Reid v. Gruntal & Co., Inc., 90-0062.

• Decision Date: 17 May 1991
• Docket Number: No. 90-0062.,90-0062.
• Parties: Rosemary REID, Plaintiff, v. GRUNTAL & CO., INC., Defendant and Third-Party Plaintiff, v. FIRST UNUM LIFE INSURANCE COMPANY, Third-Party Defendant.
• Court: U.S. District Court — District of Maine

763 F. Supp. 672

Rosemary REID, Plaintiff, v. GRUNTAL & CO., INC., Defendant and Third-Party Plaintiff, v. FIRST UNUM LIFE INSURANCE COMPANY, Third-Party Defendant.

No. 90-0062.

United States District Court, D. Maine.

May 17, 1991.

Peter J. DeTroy, Christopher C. Taintor, Norman Hanson & DeTroy, Portland, Me., for plaintiff.

Andrew J. Bernstein, G. Steven Rowe, Portland, Me., for First UNUM Life Ins. Co.

Rufus Brown, Drummond, Woodsum, Plimpton & MacMahon, Portland, Me., for Gruntal & Co.

MEMORANDUM OF DECISION AND ORDER ON DEFENDANT GRUNTAL'S MOTION IN LIMINE

GENE CARTER, Chief Judge.

Defendant Gruntal & Co., Inc. (hereinafter Gruntal) moves to exclude all evidence regarding consequential damages which may be submitted by Plaintiff Rosemary Reid at trial. This motion in limine presents the question of whether the phrase "other appropriate equitable relief" contained in 29 U.S.C. section 1132(a)(3)(B) may be interpreted to permit the recovery of consequential damages under the Employee Retirement Income Security Act (hereinafter ERISA). 29 U.S.C. § 1001 et seq.

I. THE STATUTORY FRAMEWORK

ERISA creates four different civil actions for participants and beneficiaries of employee benefit plans. 29 U.S.C. §§ 1132(a)(1)(A) and (B), 1132(a)(2), (3), and (4). Along with the other expressly enumerated actions not available to participants and beneficiaries,¹ these are the exclusive remedies for violations of ERISA. Massachusetts Mutual Life Insurance Co. v. Russell, 473 U.S. 134, 146-47, 105 S.Ct. 3085, 3092-93, 87 L.Ed.2d 96 (1985). Only two types of ERISA civil actions are at issue in this case: those allowed by section 1132(a)(2) and section 1132(a)(3). These sections read in full:

§ 1132. Civil enforcement

(a) Persons empowered to bring a civil action.

A civil action may be brought ...

(2) by the Secretary, or by a participant, beneficiary or fiduciary for appropriate relief under section 409 29 U.S.C. § 1109;

(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this title 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 title or the terms of the plan; ...

29 U.S.C. § 1132(a). Section 1109, which is expressly incorporated into section 1132(a)(2), reads, in pertinent part:

§ 1109. Liability for Breach of Fiduciary Duty

(a) 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 title 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....

29 U.S.C. § 1109(a).

A. Section 1132(a)(2) and Breach of Fiduciary Duty

The Supreme Court has determined that section 1132(a)(2) does not permit the recovery of compensatory or punitive damages for breach of fiduciary duty claims. Russell, 473 U.S. at 144, 105 S.Ct. at 3091. Section 1132(a)(2) and section 1109 create a civil action holding personally liable any fiduciary of an employee benefit plan "who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this title...." 29 U.S.C. § 1109(a). Plaintiff's Complaint includes a claim, under ERISA, that Defendant Gruntal breached its fiduciary duty.

The fiduciary's "responsibilities, obligations, and duties" are enumerated in sections 1104 and 1106.² Section 1104 establishes a standard of loyalty which requires all fiduciaries to discharge their duties "solely in the interest of the participants and beneficiaries and ... for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan...." 29 U.S.C. § 1104(a)(1)(A). This section also establishes a standard of care which requires fiduciaries to discharge their duties "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...." 29 U.S.C. § 1104(a)(1)(B).

Congress intended that courts look to the common law of trusts to define the general scope of fiduciaries' duties. Central States Pension Fund v. Central Transport, Inc., 472 U.S. 559, 570, 105 S.Ct. 2833, 2840, 86 L.Ed.2d 447 (1985). However, Congress expressly identified and proscribed in section 1106 certain transactions involving the fiduciary and the employee benefit plan. 29 U.S.C. § 1106. The legislative history explains that participation by a fiduciary in any of these proscribed transactions would necessarily constitute a breach of the fiduciary's duty of loyalty. See S.Rep. No. 127, 93rd Cong., 2nd Sess., reprinted in 1974 U.S.Code Cong. & Admin.News 4639, 4838, 4866 (1974) ("There follows section 1104 a list of proscriptions which represent the most serious type of fiduciary misconduct which in one way or another has occurred in connection with some welfare or pension plan"). See also Russell, 473 U.S. at 143 n. 10, 105 S.Ct. at 3090 n. 10 ("ERISA establishes duties of loyalty and care for fiduciaries. With regard to loyalty, the principal provision is § 406 29 U.S.C. § 1106, which in general prohibits self-dealing and sales or exchanges between the plan, on the one hand, and `parties in interest' and `disqualified persons,' on the other hand.")

Section 1109 specifies three remedies for breaches of fiduciary duties: (1) the fiduciary makes good to such plan any losses to the plan resulting from such breach, (2) the fiduciary restores to such plan any profits of such fiduciary which have been made through the use of assets of the plan by the fiduciary, and (3) "such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary." 29 U.S.C. § 1109(a). The Russell Court read section 1109 to emphasize "the relationship between the fiduciary and the plan as an entity," rather than the direct relationship between the participant or beneficiary and the plan:

Thus, not only is the relevant fiduciary relationship characterized at the outset as one "with respect to a plan," but the potential personal liability of the fiduciary 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...."

473 U.S. at 140, 105 S.Ct. at 3089 (emphasis in Russell quotation). As a result, the Russell Court held that the phrase "other equitable or remedial relief" in section 1109 does not manifest a congressional intent to permit any relief except for the plan itself. The section 1109 remedies serve only to protect the fund from misconduct by fiduciaries. The "other equitable or remedial relief" authorized by section 1109 cannot, therefore, include the recovery of compensatory or punitive damages sought by the plaintiff in Russell.

Accordingly, Plaintiff Reid will not be able to recover damages under section 1132(a)(2) should she succeed on her breach of fiduciary duty claim.

B. Section 1132(a)(3) and Breach of Fiduciary Duty

The Court of Appeals for the First Circuit has held that compensatory and punitive damages are not available under section 1132(a)(3) to redress claims for breach of fiduciary duty under ERISA. Drinkwater v. Metropolitan Life Insurance Co., 846 F.2d 821, 824-25 (1st Cir.1988), cert. denied, 488 U.S. 909, 109 S.Ct. 261, 102 L.Ed.2d 249 (1989).³ The damages claim discussed and disallowed by the First Circuit sought "compensatory and punitive damages pursuant to 29 U.S.C. § 1132(a)(3) for breach of fiduciary duty ... in that Metropolitan's acts constituted attempted interference with Drinkwater's `attainment of his vested right to retirement.'" Drinkwater, 846 F.2d at 823 (emphasis added) (footnote omitted).⁴

Russell was expressly limited to breach of fiduciary duty claims brought under sections 1132(a)(2) and 1109. See Russell, 473 U.S. at 157, 105 S.Ct. at 3098 (Brennan, J., concurring). But the Supreme Court's interpretation of those provisions, permitting only equitable relief which protects the plan's fund from fiduciary duty breaches, requires reaching the same narrow interpretation of section 1132(a)(3) when addressing breach of fiduciary duty claims. If the "appropriate equitable relief" for breaches of fiduciary duties available under section 1132(a)(3) is broader than the "equitable or remedial relief as the court may deem appropriate" for breaches of fiduciary duties available under section 1132(a)(2), then section 1132(a)(2) would be completely unnecessary.⁵ As the First Circuit has observed: "If there is a big hole in the fence for the big cat, need there be a small hole for the small one?" Polaroid Corp. v. Commissioner of Internal Revenue, 278 F.2d 148, 153 (1st Cir.1960).

Accordingly, the holding in Drinkwater prohibits Plaintiff Reid from recovering any damages under section 1132(a)(3) should she succeed on her breach of fiduciary duty claim. The holding in Drinkwater left open the question of whether additional remedies would be available under section 1132(a)(3) for claims other than breach of fiduciary duty.⁶ The First Circuit opined in dictum, however, that no "extracontractual damages" are available under section 1132(a)(3) in any circumstances. Drinkwater, 846 F.2d at 824-25. The First Circuit's Drinkwater opinion suggests that the only "other appropriate equitable relief" available under section 1132(a)(3) is the same "equitable or remedial relief" which is available under section 1132(a)(2): "`other appropriate equitable relief' should be interpreted to mean what it says — declaratory or injunctive relief...." Id. at 824 (...