Powell V Blue Cross Blue Shield of Alabama
138 F.3d 1347
Important Paras
- In determining whether the district court had subject matter jurisdiction, we respect the important distinction between the lack of subject matter jurisdiction and the failure to state a claim upon which relief can be granted. In Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946), the Court ruled that a claim alleged to arise under federal law should not be dismissed for lack of subject matter jurisdiction if "the right of the petitioners to recover under their complaint will be sustained if the Constitution and laws of the United States are given one construction and will be defeated if they are given another." Id. at 685, 66 S.Ct. at 777. Thus, a federal court may dismiss a federal question claim for lack of subject matter jurisdiction only if: (1) "the alleged claim under the Constitution or federal statutes clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction"; or (2) "such a claim is wholly insubstantial and frivolous." Id. at 682-83, 66 S.Ct. at 776. Under the latter Bell exception, subject matter jurisdiction is lacking only "if the claim `has no plausible foundation, or if the court concludes that a prior Supreme Court decision clearly forecloses the claim.'" Barnett v. Bailey, 956 F.2d 1036, 1041 (11th Cir. 1992) (quoting Olivares v. Martin, 555 F.2d 1192, 1195 (5th Cir. 1977)); see also McGinnis v. Ingram Equipment Co., Inc., 918 F.2d 1491, 1494 (11th Cir. 1990) (en banc) ("The test of federal jurisdiction is not whether the cause of action is one on which the claimant can recover. Rather the test is whether `the cause of action alleged is so patently without merit as to justify . . . the court's dismissal for want of jurisdiction.'") (quoting Dime Coal Co. v. Combs, 796 F.2d 394, 396 (11th Cir. 1986)).Go to
- Blue Cross has more than satisfied its burden of demonstrating that the relief sought is plausibly "equitable." Blue Cross essentially seeks specific performance of the reimbursement provision of the Plan. Specific performance is an equitable remedy available when legal remedies are inadequate. See Dairy Queen, Inc. v. Wood, 369 U.S. 469, 478, 82 S.Ct. 894, 900, 8 L.Ed.2d 44 (1962). Legal remedies were inadequate here because ERISA preemption would have precluded Blue Cross from suing the Sanderses at law in state court, cf. Landwehr v. Dupree, 72 F.3d 726, 736-37 (9th Cir. 1995) (holding that where state law claims for damages would fall within ERISA's preemptive scope, plan beneficiaries had no adequate remedy at law), and because Blue Cross's only potential federal remedy was equitable, see 29 U.S.C. § 1132(a)(3), not legal, see 29 U.S.C. § 1132(a)(1)-(9) (listing types of civil enforcement actions that may be brought under ERISA). Moreover, because Blue Cross had no other available remedy, specific performance is "appropriate equitable relief" under 29 U.S.C. § 1132(a)(3)(B). Cf. Varity Corp. v. Howe, 516 U.S. 489, 514, 116 S.Ct. 1065, 1079, 134 L.Ed.2d 130 (1996) ("[W]here Congress elsewhere provided adequate relief for a beneficiary's injury, there will likely be no need for further equitable relief, in which case such relief normally would not be `appropriate.'").
In arguing that the relief sought by Blue Cross is not equitable, the Sanderses rely on FMC Med. Plan v. Owens, 122 F.3d 1258 (9th Cir. 1997), which, like this case, involved a fiduciary seeking reimbursement pursuant to a benefit plan provision requiring reimbursement from an insured who recovered payments from a third party. The Owens court stated that the action was essentially "a breach of contract claim for monetary relief" that did not fall within any of three traditional categories of equitable relief: injunction, mandamus, or restitution. Id. at 1261. The court thus ruled that the action was legal, rather than equitable, and not authorized under 29 U.S.C. § 1132(a)(3). Id.; but see Harris Trust Sav. Bank v. Provident Life Accident Ins. Co., 57 F.3d 608, 615-16 (7th Cir. 1995) (holding that employer's claim for reimbursement of benefits pursuant to plan provision constituted action for restitution, which was equitable relief under § 1132(a)(3)(B)).
In our view, Owens appears to be based on an unduly narrow reading of Mertens v. Hewitt Assocs., 508 U.S. 248, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993), which held that 29 U.S.C. § 1132(a)(3) does not allow a suit by plan participants for money damages against nonfiduciaries who knowingly participate in a fiduciary's breach of fiduciary duty. In Mertens, the Court reasoned that "equitable relief," as used in § 1132(a)(3)(B), means those types of relief that were "typically available in equity (such as injunction, mandamus, and restitution, but not compensatory damages)." 508 U.S. at 256, 113 S.Ct. at 2069 (emphasis in original); see also id. at 260, 113 S.Ct. at 2071 (stating that traditional equitable relief of restitution includes disgorgement of ill-gotten plan assets or profits). Relying on Mertens, the Owens court held that "equitable relief" includes only injunction, mandamus, and restitution. See 122 F.3d at 1261 (stating that the Ninth Circuit has interpreted Mertens as allowing "only the traditional forms of equitable relief under section 1132(a)(3) — injunction, mandamus, and restitution") (citing Watkins v. Westinghouse Hanford Co., 12 F.3d 1517 (9th Cir. 1993)).
The Court in Mertens, however, did not imply that specific performance is unavailable under 29 U.S.C. § 1132(a)(3)(B). Because specific performance is a traditional form of equitable relief, see Owens-Illinois, Inc. v. Lake Shore Land Co., Inc., 610 F.2d 1185, 1189 (3d Cir. 1979) ("An action for specific performance without a claim for damages is purely equitable and historically has always been tried to the court."), we believe that specific performance may be equitable relief available under 29 U.S.C. § 1132(a)(3)(B). Other courts have so held. See In re Unisys Corp. Retiree Med. Ben. ERISA Litigation, 57 F.3d 1255, 1268-69 (3d Cir. 1995) (ruling that "equitable relief" under § 1132(a)(3)(B) includes monetary awards typically available in equity but not compensatory or consequential damages; granting retirees both specific performance of fiduciary's assurances of post-retirement medical benefits and restitutionary reimbursement of back benefits), cert. denied, 517 U.S. 1103, 116 S.Ct. 1316, 134 L.Ed.2d 469, 470 (1996); Bishop v. Martin Marietta Corp., No. CIV.A.95-5426, (E.D.Pa. March 31, 1997) (stating that employee suing fiduciary under § 1132(a)(3)(B) may obtain equitable relief in the form of specific performance of fiduciary's assurances of benefit eligibility). Because ERISA plausibly authorized the relief sought by Blue Cross, the district court had subject matter jurisdiction over this case.
We note that Blue Cross sued under 29 U.S.C. § 1132(a)(3)(B). We therefore are not presented with the question of whether an action to compel reimbursement could be considered an injunctive action allowable under 29 U.S.C. § 1132(a)(3)(A) (authorizing suit by a participant, beneficiary, or fiduciary "to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan").Go to
- Under the reasoning of Bell and its progeny, federal subject matter jurisdiction exists in this case as long as Blue Cross plausibly is a "fiduciary," see 29 U.S.C. § 1132(a)(3), seeking "equitable relief," see 29 U.S.C. § 1132(a)(3)(B). Blue Cross plainly satisfied both the "fiduciary" and "equitable relief" elements of this inquiry. Accordingly, because Blue Cross's ERISA claims are neither "immaterial and made solely for the purpose of obtaining jurisdiction" nor "wholly insubstantial and frivolous," see Bell, at 682-83, 66 S.Ct. at 776, we hold that the district court properly exercised jurisdiction over the case, see Health Cost Controls v. Skinner, 44 F.3d 535, 537-38 (7th Cir. 1995) (ruling that the district court had subject matter jurisdiction over an action brought by a fiduciary to enforce reimbursement rights under 29 U.S.C. § 1132(a)(3); concluding that the district court's holding that the remedy sought was not equitable "does not negate the existence of federal subject matter jurisdiction, but rather indicates that [the plaintiff] may have failed to state" a claim upon which relief can be granted); Brule v. Southworth, 611 F.2d 406, 409 (1st Cir. 1979) (holding that subject matter jurisdiction existed because plaintiff's claim was not frivolous or insubstantial).Go to
- Blue Cross has amply satisfied its burden of demonstrating that it plausibly is a fiduciary. According to 29 U.S.C. § 1002(21)(A),
[A] person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, . . . or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan. . . .
See also 29 U.S.C. § 1002(9) (stating that the term "person" includes corporations).
Claims administrators are fiduciaries if they have the authority to make ultimate decisions regarding benefits eligibility. Compare Libbey-Owens-Ford Co. v. Blue Cross Blue Shield Mut. of Ohio, 982 F.2d 1031, 1035 (6th Cir. 1993) (holding that claims administrator was fiduciary because it "retained authority to resolve all disputes regarding coverage"), with Baker v. Big Star Div. of the Grand Union Co., 893 F.2d 288, 290 (11th Cir. 1989) ("An insurance company does not become an ERISA `fiduciary' simply by performing administrative functions and claims processing within a framework of rules established by an employer, especially if, as in this case, the claims processor has not been granted the authority to make the ultimate decisions regarding eligibility."); Harris Trust and Sav. Bank v. Provident Life and Accident Ins. Co., 57 F.3d 608, 613 (7th Cir. 1995) (ruling that claims administrator was not a fiduciary where employer had the right to decide all disputed and non-routine claims); and Kyle Rys., Inc. v. Pac. Admin. Servs., Inc., 990 F.2d 513 (9th Cir. 1993) (stating that plan administrators are not fiduciaries when they merely perform ministerial duties or process claims).
According to this standard, Blue Cross likely is a fiduciary under 29 U.S.C. § 1132(a)(3) because Blue Cross has full authority to determine payment eligibility for submitted claims and to review denied claims. See Plan at 45-48; Administrative Services Agreement between Blue Cross and Blue Shield of Alabama and Nichols Research Corporation, Inc. at 2, 9.Go to
- Blue Cross and Blue Shield of Alabama ("Blue Cross") sued Doyle G. Sanders and Tina M. Sanders ("the Sanderses") under ERISA, 29 U.S.C. § 1132(a)(3)(B). The district court denied summary judgment to the Sanderses and granted summary judgment to Blue Cross. See Blue Cross Blue Shield of Ala. v. Sanders, 974 F. Supp. 1416 (N.D.Ala. 1997). We affirm.Go to
- ERISA does not specify a limitations period for a fiduciary's suit against a participant under 29 U.S.C. § 1132(a)(3) to enforce a reimbursement provision of a plan. In an ERISA action with no congressionally mandated limitations period, the district court "must define the essential nature of the ERISA action and apply the forum state's statute of limitations for the most closely analogous action." Byrd v. MacPapers, 961 F.2d 157, 159 (11th Cir. 1992); see also Wilson v. Garcia, 471 U.S. 261, 266-67, 105 S.Ct. 1938, 1942, 85 L.Ed.2d 254 (1985) (stating that when Congress has not established a time limitation for a federal cause of action, courts should adopt a local time limitation as federal law if it is not inconsistent with federal law or policy to do so). The characterization of the federal claim for statute of limitations purposes "is derived from the elements of the cause of action, and Congress' purpose in providing it. These, of course, are matters of federal law." Byrd, 961 F.2d at 159 (citing Clark v. Coats Clark, 865 F.2d 1237, 1241 (11th Cir. 1989)).Go to
- Furthermore, we need not determine whether Blue Cross failed "to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). As this court has held, "[T]he failure to state a claim is not a jurisdictional question." Gholston v. Hous. Auth. of City of Montgomery, 818 F.2d 776, 781 (11th Cir. 1987). Thus, although we may determine sua sponte whether subject matter jurisdiction exists, we will not decide whether the plaintiff failed to state a claim unless the defendant preserved that defense in the district court pursuant to Fed.R.Civ.P. 12(h)(2). See Brule, 611 F.2d at 409 ("Having neglected to assert the defense of failure to state a claim below, defendants have waived their right to assert it now."); see also Dean Witter Reynolds, Inc. v. Fernandez, 741 F.2d 355, 360-61 (11th Cir. 1984) (declining to consider a defense not raised in the district court except under extraordinary circumstances).Go to
- This case differs from FMC Corp. v. Holliday, 498 U.S. 52, 111 S.Ct. 403, 112 L.Ed.2d 356 (1990), which applied ERISA's saving clause because the state subrogation law was directly related to insurance. In that case, the state law prohibited subrogation or reimbursement of benefits paid or payable for tort recoveries in actions arising out of the maintenance or use of a motor vehicle, where the benefits were provided through "[a]ny program, group contract or other arrangement for payment of benefits." See FMC Corp., 498 U.S. at 59, 111 S.Ct. at 408 (citing 75 Pa. Cons.Stat. § 1719-20). Reasoning that the state law "does not merely have an impact on the insurance industry; it is aimed at it," see FMC Corp., 498 U.S. at 61, 111 S.Ct. at 409, the Court ruled that the saving clause applied. By contrast, the subrogation law at issue in this case covers all subrogation actions, including those arising outside of the insurance context. FMC Corp., therefore, does not govern this case.
Because Ala. R. Civ. P. 17(a) is not directly related to the insurance industry, the instant case is analogous to Baxter By and Through Baxter v. Lynn, 886 F.2d 182, 186 (8th Cir. 1989), in which the court ruled that ERISA preempted the state common law of subrogation. As the court explained,
[T]he law of subrogation, while generally applicable to insurance contracts, is not specifically directed toward the insurance industry. While laws regulating subrogation rights apply in part to holders of insurance, they do not regulate the insurance industry directly. . . . Thus, a common sense reading of the insurance saving clause indicates that common law rules on subrogation are not the type of state insurance regulations intended to survive the broad scope of ERISA preemption.
Id. at 186. Similarly, we hold that Ala. R. Civ. P. 17(a) is not the type of state law that is intended to survive the broad scope of ERISA preemption.Go to
- The Sanderses did not make this argument before the district court. Indeed, in their answer, they explicitly admitted that Blue Cross was a fiduciary seeking equitable relief. See Answer at 2-3, ¶¶ 3(c), 4, 6, 12. Notwithstanding the Sanderses' failure to raise the issue in the district court, this court may review subject matter jurisdiction sua sponte. See Baltin v. Alaron Trading Corp., 128 F.3d 1466, 1468 (11th Cir. 1997) (stating that this court may conduct plenary review of subject matter jurisdiction and that this court has the obligation to inquire into subject matter jurisdiction whenever it may be lacking) (citations omitted); see also Fed.R.Civ.P. 12(h)(3) ("Whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action.").Go to
- 611 F.2d 406, 409 (1st Cir. 1979); see also McGinnis v. Ingram Equipment Co., Inc., 918 F.2d 1491, 1494 (11th Cir. 1990) (en banc) (holding that defendant waived the right to assert a failure to state a claim; stating that issue was not jurisdictional); Brown v. Trustees of Boston Univ., 891 F.2d 337, 356-57 (1st Cir. 1989) (same). Thus, the question of whether Blue Cross actually is a "fiduciary," see 29 U.S.C. § 1132(a)(3), seeking "equitable relief," see 29 U.S.C. § 1132(a)(3)(B), is not properly before this court.Go to
- Moreover, even if the saving clause were applicable, the deemer clause, 29 U.S.C. § 1144(b)(2)(B), would exempt the instant self-funded plan from Ala. R. Civ. P. 17(a). As the Court ruled in FMC Corp., "State laws that directly regulate insurance are `saved' but do not reach self-funded employee benefit plans because the plans may not be deemed to be insurance companies, other insurers, or engaged in the business of insurance for purpose of such state laws." 498 U.S. at 61, 111 S.Ct. at 409; see id., at 65, 111 S.Ct. at 411 (holding that ERISA preempted the application of a state anti-subrogation law to an employer's self-funded health care plan). The Sanderses' reliance on Ala. R. Civ. P. 17(a) therefore is misplaced.Go to
- We therefore look to Alabama law for the relevant limitations period. As a matter of first impression for this court, we hold that a fiduciary's action to enforce a reimbursement provision pursuant to 29 U.S.C. § 1132(a)(3) is most closely analogous to a simple contract action brought under Alabama law. Accordingly, we apply Alabama's six-year statute of limitations for simple contract actions, see Ala. Code § 6-2-34(9), and reject the Sanders's proposed two-year limitations period.Go to
- From June 1990 to May 1992, the Sanderses were participants in a health benefits plan ("the Plan") offered through Mr. Sanders's employer, the Nichols Research Corporation ("NRC"). The Plan, an "employee welfare benefit fund" under 29 U.S.C. § 1002(1), was self-funded by NRC, which paid the cost of all claims approved by Blue Cross, the "Claims Administrator" under the terms of the Plan. See Plan at 1, § I, ¶ 2.Go to
- The parties filed cross-motions for summary judgment. The district court denied summary judgment to the Sanderses and granted summary judgment to Blue Cross. See Blue Cross Blue Shield of Ala. v. Sanders, 974 F. Supp. 1416 (N.D.Ala. 1997). In its order, the court determined that the Plan conflicted with Alabama's common law of subrogation, but it ruled that ERISA preempted this state law. Id. at 1419-22. The court concluded: "Under the plan's provisions on subrogation, the plan is entitled to recover the $12,678.69 that it has paid for Tina M. Sanders' injuries." Id. at 1422.Go to
- Second, even if we were to accept the Sanderses' interpretation of Ala. R. Civ. P. 17(a), we would hold that ERISA preempts this state law. As interpreted by the Sanderses, Rule 17(a) would preclude Blue Cross from obtaining reimbursement under the Plan. See Plan, Section XI, ¶ 2. Rule 17(a) thus would fall within the scope of ERISA preemption. See 29 U.S.C. § 1144(a) (stating that, except as provided in the saving clause, ERISA supersedes all state laws that "relate to any employee benefit plan"); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47, 107 S.Ct. 1549, 1549, 95 L.Ed.2d 39 (1987) (stating that ERISA preemption has an "expansive sweep" and is not limited to state laws designed specifically to affect employee benefit plans); cf. FMC Corp. v. Holliday, 498 U.S. 52, 111 S.Ct. 403, 112 L.Ed.2d 356 (1990) (holding that state subrogation law related to employee benefit plans because it prohibited plans from being structured in a manner requiring reimbursement in the event of recovery from a third party).Go to
- No relevant limitations period is found in 29 U.S.C. § 1132, see Blue Cross Blue Shield of Ala. v. Weitz, 913 F.2d 1544, 1551 n. 12 (11th Cir. 1990) (stating that 29 U.S.C. § 1132 does not specify a limitations period), or in any other ERISA provision, cf. 29 U.S.C. § 1113 (providing limitations periods for suits brought "under this subchapter with respect to a fiduciary's breach of any responsibility, duty, or obligation under this part, or with respect to a violation of this part"); Trustees of Wyo. Laborers Health and Welfare Plan v. Morgen Oswood Constr. Co., Inc. of Wyo., 850 F.2d 613, 618 n. 8 (10th Cir. 1988) ("The statute of limitations contained in 29 U.S.C. § 1113 applies only to actions brought to redress a fiduciary's breach of its obligations to enforce the provisions of ERISA.").Go to
- The Sanderses cite two inapposite cases in support of their contention that a two-year statute of limitations applies. See Musick v. Goodyear Tire Rubber Co., Inc., 81 F.3d 136 (11th Cir. 1996); O'Neal v. Kennamer, 958 F.2d 1044, 1047 (11th Cir. 1992). In Musick, this court determined the appropriate Alabama limitations period to apply to ERISA actions brought by employees alleging that their layoffs were motivated by the employer's desire to avoid paying retirement benefits. 81 F.3d at 137. The court applied Alabama's two-year limitations period applicable to claims for wages and claims for discharge in retaliation for seeking worker's compensation, rather than the six-year limitations period applicable to actions on simple contracts. Id. at 138-39. The cause of action in Musick is entirely dissimilar to Blue Cross's claim here.
In O'Neal, this court noted that under Alabama law a subrogee's action against a third-party tortfeasor is a tort action for damages. 958 F.2d at 1047; see also Ala. Code 1975, Section 6-2-38(l), (n) (providing two-year limitations period for any injury to the person or rights of another not arising from contract). O'Neal is not relevant, however, because the instant suit is not a subrogation action against third-party tortfeasors, but rather a suit seeking reimbursement from the Sanderses under the terms of the Plan.
Go to - In their answer, the Sanderses admitted that Blue Cross was a fiduciary seeking equitable relief under 29 U.S.C. § 1132(a)(3). See Answer at 2, ¶ 4 ("The Defendants admit the allegations of paragraphs 1 through 7 except this action is not prosecuted by Nichols Research Corporation's Employee's Health Benefit Plan, the real party in interest, as required by Rule 17, Federal Rules of Civil Procedure."); Complaint at 2, ¶ 5 (stating that the court had subject matter jurisdiction under 29 U.S.C. § 1132(a)(3) because the action was brought by a fiduciary under an employee welfare benefit plan to enforce provisions of the plan); id. at ¶ 3 (stating that Blue Cross was a Plan fiduciary with standing to bring an action under 29 U.S.C. § 1132(a)(3)); Answer at 2-3, ¶¶ 3(c), 6, 12 (stating that Blue Cross was seeking "equitable" relief).Go to
- Other circuits have used state contract law to establish limitations periods for civil enforcement actions brought under 29 U.S.C. § 1132. See Pierce County Hotel Employees Restaurant Employees Health Trust v. Elks Lodge, 827 F.2d 1324, 1328 (9th Cir. 1987); Dameron v. Sinai Hosp. of Baltimore, Inc., 815 F.2d 975, 981 (4th Cir. 1987); Miles v. N YS. Teamsters Conference Pension Retirement Fund Employee Pension Benefit Plan, 698 F.2d 593, 598 (2d Cir. 1983).Go to
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