Sladek v. Bell System Management Pension Plan

• Decision Date: 31 July 1989
• Docket Number: No. 88-1971,88-1971
• Citation: 880 F.2d 972
• Parties: , 58 USLW 2103, 14 Fed.R.Serv.3d 495, 11 Employee Benefits Ca 1427 Gloria SLADEK, Plaintiff-Appellant, v. BELL SYSTEM MANAGEMENT PENSION PLAN, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 972

880 F.2d 972

112 A.L.R.Fed. 849, 58 USLW 2103, 14

Fed.R.Serv.3d 495,

11 Employee Benefits Ca 1427

Gloria SLADEK, Plaintiff-Appellant, v. BELL SYSTEM MANAGEMENT PENSION PLAN, Defendant-Appellee.

No. 88-1971.

United States Court of Appeals,

Seventh Circuit.

Argued Dec. 5, 1988.

Decided July 27, 1989.

As Corrected July 31, 1989.

Mark S. Schaffner, Potter & Schaffner, Chicago, Ill., for Gloria sladek.

Charles C. Jackson, Gary S. Kaplan, Seyfarth, Shaw, Fairweather & Geraldson, Chicago, Ill., Raymond A. Ledogar, Berkeley Heights, N.J., for Bell System Management Pension Plan.

Before BAUER, Chief Judge, EASTERBROOK, Circuit Judge, and GRANT, Senior District Judge. ^*

GRANT, Senior District Judge.

The appellant, Gloria Sladek, filed the instant action in district court under the Employee Retirement Income Security Act ("ERISA" or "the Act"), 29 U.S.C. Secs. 1001-1461, to set aside her husband's pension election as voidable due to incompetency. Mr. Sladek, a qualified participant in an employee benefit plan governed by the Act, elected to forego the survivor annuity option offered by the defendant-plan, the Bell System Management Pension Plan ("the Plan"), in order to receive full pension benefits during his lifetime. The appellant brought this suit as a potential beneficiary pursuant to 29 U.S.C. Sec. 1132(a)(1)(B), alleging that Mr. Sladek suffered from Alzheimer's Disease at the time he declined the survivor annuity and was incompetent to make a valid election as a result of his condition. Inasmuch as the Plan presumes that the survivor annuity is selected unless expressly declined, the appellant argues that she is entitled to an annuity by reason of the voidable election. The district court dismissed the appellant's second amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) on the ground that the appellant was not a beneficiary under the Act and therefore lacked standing to challenge the validity of the election. We reverse and remand to the district court, with instructions to order Mr. Sladek joined to the action pursuant to Fed.R.Civ.P. 19.

I.

Henry Robert Sladek retired from the Western Electric Company on May 1, 1981 as a full service participant in the Bell System Management Pension Plan. As an employee benefit plan controlled by ERISA, the Plan grants participants a survivor annuity in the absence of an express election to receive full benefits. See 29 U.S.C. Sec. 1055(a). If no election is made, the participant's monthly benefits are reduced by ten percent (10%) and the annuity is granted to a designated beneficiary. If the participant fails to name a beneficiary, the designation is made according to the terms of the Plan. Under the Plan, the surviving spouse is typically granted an annuity.

Prior to his retirement, Mr. Sladek elected to receive full benefits in lieu of the survivor annuity. Approximately four years later, the appellant challenged the validity of the election. After having exhausted her remedies under the internal system of review established by the Plan, the appellant filed this action in district court. The defendant moved to dismiss the second amended complaint on the grounds that: (i) the plaintiff-appellant was not a beneficiary under Sec. 1002(8) and therefore lacked standing to prosecute the action; and (ii) Mr. Sladek was an indispensable party whose joinder was necessary under Fed.R.Civ.P. 19.

The district court ruled that the appellant was not a beneficiary as defined by Sec. 1002(8) ¹ and dismissed the second amended complaint with prejudice pursuant to Rule 12(b)(1). Sladek v. Bell Sys. Management Pension Plan, No. 87 C 6468, slip op. at 4-5, 1988 WL 33839 (N.D.Ill. April 6, 1988). The district court did not reach the indispensable party issue, stating that "the court will not address the merits of the Rule 12(b)(7) motion." Id. at 2 n. 1. The district court acknowledged that it must accept "all well-pleaded factual allegations of the complaint as true" on a motion to dismiss, id. at 2, but distinguished between purely factual allegations, such as those relating to Mr. Sladek's illness, and "conclusory allegations" surrounding "the legal effect of plaintiff's claim that her husband had Alzheimer's disease." Id. at 3. The district court concluded that the allegations of incompetency, which, in turn, fuelled the appellant's argument that the election was voidable and bestowed standing upon her as a potential beneficiary, need not be taken as true. Id. Insofar as the appellant was not a designated beneficiary and standing was predicated upon "an assumed evidentiary finding in [her] favor," the district court concluded that the appellant lacked standing. Id. at 4. The second amended complaint was dismissed with prejudice pursuant to Rule 12(b)(1) because the "plaintiff no longer has standing to bring a motion to amend her second amended complaint to add a party who meets the standing provisions of ERISA." Id. at 5. The appellant subsequently filed a timely notice of appeal on May 19, 1988.

II.

Two issues have been raised throughout the course of this litigation: (i) whether the appellant has standing to challenge the validity of the election made by her husband; and (ii) whether Mr. Sladek is an indispensable party under Rule 19. We will address each of these issues in turn.

The question of whether the spouse of a plan participant, who would normally have standing but for the disputed election by the participant, continues to have standing to challenge an election is one of first impression in this Circuit. In fact, neither the briefs of the parties nor our own independent research have been able to identify a case that is precisely on point. Given the pristine nature of our field of inquiry, we are mindful of the need for deliberate and exacting analysis, careful not to overlook subtle, though often critical, distinctions.

As the district court recognized, it is axiomatic that a "court must accept all well-pleaded factual allegations of [sic] a complaint as true" "[f]or the purposes of resolving a motion to dismiss." Id. at 2. See also Hishon v. King & Spaulding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957); Ed Miniat, Inc. v. Globe Life Ins. Group, Inc., 805 F.2d 732, 733 (7th Cir.1986), cert. denied, 482 U.S. 915, 107 S.Ct. 3188, 96 L.Ed.2d 676 (1987); Republic Steel Corp. v. Pennsylvania Eng'g Corp., 785 F.2d 174, 182-83 (7th Cir.1986). From that premise, however, the district court went on to conclude that the appellant's "claim of incompetency and voidability are in fact conclusory allegations concerning the legal effect of plaintiff's claim that her husband had Alzheimer's disease" and "[o]nly this latter fact must be taken as true for the purposes of this motion." Sladek, slip op. at 3.

In support of its conclusion, the district court cites our decision in Republic Steel Corp. v. Pennsylvania Eng'g Corp., 785 F.2d at 174, in which we stated that a court is "not bound by the legal characterization [the plaintiff] gives [to the] ... facts." Id. at 183. A careful reading of that decision, however, indicates that the rule enunciated in Republic Steel does not mandate the ruling below. In Republic Steel, the plaintiff sought to recover in tort for damages alleged to have been incurred during the installation of a pair of furnaces. Id. at 176. The district court dismissed the negligence and product liability claims pursuant to Fed.R.Civ.P. 12(b)(6), with this Court affirming on the ground that the district court was not bound by the plaintiff's "legal characterization" of his claims as sounding in tort when, in fact, the claims were essentially contractual in nature. Id. at 184. That is, dismissal was proper under Rule 12(b)(6), because the factual allegations contained in the complaint, when taken as true, did not state a claim upon which relief could be granted in tort.

Our decisions have consistently held that the allegations in the complaint must be taken as true when ruling upon a motion to dismiss. See Morgan v. Bank of Waukegan, 804 F.2d 970, 973 (7th Cir.1986) ("plaintiffs' allegations must be accepted as true"). In Evans v. First Fed. Sav. Bank of Ind., 669 F.Supp. 915 (N.D.Ind.1987), the district court correctly noted that "when ruling on a 12(b)(1) dismissal, the trial court 'must accept as true all allegations of the complaint in favor of the complaining party.' " Id. at 917 (quoting Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 2206, 45 L.Ed.2d 343 (1975)) (emphasis added). If the allegations in the appellant's second amended complaint are taken as true, it seems clear that the appellant has standing as a potential beneficiary under the Act. See 29 U.S.C. Sec. 1002(8). The district court refused to find that the appellant had standing on the ground that "plaintiff asks the court to find jurisdiction on the basis of an assumed evidentiary finding in plaintiff's favor," i.e., that the election made by Mr. Sladek was voidable due to incompetency, and reasoned that "this court cannot allow plaintiff to have ERISA standing under such malleable circumstances." Sladek, slip op. at 4. While we acknowledge that the complexity of this issue has led to less than uniform results in other federal courts, we cannot accept the district court's analysis.

In Ed Miniat, Inc. v. Globe Life Ins. Group, Inc., 805 F.2d at 732, a decision that seems dispositive of the instant appeal, the plaintiffs filed suit as fiduciaries under Sec. 1002(9) of the Act. As in the instant case, standing turned upon whether the facts as alleged in the complaint were true. If so, the plaintiffs qualified as fiduciaries and had standing to bring the action. If not, the plaintiffs lacked standing. In short, standing was based upon the sort of "assumed evidentiary finding in plaintiff[s'] favor," Sladek, slip op. at 4, that the district court found to be present...