980 F.2d 1261 (9th Cir. 1992), 91-55987, Cripps v. Life Ins. Co. of North America

Docket Nº:91-55987.
Citation:980 F.2d 1261
Party Name:Susan CRIPPS, et al., Defendant-cross-claimant-Appellant, v. LIFE INSURANCE COMPANY OF NORTH AMERICA, Plaintiff-cross-defendant-Appellee.
Case Date:December 01, 1992
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

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980 F.2d 1261 (9th Cir. 1992)

Susan CRIPPS, et al., Defendant-cross-claimant-Appellant,




No. 91-55987.

United States Court of Appeals, Ninth Circuit

December 1, 1992

Withdrawn from Submission June 16, 1992. Argued and Submitted June 4, 1992.

Withdrawn from Submission June 16, 1992.

Resubmitted July 30, 1992.

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Bruce Cornblum, San Diego, Cal., for defendant-cross-claimant-appellee Cynthia Cripps.

Appeal from the United States District Court for the Southern District of California.

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Before D.W. NELSON, BOOCHEVER, and THOMPSON, Circuit Judges.

D.W. NELSON, Circuit Judge:


Appellant Susan Cripps ("Susan") and appellee Cynthia Cripps ("Cynthia") both lay claim to the life insurance proceeds from the death of John Cripps ("John"), to whom both were married at different times. Appellee Life Insurance Company of North America ("LICNA") interpled Cynthia, Susan, and Susan's three children in a suit to determine who should receive those proceeds. Cynthia in turn cross-claimed against Susan, asserting her right to the proceeds. When Susan failed to answer, Cynthia obtained a default judgment against her. Susan now appeals that judgment, and raises a host of procedural arguments. We believe the district court lacked subject matter jurisdiction over the interpleader action. Accordingly, we reverse and remand to the district court with instructions to dismiss the interpleader claim. We find, however, that under ERISA the district court had subject matter jurisdiction over Cynthia's cross-claim and personal jurisdiction over Susan. We also find that the default judgment against Susan is legally insupportable. Accordingly, we vacate the default judgment and remand to the district court for a determination of whether Cynthia is entitled to any of the proceeds from the insurance policy in question.


Susan was born and raised in Nahant, Massachusetts. In 1966, she married John, and resided with him in California until their divorce in 1975. Among the couple's assets was a life insurance policy issued by John's employer as a part of its group health and welfare plan. As part of the terms of the property settlement in the divorce, the court required John to maintain his LICNA life insurance policy in the amount of $25,000, and to maintain Susan and their children as beneficiaries on the policy. After the divorce, Susan moved back to Massachusetts, where she has lived since 1975. She has not returned to, or had further contact with, California since that time.

In 1976, John married Cynthia. John continued to pay the premiums on his life insurance policy, and Susan remained the beneficiary of that policy. When John became disabled in 1978, the policy was maintained by his employer through disability insurance. John signed a holographic will in 1988 which purported to leave all the proceeds of any life insurance policies to Cynthia, but John never changed the beneficiary on the LICNA policy from Susan to Cynthia. John died in 1989.

In September 1990, LICNA filed this action in the federal district court for the Southern District of California, seeking to interplead Cynthia, Susan, and Susan's children. LICNA asserted that the claim arose under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., because the policy was issued pursuant to an ERISA health and welfare plan. LICNA also asserted jurisdiction under the federal interpleader statute, 28 U.S.C. § 1335, which allows the holder of a single item (in this case the insurance benefits) to which there are multiple, competing claims to bring all the claimants together in one court and let them resolve ownership of the item. LICNA deposited the insurance proceeds--now totalling $37,000--with the court. However, LICNA did not serve Susan or her children with process, and they received no actual notice of the suit.

On October 1, 1990, Cynthia filed an answer to LICNA's complaint and a cross-claim against Susan and LICNA, asserting that she was entitled to the life insurance proceeds by virtue of the holographic will. Susan was served with a copy of the cross-claim in Massachusetts on December 24, 1990. Acting pro se, 1 Susan prepared an

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answer, which she mailed to the district court for filing on January 12, 1991. However, because of her failure to comply with a number of local procedural rules, her answer was not filed. The district court did not return the answer to Susan, or otherwise notify her that it had not accepted her papers, and Susan did not discover until April that they had not been filed.

Having received no answer, Cynthia moved for a default judgment on her cross-claim on January 25, 1991. The clerk entered a default against Susan on January 30 on the cross-claim. Thereafter, LICNA and Cynthia--the parties remaining in the cross-claim--entered into an agreement to submit the claim to a magistrate. The magistrate heard the case on April 18, 1991, and determined that Cynthia was entitled to the proceeds of the life insurance policy. 2 That same day, Susan, having learned of the default informally, filed an Opposition to the Entry of the Default Judgment, along with supporting argument and affidavits.

The district court entered judgment--apparently on the interpleader action as well as the cross-claim--on April 29. Susan filed a Motion to Vacate the Default Judgment on the same day. However, because that motion would not be heard until after the time to file a notice of appeal had run, Susan also filed a notice of appeal on May 25. That notice divested the district court of jurisdiction to entertain the motion to vacate. Susan then requested that the district court indicate that it wished to entertain the motion, so that she could seek a limited remand from the Ninth Circuit for that purpose. See Scott v. Younger, 739 F.2d 1464, 1466 (9th Cir.1984). The district court, per Judge Judith Keep, denied that request on July 1, 1991. The appeal from the default judgment is before us today.


Questions of subject matter jurisdiction are questions of law reviewed de novo. Kruso v. International Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir.1989), cert. denied, 496 U.S. 937, 110 S.Ct. 3217, 110 L.Ed.2d 664 (1990). Defects in subject matter jurisdiction may be raised at any time, by the parties or by the court on its own motion, and may never be waived. Louisville & Nashville R.R. v. Mottley, 211 U.S. 149, 152, 29 S.Ct. 42, 43, 53 L.Ed. 126 (1908).


On appeal, Susan brings a number of procedural challenges to the judgment below. She contends that the district court lacked subject matter jurisdiction over the interpleader action, that it lacked personal jurisdiction over her, that the magistrate improperly exceeded his authority, and that Cynthia's cross-claim was legally insufficient to warrant the entry of judgment against her.

Subject Matter Jurisdiction

LICNA's complaint asserts two independent bases for federal jurisdiction: that the complaint presents a federal question arising under ERISA, 29 U.S.C. § 1001 et seq., and that the complaint interpleads diverse defendants and therefore falls within the federal interpleader statute, 28 U.S.C. § 1335.

a. Federal Question Jurisdiction

ERISA regulates the provision of health and welfare benefits by employers. Federal jurisdiction over ERISA-related questions is defined and limited by 29 U.S.C. § 1132(a). That section describes six different types of ERISA civil actions which may be brought in federal court. It

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also identifies who can bring which actions. No one except plan participants, beneficiaries, fiduciaries, and the Secretary of Labor is expressly authorized by § 1132(a) to bring claims in federal court.

LICNA is not a participant, beneficiary, or fiduciary within the meaning of ERISA. While that fact might seem determinative of its claim to federal question jurisdiction, one Ninth Circuit case suggests that groups not listed in § 1132(a) may still have standing to bring suit. In Fentron Indus. v. National Shopmen Pension Fund, 674 F.2d 1300, 1305 (9th Cir.1982), we held that § 1132's list of possible plaintiffs was not exclusive, relying on the legislative history of ERISA. Fentron concluded that employers as well as the parties enumerated in the statute could bring federal claims under ERISA. Under Fentron, it is possible that insurers could be empowered to bring ERISA actions as well.

The reasoning of Fentron has twice been repudiated by the Supreme Court. 3 See Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 146, 105 S.Ct. 3085, 3092, 87 L.Ed.2d 96 (1984) (the complex remedial scheme of ERISA "provide[s] strong evidence that Congress did not intend to authorize other remedies") (emphasis in original); Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 27, 103 S.Ct. 2841, 2855, 77 L.Ed.2d 420 (1983) (ERISA "does not provide anyone other than participants, beneficiaries, or fiduciaries with an express cause of action.... A suit for similar relief by some other party does not 'arise under' " § 1132). We need not decide whether Fentron remains good law after Massachusetts Mutual and Construction Laborers. In light of the relatively clear language from the Supreme Court limiting the scope of § 1132, we decline to extend the coverage of that section to provide a cause of action for insurance companies. There was therefore no federal question jurisdiction under ERISA over the interpleader action.

b. Interpleader Jurisdiction

In an interpleader action, the "stakeholder" of a sum of money sues all those who might have claim to the money, deposits the money with the district court, and lets the claimants litigate who is entitled to the money. See, e.g., Gaines v. Sunray Oil Co., 539 F.2d 1136, 1141...

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