Luitgaren v. Sun Life Assurance Co. of Canada

• Decision Date: 26 August 2014
• Docket Number: No. 13–2090.,13–2090.
• Parties: Thomas W. VANDER LUITGAREN, Plaintiff, Appellant, v. SUN LIFE ASSURANCE COMPANY OF CANADA, Defendant, Appellee, Sun Life Assurance Company of Canada (US) and Sun Life Financial, Inc., Defendants.
• Court: U.S. Court of Appeals — First Circuit

765 F.3d 59

Thomas W. VANDER LUITGAREN, Plaintiff, Appellant,

v.SUN LIFE ASSURANCE COMPANY OF CANADA, Defendant, Appellee,Sun Life Assurance Company of Canada (US) and Sun Life Financial, Inc., Defendants.

No. 13–2090.

United States Court of Appeals,First Circuit.

Aug. 26, 2014.

Stuart T. Rossman, with whom Arielle Cohen, The National Consumer Law Center, John C. Bell, Jr., Lee W. Brigham, Bell & Brigham, M. Scott Barrett, and BarrettWylie LLC were on brief, for appellant.

Byrne J. Decker, with whom Catherine R. Connors, Gavin G. McCarthy, and Pierce Atwood LLP were on brief, for appellee.

Before TORRUELLA and SELYA, Circuit Judges, and McAULIFFE,^* District Judge.

SELYA, Circuit Judge.

Our system of justice is precedent-based. Once we have decided a legal question and articulated our reasoning, there is usually no need for us to repastinate the same soil when another case presents essentially the same legal question.¹ So it is here.

In Merrimon v. Unum Life Insurance Co., 758 F.3d 46 (1st Cir.2014) [Nos. 13–2128, 13–2168, slip op.], we recently held that an insurer, acting in the place and stead of a plan administrator, properly discharges its duties under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001–1461, when it pays a death benefit by establishing a retained asset account (RAA) as long as that method of payment is called for by the terms of the particular employee welfare benefit plan. See id. at 57, 59. This case and Merrimon are fair congeners; and for the most part, this case can be decided on the basis of our opinion in Merrimon. We write separately only to cover points not squarely addressed in Merrimon.

To assure the reader that this case and Merrimon are cut from the same cloth, we briefly sketch the largely undisputed facts. Plaintiff-appellant Thomas Vander Luitgaren is the beneficiary of an employee welfare benefit plan (the Plan) sponsored by his late brother's employer. The employer funded the Plan by arranging with defendant-appellee Sun Life Assurance Company of Canada for group life insurance. The employer, as the Plan administrator, delegated authority to Sun Life to make claim determinations.

Following his brother's demise, the appellant submitted a claim for death benefits to Sun Life, which promptly approved the claim and paid the death benefit. Its method of payment lies at the heart of this case: through a contractor, Sun Life established an RAA at State Street Bank; credited the full amount of the death benefit ($151,000) to that account; and mailed the appellant a book of drafts that he could use to withdraw the credited funds.

The RAA funds earned interest for the appellant at a rate of two percent per annum—an interest rate set by Sun Life.² As long as the funds remained unliquidated, Sun Life kept them in its general account and invested them to its own behoof.

As in Merrimon, it is uncontroverted that the appellant had the right to withdraw all or any part of his RAA funds at any time or times; provided, however, that no withdrawal could be for less than $250. Sun Life retained the right to close the RAA if the balance dipped below $250. In that event, it was obligated to remit the balance to the appellant.

The appellant's RAA proved fleeting: within a matter of days, the appellant withdrew the full $151,000. Sun Life then closed the account and mailed the appellant a check for the interest earned: $74.48.

That was not the end of the matter. The appellant sued Sun Life in the United States District Court for the District of Massachusetts. This suit, filed on behalf of the appellant and a putative class of similarly situated beneficiaries, alleged that Sun Life's use of RAAs as a method for paying death benefits transgressed its ERISA-inspired fiduciary duties in two ways. First, this method was said to constitute self-dealing in plan assets in violation of ERISA section 406(b). See29 U.S.C. § 1106(b). Second, this method was said to contravene Sun Life's obligation under ERISA section 404(a) to act “solely in the interest of the participants and beneficiaries.” Id. § 1104(a)(1). These are essentially the same claims advanced, on strikingly similar facts, by the Merrimon plaintiffs. See Merrimon, 758 F.3d at 50–52.

In due course, the parties cross-moved for summary judgment. On November 19, 2012, the district court granted partial summary judgment in Sun Life's favor on the section 406(b) claim. See Vander Luitgaren v. Sun Life Assurance Co. (Vander Luitgaren I), 966 F.Supp.2d 59, 68–69 (D.Mass.2012). The court reasoned that the assets backing the appellant's RAA were not plan assets and, thus, Sun Life was not dealing with plan assets when it retained and invested the RAA funds. See id. But the court withheld summary judgment on the section 404(a) claim, suggesting that “[f]urther factual development [was] necessary.” Id. at 71.

While the litigation was continuing, the Third Circuit rejected a nearly identical claim. See Edmonson v. Lincoln Nat'l Life Ins. Co., 725 F.3d 406, 423–24 (3d Cir.2013), cert. denied, ––– U.S. ––––, 134 S.Ct. 2291, 189 L.Ed.2d 173 (2014). At that point, the district court wisely revisited the matter and granted summary judgment in favor of Sun Life on the section 404(a) claim. See Vander Luitgaren v. Sun Life Assurance Co. (Vander Luitgaren II), No. 09–11410, 2013 WL 4058916, at *5 (D.Mass. Aug. 9, 2013). The court's order disposed of the last remaining claim, setting the stage for this timely appeal. We have jurisdiction under 28 U.S.C. § 1291.

Most of the issues raised by the appellant duplicate issues that were decided in Merrimon, and it would serve no useful purpose to retrace our steps. We therefore affirm substantially on the basis of Merrimon, limiting our further discussion to two issues that were not decided in Merrimon.

Sun Life mounts a challenge to the appellant's statutory standing. No comparable challenge was seasonably raised in Merrimon. See 758 F.3d at 53 n. 3.

Constitutional standing differs from statutory standing. Constitutional standing goes to the power of the court: the question is whether the parties have presented the kind of case or controversy that the Constitution allows federal courts to hear. See Katz v. Pershing, LLC, 672 F.3d 64, 71, 75 (1st Cir.2012). In contrast, statutory standing “is simply statutory interpretation: the question it asks is whether Congress has accorded this injured plaintiff the right to sue the defendant [under the particular statute] to redress his injury.” Graden v. Conexant Sys. Inc., 496 F.3d 291, 295 (3d Cir.2007) (emphasis in original).

As framed by Sun Life, the statutory standing inquiry here turns on whether the appellant “falls within the class of plaintiffs whom Congress has authorized to sue under” ERISA. Lexmark Int'l, Inc. v. Static Control Components, Inc., ––– U.S. ––––, 134 S.Ct. 1377, 1387 & n. 4, 188 L.Ed.2d 392 (2014); see Radha A. Pathak, Statutory Standing and the Tyranny of Labels, 62 Okla. L.Rev. 89, 94 (2009). The appellant purposes to sue under ERISA section 502(a)(3), which authorizes a “beneficiary” to sue to obtain “appropriate equitable relief” for certain ERISA violations. 29 U.S.C. § 1132(a)(3). Inasmuch as ERISA defines a beneficiary as “a person designated by a participant ... who is or may become entitled to a benefit” under a benefit plan, id. § 1002(8), the appellant would, at first blush, appear to satisfy this definition.

But appearances can be deceiving, cf. Aesop, The Wolf in Sheep's Clothing (circa 550 B.C.), and Sun Life argues cleverly that because the appellant received the full amount of the death benefit when that sum was credited to the RAA, he is no longer entitled to a benefit under the Plan. On this basis, Sun Life suggests that the appellant lacks standing to sue under the statute.

This suggestion need not detain us. Unlike constitutional standing, statutory standing is part and parcel of the merits of a particular claim. See Katz, 672 F.3d at 75. It follows that, in certain circumstances, we may bypass a statutory standing inquiry and resolve the dispute on the merits.³See United States v. Moloney (In re Price), 685 F.3d 1, 13 n. 15 (1st Cir.2012), cert. denied, – –– U.S. ––––, 133 S.Ct. 1796, 185 L.Ed.2d 856 (2013); Nisselson v. Lernout, 469 F.3d 143, 151 (1st Cir.2006). This is such a case. Accordingly, we take no view of whether the appellant has statutory standing at the threshold but, rather, dive directly into the merits. See Faber v. Metro. Life Ins. Co., 648 F.3d 98, 103 (2d Cir.2011) (adopting this approach in a substantially similar case).

Merrimon, without more, resolves the appellant's section 406(b) claim. We held there that “the funds backing the plaintiffs' RAAs were not, and never became, plan assets,” so that “there was no showing of self-dealing [in plan assets] sufficient to ground a section 406(b) claim.” Merrimon, 758 F.3d at 57. We premised this holding on the principle that the assets of a policy-issuing insurer are not plan assets, see29 U.S.C. § 1101(b)(2), and are not transformed into plan assets by the establishment of an RAA. See Merrimon, 758 F.3d at 56, 56 (explaining that determining whether an item is a plan asset will often turn on “ordinary notions of property rights”). These conclusions apply unreservedly in the instant case.⁴

This leaves the appellant's section 404(a) claim. Section 404(a) directs generally 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). The appellant contends that when Sun Life paid him by establishing an RAA, its decision was not made solely for his benefit.

In Merrimon, we rejected a virtually identical contention. See 758 F.3d at 58, 59. We held that a life insurer's payment of death benefits by means of an RAA does not violate its ERISA-inspired fiduciary duties when the Plan promises payment in that manner. See id. at 58–59.

But this case...