In Massachusetts Mutual Life Insurance Co. v.
Russell, 473 U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96
(1985), the Supreme Court considered whether punitive damages
were available to a beneficiary bringing a breach of fiduciary
claim pursuant to sections 409 and 502(a)(2). The appeals
court below held that punitive damages may be awarded to an
individual beneficiary pursuant to the provisions of section
409(a). Justice Stevens, writing for the Court, reversed and
held that since the text of section 409 indicated that
Congress intended that section to authorize relief only for
the plan itself, section 409 did not contain any authority to
award extracontractual damages to an individual beneficiary.
Massachusetts Mutual Life, 473 U.S. at 144, 105 S.Ct.
at 3091. However, in a footnote the Court expressly stated
that it did not reach the question whether section 409
authorized the recovery of punitive damages from a fiduciary
by a plan. Massachusetts Mutual Life, 473 U.S. at 144
n. 12, 105 S.Ct. at 3091 n. 12 (emphasis original). It is this
issue which we must now decide.
Various courts have considered what was left undecided in
Massachusetts Mutual Life as to punitive damages
under section 409(a) with divergent results. See, e.g.,
Sommers Drug Stores Co. Employee Profit Sharing Trust v.
Corrigan Enterprises, Inc., 793 F.2d 1456, 1463-64 (5th
Cir. 1986) (Congress did not intend to permit plans to recover
punitive damages from fiduciaries who breach their duties
under ERISA), cert. denied, 479 U.S. 1034, 107 S.Ct.
884, 93 L.Ed.2d 837 and cert. denied, 479 U.S. 1089,
107 S.Ct. 1298, 94 L.Ed.2d 154 (1987); Leigh v.
Engle, 669 F. Supp. 1390, 1413 (N.D.Ill. 1987), aff'd,
858 F.2d 361 (7th Cir. 1988); Utilicorp United Inc. v. Kemper
Financial Services, Inc., No. 88-0129-CV-W-1 (W.D.Mo.
April 11, 1989) (LEXIS, Genfed library, Courts file); but
see Schoenholtz v. Doniger, 657 F. Supp. 899, 913-915
(S.D.N.Y. 1987) (under ERISA punitive damages are available to
a plan for a fiduciary's breach); James A. Dooley
Associates Employees Plan v. Reynolds, 654 F. Supp. 457,
461 (E.D.Mo. 1987). The Second Circuit has not yet ruled on
Since there is no language in section 409(a) expressly
permitting the award of punitive damages, the starting point
for our analysis is the language of the statute which
authorizes a court to award "other equitable or remedial
relief as the court may deem appropriate" in cases where a
person breaches a fiduciary duty to a plan. 29 U.S.C. § 1109(a).
We must decide whether "other equitable or remedial
relief" contemplates punitive damages. We conclude that it
An approach to whether punitive damages are available under
section 409(a) is in essence no different from an analysis of
whether section 502(a)(3) provides for punitive damages since
any authority for awarding such relief under section 502(a)(3)
would be pursuant to language permitting the award of "other
appropriate equitable relief."*fn22
29 U.S.C. § 1132(a)(3).
In construing the term "equitable relief" in relation to
section 502(a)(3), the six circuit courts which have addressed
the issue agree that it does not encompass extracontractual or
punitive damages. See, e.g., Sokol v. Bernstein,
803 F.2d 532, 538 (9th Cir. 1986) (equitable relief as stated in
section 502(a)(3) means only injunctive and declaratory
relief); see also Drinkwater v. Metropolitan Life
Insurance Co., 846 F.2d 821, 825 (1st Cir. 1988)
(equitable relief in section 502(a)(3) is injunctive and
declaratory relief), cert. denied, 488 U.S. 909, 109
S.Ct. 261, 102 L.Ed.2d 249 (1988). Moreover, we are persuaded
by the Fifth Circuit's reasoning in Sommers, supra,
that "equitable" relief under either section 502(a)(3) or
section 409(a) does not contemplate punitive damages. First,
we are convinced that Congress intended to import
into ERISA the fiduciary principles of the law of trusts.
See Sommers, 793 F.2d at 1463. Second, under the law
of trusts trustees are generally not liable for punitive
damages for breaches of fiduciary duty. Id. at
1463-64; see also Powell v. Chesapeake & Potomac Telephone
Co. of Virginia, 780 F.2d 419, 424 (4th Cir. 1985),
cert. denied, 476 U.S. 1170, 106 S.Ct. 2892, 90
L.Ed.2d 980 (1986); In re Emhart Corporation,
706 F. Supp. 153, 157 (D.Conn. 1988).
Finally, within ERISA's legislative history in connection
with remedies for breaches of fiduciary duties, the kinds of
equitable relief contemplated are the traditional forms of
equitable relief such as injunctions, constructive trusts, and
removal of fiduciaries. See S.Rep. No. 383, 93d
Cong., 2d Sess., reprinted in 1974 U.S.Code Cong. &
Admin.News 4639, 4890, 4989.*fn23 Therefore, we hold that
section 409(a) does not authorize the recovery of punitive
damages from a fiduciary by a plan.
Rule 15(a) of the Federal Rules of Civil Procedure states
that leave to amend "shall be freely given when justice so
requires it." The Supreme Court has stated [i]n the absence of
any apparent or declared reason — such as undue delay,
bad faith, or dilatory motive on the part of the movant,
repeated failure to cure deficiencies by amendments previously
allowed, undue prejudice to the opposing party by virtue of
the allowance of the amendment, futility of amendment, etc.
— the leave to amend sought should, as the rules
require, be "freely given."
Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230,
9 L.Ed.2d 222 (1962).
Prejudice to the opposing party is ordinarily the most
compelling reason for denying a motion to amend under Rule
15(a). See 6 C. Wright & A. Miller, Federal Practice
and Procedure § 1487; cf. Barrows v. Forest
Laboratories, Inc., 742 F.2d 54, 58 (2d Cir. 1984) (undue
delay, bad faith, prejudice to opposing party are the
"touchstones" of court's discretion to deny leave to amend).
Prejudice has been found when a proposed amendment contained
an unexpected allegation or defense. See Evans v. Syracuse
City School District, 704 F.2d 44, 47 (2d Cir. 1983).
Prejudice may also occur when the proposed amended pleading is
interposed after the completion of discovery,
or is based upon a new set of operative facts. See Ansam
Associates Inc. v. Cola Petroleum, Ltd., 760 F.2d 442,
446 (2d Cir. 1985).
Defendants do not claim that the proposed amendments cause
them any undue prejudice contending only that the proposed
amendments are not legally cognizable. We also find no
prejudice. Moreover, we see no evidence of bad faith or
Therefore, we grant plaintiff's motion to amend the
complaint to add the Trump defendants to his sixth cause of
action and deny plaintiff's motion to amend the complaint to
add a prayer for punitive damages.
For the reasons articulated, we have decided the following:
1. Plaintiff Harry J. Diduck's motion for leave to amend the
first amended complaint to add the Trump defendants to the
sixth cause of action is granted;
2. Plaintiff's motion for leave to amend the first amended
complaint to add a prayer for punitive damages is denied;
3. Plaintiff's motion for class certification is granted as
to the sixth cause of action and denied as to the second,
third, fourth, and fifth causes of action;
4. Defendant John Senyshyn's motion for partial summary
judgment as to the third and fourth causes of action is
5. The motion for summary judgment to dismiss the complaint
of defendants Trump-Equitable Fifth Avenue Company, the Trump
Organization, Inc., Donald Trump d/b/a The Trump Organization,
and the Equitable Life Assurance Society of the United States
is granted as to the second, third, fourth, fifth and seventh
causes of action and denied as to the sixth cause of action.
In our Memorandum Decision of March 28, 1990 we, inter
alia, dismissed plaintiff's third and fourth derivative
causes of action against defendant John Senyshyn and
plaintiff's second, third, fourth, and seventh derivative
causes of action against defendants Trump-Equitable Fifth
Avenue Company, the Trump Organization, Inc., Donald Trump
d/b/a The Trump Organization, and the Equitable Life Assurance
Society of the United States ("Trump Defendants") for failure
to comply with the requirements of Fed.R.Civ.P. 23.1 ("Rule
23.1"). Defendant Senyshyn now requests that since plaintiff's
seventh cause of action alleged only that plaintiff had met
the derivative requirements under Rule 23.1, we also dismiss
the seventh cause of action against him. We agree and dismiss
plaintiff's seventh derivative cause of action against
Senyshyn, joined by nominal defendants Trustees ("Trustees")
of the House Wreckers Union Local 95 Insurance Trust Fund and
of the House Wreckers Union Local 95 Pension Fund ("Funds"),
also requests that since all derivative claims have been
dismissed, the Trustees be dismissed as nominal defendants.
Plaintiff opposes the request on the grounds that if plaintiff
should prevail in this action, the court should be in a
position to exercise "equitable control" over the Trustees.
We are of the view that since all the derivative claims have
been dismissed and since, should plaintiff prevail, all monies
would go to the Funds irrespective of whether the court
exercises "equitable control" over the Trustees, there is no
reason to have the Trustees remain as nominal defendants.
Accordingly, we dismiss the Trustees from the action.