Clair & O'Malley v. Harris Trust & Sav. Bank

• Decision Date: 10 August 1999
• Docket Number: No. 98-2334,98-2334
• Citation: 190 F.3d 495
• Parties: (7th Cir. 1999) William L. Clair and John D. O'Malley, for themselves and for all others similarly situated, Plaintiffs-Appellants, v. Harris Trust and Savings Bank, et al., Defendants-Appellees
• Court: U.S. Court of Appeals — Seventh Circuit

Page 495

190 F.3d 495 (7th Cir. 1999)

William L. Clair and John D. O'Malley, for themselves and for all others similarly situated, Plaintiffs-Appellants, v. Harris Trust and Savings Bank, et al., Defendants-Appellees.

No. 98-2334

United States Court of Appeals, Seventh Circuit

Argued January 15, 1999

Decided August 10, 1999

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 96-C-7311--Wayne R. Andersen, Judge.

Before Posner, Chief Judge, and Kanne and Evans, Circuit Judges.

Posner, Chief Judge.

This is a class action suit under ERISA complaining about delay in the payment of benefits to which the members of the class were entitled by their employer's retirement plan. The defendant bank has a defined-contribution retirement plan. The contributions that the employer and the employee make are deposited in an individual account of the employee and he decides how to invest it. When he retires he receives the current market value of the investments in his account as of the last day of the quarter preceding his retirement. That day is the "settlement date," and the plan provides that the benefits will be paid to the employee "within a reasonable time after his settlement date, but not later than 60 days after (a) the end of the plan year in which his settlement date occurs, or (b) such later date on which the amount of the payment can be ascertained by the committee [that administers the plan]." The settlement date is the end of the plan year for a retiring employee, and so, with the exception of the qualification in (b), the plan entitles the employee to receive his benefits within a reasonable time after the settlement date that is not to exceed 60 days.

The bank's practice is to pay the benefits 45 days after the settlement date and the plaintiffs complain that this is unreasonably long--that the bank could easily pay within 3 days. They point out that the plan does not say that the benefits will be paid 45 days, or no more than 60 days, after the settlement date; it says they must be paid within a "reasonable time"--45 days is nowhere mentioned in the plan itself and 60 days is just the outer limit. If payment is made after 60 days, the plan cannot defend on the ground that it was reasonable to take longer, unless it can squeeze itself into the exception in (b) for cases in which for some reason it is impossible to determine the value of the employee's share of the plan on the settlement date, and this is not claimed to be the situation here.

The district court dismissed the suit on the basis of the defendants' argument that the plaintiffs lack standing to complain under ERISA about this alleged violation of the plan because, when they received the full balance in their retirement accounts as determined on the settlement date--which they did, albeit 45 days after that date--they ceased to be participants in the plan. ERISA permits only "a participant or beneficiary . . . to recover benefits due to him under the terms of his plan," ERISA sec. 502(a)(1)(B), 29 U.S.C. sec. 1132(a)(1)(B), and only a "participant, beneficiary, or fiduciary" to obtain (so far as relevant to this case) "appropriate equitable relief . . . to redress . . . violations [of] the terms of the plan." sec. 502(a)(3)(B)(i), 29 U.S.C. sec. 1132(a)(3)(B)(i).

The term "participant" has been interpreted to include former employees "who have 'a colorable claim' to vested benefits." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117-18 (1989); Jackson v. E.J. Brach Corp., 176 F.3d 971, 978-79 (7th Cir. 1999); Panaras v. Liquid Carbonic Industries Corp., 74 F.3d 786, 789-91 (7th Cir. 1996). These cases involved section 502(a)(1)(B), but we cannot think of any reason why "participant" or "beneficiary" would be defined differently under (3)(B) or why, if the plan had cashed the plaintiffs out at a smaller benefit than they were due under the plan, they could not have sued as plan beneficiaries as well as participants (several cases assume they could have, Mers v. Marriott Int'l Group Accidental Death & Dismemberment Plan, 144 F.3d 1014, 1018 (7th Cir. 1998); Fotta v. Trustees, 165 F.3d 209 (3d Cir. 1998); Turner v. Fallon Community Health Plan, Inc., 127 F.3d 196 (1st Cir. 1997)), since the plan designated them as the beneficiaries. We cannot see, incidentally, what difference it makes under which classification they sue. Matassarin v. Lynch, 174 F.3d 549, 566 (5th Cir. 1999), and Smith v. Provident Bank, 170 F.3d 609, 616 (6th Cir. 1999), assume there is none.

These plaintiffs, however (and the rest of the class, which consists of similarly situated employees of the bank), do not seek unpaid benefits. Their complaint is that their benefits were not paid in a timely fashion and as a result they lost the time value of the money. They want the interest they could have earned had they been paid the money in a timely fashion and invested it, but interest is not a benefit specified anywhere in the plan, and only benefits specified in the plan can be recovered in a suit under section 502(a)(1)(B). E.g., Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 144-47 (1985); Harsch v. Eisenberg, 956 F.2d 651, 654-56 (7th Cir. 1992); Turner v. Fallon Community Health Plan, Inc., supra, 127 F.3d at 198-200. Their argument that benefits include interest on benefits when the benefits are paid late is inconsistent with the principle that benefits payable under an ERISA plan are limited to the benefits specified in the plan. E.g., Massachusetts Mutual Life Ins. Co. v. Russell, supra, 473 U.S. at 148; Pohl v. National Benefits Consultants, Inc., 956 F.2d 126, 128 (7th Cir. 1992); Hein v. FDIC, 88 F.3d 210, 215 (3d Cir. 1996). The plan freezes the amount of benefits as of the settlement date and makes no provision for interest on that amount however long the payment of the benefits is delayed.

The plaintiffs also sued under section 502(a)(3)(B), however, which authorizes suits to redress plan violations, as distinct from suits to recover unpaid benefits. In failing to give any weight to the difference between the language of the two sections, the district court may have been misled by the passage we quoted earlier from Firestone--that the "participants" (and, we have added, the "beneficiaries") entitled to sue under ERISA's enforcement provisions include former employees "who have 'a colorable claim' to vested benefits." The Court was talking about who may bring a suit for benefits, not whether someone who would be entitled to bring such a suit if he were seeking that relief could sue for other relief, which section 502(a)(3)(B) plainly shows he could. See Varity Corp. v. Howe, 516 U.S. 489, 515 (1996); Fotta v. Trustees, supra, 165 F.3d at 213-14. The district court may also have been misled by the principle that ERISA does not entitle a plan participant or beneficiary to seek damages (other than unpaid benefits) for a violation of the terms of the plan, Massachusetts Mutual Life Ins. Co. v. Russell, supra, 473 U.S. at 144-47; Harsch v. Eisenberg, supra, 956 F.2d at 654-60; Turner v. Fallon Community Health Plan, Inc., supra, 127 F.3d at 198-200, and the plaintiffs here are seeking money. But not all monetary relief is damages. Equity sometimes awards monetary relief, or the equivalent, and restitution is both a legal and an equitable remedy that is monetary yet is distinct from damages. More on this shortly.

The defendants' position would have the odd implication that if the settlement date were June 30, 1990, and the bank did not cut a check to the retiring employee until July 1, 1991, the employee would have no redress, since he would have received his full plan benefits, albeit ten months after the last date on which he was entitled to receive them under the terms of the plan. The violation of the plan would be plain, but there would be no remedy. Yet if, realizing that this was his employer's policy, the employee had sought an injunction against it before he retired--that is, at a time when he was indisputably a participant and beneficiary--he would have been entitled to relief by the second statutory provision that we quoted, section 502(a)(3)(B), or possibly by the first, (1)(B) (see Massachusetts Mutual Life Ins. Co. v. Russell, supra, 473 U.S. at 147), instead (see Varity Corp. v. Howe, supra, 516 U.S. at 515) or as well, even though (1)(B) does not refer to equitable relief. If, however, the policy was new or was somehow concealed, injunctive relief, though authorized, would be infeasible, leaving (if the defendants' jurisdictional argument is correct) a big gap in ERISA's remedial scheme, which ERISA's very broad preemption provision, 29 U.S.C. sec. 1144; Jass v. Prudential Health Care Plan, Inc., 88 F.3d 1482, 1487-90 (7th Cir. 1996), would probably...