Opinion ID: 75680
Heading Depth: 2
Heading Rank: 2

Heading: Sole Shareholder as Beneficiary

Text: Gilbert argues that because he is the sole shareholder of Winfield Monument, he cannot be a beneficiary of an ERISA plan, within the meaning of 29 U.S.C. § 1002(8). If he is correct, he then argues that the state law causes of 17 action related to his insurance claims would not be subject to ERISA preemption. The issue of whether the policy claims of a business owner are subject to ERISA, has divided the Circuits.10 Compare Sipma v. Mass. Cas. Ins. Co., 256 F.3d 1006 (10th Cir. 2001) (corporation is employer, thus shareholder owning 49% of business is an employee and thus a participant of the ERISA plan); Vega v. Nat'l Life Ins. Servs., Inc., 188 F.3d 287 (5th Cir. 1999) (sole shareholder is participant so long as some other employee is also a beneficiary of the plan); Wolk v. UNUM Life Ins. of Am., 186 F.3d 352 (3rd Cir. 1999) (former law partner is beneficiary under ERISA); Robinson v. Linomaz, 58 F.3d 365 (8th Cir. 1995) (sole shareholder is beneficiary of ERISA plan); Peterson v. Am. Life & Health Ins. Co., 48 F.3d 404 (9th Cir. 1995) (business partner is beneficiary of ERISA plan); Madonia v. Blue Cross & Blue Shield of Va., 11 F.3d 444 (4th Cir. 1993) (sole shareholder was employed by corporation and thus was a participant in ERISA plan), with Agrawal v. Paul Revere Life Ins. Co., 205 F.3d 297 (6th Cir. 10 The issue has arisen in a myriad of contexts, though the underlying issue remains the same. The cases range from consideration of sole shareholders to business partners, and are divided between consideration of whether the owner may be a participant or whether he may be a beneficiary. Some of the cases relate to pension plans, which may have different considerations than those that relate to insurance claims. See Engelhardt v. Paul Revere Life Ins. Co., 139 F.3d 1346, 1351 (11th Cir. 1998) (distinguishing insurance claims from pension funds on the basis that insurance claims are not paid out of plan assets). Because this case involves a health insurance claim, we need not explore whether the nature of the plan should affect whether a business owner may be a beneficiary. 18 2000) (following earlier case law that sole shareholder/surgeon is neither a participant nor beneficiary and has no standing to sue under ERISA); Fugarino v. Hartford Life & Acc. Ins. Co., 969 F.2d 178 (6th Cir. 1992) (finding the health coverage of sole proprietor of a restaurant and his dependents not subject to ERISA, although coverage for other employees under the same group health plan was); Kwatcher v. Mass. Serv. Employees Pension Fund, 879 F.2d 957 (1st Cir. 1989) (sole shareholder was employer, not employee of corporation and was thus barred from collecting a pension under the corporation's benefit plan); Giardono v. Jones, 867 F.2d 409 (7th Cir. 1989) (holding that ERISA's definition of participant does not include a former employee who became an employer and was allowed to continue purchasing plan coverage); Peckham v. Bd. of Trustees of Int'l Bhd. of Painters and Allied Trades Union, 653 F.2d 424 (10th Cir. 1981) (Pension Fund not arbitrary and capricious in ruling that sole proprietors have no dual-status as employees, and cannot be eligible for employee pension benefit plans). We find ourselves in agreement with the more recent line of decisions. We hold that a sole shareholder is a beneficiary, within the meaning of 29 U.S.C. § 1002(8), when he is entitled to benefits from a benefits plan which otherwise qualifies as an ERISA plan. 19 Interpretation of a statutory provision begins with the words of the statute. CBS Inc. v. Primetime 24 Joint Venture, 245 F.3d 1217, 1222 (11th Cir. 2001); Harris v. Garner, 216 F.3d 970, 972 (11th Cir. 2000) (en banc). When the statutory language is unambiguous, judicial inquiry is complete. CBS Inc., 245 F.3d at 1222 (quoting Merritt v. Dillard Paper Co., 120 F.3d 1181, 1186 (11th Cir. 1997) (additional citations omitted)). The court need look no further. ERISA defines the term beneficiary as a person designated . . . by the terms of an employee benefit plan, who is or may be entitled to a benefit thereunder. 29 U.S.C. § 1002(8). Gilbert's health insurance policy included employees other than himself and his wife; thus it qualifies as an ERISA employee benefit plan. R.I at Tab 1, Ex. 1. Gilbert is designated in the insurance policy as a person entitled to health benefits. R.I at Tab 1, Ex. 1. Therefore, under the plain meaning of section 1002(8), Gilbert is a beneficiary of an ERISA plan. Our previous caselaw is consistent with this outcome. In Engelhardt v. Paul Revere Life Ins. Co., we held that a physician/shareholder was a beneficiary in the corporation's disability plan. 139 F.3d 1346 (11th Cir. 1998). We recognize that Engelhardt does not control the outcome of this case because the plaintiff there was one of four shareholders of a professional corporation, not a sole shareholder. Id. at 1348. However, in that case, we did consider the effect of the anti-inurement 20 provision, which underlies the policy argument against holding a business owner subject to ERISA. Our conclusions concerning the policy considerations embodied in the anti-inurement provision are as instructive in the instant case as they were in Engelhardt. Gilbert argues that the Department of Labor regulation, 29 C.F.R. § 2510.3- 3(c)(1),11 provides that sole shareholders are exempt from ERISA. His argument fails, however, because this regulation has no relevance to the issue at hand. The meaning of the regulation is clear from its plain language, and is further supported 11 29 C.F.R. § 2510.3-3 Employee benefit plan. provides, in relevant part: (a) General. This section clarifies the definition in section 3(3) of the term employee benefit plan for purposes of title I of the Act and this chapter. It states a general principle which can be applied to a large class of plans to determine whether they constitute employee benefit plans within the meaning of section 3(3) of the Act. Under section 4(a) of the Act, only employee benefit plans within the meaning of section 3(3) are subject to title I. (b) Plans without employees. For purposes of title I of the Act and this chapter, the term employee benefit plan shall not include any plan, fund or program, other than an apprenticeship or other training program, under which no employees are participants covered under the plan, as defined in paragraph (d) of this section .... (c) Employees. For purposes of this section: (1) An individual and his or her spouse shall not be deemed to be employees with respect to a trade or business, whether incorporated or unincorporated, which is wholly owned by the individual or by the individual and his or her spouse, and (2) A partner in a partnership and his or her spouse shall not be deemed to be employees with respect to the partnership. 21 by common sense.12 29 C.F.R. § 2510.3-3 defines the term employee benefit plan. 29 C.F.R. § 2510.3-3(a). The regulation states a general principle which can be applied to a large class of plans to determine whether they constitute employee benefit plans within the meaning of section 3(3) of [ERISA]. Id. It lays out the test for determining if a benefit plan is an ERISA plan; it does not speak to the separate issue of who may or may not be a beneficiary or participant of a plan once it is deemed an ERISA plan. Subsection (c)(1) establishes only that a sole shareholder and his spouse do not constitute employees for the purpose of determining if a plan is covered by ERISA. Because the Alta policy covers employees besides 12 Alta also argues that our interpretation of the regulation is supported by opinion letters from the Department of Labor. We recognize that agency opinion letters interpreting regulations are to be given deference only when the language of the regulation is ambiguous. Christensen v. Harris County, 529 U.S. 576, 588, 120 S.Ct. 1655, 1663 (2000). Because we find there to be no ambiguity in the regulation, no deference is accorded to Department of Labor opinion letters concerning the regulation. Nonetheless, we note that opinion letters from Department of Labor do support our reading of the 29 C.F.R. § 2510.3-3. In a 1992 opinion letter, the Department of Labor concluded that [i]f . . . the benefit program includes one or more common law employees as well as an individual described in § 2510.3-3(c), such program would be an employee benefit plan. Letter from Robert J. Doyle, Director of Regulations and Interpretations, Pension and Welfare Benefits Administration, U.S. Dept. of Labor to Susan Katz Hoffman 2 (July 31, 1992). As such, the plan is subject to the claims procedure provisions of ERISA. The opinion letter concludes that those provisions apply to any participant or beneficiary covered under the employee benefit plan, including any participant or beneficiary described in § 2510.3-3(c). Id. (emphasis added). Thus, the letter interprets 29 C.F.R. § 2510.3-3 to mean that an individual's status as sole shareholder would foreclose ERISA application if he were the only named beneficiary of the plan, but his status has no bearing on the application of ERISA if he is a named beneficiary of a plan otherwise subject to ERISA. 22 Gilbert and his wife, this section has no bearing on this case. This conclusion also comports with common sense. As the Fourth Circuit noted, once a plan has been established, it would be anomalous to have those persons benefitting from it governed by two disparate sets of legal obligations. Madonia v. Blue Cross & Blue Shield of Va., 11 F.3d 444, 449-50 (4th Cir. 1993) (refusing to apply 29 C.F.R. § 2510.3-3 to the definition of participant). If we accepted Gilbert's reading of the regulation, then he and his wife would have a different set of rights and remedies then the other employees covered by the same plan. Gilbert is a sole shareholder named in a policy which provides coverage to other employees. He is, therefore, a beneficiary of an ERISA plan, as contemplated by the statute. The district court correctly dismissed his state fraud and breach of contract claims as preempted by ERISA.