Berger v. Axa Network LLC, 05-2495.

• Decision Date: 18 August 2006
• Docket Number: No. 05-2495.,05-2495.
• Parties: Terrance BERGER and Donald Laxton, Plaintiffs-Appellants, v. AXA NETWORK LLC and Equitable Life Assurance Society of the United States, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 804

459 F.3d 804

Terrance BERGER and Donald Laxton, Plaintiffs-Appellants, v. AXA NETWORK LLC and Equitable Life Assurance Society of the United States, Defendants-Appellees.

No. 05-2495.

United States Court of Appeals, Seventh Circuit.

Argued February 14, 2006.

Decided August 18, 2006.

Joshua N. Rose (argued), Rose & Rose, Washington, DC, for Plaintiffs-Appellants.

Nancy G. Ross (argued), McDermott, Will & Emery, Chicago, IL, for Defendants-Appellees.

Before BAUER, RIPPLE and WILLIAMS, Circuit Judges.

RIPPLE, Circuit Judge.

Section 510 of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1140, prevents employers from altering their workers' employment status for the purpose of interfering with rights under an ERISA-qualified benefit plan. The named plaintiffs in this class action, two insurance salesmen, have invoked § 510 against their employers, AXA Network LLC and the Equitable Life Assurance Society of the United States (collectively, "AXA"). They allege that AXA intentionally deprived them of benefits by changing the way that insurance salesmen are defined as full-time employees of the company. The district court awarded summary judgment to AXA on the ground that the limitation period applicable to the plaintiffs' claim had expired; it ruled alternatively that the plaintiffs' assertions failed as a matter of law. We agree with the district court that the plaintiffs' claim is time-barred. Accordingly, we affirm the judgment of the district court on that ground and find it unnecessary to reach the merits.

I BACKGROUND

A. Facts

In this de novo review of the district court's grant of summary judgment to AXA, we must construe the facts in a manner that resolves all reasonable inferences in the non-movant's favor. See Scaife v. Cook County, 446 F.3d 735, 738-39 (7th Cir.2006). Indeed, there is little dispute concerning the basic facts. The defendants in this action, AXA Network LLC and the Equitable Life Assurance Society of the United States — to whom we refer collectively as "AXA" — are insurance brokerage subsidiaries of the France-based AXA Financial, Inc. Both subsidiaries are headquartered in New York City and provide the same pension and welfare benefits to their employees, agents and managers through a number of ERISA-qualified plans. AXA maintains a network of agency offices throughout the United States. Each satellite office employs a staff of insurance salesmen who work locally, selling policies to customers in their region. The lead plaintiffs in this action, Terrance Berger and Donald Laxton, are Illinois residents who signed on as insurance salesmen with a local AXA office near Chicago in the early 1980s. After having worked for the company for three years, each entered into an agreement with AXA known as the "14th Edition" contract that permitted them to sell AXA policies as independent contractors.

AXA insurance salesmen, despite being independent contractors, were able to participate in the company's ERISA-qualified plans. To become eligible, they had to be considered an "employee" under the Internal Revenue Code, which includes "full-time life insurance salesman" within the definition of "employee." 26 U.S.C. § 3121(d)(3)(B). An IRS regulation, in turn, defines a "full-time insurance salesman" as an individual "whose entire or principal activity is devoted to the solicitation of life insurance or annuity contracts, or both, primarily for one life insurance company." 26 C.F.R. § 31.3121(d)-1(d)(3)(ii). This definition is a default; the employer and employee may choose to redefine "full-time" status via contract, so long as they act reasonably. See Brian E. Gates, Internal Revenue Manual § 4.23.5-3 (2005).

At the time that the plaintiffs entered into their 14th Edition contracts with AXA, the company employed essentially an "honor system" to qualify salesmen as full-time agents. Under this system, salesmen were asked, upon contracting with AXA, to complete a FICA form indicating whether they intended to devote their principal business activity to the solicitation of life insurance or annuity policies for AXA. Assuming they answered affirmatively, AXA then applied a presumption that agents who had submitted an appropriate FICA form were statutory employees. When Mr. Berger and Mr. Laxton entered into 14th Edition contracts with AXA, both indicated on their FICA forms that they intended to devote their principal business activity to selling AXA policies. AXA then relied on these representations to qualify them as full-time agents and to allow them to participate in AXA's ERISA-qualified plans.

In the mid-1990s, senior management at AXA began recommending that the company do away with the "honor system" and no longer accept a salesman's representation that he was committed to selling AXA policies full-time. Instead, management proposed a new policy that tied statutory employee status to an objective measure of annual insurance sales. The idea was that this objective formula more accurately measured the agents' intent to devote their principal business activity to selling AXA policies. The proposal was adopted, and AXA announced that, starting January 1, 1999, agents under 14th Edition contracts who failed to meet a specified sales goal during the preceding year no longer would be considered statutory employees. The plaintiffs were alerted to this policy change by letters from AXA headquarters, dated February 6, 1998. In 1999, Mr. Berger failed to meet the new annual sales threshold and lost his status as a statutory employee. Mr. Laxton met the same fate the following year. As a result, they were no longer eligible to participate in AXA's benefit plans. From 1999 to 2004, several thousand other AXA agents lost full-time status and plan eligibility as a result of the change in policy.

B. District Court Proceedings

On January 7, 2003, Mr. Berger and Mr. Laxton filed a three-count complaint alleging that AXA's 1999 change in the way it classified agents violated § 510 of ERISA, see 29 U.S.C. § 1140.¹ In 2004, the district court granted the plaintiffs' motion for certification of a class consisting of the thousands of other insurance agents who had been reclassified by AXA and denied eligibility for benefits.

AXA then moved for summary judgment, asking the court to dismiss the class action on the ground that the plaintiffs' claims were time-barred or, alternatively, on the ground that they failed as a matter of law. The district court granted the motion. Because § 510 lacks a statute of limitations, the court borrowed a limitations period from the law of New York, the state that, in its view, had the most significant relationship to the dispute. The court determined that the most analogous claim for relief under New York law is a claim for retaliatory discharge under the state's workers' compensation law; New York law bars such claims after two years, see N.Y. Work. Comp. Law § 120. The court then rejected the plaintiffs' theory that each yearly denial of full-time status started the limitations clock anew. The court held that the plaintiffs' claims accrued in 1998, when they first learned of AXA's decision to change the way it classified insurance salesmen, or, at the latest, when the policy became effective in January 1999. In either case, the plaintiffs' failure to institute this action until January 7, 2003, barred their claim under the applicable two-year statute of limitations.

The district court held, alternatively, that the plaintiffs' grievance under § 510 failed as a matter of law. That section, which is designed to protect the employment relationship from being changed in ways intended to deny benefits, did not, according to the court, apply to the present dispute. In the court's view, the employment relationship between AXA and its salesmen had not been altered by the 1999 change in policy. What had changed was that, instead of taking an agent's word that he was committed to selling AXA policies full-time, AXA had chosen to employ a concrete sales calculus in order to make the full-time determination objective. This change, the district court concluded, did not offend § 510.

II DISCUSSION

We first address whether the district court correctly determined the appropriate limitations period for an action under § 510 of ERISA, see 29 U.S.C. § 1140. In examining this problem, we must confront several difficult methodological issues that have "spawned a vast amount of litigation" and "uncertainty for both plaintiffs and defendants." Jones v. R.R. Donnelley & Sons Co., 541 U.S. 369, 377, 379, 124 S.Ct. 1836, 158 L.Ed.2d 645 (2004).

A.

In enacting ERISA, Congress supplied an express limitations period for several parts of the statute;² it did not, however, provide one for actions grounded in § 510.³ Section 510 also was enacted too early to permit us to apply the default four-year federal limitations period contained in 28 U.S.C. § 1658(a). That statute functions as a catch-all limitations period for federal causes of action that do not have their own limitations periods.⁴ The catch-all, however, applies only to those causes of action created after 1990. Although the Supreme Court has held that, under certain circumstances, a new amendment to an older federal statute can trigger § 1658(a), see Jones, 541 U.S. at 382, 124 S.Ct. 1836, § 510 of ERISA has not been amended since its original enactment in 1974.

Because Congress has failed to provide any statutory direction, our inquiry must be guided by principles of federal common law. The basic approach is well-settled. When Congress fails to provide a statute of limitations for a federal claim and § 1658(a) is not applicable, federal courts must borrow the most analogous statute of limitations from state law. See Reed v. United Transp. Union, 488 U.S. 319, 323, 109 S.Ct. 621, 102 L.Ed.2d 665 (1989); Teumer v. Gen. Motors Corp., 34 F.3d 542, 546-47 (7th Cir.1994). The Supreme Court has recognized a...