Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-almd-3_01-cv-00447/USCOURTS-almd-3_01-cv-00447-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1132 E.R.I.S.A.-Employee Benefits

---

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE

MIDDLE DISTRICT OF ALABAMA, EASTERN DIVISION

NOEL BOONE, etc., )

)

Plaintiff, )

)

v. ) CIVIL ACTION NO.

) 3:01cv445-MHT

HEALTH STRATEGIES, INC., ) (WO)

et al., )

)

Defendants. )

PAMELA INGRAM, etc., )

)

Plaintiff, )

)

v. ) CIVIL ACTION NO.

) 3:01cv446-MHT

HEALTH STRATEGIES, INC., ) (WO)

et al., )

)

Defendants. )

GLENN BRITTON, etc., )

)

Plaintiff, )

)

v. ) CIVIL ACTION NO.

) 3:01cv447-MHT

HEALTH STRATEGIES, INC., ) (WO)

et al., )

)

Defendants. )

Case 3:01-cv-00447-MHT-VPM Document 48 Filed 08/15/07 Page 1 of 21
2

JANET MATTHEWS, )

)

Plaintiff, )

)

v. ) CIVIL ACTION NO.

) 3:01cv448-MHT

HEALTH STRATEGIES, INC., ) (WO)

et al., )

)

Defendants. )

OPINION

These cases are now on remand from the Eleventh

Circuit Court of Appeals for additional factfinding.

Plaintiffs Noel Boone, Pamela Ingram, Glenn Britton, and

Janet Matthews brought suit in state court against

defendants American Hospitality Association (AHA), Health

Strategies, Inc., Ronald D. Howard, and Capital Risk

Management, Inc., alleging, by way of state-law claims,

that the defendants failed to reimburse them properly for

insured medical expenses. The defendants removed the

cases to federal court, and the plaintiffs moved to

remand. This court held that the plaintiffs’ state-law

claims were ‘superpreempted’ by the Employee Retirement

Case 3:01-cv-00447-MHT-VPM Document 48 Filed 08/15/07 Page 2 of 21
3

Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001-

1461, and when the plaintiffs failed to amend their

complaints to state claims under ERISA their lawsuits

were dismissed. The plaintiffs timely appealed, and the

Court of Appeals vacated this court’s decision.

This court was directed to conduct, on remand,

additional factfinding on a single issue: whether

plaintiff Britton is a covered employee under the

relevant health plan. The court set a schedule for

discovery and briefing, and its additional factfinding is

now complete. Because this court finds that Britton is

a covered employee, the court will reinstate its original

decision denying the plaintiffs’ motions to remand and

dismissing these cases.

Case 3:01-cv-00447-MHT-VPM Document 48 Filed 08/15/07 Page 3 of 21
1. The factual background of this case is described

in more detail in this court’s previous opinion, Boone v.

Health Strategies, Inc., 213 F.Supp.2d 1304 (M.D. Ala.

2002) (Thompson, J.), vacated, 97 Fed. Appx. 905 (11th

Cir. 2004) (published table decision).

4

I. BACKGROUND1

The plaintiffs are hairstylists who worked at

Master’s Touch, a hair salon in Alexander City, Alabama.

Boone, Ingram, and Matthews were not, strictly speaking,

employees of Master’s Touch. They each operated his or

her own independent hairstyling business, paying rent to

Master’s Touch for the privilege of conducting his or her

independent business at that location. 

Britton, like the others, operated his own

independent hairstyling business on the premises of

Master’s Touch. But Britton, in addition to operating

his own business and unlike the other independent

hairstylists, was employed directly by Master’s Touch.

Britton’s mother was the owner of Master’s Touch; rather

than get involved in the day-to-day business of the

company, she paid her son to perform a variety of

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managerial tasks. Thus, Britton wore two hats: (1)

independent hairstylist renting a chair at Master’s

Touch; and (2) loyal son who was paid by his mother to

help run her business.

In 1999, the plaintiffs were in need of a health care

plan. Britton was told by an insurance agent that when

a business becomes a member of the AHA, employees of the

business can enroll in AHA’s group-health-insurance plan.

To that end, Britton (acting on behalf of Master’s Touch)

paid an enrollment fee to make Master’s Touch a member of

the AHA. After Master’s Touch became a member of the

AHA, all four plaintiffs enrolled in the AHA health plan.

When these lawsuits were removed to federal court,

the plaintiffs sought to avoid ERISA preemption, and

remand their state-law claims to state court, by arguing

that the AHA health plan was not an ERISA plan within the

meaning of that statute. In order to be an ERISA plan,

the relevant plan must provide benefits to an actual

employee. Slamen v. Paul Revere Life Ins. Co., 166 F.3d

Case 3:01-cv-00447-MHT-VPM Document 48 Filed 08/15/07 Page 5 of 21
2. The plaintiffs also argued that ERISA did not

apply because Master’s Touch did not “establish or

maintain” the plan. Slamen, 166 F.3d at 1104. Because

this court rejected that argument and the Eleventh

Circuit Court of Appeals agreed, it is not relevant to

this discussion.

6

1102, 1104 (11th Cir. 1999). Because Master’s Touch does

not actually employ its hairstylists, the plaintiffs

argued, ERISA did not apply.2

This court rejected the plaintiffs’ argument. The

court agreed with the plaintiffs that Boone, Ingram, and

Matthews were not employees. However, the court applied

the common law of agency and concluded that Britton was

an employee of Master’s Touch. An ERISA plan exists

where even one actual employee is covered by the plan, in

which case the rights and remedies of all of the plan’s

participants and beneficiaries, whether employees or

non-employees, are governed by ERISA. Gilbert v. Alta

Health & Life Ins. Co., 276 F.3d 1292, 1303-04 (11th Cir.

2001). Therefore, this court held, because Britton was

an employee, all four plaintiffs’ claims were preempted

by ERISA.

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The court accordingly denied the plaintiffs’ motions

to remand and gave them 14 days to amend their complaints

to state claims under ERISA. The plaintiffs did not

amend their complaints, and these cases were dismissed.

On appeal, the Eleventh Circuit agreed with this

court’s finding that Boone, Ingram, and Matthews were not

employees. The appellate court further agreed that

Britton “was employed in some capacity by Master’s Touch

as per the common law definition of ‘employee.’” Boone

v. Health Strategies, Inc., No. 03-11852, slip op. (doc.

no. 42) at 12 (11th Cir. 2004). However, the appellate

court held, it is not enough to show that Britton was an

employee. Rather, an ERISA plan does not exist unless an

employee was actually covered by the plan. Under the AHA

plan at issue in this case, only full-time employees who

work at least 30 hours per week and “certain employees in

a category of permanent status and to be determined by

the plan administrator” are eligible for coverage. Id.

Because the record did not establish whether Britton fit

Case 3:01-cv-00447-MHT-VPM Document 48 Filed 08/15/07 Page 7 of 21
3. AHA Benefit Plan & Summary Plan Description,

J.A.2d Ex. E (doc. no. 48) at 30.

8

into either of these categories of covered employees, the

Eleventh Circuit remanded these cases to this court for

additional factfinding on that issue.

II. DISCUSSION

To determine whether Britton is an eligible employee

covered by the AHA health plan, the court first examines

the plan documentation and description:

“All full-time employees regularly

scheduled to work at least thirty (30)

hours per work week or certain employees

in a category of permanent status and to

be determined by the plan administrator

shall be eligible to enroll for coverage

under this Plan. This does not include

temporary or seasonal employees.”3

As the Eleventh Circuit instructed, the court must

determine whether Britton was either a full-time employee

or an eligible permanent employee as determined by the

plan administrator.

Case 3:01-cv-00447-MHT-VPM Document 48 Filed 08/15/07 Page 8 of 21
4. Deposition of Glenn Britton, J.A.2d Ex. A (doc.

no. 48) at 93, 162.

5. Id. at 163.

9

A. Full-Time Employee

The evidence does not support a finding that Britton

was a full-time employee regularly scheduled to work at

least 30 hours per work week. Although Britton almost

certainly worked more than 30 hours per week for his own

independent hairstyling business, the relevant question

here is whether he worked more than 30 hours per week for

Master’s Touch, the AHA member organization from which he

would derive his eligibility for health benefits. The

evidence reflects that he spent only a few hours per week

performing managerial and administrative tasks for

Master’s Touch; the vast majority of his working hours

was self-employed.4

 The record also reflects that the

time Britton did spend working for Master’s Touch was not

“regularly scheduled.”5

Case 3:01-cv-00447-MHT-VPM Document 48 Filed 08/15/07 Page 9 of 21
6. AHA Benefit Plan & Summary Plan Description,

supra, at 30.

10

B. Permanent Status and 

Determination by the Plan Administrator

The question, then, is whether Britton was a

permanent-status employee eligible for coverage per

determination by the plan administrator. The health-plan

documentation describes this category of eligibility as

“certain employees in a category of

permanent status and to be determined by

the plan administrator. This does not

include temporary or seasonal

employees.”6

There are two components to this language. The first

component is that the employee must be a permanent

employee and not a temporary or seasonal employee. The

second component is that the plan administrator must be

involved in an eligibility determination of some sort.

1.

The court begins with the first component. The

evidence reflects that Britton was a permanent employee

Case 3:01-cv-00447-MHT-VPM Document 48 Filed 08/15/07 Page 10 of 21
7. Britton Depo., supra, at 89.

11

and not temporary or seasonal. Since 1992 or 1993,

Britton performed various managerial and administrative

tasks to assist his mother in running Master’s Touch, and

there has never been an occasion since that time when he

stopped doing those tasks.7

 Based on Britton’s

uncontradicted testimony, the court finds that Britton

was a permanent employee of Master’s Touch and was not a

temporary or seasonal employee.

2.

The court now turns to the second component, the

‘determination’ to be made by the plan administrator.

Although it is unclear precisely what it is the plan

administrator is supposed to determine, it is clear that

the plan grants some discretion to the plan administrator

to determine the eligibility of permanent part-time

employees.

Case 3:01-cv-00447-MHT-VPM Document 48 Filed 08/15/07 Page 11 of 21
8. See AHA Benefit Plan & Summary Plan Description,

supra, at 1.

12

Whenever an ERISA plaintiff challenges the

determination of a plan administrator, the question

arises as to whether the court should review the plan

administrator’s determination under a de-novo, arbitraryand-capricious, or “heightened” arbitrary-and-capricious

standard of review. See Williams v. BellSouth

Telecomms., Inc., 373 F.3d 1132, 1138 (11th Cir. 2004);

see also Paramore v. Delta Air Lines, Inc., 129 F.3d

1446, 1451 (11th Cir. 1997). In this case, the court

need not determine which standard of review applies,

because--as the court explains below--even if the court

were to review the plan administrator’s determinations de

novo, it would find that they are correct as to all

aspects of this case.

The plan administrator is the AHA,8

 and the court

finds that the AHA’s executive director, Ronald D.

Case 3:01-cv-00447-MHT-VPM Document 48 Filed 08/15/07 Page 12 of 21
9. See, e.g., id. at ii (executive director’s

signature adopting the plan).

10. Affidavit of Ronald D. Howard, J.A.2d Ex. B (doc.

no. 48), ¶¶ 7-8 (paragraph numbers omitted).

13

Howard, has authority to act on the AHA’s behalf.9

According to Howard,

“The AHA Plan was adopted to cover not

only full-time employees, but also part

time employees who held permanent, as

opposed to temporary or seasonal jobs.

In 1998, when the AHA Plan was adopted,

I, as Executive Director of the American

Hospitality Association, the Plan

Administrator, determined that persons

holding permanent part time jobs would

be eligible to participate in the AHA

Plan.

“When Glen Britton submitted his

application for coverage under the Plan,

I, as the Executive Director of the

American Hospitality Association, the

Plan Administrator, determined him to be

eligible to participate in the Plan.”10

The court credits this affidavit testimony and finds that

Britton’s eligibility was properly determined by the plan

administrator. The court finds, first, that the plan

administrator determined that all permanent part-time

employees were eligible. The court also finds that the

Case 3:01-cv-00447-MHT-VPM Document 48 Filed 08/15/07 Page 13 of 21
11. Affidavit of Buck King, J.A.2d Ex. D (doc. no.

48).

14

plan administrator determined that Britton was eligible.

Thus, Britton meets the eligibility criteria and was

covered under the plan.

The plaintiffs contest this evidence, pointing to the

affidavit testimony of Buck King, the insurance agent who

introduced them to the AHA health plan.11 King rightly

notes that the application form Britton used to enroll in

the health plan indicates that Britton was self-employed,

not a permanent part-time employee of Master’s Touch.

King also states that the AHA was not provided with any

information indicating that Britton was a permanent parttime employee of Master’s Touch, which means that Howard

could not have made the determination that he was

eligible as such an employee. The defendants respond

that King’s testimony should be disregarded because King

has no personal knowledge of what the AHA knew regarding

Britton’s employment status.

Case 3:01-cv-00447-MHT-VPM Document 48 Filed 08/15/07 Page 14 of 21
15

The court need not determine whether the AHA actually

knew the details of Britton’s employment status. Even if

the AHA did not know that Britton was a permanent parttime employee, and even if the plan requires the plan

administrator to make an individualized determination

that an applicant is eligible for the plan, the plan

administrator’s alleged lack of knowledge regarding

Britton’s employment status had no effect on Britton’s

eligibility under the plan. Given that the plan

administrator had already determined that all permanent

part-time employees are eligible, providing the plan

administrator with more information regarding Britton’s

employment status could not have changed the plan

administrator’s determination regarding his eligibility

under the plan. The plan administrator would have found

that Britton, as a permanent part-time employee, was

eligible. In sum, because Britton was a part-time

permanent employee of Master’s Touch, he was a covered

employee under the plan.

Case 3:01-cv-00447-MHT-VPM Document 48 Filed 08/15/07 Page 15 of 21
12. AHA Benefit Plan & Summary Plan Description,

supra, at 55-56.

13. Id. at 56.

16

C. Employer

The plaintiffs also challenge Britton’s eligibility

under the plan pursuant to a peculiar provision in the

plan document and description’s glossary of definitions.

According to the plan documentation and description, an

“employee” is “[a] person directly involved in the

regular business of and compensated for services by the

employer.”12 Then, in a separate entry in the list of

definitions, “The employer is American Hospitality

Association.”13 Because Britton is an employee of

Master’s Touch and is clearly not an “employee” of the

AHA, the plaintiffs argue, Britton is not a covered

employee under the plan and ERISA therefore does not

govern their claims.

The court must reject the plaintiffs’ argument.

Admittedly, the plan documentation’s glossary defines

employee as a person compensated by the employer and then

Case 3:01-cv-00447-MHT-VPM Document 48 Filed 08/15/07 Page 16 of 21
14. Howard Aff., supra, ¶ 11.

17

defines employer as the AHA. However, the evidence is

overwhelming that the plan is intended to cover employees

of AHA member organizations, not just the AHA’s direct

employees.

The court again refers to the plain administrator’s

interpretation of the plan. Howard’s affidavit testimony

provides as follows:

“At the time the Plan was adopted in

1998, I, as Executive Director of the

American Hospitality Association, the

Plan Administrator, interpreted the Plan

to allow for the participation of

persons whose employers were members of

the American Hospitality Association.

Coverage was extended to individuals,

none of which were employed by the

American Hospitality Association, but

instead were employed by the employers

who became members of the American

Hospitality Association.”14

Howard’s affidavit testimony, which the court credits,

reveals not only that it was the plan administrator’s

interpretation of the plan to cover employees of AHA

member organizations, but also that it was the

Case 3:01-cv-00447-MHT-VPM Document 48 Filed 08/15/07 Page 17 of 21
15. AHA Group Health Plan Company Participation

Agreement, J.A. Ex. A-2 (doc. no. 15) at 3. 

16. Id.

18

longstanding practice and course of dealing under the

plan to extend coverage to such persons.

Interpreting the AHA plan to limit eligibility to AHA

employees makes even less sense in light of the other

paperwork and documentation used by the AHA plan. When

the plaintiffs enrolled in the AHA health plan, Britton

(on behalf of Master’s Touch) completed a form entitled

“AHA Group Health Plan Company Participation Agreement,”

which contains what appears to be the AHA logo at the top

of the page.15 At the bottom of the page is the so-called

‘fine print,’ which provides, among other things: “The

Employer understands, acknowledges and certifies that the

American Hospitality Association is the Policyholder of

the group insurance policy which will insure Employer’s

eligible Employees and their eligible Dependents, if

approved.”16 That statement would be virtually

Case 3:01-cv-00447-MHT-VPM Document 48 Filed 08/15/07 Page 18 of 21
17. Enrollment Applications, J.A. Ex. A-2 (doc. no.

15) at 4-8.

19

nonsensical if only AHA employees were eligible for

coverage under the AHA health plan.

Britton and the other plaintiffs also completed

individual enrollment applications for the AHA plan.

Among the information requested of each applicant was his

or her “employer.”17 Again, if the AHA health plan were

available only to AHA employees and not to the employees

of AHA member organizations, there would be no point in

providing a blank space on the enrollment application

form asking for the name of the applicant’s employer.

In addition, as the defendants note, the statutory

language of ERISA itself includes a definition of

“employer” that is similarly non-intuitive in the sense

that it does not match up with the traditional

understanding of that word: “The term ‘employer’ means

any person acting directly as an employer, or indirectly

in the interest of an employer, in relation to an

employee benefit plan; and includes a group or

Case 3:01-cv-00447-MHT-VPM Document 48 Filed 08/15/07 Page 19 of 21
20

association of employers acting for an employer in such

capacity.” 29 U.S.C. § 1002(5) (emphasis added). Under

this statutory definition of employer, the AHA is

Britton’s employer because it is an association of

employers of which Master’s Touch is a member.

Admittedly, this statutory definition of employer does

not completely resolve the issue regarding the AHA plan’s

definitions because Britton is not, under the AHA plan’s

definition of “employee,” an employee of the AHA.

However, ERISA’s statutory definitions places the AHA

plan’s definitions in context so as to add credence to

the plan administrator’s interpretation and course of

dealing under the plan.

Based on the evidence, the court finds that employees

of AHA member organizations were eligible for coverage

under the AHA plan notwithstanding the glossary entry in

the plan description that defines “employer” as “American

Hospitality Association.”

* * *

Case 3:01-cv-00447-MHT-VPM Document 48 Filed 08/15/07 Page 20 of 21
In sum, the court finds that at least one employee,

Glenn Britton, was covered by the AHA health plan.

Therefore, the plaintiffs’ state-law claims are preempted

by ERISA, removal to federal court was proper, and due to

the plaintiffs’ failure to restate their claims under

ERISA their lawsuits must be dismissed.

An appropriate judgment will be entered.

DONE, this the 15th day of August, 2007.

 /s/ Myron H. Thompson 

UNITED STATES DISTRICT JUDGE

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