Opinion ID: 4941
Heading Depth: 1
Heading Rank: 4

Heading: extracontractual damages

Text: The Corcorans argue in the alternative that the damages they seek are available as other appropriate equitable relief under ERISA § 502(a)(3). That section provides: (a) A civil action may be brought -- . . . (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; . . . Although the Corcorans did not assert a cause of action under § 502(a)(3) in their original state court complaint, they asked the district court in their motion for reconsideration to award damages pursuant to this section. The defendants agreed at oral argument that the issue was properly raised and preserved for appeal, and we proceed to consider it. Section 502(a)(3) provides for relief apart from an award of benefits due under the terms of a plan. When a beneficiary simply wants what was supposed to have been distributed under the plan, the appropriate remedy is § 502(a)(1)(B). See, e.g., Cathey v. Dow Chemical Co. Medical Care Program, 907 F.2d 554, 555 (5th Cir. 1990), cert. denied, 111 S. Ct. 964 (1991). Damages that would give a beneficiary more than he or she is 32 entitled to receive under the strict terms of the plan are typically termed extracontractual. Section 502(a)(3) by its terms permits beneficiaries to obtain other appropriate equitable relief to redress (1) a violation of the substantive provisions of ERISA or (2) a violation of the terms of the plan. Although the Corcorans have neither identified which of these two types of violations they seek to redress nor directed us to the particular section of the Plan or ERISA which they claim was violated, we need not determine this in order to resolve the issue before us. As outlined below, we find that the particular damages the Corcorans seek -- money for emotional injuries -- would not be an available form of damages under the trust and contract law principles which, the Corcorans urge, should guide our interpretation of ERISA's remedial scheme. Thus, we hold that even under the interpretation of § 502(a)(3) urged by the Corcorans, they may not recover. The question whether extracontractual or punitive damages are available to a beneficiary under § 502(a)(3) has been left open by the Supreme Court ever since Massachusetts Mutual Life Insurance Co. v. Russell, 473 U.S. 134 (1985). In Russell, the beneficiary of a plan sought compensatory and punitive damages under ERISA §§ 502(a)(2) and 409(a)17 for the improper processing of her claim for disability benefits. Id. at 136, 138. The Court rejected the argument that such damages were available 17 Section 502(a)(2) permits the Secretary. . .a participant, beneficiary or fiduciary to sue for appropriate relief under § 409. 33 under § 409(a), holding that § 409(a) (1) authorized only actions on behalf of the plan as a whole, not individual beneficiaries, for losses to the plan; and (2) provided no implied cause of action for extracontractual damages caused by improper claims processing. Russell, 473 U.S. at 140, 147. Because the beneficiary expressly disclaimed reliance on § 502(a)(3), however, the Court had no occasion to consider whether the damages the plaintiff sought were available under that section. Id. at 139 n.5. In a concurrence joined by three other Justices, Justice Brennan emphasized that he read the Court's reasoning to apply only to § 409(a), and that the legislative history of ERISA suggested that courts should develop a federal common law in fashioning other appropriate equitable relief under § 502(a)(3). Id. at 155-56 (Brennan, J., concurring in the judgment). Justice Brennan argued that Congress intended to engraft trust-law principles onto the enforcement scheme of ERISA, including the principle that courts should give to beneficiaries of a trust the remedies necessary for the protection of their interests. Id. at 156-57. Consequently, he encouraged courts faced with claims for extracontractual damages first to determine to what extent state and federal trust and pension law provide for the recovery of damages beyond any benefits that have been withheld, and second to consider whether extracontractual relief would conflict with ERISA in any way. Id. at 157-58. With respect to the first inquiry he indicated 34 that any deficiency in trust law in the availability of makewhole remedies should not deter courts from authorizing such remedies under § 502(a)(3), for Congress intended in ERISA to strengthen the requirements of the common law of trusts as they relate to employee benefit plans. Id. at 157 n.17. Finally, Justice Brennan suggested, courts should keep in mind that the purpose of ERISA is the enforcement of strict fiduciary standards of care in the administration of all aspects of pension plans and promotion of the best interests of participants and beneficiaries. Id. at 158. The Corcorans urge us to apply Justice Brennan's concurrence and hold that the damages they seek amount to other appropriate equitable relief. The defendants, on the other hand, urge us to interpret other appropriate equitable relief to include only declaratory and injunctive relief. Under the defendants' view of § 502(a)(3), which has been adopted by a number of circuits,18 no money damages would be awardable and our discussion would be at an end. However, even assuming that Justice Brennan's view of other appropriate equitable relief as potentially encompassing make-whole relief is a proper construction of that section, the damages the Corcorans seek would not be available. 18 Drinkwater v. Metropolitan Life Ins. Co., 846 F.2d 821 (1st Cir.), cert. denied, 488 U.S. 909 (1988); Harsch v. Eisenberg, 956 F.2d 651 (7th Cir. 1992), petition for cert. filed, 60 U.S.L.W. 3816 (U.S. May 11, 1992) (No. 91-1835); Novak v. Andersen Corp., No. 91-1957 (8th Cir. April 9, 1992); Sokol v. Bernstein, 803 F.2d 532 (9th Cir. 1986); Bishop v. Osborn Transp., Inc., 838 F.2d 1173 (11th Cir.), cert. denied, 488 U.S. 832 (1988). 35 The characterization of equitable relief as encompassing damages necessary to make the plaintiff whole may well be consistent with the trust law principles that were incorporated into ERISA and which guide its interpretation. See Firestone, 489 U.S. at 110-11 (because ERISA is largely based on trust law, those principles guide interpretation); H.R. Rep. No. 533, 93d Cong., 1st Sess. (1973), reprinted in 1974 U.S. Code Cong. & Admin. News 4639; S. Rep. No. 127, 93d Cong., 1st Sess., reprinted in 1974 U.S. Code Cong. & Admin. News 4838 (indicating intent to incorporate the law of trusts into ERISA). Section 205 of the Restatement (Second) of Trusts allows for monetary damages as make-whole relief, providing that a beneficiary has the option of pursuing a remedy which will put him in the position in which he was before the trustee committed the breach of trust or of pursuing a remedy which will put him in the position in which he would have been if the trustee had not committed the breach of trust. In the context of the breach of a trustee's investment duties, the general rule [is] that the object of damages is to make the injured party whole, that is, to put him in the same condition in which he would have been if the wrong had not been committed. . . . Both direct and consequential damages may be awarded. G. Bogert & G. Bogert, The Law of Trusts and Trustees § 701, at 198 (2d ed. 1982). See also Estate of Talbot, 141 Cal. App. 309, 296 P.2d 848 (1956); In re Cook's Will, 136 N.J. Eq. 123, 40 A.2d 805 (1945). 36 This view may also be consistent with the common law contract doctrine which assists us in interpreting ERISA. As the Court observed in Russell, ERISA was enacted to protect contractually defined benefits. 473 U.S. at 148. Prior to the enactment of ERISA, the rights and obligations of pension beneficiaries and trustees were governed not only by trust principles, but in large part by contract law. Firestone, 489 U.S. at 112-13; see also Rochester Corp. v. Rochester, 450 F.2d 118, 120-21 (4th Cir. 1971); Audio Fidelity Corp. v. Pension Benefit Guaranty Corp., 624 F.2d 513, 517 (4th Cir. 1980); Hoefel v. Atlas Tack Corp., 581 F.2d 1, 4-7 (1st Cir. 1978). It is well-established that contract law enables an aggrieved party to recover such damages as would place him in the position he would have occupied had the contract been performed, Restatement (Second) of Contracts § 347 & comment a (1981), including those damages that could reasonably have been foreseen to flow from the breach. Id. § 351; see Warren v. Society Nat. Bank, 905 F.2d 975, 980 (6th Cir. 1990) (§ 502(a)(3) allows for recovery of beneficiaries' increased tax liability after plan administrators failed to follow instructions regarding distribution), cert. denied, 111 S. Ct. 2556 (1991). However, the Corcorans seek a form of extracontractual damages that is never, as far as we can tell, awarded for breach of trust duties, and is granted only in the most limited of circumstances for a breach of contract. Certainly, patients and their physicians can enter into contracts and physicians may 37 incur liability for breach. The cases are uniform, however, in holding that there can be no recovery against a physician on a contractual theory, as opposed to the usual recovery on a tort theory of medical negligence, unless there is an express agreement to perform a particular service or to achieve a specific cure. E.g., Bobrick v. Bravstein, 497 N.Y.S.2d 749, 751, 116 A.D.2d 682 (App. Div. 1986); Cirafici v. Goffen, 85 Ill. App. 3d 1102, 407 N.E.2d 633, 635, 41 Ill. Dec. 135 (1980); Depenbrok v. Kaiser Foundation Health Plan, Inc., 79 Cal. App. 3d 167, 144 Cal. Rptr. 724, 726 (1978). In a few cases, courts, recognizing a distinction between commercial contracts and contracts for the performance of personal services, have found inapplicable the general rule that emotional distress damages are not available in contract actions19 and have allowed damages for emotional injuries within the contemplation of the parties. Stewart v. Rudner, 349 Mich. 459, 84 N.W.2d 816, 824 (1957) (the parties may reasonably be said to have contracted with reference to the payment of [emotional distress] damages therefor in event of breach); Sullivan v. O'Connor, 363 Mass. 579, 296 N.E.2d 183, 188-89 (1973) (although mental anguish damages are not available for breach of a commercial contract, psychological injury may be contemplated in a contract for an operation) (citing Stewart). The Stewart rule, however, has not been widely adopted, and the 19 See J. Calamari & J. Perillo, The Law of Contracts §§ 14-3, 14-5(b), at 595-96 (3d ed. 1987); 11 W. Jaeger, Williston on Contracts § 1341, at 214 (3d ed. 1968); 5 Corbin on Contracts § 1076, at 426 (2d ed. 1964). 38 Michigan courts recently have characterized its holding concerning damages as applying only to contracts involving deep, personal relationships, Chrum v. Charles Heating & Cooling, Inc., 121 Mich. App. 17, 327 N.W.2d 568, 570 (1982), and contracts to perform very specific acts. Penner v. Seaway Hosp., 169 Mich. App. 502, 427 N.W.2d 584, 587 (1988). The strictness with which courts have viewed doctor-patient contracts thwarts the Corcorans' claim that emotional distress damages would be available here under a make-whole interpretation of § 502(a)(3). The existence of a true doctor-patient relationship between Mrs. Corcoran and United which could support a contractual theory of recovery is dubious at best. Related to this problem is the lack of an express agreement for a particular service or for a particular result that serves as a prerequisite to a contract-based recovery. Even assuming that United's booklet could be considered an aspect of the plan, breach of which would give rise to a cause of action under § 502(a)(3), it cannot be construed as making an agreement to perform any particular medical procedure or to arrive at any result. At most it makes promises to act in accordance with accepted standards of medical care. But courts have not recognized these sorts of promises as creating contractual duties between physicians and patients. Cirafici, 407 N.E.2d at 635-36 (failure to perform with requisite skill and care leads to action for negligence, not breach of contract); Awkerman v. Tri-County Orthopedic Group, P.C., 143 Mich. App. 722, 373 N.W.2d 204, 206 (1985) (physician's 39 breach of express or implied promise to act in accordance with standard of care not actionable in contract). Indeed, the Massachusetts Supreme Judicial Court has emphasized that in an action seeking damages under Sullivan, one of the leading cases allowing mental distress damages for a breached medical contract, recovery is not for the doctor's failure to live up to the standard of care but solely for a failure to perform the specific promise contained in the agreement. Salem Orthopedic Surgeons, Inc. v. Quinn, 377 Mass. 514, 386 N.E.2d 1268, 1271 (1979). See also Murray v. University of Pennsylvania Hosp., 490 A.2d 839, 841 (Pa. Super. 1985) (action for breach of contract to achieve particular result may lie even if doctor has exercised highest degree of skill and care). The fact that courts regularly view doctors and their patients as standing in a fiduciary relationship, e.g., Black v. Littlejohn, 312 N.C. 626, 325 S.E.2d 469, 482 (1985); Liebergesell v. Evans, 93 Wash. 2d 881, 613 P.2d 1170, 1176 (1980); State ex rel. Stufflebaum v. Appelquist, 694 S.W.2d 882, 885 (Mo. App. 1985), also is of no avail. Although a plan beneficiary certainly may sue under § 502(a)(3) for a breach of the fiduciary duties set forth in § 404, the lack of a true doctor-patient relationship between Mrs. Corcoran and United undermines this ground of recovery. In any event, courts have not held that patients may sue their doctors under any independent breach of fiduciary duty theory. The remedies are limited to contract actions (where an express agreement has been 40 made) and, in the vast majority of cases, tort actions for negligence. Assuming without deciding, therefore, that § 502(a)(3) permits the award of make-whole relief as other appropriate equitable relief, we hold that the emotional distress and mental anguish damages sought here by the Corcorans are not recoverable.