473 U.S. 134 (1985), 84-9, Massachusetts Mutual Life Insurance Co. v. Russell

Docket Nº:No. 84-9
Citation:473 U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96, 53 U.S.L.W. 4938
Party Name:Massachusetts Mutual Life Insurance Co. v. Russell
Case Date:June 27, 1985
Court:United States Supreme Court
 
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473 U.S. 134 (1985)

105 S.Ct. 3085, 87 L.Ed.2d 96, 53 U.S.L.W. 4938

Massachusetts Mutual Life Insurance Co.

v.

Russell

No. 84-9

United States Supreme Court

June 27, 1985

Argued January 16, 1985

Reargued April 24, 1985

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE NINTH CIRCUIT

Syllabus

Respondent, a claims examiner for petitioner insurance company (petitioner), is a beneficiary under employee benefit plans administered by petitioner and governed by the Employee Retirement Income Security Act of 1974 (ERISA). In May, 1979, respondent became disabled with a back ailment, and received plan benefits until October 17, 1979, when petitioner's disability committee terminated her benefits based on an orthopedic surgeon's report. Respondent then requested review of that decision, and on March 11, 1980, the plan administrator reinstated her benefits based on further medical reports, and retroactive benefits were paid in full. But claiming that she had been injured by the improper refusal to pay benefits from October 17, 1979, to March 11, 1980, respondent sued petitioner in California Superior Court, alleging various causes of action based on state law and on ERISA. Petitioner removed the case to Federal District Court, which granted petitioner's motion for summary judgment, holding, inter alia, that ERISA barred any claims for extracontractual damages arising out of the original denial of respondent's claim for benefits. The Court of Appeals reversed in pertinent part, holding that the 132 days that petitioner took to process respondent's claim violated the plan fiduciary's obligation to process claims in good faith and in a fair and diligent manner, and that this violation gave rise to a cause of action for damages under § 409(a) of ERISA that could be asserted by a plan beneficiary pursuant to § 502(a)(2) authorizing civil enforcement of ERISA. Section 409(a) provides that

[a]ny person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this title shall be personally liable to make good to such plan any losses to the plan resulting from 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.

Held: Section 409(a) does not provide a cause of action for extracontractual damages to a beneficiary caused by improper or untimely processing of benefit claims. Pp. 139-148.

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(a) The text of § 409(a) contains no express authority for an award of such damages, and there is nothing in the text to support the conclusion that a delay in processing a disputed claim gives rise to a private cause of action for compensatory or punitive relief. Rather, the text shows that Congress did not intend to authorize any relief except for the plan itself. Not only is the relevant fiduciary relationship characterized at the outset of § 409(a) as one "with respect to a plan," but the fiduciary's potential personal liability is

to make good to such plan any losses to the plan . . . and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan.

Pp. 139-144.

[105 S.Ct. 3087] (b) Nor can a private cause of action for extra-contractual damages be implied. While respondent is a member of the class for whose benefit ERISA was enacted and, in view of the preemptive effect of ERISA, there is no state law impediment to implying a remedy, legislative intent and consistency with the legislative scheme support the conclusion that Congress did not intend the judiciary to imply such a cause of action. The civil enforcement provisions of § 502(a) provide strong evidence that Congress did not intend to authorize other remedies that it did not incorporate expressly. Pp. 145-148.

722 F.2d 482, reversed.

STEVENS, J., delivered the opinion of the Court, in which BURGER, C.J., and POWELL, REHNQUIST, and O'CONNOR, JJ., joined. BRENNAN, J., filed an opinion concurring in the judgment, in which WHITE, MARSHALL, and BLACKMUN, JJ., joined, post, p. 148.

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STEVENS, J., lead opinion

JUSTICE STEVENS delivered the opinion of the Court.

The question presented for decision is whether, under the Employee Retirement Income Security Act of 1974 (ERISA), a fiduciary to an employee benefit plan may be held personally liable to a plan participant or beneficiary for extracontractual compensatory or punitive damages caused by improper or untimely processing of benefit claims.

Respondent Doris Russell, a claims examiner for petitioner Massachusetts Mutual Life Insurance Company (hereafter petitioner), is a beneficiary under two employee benefit plans administered by petitioner for eligible employees. Both plans are funded from the general assets of petitioner, and both are governed by ERISA.

In May, 1979, respondent became disabled with a back ailment. She received plan benefits until October 17, 1979, when, based on the report of an orthopedic surgeon, petitioner's disability committee terminated her benefits. On October 22, 1979, she requested internal review of that decision and, on November 27, 1979, submitted a report from her own psychiatrist indicating that she suffered from a psychosomatic disability with physical manifestations, rather than an orthopedic illness. After an examination by a second psychiatrist on February 15, 1980, had confirmed that respondent was temporarily disabled, the plan administrator reinstated her benefits on March 11, 1980. Two days later, retroactive benefits were paid in full.1

Although respondent has been paid all benefits to which she is contractually entitled, she claims to have been injured by the improper refusal to pay benefits from October 17, 1979, when her benefits were terminated, to March 11, 1980, when her eligibility was restored. Among other allegations, she asserts that the fiduciaries administering petitioner's employee benefit plans are high-ranking company officials who

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(1) ignored readily available medical evidence documenting respondent's disability, (2) applied unwarrantedly strict eligibility standards, and (3) deliberately took 132 days to process her claim, in violation of regulations promulgated by the Secretary of Labor.2 The interruption of benefit payments allegedly forced respondent's disabled husband to cash out his retirement savings which, in turn, aggravated the psychological condition that caused respondent's back ailment. Accordingly, she sued petitioner in the California Superior Court pleading various causes of action based on state law and on ERISA.

Petitioner removed the case to the United States District Court for the Central District of California, and moved for summary judgment. The District Court granted the motion, holding that the state law claims were preempted by ERISA and that

ERISA bars any claims for extra-contractual damages and punitive damages arising [105 S.Ct. 3088] out of the original denial of plaintiff's claims for benefits under the Salary Continuance Plan and the subsequent review thereof.

App. to Pet. for Cert. 29a.

On appeal, the United States Court of Appeals for the Ninth Circuit affirmed in part and reversed in part. 722 F.2d 482 (1983). Although it agreed with the District Court that respondent's state law causes of action were preempted by ERISA, it held that her complaint alleged a cause of action under ERISA. See id. at 487-492. The court reasoned that the 132 days3 petitioner took to process respondent's claim violated the fiduciary's obligation to process claims in good faith and in a fair and diligent manner. Id. at

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488. The court concluded that this violation gave rise to a cause of action under § 409(a) that could be asserted by a plan beneficiary pursuant to § 502(a)(2). Id. at 489-490. It read the authorization in § 409(a) of "such other equitable or remedial relief as the court may deem appropriate" as giving it "wide discretion as to the damages to be awarded," including compensatory and punitive damages. Id. at 490-491.

According to the Court of Appeals, the award of compensatory damages shall "remedy the wrong and make the aggrieved individual whole," which meant not merely contractual damages for loss of plan benefits, but relief

that will compensate the injured party for all losses and injuries sustained as a direct and proximate cause of the breach of fiduciary duty,

including "damages for mental or emotional distress." Id. at 490. Moreover, the liability under § 409(a) "is against the fiduciary personally, not the plan." Id. at 490, n. 8.

The Court of Appeals also held that punitive damages could be recovered under § 409(a), although it decided that such an award is permitted only if the fiduciary "acted with actual malice or wanton indifference to the rights of a participant or beneficiary." Id. at 492. The court believed that this result was supported by the text of § 409(a) and by the congressional purpose to provide broad remedies to redress and prevent violations of the Act.

We granted certiorari, 469 U.S. 816 (1984), to review both the compensatory and punitive components of the Court of Appeals' holding that § 409 authorizes recovery of extracontractual damages.4 Respondent defends the judgment of the Court of Appeals both on its reasoning that § 409 provides an express basis for extracontractual damages, as well as by arguing that, in any event, such a private remedy should be inferred under the analysis employed in Cort v. Ash, 422 U.S. 66, 78 (1975). We reject both arguments.

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