Carlson v. Principal Financial Group

• Decision Date: 12 February 2003
• Docket Number: Docket No. 01-9466.
• Citation: 320 F.3d 301
• Parties: Mary W. CARLSON, Plaintiff-Appellant, v. PRINCIPAL FINANCIAL GROUP, Defendant-Cross-Claimant-Appellee, Eileen Carlson, Defendant-Cross-Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

320 F.3d 301

Mary W. CARLSON, Plaintiff-Appellant, v. PRINCIPAL FINANCIAL GROUP, Defendant-Cross-Claimant-Appellee, Eileen Carlson, Defendant-Cross-Defendant-Appellee.

Docket No. 01-9466.

United States Court of Appeals, Second Circuit.

Argued: October 16, 2002.

Decided: February 12, 2003.

Edgar Pauk, New York, NY, for Plaintiff-Appellant Mary W. Carlson.

Randi F. Knepper, Del Mauro, Digiaimo & Knepper, P.C., New York, NY, for Defendant-Cross-Claimant-Appellee Principal Financial Group.

Andrew Wilson, Simpson Thacher & Bartlett, New York, NY (Bruce D. Angiolillo, on the brief), for Defendant-Cross-Defendant-Appellee Eileen Carlson.

Before: LEVAL, CALABRESI, and B.D. PARKER, Circuit Judges.

B.D. PARKER, JR., Circuit Judge.

Mary Carlson appeals from a judgment of the United States District Court for the Eastern District of New York (Jacob Mishler, Judge), dismissing her complaint for lack of subject matter jurisdiction. See Fed.R.Civ.P. 12(b)(1). The complaint alleges that defendant Principal Financial Group ("Principal") breached ERISA § 502(a)(3) and (a)(9), 29 U.S.C. § 1132(a)(3) and (a)(9), by failing to pay Mary at least one-half of the survivor benefit of the annuity that the administrator of her late husband Donald Carlson's pension plan had purchased from Principal on Donald's behalf. The complaint also names as a defendant Eileen Carlson, Donald's first wife and, like Mary, a beneficiary of the survivor benefit of his annuity.

The District Court dismissed Mary's complaint for lack of subject matter jurisdiction. Because the complaint on its face seeks relief under ERISA, we hold that the District Court erred in dismissing it on jurisdictional grounds, and we vacate that dismissal. In addition, we offer guidance for the District Court's consideration on remand of Mary's ability to state a claim under ERISA. The District Court also declined to exercise supplemental jurisdiction over what it apparently deemed a state-law cross-claim that Principal had asserted against Eileen. Because the District Court possessed subject matter jurisdiction over the complaint, however, its dismissal of the cross-claim on jurisdictional grounds was also erroneous. Therefore, we vacate the District Court's dismissal of Principal's cross-claim.

BACKGROUND

In reviewing the dismissal of the complaint pursuant to Fed.R.Civ.P. 12(b)(1), we accept the allegations of the complaint as true and construe them in Mary's favor. Hirsch v. Arthur Andersen & Co., 72 F.3d 1085, 1088 (2d Cir.1995). Donald J. Carlson worked for the Savings Bank Trust Company from 1937 to 1983 and participated in its pension plan, which was administered by the Savings Bank Retirement System, whose name was later changed to the Retirement System for Savings Institutions. Upon his retirement in 1983, Donald elected to receive a 100% joint-and-survivor retirement benefit package, which would pay him a reduced benefit during his life ($2,795.02 per month instead of $4,320 per month) and, in the event that he was survived by both his first wife, Eileen, and his second wife, Mary, $1,397.51 per month for life to each of them. In the event that Donald were to be survived by only Mary or Eileen, the surviving beneficiary would receive the entire $2,795.02 per month for her lifetime.

On April 1, 1983, Donald began receiving his pension benefits of $2,795.02 per month, which he continued to receive each month until he died on September 30, 1995. In 1988, the Savings Bank Trust Company became the trustee of its own retirement plan and began to issue Donald's pension checks directly. In 1989, the Savings Bank Trust Company was renamed Nationar, and its pension plan was renamed the Nationar Retirement Plan (the "Plan" or the "Nationar Plan"). In 1993, Nationar filed for bankruptcy protection and, in 1995, it was taken over by the New York Superintendent of Banks.

In 1993 Nationar decided to terminate the Plan. In order to continue to fulfill the financial obligations of the Plan, it purchased annuities from Principal on behalf of all vested participants, and stopped operating the Plan. In an October 18, 1993 letter, Nationar informed Donald that "the obligation for providing your benefits under the Retirement Plan of Nationar, which has been terminated, has been transferred to the Principal Mutual Life Insurance Company ("Principal"). You will soon receive a copy of a certificate clearly reflecting Principal's obligation to provide your benefits." (Compl. ¶ 21.)

In transferring the obligation to pay Donald's pension and survivors' benefits to Principal, Nationar purchased an annuity for $339,848.17. In purchasing this annuity from Principal, however, Nationar made an error: instead of purchasing a 50% survivor annuity for Mary and a 50% survivor annuity for Eileen, which would have corresponded with Donald's benefits under the Plan, Nationar mistakenly purchased a 100% survivor annuity for Eileen and no annuity for Mary. In other words, Nationar erroneously calculated the annuity based on two lives — Donald's and Eileen's — instead of three — Donald's, Eileen's, and Mary's. Mary acknowledges that the mistake was Nationar's, not Principal's. At the time, neither Donald nor Mary was aware of Nationar's error.

After Nationar ceased operating the Plan and purchased the annuities, Donald began to receive his monthly pension benefits from Principal. Mary asserts, however, that Donald never received the promised certificate reflecting Principal's obligations to him and his beneficiaries. See 29 C.F.R. § 4041.28(d)(1) (requiring plan administrator or insurer to provide participants and beneficiaries with copy of annuity contract or certificate reflecting insurer's obligation to provide plan benefits). Mary alleges that she requested a copy of the certificate from Principal several times between January 1994 and January 1995, but never received it.

Shortly after Donald's death in September 1995, Mary and Eileen both filed claims with Principal to begin receiving their survivor benefits. In a November 24, 1995 letter, however, Principal informed Mary that the annuity that Nationar had purchased on Donald's behalf was based "on [Donald's] life and a female survivor with a date of birth of October 4, 1918," which is Eileen's birth date. (Compl. ¶ 32.) Mary learned for the first time that, years earlier, Nationar had mistakenly purchased from Principal an annuity based only on the lives of Donald and Eileen, instead of an annuity based on all three lives. As a result, Nationar, in purchasing the annuity, had provided Principal with assets sufficient only to pay Eileen $2,795.02 per month for life. Because Mary is younger than Eileen, and therefore has a longer life expectancy, the assets that Principal received from Nationar were insufficient to pay $1,397.51 per month each to Mary and Eileen for their lives.

Despite the apparent entitlement of both Mary and Eileen to receive $1,397.51 per month from Nationar, Principal was unwilling or unable to provide an income stream greater than the annuity that Nationar had purchased. Instead, Principal offered to divide the assets that it had received from Nationar evenly between Mary and Eileen. Eileen, based on her birth date (October 4, 1918), would receive $1,397.51 per month for life, while Mary, based on her date of birth (May 14, 1937), would receive $1,007.55 per month for life. Based on Mary's longer life expectancy, the benefit that Principal proposed to pay to Mary was the actuarial equivalent of the benefit that it proposed to pay to Eileen.

Unsatisfied with Principal's proposal, Mary told Principal not to make any payments to her until she instructed otherwise. In the meantime, Mary also sought relief from the New York State Superintendent of Banks, which had taken over Nationar following its bankruptcy. In a January 5, 1996 letter, the Administrator of Nationar's bankruptcy estate informed Mary that, because Nationar had purchased the annuity contract from Principal before the Superintendent of Banks took possession of Nationar's business and property, "the estate of Nationar is not able to purchase another annuity contract or otherwise provide you with additional benefits." In April 1996, Mary learned that August 10, 1995 had been established as a bar date for creditors to file claims against Nationar's bankruptcy estate. Mary obviously had not filed a claim prior to the bar date. Although Mary apparently attempted to file a claim against Nationar's estate sometime in 1996, she was not successful.

Mary initiated this action against Principal and Eileen by filing a complaint in the Eastern District of New York, asserting claims against Principal under § 502(a)(3) and (a)(9) of ERISA, but seeking no relief from Eileen. Principal answered the complaint and asserted a cross-claim against Eileen for unjust enrichment. Eileen moved to dismiss the complaint and the cross-claim for failure to state a claim, pursuant to Fed.R.Civ.P. 12(b)(6). Principal then cross-moved to dismiss the complaint for lack of subject matter jurisdiction, see Fed.R.Civ.P. 12(b)(1), and Mary cross-moved for summary judgment against Principal, see Fed.R.Civ.P. 56(a).

In an unpublished Memorandum of Decision and Order, the District Court granted Principal's motion to dismiss the complaint for lack of subject matter jurisdiction and declined to exercise jurisdiction over Principal's cross-claim. The District Court concluded that (1) Mary could not maintain an action against Principal under § 502(a)(3) because the annuity contract that Principal sold to Nationar was not an employee benefit plan within the meaning of ERISA § 3(3), 29 U.S.C. § 1002(3), and (2) Mary could not maintain an action against Principal under § 502(a)(9) because Principal was not a fiduciary with respect to the Nationar Plan. Having dismissed the complaint in its entirety, the District Court also dismissed Principal's cross-claim, which it apparently viewed as a...