Hutchinson v. Benton Casing Service, Inc., Civ. A. No. E84-0129(L).

Decision Date09 October 1985
Docket NumberCiv. A. No. E84-0129(L).
PartiesJohn C. HUTCHINSON, Plaintiff, v. BENTON CASING SERVICE, INC., Income Security Corporation, Inc., and Louisiana Oilfield Contractors Association, Defendants.
CourtU.S. District Court — Southern District of Mississippi

Mark S. Howard, Waynesboro, Miss., for plaintiff.

T. Mark Sledge, Jackson, Miss., Gregory E. Tonore, Lafayette, La., for defendant Louisiana Oilfield Contractors Ass'n.

Brooke Ferris, Laurel, Miss., for defendant Benton Casing Service, Inc.

Dan R. Wise, Hattiesburg, Miss., for defendant Income Sec. Corp., Inc.

MEMORANDUM OPINION

DAN M. RUSSELL, Jr., District Judge.

This cause is presently before the Court upon the defendant, Income Security Corporation, Inc.'s (Income), motion for partial summary judgment. Income contends that the recent decisions of the United States Supreme Court and the Fifth Circuit Court of Appeals hold that the plaintiff is not entitled to extra-contractual damages under the provisions of the Employee Retirement Income Security Act of 1974, (ERISA), 29 U.S.C. § 1001 et seq. The cause of action arises out of an alleged wrongful termination of medical benefits under an employee benefit plan established under ERISA. After careful review of the applicable law and the submitted briefs, the Court requested affidavits from all the parties addressing the question of whether the employer, Benton Casing Service, Inc.'s ERISA plan was self-funded, self-insured, or was a plan which was funded by the purchase of insurance from a commercial insurance company.

The plaintiff originally brought this action in the Circuit Court of Wayne County, Mississippi. The plaintiff sought $175,000.00 compensatory and exemplary damages and asserted claims under Mississippi law for "bad faith" breach of contract. The action was subsequently removed to this Court by the defendant, Louisiana Oilfield Contractors Association (LOCA). Thereafter, the plaintiff was allowed to amend his complaint. In his amended complaint, in addition to those claims asserted above, the plaintiff asserted various claims under ERISA; breach of 29 U.S.C. § 1109(a), "Liability for breach of fiduciary duty" and breach of 29 U.S.C. § 1307, "Payment of premiums." The Court will first determine whether the plaintiff's claim for extra-contractual damages for the alleged breach of § 1109(a) and § 1307 is pre-empted by ERISA. The Court's second determination is whether the plaintiff's tort and contract claims are saved from preemption by 29 U.S.C. § 1144(b)(2)(A) or are pre-empted by the so-called "deemer clause". 29 U.S.C. § 1144(b)(2)(B).1

There can be no doubt that the law dispositive to the above issues can be found in Massachusetts Mutual Life Ins. Co. v. Russell, ___ U.S. ___, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985); Metropolitan Life Ins. Co. v. Massachusetts, ___ U.S. ___, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985), and Dedeaux v. Pilot Life Ins. Co., 770 F.2d 1311 (5th Cir.1985).

The Russell decision is determinative of the first issue above. In Russell, the Supreme Court addressed the issue of whether under ERISA, a fiduciary to an employee benefit plan may be held personally liable to a plan participant for extra-contractual damages caused by improper or untimely processing of benefit claims. The respondent, Doris Russell, was a claims examiner for Massachusetts Life Insurance Company and also was a beneficiary under two employee benefit plans, both governed by ERISA. Russell became disabled with back ailments in May, 1979 and received plan benefits until October, 1979 when a disability committee terminated her benefits. Russell requested a review of that decision alleging a psychosomatic disability. A second physician confirmed that Russell was temporarily disabled and she was reinstated benefits. Two days later retroactive benefits were paid in full. She brought a bad faith claim in the California state courts based on state law and on ERISA. Massachusetts Mutual removed the case to United States District Court for the Central District of California. The District Court held that state law claims were pre-empted by ERISA and that ERISA barred any claims for extra-contractual damages and punitive damages arising out of the original denial of plaintiff's claims for benefits under the Salary Continuance Plan and the subsequent review thereof. The Court of Appeals agreed with the District Court that state law causes of action were pre-empted by ERISA but held that her complaint stated a claim under ERISA. The Court read § 1109(a) of ERISA to authorize "such other equitable or remedial relief as the Court may deem appropriate" as giving it "wide discretion as to the damages to be awarded", including compensatory and punitive damages. Russell v. Massachusetts Mutual Life Ins. Co., 722 F.2d 482, 490-491 (9th Cir.1983). The Supreme Court reversed.

The Court held that § 1109(a) does not provide for an award of extra-contractual damages to a beneficiary. The Court also responded to the plaintiff's argument that a private right for extra-contractual damages should be implied even if not expressly authorized by ERISA. The Court's response was that "`unless this congressional intent can be inferred from the language of the statute, the statutory structure, or some other source, the essential predicate for implication of a private remedy simply does not exist.' Northwest Airlines, Inc. v. Transport Workers, 451 U.S. 77, 94 101 S.Ct. 1571, 1582, 67 L.Ed.2d 750 (1981). `The federal judiciary will not engraft a remedy on a statute, no matter how salutary, that Congress did not intend to provide.' California v. Sierra Club, 451 U.S. 287, 297 101 S.Ct. 1775, 1781, 68 L.Ed.2d 101 (1981)." Russell, supra, ___ U.S. at ___, 105 S.Ct. at 3092.

Finally, the Court cited to the six carefully integrated civil enforcement provisions found in § 1132(a) as providing strong evidence that Congress did not intend to authorize other remedies that it simply forgot to incorporate expressly.

We are reluctant to `fine-tune' an enforcement scheme crafted with such evident care as the one in ERISA. As we stated in Transamerica Mortgage Advisors, Inc. v. Lewis (TAMA), 444 U.S. 11, 19 100 S.Ct. 242, 246, 62 L.Ed.2d 146 (1979): `Where a statute expressly provides a particular remedy or remedies, a court must be chary of reading others into it.' See also Touche Ross & Co. v. Redington, 442 U.S. 560, 571-574 99 S.Ct. 2479, 2486-2488, 61 L.Ed.2d 82 (1979). `The presumption that a remedy was deliberately omitted from a statute is strongest when Congress has enacted a comprehensive legislative scheme including an integrated system of procedures for enforcement.' Northwest Airlines, Inc. v. Transport Workers Union, 451 U.S., at 97 101 S.Ct., at 1583.
In contrast to the repeatedly emphasized purpose to protect contractually defined benefits, there is a stark absence — in the statute itself and in its legislative history — of any reference to an intention to authorize the recovery of extra-contractual damages. Because `neither the statute nor the legislative history reveals a congressional intent to create a private right of action ... we need not carry the Cort. v. Ash inquiry further.' Northwest Airlines, Inc. v. Transport Workers Union, 451 U.S., at 94, n. 31 101 S.Ct., at 1582, n. 31.
* * * * * *
Thus, the relevant text of ERISA, the structure of the entire statute, and its legislative history all support the conclusion that in § 409(a) § 1109(a) Congress did not provide, and did not intend the judiciary to imply, a cause of action for extra-contractual damages caused by improper or untimely processing of benefit claims.

Russell, supra, ___ U.S. at ___, 105 S.Ct. at 3093.

The plaintiff's Second Amended Complaint alleges that the defendant, Benton Casing Service, Inc., (Benton), as named fiduciary under the ERISA plan, owed a fiduciary duty to the plaintiff and other plan participants. The paragraph further alleges that the defendant, Benton, breached the fiduciary duties and obligations it owed to the plaintiff. The complaint paragraph does not specifically assert that the cause of action arises under 29 U.S.C. § 1109(a). Assuming arguendo that the plaintiff has asserted a claim under § 1109(a) it is clear that Russell would preclude the recovery of extra-contractual damages. Whether plaintiff's state law cause of action for breach of fiduciary duty is pre-empted will be discussed later herein.

The plaintiff has also asserted "that pursuant to the terms and provisions of 29 U.S.C. Section 1307, the Defendants, Income Security Corporation, Inc., and LOCA, should not have terminated Plaintiff's ERISA Plan coverage because of the failure of Defendant, Benton Casing Service, Inc., to pay the premiums." Second Amended Complaint, p. 5. The plaintiff seeks both compensatory and exemplary damages for these acts of the defendants.

Section 1307 is just one section in ERISA's insurance termination program. ERISA's insurance termination program provides for the payment of vested pension benefits when a plan is terminated with assets which are insufficient to pay the benefits in full. The statute establishes within the Department of Labor a corporation, the Pension Benefit Guaranty Corporation (PBGC) that administers the pension plan termination program. PBGC guarantees the payment of benefits subject to the limit of the lesser of the employee's average wages during his highest paid five years, or $750 per month. If the plan has not been in effect for five years or more, the coverage is prorated. 29 U.S.C. § 1322. To pay for this termination insurance the plan administrator of each plan is required to pay the PBGC a premium. 29 U.S.C. § 1307.

There are several problems with the plaintiff's assertion of a breach of § 1307. Section 1307 states in pertinent part that "the plan administrator of each plan shall pay the premiums imposed by the corporation under the subchapter with respect to that plan when they are due." It...

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