Identifying the Proper Party Defendant in ERISA Benefits Claims: A Circuit Survey
By Jeffrey S. Russell and Carrie E. Byrnes, Bryan Cave LLP
Identifying the proper party defendant in a claim for benefits under the Employee Retirement Income Security Act presents a surprisingly difficult task, and the correct answer depends upon the forum in which the lawsuit is brought. Faced with uncertainty as to the proper party, plaintiffs predictably take a “kitchen sink” approach to avoid missing a necessary defendant.
Plan sponsors, administrators, and insurers share responsibility by adopting unclear plan documents and participant communications. The result is frequent and costly motion practice as defendants seek dismissal of claims and sort out among themselves responsibility for the payment of benefits and costs of legal defense.
This article, which updates an earlier BNA Insights article (112 PBD, 6/14/10; 37 BPR 1392, 6/15/10), provides a circuit-by-circuit survey of case law on this proper party issue. Our goal is to clarify the rules applied in each circuit and to help avoid unproductive litigation over the identity of the proper defendants.
ERISA ‘Uniformity’ Is Aspirational
ERISA is a “comprehensive statute designed to promote the interests of employees and their beneficiaries in employee benefit plans.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90, 4 EBC 1593 (1983). In order to further the “public interest in encouraging the formation of employee benefit plans,” ERISA was designed to simplify and unify the regulatory environment within which a plan administrator must operate. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54, 8 EBC 1409 (1987).
Seeking to encourage employers to offer benefit arrangements to their employees, while not subjecting them to inconsistent regulations among the various states, Congress in ERISA created a uniform scheme of regulation for employee benefits. See, e.g., Shaw, 463 U.S. at 99 (quoting 120 Cong. Rec. 29197, 29933 (1974)).
While setting a goal of national uniformity, Congress failed to provide explicit guidance on the identity of the proper defendant in a claim for benefits. Cf. Harris Trust & Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238, 24 EBC 1654 (2000)(recognizing similar failure to specify proper defendants in ERISA Section 502(a)(3))(27 BPR 1439, 6/13/00). ERISA Section 502(a)(1)(B) provides that a claim for benefits may be brought “by a participant or beneficiary.” ERISA does not identify the potential defendant for such a claim, and the U.S. Supreme Court has not weighed in.2
Left to struggle with the issue, the federal circuit and district courts have developed a remarkably complex body of conflicting law on the issue. Courts have held variously that the plan, the plan administrator, the employer/sponsor, third-party insurers and administrators and plan fiduciaries are proper parties.
Courts that look to the plan as the proper party rely frequently on Section 502(d)(2), which states that “[a]ny money judgment under this title against an employee benefit plan shall be enforceable only against the plan as an entity and shall not be enforceable against any other person unless liability against such person is established in his individual capacity under this title.”
Other courts focus not on the ultimate judgment but on the responsibility for decision-making. Among these courts, some look only at the designations contained in plan documents while others will consider allegations that a party, while not formally designated in plan documents, is actually controlling claims decisions.
These variations have procedural consequences: the courts that look only to designations in the plan documents tend to resolve the issue on a motion to dismiss while the courts that consider administrative control tend to defer resolution to a motion for summary judgment, particularly where plan documents lack clarity.
Finally, courts vary even in the degree to which they acknowledge clarity on the proper party issue. At least one court has found the identity of the proper party so clear as to warrant sanctions for pursuing other defendants.Moore v. Lafayette Life Ins. Co., 458 F.3d 416, 445, 38 EBC 2423 (6th Cir. 2006) (affirming sanctions because “[t]he case law is very clear about who is a proper party defendant”)(153 PBD, 8/10/06; 33 BPR 1955, 8/15/06).
A close look at the cases in each circuit shows they are divided as to the proper party defendant in an ERISA Section 502(a)(1)(B) claim for benefits. The Seventh Circuit generally regards the plan as the only proper party defendant, but a recent case has suggested movement away from this strict rule. The First, Second, Third, Fourth, Fifth, Sixth, Eighth, Ninth and Eleventh Circuits have identified the proper party as any party with control over the administration of the plan. The Second and Fourth Circuits have expressly recognized the plan itself as an additional proper party. The Tenth Circuit has yet to address the proper party issue expressly.
The proper party defendant is the party that controls administration of the plan. Terry v. Bayer Corp., 145 F.3d 28, 36 (1st Cir. 1998) (citing Garren v. John Hancock Mut. Life Ins. Co., 114 F.3d 186, 187, 21 EBC 1367 (11th Cir. 1997) (per curiam)). The plan or the plan administrator can be sued in a claim for benefits brought under Section 502(a)(1)(B). Negron-Fuentes v. UPS Supply Chain Solutions, 532 F.3d 1, 9-10, 44 EBC 1848 (1st Cir. 2008)(119 PBD, 6/20/08; 35 BPR 1511, 6/24/08).
There is an exception to this general rule if an entity or person other than the named plan administrator takes on responsibilities of the administrator. Law v. Ernst & Young, 956 F.2d 364, 372-73, 14 EBC 2710 (1st Cir. 1992). In that scenario, the entity may also be liable for benefits. Id. However, ministerial control over plan administration is not sufficient to create liability. Gomez-Gonzalez v. Rural Opportunities, 626 F.3d 654, 665 (1st Cir. 2010)(quoting Beddall v. State St. Bank & Trust Co., 137 F.3d 12, 18 (1st Cir. 1998)(“the mere exercise of physical control or the performance of mechanical administrative task generally is insufficient to confer fiduciary status.”)).
Typically, an employer is not a proper party but may be named if the plaintiff shows that the employer controlled or influenced the administration of the plan. Beegan v. The Associated Press, 43 F. Supp. 2d 70, 73-74 (D. Me. 1999) (citing Daniel v. Eaton Corp., 839 F.2d 263, 266, 10 EBC 1197 (6th Cir. 1988); McLaughlin v. Reynolds, 886 F. Supp. 902, 906 (D. Me. 1995); Marcum v. Zimmer, 887 F. Supp. 891, 894 (S.D. W. Va. 1995); Rossi v. Boston Gas Co., 833 F. Supp. 62, 67 (D. Mass. 1993); Green v. Eastern Airlines, 138 F.R.D. 146, 147 (M.D. Fla. 1991)); Negron-Fuentes, 532 F.3d at 10 (citing Beegan, 43 F. Supp. 2d at 73).
A claim for benefits can be brought only against the plan and plan administrators or trustees in their capacity as such. Paneccasio v. Unisource Worldwide, Inc., 532 F.3d 101, 108 n.2, 44 EBC 1297 (2d Cir. 2008)(130 PBD, 7/8/08; 35 BPR 1667, 7/15/08); Leonelli v. Pennwalt Corp., 887 F.2d 1195, 1199, 11 EBC 1923 (2d Cir. 1989)(per curiam); Chapman v. ChoiceCare Long Island Term Disability Plan, 288 F.3d 506, 509-10, 27 EBC 2505(2d Cir. 2002)(84 PBD, 5/1/02; 29 BPR 1394, 5/7/02) (citing with approval Fifth, Seventh, Eighth and Eleventh Circuit decisions holding that benefits may be recovered against plan administrators).
An employer is not a proper party if a plan administrator is designated. Crocco v. Xerox Corp., 137 F.3d 105, 107, 28 EBC 1137 (2d Cir. 1998) (disagreeing with First and Eleventh Circuit decisions holding employers responsible as de facto administrators and citing with approval a Tenth Circuit decision criticizing the holding that an employer could be a de facto administrator).
However, a claim against an employer may survive a motion to dismiss if the plan document fails to identify the plan administrator clearly. See, e.g., Gill v. Bausch & Lomb Supplemental Ret. Income Plan, No. 09-CV-6043 (W.D.N.Y. Sept. 28, 2009) (citing Creighton v. Cont’l Airlines, Inc., 321 F. Supp. 2d 1309, 1311, 33 EBC 1053(M.D. Fla. 2004))(114 PBD, 6/15/04; 31 BPR 1363, 6/22/04); Fredericks v. Hartford Life Ins. Co., 488 F. Supp. 2d 210, 212-13 (N.D.N.Y. 2007).
The proper defendant in a claim for wrongful denial of benefits is the plan itself or a person who controls the administration of benefits under the plan. Evans v. Employee Benefit Plan, 11 Fed. Appx. 556, 558 (3d Cir. 2009)(33 PBD, 2/23/09; 36 BPR 435, 2/24/09). Evans dismissed claims against the employer because the plan specifically delegated authority for administering benefits to the insurer and the employer did not exercise control over the plan’s administration as required by Section 502(a)(1)(B).
Evans relied upon the Third Circuit’s earlier decision in Curcio v. John Hancock Mutual Life Insurance Co., 33 F.3d 226, 233, 18 EBC 1822 (3d Cir. 1994) and noted that ERISA allows lawsuits against the plan and plan fiduciaries. Curcio, 33 F.3d at 233 (“the linchpin of fiduciary status under ERISA is discretion”). Curcio held the plan administrator to be a fiduciary, however the claims in Curcio were for equitable estoppel and breach of fiduciary duty. Id. at 229.
District court cases in the Third Circuit are split as to whether Curcio is applicable to Section 502(a)(1)(B) claims. Compare Vaughn v. Metro. Life Ins. Co., 87 F. Supp. 2d 421, 425, 25 EBC 1160 (E.D. Pa. 2000)(27 BPR 1044, 4/18/00) (relying on Curcio to hold that an insurer/administrator may be sued for recovery of benefits)and Briglia v. Horizon Healthcare Servs., Inc., No. 03-6033 (FLW), 2005 BL 15041 (D.N.J. May 13, 2005) (citing Curcio and noting that there was no reason to believe that the Third Circuit would distinguish among Section 502(a)’s provisions on the issue of who is a proper party defendant) with Guiles v. Metro. Life Ins. Co., No. 00-5029, 27 EBC 2131 (E.D. Pa. Feb. 13, 2002)(36 PBD, 2/22/02; 29 BPR 718, 2/26/02) (distinguishing Curcio and holding that plan administrators are not proper parties to actions for a recovery of benefits because the statute “clearly and unambiguously provides that the plan is the only entity against whom claims for benefits under the plan may be brought”). Bypassing a discussion of Curcio, the court in Jones v. South Williamsport Sch. Dist., No. 4:11-cv-01179-YK, 53 EBC 2088 (M.D. Pa. Jan. 26, 2012)(18 PBD, 1/30/12; 39 BPR 202, 1/31/12) simply applied Evans in finding that the claims administrator’s responsibility for benefit determinations and review of denials demonstrated enough authority for the administrator to be determined a defendant for the benefits due claim.
The Fourth Circuit appears to be aligned with circuits that identify as proper parties the plan and fiduciaries who control its administration. Citing the Ninth Circuit’s decision in Gelardi v. Pertec Computer Corp., 761 F.2d 1323, 1324-1325, 28 EBC 1397 (9th Cir. 1985) and the Sixth Circuit’s decision in Daniel (both discussed below), the Fourth Circuit held in an unpublished decision that a trust that provides funding for plan benefits was not a proper party because it had no control over plan administration. Gluth v. Wal-Mart Stores, Inc., 117 F.3d 1413,21 EBC 1353 (4th Cir. 1997).
District courts of the Fourth Circuit have ruled both before and after Gluth that an employer may not be named a defendant in an ERISA action unless the plaintiff shows the employer actually controlled or influenced the administration of the plan or no person had been designated as the plan administrator. Nicholes v. McCulloch, No. 5:04-1220, 2006 BL 41218, n.3 (S.D. W. Va. Mar. 23, 2006); Williams v. Unum Life Ins. Co., 250 F. Supp. 2d 641, 645 (E.D. Va. 2003) (granting summary judgment for the employer, where the SPD identified the employer as the administrator but the record showed that the insurer was delegated authority to make benefit decisions); Marcum v. Zimmer, 887 F. Supp. 891, 894 (S.D. W. Va. 1995).
The plan is a proper party as well as persons with the authority for plan decision-making and an obligation to pay benefits that are owed. Musmeci v. Schwegmann Giant Super Mkts., Inc., 332 F.3d 339, 349-50, 30 EBC 1833 (5th Cir. 2003)(113 PBD, 6/13/03; 30 BPR 1322, 6/17/03) (considering decisions in the Sixth, Seventh, Eighth and Eleventh Circuits and explaining that an employer is a proper party only if it actually made the decision to deny benefits and is the plan administrator or sponsor); Lifecare Mgmt. Serv. LLC v. Ins. Mgmt. Admins. Inc., 761 F. Supp. 2d 426 (N.D. Texas 2011)(holding that defendant who was responsible for “receiving, processing, and investigating claims,” was a proper party defendant); Pippin v. Broadspire Servs., Inc., No. 05-2125, 2006 BL 127647 (W.D. La. Sept. 8, 2006) (discussing the divide among the circuits as to whether to permit an ERISA claim for benefits against parties other than the plan and ruling that a plan administrator, maintaining discretionary authority over the plan, is a fiduciary, and therefore a proper party defendant); cf. Kinnison v. Humana Health Plan of Texas, Inc., No. C-07-381, 44 EBC 1436 (S.D. Tex. 2008)(121 PBD, 6/24/08; 35 BPR 1577, 7/1/08) (holding that the proper defendant is the final decision-maker on benefits eligibility); Carroll v. United of Omaha Life Ins. Co., 378 F. Supp. 2d 741, 747 (E.D. La. 2005) (holding that employer was not a proper party because it did not make the final decision on benefits; the key factor in determining whether the defendant is a proper party is whether it had ultimate authority to decide benefits).
Courts have denied motions to dismiss where the complaint alleges that the employer was responsible for the benefit decision. Wilson v. Kimberly-Clark Corp., No. 07-60289, 42 EBC 2963 (5th Cir. Nov. 5, 2007)(214 PBD, 11/6/07; 34 BPR 2683, 11/13/07) (determining that the district court erred in granting a motion to dismiss plaintiff’s claims against his employer when plaintiff alleged that employer was responsible for paying benefits);Morales v. Prudential Fin., Inc., No. M-08-235, 46 EBC 2208 (S.D. Texas Feb. 5, 2009)(27 PBD, 2/12/09; 36 BPR 372, 2/17/09) (holding that dismissal was improper because plaintiff alleged that all defendants, including the employer, were responsible for the coverage decision and alleged implicitly that the employer was the plan sponsor).
The Fifth Circuit has also denied motions to dismiss when an insurer was responsible for the benefit decisions. See Encompass Office Solutions, Inc. v. Ingenix, Inc., 775 F. Supp. 2d 938 (E.D. Texas 2011)(denying the defendant-insurers’ motion to dismiss, and finding that plaintiff had pled enough facts to establish insurer’s control over plan administration to make it a proper party defendant under the Circuit’s standard); see also N. Cypress Md. Ctr. Operating Co. v. Cigna Healthcare, 782 F. Supp. 2d 294 (S.D. Texas 2011) (216 PBD, 11/8/11; 38 BPR 2111, 11/15/11).
The entity that exercises authority in adjudicating a participant’s administrative claim for benefits is a proper party. Moore, 458 F.3d at 438 (concluding that the proper party was the insurer, who served as the claims administrator, and not the employer, who was the named plan administrator); accord Teel v. Sedgwick Claim Mgmt. Servs., Inc., No. 3:07CV-184R., 2007 BL 213366 (W.D. Ky. Apr. 25, 2007) (holding that the party in control of administration is a proper party); West v. Sedgwick Claims Mgmt. Servs. Inc., No. 3:05CV-486-S.,2006 BL 70496 (W.D. Ky. June 19, 2006) (declining to address whether the plan is a necessary party and denying the third-party administrator’s motion to dismiss)).
A recent district court decision noted that the Sixth Circuit has still not addressed “the precise question of whether the plan is a proper party defendant.” Gadberry v. Bethesda, Inc., 608 F. Supp. 2d 916, 919 (S.D. Ohio 2009) (citing Daniel, 839 F.2d at 266). Daniel notes that the defendant was a proper party because both parties proceeded under the assumption that the employer was serving as the plan administrator with responsibility for denial of benefits. Daniel, 839 F.2d at 266.
The general rule is that the plan is the only proper party defendant in a claim for benefits. Mote v. Aetna Life Ins. Co., 502 F.3d 601, 610-11, 42 EBC 1599 (7th Cir. 2007) (177 PBD, 9/13/07; 34 BPR 2177, 9/18/07); Neuma, Inc. v. AMP, Inc., 259 F.3d 864, 872, 26 EBC 2289 (7th Cir. 2001)(150 PBD, 8/9/01; 28 BPR 2068, 8/14/01);Jass v. Prudential Health Care Plan, Inc., 88 F.3d 1482, 1490, 20 EBC 1580 (7th Cir. 1996).
The Seventh Circuit has allowed exceptions to this general rule where the employer or plan sponsor is “closely intertwined” with the plan. Mein v. Carus Corp., 241 F.3d 581, 585, 25 EBC 1961 (7th Cir. 2001) (37 PBD, 2/23/01; 28 BPR 753, 2/27/01)(noting that “it is silly not to name the plan as a defendant,” but still allowing the claim to proceed against employer/administrator); Riordan v. Commonwealth Edison Co., 128 F.3d 549, 551 (7th Cir. 1997) (allowing a claim to proceed against the employer, where the plan documents referred interchangeably to the employer and the plan); cf. Lewis v. Aetna Ins. Agency, Inc., 749 F. Supp. 2d 852, 857-58 (S.D. Ill. 2010) (entering summary judgment for the defendant because plaintiff had not offered sufficient evidence regarding the interrelationship between the sponsor-defendant and the plan).
Another exception has also been recognized where the plan was not clearly identified in the plan documents; in such cases, the entity or entities that control the plan may be named as a defendant. Leister v. Dovetail, Inc.,546 F.3d 875, 879, 45 EBC 1308 (7th Cir. 2008) (206 PBD, 10/24/08; 35 BPR 2453, 10/28/08)(holding that employer and two principals are proper defendants absent a designated plan entity); Rivera v. Network Health Plan of Wis., Inc., 320 F. Supp. 2d 795, 798-99, 33 EBC 1720 (E.D. Wis. 2004)(115 PBD, 6/16/04; 31 BPR 1352, 6/22/04). At least one district court has declined to expand these limited exceptions. Powers v. Corn Prods. Int’l, 557 F. Supp. 2d 921, 926, 44 EBC 2367 (N.D. Ill. 2008) (88 PBD, 5/7/08; 35 BPR 1094, 5/13/08).
However, the Seventh Circuit recently expanded these limited exceptions in Larson v. United Healthcare Ins. Co., No. 12-1256 (7th Cir. July 26, 2013)(145 PBD, 7/29/13; 40 BPR 1854, 7/30/13). After repeating the general rule that a claim should be brought against the plan (which rule was the basis for the lower court’s dismissal for the failure to name a proper party defendant), the court continued by stating that “nothing in ERISA categorically precludes a benefits claim against an insurance company.” Further, since the complaint alleged that the insurers decide all claims questions and owe the benefits, the insurers were proper defendants for purposes of the Section 502(a)(1)(B) claim. The Larson decision represents a significant change in the previously-restrictive Seventh Circuit law and opens an avenue for claims to be brought against whatever party has the obligation to pay the benefits.
In Ross v. Rail Car Am. Group Disability Income Plan, 285 F.3d 735, 741, 27 EBC 2271 (8th Cir. 2002), the Eighth Circuit noted that the plan itself is ordinarily liable for benefits payable under the terms of the plan and is thus the primary defendant in a Section 502(a)(1)(B) action. However, Ross does not comment on the prior Eighth Circuit decisions, which held that the plan administrator is also a proper party defendant. See Layes v. Mead Corp., 132 F.3d 1246, 1249, 28 EBC 1298 (8th Cir. 1998); Hall v. LHACO, Inc., 140 F.3d 1190, 1194, 28 EBC 1306 (8th Cir. 1998)(reserving the question whether a party other than the one designated as the plan administrator in the plan documents may be a proper party).
Courts of the circuit have looked to the party’s role in administering the plan, when determining if the administrator is a proper party defendant. See, e.g., Anderson v. Nationwide Mut. Ins. Co., 592 F. Supp. 2d 1113, 1133 (S.D. Iowa 2009) (denying motion to dismiss the employer based on “bare terms of the Benefit Plan”); Price v. Xerox Corp., 379 F. Supp. 2d 1026, 1028 (D. Minn. 2005), aff’d on other grounds, 445 F.3d 1054, 37 EBC 1617 (8th Cir. 2006); cf. Plitt v. Ameristar Casino, Inc., 46 EBC 2534 (E.D. Mo. 2009) (87 PBD, 5/8/09; 36 BPR 1159, 5/12/09) (denying motion to dismiss where SPD was not filed with motion to dismiss and identity of administrator was not clear). The circuit has also specified that non-fiduciary service providers are not proper parties. Clark v. Ameritas Inv. Corp., 408 F. Supp. 2d 819, 831-32, 36 EBC 2252 (D. Neb. 2005).
Until recently, the Ninth Circuit had competing lines of authority as to who the proper defendant should be in a Section 502(a)(1)(B) claim. In Gelardi, the Ninth Circuit affirmed the dismissal of claims against the employer and insurer/administrator, explaining that ERISA permits “suits to recover benefits only against the Plan as an entity.” 761 F.2d at 1324. The Ninth Circuit’s later decision in Taft v. Equitable Life Assurance Soc’y, 9 F.3d 1469, 1471, 17 EBC 1888 (9th Cir. 1993), does not refer to Gelardi and states that a participant may bring a claim against a plan administrator. The Ninth Circuit revisited this issue in Everhart, 275 F.3d 751, 754 (9th Cir. 2001), where the court had determined that a third-party insurer was not a proper defendant, but declined to choose between the Taft and Gelardi lines of cases and affirmed the dismissal of claims because the named defendant was the plan’s insurer and not the plan or the plan administrator.
Most recently, a unanimous en banc Ninth Circuit panel—in Cyr v. Reliance Standard Life Insurance, 642 F.3d 1202, 1206 (9th Cir. 2011) (121 PBD, 6/23/11; 38 BPR 1223, 6/28/11)—overruled all three previous lines of authority, finding that an entity other than the plan or plan administrator could be sued for benefits due in appropriate circumstances. As a result, the Ninth Circuit is likely to find that any party with the authority to resolve benefit claims or to pay them is a proper party defendant. In rejecting Gelardi, Taft, and Everhart, the court looked to the Supreme Court’s decision in Harris Trust & Savings Bank v. Salomon Smith Barney, Inc., in determining who can be sued under the different subsections of Section 502(a)(1)(B). 642 F.3d at 1206. The Ninth Circuit noted that even though Harris addressed proper parties to be sued under Section 502(a)(3), its reasoning—that the language of Section 502(a)(3) does not express a limit to the parties who can be sued—was applicable to Section 502(a)(1)(B) because there was not any limiting language in the provision. Id.
After Cyr, district courts have expanded the reach of Section 502(a)(1)(B) claims beyond the plan and plan administrator. In Forest Ambulatory Surgical Assocs., L.P. v. United Healthcare Ins. Co., No. 10-CV-04911-EJD, 52 EBC 1258 (N.D. Cal. Jul. 13, 2011)(139 PBD, 7/20/11; 38 BPR 1393, 7/26/11), the court cited Cyr in finding that an insurer could be a proper party defendant. The court noted that “[r]egardless of whether United was the claims administrator or the plan administrator (or both, or neither), it was undoubtedly the insurer. Thus, United’s argument that it is not a proper defendant fails as a matter of newly-decided law.” Id.; See In re WellPoint, Inc. Out-of-Network UCR Rates Litigation, 903 F. Supp. 2d 880 (C.D. Cal., Aug. 11, 2011) (159 PBD, 8/17/11; 38 BPR 1543, 8/23/11)(noting that the Cyr ruling expands the list of Section 502(a)(1)(B) defendants to include insurers).
The Tenth Circuit has not expressly addressed the proper party issue. In Hemphill v. Unisys Corp., 855 F. Supp. 1225, 1233-34 (D. Utah 1994), the district court noted the lack of circuit authority and gave the plaintiff leave to amend his complaint to name the plan. Hemphill also noted that the Tenth Circuit has permitted claims against an employer. Id. (citing Held v. Manufacturers Hanover Leasing Corp., 912 F.2d 1197, 1203, 28 EBC 1354 (10th Cir. 1990) and Anthony v. Texaco, Inc., 803 F.2d 593, 598 (10th Cir. 1986); see also Miller v. Pension Plan for Employees of Coastal Corp., 780 F. Supp. 768, 773 (D. Kan. 1991) (dismissing employer where plaintiff did not oppose a motion to dismiss relying upon Gelardi (discussed above)), aff’d on other grounds, 978 F.2d 622 (10th Cir. 1992).
In a case involving a claim for failure to furnish plan documents under Section 502(c)—not a claim for benefits—the Tenth Circuit rejected the First Circuit’s theory of employer de facto liability where the plan documents had designated an administrator, explaining that if persons other than the plan administrator assume administrative responsibilities, their actions may be imputed to the administrator, not the employer. McKinsey v. Sentry Ins.,986 F.2d 401, 404, 16 EBC 2153 (10th Cir. 1993).
The proper defendant is the party that controls administration of the plan, typically the plan administrator.Hamilton v. Allen-Bradley Co., 244 F.3d 819, 824 (11th Cir. 2001); Garren, 114 F.3d at 187. An employer may be a proper defendant when it is designated or acting as the plan administrator, regardless of who the plan documents name as the plan administrator. Rosen v. TRW, Inc., 979 F.2d 191, 193-94, 16 EBC 1101 (11th Cir. 1992).
Conversely, an insurer/administrator that does not exercise discretion, responsibility or control over the administration of the plan is not a proper party defendant (Garren, 114 F.3d at 187; Baker v. Big Star Div. of Grand Union Co., 893 F.2d 288, 290, 11 EBC 2696 (11th Cir. 1989); Oliver v. Coca Cola Co., 497 F.3d 1181, 1193-94, 41 EBC 1856 (11th Cir. 2007) (169 PBD, 8/31/07; 34 BPR 2055, 9/4/07) (declining to apply the de facto administrator doctrine to a third-party administrator that did not make the final benefit determination).
Reducing Litigation Expense
There are several actions that can be taken to avoid costly motions before lawsuits are filed.
- When drafting documents, sponsors, administrators and insurers should state the name of the plan precisely, identify the plan administrator clearly and maintain consistent distinctions between the parties sponsoring the plan, providing benefits and administering claims.
- Even seemingly innocuous phrases, such as “we provide benefits” when only the plan does so, have been sufficient for courts to find issues of fact regarding the identity of the proper party.
- Prior to filing a lawsuit, plaintiffs should request and examine the governing plan documents to determine the roles played by potential defendants. If electing to name an employer, insurer, or third-party administrator, the complaint should plead the basis on which that party is believed to control the claims decision.
- When moving to dismiss claims for benefits, defendants should supply the court with plan documents that identify the proper parties. Failure to attach plan documents has been grounds for denying motions to dismiss. Defendants should consider also whether to forego motion practice and to answer on behalf of the proper party while identifying the misnomer. This approach is appropriate where the outcome of a motion does not shift responsibility for payment of any judgment, for instance, where the employer is named but a corporate committee made the final claims determination.
- Where responsibility for payment rests with an unnamed and unrelated party (for example, where the employer is named but benefits are fully insured), a simple indemnification agreement among potentially responsible parties may be a cost-effective alternative to motion practice. Likewise, discussions among counsel for plaintiffs and defendants may lead to amended pleadings without the need for motions.
Jeffrey S. Russell (email@example.com) is a partner at Bryan Cave LLP, St. Louis, concentrating on the defense of class actions and other complex litigation, with a particular focus on ERISA matters. Carrie E. Byrnes (firstname.lastname@example.org) is an associate at Bryan Cave, Chicago, practicing exclusively in employee benefits and executive compensation law. The authors acknowledge the assistance of Michael Lanahan, a summer associate at Bryan Cave, St. Louis.
© 2013 Bloomberg Finance L.P. All rights reserved. Bloomberg Law Reports ® is a registered trademark and service mark of Bloomberg Finance L.P.
This document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be addressed to particular facts and circumstances involved in any given situation. Review or use of the document and any discussions does not create an attorney-client relationship with the author or publisher. To the extent that this document may contain suggested provisions, they will require modification to suit a particular transaction, jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions. Any tax information contained in the document or discussions is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code. Any opinions expressed are those of the author. Bloomberg Finance L.P. and its affiliated entities do not take responsibility for the content in this document or discussions and do not make any representation or warranty as to their completeness or accuracy.