Court Opinion

ID: 2962769
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:01:45.40267+00
Date Added: 2024-06-11T08:45:45.540231
License: Public Domain

USCA1 Opinion

	

                            United States Court of Appeals                            United States Court of Appeals                                For the First Circuit                                For the First Circuit                                 ____________________        No. 94-1060                       ROLAND L. ARMSTRONG AND REILOUS LATNEY,                               Plaintiffs, Appellants,                                          v.                            JEFFERSON SMURFIT CORPORATION                        AND SMURFIT PENSION SERVICES COMPANY,                                Defendants, Appellees.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                 [Hon. Frank H. Freedman, Senior U.S. District Judge]                                          __________________________                                 ____________________                                        Before                                Cyr, Boudin and Stahl,                                    Circuit Judges.                                   ______________                                 ____________________            David  A. Robinson with  whom Jay  N. Michelman  and Michelman Law            __________________            _________________      _____________        Offices were on brief for appellants.        _______            Michael  L.  Mulhern, with  whom  Deborah  Gage Haude,  Winston  &            ____________________              ___________________   __________        Strawn, John  O. Mirick, and  Mirick, O'Connell,  DeMaillie &  Lougee,        ______  _______________       _______________________________________        were on brief for appellees.                                 ____________________                                    July 22, 1994                                 ____________________                      Stahl, Circuit Judge.  In  this appeal, plaintiffs-                             _____________            appellants  Roland L. Armstrong  and Reilous Latney challenge            the  district  court's  dismissal  of  their  action  brought            pursuant to  the Employee  Retirement Income Security  Act of            1974 ("ERISA"), 29 U.S.C.   1001 et seq.  We affirm.                                             __ ____                                          I.                                          I.                                          __                          STANDARD OF REVIEW AND BACKGROUND                          STANDARD OF REVIEW AND BACKGROUND                          _________________________________                      Because  we are reviewing  the grant  of a  Fed. R.            Civ.  P.  12(b)(6)  motion to  dismiss,  we  will  accept the            allegations of the complaint  as true for purposes of  our de                                                                       __            novo review.  See Vartanian v. Monsanto Co., 14 F.3d 697, 700            ____          ___ _________    ____________            (1st Cir. 1994).  If, under any theory, these allegations are            sufficient to state a  claim for which the relief  sought can            be granted, we will reverse the district court's dismissal of            plaintiffs' complaint.  See id.                                    ___ ___                      Plaintiffs are disabled  retirees who  participated            in an  employee welfare benefit plan  sponsored by defendant-            appellee  Jefferson Smurfit  Corporation and  administered by            defendant-appellee  Smurfit  Pension  and Insurance  Services            Company.   In  early  1992, defendants  made what  plaintiffs            claim was a  "highly unusual" offer of  either (1) continuing            to  participate  in   the  existing  retiree  group   medical            insurance program at  new 1992 monthly premium  costs, or (2)            discontinuing participation  in the program  in exchange  for                                         -2-                                          2            lump  sum payments.1   In  the course  of making  this offer,            defendants neither  informed  plaintiffs that  the  lump  sum            payments were  subject to taxation nor  advised plaintiffs to            seek  tax  counsel in  making  their  elections.   Plaintiffs            elected to receive the lump sum payments.  Subsequently, they            incurred substantial tax liabilities.2                        Plaintiffs  allege  that defendants  stood  to gain            from plaintiffs' election of the lump sum  payments, and that            defendants'  failure   to   inform  them   of  possible   tax            implications was prompted  by a desire  to encourage such  an            election.   Plaintiffs  further contend  that they  would not            have elected to receive  the lump sum payments had  they been            aware of the tax consequences.   The theory of their  case is            that defendants' failure either to  inform them that the lump            sum payments would be  subject to taxation or to  advise them            to  seek  tax counsel  constituted  a  breach of  defendants'            ERISA-prescribed fiduciary duties, see section  404(1)(A) and                                               ___            (B), codified  at 29  U.S.C.    1104(a)(1)(A)  and (B),3  and                                            ____________________            1.  Plaintiff Armstrong  was offered a lump  sum of $120,000.            Plaintiff Latney was offered a lump sum of $55,000.            2.  Plaintiff Armstrong incurred over  $37,000 in federal and            state  tax liabilities.    Plaintiff Latney  incurred  almost            $17,000 in federal and state tax liabilities.            3.  Section 404(a)(1) directs  fiduciaries of ERISA plans  to            discharge  their duties with respect to a plan "solely in the            interest of the participants and beneficiaries of the plans."            Subsection A  of this provision instructs  fiduciaries to act            "for the exclusive purpose of . . . (i) providing benefits to            participants  and their  beneficiaries;  and  (ii)  defraying                                         -3-                                          3            entitles them to  recover the  federal and  state taxes  they            paid on the lump sum payments.  At oral argument, plaintiffs'            counsel made clear  that reimbursement for the  taxes paid by            plaintiffs -- the remedy requested in plaintiffs' complaint -            - is the only remedy sought in this case.                       The district court rejected plaintiffs' argument on            two separate grounds.  The court first ruled that plaintiffs'            allegations are insufficient to state  a claim for breach  of            fiduciary  duty   under  ERISA.     It  then  held,   in  the            alternative, that ERISA does not permit the remedy plaintiffs            are seeking.   Accordingly, it granted  defendants' motion to            dismiss the complaint.  This appeal followed.                                         II.                                         II.                                         ___                                      DISCUSSION                                      DISCUSSION                                      __________                      The  question of  whether plaintiffs'  complaint is            sufficient to state a claim for breach of fiduciary duty is a            close one,  given (1) plaintiffs'  allegation that defendants            intentionally  withheld  the information,  and  (2) that  the            _____________            common law  trust principles incorporated into section 404(a)            require a fiduciary to  disclose material facts affecting the            interests  of   participants  and  beneficiaries   which  the                                            ____________________            reasonable expenses of administering the plan."  Subsection B            of  this provision  mandates that  fiduciaries act  "with the            care, skill, prudence, and diligence under  the circumstances            then  prevailing that a prudent man acting in a like capacity            and familiar with such matters would use in the conduct of an            enterprise of like character and with like aims."                                         -4-                                          4            fiduciary  knows  the participants  and beneficiaries  do not            know,   and  which  such  parties  need  to  know  for  their            protection in dealing with third  persons.  See, e.g., Bixler                                                        ___  ____  ______            v. Central Pa. Teamsters Health & Welfare Fund, 12 F.3d 1292,               ___________________________________________            1300 (3d Cir. 1993) (citing  Restatement (Second) of Trusts              173, comment d (1959)).   It is, however, a question  that we            need  not   answer,  for   the  relief  plaintiffs   seek  is            unavailable under ERISA.                      Plaintiffs  primarily  frame  their  claim  as  one            brought pursuant  to ERISA section 502(a)(3),  codified at 29            U.S.C.     1132(a)(3).4    Under section  502(a)(3),  a  plan            participant  or beneficiary  can  "obtain .  . .  appropriate            equitable relief" to redress violations of ERISA or the terms            of a  plan.  We note  that it is  not at all clear  that this            provision empowers plan participants or  beneficiaries to sue            fiduciaries directly  for breach  of a fiduciary  duty rather            than  on behalf of the  plan.  See  Massachusetts Mutual Life                                           ___  _________________________                                            ____________________            4.  In  the   final  paragraph  of  their   appellate  brief,            plaintiffs raise for the first time a halfhearted alternative            argument  that  the reimbursement  they  are  seeking can  be            viewed  as "benefits due to [them] under the terms of [their]            plan,"  and that  they therefore  have  stated a  claim under            ERISA  section   502(a)(1)(B),  codified   at  29   U.S.C.               1132(a)(1)(B)  (allowing  participants  and beneficiaries  to            recover,  inter alia, benefits  due them  under the  terms of                      _____ ____            their ERISA  plans).  While this argument strikes us as a bit            farfetched,  given that  lump sum  payments seem not  to have            been contemplated by  the plan  and were offered  in lieu  of                                                              __ ____  __            continued plan participation, we regard it as waived and will            not address it on the merits.   See FDIC v. World Univ. Inc.,                                            ___ ____    ________________            978 F.2d 10,  13 (1st  Cir. 1992) (arguments  raised for  the            first time on appeal ordinarily are deemed waived).                                                -5-                                          5            Ins. Co. v.  Russell, 473 U.S.  134, 151-52 (1985)  (Brennan,            ________     _______            J., concurring in the judgment) (noting ambiguity in majority            opinion  as   to  whether  ERISA   imposes  upon  fiduciaries            actionable duties beyond those running to the plan itself).                        Even  if we  assume arguendo  that such  a suit  is                                          ________            authorized, however,  plaintiffs' claim founders  because the            Supreme  Court, after  a comprehensive  review of  the entire            statute, clearly has held that the compensatory legal damages            they  are seeking  here do  not fall within  the "appropriate            equitable  relief" authorized  by ERISA's  section 502(a)(3).            See Mertens  v.  Hewitt Assocs.,  113  S. Ct.  2063,  2068-72            ___ _______      ______________            (1993).  In the  face of this recent, on-point  Supreme Court            decision, plaintiffs  presented the  district court  with two            rather weak  arguments.  First,  plaintiffs made much  of the            fact that they were seeking only "make-whole" damages.   What            they overlooked,  however,  is that  Mertens precludes  make-                                                 _______            whole  damages which are  not equitable  in nature.   Second,            plaintiffs, reading significance  into the fact  that, unlike            the instant  action, Mertens  involved a claim  under section                                 _______            502(a)(3) against a nonfiduciary, contended that, for several                                ___            reasons, section  502(a)(3) would  allow for the  recovery of            money damages  against fiduciaries.   All of  these arguments            are answered, however,  by the  fact that the  status of  the            defendant (i.e.,  fiduciary or nonfiduciary)  does not affect            the question of whether compensatory legal damages constitute                                         -6-                                          6            "appropriate equitable  relief" under  the statute.   This is                                                                  ____            the question answered, in the negative, by the Mertens Court.                                                           _______            And,  this  negative  answer  compels  the  conclusion   that            plaintiffs  are  precluded from  recovering  damages for  the            federal and state  tax liabilities they incurred  on the lump            sum payments.5                                         III.                                         III.                                         ____                                      CONCLUSION                                      CONCLUSION                                      __________                      For  the  reasons  stated  above,  we   affirm  the            district court's dismissal of plaintiffs' complaint.                        Affirmed.  Costs to appellees.                      Affirmed.  Costs to appellees.                      ________   _____ __ _________                                            ____________________            5.  On appeal, plaintiffs argue for the first time that their            damages   claim   constitutes   an   equitable    claim   for            "restitution."   This  argument  is highly  dubious; the  tax            payments at issue would  seem to be completely distinct  from            any ill-gotten  profits which might properly  be made subject            to  a  viable  restitution  claim.    At  any  rate,  because            plaintiffs  did not  present  this argument  to the  district            court in  the first instance,  we regard it  as waived.   See                                                                      ___            World Univ., 978 F.2d at 13.            ___________                                         -7-                                          7