Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca4-07-01502/USCOURTS-ca4-07-01502-0/pdf.json

Parties Involved:
Great-West Life & Annuity Insurance Company
Appellee
Information Systems & Networks Corporation
Appellant

Document Text:

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

GREAT-WEST LIFE & ANNUITY 

INSURANCE COMPANY,

Plaintiff-Appellee,

v.  No. 07-1502

INFORMATION SYSTEMS & NETWORKS

CORPORATION,

Defendant-Appellant. 

Appeal from the United States District Court

for the District of Maryland, at Greenbelt.

Alexander Williams, Jr., District Judge.

(8:03-cv-00951-AW)

Argued: March 18, 2008

Decided: April 11, 2008

Before Sandra Day O’CONNOR, Associate Justice (Retired),

Supreme Court of the United States, sitting by designation,

WILLIAMS, Chief Judge, and HAMILTON, Senior Circuit Judge.

Affirmed by published opinion. Senior Judge Hamilton wrote the

opinion, in which Associate Justice O’Connor and Chief Judge Williams joined. 

COUNSEL

ARGUED: Norman Henry Singer, SINGER & ASSOCIATES, P.C.,

Bethesda, Maryland, for Appellant. Thomas G. Collins,

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BUCHANAN, INGERSOLL & ROONEY, P.C., Harrisburg, Pennsylvania, for Appellee. ON BRIEF: Stephen Moniak, BUCHANAN,

INGERSOLL & ROONEY, P.C., Harrisburg, Pennsylvania, for

Appellee. 

OPINION

HAMILTON, Senior Circuit Judge: 

This appeal presents yet another set of facts upon which we must

determine whether the Employee Retirement Income Security Act of

1974 (ERISA), 88 Stat. 829, as amended, 29 U.S.C. § 1001 et seq.,

preempts certain state law claims. More specifically, the sole issue we

decide in this appeal is whether ERISA preempts a state law breach

of contract claim and an alternatively pled state law unjust enrichment

claim brought by a third-party company hired to perform only nondiscretionary administrative services, under the self-funded portion of

an employee health care benefit plan covered by ERISA, against the

sponsor of such plan for reimbursement of $93,999.73 in nondiscretionary payments the third-party company fronted to satisfy selffunded benefit claims, when: (1) the plan administrator, with full discretion to determine whether a claim for self-funded benefits should

be paid or denied (and who also served as the sponsor’s chief financial officer) expressly acknowledged the debt and recommended to

the sponsor’s chief executive officer that it should be paid; and (2)

resolution of either claim requires no interpretation of the plan terms

nor is it in any way dependant upon the plan being governed by

ERISA. After careful consideration, we hold that ERISA preempts

neither state law claim at issue in this appeal. Accordingly, we affirm

the district court’s entry of judgment in favor of the third-party company following the grant of the third-party company’s motion for

summary judgment. 

I.

Effective September 1, 2000, the defendant in this case, Information Systems and Networks Corp. (ISN), established a health care

benefit plan for the purpose of providing certain health care benefits

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to its covered employees and their dependents (the Plan). The parties

agree that the Plan is governed by ERISA. 

ISN is the "plan sponsor," as that term is defined by ERISA. 29

U.S.C. § 1002(16)(B) ("The term ‘plan sponsor’ means (i) the

employer in the case of an employee benefit plan established or maintained by a single employer . . . ."). ISN operated the Plan pursuant

to the written terms of a summary plan description. The Plan designated ISN’s Chief Financial Officer, Charles Bonuccelli (CFO

Bonuccelli) as the Plan’s "administrator" as that term is defined by

ERISA. 29 U.S.C. § 1002(16)(A) ("The term ‘administrator’ means—

(i) the person specifically so designated by the terms of the instrument

under which the plan is operated . . . ."). 

ISN purchased insurance from the plaintiff in this case, Great-West

Life and Annuity Insurance Company (Great-West), to cover some

benefits under the Plan, for example, accidental death benefits. ISN

also contracted separately with Great-West to provide stop-loss coverage for the amount any claims by an employee or dependent exceeded

$30,000.00 per month in the aggregate. 

Relevant to the preemption issue we decide in the present appeal,

in a separate and distinct contractual agreement between ISN and

Great-West (the Services Agreement), ISN also hired Great-West to

perform certain non-discretionary administrative services under the

Plan. Great-West’s state law claims against ISN in this case both arise

from Great-West’s performance of only one of these nondiscretionary

administrative services, namely, Great-West’s non-discretionary duty

to front the payment of claims made by ISN employees and their

dependents for self-funded benefits under the Plan. ISN, in turn,

agreed to reimburse Great-West for any such payments. 

Notably, the Plan stated the following with respect to the roles of

the plan administrator (the Plan Administrator) and Great-West with

respect to the self-funded portion of the Plan: 

Self-Funded Benefits

Medical, Prescription Drug, Dental and Vision Benefits

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The Plan Administrator has complete authority to control

and manage the Plan. The Plan Administrator has full discretion to determine eligibility, to interpret the Plan and to

determine whether a claim should be paid or denied, according to the provisions of the Plan as set forth in this booklet.

The Employer is fully responsible for the self-funded benefits. Great-West processes claims and provides other services to the Employer related to the self-funded benefits.

Great-West does not insure or guarantee the self-funded

benefits.

(J.A. 84). 

Article 4 of the Services Agreement confirms that, at all times, ISN

retained the authority to control and manage the Plan:

[ISN] acknowledges that [it] has authority to control and

manage the operation of the Plan. It is expressly agreed that

under no circumstances will Great-West be designated as

plan administrator or a fiduciary of the Plan. Nothing herein

will be deemed to constitute Great-West a party to the Plan

or to confer upon Great-West any authority or control

respecting management of the Plan, authority or responsibility in connection with administration of the Plan or responsibility for the terms or validity of the Plan. 

(J.A. 36). 

By letter dated December 28, 2000, ISN notified Great-West of its

intention to terminate their contractual relationship effective February

1, 2001. Thereafter, Great-West, pursuant to the Services Agreement,

demanded that ISN reimburse it $93,999.73, representing the balance

amount of benefit claims Great-West paid out on behalf of ISN under

the self-funded portion of the Plan. In the spring of 2002, GreatWest’s collection representative spoke with CFO Bonuccelli about the

outstanding balance. Over the course of an eight-month period, GreatWest issued a series of letters, some with supporting documentation

and some without, to ISN seeking payment of the outstanding balance. 

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After reviewing the documentation provided by Great-West as to

the self-funded benefit payments at issue, CFO Bonuccelli acknowledged the validity of Great-West’s demand for reimbursement of the

$93,999.73 and recommended to ISN’s President and Chief Executive

Officer Roma Malkani (CEO Malkani), on at least two occasions, that

ISN satisfy Great-West’s demand. But each time, without explanation, CEO Malkani refused to reimburse Great-West, and continues

steadfastly to do so. Notably, ISN does not dispute that, pursuant to

Great-West’s obligations under the Services Agreement, Great-West

fronted $93,999.73 on behalf of ISN to satisfy claims for self-funded

benefits under the Plan. 

With no hope of ISN voluntarily reimbursing it the $93,999.73, on

April 2, 2003, Great-West filed the present civil action against ISN

in federal court in Maryland, based upon diversity jurisdiction. The

complaint alleged two alternative common law causes of action under

Maryland law—breach of contract and unjust enrichment. As should

be obvious by now, the crux of both causes of action is that ISN owes

Great-West $93,999.73 for breach of the Services Agreement. To be

clear, Great-West’s claims against ISN arose exclusively under the

Services Agreement. 

ISN moved to dismiss Great-West’s complaint under Federal Rule

of Civil Procedure 12(b)(6), on the grounds that Great-West’s state

law breach of contract and unjust enrichment claims were preempted

by ERISA, 29 U.S.C. § 1144(a), and that Great-West lacked standing

to assert any claims under ERISA’s civil enforcement provision, id.

at § 1132. The district court denied the motion, but noted that ISN

would have the opportunity to reassert its ERISA preemption argument in a future motion for summary judgment. ISN then filed its

answer to Great-West’s complaint, asserting, inter alia, ERISA preemption as an affirmative defense to both claims. 

Following discovery, the parties filed cross-motions for summary

judgment, with ISN’s motion asserting ERISA preemption as its sole

basis. In fact, in its "OPPOSITION TO PLAINTIFF GREAT-WEST

LIFE & ANNUITY INSURANCE COMPANY’S MOTION FOR

SUMMARY JUDGMENT AND CROSS-MOTION FOR SUMMARY JUDGMENT," filed with the district court, ISN expressly "recognize[d] that the payments made by Plaintiff pursuant to the Health

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Plan, if not for ERISA, would be reimbursable if ERISA had not been

implicated." 

The district court rejected ISN’s ERISA preemption argument,

denied its motion for summary judgment, and granted summary judgment for $93,999.73 in favor of Great-West with respect to GreatWest’s breach of contract claim.* This timely appeal by ISN followed. 

II.

As its sole challenge to the judgment below, ISN argues that the

district court erred in concluding that ERISA does not preempt either

of Great-West’s state law claims. As ISN seeks to use ERISA preemption as an affirmative defense to Great-West’s state law claims,

ISN bears the burden of proving the defense’s applicability. See Bank

of Louisiana v. Aetna U.S. Healthcare, Inc., 468 F.3d 237, 242 (5th

Cir. 2006) (when defendant uses ERISA preemption as an affirmative

defense to plaintiff’s state law claims, defendant bears burden of

proof that defense applies), cert. denied, 127 S. Ct. 1826 (2007). Cf.

Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63 (1987) ("Federal preemption is ordinarily a federal defense to the plaintiff’s suit."). ISN

presents no specific argument in challenge to the district court’s ruling on the merit’s of Great-West’s breach of contract claim. Accordingly, the sole issue presented in this appeal is whether ISN has

carried its burden of showing that ERISA preempts Great-West’s

state law breach of contract claim as well as its alternative and virtually identical state law claim for unjust enrichment. 

Our review of this issue on appeal from the grant of summary judgment is de novo, construing the evidence in the light most favorable

to ISN, the nonmoving party. See Holland v. Washington Homes, Inc.,

487 F.3d 208, 213 (4th Cir. 2007). We begin our analysis by setting

forth the text of ERISA’s preemption clause: "[T]he provisions of

[ERISA] shall supersede any and all State laws insofar as they may

now or hereafter relate to any employee benefit plan." 29 U.S.C.

*Given its ruling with respect to the merits of Great-West’s breach of

contract claim, the district court expressly did not address the merits of

Great-West’s alternatively pled unjust enrichment claim. 

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§ 1144(a). "A law ‘relates to’ an employee benefit plan, in the normal

sense of the phrase, if it has a connection with or reference to such

a plan." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97 (1983). 

Although the phrase "relates to" has an expansive connotation,

ERISA’s preemptive scope is not unlimited, for "[i]f ‘relate to’ were

taken to extend to the furthest stretch of its indeterminacy, then for

all practical purposes pre-emption would never run its course, for

really, universally, relations stop nowhere." N.Y. State Conference of

Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645,

655 (1995) (internal quotation marks omitted). Thus, as the Supreme

Court has instructed, courts must go "beyond the unhelpful text . . .

and look instead to the objectives of the ERISA statute as a guide to

the scope of the state law that Congress understood would survive."

Id. at 656.

"Considering ERISA’s objectives set forth in 29 U.S.C.A.

§ 1001(b), the Supreme Court has explained that Congress intended

ERISA to preempt at least three categories of state law: (1) laws that

‘mandate[ ] employee benefit structures or their administration’; (2)

laws that bind employers or plan administrators to particular choices

or preclude uniform administrative practice; and (3) ‘laws providing

alternate enforcement mechanisms’ for employees to obtain ERISA

plan benefits." Wilmington Shipping Co. v. New England Life Ins.

Co., 496 F.3d 326, 342 (4th Cir. 2007) (quoting Travelers, 514 U.S.

at 658) (alteration in original). "A key feature of these categories of

laws is that they implicate the relations among the traditional ERISA

plan entities." Id. (internal quotation marks omitted). "Some state

actions may affect employee benefit plans in too tenuous, remote, or

peripheral a manner to warrant a finding that the law ‘relates to’ the

plan." Shaw, 463 U.S. at 100 n.21. Indeed, the Supreme Court has

explained that ERISA does not preempt "lawsuits against ERISA

plans for run-of-the-mill state-law claims such as unpaid rent, failure

to pay creditors, or even torts committed by an ERISA plan" even

though such claims "obviously affect[ ] and involv[e] ERISA plans

and their trustees." Mackey v. Lanier Collection Agency & Svc., Inc.,

486 U.S. 825, 833 (1988). 

With these guiding principles in mind, we now turn to consider

whether ERISA preempts Great-West’s state law claims for breach of

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contract and unjust enrichment. Both claims rest upon the same basic

theory of liability; specifically, that ISN is liable to reimburse GreatWest for non-discretionary payments totaling $93,999.73 that GreatWest fronted on self-funded claims under the Plan. 

The following two sentences set forth the crux of ISN’s position on

appeal. First, Great-West’s claims implicate the uniform administrative practice under the Plan because any determination of Great

West’s state law claims, and the defenses thereto, would determine

whether any claims should be paid under the Plan. Second, ISN further argues that any potential claim brought by a participant or beneficiary of the Plan regarding benefits paid or unpaid during the life of

the Plan will be impacted by a ruling under state law in this case as

to the proper administration of claims under the Plan. 

Neither argument bears fruit for ISN. Instead, we agree with GreatWest and the district court that Great-West’s claims are run-of-themill state law claims alleging failure to pay a creditor, i.e., GreatWest under the Services Agreement, and thus, are not preempted. The

plain and unambiguous terms of the Plan and the Services Agreement

make clear that Great-West lacked any discretion in determining

whether to pay claims submitted by Plan participants and their beneficiaries for benefits under the self-funded portion of the Plan. Rather,

the Plan and the Services Agreement reserved all discretion to deny

claims for benefits under the self-funded portion of the Plan to the

Plan Administrator, who the parties agree was CFO Bonuccelli.

Accordingly, proof that Great-West is deserving of reimbursement

under the Services Agreement for the nondiscretionary payment of

benefit claims under the self-funded portion of the Plan does not

implicate the uniform administration of the Plan as ISN maintains.

The final analysis establishes that Great-West has come forward

with undisputed evidence that it paid, on behalf of ISN, $93,999.73

in claims for benefits under the self-funded portion of the Plan, for

which amount ISN agreed under the Services Agreement to reimburse

Great-West. Of significant evidentiary weight is the deposition testimony of CFO/Plan Administrator Charles Bonuccelli, who had full

discretion to determine whether a claim under the self-funded portion

of the Plan should be paid or denied, acknowledging that ISN owes

Great-West the claimed $93,999.73. Because ISN’s payments were

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nondiscretionary, and were approved by Bonuccelli, we can reduce

this situation to a simple form where the details of the ERISA plan

are immaterial: ISN owes a debt to Great-West for a series of loans

that Great-West made to ISN. Accordingly, Great-West’s alternative

claims under Maryland common law: (1) do not mandate employee

benefit structures or their administration; (2) do not bind ISN as an

employer or plan administrator to particular choices or preclude uniform administrative practice; and (3) do not provide an alternate

enforcement mechanism for ISN’s employees and their dependants to

obtain ERISA plan benefits. Thus, neither claim implicates the three

categories of state law that the Supreme Court has long recognized

Congress intended to preempt by enacting ERISA. 

Furthermore, analysis of Great-West’s claims do not require interpretation of the Plan terms nor depend upon the existence of an

ERISA plan. Thus, Great-West’s claims do not fall within the recognized rule that "[w]hen a cause of action under state law is ‘premised

on’ the existence of an employee benefit plan so that ‘in order to prevail, a plaintiff must plead, and the court must find, that an ERISA

plan exists,’ ERISA preemption will apply." Griggs v. E.I. DuPont de

Nemours & Co., 237 F.3d 371, 378 (4th Cir. 2001) (quoting IngersollRand Co. v. McClendon, 498 U.S. 133, 140 (1990)) (citation omitted).

See also Tri-State Machine, Inc. v. Nationwide Life Ins. Co., 33 F.3d

309, 313-14 (4th Cir. 1994) (employer/sponsor’s state-law claims

against its ERISA plan’s third-party administrator for improper claims

processing preempted because they related to an ERISA plan). 

Finally, we take a moment to distinguish an unpublished opinion

of this court, Information Systems & Networks Corp. v. Principal Life

Ins. Co., 2004 WL 1244290 (4th Cir. June 8, 2004), upon which ISN

heavily relies in support of its appeal. Before we begin, however, we

note that, as an unpublished opinion, Principal Life is not binding precedent in our circuit. Hogan v. Carter, 85 F.3d 1113, 1118 (4th Cir.

1996) (en banc). That being said, in Principal Life, ISN brought suit

against a third-party administrator of its employer sponsored ERISA

plan alleging state law claims of breach of contract and professional

negligence. Principal Life, 2004 WL 1244290 at *1. The gravamen

of ISN’s complaint in Principal Life was that certain distributions

made by the third-party administrator were erroneous because the

beneficiaries were not entitled to those distributions under the terms

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of the ERISA plan. Id. The third-party administrator moved to dismiss

under Rule 12(b)(6) on the ground that ERISA preempted ISN’s

claims. The district court granted the motion, "holding that because

ISN’s claims essentially asserted ‘improper administration of the

plan,’ they were pre-empted under ERISA." Id. We affirmed on the

same basis. Id. As noted previously, Great-West’s claims here are not

based upon claims processing errors, but upon its right to reimbursement under the Services Agreement for its nondiscretionary payment

of claims under the self-funded portion of the Plan, which claims the

Plan Administrator, who has full discretion to determine whether a

claim should be paid or denied, has already determined were properly

paid. As such, Principal Life, is materially inapposite to the case at

hand. 

To summarize, we hold that ERISA does not preempt a state law

breach of contract claim, nor an alternatively pled state law unjust

enrichment claim, brought by the third-party company hired to perform only nondiscretionary administrative services, under the selffunded portion of an employee health care benefit plan covered by

ERISA, against the sponsor of such plan for reimbursement of

$93,999.73 in nondiscretionary payments the third-party company

fronted to satisfy self-funded benefit claims, when: (1) the plan

administrator, with full discretion to determine whether a claim for

self-funded benefits should be paid or denied (and who also served as

the sponsor’s chief financial officer) expressly acknowledged the debt

and recommended to the sponsor’s chief executive officer that it

should be paid; and (2) resolution of either claim requires no interpretation of the plan terms nor is it in any way dependant upon the plan

being governed by ERISA. Accordingly, we affirm the judgment

below. 

AFFIRMED

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