Massachusetts Mutual Life Insurance v. Russell

473 U.S. 134, 105 S. Ct. 3085, 87 L. Ed. 2d 96, 1985 U.S. LEXIS 85, 6 Employee Benefits Cas. (BNA) 1733, 53 U.S.L.W. 4938

Opinions

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 . 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 (1984), to review both the compensatory and punitive components of the Court of Appeals’ holding that § 409 authorizes recovery of extra-contractual 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 (1975). We reject both arguments.

r-H

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. § 1182(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 (1973); United States v. Jones, 131 U. S. 1, 19 (1889). This “blue pencil” method of statutory interpretation — omitting all words not part of the clauses deemed pertinent to the task at hand — impermissibly ignores the relevant context in which statutory language subsists. See Jarecki v. G. D. Searle & Co., 367 U. S. 303, 307 (1961). In this case, this mode of interpretation would render superfluous the preceding clauses providing relief singularly to the plan, and would slight the language following after the phrase “such other equitable or remedial relief.” Congress specified that this remedial phrase includes “removal of such fiduciary” — an example of the kind of “plan-related” relief provided by the more specific clauses it succeeds. A fair contextual reading of the statute makes it abundantly clear that its draftsmen were primarily concerned with the possible misuse of plan assets, and with remedies that would protect the entire plan, rather than with the rights of an individual beneficiary.⁹

It is of course true that the fiduciary obligations of plan administrators are to serve the interest of participants and beneficiaries and, specifically, to provide them with the benefits authorized by the plan. But the principal statutory duties imposed on the trustees relate to the proper management, administration, and investment of fund assets, the maintenance of proper records, the disclosure of specified information, and the avoidance of conflicts of interest.¹⁰ Those duties are described in Part 4 of Title 1 of the Act, which is entitled “Fiduciary Responsibility,” see §§401-414, 88 Stat. 874-890, 29 U. S. C. §§ 1101-1114, whereas the statutory provisions relating to claim procedures are found in Part 5, dealing with “Administration and Enforcement.” §§ 502(a), 503, 88 Stat. 891, 893, 29 U. S. C. §§ 1132(a), 1133. The only section that concerns review of a claim that has been denied — §503—merely specifies that every plan shall comply with certain regulations promulgated by the Secretary of Labor.¹¹

The Secretary’s regulations contemplate that a decision “shall be made promptly, and shall not ordinarily be made later than 60 days after the plan’s receipt of a request for review, unless special circumstances . . . require an extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than 120' days after receipt of a request for review.” 29 CFR §2560.503-l(h)(l)(i) (1984). Nothing in the regulations or in the statute, however, expressly provides for a recovery from either the plan itself or from its administrators if greater time is required to determine the merits of an application for benefits. Rather, the regulations merely state that a claim may be treated as having been denied after the 60- or 120-day period has elapsed. See §2560.503-l(h)(4) (“If the decision on review is not furnished within such time, the claim shall be deemed denied on review” (emphasis added)). This provision therefore enables a claimant to bring a civil action to have the merits of his application determined, just as he may bring an action to challenge an outright denial of benefits.

Significantly, the statutory provision explicitly authorizing a beneficiary to bring an action to enforce his rights under the plan — § 502(a)(1)(B), quoted supra, at 140 — says nothing about the recovery of extracontractual damages, or about the possible consequences of delay in the plan administrators’ processing of a disputed claim. Thus, there really is nothing at all in the statutory text to support the conclusion that such a delay gives rise to a private right of action for compensatory or punitive relief. And the entire text of §409 persuades us that Congress did not intend that section to authorize any relief except for the plan itself. In short, unlike the Court of Appeals, we do not find in § 409 express authority for an award of extracontractual damages to a beneficiary.¹²

I — I HH

Relying on the four-factor analysis employed by the Court in Cort v. Ash, 422 U. S., at 78,¹³ respondent argues that a private right of action for extracontractual damages should be implied even if it is not expressly authorized by ERISA. Two of the four Cort factors unquestionably support respondent’s claim: respondent is a member of the class for whose benefit the statute was enacted and, in view of the preemptive effect of ERISA, there is no state-law impediment to implying a remedy. But the two other factors — legislative intent and consistency with the legislative scheme— point in the opposite direction. And “unless this congressional intent can be inferred from the language of the statute, the statutory structure, or some other source, the essential predicate for implication of a private remedy simply does not exist.” Northwest Airlines, Inc. v. Transport Workers, 451 U. S. 77, 94 (1981). “The federal judiciary will not engraft a remedy on a statute, no matter how salutary, that Congress did not intend to provide.” California v. Sierra Club, 451 U. S. 287, 297 (1981).

The voluminous legislative history of the Act contradicts respondent’s position. It is true that an early version of the statute contained a provision for “legal or equitable” relief that was described in both the Senate and House Committee Reports as authorizing “the full range of legal and equitable remedies available in both state and federal courts.” H. R. Rep. No. 93-533, p. 17 (1973), 2 Leg. Hist. 2364; S. Rep. No. 93-127, p. 35 (1973), 1 Leg. Hist. 621. But that language appeared in Committee Reports describing a version of the bill before the debate on the floor and before the Senate-House Conference Committee had finalized the operative language.¹⁴ In the bill passed by the House of Representatives and ultimately adopted by the Conference Committee the reference to legal relief was deleted. The language relied on by respondent and by the Court of Appeals below, therefore, is of little help in understanding whether Congress intended to make fiduciaries personally liable to beneficiaries for extracontractual damages.

The six carefully integrated civil enforcement provisions found in § 502(a) of the statute as finally enacted, however, 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.” Nachman Corp. v. Pension Benefit Guaranty Corporation, 446 U. S. 359, 361 (1980). If in this case, for example, the plan administrator had adhered to his initial determination that respondent was not entitled to disability benefits under the plan, respondent would have had a panoply of remedial devices at her disposal. To recover the benefits due her, she could have filed an action pursuant to § 502(a)(1)(B) to recover accrued benefits, to obtain a declaratory judgment that she is entitled to benefits under the provisions of the plan contract, and to enjoin the plan administrator from improperly refusing to pay benefits in the future. If the plan administrator’s refusal to pay contractually authorized benefits had been willful and part of a larger systematic breach of fiduciary obligations, respondent in this hypothetical could have asked for removal of the fiduciary pursuant to §§ 502(a)(2) and 409. Finally, in answer to a possible concern that attorney’s fees might present a barrier to maintenance of suits for small claims, thereby risking underenforcement of beneficiaries’ statutory rights, it should be noted that ERISA authorizes the award of attorney’s fees. See § 502(g), 88 Stat. 892, as amended, 29 U. S. C. § 1182(g)(1).

We are reluctant to tamper with an enforcement scheme crafted with such evident care as the one in ERISA. As we stated in Tmnsamerica Mortgage Advisors, Inc. v. Lends, 444 U. S. 11, 19 (1979): “[W]here a statute expressly provides a particular remedy or remedies, a court must be chary of reading others into it.” See also Touche Ross & Co. v. Redington, 442 U. S. 560, 571-574 (1979). “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., at 97.¹⁵

In contrast to the repeatedly emphasized purpose to protect contractually defined benefits,¹⁶ there is a stark absence — in the statute itself and in its legislative history — of any reference to an intention to authorize the recovery of extracontractual damages.¹⁷ Because “neither the statute nor the legislative history reveals a congressional intent to create a private right of action ... we need not carry the Cort v. Ash inquiry further.” Northwest Airlines, Inc. v. Transport Workers, 451 U. S., at 94, n. 31.

hH I — I i

Thus, the relevant text of ERISA, the structure of the entire statute, and its legislative history all support the conclusion that in § 409(a) Congress did not provide, and did not intend the judiciary to imply, a cause of action for extra-contractual damages caused by improper or untimely processing of benefit claims.

The judgment of the Court of Appeals is therefore

Reversed.

1

Respondent later qualified for permanent disability benefits which have been regularly paid.

2

The regulations, which are authorized by §§ 503, 505, 88 Stat. 893-894, 29 U. S. C. §§ 1133, 1135, appear at 29 CFR §2560.503-l(h) (1984). We discuss them infra, at 144, and n. 11.

3

Petitioner argues that the review period should be measured from November 27, 1979, when respondent submitted her medical evidence, rather than from October 22, 1979, the date she requested review, but for purposes of our decision we accept respondent’s position on this point.

4

Respondent did not file a cross-petition and therefore has not questioned the Court of Appeals’ holding that her state-law causes of action are pre-empted by ERISA.

5

Because respondent relies entirely on § 409(a), and expressly disclaims reliance on § 502(a)(3), we have no occasion to consider whether any other provision of ERISA authorizes recovery of extracontractual damages. Tr. Oral Arg. 31-32.

6

Section 411 prohibits any person who has been convicted of certain enumerated offenses from serving as an administrator or fiduciary of a regulated plan. See 88 Stat. 887, 29 U. S. C. § 1111.

7

Section 501 reads as follows:

“Any person who willfully violates any portion of part 1 of this subtitle, or any regulation or order issued under any such provision, shall upon conviction be fined not more than $5,000 or imprisoned not more than one year, or both; except that in the case of such violation by a person not an individual, the fine imposed upon such person shall be a fine not exceeding $100,000.” 88 Stat. 891, 29 U. S. C. § 1131.

Part 1 of the subtitle, which consists of §§ 101-111, imposes elaborate reporting and disclosure requirements on plan administrators. See 88 Stat. 840-851, 29 U. S. C. §§ 1021-1031.

8

The Committee Reports also emphasize the fiduciary’s personal liability for losses to the plan. See H. R. Conf. Rep. No. 93-1280, p. 320 (1974), reprinted in 3 Subcommittee on Labor and Public Welfare of the Senate Committee on Labor and Public Welfare, 94th Cong., 2d Sess., Legislative History of the Employee Retirement Income Security Act of 1974, p. 4587 (Comm, print 1976) (hereinafter Leg. Hist.); S. Rep. No. 93-383, pp. 8, 32, 105 (1973), 1 Leg. Hist. 1076,1100,1173; S. Rep. No. 93-127, p. 33 (1973), 1 Leg. Hist. 619.

The floor debate also reveals that the crucible of congressional concern was misuse and mismanagement of plan assets by plan administrators and that ERISA was designed to prevent these abuses in the future. See 120 Cong. Rec. 29932 (1974) (“[T]he legislation imposes strict fiduciary obligations on those who have discretion or responsibility respecting the management, handling, or disposition of pension or welfare plan assets”) (remarks of Sen. Williams), reprinted in 3 Leg. Hist. 4743; 120 Cong. Rec. 29951 (1974) (“This bill will establish judicially enforceable standards to insure honest, faithful, and competent management of pension and welfare funds”) (remarks of Sen. Bentsen), reprinted in 3 Leg. Hist. 4795; 120 Cong. Rec. 29954 (1974) (“[Ijnstances have arisen in which pension funds have been used improperly by plan managers and fiduciaries. . . . [T]his bill contains measures designed to reduce substantially the potentialities for abuse”) (remarks of Sen. Nelson), reprinted in 3 Leg. Hist. 4803; 120 Cong. Rec. 29957 (1974) (“In addition, frequently the pension funds themselves are abused by those responsible for their management who manipulate them for their own purposes or make poor investments with them”) (remarks of Sen. Ribicoff), reprinted in 3 Leg. Hist. 4811; 120 Cong. Rec. 29957 (1974) (“[Mjisuse, manipulation, and poor management of pension trust funds are all too frequent”) (remarks of Sen. Ribicoff), reprinted in 3 Leg. Hist. 4812; 120 Cong. Rec. 29961 (1974) (“This legislation . . . sets fiduciary standards to insure that pension funds are not mismanaged”) (remarks of Sen. Clark), reprinted in 3 Leg. Hist. 4823; 120 Cong. Rec. 29194 (1974) (ERISA contains “provisions to insure fair handling of a worker’s money”) (remarks of Rep. Biaggi), reprinted in 3 Leg. Hist. 4661; 120 Cong. Rec. 29196-29197 (1974) (“These standards . . . will prevent abuses ... by those dealing with plans”) (remarks of Rep. Dent), reprinted in 3 Leg. Hist. 4668; 120 Cong. Rec. 29206 (1974) (ERISA imposes “fiduciary and disclosure standards to guard against fraud and abuse of pension funds”) (remarks of Rep. Brademas), reprinted in 3 Leg. Hist. 4694.

9

Consistent with this objective, § 502(a)(2), the enforcement provision for §409, authorizes suits by four classes of party-plaintiffs: the Secretary of Labor, participants, beneficiaries, and fiduciaries. Inclusion of the Secretary of Labor is indicative of Congress’ intent that actions for breach of fiduciary duty be brought in a representative capacity on behalf of the plan as a whole. Indeed, the common interest shared by all four classes is in the financial integrity of the plan.

10

Accordingly, ERISA establishes duties of loyalty and care for fiduciaries. With regard to loyalty, the principal provision is § 406, which in general prohibits self-dealing and sales or exchanges between the plan, on the one hand, and “parties in interest” and “disqualified persons,” on the other. See 88 Stat. 879-880, 29 U. S. C. § 1106. In the same vein, § 408(c)(2) prohibits compensating fiduciaries who are full-time employees of unions or employers. 88 Stat. 885, 29 U. S. C. § 1108(c)(2).

With regard to the duty of care, §404, among other obligations, imposes a “prudent person” standard by which to measure fiduciaries’ investment decisions and disposition of assets. See 88 Stat. 877, 29 U. S. C. § 1104(a)(1)(B). Section 404 also mandates that “a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and — (A) for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries.” 88 Stat. 877, 29 U. S. C. § 1104(a)(1).

11

Section 503 provides:

“In accordance with regulations of the Secretary, every employee benefit plan shall—

“(1) provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant, and

“(2) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.” 88 Stat. 893, 29 U. S. C. § 1133.

The Secretary of Labor’s rulemaking power is contained in § 505, 88 Stat. 894, 29 U. S. C. § 1135.

12

In light of this holding, we do not reach any question concerning the extent to which § 409 may authorize recovery of extracontraetual compensatory or punitive damages from a fiduciary by a plan.

13

“In determining whether a private remedy is implicit in a statute not expressly providing one, several factors are relevant. First, is the plaintiff ‘one of the class for whose especial benefit the statute was enacted,’ Texas & Pacific R. Co. v. Rigsby, 241 U. S. 33, 39 (1916) (emphasis supplied) — that is, does the statute create a federal right in favor of the plaintiff? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one? See, e. g., National Railroad Passenger Corporation v. National Assn. of Railroad Passengers, 414 U. S. 453, 458, 460 (1974) (Amtrak). Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? . . . And finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the States, so that it would be inappropriate to infer a cause of action based solely on federal law?” Cort v. Ash, 422 U. S., at 78 (citations omitted).

14

This provision, which was part of H. R. 2 as passed by the Senate, provided for “[cjivil actions for appropriate relief, legal or equitable, to redress or restrain a breach of any responsibility, obligation, or duty of a fiduciary.” H. R. 2, §693, 93d Cong., 2d Sess. (Mar. 4, 1974), 3 Leg. Hist. 3816. (It was also part of earlier bills. See S. 4, § 603, 93d Cong., 1st Sess. (Apr. 18. 1973), 1 Leg. Hist. 579; see also S. 1179, § 501(d), 93d Cong., 1st Sess. (Aug. 21, 1973), 1 Leg. Hist. 950.)

15

See Middlesex County Sewerage Authority v. National Sea Clammers Assn., 453 U. S. 1, 14-15 (1981); Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U. S. 630, 639-640 (1981); California v. Sierra Club, 451 U. S. 287, 295, n. 6 (1981); National Railroad Passenger Corporation v. National Assn, of Railroad Passengers, 414 U. S. 453, 458 (1974); Nashville Milk Co. v. Carnation Co., 355 U. S. 373, 375-376 (1958); Switchmen v. National Mediation Board, 320 U. S. 297, 301 (1943); Botany Worsted Mills v. United States, 278 U. S. 282, 289 (1929).

16

See, e. g., Nachman Corp. v. Pension Benefit Guaranty Corporation, 446 U. S. 359, 374-375 (1980); 120 Cong. Rec. 29196 (1974), 3 Leg. Hist. 4665; 119 Cong. Rec. 30041 (1973), 2 Leg. Hist. 1633.

17

Indeed, Congress was concerned lest the cost of federal standards discourage the growth of private pension plans. See, e. g., H. R. Rep. No. 93-533, 1, 9 (1973), 2 Leg. Hist. 2348, 2356; 120 Cong. Rec. 29949 (1974), 3 Leg. Hist. 4791; 120 Cong. Rec. 29210-29211 (1974), 3 Leg. Hist. 4706-4707.