Source: https://law.justia.com/cases/federal/appellate-courts/F3/297/558/505522/
Timestamp: 2019-09-18 02:45:07
Document Index: 95662347

Matched Legal Cases: ['§ 1144', '§ 1144', '§ 1102', '§ 1104', '§ 1002', '§ 1002', '§ 1144']

Metropolitan Life Insurance Company, Plaintiff, v. Mildred Johnson, Defendant-appellant, v. Lashanda Smith, Leonard Smith and Carolyn Hall, Defendants-appellees, 297 F.3d 558 (7th Cir. 2002) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Seventh Circuit › 2002 › Metropolitan Life Insurance Company, Plaintiff, v. Mildred Johnson, Defendant-appellant, v. Lashanda...
Metropolitan Life Insurance Company, Plaintiff, v. Mildred Johnson, Defendant-appellant, v. Lashanda Smith, Leonard Smith and Carolyn Hall, Defendants-appellees, 297 F.3d 558 (7th Cir. 2002)
US Court of Appeals for the Seventh Circuit - 297 F.3d 558 (7th Cir. 2002)
COPYRIGHT MATERIAL OMITTED James B. Davidson, Davidson, Mandell & Menkes, Chicago, IL, for plaintiff.
While we must construe the facts in favor of Mildred, that, however, does not diminish her responsibility to present those facts in the manner dictated by local court rules. The Local Rules of the Northern District of Illinois require a moving party to submit, with its summary judgment motion, "a statement of material facts as to which the moving party contends there is no genuine issue and that entitle the moving party to a judgment as a matter of law." N.D. Ill. Local R. 56.1(a) (3). This statement "shall consist of short, numbered paragraphs, including within each paragraph specific references to the affidavits, parts of the record, and other supporting materials relied upon to support the facts set forth in that paragraph." Id. at 56.1(a). The opposing party must also submit a statement responding to each numbered paragraph of the moving party's statement, likewise supporting any disagreement with references to the record. Id. at 56.1(b) (3) (A). All supported facts set forth in a moving party's Rule 56.1 statement "will be deemed admitted unless controverted by" the opposing party. Id. at 56.1(a).
In this case, Mildred failed to follow the procedures set forth by Local Rule 56.1. Mildred filed her summary judgment motion without the required statement, although her motion did include a section entitled "Facts." This section was not delineated into separate numbered paragraphs. She later filed an "Amended Statement of Material Facts," which is structured in separately numbered paragraphs, but many paragraphs lack any reference to relevant portions of the record. However, SS & H fared no better. They did not file a statement with their motion for summary judgment, and in responding to Johnson's statement, they, in many cases, also failed to make references to the record. But then, Mildred never responded to SS & H's statement. The district court, faced with this hodge-podge of factual and often unsupported assertions, accepted those facts that both parties admitted were uncontroverted. The court also deemed admitted any facts supported with citations to the record set forth in Mildred's statement, where SS & H stated they had insufficient knowledge to admit or deny the facts. The court then disregarded the statements set forth in SS & H's statement unless admitted by Mildred. This resulted in a version of the facts that is perhaps not as favorable to Mildred as it could have been had she followed the local rules. But, we have emphasized the importance of local rules and "have consistently and repeatedly upheld a district court's discretion to require strict compliance with its local rules governing summary judgment." Bordelon v. Chicago Sch. Reform Bd. of Trustees, 233 F.3d 524, 527 (7th Cir. 2000) (upholding the district court's decision to strike response in its entirety rather than selectively due to failure to comply with local rules).
To address this issue, we must first determine the controlling law. As noted, the Plan is governed by ERISA. However, ERISA does not contain any provisions governing disputes between claimants to plan proceeds, or addressing whether an insured has effectively changed a beneficiary designation. Phoenix Mut. Life Ins. Co. v. Adams, 30 F.3d 554, 559 (4th Cir. 1994). Thus, Mildred advocates that we apply the Illinois doctrine of "substantial compliance,"5 relying on the principle enunciated in John Hancock Mut. Life Ins. Co. v. Harris Trust & Sav. Bank, 510 U.S. 86, 98, 114 S. Ct. 517, 126 L. Ed. 2d 524 (1993), that ERISA "leaves room for complementary or dual federal and State regulation." SS & H, on the other hand, argue that ERISA preempts state law and, therefore, urge us to apply federal common law to resolve the dispute.6
Generally, ERISA preempts all state laws "insofar as they may now or hereafter relate to any employee benefit plan" which is subject to ERISA. See 29 U.S.C. § 1144(a). The Supreme Court has set forth a two-part inquiry for determining whether a state law "relates to" an employee benefit plan for purposes of 29 U.S.C. § 1144(a). According to the Court, a state law7 "relates to" an ERISA plan if it has (1) a connection with or (2) reference to such a plan. California Div. of Labor Standards Enforcement v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 324, 117 S. Ct. 832, 136 L. Ed. 2d 791 (1997) (citations omitted). A state law has "reference to" an ERISA plan where it "acts immediately and exclusively upon ERISA plans, ... or where the existence of ERISA plans is essential to the law's operation." Dillingham, 519 U.S. at 325, 117 S. Ct. 832. The Illinois doctrine of substantial compliance applies generally to life insurance policy beneficiary designations, see Dooley, 65 Ill. Dec. 911, 442 N.E.2d at 227, and accordingly does not have "reference to" an ERISA plan for purposes of preemption. Therefore, the only issue is whether the substantial compliance doctrine as applied in this case has a "connection with" ERISA.
In Egelhoff, the Supreme Court recently addressed whether a state law had a "connection with" ERISA when it analyzed whether a Washington statute providing for automatic revocation, upon divorce, of any designation of spouse as a beneficiary of a life insurance policy was preempted, as it applied to ERISA plans. See Egelhoff v. Egelhoff, 532 U.S. 141, 121 S. Ct. 1322, 149 L. Ed. 2d 264 (2001). The Court stated that, to determine whether a state law has "the forbidden connection, we look both to the objectives of the ERISA statute ... as well as to the nature of the effect of the state law on ERISA plans." Id. at 147, 121 S. Ct. 1322 (citation omitted). Applying this principle, the Supreme Court concluded that the Washington statute in question had "an impermissible connection with" ERISA plans because it purported to bind "ERISA plan administrators to a particular choice of rules for determining beneficiary status. The administrators must pay benefits to the beneficiaries chosen by state law, rather than to those identified in the plan documents." Id. Specifically, the Supreme Court found that the Washington statute ran contrary to the ERISA provisions that a plan shall "`specify the basis on which payments are made to and from the plan,' § 1102(b) (4), and that the fiduciary shall administer the plan `in accordance with the documents and instruments governing the plan,' § 1104(a) (1) (D), making payments to a `beneficiary' who is `designated by a participant, or by the terms of [the] plan.' § 1002(8)." Id. at 147, 121 S. Ct. 1322. The Supreme Court criticized the Washington statute as one which "governs the payment of benefits, a central matter of plan administration," id. at 148, 121 S. Ct. 1322. In contrast, the Court has upheld generally applicable laws "where ERISA has nothing to say ... notwithstanding their incidental effect on ERISA plans." Id. at 147-48, 121 S. Ct. 1322.8
We have not directly addressed the precise issue of whether ERISA preempts a state's substantial compliance doctrine because the doctrine "relates to" an ERISA plan.9 Other circuits have had occasion to do so, and their conclusions are split. For instance, the Ninth Circuit recently concluded that ERISA did not preempt the state doctrine of substantial compliance because it would not affect the administration of the plan, but would merely "aid in determining the identity of the proper recipient of the proceeds." BankAmerica Pension Plan v. McMath, 206 F.3d 821, 829 (9th Cir. 2000), cert. denied, McMath v. Montgomery, 531 U.S. 952, 121 S. Ct. 358, 148 L. Ed. 2d 288. See also Peckham v. Gem State Mut. of Utah, 964 F.2d 1043, 1052 (10th Cir. 1992) (state law "doctrine of substantial compliance does not materially modify a plan, but rather is simply a doctrine to assist the court in determining whether conduct should, in reality, be considered the equivalent of compliance under the contract").
In contrast, the Fourth Circuit, while agreeing that the doctrine of substantial compliance did not modify a plan, nevertheless concluded that the state law "relates to" such a plan because it involved the designation of the beneficiary of an ERISA plan. Phoenix Mut., 30 F.3d at 560. Accordingly, the court concluded that ERISA preempted the state law doctrine, and adopted the district court's formulation of the following federal common law test: an "insured substantially complies with the change of beneficiary provisions of an ERISA life insurance policy when the insured: (1) evidences his or her intent to make the change and (2) attempts to effectuate the change by undertaking positive action which is for all practical purposes similar to the action required by the change of beneficiary provisions of the policy." Id. at 564 (relying upon established South Carolina law to formulate test). See also Tinsley v. General Motors Corp., 227 F.3d 700, 704 (6th Cir. 2000) (in interpleader action to determine legitimacy of beneficiary designation under life insurance policy, ERISA preempted state law; however, court looked to Michigan state law to formulate federal common law test for analyzing beneficiary designations that are allegedly the result of forgery or undue influence).
Given the Supreme Court's latest word on ERISA preemption in Egelhoff, we believe that a state law affecting the designation of a beneficiary is sufficiently "related to" an ERISA plan such that a state law doctrine of substantial compliance is preempted by ERISA. Thus, we find the Fourth Circuit's decision in Phoenix Mutual persuasive and believe this conclusion is consistent with our own precedent. See MacLean v. Ford Motor Co., 831 F.2d 723, 727-28 (7th Cir. 1987) (in determining proper beneficiary of pension plan, where Indiana testamentary transfer law, if applied, would determine the distribution under the plan, ERISA preempted state law). Under an ERISA plan, benefits must be paid to a "beneficiary" who is "designated by a participant, or by the terms of [the] plan." 29 U.S.C. § 1002(8). The plan administrator's determination, and a court's interpretation, of the identity of that beneficiary clearly "relates to" ERISA insofar as it "governs the payment of benefits, a central matter of plan administration." Egelhoff, 532 U.S. at 148, 121 S. Ct. 1322. Egelhoff stands for the proposition that a state law cannot invalidate an ERISA plan beneficiary designation by mandating distribution to another person. Similarly to the operation of the Washington statute under consideration in Egelhoff, the application of the legal doctrine of substantial compliance mandates a conclusion as to the identity of the proper recipient of such payments. It is thus very different from state laws which may have an incidental effect on ERISA plans, but which do not mandate certain choices or conclusions. See, e.g., supra note 7. The Ninth Circuit's reasoning that the state law doctrine of substantial compliance would not affect the administration of the plan, but would merely "aid in determining the identity of the proper recipient of the proceeds," McMath, 206 F.3d at 829, seems to us a distinction without a difference. Thus, we conclude that ERISA preempts the Illinois state law doctrine of substantial compliance.
The question then is whether the 1996 change of beneficiary form is valid under ERISA. But, as we previously noted, ERISA is silent as to the resolution of disputes between putative beneficiaries of a life insurance policy. The Supreme Court has recognized, in situations where ERISA preempts state law but is silent on a topic, that courts would have to develop a body of federal common law, where appropriate, based on principles of state law. See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56, 107 S. Ct. 1549, 95 L. Ed. 2d 39 (1987); Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 110, 109 S. Ct. 948, 103 L. Ed. 2d 80 (1989). See also Thomason v. Aetna Life Ins. Co., 9 F.3d 645, 647 (7th Cir. 1993) (where ERISA is silent, court must develop federal common law and, in so doing, may use state common law as a basis, to the extent that state law is not inconsistent with congressional policy concerns).
On appeal, Mildred argues that, even if ERISA preempts state law, in formulating federal common law we should still look to Illinois' doctrine of substantial compliance. SS & H argue that we should instead adopt the Fourth Circuit's standard from Phoenix Mutual. Under the Fourth Circuit's test, we look at whether the insured "evidences his or her intent" and "attempts to effectuate the change by undertaking positive actions." Phoenix Mutual, 30 F.3d at 564. Mildred believes the Fourth Circuit's standard is too lenient because, under the Illinois standard, SS & H would be required to establish the "certainty" of the insured's intent and that he "did everything he could have reasonably done under the circumstances" to carry out that intent. Aetna Life Ins. Co., 184 F.3d at 663. The Illinois doctrine of substantial compliance and the test enunciated by the Fourth Circuit invoking federal common law are essentially the same, and in this particular case, it would make no practical difference which standard we applied. We recognize, however, the need to ensure uniformity in ERISA jurisprudence, and of the principle that "federal common law should be consistent across the circuits." Phoenix Mutual, 30 F.3d at 564. See also Egelhoff, 532 U.S. at 148, 121 S. Ct. 1322 ("one of the principal goals of ERISA is to enable employers to establish a uniform administrative scheme, which provides a set of standard procedures to guide processing of claims and disbursement of benefits") (citation omitted). In analyzing whether the doctrine of substantial compliance applied to a signature requirement, this court recently adopted the Fourth Circuit's test as set forth in Phoenix Mutual.10 Davis, 294 F.3d 931, 2002 WL 1396515 at *9-10. Therefore, we will apply that formulation of the federal common law doctrine of substantial compliance.
For example, Mildred argued that Johnson's signature on the 1996 form was different from the one on the 1968 beneficiary designation. Mildred represented in her motion for summary judgment, and her attorney verified at oral argument, that an expert witness could not issue an opinion on the validity of the 1996 signature because no recent signatures could be obtained by subpoenas issued to his mother, Clara Johnson, Murbile Harmon (Johnson's sister) and the Internal Revenue Service. The attorney for SS & H stated at oral argument that no subpoenas were served on him or his clients. The district court did not consider this argument since Mildred had failed to provide competent evidence of the decedent's signature. Mildred also argued that the form was suspect because Johnson listed himself as "legally separated," although he had been divorced from Mildred for twenty years. Like the district court, we are unsure why this inconsistency was material. Finally, Mildred argued that the form may not have been executed by Johnson because he listed his mother's address. However, the district court also ignored this argument because Mildred failed to present any evidence of his address in 1996. As noted, Mildred's failure to comply with the local rules was her downfall in this action. While we construe the facts in her favor, Mildred must present us with some facts to construe in her favor. Instead, she attempts to create a factual dispute by introducing doubt as to who executed the form through conclusory assertions. As we have stated over and over again, allegations of the mere existence of some alleged factual dispute are not enough to preclude summary judgment. Fisher v. Wayne Dalton Corp., 139 F.3d 1137, 1140 (7th Cir. 1998).
The Illinois doctrine of substantial compliance requires that, for a change of beneficiary to be effective, "the party asserting that a change has occurred must establish: (1) the certainty of the insured's intent to change his beneficiary; and (2) that the insured did everything he could have reasonably done under the circumstances to carry out his intention to change the beneficiary."Aetna Life Ins. Co. v. Wise, 184 F.3d 660, 663 (7th Cir. 1999) (citing Dooley v. James A. Dooley Assoc. Employees Ret. Plan, 92 Ill. 2d 476, 65 Ill.Dec. 911, 442 N.E.2d 222, 227 (1982)).
While this decision was circulating among the panel, another panel of this court rendered a decision on similar facts See Davis v. Combes, 294 F.3d 931 (7th Cir. 2002). In that case, the district court concluded that federal law controlled the ERISA-governed life insurance policy. The parties did not appeal that ruling, and this court proceeded on that basis.
ERISA defines a state law as including "all laws, decisions, rules, regulations, or other State action having the effect of law, of any State." 29 U.S.C. § 1144(c) (1)
See, e.g., Dillingham, 519 U.S. at 334, 117 S. Ct. 832 (holding that California prevailing wage statute has no "connection with" ERISA plans, even where it altered incentives facing ERISA plans, and thus was not preempted); New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 659, 115 S. Ct. 1671, 131 L. Ed. 2d 695 (1995) (holding that New York statute regulating hospital rates was not preempted by ERISA, even though resulting cost variations encouraged ERISA plans to provide insurance through certain providers, because it did not bind plan administrators to any particular choice).
See Davis, 294 F.3d 931, 2002 WL 1396515 at *3 (applying federal common law doctrine of substantial compliance without reaching preemption issue); Aetna Life Ins. Co., 184 F.3d at 663-65 (applying Illinois doctrine of substantial compliance without discussion of choice of law issue); Rendleman v. Metropolitan Life Ins. Co., 937 F.2d 1292, 1296-97 (7th Cir. 1991) (same); Connecticut General Life Ins. Co. v. Gulley, 668 F.2d 325, 326-28 (7th Cir. 1982) (same).
A number of district courts have also followed the test set forth in Phoenix Mutual. See e.g., Life Ins. Co. of North America v. Leeson, 2002 WL 483563, *6 (S.D. Ohio March 19, 2002); Harpole v. Entergy Arkansas, Inc., 197 F. Supp. 2d 1152, 1158 (E.D. Ark. 2002); Metropolitan Life Ins. Co. v. Hall, 9 F. Supp. 2d 560, 563 (D. Md. 1998); Connecticut Gen. Life Ins. Co. v. Thomas, 910 F. Supp. 297, 301 (S.D. Tex. 1995); First Capital Life Ins. Co. v. AAA Communications, Inc., 906 F. Supp. 1546, 1560 (N.D. Ga. 1995).