Court Opinion

ID: 8412748
Source: CourtListenerOpinion
Date Created: 2022-11-02 19:55:04.210878+00
Date Added: 2024-06-11T16:47:59.138804
License: Public Domain

POSNER, Circuit Judge,
concurring in the judgment.
I agree with the outcome, and with much of the analysis in the majority opinion. But I disagree that the obligation at issue in the appeal derives from a fiduciary duty. This is really a breach of contract case, and treating it as such not only is the correct approach but simplifies analysis wonderfully.
But before discussing the merits, I want to say a few words about mootness, the subject of a protracted debate between Judges Ripple and Manion. Both quote the standard formula, repeatedly endlessly in cases, that a case is moot if a judgment on the merits in favor of the plaintiff would not give the plaintiff money or anything else of tangible value. In other words, if something happens in the course of the case that, had it happened before the case was brought, would have required dismissal for lack of standing, the case must be dismissed as moot; the plaintiff has lost standing. But that isn’t the actual doctrine. See generally Matthew I. Hall, “The Partially Prudential Doctrine of Mootness,” 77 Geo. Wash. L.Rev. 562 (2009). A case is not moot, for example, if the defendant voluntarily discontinues the practice that the plaintiff sought to enjoin, but maybe plans to resume it if the suit is dismissed as moot. United States v. W.T. Grant Co., 345 U.S. 629, 632-33, 73 S.Ct. 894, 97 L.Ed. 1303 (1953). Or if the plaintiff can never get relief if mootness is a bar, as in a suit to establish a woman’s right to an abortion because the suit can’t be completed in the nine months between her becoming pregnant and giving birth. Roe v. Wade, 410 U.S. 113, 125, 93 S.Ct. 705, 35 L.Ed.2d 147 (1973). (For the general principle that excepts from the doctrine of mootness orders capable of repetition but evading review, see, e.g., Southern Pacific Terminal Co. v. ICC, 219 U.S. 498, 514-16, 31 S.Ct. 279, 55 L.Ed. 310 (1911).) Nor does a class action suit become moot (after the class is certified), because the named plaintiff has settled with the defendant and so no longer has anything to gain from a judgment. Genesis Healthcare Corp. v. Symczyk, — U.S. -, 133 S.Ct. 1523, 1529-30, 185 L.Ed.2d 636 (2013); County of Riverside v. McLaughlin, 500 U.S. 44, 51-52, 111 S.Ct. 1661, 114 L.Ed.2d 49 (1991).
The reason that mootness is a less strict doctrine than standing is that a case that becomes moot, unlike a case in which there never was standing, is a case that originally was properly before the court, and the court may have made, as it was entitled to make, substantive rulings in the ease. “[B]y the time mootness is an issue, the case has been brought and litigated, often (as here) for years. To abandon the case at an advanced stage may prove more wasteful than frugal. This argument from sunk costs does not license courts to retain jurisdiction over cases in which one or both of the parties plainly lack a continuing interest, as when the parties have settled or a plaintiff pursuing a nonsurviving claim has died____But the argument surely highlights an important difference between the two doctrines.” Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167, 191-92, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000) (footnote omitted).
When want of standing is detected at the outset of suit, there is no wasted court motion. But mootness by definition is detected later, and there can be a great deal of wasted motion if mootness is equated to an absence of standing and in consequence everything the court has done to date in the case is wiped out. The present case was filed seven years ago. The passage of time has witnessed changes that arguably moot the issue in the case. I think one *674could argue that when a case is fully adversary until the very end, the prece-dential value of a decision on the merits would justify carving still another exception to the doctrine of mootness. But we don’t have to go that far in this case. Judge Ripple has presented grounds for regarding Mr. Killian as continuing to have a tangible stake in a favorable judgment. Those grounds are tenuous; but, when the issue is mootness, even a tenuous ground should suffice to avert dismissal.
So on to the merits. The administrator of an employee welfare benefits plan (the type of plan at issue in this case) has a fiduciary duty to the plan’s participants “to the extent” that “he has any discretionary authority or discretionary responsibility in the administration of [the] plan.” 29 U.S.C. § 1002(21)(A)(iii); see Pegram v. Herdrich, 530 U.S. 211, 223-26, 120 S.Ct. 2143, 147 L.Ed.2d 164 (2000); Baker v. Kingsley, 387 F.3d 649, 660 (7th Cir.2004); Johnson v. Georgia-Pacific Corp., 19 F.3d 1184, 1188 (7th Cir.1994); In re Citigroup ERISA Litigation, 662 F.3d 128, 135 (2d Cir.2011). (Other subsections of ERISA concerning fiduciary obligation, unrelated to this case, focus on financial issues in plan administration. See 29 U.S.C. §§ 1002(21)(A)(i), (ii).)
To call authority “discretionary” is to say that the persons affected by its exercise, such as the plaintiff in this case, have no crisply defined right to limits on that exercise. The plan administrator has been given discretion by the plan to decide for example how much to spend on training his employees, including telephone receptionists who answer participants’ questions about coverage. Such decisions, being entrusted to the administrator, are not to be picked apart by appeal to the wisdom of hindsight. The participants’ protection from the plan administrator’s abusing his discretion lies in the rule that a fiduciary must discharge his responsibilities with the same prudence — trading off costs and benefits with the same care — that he would employ were he a recipient rather than a provider of such services: he must treat the participants as well as he would treat himself.
There is no evidence of abuse of discretion in this case and thus of a violation of a fiduciary obligation. There was a breach of contract, but not every such breach is a violation of a fiduciary obligation. Liability for breach of contract is strict. The plan administrator may discharge his fiduciary obligations scrupulously, yet if an employee, acting within the scope of his employment, makes a mistake that gives rise to a breach of contract, the mistake and hence the breach will be imputed to the plan administrator by the doctrine of respondeat superior — but without any implication that the administrator committed a breach of trust.
No matter. ERISA authorizes a plan participant to bring a suit “to recover benefits due to him under the terms of his plan,” 29 U.S.C. § 1132(a)(1)(B) — benefits in other words that the plan promised. Such a suit treats the plan as a contract. Herzberger v. Standard Ins. Co., 205 F.3d 327, 330 (7th Cir.2000); Harlick v. Blue Shield of California, 686 F.3d 699, 708-09 (9th Cir.2012). The plaintiff in this case is complaining about a breach of the plan by the claims administrator, an insurance company hired by (and for purposes of appeal indistinguishable from) the plan administrator. The plaintiff seeks “a contract remedy under the terms of the plan.” Ponsetti v. GE Pension Plan, 614 F.3d 684, 695 (7th Cir.2010). As that is all he seeks, there is no need, or occasion, to decide whether the plan administrator violated a fiduciary duty.
ERISA preempts breach of contract suits based on state law. 29 U.S.C. *675§ 1144. But all this means is that in an ERISA suit for breach of contract “the relevant principles of contract interpretation are not those of any particular state’s contract law, but rather are a body of federal common law tailored to the policies of ERISA.” Mathews v. Sears Pension Plan, 144 F.Sd 461, 465 (7th Cir.1998); see also Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 55-56, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987). Not all American common law is an emanation from state courts. When Justice Holmes, protesting against the rule of Swift v. Tyson allowing federal courts to apply “general” common law in diversity cases, said that “the common law is not a brooding omnipresence in the sky, but the articulate voice of some sovereign or quasi sovereign that can be identified,” Southern Pacific Co. v. Jensen, 244 U.S. 205, 222, 37 S.Ct. 524, 61 L.Ed. 1086 (1917) (dissenting-opinion), he didn’t mean that states were the only sovereigns that create common law. Just as federal common law governs suits charging breach of federal government contracts, so ERISA’s preemption provision makes federal common law govern suits for breach of the terms of ERISA plans.
It’s true that in suits to enforce federal government contracts the Supreme Court has told us “to adopt the ready made body of state law as the federal rule of decision until Congress strikes a different accommodation.” Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 691-92, 126 S.Ct. 2121, 165 L.Ed.2d 131 (2006), quoting United States v. Kimbell Foods, Inc., 440 U.S. 715, 740, 99 S.Ct. 1448, 59 L.Ed.2d 711 (1979). But that approach isn’t possible in this case because ERISA preempts state law in order “to ensure that plans and plan sponsors would be subject to a uniform body of benefits law” and thus “minimize the administrative and financial burden of complying with conflicting directives among States or between States and the Federal Government.” In-gersoll-Rand Co. v. McClendon, 498 U.S. 133, 142, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990).
To treat the present case as charging breach of a fiduciary obligation creates uncertainty as to remedy — uncertainty we don’t need. ERISA provides only equitable relief to a participant complaining of a violation of such an obligation, 29 U.S.C. § 1132(a)(3)(B); Mertens v. Hewitt Associates, 508 U.S. 248, 255-58, 266, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993); Kenseth v. Dean Health Plan, Inc., 610 F.3d 452, 482 (7th Cir.2010), whereas all that the plaintiff in this case seeks is simple damages. Monetary relief is sometimes permissible in equitable cases, but why enter that briar patch?
Casting this as a case of fiduciary obligation also creates uncertainty concerning the scope of a plan administrator’s duty. How expansive is the fiduciary obligation to inform a plan participant of the differences in the plan’s reimbursement for charges by alternative providers of medical treatment? What body of fiduciary law supplies an answer to that question?
And notice that the fiduciary approach arbitrarily and paradoxically bestows greater rights on participants in and beneficiaries of ERISA plans than on beneficiaries of functionally identical insurance plans not governed by ERISA, and even Medicare Advantage plans. What sense does that make?
Analysis of the case as a suit for breach of contract is straightforward. The plan creates a “provider network” of hospitals and other health care providers. A plan participant who obtains treatment within the network is entitled to reimbursement of a much larger fraction of his expenses than if he’s treated by an out-of-network provider. The difference in this case, in *676which expensive surgery was performed in an out-of-network hospital (Rush), was $80,000. Implicitly the plan administrator was required, when asked, to furnish the participant in a timely manner with an adequate means of determining whether the participant’s preferred provider was in or out of the network. To provide this information would not have involved a difficult determination of the scope of coverage, a determination that would have required the receptionist who took the plaintiffs call to interpret the plan. She just had to look up the hospital’s name in a database or, if unable to do so, tell the plaintiff where to find the requested information online or in his plan documents. She failed to do this, and the result was that all he had to guide him was a confusing insurance card with multiple phone numbers unclearly labeled as to purpose.
The provider’s contractual duty is to furnish requested information in a “timely” manner, lest delay, caused for example by refusing to provide the information orally, prevent the participant from receiving the information in time to act on it. The plaintiff claims that when he told the receptionist that his wife was receiving treatment at “St. Luke’s” (Rush-Presbyterian-St. Luke’s Medical Center) the receptionist told him to “go ahead with whatever had to be done.” She did not tell him that the hospital was not in the provider network. Nor did she tell him where he could find the list of Chicago hospitals that are in the network — indeed, the plaintiff alleges that the list had not been made publicly available.
A contract consists not only of explicit terms but of implicit ones needed to make the explicit terms effective. Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S. 662, 130 S.Ct. 1758, 1775, 176 L.Ed.2d 605 (2010); Bidlack v. Wheelabrator Corp., 993 F.2d 603, 607 (7th Cir.1993) (en banc), Wood v. Duff-Gordon, 222 N.Y. 88, 118 N.E. 214 (1917) (Cardozo, J.); Restatement (Second) of Contracts § 204 (1981). This is true of ERISA plans in their capacity as contracts. Singer v. Black & Decker Corp., 964 F.2d 1449, 1452-53 (4th Cir.1992). Such implicit terms are read into written as well as oral contracts and thus coexist with the requirement that ERISA plans be “established and maintained pursuant to a written instrument,” 29 U.S.C. § 1102(a)(1), a requirement that we have called “a long way toward a statute of frauds.” Frahm v. Equitable Life Assurance Society, 137 F.3d 955, 958 (7th Cir.1998).
One of the implicit terms in every contract is the duty of good-faith performance. Denil v. DeBoer, Inc., 650 F.3d 635, 639 (7th Cir.2011); Market Street Associates Ltd. Partnership v. Frey, 941 F.2d 588, 593-96 (7th Cir.1991). It requires the performing party, in this case the plan administrator, to avoid “tak[ing] deliberate advantage of an oversight by your contract partner concerning his rights under the contract.” Id. at 594. A closely related principle is that “you cannot prevent the other party to the contract from fulfilling a condition precedent to your own performance, and then use that failure to justify your nonperformance.” Ethyl Corp. v. United Steelworkers of America, AFL-CIO-CLC, 768 F.2d 180, 185 (7th Cir.1985). The plan in this case saved itself a considerable sum of money because the plaintiff obtained surgery for his wife at a hospital that wasn’t in the provider network. The contractual duties that I have just described required the plan administrator to inform the plaintiff of his options if he inquired about them — and he claims he did. If so informed the plaintiff might have decided to move his wife to a hospital in the network. There was time, and it appears that there was at least one hospital in range of Rush competent to perform *677the surgery. Whether the plaintiff and his wife would have exercised that option is critical to whether he can recover the additional $80,000 that he paid Rush for the surgery. But it is an issue that awaits resolution on remand.
The Supreme Court’s decision in Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985), does not rule conventional principles of contract interpretation out of ERISA and so deny the duty of good faith performance of obligations created by an ERISA plan. It holds only that extracontractual damages can’t be obtained in a suit for breach of a plan’s obligation, whether fiduciary or contractual, explicit or implicit, to process claims in good faith.
Concurring in the Singer case cited above, Judge Wilkinson expressed concern that allowing plan participants or beneficiaries to enforce implicit terms in ERISA plans would increase cost and uncertainty. 964 F.2d at 1453. I doubt that. The common law of contracts, a law that enforces implicit contractual terms, is a stable, largely uniform, and generally quite satisfactory body of law. One hears plenty of complaints about the costs and uncertainty entailed by the litigation of other claims, but few about the costs and uncertainty entailed in enforcing claims of breach of contract. Judge Wilkinson cites no evidence in support of his fear that allowing general common law principles to inform litigation over alleged breaches of the terms of ERISA plans will cause “actuarial chaos.” Id. at 1454. Following his advice would just create pressure for an expansive interpretation of fiduciary obligation, as in the majority opinion in this case — and how is uncertainty reduced by substituting the equitable doctrine of fiduciary obligation for the common law of contracts?