Prudential opposed the motions both because they

were untimely and because punitive damages are not

available under ERISA. The United States District Court

for the Southern District of Florida denied both motions.

Following non-jury trial, the district court entered its

Findings of Fact and Conclusions of Law (“Findings”),

which explain that Prudential’s denial of benefits was

based upon its decision that only custodial care, or care

by a lay person with minimal training, was necessary

when Ashley’s fibrotic condition was not aggravated, and

that such custodial care was excluded by the Plan. Pet.

App. 9a. In ruling against Prudential on the issue, the

court found that Ms. Audet’s claim for professional ser-

vices was reasonable and medically required by Ashley’s

condition. Pet. App. 10a. While the court held that Ms.

Audet was entitled to the amount she claimed, it assigned

no bad motive to Prudential’s decision and declined to

find any significance in a modified recommendation

regarding Ashley’s need for daily professional physi-

otherapy. Pet. App. 12a-15a.

2 “A civil action may be brought . . . by a participant... 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... . ”

Relying upon Ingersoll-Rand,? Ms. Audet appealed

the punitive damage and jury decisions to the Eleventh

Circuit, again arguing that Prudential’s “falsifying medi-

cal records to justify denying care to Ashley” entitled her

to claim punitive damages and go to a jury. Pet. App.

la-3a. Prudential again responded that the alleged “falsi-

fication” was merely a revision from a first memoran-

dum, recommending that Ashley have physiotherapy five

days a week by a professional therapist, to a second

memorandum, recommending as-needed professional!

physiotherapy. Prudential pointed out that the district

court, as the factfinder, characterized the difference as a

modification to which it refused to assign any bad

motive.

The Eleventh Circuit affirmed the decision of the

district court, explaining that it “already considered and

rejected the argument that Ingersoll-Rand opened the door

to punitive damages in ERISA cases.” Pet. App. 2a.

Ms. Audet now seeks this Court’s review, again argu-

ing the Court has held that punitive damages are avail-

able under ERISA.

B. Statement of the Facts:

1. The Custodial Care Issue

This case concerned less than $3,000 in insurance

coverage for custodial, not emergency, care. Prudential

covered the cost of Ashley’s chest physiotherapy when-

ever her condition exacerbated, and Ashley’s mother, a

3 Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 (1990).

trained nurse, was providing chest physiotherapy on a

daily basis when the cystic fibrosis was quiescent. No

lives were at stake. There is no evidence that Ashley was

ever denied treatment or that her health was ever imper-

iled.

While the district court found that no case manager

was assigned to Ashley’s case, Ms. Audet never argued

that her claims suffered from lack of management. As the

district court found, the parties simply differed on

whether daily professional chest physiotherapy constitu-

ted custodial care excluded from coverage under the

Plan. Pet. App. 10a-12a.

2. The Punitive Damages Issue

Ms. Audet’s attempt to claim punitive damages is

based upon two reports appended to the Findings as

Attachment #1 and Attachment #2, both authored by the

home health care service retained by Prudential to exam-

ine Ashley and report on her therapeutic needs. Pet. App.

12a-15a. The difference in the two Attachments is that the

first recommends once-a-day professional chest physi-

otherapy and the second recommends professional chest

physiotherapy on an as-needed basis.

After reviewing the testimony and evidence regard-

ing the reports, their preparation, and the reasons for the

difference, the district court declined to conclude that the

evidence showed either falsification or alteration, as Ms.

Audet urged. Instead, the court simply found a modifica-

tion from the first report to the second.

+

REASONS FOR DENYING THE WRIT

I. The Court has held that punitive damages are not

available under ERISA.

Ms. Audet’s argument ignores the Court’s decision in

Mertens.* The Mertens petitioners, representing a class of

former employees who participated in a retirement plan,

sued the plan’s actuary for breach of fiduciary duty and

sought an award of compensatory damages as “appropri-

ate equitable relief” under § 502(a)(3)(B), 29 U.S.C.

§ 1132(a)(3)(B).5 The district court dismissed the action;

the circuit court affirmed; and the case came to this Court

to answer the question whether ERISA authorizes suits

for money damages against nonfiduciaries who know-

ingly participate in the breach of a fiduciary duty

imposed by ERISA.®

Writing for the majority, Justice Scalia noted that the

Court had not yet interpreted the phrase “appropriate

equitable relief” found in § 502(a)(3)(B) but had construed

similar language contained in Title VII of the Civil Rights

Act of 1964, 42 U.S.C. § 2000e-5(g), to preclude “awards

for compensatory or punitive damages.”” The Court

showed no uncertainty in determining that the same

meaning applied to 29 U.S.C. § 1132(a)(3)(B):

In the context of the present statute, we think

there can be no doubt. Since all relief available

for breach of trust could be obtained from a

4 Mertens v. Hewitt Associates, 508 U.S. 248 (1993).

5 Id. at 250.

6 Id. at 249-50.

7 Id. at 255 (citing U.S. v. Burke, 504 U.S. 229, 238 (1992)).

court of equity, limiting the sort of relief obtain-

able under § 502(a)(3) to “equitable relief” in the

sense of “whatever relief a common-law court of

equity could provide in such a case” would limit

the relief not at all. We will not read the statute

to render the modifier superfluous.

Regarding “equitable” relief in § 502(a)(3) to

mean “all relief available for breach of trust at

common law” would also require us either to

give the term a different meaning there than it

bears elsewhere in ERISA, or to deprive of all

meaning the distinction Congress drew between

“equitable” and “remedial” relief in the very

same section of ERISA... . 8

In the end, the majority held that only traditional equita-

ble remedies such as injunction, mandamus, and restitu-

tion, but not money damages, were available to ERISA

plaintiffs.9

Writing in dissent, Justice White asserted that, since

ERISA “abounds with the language and terminology of

trust law,” the statutory phrase “must be construed

against the background of the common law of trusts.”

Since both courts of equity and law had jurisdiction over |

a trust beneficiary’s claims, the dissent stated that it was }

appropriate to look to the traditional equitable remedies

afforded a trust beneficiary. This, the dissent said,

included “a monetary award to make the victims of the

8 Id. at 257-59.

9 Id. at 260.

'© Id. at 264 (White, J., dissenting) (quoting Firestone Tire &

Rubber Co. v. Bruch, 489 U.S. 101, 110-111 (1989)).

breach whole.”1! Even though the dissent disagreed with

the majority on whether some form of compensatory

award was available under ERISA, it agreed that punitive

damages were not available:

The fact of the matter is that not all forms of

relief were available in the common-law courts

of equity for a breach of trust. Although the

equity courts could award monetary relief to

make the victim of a breach of trust whole,

extracompensatory forms of relief, such as puni-

tive damages, were not available. As this Court

has long recognized, courts of equity would not

- absent some express statutory authorization —

enforce penalties or award punitive dam-

ages. .. . As Justice Kennedy has observed, this

limitation on equitable relief applied in the trust

context as well, where plaintiffs could recover

compensatory monetary relief for a breach of

trust, but not punitive or exemplary damages. !2

Although the Mertens majority and dissent differed

on the availability of compensatory damages under

ERISA, they agreed that punitive damages are not avail-

able. Because the Court has already answered the ques-

tion Ms. Audet asks, the Petition should be denied.

‘1! Id. at 266 (White, J., dissenting).

12 Id. at 270 (White, J., dissenting).

II. There is no conflict among the federal circuit courts

or with any valid decision of the highest court of a

state.

Ms. Audet claims the decision of the Eleventh Circuit

conflicts with the decision of this Court in Ingersoll-

Rand,'3 and the pronouncement of the Supreme Court of

Alabama in Weems.'4 As to Ingersoll-Rand, she is incorrect.

And, although the Eleventh Circuit’s decision may

facially conflict with Weems, Weems and its Alabama com-

panions are not only isolated in a sea of correctly-decided

cases, the Weems pronouncement on the ERISA punitive

damage issue was either dicta or the court was without

jurisdiction to decide the issue.

In Ingersoll-Rand, the Court addressed a wrongful

discharge suit brought by an ex-employee who claimed

his discharge was motivated by his employer’s desire to

avoid contributing to his pension fund.!5 The ex-

employee sought compensatory and punitive damages.

The issue before the Court was whether the relief sought

by the ex-employee was pre-empted by ERISA. In finding

that the suit was pre-empted, the Court noted: “It is clear

that the relief requested here is well within the power of

federal courts to provide.”!© The United States District

Court for the Northern District of Alabama seized upon

13 Jd. at 133.

14 Weems v. Jefferson-Pilot Life Ins. Co., Inc., 663 So. 2d 905

(Ala. 1995).

1S Id. at 136.

16 Id. at 145.

ai i acai

this sentence as allowing any form of extra-contractual

damages:

In Ingersoll-Rand the Supreme Court has now

clearly answered the Eleventh Circuit’s prayer

by giving it the “green light” to fashion ERISA

remedies beyond the mere enforcement of

claims for unpaid benefits, even though a feder-

ally fashioned remedy may bear a striking sim-

ilarity to some “preempted” state or common

law remedy. According to Ingersoll-Rand, a

court, state or federal, in an ERISA case, may, as

an ERISA remedy, award extra-contractual, even

punitive, damages, that is, if the facts call for

such a remedy.!7

The state courts of Alabama followed this misinterpreta-

tion of Ingersoll-Rand in a series of cases holding that state

and federal courts are authorized to impose extra-con-

tractual and punitive damages in ERISA cases.18

Ms. Audet focuses on Weems to argue that Ingersoll-

Rand established that punitive damages are available

under ERISA. Prudential’s response is threefold. First, the

language in Ingersoll-Rand speaks of relief, not remedies

17 Blue Cross and Blue Shield of Alabama v. Lewis, 753 F. Supp.

345, 347 (N.D. Ala. 1990).

18 See Ex parte Metropolitan Life Ins. Co., 679 So. 2d 686,

688-89 (Ala. 1996); Weems, 663 So. 2d at 905; Haywood v. Russell

Corp., 584 So. 2d 1291, 1296 (Ala. 1991). One of the Weenzs

dissenters later took the incorrect position in Metropolitan Life

that the Court’s denial of certiorari in Weems was an indication

that punitive damages are available under ERISA, Metropolitan

Life at 689 (Houston, J. concurring); the denial of a petition for

certiorari “imports no expression of opinion upon the merits of

the case.” U.S. v. Carver, 260 U.S. 482, 490 (1923).

10

such as compensatory and punitive damages. Second,

whatever precedential value the language in Ingersoll-

Rand once had was supplanted by this Court's decision in

Mertens, which clarifies that compensatory and punitive

damages are not available remedies under ERISA. Third,

Weems does not present a conflict with the decision of the

Eleventh Circuit in this case over which this Court should

exercise jurisdiction for two reasons.

In Weems, plan participants sued an employer and

insurer under state law and ERISA. The participants’

pleadings showed that their ERISA claim was under

§ 1132(a)(1)(B), but they also sought compensatory and

punitive damages alleging that the employer had allowed

their ERISA plan to lapse. One of two analyses of Weems

must be accurate. Either the Weems court had jurisdiction

because the only ERISA claim was under § 1132(a)(1)(B),

in which case any language regarding the availability of

compensatory and punitive damages under 29 U.S.C.

§ 1132(a)(3) is nothing more than dicta. Or, alternatively,

the Weems court improperly asserted jurisdiction over a

claim under § 1132(a)(3), because exclusive jurisdiction

over § 1132(a)(3) claims is vested in federal courts. 29

U.S.C. § 1132(e). In either event, Weems is not a “decision”

upon which Ms. Audet can validly rely to argue that

conflict exists with the Eleventh Circuit’s decision here.

S.Ct.R. 10(a).

Ms. Audet also claims conflict among the federal

circuit courts. The cases upon which she relies, however,

all expressly recognize, as did the Eleventh Circuit here,

:

11

that punitive damages are not available under ERISA.19

Again, there is no conflict.

Ill. Neither Mertens nor the decisions of the federal

circuit courts conflict with Congressional intent.

To support her argument that the decisions of the

federal circuit courts conflict with Congressional intent,

Ms. Audet cites a 1988 Report from the House of Repre-

sentatives Education and Labor Committee.2° As the

Eleventh Circuit recognized in McRae, the Report “carries

19 See Turner v. Fallon Community Health Plan, Inc., 127 F.3d

196, 199 (1st Cir. 1997), cert. denied, __ U.S. __, 118 S.Ct. 1512

(1998) (recognizing that the Supreme Court has “adamantly

ruled that ERISA’s express remedies are a signal to courts not to

create additional remedies of their own.”); Hemelt v. TERE Ye,

F.3d 204, 207 (4th Cir. 1997) (holding that ERISA does not allow

claims for compensatory or punitive damages); Zimmerman v.

Sloss Equipment, Inc., 72 F.3d 822, 828 (10th Cir. 1995) (“We have

previously held that punitive damages are not available in an

ERISA action.”); Landwehr v. DuPree, 72 F.3d 726, 735 (9th Cir.

1995) (“ERISA plaintiffs may only obtain equitable relief such as

restitution, and not compensatory or punitive damages, from a

party in interest.”); Medina v. Anthem Life Ins. Co., 983 F.2d 29, 31

(Sth Cir.), cert. denied, 510 U.S. 816 (1993) (“Had Congress

intended to develop ERISA remedies additional to the ones it

specifically crafted, it has had ample opportunity to enact such

legislation.”); Diduck v. Kaszycki & Sons Contractors, Inc., 974 F.2d

270, 286 (2d Cir. 1992) (holding that neither § 502(a)(2) nor

§ 502(a)(3) allows punitive damage awards); Harsch v. Eisenberg,

956 F.2d 651, 660 (7th Cir.), cert. denied, 506 U.S. 818 (1992) (“We

are not rash enough to believe that the [Ingersoll-Rand] Court

intended to overrule settled law in most of the circuits, as well

as narrowly limit — if not overrule — its own decision in Russell in

such an off-hand manner.”).

20 H.R. Rep. No. 101-247, at 98 (1989).

12

slight weight in this case.”?! A Committee statement does

not express Congressional intent — just the opinion of a

Committee nearly 15 years after ERISA was enacted.

As this Court noted in Mertens, the “notion that

concern about punitive damages motivated Congress is a

classic example of projecting current attitudes upon the

helpless past.”22 In 1974, when ERISA was enacted, the

availability of punitive damages was not an issue. By

1988, when the Committee Report was promulgated,

there were “clear precedents” from this Court and the

federal circuit courts that punitive damages were not

available under ERISA.?3 Faced with such clear prece-

dents, Congress could easily have amended ERISA to

clarify that punitive damages were available to ERISA

plaintiffs — if that were Congressional intent. That Con-

gress enacted no such amendment in response to the

well-developed case law construing ERISA and the 1988

Committee report leaves little doubt that this Court and

the federal circuit courts have correctly construed Con-

gressional intent.

IV. Ms. Audet’s remaining arguments are for Congress

and not this Court.

Ms. Audet’s final arguments are correctly directed to

her Congressional representatives and not to this Court.

If public policy, public outcry, and rampant abuses by

21 McRae v. Seafarers’ Welfare Plan, 920 F.2d 819, 822-23 (1ith

Cir. 1991).

22 Id. at 257 n. 7.

23 McRae, 920 F.2d at 823.

13

ERISA insurers call for response, as she contends, then

that response is for Congress to provide. The Seventh

Circuit, which authored Herdrich v. Pegram,?4 the case

upon which Ms. Audet relies for her “consumer outcry”

argument, recognized as much.?° To the extent Ms. Audet

claims that the facts of this case support an award of

punitive damages, the district court, as the trier of fact,

disagreed that Prudential even exhibited a bad motive.

Pet. App. 12a.

The only question presented by the Petition is

whether punitive damages are available under ERISA as

it exists today. This Court has correctly answered the

question in Mertens. Long before Marbury v. Madison,?®

this Court established that it is the province of the judici-

ary to construe the laws enacted by Congress, but not to

determine what the law should be. The Court most

recently clarified that division of power in Mertens: “We

will not attempt to adjust the balance between . . . com-

peting goals that the text adopted by Congress has

struck.”27

24 154 F.3d 362 (7th Cir. 1997).

25 Harsch, 956 F.2d at 660.

26 5 U.S. (1 Cranch) 137 (1803).

27 Id. at 263.

14

CONCLUSION

There is no reason for this Court to exercise its super-

visory jurisdiction in this case. The question presented

was authoritatively answered in Mertens, the federal cir-

cuit courts are unified in their rejection of ERISA punitive

damage claims, and the few incorrectly-decided Alabama

cases are insufficient to trigger conflict jurisdiction. Any

further evolution of ERISA is for Congress.

Respectfully submitted,

Nancy W. Grecorre

W. Epwarp McIntyre

Grecc A. Toomey

BUNNELL, WouLFE, KIRSCHBAUM,

Ketter, COHEN & McIntyre, P.A.

888 East Las Olas Boulevard

4th Floor

Fort Lauderdale, Florida 33301

(954) 761-8600