Opinion ID: 545161
Heading Depth: 1
Heading Rank: 4

Heading: reporting and disclosure violations

Text: 45 Plaintiffs' second cause of action seeks a declaratory judgment that defendants' violations of ERISA's reporting and disclosure provisions, ERISA Secs. 101-111, 29 U.S.C. Secs. 1021-1031, are either relevant or dispositive in determining plaintiffs' entitlement to benefits. Much of the parties' argument on this score centers on whether defendants' purported amendment was rendered invalid by their failure to satisfy section 104(b)(1) of ERISA, which requires that any material modification in the terms of a plan be disclosed to each participant and beneficiary not later than 210 days after the end of the plan year in which the change is adopted. See 29 U.S.C. Sec. 1024(b)(1). Because we have already determined that the purported amendment was invalid on other grounds, see supra Part III(A), we need not decide this issue. Plaintiffs contend further, however, that defendants' reporting and disclosure violations are also relevant in evaluating their entitlement to benefits under the terms of the unamended 1985 plan. Insofar as this latter contention affects what evidence the trier of fact may consider on remand, it remains a live issue in this case. We therefore address--and reject--only the latter contention. 46 ERISA contains two express causes of action to remedy reporting and disclosure violations as such. Section 502(a)(4), 29 U.S.C. Sec. 1132(a)(4), allows a participant to sue for appropriate relief in the case of violations of section 105(c) of ERISA, 29 U.S.C. Sec. 1025(c) (Supp. V 1987) (as amended), which requires disclosure of certain tax information to certain participants. In the case of all other reporting and disclosure violations, an aggrieved participant must sue under section 502(a)(1)(A) for the relief provided in [section 502(c) ]. 29 U.S.C. Sec. 1132(a)(1)(A) (1982). Section 502(c), in turn, makes an administrator personally liable to the participant for no more than $100 per day, or for such other relief as [the court] deems proper. 29 U.S.C.A. Sec. 1132(c)(1), -(3) (Supp.1990) (as amended). Moreover, with two limited exceptions not relevant here, liability under section 502(c) cannot be imposed unless and until a participant requests from the administrator the information to which he claims entitlement, and the administrator fails to comply with the request for at least 30 days. Id. Sec. 1132(c)(1)(B). 12 Plaintiffs do not allege claims under either section 502(a)(4) or section 502(a)(1)(A). 47 Plaintiffs contend, however, that defendants' reporting and disclosure violations are relevant in evaluating their claim under section 502(a)(1)(B) to recover benefits due to [them] under the terms of [their] plan. 29 U.S.C. Sec. 1132(a)(1)(B) (1982). That, in essence, was the Ninth Circuit's holding in Blau v. Del Monte Corp., 748 F.2d 1348 (9th Cir.1984), cert. denied, 474 U.S. 865, 106 S.Ct. 183, 88 L.Ed.2d 152 (1985). Blau involved a claim under section 502(a)(1)(B) challenging an administrator's denial of benefits. Under then-applicable precedent, the administrator's decision would be upheld unless, essentially, it were shown to be arbitrary and capricious. See id. at 1352-53. Blau held that a court must consider continuing [reporting and disclosure] violations in determining whether the decision to deny benefits was arbitrary and capricious. Id. at 1354. 48 The frequent usage of the term arbitrary and capricious in this context is perhaps unfortunate, for it tends to elide a critical distinction between the applicable substantive standard of liability and the applicable standard of judicial review. In ordinary parlance, it seems reasonable to posit that an administrator who repeatedly or intentionally violates ERISA's reporting and disclosure provisions is behaving arbitrarily and capriciously. ERISA, however, does not entitle a participant to benefits whenever the administrator behaves arbitrarily; rather, it entitles him to benefits whenever the terms of his plan so provide. See ERISA Sec. 502(a)(1)(B), 29 U.S.C. Sec. 1132(a)(1)(B). Properly understood, therefore, the phrase arbitrary and capricious in this context connotes a deferential standard of judicial review, not a substantive standard of liability. It requires simply that a district court, in reviewing an administrator's construction of the terms of [a] plan so as to deny benefits to the plaintiff, afford some degree of deference to that construction. 49 To the extent that Blau was simply attempting to avoid a perceived unfairness in affording only deferential review in this context, its holding is no longer necessary. After Blau was decided, the Supreme Court rejected the arbitrary and capricious standard of review, holding instead that in actions challenging an administrator's denial of benefits under section 502(a)(1)(B), the district court must construe the terms of a plan de novo, unless the plan itself expressly provides otherwise. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 956, 103 L.Ed.2d 80 (1989). Blau, however, can plausibly be read as holding that reporting and disclosure violations are relevant in evaluating a section 502(a)(1)(B) claim regardless of whether the district court construes the terms of the plan deferentially or de novo. Since plaintiffs have asked us to endorse the Blau theory post-Bruch, we assume that this the principle they would have us announce. 50 Blau reasoned loosely that procedural (i.e. reporting and disclosure) violations are relevant because procedural violations may ... work a substantive harm. 748 F.2d at 1354. Perhaps by substantive harm Blau meant that reporting and disclosure violations could interfere with a court's ability to review a section 502(1)(1)(B) claim under the terms of [a] plan. That would occur, for example, if a defendant never disclosed the terms of its plan then lost all copies of it before discovery, thus threatening to render a potentially meritorious claim for benefits unprovable. Here as in Blau itself, however, this kind of substantive injury is simply not present: the terms of the plan are before the court, to be construed under whatever standard of review is found appropriate. 13 51 Of course an employee can be harmed by an employer's reporting and disclosure violations regardless of whether the violations threaten to prejudice a potentially meritorious claim for benefits. An employee who never receives information about gaps in the coverage of his benefits package, for example, is unable to make fully informed decisions about whether to purchase alternative insurance, or even to seek alternative employment. That kind of injury is substantive to the extent that substantive means something like real or substantial. 14 It cannot, however, plausibly be deemed relevant to a court's construction of the terms of [a] plan where, as here, the plan defines the scope of the entitlements it creates without any reference to reporting and disclosure issues. The terms of this plan, for example, provide that an employee is entitled to benefits if terminated for the merger. We think it clear that the determination of whether a particular employee was terminated for the merger, whatever else that term might mean, does not depend on the extent to which the employee was made aware that he would receive certain severance benefits if terminated for the merger. 15 52 The injury produced by reporting and disclosure violations as such is remediable under ERISA, of course, just not remediable under section 502(a)(1)(B). As explained above, a participant aggrieved by any reporting and disclosure violation has an available, though limited, remedy under section 502(a)(1)(A). Blau, however, decreed that the remedy to which [reporting and disclosure violations] entitle[ ] the victimized employees has often been less than satisfactory. 748 F.2d at 1353. In order to right this wrong, Blau created a class of cases in which, although a plaintiff is not entitled to benefits solely because of a court's construction of the terms of his plan, and although the reporting and disclosure violations as such give rise to different remedies under different statutory provisions, the plaintiff recovers benefits nonetheless. In effect, Blau creates a kind of hybrid action designed to afford the section 502(a)(1)(B) remedy (recovery of benefits) to redress violations of rights (to certain information) made remediable under section 502(a)(1)(A)--an action outside the literal scope of each, but implied from the penumbras of both, the recognition of which obliterates the limitations expressly built into the section 502(a)(1)(A) remedy. 53 It is well settled that implied remedies are disfavored in the context of statutes that set out an expressly detailed remedial scheme. 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, 451 U.S. 77, 97, 101 S.Ct. 1571, 1583-84, 67 L.Ed.2d 750 (1981). ERISA is a prime example of just such a statute. Thus, in Massachusetts Mutual Life Insurance Company v. Russell, 473 U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985), the Supreme Court refused to imply a cause of action for extracontractual damages from ERISA. In language that could easily be transposed into a dissent to Blau, the Court explained: 54 The six carefully integrated civil enforcement provisions found in Sec. 502(a) of the statute as finally enacted ... provide strong evidence that Congress did not intend to authorize other remedies that it simply forgot to incorporate expressly. The assumption of inadvertent omission is rendered especially suspect upon close consideration of ERISA's interlocking, interrelated, and interdependent remedial scheme, which is in turn part of a comprehensive and reticulated statute. 55 Id. at 146, 105 S.Ct. at 3092 (emphasis in original; citation omitted). Following the Supreme Court's warnings, we should be reluctant to tamper with an enforcement scheme crafted with such evident care as the one in ERISA. Id. at 147, 105 S.Ct. at 3093. 56 The Blau court correctly noted two salutary purposes behind ERISA's reporting and disclosure provisions--to ensure that the individual participant knows exactly where he stands with respect to the plan and to enable employees to police their plans. H. Rep. No. 533, 93rd Cong., 1st Sess. 11, reprinted in 1974 U.S.Code Cong. & Admin. News 4639, 4649; S.Rep. No. 127, 93rd Cong., 1st Sess. 27, reprinted in 1974 U.S.Code Cong. & Admin. News 4838, 4863. We believe that Blau 's rather freewheeling statutory construction, even though embarked upon to vindicate correctly perceived underlying purposes, has little place in the context of a carefully balanced and reticulated statute like ERISA. Congress did seek to provide employees with more information about their plans. However, Congress also chose to limit the remedies available for violations of the very provisions designed to effect that purpose. 57 Perhaps these limitations represent a modest concession to employers' interests. More likely, they embody Congress's judgment that employees themselves are best served by an enforcement regime that minimizes employers' expected liability for reporting and disclosure violations--and with it, the disincentives against creating employee benefit plans in the first place--consistent with ensuring that plan administrators have some significant incentive to make required disclosures to employees who want the information enough specifically to request it. [T]he detailed provisions of Sec. 502(a) set forth a comprehensive civil enforcement scheme that represents a careful balancing of the need for prompt and fair claims settlement procedures against the public interest in encouraging the formation of employee benefit plans. Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 1556, 95 L.Ed.2d 39 (1987). 58 It is perhaps arguable that Congress should have provided employees with more generous remedies under section 502(a)(1)(A) for reporting and disclosure violations. Through express textual provisions of ERISA, however, Congress has provided only limited remedies in this context. 16 Absent constitutional objection, of course, it is not the job of this court to second-guess Congress's judgment in these matters. Our task is to apply the text, not to improve upon it. Pavelic & LeFlore v. Marvel Entertainment Group, --- U.S. ----, 110 S.Ct. 456, 460, 107 L.Ed.2d 438 (1989). 59 For the foregoing reasons, we hold that defendants' reporting and disclosure violations are irrelevant in determining plaintiffs' entitlement to benefits under the terms of the 1985 plan. To the extent plaintiffs seek benefits under section 502(a)(1)(B), they must do so on the basis of the terms of [their] plan, which defines the scope of the entitlements it creates without reference to the extent of the disclosure of its terms. To the extent plaintiffs seek redress for defendants' reporting and disclosure violations as such, they should have sought the remedies available to them under section 502(a)(1)(A). We decline to use section 502(a)(1)(B) as a device to undercut the limitations built into section 502(a)(1)(A), and we decline to follow Blau accordingly. 60 In sum, to the extent that count two of the complaint seeks to have the purported 1987 amendment struck down because of defendants' failure to satisfy the notice requirement of section 104(b)(1) of ERISA, see supra p. 1167, this contention has been mooted by our determination that the amendment is invalid on other grounds. To the extent that count two seeks to establish that defendants' reporting and disclosure violations are relevant in determining plaintiffs' entitlement to benefits under the terms of the 1985 plan, that contention is without merit. Accordingly, we will affirm the district court's grant of summary judgment for defendants on count two of plaintiffs' complaint.