Werb v. ING Group et al
Filing
86
MEMORANDUM OPINION AND ORDER : 1. Defendants' motion for summary judgment [Doc. No. 58] is DENIED IN PART (insofar as it seeks judgment on ReliaStar's affirmative defense that Werb released his ERISA claims), and DENIED AS MOOT IN PART ( insofar as it seeks judgment on the Plan's affirmative defense that Werb released his ERISA claims); and 2. Plaintiff's motion for summary judgment [Doc. No. 63] is GRANTED IN PART (as to ReliaStar) and DENIED AS MOOT IN PART (as to the Plan) (Written Opinion). Signed by Judge Susan Richard Nelson on 1/20/12. (LPH)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Michael Werb,
Civil No. 08-5126 (SRN/JJG)
Plaintiff,
MEMORANDUM OPINION
AND ORDER
v.
ReliaStar Life Insurance Company, and
the Goodrich Long Term Disability Plan,
Defendants.
Mark M. Nolan, Nolan, Thompson & Leighton, 710 Lawson Commons, 380 St. Peter St.,
St. Paul, MN 55102, for Plaintiff.
William D. Hittler, and Gregory A. Bromen, Nilan Johnson Lewis PA, 400 One Financial
Plaza, 120 South Sixth St., Minneapolis, MN 55802, for Defendants.
SUSAN RICHARD NELSON, United States District Judge
This matter is before the court on the parties’ cross-motions for summary judgment
(Doc. Nos. 58 & 63). For the reasons stated below, this Court grants in part and denies as
moot in part Plaintiff Michael Werb’s motion, and denies in part and denies as moot in
part Defendants ReliaStar Life Insurance Company and the Goodrich Long Term
Disability Plan’s motion.
I.
FACTUAL AND PROCEDURAL BACKGROUND
Werb was employed by Goodrich Corporation and participated in its long-term
disability (“LTD”) benefit plan.1 Goodrich funded the plan, which is governed by the
1
The B.F. Goodrich Company became Goodrich Corporation in 2001. (Doc.
continue...
Employee Retirement Income Security Act (“ERISA”), through an insurance policy
issued by ReliaStar Life Insurance Company.
As the result of a work-related car accident in 1997, Werb experienced ongoing
disabling pain.2 ReliaStar denied his claim for LTD benefits, arguing that Werb had
released his claim in a 2002 settlement agreement with Goodrich. In September 2008,
Werb thus initiated this action against ReliaStar and Goodrich challenging the denial.
(Doc. No. 1.)3 Almost a year later, during the pendency of the case, ReliaStar informed
Werb that it was voluntarily reconsidering his claim for LTD benefits on the merits, and
then denied his claim again, not only because it viewed Werb as having released his claim
for such benefits, but also because it concluded that Werb had failed to establish that he
was disabled.
The parties then cross-moved for summary judgment. The Court (Judge Schiltz)
denied Werb’s motion and denied Defendants’ motion insofar as judgment was sought by
ReliaStar but granted the motion insofar as judgment was sought by Goodrich. Werb v.
ReliaStar Life Ins. Co., No. 08-CV-5126 (PJS/JJG), 2010 WL 3269974 (D. Minn. Aug.
1
...continue
No. 52, ¶ 5.)
2
The facts and procedural history are recounted in greater detail in the
Court’s (J. Schiltz) earlier summary judgment ruling. Werb v. ReliaStar Life Ins. Co.,
No. 08-CV-5126 (PJS/JJG), 2010 WL 3269974 (D. Minn. Aug. 17, 2010).
3
Neither the original Complaint, nor the Amended Complaint, enumerates
specific counts. Nor do either expressly identify the statutory basis of the claim (or
claims). But based on the relief requested, that is, recovery of benefits plus prejudgment
interest, attorney’s fees and costs and “such other and further relief,” it appears to be a
claim under 29 U.S.C. § 1132(a)(1)(B). See infra Section II.B.
2
17, 2010). As the Court explained, the only issue before the Court at that time was
whether Werb released his claim for LTD benefits. Neither of ReliaStar’s two decisions
that Werb was not disabled was properly before the Court. Id. at *6 (addressing the
“procedural knot” into which the case had been tied).
With respect to the release, the Court noted that, on its face, the settlement
indisputably released Werb’s claim against Goodrich. Under that agreement, Werb
released Goodrich “from any and all liability now accrued or hereafter to accrue on any
and all claims, or causes of action [Werb] now or may hereafter have or claim to have
against Goodrich, or its insurers, including but not limited to claims . . . pursuant to
ERISA.” (Doc. No. 61-9.)
Werb contended, however, that the release was invalid insofar as it purported to
release his ERISA claims. Applying the factors delineated in Leavitt v. Northwestern
Bell Tel. Co., which guide the decision whether an agreement to release ERISA claims is
made knowingly and voluntarily, the Court noted that “[v]irtually all of the Leavitt factors
cut against Werb and in favor of Goodrich.” Werb, 2010 WL 3269974, at *12. The
Court concluded that the release extended to Werb’s ERISA claims against Goodrich, and
thus granted Goodrich’s motion for summary judgment. Id. at *13.
With respect to ReliaStar, however, the Court noted that Werb clearly released his
ERISA claims against “Goodrich and its insurers,” but that it was less clear whether
ReliaStar was an “insurer” and who was the “insured” party. Id. While ReliaStar
contended that it was the insurer of Goodrich (or at least that the plan was not the only
3
insured), Werb had argued that ReliaStar’s “insured is not Goodrich, but the disability
plan.” Id. The Court, noting that the policy did not define “insured,” concluded that a
genuine issue of material fact remained as to whether ReliaStar was an “insurer” of
Goodrich. Id. at *14.
With respect to ReliaStar’s position that it is the “insurer of Goodrich,” the Court
noted that two policy provisions repeatedly and consistently identify Goodrich as the
“Policyholder,” and never explicitly as the “insured,” further noting that the policyholder
is often not the insured. Id. Moreover, the policy, with one exception, consistently
distinguished between the policyholder, on the one hand, and the insured, on the other,
and that “insured” consistently (with that one exception) refers to individual employees
participating in the LTD plan. Id. at *14.
The Court observed that in the usual situation, it would likely set the remaining
issues for trial. Id. But based on its concerns (1) that the parties had given little thought
to the question of who, exactly, is liable to Werb and who, exactly, was released under the
2002 settlement agreement, such that the parties might want “an additional period of
discovery–and perhaps another round of dispositive motions,” (2) that Werb may wish to
amend the complaint to add the plan as a defendant, assuming it could be sued as a
defendant, and (3) if the plan would be added as a defendant, and if ReliaStar is found to
be an “insurer” of Goodrich and thereby released, the matter may have to be remanded to
consider Werb’s claim for LTD benefits on the merits, the Court deferred any trial at that
time. Id. at *14-15. Thus, in addition to denying Werb’s motion, granting that portion of
4
Defendants’ motion seeking dismissal of Werb’s claims against Goodrich, and denying
the remaining portion, that with respect to ReliaStar, the Court permitted the parties to
consider those options. Id. at *14.
The parties largely agreed on a course of action. The Court thus ordered them to
complete discovery on the question of whether ReliaStar is an “insurer” of Goodrich,
remanded the matter to ReliaStar for a determination by its claims department of whether
Werb was disabled, and directed them to then file any motion to amend the Complaint
and motions for summary judgment. (Doc. No. 46.)
On remand to the insurer, ReliaStar determined that Werb is disabled. (Doc. No.
60, at 11.) The parties also conducted additional discovery. Finally, pursuant to a
stipulation, Werb amended his Complaint to delete Goodrich as a defendant and to add
the plan in its place. (Doc. Nos. 47, 47-2, 49.)4
Werb and the Defendants (with the plan substituted for Goodrich) now crossmove, again, for summary judgment.
II.
DISCUSSION
A.
Summary Judgment Standard
Defendants contend the motions are governed by the usual summary judgment
standard and that the only question here is one of contract interpretation–a question of
law. (Doc. No. 60, at 11-12.) Similarly, Werb argues that because the sole remaining
issue before the Court is a legal issue of interpreting the release, “any standard of review
4
On January 12, 2011, this action was reassigned to the undersigned. (Doc.
No. 55.)
5
language in the Plan,” which is separate from the release, is not controlling. (Doc. No.
71, at 9.) Werb further asserts that because Defendants have relied on the release as an
affirmative defense, they bear the burden of proof. (Id.)
Now that ReliaStar has found Werb to be disabled, this Court is not reviewing any
decision that Werb is not disabled. The issue is now confined to whether the release
encompasses Werb’s ERISA claims against ReliaStar and the plan. Thus, the usual
summary judgment standard applies. The movant is entitled to summary judgment if it
“shows that there is no genuine dispute as to any material fact and the movant is entitled
to judgment as a mater of law.” Fed. R. Civ. P. 56(a).
B.
Scope of the Release
Defendants contend that the “sole remaining issue” is whether the 2002 release
extends to Werb’s claim for disability benefits. More precisely, they argue that the issue
is whether that release applies to the specific relevant entity against which such a claim
would be directed. (Doc. No. 60, at 1.) They argue that Judge Schiltz’s earlier rulings
constitute the “law of the case” so as to preclude any further consideration of whether that
release is valid and encompasses the claims at issue. (Id.)
The Court agrees that Judge Schiltz decided the issue of whether the release was
valid and enforceable, at least with respect to releasing any ERISA claims against
Goodrich. Judge Schiltz’s discussion of the Leavitt factors, however, occurs only in the
separately-denominated section of his opinion that concerns Goodrich, not that which
addresses claims against ReliaStar. Werb, 2010 WL 3269974, at *12 (“Virtually all of
6
the Leavitt factors cut against Werb and in favor of Goodrich.”)5
As Defendants frame the issue, “Werb seeks benefits from Goodrich’s long-term
disability plan, which is insured by ReliaStar.” (Doc. No. 60, at 1.) Werb, in contrast,
maintains that his claim “is against ReliaStar, and ReliaStar insures [him], not Goodrich.”
(Doc. No. 71, at 11.) As Judge Schiltz observed earlier, the present dispute appears to be
somewhat unique in that it requires the Court “to distinguish between the employer, the
plan, and the insurer,” because the release applies by its terms to claims against “the
company and the insurer but doesn’t release the plan” per se, whereas “in a typical case
the insurer doesn’t care whether the lawsuit is against the plan or the insurer. The money
is going to come out of the same pocket.” (Doc. No. 79 (Dec. 14, 2009 Hearing
Transcript), at 34.) Resolution of the issue here, however, requires the Court to discern
the scope of the particular release agreed to by Werb and Goodrich in the context of
Goodrich’s ERISA plan and the relationships between Goodrich, the plan, and ReliaStar.
The 2002 release executed by Werb contains two separately-denominated release
provisions: (1) a “full and final settlement of all workers’ compensation claims,” and (2)
5
Some of the Leavitt factors pertain solely to the plaintiff, such that Judge
Schiltz’s analysis with respect to those factors would also apply in evaluating whether
Werb released his ERISA claims against ReliaStar. But at least one factor focuses not on
the parties but on the release itself. For example, the third factor concerns the clarity of
the release language. Judge Schiltz observed that “[t]he language of the release is crystal
clear, at least as it applies to Goodrich.” Id. at *12. And other factors arguably implicate
specific defendants. For example, the eighth factor concerns the consideration received
by the plaintiff, and adequate consideration from one defendant does not necessarily
mean that the consideration, if any, from a different defendant is adequate. And the ninth
factor concerns whether the release was induced by any improper conduct of a particular
defendant. Thus, it is not clear that Judge Schiltz implicitly found that the release is also
valid and enforceable against ReliaStar.
7
a “full and final settlement of other claims.” (Doc. No. 61-9, at 4.)6 Under the workers’
compensation provision, Werb released “Goodrich, its affiliates, subsidiaries, divisions,
officers, employees, agents, successors and assigns (hereinafter collectively referred to as
‘Goodrich’) and its insurers, from any and all liability . . . against Goodrich, its insurers,
the Commission and the Bureau” arising from injuries occurring during Werb’s
employment. (Id. (emphasis added).) And under the “other claims” provision, Werb
released “Goodrich and its insurers from any and all liability” on any claims “against
Goodrich, or its insurers, including, but not limited to claims . . . pursuant to ERISA.”
(Id. (emphasis added).)
Accordingly, with respect to the plan, Defendants–noting that “Goodrich” is
defined broadly to include, among others, Goodrich’s “affiliates”–argue that “the Plan
was clearly” released, regardless of whether “an ERISA plan is a distinct entity or merely
part of the employer.” (Doc. No. 60, at 1-2.) Defendants thus assert that it is not
necessary here to resolve the question “whether the ‘plan’ is an entity distinct from the
employer, or whether it is simply a part of the employer.” (Id. at 15 (emphases in
original).)
And with respect to ReliaStar, Defendants argue that the insurer was released
because (1) ReliaStar is either the insurer of Goodrich (and thus expressly released
6
The agreement results from the settlement of Werb’s workers compensation
claim and underinsured motorist claims against Goodrich. Werb v. ReliaStar Life Ins.
Co., No. 08-CV-5126 (PJS/JJG), 2010 WL 3269974, *2 (D. Minn. Aug. 17, 2010). Werb
had separately also sought benefits under Social Security’s disability program. Id. at *3.
At the time of the 2001 negotiations regarding the release and at the time of its execution
in 2002, Werb had not yet formally sought disability benefits under the plan.
8
pursuant to the clause “Goodrich, or its insurers”), or the insurer of the Plan (and thus
released as an “affiliate” or “division” of Goodrich pursuant to the expansive definitional
provision regarding Goodrich); and (2) because the Plan is released, so is ReliaStar as its
liability to Werb “flows through the Plan” and the “ReliaStar policy is merely a
mechanism for the Plan to provide benefits.” (Id. at 2 (emphasis in original).) They
further argue that Werb is estopped from arguing that ReliaStar is not the Plan’s insurer
because” the Amended Complaint asserts that the “‘ReliaStar policy insured the Plan for
benefits to employees covered by the Plan.’” (Doc. No. 74, at 4 (quoting Doc. No. 49, ¶
10).) Finally, Defendants note that under an additional provision entitled “Permanent
Disability,” Werb acknowledged that the payment he received under the settlement and
release “takes into account the possibility of any future disability, including potential
wage loss or need for medical treatment,” such that he agreed to accept that sum “in lieu
of any compensation or benefits” that might otherwise become due in the future. (Doc.
No. 61-9, at 5.)
In response, Werb argues that ReliaStar insures Werb (as an employee), not
Goodrich, or, in the alternative, that Werb did not voluntarily and knowingly release his
claim for LTD benefits against ReliaStar. (Doc. No. 71, at 2-3.) Werb thus contends that
the release of ERISA claims against Goodrich and its insurers does not apply to his claim
for LTD benefits because such a claim is brought by Werb–as the insured–“against the
Plan and the insurer, ReliaStar,” not against Goodrich, which is not the insured, but rather
the policyholder. (Id. at 4.) Werb asserts that ReliaStar admits as much because it plead
9
that it “‘issued the policy to [Goodrich] as plan sponsor for the plan for the benefit of
eligible Goodrich employees.’” (Id. (quoting Doc. No. 52 (ReliaStar’s Amended
Answer) ¶ 9).)
1.
Plan Administrators, De Facto Plan Administrators, and Claim
Administrators
The policy identifies Goodrich as “the Plan Administrator.” (Doc. No. 72, Ex. 4,
at RS001470.) Judge Schiltz found, however, that ReliaStar was “the plan
administrator.” Werb, 2010 WL 3269974, at 1. As will be discussed, ERISA defines (or
provides bases for identifying) the “administrator,” but does not expressly define either
“plan administrator” or “claims administrator.” Nevertheless, courts have recognized that
there are two distinct functions performed under an ERISA benefits plan: (1) making
“plan-level decisions about covering employees (e.g., whether employee x will be
covered at all–for anything–under the [disability] policy),” including “decisions about
premium collection and employee enrollment,” and (2) making “claim-level decisions
about paying benefits (e.g., to what extent employee x’s visit to doctor y on date z is
covered).” Slayhi v. High-Tech Institute, Inc., No. 06-CV-2210 (PJS/JJG), 2007 WL
4284859, *3, *7 (D. Minn. Dec. 3, 2007). And lacking any statutory guidance on this
distinction, some courts have identified what they deem “de facto plan administrators.”
See infra note 14. Here, the policy denominates a “plan administrator” but not a “claims
administrator,” even though, as will be seen, the policy leaves no doubt that ReliaStar is
the “insurer” of Goodrich’s employees and the party authorized to decide claims for
disability benefits. Judge Schiltz plainly recognized that ReliaStar–not Goodrich, or even
10
“the plan”–was the entity deciding whether Werb was entitled to benefits under the plan.
Werb, 2010 WL 3269974, at 1. Accordingly, Judge Schiltz presumably meant that
ReliaStar was in effect the de facto administrator or the claims administrator. And
regardless of the labels that the courts have developed to fill in the statutory gaps, it is
clear that Werb’s present action alleging that he was improperly denied disability benefits
is a claim properly directed at ReliaStar, the party that made the decision. Finally,
because ReliaStar insured the plan participants such as Werb, and not either Goodrich or
the plan, Werb did not release his ERISA claim for disability benefits.
2.
ReliaStar As “Insurer”
In this dispute over the scope of a release of claims that derive from rights to
benefits provided under a disability insurance policy that the employer obtained for the
benefit of its employees, the Court begins with the terms of the policy itself, that is, the
“insurance contract between ReliaStar Life and the Policyholder.” (Doc. No. 72, Ex. 4, at
RS001469.)7 As Judge Schiltz previously observed, the policy plainly identifies
Goodrich as the “policyholder.” (Id. at RS001455, RS001470.) Moreover, the policy
differentiates between the policyholder and the “insureds,” noting that although the
“Policyholder sends the premiums to ReliaStar,” the “insureds” may pay part of the cost.
(Id. at RS001456-57.) As Judge Schiltz also observed, although a policyholder is often
also the insured, there is no necessity that it be so, as “a parent may take out a policy on a
child, or a corporation on an executive.” Werb, 2010 WL 3269974, at *13.
7
ERISA itself does not define either “insurer” or “insured.” ERISA also
seems to contemplate some variety in terms of the structure of benefit plans.
11
And it also seems clear that the insureds are confined to individual employees
participating in the plan–and do not also extend to their employer–insofar as the policy
refers to “the insured’s lifetime,” and the fact that ReliaStar “issues a certificate to the
Policyholder for delivery to the insured” that “describes the insured’s benefits.” (Doc.
No. 72, Ex. 4, at RS001457-58.) Moreover, the policy requires that “to become insured,”
the “employee” must meet certain conditions, all of which make sense only with respect
to individual employees. (Id.) And with respect to ReliaStar’s waiver of premiums, “it is
the Policyholder’s responsibility to refund” any contribution made by the “employee
insured under [the policy]” to that employee. (Id.) And an “employee” is one “employed
by the Policyholder,” including those “employees of companies and affiliates controlled
by the Policyholder.” (Id.)
Accordingly, at least based on the consistent terms of the policy itself–the
document that governed the relationship between ReliaStar as insurer and Goodrich as the
“policyholder” and that by extension also governed employees’ rights under the
policy–employees such as Werb, and only such individual employees, are the “insureds.”8
8
Defendants argue that Werb may not now contend that he was an “insured”
of ReliaStar because his Amended Complaint asserts that the “ReliaStar policy insured
the Plan for benefits to employees covered by the Plan.” (Doc. No. 60, at 18 (quoting
Doc. No. 49, ¶ 10); Doc. No. 74 at 4.) Defendants rely on National Surety Corp. v.
Ranger Ins. Co., for the proposition that “[f]actual statements in a party’s pleadings are
generally binding on that party unless the pleading is amended.” 260 F.3d 881, 886 (8th
Cir. 2001). But it is far from clear in this context that the identity of the “insured” is a
question of fact. Insofar as construing the disability policy, which is a contract of
insurance, is a question of law, the conclusion that ReliaStar insured participants such as
Werb is not a factual determination. Moreover, here it is not one that Werb, or any party,
has the authority to determine via a pleading where the policy plainly provides otherwise.
12
The Court recognizes that, in appropriate circumstances, there can be more than one
insured (or type of insured) under a particular policy, but Defendants’ argument that
Goodrich was also an insured is untenable in the face of the policy terms.9
Thus, with employees such as Werb as the insureds, and ReliaStar the insurer,
Goodrich is properly identified as the “Policyholder” (and, at least nominally, the “Plan
Administrator” but plainly not the actual claims administrator)–in effect, an intermediary
between the insured and the insurer. Goodrich, the employer, sought to provide a benefit
to its employees, and did so not by setting up a self-insured benefit plan, but rather by
obtaining a disability policy from an insurer to provide the benefits to its employees.
Accordingly, where, as here, the insurer assesses claims of disability and denies benefits,
the insured employee’s action to receive such benefits is appropriately directed at the
insurer.
Granted, some courts have ruled that the appropriate defendant–and perhaps the
sole appropriate defendant–in an ERISA action seeking benefits is the plan
“administrator.” See, e.g., Layes v. Mead Corp. 132 F.3d 1246, 1249 (8th Cir. 1998)
(dismissing claim against employer where insurer “was at all relevant times the sole
9
Granted, as Laura Olsen, a Goodrich employee who produces and maintains
group policies, testified, Goodrich might possess an “insurable interest in the policy” and
might derive a “benefit” in the form of the ability “to offer a comprehensive package of
compensation, to attract and retain quality employees,” and if such employees become
disabled, Goodrich derives the “rehabilitative benefits” of the policy that allow the
workers to “get back to work” for the company. (Doc. No. 72, Ex. 5.) But such indirect
“benefits” to Goodrich do not render it an “insured.” Goodrich itself may not become
disabled or receive disability benefits, the main attributes of an “insured” under a
disability policy.
13
administrator of the” disability plan).10 In Layes, however, the court did not differentiate
between a “plan administrator” and a “claims administrator,” presumably because the
policy did not expressly designate the employer as “plan administrator” even though the
insurer was the party making the claims-level decisions. Id. (noting that insurer
“determined that [claimant] was not totally disabled under the terms of the plan”).
ERISA does not define “administrator” in terms of what one does, but rather
provides various means of identifying who or what is the “administrator.” 29 U.S.C. §
1002(16)(A)(I) (providing that the “administrator” is generally “the person specifically so
designated by the terms of the instrument under which the plan is operated,” and that if
none is so designated, then the “plan sponsor”). Here, the plan expressly designates
Goodrich as the “Plan Administrator.” (Doc. No. 72, Ex. 4, at RS001470.) Thus,
10
In addition, some courts adhere to the view that ERISA benefit actions may
be brought only against the “plan” itself. This view is largely traced back to the Ninth
Circuit’s per curiam decision in Gelardi v. Pertec Computer Corp., 761 F.2d 1323 (9th
Cir. 1985). See Slayhi v. High-Tech Institute, Inc., No. 06-CV-2210 (PJS/JJG), 2007 WL
4284859, *6 (D. Minn. Dec. 3, 2007) (referring to the “oft-cited opinion” in Gelardi,
which, however, lacked any “accompanying analysis”). In Gelardi, the court stated that
“ERISA permits suits to recover benefits only against the Plan as an entity.” 761 F.2d at
1324 (citing 29 U.S.C. § 1132(a)(1)(B), (d)). But it is possible to read this
statement–consistent with the statute–as meaning, if one brings suit against a plan, one
may sue the plan only as an entity, not also its individual trustees or administrators,
unless their personal liability is separately established. 29 U.S.C. § 1332(d). Moreover,
an individual administrator of a plan must be distinguished from a “plan administrator”
that is not an individual but rather the company itself or some special sub-entity such as a
committee to which the company or insurer has delegated the authority to administer
ERISA benefit claims. E.g., Daniel v. Eaton Corp., 839 F.2d 263, 266 (6th Cir. 1988)
(noting that plan “provides for administration by the Central Board of Administration . . .
and a Local Pension Committee at each plant”). And, in any event, the Eighth Circuit
does not limit benefit actions to the plan itself. Slayhi, 2007 WL 4284859, at *7 (“[T]he
Eighth Circuit has rejected the notion that only a ‘plan’ can be sued under §
1132(a)(1)(B).”).
14
Goodrich could be an appropriate defendant, at least with respect to claims regarding
plan-level decisions.
Nevertheless, the Plan also plainly reveals that ReliaStar “will process the claim
and make payment or issue a denial notice.” (Id. at RS001471.) ReliaStar is also the
entity that “will consider requests for an appeal of a denied claim,” and the “[r]eview of
claim denials and final decisions on appeal are the responsibility of ReliaStar Life.” (Id.)
Finally, it is clear that ReliaStar’s role and function with respect to administering claims
is not merely ministerial. “ReliaStar has final discretionary authority to determine all
questions of eligibility and status and to interpret and construe the terms of this
policy(ies) of insurance.” (Id.)11 ReliaStar is thus the actual claims administrator of the
plan, despite the designation of Goodrich as “Plan Administrator.”12
11
This action is thus distinguishable from Garren v. John Hancock Mut. Life
Ins. Co., 114 F.3d 186 (11th Cir. 1997) (concluding that employer, not insurer, “is the
proper party defendant”). In Garren, while the employer was designated as “plan
administrator,” the employer also had the “‘exclusive responsibility and complete
discretionary authority to control the operation and administration of this Plan . . . and to
resolve all interpretative, equitable and other questions that shall arise in the operation of
this Plan.’” Id. at 187. Moreover, the insurer did “not exercise any discretion,
responsibility or control over the administration of the Plan.” Id.
12
ReliaStar is thus perhaps the de facto plan administrator. See Jones v. UOP,
16 F.3d 141, 145 (7th Cir. 1994) (Posner, J.) (identifying circuits that recognize “‘de facto’
plan administrators”). The Eighth Circuit has yet to rule on whether to recognize de facto
administrators. Hall v. Lhaco, Inc., 140 F.3d 1190, 1195 (8th Cir. 1998) (“We do not
deem this to be the appropriate case upon which to decide the question . . . . Thus, we
must reserve for another time the question of whether a party other than the one
designated in ERISA plan documents can be sued under § 5023(a)(1)(B) as a ‘de facto’
plan administrator.”). Defendants rely on Brown v. J.B. Hunt Trans. Servs., Inc., 586
F.3d 1079 (8th Cir. 2009), to contend that “there is no such thing as a de facto
administrator.” (Doc. No. 60, at 15 n.7.) But in Brown, the court only ruled that Ross
continue...
15
“[T]he proper defendant under § 1132(a)(1)(B) is the party with authority, under
the relevant plan documents, to pay benefit claims from plan assets.” Slayhi v. HighTech Institute, Inc., No. 06-CV-2210 (PJS/JJG), 2007 WL 4284859, *10 (D. Minn. Dec.
3, 2007) (concluding that, under the facts of that case, the insurer, not the employer, was
the proper defendant).13 Accordingly, on the particular facts presented here, the Court is
12
...continue
precluded the argument that a claim under Section 1132(c), which “only provides a cause
of action against plan administrators,” could be brought against the insurer where the
employer was designated as plan administrator. And in Ross, the court simply ruled that
where there was a designated Plan Administrator, which had the sole statutory
responsibility to provide the plan documents to plan participants, the insurer’s role as
“claims administrator” “did not transform it into the Plan Administrator.” Ross, 285 F.3d
at 743. Thus, the Eighth Circuit apparently has differentiated between a “plan
administrator” and a “claims administrator.” Id. at 739 (noting that while plan designated
employer as “Plan Administrator,” insurer served as “claims administrator,” which “was
responsible for the administration of claims, including the handling and processing of
claims forwarded to it by” the employer). Insofar as ReliaStar is the entity deciding
whether Werb is entitled to disability benefits, his action challenging the denial of such
benefits would necessarily have to be directed at ReliaStar, which then presumably is the
“claims administrator.” Defendants admit as much. (Doc. No. 52 (Answer to Amended
Complaint), ¶ 8 (“ReliaStar was the claims administrator.”), ¶ 11 (“[T]he Plan
Administrator delegated to ReliaStar as claims administrator final discretionary authority”
regarding the policy.) In any event, regardless of titles, ReliaStar is the entity “with
authority, under the relevant plan documents, to pay benefit claims from plan assets.”
Slayhi v. High-Tech Institute, Inc., No. 06-CV-2210 (PJS/JJG), 2007 WL 4284859, *10
(D. Minn. Dec. 3, 2007). The policy begins by stating that ReliaStar “will pay the
benefits according to the terms and conditions of this Group Policy.” (Doc. No. 72, Ex. 4,
at RS001455.)
13
In Slayhi, the plan documents did not specifically designate any
administrator. Accordingly, the employer, as “plan sponsor,” was, “by operation of law,
the ‘administrator.’” 2007 WL 4284859, at *7. The court noted that the insurer was
“entirely responsible under the plan for claim-level decisions about benefits, [while the
employer was] responsible for plan-level decisions about premium collection and
employee enrollment.” Id. Reviewing the Eighth Circuit case law, Judge Schiltz
concluded that “Layes left open the . . . question whether and to what extent a party that
continue...
16
unable to conclude that Goodrich is the sole proper Defendant. And in light of the fact
that the release plainly covers any of Werb’s ERISA claims against Goodrich, the Court
need not determine whether Goodrich is an appropriate Defendant. But it is clear enough
that Werb’s present ERISA claim, which he asserts lies against ReliaStar (and maybe also
against the plan) regarding its denial of his claim for benefits, need not be dismissed on
the grounds that ReliaStar is not a proper Defendant.
Nevertheless, Defendants rely on general ERISA case law to argue that the plan
itself “is generally the proper defendant in a benefits action under ERISA” (Doc. No. 60,
at 14); the plan is often a separate entity distinct from the employer (id. at 15); but even if
separate, it is an “affiliate” of the employer (id. at 16); ReliaStar is the insurer of the plan
(Doc. No. 74, at 5); such that ReliaStar was released as the insurer of the plan (whether
the plan is part of Goodrich or a separate, but affiliated, entity) (id. at 5-6). Defendants
thus contend that “Werb’s argument simply ignores the statutory framework of ERISA
and the definition of Goodrich contained within the [release].” (Doc. No. 74 at 6.)
The Court does not agree that ERISA clearly resolves this question. As noted
above, ERISA does not clearly address what parties–employer, benefits plan, or
insurer–are proper defendants, and does not even define “insurer,” “insured” or
“affiliate,” three of the key terms of the release. ERISA provides a cause of action to “a
participant or beneficiary” to “recover benefits due to him under the terms of his plan, to
13
...continue
in fact administers a plan, but that is not identified by the statute as a plan administrator,
can be sued under 1132(a)(1)(B).” Id. at *8.
17
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). ERISA also provides that
[a]n employee benefit plan may sue or be sued under this subchapter as an
entity. Service . . . upon a trustee or an administrator of an employee
benefit plan in his capacity as such shall constitute service upon the
employee benefit plan. In a case where a plan has not designated in the
summary plan description of the plan an individual as agent for the service
of legal process, service upon the Secretary shall constitute such service.
Id. § 1132(d)(1). Likewise, a money judgment “against an employee benefit plan shall be
enforceable only against the plan as an entity and shall not be enforceable against any
other person unless liability against such person is established in his individual capacity
under this subchapter.” Id. § 1132(d)(2). It appears that this provision simply recognizes
a plan as a legal entity capable of suing and being sued in its own name.14 And that the
individual plan trustee or administrator is thus not liable absent some other legal basis for
such individual liability.
Some courts, however, have construed this provision as limiting ERISA actions for
plan benefits solely to the plan itself. See, e.g., Slayhi v. High-Tech Institute, Inc., 2007
WL 4284859, *6-10 (D. Minn. Dec. 3, 2007) (addressing issue of permissible defendants
in ERISA benefit actions). But this view misreads the statute. Id. at *6 (“[T]he text of §
14
As a general matter, individuals and some entities such as corporations are
legal persons capable of suing and being sued in their own name. In contrast,
unincorporated divisions of a corporation may not sue or be sued in their own name. E.g.,
United States v. ITT Blackburn Co., A Division of ITT, 824 F.2d 628, 631 (8th Cir. 1987)
(“[A]n unincorporated division cannot be sued or indicted, as it is not a legal entity.”). In
the ERISA context, Congress thus sought to accord benefit “plans”–which are neither
individuals, corporations, nor otherwise any other conventional juridical entity–the
authority to sue and be sued.
18
1132(d) does not compel the conclusion that ERISA plans, as entities, are the only
possible defendants in suits for benefits.”). And it also ignores the reality that “[i]n order
to obtain complete relief, a successful plaintiff may need to assert claims against both a
plan and its sponsor and/or administrator and/or issuer of an insurance policy that
provides benefits under the plan.” Ross v. Rail Car America Group Disability Income
Plan, 285 F.3d 735, 741 n.7 (8th Cir. 2002), quoted in Slayhi, 2007 WL 4284859, at *5-6
(concluding that “ERISA plans are among the possible defendants in suits for benefits”
(emphasis in original)).15 “ERISA itself does not identify the proper defendant in suits for
benefits.” Slayhi, 2007 WL 4284859, at *6. And “in some cases, . . . the ‘plan’ simply
does not exist as an entity.” Id. at *7.
In sum, the Court rejects Defendants’ argument that ReliaStar was released on the
grounds that it was the insurer of Goodrich or of the plan. To the contrary, ReliaStar is a
proper defendant and was the insurer of individual plan participants such as Werb. This
leaves the question of whether the plan itself was released.16
15
In Ross, the Eighth Circuit did not hold that an action to recover ERISA
benefits may be brought only against the relevant plan. It simply stated, consistent with
Section 1132(d), that the “plan itself is ordinarily liable for benefits payable under the
terms of the plan and is thus the primary defendant in a section 502(a)(1)(B) [29 U.S.C. §
1132(a)(1)(B)] action.” 285 F.3d at 740 (emphasis added). Ross is not controlling here
because the court expressly ruled that the plaintiff’s claim was not one for benefits under
Section 1132(a)(1)(B), but rather a claim against the plan sponsor and policyholder under
Section 1132(a)(3) regarding amendments to the plan, not a denial of benefits. Id. 74041. And even if the statement regarding Section 1132(a)(1)(B) claims was not dicta, the
court merely cited the questionable line of authority emanating from the Ninth Circuit’s
decision in Gelardi.
16
There is no question that, generally, a plan may be sued in an action for
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19
3.
“Affiliates” of Goodrich
Finally, Defendants also argue that the Plan was an “affiliate” of Goodrich. The
release plainly defines “Goodrich” to extend beyond the company itself to also include
“its affiliates, subsidiaries, divisions, officers, employees, agents, successors and assigns.”
(Doc. No. 61-9, at 4.) Defendants thus presumably contend that Werb’s claims against
the plan were released. Perhaps more importantly, they thus contend that Werb’s claims
against ReliaStar were released, under the assumption that ReliaStar insured the plan. In
other words, by releasing Goodrich, Werb also necessarily released the plan, and by
releasing Goodrich’s insurers, Werb also necessarily released ReliaStar, as the plan’s
insurer. But the Court has rejected a key component of this presumption, that is, that
ReliaStar insured the plan. Thus, it is not clear whether Defendants’ argument that the
plan is either a part of Goodrich or its affiliate is effectively moot. But since the plan is
now formally a party to this action, the Court will address the argument.
In the general corporate context, an “affiliate” is usually a separate corporate entity
that is nonetheless related by ownership to the main corporate entity. Black’s Law
Dictionary 59 (7th ed.) (defining “affiliate” as a “corporation that is related to another
corporation by shareholdings or other means of control”). For example, a parent
corporation, a subsidiary corporation and sibling (“sister” or “brother”) corporations (that
16
...continue
ERISA benefits. 29 U.S.C. § 1132(d). But whether a particular plan is a proper
defendant in a specific action presumably would turn on its precise role and the nature of
the claim. ERISA provides for a variety of causes of action by a plan “participant” or
“beneficiary” such as Werb other than one under Subsection 1132(a)(1)(B) to recover
benefits. 29 U.S.C. § 1132(a)(1), 1132(a)(2), 1132(a)(3), 1132(a)(4), 1132(c).
20
is, those sharing ownership by a common parent) are affiliates. Id. (“a subsidiary, parent,
or sibling corporation”). A division of a corporation, in contrast, is not separately
incorporated, but rather only a component part of the single corporate entity.
Here, the reference to “affiliates” deviates slightly from this general understanding
by apparently not including “subsidiaries” within “affiliates,” but it does not by its
express terms necessarily extend to a disability insurance plan. Furthermore, a disability
plan is presumably not a separately incorporated entity, and there is nothing in the record
remotely suggesting that Goodrich’s plan was some sort of wholly-owned subsidiary.
And it is difficult to understand how a benefit plan could be a “division” of a corporation
as it is not analogous to an operating division of a company. All of the individuals and
entities included within the broad definitional scope of “Goodrich” are those that are
owned, controlled, or employed by the company per se, or those whose rights would be
derived from those of the company by merger or sale (its “successors” and “assigns”). A
“benefit plan,” in contrast, while enjoying the status of a juridical entity capable of being
sued “as an entity,” 29 U.S.C. § 1132(d), is not a conventional “affiliate” in the general
law of corporate groups. And nothing in either the release or the policy addresses
whether the plan could be an “affiliate” of Goodrich.17
But this Court need not resolve that question because even if the plan is an
“affiliate” of Goodrich, Werb’s action is mainly against ReliaStar, which is neither an
17
Some courts, however, have concluded that benefit plans are “affiliates” of
the company that establishes and sponsors the plans. E.g. Christian v. Vought Aircraft
Industries, Inc., 2010 WL 4065482, *8 (E.D.N.C. Oct. 15, 2010) (collecting cases).
21
“affiliate” of Goodrich nor its insurer. Even if the Plan would be released, Werb’s claim
for disability benefits would be paid by ReliaStar, as the policy plainly indicates. To the
extent that the plan might yet be involved in the process of paying such benefits, it seems
clear enough that the plan–even if released in terms of whatever liability it might itself
have had to Werb–continues to be a defendant in this action such that it may facilitate
ReliaStar’s payment of benefits to Werb. Not only is there no motion to dismiss the plan
as an inappropriate defendant, Defendants in fact stipulated to the substitution of the plan
for Goodrich. (Doc. No. 47.)
C.
Attorney Fees and Costs
Finally, Plaintiff requests an award of attorney fees and costs. ERISA provides
that in actions by plan participants or beneficiaries, “the court in its discretion may allow
a reasonable attorneys’s fee and costs of action to either party.” 29 U.S.C. § 1132(g)(1).
The Eighth Circuit has rejected any presumption in favor of awarding fees and costs to
ERISA plaintiffs. Martin v. Arkansas Blue Cross and Blue Shield, 299 F.3d 966, 971-72
(8th Cir. 2002) (en banc). The court referenced the five Westerhaus factors that provide
the district court with a general framework in which to determine if fees and costs should
be awarded. Id. at 972. These factors are:
“(1) the degree of the opposing parties’ culpability or bad faith; (2) the
ability of the opposing parties to satisfy an award of attorneys’ fees; (3)
whether an award of attorneys’ fees against the opposing parties could deter
other persons acting under similar circumstances; (4) whether the parties
requesting attorneys’ fees sought to benefit all participants and beneficiaries
of an ERISA plan or to resolve s significant legal q[ue]stion regarding
ERISA itself; and (5) the relative merits of the parties’ positions.”
22
Lawrence v. Westerhaus, 749 F.2d 494, 496 (8th Cir. 1984) (quoting Iron Workers Local
No. 272 v. Bowen, 624 F.2d 1255, 1266 (5th Cir. 1980)). Accord Hardt v. Reliance Std.
Life Ins. Co., ___ U.S. ___, 130 S. Ct. 2149, 2156-58 & n.8 (2010) (clarifying that such
factors do not control resolution of the initial requirement of “some success on the
merits,” but not foreclosing “the possibility that once a claimant has satisfied this
requirement, and thus becomes eligible for a fees award under § 1132(g)(1), a court may
consider the five factors” delineated by the court below as well as in Westerhaus).
Here, Werb has achieved the requisite success on the merits. Hardt, 130 S. Ct. at
2156-58. But much of the litigation before the Court concerned contract-law issues
regarding the scope of the release, rather than the ERISA question of whether Werb was
disabled. Accordingly, the Court shall permit Werb to recover that portion of his fees and
costs that (1) is attributable to the issue of whether he was disabled on the merits, and (2)
was incurred from the time ReliaStar announced it would reconsider its original decision
to the time it declared him disabled. Werb shall file within twenty days of the date of this
Order an affidavit identifying such fees and costs. Defendants may file within ten days
thereafter any objections. The Court will then rule on the issue without argument.
III.
CONCLUSION
ReliaStar, as the actual claims administrator, has now found Werb disabled,
leaving only the question of whether Werb’s release of Goodrich, his employer, also
released his ERISA claims against ReliaStar. The Court concludes that the release of
Goodrich, its affiliates, and its insurers, does not extend to Werb’s claim for benefits
23
because ReliaStar is the insurer of Werb, not Goodrich.
IV.
ORDER
Based on the foregoing, and all the files, records and proceedings herein, IT IS
HEREBY ORDERED that:
1.
Defendants’ motion for summary judgment [Doc. No. 58] is DENIED IN
PART (insofar as it seeks judgment on ReliaStar’s affirmative defense that Werb released
his ERISA claims), and DENIED AS MOOT IN PART (insofar as it seeks judgment on
the Plan’s affirmative defense that Werb released his ERISA claims); and
2.
Plaintiff’s motion for summary judgment [Doc. No. 63] is GRANTED IN
PART (as to ReliaStar) and DENIED AS MOOT IN PART (as to the Plan).
Dated: January 20, 2012
s/ Susan Richard Nelson
SUSAN RICHARD NELSON
United States District Judge
24
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