Source: https://law.justia.com/cases/federal/appellate-courts/F3/454/120/489709/
Timestamp: 2017-11-22 14:49:56
Document Index: 517625864

Matched Legal Cases: ['§ 502', '§ 1132', '§ 1001', '§ 1002', '§ 502', '§ 1132', '§ 404', '§ 1104', '§ 502', '§ 1132', '§ 502', '§ 502', '§ 502', '§ 1002', '§ 502', '§ 502', '§ 502', '§ 3', '§ 3', '§ 502', '§ 502', '§ 1132', '§ 502', '§ 1132', '§ 502', '§ 1202', '§ 3', '§ 1002', '§ 502', '§ 1132']

Frank W. Leuthner; William Reasner, and All Others Similarly Situated Elizabeth Melley; Jean Mikulis, Intervenor-plaintiffs in District Court v. Blue Cross and Blue Shield of Northeastern Pennsylvania Elizabeth Melley and Jean Mikulis, Appellants, 454 F.3d 120 (3d Cir. 2006) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Third Circuit › 2006 › Frank W. Leuthner; William Reasner, and All Others Similarly Situated Elizabeth Melley; Jean Mikulis...
Frank W. Leuthner; William Reasner, and All Others Similarly Situated Elizabeth Melley; Jean Mikulis, Intervenor-plaintiffs in District Court v. Blue Cross and Blue Shield of Northeastern Pennsylvania Elizabeth Melley and Jean Mikulis, Appellants, 454 F.3d 120 (3d Cir. 2006)
US Court of Appeals for the Third Circuit - 454 F.3d 120 (3d Cir. 2006)
Opinion filed July 10, 2006
COPYRIGHT MATERIAL OMITTED Clifford A. Rieders, Esquire, (Argued), Rieders, Teavis, Humphrey, Harris, Wates & Waffenschmidt, Williamsport, PA, for Appellant.
John F. Schultz, Esquire, (Argued), Kristofor T. Henning, Esquire, Morgan, Lewis & Bockius, Philadelphia, PA, for Appellees.
Before McKEE, FISHER and ROTH,* Circuit Judges.
If the beneficiary of an ERISA plan has lost her status as a beneficiary, due to what she claims is the plan administrator's breach of fiduciary duty, does she then have standing to sue the administrator under ERISA § 502(a), 29 U.S.C. § 1132(a)? Appellant Jean Mikulis retired early from Blue Cross, relying on what she claims was a promise from Blue Cross to provide her with 100% lifetime health benefits. Appellant Elizabeth Melley is the widow of a Blue Cross retiree. Both women lost their lifetime health benefits when the Blue Cross Plan was retroactively changed on January 1, 2001. After their benefits had been terminated, they intervened in a class action that had been brought by other Plan participants and beneficiaries to challenge the retroactive changes. The District Court dismissed Mikulis and Melley's suits under Fed. R. Civ. P. 12(b) (6) for lack of statutory standing. Although appellants may have made retirement decisions based on a belief that their retirement medical benefits would continue for their lifetimes, we agree with the District Court's determination that they do not have statutory standing to bring this action. We will, therefore, affirm.
Blue Cross Blue Shield of Northeastern Pennsylvania (Blue Cross) administers the Blue Cross of Northeastern Pennsylvania Retiree Health Insurance Plan (the Plan), a welfare benefits plan for Blue Cross retirees. The Plan is subject to the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001, et seq. Blue Cross is a Plan fiduciary under 29 U.S.C. § 1002(21) (A).1 Originally, the Plan provided Blue Cross retirees with 100% lifetime health insurance coverage. Blue Cross altered the Plan in 1993, and then again in 1999 and 2001. Starting in 1993, the Plan's coverage changed to a formula that provided a percentage of the cost of the health care plan, based on the number of years of service that an employee had on retirement. The formula required a minimum of 10 years of service. The formula was changed in 1999 to require a minimum of 15 years of service. The 1993 and 1999 changes were applied prospectively to new retirees; the benefits of former retirees were not changed. On January 1, 2001, Blue Cross again amended the Plan (1) to provide for a graduated dollar contribution toward health insurance coverage for retirees with at least 15 years of service and (2) to eliminate coverage for surviving spouses of retirees. Blue Cross applied the 2001 Plan Amendment retroactively to all retirees.
Retired Blue Cross employees have brought a class action against Blue Cross for breach of fiduciary duty stemming from various changes made in the Plan's coverage.2 Elizabeth Melley and Jean Mikulis are intervenors in the action. Mikulis was an employee of Blue Cross for almost 13 years. She retired at age 62 on February 27, 1993, after being notified by Blue Cross that, unless she retired by April 1, 1993, her future retirement health benefits would no longer be guaranteed at 100% lifetime but would be subject to a percentage formula based on years of employment. As a result of early retirement, Mikulis received a smaller pension from Blue Cross and reduced Social Security benefits. Mikulis received 100% benefits under the Plan until January 1, 2001, when she ceased to be eligible for any benefits under the amended Plan. She claims to have relied on having 100% lifetime health coverage in her savings and spending decisions.
Mikulis and Melley brought an action under ERISA § 502(a) (3), 29 U.S.C. § 1132(a) (3), in which they allege that Blue Cross breached its fiduciary duties under ERISA § 404(a), 29 U.S.C. § 1104(a) by amending the plan in 20013 and by failing to disseminate accurate information about the terms of retiree medical benefits under the Plan. They are seeking either reinstatement in the Plan as it existed prior to the 2001 amendments, comparable coverage, or its monetary equivalent.
Blue Cross moved to dismiss pursuant to Fed. R. Civ. P. 12(b) (1), 12(b) (6) and/or 56. The District Court construed the motion as a motion to dismiss under Rule 12(b) (6) because the parties' submissions did not include matters outside of the pleadings. The District Court found that Mikulis and Melley did not have standing because they were neither Plan participants nor beneficiaries at the time they commenced their suit. Accordingly, the District Court dismissed both complaints for lack of standing. The District Court certified its judgment as final under Fed. R. Civ. P. 54(b). This appeal followed.
We undertake a plenary review of the grant of a motion to dismiss, Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250 (3d Cir. 1994), including questions of standing. Miller v. Rite Aid Corp., 334 F.3d 335, 340 (3d Cir. 2003). When considering an appeal from a dismissal pursuant to Rule 12(b) (6), we accept as true all well-pled factual allegations. Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997).
ERISA's statutory standing requirements provide in § 502(a) (1) and (3) that a civil action may only be brought:
(1) by a participant or beneficiary ... (B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan....
29 U.S.C. § 1132(a) (1), (a) (3).
the term "participant" is naturally read to mean either "employees in, or reasonably expected to be in, currently covered employment," or former employees who "have ... a reasonable expectation of returning to covered employment" or who have "a colorable claim" to vested benefits. In order to establish that he or she "may become eligible" for benefits, a claimant must have a colorable claim that (1) he or she will prevail in a suit for benefits, or that (2) eligibility requirements will be fulfilled in the future. "This view attributes conventional meanings to the statutory language since all employees in covered employment and former employees with a colorable claim to vested benefits `may become eligible.'"
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 118, 109 S. Ct. 948, 103 L. Ed. 2d 80 (1989) (internal citations omitted).
Whether a party has prudential standing depends on whether "a plaintiff's grievance ... arguably fall [s] within the zone of interest protected or regulated by the statutory provision or constitutional guarantee invoked in the suit." Bennett v. Spear, 520 U.S. 154, 162, 117 S. Ct. 1154, 137 L. Ed. 2d 281 (1997). As a general matter, we have found that statutory standing requirements can eliminate prudential standing restrictions but are presumed not to:
We extensively addressed the interplay of prudential and statutory standing in ERISA cases in Rite Aid. We remarked there that in past decisions we had stated that " [f]ar from abrogating the prudential standing doctrine ... ERISA § 502(a) (1) ... restricts civil actions brought against a plan administrator to actions brought by a `participant or beneficiary.'" 334 F.3d at 340 (quoting Saporito v. Combustion Eng'g Inc., 843 F.2d 666, 670-71 (3d Cir. 1988), vacated on other grounds by Combustion Eng'g, Inc. v. Saporito, 489 U.S. 1049, 109 S. Ct. 1306, 103 L. Ed. 2d 576 (1989)). In other words, the language of § 502(a) (1) sets forth the standing requirements to bring such an action — both prudential and statutory standing:
In that sense, the "zone of interest" inquiry in the prudential standing analysis for § 502(a) (1) claims is inextricably tied to the question of whether a plaintiff can meet the definitions of either a "participant" or "beneficiary".
"In determining who is a `participant,' for purposes of standing, the definition found in 29 U.S.C. § 1002(7) must be read in the context of traditional concepts of standing.... The ultimate question is whether the plaintiff is within the zone of interest ERISA was intended to protect."
334 F.3d at 341 (quoting Vartanian, 14 F.3d at 701) (emphasis original to Vartanian).
This interpretation is not correct. When we stated in Rite Aid that "the `zone of interest' inquiry in the prudential standing analysis for § 502(a) (1) claims is inextricably tied to whether a plaintiff can meet the definitions of either `participant' or `beneficiary'," 334 F.3d at 341, we meant that statutory standing requirements in ERISA § 502(a) (1) were essentially a codification of ERISA's "zone of interest" — we did not mean the inverse, i.e., that prudential standing suffices for statutory standing. Indeed, it would make little sense for Congress to have enacted ERISA § 502(a) (1) to define who may bring suit against a plan administrator if standing to sue were to be determined by the traditional "zone of interest" prudential standing test.
Moreover, despite the citation to Vartanian, we did not undertake a "zone of interest" analysis in Rite Aid. Instead, we focused solely on whether the plaintiff met the ERISA § 3(7) definition of "participant." This focus is consistent with the conclusion that ERISA's statutory standing requirements are a codification of the "zone of interest" analysis. Mikulis and Melley's "zone of interest" argument does not prevail.
ERISA §§ 3(7) and 3(8) define participants and beneficiaries as those "who [are] or may become eligible to receive a benefit of any type from an employee benefit plan...." Tracking this language, Mikulis and Melley's second argument is that they have standing because they are Plan participants/beneficiaries and they qualify as participants/beneficiaries because they have a colorable claim to receive Plan benefits in the future via equitable relief ordering the restoration of the Plan to its pre-January 1, 2001, status or enjoining the retroactive application of the January 1, 2001, Amendment.
Turning to the merits of the colorable claim to benefits argument, Blue Cross made four objections to it. First, Blue Cross contends that Mikulis and Melley have not asserted any claim for reinstatement in the Plan under ERISA § 502(a) (1) (B) but have merely requested monetary damages. Blue Cross is incorrect. Mikulis and Melley's joint Amended Class Action Complaint specifically requested that the Court "order the Defendant to reinstitute the Plan as it was in existence prior to the change complained of, and/or enjoin Defendant from implementing the revised Plan", not to mention award "such other legal and equitable relief as the Court may deem just and necessary." Mikulis's Second Amended Complaint only requests "Any other legal and equitable relief as the Court may deem just and necessary." Although this is boilerplate, it tracks the language of ERISA § 502(a) (3) (B), 29 U.S.C. § 1132(a) (3) (B), which provides for participants and beneficiaries to bring suit "to obtain other appropriate equitable relief (i) to redress [ERISA violations] or (ii) to enforce any provisions of this subchapter or the terms of the plan".
Third, Blue Cross remonstrates that Mikulis and Melley cannot have standing as a result of possible equitable relief because standing must exist at the time a suit is commenced, not at the time of judgment. For constitutional and prudential standing it is well established that standing must exist at the time the suit is commenced and throughout the suit. See, e.g., Friends of the Earth v. Laidlaw Envtl. Servs., 528 U.S. 167, 189, 120 S. Ct. 693, 145 L. Ed. 2d 610 (2000); Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 571 n. 5, 112 S. Ct. 2130, 119 L. Ed. 2d 351 (1992); PIRG v. Magnesium Elektron, Inc., 123 F.3d 111, 117 (3d Cir. 1997). We have not addressed this issue in regard to statutory standing; moreover, because a decision on this issue is not necessary for the outcome of this case, we do not express an opinion on it now.4
Fourth, Blue Cross maintains that because the amendment of ERISA plans is not a fiduciary act, equitable relief is not available. ERISA § 502(a) (3), 29 U.S.C. § 1132(a) (3), authorizes equitable relief only for violations of ERISA's provisions. The amendment of an ERISA plan is not a fiduciary act governed by ERISA. Lockheed Corp. v. Spink, 517 U.S. 882, 890, 116 S. Ct. 1783, 135 L. Ed. 2d 153 (1996); Walling v. Brady, 125 F.3d 114, 120 (3d Cir. 1997). Therefore, as the District Court correctly noted, Blue Cross did not violate ERISA by amending the Plan.
Mikulis and Melley, however, alleged breaches of fiduciary duty that included not only the amendment of the Plan, but also misrepresentations about future plan benefits and coverage. Unlike the amendment of the Plan, the provision of information about Plan benefits and coverage is a fiduciary act. Adams v. Freedom Forge Corp., 204 F.3d 475, 492 (3d Cir. 2000). Therefore, " [a]n employee may recover for a breach of fiduciary duty if he or she proves that an employer, acting as a fiduciary, made a misrepresentation that would confuse a reasonable beneficiary about his or her benefits, and the beneficiary acted thereupon to his or her detriment." In re Unisys Corp. Retiree Med. Benefit "ERISA" Litig., 242 F.3d 497, 505 (3d Cir. 2001). If Mikulis and Melley raised a colorable claim of such a breach and detrimental reliance, then they would have standing because they would have a colorable claim to be eligible for equitable relief under § 502(a) (3).
Mikulis is in the same situation as Melley in regard to the alleged misrepresentations made since the time of her retirement. Mikulis was not in a position to change her status of retired employee. Mikulis has, however, raised a related argument — "but for" Blue Cross's misrepresentations she would have retired later and would currently be a Plan participant.
In Saporito v. Combustion Engineering, Inc., we adopted a "but for" theory of ERISA standing, holding that "but for the selective divulgence of information [by the plan fiduciary], [appellants] would have been members [of the plan], and, for the purposes of standing to bring an action under ERISA, should be considered as such." 843 F.2d at 672. The Saporito plaintiffs, however, were not and had not been members of the plan in question. Their "but for" claim was one to make them members of a plan concerning which they claimed not to have been informed. Saporito, however, was decided before the Supreme Court's decision in Firestone. The Supreme Court vacated our judgment in Saporito without comment and remanded it in light of its decision earlier that week in Firestone. Combustion Eng'g, Inc. v. Saporito, 489 U.S. 1049, 109 S. Ct. 1306, 103 L. Ed. 2d 576 (1989). Since the Supreme Court's ruling in Firestone, we have not had occasion to rule on the issue of whether a claimant, who is a former plan participant, has standing when it is the alleged breach of fiduciary duty that has caused the claimant to lose status as a plan participant.
The majority of circuits that have addressed whether there is a "but for" exception for ERISA standing have adopted it. In Christopher v. Mobil Oil Corp., 950 F.2d at 1221, the Fifth Circuit concluded that "it would seem more logical to say that but for the employer's conduct alleged to be in violation of ERISA, the employee would be a current employee with a reasonable expectation of receiving benefits, and the employer should not be able through its own malfeasance to defeat the employee's standing." Similarly, in McBride v. PLM Int'l, Inc., 179 F.3d 737, 743 (9th Cir. 1999), the Ninth Circuit held that " [i]f an employee is a participant at the time of the alleged ERISA violation and alleges that he was discharged or discriminated against because of the protected whistleblowing activities, we hold that such an employee has standing to sue under ERISA." Accord, Swinney, 46 F.3d at 518-519; Mullins v. Pfizer, 23 F.3d 663, 668 (2nd Cir. 1994); Vartanian, 14 F.3d at 702. But see Raymond v. Mobil Oil Corp., 983 F.2d 1528, 1536 (10th Cir. 1993); Stanton v. Gulf Oil Corp., 792 F.2d 432 (4th Cir. 1986) (rejecting "but for" theory of ERISA standing).
The majority acknowledges that, "in a proper case, we may find that a plaintiff has statutory standing if the plaintiff can in good faith plead that she was an ERISA plan participant or beneficiary and that she still would be but for the alleged malfeasance of a plan fiduciary." Supra p. 129 (majority op.). I submit that this is a "proper case." According to the complaint, Mikulis was urged by Blue Cross in 1992, after nearly thirteen years of service, to accept early retirement. She acquiesced after being assured by the company that she would receive full health insurance benefits upon retirement and that those benefits would continue "without amendment" for her lifetime. (A.144, 146, 158.) This promise, of guaranteed lifetime benefits without the possibility of change, is plainly contrary to plan provisions reserving the administrator's right to amend. As a result of her reliance on this misrepresentation, Mikulis was denied benefits when the plan was amended in 2001 to limit coverage to only those retirees who had worked at the company for more than fifteen years. (A.168, 173.) Had Mikulis known in 1992 that her benefits were subject to change, she presumably would have remained in the company's employ, possibly exceeding the fifteen-year threshold for coverage under the current plan. (A.144-46, 158.) In other words, "but for" the alleged misrepresentation by Blue Cross, Mikulis might still be a participant in the plan. Cf. supra p. 123 (majority op.) ("Mikulis contends that, but for Blue Cross's misrepresentations and omissions, she would not have taken early retirement."). She thus has standing to assert a claim for breach of fiduciary duty. See, e.g., Daniels v. Thomas & Betts Corp., 263 F.3d 66, 73-76, 78-79 (3d Cir. 2001).
The deficiencies cited by my colleagues are not grounds for dismissal. They complain that (1) Mikulis has set forth only "generalities" regarding the factual predicate of her claim, (2) she has not specified "how much longer she would have worked `but for' the alleged misrepresentations," and (3) she "has not alleged that the statements made by Blue Cross prior to the 1993 amendment were false at the time that they were made." Supra p. 129 (majority op.). The third point seems to ignore Mikulis's allegation that the company promised her in 1992 that the health insurance benefits offered under the then-existing plan would not be subject to change, a representation that is clearly contrary to the plan's terms. (A.142-44, 168, 173.)
The other two points are similarly invalid, as they seem to impose upon Mikulis a "heightened pleading standard," demanding that she set forth the facts underlying her claim with particularity. This approach has been soundly rejected by the Supreme Court as inconsistent with the liberal pleading system embodied in the Federal Rules of Civil Procedure, which require only that the complaint provide "fair notice" of the proposed cause of action, allowing the court to assess whether relief is potentially available and permitting the parties to engage in meaningful discovery. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514, 122 S. Ct. 992, 152 L. Ed. 2d 1 (2002); Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 168, 113 S. Ct. 1160, 122 L. Ed. 2d 517 (1993); see also 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure §§ 1202, 1215 (3d ed.2004). The complaint in this case satisfies this minimal burden. Cf. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957) (" [A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief."). The concerns raised by my colleagues reflect possible deficiencies in the proof, not defects in the pleadings, and they should be addressed through discovery and summary judgment, not dismissal of the complaint. See, e.g., Swierkiewicz, 534 U.S. at 514, 122 S. Ct. 992.
Congress defines a plan fiduciary as a person: (i) [who] 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) [who] 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) [who] has any discretionary authority or discretionary responsibility in the administration of such plan
The District Court has denied class certification
Mikulis and Melley no longer contend that the amendment of the plan constituted a breach of fiduciary duty
We note, however, that Blue Cross has wrongly conflated the inquiry for standing with an inquiry on the merits. The issue is not whether litigants are entitled to injunctive relief, but merely whether they have a colorable claim to it. If they have a colorable claim to receiving injunctive relief that would make them Plan beneficiaries, then they fall within ERISA §§ 3(7)-(8) definitions of participant and beneficiary, 29 U.S.C. § 1002(7) (8), and have standing under ERISA § 502(a) (1), 29 U.S.C. § 1132(a) (1)