Sharp Electronics Corp. v. Metropolitan Life Ins.

• Decision Date: 18 August 2009
• Docket Number: No. 08-2959.,08-2959.
• Parties: SHARP ELECTRONICS CORPORATION, Plaintiff-Appellant, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

578 F.3d 505

SHARP ELECTRONICS CORPORATION, Plaintiff-Appellant, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant-Appellee.

No. 08-2959.

United States Court of Appeals, Seventh Circuit.

Argued April 14, 2009.

Decided August 18, 2009.

Craig R. Annunziata, Fisher & Phillips, Chicago, IL, Brian K. Lafratta (argued), Fisher & Phillips, Chicago, IL, for Plaintiff-Appellant.

Ian S. Linker (argued), Metlife Group, Incorporated, Long Island City, NY, for Defendant-Appellee.

Before KANNE, ROVNER, and WOOD, Circuit Judges.

WOOD, Circuit Judge.

From 1997 until April 2, 2002, Sandra Rudzinski worked for Sharp Electronics Corporation. As a full-time employee, she was entitled to participate in a long-term group disability plan (the "Plan"), which was underwritten by Metropolitan Life Insurance Company ("MetLife"). The present controversy arose out of a lawsuit between Rudzinski and MetLife. Briefly, after Rudzinski stopped working for Sharp, she applied for a conversion policy with MetLife to preserve her long-term disability coverage. MetLife denied her application. Rudzinski responded with a suit in federal court asserting that MetLife had wrongfully denied her benefits. Initially, MetLife was the sole defendant. During a settlement conference, however, MetLife represented to Rudzinski that one reason it had refused to pay her any long-term benefits was that Sharp had failed to make required payments to it on her behalf.

Based on this statement, Rudzinski filed an amended complaint adding Sharp as an additional defendant; she asserted that Sharp had breached its fiduciary duty to her and had interfered with her benefits. On July 19, 2006, following an unsuccessful motion to dismiss, Sharp filed a cross-claim against MetLife asserting that MetLife had breached a fiduciary duty it allegedly owed to Sharp under the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132, that MetLife was obliged to indemnify Sharp for certain expenses, and that MetLife was estopped from denying these obligations.

Although Rudzinski and Sharp reached a settlement and the district court entered judgment in favor of Rudzinski in her action against MetLife, Sharp's claim against MetLife remained pending. After Sharp filed an amended cross-claim, MetLife moved to dismiss for failure to state a claim. See FED.R.CIV.P. 12(b)(6). The district court granted that motion on July 9, 2008, and Sharp has now appealed from the judgment against it. We affirm.

I

Sharp adopted the MetLife long-term disability plan in 1997 as part of the welfare benefits package it furnished for its employees; the Plan was qualified under ERISA. Sharp was, at all relevant times, the Plan administrator and MetLife the Plan fiduciary. Pursuant to the Plan, Sharp was required to pay short-term disability benefits to eligible employees during a 180-day policy benefits elimination period. Thereafter, MetLife was required to pay long-term disability benefits to employees who met criteria specified in the Plan. Sharp was required under the Plan to pay premiums to MetLife for the benefit of its employees, but it had no responsibility to pay premiums for a person whose employment with Sharp had been terminated, unless the person was disabled and was within an elimination period at the time her employment ended.

On April 2, 2002, as a result of chronic fatigue, joint pain, and headaches, Rudzinski ceased active employment with Sharp. (Later, she was diagnosed with fibromyalgia.) As a participating member in the Plan, Rudzinski was eligible for both short-term and long-term disability benefits. Accordingly, following the cessation of her employment, she began receiving short-term disability benefits from Sharp and the 180-day elimination period began to run. Rudzinski also filed a claim with MetLife in which she requested long-term disability insurance benefits, to commence immediately upon the completion of the 180-day period.

On July 9, 2002, Sharp notified Rudzinski that if she did not return to active employment by July 31, 2002, she would lose her job and Sharp would cease making payments on her behalf to MetLife for long-term disability benefits. Rudzinski did not return to work at Sharp, and, as promised, Sharp ended her employment effective July 31, 2002. Sometime prior to the deadline, Sharp informed Rudzinski that, if she did not return to work, she could preserve her long-term disability coverage with MetLife by obtaining a "conversion policy" and paying premiums on her own behalf as a non-employee. Rudzinski took the advice, applied to MetLife for a conversion policy, and paid the requisite premiums. After some time had passed, however, MetLife denied Rudzinski long-term disability benefits on the ground that she had a pre-existing disability at the time she applied for the conversion policy. Rudzinski then made a formal demand on MetLife for long-term disability benefits pursuant to the Plan. MetLife considered her demand and denied it, this time on the ground that she had not fulfilled the 180-day period that was supposed to precede long-term benefits.

Rudzinski then filed a claim in the district court pursuant to 29 U.S.C. § 1132(a)(1)(B), alleging that MetLife wrongfully denied her benefits. Approximately two years after Rudzinski filed her lawsuit, and more than two years after MetLife initially denied her claim for benefits, MetLife's lawyer let slip in a settlement conference that an additional reason why she did not qualify for benefits was that Sharp had discontinued payment of her long-term disability premiums following the termination of her employment. The Plan does not obligate Sharp to make premium payments for any employee once the person is no longer working for it. Based on this representation from MetLife, Rudzinski amended her complaint to add Sharp as a defendant, alleging that Sharp violated 29 U.S.C. § 1140 by wrongfully interfering with her disability benefit rights under the Plan; violated its fiduciary duties to her; and misled her into believing that by obtaining a conversion policy and paying the necessary premiums, she could protect her rights to longterm disability benefits.

Sharp responded to Rudzinski's claim in two ways. First, it filed a Rule 12(b)(6) motion to dismiss for failure to state a claim; the district court denied that motion on April 27, 2006. Second, Sharp filed a cross-complaint against MetLife, alleging that (1) MetLife breached its fiduciary duties to Sharp under 29 U.S.C. §§ 1132(a)(2), 1132(a)(3), and 1109(a), when it stated in Rudzinski's presence that Sharp's nonpayment of premiums influenced its decision about her benefits; (2) MetLife was equitably estopped from relying on Sharp's alleged nonpayment as a reason for denying Rudzinski's benefits; and (3) if Sharp were found liable to Rudzinski on any of her claims, MetLife had to indemnify Sharp.

On January 16, 2007, Rudzinski voluntarily dismissed her claims against Sharp. This action left two claims pending in the district court: Rudzinski's claim against MetLife, and Sharp's cross-claim against MetLife. MetLife moved to dismiss Sharp's cross-claim. It argued with respect to Sharp's assertion that MetLife had breached a fiduciary duty that it owed to Sharp that it owed no such duty. MetLife also asserted that Sharp's indemnification claim was preempted by ERISA. On January 25, 2007, the district court denied MetLife's motion to dismiss, holding that the question whether MetLife owed any fiduciary duty to Sharp was one of fact, and that Sharp had stated a cognizable claim for indemnification that was not necessarily preempted by ERISA. MetLife then filed an answer to the cross-claim, and in the meantime, the district court entered judgment in favor of Rudzinski on her claim against MetLife, finding that MetLife wrongfully denied her benefits.

That left Sharp's cross-claim against MetLife as the only remaining claim before the district court. At that stage, the parties consented to the resolution of the claim before a magistrate judge. See 28 U.S.C. § 636(c). The next event of any consequence occurred on April 4, 2008, when Sharp filed an amended cross-complaint raising seven different theories of recovery against MetLife: breach of fiduciary duty under ERISA, 29 U.S.C. §§ 1132(a)(2), 1132(a)(3), and 1109(a); indemnification; negligence; negligent inducement; negligent misrepresentation; abuse of process; and common law breach of fiduciary duty.

MetLife responded on April 25, 2008, with a motion to dismiss the entire cross-complaint under Rule 12(b)(6). MetLife asserted that all of the theories outlined in Sharp's amended pleading were based upon statements made during the course of litigation. Those statements, it maintained, were absolutely privileged and could not form the basis of any liability. MetLife also argued that Sharp lacked standing to pursue the claims, that the relief sought was not available to Sharp, that the claims were preempted by ERISA, and that because Sharp had previously been dismissed from the case it could not recover damages, fees, or costs incurred in defending Rudzinski against MetLife. Sharp resisted these arguments on their merits and also contended that MetLife's motion was barred by the law of the case because the district court earlier had denied MetLife's motion to dismiss the cross-claims.

On July 9, 2008, the district court granted MetLife's motion, holding that the law of the case doctrine was inapplicable because the determination of MetLife's earlier motion to dismiss did not involve the claims as Sharp presented them in its amended cross-complaint. The court then held that, although the statement made by MetLife during the settlement conference was not privileged, MetLife's motion should be granted because MetLife had not breached any fiduciary duty to Sharp. The district court finally held that Sharp's remaining state-law claims are preempted by ERISA because, it thought, it would be...