Opinion ID: 453346
Heading Depth: 1
Heading Rank: 1

Heading: backround facts and procedural history

Text: 3
4 Ruth Fazio is an employee in the garment industry and a participant in the ILGWU plan, an employee benefit plan within the meaning of ERISA, 29 U.S.C. Secs. 1002(1) & (3). Mrs. Fazio's husband, Nicholas Fazio, is a participant in the Teamsters plan, which is likewise an employee benefit plan within the meaning of ERISA. Both plans pay for medical care for their respective employees. In addition, the Teamsters Fund provides medical coverage for the spouse and children of covered employees, and Mrs. Fazio is thus a beneficiary of the Teamsters Fund. 5 In March 1981, Mrs. Fazio underwent medical treatment and subsequently submitted her medical bills to the ILGWU Fund. The ILGWU Fund advised Mrs. Fazio that she was not eligible for benefits under its plan because she was covered by the Teamsters plan. Mr. Fazio thereupon submitted a claim for his wife's medical bills to the Teamsters Fund, but that fund advised Mrs. Fazio that it would not pay these bills because she was covered by the ILGWU plan. 6 Faced with one set of medical bills and two insurers who refused to pay, Mrs. Fazio filed suit in the United States District Court for the Middle District of Pennsylvania, naming both funds as defendants. Federal jurisdiction was grounded on 29 U.S.C. Sec. 1132(a)(1)(B). From the outset, it was clear that Mrs. Fazio was entitled to reimbursement for her medical expenses from one of the funds. The district court thus thought it unfair for Mrs. Fazio to incur counsel fees and to wait for payment while the court decided which of the funds was liable for her bills. The court therefore suggested, and defendants agreed, that (1) the ILGWU Fund would pay Mrs. Fazio's claim, (2) the action brought by Mrs. Fazio would then be dismissed, and (3) the ILGWU Fund would file, contemporaneously with the dismissal, a complaint in federal court against the Teamsters Fund seeking a declaration of the rights and obligations of the two funds regarding Mrs. Fazio and persons similarly situated. 7 This agreement was promptly carried out. Federal jurisdiction over the new suit was predicated on two provisions of ERISA, 29 U.S.C. Secs. 1132(a)(1)(B) and 1132(a)(3). In addition to the ILGWU Fund, Sol Hoffman, Chairman of the Trustees of the ILGWU Fund, was added as a party-plaintiff. The parties stipulated to the facts and cross-moved for summary judgment. Each fund contended that its applicable other insurance provision, that is, the language in its benefits plan purporting to exclude from coverage persons in Mrs. Fazio's position, was controlling. In addition, the Teamsters Fund argued that, if the ILGWU Fund's provision operated as the ILGWU trustees contended, those trustees were acting in an arbitrary and capricious manner, in violation of their fiduciary duties as set out in ERISA at 29 U.S.C. Sec. 1104, because they were discriminating among participants on the basis of sex and marital status.
8 Both the ILGWU and the Teamsters plans have other insurance clauses providing for situations in which a participant or beneficiary is covered by another insurance policy or plan. Specifically, each plan has a coordination of benefits (COB) section that sets out when the plan intends to be the primary insurer of a participant or beneficiary and when it intends to be a secondary or excess insurer. See infra notes 9 & 10. The Teamsters Fund's COB provision states that a[nother] plan covering the patient directly, rather than as an employee's dependent, is primary. The ILGWU Fund COB provision does not apply to the situation in which a participant is also a potential beneficiary of a spouse's plan. Instead, the ILGWU plan has a separate section labeled Exception to Eligibility, which states: 9 Exception to Eligibility--You are not eligible for hospital, medical-surgical, or Major Medical benefits under this plan if there exists at your spouse's place of employment a group plan which provides for family coverage of these types of benefits so long as 50% or more of the cost of such family coverage is paid for by other than you or a member of your family. 10 Id. at 54a. The Teamsters plan does not have any provision comparable to the ILGWU plan's Exception to Eligibility clause.
11 The district court, 584 F.Supp. 68, granted summary judgment for ILGWU, holding the Teamsters Fund liable for Mrs. Fazio's medical bills. The court predicated its judgment on the fact that the Exception to Eligibility language in the ILGWU plan excludes coverage for employees if there exists at their spouse's place of employment a group plan that provides for family coverage, whereas the Teamsters plan provides that it will be an excess insurer only if a beneficiary is covered by another plan. The court concluded that, since the Teamsters Fund exists, Mrs. Fazio is not covered by the ILGWU plan. The court further concluded that, because the Teamsters Fund purports to provide excess coverage only where a participant's spouse is covered by another plan and provides primary coverage otherwise, the Teamsters Fund is liable for all of Mrs. Fazio's medical expenses. Influencing the court's analysis was its concern that the ILGWU Fund ought to be able to protect its limited financial resources by shifting liability to the wealthier Teamsters Fund. See Appellant's Appendix at 130a n. 6 (The court recognizes the fact that generally members of the ILGWU have lower salaries than members of the Teamsters Union. It therefore follows that the ILGWU Fund has more limited financial resources from which to draw in distributing.) Finally, the court rejected the Teamsters Fund's argument that the ILGWU Fund provision is discriminatory and in violation of Sec. 1104 of ERISA. 12 The Teamsters Fund appeals. Although both funds maintain that we have jurisdiction over this suit, we expressed concern about this issue at oral argument and requested that the funds file supplemental briefs on this point. In addition to supporting the allegation in its complaint that jurisdiction properly rests on Sec. 1132 of ERISA, the ILGWU Fund contended in its supplemental brief that federal jurisdiction also can be based on 28 U.S.C. Sec. 1331.