Moore v. Lafayette Life Insurance , 458 F.3d 416 ( 2006 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 06a0279p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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Nos. 04-1146/1942; 05-1109
Plaintiff-Appellant, -
RICHARD L. MOORE,
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Nos. 04-1146/1942/1945;
,
05-1109
v. >
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LAFAYETTE LIFE INSURANCE CO., an Indiana
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Corporation; MICHIGAN TOOLING ASSOCIATION, a
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Michigan Corporation; MICHIGAN TOOLING
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ASSOCIATION LONG TERM DISABILITY PLAN;
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MICHIGAN TOOLING ASSOCIATION SHORT TERM
DISABILITY PLAN, Jointly and Severally, -
Defendants-Appellees. -
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No. 04-1945
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RICHARD L. MOORE,
Plaintiff-Appellant/Cross-Appellee, -
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v.
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LAFAYETTE LIFE INSURANCE CO., an Indiana
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Corporation,
Defendant-Appellee/Cross-Appellant, -
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MICHIGAN TOOLING ASSOCIATION, a Michigan
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Corporation; MICHIGAN TOOLING ASSOCIATION
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LONG TERM DISABILITY PLAN; MICHIGAN TOOLING
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ASSOCIATION SHORT TERM DISABILITY PLAN,
Jointly and Severally, -
Defendants. -
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N
Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 01-73944—Robert H. Cleland, District Judge.
Argued: December 2, 2005
Decided and Filed: August 7, 2006
1
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 2
Before: CLAY and COOK, Circuit Judges; OLIVER, District Judge.*
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COUNSEL
ARGUED: Mary C. O’Donnell, DURKIN, McDONNELL, CLIFTON & O’DONNELL, Detroit,
Michigan, for Appellant. D. Andrew Portinga, MILLER, JOHNSON, SNELL & CUMMISKEY,
Grand Rapids, Michigan, Elaine A. Parson, RAYMOND & PROKOP, Southfield, Michigan, for
Appellees. ON BRIEF: Mary C. O’Donnell, Gregory A. Clifton, DURKIN, McDONNELL,
CLIFTON & O’DONNELL, Detroit, Michigan, for Appellant. D. Andrew Portinga, MILLER,
JOHNSON, SNELL & CUMMISKEY, Grand Rapids, Michigan, Elaine A. Parson, Jeffrey D.
Wilson, RAYMOND & PROKOP, Southfield, Michigan, for Appellees.
CLAY, J., delivered the opinion of the court. OLIVER, D. J. (p. 26), delivered a separate
concurring opinion, in which COOK, J., joined. COOK, J. (pp. 27-29), delivered a separate opinion
concurring in part and dissenting in part.
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OPINION
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CLAY, Circuit Judge. Plaintiff, Richard L. Moore, appeals the district court’s judgments
in favor of Defendants Lafayette Life Insurance Co. (“Lafayette”) and the Michigan Tooling
Association (“MTA”). The district court granted judgment to Defendants on Plaintiff’s claims under
the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq.
Plaintiff also appeals the district court’s award of partial attorneys’ fees and costs to Defendants,
along with sanctions against Plaintiff’s attorney. Defendant Lafayette cross-appeals the award of
attorneys’ fees in its favor as too low. For the reasons which follow, we AFFIRM the decision of
the district court in all respects.
I.
BACKGROUND
A. Substantive Facts
Defendant MTA is an association of approximately 700 member companies in the metal-
working industry in Michigan. Plaintiff is a licensed insurance agent in the state of Michigan.
MTA hired Plaintiff in 1971 to handle all group life, disability, and workers’ compensation
insurance for MTA and its member companies. While Plaintiff was initially hired as a salaried
employee, in 1972 MTA and Plaintiff agreed that Plaintiff’s compensation would come only from
commissions for premiums paid and signed a “Memorandum of Understanding” (“MOU”) to that
effect. Plaintiff’s responsibilities included taking “complete responsibility for all Group Life and
Disability insurance for the Detroit Tooling Association . . . . handl[ing] all questions, claim
problems and generally servic[ing] all participants in the plan . . . .” (J.A. at 1722.) The MOU also
provided that Plaintiff would pay all his own expenses. MTA filed 1099s on Plaintiff for income
tax purposes.
*
The Honorable Solomon Oliver, Jr., United States District Judge for the Northern District of Ohio, sitting by
designation.
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 3
MTA and Plaintiff operated under the MOU until December 1998, when Plaintiff and MTA
signed a “Consulting Service Agreement” (“CSA”), whereby MTA would pay Plaintiff a fixed sum
of $75,000, in monthly installments, and Plaintiff was deemed an “independent contractor.” (J.A.
at 273.) Plaintiff was responsible for all federal and state payroll taxes, all expenses incurred in the
state of Michigan, and was free to accept outside consulting agreements. MTA continued to file
1099s on Plaintiff for income tax purposes.
Prior to 1996, Royal Maccabees Insurance provided MTA life and disability insurance
policies. In 1996, Plaintiff recommended to MTA that MTA switch its insurance provider to
Lafayette. Lafayette became MTA’s provider of group life and disability insurance in March 1996;
Plaintiff signed the Application for Group Insurance as a licensed agent. As the signing agent,
Plaintiff attested:
I have fully explained to the Policyholder that any Employee not in Active
Employment or in a class otherwise eligible to apply for insurance coverage on the
Contract Effective Date of any Contract to be issued by the Company will not be
eligible to apply for any such insurance issued by the Company unless and until such
time such Employee becomes a member of a class eligible to apply for insurance
coverage.
(J.A. at 236.)
In March 1996, at the time Lafayette began writing insurance polices to MTA, its employees,
and MTA member companies, Plaintiff was listed as an “employee” on premium statements
submitted by MTA. From 1996 through December 1998, Plaintiff paid the premiums on his own
coverage for disability insurance directly to Lafayette.
Plaintiff and MTA operated under the CSA throughout 1999 and into 2000. During this
period, MTA deducted the costs of short-term disability (“STD”) and long-term disability (“LTD”)
premiums from Plaintiff’s monthly remunerations and remitted the premiums to the insurer,
Lafayette. MTA asserts that MTA was reliant on Plaintiff’s representations to MTA of who would
be a covered “employee” under the terms of the plan. Neither Plaintiff nor MTA informed Lafayette
of the terms of the CSA.
In September 2000, Plaintiff filed for STD benefits, and then one month later requested LTD
benefits. MTA filed the benefit request forms on behalf of Plaintiff with Lafayette in those same
months. Lafayette proceeded to adjudicate the claims for benefits; although there are indications
in the record that Lafayette initially indicated that MTA should adjudicate the STD claim, MTA and
Lafayette ultimately agreed that Lafayette would adjudicate both claims.
Lafayette ultimately determined that Plaintiff was not a covered “employee” under the
ERISA plan. Lafayette does not dispute that “prior to January 1, 1999 [the CSA effective date]
[Plaintiff] was eligible for certain group insurance coverages issued by Lafayette . . . . However,
facts show that effective January 1, 1999, [Plaintiff’s] status with MTA changed. We were not
aware of this change in status until [Plaintiff’s] claims for benefits were submitted to us.” (J.A. at
1923.)
The STD policy states that “[a]ny employee whose employment commenced on or before
the effective date of this policy and is actively at work on full time [sic]” was eligible for coverage
upon the plan’s effective date. (J.A. at 1434.) The STD policy further provides for coverage for
employees starting after the effective date of the policy. The STD policy defines “employee” as “an
employee in the service of the employer whose terms of employment require him to work at least
20 hours per week.” (J.A. at 1435.) The policy further defines “actively at work on full time” to
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 4
mean “actually working at least six hours per working day at the employer’s place of business or
other location where his business requires the employee to be.” (J.A. at 1435.)
The LTD policy defines “employee” to mean:
A regular, full-time employee duly recorded as such on the payroll records of the
Policyholder, who is regularly working through the entire duration of the
Policyholder’s work week, and in any event not less than 30 hours per week, and is
insured under the terms of this Policy.
(J.A. at 1893.) The clause “on the payroll records” is not further defined.
B. Procedural History
Plaintiff filed the instant action in district court on October 17, 2001. Plaintiff alleged that
Defendants violated numerous responsibilities under the STD and LTD policies of MTA’s ERISA
benefit plan and prayed for relief in the form of benefits due, attorneys’ fees and costs, and statutory
penalties. Specifically, Plaintiff alleged:
Count I: that he was wrongfully denied STD and LTD benefits as an MTA-covered
“employee” under 29 U.S.C. § 1132(a)(1)(B);
Count II: that Defendants breached fiduciary duties to Plaintiff with respect to the ERISA
plan;
Count III: that if Plaintiff is not covered “employee,” Plaintiff qualifies for benefits as a
“participating employer” under the plan;
Count IV: that Defendants should pay Plaintiff’s attorneys’ fees and costs with respect to the
ERISA action;
Count V: that Defendants refused to furnish requested information as required by 29 U.S.C.
1132(c); and
Count VI: that Defendants are estopped from asserting that Plaintiff was not covered under
the STD and LTD policies.
(J.A. at 17-28 (list formatting not in original).)
At an initial Rule 16 conference, Plaintiff objected to the application of the rules set forth
in Wilkins v. Baptist Healthcare Sys., Inc., 150 F.3d 609 (6th Cir. 1998), as controlling the form and
extent of discovery in the case. Accordingly, the magistrate judge ordered the parties to brief the
applicability of Wilkins. In conjunction with its brief and motion on Wilkins, Defendant Lafayette
filed a motion to dismiss with respect to Counts II, V, and VI. Likewise, Defendant MTA moved
to dismiss with respect to Counts I, II, III, and VI. The district court judge consolidated the Wilkins
motions and the motions to dismiss and issued an opinion and judgment on the motions on August
19, 2002.
The district court denied MTA’s motions on Count I, dismissed the first three (of five)
subclaims under Count II as against both Defendants, denied the motion to dismiss on Count III,
dismissed Count V as against Lafayette, and dismissed Count VI as against both defendants.
Additionally, the court concluded that Wilkins controlled discovery in the case and therefore
restricted discovery to Plaintiff’s underlying allegations of denial of due process and the withholding
of information count.
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 5
Plaintiff filed a motion to reconsider on September 6, 2002. The district court found the
motion untimely as exceeding the 10-day limit for motions to reconsider as set by Federal Rule of
Civil Procedure 6(a). The court further found the motion to be without merit, noting that Plaintiff
did not point to additional authority or facts supposedly left out of the court’s consideration of the
earlier motions.
After a period of limited discovery, the parties filed cross-motions for partial summary
judgment. The district court ruled on these motions on September 19, 2003. In its order, the district
court denied Plaintiff’s motion for summary judgment on Counts II and V, and further denied
Plaintiff’s request for expanded discovery under Count I. The court granted Lafayette’s motion for
summary judgment on Count II, and likewise granted MTA’s request for summary judgment on
Counts II, III, and V. The surviving Counts were Count I against both Defendants for denial of
benefits and Count III to designate Plaintiff a “participating employer” as against Lafayette (the
court having found that Count IV, for attorneys’ fees and costs, was more properly considered an
element of relief requested under the remaining substantive counts). The Court further noted that
while Lafayette did not file a motion for summary judgment on Count III, the court had grave doubts
as to the viability of such a claim. The court therefore ordered Plaintiff either to stipulate as to the
dismissal of Count III against Lafayette, or indicate to the court that Plaintiff intended to pursue
Count III against Lafayette, in which case the district court would afford Lafayette an opportunity
to file a second motion for summary judgment. Plaintiff voluntarily dismissed Count III against
Lafayette on September 30, 2003.
The district court took final action on the substantive counts in this case on January 6, 2004.
The court dismissed the remaining Count I against MTA, reasoning that because Lafayette, and not
MTA, was responsible for claims administration under the plan, MTA was not a proper defendant
in a claim for benefits. Finally, the court concluded that Plaintiff was not a covered employee for
purposes of the STD and LTD policies and granted judgment for Defendant Lafayette on Plaintiff’s
sole remaining claim for benefits in the suit. Plaintiff timely appealed all orders in the case on
January 26, 2004.
Defendant MTA thereafter filed motions for attorneys’ fees and costs and Rule 11 sanctions
against Plaintiff’s counsel. Defendant Lafayette filed a motion for attorneys’ fees and costs.
Plaintiff cross-filed for review of the clerk’s taxed bill of costs as submitted by Defendants. On June
21, 2004, the court denied Plaintiff’s motion and granted MTA’s and Lafayette’s motions for
attorneys’ fees and costs, ordering Plaintiff to pay 50 percent of Defendants’ attorneys’ fees in
addition to Defendants’ taxed bill of costs (J.A. at 2552). In addition, the court found, under both
Rule 11 and its authority under 28 U.S.C. § 1927, that Plaintiff’s counsel should be jointly and
severally liable with Plaintiff for the 50 percent assessment.
Plaintiff and Plaintiff’s counsel timely appealed the award of attorneys’ fees and the
imposition of sanctions on July 20, 2004. Defendant Lafayette timely cross-appealed its award of
attorneys’ fees as too low on July 29, 2004.
II.
ANALYSIS
A. The District Court’s Initial Determinations Under ERISA
In arguments to this Court, Plaintiff avers that in its August 19, 2002 order the district court
improperly dismissed subclaims (a), (b), and (c) of Plaintiff’s Count II (breach of fiduciary duty) and
improperly dismissed Count VI in its entirety (promissory estoppel).
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 6
1. Standard of Review
This Court reviews a district court’s judgment in an ERISA case de novo, applying the same
standard of review to the administrator’s action as required by the district court. See Wilkins, 150
F.3d at 615-16. Claims for breaches of fiduciary duty and promissory estoppel are not claims for
denial of benefits and are therefore addressed in the first instance in the district court, requiring no
deference to any administrator’s action or decision.
2. The District Court Correctly Dismissed Subclaims (a), (b), and (c) of Count II
Plaintiff’s Count II alleged that Defendants breached their fiduciary duties and obligations
as follows:
(a) Defendants failed to make and authorize short term disability and long term
disability benefit payments to plaintiff at a time when Lafayette and/or MTA
knew or should have known that he was entitled to such benefits;
(b) Defendants unreasonably and/or arbitrarily withheld payments in bad faith
knowing the plaintiff’s claims to be valid;
(c) Defendants unreasonably, arbitrarily and in bad faith failed to pay plaintiff’s
benefits at a time when defendant[s] had insufficient information to justify
such actions;
(d) Defendant MTA failed to provide a written plan document and a claims
procedure for the STD and LTD policies as required by ERISA §§ 402 and
503 respectively;
(e) Other breaches of fiduciary duties yet unknown, but which will become
known to plaintiff through discovery.
(J.A. at 22.) Plaintiff’s claims under Count II were brought under 29 U.S.C. § 1132(a)(3), ERISA’s
“catch all” remedial section.
The district court reasoned that subclaims (a) through (c) were merely restatements of
Plaintiff’s claim for benefits. The district court reasoned that Plaintiff’s ability to bring suit for
payment of benefits under 29 U.S.C. § 1132(a)(1) precluded Plaintiff’s suit under the “catch-all”
remedial section for those subclaims sounding as failure to pay due benefits. See Varity Corp. v.
Howe, 516 U.S. 489, 512 (1996); see also Wilkins, 150 F.3d at 615-16 (“Because § 1132(a)(1)(B)
provides a remedy for [the plaintiff’s] alleged injury . . . he does not have a right to a cause of action
for breach of fiduciary duty pursuant to § 1132(a)(3) . . . . To rule in [the plaintiff’s] favor would
allow him and other ERISA claimants to simply characterize a denial of benefits as a breach of
fiduciary duty, a result which the Supreme Court expressly rejected.”) (citing Varity Corp., 516 U.S.
at 512 (1996)).
The district court was correct. The allegedly wrongful actions referred to in subclaims
(a) through (c) all relate to Plaintiff’s denial of benefits and point to the same remedy as Plaintiff’s
claim under Count I. As such, Plaintiff is precluded from using § 1132(a)(3) for allegedly wrongful
actions addressable under § 1132(a)(1).
3. The District Court Correctly Dismissed Count VI in its Entirety
Under Count VI, Plaintiff claims that MTA and Lafayette are estopped from asserting that
Plaintiff is not a covered employee under the STD and LTD policies. Plaintiff claims that Plaintiff
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 7
relied on representations by MTA and Lafayette that his disability coverage would continue under
the CSA, and in particular that MTA’s remittance of premium payments to Lafayette on Plaintiff’s
behalf is conduct inconsistent with any subsequent position that Plaintiff is not eligible for benefits.
This Court has recognized that promissory estoppel is a viable theory in ERISA welfare
benefit actions. See Sprague v. Gen. Motors, Inc., 133 F.3d 388, 403 (6th Cir. 1998). The elements
of an estoppel claim are as follows:
(1) there must be conduct or language amounting to a representation of material
fact;
(2) the party to be estopped must be aware of the true facts;
(3) the party to be estopped must intend that the representation be acted on, or
the party asserting the estoppel must reasonably believe that the party to be
estopped so intends;
(4) the party asserting the estoppel must be unaware of the true facts; and
(5) the party asserting the estoppel must reasonably or justifiably rely on the
representation to his detriment.
Sprague, 133 F.3d at 403 (list formatting not in original).
Typically, estoppel actions occur when a plan fiduciary misrepresents the actual meaning
of plan terms in a situation where the plan itself is ambiguous. See id. at 404. Plaintiffs cannot
recover under an estoppel theory for misrepresentations which contradict unambiguous, written plan
terms because their reliance on the subsequent representation would be unreasonable. See id. The
district court found that Plaintiff had failed to base his promissory estoppel claim on a premise that
the plan terms were ambiguous. Because, in the district court’s determination, Plaintiff did not
allege that the plan documents were ambiguous, the district court granted judgment for Defendants
on Plaintiff’s promissory estoppel theory.1
This Court can affirm a district court on any basis supported by the record. See City Mgt.
Corp. v. U.S. Chem. Corp., 43 F.3d 244, 251 (6th Cir. 1994). Plaintiff did properly allege that the
plan documents were ambiguous, insofar as Plaintiff was arguing over the meaning of “employee”
under the plan. Nonetheless, Plaintiff cannot prove at least one element of promissory estoppel with
respect to each Defendant and therefore cannot prevail.
Plaintiff cannot show that his reliance on any alleged misrepresentations by MTA
management was reasonable, as required by the Supreme Court and this Circuit. See Sprague, 133
F.3d at 403; Gregg v . Transp. Workers of Am. Int’l, 343 F.3d 833, 841 (6th Cir. 2003). Plaintiff
admits to being more knowledgeable about insurance coverage issues than anyone in management
at MTA. Plaintiff was the self-acknowledged expert in welfare benefits coverage for MTA.
Plaintiff admitted that he sold the policy at issue to MTA and likewise explained the policy terms
to MTA officers, including the term on covered employees. Plaintiff admitted that he was the “go
to” guy for insurance questions held by MTA and its member companies. (J.A. at 1031-32.)
Plaintiff had worked in insurance for over 30 years. Under the1972 MOU between Plaintiff and
1
Judge Cook’s partial dissent insists that this Court’s determination that Plaintiff is not, in fact, an “employee”
under ERISA, see infra, deprives this Court of jurisdiction over this case. We therefore fail to see how Judge Cook could
join Judge Oliver’s conclusion on the merits of Plaintiff’s promissory estoppel claim, inasmuch as promissory estoppel
is merely an alternative theory of recovery under Plaintiff’s ERISA benefits claim.
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 8
MTA, Plaintiff handled all questions and claim problems for MTA’s group life and disability
insurance plans. Any reliance by Plaintiff on representations by MTA management going to
insurance coverage, therefore, would have been unreasonable under the circumstances of this case
and in light of Plaintiff’s acknowledged superior expertise on the specific insurance policies at issue.
This is not to say that an insurance “expert” can never prevail in an ERISA action under a
promissory estoppel theory, only that reasonable reliance by Plaintiff would require a representation
from someone with better or more specific knowledge than Plaintiff, or at least from someone who
Plaintiff reasonably believed to have better or more specific knowledge. Under the circumstances
of this case, for example, had Lafayette known the terms of Plaintiff’s relationship with MTA under
the CSA and then represented to Plaintiff that Plaintiff was covered under the plan, Plaintiff’s
promissory estoppel theory might be viable. Under the facts of this case, however, Lafayette did not
know the terms of the CSA and therefore did not know whether Plaintiff was an “employee” under
the plan. See infra, Part II.C. Consequently, any alleged representations by Lafayette were not
made while Lafayette was “aware of the true facts” (criteria two for a promissory estoppel claim),
and Plaintiff therefore cannot assert promissory estoppel against Lafayette.
B. The District Court Properly Limited the Scope of Discovery for the Remaining Claims
Under Wilkins
Plaintiff argues that the district court improperly limited the scope of discovery for his
remaining benefits and breach of fiduciary duty claims. We disagree.
1. Standard of Review
This Court reviews the district court’s conclusions as to the applicability of Wilkins de novo.
Cf. Putney v. Medical Mut., 111 Fed. App’x 803, 806 (6th Cir. 2004) (unpublished opinion).
2. Wilkins Applies to All ERISA Benefit Cases
In Wilkins, this Court clarified the permissible scope of discovery in an ERISA action in
federal district court. 150 F.3d at 618-19. This Court instructed district courts to follow a two-step
process in adjudicating an ERISA benefit action:
1. As to the merits of the action, the district court should conduct a de novo
review based solely upon the administrative record, and render findings of
fact and conclusions of law accordingly. The district court may consider the
parties’ arguments concerning the proper analysis of the evidentiary
materials contained in the administrative record, but may not admit or
consider any evidence not presented to the administrator.
2. The district court may consider evidence outside of the administrative record
only if that evidence is offered in support of a procedural challenge to the
administrator’s decision, such as an alleged lack of due process afforded by
the administrator or alleged bias on its part. This also means that any
prehearing discovery at the district court level should be limited to such
procedural challenges.
Id.
Plaintiff argues that because he alleged that Defendants denied him due process in
adjudicating his claim for benefits, Plaintiff was entitled to discovery into his denial of benefits
claim. Plaintiff argues that his case is distinct from the action in Wilkins because, among other
things: 1) the claimant in that case did not allege violations of due process, 2) there was no
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confusion in the Wilkins case about which documents actually constituted the applicable ERISA
plan, and 3) there was no confusion in Wilkins about who was the plan administrator.
While Plaintiff is correct about the factual dissimilarities between Wilkins and his case, these
dissimilarities do not make the Court’s instructions in Wilkins any less applicable to the case at bar.
Plaintiff’s arguments about the inapplicability of Wilkins all come back to whether Plaintiff had
sufficient opportunity to present evidence and arguments to Defendants and to respond to
Defendants contentions – in essence, all due process issues. The Wilkins panel foresaw occasions
in which the procedural process of gathering all pertinent information may have broken down at the
administrative level and directed the courts to permit discovery in those cases. Wilkens, 150 F.3d
at 619. (“The district court may consider evidence outside of the administrative record only if that
evidence is offered in support of a procedural challenge to the administrator’s decision.”) If
discovery into the alleged procedural defects supports a plaintiff’s allegations of due process denial,
then a district court is obligated to permit discovery into more substantive areas of a plaintiff’s
claim. See id. If a court finds that due process was not denied, however, then it is appropriate for
the district court to deny further discovery into substantive areas, or else a plaintiff could circumvent
the directive of Wilkins merely by pleading a due process problem. Cf. id.
3. The District Court Properly Applied Wilkins
The district court permitted discovery into whether Plaintiff was actually denied due process.
The district court noted that “the court will not expand discovery until it is proven that such a denial
of due process occurred.” (J.A. at 44.) This order was entirely consistent with the intent and letter
of Wilkins.2 Plaintiff argues that the district court’s ruling on Wilkins somehow held Plaintiff to a
higher standard than this Court requires under Wilkins. (See Pl. Br. 23-24 (“In neither Vanderlock
nor Wilkins did this Court require that plaintiff prove the alleged denial of due process before it
permitted both expanded discovery and consideration of additional evidence outside of the
administrative record.”).) We find Plaintiff’s argument without merit. The Vanderlock panel found,
as a matter of law, that the evidence before the court established that the plaintiff in that action had
been substantially denied the procedural protections afforded by ERISA. Vanderklok v. Provident
Life & Accident Ins. Co., 956 F.2d 610, 617 (6th Cir. 1992). After reaching such a conclusion, this
Court remanded to the district court for discovery. Id. In the instant action, the district court
deferred discovery into Plaintiff’s substantive claims until it had enough evidence to determine
whether Plaintiff had been substantially denied ERISA’s procedural protections. There is no
inconsistency between the district court’s actions and this Court’s holding in Vanderlock. Moreover,
the only logical reading of this Court’s instructions in Wilkins is that until a due process violation
is at least colorably established, additional discovery beyond the administrative record into a
plaintiff’s denial of benefits claim is impermissible. Wilkins was properly followed.
C. The District Court Properly Granted Summary Judgment for Defendants on Plaintiff’s
Claims for Breach of Fiduciary Duty and § 1132(c) Monetary Penalties
Plaintiff argues that the district court improperly granted Defendants summary judgment on
his breach of fiduciary duty and § 1132(c) claims. We conclude that the district court properly
found that Plaintiff had failed to present evidence of either a due process violation or a breach of
fiduciary duties. In addition, the district court did not abuse its discretion in refusing to grant
penalties under 29 U.S.C. § 1132(c).
2
That the district court was permitting discovery into due process issues with respect to Defendants’ denial of
benefits is even clearer when the Court considers the lower court’s opinion on Plaintiff’s motion for reconsideration:
“[U]ntil Plaintiff has proven the denial of due process, the court will not expand the review on the denial of benefits
claim.” (J.A. at 60.)
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 10
1. Standard of Review
This Court reviews summary judgment de novo. Eastman Kodak Co. v. Image Technical
Servs., Inc., 504 U.S. 451, 466 n.10 (1992). Summary judgment is appropriate when there is no
genuine issue of material fact, thereby entitling the movant to a judgment as a matter of law. Kocsis
v. Multi-Care Mgt., Inc., 97 F.3d 876, 882 (6th Cir. 1996). This Court’s “inquiry, therefore,
unavoidably asks whether reasonable [fact-finders] could find by a preponderance of evidence that
the plaintiff is entitled to a [judgment].” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 322 (1986).
“This Court reviews de novo ‘the question of whether the procedure employed by the
fiduciary in denying the claim meets the requirements of Section [503].’” Marks v. Newcourt Credit
Group, Inc., 342 F.3d 444, 459 (6th Cir. 2003) (quoting Kent v. United of Omaha Life Ins. Co.,
96 F.3d 803, 806 (6th Cir. 1996)).
Because a district court has discretion in the award of monetary penalties under 29 U.S.C.
§ 1132(c), this Court reviews a district court’s decision under that section for an abuse of discretion.
Bartling v. Fruehauf Corp., 29 F.3d 1062, 1068 (6th Cir. 1994). An abuse of discretion exists when
the reviewing court is firmly convinced that a mistake has been made. In re Bendectin Litig., 857
F.2d 290, 307 (6th Cir. 1988).
2. The District Court Properly Dismissed Plaintiff’s Breach of Fiduciary Duties Claim
The district court allowed Plaintiff’s breach of fiduciary duties claim to proceed, with
discovery, to the extent that the claim alleged 1) that Defendants had made material
misrepresentations to Plaintiff about Plaintiff’s eligibility for benefits, and 2) that Defendants had
failed to provide Plaintiff with requested plan documentation. (J.A. at 40-45.) Inherent in these
allegations was Plaintiff’s assertion that Defendants had denied Plaintiff due process in the
adjudication of his denial of benefits claim, and the district court reached Plaintiff’s due process
allegations in ruling on Plaintiff’s claim for breach of fiduciary duty.
a. Breach of fiduciary duty claims under ERISA
This Court has recognized an equitable claim by a participant against an ERISA plan
fiduciary arising out of 29 U.S.C. § 1132(a)(3) when a fiduciary misleads a participant or
beneficiary. See Krohn v. Huron Mem. Hosp’l, 173 F.3d 542, 546 (6th Cir. 1999).
Pursuant to § 1002(21)(A) of ERISA:
[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.
29 U.S.C. § 1002(21)(A). ERISA also provides that “a fiduciary shall discharge his duties with
respect to a plan solely in the interest of the participants and beneficiaries.” 29 U.S.C. § 1104(a)(1).
A fiduciary breaches his duty by providing plan participants with materially misleading
information, “regardless of whether the fiduciary’s statements or omissions were made negligently
or intentionally.” Krohn, 173 F.3d at 547 (internal quotation and citation omitted). “Misleading
communications to plan participants regarding plan administration (for example, eligibility under
a plan, the extent of benefits under a plan) will support a claim for a breach of fiduciary duty.”
Drennan v. Gen. Motors Corp., 977 F.2d 246, 251 (6th Cir. 1992) (internal quotation and citation
omitted). A lower court in this Circuit has applied the fiduciary duty/misrepresentation case law of
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 11
this Court to a plaintiff’s claim that a misrepresentation precluded her from seeking alternative
sources of disability coverage. See Parks v. Fin. F.S.B., 345 F. Supp. 2d 889, 897 (W.D. Tenn.
2004).
To establish a claim for breach of fiduciary duty based on alleged misrepresentations
concerning coverage under an employee benefit plan, a plaintiff must show:
(1) that the defendant was acting in a fiduciary capacity when it made the
challenged representations;
(2) that these [representations] constituted material misrepresentations; and
(3) that the plaintiff relied on those misrepresentations to [his] detriment.
James v. Pirelli Armstrong Tire Corp., 305 F.3d 439, 449 (6th Cir. 2002). “Whether an affirmative
misrepresentation was ‘material’ is a mixed question of law and fact. [] [A] misrepresentation is
material if there is a substantial likelihood that it would mislead a reasonable employee in making
an adequately informed decision about if and when to retire.” Id. (internal quotations and citations
omitted). Finally, a plaintiff’s reliance on the misrepresentation must be “reasonable.” Parks, 345
F. Supp. 2d at 897; cf. Gregg, 343 F.3d at 843 (requiring defendant plan administrator show that its
reliance on financial experts was reasonable).
b. The district court correctly concluded that no genuine issues of material fact
existed as to Defendants’ liability for alleged misrepresentations
i. No misrepresentations were made by either Defendant prior to
Plaintiff’s signing of the CSA
The district court found that Plaintiff had failed to put forth any evidence that MTA or
Lafayette made misrepresentations to Plaintiff about the effect of the CSA on his status as a covered
“employee” prior to Plaintiff’s signing of the CSA. The district court referred to Plaintiff’s
deposition testimony, in which Plaintiff’s testimony as to statements by Defendants contain no exact
time reference. Plaintiff’s only time reference cites statements made at a “December 1998” meeting.
(See J.A. at 273, 1060.) Defendant MTA’s witness testified in a later deposition that this meeting
took place on December 3, 1998, one day after Plaintiff signed the CSA. In addition, elsewhere in
his deposition testimony, Plaintiff asserts that he signed the CSA within moments of its presentation
to him, without discussing its terms or its effect on Plaintiff’s disability coverage with Defendants.
The district court refused to consider a subsequent affidavit submitted by Plaintiff in support of his
motion for summary judgment as an unreliable affidavit pursuant to Penny v. United Parcel Serv.,
128 F.3d 408, 417 (6th Cir. 1997) (noting that a “party cannot create a genuine issue of material fact
by filing an affidavit, after a motion for summary judgment has been made, that essentially
contradicts his earlier deposition testimony”). Plaintiff’s late-filed affidavit states that Plaintiff
sought and received assurance from Defendants, prior to signing the CSA, that the CSA would not
affect Plaintiff’s disability coverage.
Plaintiff alleges that the district court’s reference to Plaintiff’s deposition testimony was
somehow incomplete and unjustified, and asserts that counsel for Defendants, taking the deposition,
somehow had the obligation to establish when the alleged misrepresentations were made. (See Pl.
Br. 40.) Plaintiff further argues that the district court improperly discounted Plaintiff’s affidavit.
Plaintiff’s assertions that somehow Defendants’ counsel had the burden of pulling out of
Plaintiff when the alleged misrepresentations were made are without merit. At the summary
judgment stage, Defendants had the burden of putting evidence or argument before the district court
which showed that Plaintiff had failed to establish a genuine issue of material fact. See Fed. R. Civ.
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 12
Proc. 56. Defendants did this, with respect to any misrepresentations allegedly made before Plaintiff
signed the CSA, by pointing to Plaintiff’s deposition testimony and the lack of dates therein. (See
J.A. at 470-71.) The burden then shifted to Plaintiff to show evidence in the record from which a
reasonable trier of fact could find that Defendants did make misrepresentations prior to Plaintiff’s
signing of the CSA. Plaintiff does not do this.
Instead, Plaintiff points to his late filed affidavit and defense counsel’s “failure” to establish
the dates of the alleged statements. We find that the district court correctly excluded the affidavit
from consideration because it cannot be reconciled with Plaintiff’s deposition testimony that
Plaintiff signed the CSA within moments of receiving it and without asking any questions beyond
“who . . . wants this?” (J.A. at 1059.) Further, the district court correctly found that Plaintiff had
failed to put forth sufficient evidence to survive summary judgment. Plaintiff cannot establish a date
for the alleged misrepresentations, and Defendants’ evidence indicates that any discussions as to
Plaintiff’s continued disability coverage, if such discussions did occur, took place after Plaintiff
signed the CSA.3 Plaintiff therefore could not have relied on these alleged misrepresentations in
signing the CSA.
ii. Plaintiff cannot show reasonable reliance on any alleged
misrepresentations by MTA after Plaintiff signed the CSA
Plaintiff alleges that MTA misrepresented Plaintiff’s eligibility for disability benefits after
Plaintiff signed the CSA by deducting premium payments from Plaintiff’s monthly remunerations
and remitting these premiums to Lafayette.
The district court found that any reliance by Plaintiff on statements made by MTA personnel
would be unreasonable, when Plaintiff was the self-acknowledged expert in welfare benefits
coverage for MTA. Plaintiff admitted that he sold the policy at issue to MTA and likewise
explained the policy terms to MTA officers, including the term on covered employees. Plaintiff
admitted that he was the “go to” guy for insurance questions held by MTA and its member
companies. Plaintiff had worked in insurance for over 30 years. Plaintiff began his insurance
career as an underwriter for AETNA Casualty. Plaintiff was originally hired by MTA in 1971 to
manage MTA’s insurance programs. When Plaintiff and MTA signed an MOU in 1972, Plaintiff
continued to handle all questions and claim problems for MTA’s group life and disability insurance.
We find that the district court correctly concluded that any reliance by Plaintiff on
representations by MTA management personnel as to the CSA’s effect on Plaintiff’s disability
coverage would be unreasonable in light of Plaintiff’s undisputed position vis-a-vis MTA
management on insurance issues. Plaintiff argues that he was not an undisputed expert on ERISA.
Plaintiff need not be an undisputed expert on ERISA, however, to be the undisputed most
knowledgeable person operating in or with MTA on welfare benefit issues. Plaintiff admits in his
brief to this Court that when Plaintiff was unable to answer an MTA employee or member’s question
on welfare benefits, Plaintiff would refer such questions to Lafayette. Plaintiff does not assert that
Plaintiff would refer such unanswerable questions to a member of MTA management. Were
Lafayette, not MTA, to have represented to Plaintiff that Plaintiff was a covered “employee” under
the terms of the CSA, Plaintiff’s reliance might be reasonable. In light of Plaintiff’s superior
3
Plaintiff additionally argues that general assertions by MTA management in the year leading up to the CSA,
that upon Plaintiff’s retirement or change in status, his coverage under the benefit plan would remain the same, materially
misrepresented Plaintiff’s disability benefits to Plaintiff. This argument fails due to the very generality of the statements
upon which Plaintiff purportedly relied. These statements do nothing more than speak to management’s desire at the
time the statement were made to maintain Plaintiff’s coverage. The statements do not represent that the CSA, which
Plaintiff subsequently signed, actually maintained Plaintiff’s eligibility for benefits. In fact, the general assurances do
not refer to any specific agreement or arrangement.
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 13
insurance knowledge, however, Plaintiff’s reliance on any representations by MTA management
would be unreasonable.
iii. Plaintiff has failed to show that Lafayette made misrepresentations to
Plaintiff after Plaintiff signed the CSA
Plaintiff does not put forth any evidence that Lafayette knew the terms of the CSA prior to
Plaintiff’s application for disability benefits. Plaintiff argues that Lafayette knew that Plaintiff was
going to operate under a consulting arrangement with MTA beginning in 1999, but knowing that
Plaintiff’s relationship with MTA was going to change is not the same as knowing the terms of that
new relationship. Plaintiff testified that he could not recall providing Lafayette with a copy of the
CSA. (J.A. at 1068.) Without any evidence that Lafayette knew the terms of Plaintiff’s status under
the CSA, any alleged misrepresentations by Lafayette could not even have been negligently made.
The district court therefore correctly granted summary judgment for Lafayette on Plaintiff’s breach
of fiduciary duty/misrepresentation claim.
3. The District Court Correctly Concluded That Plaintiff Had Failed to Create a
Genuine Issue of Material Fact as to Whether Plaintiff Was Denied Due Process in
the Adjudication of His Claim
The district court found that despite some initial confusion as to the proper ERISA
documentation, the lack of a summary plan description, and some initial disagreement between
MTA and Lafayette as to who was responsible for adjudicating Plaintiff’s STD claim, the claim was
ultimately adjudicated without any substantive impairment to Plaintiff’s procedural rights. The
district court concluded that Plaintiff had been afforded a full opportunity to present any and all
evidence to Lafayette in support of Plaintiff’s claims for disability and that Plaintiff could have taken
advantage of an appeals process should Plaintiff have chosen to do so.
Plaintiff argues that numerous procedural defects “deprived [Plaintiff] of any assurance that
the process would be something other than arbitrary.” (Pl. Br. 47.) Plaintiff fails, however, to show
how these procedural defects prejudiced Plaintiff’s ability to put desired evidence in front of the
claims adjudicator, Lafayette. Generally, the courts have recognized in ERISA cases that procedural
violations entail substantive remedies only when some useful purpose would be served. Kent, 96
F.3d at 807. Neither does Plaintiff point to any evidence in briefs to this Court or to the district court
which Plaintiff argues he would have placed before Lafayette had Plaintiff been given an
opportunity.
Plaintiff argues that he was prejudiced by Lafayette’s adjudication of Plaintiff’s STD claim.
Under a 1999 Agreement between Lafayette and MTA, MTA agreed to administer claims for STD
benefits. MTA, however, asked Lafayette to administer Plaintiff’s claim for STD benefits because
of a feared conflict of interest due to Plaintiff’s close association with MTA. Lafayette ultimately
agreed to do so. Plaintiff alleges that were MTA, instead of Lafayette, to have adjudicated his STD
claim, Plaintiff would have prevailed in his pursuit of benefits because MTA “admitted” that
Plaintiff was a covered “employee” under the ERISA plan in its Answer to Plaintiff’s Complaint.
(Pl. Br. 46.) Plaintiff’s argument, however, misconstrues Defendants’ obligations to Plaintiff.
Lafayette was ultimately responsible under the terms of the STD policy itself for the adjudication
of STD claims. The subsequent contract between Lafayette and MTA did not confer legal
entitlements on Plaintiff. Plaintiff was entitled to substantial compliance by Defendants with
ERISA’s procedural requirements in claims administration. Contractual arrangements as to who was
to engage in this process do not affect whether Plaintiff actually enjoyed these procedural
protections.
ERISA requires claim administrators to put a claimant on notice of the reasons for its denial
and to afford claimants an opportunity to appeal an adjudicator’s initial decision. Pursuant to § 503,
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 14
Every employee benefit plan shall –
(1) provide adequate notice in writing to any participant or beneficiary whose
claim for benefits under the plan has been denied, setting forth the specific
reasons for such denial, written in a manner calculated to be understood by
the participant, and
(2) afford a reasonable opportunity to any participant whose claim for benefits
has been denied for a full and fair review by the appropriate named fiduciary
of the decision for denying the claim.
29 U.S.C. § 1133.
Generally, an administrator’s failure to comply with ERISA procedural requirements can
result in a remand by the reviewing court to the administrator. See VanderKlok, 956 F.2d at 619.
This Court, however, has adopted the rule that administrators need only substantially comply with
these ERISA notice requirements in order to avoid remand. Kent, 96 F.3d at 807. To decide
whether there is substantial compliance, this Court considers all communications between an
administrator and plan participant to determine whether the information provided was sufficient
under the circumstances. See Marks, 342 F.3d at 461; see also White v. Aetna Life Ins. Co., 210 F.3d
412, 414 (D.C. Cir. 2000); Brehmer v. Inland Steel Indus. Pension Plan, 114 F.3d 656, 662 (7th Cir.
1997) (“The question is whether [plaintiff] was supplied with a statement of reasons that under the
circumstances of the case permitted a sufficiently clear understanding of the administrator’s decision
to permit effective review.”). “When claim communications as a whole are sufficient to fulfill the
purposes of Section 1133 the claim decision will be upheld even if a particular communication does
not meet those requirements.” Kent, 96 F.3d at 807. In this analysis, this Court asks whether the
plan administrators fulfilled the essential purpose of § 503 – notifying Plaintiff of their reasons for
denying his claims and affording him a fair opportunity for review. Id.
Plaintiff argues that Lafayette’s denial letter was inadequate and that Plaintiff was denied
an appeals process. Plaintiff’s arguments, however, are unsupported by the record. Lafayette’s
denial letter explained its reason for denying Plaintiff’s claim in depth – Lafayette’s determination
that Plaintiff was not an “employee” under the terms of the plan. (J.A. at 1655.) The denial letter
was more than four pages in length and further explained the factual basis for Lafayette’s
determination that Plaintiff was not an “employee.” We find that the letter very clearly placed
Plaintiff on notice as to why Lafayette was denying benefits.
Similarly, Plaintiff was very clearly afforded an appeals procedure. Before any decision on
Plaintiff’s claim had been reached, the adjudicator forwarded to Plaintiff’s counsel a copy of
Lafayette’s “Grievance Procedure” used in connection with Lafayette’s LTD policy. The Grievance
Procedure established a contact person and procedure for any claimant wishing to contest a coverage
determination. Moreover, Lafayette’s letter of July 20, 2000, denying benefits, concluded by
stating:
Should you and your client disagree with our conclusions that neither long-term
disability nor short-term disability benefits can be paid, you may certainly, prior to
the institution of any formal grievance with us, provide us with the written basis for
your opinion and any information supporting your belief to us in writing and we will
consider it.
(J.A. at 1658.) Plaintiff does not contend that he attempted to submit any additional evidence to
Lafayette or that he attempted to institute formal grievance procedures as outlined in Lafayette’s
policy documents held by Plaintiff’s counsel.
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 15
We find that Plaintiff was afforded a full and fair opportunity to present his claims for
benefits to Lafayette. Without any evidence that Plaintiff was precluded from submitting such
evidence, or that Plaintiff was prevented from undertaking an administrative appeal, Plaintiff’s
claims for due process violations must fail.
4. The District Court Did Not Abuse its Discretion in Refusing to Grant Monetary
Penalties Under 29 U.S.C. § 1132(c)
Under Count V, Plaintiff asserted a claim under 29 U.S.C. § 1132(c) against MTA for failure
to furnish requested information. MTA does not dispute that it did not produce a summary plan
description as required by ERISA. The district court, however, exercised its discretion in refusing
to assess monetary penalties as authorized under 29 U.S.C. § 1132(c). In reaching its decision, the
district court noted that Plaintiff had received a copy of the relevant policies, if not the summary
plan descriptions, that Plaintiff’s expertise in the benefit field counseled against any finding of
prejudice as a result of a lack of summary plan descriptions, and that Plaintiff had not, in fact,
demonstrated any prejudice from lacking the summary plan descriptions.
This Court has said that courts may consider any prejudice or lack thereof in deciding
whether § 1132(c) penalties are warranted. See Bartling, 29 F.3d at 1068. We find that the evidence
does not firmly establish that a “mistake has been made.” Id. We therefore affirm the district
court’s refusal to grant monetary penalties under § 1132(c).
D. THE DISTRICT COURT CORRECTLY GRANTED JUDGMENT IN FAVOR OF
DEFENDANTS ON PLAINTIFF’S CLAIM FOR BENEFITS
Plaintiff argues that the district court improperly concluded that Plaintiff was not a covered
“employee” under ERISA and therefore was not entitled to benefits under the applicable ERISA
plan.
1. Standard of Review
Courts review a denial of benefits challenged under 29 U.S.C. § 1132(a)(1)(B) de novo,
unless the plan gives the plan administrator or fiduciary discretionary authority to determine benefit
eligibility or construe the terms of the plan. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101,
115 (1989). The parties do not appeal the lower court’s determination that the plan administrator
here does not have discretionary benefit eligibility authority. This Court reviews the district court’s
decisions on matters of law in an ERISA benefits action de novo and its factual findings for clear
error. See Stoll v. W. & S. Life Ins Co., No. 01-3401, 64 Fed. App’x 986, 990 (6th Cir. May 22,
2003) (unpublished opinion).
2. The District Court Properly Dismissed MTA as a Defendant
The district court concluded that MTA was not a proper defendant for a claim for benefits
because MTA did not participate in the decision to deny Plaintiff benefits under either the STD or
the LTD policies. Rather, Lafayette, as the claims administrator, was the proper party defendant for
Plaintiff’s denial of benefit claim.
According to ERISA, a plan “fiduciary” is one who “exercises any discretionary authority
or discretionary control respecting the management of [an ERISA] plan or exercises any authority
or control respecting the management or disposition of its assets” or who “has any discretionary
authority or discretionary responsibility in the administration of such plan.” 29 U.S.C.
§ 1002(21)(A). This Court has found that “the definition of a fiduciary under ERISA is a functional
one, [and] is intended to be broader than the common-law definition” such that the issue of whether
one is considered a fiduciary does not turn upon formal designations. Smith v. Provident Bank, 170
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 16
F.3d 609, 613 (6th Cir. 1999). Therefore, for purposes of ERISA, a “fiduciary” not only includes
persons specifically named as fiduciaries by the benefit plan, but also anyone else who exercises
discretionary control or authority over a plan’s management, administration, or assets. See Mich.
Affiliated Healthcare Sys., Inc. v. CC Sys. Corp. of Mich., 139 F.3d 546, 549 (6th Cir. 1998).
Under ERISA a person is a fiduciary only with respect to those aspects of the plan over
which he or she exercises authority or control. See Grindstaff v. Green, 133 F.3d 416, 426 (6th Cir.
1998). When an insurance company administers claims for employee welfare benefit plans and has
authority to grant or deny claims, the insurance company is a “fiduciary” for ERISA purposes. See
Libbey-Owens-Ford Co. v. Blue Cross & Blue Shield Mut. of Ohio, 982 F.2d 1031, 1035 (6th Cir.
1993). An employer who does not control or influence the decision to deny benefits is not the
fiduciary with respect to denial of benefit claims. Chiera v. John Hancock Mut. Life Ins. Co., 3 Fed.
App’x 384, 389 (6th Cir. 2001) (unpublished decision) (“Defendant [insurance company] is a
fiduciary for purposes of ERISA inasmuch as it had a role in administering the plan because it had
authority to accept or reject claims for losses under the group insurance policy as evidenced by the
rejection letter that it sent to Plaintiff in response to her attorney’s letter.”)
Here, despite some initial confusion over proper ERISA titles, Lafayette and MTA agreed
early on in the litigation that while MTA is the plan administrator, Lafayette is the claims
administrator and exercised full authority in adjudicating Plaintiff’s claim for benefits. It was
Lafayette who made a decision with respect to Plaintiff’s benefits, not MTA. Lafayette, and not
MTA, is therefore the proper party defendant for a denial of benefits claim by Plaintiff. See
Kennard v. Unum Life Ins. Co., No. 01-217-B-K, 2002 U.S. Dist. LEXIS 4467, at *4-6 (D. Me. Mar.
14, 2002) (unpublished opinion) (dismissing employer from benefits suit when insurance company,
and not employer, made benefit decisions). The district court did not err in dismissing MTA from
Plaintiff’s suit for benefits.
3. The District Court Properly Found That Plaintiff Was Not a Covered Employee
a. As a threshold matter, Plaintiff must meet the definition of “employee” under
ERISA
Plaintiff’s action for benefits arises under 29 U.S.C. § 1132(a), which enables a benefit plan
“participant” to enforce the substantive provisions of ERISA. The Act elsewhere defines
“participant” as “any employee or former employee of an employer . . . who is or may become
eligible to receive a benefit of any type from an employee benefit plan . . . .” § 1002(7).
Plaintiff does not allege that he has vested welfare benefits due to his status as a “former
employee” of MTA in reference to his work with MTA prior to 1999. Instead, Plaintiff alleges that
he is a “participant” because he was an “employee” of MTA while under the CSA. Thus, Plaintiff’s
claim for benefits under ERISA “can succeed only if he was [MTA’s] ‘employee,”’ while under the
CSA. The Supreme Court has held that to qualify as an “employee” for ERISA purposes, a plaintiff
must meet the common law test for employee. Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318,
320-321 (1992). Only once Plaintiff has demonstrated that he meets the common law meaning of
“employee” should this Court turn to whether Plaintiff was an “employee” as defined in the STD
and LTD policies, as distinct from an “employee” under ERISA.
b. Plaintiff is not a common law employee
The Supreme Court has adopted a common law definition of employee under ERISA:
In determining whether a hired party is an employee under the
general common law of agency, we consider the hiring party’s right
to control the manner and means by which the product is
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 17
accomplished. Among the other factors relevant to this inquiry are
the skill required; the source of the instrumentalities and tools; the
location of the work; the duration of the relationship between the
parties; whether the hiring party has the right to assign additional
projects to the hired party; the extent of the hired party’s discretion
over when and how long to work; the method of payment; the hired
party’s role in hiring and paying assistants; whether the work is part
of the regular business of the hiring party; whether the hiring party is
in business; the provision of employee benefits; and the tax treatment
of the hired party.
490 U.S. at 751-752 (footnotes omitted).
Cf. Restatement (Second) of Agency § 220(2) (1958) (listing nonexhaustive criteria
for identifying master-servant relationship); Rev. Rul. 87-41, 1987-1 Cum. Bull. 296,
298-299 (setting forth 20 factors as guides in determining whether an individual
qualifies as a common-law “employee” in various tax law contexts). Since the
common-law test contains no shorthand formula or magic phrase that can be applied
to find the answer, . . . all of the incidents of the relationship must be assessed and
weighed with no one factor being decisive.
Nationwide, 503 U.S. at 324 (internal quotations and citations omitted).
The district court considered all the factors outlined in Nationwide. The district court
concluded that:
a. MTA exercised no significant control over how Plaintiff performed his duties, and the CSA
described Plaintiff as an “independent contractor;”
b. Plaintiff required significant skill to perform his duties, counseling against finding Plaintiff
an employee;
c. While Plaintiff had an office at MTA, he covered much of his own expenses;
d. MTA did not appear to require Plaintiff to work on site at MTA;
e. While MTA and Plaintiff worked together for many years, they did so under a contractual
relationship, which changed in December 1998 when the CSA was signed;
f. Under the terms of the CSA, MTA did not have the right to assign additional duties to
Plaintiff;
g. Plaintiff had significant discretion over when and how long to work;
h. Plaintiff was paid pursuant to the CSA as an independent contractor and had to remit his own
taxes and social security payments;
i. Plaintiff appeared free to hire assistants if he so chose;
j. Plaintiff’s services were essential to the regular business of MTA;
k. Plaintiff was not eligible for “employee benefits” in the normal course of MTA business and
pursuant to the language of the CSA, which provided for remittance of the balance due under
the CSA in the event of Plaintiff’s extended illness or medical incapacity; and
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 18
l. Plaintiff’s tax treatment indicated Plaintiff was not an employee, because MTA reported
Plaintiff’s remuneration on 1099s and not W-2s.
(J.A. at 103-10.) In addition to the Nationwide factors, the district court also considered Plaintiff’s
representation of his employment status on a social security disability benefit application. In those
forms, Plaintiff asserted that he was “self-employed” and “president of [a] one man company.” (J.A.
at 110.) Plaintiff further represented that he had “incorporated himself” and that he was receiving
payment “until the end of contracts that expire 12-31-00.” (J.A. at 110.)
We find that the district court’s factual findings are not clearly erroneous. We further agree
with the district court that the balance of the evidence supports the conclusion that Plaintiff does not
meet the definition of an “employee” under the common law. Plaintiff’s self-representation to the
Social Security Administration is compelling. When viewed in conjunction with the issuance of
1099s, Plaintiff’s responsibility for his own payroll taxes, and reference to Plaintiff as an
“independent contrator” by the CSA itself, Plaintiff is not a common law employee and therefore
ineligible under an ERISA benefit plan.
E. The District Court Did Not Abuse its Discretion in Awarding Partial Attorneys’ Fees
Under 29 U.S.C. § 1132(g)(1) Against Plaintiff and in Sanctioning Plaintiff’s Counsel
Plaintiff argues that the Court’s conclusion that Plaintiff is not a common law employee, and
therefore not a “participant” under ERISA, results in a determination that Plaintiff lacks statutory
standing and that this Court therefore lacks jurisdiction under 29 U.S.C. § 1132(g)(1) to award fees
against Plaintiff. In the alternative, Plaintiff argues that the district court abused its discretion in
awarding attorneys fees against Plaintiff pursuant to 29 U.S.C. § 1132(g)(1). In addition, Plaintiff’s
attorney argues that the district court abused its discretion in sanctioning Plaintiff’s attorney by
holding the attorney jointly and severally liable with Plaintiff for the award of fees. Plaintiff,
Plaintiff’s attorney, and Lafayette also take issue with the district court’s calculation of awarded
fees. We reject these arguments in turn.
1. Standard of Review
This Court construes the terms of the ERISA statute de novo. Jordan v. Mich. Conf. of
Teamsters Welfare Fund, 207 F.3d 854, 858 (6th Cir. 2000).
This Court reviews a district court’s award of attorneys’ fees and costs under 29 U.S.C.
§ 1132(g)(1) for an abuse of discretion. See 29 U.S.C. § 1132(g)(1) (“[T]he court in its discretion
may allow a reasonable attorney’s fees and costs . . . .”). Similarly, this Court reviews a district
court’s decision to impose sanctions against an attorney for abuse of discretion. See 28 U.S.C.
§ 1927.4 “[A]n abuse of discretion exists only when the court has the definite and firm conviction
that the district court made a clear error of judgment in its conclusion upon weighing relevant
factors.” Sec’y of Dep’t of Labor v. King, 775 F.2d 666, 669 (6th Cir. 1985).
2. The District Court Had Authority to Impose Attorneys’ Fees Against Plaintiff
Plaintiff first argues that the district court lacked authority to impose attorneys’ fees against
Plaintiff because the court had found that Plaintiff was not an “employee” under ERISA and was
therefore ineligible to recover benefits under an ERISA cause of action. Plaintiff argues that the
4
“Any attorney or other person admitted to conduct cases in any court of the United States or any Territory
thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to
satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.” 28
U.S.C. § 1927.
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 19
district court’s factual conclusion as to Plaintiff’s status as an “employee” means that Plaintiff can
not be a “participant” under § 1132(g)(1), which authorizes the award of attorneys’ fees against a
participant, beneficiary, or fiduciary of an ERISA plan involved in a suit under the statute. See 29
U.S.C. § 1132(g)(1).
We find Plaintiff’s argument both self-serving and incorrect.5 Were the Court’s factual
determination on the merits as to Plaintiff’s status as an “employee” determinative of whether
Plaintiff was a “participant” under the ERISA statute, our merits determination would render
Plaintiff without statutory standing and this Court without jurisdiction to hear the case at all, a result
inapposite to Supreme Court precedent, despite Judge Cook’s conclusion to the contrary in her
partial dissent in this case.
a. ERISA “participants” and Firestone
Plaintiff’s action for benefits arises under 29 U.S.C. § 1132(a), which enables a benefit plan
“participant” to enforce the substantive provisions of ERISA. The Act elsewhere defines
“participant” as “any employee or former employee of an employer . . . who is or may become
eligible to receive a benefit of any type from an employee benefit plan which covers employees of
such employer . . . .” 29 U.S.C. § 1002(7). Plaintiff alleges that he was an employee of MTA when
his disability began, making him an “employee . . . who is eligible to receive a benefit . . . .” and
therefore a “participant” under ERISA with standing to sue. MTA argues that Plaintiff was an
“independent contractor” and not an “employee.”
Judge Cook cites to Ward v. Alternative Health Delivery Systems, 261 F.3d 624 (6th Cir.
2001), for the proposition that this Court lacks subject matter jurisdiction over an ERISA suit
brought by a plaintiff who lacks statutory standing. While we agree that lack of standing is
determinative of the jurisdiction of this Court in an ERISA action, we do not agree that Plaintiff
lacks standing in the case at bar or that this case is analogous to that cited in Ward. The Ward
plaintiff argued for an extension of existing law under the corollary “beneficiary” standing prong
of ERISA. Id. at 627. This Court refused to extend the definition of “beneficiary” to include health
care providers. Id. This was a ruling of law, not a factual determination that the Ward plaintiff did
not qualify as a beneficiary under traditional definitions.
Plaintiff in the case at bar is not arguing for an extension of existing ERISA standing law.
Rather, Plaintiff argues that, as a matter of fact, Plaintiff was an “employee” when his disability
began. This goes to the merits. Questions of statutory standing and cause of action often merge.
This is the circumstance of the case at bar. Plaintiff alleges that he was an employee of the
Defendant MTA when he became disabled. In fact, whether or not Plaintiff was an employee is
determinative in the suit. It is circular to argue that because the Court has determined that Plaintiff
was not an employee, Plaintiff lacked standing to sue and that this Court therefore lacks jurisdiction.
Rather, Plaintiff had a colorable claim that he was an employee and that he was therefore covered
by the statute. Logic dictates that the federal courts be able to reach this question.
The Supreme Court addressed this issue in Firestone Tire and Rubber Co. v. Bruch, 489
U.S. at 101. The Firestone Court addressed the question of statutory standing under the term
“participant.” Id. at 115-18. The plaintiffs in Firestone were former employees of the tire
manufacturer who claimed that they were entitled to benefits under a termination pay plan that
Firestone had in place at the time Firestone sold the business in which plaintiffs worked. The
5
The United States Court of Appeals for the Ninth Circuit has explicitly rejected such a self-serving argument
as Plaintiff presents here. See Credit Mgrs. Assoc. of So. Calif. v. Kennesaw Life & Accident Ins. Co., 25 F.3d 743 (9th
Cir. 1994) (“[I]t would be unjust to permit [plaintiff] to insulate itself from liability for attorney’s fees simply because
[he] failed to produce sufficient evidence to prevail on [his] claims.”).
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 20
plaintiffs argued, in part, that they were entitled to receive plan information from Firestone after
Firestone sold the business unit in which the plaintiffs worked. The district court agreed with
Firestone, however, that at the time plaintiffs requested the information (after the sale of the business
unit in which they worked), plaintiffs were no longer participants of Firestone’s ERISA plans,
obviating Firestone’s obligations to provide information. Id. at 107. The Third Circuit reversed the
district court, reasoning that the right to request and receive information about an employee benefit
plan “most sensibly extend[s] both to people who are in fact entitled to a benefit under the plan and
those who claim to be but in fact are not.” Id. at 108 (quoting from the Third Circuit opinion).
On appeal, the Supreme Court rejected the Third Circuit’s contention that a litigant’s bald
assertion of participant status ended the inquiry. Id. at 117. The Supreme Court noted that
“Congress did not say that all ‘claimants’ could receive information about benefit plans. To say that
a ‘participant’ is any person who claims to be one begs the question of who is a ‘participant’ and
renders the definition set forth in § 1002(7) superfluous.” Id.; see also 29 U.S.C. § 1002(7)
(defining participant as “any employee or former employee of an employer . . . who is or may
become eligible to receive a benefit of any type from an employee benefit plan . . . .”). The Supreme
Court was therefore requiring the court of appeals to address the more particularized definition of
participant available in the statute.
In remanding the case, the Supreme Court further noted that “[i]n our view, the term
‘participant’ is naturally read to mean either employees in, or reasonably expected to be in, currently
covered employment . . . or former employees who have . . . a reasonable expectation of returning
to covered employment or who have a colorable claim to vested benefits.” Firestone Tire & Rubber,
489 U.S. at 117 (internal quotations and citations omitted). The Supreme Court expanded on its
definition even further by noting that:
“[i]n order to establish that he or she ‘may become eligible’ for benefits, a claimant
must have a colorable claim that (1) he or she will prevail in a suit for benefits, or
that (2) eligibility requirements will be fulfilled in the future. This view attributes
conventional meanings to the statutory language since all employees in covered
employment and former employees with a colorable claim to vested benefits ‘may
become eligible.’ A former employee who has neither a reasonable expectation of
returning to covered employment nor a colorable claim to vested benefits, however,
simply does not fit within the phrase ‘may become eligible.’”
Id. at 118-19 (internal quotations and citations omitted). The Supreme Court did not reach the
question of whether the claimants qualified as participants in Firestone, preferring to leave that
determination to the court of appeals upon remand. Id. at 118.
The logical reading of the Supreme Court’s opinion in Firestone is that by failing to look to
the statutory definition of participant, the court of appeals abrogated the statutory restriction on who
was entitled to plan information. At minimum, the Supreme Court seemed to be saying that a
litigant must claim to be an “employee or former employee” as a participant is defined in the ERISA
statute, and in determining “participant” status a court must do more than take the claimant’s bald
assertion. It does not follow, however, that a claim for benefits which revolves around the question
of whether a litigant is or was an “employee” under ERISA devolves into a standing issue alone.
Since Firestone, the Supreme Court has ruled on a case revolving around the claimant’s
status as an employee. See Nationwide, 503 U.S. at 318. The posture of the parties in Nationwide
was very similar to the posture in the case at bar. The plaintiff was a former insurance agent for
defendant Nationwide. After Nationwide terminated the plaintiff’s agency, the plaintiff brought suit
under ERISA to enforce the terms of a retirement plan under which the plaintiff claimed eligibility.
Id. at 320. The proceedings in the lower court turned on whether the plaintiff qualified as an
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 21
“employee or former employee” of Nationwide and thereby a “participant” eligible to claim benefits
under ERISA. Id. at 321-22. The Supreme Court held that common law agency principles applied
to determine whether the plaintiff was an “employee” under ERISA. The Supreme Court remanded
the case for the application of the correct legal standard. Id. at 328. The Court did not imply, in any
way, that a finding that the plaintiff was not an employee would function to strip the federal courts
of their authority over the case.
b. When the merits and jurisdictional issues merge
While Firestone is directly on point and favors standing, we have also been instructed by the
Supreme Court more generally to assume jurisdiction when statutory standing and merits questions
converge. See Bell v. Hood, 327 U.S. 678, 681-82 (1945). The Fifth Circuit has summarized the
meaning of that case very well as it relates to cases such as the one at bar:
When the basis of federal jurisdiction is intertwined with the plaintiff’s federal cause
of action, the court should assume jurisdiction over the case and decide the case on
the merits. Bell v. Hood, 327 U.S. 678, 681-82 . . . . (1945) . . . . “The question of
subject matter jurisdiction and the merits will normally be considered intertwined
where the [same] statute provides both the basis of federal court subject matter
jurisdiction and the cause of action.” Clark v. Tarrant County, Texas, 798 F.2d 736,
742 (5th Cir. 1986) (citation omitted). In Williamson [v. Tucker], we explained that
no purpose is served by indirectly arguing the merits in the context
of federal jurisdiction. Judicial economy is best promoted when the
existence of a federal right is directly reached and, where no claim is
found to exist, the case is dismissed on the merits. . . . Therefore as
a general rule a claim cannot be dismissed for lack of subject matter
jurisdiction because of the absence of a federal cause of action.
645 F.2d [404,] 415-16 [5th Cir. 1981]. The basic reason for this rule is obvious. If
federal jurisdiction turned on the success of a plaintiff’s federal cause of action, no
such case could ever be dismissed on the merits.
The exceptions to the rule of Bell v. Hood are that jurisdictional dismissal is proper
if the federal claim “clearly appears to be immaterial and made solely for the purpose
of obtaining jurisdiction or where such a claim is wholly insubstantial and frivolous.”
Bell v. Hood, 327 U.S. at 682-83 . . . . This “standard is met only where the plaintiff's
claim ‘has no plausible foundation’ or ‘is clearly foreclosed by a prior Supreme
Court decision.’” Williamson, 645 F.2d at 416 (quoting Bell v. Health-Mor, Inc., 549
F.2d 342, 344 (5th Cir. 1977)).
Eubanks v. McCotter, 802 F.2d 790, 793 (5th Cir. 1986).
The Supreme Court has recently expanded on the premise of Bell v. Hood and emphasized
that the courts must not extend the concept of subject matter jurisdiction, which deals with the
“classes of cases . . . falling within a court’s adjudicatory authority,” to capture other instances in
which a court should dismiss or refuse to take a case. See Kontrick v. Ryan, 540 U.S. 443, 455-56
(2004) (distinguishing between issues of subject matter jurisdiction and claims processing rules).
This Court recently reflected the Kontrick distinction in Primax Recoveries, Inc. v. Gunter, in which
a panel held that a plaintiff’s claim under ERISA § 1132(a)(3) was properly dismissed for failure
to state a claim, and not for lack of subject matter jurisdiction, when the plaintiff sought legal relief
and the statute authorized only equitable actions. 433 F.3d 515, 519-20 (6th Cir. 2006). The Primax
Recoveries panel further held that because the district court possessed subject matter jurisdiction
over the case, even though the plaintiff failed to state a claim, the court possessed full authority to
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 22
award attorneys’ fees to the prevailing party under the ERISA statute. Id. at 520. The Primax panel
cited to Steel Co. v. Citizens for a Better Env’t, 533 U.S. 83, 89 (1998), noting that dismissal for lack
of subject matter jurisdiction because of the inadequacy of a federal claim is proper only when a
claim is “so insubstantial, implausible, foreclosed by prior decisions of this Court, or otherwise
completely devoid of merit so as not to involve a federal controversy.” Primax Recoveries, 433 F.3d
at 519 (citing Steel Co., 533 U.S. at 89).
In the instant case, Plaintiff makes at least a colorable claim that he was an “employee,” and
therefore an ERISA “participant,” at the time of his disability. His claim is not so insubstantial that
it fails to present a federal controversy. Steel Co., 533 U.S. at 89. Moreover, a factual determination
on the merits that Plaintiff’s status was not actually that of an employee does not strip the federal
courts of jurisdiction over the case. Rather, under the rules of Bell v. Hood and Steel Co., we may
properly reach the merits of Plaintiff’s case and retain jurisdiction to make an appropriate award of
attorneys fees’ as envisioned by Congress when crafting the ERISA scheme.
3. The District Court Did Not Abuse its Discretion in Awarding Attorneys’ Fees and
Costs
Plaintiff argues that the district court abused its discretion in awarding Defendants a portion
of their attorneys’ fees and costs.
Courts in this Circuit consider five factors in deciding ERISA attorneys’ fees questions:
(1) the degree of the opposing party’s culpability or bad faith;
(2) the opposing party’s ability to satisfy an award of attorneys’ fees;
(3) the deterrent effect of an award on other persons under similar circumstances;
(4) whether the party requesting fees sought to confer a common benefit on all
participants and beneficiaries of an ERISA plan or resolve significant legal questions
regarding ERISA; and
(5) the relative merits of the parties’ positions.
King, 775 F.2d at 669. The district court addressed each of these factors in turn. The district court
found, first and foremost, that Plaintiff did not litigate in good faith. While Plaintiff presented a
colorable claim for benefits, Plaintiff asserted a number of “near frivolous” claims against both
Defendants, Plaintiff refused to dismiss claims against one Defendant or another once it became
clear which was the proper Defendant for that claim, and Plaintiff unnecessarily prolonged litigation
by filing unreliable briefs and pursuing arguments even after their rejection by the court. In
addition, the district court found that Plaintiff “improperly took quotations out of context and made
strained arguments based upon such misinterpreted citations.” (J.A. at 2548.)
We find that the district court’s conclusions are supported by the record. For example, after
the parties agreed that MTA was the plan administrator while Lafayette was the claims
administrator, Plaintiff refused to dismiss his claim for benefits against MTA and refused to dismiss
his claim for failure to turn over plan documents against Lafayette. The case law is very clear about
who is a proper party defendant for each of these claims. The district court need not determine that
the entire matter was pursued in bad faith to find some level of culpability on the part of Plaintiff
for the unnecessary scope of litigation.
Plaintiff further argues that the district court had insufficient basis to reach a conclusion that
Plaintiff could afford to pay the imposed attorneys’ fees. The district court based its conclusion on
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 23
the fact that Plaintiff had reported approximately half a million dollars in income in 1998 and 1999.
Plaintiff presented no evidence to the district court, and indeed presents no evidence to this Court,
in support of his contention that he cannot pay the fees.
Plaintiff next argues that the district court is improperly deterring colorable claims for
benefits by awarding partial attorneys’ fees against Plaintiff. Plaintiff’s argument is without merit.
While there is no presumption of award of attorneys’ fees to the prevailing party in an ERISA
action, see Schwartz v. Gregori, 160 F.3d 1116, 1119-20 (6th Cir. 1998), the district court’s
objective was not to deter plaintiffs from bringing colorable claims for benefits, but from
unnecessarily expanding the scope and complexity of litigation. Finally, the district court
considered that the fourth King factor was inapplicable, and that the fifth factor favored Defendants
because many of Plaintiff’s subclaims were either duplicative or lacked merit.
This Court is not left with a “definite and firm conviction that the district court made a clear
error of judgment.” We have reviewed Plaintiff’s briefs to the district court and agree with the
district court that the briefs were relatively unreliable, an unreliability that continued in Plaintiff’s
briefs to this Court. In addition, Plaintiff continued to pursue claims against both Lafayette and
MTA when the record had become clear that one or the other was not a proper defendant for some
of Plaintiff’s subclaims, despite the communication of relevant and clear legal authority for the
dismissal of one defendant or the other to Plaintiff’s counsel. The district court did not abuse its
discretion in awarding attorney fees’ against Plaintiff.
4. The District Court Did Not Abuse its Discretion in Sanctioning Plaintiff’s Attorney
Plaintiff argues that the district court abused its discretion in holding Plaintiff’s attorney
jointly and severally liable with Plaintiff to pay 50 percent of Defendant’s attorneys’ fees. The
district court rendered its decision for MTA’s fees under both Rule 11 and 28 U.S.C. § 1927
authority. The district court rendered its decision for Lafayette’s fees under its 28 U.S.C.§ 1927
authority. While Rule 11 and § 1927 are alternative sanctioning schemes, each possesses its own
requirements. See Chambers v. NASCO, Inc., 501 U.S. 32, 43-44 (1991) (finding that § 1927, Rule
11, and a court’s inherent power to impose sanctions exist in concert). This Court may affirm the
district court’s imposition of sanctions, however, if we find counsel’s conduct sanctionable under
either Rule 11 or § 1927, because we may affirm the district court on any grounds supported by the
record. City Mgmt. Corp., 43 F.3d at 251; see also Ridder v. City of Springfield, 109 F.3d 288, 299
(6th Cir. 1997) (affirming award of attorneys’ fees pursuant to § 1927 when award under Rule 11
was improper).
a. Sanctions were untimely under Rule 11
Under the revised Rule 11, sanctions under Rule 11 are only appropriate when a party is
made aware of the offending document as filed with the court and has an opportunity to withdraw
the filing. Fed. R. Civ. Proc. 11 advisory comm. notes (1993 amendments) (“[A] party cannot delay
serving its Rule 11 motion until conclusion of the case . . . .”) This Court held as much in Ridder,
109 F.3d at 295 (“A party must now serve a Rule 11 motion on the allegedly offending party at least
twenty-one days prior to the conclusion of the case or judicial rejection of the offending
contention.”). The parties do not dispute that the Rule 11 motions were made after the disposition
of the case on summary judgment. Therefore any sanction under Rule 11 constitutes an abuse of
discretion. We find, however, that the district court’s sanctions were proper under its alternative
§ 1927 holding. See infra.
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 24
b. The district court did not abuse its discretion in imposing sanctions under
§ 1927
Section 1927 provides:
Any attorney or other person admitted to conduct cases in any court of the United
States or any Territory thereof who so multiplies the proceedings in any case
unreasonably and vexatiously may be required by the court to satisfy personally the
excess costs, expenses, and attorneys’ fees reasonably incurred because of such
conduct.
28 U.S.C. § 1927. This Court has held that:
the question under 28 U.S.C. § 1927 is whether Plaintiff’s attorney “multiplie[d] the
proceedings . . . unreasonably and vexatiously.” An affirmative answer to that
question does not require a finding of recklessness, subjective bad faith, or conscious
impropriety; an attorney does not have carte blanche to burden the federal courts by
pursuing claims that he should know are frivolous (see Jones v. Continental Corp.,
789 F.2d 1225 (6th Cir. 1986)) . . . .
Haynie v. Ross Gear Div. of TRW, 799 F.2d 237, 243 (6th Cir. 1986).
Our inquiry, therefore, is whether there is support in the record that Plaintiff’s attorney
“multiplie[d] the proceedings . . . unreasonably and vexatiously.” The district court’s sanction
against Plaintiff’s counsel is supported by the court’s finding of bad faith supporting the award of
attorneys’ fees against Plaintiff. See supra. The district court specifically found that “Plaintiff’s
counsel’s litigation tactics, mischaracterizations, and relentless pursuit of untenable claims and
positions satisfies § 1927.” (J.A. at 2557.) A court may hold a party’s attorney jointly and severally
liable for the opposition’s attorneys’ fees as a 28 U.S.C. § 1927 sanction. See N. Trust Co. v. Muller,
616 F. Supp. 788, 789 (N.D. Ill. 1985). This Court is not left with a “definite and firm conviction
that the district court made a clear error of judgment.”
5. The Size of the Attorneys’ Fee Award Was Reasonable
Plaintiff argues in the alternative that the size of the district court’s award of fees was
unreasonable. MTA submitted monthly invoices with hourly accountings accompanied by attorney
hourly rate charges. MTA’s total amount requested was approximately $166,000. The district court
found these charges reasonable. Lafayette, however, submitted only a total amount and an
accompanying affidavit attesting to the amount’s reasonableness. Lafayette requested a total amount
of about $75,000. The district court likewise found this amount reasonable. Concluding that
Plaintiff and Plaintiff’s counsel unnecessarily expanded the scope and complexity of the ERISA
action by approximately 50 percent, the district court ordered Plaintiff and Plaintiff’s counsel held
jointly and severally liable for 50 percent of both MTA’s and Lafayette’s submitted fees.
Plaintiff points to no portion of the bill submitted by MTA which Plaintiff avers represents
an unreasonable charge. Rather, Plaintiff argues only that the district court failed to give the matter
“careful analysis” and make “discrete findings” as required for a § 1927 sanction. We disagree. The
district court held counsel jointly responsible for the same conduct which underpinned the court’s
award of attorneys’ fees against Plaintiff, conduct which the district court referenced in the
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 25
memorandum of opinion accompanying the order awarding fees.6 We therefore find the district
court’s award of 50 percent of Lafayette and MTA’s attorneys’ fees a reasonable award, pursuant
to the district court’s factual findings that Plaintiff and Plaintiff’s counsel unreasonably multiplied
the litigation by the same amount. We believe the district court’s findings satisfied this Court’s
instructions that trial courts provide “clear and concise explanation[s] of [their] reasons” for
awarding attorneys’ fees. Gettings v. Bldg. Laborers Local 310, 349 F.3d 300, 310 (6th Cir. 2003).
Plaintiff further argues, in a perfunctory way, that the district court erred in awarding fees
to Lafayette when Lafayette had yet to submit detailed hourly charges constituting a breakdown of
its fees.7 Plaintiff argues only that such documentation would be a “logical prerequisite to
establishing ‘reasonableness’” under § 1927. (Pl. Br. 67.) Plaintiff fails to support this statement
with any case law, and further fails to cite to any relevant legal authority which requires this Court
to overturn a district court’s award of attorneys’ fees in the absence of an hourly bill. Plaintiff’s one
sentence argument to this effect is therefore insufficient to preserve this argument on appeal. “[The
courts of appeals] are not self-directed boards of legal inquiry and research, but essentially arbiters
of legal questions presented and argued by the parties.” See Cruz v. Am. Airlines, Inc., 356 F.3d
320, 333-34 (D.C. Cir. 2004); Indeck Energy Servs., Inc. v. Consumers Energy Co., 250 F.3d 972,
979 (6th Cir. 2000) (“[I]ssues adverted to in a perfunctory manner, unaccompanied by some effort
at developed argumentation, are deemed waived.” (internal quotation and citation omitted)); see also
Re/Max North Central, Inc. v. Cook, 64 Fed. App’x 562, 565 (7th Cir. 2003) (finding party’s
arguments as to attorneys’ fees waived for lack of development on appeal); cf. Taubenfeld v. Aon
Corp., 415 F.3d 597, 600 (7th Cir. 2005) (applying waiver analysis to party’s allegations of lower
court error in the award of attorneys’ fees); Griggs v. E. I. DuPont de Nemours & Co., 385 F.3d 440,
454 (4th Cir. 2004) (same). Plaintiff’s perfunctory argument and failure to elucidate relevant case
law therefore amounts to a waiver of this argument on appeal.
6. The District Court Did Not Abuse its Discretion in the Amount of Fees Awarded to
Lafayette
Lafayette cross-appeals the district court’s award of its attorneys’ fees as too low. Inasmuch
as the amount awarded by the district court was premised on the amount submitted by Lafayette, and
the fact the Plaintiff’s claim for benefits was at least colorable as against Lafayette, we find that this
cross-appeal is without merit.
III.
CONCLUSION
For the foregoing reasons, we AFFIRM the decision of the district court in all respects.
6
The district court found, first and foremost, that Plaintiff did not litigate in good faith. While Plaintiff
presented a colorable claim for benefits, Plaintiff asserted a number of “near frivolous” claims against both Defendants,
Plaintiff refused to dismiss claims against one Defendant or another once it became clear which was the proper
Defendant for that claim (e.g., the claim for failure to provide plan documentation upon request), and Plaintiff
unnecessarily prolonged litigation by filing unreliable briefs and pursuing arguments even after their rejection by the
court. In addition, the district court found that Plaintiff “improperly took quotations out of context and made strained
arguments based upon such misinterpreted citations.” (J.A. at 2548.)
7
While normally a party seeking attorneys’ fees under ERISA should submit detailed hourly billing statements,
see Adcock-Ladd v. Sec’y of Treasury, 227 F.3d 343, 349 (6th Cir. 2000), Plaintiff’s failure to present proper argument
to this Court makes it unnecessary for us to reach this issue here.
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 26
______________________
CONCURRENCE
______________________
OLIVER, District Judge, concurring. I join Judge Clay’s opinion affirming the decision of
the district court, except in regard to Section II.A.3, which discusses Plaintiff’s promissory estoppel
claim. I write separately because, unlike Judge Clay, I would affirm the trial court’s dismissal of
the promissory estoppel claim on the same ground the trial court relied upon: failure to state a claim
upon which relief could be granted. Before the trial court, Plaintiff based his promissory estoppel
claim on his reliance upon Defendants’ representations and on the fact that the insurance policies
in issue were not plan documents. Even though Plaintiff had copies of, and was intimately familiar
with, the insurance policies, he did not argue, as he argues before this court, that the term
“employee” as used in the plans, was ambiguous. The trial court found that the LTD and STD
policies were plan documents. See Musto v. Am. Gen. Corp., 861 F.2d 897, 901 (6th Cir. 1988). The
trial court further found that under Sprague v. Gen. Motors Corp., 133 F.3d 388, 404 (6th Cir. 1998)
(en banc), where written plan documents exist, a promissory estoppel claim cannot succeed unless
the plan documents are ambiguous. Id. Because Plaintiff did not argue there was ambiguity in the
plan documents, the court dismissed his estoppel claim.
At the trial court, Plaintiff wholly failed to raise any alternative argument that the plan
documents were ambiguous, even in the face of briefing on Sprague by Defendants and strong
suggestions from the court at the oral hearing on the motion that the insurance policies were plan
documents. Plaintiff even filed a supplemental brief after oral argument, and before the court issued
its order addressing whether legally sufficient plan documents existed, but that brief also failed to
raise an alternative argument on ambiguity. Moreover, after the court ruled that the insurance
policies constituted plan documents and dismissed the promissory estoppel claim, Plaintiff filed a
motion for reconsideration regarding other issues which were addressed in the court’s order, but did
not challenge the court’s finding that the policies were plan documents or raise an alternative
argument on ambiguity. Thus, Plaintiff had ample reason and opportunity to raise this argument
throughout the district court proceedings, but did not. Since Moore never raised an argument about
ambiguity below, he may not do so now. See United States v. Ninety-Three Firearms, 330 F.3d 414,
424 (6th Cir. 2003) (holding that “[t]his court has repeatedly held that it will not consider arguments
raised for the first time on appeal unless our failure to consider the issue will result in a plain
miscarriage of justice.”).
I would not reach the merits of the claim, as Judge Clay does in his opinion. The issues he
addresses were not squarely before the district court, and thus, there was no incentive for the lawyers
to focus their arguments on the evidence or law bearing on those issues.
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 27
____________________________________________________
CONCURRING IN PART, DISSENTING IN PART
____________________________________________________
COOK, Circuit Judge, concurring in part and dissenting in part. Though I agree with much
of the lead opinion, I respectfully differ on two points. First, I join Judge Oliver’s concurrence
dismissing Moore’s promissory estoppel claim on the grounds employed by the district court.
Second, the determination that Moore is not a common-law employee (and thus not a “participant”)
leads me to conclude that Moore lacked statutory standing, and accordingly that the district court
lacked jurisdiction over the merits of certain of his ERISA claims, including fees and costs.
I. Effect of Concluding that Moore Was not a Common-Law Employee
I agree with the majority’s application of the multi-factor test of employment in Nationwide
Mut. Ins. Co. v. Darden, 503 U.S. 318 (1992), to conclude that Moore was not a common-law
employee. But given this conclusion, I cannot agree that the district court retained jurisdiction over
Moore’s ERISA claims.
ERISA empowers a “participant or beneficiary” to bring a civil action “to recover benefits
due to him” or “for relief [from an administrator’s refusal to supply requested information],” 29
U.S.C. § 1132(a)(1)(B), and empowers a “participant, beneficiary or fiduciary” to bring a civil action
“to obtain other appropriate equitable relief.” 29 U.S.C. § 1132(a)(3). ERISA also provides that
“[i]n any action . . . by a participant, beneficiary or fiduciary, the court in its discretion may allow
a reasonable attorney’s fees and costs of action to either party.” 29 U.S.C. § 1132(g)(1). No party
argues that Moore is a “beneficiary” or “fiduciary” so we examine “participant” status.
ERISA defines “participant” to include “any employee or former employee of an employer
. . . who is or may become eligible to receive a benefit of any type from an employee benefit plan,”
29 U.S.C. § 1002(7), and defines “employee” as “any individual employed by an employer.” 29
U.S.C. § 1002(6). To help clarify these definitions, the Supreme Court, in Nationwide, 503 U.S. at
323-24, adopted the common-law test of employment for determining who qualifies as an
“employee” under ERISA. Because Moore is not a common-law employee, he also is not an
“employee” for purposes of ERISA and, by definition, not a “participant.”
Statutory standing—the issue of whether a statute “authorizes [a] plaintiff to sue”—is a
jurisdictional matter deserving of threshold judicial inquiry. Steel Co. v. Citizens for a Better Env’t,
523 U.S. 83, 92 (1998). This court confirmed in Ward v. Alternative Health Delivery Sys., Inc., 261
F.3d 624 (6th Cir. 2001), that whether a person is a “participant” or “beneficiary” under ERISA is
a matter of statutory standing. The plaintiff in Ward was a member of a network of health care
providers who, on the basis of her clients’ participation in an employee plan, brought ERISA claims
against the network’s corresponding HMO and specialty care management company. This court
agreed with the district court that “[the] plaintiff was not an ERISA plan participant or beneficiary
and, therefore, that she did not have standing to bring her ERISA claims.” Id. at 627. In the context
of Ward’s pendent state law claims, the court left no doubt as to the consequence of that
determination: “[P]lantiff’s ERISA standing is a jurisdictional matter. Once the district court
dismissed the only claims within its original jurisdiction for lack of subject matter jurisdiction, it did
not have jurisdiction to retain plaintiff’s state law claims.” Id. And likewise, upon this court’s
finding that Moore is not a “participant,” this court should hold that the district court lacked
jurisdiction to adjudicate his substantive claims.
The majority distinguishes Ward on the ground that the plaintiff there “argued for an
extension of existing law,” rather than appealing to “traditional definitions”—a distinction with
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 28
which I am respectfully unfamiliar—and that therefore the court’s holding constituted “a ruling of
law,” rather than a “factual determination.” (Maj. Op. at 19.) Ward’s argument may have been
weaker than Moore’s, but the cases differ (if at all) by degree, not by kind, and I cannot see how the
statutory language—particularly when combined with the twelve-factor common law test of
employment—could resolve a legal question in one context and a “factual” question in a closer case.
Both cases required the court to apply parallel statutory language to undisputed facts; and in each
case those facts have been found to fall outside of the statutory concept. The consequences of the
inquiries should not differ.
The majority worries that holding that the district court lacked jurisdiction because Moore
is not a “participant” will produce a “circular” result—presumably because it believes that such a
conclusion forecloses jurisdiction over the question whether Moore was a “participant” in the first
place. (Maj. Op. at 20.) But this conflates jurisdiction over the merits with “jurisdiction” over
questions of jurisdiction. Courts are always free (and in fact are required) to determine their own
jurisdiction. And that determination has res judicata effect. See Ins. Corp. of Ir. v. Compagnie Des
Bauxites De Guinee, 456 U.S. 694, 702 n.9 (1982) (“A party that has had an opportunity to litigate
the question of subject-matter jurisdiction may not, however, reopen that question in a collateral
attack upon an adverse judgment. It has long been the rule that principles of res judicata apply to
jurisdictional determinations -- both subject matter and personal.”) (citing Chicot County Drainage
Dist. v. Baxter State Bank, 308 U.S. 371 (1940); Stoll v. Gottlieb, 305 U.S. 165 (1938)). No
circularity results because the determination that a court lacks jurisdiction over the merits of a claim
does not undermine its authority to make that determination.
I am puzzled by the majority’s later discussion of Firestone Tire & Rubber Co. v. Bruch, 489
U.S. 101 (1989). In the cited section of that case, the Court rejected a gloss that the Third Circuit
applied to the term “participant.” The Supreme Court held that “participant[s]” consisted only of
actual “employee[s] or former employee[s] . . . who [are] or may become eligible [for benefits],”
29 U.S.C. § 1002(7), and that a plaintiff who merely claims to be a “participant” does not fall within
the statute. Id. at 115-18. The Court did suggest that the phrase “may become eligible” extends the
term “participant” to employees or former employees who have a “colorable claim” to benefits. But
it did not extend the statutory definition of “participant” to persons who have only a colorable claim
to being “employees or former employees.”
The discussion is puzzling because Firestone’s parsing of the term “participant” adds nothing
to the majority’s analysis, given its previous holding (with which I fully concur) that Moore was
not a “participant.” Whether a plaintiff is a “participant” differs from what consequences flow from
the determination that he or she is not, and Firestone only implicates the first question. We are still
left to determine whether “participant” status implicates statutory standing.
Nationwide, in which “[t]he Supreme Court held that common law agency principles applied
to determine whether the plaintiff was an ‘employee’” (Maj. Op. at 21), does not suggest otherwise.
The majority observes that “[t]he Court did not imply” that whether a plaintiff was a “participant”
was a question of statutory standing. Id. But nor did it “imply” the contrary. And the fact that
Nationwide was published several years before Ward suggests that Nationwide poses no barrier to
the conclusion that being a “participant” implicates statutory standing.
That leaves only Bell v. Hood, 327 U.S. 678 (1946), which the majority reads as instructing
federal courts “to assume jurisdiction when statutory standing and merits questions converge.”
(Maj. Op. at 21.) But Bell stands for the narrower proposition that “the failure to state a proper
cause of action calls for a judgment on the merits and not for a dismissal for want of jurisdiction.”
327 U.S. at 682; see Steel Co., 523 U.S. at 89-90 (“[T]he absence of a valid (as opposed to arguable)
cause of action does not implicate subject-matter jurisdiction, i.e., the courts’ statutory or
constitutional power to adjudicate the case.” (emphasis in original)). This is significant because the
Nos. 04-1146/1942/1945; 05-1109 Moore v. Lafayette Life Ins. Co., et al. Page 29
question implicated by whether Moore is a “participant” is not whether Moore has stated a proper
cause of action, but whether he is a proper plaintiff for those claims. Cf. Steel Co., 523 U.S. at 92
(distinguishing questions of who may seek relief under a statute from questions regarding the scope
of a statutory cause of action); Primax Recoveries, Inc. v. Gunter, 433 F.3d 515 (6th Cir. 2006)
(characterizing the dismissal of a claim under 29 U.S.C. § 1132(a)(3) that improperly sought legal
relief, rather than equitable relief, as failing to state a claim, rather than failing to support the court’s
jurisdiction—and where there was no dispute over whether the plaintiff was a “participant”). To see
that this is so, consider that the district court dismissed Moore’s fiduciary duty claim (Count II) and
failure to furnish information claim (Count V) on the merits without relying on its later conclusion
that he was not a “participant.” Even under the majority’s reading of Bell, the question of whether
Moore was a “participant” could still be jurisdictional because the merits of such claims did not
converge with statutory standing.
The same is true of Moore’s claim for benefits, which the district court did resolve on the
basis that Moore was not a “participant.” For if the district court had found that Moore was a
“participant,” that would not have ended the court’s inquiry. It still would have had to assess
whether Moore was an employee and eligible for relief under the plan’s definitions, and while that
may have been straightforward in this case, it is not always so. Eligibility for relief is a distinct
concept from whether a plaintiff is a “participant,” thus the merits of Moore’s claim for benefits do
not converge with the issue of statutory standing. Bell does not require us to view whether Moore
was a “participant” as a question on the merits.
Finally, viewing whether Moore was a “participant” as a question of statutory standing
promotes the goal of judicial economy. The district court should have addressed the issue first and,
upon determining that Moore was not a “participant,” dismissed all of Moore’s ERISA claims—for
benefits, breach of fiduciary duty, attorneys’ fees, and failure to supply information—that stemmed
from conduct occurring after he signed the CSA.
II. Fees
Just as the district court lacked jurisdiction to consider the merits of Moore’s ERISA claims,
so too it lacked jurisdiction to award attorneys’ fees under ERISA. Section 1132(g)(1) only allows
a court to award fees and costs in actions “by a participant, beneficiary, or fiduciary.” Because
Moore was none of the above, the district court did not have jurisdiction over Moore’s Count IV
(seeking such fees), or over the defendants’ motion for fees under ERISA. I would thus vacate the
district court’s award of fees against Moore.
Because the district court held Moore’s counsel jointly and severally liable with Moore for
the § 1132(g) penalty, a holding that the court was without jurisdiction to award fees under ERISA
would seem to remove the only basis for that sanction. However, because the district court
suggested an independent basis for Moore’s counsel’s liability, I would remand the question of
whether sanctions were appropriate under 28 U.S.C. § 1927 (given the majority’s conclusion that
defendants’ Rule 11 motion was untimely). I would also remand the question of whether Moore
himself was similarly liable on a non-ERISA basis.