Ed Miniat, Inc. v. Globe Life Ins. Group, Inc.

Decision Date16 January 1987
Docket NumberNo. 85-2846,85-2846
Parties, 6 Fed.R.Serv.3d 497, 7 Employee Benefits Ca 2414 ED MINIAT, INC., South Chicago Packing Company, Ronald M. Miniat and Edmund M. Miniat, Jr., Plaintiffs-Appellants, v. GLOBE LIFE INSURANCE GROUP, INC. and Combined International Corporation, Defendants-Appellees.
CourtU.S. Court of Appeals — Seventh Circuit

Alexander D. Kerr, Jr., Keck, Mahin & Cate, Oak Brook, Ill., for plaintiffs-appellants.

Gary L. Starkman, Arvey, Hodes, Costello & Burman, Chicago, Ill., for defendants-appellees.

Before BAUER, Chief Judge, CUDAHY and RIPPLE, Circuit Judges.

CUDAHY, Circuit Judge.

The plaintiffs were participating employers in a Retirement Life Reserve ("RLR") insurance policy issued by the defendants. The plaintiffs allege that the defendants violated their fiduciary duties under ERISA and also make various state claims. The district court dismissed the complaint on the grounds that the plan was not established and maintained by an employer or an employee organization and thus was not an employee welfare benefit plan covered by ERISA. We reverse.

I.

The well-pleaded facts in the complaint, which must be accepted as true when considering a motion to dismiss, see LaSalle National Bank v. County of DuPage, 777 F.2d 377 (7th Cir.1985), are as follows. The plaintiffs are Ed Miniat, Inc., an Illinois corporation ("Miniat"); South Chicago Packing Company, the successor in interest to Miniat; and Ronald and Edmund Miniat, Jr., officers and shareholders of Miniat and South Chicago Packing Company (collectively the "Miniats"). Defendants are Globe Life Insurance Company ("Globe"), which issued the RLR policy to Miniat; Ryan Insurance Group, which owns Globe's stock; and Combined International Corporation, which in turn owns Ryan's stock.

In late 1980 Miniat adopted an employee benefit plan consisting of group life insurance (the "Miniat Plan" or the "Plan"). 1 The Miniat Plan provided for the acquisition of life insurance for eligible employees that would provide a fully paid policy upon the employees' retirement. The funding provision of the plan provided:

The benefits provided under the Plan are to be funded in their entirety by insurance underwritten by The Globe Life Insurance Company, Executive Life Insurance Company, Guardian Life Insurance Company and Provident Life Insurance Company or any other carrier the Plan Administrator deems acceptable. All of the provisions contained in the policies representing any insurance companies [sic] liabilities are considered part of this Plan. Benefits not payable under such policies shall not otherwise be payable under this Plan.

Plaintiffs' Appendix (hereafter "App.") at 47.

The Miniat Plan was actually funded through Miniat's participation, effective October 1, 1980, in a RLR trust (established to hold premiums) sponsored by Globe. 2 Amended Complaint p 18. Miniat paid premiums which were accumulated in the RLR trust and which were later to be used to purchase the life insurance coverage provided for in the Miniat Plan.

The amended complaint alleges that the RLR policy included clauses that gave Globe the "apparent unilateral right to reduce the rate of return that Globe was to pay on account to Miniat to a scheduled minimum (4% per annum) and to increase significantly the annual premium rates to a scheduled maximum." Amended Complaint p 21. Plaintiffs allege that about July 1983 Globe "unilaterally and without justification announced a withdrawal from the RLR insurance business and an abandonment of existing policy holders, by reducing the rate of return paid on account from 10% to 7% to 4% per annum by November 1, 1983 and increasing premium rates to the maximum allowed by the policy." Amended Complaint p 24. Miniat then terminated its participation in the RLR Trust. Globe allegedly deducted "front end load" charges when returning the company's accumulated contributions, thus retaining as "overhead more than half of the premiums paid by plaintiffs to fund the plan without having ever issued any insurance under the plan." 3 Amended Complaint p 35. Plaintiffs allege that Globe's actions were without economic justification and breached Globe's fiduciary duties and obligations under ERISA. Amended Complaint paragraphs 34, 36, 37, 49, 50. The complaint also contains state law claims respecting unlawful discrimination in violation of the Illinois Insurance Code, promissory estoppel, breach of contract and unjust enrichment.

The district court granted defendants' motion to dismiss. It found "no evidence of the existence of a plan separate and apart from the RLR trust," District Court Memorandum at 9, and that the RLR trust did not fall within ERISA because the Plan was not established and maintained by an employer or an employee organization. District Court Memorandum at 10. The court thus dismissed the allegedly federal claims for lack of subject matter jurisdiction under ERISA and dismissed the state claims for lack of pendent jurisdiction.

On appeal plaintiffs contend that the pleadings adequately allege that the Miniat Plan was separate from the RLR trust and was established by an employer. Defendants argue that the district court's analysis and disposition were correct and further argue that the plaintiffs lack standing and that Globe was not a fiduciary under ERISA.

II.

The defendants argue that the plaintiffs lack standing to bring this claim. ERISA provides that an action may be brought by a "participant, beneficiary, or fiduciary." 29 U.S.C. Sec. 1132(a). Further, ERISA provides that "the district courts of the United States shall have exclusive jurisdiction of civil actions under this subchapter brought by the Secretary or by a participant, beneficiary, or fiduciary." 29 U.S.C. Sec. 1132(e)(1). Defendants argue that the corporate plaintiffs, who clearly are not participants or beneficiaries, are not fiduciaries and therefore lack standing.

ERISA provides that:

a person 4 is a fiduciary with respect to a plan to the extent (i) 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, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan. Such term includes any person designated under section 1105(c)(1)(B) 5 of this title.

29 U.S.C. Sec. 1002(21)(A) (footnotes added).

Plaintiffs contend that Miniat had discretionary authority over the income or assets of the Miniat Plan by virtue of its ability under Article XIV of the Plan to amend any provision of the Plan. Article XIV provides:

The Employer may amend or terminate this Plan at any time and will furnish any required notification of amendment or termination to the appropriate regulatory authorities and to Plan participants or beneficiaries.

App. at 53. Presumably the provisions subject to amendment include the funding provisions of Article V, in which the insurers providing benefits under the Plan are named, as well as Article I, which designates the administrator and named fiduciary under the Plan.

A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiffs can prove no set of facts in support of their claim that would entitle them to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). We think that the allegations in plaintiffs' complaint, considered in connection with the Miniat Plan, show that plaintiffs may well be able to prove that the corporate plaintiffs were fiduciaries and thus had standing to bring this action. Hence the claims of the corporate plaintiffs should not have been dismissed at this stage for lack of standing.

In Leigh v. Engle, 727 F.2d 113, 133 (7th Cir.1984), we held that an individual and a corporation who had the power to appoint and remove the trust administrators were fiduciaries for that purpose. See ERISA Interpretative Bulletin 75-8, 29 C.F.R. Sec. 2509.75-8, D-4 (1985). 6 In the case before us it appears that the corporate plaintiffs, by virtue of their power to amend the plan, had the power to select a new insurance company and a new administrator to administer the Plan. Thus, at least for some purposes, they may be fiduciaries and hence have standing to bring this suit. 7 See Great Lakes Steel v. Deggendorf, 716 F.2d 1101 (6th Cir.1983) (complaint under ERISA should not be dismissed for lack of standing because employer adequately alleged its status as fiduciary); United States Steel Corp. v. Commonwealth of Pennsylvania Human Relations Commission, 669 F.2d 124, 126 (3d Cir.1982) (employer may be fiduciary when it has authority to alter terms of plan and authority to administer plan). Further, in Leigh we held that fiduciaries responsible for selecting and retaining their close business associates as plan administrators had a duty to monitor appropriately the administrators' action. Leigh, 727 F.2d at 135. Similarly, the corporate plaintiffs here may well have some duty to monitor the actions of the plan administrator and the insurance company administering the Plan.

Defendants also argue that the individual plaintiffs are not properly before the court and therefore their standing as beneficiaries (which is undisputed) cannot operate to resolve the standing issue. Plaintiffs filed an amended complaint, without leave of court, adding Ronald and Edmund Miniat, as beneficiaries, to the complaint as additional plaintiffs. Although Federal Rule of Civil Procedure 15(a) permits a party to freely amend its complaint in a timely fashion, 8 Federal Rule 21 requires a court order to add or...

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