Faber v. Metro. Life Ins. Co.

Decision Date05 August 2011
Docket NumberDocket No. 09–4901–cv.
Citation51 Employee Benefits Cas. 2948,648 F.3d 98
PartiesCarol D. FABER and the Estate of Russell E. Young, by its Administrator, Tonia M. Ray, Individually and on behalf of a class of all others similarly situated, Plaintiffs–Appellants,v.METROPOLITAN LIFE INSURANCE COMPANY, Defendant–Appellee.*
CourtU.S. Court of Appeals — Second Circuit


John C. Bell, Jr. (Leroy W. Brigham, on the brief), Bell & Brigham, Augusta, GA, for PlaintiffsAppellants.Michael H. Bernstein (John T. Seybert, of counsel), Sedgwick, Detert, Moran & Arnold, LLP, New York, NY, for DefendantAppellee.M. Patricia Smith, Solicitor of Labor, Timothy D. Hauser, Associate Solicitor, Nathaniel I. Spiller, Counsel for Appellate Litigation, Thomas Tso, Attorney, for Amicus Curiae U.S. Department of Labor.Before: FEINBERG, B.D. PARKER, and WESLEY, Circuit Judges.B.D. PARKER, JR., Circuit Judge:

PlaintiffsAppellants Carol D. Faber and the Estate of Russell E. Young (the Estate) appeal from a judgment of the United States District Court for the Southern District of New York (Baer, J.) dismissing their class-action complaint, which asserts a single claim against DefendantAppellee Metropolitan Life Insurance Company (MetLife) under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. Plaintiffs allege that through the use of “retained asset accounts” (“RAAs”), MetLife breached fiduciary duties imposed by ERISA by retaining and investing for its own profit life insurance proceeds due them under employee benefit plans that MetLife administered. See id. §§ 1104(a), 1106(b)(1). An RAA is an interest-bearing account backed by funds that the insurer retains until the account holder writes a check or draft against the account. We conclude that the district court correctly determined that Plaintiffs fail to state a claim, since MetLife discharged its fiduciary obligations under ERISA when it established the RAAs in accordance with the plans at issue, and did not misuse “plan assets” by holding and investing the funds backing the accounts. Accordingly, we affirm.


The relevant facts are undisputed. Plaintiffs were beneficiaries of ERISA-governed employee welfare benefit plans. Faber was a beneficiary of a plan sponsored by her late husband's employer, the Eastman Kodak Company (the “Kodak Plan”). The Estate was a beneficiary of a plan sponsored by the late Russell E. Young's employer, the General Motors Corporation (the “GM Plan”). Both Plans provide life insurance benefits funded by group life insurance policies issued to Kodak and GM by MetLife, the claims administrator for the Plans.

Under the Plans, if the life insurance proceeds due to a beneficiary exceed a specified amount, MetLife establishes an RAA, branded a “Total Control Account” (“TCA”), in the name of the beneficiary, credits the TCA with the amount of benefits due, and issues the beneficiary a “checkbook” that he can use at any time to draw on the TCA for some or all of the balance. The Summary Plan Description (“SPD”) for the Kodak Plan states:

Payment of a death benefit of $7,500 or more is made under MetLife's Total Control Account. The death benefit amount is deposited in an interest bearing money market account and your beneficiary is provided with a checkbook to use for writing checks to withdraw funds. Other payment options are available. However, if the total death benefit is less than $7,500, a lump sum payment will be made.

Similarly, the SPD for the GM Plan states:

If the benefit from a single claim is $6,000, or more, your beneficiary may receive basic life insurance benefits under one of the several options available under the Beneficiary's Total Control Account (TCA) Program. The TCA Program provides your beneficiary with total control of the proceeds from your life insurance. A personalized checkbook allows your beneficiary to easily use all, or a portion, of the money. Funds left with the insurance company earn interest at competitive rates. Several investment options also are available under TCA. A separate brochure describing the TCA options is available on request from the GM National Benefit Center.

When a TCA is set up, MetLife sends the beneficiary a “Total Control Account Money Market Option Customer Agreement” (“Customer Agreement”), which lays out the terms of the TCA relationship. The Customer Agreement provides that MetLife will set the interest rate for the TCA weekly based on the performance of certain money market indices. MetLife fully guarantees both the balance of the TCA and that the annual yield on the account will be at least 1.5%. While the TCA remains open, MetLife retains the funds backing the TCA in its general account and invests those funds for its own profit, earning the spread between its return on investment and the interest paid on the TCA. When the TCA holder writes a check against the account, MetLife transfers funds sufficient to cover the draft to the bank servicing the TCA.

Faber and the Estate submitted claims for death benefits in 2004 and 2007, respectively. Once their claims were approved, MetLife established TCAs in their names and provided them with Customer Agreements and checkbooks. The opening balance of Faber's TCA was $393,651.90, while the Estate's was $42,765.48. The Estate withdrew all of its proceeds in 2007 and its TCA was closed. Faber has written checks against her TCA over the years, but it remains open with a positive balance.

Although Plaintiffs do not dispute that they have received the entire amount of the life insurance proceeds and interest guaranteed to them under the Plans, they brought a putative class action on behalf of all persons who were, between 2002 and 2009, beneficiaries of MetLife group life insurance policies that paid benefits via TCAs. The complaint alleges that by using the TCA mechanism to retain and invest the proceeds due to beneficiaries, MetLife breached section 404(a)(1) of ERISA, 29 U.S.C. § 1104(a)(1), which requires a fiduciary to act solely in the interest of plan participants and beneficiaries, and section 406(b)(1) of ERISA, 29 U.S.C. § 1106(b)(1), which prohibits a fiduciary from self-dealing in plan assets. Plaintiffs seek disgorgement of MetLife's profits, as well as injunctive relief.

In 2009, the district court granted MetLife's motion to dismiss the complaint. Faber v. Metro. Life Ins. Co., No. 08 Civ. 10588(HB), 2009 WL 3415369, 2009 U.S. Dist. LEXIS 98775 (S.D.N.Y. Oct. 23, 2009). The court first concluded that Plaintiffs lacked constitutional standing to seek disgorgement because they had failed to show the requisite injury, but that they did have constitutional standing to seek injunctive relief. Id. at *3–6, 2009 U.S. Dist. LEXIS 98775 at *10–19. The court presumed—but declined to decide—that Plaintiffs had statutory standing, and held that the complaint failed to state a claim under ERISA because Plaintiffs received all of the benefits to which they were entitled under the Plans.” Id. at *7, 2009 U.S. Dist. LEXIS 9877 at *25. The court focused on “the parties' expectations under the Plans,” concluding that the fact that MetLife had furnished Plaintiffs with all of the benefits promised by the Plans, in the manner provided for by the Plans, foreclosed their claims. See id. at *7, 2009 U.S. Dist. LEXIS 9877 at *23–28. Plaintiffs appealed.

Following oral argument, we invited the Department of Labor (“DOL”) to submit its views on certain of the issues presented. In response, the DOL took the position that MetLife discharges its ERISA fiduciary duties by furnishing beneficiaries a TCA in accordance with plan terms and does not retain plan benefits by holding and managing the assets that back the TCA. In the DOL's view, once MetLife creates and credits a beneficiary's TCA and provides a checkbook, the beneficiary “has effectively received a distribution of all the benefits that the Plan promised,” and ERISA no longer governs the relationship between MetLife and the ... account holder[ ].” We conclude that the DOL's reasoning comports with ours, and we affirm.

I. Standing

We review constitutional standing de novo and, at the pleading stage, accept as true all material allegations of the complaint, which we must construe in Plaintiffs' favor. W.R. Huff Asset Mgmt. Co., LLC v. Deloitte & Touche LLP, 549 F.3d 100, 106 (2d Cir.2008). The three elements comprising Article III standing are well established: a plaintiff must show (1) an “injury in fact”—an invasion of a legally protected interest that is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical; (2) a causal connection between the plaintiff's injury and the challenged conduct; and (3) that it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992).

In the ERISA context, we have drawn a distinction between constitutional standing to seek injunctive relief and constitutional standing to seek disgorgement. See Cent. States Se. & Sw. Areas Health & Welfare Fund v. Merck–Medco Managed Care, L.L.C., 433 F.3d 181, 199–200 (2d Cir.2005) ( “ Central States I ”); see also Kendall v. Emps. Ret. Plan of Avon Prods., 561 F.3d 112, 119–21 (2d Cir.2009). In Central States I, we observed that a plaintiff “may have Article III standing to obtain injunctive relief related to ERISA's ... fiduciary duty requirements without a showing of individual harm,” whereas [o]btaining restitution or disgorgement under ERISA requires that a plaintiff satisfy the strictures of constitutional standing by demonstrating individual loss; to wit, that they have suffered an injury-in-fact.” 433 F.3d at 199 (citation and internal quotation marks omitted); see also id. ([The] fiduciary duties contained in ERISA create in [plaintiff] certain rights,...

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