United States District Court, Southern District of New York
May 6, 1991
SHANE O'NEIL AND ROBERT JOHNSON ON BEHALF OF THEMSELVES AND ALL THOSE SIMILARLY SITUATED, PLAINTIFFS,
GENCORP, INC., RETIREMENT PLAN FOR SALARIED EMPLOYEES OF RKO GENERAL, INC. AND CERTAIN SUBSIDIARY COMPANIES; AND RKO BOTTLERS, INC., RETIREMENT PLAN FOR NON-UNION EMPLOYEES, DEFENDANTS.
The opinion of the court was delivered by: Martin, District Judge:
MEMORANDUM OPINION AND ORDER
This matter is before the Court on defendant GenCorp's
motion to dismiss plaintiffs' claim for punitive damages and
defendant GenCorp, Inc. pursuant to Rule 12(b)(6).
GenCorp seeks dismissal from this action on two grounds: a)
it claims that since the only remedy sought from it is
punitive damages and this being unavailable to plaintiffs as
a matter of law, GenCorp should be dismissed; and b) the
Amended Complaint fails to allege a colorable claim for breach
of fiduciary duty against GenCorp. For the reasons set forth
below, the claims for punitive damages and against GenCorp are
dismissed for failure to state a claim upon which relief can
Plaintiffs' argue that punitive damages are an appropriate
remedy under ERISA for GenCorp's wilful misconduct. They hinge
this argument on what can be characterized as a very thin
In support of their proposition that punitive damages are
available as a remedy for breach of fiduciary duty under
ERISA, plaintiffs cite Massachusetts Mut. Life Ins. Co. v.
Russell, 473 U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985).
Russell held that recovery from a fiduciary for a violation of
§ 409(a) of ERISA, 29 U.S.C. § 1109(a), establishing liability
for breach of fiduciary duty, inures to the benefit of the Plan
whole. The Court stated that the drafters of that provision
were primarily concerned with possible misuse that would
protect the entire plan, rather than with rights of an
individual beneficiary. Russell, 105 S.Ct. at 3089.
In discussing § 409(a), the Supreme Court in footnote 5 at
3088, stated "[b]ecause 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." Plaintiffs
grasp onto this footnote and claim that based on this, they are
entitled to punitive damages under § 502(a)(3), 29 U.S.C. § 1132(a)
in this case. We disagree.
Plaintiffs also cite Ingersoll-Rand Co. v. McClendon, ___
U.S. ___, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990), in support of
their claim that punitive damages are available. They argue
that Justice O'Connor's concluding paragraph reverses the
existing case law that holds that punitive damages are not
available under ERISA. For the reasons set forth below,
Ingersoll-Rand is also inapposite to the case at bar.
In Ingersoll-Rand the Supreme Court had to decide whether
ERISA § 510, 29 U.S.C. § 1140, preempts a state cause of action
for wrongful discharge. The Court held that "ERISA's explicit
language and its structure and purpose demonstrate a
congressional intent to pre-empt a state common law claim that
an employee was unlawfully discharged to prevent his attainment
of benefits under an ERISA-covered plan." 111 S.Ct. at 480.
Section 510 prohibits the discharge, fine, suspension,
expulsion, discipline or discrimination of a plan participant
or beneficiary "for exercising any right to which he is
entitled under the provisions of an employee benefit plan . .
. or for the purpose of interfering with [his] attainment of
any right to which such participat may become entitled under
the plan. . . ." 29 U.S.C. § 1140.
Unlike the case at bar whereby plaintiffs claim entitlement
to additional pension benefits under the terms of their
pension plans, a § 510 plaintiff is usually not entitled to
receive benefits from the plan. The plan is usually not a party
in an action under § 510 because any recovery will not be from
The Court noted in Ingersoll-Rand, that § 502(a) (ERISA's
civil enforcement mechanism), when invoked to enforce § 510,
permits recovery from a non-plan entity. 111 S.Ct. at 485. In
the last paragraph of the Court's opinion, Justice O'Connor
The preceding discussion also reponds to the
Texas court's attempt to distinguish this case as
not one within ERISA's purview. Not only is §
502(a) the eclusive remedy for vindicating §
510-protected rights, there is no basis in §
502(a)'s language for limiting ERISA actions to
only those which seek "pension benefits." It is
clear that the relief requested here is well within
the power of federal courts to provide.
Consequently, it is no answer to a pre-emption
argument that a particular plaintiff is not seeking
recovery of pension benefits.
Had Justice O'Connor intended, as plaintiffs claim, that
this analysis of § 510 was overruling the considerable amount
of federal caselaw barring punitive and extra-contractual
damages under ERISA (particularly the cases which specify that
punitive damages are unavailable under § 510), she undoubtedly
would have so stated.
Furthermore, since Justice O'Connor's dicta in Ingersoll-Rand
discusses remedies under § 502(a) generally and are not limited
to § 502(a)(3), one would also expect an explanation of the
effect on Russell's holding that punitive damages are
unavailable under § 502(a)(2), as well as a distinction from
Russell's elaborate rationale for generally excluding punitive
damages in ERISA actions. Plaintiffs' suggestion that
the Supreme Court intended to disavow Russell without so much
as an acknowledgment, is highly suspect in light of Justice
O'Connor's general criticisms of punitive damages. Pacific Mut.
Life Ins. Co. v. Haslip, ___ U.S. ___, 111 S.Ct. 1032, 113
L.Ed.2d 1 (1991) (O'Connor, J., dissenting).
Ingersoll-Rand does not offer any real support to plaintiff.
The Court in Ingersoll-Rand was addressing § 510, a cause of
action completely distinct from the breach of fiduciary duty
alleged in this case. Plaintiffs are seeking punitive damages
to inure to them because of an alleged breach of fiduciary duty
owed to the Defendant Plans. GenCorp is correct in arguing that
Ingersoll-Rand has no bearing on plaintiffs' claim.
While plaintiffs are correct in arguing that the Second
Circuit has not addressed the issue of punitive damages with
regards to ERISA § 502(a)(3), all of the U.S. Courts of Appeals
that have ruled on the issue have held that extra-contractual
damages are not available under § 502(a)(3) of ERISA,
29 U.S.C. § 1132(a)(3), Drinkwater v. Metropolitan Life Ins. Co.,
846 F.2d 821, 825 (1st Cir. 1988), cert. denied 488 U.S. 909, 109
S.Ct. 261, 102 L.Ed.2d 249 (1988); Powell v. Chesapeake &
Potomac Tel. Co., 780 F.2d 419, 424 (4th Cir. 1985), cert.
denied, 476 U.S. 1170, 106 S.Ct. 2892, 90 L.Ed.2d 980 (1986);
Sommers Drug Stores Co. Employee Profit Sharing Trust v.
Corrigan Enterprises, Inc., 793 F.2d 1456, 1465 (5th Cir. 1986)
reh. den., en banc Sommers Drug Stores Co. Employee Profit
Sharing Trust v. Corrigan Enterprises, Inc., 797 F.2d 977 (5th
Cir. 1986), and cert. den., Corrigan v. Sommers Drug Stores
Co., 479 U.S. 1034, 107 S.Ct. 884, 93 L.Ed.2d 837 and cert.
denied Sommers Drug Stores Co. Employee Profit Sharing Trust v.
Corrigan, 479 U.S. 1089, 107 S.Ct. 1298, 94 L.Ed.2d 154 (1987);
Varhola v. Doe, 820 F.2d 809, 817 (6th Cir. 1987); Kleinhans
v. Lisle Sav. Profit Sharing Trust, 810 F.2d 618, 627 (7th Cir.
1987); Sokol v. Bernstein 803 F.2d 532, 534 (9th Cir. 1986);
McRae v. Seafarers' Welfare Plan, 920 F.2d 819 (11th Cir.
1991); United Steelworkers of America, etc. v. Connors Steel
Co., 855 F.2d 1499 (11th Cir. 1988), cert. denied H.K. Porter
Co. v. United Steelworkers of America, etc., 489 U.S. 1096, 109
S.Ct. 1568, 103 L.Ed.2d 935 (1989).
Indeed, this Court in Giuntoli v. Garvin Guybutler Corp.,
726 F. Supp. 494, 509 (S.D.N.Y. 1989) held that "[s]uch a conclusion
(that punitive damages were unavailable under § 502(a)(3))
appears compelled by the Supreme Court's reasoning in
Massachusetts Mut. Life Insurance Co. v. Russell, 473 U.S. 134,
105 S.Ct. 3085, 87 L.Ed.2d 96 (1985) and Pilot Life Insurance
Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39
(1987). Accordingly, plaintiff's damages claim is dismissed
insofar as she seeks punitive damages under § 502(a)(3) of
This Court in 1990 held that "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 trustees." Diduck v. Kaszycki & Sons Contractors, Inc.,
737 F. Supp. 792, 805 (S.D.N.Y. 1990). While Plaintiffs are correct
in arguing that there is no 2nd Circuit decision directly
addressing whether § 502(a)(3) permits punitive damages, there
is overwhelming precedent that indicates that punitive damages
are not available.
Plaintiffs state that the cases defendant GenCorp cites in
support of its contention that punitive damages are
unavailable under § 502(a)(3) were decided before
Ingersoll-Rand Co. v. McClendon, ___ U.S. ___, 111 S.Ct. 478,
112 L.Ed.2d 474 (1990) and "undoubtedly would have permitted
[punitive damage] recovery if decided today." This assertion is
incorrect. In McRae v. Seafarers' Welfare Plan, 920 F.2d 819
(11th Cir. 1991), decided after Ingersoll-Rand, the Eleventh
Circuit held that ERISA § 502(a)(3) does not authorize
extra-contractual damages. Thus, despite plaintiffs' claims
that Ingersoll-Rand permits punitive damages under ERISA,
courts continue to hold to the contrary.
Since punitive damages are the only remedy plaintiffs seek
from GenCorp, and punitive damages being unavailable under
ERISA § 502(a)(3), plaintiffs' claim against GenCorp must
necessarily be dismissed.