Mass. Mut. Life Ins. Co. v. Russell, 84-9.

Decision Date27 June 1985
Docket NumberNo. 84-9.,84-9.
Citation87 L.Ed.2d 96,105 S.Ct. 3085
CourtU.S. Supreme Court

John E. Nolan, Jr., reargued the cause for petitioners. With him on the briefs were Paul J. Ondrasik, Jr., Antonia B. Ianniello, Richard T. Davis, Jr., and David L. Bacon.

Brad N. Baker reargued the cause and filed a brief for respondent.*

* Briefs of amici curiae urging reversal were filed for the Alaska Fishermen's Union-Salmon Canners Pension Trust et al. by Thomas J. Hart and Richard P. Donaldson; for the American Council of Life Insurance and Health Insurance Association of America by Erwin N. Griswold, Jack H. Blaine, and Edward J. Zimmerman; for the Board of Trustees of the Northern California Carpenters Trust Funds et al. by Thomas E. Stanton and Donald S. Tayer; for the Motion Picture Health and Welfare Fund by William L. Cole; for the Pipe Trust et al. by Stuart H. Young, Jr.; for the Construction Laborers Pension Trust for Southern California et al. by James P. Watson, George M. Cox, John S. Miller, Jr., and Lionel Richman.

Carl B. Frankel and Bernard Kleiman filed a brief for the United Steelworkers of America, AFL-CIO: CLC, as amicus curiae urging affirmance.

Justice STEVENS delivered the opinion of the Court.

The question presented for decision is whether, under the Employee Retirement Income Security Act of 1974 (ERISA), a fiduciary to an employee benefit plan may be held personally liable to a plan participant or beneficiary for extra-contractual compensatory or punitive damages caused by improper or untimely processing of benefit claims.

Respondent Doris Russell, a claims examiner for petitioner Massachusetts Mutual Life Insurance Company (hereafter petitioner), is a beneficiary under two employee benefit plans administered by petitioner for eligible employees. Both plans are funded from the general assets of petitioner and both are governed by ERISA.

In May 1979 respondent became disabled with a back ailment. She received plan benefits until October 17, 1979, when, based on the report of an orthopedic surgeon, petitioner's disability committee terminated her benefits. On October 22, 1979, she requested internal review of that decision and, on November 27, 1979, submitted a report from her own psychiatrist indicating that she suffered from a psychosomatic disability with physical manifestations rather than an orthopedic illness. After an examination by a second psychiatrist on February 15, 1980, had confirmed that respondent was temporarily disabled, the plan administrator reinstated her benefits on March 11, 1980. Two days later retroactive benefits were paid in full.1

Although respondent has been paid all benefits to which she is contractually entitled, she claims to have been injured by the improper refusal to pay benefits from October 17, 1979, when her benefits were terminated, to March 11, 1980, when her eligibility was restored. Among other allegations, she asserts that the fiduciaries administering petitioner's employee benefit plans are high-ranking company officials who (1) ignored readily available medical evidence documenting respondent's disability, (2) applied unwarrantedly strict eligibility standards, and (3) deliberately took 132 days to process her claim, in violation of regulations promulgated by the Secretary of Labor.2 The interruption of benefit payments allegedly forced respondent's disabled husband to cash out his retirement savings which, in turn, aggravated the psychological condition that caused respondent's back ailment. Accordingly, she sued petitioner in the California Superior Court pleading various causes of action based on state law and on ERISA.

Petitioner removed the case to the United States District Court for the Central District of California and moved for summary judgment. The District Court granted the motion, holding that the state-law claims were pre-empted by ERISA and that "ERISA bars 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." App. to Pet. for Cert. 29a.

On appeal, the United States Court of Appeals for the Ninth Circuit affirmed in part and reversed in part. 722 F.2d 482 (1983). Although it agreed with the District Court that respondent's state-law causes of action were pre-empted by ERISA, it held that her complaint alleged a cause of action under ERISA. See id., at 487-492. The court reasoned that the 132 days3 petitioner took to process respondent's claim violated the fiduciary's obligation to process claims in good faith and in a fair and diligent manner. Id., at 488. The court concluded that this violation gave rise to a cause of action under § 409(a) that could be asserted by a plan beneficiary pursuant to § 502(a)(2). Id., at 489-490. It read the authorization in § 409(a) of "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. Id., at 490-491.

According to the Court of Appeals, the award of compensatory damages shall "remedy the wrong and make the aggrieved individual whole," which meant not merely contractual damages for loss of plan benefits, but relief "that will compensate the injured party for all losses and injuries sustained as a direct and proximate cause of the breach of fiduciary duty," including "damages for mental or emotional distress." Id., at 490. Moreover, the liability under § 409(a) "is against the fiduciary personally, not the plan." Id., at 490, n. 8.

The Court of Appeals also held that punitive damages could be recovered under § 409(a), although it decided that such an award is permitted only if the fiduciary "acted with actual malice or wanton indifference to the rights of a participant or beneficiary." Id., at 492. The court believed that this result was supported by the text of § 409(a) and by the congressional purpose to provide broad remedies to redress and prevent violations of the Act.

We granted certiorari, 469 U.S. 816, 105 S.Ct. 81, 83 L.Ed.2d 29 (1984), to review both the compensatory and punitive components of the Court of Appeals' holding that § 409 authorizes recovery of extracontractual damages.4 Respondent defends the judgment of the Court of Appeals both on its reasoning that § 409 provides an express basis for extracontractual damages, as well as by arguing that in any event such a private remedy should be inferred under the analysis employed in Cort v. Ash, 422 U.S. 66, 78, 95 S.Ct. 2080, 2088, 45 L.Ed.2d 26 (1975). We reject both arguments.


As its caption implies, § 409(a) establishes " LIABILITY FOR BREACH OF FIDUCIARY DUTY ."5 Specifically, it provides:

"(a) Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this title shall be personally liable to make good to such plan any losses to the plan resulting from each such breach, and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary, and shall be subject to such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary. A fiduciary may also be removed for a violation of section 411 of this Act."6 88 Stat. 886, 29 U.S.C. § 1109(a). Sections 501 and 502 authorize, respectively, criminal and civil enforcement of the Act. While the former section provides for criminal penalties against any person who willfully violates any of the reporting and disclosure requirements of the Act,7 the latter section identifies six types of civil actions
that may be brought by various parties. Most relevant to our inquiry is § 502(a), which provides in part:
"A civil action may be brought-
"(1) by a participant or beneficiary-
"(A) for the relief provided for in subsection (c) of this section, or
"(B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan;
"(2) by the Secretary, or by a participant, beneficiary or fiduciary for appropriate relief under section 409 ...." 88 Stat. 891, 29 U.S.C. § 1132(a).

There can be no disagreement with the Court of Appeals' conclusion that § 502(a)(2) authorizes a beneficiary to bring an action against a fiduciary who has violated § 409. Petitioner contends, however, that recovery for a violation of § 409 inures to the benefit of the plan as a whole. We find this contention supported by the text of § 409, by the statutory provisions defining the duties of a fiduciary, and by the provisions defining the rights of a beneficiary.

The Court of Appeals' opinion focused on the reference in § 409 to "such other equitable or remedial relief as the court may deem appropriate." But when the entire section is examined, the emphasis on the relationship between the fiduciary and the plan as an entity becomes apparent. Thus, not only is the relevant fiduciary relationship characterized at the outset as one "with respect to a plan," but the potential personal liability of the fiduciary is "to make good to such plan any losses to the plan ... and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan ...."8

To read directly from the opening clause of § 409(a), which identifies the proscribed acts, to the "catchall" remedy phrase at the end-skipping over the intervening language establishing remedies benefiting, in the first instance, solely the plan-would divorce the phrase being construed from its context and construct an entirely new class of relief available to entities other than the plan. Cf. FMC v. Seatrain Lines, Inc., 411 U.S. 726, 734, 93 S.Ct. 1773, 1779, 36...

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