Harsch v. Eisenberg

Decision Date19 February 1992
Docket Number90-3303,Nos. 90-3169,s. 90-3169
Citation956 F.2d 651
Parties, 14 Employee Benefits Cas. 2521 Kathaleen A. Bassler HARSCH, Douglas M. Bihler, Thomas D. Kuehl, Paula C. Miller, and Lisa P. Tallar-Kuehl, Plaintiffs-Appellees, Cross-Appellants, v. Alan D. EISENBERG, Individually and as Trustee and Administrator of the Alan D. Eisenberg, S.C. Pension and Profit Sharing Plan, and as President and Sole Director of Alan D. Eisenberg, S.C., the Alan D. Eisenberg, S.C. Pension and Profit Sharing Plan, and Alan D. Eisenberg, S.C., a Wisconsin service corporation, Defendants-Appellants, Cross-Appellees.
CourtU.S. Court of Appeals — Seventh Circuit

L. William Staudenmaier, Brian C. Tyndall (argued), Paul J. Hinkfuss, Cook & Franke, Milwaukee, Wis., for plaintiffs-appellees.

Alan M. Levy (argued), Steven J. Slawinski, O'Neil, Cannon & Hollman, Milwaukee, Wis., for defendants-appellants.

Before CUDAHY and FLAUM, Circuit Judges, and ROSZKOWSKI, Senior District Judge. *

CUDAHY, Circuit Judge.

The principal question presented by this appeal is whether either extracontractual compensatory or punitive damages may be recovered by a beneficiary in an action for breach of fiduciary duty under ERISA. The district court held that punitive damages were not available in such an action, but that the compensatory damages sought by the plaintiffs were. We affirm the district court's holding as to punitive damages, but reverse on the issue of compensatory damages. We also affirm the denial of sanctions under Fed.R.Civ.P. 11, and vacate and remand the rulings on attorney's fees and sanctions under ERISA.

I.

This remarkably vexatious litigation arose out of a dispute between defendant Alan D. Eisenberg and some of his former employees over the distribution of the employees' pension benefits. Eisenberg is the president and sole director of defendant Alan D. Eisenberg, S.C., a Milwaukee law firm. The plaintiffs are former employees of the firm who left at various times during 1986. 1 Prior to leaving the firm, all were participants in the Alan D. Eisenberg, S.C. Pension and Profit Sharing Plan (the Plan), of which Eisenberg was and is the named trustee and administrator.

Beginning with Lisa Tallar (now Tallar-Kuehl) in May of 1986, the plaintiffs made a number of requests to Eisenberg for information about and distribution of their benefits under the Plan. Tallar wrote to Eisenberg requesting payment of her benefits in May and July, and Paula Miller did the same in September. Neither received a response. Thomas Kuehl made oral requests for a distribution in July and September, which Eisenberg rebuffed with a variety of explanations and excuses why the benefits could not be paid at the time in question.

In January of 1987, Kuehl began to make written requests on behalf of all the plaintiffs for Plan documents and distribution of benefits. These requests continued through September 3, 1987. Eisenberg rebuffed all the requests, with increasing hostility. 2 The plaintiffs contended that according to the firm's practice and policy they were entitled to their benefits shortly after their departures from the firm. Eisenberg responded that the plaintiffs were not entitled to any payment until they reached retirement age (59 years), and demanded that the plaintiffs produce some "statutory, or contractual, authority" for their demands for information and benefits.

The plaintiffs filed this lawsuit against Eisenberg, Alan D. Eisenberg, S.C. and the Plan on November 24, 1987. The complaint alleged that Eisenberg had refused to comply with the plaintiffs' written requests for information and claims for benefits, in violation of the terms of the Plan, the policy and practice of the firm and ERISA. In addition to Plan documents and benefits, the plaintiffs sought compensatory and punitive damages. On December 16, the defendants filed their answer, in which they denied all liability, asserted that Kuehl had been responsible for administering the Plan and that therefore any alleged noncompliance with ERISA was a result of his actions, and requested costs and fees under Rule 11. Nevertheless, on December 24, 1987, the defendants notified the plaintiffs that all of the benefits sought by the plaintiffs would be paid. The plaintiffs received their first payment of benefits in January of 1988 (the defendants had offered to make payments in December, but the plaintiffs rejected the offer for tax reasons). Distribution was largely completed by March, with a few minor adjustments in April.

The defendants continued to deny liability for compensatory or punitive damages, and in April filed a counterclaim against Kuehl alleging that he had been a fiduciary with respect to the Plan during his employment with the firm and that he had breached his duties as a fiduciary by failing to ensure that the Plan complied with its obligations under ERISA. The defendants also moved to dismiss the complaint on the ground that neither compensatory nor punitive damages are available in an action brought by individual beneficiaries under ERISA. The court denied the motion to dismiss the compensatory damages claim, but agreed with the defendants that punitive damages could not be recovered under ERISA, and dismissed the plaintiffs' claim for such damages. The claim for compensatory damages and the counterclaim against Kuehl were tried to a jury over the defendants' objection. The jury ruled for the plaintiffs on both issues, and awarded $7,500 each to Tallar, Miller, Douglas Bihler and Kathaleen Bassler Harsch, and $25,000 to Kuehl. On the defendants' motion, all the awards except Kuehl's were subjected to substantial remittiturs on the ground that they bore no reasonable relationship to the evidence.

II.

The civil enforcement provisions of ERISA appear in section 502(a) of the statute. That section provides in pertinent part:

A civil action may be brought--

(1) by a participant or beneficiary--

. . . . .

(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;

. . . . .

(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 subchapter or the terms of the plan.

29 U.S.C. § 1132(a) (1988). The plaintiffs argue that both extracontractual compensatory and punitive damages are recoverable under either section 502(a)(1)(B) or section 502(a)(3)(B). The defendants contend that neither type of relief is available under any provision of section 502. We deal with each type of damages in turn.

A. Compensatory Damages

The plaintiffs in this case sought a variety of damages that arose from the defendants' delay in payment of their benefits. Paula Miller claimed that she incurred additional interest expense on her credit card balance, which she would have paid off earlier if she had received the benefits due her from the Plan. Tom Kuehl and Lisa Tallar-Kuehl testified that the delay in payment caused their distributions to be subject to the less favorable provisions of the then-new Tax Reform Act of 1986. Douglas Bihler claimed that the delay forced him to forgo hiring a secretary for his new law practice for four months, which limited the time he could devote to billable work and resulted in a loss of income. 3 The defendants argue that all of these damages are extracontractual in nature and therefore not recoverable under either section 502(a)(1)(B) or section 502(a)(3) of ERISA. 4

1. Section 502(a)(1)(B)

In Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985), a beneficiary of an ERISA-governed employee benefit plan sued the plan administrator for compensatory and punitive damages arising out of the administrator's delay in processing her claim for disability benefits. The Ninth Circuit found that the petitioner had stated a cause of action under section 409(a) of ERISA that could be asserted by a beneficiary under section 502(a)(2). The Supreme Court reversed, holding that "extracontractual damages caused by improper or untimely processing of benefit claims," id. at 136, 105 S.Ct. at 3087, may not be recovered in an action brought by a beneficiary to redress a violation of section 409(a).

The Russell Court did not expressly consider whether extracontractual damages might be available under ERISA section 502(a)(1)(B). Nevertheless, its opinion has important implications for that issue. In support of its holding, the Russell Court made the following observation:

Significantly, the statutory provision explicitly authorizing a beneficiary to bring an action to enforce his rights under the plan--s 502(a)(1)(B) ...--says nothing about the recovery of extracontractual damages, or about the possible consequences of a delay in the plan administrators' processing of a disputed claim. Thus, there really is nothing in the statutory text to support the conclusion that such a delay gives rise to a private right of action for compensatory or punitive relief.

Id. at 144, 105 S.Ct. at 3091. The Court also found that, in light of ERISA's carefully crafted remedial scheme, the complete absence in section 502(a) of any mention of extracontractual damages demonstrates Congress' deliberate intent not to afford such a remedy:

The six carefully integrated civil enforcement provisions found in § 502(a) of the statute as finally enacted ... provide strong evidence that Congress did not intend to authorize other remedies that it simply forgot to incorporate expressly.

Id. at 146-47, 105 S.Ct. at 3092 (citation omitted) (emphasis in original).

We can see--particularly as illustrated by the case at bar--good reasons to allow...

To continue reading

Request your trial
78 cases
  • Mathis v. American Group Life Ins. Co.
    • United States
    • U.S. District Court — Eastern District of Missouri
    • October 17, 1994
    ...circuits that have held that section 502(a)(1)(B) does not allow the recovery of extracontractual or punitive damages. Like the court in Harsch, Harsch v. Eisenberg, 956 F.2d 651 (7th Cir.1992), we are reluctant to believe that the Supreme Court intended us to create a body of federal commo......
  • Garcia v. Kaiser Foundation Hospitals
    • United States
    • Supreme Court of Hawai'i
    • June 9, 1999
    ...Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 145-48, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985) (hereafter "Russell"); Harsch v. Eisenberg, 956 F.2d 651, 660 (7th Cir.), cert. denied, 506 U.S. 818, 113 S.Ct. 61, 121 L.Ed.2d 29 (1992); Medina v. Anthem Life Ins. Co., 983 F.2d 29, 31-32 (5th Cir.),......
  • Richards v. General Motors Corp.
    • United States
    • U.S. District Court — Western District of Michigan
    • March 31, 1994
    ...sought in the instant case13, are simply not available in an action by an individual beneficiary under § 502(a)(1)(B). Harsch v. Eisenberg, 956 F.2d 651, 656 (7th Cir.), cert. denied ___ U.S.___, 113 S.Ct. 61, 121 L.Ed.2d 29 Plaintiffs rely heavily on the above-quoted language from Daniel (......
  • Simpson v. Ernst & Young
    • United States
    • U.S. District Court — Southern District of West Virginia
    • September 23, 1994
    ...v. Anthem Life Insurance Co., 983 F.2d 29, 31 (5th Cir.), cert. denied, ___ U.S. ___, 114 S.Ct. 66, 126 L.Ed.2d 35 (1993); Harsch v. Eisenberg, 956 F.2d 651 (7th Cir.), cert. denied, ___ U.S. ___, 113 S.Ct. 61, 121 L.Ed.2d 29 (1992); Reinking v. Philadelphia American Life Insurance Co., 910......
  • Request a trial to view additional results
2 books & journal articles

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT