Miller v. Rite Aid Corp.

• Decision Date: 11 October 2007
• Docket Number: No. 05-35505.,05-35505.
• Citation: 504 F.3d 1102
• Parties: Morgan MILLER; Kylee Miller; Wayne Hoover, and Morgan Miller, as personal representative of the Estate of Connie Miller, Plaintiffs-Appellants, v. RITE AID CORPORATION, a Delaware corporation; Thrifty Payless Inc; Standard Insurance Company, an Oregon Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

504 F.3d 1102

Morgan MILLER; Kylee Miller; Wayne Hoover, and Morgan Miller, as personal representative of the Estate of Connie Miller, Plaintiffs-Appellants, v. RITE AID CORPORATION, a Delaware corporation; Thrifty Payless Inc; Standard Insurance Company, an Oregon Corporation, Defendants-Appellees.

No. 05-35505.

United States Court of Appeals, Ninth Circuit.

Argued & Submission Deferred July 11, 2007.

Submitted July 19, 2007.

Filed October 11, 2007.

J. Michael Alexander, Swanson, Lathen, Alexander & McCann, PC, Salem, OR, for the appellants.

Bruce A. Rubin and Jennifer J. Roof, Miller Nash LLP, Portland, OR, for the appellees.

Appeal from the United States District Court for the District of Oregon; Anna J. Brown, District Judge, Presiding. D.C. No. CV-04-00601-AJB.

Before: STEPHEN REINHARDT, CYNTHIA HOLCOMB HALL, and MILAN D. SMITH, JR., Circuit Judges.

REINHARDT, Circuit Judge:

This case presents the question whether the estate and alleged beneficiaries of an employee who was neither enrolled in, nor eligible for, a life insurance plan regulated by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001, et seq., at the time of her death (which preceded the time this action was filed) may bring an ERISA claim. We hold that these parties may not bring such a claim, and therefore ERISA does not preempt Appellants' state law claims.

I. Factual and Procedural Background

Connie Miller ("Miller") was employed by Rite Aid from approximately 1981 until her death on February 13, 2002. For some unknown period of time, Rite Aid made deductions from Miller's paycheck to pay for life insurance through a group plan provided by ReliaStar Life Insurance Company ("ReliaStar"). Appellants claim that the ReliaStar policy provided for a benefit of approximately $150,000 and that Miller's children were the beneficiaries of the policy.

In February 2001, Miller was diagnosed with terminal cancer and was placed on disability until her death one year later. On July 1, 2001, before Miller's death, Rite Aid terminated its ReliaStar plan and replaced it with a group plan provided by Standard Insurance Company ("Standard"). Miller was not enrolled in the Standard life insurance plan because she was not included in the list of employees exempt from the plan's "active at work" requirement, which provided that

If you are incapable of Active Work because of Sickness, Injury or Pregnancy on the day before the scheduled effective date of your insurance . . . your insurance will not become effective until the day after you complete one full day of Active Work as an eligible member. [] Active Work . . . mean[s] performing the material duties of your occupation at your Employer's usual place of business.

Therefore, Miller was not enrolled in a group life insurance plan after Rite Aid terminated the ReliaStar plan. Miller also did not convert the ReliaStar group plan into an individual plan.¹

Appellants allege, without any details, that Rite Aid "offered, as part of the employment agreement [with Miller], that [Miller] would be provided with life insurance." Appellants also allege that after Miller became terminally ill Rite Aid representatives assured her that she would continue to have life insurance through the time of her death. Miller allegedly repeated these assurances to her daughter. Appellants also allege that after Miller's death Rite Aid representatives told her daughter that Miller had life insurance at the time of her death.² Appellants later discovered that they were not eligible for any benefits because Miller was not enrolled in any life insurance plan.

After Miller died, her children and alleged beneficiaries, Morgan Miller, Kylee Miller, Wayne Hoover, individually, and Morgan Miller as personal representative of Miller's Estate, filed suit in the Circuit Court of the State of Oregon against Rite Aid Corporation, Thrifty Payless, Inc.,³ ReliaStar Insurance Company, and Standard Insurance Company. In their Amended Action, they alleged breach of insurance contract against ReliaStar and, in the alternative, against Standard, for failure to pay death benefits worth approximately $150,000. Alternatively, Appellants alleged breach of employment contract against Rite Aid for failing to provide Miller with life insurance. The Millers also alleged that Rite Aid negligently failed to "ensure that [Miller's] fringe benefits would be preserved."

The defendants removed the action to the United States District Court for the District of Oregon, on the ground that the District Court had federal question jurisdiction because ERISA preempted the Appellants' state law claims. In the alternative, the defendants claimed that the District Court had diversity jurisdiction with respect to Rite Aid.

Appellants voluntarily dismissed their claim against ReliaStar, and Standard and Rite Aid filed motions for summary judgment. The district judge granted summary judgment in favor of Standard, and Appellants did not appeal that decision. In the district court, Rite Aid contended that Appellants' state common law claims were preempted by ERISA. Rite Aid further argued that the Millers did not have valid common law or ERISA claims against it because ReliaStar provided instructions for converting the group policy to an individual policy, and because "Miller was not even eligible to receive life insurance through Rite Aid" due to the Standard policy's "active at work" requirement. The district judge granted summary judgment on the preemption ground and dismissed the action.

The Millers appealed. Rite Aid is the only appellee.

II. Discussion

State common law claims are preempted by ERISA "insofar as they may now or hereafter relate to any employee benefit plan" regulated by ERISA. 29 U.S.C. § 1144(a). But before a court wades into this provision's "veritable Sargasso Sea of obfuscation," it must first resolve the simpler question of whether a party may assert a claim under ERISA. Toumajian v. Frailey, 135 F.3d 648, 653 n. 3 (9th Cir. 1998) (citation and internal quotation marks omitted). See also Burrey v. Pac. Gas & Elec. Co., 159 F.3d 388, 392 (9th Cir.1998); Curtis v. Nev. Bonding Corp., 53 F.3d 1023, 1026-27 (9th Cir.1995).

A civil action under ERISA may be brought by a "participant" in or "beneficiary" of an ERISA plan. 29 U.S.C § 1132(a)(1). ERISA does not preempt the claims of parties who do not have the right to sue under ERISA because they are neither participants in nor beneficiaries of an ERISA plan. Curtis, 53 F.3d at 1027. As we stated in Harris v. Provident Life & Accident Insurance Co., 26 F.3d 930, 934 (9th Cir.1994), "it would be contradictory to rule that state law claims are preempted where the court has already held that the same plaintiffs may not assert a claim under ERISA because they are not `participants' in the ERISA plan. . . . Unlike the Chesire [sic] Cat, one cannot have the smile of preemption without the stripes of participation." (citations and internal quotation marks omitted).

Appellants, the Miller's estate and her beneficiaries, may bring a civil suit under ERISA only if Miller was a "participant" in an ERISA plan at the relevant time. ERISA defines a "participant" as "any employee or former employee . . . who is or may become eligible to receive a benefit of any type from an employee benefit plan . . . or whose beneficiaries may be eligible to receive any such benefit." 29 U.S.C. § 1002(7). The Supreme Court has interpreted this provision to mean that a party is a "participant" if he is an employee in, or reasonably expected to be in, currently covered employment, or if he is a former employee who has a reasonable expectation of returning to covered employment, or a "colorable claim" to vested benefits. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989).

Miller was employed by Rite Aid until the time of her death, so to decide whether Miller was a "participant," we must ask whether Miller was either covered by an ERISA life insurance plan at the relevant time, or whether she may have become eligible for benefits from such a plan at such time. In order to establish that Miller "may become eligible," she "must have a colorable claim that (1) [she] will prevail in a suit for benefits, or that (2) eligibility requirements will be fulfilled in the future." Id. at 117-18, 109 S.Ct. 948.

In order to answer the questions before us we must first identify the relevant time for determining whether Miller was a "participant." We have repeatedly held that whether a living party is a "participant" or "beneficiary" is determined as of the time the lawsuit is filed. See, e.g., Chuck v. Hewlett Packard Co., 455 F.3d 1026, 1039 (9th Cir.2006); Schultz v. PLM Int'l, Inc., 127 F.3d 1139, 1141-42 (9th Cir.1997); Crotty v. Cook, 121 F.3d 541, 544-47 (9th Cir.1997); Curtis, 53 F.3d at 1027 (9th Cir.1995); Parker v. Bain, 68 F.3d 1131, 1138-39 (9th Cir.1995); Harris, 26 F.3d at 933; Olson v. Gen. Dynamics Corp., 960 F.2d 1418, 1422 (9th Cir.1991), cert. denied, 504 U.S. 986, 112 S.Ct. 2968, 119 L.Ed.2d 588 (1992); Nishimoto v. Federman-Bachrach & Assocs., 903 F.2d 709, 714-15 (9th Cir.1990); Kuntz v. Reese, 785 F.2d 1410, 1411 (9th Cir.1986), cert. denied, 479 U.S. 916, 107 S.Ct. 318, 93 L.Ed.2d 291 (1986), abrogated on other grounds by Kayes v. Pac. Lumber Co., 51 F.3d 1449 (9th Cir.1995). However, we have never identified the applicable time for evaluating the claims of a decedent's estate and beneficiaries.⁴

In the case of a deceased employee, it would seem to make more sense to look to the time of the employee's death to determine whether he is covered by an insurance plan, although it is inconceivable that there could be any change in eligibility between the time of death and the time the suit is filed. This will also be the applicable time for determining whether the decedent had a colorable claim to benefits.⁵

At the time of Miller's death she did...