FILED 

 U.S. COURT OF APPEALS

 ELEVENTH CIRCUIT 

 March 16, 2005 

 THOMAS K. KAHN 

 CLERK

 Honorable William H. Stafford, Jr., United States District Judge for the Northern *

District of Florida, sitting by designation.

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

________________________

No. 02-12409

________________________

D. C. Docket No. 98-02607-CV-JTC-1

JAMES P. COTTON, JR., 

GERALD EICKHOFF, 

Plaintiffs-Appellees

Cross-Appellants, 

versus 

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, 

a Massachusetts Corporation, 

Defendant-Appellant 

Cross-Appellee. 

________________________

Appeals from the United States District Court

for the Northern District of Georgia

_________________________

(March 16, 2005)

Before TJOFLAT and ANDERSON, Circuit Judges, and STAFFORD , District *

Judge.
 Because we reverse on this ground, we do not address Mass Mutual’s additional 1

arguments.

2

TJOFLAT, Circuit Judge:

Defendant Massachusetts Mutual Life Insurance Co. appeals the judgment

of the district court in favor of the plaintiffs, James Cotton and Gerald Eickhoff,

on their claim for breach of fiduciary duty under the Employee Retirement Income

Security Act (ERISA), 29 U.S.C. §§ 1001 et seq. The district court entered

judgment for the plaintiffs after striking Mass Mutual’s answer and entering a

default as a sanction for discovery violations. On appeal, Mass Mutual makes

three arguments: first, that the entry of a default was an abuse of discretion;

second, that the well-pleaded factual allegations in the amended complaint fail to

establish liability under ERISA; and, third, that the district court impermissibly

awarded individualized, extra-contractual damages that are not available under

ERISA. We agree with Mass Mutual that the amended complaint fails to establish

liability under ERISA. Accordingly, we reverse and remand with instructions that

the plaintiffs’ ERISA claims be dismissed with prejudice. As we explain in Part

II, infra, the plaintiffs are unable to establish liability under ERISA because Mass

Mutual simply is not a fiduciary for any purpose related to the misconduct they

allege. Indeed, as we explain in Part III, infra, our review leads us to conclude

1
 Mass Mutual maintains that Hilliard, Martin, and the other former co-defendants in this 2

case were not its legal agents, but rather were simply independent agents authorized to sell Mass

Mutual products. We assume that they were in fact Mass Mutual agents. 

3

that this was never really an ERISA case at all, that it never should have been

litigated in federal court, and that the plaintiffs’ motion to remand should have

been granted at the outset. In Part IV, infra, we briefly address the other

discovery-related sanctions that the district court imposed in its order entering a

default.

I.

After entering a default, the district court adopted as true the well-pleaded

factual allegations contained in the amended complaint. Our statement of the case

is, in turn, drawn primarily from the district court’s summary of these allegations. 

Cotton and Eickhoff were executive officers of BEI Holdings, Inc. (now

known as AMERSCO, Inc.). In 1982, Cotton and Eickhoff entered into a

“Wealth-Op Deferred Compensation Agreement” with BEI. Under the agreement,

BEI agreed to pay Cotton and Eickhoff, or their beneficiaries, $250,000 annually

for fifteen years beginning at age 65 or upon their death. 

In December 1986, Mass Mutual agents Ronald Hilliard and Gary Martin2

proposed arrangements between Cotton and BEI and between Eickhoff and BEI

whereby BEI and the employee would split premiums and death benefit proceeds
4

on a permanent whole life insurance policy issued on the employee. Under the

proposal, BEI would pay all premiums on each policy. A portion of the premiums

would be taxable as compensation to Cotton and Eickhoff, while the remainder

would be treated as loans from BEI to Cotton and Eickhoff. According to the

proposal, the cash value of each whole life policy would continue to grow until it

would cover the annual premium payments—that is, until the premiums would

“vanish.” This was projected to occur after only seven years in Eickhoff’s case

and only ten years in Cotton’s case. Cotton and Eickhoff are required to repay the

portion of the premiums treated as loans at a certain time from the cash value of

the policies. This was referred to as the “rollout.” At the rollout, the cash values

of the policies will be reduced by the amount of premiums repaid to the employer. 

Based on this proposal, Cotton, Eickhoff, and BEI agreed to establish what the

amended complaint and the district court refer to as the “Split-Dollar Employee

Welfare Benefit Plan Sponsored by AMRESCO, Inc.”

As part of the plan, Mass Mutual issued two whole life insurance policies to

Cotton in early 1987. Each had a face amount of $5,715,500 and a stated annual

premium of $119,697. Eickhoff was also issued two policies, one of which was

later divided into two, leaving him with three policies, one with a face amount of

$5,327,500 and a stated annual premium of $76,426, one with a face amount of
5

$3,350,729 and a stated annual premium of $48,079, and one with a face amount

of $1,976,771 and a stated annual premium of $28,376. BEI and its successor,

AMRESCO, paid the premiums on the policies.

In 1990, the plan’s primary objective was changed to use the insurance

policies as the primary source of retirement income for the plaintiffs and to

provide greater cash and payout values by committing BEI to continue to pay

premiums for additional periods of time—seventeen years, beginning in 1990, in

Cotton’s case, and eighteen years, also beginning in 1990, in Eickhoff’s case. In

return, Cotton and Eickhoff relieved BEI of its obligations under the “Wealth-Op

Deferred Compensation Agreement.” The plaintiffs claim that in making these

amendments they relied substantially on the policy projections Mass Mutual and

its agents provided, as well as the agents’ similar oral representations. These

analyses projected significant death benefits and cash surrender values and annual

retirement income of $250,000.

In 1992, Cotton and Eickhoff took out substantial loans against their

policies. Cotton borrowed $910,000, and Eickhoff borrowed $571,000—the

maximum amounts the two were permitted to borrow against their policies. They

allege that they did so in reliance upon representations made by Mass Mutual and

its agents that the policies were sufficiently strong and had sufficient value to
 Mass Mutual also denies that Alexander & Alexander was its agent; again, though, we 3

assume that it was.

6

support the loans while still generating retirement income after the rollout. Cotton

and Eickhoff also changed the policies’ dividend option at this time so that

dividends would be used to pay interest and principal on the loans rather than to

purchase additional insurance, as had been the case previously.

In February 1996, Alexander & Alexander Benefit Services, another Mass

Mutual agent, notified Cotton and Eickhoff that the policy illustrations provided 3

in December 1995 overstated their policies’ cash surrender values and death

benefits because they did not take into account the rollout—i.e., the repayments

due AMRESCO in 2006 in Cotton’s case and in 2007 in Eickhoff’s case. The

plaintiffs allege that illustrations provided to them in 1986, 1990, 1992, 1993, and

1994 included the same error. Whereas analyses provided in 1994 and 1995

projected death benefits of several million dollars and annual retirement income of

at least $200,000, new analyses predict that Cotton would receive only nominal

retirement income and death benefits of less than $600,000, and that Eickhoff

would receive virtually no retirement income and death benefits of no more than

$1,000,000. Moreover, the new analyses project that Cotton and Eickhoff will

have to pay post-rollout premiums in order to keep the policies in force. In other
 This scenario, unfortunately, is not uncommon. Vanishing premium plans are a product

4

of the soaring interest rates of the late 1970s and early 1980s. During this time, “the economics

of traditional whole life insurance policies turned unattractive” because the policies generally

“earned a rate of return based on the average interest rate of the predominately fixed-rate

securities in the company’s investment portfolio, which generally had interest rates that were

much lower than the rates then available to consumers.” Daniel R. Fischel & Robert S. Stillman,

The Law and Economics of Vanishing Premium Life Insurance, 22 Del. J. Corp. L. 1, 5 (1997). 

The industry responded to this phenomenon by offering consumers several new types of interestsensitive policies. These new policies differed from traditional whole life insurance in that their

returns were based on current interest rates rather than the interest and dividend income produced

by the insurance company’s historical investments. Id. at 5-6. The vanishing premium plan was

one common payment option for these new types of policies; Professors Daniel R. Fischel and

Robert S. Stillman describe the economics of its rise and fall as follows:

In a vanishing premium plan, the policyholder pays higher-than-normal premiums

in the early years of the policy. By making higher payments in early years, a

higher fraction of premium dollars is distributed into the policy’s savings account

(i.e., accumulation fund), allowing the cash value of the policy to accumulate

faster. The goal of a vanishing premium plan is to set premiums at a level where,

after a certain number of years, enough cash value has accumulated within the

policy so that future administrative and insurance costs can be paid out of the

accumulation fund, with no further out-of-pocket payments by the policyholder. 

In the mid-1980s, when the new policies were marketed most aggressively, the

assumption of most vanishing premium “illustrations” was that no further

out-of-pocket premiums would be required after five or ten years.

Vanishing premium plans have not worked out as initially contemplated. 

For many, vanishing premiums have not vanished. The primary cause of this

problem has been low interest rates. . . . Although rates rose to as high as twelve

percent in the mid-1980s, the early 1990s reflected a low of three percent. These

declining rates upset the economics of vanishing premium plans. With the

economy-wide decline in interest rates, interest-credit rates have also dropped and

cash value has not grown as assumed in the initial illustrations. In many cases,

cash value in vanishing premium plans has become insufficient to pay expected

future insurance and administrative costs. As a result, many consumers who

bought insurance on a vanishing-premium basis will soon be forced to make

additional out-of-pocket premium payments or else have their insurance

terminated or death benefits reduced.

Id. at 7-8 (footnotes omitted).

7

words, premiums have not “vanished.” In addition, the plaintiffs allege that Mass

4

Mutual (a) concealed the existence of “modal penalties” that resulted from their
8

employer paying premiums on a monthly rather than annual basis; (b) used

methods of allocating premium payments between income to the plaintiffs and

loans from their employer that were less favorable to the plaintiffs than those used

in policy projections; (c) understated the policies’ sensitivity to changes in interest

and dividend rates; and (d) generally obscured actual policy performance by

consistently presenting reports in different and misleading formats.

In August 1998, Cotton and Eickhoff filed suit in the Superior Court of

Dekalb County, Georgia. The state-court complaint asserted state-law claims of

innocent misrepresentation, negligent misrepresentation, fraud, and promissory

estoppel and sought equitable relief requiring the defendants to ensure that their

policies performed as described in policy analyses. All defendants—i.e., Mass

Mutual, Martin, Hilliard, Alexander & Alexander, and several other alleged Mass

Mutual agents—joined in removing the case to federal court on the theory that the

plaintiffs’ claims were completely preempted by ERISA. The plaintiffs moved to

remand the case to state court, arguing that the claims were not completely

preempted because the policies and agreements did not constitute an ERISA plan

and because the complaint did not seek relief available under ERISA. 

On May 1999, the district court denied the plaintiffs’ motion to remand. It

first held that an ERISA plan existed under the test established in Donovan v.
 These ERISA sections are at 29 U.S.C. §§ 1132(a)(1)(b), (a)(2), and (a)(3). 5

9

Dillingham, 688 F.2d 1367, 1371 (11th Cir. 1982) (en banc). Relying primarily on

our decision in Engelhardt v. Paul Revere Life Ins. Co., 139 F.3d 1346 (11th Cir.

1998), it also held that the complaint sought relief available under ERISA. As

such, it determined that the plaintiffs’ state-law claims were completely preempted

so that removal based on federal question jurisdiction was permissible. 

In a subsequent order, the court granted the plaintiffs’ motion to file an

amended complaint asserting claims under ERISA. The plaintiffs’ amended

complaint asserted four ERISA claims: a § 502(a)(1)(B) claim to enforce the terms

of the plan, a § 502(a)(2) claim for breach of fiduciary duty, a § 502(a)(3) claim

for appropriate equitable relief, and a claim under the ERISA federal common law 5

doctrine of equitable estoppel. The amended complaint also reasserted the statelaw claims that comprised the plaintiffs’ original complaint. The same day the

plaintiffs filed the amended complaint, they also filed a motion to compel Mass

Mutual to produce a number of items that they claimed Mass Mutual had

improperly withheld in response to legitimate discovery requests, namely, the

computer software and data used to produce the various policy analyses presented

to them and, in general, all documents issued or in effect during the preceding

fourteen years or so that in any way related to the sale or promotion of, or policies
 Fed. R. Civ. P. 37(b)(2) provides in relevant part: 

6

If a party . . . fails to obey an order to provide or permit discovery, including an

order made under subdivision (a) of this rule . . . , the court in which the action is

pending may make such orders in regard to the failure as are just, and among

others the following:

. . . . 

(C) An order striking out pleadings or parts thereof, . . . or dismissing the

action or proceeding or any part thereof, or rendering a judgment by default

against the disobedient party;

. . . .

In lieu of any of the foregoing orders or in addition thereto, the court shall

require the party failing to obey the order or the attorney advising that party or

both to pay the reasonable expenses, including attorney’s fees, caused by the

failure, unless the court finds that the failure was substantially justified or that

other circumstances make an award of expenses unjust.

10

or practices regarding, any Mass Mutual split-dollar whole life insurance plan or

policy and also, more particularly, the specific type of plan sold to them. In

response, Mass Mutual argued that this information was not discoverable because

it was relevant only, if at all, to the plaintiffs’ completely preempted—and,

therefore, no longer viable—state-law claims. At a hearing on February 11, 2000,

the court granted the motion to compel.

This order, however, did not put an end to discovery-related disputes, and in

July 2000, the plaintiffs moved for sanctions against Mass Mutual under Fed. R.

Civ. P. 37(b), claiming that Mass Mutual had failed to comply with the compel 6

order. That same day, they also filed a brief in response to Mass Mutual’s motion

for summary judgment in which they appear to have abandoned all of their statelaw claims. In a December 28, 2000 order, the district court concluded that Mass
 In June of 2001, the court denied Mass Mutual’s motion to set aside the default under 7

Fed. R. Civ. P. 55(c).

11

Mutual had “acted in bad faith and abused the discovery process” by “delay[ing]

the production of responsive documents, only to produce them subsequently in a

piecemeal fashion; fail[ing] to produce knowledgeable [Fed R. Civ. P.] 30(b)(6)

representatives; and attempt[ing] to conceal a history of vanishing premium

litigation.” The court further determined that Mass Mutual had “engaged in a

systematic effort to frustrate Plaintiffs legitimate attempts at discovery and . . .

failed to obey” the earlier compel order. The court found that these violations had

prejudiced the plaintiffs because—despite bringing the dispute before the court on

two separate occasions—the plaintiffs had yet to receive the relevant information

to which they were entitled and had incurred the trouble and expense of traveling

outside the state to depose unqualified Rule 30(b)(6) witnesses. Finally, the court

determined that imposing sanctions less significant than a default would not

sufficiently deter future litigants from engaging in similar conduct. As such, it

ordered, among other things, that Mass Mutual’s answer be stricken and a default

entered against it, and that Mass Mutual pay all reasonable costs and attorney’s

fees incurred by the plaintiffs in connection with litigation against Mass Mutual

since the February 11 compel order. 

7
 On cross-appeal, the plaintiffs contest the district court’s determination that the policy 8

projections were neither plan documents nor summary plan descriptions (SPDs). However, the

projections certainly are not plan documents of the type described in ERISA § 402(b), 29 U.S.C.

§ 1102(b), as they do not (1) “provide a procedure for establishing and carrying out a funding

policy,” (2) “describe . . . the operation and administration of the plan,” (3) “provide a procedure

for amending [the] plan” or “for identifying the persons who have authority to amend the plan,”

or (4) “specify the basis on which payments are made to and from the plan.” See, e.g., Cinelli v.

Sec. Pac. Corp., 61 F.3d 1437, 1442 (9th Cir. 1995). Nor are they “other instrument[s] under

which the plan was established or is operated.” ERISA § 104(b)(2), 29 U.S.C. § 1024(b)(2); see,

e.g., Faircloth v. Lundy Packing Co., 91 F.3d 648, 653 (4th Cir. 1996) (“the language ‘other

12

In May 2001, the plaintiffs settled with all defendants other than Mass

Mutual and claims against them were accordingly dismissed.

On October 3, 2001, following a bench trial held to examine the legal

sufficiency of the amended complaint’s well-pleaded factual allegations and to

address the issue of damages, the district court issued an opinion detailing its

findings of fact and conclusions of law. First, the court rejected the plaintiffs’

claim under ERISA § 502(a)(1)(B), which permits a beneficiary “to recover

benefits due to him under the terms of his plan, to enforce his rights under the

terms of the plan, and to clarify his rights to future benefits under the terms of the

plan.” The court determined that the various policy projections presented to the

plaintiffs were neither “plan documents” nor “summary plan descriptions”; rather,

the only such documents at issue were the insurance agreements and insurance

policies. And because these documents were clear and unambiguous, there was no

plan term that needed to be “clarified” or “enforced.” Therefore, the plaintiffs’ § 8
instruments under which the plan is established or operated’ encompasses formal or legal

documents under which a plan is set up or managed”). The policy projections do not govern plan

management, amendment, or administration; rather, they simply project future benefit levels

based on certain economic assumptions. Therefore, they are not plan documents and provide no

basis for a § 502(a)(1)(B) claim unless they can qualify as summary plan descriptions.

In Hicks v. Fleming Cos., 961 F.2d 537 (5th Cir. 1992), the Fifth Circuit held that to

qualify as a summary plan description a document must “contain[] all or substantially all

categories of information required under 29 U.S.C. § 1022(b) and the DOL’s regulations at 29

C.F.R. § 2520.102-3.” Hicks, 961 F.2d at 542; accord Palmisano v. Allina Health Sys., Inc., 190

F.3d 881, 887-88 (8th Cir. 1999); Pisciotta v. Teledyne Indus., Inc., 91 F.3d 1326, 1329-30 (9th

Cir. 1996) (“[I]t is undisputed . . . that neither . . . booklet contained all twelve of the required

statutory elements. Accordingly, the district court correctly concluded . . . that, as a matter of

law, the booklets did not constitute SPDs.”); see also Coleman v. Nationwide Life Ins. Co., 969

F.2d 54, 62 n.3 (4th Cir. 1992) (“ERISA provides a lengthy, detailed list of what must be

included in a summary plan description. 29 U.S.C. § 1022(b). An agreement to provide a

description of ‘the main benefits and requirements’ cannot be reasonably regarded as the

equivalent of the summary plan description, which the statute requires to be far broader in scope

and detail.”). The Third Circuit appears to hold that additional factors may be relevant to this

issue, but it does agree that a document that is missing significant statutorily required information

is unlikely to qualify as an SPD. See Gridley v. Cleveland Pneumatic Co., 924 F.2d 1310, 1316-

17 (3d Cir. 1991). One district court, in contrast, has stated,

We do not believe that Congress intended to exclude from the term

“summary plan description” every document which lacks some of the information

required in section 1022(b). Rather, any document a plan distributes to its

participants which contains all or substantially all of the information the average

participant would deem crucial to a knowledgeable understanding of his benefits

under the plan shall be deemed a summary plan description.

Kochendorfer v. Rockdale Sash and Trim Co., 653 F. Supp. 612, 615 (N.D. Ill. 1987).

We have perhaps suggested that we would adopt the majority view stated in Hicks, but

we have never unequivocally said so. In Alday v. Container Corp. of Am., 906 F.2d 660 (11th

Cir. 1990), we concluded that a benefit summary booklet did “not fulfill the requirements . . . set

out at 29 U.S.C. § 1022” was not an SPD. Alday, 906 F.2d at 665. The plaintiff there argued

that Kochendorfer’s broader SPD definition was the correct one, but “[w]ithout endorsing the

holding in Kochendorfer,” we simply noted that the benefit summary booklet “hardly reache[d]

the level of specificity required by the Kochendorfer court.” Id. at 665 n.14. We can do the same

here. The district court correctly concluded that the policy projections at issue are “merely . . .

informal communications” that “do not satisfy any of the requirements found in 29 U.S.C. §

1022” (emphasis added). Accordingly, they do not qualify as summary plan descriptions under

Hicks, Gridley, or Kochendorfer. 

13

502(a)(1)(B) claim failed as a matter of law.
 On appeal, Mass Mutual contests all four of these determinations.

9

14

Second, the court addressed the plaintiffs claim under ERISA § 502(a)(2)

claim “for appropriate relief” based on Mass Mutual’s alleged breach of fiduciary

duty under ERISA § 409(a), 29 U.S.C. § 1109(a). Accepting the amended

complaint’s well-pleaded factual allegations as true, it concluded (a) that the

plaintiffs sought relief on behalf of the plan, (b) that Mass Mutual was a fiduciary

with respect to the plan, (c) that Mass Mutual had breached a fiduciary duty to the

plan, and (d) that such breach had caused a loss to the plan. As such, it concluded 9

that the amended complaint established liability under § 502(a)(2). 

On the issue of damages, the court ordered Mass Mutual to restore annually

the “missing” death benefits and cash surrender values—i.e., the difference

between those shown in the 1990 illustrations and the current policy values—less

any portion of the missing values attributable to (a) the 1990 changes in the

dividend option, (b) the 1992 loans, or (c) changes in dividend scales/interest

rates. The court reasoned that the adjustment for dividend scale/interest rate

changes was necessary because Cotton and Eickhoff “were knowledgeable

businessmen who took an active role in monitoring the practices governing the

Plan and understood that the interest rates and scales would fluctuate over time.” 

The parties were directed to draft and file an injunction requiring Mass Mutual to
15

pay damages in accordance with the order.

Third, the court addressed the plaintiffs claim for relief under ERISA §

502(a)(3), which permits beneficiaries to bring suit “(A) to enjoin any act or

practice which violates any provision of this subchapter or the terms of the plan, or

(B) to obtain other appropriate equitable relief (i) to redress such violations or (ii)

to enforce any provisions of this subchapter or the terms of the plan.” The

Supreme Court has described § 502(a)(3) as a “safety net, offering appropriate

equitable relief for injuries caused by violations that § 502 does not elsewhere

adequately remedy.” Varity Corp. v. Howe, 516 U.S. 489, 512, 116 S. Ct. 1065,

1078, 134 L. Ed. 2d 130 (1996). In Katz v. Comprehensive Plan of Group

Insurance, 197 F.3d 1084 (11th Cir. 1999), we held that a plaintiff who has an

available claim under another subsection of § 502(a) cannot proceed under §

502(a)(3), and, moreover, that “the availability of an adequate remedy under the

law . . . does not mean, nor does it guarantee, an adjudication in one’s favor.” Id.

at 1089. In other words, a plaintiff who can state a cognizable claim under either

(a)(1)(b) or (a)(2) may not also rely on the (a)(3) “safety net” even if he is

ultimately unable to prevail under both (a)(1)(b) and (a)(2). Relying on Katz, the

district court held that the plaintiffs’ (a)(3) claim was barred as a matter of law.

Finally, the district court addressed the plaintiffs’ federal common law
16

equitable estoppel claim. “This circuit has created a very narrow common law

doctrine under ERISA for equitable estoppel. It is only available when (1) the

provisions of the plan at issue are ambiguous, and (2) representations are made

which constitute an oral interpretation of the ambiguity.” Id. at 1090 (citations

omitted). As it had already determined that the terms contained in the plan

document were not ambiguous, the district court held that the plaintiffs were not

entitled to recover under this doctrine.

Although the court’s order included what it thought were “straightforward”

instructions regarding the calculation of damages, the parties could not agree as to

how the order would be implemented. Thus, after the plaintiffs filed a proposed

injunction and Mass Mutual filed extensive objections to it, the parties ended up

back before the court for another hearing on the issue of damages. Shortly

thereafter, the court issued a short order requiring Mass Mutual to restore to the

plan the rollout amounts—i.e., the amounts the plaintiffs’ employer is due to be

repaid under the insurance agreements. This appeal followed.

II. 

To establish liability for a breach of fiduciary duty under any of the

provisions of ERISA § 502(a), a plaintiff must first show that the defendant is in

fact a fiduciary with respect to the plan. Baker v. Big Star Div. of the Grand
17

Union Co., 893 F.2d 288, 289 (11th Cir. 1989) (“non-fiduciaries cannot be held

liable under ERISA”). ERISA provides that

a person is a fiduciary with respect to the plan to the extent (i) he

exercises any discretionary authority or discretionary control

respecting management of such plan or exercises any authority or

control respecting management or disposition of its assets, (ii) he

renders investment advice for a fee or other compensation, direct or

indirect, with respect to any moneys or other property of such plan, or

has any authority or responsibility to do so, or (iii) he has any

discretionary authority or discretionary responsibility in the

administration of such plan.

ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A). Significantly, under this definition,

a party is a fiduciary only “to the extent” that it performs a fiduciary function. As

such, fiduciary status under ERISA is not an “all-or-nothing concept,” and “a court

must ask whether a person is a fiduciary with respect to the particular activity at

issue.” Coleman v. Nationwide Ins. Co., 969 F.2d 54, 61 (4th Cir. 1992). Here,

although “Mass Mutual has conceded that it is a fiduciary for the limited purpose

of making death benefit determinations under the policies,” it maintains that the

amended complaint fails to establish that it is “a fiduciary for any other purpose”

(brief p.43). The question whether a party is an ERISA fiduciary is a mixed

question of law and fact. In this case, because the district court accepted as true

all of the amended complaint’s well-pleaded factual allegations, there are no

“findings of fact” in the ordinary sense. Our review of the district court’s legal
18

conclusions is de novo, and we accord no deference to its legal analysis. Reich v.

Lancaster, 55 F.3d 1034, 1045 (5th Cir. 1995).

The district court concluded that the plaintiffs had sufficiently alleged that

Mass Mutual was wearing its fiduciary hat when the alleged misconduct occurred:

The factual allegations in the Complaint clearly state that Mass

Mutual and its agents helped establish the Plan and “administered,

managed and controlled [the insurance policies governing the Plan]

since they were first issued.” Mass Mutual retained “discretionary

authority to administer[,] manage and control” policy assets. It also

exercised discretionary authority with respect to plan management

and administration. Finally, Mass Mutual and its agents provided

policy projections upon which Plaintiffs relied.

D. Ct. Op. at ¶ 41 (quoting First Am. Compl.) (citations omitted). As a result of

the discovery sanctions the district court imposed, it accepted all of the wellpleaded factual allegations in the amended complaint as true. But even assuming

for the purpose of this appeal that the district court’s sanction was appropriate, the

amended complaint does not state a set of facts under which Mass Mutual is a

fiduciary for the purposes of this case. Therefore, we must reverse.

The passage from the district court’s opinion reprinted above summarizes

the plaintiffs’ basic allegations regarding Mass Mutual’s fiduciary status. In other

words, the amended complaint simply recites portions of the statutory definition. 

The plaintiffs argue that this is enough to establish Mass Mutual’s fiduciary status
 In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir.1981) (en banc), this

10

court adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to

October 1, 1981.

19

because the factual allegations of their admitted complaint are deemed admitted. 

But while a defaulted defendant is deemed to “admit[] the plaintiff’s well-pleaded

allegations of fact,” he “is not held to admit facts that are not well-pleaded or to

admit conclusions of law.” Nishimatsu Constr. Co. v. Houston Nat’l Bank, 515

F.2d 1200, 1206 (5th Cir. 1975). Therefore—again, assuming for the sake of the 10

argument that a default was an appropriate sanction—although Mass Mutual “may

not challenge the sufficiency of the evidence, [it] is entitled to contest the

sufficiency of the complaint and its allegations to support the judgment.” Id. 

Plaintiffs allege that Mass Mutual (a) “sold Policies and helped establish the

Plan,” (b) “administered, managed, and controlled such Policies,” (c) exercised

discretionary authority over plan assets, and (d) “exercised discretionary authority

with respect to plan management and administration.” Simple allegations that

Mass Mutual falls within the statutory definition of fiduciary, however, are not

well-pleaded factual allegations sufficient to establish liability in the wake of an

entry of default. Indeed, because the plaintiffs do not otherwise explain from

whence this discretion came or how specifically Mass Mutual “administered,

managed, and controlled” the plan, their allegations are really no more than a
20

conclusory assertion that Mass Mutual is an ERISA fiduciary. Thus, the plaintiffs’

“well-pleaded factual allegations” regarding Mass Mutual’s fiduciary status are

not well-pleaded factual allegations at all; rather, they are merely the plaintiffs’

own conclusions of law, which Mass Mutual is not deemed to have admitted as a

result of default. Cf. Oxford Asset Mgmt. v. Jaharis, 297 F.3d 1182, 1188 (11th

Cir. 2002) (“[On a motion to dismiss,] [t]he plaintiff’s factual allegations are

accepted as true. . . . However, . . . legal conclusions masquerading as facts will

not prevent dismissal.”). 

“Simply urging the purchase of its products does not make an insurance

company an ERISA fiduciary with respect to those products.” Am. Fed’n of

Unions Local 102 Health & Welfare Fund v. Equitable Life Assurance Soc’y, 841

F.2d 658, 664 (5th Cir. 1988). This is all that the plaintiffs here really allege. 

Specifically, they allege that in 1987 they purchased a set of Mass Mutual life

insurance policies as a means of funding the split-dollar plan. They claim that the

purchase was the result of a presentation by Martin and Hilliard that projected that

the policies would yield substantial retirement and death benefits and that

premiums would “vanish” within ten years. They allege that in 1990 the plan was

amended and that they relieved BEI of its obligations to them under a separate

deferred compensation agreement in exchange for BEI’s promise to pay additional
21

premiums under the plan. They claim that in making this decision they again

relied on analyses prepared by Martin and Hilliard. Then, in 1992, the plaintiffs

took out substantial loans against the policies—indeed, they borrowed all that the

policies permitted. They allege that they did so “in reliance on the representations

of Mass Mutual and its agents that the Policies were sufficiently strong and had

sufficient value to support the loans while still generating substantial retirement

income after rollout.” Finally, they claim that even after 1992, Mass Mutual

continued to provide inaccurate or misleading policy analyses showing that the

plan was continuing to perform as projected.

Thus, reduced to the size of a pea, this case is really about claims of fraud

and misrepresentation in the sale of some life insurance policies. The plaintiffs

attempt to match these allegations with ERISA’s definition of a fiduciary, but they

are unable to do so. Mass Mutual has never exercised discretionary authority or

control over plan management or the administration of plan assets because the

decisions to purchase, amend, and borrow against the policies were made by the

plaintiffs themselves. Cases holding that insurers like Mass Mutual are not

ERISA fiduciaries are numerous. See, e.g., Flacche v. Sun Life Assurance Co. of

Can., 958 F.2d 730, 733-35 (6th Cir. 1992) (insurer did not act as a fiduciary by

supplying annuity contracts to fund a plan and performing ministerial services for
22

the plan); Consol. Beef Insus., Inc. v. N.Y. Life Ins. Co., 949 F.2d 960, 965 (8th

Cir. 1991) (insurer was not acting as a fiduciary when, through its agent, it “simply

sold . . . annuities” and “did not recommend specific investments beyond its

products”); Gallagher Corp. v. Mass. Mutual Life Ins. Co., 105 F. Supp. 2d 889,

893-97 (N.D. Ill. 2000) (insurer did not act as a fiduciary by persuading an

employer to purchase its whole life insurance policies to fund a prototype plan it

designed and providing record-keeping and actuarial services to the plan); Fechter

v. Conn. Gen. Life Ins. Co., 800 F. Supp. 182, 196-206 (E.D. Pa. 1992) (insurer

did not act as a fiduciary by supplying fund assets and actuarial calculations);

Assocs. in Adolescent Psychiatry v. Home Life Ins. Co. of N.Y., 729 F. Supp.

1162, 1191 (N.D. Ill. 1989) (insurer was not acting an a fiduciary because “all [it]

did was talk the plans into buying its insurance products as a means of funding

retirement benefits” and “design . . . the prototype plan [the employer] adopted”)

aff’d 941 F.2d 561 (7th Cir. 1991); Bozeman v. Provident Nat’l Assurance Co.,

1992 WL 328804, at *1-4 (W.D. Tenn. 1992) (insurer did not act as a fiduciary by

supplying annuity contracts to fund a plan and giving actuarial advice). 

The plaintiffs argue that they have alleged that Mass Mutual did more than

just sell its insurance products to the plan because it (along with various alleged

agents and delegatees) was also responsible for allocating premium payments
23

between the portion counted as loans from their employer and the portion treated

as income to them, analyzing policy performance, and communicating with them

regarding policy performance. The performance of such ministerial policy-related

services, however, does not render an insurer such as Mass Mutual a fiduciary if it

does not otherwise occupy that status. See, e.g., Gallagher, 105 F. Supp. 2d at

895-96; Fechter, 800 F. Supp. at 204-06. Nor does the performance of multiple

duties, none of which in and of itself creates fiduciary status, render one a

fiduciary. See, e.g., Bozeman, 1992 WL 328804, at *4 (rejecting the suggestion

“that a ‘package deal’ of services and products, none of which separately creates

fiduciary status, necessarily betokens an unusual degree of influence because of

their variety and number”). 

Moreover, the plaintiffs’ claims that Mass Mutual acted fraudulently, even

if true, do not alter the fact that they have failed to allege facts from which we

could infer that Mass Mutual is in fact a fiduciary. “Congress took a functional

approach to defining an ERISA fiduciary.” Fechter, 800 F. Supp. at 205. 

Therefore, while “[w]rongful motivation and conduct” is certainly relevant once a

plaintiff demonstrates that a defendant is a fiduciary with respect to the plan, it is
 In their briefs to this court, the plaintiffs point us to no case that suggests that an insurer 11

performing functions akin to those performed by Mass Mutual is an ERISA fiduciary. Instead,

they rely solely on the default and argue that “the analysis whether a person is a fiduciary is

inherently factual” and that “Mass Mutual lost its opportunity to make . . . fact-based arguments”

by committing the discovery violations that led to the default. In holding that Mass Mutual is not

a fiduciary, however, we need only look to the amended complaint and plan documents; it is,

therefore, unnecessary for us to make any fact-based determinations.

24

“insufficient to establish fiduciary responsibility” to begin with. Id. And, 11

finally, because the plaintiffs have not shown that Mass Mutual itself ever had any

fiduciary duty with respect to the plan, their additional allegation that, “[d]uring

relevant times, Mass Mutual delegated certain discretionary authority” is also of

no help.

In sum, because the plaintiffs cannot establish that Mass Mutual is a

fiduciary for any purpose that is relevant to the misconduct they allege, they

cannot recover under ERISA § 502(a).

III.

Our determination that Mass Mutual is not a fiduciary for any purpose

implicated by the amended complaint is reinforced by our additional conclusion

that the plaintiffs’ original state-law claims were not completely preempted; thus,

removal was improper, as federal question jurisdiction was lacking, and the

plaintiffs’ motion to remand should have been granted at the outset. On appeal,
 This is not surprising. It was Mass Mutual who removed the case, and presumably it 12

continues to prefer federal court and ERISA law to state court and state law. And although they

originally moved to remand the case to state court, the plaintiffs now have a judgment in their

favor that they would like affirmed.

25

neither party has raised this issue. Ordinarily, if removal was improper, the court 12

lacks subject matter jurisdiction and must raise the issue sua sponte and then

dismiss on that ground, see Rembert v. Apfel, 213 F.3d 1331, 1333 (11th Cir.

2000) (“As a federal court of limited jurisdiction, we must inquire into our subject

matter jurisdiction sua sponte even if the parties have not challenged it.”);

however, because the post-removal amended complaint asserted claims under

ERISA, we have jurisdiction even if removal was initially improper, see Pegram v.

Herdrich, 530 U.S. 211, 215 n.2, 120 S. Ct. 2143, 2147 n.2, 147 L. Ed. 2d 164

(2000) (“[The plaintiff] does not contest the propriety of removal before us, and

we take no position on whether or not the case was properly removed. . . . [The]

amended complaint alleged ERISA violations, over which the federal courts have

jurisdiction, and we therefore have jurisdiction regardless of the correctness of the

removal.”); see also Grubbs v. Gen. Elec. Credit Corp., 405 U.S. 699, 700, 92 S.

Ct. 1344, 1346, 31 L. Ed. 2d 612 (1972) (holding that when a district court has

jurisdiction at the time it enters judgment “the validity of the removal procedure
 Thus, once the plaintiffs asserted ERISA claims, the district court had subject matter 13

jurisdiction over the case even though the removal itself was improper. As a result, it also had

jurisdiction to enter discovery sanctions against Mass Mutual.

26

followed may not be raised for the first time on appeal”). We nonetheless 13

address this issue here because it helps to clarify that Mass Mutual was not

wearing its fiduciary hat when it allegedly misled the plaintiffs regarding future

benefits under their policies.

Under 28 U.S.C. § 1441, a defendant may remove a state-court case to

federal court only if the district court would have had jurisdiction over the case

had it been brought there originally. As this case was originally filed, diversity

jurisdiction was lacking because both plaintiffs and four of the seven defendants

were citizens of Georgia. Therefore, if the case was removable it must have been

because the plaintiffs’ claims “arise under” federal law for the purposes of federal

question jurisdiction. See 28 U.S.C. § 1331. But because the original complaint

asserted only state-law claims, this case also does not arise under federal law

under the ordinary operation of the well-pleaded complaint rule. See Kemp v.

Int’l Bus. Mach. Corp., 109 F.3d 708, 712 (11th Cir. 1997) (“A case does not arise

under federal law unless a federal question is presented on the face of the

plaintiff’s complaint.”). Therefore, if the case arises under federal law, it must be

because it falls within the special category of federal question jurisdiction created
27

by the doctrine of complete preemption. “Under that doctrine, Congress may

preempt an area of law so completely that any complaint raising claims in that area

is necessarily federal in character and therefore necessarily presents a basis for

federal court jurisdiction.” Id. “Congress has accomplished this ‘complete

preemption’ in [ERISA § 502(a)], which provides the exclusive cause of action for

the recovery of benefits governed by an ERISA plan. State law claims seeking

relief available under [§ 502(a)] are recharacterized as ERISA claims and therefore

‘arise under’ federal law.” Id. (citations omitted).

This court’s clearest statement of the ERISA complete preemption rule is

found in Butero v. Royal Maccabees Life Insurance Co., 174 F.3d 1207 (11th Cir.

1999), where we explained that complete preemption

exists only when the plaintiff is seeking relief that is available under

[ERISA § 502(a)]. Regardless of the merits of the plaintiff’s actual

claims (recast as ERISA claims), relief is available, and there is

complete preemption, when four elements are satisfied. First, there

must be a relevant ERISA plan. Second, the plaintiff must have

standing to sue under that plan. Third, the defendant must be an

ERISA entity. Finally, the complaint must seek compensatory relief

akin to that available under [§ 502(a)]; often this will be a claim for

benefits due under a plan. 

Id. at 1212 (internal citations and quotation marks omitted). Complete preemption

is thus narrower than “defensive” ERISA preemption, which broadly “supersede[s]

any and all State laws insofar as they . . . relate to any [ERISA] plan.” ERISA §
 ERISA § 514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A), exempts “any law of any State 14

which regulates insurance, banking, or securities” from § 514(a)’s broad (defensive) preemption

provision. In Ervast v. Flexible Products Co., 346 F.3d 1007 (11th Cir. 2003), we suggested that

claims based on such laws “might appropriately be completely preempted, but defensive

preemption may not apply.” Id. at 1013 n.7. In other words, if a claim is completely preempted

under Butero’s four-part test, the case may be removable even though § 514(b)(2)(A) explicitly

provides that ERISA does not provide a defense to the state-law claim; in such a case, the federal

court simply has jurisdiction over the state-law claim. In the same footnote in Ervast, we also

explained: 

Defensive preemption may not be a prerequisite for complete preemption,

but they usually co-exist. Naturally, if a claim were for the recovery or

clarification of benefits under an ERISA plan, then the claim will “relate to” the

plan. . . . [T]he “relate to” analysis and the law interpreting such can[] inform the

issue facing a court that must determine whether state law claims are completely

preempted, however, complete preemption is not dependent on the existence of

defensive preemption. Moreover, a decision regarding complete preemption does

not decide the issue of defensive preemption. As we stated defensive preemption

is a substantive issue that must be decided by a court with competent jurisdiction.

Id. (citations omitted). This discussion of the relationship between complete and defensive

preemption is also consistent with Butero’s more general statement that claims that are

28

514(a), 29 U.S.C. § 1144(a) (emphasis added). Therefore, a state-law claim may

be defensively preempted under § 514(a) but not completely preempted under §

502(a). In such a case, the defendant may assert preemption as a defense, but

preemption will not provide a basis for removal to federal court. 

Although we address complete preemption in this Part, we will also discuss

several defensive preemption cases. These cases are helpful because claims that

are completely preempted are also defensively preempted. Butero, 174 F.3d at

1215 (“If the plaintiff’s claims are [completely preempted], then they are also

defensively preempted.”). Thus, if it appears that a claim is not even defensively

preempted, then it will not be completely preempted either. As such, defensive 14
completely preempted are also defensively preempted; it simply explains, first, that it is not

necessary for a court addressing complete preemption to decide whether a claim is defensively

preempted in order to decide the complete preemption issue, and, second, that a federal court’s

order remanding a case to state court based on the inapplicability of the complete preemption

doctrine leaves open the question whether the plaintiff’s claims are nevertheless defensively

preempted.

29

preemption cases may inform the complete preemption analysis. “The complete

preemption and defensive preemption doctrines are very complicated and the cases

are numerous. The facts of the instant case do not fall neatly into any category of

case law that allows for an easy or quick answer to be found from Eleventh Circuit

case law.” Wilson v. Coman, 284 F. Supp. 2d 1319, 1341 (M.D. Ala. 2003). 

Therefore, we will start by briefly reviewing our significant decisions in this area

in section A. In section B, we will apply those cases to the facts of this case.

A.

In Butero, the defendant insurer issued a life insurance policy to the

husband of the plaintiff (Butero) through his employer; however, sometime after

the policy’s putative effective date, the defendant remitted all premiums paid by

the employer and informed it that its request for coverage was denied and that no

policy existed. Butero’s husband died that same day, her claim for benefits under

the policy was denied on the ground that no policy existed, and she filed suit in

state court against the insurer and an insurance agent alleging breach of contract,

bad faith refusal to pay, and fraud in the inducement. The defendants then
30

removed the case to federal court, arguing that the state-law claims were

completely preempted. On Butero’s motion to remand, the district court held that

the claims against the agent were not preempted, and they were severed and

remanded; however, it held that the claims against the insurer were completely and

defensively preempted and accordingly dismissed them without prejudice to

Butero’s right to file a complaint stating claims under ERISA. See Butero, 174

F.3d at 1210-11.

On appeal, Butero challenged the district court’s disposition of her state-law

claims against the insurer. After stating the complete preemption rule set out

above, we held that her claims were completely and defensively preempted and

accordingly affirmed. As to the third element of complete preemption—whether

the defendant is an ERISA entity—we concluded that the insurer was a fiduciary

because “[i]t could ‘control . . . the payment of benefits’ and the ‘determination of

[the plaintiff’s] rights’ under [the plan].” Id. at 1213 (quoting Morstein v. Nat’l

Ins. Servs., Inc., 93 F.3d 715, 723 (11th Cir. 1996) (en banc)). As to the fourth

element—whether the plaintiff seeks relief available under § 502(a)—we first

noted that “we have held that claims against an insurer for fraud and fraud in the

inducement to purchase a policy are in essence claims ‘to recover benefits due to

[the beneficiary] under the terms of the plan,’” and we then concluded that the
31

plaintiffs’ additional claims for bad faith refusal to pay and breach of contract

essentially sought the same thing—payment of a life insurance benefit. Butero,

174 F.3d at 1213 (quoting ERISA § 502(a)(1)(B)).

Initially, we note two important distinctions between Butero and the instant

case. First, the basis of the plaintiff’s case in Butero was the insurer’s decision in

its capacity as an ERISA entity not to pay a death benefit. Here, in contrast, Mass

Mutual emphasizes, and we agree, that it is an ERISA fiduciary for the purpose of

making death benefit determinations only, and the plaintiffs do not challenge any

decision not to pay benefits under the terms of the plan. Rather, they allege that

Mass Mutual induced them to purchase and maintain vanishing premium life

insurance policies as a source of retirement income and death benefits by

misrepresenting the level of benefits those policies would provide. In other words,

the plaintiffs’ dispute is with Mass Mutual the seller of insurance products, not

Mass Mutual the ERISA fiduciary. The second distinction, which is related to the

first, is that while Butero’s claim was one for benefits due under the terms of an

ERISA plan, Cotton and Eickhoff claim a loss based on the difference between

Mass Mutual’s alleged misrepresentations—perhaps the most important of which

predate the formation of the plan itself—and the terms of the plan. Thus, while

Butero’s statement that “claims against an insurer for fraud or fraud in the
32

inducement to purchase a policy are in essence claims ‘to recover benefits due to

[the beneficiary] under the terms of the plan,’” id., does, as one district court in

this circuit recently put it, “immediately draw[] this court’s attention,” we agree

with that court that this generalization should not be automatically extended to

cases in which the plaintiff’s claims do not actually seek benefits under the terms

of the plan. Wilson v. Coman, 284 F. Supp. 2d 1319, 1334 (M.D. Ala. 2003).

In Morstein v. National Life Insurance Co., 93 F.3d 715 (11th Cir. 1996) (en

banc), the plaintiff (Morstein), the president/sole shareholder of a small business,

purchased health insurance for herself and her only employee from an independent

insurance agent. According to the complaint, Morstein told the agent that any

policy that did not cover any preexisting condition would be unacceptable, and the

agent assured her that the policy she purchased would cover all such conditions. 

Over a year later, however, the insurer denied a claim for benefits under the policy

for the reason that it was based on an undisclosed preexisting condition. Morstein

then sued the agent and the insurer in state court for negligence, malfeasance,

misrepresentations, and breach of contract; in response, the defendants removed

the case to federal court under the complete preemption doctrine. The district

court then denied Morstein’s motion to remand and granted the defendants’

motions for summary judgment on the ground that all of Morstein’s state-law
33

claims were both completely and defensively preempted. Morstein thereafter

voluntarily dismissed her claims against the insurer and appealed the district

court’s grant of summary judgment in favor of the agent. Id. at 716-17.

On appeal, we reversed the district court’s order granting the agent’s motion

for summary judgment and held that Morstein’s state-law claims against him were

not preempted. Id. at 722-74. In so holding, we relied primarily on the Fifth

Circuit’s decision in Perkins v. Time Insurance Co., 898 F.2d 470 (5th Cir. 1990),

which held that

a claim that an insurance agent fraudulently induced an insured to

surrender coverage under an existing policy, to participate in an

ERISA plan which did not provide the promised coverage, ‘relates to’

that plan only indirectly. A state law claim of that genre, which does

not affect the relations among the principal ERISA entities (the

employer, the plan fiduciaries, the plan, and the beneficiaries) as

such, is not preempted by ERISA.

Id. at 473. The Fifth Circuit in Perkins reasoned—and we agreed—that Congress

did not intend to “immunize agents from personal liability for their solicitation of

potential participants in an ERISA plan prior to its formation.” Morstein, 93 F.3d

at 722 (quoting Perkins, 898 F.2d at 473). We therefore held that “when a state

law claim brought against a non-ERISA entity does not affect relations among

principal ERISA entities as such, then it is not preempted by ERISA.” Morstein,

93 F.3d at 722 (emphasis added). This included Morstein’s claims, as the
34

defendant agent plainly was not an ERISA entity.

In Morstein, we also explained why we thought it unlikely that Congress

intended to preempt the type of claims at issue in that case:

[E]conomic impact alone is not necessarily enough to preempt a state

law. Therefore, the possibility that insurance premiums will be

higher or that insurance will be more difficult to obtain because

independent agents will have less incentive to sell insurance to

employers whose employee benefit plans will be governed by ERISA,

does not provide a reason to preempt state laws that place liability on

agents for fraud. These same agents currently face the threat of state

tort claims if they make fraudulent misrepresentations to individuals

and entities not governed by ERISA. To hold these agents

accountable in the same way when making representations about an

ERISA plan merely levels the playing field.

Allowing preemption of a fraud claim against an individual

insurance agent will not serve Congress’s purpose for ERISA. . . .

Congress enacted ERISA to protect the interests of employees and

other beneficiaries of employee benefit plans. To immunize

insurance agents from personal liability for fraudulent

misrepresentation regarding ERISA plans would not promote this

objective. If ERISA preempts a beneficiary’s potential cause of

action for misrepresentation, employees, beneficiaries, and employers

choosing among various plans will no longer be able to rely on the

representations of the insurance agent regarding the terms of the plan.

These employees, whom Congress sought to protect, will find

themselves unable to make informed choices regarding available

benefit plans where state law places the duty on agents to deal

honestly with applicants.

Id. at 723-24 (citations omitted). This reasoning can be applied to the instant case

as well. After all, the plaintiffs allege that Mass Mutual, like the independent

agent in Morstein, made misrepresentations in the sale of an insurance policy. 
 See e.g., Vos v. Farm Bureau Life Ins. Co., 667 N.W. 2d 36, 46-55 (Iowa 2003) 15

(upholding the denial of class certification of vanishing premium claims because the state-law

misrepresentation claims raised too many individualized questions of fact); Banks v. N.Y. Life

Ins. Co., 737 So. 2d 1275, 1283 (La. 1999) (holding that the trial court abused its discretion in

certifying a vanishing premium class action because the state-law misrepresentation claims raised

too many individualized issues); Varacallo v. Mass. Mut. Life Ins. Co., 752 A.2d 807 (N.J.

Super. A.D. 2000) (ordering class certification of vanishing premium policyholders’ state-law

fraud claims); Gaidon v. Guardian Life Ins. Co., 725 N.E. 2d 598, 608 (N.Y. 1999) (holding that

vanishing premium sales practices, as pled, “fall[] within the purview” of the state deceptive

business practices statute but do “not constitute a ‘misrepresentation or material omission’

necessary to sustain a cause of action for fraud”).

35

And when an insurer is not acting in its capacity as an ERISA entity, we can see

no reason that Congress would have sought to immunize it from liability for fraud

or similar state-law torts. For conduct such as that alleged by the plaintiffs,

insurers currently face the threat of suit under state law by non-ERISA entities.15

To hold them accountable in this context, therefore, “merely levels the playing

field,” and any indirect economic impact such claims may have on plans governed

by ERISA is not by itself sufficient to establish complete preemption. Id. at 723. 

Indeed, just like the judgment against the independent insurance agent in

Morstein, a judgment against Mass Mutual will have no direct economic impact on

any ERISA plan.

Finally, Engelhardt v. Paul Revere Life Insurance Co., 139 F.3d 1346 (11th

Cir. 1998), which addressed both defensive and complete preemption, is relevant

here. There, the plaintiff (Engelhardt) disclosed glaucoma as a preexisting
 For clarity, the statement of Engelhardt’s facts given in the text is somewhat simplified. 16

After the case was removed to federal court, Engelhardt moved to remand his fraud claim and

also amended his complaint to bring a separate ERISA claim. During discovery, Paul Revere

discovered a memo supporting Engelhardt’s claim and therefore tendered past disability benefits,

which Engelhardt accepted. Paul Revere also offered to discuss the possibility of reimbursing

Engelhardt for reasonable costs and attorney’s fees. There was no formal settlement agreement,

however. Paul Revere then moved for summary judgment on both of Engelhardt’s claims,

arguing that the parties had settled the ERISA claim and that the fraud claim was preempted. 

The district court agreed that the parties had reached a “de facto settlement” of the ERISA claim

and accordingly dismissed it (although it also retained jurisdiction over the issues of attorney’s

fees and the proper interest rate on the back benefits). The district court concluded, however,

that the fraud claim was not completely preempted and therefore granted Engelhardt’s motion to

remand that portion of the case to state court. Specifically, the district court concluded that

because Engelhardt was not a “beneficiary” and therefore lacked standing to sue under ERISA. 

See Engelhardt, 139 F.3d at 1348-50. 

36

condition in his application for disability insurance through his employer. After

reviewing Engelhardt’s application, the insurer (Paul Revere) requested that he

sign an amendment to the policy excluding disability related to “either or both

eyes.” Engelhardt, however, insisted that only glaucoma-related disability should

be excluded. The independent agent who sold the policy agreed that the exclusion

should be so interpreted, and Paul Revere sent Engelhardt a letter confirming the

same. When Engelhardt suffered a detached retina, however, Paul Revere relied

on the exclusion to deny his claim for benefits. Engelhardt then sued Paul Revere

in state court for fraudulent inducement, and Paul Revere removed the case to

federal court under the complete preemption doctrine. The district court granted

Engelhardt’s motion to remand, concluding that complete preemption did not

exist. See id. at 1348-50.16
On appeal, we noted an “internal inconsistency” in the district court’s order—specifically,

between, on the one hand, its determination that Engelhardt lacked standing to sue under ERISA

and, on the other, its exercise of jurisdiction over the ERISA claim. We explained that there

were two ways that the district court could have resolved the jurisdictional issue: First, it might

have held that Engelhard’s fraud claim was not completely preempted, which would have meant

that it lacked jurisdiction over that claim as well as the subsequently added ERISA claim. 

Alternatively, it might have found that the state-law claim was completely preempted, which

would have given it jurisdiction over both claims. By exercising jurisdiction over the ERISA

claim and then determining in essence that it lacked jurisdiction over the whole case from the

start, however, the district court improperly “merged these options.” Id. at 1350 n.3. As we

explained, the district court’s (erroneous) “conclusion . . . that Engelhardt lack[ed] standing to

bring an ERISA claim should have led [it] to conclude that complete preemption [did] not apply .

. . and that the state law fraudulent inducement claim was thus not removable to federal court.” 

Id.

37

On appeal, we reversed and held that Engelhardt’s state-law claim was

completely and defensively preempted. On the defensive preemption issue, we

distinguished Morstein as follows: “[u]nlike the independent insurance agent and

agency in Morstein, Paul Revere is an ERISA fiduciary, and thus an ‘ERISA

entity,’ because it had the exclusive authority to determine eligibility for benefits

under the plan and to review denied claims.” Id. at 1352. We then elaborated on

this distinction:

Engelhardt’s suit “affects the relations among principal ERISA

entities as such” and “relates to” an ERISA plan for a number of

reasons. First, as noted above, Engelhardt’s suit is against an ERISA

entity. Second, Paul Revere had assumed its role as an ERISA entity

and [the] ERISA plan had been established before, albeit only shortly

before, Paul Revere made its alleged misrepresentations to an

individual regarding the scope of coverage under the ERISA plan. 

Third, the impetus for Engelhardt’s suit was Paul Revere’s decision in

its role as an ERISA entity to deny Engelhardt’s claim for benefits

under the ERISA plan. Although Engelhardt initially attempted to
38

challenge the denial through Paul Revere’s appeals process,

Engelhardt ultimately abandoned that approach and filed this lawsuit. 

Fourth, as a result of documents produced during the discovery

process, Paul Revere determined that its denial of benefits was

improper and decided to pay Engelhardt the ERISA benefits he had

been seeking all along.

Id. at 1352-53 (emphasis added) (footnote omitted) (quoting Morstein, 93 F.3d at

722). Thus, we emphasized that the suit was between ERISA entities “as such,”

that Paul Revere “assumed its role as an ERISA entity” prior to the alleged fraud,

and that the suit was really about Paul Revere’s denial of benefits “in its role as an

ERISA entity.” Id. In other words, we did not simply establish that Paul Revere

was an ERISA entity at some point or for some purposes; rather, we emphasized

that Engelhardt’s complaint alleged misconduct by Paul Revere in that capacity.

Having determined that Engelhardt’s suit related to an ERISA plan and was

thus defensively preempted, we also held that it was completely preempted for

three reasons: First, the parties were “ERISA entities whose relationship became

strained when Paul Revere denied Engelhardt’s claim for benefits under the

ERISA plan”—i.e., “precisely the types of parties who Congress intended to

litigate under § 1132(a)” and “precisely the type of dispute that the statute was

intended to resolve.” Id. at 1353. Second, Engelhardt’s claim was “essentially a

challenge to Paul Revere’s refusal to pay benefits.” Id. at 1354. Third, Engelhardt
39

did not seek to rescind his contract but instead sought benefits allegedly owed him

under its terms. Id. Thus, the district court had jurisdiction over Engelhardt’s

state-law claim and should have dismissed it as preempted under § 514.

Thus, again, we did not rely simply on Paul Revere’s general status as an

“ERISA entity.” Rather, we thought it necessary to show that Paul Revere was

acting in that role when the alleged fraud took place and when it subsequently

denied Engelhardt’s claim for benefits, and we noted that the dispute concerned a

denial of benefits under an ERISA plan. In contrast, in the instant case, we agree

that Mass Mutual is not a fiduciary for any purpose other than making benefit

determinations, a function that is not at issue in this lawsuit. Thus, it was not

acting “in its role as an ERISA entity” at the time the plaintiffs allege that it

fraudulently induced them to buy the vanishing premium life insurance policies at

issue here. As such, this lawsuit does not seem to “affect[] . . . relations among

principal ERISA entities as such” but instead affects only the relationship between

two policyholders and their insurer. Id. at 1352. Nor is the suit “essentially a

challenge to [a] refusal to pay benefits” under an ERISA plan. Id. at 1354. 

Benefits have not yet become due under the policy, and from the plaintiffs’

perspective the problem is that the terms of the policy themselves do not match

Mass Mutual’s earlier representations.
40

Moreover, as noted above, the Engelhardt court also relied on the fact that

“Paul Revere had assumed its role as an ERISA entity and [the] ERISA plan had

been established before, albeit only shortly before, Paul Revere made its alleged

misrepresentations.” Id. at 1352. Along these lines, in Franklin v. QHG of

Gadsden, Inc., 127 F.3d 1024 (11th Cir. 1997), we commented that, “unlike the

circumstances in Morstein, [the plaintiff and the defendant] were ERISA entities at

the time the alleged fraudulent misrepresentations were made.” Id. at 1029. In

Butero, however, we described Franklin’s comment as a mere “suggest[ion] in

dicta . . . that an insurance company allegedly obligated to pay benefits under a

plan is not considered an ERISA entity if the complaint alleges pre-policy fraud.” 

Butero, 174 F.3d at 1213 n.3. Furthermore, we expressed some “doubt that

ERISA status can be so cleanly switched on and off” when a plaintiff claims to be

due benefits under an ERISA plan, and the insurer’s decision denying those

benefits was plainly made in its fiduciary capacity. Id. We agree with Butero’s

statement that a plaintiff cannot avoid complete preemption simply by alleging

pre-policy fraud only. (The plaintiffs here, of course, allege that

misrepresentations were made both before and after the plan was established.)

However, we do think that the fact that misconduct is alleged to have begun at a

time when the defendant could not possibly have been acting as an ERISA
 In its order denying the plaintiffs’ motion to remand, the district court noted that “the 17

record . . . indicates that other executive officers of BEI obtained similar benefits from other

similar policies written by Mass Mutual.” This finding relied on an affidavit submitted by Mass

Mutual that the district court later struck in its order imposing sanctions under Fed. R. Civ. P. 37. 

On appeal, the plaintiffs argue that this affidavit was not only stricken, but was also false, and

that the plan is a two-beneficiary plan that covers the plaintiffs only. Mass Mutual, in contrast,

argues that the affidavit was accurate and that the plan extends to other BEI executive officers. 

In any event, we note that neither the contested affidavit nor Mass Mutual’s Memorandum in

Opposition to Plaintiffs’ Motion to Remand lists a policy with an effective date prior to those of

the plaintiffs’ policies. Thus, even if the plan covers persons other than the plaintiffs, we assume

that the plaintiffs were the first participants in the plan and that the plan began on the effective

date of the first policies they purchased. This distinguishes this case from Englehardt because the

plan in that case was created before the allegedly fraudulent misrepresentations were made. See

Engelhardt, 139 F.3d at 1353 n.7.

41

fiduciary at least suggests that the suit may not be against the insurer-quafiduciary.17

Franklin and Hall v. Blue Cross/Blue Shield of Ala., 134 F.3d 1063 (11th

Cir. 1998), also require brief mention, but, as a district court in this circuit recently

concluded, their analyses are not altogether consistent with Butero, and they are

therefore less helpful to us here. See generally Wilson, 284 F. Supp. 2d at 1330-

42. In Franklin, the plaintiff (Franklin) alleged that she accepted a position with

the defendant hospital on the condition that her husband would continue to receive

the same home nursing care provided under her former employer’s plan. Two-plus

years later, however, the hospital informed Franklin that it was discontinuing

coverage for home nursing care; in doing so, it relied on a clause in the plan that

reserved to it the right to reduce or terminate coverage at any time. Franklin then
42

sued in state court, alleging that the hospital fraudulently induced to leave her

former employment by promising to provide the same level of home nursing care

provided by her former employer’s plan. The hospital removed the case to federal

court under the complete preemption doctrine, and the district court denied

Franklin’s motion to remand and ultimately entered summary judgment in favor of

the hospital on the ground that Franklin’s state-law claims were completely and

defensively preempted. Franklin, 127 F.3d at 1026-27.

On appeal, we affirmed. This result is consistent with Butero: the hospital,

in its role as an ERISA fiduciary, discontinued benefits under an ERISA plan, and

Franklin, a beneficiary, responded by filing a lawsuit that essentially sought to

recover benefits under the terms of that plan—that is, she sought “compensatory

relief akin to that available under § 1132(a).” Butero, 174 F.3d at 1212. 

Franklin’s analysis, however, focused almost entirely on § 514’s defensive

preemption test—that is, whether the plaintiff’s state-law claims “related to” an

ERISA plan. See Franklin, 127 F.3d at 1027-29. The Franklin court did begin its

analysis correctly by recognizing that “the jurisdictional issue . . . turns on whether

the plaintiffs are seeking relief that is available under [ERISA § 502(a)],” id. at

1028 (quoting Kemp, 109 F.3d at 712), but the rest of the opinion addresses only §

514’s “relate to” standard. And, after noting that a “state law relates to an
 In such a case, the court’s determination that state-law claims are not defensively 18

preempted would have no res judicata effect because the court would simply dismiss for lack of

subject matter jurisdiction. The defensive preemption analysis would simply assist the court in

its complete preemption analysis. 

43

employee benefit plan ‘if it has a connection with or reference to such a plan,’”

Franklin, 127 F.3d at 1028 (quoting N.Y. Conference of Blue Cross & Blue Shield

Plans v. Travelers Ins. Co., 514 U.S. 645, 656, 115 S. Ct. 1671, 1677, 131 L. Ed.

2d 695 (1995)), the court held that the plaintiff’s state-law claims were completely

preempted because they had such a “direct connection to the administration of

medical benefits under an ERISA plan,” Franklin, 127 F.3d at 1029.

This analysis is not consistent with Butero’s complete preemption rule,

which holds that a state-law claim is completely preempted only where all four

“elements” of complete preemption are present. Butero, 174 F.3d at 1212. 

Butero, moreover, explicitly recognizes that state-law claims may be defensively

preempted under § 514 but still not completely preempted under § 502—that is,

that defensive preemption is broader than complete preemption. Id. Thus, if a

court determines that state-law claims are not defensively preempted, it necessarily

follows that they are not completely preempted. But the converse is not true, so 18

a court cannot hold that state-law claims are completely preempted simply because

they “relate to” an ERISA plan. 
44

In Hall, the plaintiff (Hall) alleged that the defendant insurer (Blue Cross)

assured her that although known preexisting conditions would not be covered

during the first 270 days of her new medical plan, any other condition that arose

during the period would be covered; however, when Hall required surgery to

remove an ovarian mass during the 270-day period, Blue Cross denied her claim

even though the mass was not a known preexisting condition. Hall then filed suit

in state court, asserting three fraud-related claims, and Blue Cross removed on the

basis of complete preemption. The district court denied Hall’s motion to remand,

and granted Blue Cross’s motion to dismiss, holding that Hall’s claims were

defensively and completely preempted. Hall, 134 F.3d at 1064.

On appeal, we affirmed. This result is also consistent with Butero: Blue

Cross, in its role as a fiduciary, denied a claim for benefits under the terms of an

ERISA plan, and Hall, a beneficiary, responded by filing a lawsuit that essentially

sought benefits under the terms of that plan—that is, she sought “compensatory

relief akin to that available under [ERISA § 502(a)].” Butero, 174 F.3d at 1212. 

The court, however, relied primarily on Franklin, and its analysis focused entirely

on § 1144’s defensive preemption standard. See Hall, 134 F.3d at 1065-66.

Thus, Hall and Franklin reach results that are consistent with Butero, but

they employ analyses that are inconsistent with the rule it established. In Wilson
45

v. Coman, 284 F. Supp. 2d 1319 (M.D. Ala. 2003), the court addressed this

inconsistency at length and concluded (a) that while Butero “provides the proper

standard for analyzing the question of complete preemption in the Eleventh

Circuit,” (b) that standard is in direct conflict with Franklin, and (c) “since

Franklin is an earlier panel decision . . . , under the prior panel rule,” he was bound

to follow Franklin and not Butero. Id. at 1329. We agree that the analysis of

Franklin, the earlier case, conflicts with that of Butero, the later one, but we do not

think that the prior panel rule obliges us to follow Franklin. The reason is that our

pre-Franklin cases are consistent with Butero. For example, in Kemp v. Int’l Bus.

Mach. Corp., 109 F.3d 708 (11th Cir. 1997), we held that the complete preemption

question “turns on whether the plaintiffs are seeking relief that is available under

[§ 502(a)]” and that “[a]n ordinary ERISA preemption defense, even if valid, is

not enough to create federal question jurisdiction,” and we analyzed the complete

preemption issue without reference to § 514’s “relate to” standard. Id. at 711-14. 

Indeed, in declining the defendant’s invitation to reach the defensive preemption

issue, we explained, “We cannot decide whether the plaintiffs’ claims relate to an

ERISA plan . . . because we have no jurisdiction over this case. The defense of

ordinary ERISA preemption, by itself, does not create federal question

jurisdiction.” Id. at 714 (emphasis added). Similarly, in Brown v. Conn. Gen.
46

Life Ins. Co., 934 F.2d 1193 (11th Cir.), we distinguished defensive preemption

under § 514 and complete preemption under § 502(a). See id. at 1195-96; id. at

1197-99 (Johnson, J., dissenting). And in our most recent complete preemption

case (issued after the district court’s decision in Wilson), we again held that a

claim is not completely preempted under § 502(a) simply because it is defensively

preempted under § 514; indeed, we specifically stated that “the district court erred

in deciding the [complete] preemption issue by applying the defensive preemption

analysis.” Ervast v. Flexible Products Co., 346 F.3d 1007, 1013 (11th Cir. 2003). 

Thus, we are not bound by the analyses of Franklin and Hall; rather, we will apply

the complete preemption rule set out in Butero.

B.

In this section, we state briefly what is likely clear at this point: The claims

of the plaintiffs in this case are unlike those of plaintiffs in past cases in which we

have held complete preemption to apply because they “do[] not affect . . . relations

among principal ERISA entities . . . as such,” Perkins, 898 F.2d at 473, or concern

Mass Mutual’s conduct in its capacity as an ERISA fiduciary. Nor do the

plaintiffs “seek compensatory relief akin to that available under [§ 502(a)],”

Butero, 174 F.3d at 1212, because they seek damages based on fraud in the sale of

insurance policies, not benefits alleged to be due under the terms of the plan itself. 
 Wilson was in many respects similar to the instant case. There, the plaintiff (Wilson) 19

had obtained life insurance from Southern Insurance. The defendants, Loyal American Life

Insurance and its agents, persuaded her to switch to a Loyal American policy offered through her

employer as part of a plan governed by ERISA. Wilson alleged that Loyal American failed “to

advise her that her existing policies would remain in effect and that she would continue to owe

premiums on [them].” As a result, she stopped making payments to Southern, Southern began

deducting premiums from the policies’ accumulated cash surrender value, and she ultimately

suffered a loss due to the depletion of the cash value built up in those policies. She also alleged

Loyal American “failed to advise her that the new policies provided lesser benefits, but for a

higher premium because of her age” and “committed fraud in misrepresenting the length of time

that surrender charges would be applicable to her Loyal American policy,” as well as the amount

of those charges. Wilson, 284 F. Supp. 2d at 1328-29.

Based on this description of Wilson’s complaint, we agree that her core claim was that

47

Because of these differences, this case proves to be an exception to our

general rule of thumb that “claims against an insurer for fraud or fraud in the

inducement to purchase a policy are in essence claims ‘to recover benefits due to

[the beneficiary] under the terms of the plan.’” Id. at 1213 (quoting ERISA §

502(a)(1)(B)). “From the Butero opinion, it is apparent that [the plaintiff in that

case] sought to recover insurance benefits that she believed she was entitled to as a

result of [her husband’s] death.” Wilson, 284 F. Supp. 2d at 1334. In contrast,

Cotton and Eickhoff are “very much alive” and are “not seeking actual death

benefits” from Mass Mutual. Id. “In essence,” they are suing Mass Mutual for its

“alleged fraudulent and negligent conduct, which caused [them] to suffer

economic losses.” Id. at 1336. “What [they] are not suing . . . for is a refusal to

pay benefits under the terms of the . . . life insurance policies . . . . This fact

distinguishes the instant case from Butero.” Id. (emphasis added). It also 19
Loyal American “caused her to suffer economic loss, neither in the form of a denial of benefits

nor in a denial of rights under her policy, but in the fact that she was worse off economically after

. . . agreeing to purchase the Loyal American policy. . . . In essence, [she sought] damages for an

agreement that she entered into based on allegedly false representations, but not for the actual

death benefits of her policy.” Id. at 1329. The district court stated that it would have held that

such a state-law claim is not completely preempted under Butero, but felt itself bound to reach

the opposite result under Franklin’s analysis. As we explain above, Franklin’s analysis was not

controlling.

In concluding that the state-law claim was not completely preempted under Butero, the

district court found Towne v. National Life of Vermont, Inc., 130 F. Supp. 2d 604 (D. Vt. 2000),

to be persuasive. In Towne, as part of a plan governed by ERISA, the plaintiffs purchased whole

life insurance policies from a National Life agent. They alleged that the agent “intentionally

deceived them about the nature of the Plan in order to induce them to invest in it.” Id. at 606. 

Specifically, they claimed that he misrepresented the effect of a decision to withdraw from the

plan. The district court held that such a claim was not completely preempted because the

plaintiffs did not seek relief available under ERISA § 502(a). That is, they did not seek any

benefit described in the plan itself. “Rather, they claim[ed] simply that [National Life]

fraudulently concealed the terms and conditions of the . . . Plan in order to induce them to invest

in it, and they [sought] only to be returned to the status quo prior to their adoption of the Plan.” 

Id. at 608.

48

distinguishes it from cases such as Engelhardt, Franklin, and Hall, because in each

of those cases the plaintiff was actually contending to be due a benefit that could

be identified within the terms of his or her policy—namely, a disability benefit

(Engelhardt), home nursing care (Franklin), and reimbursement for healthcare

expenses (Hall). 

More important with respect to the ERISA claims at issue here, our case law

in this area supports our conclusion that Mass Mutual was not acting in its

fiduciary capacity for any purpose relevant to the plaintiffs’ § 502(a) claims. In

Butero, Engelhardt, Franklin, and Hall, there were actual decisions denying

benefits under the relevant plan. When an insurer makes such a decision, it is
49

plainly wearing its fiduciary hat, and the beneficiary may challenge the correctness

of the decision according to the terms of the ERISA plan. Here, in contrast, as the

district court correctly concluded, the terms of the plan documents “are clear and

unambiguous,” and the plaintiffs are not entitled to relief under them. Nor do their

allegations, if properly characterized and understood, seek relief under the plan or

challenge any action by Mass Mutual in its fiduciary capacity. This distinguishes

the case from those in which we reasoned that the plaintiff was essentially

challenging an insurer’s denial of benefits. 

The plaintiffs claims are instead more like those asserted against the

independent insurance agent in Morstein. We are, of course, aware that Mass

Mutual is in many respects different from such an agent and would be considered

a fiduciary for some purposes, but, as we explain above, fiduciary status under

ERISA is a functional concept, and in this case Mass Mutual was performing a

function similar to that performed by the agent in Morstein or professionals who

provided ministerial plan-related services in other cases. Therefore, it was not

wearing its fiduciary hat in any situation relevant to this lawsuit. Thus, while the

case does in one sense affect relations among parties who are ERISA entities, it

“does not affect . . . relations among the principal ERISA entities . . . as such.”

Perkins, 898 F.2d at 473. Moreover, just as in Morstein, the plaintiffs’ state-law
50

claims, if proven, should have only had an indirect economic impact on any

ERISA plan, and allowing state-law claims against Mass Mutual on the same basis

that they are permitted outside of the ERISA context “merely levels the playing

field.” Morstein, 93 F.3d at 723. 

IV.

When it denied the plaintiffs’ motion to remand, the district court held that

the plaintiffs’ state-law claims were completely preempted. As a technical matter,

“a decision regarding complete preemption does not decide the issue of defensive

preemption” because “defensive preemption is a substantive issue that must be

decided by a court with competent jurisdiction.” Ervast, 346 F.3d at 1013 n.7. 

Thus, if a district court remands to state court claims that are not completely

preempted, the defendant may still attempt to raise ERISA § 514 preemption as a

defense in the state court. As a practical matter, however, because defensive

preemption is significantly broader than complete preemption, a district court’s

determination that a claim is completely preempted does resolve the defensive

preemption issue. As we held in Butero, “[i]f the plaintiff’s claims are [completely

preempted], then they are also defensively preempted.” 174 F.3d at 1215. Thus,

we agree with Mass Mutual that the district court’s order denying the plaintiffs’

motion to remand is inconsistent with its subsequent decision allowing them to file
51

an amended complaint asserting all of the same state-law claims.

Mass Mutual argues that all of the discovery requests that ultimately led to

discovery sanctions related solely to the state-law claims. Therefore, the argument

goes, the earlier order to compel was itself an abuse of discretion. When a district

court imposes sanctions under Fed. R. Civ. P. 37(b), “the propriety of [the

sanctions] depends in large part on the propriety of the earlier compel order.” 

Chudasama v. Mazda Motor Corp., 123 F.3d 1353, 1366 (11th Cir. 1997). Thus,

“[i]n evaluating whether a district court abuses its discretion when it imposes

severe sanctions upon a party that violates an order, we believe that an important

factor is whether the entry of that order was itself an abuse of discretion.” Id. 

This is not to say, however, that sanctions based on erroneous discovery orders

will never be upheld. “Because we expect litigants to obey all orders, even those

they believe were improvidently entered, sanctions will very often be sustained,

particularly when the infirmity of the violated order is not clear and the sanctions

imposed are moderate.” Id. at 1366 n.34.

In Chudasama, we noted that a “[f]ailure to consider and rule on significant

pretrial motions before issuing dispositive orders can be an abuse of discretion.”

Id. at 1367. We also instructed that “[f]acial challenges to the legal sufficiency of

a claim or defense . . . should . . . be resolved before discovery begins,” id.,
52

especially when the challenged claim will significantly expand the scope of

allowable discovery, id. at 1368. This is so because every claim has the potential

to enlarge the scope and cost of discovery. Id. “If the district court dismisses a

nonmeritorious claim before discovery has begun, unnecessary costs to the

litigants and to the court system can be avoided.” Id. Given the relationship

between complete and defensive preemption, it was an abuse of discretion for the

district court to delay ruling on Mass Mutual’s challenges to the plaintiffs’ statelaw claims. Indeed, the court declined to resolve this issue not only when the statelaw claims reappeared in the plaintiffs’ amended complaint, but also when Mass

Mutual raised it again in the context of the later motion to compel. That we

disagree with the district court’s initial ruling that the state-law claims were

completely preempted does not alter our analysis in this Part. We assume the

correctness of that ruling for the purpose of addressing the court’s compel order

and order imposing sanctions, since those orders were entered on the assumption

that the plaintiffs’ state-law claims were, in fact, completely preempted. The

default sanction is, of course, mooted by our determination that the plaintiffs

cannot establish liability under ERISA, but the order requiring Mass Mutual to pay

a part of the plaintiffs’ reasonable costs and attorneys fees remains and should be

revisited on remand. 
53

Even if the district court’s failure to rule on Mass Mutual’s preemption

defense to the state-law claims was an abuse of discretion, we do not think that

necessarily means that the compel order was also an abuse of discretion. Although

Mass Mutual has repeatedly asserted that the discovery requests that led to the

compel order related only to the state-law claims, the plaintiffs deny that this was

the case, and it does not appear that the district court ever explicitly agreed with

Mass Mutual that the ERISA claims did not by themselves justify the compel

order. If Mass Mutual had been wearing its fiduciary hat for any purpose relevant

to the plaintiffs’ allegations, the material covered by the compel order could have

been relevant to the plaintiffs’ breach of fiduciary duty claims. The central theory

of these claims is that “[l]ying is inconsistent with the duty of loyalty owed by all

fiduciaries and codified in section 404(a)(1) of ERISA.” Varity Corp. v. Howe,

516 U.S. 489, 506, 116 S. Ct. 1065, 1075, 134 L. Ed. 2d 130 (1996) (quoting

Peoria Union Stock Yards Co. v. Penn Mut. Life Ins. Co., 698 F.2d 320, 326 (7th

Cir. 1997)). In the district court, Mass Mutual argued that the only documents

relevant to the such a claim are formal plan documents and perhaps any informal

documents that the plaintiffs actually reviewed. We think that Mass Mutual’s

view of the discovery relevant to such a claim is too narrow. While it is true that

the district court could have resolved the plaintiffs’ § 502(a)(1)(B) claim solely by
54

reference to the plan documents, the plaintiffs’ breach of fiduciary duty theory

justified additional discovery into whether Mass Mutual intentionally defrauded or

misled them and thus breached the fiduciary “duty of loyalty . . . codified in

section 404(a)(1) of ERISA.” 

In Varity, for example, § 502(a)(3) liability was premised on the fiduciaryemployer’s “falsely optimistic forecasts about its new venture’s prospects for

success,” which were intended to persuade its employees that they would not

undermine the security of their benefits by transferring to the newly formed

subsidiary. Varity, 516 U.S. at 537, 116 S. Ct. at 1089 (Thomas, J., dissenting). 

To establish that the forecasts were in fact “falsely optimistic,” the Varity

plaintiffs apparently introduced evidence that management itself expected the new

subsidiary to fail and sought to convince them to switch employment specifically

so that the company could rid itself of its ERISA obligations to them. See Varity

Corp. v. Howe, 36 F.3d 746, 748-50 (8th Cir. 1994). To prevail on a similar

theory in this case, the plaintiffs would have needed to show that Mass Mutual,

acting in its fiduciary capacity, presented falsely optimistic policy illustrations that

it essentially knew overstated the benefits that the policies could be expected to

produce. We express no opinion as to what exactly the plaintiffs would have had

to show to prevail on such a claim, but we do not see how they could have even
55

begun to do so without discovery regarding the methodologies, assumptions, and

data Mass Mutual used to produce the policy illustrations and Mass Mutual’s

internal communications regarding the marketing and economics of vanishing

premium policies.

From the record and the orders below, it is difficult to discern the precise

basis of the compel order. Because the district court apparently thought that all of

the original state-law claims could survive even though completely preempted, it

never clarified whether the compel order related to the those claims, the new

ERISA claims, or both. On remand, the district court should revisit this issue. If,

as Mass Mutual contends, the plaintiffs had everything they needed to proceed on

a Varity/Peoria Union-type breach of fiduciary duty claim, then the compel order

must have related solely to the no longer viable (under the district court’s order

denying the plaintiffs’ motion to remand) state-law claims and was an abuse of

discretion because the failure to dismiss those claims was itself an abuse of

discretion. The question whether a finding of complete preemption compelled an

additional finding of defensive preemption was a straightforward question of law,

and the district court’s decision not to answer it cannot be justified. Thus, if the

court’s decision not to decide significantly increased the burden of discovery, then

any significant sanctions it imposed were an abuse of discretion because “the
56

infirmity of the violated order” in that case would be “clear.” Chudasama, 123

F.3d at 1366 n.34. If, however, as the plaintiffs’ claim, the compel order related

not only to the state-law claims but also to the breach of fiduciary duty claims

under ERISA, then it was not an abuse of discretion, at least to the extent that was

justified by the ERISA claims. And if the compel order was not itself an abuse of

discretion, then sanctions for a willful, “bad faith” violation of it would be well

within the district court’s “broad discretion to fashion appropriate sanctions for

violation of discovery orders.” Malautea v. Suzuki Motor Co., 987 F.2d 1536,

1542 (11th Cir. 1993).

V.

For the foregoing reasons, we REVERSE the judgment of the district court

in favor of the plaintiffs under ERISA § 502(a)(2). Because the plaintiffs cannot

establish that Mass Mutual is an ERISA fiduciary for any purpose relevant to their

amended complaint, all ERISA claims should be dismissed with prejudice. We

VACATE the district court’s order imposing sanctions under Fed. R. Civ. P. 37(b)

and REMAND with the instruction that the district court should consider what, if

any, sanctions are appropriate in light of this opinion.