Kleinhans v. Lisle Sav. Profit Sharing Trust

• Citation: 810 F.2d 618
• Decision Date: 16 January 1987
• Docket Number: No. 85-2860,85-2860
• Parties: , 8 Employee Benefits Ca 1038 Stephen D. KLEINHANS, Plaintiff-Appellant, v. LISLE SAVINGS PROFIT SHARING TRUST, et al., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 618

810 F.2d 618

55 USLW 2406, 8 Employee Benefits Ca 1038

Stephen D. KLEINHANS, Plaintiff-Appellant, v. LISLE SAVINGS PROFIT SHARING TRUST, et al., Defendants-Appellees.

No. 85-2860.

United States Court of Appeals Seventh Circuit.

Argued April 8, 1986.

Decided Jan. 16, 1987.

Thomas J. Cisar, Oak Brook, Ill., for plaintiff-appellant.

Joseph F. Griffin, Hopkins & Sutter, Chicago, Ill., for defendants-appellees.

Before COFFEY and FLAUM, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

COFFEY, Circuit Judge.

The Plaintiff appeals the district court's grant of summary judgment to the defendants on his claim for the statutory penalty available under Sec. 502(c) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Sec. 1132(c), and the denial of his motion to amend his complaint to state a claim for punitive damages under ERISA Sec. 502(a)(3), 29 U.S.C. Sec. 1132(a)(3). We affirm.

I

On January 27, 1983, the plaintiff tendered his resignation ¹ as treasurer and vice president of Lisle Savings and Loan (Lisle) to Joseph Renn, president of Lisle. Kleinhans since his employment with Lisle in 1971 has participated in the Lisle Savings Profit Sharing Trust (the "Trust") and also acted as a trustee of the Trust. His participation in the Trust as well as his duties as a trustee were also terminated as of the date of the acceptance of his resignation.

There is no dispute that according to the terms of the Trust, the plaintiff's interest in the Trust was fully vested at the time of his resignation. Furthermore, the Trust agreement also provided that he was entitled to only those benefits which had accrued to his account as of the date specified in the Trust for the allocation of benefits accrued--June 30 of each year. Accordingly, Kleinhans was entitled to benefits that had accrued to his account as of June 30, 1982, the allocation date prior to his termination from the plan. The terms of the Trust also provided that the Trust had 60 days from the close of the plan year, June 30, in which a participant terminates his or her participation in the trust to distribute accrued benefits. Thus the Trust had until August 30, 1983, to distribute the plaintiff's share of his accrued benefits.

Upon the defendants' acceptance of Kleinhans' resignation, the plaintiff, in a letter dated February 17, 1983, requested immediate distribution of his accrued Trust benefits. The defendants failed to respond to this letter of February 17, 1983, requesting distribution of his benefits as they claimed no response was necessary because Joseph Renn had previously assured the plaintiff that he would receive his benefits in accordance with the terms of the Trust. ²

Kleinhans once more requested distribution of his benefits from the Trust on July 11, 1983, even though under the terms of the Trust he was not yet entitled to them. Kleinhans did not request that a date be set for distribution. A letter to Kleinhans from the attorney for the defendants dated July 28, 1983 neither denied his trust benefits nor set a date for the distribution of the same, but merely acknowledged having received his request for his trust benefits. The letter did suggest that any Trust benefits owing to the plaintiff were subject to unspecified claims that the defendants may have against the plaintiff Kleinhans. ³ The letter concluded stating that the defendants were willing to settle "these claims in conjunction with any monies that may be due" from the Trust.

On October 19, 1983, Kleinhans' attorney advised the defendants by letter that because discussions with their attorney "demonstrated that no proceeds will be paid to Mr. Kleinhans" the defendants' "willful refusal to pay" constitutes a violation of ERISA Sec. 503 (29 U.S.C. Sec. 1133). After the defendants had failed to respond to this letter for over two months, the plaintiff filed suit in federal district court on December 23, 1983, alleging that the defendants violated the terms of the Trust and Sec. 503 of ERISA by refusing to distribute plaintiff's Trust benefits, and that the defendants' failure to respond to his requests for distribution of his Trust benefits constituted a violation of ERISA Sec. 502(c), 29 U.S.C. Sec. 1132(c) entitling him to the statutory penalty provided by ERISA Sec. 502(c), 29 U.S.C. Sec. 1132(c).

The defendants moved for summary judgment on April 22, 1985, alleging that they were willing to pay Kleinhans the benefits he was entitled to under the Trust, ⁴ and that the plaintiff had never made a request for "information" from the defendants as required under ERISA Sec. 502(c), 29 U.S.C. Sec. 1132(c) to trigger liability for the statutory penalty provided for by ERISA. Kleinhans opposed the defendants' motion for summary judgment and moved the district court to allow him to amend his complaint to state a claim for punitive damages against the defendants under ERISA Sec. 502(a)(3), 29 U.S.C. Sec. 1132(a)(3), alleging that the defendants acted with malice or wanton indifference in their refusal to distribute plaintiff's Trust benefits within the time provided for distribution in the Trust.

The district court in an order dated September 30, 1985, dismissed the plaintiff's claim for unpaid Trust benefits and granted the defendants' motion for summary judgment against the plaintiff on his statutory penalty claim. The court determined that since Kleinhans had accepted payment of $53,052.51 plus interest on July 9, 1985, his claim against the defendants had been satisfied and thus he no longer had a claim against the defendants for benefits owing. Further, the district court held that because Kleinhans had never made a request for "information" from the defendants, no basis existed for invoking the statutory penalty made available by ERISA Sec. 502(c), 29 U.S.C. Sec. 1132(c). The district court denied the plaintiff's motion to amend his complaint to state a claim for punitive damages because punitive damages are not available under the provisions of ERISA. Furthermore, if punitive damages were available under ERISA, imposing them in this case would unduly prejudice the defendants in view of the fact that plaintiff's motion to amend was made more than six months after discovery had been closed and 18 months after the filing of his initial complaint.

Kleinhans appeals the district court's grant of summary judgment to the defendants on his statutory penalty claim and the district court's denial of his motion to amend his complaint to state a claim for punitive damages.

II STATUTORY PENALTY CLAIM

The participants in an ERISA plan have several alternative ways to obtain redress for violations of ERISA. With respect to violations of those sections of ERISA that require plan administrators to make information available to participants, a participant has two options in pursuing his redress, the choice of which will depend on the particular facts of a participant's case. Where the administrator fails to make information available to a participant as required by ERISA, whether the obligation is automatic or triggered by a request from the participant, the participant under Sec. 502(a)(3), 29 U.S.C. Sec. 1132(a)(3), can force the administrator to comply with the provisions of ERISA and to make available the information which the participant seeks. Section 1132(a)(3) provides:

A civil action may be brought--

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(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan;

ERISA Sec. 502(a)93), 29 U.S.C. Sec. 1132(a)(3). The relief obtainable under this provision is limited to that which is necessary to provide the participant with the information he is entitled to under ERISA; a participant is not entitled to a substantive remedy for establishing a procedural violation on the part of the administrator. Wolfe v. J.C. Penney Co., 710 F.2d 388 (7th Cir.1983); Grossmuller v. International Union, U.A.W., 511 F.Supp. 709 (E.D.Pa.1981), affirmed in part, 715 F.2d 853 (3rd Cir.1983). Thus, if the defendants as administrators of the Trust failed to provide information under the automatic provisions of ERISA or pursuant to a request for information by Kleinhans, Sec. 1132(a)(3) provides an appropriate means for Kleinhans to obtain the information he seeks. However, if the administrator ultimately provides the participant with the information, Sec. 1132(a)(3) does not provide the participant with the means to penalize the administrator for any actual violation of ERISA which might have delayed (or prevented) the participant from obtaining the information. Accordingly, if the information has been provided, the participant must resort to Sec. 1132(c). Section 1132(c) allows the court, in its discretion, to penalize an administrator up to $100 per day for each day the administrator fails to comply with the requirements of ERISA. Section 1132(c) provides:

Any administrator who fails or refuses to comply with a request for any information which such administrator is required by this subchapter to furnish to a participant or beneficiary (unless such failure or refusal results from matters reasonably beyond the control of the administrator) by mailing the material requested to the last known address of the requesting participant or beneficiary within 30 days after such request may in the court's discretion be personally liable to such participant or beneficiary in the amount of up to $100 a day from the date of such failure or refusal, and the court may in its discretion order such other relief as it deems proper.

ERISA Sec. 502(c), 29 U.S.C. Sec. 1132(c).

The operative words "fails or refuses to comply with a request for information" limit the availability of the Sec. 1132(c) statutory penalty to a participant...