USCA1 Opinion
United States Court of Appeals
United States Court of Appeals
For the First Circuit
For the First Circuit
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No. 94-1060
ROLAND L. ARMSTRONG AND REILOUS LATNEY,
Plaintiffs, Appellants,
v.
JEFFERSON SMURFIT CORPORATION
AND SMURFIT PENSION SERVICES COMPANY,
Defendants, Appellees.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Frank H. Freedman, Senior U.S. District Judge]
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Before
Cyr, Boudin and Stahl,
Circuit Judges.
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David A. Robinson with whom Jay N. Michelman and Michelman Law
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Offices were on brief for appellants.
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Michael L. Mulhern, with whom Deborah Gage Haude, Winston &
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Strawn, John O. Mirick, and Mirick, O'Connell, DeMaillie & Lougee,
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were on brief for appellees.
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July 22, 1994
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Stahl, Circuit Judge. In this appeal, plaintiffs-
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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.
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I.
I.
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STANDARD OF REVIEW AND BACKGROUND
STANDARD OF REVIEW AND BACKGROUND
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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
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novo review. See Vartanian v. Monsanto Co., 14 F.3d 697, 700
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(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.
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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
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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
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(B), codified at 29 U.S.C. 1104(a)(1)(A) and (B),3 and
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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
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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.
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DISCUSSION
DISCUSSION
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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
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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
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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."
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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
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v. Central Pa. Teamsters Health & Welfare Fund, 12 F.3d 1292,
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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
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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
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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
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continued plan participation, we regard it as waived and will
not address it on the merits. See FDIC v. World Univ. Inc.,
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978 F.2d 10, 13 (1st Cir. 1992) (arguments raised for the
first time on appeal ordinarily are deemed waived).
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Ins. Co. v. Russell, 473 U.S. 134, 151-52 (1985) (Brennan,
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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
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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
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(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-
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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
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502(a)(3) against a nonfiduciary, contended that, for several
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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
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"appropriate equitable relief" under the statute. This is
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the question answered, in the negative, by the Mertens Court.
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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.
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CONCLUSION
CONCLUSION
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For the reasons stated above, we affirm the
district court's dismissal of plaintiffs' complaint.
Affirmed. Costs to appellees.
Affirmed. Costs to appellees.
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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
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World Univ., 978 F.2d at 13.
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