All of Kishter's claims against defendant Principal have been dismissed
by agreement of the parties. Defendant LAI now moves for summary judgment
on all claims. Kishter cross-moves for summary judgment on his breach of
fiduciary duty claims. For the reasons set forth below, LAI's motion for
summary judgment is granted, and Kishter's cross-motion is denied.
The following facts are undisputed. Alice Russell was the Director of
Finance for Ward Howell International, Inc. ("Ward Howell") when she was
diagnosed with cancer in late August or early September 1997. (Def. 56.1
¶¶ 1, 2) In connection with her employment with Ward Howell, Russell
was entitled to life insurance benefits through First Fortis Life
Insurance Company ("First Fortis") in the amount of $210,000, and an
additional $40,000 through Allmerica Financial ("Allmerica"). (Id.
On September 5, 1997, Russell stopped going to work because of her
illness, but made arrangements with Ward Howell that allowed her to do a
limited amount of work from home. (Id. ¶ 2; Pl. 56.1 ¶ 6) On
February 1, 1998, Ward Howell was acquired by LAI. (Def. 56.1 ¶ 4)
LAI personnel records show that Russell was transferred to LAI's payroll
on February 1.*fn1 (Dashefsky Affirm. Ex. G) The same records indicate
that she remained on the LAI payroll until March 31, 1998, shortly after
she began receiving long-term disability benefits from First Fortis on
March 5, 1998. (Id.) Russell applied for Social Security disability
benefits on March 30, 1998. (Id. Ex. D) Neither party has presented
evidence that her employment was ever formally terminated.
Between February and August 1998, LAI enrolled all former employees of
Ward Howell, including Russell, in the LAI benefits plan, which included
life insurance coverage with Principal. (Def. 56.1 ¶¶ 4-5) LAI paid a
total of $342 in life insurance premiums on Russell's behalf from August
1, 1998 to January 31, 1999 (Kornrich Aff. Ex. H), providing her with at
least $200,000 worth of coverage (Def. 56.1 ¶ 15; Pl. 56.1 ¶¶
13-14).*fn2 Although Russell's coverage with First Fortis and Allmerica
might ordinarily have lapsed at this point, coverage continued under
those policies because she was receiving longterm disability benefits,
and premiums were therefore no longer required. (Kornrich Aff. Ex. E;
Dashefsky Affirm. Ex. A at 118)
On September 9, 1998, Russell wrote to Marilyn Long, the benefits
administrator for LAI, to tell her that she had confirmed her $210,000
coverage with First Fortis, and to inquire whether she was still covered
by the $40,000 policy from Allmerica. (Kornrich Aff. Ex. E) Long
responded that until questions could be answered by her broker, Russell
was covered for $270,000 through Principal. (Kornrich Aff. Ex. F;
Dashefsky Affirm. Ex. E) "If that needs to be adjusted later," Long
stated, "we will make sure that you have at least $40,000 through
Principal as long as you have
$210,000 through First Fortis." (Id.) Long cautioned that she did not
yet know how the benefits would be coordinated among the various carriers.
Russell died on January 13, 1999. (Def. 56.1 ¶ 10) Upon her
death, the Alice A. Russell Trust received $210,000 in life insurance
benefits from First Fortis and $40,000 from Allmerica Financial. (Def.
56.1 ¶ 13) However, when plaintiff Kishter, who is both the executor
of Russell's estate and the trustee of the Alice A. Russell Trust, filed
an additional claim with Principal, the claim was denied. (Def. 56.1
¶ 12) In a letter to Kishter dated September 2, 1999, Principal
explained that it had denied coverage because Russell was not a "Member"
who was "Actively at Work," as defined in the Group Policy of LAI, on the
date coverage was to begin. (Kornrich Aff. Ex. H)
Kishter sues LAI,*fn3 claiming that Marilyn Long's inaccurate
statements about the extent of Russell's life insurance benefits and the
subsequent denial of those benefits constituted a breach of fiduciary
duty under ERISA, as well as a breach of contract and common-law fraud.
(Compl. ¶¶ 17-19, 24-28) Defendant LAI counters that Kishter has no
standing to sue under ERISA § 502 because he is not a proper
"beneficiary" of an ERISA plan. (Def. Mem. at 9-14, 27-29) Moreover, LAI
argues that even if Kishter has standing under ERISA, he cannot recover
because he has failed to prove a breach of fiduciary duty. (Id. at 14-21)
Finally, LAI asserts that Kishter's state-law claims are preempted by
ERISA. (Id. at 27-30)
Summary judgment will be granted on Kishter's breach of fiduciary duty
claim because, even assuming that a breach occurred, Kishter may not
obtain the relief he seeks under ERISA's statutory framework, as recently
clarified by the Supreme Court in Great-West Life & Annuity Insurance
Co. v. Knudson, 122 S.Ct. 708 (2002).
Kishter alleges that LAI, through its agent Marilyn Long, breached its
fiduciary duty by telling Russell that she was covered for life insurance
with Principal when, in fact, she was not (Compl. ¶¶ 17-19).
Plaintiff requests "judgment against the Defendants in the sum of Two
Hundred and Seventy Thousand ($270,000.00) Dollars, together with costs,
disbursements, attorneys fees, and punitive damages, and such other legal
or equitable relief as the Court deems appropriate." (Compl. ¶ 29)
Kishter's complaint does not specify the precise subsection of ERISA
§ 502 under which he is suing for breach of fiduciary duty and,
therefore, the court is left to determine the precise statutory basis for
the action. Section 502 of ERISA authorizes "beneficiaries" to bring five
different types of civil actions to obtain the following relief:
— to obtain relief from an administrator who
fails to supply requested information,
29 U.S.C. § 1132 (a)(1)(A);
— to "recover benefits due to [the beneficiary
. . .] 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," 29 U.S.C. § 1132 (a)(1)(B);
— to obtain "appropriate relief under Section
" of ERISA which imposes personal liability on
fiduciaries who breach their fiduciary duties,
29 U.S.C. § 1132 (a)(2);
— "to enjoin any act or practice which violates any
provision of (ERISA] or the terms of the plan, or . . .
to obtain other appropriate equitable relief . . . to
redress such violations or . . . to enforce any
provisions of [ERISA] or the terms of the plan,"
29 U.S.C. § 1132 (a)(3);
— to obtain appropriate relief for failure of a
plan administrator to provide a statement setting
forth information in the administrator's report to the
Internal Revenue Service ["IRS"], 29 U.S.C. § 1132(a)(4)
Lee v. Burkhart, 991 F.2d 1004, 1008 (2d Cir. 1993)
Two of the above provisions can be immediately eliminated from
consideration, as they are inapplicable on their face. Section
502(a)(1)(A) authorizes a beneficiary to sue for statutory damages of up to
$100 per day when an administrator refuses to provide certain plan
information. 29 U.S.C. § 1132(a)(1)(A) (1994). Similarly, §
502(a)(4) allows a beneficiary to sue for failure of a fiduciary to provide
information submitted to the IRS. 29 U.S.C. § 1132(a)(4) (1994).
Neither section is implicated in this case because Kishter has not
alleged that LAI has failed to provide either type of information.
ERISA § 502(a)(1)(B) is also not a viable basis for a claim
because Kishter's breach of fiduciary duty claim cannot be construed as
one to "recover benefits due." 29 U.S.C. § 1132 (a)(1)(B) (1994). In
a separate claim in his complaint, Kishter explicitly included a claim
for wrongful denial of benefits and, significantly, that claim was
asserted only against Principal (Compl. ¶¶ 20-22), the life insurance
carrier that has already been dismissed from this action with the consent
of the parties.*fn4 The present breach of fiduciary duty claim is
separate from that claim; unlike the wrongful denial of benefits claim,
Kishter here admits that Russell was not entitled to benefits under the
LAI plan itself, but alleges that LAI should be liable for telling
Russell that she was covered when, in fact, she was not. (Compl. ¶
18). Because plaintiff has admitted, for the purposes of this claim, that
he is not entitled to benefits under the plan, the claim cannot be
construed as one to recover benefits wrongfully withheld.
Relief under § 502(a)(2) is also unavailable because, although
the section will support a breach of fiduciary duty claim when the facts
justify it, the section allows damages to be recovered only by the ERISA
plan itself, and plaintiff has made clear in his complaint that he seeks
an individual remedy payable to himself rather than to the LAI benefits
plan. Section 502(a)(2) authorizes a "participant or beneficiary" to
bring a civil action for appropriate relief under ERISA § 409,
which, in relevant part, requires a fiduciary who has breached his duties
to an ERISA plan to "make good to such plan any losses to the plan
resulting from each such breach," 29 U.S.C. § 1109 (a), 1132(a)(2)
(1994). The Supreme Court has interpreted this language to mean that
recovery under § 502(a)(2) "inures to the benefit of the plan as a
whole." See Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 140
(1985). Section 502(a)(2) does not provide a remedy for an individual
plaintiff to recover for a breach of
fiduciary duty. See id.; Anweiler v. Am. Elec. Power Serv. Corp.,
3 F.3d 986, 992 (7th Cir. 1993) (collecting cases); Lee, 991 F.2d at
The subsection that best fits plaintiff's breach of fiduciary duty
claims is ERISA § 502(a)(3), which essentially functions as a
"`catchall' remedial section." Varity Corp. v. Howe, 516 U.S. 489, 512
(1996). It authorizes a court to grant "appropriate equitable relief" to
redress ERISA violations. 29 U.S.C. § 1132 (a)(3) (1994). The Supreme
Court has held that breach of fiduciary duty claims are proper under
ERISA § 502(a)(3), including breach of fiduciary duty claims
seeking individualized remedies that would not be obtainable under ERISA
§ 502(a)(2). See Varity, 516 U.S. at 507-13; see also Devlin v.
Empire Blue Cross and Blue Shield, 274 F.3d 76, 89 (2d Cir. 2001); Bixler
v. Cent. Penn. Teamsters Health & Welfare Fund, 12 F.3d 1292, 1298-1300 &
n. 17 (3d Cir. 1993) (collecting cases).
Historically, the requirement that relief under ERISA § 502(a)(3)
be "equitable" has not been a significant obstacle to relief for
employees seeking a remedy for breach of fiduciary duty. Although the
Supreme Court in Mertens v. Hewitt Associates, 508 U.S. 248 (1993), held
that "compensatory damages — monetary relief for all losses [the]
plan sustained as a result of the alleged breach of fiduciary duties"
— are not recoverable under § 502(a)(3), id. at 255 (emphasis
removed), courts have still found purportedly equitable means of
providing relief to ERISA plaintiffs seeking a remedy for lost benefits.
For example, in Strom v. Goldman, Sachs & Co., 202 F.3d 138 (2d Cir.
1999), a case remarkably similar to this one, the Second Circuit held
that the recovery of $500,000 in life insurance proceeds that the
plaintiff would have received but for her late husband's employer's breach
of fiduciary duty was a form of "equitable relief" under § 502(a)
(3). Id. at 143-50. But see Helfrich v. PNC Bank, Kentucky, Inc.,
267 F.3d 477, 482 n. 5 (6th Cir. 2001) (explicitly rejecting Strom),
petition for cert. filed, 70 U.S.L.W. 3445 (U.S. Dec. 28, 2001) (No.
01-977); Ostler v. Oce-USA, Inc., No. 00 C 7753, 2001 WL 1191183, at *2-3
(N.D. Ill. Oct. 4, 2001) (same). The Strom Court reasoned that such
monetary relief was similar to the type of relief traditionally sought in
an equitable action to enforce the positive duties of loyalty and
prudence owed by a fiduciary to a trust. Id. at 143-45. Furthermore, the
Court stated that the remedy was indistinguishable from the remedy of
back pay available under the National Labor Relations Act ("NLRA") and
Title VII of the Civil Rights Act of 1964 ("Title VII") — a type of
relief that courts have always treated as equitable, and which Congress
understood to be a facet of equitable relief when it drafted ERISA's
remedial scheme in 1973. Id. at 145-50. At least three circuits,
including the Second, have similarly held that a monetary award of
interest for benefits wrongfully delayed is an equitable remedy
recoverable under § 502(a)(3). See Dunnigan v. Metro. Life Ins.
Co., 277 F.3d 223, 228-29 (2d Cir. 2002); Clair v. Harris Trust and Sav.
Bank, 190 F.3d 495, 498 (7th Cir. 1999); Fotta v. Trustees of the United
Mine Workers, 165 F.3d 209, 211-14 (3d Cir. 1998)
The availability of a relatively broad spectrum of relief for
plaintiffs suing for breach of fiduciary duty under ERISA § 502(a)
(3) likely explains why some courts that have considered breach of
fiduciary duty claims similar to those in the present case have turned
their attention directly to the merits of the claim, without
consideration of ERISA's statutory framework or the availability of
remedies within that framework. See, e.g., Taylor v. Peoples
Natural Gas Co., 49 F.3d 982 (3d Cir. 1995); Eddy v. Colonial Life
Ins. Co. of Am. 919 F.2d 747 (D.C. Cir. 1990); Fortune v. Medical
Assocs. of Woodhull, P.C., 803 F. Supp. 636 (E.D.N.Y. 1992).
However, the Supreme Court's recent decision in Great-West Life &
Annuity Insurance Co. v. Knudson, 122 S.Ct. 708 (2002), has limited the
availability of monetary relief under ERISA § 502(a)(3).
Therefore, it makes sense in the instant case to examine first the issue
of damages and whether plaintiff can obtain any of the relief he seeks,
before proceeding to the merits. In Great-West Life, the Supreme Court
determined that an ERISA beneficiary — a medical insurance company
seeking to recover from an employee under the reimbursement provision of
an ERISA plan sums that the employee was awarded as compensatory damages
in a lawsuit — could not sue that employee under ERISA §
502(a)(3) to recover money due under the plan. Id. at 712-13. The Court
held that an injunction ordering specific performance under the plan
(i.e. reimbursement) would not constitute equitable relief because "an
injunction to compel the payment of money past due under a contract, or
specific performance of a past due monetary obligation, was not typically
available in equity." Id. at 713.
In addition, the Court rejected the notion that the claim could be one
for restitution "in the form of a constructive trust or an equitable
lien," because restitution is available only "where money or property
identified as belonging in good conscience to the plaintiff [can] clearly
be traced to particular funds or property in the defendant's possession."
Id. at 714. In Great-West Life, this condition was not met because the
money in question was being held in a separate trust outside of the
defendant's possession. Id. at 715. Finally, the Court rejected the
proposition that "the common law of trusts provides petitioners with
equitable remedies that allow them to bring [an] action under §
502(a)(3)." Id. at 717-18.
The impact of the Great-West Life decision on precedent in the Second
Circuit, most particularly on Strom v. Goldman Sachs, is not entirely
clear. On the one hand, Strom is distinguishable from Great-West Life in
that Strom involved, as the present case does, an alleged breach of
fiduciary duty, whereas Great-West Life involved only an alleged breach
of the terms of an ERISA plan. The Second Circuit in Strom noted that
"[t]he crucial fact" distinguishing Strom from a similar case in which
the Circuit had denied a monetary remedy was that Strom involved "an
action against an alleged fiduciary," as opposed to "a suit . . . against
nonfiduciary wrongdoers." Id. at 143. The distinction, the Court
explained, is important because "[an] alleged breach of a fiduciary duty
. . . always has been within the exclusive jurisdiction of equity." Id.
On the other hand, there is substantial reason to believe that
Great-West Life has repudiated Strom and its reasoning. In Great-West
Life, the Court reiterated its rejection of the view that "the special
equity-court powers applicable to trusts define the reach of §
502(a)(3)." Great-West Life, 122 S.Ct. at 718 (citing the Court's previous
rejection of that view in Mertens, 508 U.S. at 256). Instead, the Court
stated that "the term `equitable relief' in § 502(a)(3) must refer
to `those categories of relief that were typically available in equity.'"
Id. (quoting Mertens, 508 U.S. at 256). Outside of an action for
restitution, as narrowly defined by the Court in Great-West Life, it is
hard to see how a forced payment of life insurance proceeds could be a
remedy that was "typically available in equity," even if breach of
fiduciary duty claims sometimes necessitated such a remedy pursuant to
"the special equity-court powers applicable to trusts."
In addition, the Court in Great-West Life expressly rejected each of
the remaining arguments that the Strom Court used to justify its
decision. The Strom Court had reasoned that ordering the payment of life
insurance benefits to remedy a breach of fiduciary duty was
indistinguishable from back pay, which was treated as an equitable remedy
under Title VII. Strom 202 F.3d at 145-50. However, the Supreme Court in
Great-West Life denied that back pay is a form of equitable relief,
stating instead that back pay may be "made part of an equitable remedy"
that includes the hiring or reinstatement of employees, but is not an
equitable remedy in itself. Great-West Life, 122 S.Ct. at 717 n. 4. But
see Great-West Life, 122 S.Ct. at 723 & n. 2 (Ginsburg, J., dissenting)
(disputing the Court's characterization of back pay). Furthermore, the
Court declined to attach significance independent of the text to
Congress's remedial purpose in drafting ERISA § 502(a)(3). Although
the Strom Court had found such Congressional intent highly instructive,
see Strom, 202 F.3d at 149-50, the Court in Great-West Life referred to
ERISA as a "carefully crafted and detailed enforcement scheme" in which
Congress had expressly declined to make available any form of legal
relief available, Great-West Life, 122 S.Ct. at 718 (quoting Mertens, 508
U.S. at 254) (internal quotation marks omitted). The Court cautioned that
"vague notions of a statute's `basic purpose' are . . . inadequate to
overcome the words of its text regarding the specific issue under
consideration." Id. (quoting Mertens, 508 U.S. at 261) (internal
quotation marks omitted).
Because the Second Circuit's reasoning in Strom has been superseded by
Great-West Life,*fn5 defendant LAI's motion for summary judgment may be
granted because plaintiff Kishter cannot recover the relief he seeks.
Kishter seeks a payment in the amount of $270,000 from LAI. (Compl.
¶ 29) However, Great-West Life dictates that any transfer of funds
from LAI to Kishter would not be not a viable remedy because "[a]lmost
invariably . . . suits seeking . . . to compel the defendant to pay a sum
of money to the plaintiff are suits for `money damages,' as that phrase
has traditionally been applied, since they seek no more than compensation
for loss resulting from the defendant's breach of legal duty." Id. at 713
(quoting Bowen v. Massachusetts, 487 U.S. 879, 918-19 (1988) (Scalia,
J., dissenting)) (internal quotation marks omitted). Furthermore, such an
action cannot be considered an action for restitution or one implicating
a constructive trust because, under Great-West Life, such remedies are
appropriate only where the specific property being sought is identifiable
and in the hands of the defendant. Id. at 714. In this case, the money to
which plaintiff has a claim is in the hands of Principal, the life
insurance carrier, and not LAI. The money he seeks from LAI is the damage
he has suffered because Principal will not pay the money it has. Nor
can plaintiff recover for the damages that he claims were caused Ms.
Russell's reliance on LAI's alleged misstatements and her failure to buy
additional life insurance or mortgage insurance that would now be payable
to plaintiff. These kinds of compensatory damages are exactly the kind that
the Court in Mertens decided are not an equitable remedy. See Mertens,
508 U.S. at 255-63. Thus, under the Supreme Court's opinions in Mertens
and Great-West Life, there is no type of "appropriate equitable relief"
that could result in plaintiff's receiving the $270,000 he seeks.
Plaintiff has also requested "such other . . . equitable relief as the
Court deems appropriate." (Compl. ¶ 29) However, neither plaintiff
nor the court's own ingenuity suggest a form of alternative equitable
relief that would be appropriate. Plaintiff has not alleged a pattern of
untoward behavior on LAI's part, so there is no occasion for a
forward-looking injunction. To the contrary, there is no evidence in the
record that LAI has mistreated any other employee or that any
misrepresentations were made in bad faith. Instead, what plaintiff seeks
is an individualized recovery of at least some part of the money that he
lost because LAI did not provide Alice Russell with complete and accurate
information about her life insurance policy. (Compl. ¶¶ 17-19)
However, there is no equitable remedy available under ERISA § 502(a)
(3) that can make plaintiff whole under these circumstances.
Because plaintiff has not stated a claim upon which appropriate relief
can be granted under any part of ERISA § 502, it is unnecessary to
determine whether he is a proper "beneficiary" with standing to sue, or
whether the statement he alleges was a breach of LAI's fiduciary duties
was in fact an actionable misrepresentation. Defendant LAI's motion for
summary judgment is therefore granted as to plaintiff's ERISA claims.
In addition to his claims under ERISA, plaintiff brings common-law
claims against LAI for breach of contract and fraud. Those claims are
preempted by ERISA and, therefore, summary judgment on those claims is
ERISA preempts "any and all State laws insofar as they may now or
hereafter relate to any employee benefit plan." ERISA § 514(a),
29 U.S.C. § 1144 (a) (1994). ERISA preemption is not limited to state
laws that specifically affect employee benefit plans; it extends to state
common-law contract and tort actions that relate to benefits as well. See
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987). The phrase
"`[r]elates to' must be construed in its `normal sense' — that is,
a state law claim is preempted `if it has a connection with or reference
to such a plan.'" Gilbert v. Burlington Indus., 765 F.2d 320, 326-27 (2d
Cir. 1985) (quoting Shaw v. Delta Air Lines, 463 U.S. 85, 97 (1983)). "A
state common law action which merely amounts to an alternative theory of
recovery for conduct actionable under ERISA is preempted." Diduck v.
Kaszycki & Sons Contractors, Inc., 974 F.2d 270, 288 (2d Cir. 1992)
The claims that plaintiff has raised clearly relate to an employee
benefit plan. Specifically, plaintiff alleges: 1) that LAI breached its
employment contract with Alice Russell when it refused to pay benefits to
which she was entitled under an ERISA plan; and 2) that LAI committed
fraud by representing to Russell that she was entitled to benefits under
an ERISA plan when, in fact, she received no such benefits. Numerous
decisions in this Circuit make clear that breach of contract claims
arising from a failure to pay benefits under an ERISA plan are
preempted. See Smith v. Dunham-Bush, Inc., 959 F.2d 6, 8-10 (2d Cir.
1992); Keiser v. CDC Inv. Management Corp., 160 F. Supp.2d 512, 516-17
(S.D.N.Y. 2001) (collecting cases); Yoran v. Bronx-Lebanon Hosp. Ctr.,
No. 96 Civ. 2179, 1999 WL 378350, at *5 (S.D.N.Y. Jun. 10, 1999)
(collecting cases); Protocare of Metro. N.Y., Inc. v. Mutual Ass'n
Admin'rs, Inc., 866 F. Supp. 757, 759-60 (S.D.N Y 1994); Snyder v. Elliot
W. Dann Co., 854 F. Supp. 264, 273 (S.D.N.Y. 1994). Likewise, allegations
of common-law fraud associated with a failure to pay benefits also are
preempted. See Ratner v. Local 29 RWDSU Health & Welfare Fund, No. 98
Civ. 6808, 2001 WL 11072, at *2 (S.D.N.Y. Jan. 4, 2001); Lewis v. John
Hancock Mut. Life Ins. Co., 6 F. Supp.2d 244, 247 (S.D.N Y 1998);
Snyder, 854 F. Supp. at 273.
The fact that plaintiff has no remedy under ERISA, and therefore will
have no adequate remedy if his state-law claims are preempted, is
immaterial to the above analysis. See Romney v. Lin, 94 F.3d 74, 81 (2d
Cir. 1996); Smith, 959 F.2d at 11 (collecting cases). Although the result
disappoints this plaintiff, the express purpose of ERISA's preemption
provision is to make the statute "the exclusive remedy for rights
guaranteed under ERISA." Romney, 94 F.3d at 80 (quoting Ingersoll-Rand
Co. v. McClendon, 498 U.S. 133, 144 (1990)) (internal quotation marks
omitted). "The policy choices reflected in Congress's inclusion of
certain remedies and exclusion of others would be `completely undermined'
if ERISA plan participants and beneficiaries could freely obtain remedies
under state law that Congress has rejected." Smith, 959 F.2d at 11
(quoting Pilot Life, 481 U.S. at 54).
Accordingly, summary judgment is granted in favor of LAI on all of
plaintiff's state-law claims.
Defendant LAI's motion for summary judgment dismissing plaintiff's
breach of fiduciary duty claim under ERISA § 502 is granted, and
Kishter's cross-motion for summary judgment as to that claim is denied.
Because plaintiff's state-law claims are preempted by ERISA, LAI's motion
for summary judgement dismissing those claims is granted as well.