Chelf v. Prudential Ins. Co. of Am.
| Decision Date | 12 April 2022 |
| Docket Number | 20-6097 |
| Citation | 31 F.4th 459 |
| Parties | Ruth Mae CHELF, Plaintiff-Appellant, v. PRUDENTIAL INSURANCE COMPANY OF AMERICA, Defendant, Administrative Committee for the Associates’ Health and Welfare Plan; Wal-Mart Associates, Inc., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Sixth Circuit |
ARGUED: Andrew M. Grabhorn, GRABHORN LAW | INSURED RIGHTS®, Louisville, Kentucky, for Appellant. J. Gordon Howard, RUSSELL, OLIVER & STEPHENS, PLC, Memphis, Tennessee, for Appellees. ON BRIEF: Andrew M. Grabhorn, Michael D. Grabhorn, GRABHORN LAW | INSURED RIGHTS®, Louisville, Kentucky, for Appellant. J. Gordon Howard, RUSSELL, OLIVER & STEPHENS, PLC, Memphis, Tennessee, for Appellees.
Before: MOORE, CLAY, and STRANCH, Circuit Judges.
Elmer Chelf, a former employee of Wal-Mart, was on long-term disability leave when he passed away. His widow, Ruth Mae Chelf, was denied benefits under his work-based optional term life insurance policy. She brought claims against Wal-Mart and the Plan Administrator (collectively, Wal-Mart) for breach of fiduciary duty pursuant to the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 – 1461 (ERISA).1 Her suit alleges that Wal-Mart breached its fiduciary duty to Mr. Chelf in several ways, including by assessing certain premiums in error; by failing to inform him that his premiums were assessed in error; by failing to remit premiums to Prudential to cover his optional life insurance policy resulting in that policy's termination; by failing to inform Mr. Chelf that his accrued paid time off (PTO) could cover his life insurance premiums; and by failing to notify him of his right to convert his term life insurance policy. Wal-Mart filed a motion to dismiss, which the district court granted, dismissing Ms. Chelf's fiduciary breach claims with prejudice. We AFFIRM in part, REVERSE in part, and REMAND for further proceedings consistent with this opinion.
As a full-time, hourly associate at Wal-Mart, Mr. Chelf purchased basic life insurance, as well as short-term and long-term disability insurance, and had the premiums deducted from his paycheck. He also purchased $25,000 in optional term life insurance through Prudential, and that premium was also deducted from his paycheck.
Mr. Chelf requested and obtained a leave of absence from Wal-Mart, and applied for short-term disability benefits, with a last work day of October 17, 2014. In the spring of 2015, Mr. Chelf was still on medical leave and, because his short-term benefits (STDB) had maxed out, he applied for long-term disability benefits (LTDB), which were approved. When he switched to LTDB, the long-term premiums were either paid directly by Mr. Chelf or deducted from other payments from Wal-Mart. Under the Plan documents, however, Mr. Chelf was not required to pay premiums for his short- or long-term disability benefits during the time he was receiving those benefits. Even so, Wal-Mart continued to charge him those premiums. While on disability leave, Mr. Chelf was eligible to continue his elected insurance benefits, such as the optional term life insurance that he had elected. He made life insurance premium payments during his leave. He had accrued 50.8 hours of PTO, and Ms. Chelf alleges that his accrued PTO was sufficient to cover any optional life insurance premiums he owed during his leave.
Mr. Chelf died from natural causes on April 17, 2016. Ms. Chelf filed a claim with Prudential for benefits due to her under his policies. Prudential approved the claim for basic life insurance benefits, but eventually denied her claim for the optional life insurance benefits that Mr. Chelf had elected. Ms. Chelf then submitted a claim with Wal-Mart and the Plan Administrator, which was denied, along with her voluntary appeal. Wal-Mart subsequently upheld the denial of Ms. Chelf's appeal.
Ms. Chelf contends that Wal-Mart incorrectly treated Mr. Chelf's life insurance coverage as terminated prior to his death and did not inform him that the policy had terminated. She claims that under the life insurance policy and Wal-Mart's Summary Plan Description (SPD), conversion to an individual life insurance policy should have been automatic because Mr. Chelf died within 30 days of his insurance coverage terminating.
Ms. Chelf then filed suit against Wal-Mart, alleging violations of ERISA. She brought a count of breach of fiduciary duty under 29 U.S.C. § 1132(a)(3), alleging that Wal-Mart:
(R. 1, Compl., ¶ 40) Ms. Chelf asserts that she and Mr. Chelf reasonably relied on Wal-Mart's material misrepresentations and omissions in the course of their decision-making about Mr. Chelf's benefits.
Wal-Mart filed a motion to dismiss. Wal-Mart attached numerous documents to its motion, including Plan documents (which the district court considered) and documents detailing Ms. Chelf's administrative appeal (which the district court did not consider). The district court granted Wal-Mart's motion and dismissed Ms. Chelf's breach of fiduciary duty claim with prejudice. In doing so, the district court determined that Ms. Chelf's allegations fell "outside the scope of ERISA's fiduciary requirements or administrative functions" under 29 C.F.R § 2509.75-8 (D-2).2 Chelf v. Prudential Ins. Co. , No. 17-cv-736, 2018 WL 4219424, at *6 (W.D. Ky. Sept. 5, 2018). Ms. Chelf timely appealed.
We review a dismissal under Federal Rule of Civil Procedure 12(b)(6) de novo. Vest v. Resolute FP US Inc. , 905 F.3d 985, 986–87 (6th Cir. 2018). In doing so, we take all the plaintiff's well-pleaded factual allegations as true and affirm the district court's dismissal only if the defendants are entitled to judgment as a matter of law. Wilmington Trust Co. v. AEP Generating Co. , 859 F.3d 365, 370 (6th Cir. 2017).
In addition to suing to recover benefits, a beneficiary of an ERISA-governed benefit plan may sue the plan "to obtain other appropriate equitable relief" to redress violations of ERISA or the terms of the plan. 29 U.S.C. § 1132(a)(3). Such violations can include breaches of fiduciary duty: a fiduciary under ERISA is required to "discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries." 29 U.S.C. § 1104(a)(1). A claim for breach of fiduciary duty under ERISA requires the plaintiff to prove: (1) the defendant is a plan fiduciary; (2) the defendant breached its fiduciary duty; and (3) the breach resulted in harm to the plaintiff. See James v. Pirelli Armstrong Tire Corp. , 305 F.3d 439, 449, 454 (6th Cir. 2002).
Taking each element separately, ERISA defines a fiduciary as:
[A] person is a fiduciary with respect to a plan to the extent ... 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 ... [or] he has any discretionary authority or discretionary responsibility in the administration of such plan.
29 U.S.C. § 1002(21)(A).
"Though ERISA fiduciary status is broadly triggered with any control over plan assets, the inquiry in each case is granular, ‘ask[ing] whether [an entity] is a fiduciary with respect to the particular act in question.’ " Pipefitters Local 636 Ins. Fund v. Blue Cross & Blue Shield of Mich. , 722 F.3d 861, 866 (6th Cir. 2013) (quoting Briscoe v. Fine , 444 F.3d 478, 486 (6th Cir. 2006) ). "[A]n entity that exercises any authority or control over [the] disposition of a plan's assets becomes a fiduciary." Guyan Int'l Inc. v. Prof'l Benefits Adm'rs, Inc. , 689 F.3d 793, 798 (6th Cir. 2012) (citing Briscoe , 444 F.3d at 490–91 ) (emphasis in original). Discretionary determinations "about whether a claimant is entitled to benefits under the terms of the plan documents" are exercises of fiduciary duty. Varity Corp. v. Howe , 516 U.S. 489, 511, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996).
Once an entity is deemed a fiduciary under ERISA, it must act "with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims." 29 U.S.C. § 1104(a)(1)(B). The fiduciary must also act "in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions" of ERISA. Id. § 1104(a)(1)(D). Fiduciary duties are defined functionally and "attach not just to particular persons, but to particular persons performing particular functions." Sprague v. Gen. Motors Corp. , 133 F.3d 388, 404 (6th Cir. 1998) (en banc) (quoting Hozier v. Midwest Fasteners, Inc. , 908 F.2d 1155, 1158 (3d Cir. 1990) ).
ERISA's fiduciary duties also give rise to an obligation to disclose information to beneficiaries in certain circumstances. See Haviland v. Metro. Life Ins. Co. , 730 F.3d 563, 572 (6th Cir. 2013). In general, a fiduciary does not have a duty to "disclose information that [it] is not required to ... disclose[ ]," because "[i]t would be strange indeed if ERISA's fiduciary standards could be...
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