Ellis v. Liberty Life Assur. Co. of Boston, No. 03-20623.

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Writing for the CourtWiener
PartiesLinda ELLIS, Plaintiff-Appellee-Cross-Appellant, v. LIBERTY LIFE ASSURANCE COMPANY OF BOSTON, Defendant-Appellant-Cross-Appellee.
Docket NumberNo. 03-20623.
Decision Date19 November 2004

Page 262

394 F.3d 262
Linda ELLIS, Plaintiff-Appellee-Cross-Appellant,
v.
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON, Defendant-Appellant-Cross-Appellee.
No. 03-20623.
United States Court of Appeals, Fifth Circuit.
November 19, 2004.
As Corrected January 13, 2005.

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COPYRIGHT MATERIAL OMITTED

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Howard R. King (argued), Hill, Angel & King, Houston, TX, for Ellis.

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Scott A. Lemond (argued), Seyfarth Shaw, Houston, TX, for Liberty Life Assur. Co. of Boston.

Appeals from the United States District Court for the Southern District of Texas.

Before JOLLY, WIENER, and PICKERING, Circuit Judges.*

WIENER, Circuit Judge:


Defendant-Appellant-Cross-Appellee Liberty Life Assurance Company of Boston ("Liberty") appeals the district court's denial of its motion for summary judgment and that court's grant of summary judgment in favor of plaintiff-appellee-cross-appellant Linda Ellis ("Ellis"). The district court concluded that no genuine issue of material fact existed as to Ellis's claim under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, et seq., and that she was entitled to summary judgment. The court ultimately ruled that Liberty in its role as plan fiduciary abused its discretion when it terminated Ellis's long-term disability ("LTD") benefits because substantial evidence did not demonstrate a change in her medical condition after Liberty initially determined that Ellis qualified for LTD benefits. The district court dismissed Ellis's state-law claims, however, holding that they are preempted by ERISA; and Ellis cross-appeals that ruling. For the reasons that follow, we (1) affirm the district court's dismissal of Ellis's state-law claims, (2) reverse the district court's grant of summary judgment and award of costs and fees in favor of Ellis, and (3) grant summary judgment in favor of Liberty, rendering a take-nothing judgment on Ellis's ERISA claim.

I. FACTS AND PROCEEDINGS

A. The Policy

Liberty is a nationwide insurance carrier that issued a disability insurance policy ("the Policy") to Chase Manhattan Bank ("Chase") in January 1997. The Policy, which is an integral part of an employee welfare benefits plan governed by ERISA, provides LTD benefits to eligible Chase employees.

The Policy specifies that LTD benefits are payable for the first 24 months of disability to a covered employee who is "unable to perform all of the material and substantial duties of his occupation on an Active Employment basis because of an Injury or Sickness."1 The Policy further provides that after 24 months, LTD benefits continue to be payable if the disabled employee "is unable to perform with reasonable continuity, all of the material and substantial duties of his own or any other occupation for which he is or becomes reasonably fitted by training, education, experience, age and physical and mental capacity."2 As the plan fiduciary, Liberty is expressly vested with discretionary authority to make all coverage, eligibility, and interpretation decisions with regard to the Policy: "Liberty shall possess the authority, in its sole discretion, to construe the terms of this policy and to determine benefit eligibility hereunder."3

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B. Ellis's Claim

In 1997, Chase hired Ellis as a mortgage loan officer. Ellis worked at Chase until 1999, when she applied for short-term disability ("STD") benefits — under a different Liberty policy — because she could no longer perform her job duties as a loan officer. Although the exact nature of Ellis's medical condition remains somewhat unclear from the evidence in the record on appeal, her medical records indicate that she might suffer from fibromyalgia, a rheumatic syndrome that causes pain in muscles, tendons, and fibrous and other connective tissues. Liberty reviewed Ellis's STD claim, approved it, and started paying her STD benefits in January 2000.4

When Ellis's STD benefits expired later that year, her claim automatically converted into one for LTD benefits under the Policy. Liberty then began to investigate whether Ellis's claim fell within the Policy's definition of LTD. In June 2000, Liberty informed Ellis by letter that it had reviewed her file and determined that she was eligible for LTD benefits. Liberty also informed Ellis that it would periodically require updated medical information "to support total disability as defined by the Policy." Liberty continued its investigation, and, in light of additional medical evidence that it subsequently gathered, Liberty determined that Ellis was not eligible for LTD benefits. In December, Liberty wrote to Ellis:

While it is apparent you were ill and met the criteria for your policy's definition of disability initially, based on the medical information received, you no longer meet your Long Term Disability Policy's definition of disability. Therefore, we must close your claim for benefits, effective December 31, 2000.

The following month, Ellis administratively appealed Liberty's decision to terminate her LTD benefits. Ellis submitted further medical information to Liberty, which forwarded her file to its Managed Disability Services Unit ("MDSU"). The MDSU concluded that no objective medical

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findings existed that would render Ellis "disabled" within the contemplation of the Policy. Liberty then affirmed its decision to terminate Ellis's LTD benefits. (Liberty has made no effort, however, to recoup the LTD benefits previously paid to Ellis.)

In October, Ellis sued Liberty in Harris County, Texas. Ellis asserted Texas statutory and common law claims for violations of the state insurance code, breach of contract, and breach of the duty of good faith and fair dealing. Liberty timely removed the suit to the district court pursuant to 28 U.S.C. § 1441(b) on the basis of ERISA preemption.

The following fall, after the close of discovery, Liberty filed a motion for summary judgment seeking dismissal of Ellis's state-law claims. In response, Ellis filed a cross-motion for summary judgment and sought to amend her complaint to state an ERISA claim. The district court granted Ellis leave to amend her complaint, and Liberty filed a supplemental motion for summary judgment to dismiss her ERISA claim.

The district court eventually denied Liberty's motion for summary judgment and granted summary judgment to Ellis on her ERISA claim. The court dismissed Ellis's state-law claims, however, holding that they were preempted by ERISA. The district court subsequently issued a supplemental memorandum and order clarifying its award of attorneys' fees and prejudgment interest to Ellis, ultimately entering final judgment in favor of Ellis.

Two days later, Ellis filed a motion to alter or amend the judgment on the amount of damages, attorneys' fees, and prejudgment interest. The district court granted the motion in part, increasing the quantum of Ellis's future disability benefits and clarifying the rate of prejudgment interest. Liberty timely filed its notice of appeal.5

II. ANALYSIS

A. Leave to Amend Complaint

Liberty first argues that the district court erred when it granted Ellis leave to amend her complaint to state an ERISA claim. We review a district court's decision to grant leave to amend a complaint for abuse of discretion.6 Federal Rule of Civil Procedure 15 states that leave to amend pleadings "shall be freely given when justice so requires."7 In determining whether to grant leave, a district court may consider such factors as (1) undue delay; (2) bad faith; (3) dilatory motive on the part of the movant; (4) repeated failure to cure deficiencies by any previously allowed amendment; (5) undue prejudice to the opposing party; and (6) futility of amendment.8 Although the district court assigned no reasons on the record for granting Ellis leave to amend her complaint, we are satisfied that it did not abuse its discretion when it did so.

Although Liberty argues that Ellis's amendment demonstrates undue delay, bad faith, and dilatory motive, we find no evidence in the record to support such

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an argument. Liberty's strongest argument concerns the potential prejudice that it may have suffered as a result of Ellis's filing of her amendment so late in the proceedings in district court. We reject this argument. Liberty removed Ellis's state-court suit on the basis of ERISA preemption. Ultimately, and as Liberty argued in its Notice of Removal, the district court concluded that ERISA preempted all of Ellis's state-law claims.9 We have previously held that "ERISA's preemptive and civil enforcement provisions operate to `recharacterize' such claims into actions arising under federal law."10 Thus, for removal purposes, ERISA's preemptive power recharacterized Ellis's state-law breach of contract claim as a claim arising under federal law, specifically ERISA. Liberty might not have known with certainty that Ellis's breach of contract claim would be recharacterized as an ERISA claim and that Liberty would ultimately have to litigate such a claim. Having removed on the basis of ERISA preemption, however, Liberty cannot now be heard to complain about the district court's grant of leave for Ellis to amend her complaint to include an ERISA claim. There was no prejudice to Liberty, and the district court did not abuse its discretion when it granted Ellis leave to amend her complaint to state an ERISA claim.

B. Erisa Claim

1. Standard of Review

We review a district court's grant of summary judgment de novo.11 "Whether the district court employed the appropriate standard in reviewing an eligibility determination made by an ERISA plan administrator is a question of law."12 We thus review this decision de novo.13 When the ERISA plan vests the fiduciary with discretionary authority to determine eligibility for benefits under the plan or to interpret the plan's provisions, "our standard of review is abuse of discretion."14 As the Policy vests Liberty, as plan...

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321 practice notes
  • Sanborn–alder v. Cigna Group Ins., Civil Action No. H–09–0806.
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • February 15, 2011
    ...The claimant bears the burden of proving that the plan administrator abused its discretion. Ellis v. Liberty Life Assurance Co. of Boston, 394 F.3d 262, 273 (5th Cir.2005). The Fifth Circuit applies a two-step analysis to review discretionary determinations by an ERISA plan administrator: (......
  • Hous. Methodist Hosp. v. Humana Ins. Co., CIVIL ACTION NO. H–16–1469
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • July 17, 2017
    ...an area of law that state causes of action are entirely displaced by federal law. Ellis v. Liberty Life Assurance Company of Boston, 394 F.3d 262, 276 & n.34 (5th Cir. 2004), cert. denied, 545 U.S. 1128, 125 S.Ct. 2941, 162 L.Ed.2d 867 (2005). "Section [1132(a) ], by providing a civil enfor......
  • Soileau & Assocs. v. La. Health Serv. & Indem. Co., CIVIL ACTION NO. 18-710-WBV-JCW SECTION: D (2)
    • United States
    • United States District Courts. 5th Circuit. United States District Court (Eastern District of Louisiana)
    • September 19, 2019
    ...295. 121. Corry v. Liberty Life Assur. Co. of Bos., 499 F.3d 389, 397 (5th Cir. 2007) (quoting Ellis v. Liberty Life Assur. Co. of Bos., 394 F.3d 262, 273 (5th Cir. 2004)). 122. Borst v. Chevron Corp., 36 F.3d 1308, 1324 (5th Cir. 1994) (citing Calamia v. Spivey, 632 F.2d 1235, 1237 (5th Ci......
  • Van Natta v. Sara Lee Corp., No. C05-4151-MWB.
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • June 29, 2006
    ...cases addressing this particular factor are logically instructive to a degree. See, e.g. Ellis v. Liberty Life Assurance Co. of Boston, 394 F.3d 262, 276 (5th Cir.2004) (noting that the Miller analysis did not, for all intents and purposes, significantly alter prior holdings utilizing the M......
  • Request a trial to view additional results
321 cases
  • Sanborn–alder v. Cigna Group Ins., Civil Action No. H–09–0806.
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • February 15, 2011
    ...The claimant bears the burden of proving that the plan administrator abused its discretion. Ellis v. Liberty Life Assurance Co. of Boston, 394 F.3d 262, 273 (5th Cir.2005). The Fifth Circuit applies a two-step analysis to review discretionary determinations by an ERISA plan administrator: (......
  • Hous. Methodist Hosp. v. Humana Ins. Co., CIVIL ACTION NO. H–16–1469
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • July 17, 2017
    ...an area of law that state causes of action are entirely displaced by federal law. Ellis v. Liberty Life Assurance Company of Boston, 394 F.3d 262, 276 & n.34 (5th Cir. 2004), cert. denied, 545 U.S. 1128, 125 S.Ct. 2941, 162 L.Ed.2d 867 (2005). "Section [1132(a) ], by providing a civil enfor......
  • Soileau & Assocs. v. La. Health Serv. & Indem. Co., CIVIL ACTION NO. 18-710-WBV-JCW SECTION: D (2)
    • United States
    • United States District Courts. 5th Circuit. United States District Court (Eastern District of Louisiana)
    • September 19, 2019
    ...295. 121. Corry v. Liberty Life Assur. Co. of Bos., 499 F.3d 389, 397 (5th Cir. 2007) (quoting Ellis v. Liberty Life Assur. Co. of Bos., 394 F.3d 262, 273 (5th Cir. 2004)). 122. Borst v. Chevron Corp., 36 F.3d 1308, 1324 (5th Cir. 1994) (citing Calamia v. Spivey, 632 F.2d 1235, 1237 (5th Ci......
  • Van Natta v. Sara Lee Corp., No. C05-4151-MWB.
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • June 29, 2006
    ...cases addressing this particular factor are logically instructive to a degree. See, e.g. Ellis v. Liberty Life Assurance Co. of Boston, 394 F.3d 262, 276 (5th Cir.2004) (noting that the Miller analysis did not, for all intents and purposes, significantly alter prior holdings utilizing the M......
  • Request a trial to view additional results

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