NEUMA, Incorporated v. AMP, Incorporated

In the
United States Court of Appeals
For the Seventh Circuit
No. 00-2544
NEUMA, INCORPORATED, an Illinois
corporation,
Plaintiff-Appellant,
v.
AMP, INCORPORATED and PROVIDENT LIFE AND
ACCIDENT INSURANCE COMPANY,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 98 C 6616- Paul E. Plunkett, Judge.
ARGUED JANUARY 10, 2001--DECIDED August 7, 2001
Before RIPPLE, KANNE and WILLIAMS, Circuit
Judges.
RIPPLE, Circuit Judge. Neuma, Inc.
("Neuma") filed this suit against AMP,
Inc. ("AMP"). It alleged four causes of
action arising from AMP’s failure to
maintain group life insurance benefits
for Stanley Larsen, a former AMP
employee./1 Larsen previously had
assigned all of the rights to his life
insurance benefits to Neuma. The district
court rejected Neuma’s claim for benefits
under Section 502(a) (1)(B), 29 U.S.C.
sec. 1132(a)(1)(B), of the Employee
Retirement Income Security Act, 29 U.S.C.
sec. 1001, et seq., ("ERISA"), because it
found that AMP’s actions were justified
based on an unambiguous provision of the
Summary Plan Description that governed
Larsen’s life insurance policy. The court
also denied Neuma’s claim under Section
502(c) of ERISA, 29 U.S.C. sec. 1132(c),
which alleged that AMP had failed to
provide documents relating to an employee
welfare benefit plan within a required
thirty-day statutory period. It found
that Neuma was not entitled to the
documents because it did not have a
"colorable claim" for the life insurance
benefits at issue. The court also
dismissed Neuma’s state law negligent
misrepresentation claim without prejudice
to its right to refile in state court.
The district court refused to exercise
supplemental jurisdiction over this claim
because it had dismissed all federal
claims. For the reasons set forth in the
following opinion, we affirm the judgment
of the district court regarding Neuma’s
claim for benefits under Section
502(a)(1)(B). We reverse and remand with
respect to the claim that AMP failed to
provide plan documents in a timely manner
under Section 502(c). Lastly, we also
reverse the district court’s dismissal of
the negligent misrepresentation claim and
remand that claim to the district court
for further proceedings.
I
BACKGROUND
A. Facts
On March 31, 1987, Larsen was hired by
AMP to work in its AMP Circuits Division.
AMP provides its workers with benefits
that include medical, dental and life
insurance coverage. During 1996 and 1997,
the life insurance coverage that AMP
provided for its employees was issued by
Provident Life & Accident Insurance
Company ("Provident") and was funded
through Group Policy No. N-377 (the "Pol
icy" or the "Provident Policy"). On
January 1, 1996, Larsen enrolled in AMP’s
life insurance program for benefits in
the amount of $81,600. The contours of
these life insurance benefits were
described in greater detail in a booklet
provided to AMP employees, entitled
"Group Benefits Program for Employees of
AMP Circuits, an AMP Division." R.42,
Ex.6. This booklet (the "Summary Plan
Description") contained the following
clause pertaining to disabled employees
(the "Disability Clause"):
Insurance During Disability Before Age 60
If you become disabled before age 60, and
while insured, [AMP] will keep your life
insurance in force by paying the
appropriate premium as long as you are
disabled, provided proofs of disability
are furnished as required. In no event,
however, will such insurance be continued
beyond the date the life insurance
provisions of the Plan terminate.
Id. at 19 (emphasis added). Another
provision in the Summary Plan Description
gave AMP the "right to terminate,
suspend, withdraw, amend or modify the
Plan at any time." Id. at 9.
On March 14, 1996, Larsen was placed on
disability status by AMP. At some point
thereafter, Neuma began negotiating with
Larsen to purchase the rights to his
group life insurance benefits. As a part
of this process, Neuma requested and
received some basic information from AMP
regarding the details of Larsen’s life
insurance coverage. On September 5, 1996,
Larsen assigned all of his rights, title
and interest in his group life insurance
coverage to Neuma, an assignment
acknowledged and accepted by AMP. Then,
on March 14, 1997, one year after Larsen
became disabled, he was terminated by AMP
pursuant to company policy.
By the end of 1997, AMP had decided to
change its group life insurer. On
December 31, 1997, AMP cancelled the
Provident Policy and purchased group life
insurance with MetLife Insurance Company
("MetLife") that went into effect on
January 1, 1998. The life insurance
coverage provided in the MetLife policy
was identical to that provided by
Provident in all material respects. AMP
did not enroll Larsen for coverage under
the MetLife policy. When the Provident
Policy was discontinued, Larsen’s group
life insurance coverage with AMP was
terminated.
On August 6, 1998, Neuma requested that
AMP provide it with copies of various
documents relating to the Provident
Policy and any larger employee benefit
plan of which the Policy was a part,
pursuant to 29 U.S.C. sec. 1024(b)(4) of
ERISA. On October 20, 1998, Neuma filed
suit against the defendants, seeking
penalties under ERISA Section 502(c) for
AMP’s failure to respond to this document
request and seeking a declaratory
judgment to declare the rights and
obligations of the parties under the
insurance policy. AMP did not reply to
Neuma’s request for plan information
until December 10, 1998, when it provided
Neuma with a copy of what Neuma claims
was an outdated version of the Summary
Plan Description. On February 17, 1999,
AMP, through its attorneys, provided more
information regarding Larsen’s group life
insurance benefits to Neuma, including an
updated version of the Summary Plan
Description in force at the time when
Larsen’s coverage was ended.
On January 18, 2000, Neuma filed a first
amended complaint (the "complaint")
against the defendants, alleging four
causes of action relating to AMP’s
failure to maintain group life insurance
benefits for Larsen after the Provident
Policy was terminated on December 31,
1997. Count I of the complaint sought,
pursuant to ERISA Section 502(a)(1)(B),
the full recovery of Larsen’s life
insurance benefits in the amount of
$81,600 if Larsen was deceased, or, if
Larsen was living, an order for AMP to
purchase and maintain a policy in that
amount on his life. Neuma alleged that
AMP should not have discontinued these
benefits under the terms of the Summary
Plan Description. Count II alleged an
Illinois state law cause of negligent
misrepresentation, due to alleged
omissions and false statements of fact
made by AMP during its correspondence
with Neuma prior to Neuma’s purchase of
Larsen’s benefits. Neuma claimed that
these misrepresentations caused it to
suffer damages by purchasing benefits
that were less valuable than what it had
anticipated. Count IV of the complaint
again alleged a claim under Section
502(c) of ERISA, based on AMP’s failure
to respond to Neuma’s requests for plan
documents within the thirty-day time
limit mandated by that section of the
Act./2
B. District Court Proceedings
On January 18, 2000, Neuma filed a
motion for summary judgment as to Count I
of its complaint. In response, AMP filed
a cross-motion for summary judgment on
that count, as well as a motion for
summary judgment on the other remaining
counts.
In its order of May 18, 2000, the
district court ruled on these motions.
With respect to Count I, Neuma’s request
to recover benefits, the court found in
favor of AMP. AMP had argued that any
dispute on this point was resolved by the
language of the Disability Clause in the
Summary Plan Description, which stated
that "[i]n no event . . . will [life
insurance for disabled employees] be
continued beyond the date the life
insurance provisions of the Plan
terminate." R.42, Ex.6 at 19. AMP claimed
that the language of the Summary Plan
Description clearly identified the "Plan"
as the Provident Policy, and that because
it had the right to and did terminate
that Policy on December 31, 1997, it no
longer had any obligation to pay Larsen’s
life insurance premiums after that date.
In contrast, Neuma maintained that AMP’s
life insurance program was one part of a
more comprehensive employee benefit plan
that also included medical and dental
insurance (the "Benefit Plan"). It
contended that, when the Disability
Clause referred to the "Plan," this
reference was not to the Provident
Policy, but to a larger Benefit Plan as a
whole, and it claimed that extrinsic
evidence it presented had established
that fact conclusively. Therefore,
because AMP continued to provide some
form of life insurance to its employees
(through the MetLife policy) after it
cancelled the Provident Policy, Neuma
argued that the "life insurance
provisions of the Plan" had not
terminated when the Provident Policy was
cancelled and that AMP should have
continued to pay Larsen’s premiums after
that date. In ruling for AMP on this
issue, the district court held that the
unambiguous language of the Summary Plan
Description showed that the "Plan"
referred to in the Disability Clause was
the Provident Policy, not a more
comprehensive Benefit Plan run by AMP.
The key piece of evidence for the
district court was that, at the beginning
of the Summary Plan Description, it
explicitly stated that any usage of the
term "Plan" in that document referred to
Provident Policy No. N-377. The court
then found that, because the Summary Plan
Description allowed AMP to terminate the
"Plan" at any time, and, because the
Disability Clause explained that disabled
employees will not continue to receive
life insurance benefits after the "life
insurance provisions of the Plan
terminate," AMP’s obligation to pay
Larsen’s life insurance premiums ended
when the Provident Policy was cancelled.
Therefore, AMP’s motion for summary
judgment on Count I was granted./3
As to Count IV, Neuma’s allegation that
AMP did not respond in the proper ERISA-
mandated time period to its request for
plan documents, the court also granted
summary judgment for AMP. It held that,
when Neuma made its request for
information, Neuma was not a plan
"beneficiary" entitled to those documents
under ERISA, because it did not have a
"colorable claim" that it would prevail
in a suit for benefits. In the court’s
view, the clear language of the Summary
Plan Description explained that AMP’s
obligation to pay Larsen’s life insurance
premiums ended on December 31, 1997, the
date AMP discontinued the Provident
Policy.
Lastly, with regard to Count II’s state
law negligent misrepresentation claim,
the district court declined to exercise
supplemental jurisdiction because it had
dismissed all of the federal claims in
the lawsuit. Accordingly, it dismissed
Count II without prejudice to Neuma’s
refiling the claim in state court.
II
DISCUSSION
A. Introduction
1.
Neuma contends that the district court
erred in its disposition of Counts I, II
and IV. As to Count I, it submits that
the district court’s interpretation of
the word "Plan" in the Disability Clause
was incorrect. In Neuma’s view, the
language of the Summary Plan Description
is at least ambiguous in this regard,
and, indeed, suggests strongly the
opposite conclusion: that the word "Plan"
means the comprehensive AMP Benefit Plan
covering medical, dental and life
insurance. Neuma contends that it has
provided, but the district court
disregarded, extrinsic evidence that
supports such an interpretation. Second,
Neuma claims that the district court
erred in its ruling on Count IV. It
contends that it is certainly a
"beneficiary" under the meaning of ERISA
and therefore is entitled to invoke the
provisions of Section 502(c) because it
has at least a "colorable claim" for
benefits under ERISA. Neuma points out
that, even if it did not ultimately
succeed, its claim was at least
"colorable" because it had an arguable
chance of success and was not frivolous.
Lastly, Neuma maintains that the district
court erred in dismissing Count II’s
negligent misrepresentation claim because
the district court had diversity
jurisdiction, not supplemental
jurisdiction, over that claim.
2.
The district court disposed of Counts I
and IV by granting summary judgment to
AMP. We apply a de novo standard of
review to the district court’s decision.
See Thomas v. Pearle Vision, Inc., 251
F.3d 1132, 1136 (7th Cir. 2001). Summary
judgment should be granted if "the
pleadings, depositions, answers to
interrogatories, and admissions on file,
together with the affidavits, if any,
show that there is no genuine issue as to
any material fact and that the moving
party is entitled to a judgment as a
matter of law." Fed. R. Civ. P. 56(c);
see also Celotex Corp. v. Catrett, 477
U.S. 317, 322-23 (1986). In determining
whether a genuine issue of material fact
exists, we consider the evidence in the
light most favorable to the non-moving
party. See Adickes v. S.H. Kress & Co.,
398 U.S. 144, 157 (1970); Grun v. Pneumo
Abex Corp., 163 F.3d 411, 419 (7th Cir.
1998), cert. denied, 526 U.S. 1087
(1999). This court has noted that cases
involving the interpretation of
contractual documents are particularly
well-suited to disposition on summary
judgment. See Grun, 163 F.3d at 419; Ryan
v. Chromalloy Am. Corp., 877 F.2d 598,
602 (7th Cir. 1989).
With respect to Count II, we review a
district court’s dismissal for lack of
subject matter jurisdiction de novo. See
LaBonte v. United States, 233 F.3d 1049,
1052 (7th Cir. 2000); Haven v. Polska,
215 F.3d 727, 731 (7th Cir.), cert.
denied, Haven v. Republic of Poland, 121
S. Ct. 573 (2000).
B. Recovery of Benefits Under Section
502(a)(1)(B) of ERISA
We first examine Neuma’s allegation that
AMP improperly discontinued Larsen’s
group life insurance benefits after it
cancelled the Provident Policy at the end
of 1997. As an initial matter, both
parties agree that the AMP life insurance
program that Larsen enrolled in is an
"employee welfare benefit plan" as
defined by ERISA. ERISA defines such
plans as "any plan, fund, or program . .
. established or maintained by an
employer . . . for the purpose of
providing for its participants or their
beneficiaries, through the purchase of
insurance or otherwise . . . medical,
surgical, or hospital care or benefits,
or benefits in the event of sickness,
accident, disability, [or] death." 29
U.S.C. sec. 1002(1)(A). AMP contends that
this life insurance program constitutes
an entire benefit plan unto itself.
Neuma, however, claims that the life
insurance program was but one part of a
larger Benefit Plan provided by AMP,
entitled the "AMP AKZO Corporation
Medical, Dental, Life Insurance Plan,"
which also included medical and dental
insurance./4
ERISA plans are governed by written
documents that define their scope; the
statute requires that "[e]very employee
benefit plan . . . be established and
maintained pursuant to a written
instrument." 29 U.S.C. sec. 1102(a)(1).
"Through those instruments, the parties
are free to subject such welfare benefits
to vesting requirements not provided by
ERISA, or they may reserve the power to
terminate such plans." Ryan, 877 F.2d at
603. ERISA requires that employers
provide these documents to their
employees to protect their interests as
participants in employee welfare plans.
See Panaras v. Liquid Carbonic Indus.
Corp., 74 F.3d 786, 788 (7th Cir. 1996)
(citing 29 U.S.C. sec. 1001(b)).
Although they dispute the nature of the
ERISA plan at issue, the parties agree
that the plan document that describes the
contours of Larsen’s life insurance
benefits is the Summary Plan Description.
Apparently, there are no other existing
plan documents that relate to the group
life insurance benefits at issue in this
litigation. The disagreement between the
parties centers on a key provision of
that Summary Plan Description, the
Disability Clause. This clause explains
AMP’s responsibilities to employees such
as Larsen who become disabled before age
60, with regard to the payment of life
insurance premiums. It states that, if a
policyholder becomes disabled, AMP "will
keep [his] life insurance in force by
paying the appropriate premium as long as
[he is] disabled." R.42, Ex.6 at 19. Yet,
it further states that "[i]n no event,
however, will such insurance be continued
beyond the date the life insurance
provisions of the Plan terminate." Id.
The meaning of the word "Plan" in the
clause is crucial.
Neuma claims that "Plan" refers to a
larger medical, dental and life insurance
plan that AMP provided to its employees,
of which the Provident Policy was merely
a part. Under this interpretation, AMP
was obligated to continue paying Larsen’s
life insurance premiums as long as the
life insurance provisions of that larger
Benefit Plan remained in effect.
Therefore, because AMP continued to
provide life insurance coverage to its
employees through MetLife after it
cancelled the Provident Policy, it should
have continued to provide coverage to
Larsen under the Disability Clause even
after the Provident Policy was replaced
by the MetLife policy. AMP counters that,
in the Summary Plan Description, "Plan"
clearly refers to the Provident Policy,
and that, when that policy was cancelled,
its obligation to provide group life
insurance benefits to Larsen also ended.
In interpreting the language of the
Disability Clause, we must apply federal
common law rules of contract
interpretation. See, e.g., Grun, 163 F.3d
at 419; Brewer v. Protexall, Inc., 50
F.3d 453, 457 (7th Cir. 1995). "Those
rules direct us to interpret ERISA plans
in an ordinary and popular sense as would
a person of average intelligence and
experience." Brewer, 50 F.3d at 457
(citation and quotation marks omitted).
In attempting to interpret such plans,
our first task is to determine if the
contract at issue is ambiguous or
unambiguous. See Grun, 163 F.3d at 420;
Ryan, 877 F.2d at 602. Contract language
is ambiguous if it is susceptible to more
than one reasonable interpretation. See
Grun, 163 F.3d at 420; Brewer, 50 F.3d at
458. If a district court determines that
the provision is without ambiguity, we
have noted that "it need not consider
extrinsic evidence" and should "proceed
to declare the meaning" of the provision.
Ryan, 163 F.3d at 602; see also Moriarty
v. Svec, 164 F.3d 323, 330 (7th Cir.
1998); Swaback v. Am. Info. Techs. Corp.,
103 F.3d 535, 541 (7th Cir. 1996). Thus,
if a document governing an ERISA plan is
unambiguous, this court will not look be
yond its "four corners" in interpreting
its meaning. Mathews v. Sears Pension
Plan, 144 F.3d 461, 466 (7th Cir. 1998).
In reviewing the Summary Plan
Description, we believe that the document
unambiguously equates the term "Plan"
with the Provident Policy. The Disability
Clause therefore absolved AMP of the
responsibility to continue to pay
Larsen’s life insurance premiums after it
discontinued that Policy.
The most compelling passage from the
Plan in this regard, which the district
court highlighted prominently in its
opinion, is located on page 5 of the
Summary Plan Description, before any of
the substantive provisions of that
document. It appears in a letter from
Provident’s president and chief executive
officer that specifies the following:
PROVIDENT
LIFE AND ACCIDENT
INSURANCE COMPANY
Chattanooga, Tennessee
(herein called the Provident)
Certifies that it has issued Group Policy
No. N-377
(herein called the Plan) to
AMP CIRCUITS, AN AMP DIVISION
(herein called the Policyholder)
The Plan provides the benefits described
on the following pages for certain
employees covered under the Plan. This
booklet gives the principal provisions of
the Plan. The Plan alone constitutes the
entire contract between the Provident and
the Policyholder.
Employees become covered under the Plan
as provided on a following page. This
booklet becomes the employee’s
certificate of coverage while covered
under the Plan.
The benefits and provisions described on
the following pages are subject in all
respects to the terms and conditions of
the Plan.
[signature]
President and Chief Executive Officer
Provident Life and Accident
Insurance Company
R.42, Ex.6 at 5 (emphasis added). This
portion of the Summary Plan Description
clearly states that Group Policy No. N-
377, which all parties agree is the
Provident Policy that covered Larsen,
will be "herein called the Plan" in the
remainder of the Summary Plan
Description. Id. It then notes that the
Provident Policy "provides the benefits
described on the following pages" for
employees covered under that Policy. Id.
Moreover, the statement itself is signed
by Provident’s president, which suggests
that the document that contains it refers
exclusively to a Provident-related
product. These statements provide direct
and unambiguous evidence that the use of
the term "Plan" in the Summary Plan
Description (including the Disability
Clause) refers to the Provident Policy.
Other textual passages in the Summary
Plan Description support the same
conclusion. On the cover of the booklet,
along with its title ("Group Benefits
Program for Employees of AMP Circuits, an
AMP Division"), is a logo that reads:
"Provident Life and Accident Insurance
Company." Id. Moreover, the booklet
itself has many provisions relating to
life insurance and Provident, but it
provides no direct reference to any other
type of insurance or to a more
comprehensive benefit plan. Additionally,
a number of times in the document the
word "Plan" is referred to in a way that
appears to relate directly to a life
insurance policy provided by Provident.
Page 9 notes that certain representations
"made to the employee by the Policyholder
. . . about being covered for benefits
under this Plan . . . shall: (a) not be
considered as representations or
statements made by, or on behalf of, the
Provident; and (b) not bind the Provident
for benefits under the Plan." Id. at 9
(emphasis in original). On page 21, the
text explains that "[t]he Provident will
pay to you the amount shown if the
Dependant dies while covered under the
Plan." Id. at 21. And on page 26 the
document states that "[c]laims for
benefits under the Plan are to be
submitted to Provident" and that
"[p]ayment of claims under the Plan will
be made by the Provident." Id. at 26.
Neuma points to several other passages
in the document to demonstrate ambiguity
regarding the meaning of the word "Plan,"
but its arguments are not persuasive.
First, it notes that the document refers
to the title of the "Plan" in a few
different ways: on page 1, it refers to
it as the "Life Insurance Plan;" on page
5’s letter from Provident’s president,
the "Plan" is called "Group Policy No. N-
377" and on page 25, the document states
that "[t]he name of the Plan is [the]
Employees Group Life Benefit Program."
Id. at 1, 5, & 25. Neuma submits that,
because they use different titles for the
"Plan," these examples create confusion
as to what that term means. We cannot
accept this argument. Indeed, this
argument supports AMP’s interpretation of
"Plan," not Neuma’s. Each of these titles
indicates a connection to a life
insurance policy alone, such as the
Provident Policy; none suggests a
reference to a more comprehensive Benefit
Plan containing medical, dental and life
insurance plans.
Second, Neuma points to the Disability
Clause itself, which states that AMP will
not keep a disabled employee’s life
insurance benefits in force beyond the
date that "the life insurance provisions
of" the Plan terminate. Id. at 19. Neuma
maintains that the only logical reading
of this phrase suggests that the "Plan"
must have provisions other than those
relating to life insurance, because, if
it did not, the phrase would be
redundant. Therefore, it claims that, be
cause the Provident Policy solely refers
to life insurance coverage, to give
effect to each word of the Disability
Clause, the term "Plan" must identify a
larger Benefit Plan that contains the
Policy along with many other components.
However, the passage in question must be
read within the context of the entire
document, including the specific
provisions that we previously have noted.
When evaluated in this context, the
phrase highlighted by Neuma does not
cause the term "Plan" to be susceptible
to more than one reasonable
interpretation. See Grun, 163 F.3d at
420. As we noted earlier, in many
instances the Summary Plan Description
either specifically equates the "Plan"
with the Provident Policy or references
the word in a way that can seemingly
point to nothing other than the Policy.
At no point does the document explicitly
mention the more comprehensive Benefit
Plan that Neuma refers to, or any form of
medical or dental insurance. Read in this
context, the Disability Clause’s
reference to "the life insurance
provisions of" the "Plan" appear to be
simply the result of cautious drafting
designed to distinguish those provisions
of the Provident Policy from others
concerned with administrative detail./5
Neuma notes that, even if we find that
the term "Plan" is unambiguous, in
limited circumstances parties may present
objective extrinsic evidence to
demonstrate that, although a contract
appears unambiguous, a disputed term
actually means something different from
what it appears to mean on its face. See
Rossetto v. Pabst Brewing Co., Inc., 217
F.3d 539, 542 (7th Cir. 2000), cert.
denied, 121 S. Ct. 1191 (2001); Mathews,
144 F.3d at 466. This type of ambiguity
is often referred to as latent or
extrinsic ambiguity. See Rossetto, 217
F.3d at 542-43 (distinguishing latent
ambiguity from patent ambiguity, which is
ambiguity that is clear from the reading
of a contract’s language); Stone
Container Corp. v. Hartford Steam Boiler
Inspection & Ins. Co., 165 F.3d 1157,
1162 (7th Cir. 1999) (same). Neuma claims
that the term "Plan" is, at the least,
latently ambiguous, even if it is not
ambiguous on its face. To support this
assertion, it puts forward two pieces of
extrinsic evidence.
Neuma first refers us to a separate
summary plan description for the MetLife
insurance policy that replaced the
Provident Policy in providing life
insurance coverage to AMP’s employees. It
notes that this document shows that,
although the MetLife policy has a
different policy number than the
Provident Policy, it identifies a Plan
Identification Number of "13-3429437-
524," the same identification number as
that located in the Provident Policy’s
Summary Plan Description. R.40, Ex.5D at
32. Neuma then assumes that this number
must refer to the larger Benefit Plan and
that its presence in the Provident
Summary Plan Description demonstrates
that the "Plan" referenced in that
document must be the Benefit Plan.
Second, Neuma refers to the 1997 and 1998
"Form 5500 Annual Return/Report of
Employee Benefit Plan" (the "Form 5500s")
submitted by AMP to the IRS in those
years. These documents each appear to (1)
identify a benefit plan entitled the "AMP
AKZO Corporation Medical, Dental, Life
Insurance Plan," which includes a life
insurance policy and a health maintenance
organization ("HMO") policy that provides
medical and dental coverage to AMP
employees, and (2) state that this plan
was not terminated in 1997 or 1998,
respectively./6 Neuma then claims that,
because these documents identify a more
comprehensive benefit plan than one that
simply included a life insurance policy,
the "Plan" referenced in the Summary Plan
Description must also equate to a larger
AMP Benefit Plan.
With respect to the identification
number "13-3429437-524," it is unclear as
to what this number actually refers.
Neuma has not put forward any evidence
linking the number to a Benefit Plan that
provides medical, dental and life
insurance. By contrast, when Neuma’s
attorney asked Jacqueline Mooneyhan, a
Human Resources Manager at AMP, about the
fact that this same number was listed as
an identification number in both the
Provident and MetLife summary plan
descriptions, she replied that this
number was issued by the government and
referred not to a larger Benefit Plan but
only to AMP’s life insurance plan./7
As for the Form 5500s, the district
court questioned their accuracy, noting
that the 1998 form incorrectly listed
Provident as the life insurance carrier
for that year, when in fact MetLife
provided life insurance coverage for AMP
employees at that time. See R.49 at 5
(noting that it "may be that other
aspects of these [forms] are incorrect as
well"). Regardless, even if the Form
5500s do reference a larger Benefit Plan,
they cannot bring serious dispute to the
fact that the word "Plan" in the Summary
Plan Description refers to the Provident
Policy.
We agree with the district court’s
determination that the Disability
Clause’s reference to the "Plan" clearly
equated it with the Provident Policy.
Therefore, because the Disability Clause
specifically stated that AMP was
responsible for paying Larsen’s life
insurance premiums only until "the life
insurance provisions of the Plan
terminate," AMP’s obligation to pay those
premiums ended on December 31, 1997. As a
result, the court was correct in granting
summary judgment to AMP on Count I.
C. Failure to Produce Documents under
Section 502(c) of ERISA
In Count IV of its complaint, Neuma
sought to recover penalties under Section
502(c) of ERISA, which requires plan
administrators to provide information
requested by plan participants or
beneficiaries within thirty days of such
a request, or face a statutory fine. See
29 U.S.C. sec. 1132(c) (1)(B)./8 Neuma
had made this request to AMP by letter on
August 6, 1998, when it asked to be
provided with "a copy of the master
[Provident] insurance policy, plan
document and related amendments thereto,
summary plan description and all other
documents constituting the benefit plan
and insurance policy under which the
policy was maintained." R.47, Ex.A. This
request was made pursuant to 29 U.S.C.
sec. 1024(b)(4), one of ERISA’s
disclosure provisions, which requires
that:
The administrator shall, upon written
request of any participant or
beneficiary, furnish a copy of the latest
updated summary plan description, plan
description, and the latest annual
report, any terminal report, the
bargaining agreement, trust agreement,
contract, or other instruments under
which the plan is established or
operated.
AMP claimed that it did not receive this
request until December 10, 1998./9 On
that date, Mooneyhan sent a copy of what
she claimed was the relevant summary plan
description to Neuma, and stated that she
was "not in possession of the master
insurance policy, plan document and
related amendments." Id., Ex.B. Neuma
claims that the summary plan description
provided by Mooneyhan at that time was
outdated because it had been superceded
by the Summary Plan Description described
in this opinion on July 1, 1996. On
February 17, 1999, AMP, through its
attorneys, sent other documents to Neuma
regarding the Provident Policy, including
the updated Summary Plan Description and
unsigned copies of other Provident group
policy documents. On April 1, 1999, AMP’s
attorneys provided Neuma with signed
copies of those Provident group policy
documents.
Under ERISA, only a "participant" or a
"beneficiary" is entitled to request such
plan documents and seek penalties for the
failure of their production. 29 U.S.C.
sec.sec. 1024(b)(4) & 1132(c)(1)(B).
Neuma claims that it was a "beneficiary,"
defined by ERISA as a "person designated
by a participant, or by the terms of an
employee benefit plan, who is or may
become entitled to a benefit thereunder."
29 U.S.C. sec. 1002(8). The parties do
not dispute that Larsen designated Neuma
as the recipient of his life insurance
benefits. However, a party such as Neuma
can demonstrate that it "may become
entitled to a benefit," and therefore be
considered a "beneficiary" for
jurisdictional purposes, only if it can
show that at the time it filed suit it
had a colorable claim to vested benefits.
See Riordan v. Commonwealth Edison Co.,
128 F.3d 549, 552 (7th Cir. 1997);
Kennedy v. Conn. Gen. Life Ins. Co., 924
F.2d 698, 700 (7th Cir. 1991) (citing
Firestone Tire & Rubber Co. v. Bruch, 489
U.S. 101, 117-18 (1989))./10 The
district court held that Neuma had not
made a colorable claim that it was due
benefits because "the summary plan
description . . . unambiguously equates
the Provident Policy with the plan;"
therefore, Neuma’s claim for benefits was
not "subject to reasonable debate." R.49
at 10.
We have noted that "[t]he requirement of
a colorable claim is not a stringent
one." Panaras, 74 F.3d at 790. A
plaintiff achieves status as a
beneficiary if they have even an
"arguable" claim; "[o]nly if the language
of the plan is so clear that any claim as
an assignee must be frivolous is
jurisdiction lacking." Kennedy, 924 F.2d
at 700; see also Panaras, 74 F.3d at 790.
Even in cases where a plaintiff’s claim
ultimately failed, the "possibility" of
success was sufficient to establish
participant or beneficiary status.
Kennedy, 924 F.2d at 701; see also
Jackson v. E.J. Brach Corp., 176 F.3d
971, 979 (7th Cir. 1999); Riordan, 128
F.3d at 552; Panaras, 74 F.3d at 790. A
determination regarding the relative
strength of that claim has often been
deemed to go to the merits, not to
whether standing as a participant or
beneficiary was demonstrated. See
Riordan, 128 F.3d at 552; Kennedy, 924
F.2d at 701./11
With this minimal standard in mind, we
must respectfully disagree with the
district court’s conclusion that Neuma’s
claim was not colorable under ERISA. The
parties do not dispute that Larsen
properly assigned his right to benefits
to Neuma, and Neuma claimed that the
language of the plan documents required
AMP to continue to pay Larsen’s life
insurance premiums. This legal argument
"is ’not so bizarre or so out of line
with existing precedent’" that Neuma has
failed to meet "’the low threshold of the
colorable requirement.’" Panaras, 74 F.3d
at 790 (quoting Andre v. Salem Technical
Servs., 797 F. Supp. 1416, 1421 (N.D.
Ill. 1992)) (internal quotation marks
omitted). After reviewing the merits of
Neuma’s claim, we have found that the
language of the Summary Plan Description
does not afford Neuma the relief it
seeks. However, the claim had at least an
arguable chance of success, and we do not
believe that in hindsight it should be
deemed so obviously lacking in any legal
merit as to be characterized as
frivolous.
Accordingly, we reverse the district
court’s decision on this issue. In doing
so, we note that a determination as to
whether penalties should be awarded under
Section 502(c) is a matter left to the
discretion of the district court, see 29
U.S.C. sec. 1132(c)(1), and we express no
opinion as to whether any penalty would
be appropriate in this case.
D. Negligent Misrepresentation Claim
Count II of Neuma’s complaint is styled
as a state law, negligent
misrepresentation claim against AMP. It
notes that, before Neuma purchased the
rights to Larsen’s group life insurance
benefits, it requested information from
AMP regarding the contours of those
benefits. A few days after receiving that
information, Neuma purchased the rights
in question. Now, in Count II, Neuma
alleges that the information provided by
AMP "omitted material facts and contained
false statements of material facts
concerning the operation of the Plan as
applied to Larsen." R.38 at 5-6. Neuma
claims that, in its response, AMP
negligently (1) stated incorrectly the
amount of Larsen’s life insurance
coverage; (2) provided incorrect
information regarding how the amount of
that insurance could decrease in the
future and (3) omitted important
information about the extent to which
conversion to an individual policy of
insurance was available, in the event
that AMP terminated Larsen’s coverage.
More generally, Neuma claims that it
suffered damages by paying "valuable
consideration" for an amount of life
insurance benefits that AMP now claims
"are not provided under the terms of the
Plan." Id. at 6. Among other relief,
Neuma sought compensatory damages in the
amount of $81,600, the full amount of the
life insurance benefits for which Larsen
enrolled while working at AMP.
Having dismissed the federal ERISA
claims in the suit, the district court
declined to exercise supplemental
jurisdiction and dismissed Count II
without prejudice, so that it could be
filed in state court. Neuma submits that
the district court chose the wrong course
because it had diversity jurisdiction
over this claim and should have retained
the claim on that basis. AMP counters by
arguing that diversity jurisdiction does
not exist because the amount in
controversy is below the statutory
threshold. AMP comes to this result by
arguing first that the allegations in
Count II that involve the administration
of the benefit plan and monies due under
that plan are completely preempted by
ERISA. It then claims that dismissal of
this count was proper because "when
stripped of the allegations relating to
administration of the Plan, and monies
purportedly due under the Plan, [Count
II] does not allege diversity
jurisdiction." Appellee’s Br. at 19. AMP
maintains that "the only non-Plan damages
would be the consideration which Neuma
paid for the assignment" and because
"this amount was not alleged, diversity
jurisdiction was not satisfied." Id.
We cannot accept AMP’s argument that the
allegations in Count II are completely
preempted by ERISA. The complete
preemption doctrine is an exception to
the well-pleaded complaint rule, which
normally allows that "’the plaintiff is
master of the complaint . . . and that
the plaintiff may, by eschewing claims
based on federal law, choose to have the
cause heard in state court.’" Speciale v.
Seybold, 147 F.3d 612, 614 (7th Cir.
1998) (quoting Caterpillar, Inc. v. Will
iams, 482 U.S. 386, 398-99 (1987)). "This
jurisdictional doctrine provides that ’to
the extent that Congress has displaced a
plaintiff’s state law claim, that intent
informs the well-pleaded complaint rule,
and a plaintiff’s attempt to utilize the
displaced state law is properly
recharacterized as a complaint arising
under federal law.’" Jass v. Prudential
Health Care Plan, Inc., 88 F.3d 1482,
1487 (7th Cir. 1996) (quoting Rice v.
Panchal, 65 F.3d 637, 640 n.2 (7th Cir.
1995)). The Supreme Court has held that
the civil enforcement provision of ERISA,
Section 502(a), completely preempts state
law causes of action that fall within the
scope of that provision. See Metropolitan
Life Ins. Co. v. Taylor, 481 U.S. 58, 67
(1987); see also Speciale, 147 F.3d at
615. Our cases have identified three
factors to be used in determining whether
a plaintiff’s state law claim is properly
characterized as a suit under ERISA’s
Section 502(a): "(1) whether the
plaintiff is eligible to bring a claim
under that section, (2) whether the
plaintiff’s cause of action falls within
the scope of an ERISA provision that the
plaintiff can enforce via sec. 502(a),
and (3) whether the plaintiff’s state law
claim cannot be resolved without an
interpretation of the contract governed
by federal law." Jass, 88 F.3d at 1487
(internal citations and quotation marks
omitted).
Neuma’s claim in Count II is that AMP,
as the plan administrator, misrepresented
the terms and conditions of Larsen’s life
insurance program, causing Neuma to
purchase the rights to a policy that was
far less valuable than it was led to
believe. The closest analogue to an ERISA
cause of action would appear to be a
claim for breach of a fiduciary duty by
AMP in negligently misrepresenting the
terms of the plan./12 However, when
Neuma requested this information, prior
to its purchase of Larsen’s right to
benefits, it was not a participant or
beneficiary to whom AMP would have owed a
fiduciary duty. See 29 U.S.C. sec. 1104
(stating that, under ERISA, a fiduciary
must "discharge his duties with respect
to a plan solely in the interest of the
participants and beneficiaries"); see
also Uselton v. Commercial Lovelace Motor
Freight, Inc., 940 F.2d 564, 582-83 (10th
Cir. 1991). In light of the fact that
Neuma’s claim in Count II does not fall
within the scope of an ERISA provision
that it can enforce via Section 502(a),
we do not believe that the claim is
completely preempted by ERISA./13
In order to support diversity
jurisdiction under 28 U.S.C. sec. 1332,
two basic requirements must be satisfied:
(1) complete diversity of citizenship
between the plaintiffs and the defendants
and (2) the proper amount in controversy
(more than $75,000). See Del Vecchio v.
Conseco, Inc., 230 F.3d 974, 977 (7th
Cir. 2000). There is no dispute that
diversity of citizenship exists in this
case./14 Moreover, aside from its
argument regarding complete preemption,
AMP does not otherwise challenge Neuma’s
allegations with respect to the proper
jurisdictional amount at stake. To
satisfy diversity jurisdiction, Neuma
must demonstrate no more than a good
faith, minimally reasonable belief that
its claim will result in a judgment in
excess of $75,000. See St. Paul Mercury
Indem. Co. v. Red Cab Co., 303 U.S. 283,
288-89 (1938); Herremans v. Carrera
Designs, Inc., 157 F.3d 1118, 1121 (7th
Cir. 1998). Neuma has claimed damages of
at least $81,600, the amount that it
asserts was due under Larsen’s policy
based on the representations made by AMP.
At this stage in the proceedings, we
cannot say to a legal certainty that
Neuma’s claim is for less then the
statutorily required amount. See Lindland
v. United States of Am. Wrestling Ass’n,
Inc., 230 F.3d 1036, 1038 (7th Cir. 2000)
(citing St. Paul, 303 U.S. at 289).
Conclusion
For the reasons set forth in this
opinion, we affirm the district court’s
judgment denying Neuma’s claim for
benefits under Section 502(a)(1)(B). We
reverse the district court’s decision
denying Neuma’s claim for penalties under
Section 502(c) and remand that claim to
the court for further proceedings
consistent with this opinion. Lastly, we
reverse the district court’s dismissal of
the negligent misrepresentation claim and
remand that claim to the district court
for further proceedings. The parties
shall bear their own costs in this court.
AFFIRMED in part, REVERSED in part,
and REMANDED
FOOTNOTES
/1 Neuma also named Provident Life and Accident
Insurance Company ("Provident"), the company that
provided the life insurance policy in which
Larsen had enrolled, as a co-defendant. However,
Provident reached a settlement agreement with
Neuma and, consequently, was dismissed from the
case.
/2 Count III of the complaint involved a claim that
AMP breached its fiduciary duty in discharging
its duties as plan administrator and plan sponsor
under 29 U.S.C. sec. 1104(a)(1) of ERISA. The
district court ruled in favor of AMP on this
claim and Neuma does not challenge that ruling on
appeal.
/3 Before the district court, Neuma also argued that
regardless of whether the "Plan" in the Disabili-
ty Clause ended, a "Reservation of Rights" clause
in the Summary Plan Description precluded AMP
from terminating the life insurance benefits of
disabled employees like Larsen. This clause gave
AMP the right to terminate the plan at any time,
and notes that "[a]ny such change or termination
in benefits . . . may apply to active employees,
future retirees and current retirees as either
separate groups or as one group." R.42, Ex.6 at
9. Neuma argued that this provision allowed AMP
to terminate the benefits of those listed groups
of employees, but not disabled former employees
like Larsen. The court disagreed, noting that
this reading would conflict with the wording of
the Disability Clause, which required AMP to pay
disabled employees’ premiums only until the "life
insurance provisions of the Plan terminate." Id.
at 19. In its appellate brief, Neuma maintains
that the "Reservation of Rights" clause does not
give AMP the right to discontinue the coverage of
a disabled employee such as Larsen, but it also
agrees with the district court that Neuma’s
rights turn on an interpretation of the Disabili-
ty Clause. Neuma notes that the district court
properly held that the Disability Clause, not the
"Reservation of Rights" clause, sets forth AMP’s
right to terminate life insurance benefits of
disabled employees.
/4 In this claim to recover benefits under Section
502(a)(1)(B), Neuma seeks recovery only from AMP
and not from the plan itself. We continually have
noted that "’ERISA permits suits to recover
benefits only against the Plan as an entity.’"
Jass v. Prudential Health Care Plan, Inc., 88
F.3d 1482, 1490 (7th Cir. 1996) (quoting Gelardi
v. Pertec Computer Corp., 761 F.2d 1323, 1324
(9th Cir. 1985)); see also 29 U.S.C.
sec. 1132(d)(2); Garratt v. Knowles, 245 F.3d
941, 949 (7th Cir. 2001); Riordan v. Commonwealth
Edison Co., 128 F.3d 549, 551 (7th Cir. 1997). We
have, however, allowed a suit for benefits to go
forward with an employer named as the defendant
when the employer was the plan administrator and
the employer and the plan were otherwise closely
intertwined. See Mein v. Carus Corp., 241 F.3d
581, 585 (7th Cir. 2001); Riordan, 128 F.3d at
551.
This case presents a rather novel factual
situation for the application of these princi-
ples. In this case, the parties disagree over the
identity of the relevant plan; this complication
made it more difficult for Neuma to determine
which "plan" was the proper entity to sue. Conse-
quently, the record is somewhat unclear as to the
exact relationship between AMP and the relevant
plan. On one hand, both parties agree that the
instrument under which that plan is operated is
the Summary Plan Description. AMP is listed as
the plan administrator in the Summary Plan De-
scription. It therefore appears that AMP is the
ERISA plan administrator, defined as "the person
specifically so designated by the terms of the
instrument under which the plan is operated." 29
U.S.C. sec. 1002(16)(A)(i). Notably, the Summary
Plan Description also lists AMP as the plan’s
designated agent for service of process. See
Mein, 241 F.3d at 585 (holding that designation
as an agent for service of process is one factor
demonstrating a close connection between the
employer and the plan, a situation that permits
the naming of the employer as a defendant);
Riordan, 128 F.3d at 551 (same). On the other
hand, as our disposition regarding Neuma’s claim
for benefits demonstrates, the Summary Plan
Description does clearly refer to a "Plan" synon-
ymous with the Provident Policy, a fact that
would make it less understandable for Neuma to
confuse AMP as an entity with the relevant plan.
Given the lack of clarity in the record, AMP’s
decision not to pursue summary judgment on this
basis, and our determination that Neuma is not
due benefits under the terms of the Summary Plan
Description, we do not think that it is appropri-
ate to dismiss this suit on the ground that Neuma
has sued the wrong party. Cf. Riordan, 128 F.3d
at 551. Moreover, as one potential form of relief
in Count I, Neuma also requested that AMP be
required to purchase and maintain an insurance
policy on Larsen’s life. This request permits
recharacterization of this claim as one seeking
a form of equitable relief to redress a plan
violation under ERISA Section 502(a)(3)(B), 29
U.S.C. sec. 1132(a)(3)(B). Cf. Bowerman v. Wal-
Mart Stores, 226 F.3d 574, 592 (7th Cir. 2000).
/5 Neuma also points out that, although AMP is
listed as the ERISA plan administrator, the
document also recites that "[a]ll benefits are
administered by Provident Life and Accident
Insurance Company." R.42, Ex.6 at 1. Neuma con-
tends that, if Provident "administers" the Poli-
cy, then AMP must be the "administrator" of a
"Plan" that does not equate to the Policy. Howev-
er, a reading of the Summary Plan Description
makes clear that, under the same "Plan," AMP and
Provident would have different responsibilities.
As the designated plan administrator, AMP was
responsible for providing plan information to
participants and beneficiaries and answering
questions about the plan, while Provident, as the
"Claims Fiduciary," processed all claims for
benefits. Id. at 25-28.
/6 The documents appear to show that the HMO policy
in 1997 was issued by Kaiser Permanente and in
1998 was issued by Aetna/US Healthcare.
/7 Q: [Neuma’s attorney] Now, directing your atten-
tion to page 32 of Exhibit 3 [the MetLife summary
plan description]?
A: [Mooneyhan] Yes.
Q: It says Employer Identification Number and
Plan Number; that in fact is the same Plan number
as appears [in the Provident Summary Plan De-
scription], correct?
A: Temporary EI number. That’s issued by the
federal government. That doesn’t change.
Q: That 524 number at the end is a Plan number,
isn’t it?
A: Right.
Q: And that’s specific to the Benefit Plan of
AMP, correct?
A: The life--it’s the Plan number for the Life
Plan.
R.42, Ex.4 at 210-11.
/8 29 U.S.C. sec. 1132(c)(1) provides in relevant
part that:
Any administrator . . . (B) who fails or refuses
to comply with a request for any information
which such administrator is required by this
subchapter to furnish to a participant or benefi-
ciary (unless such failure or refusal results
from matters reasonably beyond the control of the
administrator) by mailing the material requested
to the last known address of the requesting
participant or beneficiary within 30 days after
such request may in the court’s discretion be
personally liable to such participant or benefi-
ciary in the amount of up to $100 a day from the
date of such failure or refusal, and the court
may in its discretion order such other relief as
it deems proper.
/9 In its complaint, Neuma states that it made a
second request for plan documents to which it
alleges it was entitled, including the Form 5500s
for 1997 and 1998 and documents relating to the
MetLife insurance policy, on or before October 1,
1999. Neuma claims that AMP refused to produce
these documents and that Neuma was forced to seek
a court order to compel their production. Neuma
also seeks statutory penalties for AMP’s failure
to respond to this second information request.
/10 The district court framed this inquiry as wheth-
er, on August 6, 1998, the day that Neuma re-
quested plan information from AMP, Neuma had a
colorable claim for benefits. We have noted that
a plaintiff must have a colorable claim for
benefits not only when he requests plan informa-
tion but also on the date when the party files
suit. See Winchester v. Pension Comm. of Michael
Reese Health Plan, 942 F.2d 1190, 1193-94 (7th
Cir. 1991) (explaining that because the purpose
of Section 502(c) is not so much to penalize as
to promote ERISA’s goal of providing for prompt
and fair settlements, a plaintiff who had settled
a benefit claim before bringing suit for penal-
ties under Section 502(c) did not have a color-
able claim to benefits under ERISA’s meaning);
see also Leo v. Laidlaw, Inc., 38 F. Supp. 2d 675,
679 (N.D. Ill. 1999). However, Neuma filed its
first complaint on October 20, 1998, not long
after its request for plan information, and there
is no indication that this discrepancy would have
had any effect on the outcome of the district
court’s determination.
/11 For the claim to be one for "vested benefits,"
Neuma must have a "colorable claim to benefits
which the employer promised to provide pursuant
to the employment relationship and which a
non-frivolous argument suggests have accrued to
the employee’s benefit." Panaras v. Liquid Car-
bonic Indus. Corp., 74 F.3d 786, 791 (7th Cir.
1996).
/12 Indeed, in its ERISA breach of fiduciary duty
claim in Count III of the complaint, since dis-
missed by the district court, Neuma alleged that
such a breach occurred due to the misrepresenta-
tions discussed in Count II.
/13 AMP makes no argument that Neuma’s claim is
subject to conflict preemption, see 29 U.S.C.
sec. 1144, because, unlike complete preemption,
conflict preemption arises as a federal defense
to a state law claim. For purposes of determining
federal jurisdiction, a court does not rely on
the availability of such a defense, but must
instead look to the allegations made in the
complaint. Cf. Speciale v. Seybold, 147 F.3d 612,
614-17 (7th Cir. 1998).
/14 Neuma is an Illinois corporation with its princi-
pal place of business in Illinois, AMP is a
Pennsylvania corporation with its principal place
of business in Pennsylvania and Provident is a
Tennessee corporation with its principal place of
business in Tennessee.