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DONOVAN v. ROBBINS

January 31, 1984

RAYMOND J. DONOVAN, SECRETARY OF LABOR, PLAINTIFF,
v.
LORAN W. ROBBINS, ET AL., DEFENDANTS. RAYMOND J. DONOVAN, SECRETARY OF LABOR, PLAINTIFF, V. ALLEN M. DORFMAN, ET AL, DEFENDANTS



The opinion of the court was delivered by: Will, District Judge.

  MEMORANDUM OPINION

The plaintiff Secretary of Labor (the Secretary) has moved to strike the jury demand which certain defendants (hereinafter to be collectively referred to as "Amalgamated") filed in both Donovan v. Robbins, 78 C 4075 (Robbins) and Donovan v. Dorfman, 82 C 7951 (Dorfman) on February 18, 1983 and to strike the August 2, 1983 jury demand of defendant John F. Spickerman (Spickerman) in Robbins. For the reasons hereinafter stated, we conclude that there is no basis for a jury trial of the issues raised in the Second Amended Complaint in Robbins and the Amended Complaint in Dorfman. We further conclude, however, that Amalgamated, by its alleged failure to file a supplemental jury demand with respect to issues raised in its March 2, 1983 cross claims against the Central States, Southeast and Southwest Areas Health and Welfare Fund (the Fund) and the Fund's current trustees, has not waived its right to a jury trial as to those issues.

The Secretary's Cause of Action

The Secretary has brought these actions under the Employee Retirement Income Security Act of 1974 (ERISA) to challenge a series of contracts between the Fund and Amalgamated for provision of claims processing services and the course of performance under those agreements. Jurisdiction of both actions is predicated on Section 502(e) of ERISA, 29 U.S.C. § 1132 (e). The Secretary seeks relief under section 502(a)(2) and (5) of ERISA, 29 U.S.C. § 1132 (a)(2) and (5).

Robbins was originally brought in October 1978 to enjoin a then new three year contract between Amalgamated and the Fund. The Secretary filed his Second Amended Complaint, which is in issue here, on February 10, 1983, alleging that the contract relations between Amalgamated and the Fund violated section 406 of ERISA, 29 U.S.C. § 1106, in that it constituted a prohibited transaction between an employment benefit plan and parties in interest. The Secretary accused Spickerman, a former trustee of the Fund, of having breached his statutorily defined fiduciary duties to the Fund in connection with the Amalgamated contract. The Secretary joined Amalgamated on the theory that it participated in and aided and abetted the fiduciary violations with the aim of benefiting from improperly transferred Fund assets.

The Secretary brought the Dorfman action in late 1982 to challenge certain subsequent aspects of the continuing relationship between Amalgamated and the Fund. The original Dorfman complaint alleged that the Fund had improperly paid Amalgamated fees for certain services in excess of what was required by the contract governing the parties dealings and that a 1980 modification of that contract had been improper. In Dorfman as well, Amalgamated was joined as an alleged ERISA fiduciary and party in interest that had participated in, aided and abetted and benefited from various ERISA violations. After entry on February 1, 1983 of an Agreed Order to govern the subsequent conduct of this litigation, the secretary amended the Dorfman complaint to add a Count VII challenging the reasonableness of a proposed $10.75 million price for transfer to the Fund of the Amalgamated claims processing assets.*fn1

The Secretary's prayers for relief in both the Robbins and the Dorfman complaints are comprehensive: he seeks an accounting of the sums transferred from the Fund to Amalgamated; restitution to the Fund of allegedly improper and excessive payments made to Amalgamated, ostensibly for claims processing services; injunctive relief against future ERISA violations and against the Fund's continued relationship with certain individual defendants.

As noted, Amalgamated filed its jury demand in both Robbins and Dorfman on February 18, 1983. Spickerman's jury demand in Robbins was filed on August 2, 1983. Amalgamated, in cross claims filed on March 2, 1983, allegedly subsequent to its jury demand, contends that the current trustees have breached a contractual obligation to defend any action challenging the Amalgamated claims processing contract as amended. It also contends that Amalgamated had an implied contract for reimbursement for certain claims processing services for which it never received compensation. These cross claims, both of which were filed in Dorfman, do not concern Spickerman.

ERISA and the Right to Jury Trial

In accordance with the well established principle that constitutional questions are to be avoided where possible, we turn initially to the question whether ERISA creates a statutory right to jury trial. See Pernell v. Southall Realty, 416 U.S. 363, 365, 94 S.Ct. 1723, 1724, 40 L.Ed.2d 198 (1974). We have previously ruled that the ancient principle that the Chancellor will not award an equitable remedy where legal relief is adequate to accomplish justice between the parties does apply in the ERISA setting. See Memorandum Opinion of October 5, 1983 at 12-13; Memorandum Opinion of December 1, 1983 at 2-4. We necessarily recognized that Section 409 of ERISA, 29 U.S.C. § 1109, authorizes legal relief for an appropriate party under appropriate circumstances in an ERISA action. We affirmed that we have discretion under ERISA to refuse to implement injunctive or other equitable relief where a legal remedy would be adequate.

[1] ERISA is silent with respect to the mode of trial to be had in actions authorized by any of its sections. Lorillard v. Pons, 434 U.S. 575, 98 S.Ct. 866, 55 L.Ed.2d 40 (1978), nonetheless may imply that a jury trial would be required in an action for legal relief pursuant to section 409 of ERISA, 29 U.S.C. § 1109. Since legal relief is authorized by ERISA, we infer that Congress intended thereby to provide for a jury trial in an action under ERISA to secure a legal remedy. See id. at 584-85, 98 S.Ct. at 872.

[2] Unlike Lorillard, in which the relief sought included liquidated damages, the Secretary here styles his complaints in Robbins and Dorfman as being for equitable relief exclusively. See Second Amended Complaint in Robbins ¶ 1; Amended Complaint in Dorfman ¶ 1. If in actuality the Secretary is only suing for an equitable remedy, which section 409 of ERISA, 29 U.S.C. § 1109, undisputedly also authorizes, then it follows from Lorillard that Congress did not intend that there be a jury trial in this case. Cf Bugher v. Feightner, 722 F.2d 1356 at 1358 (7th Cir. 1983) (no Congressional intent to create jury trial right in action brought under section 502(a)(3) of ERISA, 29 U.S.C. § 1132 (a)(3), which permits only an equitable remedy). Our conclusion with respect to the absence of a statutory entitlement to a jury trial of the issues raised in the Secretary's complaints in no way pretermits our earlier-recognized obligation to decline to award an equitable remedy where a complaint at law would have been adequate.

                      The Seventh Amendment Jury Trial
                          Rights of Spickerman and
                                Amalgamated

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