Buckley Dement, Inc. v. Travelers Plan Administrators of Illinois, Inc., 93-4030

• Decision Date: 08 November 1994
• Docket Number: No. 93-4030,93-4030
• Citation: 39 F.3d 784
• Parties: , 18 Employee Benefits Cas. 2328, Pens. Plan Guide P 23903O BUCKLEY DEMENT, INCORPORATED, as Sponsor and Administrator of the Buckley Dement, Incorporated Employee Health Plan, Plaintiff-Appellant, v. TRAVELERS PLAN ADMINISTRATORS OF ILLINOIS, INCORPORATED, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 784

39 F.3d 784

63 USLW 2368, 18 Employee Benefits Cas. 2328,

Pens. Plan Guide P 23903O

BUCKLEY DEMENT, INCORPORATED, as Sponsor and Administrator of the Buckley Dement, Incorporated Employee Health Plan, Plaintiff-Appellant, v. TRAVELERS PLAN ADMINISTRATORS OF ILLINOIS, INCORPORATED Defendant-Appellee.

No. 93-4030.

United States Court of Appeals Seventh Circuit.

Argued May 10, 1994.

Decided Nov. 8, 1994.

John P. Morrison (argued), Jeffrey A. Blevins, Bell, Boyd & Lloyd, Chicago, IL, for plaintiff-appellant.

Thomas H. Fegan, William G. Beatty (argued), Thomas J. Lyman, III, Marilyn McCabe Reidy, Johnson & Bell, Chicago, IL, for defendant-appellee.

Before COFFEY, MESKILL ^* and RIPPLE, Circuit Judges.

RIPPLE, Circuit Judge.

Buckley Dement, Inc. ("Buckley Dement") brought a complaint against the Travelers Plan Administrators of Illinois, Inc. ("TPA"), the third-party claims administrator of its employee health care plan. The complaint asserted that TPA failed to process certain claims before the lapse of Buckley Dement's excess loss insurance policy. The complaint alleged violations of the Employee Retirement Income Security Act of 1974 ("ERISA") and common-law claims for breach of contract, negligence, and breach of common-law fiduciary duty. The district court granted summary judgment to TPA on the ERISA count and declined to exercise supplemental jurisdiction over the remaining counts. For the reasons that follow, we affirm the judgment of the district court.

I

A. Background

Buckley Dement is the sponsor, administrator and fiduciary of an ERISA-based group health program for its employees entitled the Buckley Dement, Inc. Employee Health Benefit Plan (the "Plan"). The Plan was self-funded by Buckley Dement. However, Buckley Dement also carried, during the period in question, an excess health insurance coverage policy issued by North American Insurance Company ("North American") to protect itself from catastrophic losses. The North American insurance plan was a "12/12" policy: North American would pay for claims if the predetermined exposure limit ($10,000 per covered participant per year) had been reached and the claim had been incurred and paid within the 12-month policy period, between November 1, 1990 and October 31, 1991. Buckley Dement also contracted with TPA to perform certain administrative duties with respect to its employees' claims under the Plan. The specific duties of TPA were set forth in a contract between Buckley Dement and TPA.

Thomas Fossati, a Buckley Dement employee who was a covered participant under the Plan, incurred large medical expenses due to the premature birth of twins to his family on May 29, 1991. One of the twins died shortly after birth, and the surviving twin's condition necessitated extensive medical care. Under the excess loss policy, North American would reimburse Buckley Dement for the Fossati claims that exceeded the $10,000 deductible limit as long as those claims were incurred and paid by Buckley Dement under the Plan prior to November 1, 1991. TPA's president and its customer service representative assured Buckley Dement that the Fossati baby's medical bills would be processed promptly so that they would be covered under the excess loss policy.

The majority of the medical claims related to the care of the Fossati infant were received and processed by TPA prior to October 31, 1991 and were therefore eligible for payment by North American. However, on October 28, 1991, TPA received two additional claims for the baby's care totaling $49,325.00. These claims were not processed prior to October 31, 1991, and were therefore ineligible for payment by North American. Buckley Dement paid the claims. Thereafter, it filed this action against TPA to recover those sums. It alleged that TPA's delay in filing the bills was a failure to administer the claims properly under the agreement, a failure which led to North American's denial of coverage.

B. Complaint

Buckley Dement brought a four-count complaint against TPA. The complaint generally alleged that TPA failed to submit the appropriate claims to North American before the expiration of its policy "[b]ecause of its careless, reckless, irresponsible, and/or willful and wanton conduct." Complaint at p 12. Under Count I Buckley Dement set forth its ERISA claim pursuant to Secs. 502(a)(2) and (a)(3) of ERISA, 29 U.S.C. Secs. 1132(a)(2) and (a)(3). ¹ It alleged that TPA was a fiduciary whose failure to process the Fossati claim in timely fashion constituted a violation of the Plan and of TPA's fiduciary and contractual duties. In this count, Buckley Dement requested "monetary relief in the amount of no less than $50,000 on account of Defendant's wrongful conduct and unjust enrichment," attorneys' fees and costs and other relief "as justice may require." Complaint at p 22.

Counts II through IV were common-law claims for breach of contract, negligence and breach of common-law fiduciary duty that, according to Buckley Dement, were brought under either state law or the federal common law of ERISA. Count II charged that TPA breached the Claims Administration Agreement by failing to process promptly, with care and diligence, the Fossati infant's claims. Buckley Dement requested the same monetary relief, fees, costs, and other relief under that count. Count III alleged that TPA breached the duty of care it owed Buckley Dement by failing to process the Fossati claims and by making false representations justifiably relied on by the plaintiff. Buckley Dement sought the same relief in that count, but added "punitive damages in an amount which is just." Finally, Count IV raised TPA's breaches of the fiduciary duties of care, prudence, good faith, fidelity, and diligence in the processing and handling of Plan claims. At the end of Count IV, closing the complaint, was a final ad damnum clause seeking the following relief:

(a) monetary relief in the amount of no less than $50,000;

(b) punitive damages in an amount which is just;

(c) an order requiring Defendant to disgorge all benefits and moneys received by Defendants from Plaintiff and North American during the term of the Claims Administration Agreement;

(d) an award of attorneys fees and costs in bringing this action; and

(e) such other, further or different relief as justice may require.

R. 1 at 8.

TPA responded to the complaint by denying liability under ERISA on the ground that it was not a fiduciary of the ERISA Plan. It moved to dismiss Counts II through IV, but later withdrew that motion and moved for summary judgment of the entire complaint.

C. Holding of the District Court

On November 2, 1993, the district court granted summary judgment to TPA on Count I, the ERISA claim. The court first determined that no claim was stated under Sec. 1132(a)(2) because TPA was simply a claims administrator, a nonfiduciary without discretionary control or duties under its agreement with Buckley Dement. (R. 41 at 7-8.) It further held that Buckley Dement had not asserted a viable claim under Sec. 1132(a)(3) because its complaint did not seek equitable relief, the only relief allowed under that section of ERISA. (R. 41 at 8-9.) ² The court noted that the allegations in the complaint focused on TPA's negligence, breach of duty and breach of contract. It then determined that this sort of claim is not a claim for equitable relief under ERISA. Rather, concluded the court, Buckley Dement's claims fell "with common state law causes of action in contract and negligence as opposed to the requirements of ERISA." (R. 41 at 9.) It therefore dismissed the ERISA count and declined to exercise its supplemental jurisdiction over the state law claims. (R. 41 at 10.)

II ANALYSIS

A. Count I: The ERISA Sec. 502(a) Claim

We conduct a de novo review of the district court's grant of summary judgment on the ERISA count. Tolle v. Carroll Touch, Inc., 23 F.3d 174, 178 (7th Cir.1994); Trustees of the Central States, Southeast & Southwest Areas Health & Welfare Fund v. State Farm Mut. Auto. Ins. Co., 17 F.3d 1081, 1083 (7th Cir.1994). We shall uphold a summary judgment determination entered "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial," Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986), after drawing all reasonable inferences in favor of the party opposing the summary judgment motion. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).

In its complaint, Buckley Dement based its ERISA claim on two sections of the statute's civil enforcement provisions, Secs. 502(a)(2) and (a)(3), codified at 29 U.S.C. Secs. 1132(a)(2) and (a)(3). As we have noted previously, the district court concluded that neither of these subsections provided a right of recovery to Buckley Dement. In this appeal, Buckley Dement does not challenge the district court's ruling that TPA is not a Sec. 502(a)(2) fiduciary. ³ Instead, Buckley Dement focuses on subsection (a)(3), the equitable remedies provision that allows a plan fiduciary such as Buckley Dement to obtain an injunction or "other appropriate equitable relief" for an act or practice that violates ERISA or the terms of the Plan. We therefore shall decide the case on the "battlefield the parties have chosen." Mertens v. Hewitt Assocs., --- U.S. ----, ----, 113 S.Ct. 2063, 2068, 124 L.Ed.2d 161 (1993).

We cannot agree with Buckley Dement that the district court erred in holding that the claim under (a)(3) fails because the remedy Buckley Dement sought was not equitable. Buckley Dement does not deny that it seeks monetary reimbursement for the claims that Buckley Dement was required to pay; it submits, however, that these money damages are the functional equivalent of disgorged benefits obtained by TPA and would make Buckley Dement...