Leuthner v. Blue Cross and Blue Shield of N.E. P.A.

• Citation: 454 F.3d 120
• Decision Date: 10 July 2006
• Docket Number: No. 04-4389.,04-4389.
• Parties: Frank W. LEUTHNER; William Reasner, and All Others Similarly Situated Elizabeth Melley; Jean Mikulis, Intervenor-Plaintiffs in District Court v. BLUE CROSS AND BLUE SHIELD OF NORTHEASTERN PENNSYLVANIA Elizabeth Melley and Jean Mikulis, Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 120

454 F.3d 120

Frank W. LEUTHNER; William Reasner, and All Others Similarly Situated Elizabeth Melley; Jean Mikulis, Intervenor-Plaintiffs in District Court v. BLUE CROSS AND BLUE SHIELD OF NORTHEASTERN PENNSYLVANIA Elizabeth Melley and Jean Mikulis, Appellants.

No. 04-4389.

United States Court of Appeals, Third Circuit.

Argued September 22, 2005.

Opinion filed July 10, 2006.

COPYRIGHT MATERIAL OMITTED

Clifford A. Rieders, Esquire, (Argued), Rieders, Teavis, Humphrey, Harris, Wates & Waffenschmidt, Williamsport, PA, for Appellant.

John F. Schultz, Esquire, (Argued), Kristofor T. Henning, Esquire, Morgan, Lewis & Bockius, Philadelphia, PA, for Appellees.

Before McKEE, FISHER and ROTH,^* Circuit Judges.

OPINION

ROTH, Circuit Judge.

If the beneficiary of an ERISA plan has lost her status as a beneficiary, due to what she claims is the plan administrator's breach of fiduciary duty, does she then have standing to sue the administrator under ERISA § 502(a), 29 U.S.C. § 1132(a)? Appellant Jean Mikulis retired early from Blue Cross, relying on what she claims was a promise from Blue Cross to provide her with 100% lifetime health benefits. Appellant Elizabeth Melley is the widow of a Blue Cross retiree. Both women lost their lifetime health benefits when the Blue Cross Plan was retroactively changed on January 1, 2001. After their benefits had been terminated, they intervened in a class action that had been brought by other Plan participants and beneficiaries to challenge the retroactive changes. The District Court dismissed Mikulis and Melley's suits under FED.R.CIV.P. 12(b)(6) for lack of statutory standing. Although appellants may have made retirement decisions based on a belief that their retirement medical benefits would continue for their lifetimes, we agree with the District Court's determination that they do not have statutory standing to bring this action. We will, therefore, affirm.

I. Background

Blue Cross Blue Shield of Northeastern Pennsylvania (Blue Cross) administers the Blue Cross of Northeastern Pennsylvania Retiree Health Insurance Plan (the Plan), a welfare benefits plan for Blue Cross retirees. The Plan is subject to the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001, et seq. Blue Cross is a Plan fiduciary under 29 U.S.C. § 1002(21)(A).¹ Originally, the Plan provided Blue Cross retirees with 100% lifetime health insurance coverage. Blue Cross altered the Plan in 1993, and then again in 1999 and 2001. Starting in 1993, the Plan's coverage changed to a formula that provided a percentage of the cost of the health care plan, based on the number of years of service that an employee had on retirement. The formula required a minimum of 10 years of service. The formula was changed in 1999 to require a minimum of 15 years of service. The 1993 and 1999 changes were applied prospectively to new retirees; the benefits of former retirees were not changed. On January 1, 2001, Blue Cross again amended the Plan (1) to provide for a graduated dollar contribution toward health insurance coverage for retirees with at least 15 years of service and (2) to eliminate coverage for surviving spouses of retirees. Blue Cross applied the 2001 Plan Amendment retroactively to all retirees.

Retired Blue Cross employees have brought a class action against Blue Cross for breach of fiduciary duty stemming from various changes made in the Plan's coverage.² Elizabeth Melley and Jean Mikulis are intervenors in the action. Mikulis was an employee of Blue Cross for almost 13 years. She retired at age 62 on February 27, 1993, after being notified by Blue Cross that, unless she retired by April 1, 1993, her future retirement health benefits would no longer be guaranteed at 100% lifetime but would be subject to a percentage formula based on years of employment. As a result of early retirement, Mikulis received a smaller pension from Blue Cross and reduced Social Security benefits. Mikulis received 100% benefits under the Plan until January 1, 2001, when she ceased to be eligible for any benefits under the amended Plan. She claims to have relied on having 100% lifetime health coverage in her savings and spending decisions.

Melley is the widow of a Blue Cross retiree. The record does not indicate when Melley's late husband retired from Blue Cross, what his age was at retirement, or if he had other employment thereafter. Melley received benefits under the Plan until January 1, 2001, when she ceased to be eligible for any benefits under the amended Plan.

Mikulis and Melley claim that Blue Cross knowingly made various material misrepresentations and omissions about Plan benefits and amendments. In particular, they maintain that they had no notice before the 1993 Plan amendment that Blue Cross could alter the Plan. They also allege that Blue Cross's pre-2001 practice of applying Plan changes only prospectively led them to believe that any future changes would be prospective. They further claim that they relied upon Blue Cross's misrepresentations and omissions to their detriment. Mikulis contends that, but for Blue Cross's misrepresentations and omissions, she would not have taken early retirement. Melley alleges that her late husband made retirement and insurance decisions based upon the promise of continuing lifetime health benefits for his spouse, even in the event of his death.

Mikulis and Melley brought an action under ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), in which they allege that Blue Cross breached its fiduciary duties under ERISA § 404(a), 29 U.S.C. § 1104(a) by amending the plan in 2001³ and by failing to disseminate accurate information about the terms of retiree medical benefits under the Plan. They are seeking either reinstatement in the Plan as it existed prior to the 2001 amendments, comparable coverage, or its monetary equivalent.

Blue Cross moved to dismiss pursuant to FED. R. CIV. P. 12(b)(1), 12(b)(6) and/or 56. The District Court construed the motion as a motion to dismiss under Rule 12(b)(6) because the parties' submissions did not include matters outside of the pleadings. The District Court found that Mikulis and Melley did not have standing because they were neither Plan participants nor beneficiaries at the time they commenced their suit. Accordingly, the District Court dismissed both complaints for lack of standing. The District Court certified its judgment as final under FED. R. CIV. P. 54(b). This appeal followed.

II. Jurisdiction and Standard of Review

We undertake a plenary review of the grant of a motion to dismiss, Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250 (3d Cir.1994), including questions of standing. Miller v. Rite Aid Corp., 334 F.3d 335, 340 (3d Cir.2003). When considering an appeal from a dismissal pursuant to Rule 12(b)(6), we accept as true all well-pled factual allegations. Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir.1997).

III. Discussion

ERISA's statutory standing requirements provide in § 502(a)(1) and (3) that a civil action may only be brought:

(1) by a participant or beneficiary ... (B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan....

(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan.

29 U.S.C. § 1132(a)(1), (a)(3).

The terms "participant" and "beneficiary" are defined in ERISA § 3(7)-(8):

(7) The term "participant" means any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or members of such organization, or whose beneficiaries may be eligible to receive any such benefit.

(8) The term "beneficiary" means a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder.

29 U.S.C. § 1002(7)-(8).

The Supreme Court has held that:

the term "participant" is naturally read to mean either "employees in, or reasonably expected to be in, currently covered employment," or former employees who "have ... a reasonable expectation of returning to covered employment" or who have "a colorable claim" to vested benefits. In order to establish that he or she "may become eligible" for benefits, a claimant must have a colorable claim that (1) he or she will prevail in a suit for benefits, or that (2) eligibility requirements will be fulfilled in the future. "This view attributes conventional meanings to the statutory language since all employees in covered employment and former employees with a colorable claim to vested benefits `may become eligible.'"

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 118, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989) (internal citations omitted).

Thus, to bring a civil action under ERISA, Melley and Mikulis must have a colorable claim to Plan benefits as the result of their suit. We have interpreted the colorable claim requirement as a lower burden of persuasion than showing likelihood of success on the merits. Daniels v. Thomas & Betts Corp., 263 F.3d 66, 78-79 (3d Cir.2001).

Mikulis and Melley have raised four arguments as to why they fall within the definition of participant or beneficiary and have statutory standing. First, they maintain that they have standing because they are within the zone of interest protected by ERISA. Second, they claim that they have standing because they have a colorable claim to receive Plan benefits in the future as part of an equitable remedy. Third, they argue that they have standing because they formerly...