Forys v. United Food and Commercial Worker's Intern. Union, AFL-CIO, and CLC

• Citation: 829 F.2d 603
• Decision Date: 13 October 1987
• Docket Number: No. 86-2392,AND,AFL-CI,86-2392
• Parties: , 8 Employee Benefits Ca 2369 Leonard FORYS and Janet Forys, Plaintiffs-Appellants, v. UNITED FOOD AND COMMERCIAL WORKER'S INTERNATIONAL UNION,CLC, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 603

829 F.2d 603

56 USLW 2157, 8 Employee Benefits Ca 2369

Leonard FORYS and Janet Forys, Plaintiffs-Appellants, v. UNITED FOOD AND COMMERCIAL WORKER'S INTERNATIONAL UNION AFL-CIO, AND CLC, Defendant-Appellee.

No. 86-2392.

United States Court of Appeals Seventh Circuit.

Argued Jan. 20, 1987.

Decided Sept. 4, 1987.

Rehearing and Rehearing En Banc Denied Oct. 13, 1987.

Charles Courtney, John J. Kurowski, P.C., Belleville, Ill., for plaintiffs-appellants.

Wesley Kennedy, Cotton, Watts, Jones & King, Chicago, Ill., for defendant-appellee.

Before FLAUM and RIPPLE, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

RIPPLE, Circuit Judge.

This case presents the question of whether United Food and Commercial Worker's International Union, AFL-CIO and CLC (Union) is a fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA), Sec. 3(21), 29 U.S.C. Sec. 1002(21). The appellants, Leonard Forys and Janet Forys, alleged in their amended complaint that the Union violated its discretionary responsibilities in representing the appellants' interests in recovering benefits from their employer's, Swift Independent Packing Company (Swift), health plan. The district court granted the Union's motion to dismiss. It held that the Union was not a fiduciary under ERISA. For the reasons set forth below, we affirm the judgment of the district court.

I Facts

Because we are reviewing a motion to dismiss, we must accept as true the well-pleaded facts in the complaint. The appellants, at the time this cause of action arose, were employees of Swift and beneficiaries of Swift's health insurance plan. The plan is an "employee welfare benefit plan" within the meaning of ERISA Sec. 3(1), 29 U.S.C. Sec. 1002(1). The appellants, husband and wife, were the parents of Lynn Ann Forys. Lynn Ann Forys was hospitalized in an intensive care unit from September 6, 1982 until June 14, 1983, and from August 27, 1983 until her death on January 26, 1984. As a result of this hospitalization, the appellants incurred medical bills totaling $591,083.26. The health care plan provided that it would pay the full rate for time in the intensive care unit without any maximum limitation. The plan provided benefits to the appellants in the amount of $551,211.24, but denied reimbursement for the remaining $39,872.02 of the medical expenses.

The appellants originally filed this action to collect the unpaid benefits. The appellants further sought relief in the form of attorneys' fees, damages for emotional distress, and punitive damages. Amended Complaint and Jury Demand; R.16. The appellants later effected a settlement with the other parties who were originally named as defendants in this action. ¹ The settlement agreement essentially provided that the medical creditors, St. Louis Children's Hospital and Washington University School of Medicine, would release from liability the appellants and all of the defendants (except for the Union) for the medical treatment of Lynn Ann Forys. As part of the settlement agreement, the defendants also paid $4,000 toward the appellants' attorneys' fees. Settlement Agreement, R.42, Ex. B; R.60. ²

Section 11 of Swift's health insurance plan provides that paragraph 42 of the collective bargaining agreement between Swift and the Union governs the handling of claims for benefits under the health insurance plan. Paragraph 42 of the collective bargaining agreement provides, in pertinent part:

The Company will designate a representative or representatives at each plant who will be available for consultation with beneficiaries or a Local Union representative or representatives with respect to the disposition of claims.

In the event the beneficiary or the Local Union representative is not satisfied with the outcome of this consultation, the Local Union representative may refer the matter to the International Union for discussion with the Director of the Industrial Relations Department of the Company or his or her designated representative.

In the event no decision is reached in the above step, the International Union may submit the matter to the Arbitrator, whose decision shall be final and binding on all parties above. In making said decision, the Arbitrator shall be governed by the provisions of this contract and restricted to its application to the facts presented to him involved in the matter.

R.16, Ex. A at 1-2 (emphasis supplied).

The Union in this case followed the procedures mandated by the collective bargaining agreement by conferring with Swift's Director of Industrial Relations. However, the Union chose not to refer the case to an arbitrator. Consequently, the denial of benefits became final under the plan. The appellants argue that the Union's liability stems from its failure to seek arbitration of their claim.

II The District Court Opinion

The district court held that the Union was not a fiduciary under ERISA. The district court reasoned that the Union was not a fiduciary because it did not exercise sufficient discretionary responsibility in the administration of the plan to be considered a fiduciary under ERISA, Sec. 3(21)(A)(iii), 29 U.S.C. Sec. 1002(21)(A)(iii). The district court noted that "[t]he only discretion granted the Union concerns its representation of the plaintiffs after the Company denies a claim. The Union cannot grant the benefits sought nor can it deny them. Its discretion lies only in its ability to forego arbitration." Forys v. Swift Indep. Packing Co., 634 F.Supp. 963, 965 (S.D.Ill.1986). The district court further reasoned that:

Because foregoing arbitration could never be in the best interests of the claimant, the Union would always face a breach of fiduciary duty suit when it exercised the very discretion that the plaintiffs maintain mandates a finding of a fiduciary status. Congress could not have intended such a result even under the broad language of ERISA.

Id. Accordingly, the district court granted the Union's motion to dismiss.

III Analysis

A. The Contentions of the Parties

The appellants contend that under section 3(21)(A)(iii) of ERISA, 29 U.S.C. Sec. 1002(21)(A)(iii), the Union is a fiduciary. ERISA defines a fiduciary as follows:

Except as otherwise provided in subparagraph (B), 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, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan....

29 U.S.C. Sec. 1002(21)(A) (emphasis supplied). The appellants argue that the Union possesses discretionary authority because only the Union can decide whether to submit the beneficiaries' claim to the arbitrator.

The appellee contends that by the plain terms of the ERISA statute, the fiduciary status under ERISA refers only to a party's relationship and obligations to an employee benefit plan, not to a particular beneficiary under such a plan. The appellee maintains that "[f]or the union to be a 'fiduciary' with respect to plaintiffs' claim for benefits, the Union would have to possess the discretionary authority to grant or deny those benefits." Appellee's Br. at 12 (emphasis in original). The appellee further claims that the collective bargaining agreement provides a remedy for unlawful denial of a beneficiary's claim because, after exhausting the plan's claims processing procedure, the beneficiary is entitled to bring suit against Swift to enforce the terms of the plan.

B. The Standard of Review

The district court decided this case on the Union's motion to dismiss for failure to state a claim. In reviewing the district court's dismissal, the factual allegations in the plaintiffs' complaint must be accepted as true. International Caucus of Labor Comm. v. City of Chicago, 816 F.2d 337, 340 (7th Cir.1987). "[D]ismissal is therefore only proper where 'it appears beyond doubt that [the plaintiffs] can prove no set of facts in support of [their] claims which would entitle [them] to relief.' " Pryzina v. Ley, 813 F.2d 821, 822 (7th Cir.1987) (per curiam) (quoting Fromm v. Rosewell, 771 F.2d 1089, 1091 (7th Cir.1985), cert. denied, 475 U.S. 1012, 106 S.Ct. 1188, 89 L.Ed.2d 304 (1986)). Accordingly, we review the district court's holding de novo.

C. The Meaning of "Fiduciary" Under ERISA

The statutory language defining "fiduciary" under ERISA does not yield a precise answer to the issue before us. We are required, therefore, to interpret that language in order to effectuate the congressional purpose in enacting ERISA.

Our first step must be to narrow the focus of our inquiry. This court has stated that "[a] person is a fiduciary for purposes of ERISA to the extent that he or she exercises discretion over the management of plan assets, renders investment advice for a fee or exercises discretionary control over the administration of a plan." Thornton v. Evans, 692 F.2d 1064, 1077 (7th Cir.1982); see also Credit Managers Ass'n v. Kennesaw Life & Accident Ins. Co., 809 F.2d 617, 625 (9th Cir.1987). There is no allegation in this case that the Union is a "named fiduciary" under 29 U.S.C. Sec. 1102(a)(2). ³ The regulations providing questions and answers relating to fiduciary responsibilities under ERISA state that "[a] fiduciary with respect to the plan who is not a named fiduciary is a fiduciary only to the extent that he or she performs one or more of the functions described in section 3(21)(A) of the Act." 29 C.F.R. Sec. 2509.75-8, at 571 (1986). In this case, the Union exercised no discretion over the management of the plan's assets nor did it offer investment advice. Its status as a fiduciary under ERISA, therefore, could...