Strom v. Goldman, Sachs & Co., Docket No. 98-7090

Citation202 F.3d 138
Decision Date01 August 1998
Docket NumberDocket No. 98-7090
Parties(2nd Cir. 1999) KATHRYN STROM, Plaintiff-Appellant, v. GOLDMAN, SACHS & CO. and GOLDMAN, SACHS & CO. SUPPLEMENTAL LIFE INSURANCE PLAN, Defendants-Appellees
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Plaintiff appeals from a judgment which dismissed her complaint to recover $500,000 and other relief from an employer- sponsored employee benefit plan or, alternatively, her husband's former employer. Affirmed in part, reversed and remanded in part. [Copyrighted Material Omitted] Jay P. Levy-Warren, Vladeck, Waldman, Elias & Engelhard, New York City, for Plaintiff-appellant.

Michael J. Dell, Kramer, Levin, Naftalis & Frankel, LLP, New York City, for Defendants-Appellees.

Before: KEARSE, Circuit Judge, BRIEANT*. and KAPLAN,**. District Judges.***.

Kaplan, District Judge.

Plaintiff's late husband applied to purchase certain group life insurance upon his employment by defendant Goldman, Sachs & Co. ("Goldman"). The application was approved, but Goldman's alleged negligence in dealing with the application delayed its effective date until four days after the death of the insured. Plaintiff here seeks reversal of the judgment of the United States District Court for the Southern District of New York, Jed S. Rakoff, Judge, dismissing her complaint against the benefit plan and Goldman.

I

This case comes to us on appeal from an order entered on defendants' motion to dismiss the complaint. We therefore accept as true the well pleaded factual allegations of the complaint and any inferences reasonably drawn therefrom.1

Goldman hired plaintiff's late husband, Jonathan Strom, as an executive director in its investment banking department on January 13, 1994. As a full time employee, Strom automatically qualified on his first day of employment for $150,000 in life insurance coverage under Goldman's basic plan. He was eligible also to receive up to an additional $1 million in life insurance coverage under the Goldman, Sachs & Co. Supplemental Life Insurance Plan (the "Plan"), the first $500,000 of which was guaranteed issue and the balance subject to submission of evidence of good health acceptable to the carrier.

On or about January 14, 1994, Strom filled out the life insurance forms provided to him by Goldman, the Plan sponsor and administrator, electing to receive the maximum $1 million in coverage and designating plaintiff as his beneficiary under both the Plan and the basic plan. One week later, at Goldman's request, Strom submitted a Statement of Health.

In February and March 1994, Strom worked in Goldman's Hong Kong office. While he was abroad, Goldman, as administrator of the Plan, sent memoranda addressed to Strom to his New York office. The memoranda incorrectly stated that Strom neither had requested the optional $1 million in life insurance coverage under the Plan nor submitted a Statement of Health.

Strom returned to his New York office in early April 1994 and found the memoranda. He thereupon resubmitted the forms that Goldman claimed were missing, again electing the full $1 million in additional coverage.

On June 17, 1994, Strom received a letter from MetLife, Goldman's insurance carrier, stating that it had received his request for the additional insurance but that an Attending Physician Statement was missing from the application. Strom timely submitted the form, receipt of which was confirmed by MetLife on July 20, 1994. On August 13, 1994, MetLife informed Strom that his application for the added coverage had been approved and would become effective on September 1, 1994. The determination of the effective date apparently was made by reference to the group life policy, which provided in substance that coverage would become effective on the first day of the month following the later of the first day of employment and the approval of the request for coverage.

On August 28, 1994, just four days before the effective date of the MetLife coverage under the Plan, Strom died suddenly of a massive pulmonary embolism. Plaintiff was paid the $150,000 in basic life insurance benefits. Defendants, however, paid only $500,000 with respect to the supplemental coverage purchased under the Plan. Although the record properly before us does not conclusively establish the reason for this distinction, it appears that the carrier took the position, well founded in the group life policy, that the guaranteed issue portion of the coverage became effective before Strom died, but that the remaining $500,000 of the death benefit did not become effective prior to his demise.2

Strom's widow commenced this action in September 1996 under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. § 1001 et seq., principally to recover the $500,000 in additional insurance benefits that she claims she is owed. The first claim simply stated that "[d]efendants have violated ERISA by refusing to pay plaintiff the full $1,000,000 supplemental life insurance benefit to which she is entitled under the terms of the . . . Plan." The second alleged that Goldman breached its fiduciary duty, that defendants were "estopped from asserting that Strom failed to enroll in the Supplemental Plan, and [that] equitable relief is appropriate to put plaintiff in the position she would have been in but for Goldman's breach."

The district court granted defendants' motion to dismiss the complaint pursuant to Rule 12(b)(6). It began by construing the first claim as asserting that plaintiff was entitled to the claimed benefit under Section 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B), on the theory that the benefit was due and payable under the terms of the Plan.3 The court, however, rejected the argument on the ground that the Plan explicitly made coverage effective on "the first day of the month after . . . the insurance company approves [the] application." It noted also, in the alternative, that any benefits that might be owed would be payable only by MetLife, not the defendants.

The district court began its analysis of the second claim by adverting to the fact that Section 502(a)(3)(B) of ERISA, 29 U.S.C. § 1132(a)(3)(B), insofar as it is relevant here, permits suit by a beneficiary only to obtain "other appropriate equitable relief." It then characterized this claim as seeking damages from Goldman for its alleged failure to act appropriately in having Strom's coverage become effective at the earliest date possible. Reasoning that the damages sought by plaintiff were legal in nature and could not be characterized as restitution, an equitable remedy, in the absence of a claim that Goldman was enriched unjustly, it concluded that ERISA does not permit recovery in these circumstances. It therefore dismissed the second claim as well. Plaintiff appeals.

II

The district court correctly dismissed the first claim. Section 502(a)(1)(B) of ERISA provides that "[a] civil action may be brought by a participant or beneficiary to recover benefits due to him under the terms of his plan . . . " 29 U.S.C. § 1132(a)(1)(B) (emphasis added). A claim under this section, in essence, is the assertion of a contractual right under a benefit plan. Tolle v. Carroll Touch, Inc., 977 F.2d 1129, 1133 (7th Cir. 1992). In consequence, to enforce the terms of the plan under Section 1132(a)(1)(B) "the participant must first qualify for the benefits provided in that plan." Id. at 1134. As Strom never qualified for the supplemental insurance coverage because he died before the first day of the month following the carrier's approval of his application, there is no benefit due under the Plan. See, e.g., Varity Corp. v. Howe, 516 U.S. 489, 515 (1996) (no remedy under Section 502(a)(1)(B) where plaintiffs no longer members of plan).

Plaintiff resists this conclusion, arguing that the defendants are precluded from relying upon the failure of Strom's coverage to have taken effect before his death on the ground that the failure was the product of Goldman's own actions. She invokes the familiar principle that a party may not rely upon the failure to satisfy a contractual condition where the party itself has caused the failure. But the argument is misguided here.

The doctrine upon which plaintiff relies holds that satisfaction of a condition is excused when a promissor wrongfully prevents its satisfaction. E.g., Cross & Cross Properties, Ltd. v. Everett Allied Co., 886 F.2d 497, 501 (2d Cir. 1989); Spanos v. Skouras Theatres Corp., 364 F.2d 161, 169 (2d Cir.) (in banc), cert. denied, 385 U.S. 987 (1966). Here, however, MetLife, the insurance carrier, not Goldman, was both the promissor on the insurance contract and the entity that invoked the failure to satisfy the condition in order to excuse performance. Hence, even if, as plaintiff alleges, Goldman wrongfully prevented satisfaction of the condition to the effectiveness of Strom's incremental coverage, it is not Goldman which seeks to benefit from its own actions, but a third party.

No doubt recognizing the difficulty with her position, plaintiff now seeks to impute Goldman's nonperformance to MetLife on a theory of agency. She argues that Goldman was MetLife's agent because the Plan designated Goldman to receive insurance applications and to submit them to MetLife. Appt's Reply Br. 4 n.3. But the argument is of no avail.

To begin with, this argument emerged for the first time in plaintiff's reply brief, affording defendant no opportunity to respond. We repeatedly have said that we will not consider contentions first advanced at such a late stage. E.g., Ernst Haas Studio, Inc. v. Palm Press, Inc., 164 F.3d 110, 112 (2d Cir. 1999); Playboy Enterprises, Inc. v. Dumas, 159 F.3d 1347 (2d Cir. 1998), aff'g 960 F. Supp. 710, 720-21 n.7 (S.D.N.Y. 1997); Keefe v. Shalala, 71 F.3d 1060, 1066 n.2 (2d Cir. 1995); Knipe v. Skinner, 999 F.2d 708, 711 (2d Cir. 1993), cert. denied, 513 U.S. 963, 115 S.Ct. 424 130...

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