Court Opinion

ID: 2998258
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:42:11.862525+00
Date Added: 2024-06-11T11:45:35.930169
License: Public Domain

In the
 United States Court of Appeals
              For the Seventh Circuit
                       ____________

No. 04-3193
BARBARA CLER,
                                         Plaintiff-Appellant,
                             v.

ILLINOIS EDUCATION ASSOCIATION,
NATIONAL EDUCATION ASSOCIATION,
IEA UNIFIED LEGAL SERVICES
PLAN, and KATE FRANK/DUSHANE
UNIFIED LEGAL SERVICES PROGRAM,
                                      Defendants-Appellees.
                       ____________
           Appeal from the United States District Court
                for the Central District of Illinois.
      No. 04 C 2011—David G. Bernthal, Magistrate Judge.
                       ____________
 ARGUED FEBRUARY 7, 2005—DECIDED SEPTEMBER 9, 2005
                    ____________

  Before ROVNER, WILLIAMS, and SYKES, Circuit Judges.
  SYKES, Circuit Judge. When Barbara Cler was terminated
from her job as a schoolteacher, she asked her union’s legal
services plan to provide her with an attorney for purposes
of pursuing an employment action against her former
employer. When the union refused her request, Cler hired
an attorney at her own expense and was ultimately success-
ful in her case. In the present action, Cler contends that the
defendants wrongfully denied her request for legal services
2                                                    No. 04-3193

and seeks to recoup the approximately $25,000 she was
forced to spend in retaining an attorney on her own. The
district court dismissed the case on the defendants’ motion
pursuant to FED. R. CIV. P. 12(b)(6), holding that the only
claim providing a basis for federal jurisdiction—specifically,
under the Employee Retirement Income Security Act of
1974, 29 U.S.C. §§ 1001 et seq. (“ERISA”)—failed to state a
claim upon which relief could be granted. We reverse.

                       I. Background
  The first task in resolving this appeal is identifying
the defendant(s) against whom the various claims in the
complaint are asserted, an inquiry that should be straight-
forward but has been complicated by the complaint’s
confusing structure and cavalier approach to grammatical
usage. The caption and opening paragraph of the complaint
identify four separate entities as defendants, two of which
are labor unions—the Illinois Education Association (“IEA”)
and the National Education Association (“NEA”). The
remaining two defendants are alleged to be welfare benefit
plans sponsored by the defendant unions—the IEA Unified
Legal Services Plan (“IEA plan”) and the Kate
Frank/DuShane Unified Legal Services Program (“DuShane
plan”).1
  After asserting the separate existence of these four
defendants, the complaint immediately becomes subsumed
in confusion as to whether, and to what extent, the two
labor unions and two legal services plans are considered
separate and distinct entities for purposes of the claims

1
  In documents filed with the district court, the IEA plan asserted
that there is no entity properly known as the “IEA Unified
Services Plan” and that the organization’s proper name is the
“IEA-NEA Legal Services Program.”
No. 04-3193                                                   3

in the lawsuit. Paragraph two of the complaint reads in
part: “The Defendants [IEA] and [NEA] are a labor
union . . . .” Paragraph three reads in part: “The plans,
[DuShane plan] and [IEA plan], is an employee benefit plan
. . . .” There is an obvious disconnect between the plural
subjects of these sentences and their corresponding singular
objects or verb tenses. The confusion generated by this
careless usage is exacerbated by subsequent fac-
tual allegations referring only to “the Defendant” or “the
Defendant union,” without specifying which of the two
unions or four defendants is intended. For example, the
complaint alleges that “the Plaintiff made several requests
of the Defendant that an attorney be appointed on her
behalf” and “Plaintiff went to the Defendant union and
requested that they provide legal representation for
her . . . .” In short, it is difficult to assay the complaint
and come away confident as to which defendant is be-
ing referenced at any given point.
  This lack of clarity spills over into the third and final
count of the complaint, in which it is alleged that the
defendant(s)’ failure to provide Cler with legal representa-
tion constituted a denial of benefits to which she was
entitled under the terms of a welfare benefit plan, in
violation of ERISA. This claim, by virtue of its invocation of
ERISA, provides the sole basis for Cler’s assertion of federal
jurisdiction.2 The DuShane plan is mentioned by name in
Count III, but there is no overt mention of the IEA plan.
However, in the five paragraphs comprising Count III, the
words “defendant” and “defendants” are used. For example,
paragraph twenty of the complaint alleges that “the
defendants failed to provide benefits to her which she was
entitled [sic] under the plan in violation of the provisions of
ERISA.” As in other parts of the complaint, this allegation

2
  The other two counts in the complaint are state law claims for
breach of contract.
4                                               No. 04-3193

refers to plural defendants but a singular “plan.” Count III
of the complaint also references an exhibit described as an
excerpt from “the Defendant unions’ booklet relating to
providing legal representation.” This allegation uses the
plural “unions” and the exhibit appears to be two pages
taken from an overview of services provided jointly by the
NEA and IEA to its members.
   All four defendants moved to dismiss. The district
court construed Count III as leveled only against the
DuShane plan. The court then held that the DuShane
plan was not a “welfare benefit plan” for purposes of ERISA
because the scope of legal services it provided to members
was limited to employment-related matters. This limitation,
in the district court’s view, took the DuShane plan outside
ERISA’s definition of a welfare benefit plan. That definition
includes plans that provide “prepaid legal services,” which
the court construed as meaning “personal legal services”
only, not legal services relating to employment matters. The
court also held that the DuShane plan did not qualify as
a welfare benefit plan because it did not provide bene-
fits directly to participants such as Cler and instead only
reimbursed state affiliates (such as the IEA) for legal
expenses incurred “under delineated circumstances.”
  Having determined that the DuShane plan was not a
welfare benefit plan within the meaning of ERISA, the
district court held that Count III failed to state an ERISA
claim, and also declined to exercise supplemental jurisdic-
tion over the state law contract claims. Accordingly, the
court dismissed the action in its entirety.

                      II. Discussion
    A. Construction of Count III of the Complaint
  Cler argues on appeal that she intended to bring Count
III, the ERISA claim, against both the IEA plan and the
No. 04-3193                                                  5

DuShane plan and that her failure to specifically name the
IEA plan in Count III was an obvious oversight that
was improperly seized upon by the district court as a
basis to dismiss her complaint. She argues that her inten-
tion to bring Count III against more than one defendant
was clear enough under the liberal rules of notice pleading
and that the district court erred when it analyzed only
whether the DuShane plan was a welfare benefit plan for
purposes of ERISA. Cler points to the fact that earlier in
the complaint she clearly alleged that both the IEA and
DuShane plans are welfare benefit plans for purposes of
ERISA, thereby putting the defendants on notice that she
was pursuing ERISA claims against both entities.
  A motion under Rule 12(b)(6) challenges the sufficiency of
the complaint, and dismissal of an action under the rule is
warranted only if “no relief could be granted under any set
of facts that could be proved consistent with the allega-
tions.” DeWalt v. Carter, 224 F.3d 607, 612 (7th Cir. 2000).
We review a district court’s grant of a 12(b)(6) motion de
novo, accepting the well-pleaded allegations in the com-
plaint as true and drawing all reasonable inferences in
favor of the plaintiff. Gen. Elec. Capital Corp. v. Lease
Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997).
  Working hand in glove with Rule 12(b)(6) is FED. R. CIV.
P. 8, subsection (a) of which requires a plaintiff’s complaint
to contain a “short and plain statement” of his claim and
the basis for federal jurisdiction, and subsection (f) of which
instructs the courts that “[a]ll pleadings shall be so con-
strued as to do substantial justice.” Rule 8(a) thus requires
only a “short and plain statement of the claim that will give
the defendant fair notice of what the plaintiff’s claim is and
the grounds upon which it rests.” DeWalt, 224 F.3d at 612.
In this regard, the Supreme Court has cautioned that “[t]he
Federal Rules reject the approach that pleading is a game
of skill in which one misstep by counsel may be decisive to
the outcome and accept the principle that the purpose of
6                                                No. 04-3193

pleading is to facilitate a proper decision on the merits.”
Conley v. Gibson, 355 U.S. 41, 48 (1957); see also Luckett v.
Rent-A-Center, Inc., 53 F.3d 871, 873 (7th Cir. 1995)
(“District judges must heed the message of Rule 8: the
pleading stage is not the occasion for technicalities.”).
  The liberal construction given to a complaint, combined
with the minimal notice pleading requirements of Rule 8
and our obligation to draw all reasonable inferences in
Cler’s favor, persuade us that the district court read the
complaint too narrowly in determining that the DuShane
plan was the only defendant alleged to have violated
ERISA. As we have noted, the complaint is anything but
a model of clarity, but neither absolute clarity nor proper
attention to grammatical norms is a necessary prerequisite
to surviving a Rule 12(b)(6) motion. The inexact wording of
the complaint is undeniably confounding; the motion to
dismiss presented the district court with the option of either
construing Count III broadly and liberally so as to include
both the DuShane and IEA plans or narrowly so as to
exclude the IEA plan from consideration. The court’s
decision to construe Count III narrowly is inconsistent with
Rule 8 and with the obligation to draw all inferences in
favor of the nonmoving party when resolving a motion to
dismiss. The dismissal order must therefore be reversed.

    B.   “Prepaid Legal Services” under ERISA
  Because of its erroneously narrow reading of the com-
plaint, the district court did not consider whether the IEA
plan was a welfare benefit plan under ERISA. The court did
conclude, however, that the DuShane plan was not
a welfare benefit plan because it did not offer “prepaid legal
services.” Under the definition of “welfare benefit plan”
contained in 29 U.S.C. § 1002(1), the plans at issue in this
suit would fall under the auspices of ERISA if they satisfied
each of the following five elements: “(1) a plan, fund, or
No. 04-3193                                                       7

program[;] (2) established or maintained[;] (3) by an . . .
employee organization . . .[;] (4) for the purpose of providing
. . . prepaid legal services . . .[;] (5) to participants or their
beneficiaries.” See Ed Miniat, Inc. v. Globe Life Ins. Group,
805 F.2d 732, 738 (7th Cir. 1986); Postma v. Paul Revere
Life Ins. Co., 223 F.3d 533, 537 (7th Cir. 2000).3
  ERISA does not define the phrase “prepaid legal services”
as used in § 1002(1), and apparently there is a dearth of
case law, in this circuit and elsewhere, that addresses the
scope of the term.4 “It is a common rule of statutory con-
struction that when the plain language of a statute is clear,
courts need look no farther than those words in interpreting
the statute.” Gildon v. Bowen, 384 F.3d 883, 886 (7th Cir.
2004) (quoting Estate of Cowser v. Commissioner, 736 F.2d
1168, 1171 (7th Cir. 1984)). The district court bypassed the
straightforward meaning of the phrase “prepaid legal
services” in favor of a strained analysis that relied upon
definitions of slightly different phrases found in the Inter-

3
   The unedited version of the definition provides that a welfare
benefit plan “requires five elements: (1) a plan, fund or program,
(2) established or maintained, (3) by an employer or by an
employee organization, or by both, (4) for the purpose of providing
medical, surgical, hospital care, sickness, accident, disability,
death, unemployment or vacation benefits, apprenticeship or other
training programs, day care centers, scholarship funds, prepaid
legal services or severance benefits, (5) to participants or their
beneficiaries.” Ed Miniat, 805 F.2d at 738.
4
  In United States v. Blood, 806 F.2d 1218, 1219 (4th Cir. 1986),
the defendant was convicted of embezzling from an ERISA
“prepaid legal services plan.” The Fourth Circuit did not have
occasion to specifically define “prepaid legal services” in a manner
that is instructive here, but the court did describe the program at
issue as one where participants were “entitled to certain limited
legal services from private attorneys who had contracted with
[defendant] to provide such services for a percentage of each
member’s dues.”
8                                                    No. 04-3193

nal Revenue Code (“IRC”) and in an NEA publication. This
approach was unwarranted.
  Specifically, the court turned to a provision in the IRC
that delineates the circumstances under which an individ-
ual’s gross income should include amounts contributed
by her employer to a “qualified group legal services plan.”
26 U.S.C. § 120(b). The district court stated that this
provision of the IRC “defines prepaid legal services,” when,
in fact, it defines a different phrase used in the IRC,
namely, “qualified group legal services plan.” The district
court then noted that the IRC definition included “personal
legal services,” and from this the court reasoned that “one
of the main elements of prepaid legal services is the
provision of ‘personal legal services.’ ” Now needing a
definition of “personal legal services,” the court inexplicably
turned to an NEA publication that used the phrase “per-
sonal legal services” in describing the types of legal assis-
tance available under a union-sponsored program called the
“Attorney Referral Program.”5 What relevance the “Attorney
Referral Program” has in this case escapes us. The district
court stated that the NEA publication “provide[s] additional
guidance as to what may be included in the category
of personal legal services.” The notion that the meaning
of a statutory phrase should be determined by reference

5
  The Attorney Referral Program offers NEA members in
participating states a 30% discount from the normal fees
charged by private attorneys providing legal services in the areas
of real estate, wills and estates, domestic relations, consumer
protection, and traffic violations. Using this list to define “per-
sonal legal services,” the district court concluded that an ERISA
prepaid legal services plan must offer legal representation to
participants in this particular array of subject matter areas. The
DuShane program, which offers legal services only in the area of
employment disputes (and not real estate, wills, traffic violations,
etc.) did not qualify as an ERISA plan under the district court’s
definition.
No. 04-3193                                               9

to a teacher’s union publication is mystifying, to say the
least.
   In short, the district court’s construction of the phrase
“prepaid legal services” as used in ERISA was based on
an income tax statute defining a different phrase and a
list of examples of the types of legal assistance available
under an NEA program that apparently has nothing to do
with this lawsuit. The defendants rely on this same convo-
luted analysis on appeal. This mode of evaluating whether
the complaint states an ERISA claim is clearly flawed.
  Our own research has disclosed no cases attempting to
define the phrase “prepaid legal services” as used in ERISA.
We again note that “the cardinal rule is that words used in
statutes must be given their ordinary and plain meaning”
and that we will “frequently look to dictionaries to deter-
mine the plain meaning of words.” Sanders v. Jackson, 209
F.3d 998, 1000 (7th Cir. 2000). Black’s Law Dictionary
contains an entry for “prepaid legal services” that reads as
follows: “An arrangement—usually serving as an employee
benefit—that enables a person to make advance payments
for future legal services.” Black’s Law Dictionary 1220 (8th
ed. 2004). For purposes of the present case, coming to us in
the posture of a motion to dismiss, this definition will
suffice. The meaning of the statutory phrase “prepaid legal
services” is not limited to “personal legal services,” what-
ever the scope of the latter phrase may be.
  We express no opinion on the merits of this suit, and
indeed do not decide whether the DuShane plan and/or the
IEA plan are in fact prepaid legal services plans falling
within the scope of ERISA. These are questions the dis-
trict court will have to answer on remand. Neither do
we find it necessary to attempt to articulate a more pre-
cise definition of the term “prepaid legal services,” beyond
what we have noted above, in order to resolve this appeal.
Given the preliminary stage of this litigation, we hold only
10                                            No. 04-3193

that (1) the district court erred in narrowly construing
Count III of the complaint as asserting a claim against the
DuShane plan only; and (2) the district court erred in
holding that the term “prepaid legal services” in § 1002(1)
is limited to “personal legal services,” and also erred
in determining that the DuShane plan was not an
ERISA welfare benefit plan on the basis of that erroneous
definition.
  The judgment of the district court is REVERSED and the
case is REMANDED for proceedings consistent with this
opinion.

A true Copy:
      Teste:

                       ________________________________
                       Clerk of the United States Court of
                         Appeals for the Seventh Circuit

                   USCA-02-C-0072—9-9-05