Ruttenberg v. U.S. Life Ins., New York City
| Decision Date | 27 July 2005 |
| Docket Number | No. 04-1653.,04-1653. |
| Citation | 413 F.3d 652 |
| Parties | Andrew RUTTENBERG, Plaintiff-Appellant, v. UNITED STATES LIFE INSURANCE COMPANY in the City of New York, a subsidiary of American General Corporation, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Mark D. Debofsky (argued), Daley, Debofsky & Bryant, Chicago, IL, for Plaintiff-Appellant.
Daniel J. McMahon (argued), Wilson, Elser, Moskowitz, Edelman & Dicker, Chicago, IL, for Defendant-Appellee.
Before COFFEY, RIPPLE and SYKES, Circuit Judges.
Andrew Ruttenberg filed a claim for total disability benefits with his insurer, United States Life Insurance Company in the City of New York ("U.S. Life" or the "Company"). After protracted consultations with a number of physicians and consultants produced no ruling on the claim, Mr. Ruttenberg filed suit. Originally, he alleged claims under Illinois law. The parties agreed to a stay in the proceedings while U.S. Life considered Mr. Ruttenberg's claim. When U.S. Life denied the claim, the parties returned to the district court. The district court then determined that Mr. Ruttenberg's claim was preempted by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. It therefore dismissed the action with leave to file a claim under that statute.
After Mr. Ruttenberg filed an ERISA claim, the parties conducted discovery, and, eventually, each filed motions for summary judgment. The district court granted U.S. Life's motion; it concluded that Mr. Ruttenberg did not qualify for coverage under the plan because he could not be considered a full-time employee under its terms.
Mr. Ruttenberg now appeals both the grant of summary judgment and the district court's previous ERISA preemption determination; U.S. Life cross-appeals certain rulings made by the district court in the course of this litigation. For the reasons set forth in the following opinion, we reverse the judgment of the district court and remand this case for proceedings consistent with this opinion.
Mr. Ruttenberg worked as an independent commodity trader at the Chicago Board of Trade and Mercantile Exchange (the "exchange"), a position requiring a certain amount of screaming in order to gain the attention of other traders on the floor. The exchange floor was open for thirty-five hours per week. He did not keep regular hours on trading days. Sometimes, he would work several hours at the exchange. Other times, he would leave early after making significant gains or taking losses. He spent time away from the floor preparing for trades or reconciling accounts. Trading constituted his primary occupation, and the evidence shows that, at times, he made over $30,000 in profits per month.
Mr. Ruttenberg cleared his trades through SMW Trading Co. ("SMW"). The firm contracted through U.S. Life1 to provide disability insurance to independent traders. Mr. Ruttenberg paid premiums on a policy which entitled him to $10,000 per month in coverage. On March 29, 2001, Mr. Ruttenberg filed a claim for disability benefits. He submitted evidence from his physician, Dr. Goldberg, that asthma prevented him from performing his job. Two other physicians, Dr. Taitz and Dr. Fisher, performed tests at Dr. Goldberg's request and found no nasal or other obstructions. U.S. Life forwarded the claim to its administrator, Disability Reinsurance Management Services ("RMS"). The RMS in-house consultant, Dr. Hogan, reviewed the claim and offered medical opinions; RMS determined that Dr. Goldberg's opinion was based on subjective complaints. RMS then arranged an appointment for Mr. Ruttenberg with another specialist, Dr. Diamond.
Dr. Diamond examined Mr. Ruttenberg and diagnosed asthma and vocal cord dysfunction and expressed concern that Mr. Ruttenberg's hoarseness, still apparent after Mr. Ruttenberg had been away from work for seven months, might be permanent. To the diagnosis, he attached a pulmonary function report and a plethysmograph report; in the latter, the technician noted that Mr. Ruttenberg had been unable to achieve reproducible results in his exhalation flow rate. Dr. Diamond appended an additional letter to the report, in which he sought to clarify his opinion that Mr. Ruttenberg is permanently disabled because he could not continue to work as a trader.
Dr. Hogan reviewed Dr. Diamond's report and concluded that a definitive diagnosis could not be made without viewing Mr. Ruttenberg's vocal cords. A claims analyst for U.S. Life told Mr. Ruttenberg that the company might accept liability if the test supported Dr. Diamond's conclusion. A month later, RMS contacted Mr. Ruttenberg and said it was waiting for Dr. Fisher to review Dr. Hogan's interpretation. Mr. Ruttenberg filed suit the next week.
Mr. Ruttenberg's action initially was based in diversity, but the district court dismissed the suit without prejudice on August 21, 2002, because Mr. Ruttenberg had not pleaded diverse defendants. He later refiled the complaint, and the parties agreed to a stay of proceedings while RMS re-reviewed the claim. Mr. Ruttenberg submitted additional medical evidence, including the results of a nasopharyngoscopy performed by Dr. Diamond.2 The test led Dr. Diamond to confirm his previous diagnosis and disability opinion because he saw the "classic posterior chinking" associated with vocal cord dysfunction. He further stated that the inconsistent results noted by the plethysmograph technician a year earlier were not the result of insufficient effort on Mr. Ruttenberg's part, as had been implied by U.S. Life, but were associated with the dysfunction.
RMS forwarded the medical records to another expert, Dr. Karetzky, for review. This physician determined that Mr. Ruttenberg's results stemmed from his poor effort and found nothing that would impair significantly his work.3 On November 19, 2002, RMS reported the results to Mr. Ruttenberg. It also raised questions about whether he qualified as a full-time employee under the policy and requested documentation to establish that he had worked more than thirty hours per week as required by the policy. Mr. Ruttenberg responded that it was impossible to actually work on the floor of the exchange for thirty hours per week and asserted that he worked on trades and performed other job-related functions which, taken together with his time on the floor, amounted to more than thirty hours. On December 6, 2002, U.S. Life denied Mr. Ruttenberg's claim. It concluded, among other things, that his injury did not meet the definition of disability under the policy and that U.S. Life could not substantiate his eligibility. The letter stated that Mr. Ruttenberg had the right to appeal the decision; the parties then returned to the district court.
U.S. Life filed a motion alleging that ERISA preempted Mr. Ruttenberg's state law claims and seeking dismissal for failure to exhaust administrative remedies. In response, Mr. Ruttenberg argued that his insurance plan was not an ERISA plan because (1) SMW did not establish or maintain it and (2) as an independent contractor, he was not a participant or beneficiary as ERISA employs those terms.
The district court rejected the first argument because SMW created the insurance plan, designated eligible employees and contributed funds. With respect to Mr. Ruttenberg's second argument, the district court stated that Mr. Ruttenberg qualified as a "beneficiary" under ERISA,4 29 U.S.C. § 1002(8), and his state law claims thus were preempted by that statute, id. § 1144. The court based its beneficiary determination on the plain language of § 1002(8), which defines a beneficiary as "a person designated . . . by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder," and precedent in other courts. Having determined that the policy qualified as an ERISA plan, the district court found Mr. Ruttenberg's state law claims to be preempted.5 The district court dismissed Mr. Ruttenberg's complaint with leave to refile an ERISA cause of action; it thus found no need to address U.S. Life's argument that Mr. Ruttenberg had failed to exhaust his administrative remedies. Mr. Ruttenberg refiled an ERISA action.
After discovery, the parties filed cross-motions for summary judgment.6 U.S Life based its motion on two grounds, both relating to Mr. Ruttenberg's eligibility under the policy: (1) that he was not an "employee" of SMW and therefore was not covered by the policy terms; and (2) that even if he was an "employee," he did not qualify as "full-time" as required by the policy because there was no evidence that he worked more than thirty hours per week.7 The district court rejected the first argument, concluding that the policy was ambiguous because it limited benefits to "employees" but listed as employees traders reporting income on IRS 1099 forms, even though such individuals generally are considered independent contractors. Given the ambiguity, the district court applied the maxim contra proferentem and construed that ambiguity against U.S. Life, foreclosing the company from arguing that Mr. Ruttenberg was not an "employee" under the policy.
The court, however, accepted U.S. Life's second argument. The district court read the policy's terms to require plainly that Mr. Ruttenberg be a full-time employee and, just as plainly, that he work at least thirty hours per week. The evidence submitted by Mr. Ruttenberg indicated that he spent at most fifteen to twenty hours working the exchange floor, and the court noted that
[p]resumably by those hours he meant to suggest that he was trading in the pit during those times, and it is reasonable to suggest that Ruttenberg may have spent another 10 hours a week preparing for his trades. However, with no evidence in the record to...
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