On Appeal from the United States District Court for the Western District of Pennsylvania, D.C. Civil No. 83-1357.
Before: GIBBONS, BECKER, and STAPLETON, Circuit Judges.
This is an appeal of a district court order denying a pension plan participant sanctions and attorney's fees in connection with what are now admitted to be violations of the participant's rights under the Employee Retirement Income Security Act, (ERISA), 29 U.S.C. §§ 1001 - 1461 (1985). It raises several interesting and difficult questions of administrative law and presents a number of issues regarding the proper construction of ERISA and the regulations promulgated pursuant thereto. For the reasons which follow, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.
Section 503 of ERISA, 29 U.S.C. § 1133 (1985), and regulations promulgated pursuant thereto by the Secretary of Labor, require pension plans to provide plan participants with certain information relating to the plan's denial of claims made under the plan's provisions. Plaintiff Robert Groves sought an explanation of such a denial as well as certain other information subject to these provisions, first by requesting the data from the plan and, when that request was denied, by filing suit in the United States District Court for the Western District of Pennsylvania. The district court held that Groves was entitled to the information he sought, and that determination has not been appealed. The parties are therefore agreed that one regulation, 29 C.F.R. § 2560.503-1(f), (which will also be referred to here as "subsection (f)") was violated when the Plan administrator -- upon whom the regulation imposes this obligation -- denied Groves's application for disability retirement benefits without articulating reasons therefor. The parties also agree that § 503 of ERISA and subsection (g) of the regulations, 29 C.F.R. § 2560.503-1(g), (which will also be referred to here as "subsection (g)") were violated when the Plan refused to release medical records on which the denial was based.
However, Groves also requested that the district court sanction the Plan administrator under § 502(c) of ERISA, 29 U.S.C. § 1132(c) (1985), for failing to provide the desired information voluntarily. In addition, Groves also sought attorney's fees under § 502(g) of ERISA, 29 U.S.C. § 1132(g) (1985), to recoup the cost of prosecuting his information demand before the district court. The district court denied both of these requests. Groves here appeals those denials.
We affirm the district court's determination that § 502(c) sanctions cannot be imposed upon a plan administrator for the violation of the provisions which were transgressed in this case. We reach that conclusion, however, for reasons slightly different from those relied upon by the district court.
To summarize our decision, we hold that failure to perform the duties imposed by ERISA § 503 and subsection (g), requiring the disclosure of medical records, do not render a plan administrator liable to § 502(c) sanctions because both § 503 and subsection (g) impose duties expressly and exclusively on "the plan," not upon the "plan administrator." Neither does the administrator's breach of subsection (f), by denying Groves disability benefits without articulating reasons for that denial, expose the administrator to § 502(c) sanctions. Although subsection (f) does impose a duty directly upon the administrator, and not upon the plan, § 502(c) imposes sanctions only for failure to fulfill obligations imposed by "this subchapter." We believe that the words "this subchapter" in § 502(c) refers only to violations of statutorily imposed obligations, and that the term does not embrace violations of regulations promulgated pursuant to the statute. We reach this result because we conclude that § 502(c) is a penal provision, and we have therefore been guided in our application of that provision by the doctrine that penal provisions should be leniently and narrowly construed; we have also relied upon the law governing the delegation of legislative authority to impose penalties.
On the attorney's fee issue, we hold that the district court's denial of fees was based on erroneous premises. We accordingly reverse that denial and remand to the district court for a determination of the amount due Groves under § 502(g).
I. FACTS AND PROCEDURAL HISTORY
Appellant Robert W. Groves was an employee of the Johns-Manville Sales Corporation. On November 1, 1982, he applied for disability retirement benefits under the Modified Retirement Plan for Hourly Paid Employees of the Johns-Manville Corporation and Subsidiaries ("the Plan").*fn1 The Plan is administered by the Retirement Committee, which evaluates employee applications for disability retirement allowances. The Retirement Committee also holds the post of Plan Administrator for purposes of ERISA. See App. at 30-31.
As part of his application for disability benefits, Groves submitted to the Retirement Committee a disability retirement sheet that was completed by his own physician, Dr. D. F. Wahl. The sheet contained Dr. Wahl's conclusions about Groves's health and abilities and was based upon Dr. Wahl's examination and treatment of Groves. When the Plan physician, Dr. Robert Anderson, evaluated Groves's application, he found it inconclusive. He therefore requested that the Plan employ another physician to examine Groves.
In accordance with Dr. Anderson's request, the Plan employed Dr. Marvin Baker to examine Groves and to submit an evaluation of Groves's physical condition. After reviewing Dr. Baker's submission, Dr. Anderson rendered his opinion that Groves was not disabled as that term is defined by the Plan. Relying on that opinion, the Retirement Committee as the Plan administrator denied Groves's request for disability retirement benefits. The Plan administrator's letter informing Groves of this decision stated simply that his disability was "insufficient to qualify for Disability Retirement under the terms of the Retirement Plan." It did not explain how the Retirement Committee had reached that conclusion.
Groves appealed the denial and requested form the Plan all information that it had used in reaching its decision, including Dr. Baker's report. He also submitted additional materials describing his physical condition. Without giving an explanation of its decision or releasing any of the records that Groves had requested, the Plan denied Groves's appeal.
Groves's attorney thereupon wrote to the Plan requesting the materials that had been used as a basis for the denial decision. The Plan denied this request, asserting that the information sought consisted of (1) documents that Groves had submitted, to which he obviously already had access, and (2) medical records, which were confidential. On June 7, 1983, Groves filed this action. He claimed that by failing to state specific reasons for its denial of his disability application and by refusing to produce the records that he had requested, the Plan and its administrator had denied him both adequate notice and a full and fair review of its denial of benefits, in violation of § 503 of ERISA. Groves also sought sanctions against the Plan administrator under ERISA § 502(c), and an award of attorney's fees under § 502(g).
On August 11, 1983, apparently having reconsidered its prior position, the Plan released to Groves the documents that he had requested. This decision, however, did not end the parties' disagreement. Groves continued to insist that the Plan's initial refusal to grant his requests for information violated § 503 and accompanying regulations. He argued that these violations entitled him to another review by the Plan of his application for benefits. He also continued to press for § 502(c) sanctions, and for attorney's fees. The Plan, by contrast, continued to argue that it had not been required to release the documents Groves had sought, that it had therefore not violated § 503, and that sanctions and attorney's fees were therefore inappropriate.
Relying on our holding in Grossmuller v. United Automobile Aerospace and Aricultural Implement Workers of America, 715 F.2d 853 (3d Cir. 1983), the district court held that the Plan's written denial of Groves's claim violated § 503 because it (1) did not specify the reasons for the denial; (2) failed to refer Groves to the pertinent provision of the Plan; and (3) did not describe any additional evidence Groves could submit to succeed on his claim. The court also found that the Plan failed to disclose the medical records that it had relied on in deciding to deny his claim for benefits, and that it had thereby deprived Groves of an opportunity for the full and fair hearing required by § 503. The Court therefore ordered the Plan to reconsider Groves's claim.
Despite its holding that the Plan had violated § 503, the district court refused to sanction the Plan administrator under § 502(c). It offered two independent reasons for this decision. First, the court concluded that § 502(c) does not apply to a violation of § 503. Second, the court reasoned that even if the failure to disclose the information required by § 503 did expose the Plan administrator to § 502(c) sanctions, the imposition of such sanctions was ...