Drinkwater v. Metropolitan Life Ins. Co., 87-1533

• Decision Date: 06 October 1987
• Docket Number: No. 87-1533,87-1533
• Parties: Richard DRINKWATER, et al., Plaintiffs, Appellants, v. METROPOLITAN LIFE INSURANCE CO., Defendant, Appellee. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 821

846 F.2d 821

Richard DRINKWATER, et al., Plaintiffs, Appellants, v. METROPOLITAN LIFE INSURANCE CO., Defendant, Appellee.

No. 87-1533.

United States Court of Appeals First Circuit.

Heard Oct. 6, 1987.

Decided May 18, 1988.

Paul G. Holian, Boston, Mass., with whom Charles J. Yeager was on brief, for plaintiffs, appellants.

William J. Toppeta with whom James M. Lenaghan and David J. Larkin, Jr., New York City, were on brief, for defendant, appellee.

Before COFFIN and TORRUELLA, Circuit Judges and BROWN, ^* Senior Circuit Judge.

JOHN R. BROWN, Senior Circuit Judge.

This is an appeal from a summary judgment rendered in favor of Metropolitan Life Insurance Co. (Metropolitan) and against the Drinkwaters, Richard and Judith, on claims arising out of Richard Drinkwater's entitlement to disability benefits under a qualified ERISA-plan. Count I, seeking compensatory and punitive damages for breach of fiduciary duty, was properly dismissed as an extra-contractual claim not authorized by ERISA. Count II, seeking compensatory damages for the difference between what Drinkwater received and what he claims he should have received, was properly dismissed for failure to exhaust administrative remedies. Count III, brought by Judith Drinkwater as a pendent state law claim, was improperly dismissed on preemption grounds. Nonetheless, we affirm the grant of summary judgment on this claim because, under Massachusetts law, Judith Drinkwater has failed to state a claim upon which relief can be granted.

Metropolitan in the thick of things--Employer or

ERISA-Insurer

This case presents Metropolitan in the somewhat unusual posture of both employer and ERISA-insurer. Richard Drinkwater had worked for Metropolitan for over thirty years as an insurance salesman when, on October 12, 1975, he suffered a heart attack. Metropolitan placed him on temporary disability status immediately, and began paying temporary disability insurance benefits to him the following week. His condition persisted. At the expiration of the one-year period covered by Metropolitan's temporary disability plan, Drinkwater was placed on permanent disability status under the plan then in effect (the "old plan"), and Metropolitan commenced paying those benefits to him in October 1976.

Metropolitan developed a new and more generous permanent disability plan which became effective January 1, 1976 (the "new plan"). Drinkwater claims he was informed by a representative of Metropolitan that he would be eligible for the higher benefits available under the new plan. Nonetheless, when Drinkwater was placed on permanent disability in October 1976, he received benefits under the old plan.

Metropolitan Has Doubts

From July 1976 to July 1982, Metropolitan paid benefits to Drinkwater under the terms of the old plan. So far as we have been able to determine, at no time during that six year period did Drinkwater contest the payment of benefits under the old plan. In July 1982, Metropolitan requested that Drinkwater submit to a medical examination to be performed by Metropolitan's own doctors.

Two physicians examined Drinkwater at that time. The first, Dr. Goldman, stated that he found "no objective data to corroborate" Drinkwater's statements that he had been diagnosed as having coronary artery disease. ¹ Subsequently, Dr. Zager, a psychiatrist, examined Drinkwater ² and concluded that (i) Drinkwater should not be ordered to return to work without first checking with his cardiologist; (ii) the stress of an insurance salesman's job was beyond Drinkwater's emotional capacity; and (iii) Drinkwater should receive a vocational evaluation to determine what other sort of work, if any, Drinkwater was capable of performing.

Metropolitan Determines to Terminate

By letter of April 8, 1983 Metropolitan, based on the reports of Drs. Goldman and Zager, advised Drinkwater that his disability status had been re-evaluated. Because "the independent medical examiners failed to find objective evidence" of his disability, Drinkwater's benefits would not be continued beyond April 30, 1983. The letter concluded with a "suggestion" that Drinkwater contact Metropolitan's regional sales manager "to discuss ... future plans and employment status."

On April 25, 1983, Drinkwater contacted Metropolitan and was advised that he could send information to refute Metropolitan's determination that he was no longer eligible for permanent disability benefits. Drinkwater supplied no additional information to Metropolitan, and did not request a review of the determination to discontinue his disability benefits. He contends, however, that he was orally advised by unspecified officers of Metropolitan that "if he did not return to work on May 2, 1983, as directed, that he would be fired ... with total forfeiture of all retirement, health, and other employee benefits."

May 2, 1983--An Eventful Day

Drinkwater did return to work on May 2, 1983, and suffered a second heart attack that very same day. Following that heart attack, Metropolitan restored Drinkwater's disability benefits, under the terms of the old plan, pursuant to the "recurrence of disability" provision of that plan. Under Metropolitan's interpretation of the plan, this second heart attack was a recurrence of a condition which manifested itself prior to January 1, 1976. As a recurrence of a preexisting condition, Drinkwater was only entitled to benefits available at the time this condition first was manifested, benefits under the old plan. Drinkwater took early retirement effective October 1, 1985, and Metropolitan, as employer, not ERISA insurer, began paying Drinkwater retirement benefits. ³

Litigation Sets In

Drinkwater and his wife Judith filed their original complaint in the District Court on December 4, 1985, asserting claims under various provisions of ERISA as the sole basis for federal jurisdiction. Count I claimed compensatory and punitive damages pursuant to 29 U.S.C. Sec. 1132(a)(3) ⁴ for breach of fiduciary duty to Drinkwater imposed by 29 U.S.C. Secs. 1104 and 1140 (ERISA Secs. 404 and 510), in that Metropolitan's acts constituted attempted interference with Drinkwater's "attainment of his vested right to retirement." Compensatory damages were sought in the amount of $5 million, punitive damages in the amount of $10 million and attorney's fees.

Count II sought compensatory damages pursuant to 29 U.S.C. Sec. 1132(a)(3) equal to the difference in the disability benefit payments payable under the new plan, and those actually paid to Drinkwater after May 2, 1983, which were calculated on the basis of the old plan, ⁵ a total of $300,000. He also sought punitive damages in the amount of $2 million, plus attorney's fees.

In Count III, Judith Drinkwater, in a pendent state law claim, sought compensatory damages under Massachusetts state law for her emotional distress because her husband was forced to return to work under circumstances that made it dangerous to his physical and mental health for him to do so. She sought $500,000, plus attorney's fees.

Metropolitan the Victor

Thereafter the District Court granted summary judgment for Metropolitan on all three claims, ruling that (i) on the basis of Pilot Life v. Dedeaux ⁶ and Metropolitan Life v. Taylor, ⁷ ERISA excluded the extra-contractual remedies sought in the first claim; (ii) exhaustion of administrative remedies was required but not satisfied for the relief requested in Count II; and (iii) the state law claim in Count III was preempted by ERISA as interpreted in Dedeaux and Taylor.

From that judgment, the Drinkwaters appeal.

I. Extra-contractual Damages

The compensatory and punitive damages sought by Richard Drinkwater are extra-contractual in that this relief is not within the terms of Metropolitan's ERISA-governed benefit plan. Richard Drinkwater has asserted his entitlement to relief based on Metropolitan's bad faith and malicious conduct in misrepresenting benefits due Drinkwater and in attempting to constructively discharge him, all in violation of Metropolitan's fiduciary duty under ERISA. The Drinkwaters concede that the extra-contractual damages they seek are not expressly authorized by ERISA, ⁸ and consequently contend that these damages come within the statutory grant of "other appropriate equitable relief" under Sec. 1132(a)(3)(B). ⁹ It is clear that the comprehensive provisions of ERISA were intended by Congress to be the exclusive remedy for beneficiaries under ERISA-authorized plans. ¹⁰ In light of that history, we cannot conclude that Congress intended to authorize any form of relief other than what was expressly granted. "Other appropriate equitable relief" should be interpreted to mean what it says--declaratory or injunctive relief, not compensatory and punitive damages.

In Massachusetts Life Ins. Co. v. Russell, ¹¹ a case holding that ERISA's Sec. 1109(a) ¹² breach of fiduciary duty provision provided no express or implied authority for an award of punitive damages to a beneficiary, the Court stated: "The six carefully integrated civil enforcement provisions found in Sec. [1132(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." ¹³

In Russell, the Court concluded that Congress had created liability for breach of fiduciary duty only in favor of the plan, and not in favor of individual beneficiaries. Following an examination of the legislative history of ERISA, the Court declined to imply a private remedy in favor of plan beneficiaries.

While Russell was limited to remedies available under Sec. 1132(a)(2) for violations of Sec. 1109 and "expressly reserve[d] the question whether extra-contractual damages might be one form of 'other appropriate relief' under Sec. [1132(a)(3) ]," ¹⁴ we conclude, as have the Fourth, Fifth, Sixth, Seventh, Eighth and Ninth Circuits, ¹⁵ that extra-contractual damages are unavailable under Sec. 1132(a)(3). W...