Court Opinion

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Opinions of the United
2007 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

9-4-2007

Metro Life Ins Co v. Price
Precedential or Non-Precedential: Precedential

Docket No. 05-2927

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                                          PRECEDENTIAL

         UNITED STATES COURT OF APPEALS
              FOR THE THIRD CIRCUIT
                   ____________

                        No. 05-2927
                       ____________

     METROPOLITAN LIFE INSURANCE COMPANY,

                                      Appellant,

                              v.

   SANDRA PRICE; SHANNON PRICE; ANDRE PRICE.

                       ___________

       On Appeal from the United States District Court
              for the District of New Jersey
                    (No. 04-cv-05044)

         District Judge: Honorable Faith S. Hochberg

         Submitted Under Third Circuit LAR 34.1(a)
                Thursday, January 25, 2007

 Before: SCIRICA, Chief Judge, FUENTES and CHAGARES,
                      Circuit Judges.

                       ____________

                 (Filed September 4, 2007)

Randi F. Knepper, Esq.
McElroy, Deutsch, Mulvaney & Carpenter, LLP
1300 Mount Kemble Ave.
P.O. Box 2075
Morristown, NJ 07962-2075
Counsel for Appellant

                            _________

                   OPINION OF THE COURT
                        ____________

CHAGARES, Circuit Judge.

       Appellant Metropolitan Life Insurance Company
(“MetLife”) is the claims fiduciary of an “employee welfare benefit
plan.” See Employee Retirement Income Security Act of 1974
(“ERISA”) § 3(1), 29 U.S.C. § 1002(1). After one of the plan’s
participants died, MetLife received competing claims to the
decedent’s life-insurance benefits. It responded by filing this
interpleader action against the competing claimants. The District
Court raised the issue of subject matter jurisdiction sua sponte and
dismissed. In our view, however, the District Court had federal
question jurisdiction. Accordingly, we will vacate and remand.

                                 I.

       The New Jersey Transit Corporation sponsors a Basic Life
Plan for the benefit of its employees. The plan is funded through
a group life insurance policy issued by MetLife to New Jersey
Transit. MetLife is the plan’s “claims fiduciary.”

       Paul Price was a participant in the plan. He was a bus driver
with New Jersey Transit and had enrolled for $20,000 in life
insurance benefits. In May 2002, Paul passed away. He was
survived by his widow, Sandra Price, and his children from a
previous marriage, Shannon and Andre Price.

        After Paul’s death, his widow and his children submitted
competing claims for the life insurance benefits. MetLife
investigated the matter and discovered that, in or around February
2000, Paul designated his widow as the primary beneficiary.
MetLife then informed the children’s attorney that it was denying
their claims. MetLife explained that it had a fiduciary duty “to
administer claims in accordance with ERISA and the terms of the

                                 2
plan.” Appendix (“App.”) 62-63. As such, it had to “pay the
proceeds to the named beneficiary only.”

       The children’s attorney requested a review of the claim.
Paul’s first marriage had ended in 1995 with a final judgment of
divorce in New Jersey Superior Court. Paragraph 11 of that
judgment specifically referenced Paul’s life insurance:

       The Husband currently has life insurance upon his
       life. The Husband shall amend these policies in
       order to name the children of the marriage as
       irrevocable beneficiaries until such time as Andre
       Price, the son of the marriage[,] is emancipated. The
       Husband shall name the Wife as trustee.

App. 69. Since Andre remained unemancipated at the time of
Paul’s death, the children claimed they were the rightful
beneficiaries under the divorce judgment’s plain terms.

       This left MetLife in a quandary. Under ERISA, it had a
duty to administer claims “in accordance with the documents and
instruments governing the plan.” 29 U.S.C. § 1104(a)(1)(D).
These documents instructed MetLife to pay the benefits to Paul’s
designated beneficiary—his widow. Under the New Jersey divorce
judgment, however, the children were to be designated “irrevocable
beneficiaries.”

       Normally, ERISA preempts any state law that “relate[s] to”
an employee benefit plan. 29 U.S.C. § 1144(a); Egelhoff v.
Egelhoff, 532 U.S. 141, 147-48 (2001). However, ERISA (as
amended by the Retirement Equity Act of 1984) contains an
exception from this general rule for “qualified domestic relations
orders” (“QDROs”). 29 U.S.C. §§ 1144(b)(7), 1056(d)(3)(B)-(E);
see Boggs v. Boggs, 520 U.S. 833, 846-47 (1997). A QDRO
“assigns to an alternate payee the right to . . . receive all or a
portion of the benefits payable with respect to a participant under
a plan.” 29 U.S.C. § 1056(d)(3)(B)(i).1

       1
       A domestic relations order is a QDRO if it meets the
requirements of 29 U.S.C. §§ 1056(d)(3)(C) & (D). Under §

                                3
        MetLife informed the competing claimants that it could not
tell “whether a court would find that th[e] divorce decree is a
QDRO.” App. 73. It noted that if the New Jersey judgment is a
QDRO, then in all likelihood the children should get the $20,000.
It further noted that if the judgment is not a QDRO, then Price’s
widow is entitled to the money.2 MetLife stated that if the

1056(d)(3)(C), the domestic relations order must “clearly specif[y]”
the following:

       (i) the name and the last known mailing address (if
       any) of the participant and the name and mailing
       address of each alternate payee,
       (ii) the amount or percentage of the participant’s
       benefits to be paid by the plan to each such alternate
       payee, or the manner in which such amount or
       percentage is to be determined,
       (iii) the number of payments or period to which such
       order applies, and
       (iv) each plan to which such order applies.

§ 1056(d)(3)(C). And under § 1056(d)(3)(D), a domestic relations
order will be considered a QDRO “only if” it:

       (i) does not require a plan to provide any type or
       form of benefit, or any option, not otherwise
       provided under the plan,
       (ii) does not require the plan to provide increased
       benefits (determined on the basis of actuarial value),
       and
       (iii) does not require the payment of benefits to an
       alternate payee which are required to be paid to
       another alternate payee under another order
       previously determined to be a qualified domestic
       relations order.

§ 1056(d)(3)(D).
       2
        Every Court of Appeals to address the question has held
that “the § 1144(b)(7) exception to ERISA preemption applies to

                                 4
claimants did not resolve the matter amicably, it would bring suit.
Price’s widow and the children negotiated, but they failed to reach
an agreement. The children’s attorney then asked MetLife to
“[k]indly initiate an interpleader action.” App. 75.

       MetLife obliged, bringing this suit in the United States
District Court for the District of New Jersey. On its own motion,
the District Court raised the issue of subject matter jurisdiction and
dismissed. This appeal followed. We review de novo the District
Court’s dismissal for lack of subject matter jurisdiction. IFC
Interconsult, AG v. Safeguard Int’l Partners, LLC, 438 F.3d 298,
309 (3d Cir. 2006).

                                  II.

        The equitable remedy of interpleader allows “a person
holding property to join in a single suit two or more persons
asserting claims to that property.” NYLife Distrib., Inc. v.
Adherence Group, Inc., 72 F.3d 371, 372 n.1 (3d Cir. 1995). The
plaintiff in an interpleader action is a stakeholder that admits it is
liable to one of the claimants, but fears the prospect of multiple
liability. Interpleader allows the stakeholder to file suit, deposit the
property with the court, and withdraw from the proceedings. The
competing claimants are left to litigate between themselves. See
Zechariah Chaffee, Jr., The Federal Interpleader Act of 1936: I, 45
Yale L.J. 963, 963 (1936). The result is a win-win situation. The
stakeholder avoids multiple liability. The claimants settle their
dispute in a single proceeding, without having to sue the
stakeholder first and then face “the difficulties of finding assets and
levying execution.” Id. at 964.

       There are two methods for bringing an interpleader in

all QDROs, whether they involve either pension or welfare plans.”
Metro. Life Ins. Co. v. Bigelow, 283 F.3d 436, 440 n.3 (2d Cir.
2002); Metro. Life Ins. Co. v. Pettit, 164 F.3d 857, 863 n.5 (4th
Cir. 1998); Metro. Life Ins. Co. v. Marsh, 119 F.3d 415, 421 (6th
Cir. 1997); Metro. Life Ins. Co. v. Wheaton, 42 F.3d 1080,
1083-84 (7th Cir. 1994); Carland v. Metro. Life Ins. Co., 935 F.2d
1114, 1119-20 (10th Cir. 1991).

                                   5
federal court. The first is the interpleader statute, 28 U.S.C. §
1335. District Courts have subject matter jurisdiction under this
provision if there is “minimal diversity” between two or more
adverse claimants, and if the amount in controversy is $500 or
more. See State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523,
530-31 (1967). The second is Federal Rule of Civil Procedure 22.
Unlike its statutory counterpart, rule interpleader is no more than
a procedural device; the plaintiff must plead and prove an
independent basis for subject matter jurisdiction. See NYLife, 72
F.3d at 372 n.1; Commercial Union Ins. Co. v. United States, 999
F.2d 581, 584 (D.C. Cir. 1993).

        In this case, MetLife does not rely on the interpleader
statute, nor could it, as the adverse claimants are all New Jerseyans.
Rather, it has styled its lawsuit as a rule interpleader action.
MetLife argues that jurisdiction exists under the federal question
statute, 28 U.S.C. § 1331, and ERISA’s jurisdictional provision, 29
U.S.C. § 1132(e).

        A federal question interpleader is a rarity. See 7 Charles
Alan Wright et al., Federal Practice & Procedure § 1710 (3d ed.
2001); see also Donald L. Doernberg, What’s Wrong with this
Picture?: Rule Interpleader, the Anti-Injunction Act, In Personam
Jurisdiction, and M.C. Escher, 67 U. Colo. L. Rev. 551, 565 n.56
(1996) (“The dearth of reported cases involving interpleader and
federal question jurisdiction implies that although such cases can
arise, they will be a small proportion of all federal interpleader
actions.”). Statutory “arising under” jurisdiction requires that a
federal question appear on the face of the plaintiff’s well-pleaded
complaint. See Louisville & Nashville R.R. v. Mottley, 211 U.S.
149, 152 (1908). This requirement poses a problem for an
interpleader plaintiff, as all the complaint seeks is an order
releasing and discharging the plaintiff from liability. It is difficult
to characterize such a request “as asserting either federal or state
rights.” Morongo Band of Mission Indians v. Cal. State Bd. of
Equalization, 858 F.2d 1376, 1383 (9th Cir. 1988) (quoting Banco
de Ponce v. Hinsdale Supermarket Corp., 663 F. Supp. 813, 816
(E.D.N.Y. 1987)). Thus, at least at first blush, it is hard to see how
a request for interpleader could raise a federal question.

                                  6
       But only at first blush. Some interpleader actions do raise
federal questions. Indeed, our sister courts of appeals have
recognized that an interpleader “arises under” federal law when
brought by an ERISA fiduciary against competing claimants to plan
benefits. See, e.g., Metro. Life Ins. Co. v. Bigelow, 283 F.3d 436,
439-40 (2d Cir. 2002); Aetna Life Ins. Co. v. Bayona, 223 F.3d
1030, 1033-34 (9th Cir. 2000); Metro. Life Ins. Co. v. Marsh, 119
F.3d 415, 418 (6th Cir. 1997).

       We agree with these courts. Federal question jurisdiction
exists when the plaintiff’s well-pleaded complaint establishes that
“federal law creates the cause of action.” Franchise Tax Bd. v.
Constr. Laborers Vacation Trust, 463 U.S. 1, 27-28 (1983).3
MetLife brings this suit under section 502(a)(3) of ERISA, 29
U.S.C. § 1132(a)(3). That provision creates a cause of action for
fiduciaries “to obtain . . . appropriate equitable relief . . . to enforce
any provisions of this subchapter or the terms of the plan.” 29
U.S.C. § 1132(a)(3)(B)(ii).         As courts have noted, “[t]he
interconnection between the basis of the District Court’s
jurisdiction—ERISA—and the elements of [an] ERISA claim[]
makes it easy to confuse the question of the court’s subject matter

       3
         This so-called “creation test” is “[t]he most familiar
definition of the statutory ‘arising under’ limitation.” Franchise
Tax, 463 U.S. at 8-9; see American Well Works Co. v. Layne &
Bowler Co., 241 U.S. 257, 260 (1916) (Holmes, J.) (“A suit arises
under the law that creates the cause of action.”). However, as
Judge Friendly famously pointed out, “[i]t has come to be realized
that Mr. Justice Holmes’ formula is more useful for inclusion than
for the exclusion for which it was intended.” T.B. Harms Co. v.
Eliscu, 339 F.2d 823, 827 (2d Cir. 1964). Jurisdiction also exists
where “some substantial, disputed question of federal law is a
necessary element of . . . [a] well-pleaded state claim[].” Franchise
Tax, 463 U.S. at 13. And if federal law completely preempts a
state claim, “the result is to convert complaints purportedly based
on the preempted state law into complaints stating federal claims
from their inception.” In re Cmty. Bank of N. Va., 418 F.3d 277,
290 (3d Cir. 2005) (quotation marks omitted); see, e.g., Metro. Life
Ins. Co. v. Taylor, 481 U.S. 58, 66-67 (1987). For purposes of this
case, Justice Holmes’ rule of inclusion is sufficient.

                                    7
jurisdiction with the question of the plaintiff’s ability to state a
claim.” Carlson v. Principal Fin. Group, 320 F.3d 301, 307 (2d
Cir. 2003). The test we must apply is a familiar one. For
jurisdictional purposes, the issue is not whether MetLife will
ultimately be successful in sustaining its cause of action under
section 502(a)(3). See Bell v. Hood, 327 U.S. 678, 681-82 (1946).
Rather, “[d]ismissal for lack of subject-matter jurisdiction because
of the inadequacy of the federal claim is proper only when the
claim is ‘so insubstantial, implausible, foreclosed by prior decisions
of [the Supreme] Court, or otherwise completely devoid of merit as
not to involve a federal controversy.” Steel Co. v. Citizens for a
Better Env’t, 523 U.S. 83, 89 (1998) (quoting Oneida Indian
Nation of N.Y. v. County of Oneida, 414 U.S. 661, 666 (1974));
see also Primax Recoveries, Inc. v. Gunter, 433 F.3d 515, 519 (6th
Cir. 2006) (“An ERISA claim can be non-frivolous (or sufficiently
substantial) even if it is unsuccessful and possibly verging on the
foolhardy in light of prior precedent barring the relief sought.”)
(quotation marks omitted); Cement Masons Health & Welfare
Trust Fund for N. Cal. v. Stone, 197 F.3d 1003, 1008 (9th Cir.
1999) (“[D]ismissal of an ERISA claim under § 1132(a)(3) is
properly a dismissal on the merits rather than a dismissal for want
of subject matter jurisdiction.”).

         Here, MetLife brings suit as a fiduciary, and it adequately
invokes the District Court’s subject matter jurisdiction by seeking
“appropriate equitable relief . . . to enforce any provisions of this
subchapter or the terms of the plan.” ERISA § 502(a)(3), 29
U.S.C. § 1132(a)(3). Specifically, MetLife seeks interpleader,
which is a form of “equitable relief.” See U.S. Fire Ins. Co. v.
Asbestospray, Inc., 182 F.3d 201, 208 (3d Cir. 1999). Through its
interpleader action, MetLife seeks to enforce the provisions of
ERISA and the plan by ensuring that funds are disbursed to the
proper beneficiary. See Aetna Life, 223 F.3d at 1034. MetLife
thus presents a substantial, non-frivolous claim for relief under
section 502(a)(3). This is enough to confer subject matter
jurisdiction under ERISA. See Bell, 327 U.S. at 681-82.4

       4
        Even apart from MetLife’s cause of action as a fiduciary,
there may be an additional basis for subject matter jurisdiction in
this case. A rule interpleader is quite similar to a declaratory

                                  8
judgment action. Both the declaratory judgment statute and Rule
22 are purely procedural. See NYLife, 72 F.3d at 372 n.1; Aetna
Life Ins. Co. v. Haworth, 300 U.S. 227, 240 (1937). Neither
provision enlarges the subject-matter jurisdiction of the federal
courts. Compare Fed. R. Civ. P. 82 (“These rules shall not be
construed to extend . . . the jurisdiction of the United States district
courts . . . .”), with 28 U.S.C. § 2201 (authorizing a federal court
to issue a declaratory judgment “[i]n a case of actual controversy
within its jurisdiction”) (emphasis added). Rather, both simply
provide plaintiffs with a means to “anticipate and accelerate . . .
coercive action[s] by . . . defendant[s].” Bell & Beckwith v. United
States, 766 F.2d 910, 914 (6th Cir. 1985). Based on these
similarities, some courts have held that the jurisdictional test
applicable in declaratory judgment cases applies equally to a rule
interpleader. See, e.g., Commercial Nat’l Bank of Chicago v.
Demos, 18 F.3d 485, 488 (7th Cir. 1994); Commercial Union Ins.
Co. v. United States, 999 F.2d 581, 585 (D.C. Cir. 1993); Morongo
Band of Mission Indians v. Cal. State Bd. of Equalization, 858 F.2d
1376, 1384 (9th Cir. 1988); Bell & Beckwith, 766 F.2d at 913-14.
       In the declaratory judgment context, “[f]ederal courts have
regularly taken original jurisdiction over . . . suits in which, if the
declaratory judgment defendant brought a coercive action to
enforce its rights, that suit would necessarily present a federal
question.” Franchise Tax, 463 U.S. at 19; see also Richard H.
Fallon, Jr., et. al, Hart & Wechsler’s Federal Courts 900 (5th ed.
2003) (stating that Franchise Tax “appears to endorse” an approach
that “would uphold jurisdiction over a declaratory action if
jurisdiction would exist in a hypothetical nondeclaratory action
brought by either party against the other.”); but see Textron
Lycoming Reciprocating Engine Div., Avco Corp. v. UAW, 523
U.S. 653, 659-60 (1998) (expressing doubt about whether a
“declaratory-judgment complaint raising a nonfederal defense to an
anticipated federal claim . . . would confer § 1331 jurisdiction”)
(emphasis in original). If the practice described by Franchise Tax
is correct, and if the principle extends to rule interpleader, then
jurisdiction exists whenever one of “the coercive actions
anticipated by the [interpleader] complaint would arise under
federal law.” Morongo, 858 F.2d at 1385.
       MetLife’s interpleader complaint anticipates coercive

                                   9
                                 III.

        Presumably, the District Court agreed that MetLife’s cause
of action arises under federal law. Its jurisdictional inquiry focused
on a different issue:          exhaustion.      “Except in limited
circumstances,” we have held, “a federal court will not entertain an
ERISA claim unless the plaintiff has exhausted the remedies
available under the plan.” Harrow v. Prudential Ins. Co. of Am.,
279 F.3d 244, 249 (3d Cir. 2002) (quotation omitted). Relying on
that rule, the District Court noted that MetLife “assert[ed] federal
jurisdiction under ERISA despite . . . having made no initial
determination about which potential plan beneficiaries should be
paid.” District Court Order at 1. It reasoned that a federal court
“sits in review of a decision of a plan administrator,” and “it is the
plan administrator’s duty to make its own initial determination
regarding who should be paid.” Id. at 1-2. Absent such a
determination, there was “no administrative record for th[e] Court
to review.” Id. at 2. Thus, the District Court held that jurisdiction
was lacking.

       The District Court’s gloss on the exhaustion requirement
raises two questions.     First, should courts label ERISA’s
exhaustion requirement as a jurisdictional prerequisite to federal
court adjudication? Second, labels aside, is there a “reverse
exhaustion” requirement that limits a fiduciary’s ability to bring an
interpleader action? We address these questions in turn.

actions by both Price’s widow and his children. Both hypothetical
claims would seek to recover “benefits due . . . under the terms of
[a] plan,” 29 U.S.C. § 1132(a)(1)(B), and would necessarily present
federal questions. See Taylor, 481 U.S. at 66-67. Thus, the
approach adopted by our sister courts of appeals in cases like Bell
& Beckwith and Morongo might provide an alternative basis for
subject matter jurisdiction.      Nonetheless, in light of our
determination that federal law creates MetLife’s cause of action,
we need not take a position on the propriety of those decisions.

                                 10
                               A.

       A recent series of Supreme Court decisions provides helpful
guidance on the uses and misuses of the word “jurisdiction.” See
Bowles v. Russell, 551 U.S. ---, 127 S. Ct. 2360 (2007); Arbaugh
v. Y&H Corp., 546 U.S. 500, 126 S. Ct. 1235 (2006); Eberhart v.
United States, 546 U.S. 12 (2005) (per curiam); Kontrick v. Ryan,
540 U.S. 443 (2004). These cases clarify that nonstatutory claim-
processing rules are not properly labeled “jurisdictional.” True
“jurisdictional” limitations are set by the Constitution and by
Congress, not by rules of procedure or judge-made doctrine. See
Kontrick, 540 U.S. at 452 (“Only Congress may determine a lower
federal court’s subject-matter jurisdiction.”); see also Bowles, 127
S. Ct. at 2364-65 & n.3 (same). Nonstatutory rules, “even if
unalterable on a party’s application, can nonetheless be forfeited if
the party asserting the rule waits too long to raise the point.” See
Kontrick, 540 U.S. at 456.

         As it explained these principles, the Supreme Court noted
that its own past decisions had sometimes mislabeled nonstatutory
rules as “jurisdictional.” The Court described these casual
invocations of the term as “drive-by jurisdictional rulings that
should be accorded no precedential effect on the question whether
the federal court had authority to adjudicate the claim in suit.”
Arbaugh, 126 S. Ct. at 1242-43 (quotation marks omitted).

       Informed by the Supreme Court’s instruction, we must
assess whether ERISA’s exhaustion doctrine is a “jurisdictional”
mandate. Certainly, it is an important legal rule. We have
recognized that requiring exhaustion of plan remedies helps to
“‘reduce the number of frivolous lawsuits under ERISA; to
promote the consistent treatment of claims for benefits; to provide
a nonadversarial method of claim settlement; and to minimize the
costs of claims settlement for all concerned.’” Harrow, 279 F.3d
at 249 (quoting Amato v. Bernard, 618 F.2d 559, 567 (9th Cir.
1980)). In addition, exhaustion enhances the ability of fiduciaries
“‘to expertly and efficiently manage their funds by preventing
premature judicial intervention in their decision-making
processes.’” Id. (quoting Amato, 618 F.2d at 567). It also has the
salutary effect of “refining and defining the problem” for final

                                 11
judicial resolution. Amato, 618 F.2d at 568.

       But as important as the rule may be, “ERISA nowhere
mentions the exhaustion doctrine.” Id. at 566. It is a judicial
innovation fashioned with an eye toward “sound policy.” Id. at
567. We have not required exhaustion where the claim seeks to
enforce a statutory right under ERISA. Zipf v. AT&T, 799 F.2d
889, 891-92 (3d Cir. 1986). In addition, the failure to exhaust will
be excused in cases where a fact-sensitive balancing of factors
reveals that exhaustion would be futile. See Harrow, 279 F.3d at
249-50.

       This is not the stuff of a jurisdictional rule. Congress has
expressly provided for jurisdiction over ERISA cases in 29 U.S.C.
§ 1132(e). Neither that provision nor any other part of ERISA
contains an exhaustion requirement. Thus, as a judicially-crafted
doctrine, exhaustion places no limits on a court’s adjudicatory
power. See Arbaugh, 126 S. Ct. at 1245; Kontrick, 540 U.S. at
452; see also Paese v. Hartford Life & Accident Ins. Co., 449 F.3d
435, 445 (2d Cir. 2006) (“[ERISA exhaustion] is purely a judge-
made concept that developed in the absence of statutory language
demonstrating that Congress intended to make [it] a jurisdictional
requirement.”); Chailland v. Brown & Root, Inc., 45 F.3d 947, 950
n.6 (5th Cir. 1995) (same).

        Furthermore, even aside from the Supreme Court’s
instruction, our own cases carefully distinguish “between
prudential exhaustion and jurisdictional exhaustion.” Wilson v.
MVM, Inc., 475 F.3d 166, 174 (3d Cir. 2007); see also Zipes v.
Trans World Airlines, Inc., 455 U.S. 385, 393 (1982). Prudential
exhaustion “is generally judicially created.” Wilson, 475 F.3d at
174. It reflects a judicial desire to “respect[] agency autonomy by
allowing it to correct its own errors.” Id. Unlike a rigid
jurisdictional rule, prudential exhaustion provides flexible
exceptions for “waiver, estoppel, tolling or futility.” Id. ERISA’s
exhaustion requirement bears all the hallmarks of a
nonjurisdictional prudential rule. In addition to being judge-made,
the doctrine’s futility exception involves a discretionary balancing
of interests. Judicial prudence, not power, governs its application
in a given case.

                                12
        In reaching this conclusion, we have not overlooked the
several cases that refer to ERISA exhaustion as “jurisdictional.” 5
Two are particularly noteworthy. In Wolf v. National Shopmen
Pension Fund, 728 F.2d 182 (3d Cir. 1984), we described our
analysis as a “jurisdictional inquiry” and classified exhaustion as
a necessary predicate to “federal jurisdiction.” Id. at 186-87. In
addition, the leading case in this area, Amato v. Bernard, 618 F.2d
559 (9th Cir. 1980), referred to the exhaustion of plan remedies in
“jurisdiction[al]” terms. Id. at 566. Neither case, however,
explained why or how a doctrine borne of “sound policy” qualified
as “jurisdictional.” Amato, 618 F.2d at 568. The opinions simply
sprinkled their analyses with offhanded references to the term. See
Arbaugh, 126 S. Ct. at 1242-43. They do not alter our conclusion
that ERISA’s exhaustion doctrine places no limits on a federal
court’s subject matter jurisdiction.

        MetLife brought this interpleader action against Paul Price’s
widow and his children. Before the widow and the children ever
filed a responsive pleading, the District Court acted in the name of
subject matter jurisdiction and dismissed on exhaustion grounds.
This was error. The exhaustion requirement is a nonjurisdictional
affirmative defense. See Paese, 449 F.3d at 446; cf. Williams v.
Runyon, 130 F.3d 568, 573 (3d Cir. 1997).

                                 B.

      The question remains whether the affirmative defense of
exhaustion bars MetLife’s interpleader action. As noted above, our

       5
        See, e.g., Peterson v. Cont’l Cas. Co., 282 F.3d 112, 117
(2d Cir. 2002) (“[A]bsent a determination by the plan
administrator, federal courts are without jurisdiction to adjudicate
whether an employee is eligible for benefits under an ERISA
plan.”); Duffie v. Deere & Co., 111 F.3d 70, 72 n.2 (8th Cir. 1997)
(per curiam) (referring to “the jurisdictional argument that [the
claimant] failed to exhaust his remedies”); White v. Jacobs Eng’g
Group Long Term Disability Benefit Plan, 896 F.2d 344, 346 (9th
Cir. 1990) (“[A]ppellant did not exhaust his administrative
remedies, and jurisdiction in the district court was improperly
granted.”).

                                 13
cases hold that persons claiming plan benefits must generally
“exhaust their administrative remedies before seeking judicial
relief.” Berger v. Edgewater Steel Co., 911 F.2d 911, 916 (3d Cir.
1990). Of course, MetLife is not a person claiming plan benefits.
It is a fiduciary attempting to interplead the competing claimants.
There is no Third Circuit precedent addressing the applicability of
exhaustion principles in this context. The question for us, then, is
whether a so-called “reverse exhaustion” requirement bars a plan
fiduciary from bringing an interpleader action without first
developing a record and rendering a final benefits decision.

       The consensus view is that a fiduciary need not make a final
benefits decision. Many courts have allowed the use of
interpleader in ERISA benefits cases.          See, e.g., Alliant
Techsystems, Inc. v. Marks, 465 F.3d 864 (8th Cir. 2006); Metro.
Life Ins. Co. v. Parker, 436 F.3d 1109 (9th Cir. 2006); Guardian
Life Ins. Co. of Am. v. Finch, 395 F.3d 238 (5th Cir. 2004); Metro.
Life Ins. Co. v. Bigelow, 283 F.3d 436 (2d Cir. 2002); Aetna Life
Ins. Co. v. Bayona, 223 F.3d 1030 (9th Cir. 2000); Metro. Life Ins.
Co. v. Marsh, 119 F.3d 415 (6th Cir. 1997). Almost none of them
even mention the possibility of using exhaustion principles to bar
interpleader actions. The prevailing view is that “[i]nterpleader is
a valuable procedural device for ERISA plans who are confronted
with conflicting multiple claims upon the proceeds of an
individual’s benefit plan.” Trustees of Directors Guild of Am.
Producer Pension Benefits Plans v. Tise, 234 F.3d 415, 426, as
amended upon denial of reh’g, 255 F.3d 661 (9th Cir. 2000). If
courts demanded a fully developed record and a final benefits
decision, ERISA plans might face exposure to multiple lawsuits
from disappointed claimants. Most courts allow fiduciaries to
avoid this quandary by filing an interpleader complaint. See id.

        But there are three reported decisions that, to varying
degrees, support a reverse-exhaustion requirement in at least some
interpleader cases. The first is Life Insurance Company of North
America v. Nears, 926 F. Supp. 86 (W.D. La. 1996). There, a
participant in two ERISA-controlled life-insurance policies failed
to designate a beneficiary. When presented with competing claims
to the benefits, the insurer brought an interpleader action. One of
the policies contained a “facility of payment” clause. It stated that

                                 14
“[a]ny amount of your . . . benefits for which there is no designated
. . . beneficiary will be paid, at [the insurer’s] option, to any of your
following living relatives: spouse, mother, father, child, or
children, or to the executors or administrators of your estate.” Id.
at 89. Because the plan did not “rank the classes of relatives in any
order or preference,” the court “decline[d] to impose its subjective
preference . . . where the insurer ha[d] clearly contracted for the
discretion to exercise its own judgment.” Id. The court thus
denied the motion for interpleader as to that policy.

       Forcier v. Forcier, 406 F. Supp. 2d 132 (D. Mass. 2005),
also involved competing claims to a life-insurance policy with no
designated beneficiary. The court noted that since exhaustion is a
prerequisite to claims for plan benefits, “[a]rguably . . . the inverse
should be true” for interpleaders brought by plan fiduciaries:
“absent good cause, insurers or plan administrators with
discretionary power under ERISA plans should be required to
exercise that discretion, and make a decision, before seeking
judicial relief.” Id. at 140-41. The court stated that this “reverse
exhaustion approach ha[d] considerable superficial appeal.” Id. at
141. The insurer had contracted to make a benefits decision “under
a policy that it wrote and that it administer[ed].” Id. Having a
federal court “step into the shoes of the insurer” might well
“impede cost-effective administration.” Id. But despite this
concern, the court decided that reverse exhaustion was merely
“preferable,” not mandatory. Id. Interpleader, it reasoned, served
the interests of both participants and beneficiaries by ensuring
prompt, fair resolutions of competing claims. Id. at 142. The court
determined that to dismiss on reverse-exhaustion grounds would
only prolong disputes, as disappointed claimants would likely seek
review in federal court. Id.

       On appeal in Forcier, the Court of Appeals for the First
Circuit declined to address the reverse-exhaustion issue because the
parties had not raised it. See Forcier v. Metro. Life Ins. Co., 469
F.3d 178, 182 (1st Cir. 2006). Parenthetically, though, the court
noted that “on a going-forward basis” it might not “look with favor
upon interpleader actions brought by insurers who, in the last
analysis, are seeking to shift their responsibilities to the district
court without any clear demonstration of a need for interpleader

                                   15
relief.” Id. at 182 n.3.

        In our view, the analyses of both the Nears opinion (which
endorsed a limited form of reverse exhaustion) and the Court of
Appeals for the First Circuit’s opinion in Forcier (which remained
uncommitted) are persuasive. Nonetheless, whatever the merits of
these opinions’ reasoning, both are inapposite. In both cases,
participants failed to designate beneficiaries, and the plans vested
the fiduciaries with broad discretionary authority to distribute the
proceeds. See Forcier, 469 F.3d at 185 (“MetLife contracted for an
extremely free hand in deciding to whom . . . the policy’s proceeds
would be paid in the absence of a designated beneficiary.”); Nears,
926 F. Supp. at 89 (“[T]he insurer has clearly contracted for the
discretion to exercise its own judgment.”). The sound judicial
policy that animates the exhaustion doctrine applies with particular
force when fiduciaries are exercising discretion granted by plan
documents. Courts review such decisions under the deferential
arbitrary and capricious standard. See Firestone Tire & Rubber Co.
v. Bruch, 489 U.S. 101, 115 (1989); McLeod v. Hartford Life &
Accident Ins. Co., 372 F.3d 618, 623 (3d Cir. 2004). This
deference insulates the decision from undue judicial second
guessing and increases the likelihood that exhaustion (or reverse
exhaustion) will weed out frivolous claims, “‘promot[ing] the
consistent treatment of claims for benefits,’” and encouraging
nonadversarial claim settlement. See Harrow, 279 F.3d at 249
(quoting Amato, 618 F.2d at 567).

       Unlike the discretionary question at issue in Nears and
Forcier, MetLife’s decision in this case would receive no deference
from a federal court. The dispute between Price’s widow and his
children turns on whether the New Jersey divorce judgment is a
QDRO. That is a question “of statutory construction over which
reviewing courts exercise de novo review.” Files v. ExxonMobil
Pension Plan, 428 F.3d 478, 486 (3d Cir. 2005), cert. denied 126 S.
Ct. 2304 (2006). In light of that standard, the policy considerations
underlying the exhaustion doctrine do not apply. First, mandating
reverse exhaustion would do little to reduce frivolous lawsuits. See
Harrow, 279 F.3d at 249. Persons with frivolous claims could still
get a plenary “second look” in federal court. Second, reverse
exhaustion in these circumstances is unlikely to produce a

                                 16
significant reduction in costs or an increase in nonadversarial claim
settlement. See id. On the contrary, with plenary review in the
offing, the disappointed claimant will have every incentive to
continue the battle in federal court. Third, little is gained by having
fiduciaries “refin[e] and defin[e] the problem” for final judicial
resolution. See Amato, 618 F.2d at 568. Questions of statutory
interpretation fall within the “peculiar expertise” of the courts, and
the fiduciary’s position on the matter will be of limited utility. Cf.
Zipf v. AT&T, 799 F.2d 889, 893 (3d Cir. 1986). In short, even if
“sound policy” supports the imposition of a reverse-exhaustion
requirement in some cases, that policy does not apply when the
question centers on the existence of a QDRO.

        Policy aside, litigants in at least one case have argued that
29 U.S.C. § 1056(d)(3)(G)(i)(II) prohibits interpleaders filed before
an initial QDRO decision by the fiduciary. See Metro. Life Ins.
Co. v. Bigelow, 283 F.3d 436, 442 (2d Cir. 2002). Section
1056(d)(3)(G)(i)(II) states that “within a reasonable period after”
receiving a domestic relations order, “the plan administrator shall
determine whether such order is a qualified domestic relations
order and notify the participant and each alternate payee of such
determination.” The Court of Appeals for the Second Circuit held
that bringing an interpleader complaint is an acceptable way to
“determin[e]” an order’s QDRO status. Bigelow, 283 F.3d at 442.
We agree. A plan administrator’s interpretation and application of
the statutory QDRO requirements is no more authoritative (and no
less final) than that of the competing claimants. An interpleader
complaint effectuates a prompt, final determination of the QDRO
issue. As the Court of Appeals for the Second Circuit pointed out,
cutting off the use of interpleader “would assist none of the
interested parties.” Bigelow, 283 F.3d at 442. It would also make
it far more difficult for administrators to “determin[e]”
conclusively an order’s QDRO status “within a reasonable period.”
See § 1056(d)(3)(G)(i)(II). We therefore hold that neither ERISA
nor the prudential doctrine of exhaustion bars MetLife’s
interpleader action.

                                 IV.

       In sum, the District Court erred when it dismissed MetLife’s

                                  17
complaint for want of subject matter jurisdiction. MetLife’s well-
pleaded complaint establishes that its cause of action arises under
ERISA. The exhaustion requirement is a nonjurisdictional
affirmative defense, and that affirmative defense did not require
MetLife to make a decision on the QDRO issue before seeking
interpleader in federal court. We will vacate the District Court’s
judgment and remand for further proceedings consistent with this
opinion.

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