Court Opinion

ID: 3021070
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:24:03.404192+00
Date Added: 2024-06-11T11:47:26.369453
License: Public Domain

United States Court of Appeals
                             FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 97-2779
                                   No. 98-1023
                                   ___________

Gloria Molasky;                         *
Melanjo Investments, Inc.,              *
                                        *
            Appellants,                 *
                                        *   Appeals from the United States
      v.                                *   District Court for the
                                        *   Eastern District of Missouri.
Principal Mutual Life Insurance         *
Company,                                *
                                        *
            Appellee.                   *
                                   ___________

                          Submitted: February 11, 1998

                               Filed: July 23, 1998
                                    ___________

Before WOLLMAN and LOKEN, Circuit Judges, and BOGUE,1 District Judge.
                          ___________

WOLLMAN, Circuit Judge.

      In No. 97-2779, Gloria Molasky and Melanjo Investments, Inc. (Melanjo) appeal
from the district court’s order dismissing their action against Principal Mutual Life
Insurance Company (Principal). In No. 98-1023, they appeal from the order awarding

      1
       The HONORABLE ANDREW W. BOGUE, United States District Judge for
the District of South Dakota, sitting by designation.
Principal $40,868.67 in attorney fees and costs. We affirm the order dismissing the
action. We reverse the order awarding attorney fees and costs and remand for further
proceedings.

                                            I.

      Melanjo is a Florida corporation, having its principal office in St. Louis, Missouri.
Melanjo, wholly owned by the Molasky family, is engaged in the business of real estate
and investments. In early 1982, Melanjo was contacted by Ben Smith, Jr., an
independent insurance broker, who supplied it with a master application and individual
application forms for group life insurance coverage with Principal.2

       In addition to requiring that a Melanjo employee be a full-time employee to be
eligible for life insurance, the group policy also included the following conditions:

      The term “Person” means any individual who is a full-time employee of
      [Melanjo].

      The term “full-time employee” means an employee whose employment
      with [Melanjo] constitutes his principle occupation and who is regularly
      scheduled to work at such occupation not less than thirty hours per week.

      The terms “active work” and “actively at work,” as used in this Policy
      with respect to any Person, mean active full-time performance of all
      customary duties of his occupation at [Melanjo’s] business establishment
      or other location of business to which [Melanjo’s] business requires the
      Person to travel.

      2
       Although Smith was originally named as a defendant, the appellants later
dismissed him from the action.

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       Melanjo’s bookkeeper, Rosemary Pace, filled out the individual forms for its
proposed covered employees, including Allan and Gloria Molasky and their son, Mark.
At the time of the application, Mark Molasky was serving a thirty-two-year sentence in
the Missouri state prison system. Allan Molasky filled out a portion of his son’s
application, listing the Molasky home as Mark’s address rather than his prison address.
Mark signed the individual application, listing his job position as “adviser.” This
application contained a box stating “Do you work at least 30 hours per week at your
place of employment?” In response to this inquiry, the “No” box was marked. Allan
Molasky also signed the master application, representing that all of his employees were
working at least thirty hours per week. Citing a lack of medical documentation,
Principal ultimately denied the proposed coverage on November 2, 1982.

       In early 1983, Melanjo reapplied for coverage and submitted a new set of
application forms. A Principal employee typed new applications for each purported
employee, using information from the previous year’s applications, thereafter relying on
the individual who was required to sign the document to confirm that the information
contained therein was correct. Melanjo and its claimed employees then completed both
the master and individual applications. Once again, the master application reflected that
all of Melanjo’s employees worked at least thirty hours per week. Moreover, Mark
Molasky’s application again listed his position as “Adviser” and indicated “No” in
response to the question whether or not he worked at least thirty hours at his place of
employment.

      It was Principal’s practice to submit group life insurance applications to a
department known as Group Underwriting C for review and approval. The
documentation would then be forwarded to other departments within Principal,
including Contracts Administration, for evaluation. Melanjo’s application was approved
by Underwriting C on May 2, 1983, and then forwarded to the Contracts Administration
department. Later that same month, Principal sought clarification of Mark Molasky’s
application, specifically citing his aforementioned “No” response. As

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a result of this inquiry, the application was amended by Principal employees to change
Mark’s answer to “Yes.” The district court found that Principal made this change only
after confirming it with either Melanjo or its insurance agent.

       Mark Molasky died in prison on January 29, 1990. Melanjo filed a claim for the
$50,000 death benefit provided by the policy, listing Gloria Molasky as the beneficiary.
Principal denied the claim, asserting that because Mark was not a person actively at
work and not a full-time employee, he was ineligible for insurance. Gloria Molasky and
Melanjo then filed suit against Principal, alleging breach of fiduciary duty, breach of
contract, and misrepresentation. (They later voluntarily dismissed the misrepresentation
claim.) By agreement, the parties submitted the case on the basis of written pleadings,
depositions, and documentary evidence. Concluding that Principal had not acted in a
fiduciary capacity, the district court dismissed the action.

                                            II.

       The appellants seek recovery from Principal on both breach of contract and
breach of fiduciary duty theories. Melanjo’s plan, which included, in part, the death
benefit funded by the group life insurance purchased from Principal, is governed by the
Employee Retirement Income Security Act (ERISA). 29 U.S.C. §§ 1001 et seq. The
appellants’ state law claim for breach of contract is preempted by ERISA. See Walker
v. National City Bank of Minneapolis, 18 F.3d 630, 634 (8th Cir. 1994) (citing Pilot
Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987)). Thus, in order to prevail, appellants
must establish that Principal acted in a fiduciary capacity and that it breached a fiduciary
duty owed to the appellants.

       Under ERISA, the written plan instrument “should identify ‘one or more named
fiduciaries.’” Kerns v. Benefit Trust Life Ins. Co., 992 F.2d 214, 216 (8th Cir. 1993)
(quoting 29 U.S.C. § 1102(a)(1)). Because Melanjo had no written plan and no named
fiduciary, the appellants must demonstrate that Principal was a fiduciary under 29

                                            -4-
U.S.C. § 1002(21)(A). See Kerns, 992 F.2d at 216. Section 1002(21)(A) provides that
any other person

      is a fiduciary with respect to a plan to the extent (i) he exercises any
      discretionary authority or discretionary control respecting management of
      such plan or . . . disposition of its assets . . . or (iii) he has any
      discretionary authority or discretionary responsibility in the administration
      of such plan.

29 U.S.C. § 1002(21)(A). We held in Kerns that this definition does not encompass
insurance companies when they are engaged in the performance of their normal
contractual claims-handling responsibilities under the terms of a group policy. See id.,
992 F.2d at 216-17.

        Department of Labor regulations mandate that every plan permit a claimant to
appeal a denied claim “to an appropriate named fiduciary or to a person designated by
such fiduciary.” 29 C.F.R. § 2560.503-1(g)(1). Often, as in this case, insurance is
purchased to fund an employer’s ERISA plan. When an insurer retains this review
function, it “shall be the ‘appropriate named fiduciary’ for purposes of this section.”
Id. at § 2560.503(g)(2); see also The Prudential Ins. Co. of America v. Doe, 140 F.3d
785, 789-90 (8th Cir. 1998); Kerns, 992 F.2d at 216. Principal supplied Melanjo with
a pamphlet entitled “Your Group Insurance Benefits” as an aid to Melanjo’s
administration of its plan. The pamphlet includes a provision that gives claimants the
right to seek Principal’s reconsideration of denied claims. Arguably, then, Principal
acted in a fiduciary capacity with respect to the claims-review function in this case.

      That does not end the matter, however, for fiduciary status is not “an all-or-
nothing concept. . . . A court must ask whether a person is a fiduciary with respect to
the particular activity in question.” Kerns, 992 F.2d at 217 (quoting Coleman v.
Nationwide Life Ins. Co., 969 F.2d 54, 61 (4th Cir. 1992)). Because the appellants’
claims relate to Principal’s alleged unilateral amendment of Mark Molasky’s

                                          -5-
application, we must determine whether Principal was acting in a fiduciary capacity
when it made the change. Because Melanjo had no written employee benefit plan, the
company by law became the plan administrator. See 29 U.S.C. § 1002(16)(A)(ii). It
is well established that insurers who, like Principal in this case, are not plan
administrators have “no ERISA fiduciary duty to notify plan participants and
beneficiaries, unless the policy documents or the insurer’s past practices have created
an obligation to communicate directly with them.” Kerns, 992 F.2d at 217. The
appellants concede that Principal’s policy documents create no obligation to notify
Melanjo’s participants and beneficiaries regarding modifications to the policy. Instead,
they argue that the alleged duty arose from Principal’s sole authority to modify the
policy.

      In support of their contention, appellants cite language from the policy that states:
“No agent or other individual except an Officer of [Principal] has authority to make or
modify this Policy . . . .” A subsequent provision of the policy, however, requires that
modifications be endorsed by both Melanjo and an officer of Principal. The appellants
argue that section 8 of the policy grants Principal the authority to terminate coverage
without reason. That provision, however, grants Melanjo a grace period for payment
of premiums; it says nothing about a unilateral power on Principal’s part to terminate
coverage.

      We conclude that the foregoing policy provisions are nothing more than standard
provisions typically found in an insurance policy, and that they, neither singly nor in
combination, transform Principal from insurer to fiduciary.

       Finally, the appellants point to no evidence that Principal had a practice of
delivering notice to participants or a beneficiary other than by means of the normal
correspondence involved in claims handling and review. Since Principal at no time
performed the notification functions at issue, the obligation to perform those functions
fell squarely on Melanjo, the plan administrator. See Kerns, 992 F.2d at 217.

                                           -6-
       Even if it were held that Principal was acting in a fiduciary capacity when it
amended Mark Molasky’s application, the appellants could not prevail, for the district
court found that Principal’s employees consulted with Melanjo before making the
change.      Although Principal’s employees had difficulty recollecting their
communications with Melanjo employees, the district court found that it was Principal’s
customary practice to consult with either the policy holder or its agent before amending
an application. Thus, the change was made not as a result of a breach of fiduciary duty,
but as the consequence of consultation with the policy holder.

       “A district court’s choice between two permissible views of evidence cannot be
clearly erroneous.” Estate of Davis by Ostenfeld v. Delo, 115 F.3d 1388, 1393 (8th Cir.
1997). We conclude that the foregoing findings are not clearly erroneous. Similarly,
we find no error in the other factual findings contested by the appellants.

       The appellants contend that the district court erroneously admitted numerous
exhibits into evidence over their objections. We review the court’s evidentiary rulings
for a “clear and prejudicial abuse of discretion.” Pittman v. Frazer, 129 F.3d 983, 989
(8th Cir. 1997). The appellants have failed to cite any legal authority in support of their
argument, however, and “it is not this court’s job to research the law to support an
appellant’s argument.” Lusby v. Union Pacific R.R. Co., 4 F.3d 639, 642 (8th Cir.
1993); see Fed. R. App. P. 28(a)(6). In any event, we find no abuse of discretion in the
district court’s admissibility rulings.

       Finally, the appellants argue that the district court abused its discretion in
awarding Principal its attorney fees and costs under 29 U.S.C. 1132(g) by failing to
make the findings required by our holding in Lutheran Med. Ctr., of Omaha, Nebraska
v. Contractors, Laborers, Teamsters and Engineers Health & Welfare Plan, 25 F.3d 616,
623 (8th Cir. 1994). Reaffirming our earlier decisions on this issue, we held that a
district court must consider the following factors before awarding attorney fees in
ERISA litigation: “[T]he degree of culpability or bad faith; the ability to pay an award

                                           -7-
for attorney fees; the deterrent effect an award would have on others; whether the
attorney fees are requested to benefit the other plan participants or to resolve legal
issues; and the relative merits of the parties’ positions.” 25 F.3d at 623. The district
court’s order awarding fees and costs reflects no consideration of these factors.
Accordingly, we reverse the fee order and remand the case to the district court for
further proceedings on the matter of fees and costs.

      The order dismissing the action is affirmed. The order awarding attorney fees
and costs is reversed, and the case is remanded to the district court for further
proceedings.

      A true copy.

             Attest:

                     CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

                                          -8-