Alday v. Raytheon Co.

• Decision Date: 04 January 2008
• Docket Number: No. CV 06-32 TUC DCB.,CV 06-32 TUC DCB.
• Parties: Frances ALDAY et al., Plaintiffs, v. RAYTHEON COMPANY, a Delaware corporation, Defendant.
• Court: U.S. District Court — District of Arizona

619 F.Supp.2d 726

Frances ALDAY et al., Plaintiffs, v. RAYTHEON COMPANY, a Delaware corporation, Defendant.

No. CV 06-32 TUC DCB.

United States District Court, D. Arizona.

January 4, 2008.

COPYRIGHT MATERIAL OMITTED

Robert Miles Gregory, Law Office of Robert M. Gregory Pc, Mesa, AZ, for Plaintiffs.

John F. Easton, Pillsbury Winthrop Shaw Pittman LLP, Houston, TX, Ronald J. Stolkin, Fennemore Craig PC, Phoenix, AZ, for Defendant.

ORDER

DAVID C. BURY, District Judge.

Plaintiffs allege that "Defendant bargained with the Union Local Lodge No. 933 for four consecutive Collective Bargaining Agreements (CBAs) spanning a period of over fourteen years (beginning in 1990 and ending in 2004) that retirees and their spouses would have company-paid health care coverage until age 65."¹ (P's Response to Motion for Judgment on the Pleadings (Rule 12(c) Motion) at 6.) Plaintiffs sue Defendants under the Employee Retirement Income Security Act (ERISA) and the Labor Management Relations Act (LMRA), challenging Defendant's decision that they must contribute toward the cost of their retirement healthcare benefits. Plaintiffs allege this breached the CBAs in violation of the LMRA and that correspondingly modifying the healthcare benefit plans violated ERISA. Plaintiffs seek reinstatement of their company-paid retirement benefits, damages for healthcare expenses they incurred, extra-contractual damages for mental and emotional distress, and punitive damages. Plaintiffs seek certification of this case as a class action.

Defendant argues for judgment on the pleadings, pursuant to Fed.R.Civ.P. 12(c), because extra-contractual damages and punitive damages cannot be recovered under either ERISA or LMRA. Defendant objects to the class definition proposed by the Plaintiffs, arguing that it must be narrowed to exclude individuals who released or waived any claims against Defendant and to exclude persons whose claims are based on retirement before July 1, 1994, and retirement after or on November 2, 2003. Furthermore, Defendant argues that membership in the class must be limited by express qualifying conditions in the CBAs for retirees, spouses, and dependants. Otherwise, there is no objection to certifying the class.

Extra-contractual and punitive damages are not available under ERISA or LMRA.

First, the Court notes that the First Amended Complaint seeks compensatory and punitive damages under ERISA, section 502(a)(1)(B), and LMRA, section 301(a), see (First Amended Complaint at ¶¶ 22 and 32), but does not allege mental or emotional distress. Plaintiffs, however, submit affidavits to support their Motion for Class Certification that allege in relation to each Plaintiff-representative that mental and emotional suffering was caused by the alleged breach of the CBAs and the ERISA violation. In response to Defendant's Rule 12(c) Motion, Plaintiffs argue that ERISA and the LMRA provide for punitive damages and extra-contractual damages for mental and emotional distress. (P's Response to D's Rule 12(c) Motion; P's Reply to D's Opposition to P's Motion for Class Certification at 10.)

Under ERISA, section 502(a)(1)(B), Plaintiffs may recover benefits due them and may sue to enforce their rights under a plan or to clarify their rights to future benefits under a plan. 29 U.S.C. § 1132(a)(1)(B). Extra-contractual damages are those that give a beneficiary more than he or she is entitled to receive under terms and provisions of the plan. Zielinski v. Pabst Brewing Comp., 360 F.Supp.2d 908, 923 n. 13 (E.D.Wis.2005). Such damages should not be confused with damages which are or are not recoverable in a contract action. Id.

There are six carefully integrated civil enforcement provisions found in section 502(a) of ERISA, which provide "strong evidence" that Congress did not intend to authorize other remedies. Congress has repeatedly emphasized that the purpose of ERISA is to protect contractually defined plan benefits. The stark absence in the statute itself and in its legislative history of any reference to recovery of extra-contractual damages led the Supreme Court to conclude that ERISA bars extra-contractual claims. Massachusetts Mut. Life Insurance Co. v. Russell, 473 U.S. 134, 146-148, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985).

The Supreme Court has repeatedly rejected claims for punitive and extra-contractual damages under ERISA. See Aetna Health Inc. v. Davila, 542 U.S. 200, 215, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004) (finding state tort claims preempted by ERISA because to find otherwise would be to allow parties to evade the pre-emptive scope of the narrowly tailored ERISA remedies). Supreme Court cases addressing the pre-emptive effect of ERISA are based on the limited remedies available under ERISA, which are inherent in the "careful balancing" between ensuring fair and prompt enforcement of rights under a plan and encouraging the creation of such plans. Id. (citing Pilot Life Insur. Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987) (finding ERISA preemption of tortious breach of contract claim seeking compensatory and punitive damages); Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990) (finding ERISA preemption of breach of contract claim involving punitive damages and damages for mental anguish); Metropolitan Life Insur. Co. v. Taylor, 481 U.S. 58, 107 S.Ct. 1542, 95 L.Ed.2d 55, (1987) (finding ERISA preemption of claim for mental anguish caused by breach of contract)). The plaintiffs in all three cases sought remedies beyond those authorized under ERISA. Id.

In Bast v. Prudential Insur. Co., 150 F.3d 1003, 1009 (9th Cir.1998), the Ninth Circuit Court of Appeals held that loss of plaintiff's chance of survival, her suit for out of pocket costs, loss of income, loss of consortium, and emotional distress were not compensable under ERISA. See also, Elliot v. Fortis Benefits Ins. Co., 337 F.3d 1138, 1147 (9th Cir.2003) (an action "which seeks non-ERISA damages for what are essentially claim processing causes of action, clearly falls under the § 1132 preemption ..."); Aetna Life Ins. Co. v. Bayona, 223 F.3d 1030, 1034 (9th Cir.2000) (breach of contract, fraud, and tortious breach of the covenant of good faith and fair dealing preempted by ERISA).

In the ninth circuit, a participant may file a civil action "to recover benefits due him under the terms of his plan," Bast, 150 F.3d at 1008 (quoting 29 U.S.C. 1132(a)(1)(B)), "[e]xtracontractual, compensatory and punitive damages are not available under ERISA." Id. at 1009 (citing Russell, 473 U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96); see also, Hancock v. Montgomery Ward Long Term Disability Trust, 787 F.2d 1302, 1306-07 (9th Cir. 1986) (holding that punitive damages are not allowed under ERISA. Accordingly, Plaintiffs' claims under ERISA for punitive damages and damages for mental and emotional distress are dismissed as a matter of law, pursuant to Fed.R.Civ.P.12(c)). Cf., Pachuta v. Unumprovident Corp., 242 F.Supp.2d 752, 764 (D.Hawaii 2002) (granting summary judgment as to claims for extra-contractual, compensatory and punitive damages); Starr v. MGM Mirage, 2006 WL 3290299 *3 (D.Nev.2006) (dismissing claim for punitive damages); Baumberger v. Hollywood Entertainment Corporation, 2006 WL 3513648 (D.Or.2006) (same).

Plaintiffs concede that under the LMRA, "`the general rule, [], is that punitive damages are not allowed in actions for breach of contract brought under section 301,'" (P's Response at 2) (quoting Moore v. Local Union 569 of the IBEW, 989 F.2d 1534, 1542 (9th Cir.1993)), "and `ordinarily, an award that exceeds the monetary loss which an injured party suffered as a result of a contract breach is considered punitive' and thus improper." Id. (quoting Desert Palace, Inc. v. Local Joint Executive Bd. of Las Vegas, 679 F.2d 789, 794 (9th Cir. 1982)).

These breach of labor contract cases are in keeping with the general rule that mental suffering is not compensation for breach of a contract. 24 Williston on Contracts § 64:7 (4th ed.2007) (citing Farmers Insur. Exchange v. Henderson, 82 Ariz. 335, 313 P.2d 404, 409 (Ariz.1957); Restatement (Second) of Contracts § 353 (damages for emotional distress are not ordinarily allowed, even if they are foreseeable as they are often particularly difficult to establish and to measure.)) There are of course exceptions to the general rule, most of which have adopted the principle set forth in the Restatement (Second) of Contracts that allows recovery for mental suffering or emotional disturbance only where the breach also causes bodily harm or the nature of the contract is such that a breach of it is particularly likely to result in serious emotional disturbance. Id. (citing Restatement (Second) of Contracts § 353). "Common examples are contracts of carriers and innkeepers with passengers and guests, contracts for the carriage or proper disposition of dead bodies, and contracts for the delivery of messages concerning death." Id.

Likewise, Plaintiffs argue, "that in very limited circumstances a court may award punitive damages under Section 301." (P's Response at 2-3 (citations omitted)). Plaintiffs argue that damages for emotional distress are available under the LMRA because the underlying CBAs dealt with matters of "obvious mental concern and solicitude for retirees such as maintenance of health and vision care during their declining years when they are no longer actively earning an income." Id. (quoting Int'l Union, United Automobile, Aerospace and Agricultural Implement Workers of America v. Federal Forge, Inc., 583 F.Supp. 1350, 1356 (W.D.Mich.1984)). Plaintiffs argue that it can reasonably be said that matters of such concern were within the contemplation of the parties when executing the CBAs covering these retirement benefits. Id. at 5.

Plaintiffs argue that "[p]unitive and extra-contractual damages are appropriate in this case given the scope of Raytheon's `persistent misconduct' ...