Opinion ID: 1715926
Heading Depth: 1
Heading Rank: 2

Heading: ERISA Claims

Text: The Weemses' federal-law claims alleged that Jefferson-Pilot (1) had breached fiduciary duties, and (2) had interfered with [their] rights to receive ERISA benefits. The trial judge granted Jefferson-Pilot's partial motion for a summary judgment, agreeing with its contention that ERISA does not authorize recovery of punitive damages, or of extracontractual damages, that is, `[d]amages that would give a beneficiary more than he or she is entitled to receive under the strict terms of the plan.' Lawrence v. Jackson Mack Sales, Inc., 837 F.Supp. 771, 786 (S.D.Miss.1992), aff'd, 42 F.3d 642 (5th Cir. 1994). In Haywood v. Russell Corp., 584 So.2d 1291 (Ala.1991), this Court, relying extensively on Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990), discussed at length the availability of extracontractual damages under ERISA. Indeed, it interpreted that case as holding that state and federal courts are authorized to award damages, both extracontractual, and even punitive, where the facts support them, ... though they are not specifically provided for in ERISA. 584 So.2d at 1297 (emphasis added). Because Haywood' s conclusions regarding the species of damages recoverable under ERISA are so pertinent to the disposition of that issue in this case, we here incorporate the following extensive excerpt: The [ Ingersoll-Rand ] Court unequivocally stated: `Not only is § 502(a) the exclusive remedy for vindicating § 510-protected rights, there is no basis in § 502(a)'s language for limiting ERISA actions to only those which seek `pension benefits.' It is clear that the relief requested here [compensatory and punitive damages for tortiously terminating a participant's employment] is well within the power of federal courts to provide. Consequently, it is no answer to a pre-emption argument that a particular plaintiff is not seeking recovery of pension benefits.' 498 U.S. at 145, 111 S.Ct. at 486. All of the Justices of the Supreme Court joined Justice O'Connor in the following statements: `[T]he [Texas] court held that under Texas law a plaintiff could recover in a wrongful discharge action if he established that the principal reason for his termination was the employer's desire to avoid contributing to or paying benefits under the employee's pension fund. The court noted that federal courts had held similar claims pre-empted by ERISA, but distinguished the present case on the basis that McClendon was not seeking lost pension benefits but [was] instead seeking future lost wages, mental anguish and punitive damages as a result of the wrongful discharge. `Because this issue has divided state and federal courts, we granted certiorari, and now reverse. 498 U.S. at 136-37, 111 S.Ct. at 481-82 (citations omitted; emphasis omitted; emphasis added [in Haywood ]). The facts in the case before us are indistinguishable from those in Ingersoll-Rand. In that case the employee alleged that his employer had tortiously terminated his employment just before his plan benefits would have vested and that he had been damaged as a result of that alleged action of the employer. The Supreme Court held that a remedy for that tort existed under § [1140] and that the state court was authorized to award damages beyond the benefits to which the plaintiff was entitled under the plan. In this case the plaintiff alleges facts from which a factfinder could conclude that the employer tortiously interfered with her right to disability benefits under an ERISA plan. She seeks compensatory and punitive damages for that interference. Ingersoll-Rand teaches that this plaintiff's allegations state a cause of action under § [1140] and that a remedy exists under § [1132(a)] that may be enforced in the federal or state courts notwithstanding that the state common law tort claim is preempted by the Act. .... ... The late Judge Robert S. Vance, in an opinion issued after his death, anticipated such action by the Supreme Court of the United States. In Kane v. Aetna Life Insurance Co., 893 F.2d 1283 (11th Cir. 1990), cert. denied, 498 U.S. 890, 111 S.Ct. 232, 112 L.Ed.2d 192 (1990), Judge Vance, writing for the United States Court of Appeals for the 11th Circuit, stated that although ERISA preempts all state common law claims relating to employee benefit plans, `Federal courts possess the authority,... to develop a body of federal common law to govern issues in ERISA actions not covered by the act itself.' District Judge William M. Acker, Jr., in Blue Cross & Blue Shield of Alabama v. Lewis, 753 F.Supp. 345 (N.D.Ala.1990), observed that `Ingersoll-Rand brings to full flower' the idea expressed by Judge Vance that federal courts have the authority to develop remedies beyond those expressly provided by ERISA. Judge Acker then stated: `In Amos v. Blue Cross-Blue Shield of Alabama, 868 F.2d 430 (11th Cir.1989), the Eleventh Circuit, prior to Ingersoll-Rand, had carried the concept of ERISA `preemption' to its ultimate reach. Amos would eliminate the possibility of recognizing any statutorily unspecified federal remedy under ERISA, especially if it would duplicate any `preempted' state remedy. Amos ended with the following near apology: `We acknowledge that by eliminating the possibility that insurance companies may be liable for punitive or extra-contractual damages, the courts are removing an historical disincentive to insurance company misbehavior. Consequently, our decision may produce unintended results. However, any change in the law's course will have to be charted by the Congress or the Supreme Court.  `Id. at 433 (emphasis supplied [by Judge Acker]). `In Ingersoll-Rand the Supreme Court has now clearly answered the Eleventh Circuit's prayer by giving it the green light to fashion ERISA remedies beyond the mere enforcement of claims for unpaid benefits, even though a federally fashioned remedy may bear striking similarity to some preempted state or common law remedy. According to Ingersoll-Rand, a court, state or federal, in an ERISA case, may, as an ERISA remedy, award extracontractual, even punitive damages, that is, if the facts call for such a remedy. This was the idea which this court was endeavoring to articulate in Amos v. Blue Cross-Blue Shield of Alabama, 681 F.Supp. 1515 (N.D.Ala.1988). This court did not and could not express the idea as forcefully as Justice O'Connor has now expressed it. Some ERISA-governed employers and administrators claim to be in a state of shock in the wake of Ingersoll-Rand. They say the Supreme Court did not know what it was saying in Ingersoll-Rand, This court [respectfully] disagrees, being willing to attribute literacy to the Supreme Court. This court can read and understand the English language and believes that the Supreme Court would not say something this important without being careful and deliberate in its choice of words. After all, the Supreme Court granted certiorari in Ingersoll-Rand for the very reason that the preemption question has divided state and federal courts. [498 U.S. at 137,] 111 S.Ct. at 481. The Supreme Court would not undertake to clear up the differences of opinion in a way which would create a new basis for misunderstanding. There is no reason in Ingersoll-Rand for any misunderstanding of the Supreme Court's intent.' 753 F.Supp. at 347. We agree entirely with Judge Acker's reading of Ingersoll-Rand. The holding is unanimous and unequivocal. No reasonable person can misunderstand it, although one might disagree with it. In our view, it comes as no surprise. The dissatisfaction with the Court's broad interpretation of the preemption provisions of ERISA, without specifically articulating what remedies existed to replace preempted state remedies, has been often brought to the attention of Congress by those, such as the writer of this opinion, who believed that the Court's construction of the preemption provisions of ERISA, without a recognition of some rights and remedies to take the place of preempted state rights and remedies, went beyond what the Congress intended. As recently as 1988, the Education and Labor Committee of the House of Representatives described the legislative intent behind ERISA as follows: `In recent years, the Committee has received numerous complaints and inquiries from Members of Congress and their constituents about improper denials of medical claims, improper denials of continuation coverage, or unreasonable delays in processing claims by employers or insurers. Participants in ERISA-covered employee benefit plans that have been treated in this manner are concerned that the Supreme Court's interpretation of ERISA (particularly as articulated in Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549 [95 L.Ed.2d 39] (1987)) as preempting state laws that authorize punitive or other extra-contractual damages in connection with claims for benefits effectively denies them legal recourse. The Committee shares their concern. In Pilot Life, the Supreme Court held that state common law claims against an insurance company for breach of contract and bad faith arising out of an improper denial of disability benefit claims under an ERISA-covered plan were preempted. In addition, the Supreme Court declined to fashion a federal common law remedy for improper processing of benefit claims[,] holding that ERISA's civil enforcement provisions under Section [1132], were intended to be the exclusive remedies afforded to plan participants and beneficiaries. The Committee disagrees with this latter conclusion. The Committee believes that the legislative history of ERISA and subsequent expansions of ERISA support the view that Congress intended for the courts to develop a federal common law with respect to employee benefit plans, including the development of appropriate remedies, even if they are not specifically enumerated in Section 502 [29 U.S.C. § 1132] of ERISA. Since the issue of preemption and civil remedies under ERISA is within the exclusive purview of the labor committee of Congress, the Committee has, over the years, considered the option of amending the statute to encompass specifically several additional remedies. In light of the legislative history on this issue, however, the Committee believes such action is unnecessary. The Committee reaffirms the authority of the Federal Courts to shape legal and equitable remedies to fit the facts and circumstances of the cases before them, even though those remedies may not be specifically mentioned in ERISA itself. In cases in which, for instance, facts and circumstances show that the processing of legitimate benefit claims has been unreasonably delayed or totally disregarded by an insurer, an employer, a plan administrator, or a plan, the Committee intends the Federal Courts to develop a federal common law of remedies, including (but certainly not limited to) the imposition of punitive damages on the person responsible for the failure to pay claims in a timely manner.' H.R.Rep. No. 801, 100th Cong., 2d Sess, p. 2, at 63 (1988) (emphasis added [in Haywood ]). The Supreme Court, in Ingersoll-Rand, has now specifically held that the courts are authorized to award damages, both extracontractual, and even punitive, where the facts support them, even though they are not specifically provided for in ERISA. In doing so, it simply correctly carries out the intent of Congress in passing ERISA.  State courts, with concurrent jurisdiction of ERISA actions, likewise possess such authority. In this case, the cause of action stated happens to be one specifically provided for in ERISA, so the trial court need not go beyond the Act itself to formulate a remedy for the wrong allegedly done the plaintiff. Ingersoll-Rand, of course, would authorize recovery even if the relief sought were not expressly provided for in the Act. Therefore, we reverse the judgment and remand the cause and permit the plaintiff to attempt to state a claim under § [1140]. In recognizing that ERISA permits such actions, the Supreme Court of the United States acknowledged that the polestar of any legislation is legislative intent. The Congress of the United States could not have intended to strip from beneficiaries of pension and employee benefit plans all of the protections long afforded by state common law and not to provide a statutory replacement for those state common law protections. Certainly it would not have done so in the guise of passing legislation to protect the very persons whose rights were the focus of the legislation. The fact that the statutory rights bear many of the characteristics of the state remedies that the Act preempted is not unusual. In Alabama the legislature has adopted statutes providing remedies for medical and legal malpractice. Ala.Code 1975, § 6-5-480 et seq.; § 6-5-570 et seq. These statutory causes of action bear a striking resemblance to the common law actions they replaced. In specifically authorizing the courts to develop remedies not specifically provided for in ERISA, the Supreme Court now recognizes the possibility of recovery of tort-like damages in ERISA cases. Haywood 584 So.2d at 1295-98. (Emphasis added except as noted.) Since Haywood was decided, a number of courts have discussed Ingersoll-Rand and have reached varying conclusions as to its meaningsome cases concluding that it does not authorize extracontractual or punitive damages, see e.g., Harsch v. Eisenberg, 956 F.2d 651 (7th Cir.), cert. denied, ___ U.S. ___, 113 S.Ct. 61, 121 L.Ed.2d 29 (1992); McRae v. Seafarers' Welfare Plan, 920 F.2d 819 (11th Cir.1991); Zimmerman v. Sloss Equipment, Inc., 835 F.Supp. 1283 (D.Kan. 1993); Roberts v. Thorn Apple Valley, Inc., 784 F.Supp. 1538 (D.Utah 1992); and others concluding that Ingersoll-Rand does authorize such remedies; see, e.g., East v. Long, 785 F.Supp. 941 (N.D.Ala.1992) (per Acker, J.); International Union, United Automobile, Aerospace & Agricultural Implement Workers v. Midland Steel Prods. Co., 771 F.Supp. 860 (N.D.Ohio 1991); cf. Lawrence v. Jackson Mack Sales, Inc., 837 F.Supp. 771 (S.D.Miss.1992) (some species of extracontractual damagesbut not punitive damagesare recoverable under ERISA). However, this Court still understands Ingersoll-Rand as it did when it released Haywood. Therefore, the Weemses' ERISA claims are not defective for the reason on which the trial court's summary judgment expressly rests, namely, that ERISA does not authorize recovery of punitive damages, or of extracontractual damages. The judgment of the trial court, to the extent that it so held, is reversed.