Metropolitan Life Ins. Co. v. Price

• Decision Date: 04 September 2007
• Docket Number: No. 05-2927.,05-2927.
• Citation: 501 F.3d 271
• Parties: METROPOLITAN LIFE INSURANCE COMPANY, Appellant, v. Sandra PRICE; Shannon Price; Andre Price.
• Court: U.S. Court of Appeals — Third Circuit

501 F.3d 271

METROPOLITAN LIFE INSURANCE COMPANY, Appellant, v. Sandra PRICE; Shannon Price; Andre Price.

No. 05-2927.

United States Court of Appeals, Third Circuit.

Submitted Under Third Circuit LAR 34.1(a) Thursday, January 25, 2007.

Filed September 4, 2007.

Randi F. Knepper, Esq., McElroy, Deutsch, Mulvaney & Carpenter, LLP, Morristown, NJ, Counsel for Appellant.

Before: SCIRICA, Chief Judge, FUENTES and CHAGARES, Circuit Judges.

OPINION OF THE COURT

CHAGARES, Circuit Judge.

Appellant Metropolitan Life Insurance Company ("MetLife") is the claims fiduciary of an "employee welfare benefit plan." See Employee Retirement Income Security Act of 1974 ("ERISA") § 3(1), 29 U.S.C. § 1002(1). After one of the plan's participants died, MetLife received competing claims to the decedent's life-insurance benefits. It responded by filing this interpleader action against the competing claimants. The District Court raised the issue of subject matter jurisdiction sua sponte and dismissed. In our view, however, the District Court had federal question jurisdiction. Accordingly, we will vacate and remand.

I.

The New Jersey Transit Corporation sponsors a Basic Life Plan for the benefit of its employees. The plan is funded through a group life insurance policy issued by MetLife to New Jersey Transit. MetLife is the plan's "claims fiduciary."

Paul Price was a participant in the plan. He was a bus driver with New Jersey Transit and had enrolled for $20,000 in life insurance benefits. In May 2002, Paul passed away. He was survived by his widow, Sandra Price, and his children from a previous marriage, Shannon and Andre Price.

After Paul's death, his widow and his children submitted competing claims for the life insurance benefits. MetLife investigated the matter and discovered that, in or around February 2000, Paul designated his widow as the primary beneficiary. MetLife then informed the children's attorney that it was denying their claims. MetLife explained that it had a fiduciary duty "to administer claims in accordance with ERISA and the terms of the plan." Appendix ("App.") 62-63. As such, it had to "pay the proceeds to the named beneficiary only."

The children's attorney requested a review of the claim. Paul's first marriage had ended in 1995 with a final judgment of divorce in New Jersey Superior Court. Paragraph 11 of that judgment specifically referenced Paul's life insurance:

The Husband currently has life insurance upon his life. The Husband shall amend these policies in order to name the children of the marriage as irrevocable beneficiaries until such time as Andre Price, the son of the marriage[,] is emancipated. The Husband shall name the Wife as trustee.

App. 69. Since Andre remained unemancipated at the time of Paul's death, the children claimed they were the rightful beneficiaries under the divorce judgment's plain terms.

This left MetLife in a quandary. Under ERISA, it had a duty to administer claims "in accordance with the documents and instruments governing the plan." 29 U.S.C. § 1104(a)(1)(D). These documents instructed MetLife to pay the benefits to Paul's designated beneficiary—his widow. Under the New Jersey divorce judgment, however, the children were to be designated "irrevocable beneficiaries."

Normally, ERISA preempts any state law that "relate[s] to" an employee benefit plan. 29 U.S.C. § 1144(a); Egelhoff v. Egelhoff, 532 U.S. 141, 147-48, 121 S.Ct. 1322, 149 L.Ed.2d 264 (2001). However, ERISA (as amended by the Retirement Equity Act of 1984) contains an exception from this general rule for "qualified domestic relations orders" ("QDROs"). 29 U.S.C. §§ 1144(b)(7), 1056(d)(3)(B)-(E); see Boggs v. Boggs, 520 U.S. 833, 846-47, 117 S.Ct. 1754, 138 L.Ed.2d 45 (1997). A QDRO "assigns to an alternate payee the right to . . . receive all or a portion of the benefits payable with respect to a participant under a plan." 29 U.S.C. § 1056(d)(3)(B)(i).¹

MetLife informed the competing claimants that it could not tell "whether a court would find that th[e] divorce decree is a QDRO." App. 73. It noted that if the New Jersey judgment is a QDRO, then in all likelihood the children should get the $20,000. It further noted that if the judgment is not a QDRO, then Price's widow is entitled to the money.² MetLife stated that if the claimants did not resolve the matter amicably, it would bring suit. Price's widow and the children negotiated, but they failed to reach an agreement. The children's attorney then asked MetLife to "[k]indly initiate an interpleader action." App. 75.

MetLife obliged, bringing this suit in the United States District Court for the District of New Jersey. On its own motion, the District Court raised the issue of subject matter jurisdiction and dismissed. This appeal followed. We review de novo the District Court's dismissal for lack of subject matter jurisdiction. IFC Interconsult, AG v. Safeguard Int'l Partners, LLC, 438 F.3d 298, 309 (3d Cir.2006).

II.

The equitable remedy of interpleader allows "a person holding property to join in a single suit two or more persons asserting claims to that property." NYLife Distrib., Inc. v. Adherence Group, Inc., 72 F.3d 371, 372 n. 1 (3d Cir.1995). The plaintiff in an interpleader action is a stakeholder that admits it is liable to one of the claimants, but fears the prospect of multiple liability. Interpleader allows the stakeholder to file suit, deposit the property with the court, and withdraw from the proceedings. The competing claimants are left to litigate between themselves. See Zechariah Chaffee, Jr., The Federal Interpleader Act of 1936: I, 45 Yale L.J. 963, 963 (1936). The result is a win-win situation. The stakeholder avoids multiple liability. The claimants settle their dispute in a single proceeding, without having to sue the stakeholder first and then face "the difficulties of finding assets and levying execution." Id. at 964.

There are two methods for bringing an interpleader in federal court. The first is the interpleader statute, 28 U.S.C. § 1335. District Courts have subject matter jurisdiction under this provision if there is "minimal diversity" between two or more adverse claimants, and if the amount in controversy is $500 or more. See State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523, 530-31, 87 S.Ct. 1199, 18 L.Ed.2d 270 (1967). The second is Federal Rule of Civil Procedure 22. Unlike its statutory counterpart, rule interpleader is no more than a procedural device; the plaintiff must plead and prove an independent basis for subject matter jurisdiction. See NYLife, 72 F.3d at 372 n. 1; Commercial Union Ins. Co. v. United States, 999 F.2d 581, 584 (D.C.Cir.1993).

In this case, MetLife does not rely on the interpleader statute, nor could it, as the adverse claimants are all New Jerseyans. Rather, it has styled its lawsuit as a rule interpleader action. MetLife argues that jurisdiction exists under the federal question statute, 28 U.S.C. § 1331, and ERISA's jurisdictional provision, 29 U.S.C. § 1132(e).

A federal question interpleader is a rarity. See 7 Charles Alan Wright, Arthur R. Miller, Mary Kay Kane, Federal Practice & Procedure § 1710 (3d ed. 2001); see also Donald L. Doernberg, What's Wrong with this Picture?: Rule Interpleader, the Anti-Injunction Act, In Personam Jurisdiction, and M.C. Escher, 67 U. Colo. L. Rev. 551, 565 n. 56 (1996) ("The dearth of reported cases involving interpleader and federal question jurisdiction implies that although such cases can arise, they will be a small proportion of all federal interpleader actions."). Statutory "arising under" jurisdiction requires that a federal question appear on the face of the plaintiff's well-pleaded complaint. See Louisville & Nashville R.R. v. Mottley, 211 U.S. 149, 152, 29 S.Ct. 42, 53 L.Ed. 126 (1908). This requirement poses a problem for an interpleader plaintiff, as all the complaint seeks is an order releasing and discharging the plaintiff from liability. It is difficult to characterize such a request "as asserting either federal or state rights." Morongo Band of Mission Indians v. Cal. State Bd. of Equalization, 858 F.2d 1376, 1383 (9th Cir.1988) (quoting Banco de Ponce v. Hinsdale Supermarket Corp., 663 F.Supp. 813, 816 (E.D.N.Y.1987)). Thus, at least at first blush, it is hard to see how a request for interpleader could raise a federal question.

But only at first blush. Some interpleader actions do raise federal questions. Indeed, our sister courts of appeals have recognized that an interpleader "arises under" federal law when brought by an ERISA fiduciary against competing claimants to plan benefits. See, e.g., Metro. Life Ins. Co. v. Bigelow, 283 F.3d 436, 439-40 (2d Cir.2002); Aetna Life Ins. Co. v. Bayona, 223 F.3d 1030, 1033-34 (9th Cir.2000); Metro. Life Ins. Co. v. Marsh, 119 F.3d 415, 418 (6th Cir.1997).

We agree with these courts. Federal question jurisdiction exists when the plaintiff's well-pleaded complaint establishes that "federal law creates the cause of action." Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 27-28, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983).³ MetLife brings this suit under section 502(a)(3) of ERISA, 29 U.S.C. § 1132(a)(3). That provision creates a cause of action for fiduciaries "to obtain . . . appropriate equitable relief . . . to enforce any provisions of this subchapter or the terms of the plan." 29 U.S.C. § 1132(a)(3)(B)(ii). As courts have noted, "[t]he interconnection between the basis of the District Court's jurisdiction — ERISA — and the elements of [an] ERISA claim[] makes it easy to confuse the question of the court's subject matter jurisdiction with the question of the plaintiff's ability to state a claim." Carlson v. Principal Fin. Group, 320 F.3d 301, 307 (2d Cir.2003). The test we must apply is a familiar one. For jurisdictional purposes, the issue is not whether MetLife will ultimately be successful in sustaining its cause of action under section 502(a)(3). See Bell v. Hood, 327...