Fotta v. Trustees of United Mine Workers of America, Health & Retirement Fund of 1974

• Citation: 165 F.3d 209
• Decision Date: 18 December 1998
• Docket Number: Nos. 97-3619,97-3663,s. 97-3619
• Parties: 22 Employee Benefits Cas. 2169, Pens. Plan Guide (CCH) P 23950A Abraham FOTTA, individually and on behalf of all other persons similarly situated, Appellant/Cross-Appellee v. TRUSTEES OF THE UNITED MINE WORKERS OF AMERICA, HEALTH AND RETIREMENT FUND OF 1974; Michael Holland; Donald Pierce; Elliott Segal; Joseph Stahl, II, Abraham Fotta, individually and on behalf of all other persons similarly situated, v. Trustees of the United Mine Workers of America, Health and Retirement Fund of 1974; Michael H. Holland; Donald E. Pierce; Elliott A. Segal; Joseph Stahl, II, Trustees of the United Mine Workers of America 1974 Pension Trust; Michael Holland; Donald Pierce; Elliott Segal and Joseph Stahl, Appellees/Cross-Appellants
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 209

165 F.3d 209

22 Employee Benefits Cas. 2169,

Pens. Plan Guide (CCH) P 23950A

Abraham FOTTA, individually and on behalf of all other

persons similarly situated, Appellant/Cross-Appellee v. TRUSTEES OF THE UNITED MINE WORKERS OF AMERICA, HEALTH AND RETIREMENT FUND OF 1974; Michael Holland; Donald

Pierce; Elliott Segal; Joseph Stahl, II,

Abraham Fotta, individually and on behalf of all other

persons similarly situated, v. Trustees of the United Mine Workers of America, Health and Retirement Fund of 1974; Michael H. Holland;

Donald E. Pierce; Elliott A. Segal;

Joseph Stahl, II,

Trustees of the United Mine Workers of America 1974 Pension

Trust; Michael Holland; Donald Pierce; Elliott

Segal and Joseph Stahl, Appellees/Cross-Appellants

Nos. 97-3619, 97-3663.

United States Court of Appeals, Third Circuit.

Argued Sept. 15, 1998.

Decided Dec. 18, 1998.

Peter M. Suwak (Argued), Washington, PA, for Appellant/CrossAppellee.

Glenda S. Finch, Deputy General Counsel, Christopher F. Clarke (Argued), Assistant General Counsel, UMWA Health and Retirement Funds, Office of the General Counsel, Washington, DC, for Appellees/CrossAppellants.

Before: SLOVITER, SCIRICA and ALITO, Circuit Judges

OPINION OF THE COURT

SLOVITER, Circuit Judge.

This appeal calls upon us to decide whether the beneficiary of an employee plan may bring an action under the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. ("ERISA") against the plan to recover interest on benefits the plan paid after some delay, but without the beneficiary's having sued under ERISA for the benefits. Relying on both ERISA and state-law theories, Abraham Fotta brought such an action against the Trustees of the United Mine Workers of America Health and Retirement Fund of 1974 ("the Trustees"). The district court dismissed the ERISA count for failure to state a claim upon which relief may be granted and dismissed the pendent state claims without prejudice. Fotta appeals the dismissal of the ERISA count and the Trustees cross-appeal to have the state claims dismissed with prejudice.

I.

Fotta's complaint alleges the following: While employed as a miner, Fotta was covered by a United Mine Workers-administered pension plan that provided, among other things, disability insurance. Fotta suffered a work-related injury on July 24, 1984, rendering him totally and permanently disabled. A considerable time after the injury, and only after the Pennsylvania Supreme Court upheld the causal relationship between Fotta's work and his disability under the Pennsylvania Workmen's Compensation Act, Fotta v. Workmen's Compensation Appeal Board, 534 Pa. 191, 626 A.2d 1144, 1147 (Pa.1993), the Trustees granted Fotta disability benefits, with an effective date of September 1, 1993. The Trustees, however, later revised this effective date and granted Fotta disability benefits effective August 1, 1984. Accordingly, Fotta received a lump-sum back payment of $21,600 reflecting disability benefits from August 1, 1984, to September 1, 1993. Fotta then demanded interest on this back payment, which the Trustees refused.

Fotta sued the Trustees in the district court for the Western District of Pennsylvania. The three-count complaint seeks recovery under ERISA and, alternatively, under state-law theories of breach of contract and unjust enrichment. The Trustees moved to dismiss, arguing that the first count failed to state a claim under ERISA and that the remaining state-law counts were preempted by § 514(a) of ERISA, 29 U.S.C. § 1144(a). The district court dismissed the ERISA count for failure to state a claim and then dismissed the remaining state-law counts without prejudice under 28 U.S.C. § 1367, stating that there was no longer federal jurisdiction over the case. We exercise plenary review over the district court's grant of a motion to dismiss. Weiner v. Quaker Oats Co., 129 F.3d 310, 315 (3d Cir.1997).

II.

This appeal raises an issue of first impression for this court: whether a beneficiary who has been able to receive his or her benefits due under an ERISA plan only after considerable delay, but without resorting to litigation to recover that payment, has a cause of action under ERISA. None of the other circuits has yet addressed the issue either. The district courts that have addressed the question are divided: two have held such claims for interest noncognizable under ERISA, see Devito v. Pension Plan of Local 819 I.B.T. Pension Fund, 975 F.Supp. 258 (S.D.N.Y.1997); Scott v. Central States, Southeast and Southwest Areas Pension Plan, 727 F.Supp. 1095 (E.D.Mich.1989), and one has ruled that ERISA does provide a cause of action for interest, see Hizer v. General Motors Corp., 888 F.Supp. 1453 (S.D.Ind.1995).

Fotta invokes two of ERISA's civil-enforcement provisions, sections 502(a)(1)(B) and 502(a)(3)(B), codified at 29 U.S.C. §§ 1132(a)(1)(B) and 1132(a)(3)(B) respectively. The first of these provisions, section 502(a)(1)(B), is the means by which an ERISA plan beneficiary is authorized to sue to recover benefits under the plan. This subsection states in relevant part: "A civil action may be brought ... by a participant or beneficiary ... to recover benefits due to him under the terms of his plan [or] to enforce his rights under the terms of the plan...." The second of these provisions, ERISA section 502(a)(3)(B), permits a plan beneficiary "to obtain other appropriate equitable relief (i) to redress [violations of ERISA or of the terms of an ERISA plan] or (ii) to enforce any provisions of this subchapter or the terms of the plan."

The Trustees emphasize, and Fotta acknowledges, that Congress has not explicitly provided a cause of action for interest on delayed benefits payments. The parties further agree that no provision in the plan itself specifically establishes Fotta's entitlement to interest. The Trustees contend that because neither the statute nor the plan expressly provides for the relief that Fotta seeks, Fotta's claim must fail.

A.

We disagree with the Trustees' contention that the lack of an express provision for interest in ERISA is necessarily fatal to Fotta's claim. In enacting ERISA, Congress intended for the judiciary to develop a body of federal law "to deal with issues involving rights and obligations under private welfare and pension plans." Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987) (quoting 120 Cong. Rec. 29,942 (1974) (statement of Sen. Javits)). This is, of course, not a boundless grant of authority; the development of federal common law under ERISA is appropriate only when "necessary to fill in interstitially or otherwise effectuate the statutory pattern enacted in the large by Congress." Bollman Hat Co. v. Root, 112 F.3d 113, 118 (3d Cir.1997) (quotation marks and citation omitted). Accordingly, we must first determine whether recognition of a cause of action for interest under one of ERISA's enforcement provisions is a proper exercise of the court's power to develop the law of remedies under ERISA.

It is of considerable moment that we have previously recognized that a beneficiary may seek prejudgment interest in a suit to recover benefits due, notwithstanding the lack of an express directive from Congress to that effect. In Schake v. Colt Industries Operating Corp. Severance Plan for Salaried Employees, 960 F.2d 1187, 1192 n. 4 (3d Cir.1992), we acknowledged, albeit in passing, that prejudgment interest was available in actions to recover benefits under ERISA (although we ultimately found that the claimant's failure to timely request such interest deprived the court of jurisdiction to award interest). We reiterated and amplified this ruling in Anthuis v. Colt Industries Operating Corp., 971 F.2d 999, 1010 (3d Cir.1992). What is even more significant, we did so while acknowledging that ERISA does specifically provide for prejudgment interest in another class of actions--lawsuits to recover delinquent employer contributions under 29 U.S.C. § 1132(g)(2)(B). Id. at 1009. In recognizing the availability of a discretionary award of prejudgment interest in Schake and Anthuis, we embraced the Eighth Circuit's reasoning in Stroh Container Co. v. Delphi Industries, Inc., 783 F.2d 743 (8th Cir.1986), and Short v. Central States, Southeast & Southwest Areas Pension Fund, 729 F.2d 567 (8th Cir.1984). In the latter case, the court set forth the rationale for the recognition of prejudgment interest: "To allow the Fund to retain the interest it earned on funds wrongfully withheld would be to approve of unjust enrichment. Further, the relief granted would fall short of making [the claimant] whole because he has been denied the use of money which was his." Short, 729 F.2d at 576. Adopting these precepts, we held in Schake, and reiterated in Anthuis, that "prejudgment interest typically is granted to make a plaintiff whole because the defendant may wrongfully benefit from use of plaintiff's money." Schake, 960 F.2d at 1192 n. 4; Anthuis, 971 F.2d at 1009.

The Trustees do not take issue with the holdings in these cases. On the contrary, they approve the cases where the courts have awarded prejudgment interest when tied to an underlying judgment on the merits, notwithstanding the lack of explicit statutory authority for such interest. Instead, the Trustees seek to distinguish the award of prejudgment interest in the circumstance where benefits have been recovered from that where the beneficiary brings an independent action solely to recover the interest, arguing that the claim for benefits is expressly provided in section 502(a)(1)(B). This was essentially the position of the district courts in Devito and Scott.

We believe the distinction is unpersuasive. The principles justifying prejudgment interest also justify an award of interest where benefits are delayed but paid without the beneficiary's having obtained a judgment. The concerns animating our decisions in Schake and Anthuis--viz., making the claimant...