Stewart v. National Educ. Ass'n, 05-7140.

• Citation: 471 F.3d 169
• Decision Date: 15 December 2006
• Docket Number: No. 05-7140.,05-7140.
• Parties: Michael STEWART and Ilene Bergenfeld, As Trustees of the Philip A. Stewart Irrevocable Trust, on Behalf of Themselves and all Other Persons Similarly Situated, Appellants v. NATIONAL EDUCATION ASSOCIATION and National Education Members Insurance Trust, Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

471 F.3d 169

Michael STEWART and Ilene Bergenfeld, As Trustees of the Philip A. Stewart Irrevocable Trust, on Behalf of Themselves and all Other Persons Similarly Situated, Appellants v. NATIONAL EDUCATION ASSOCIATION and National Education Members Insurance Trust, Appellees.

No. 05-7140.

United States Court of Appeals, District of Columbia Circuit.

Argued September 15, 2006.

Decided December 15, 2006.

COPYRIGHT MATERIAL OMITTED

Appeal from the United States District Court for the District of Columbia (No. 02cv02014).

James M. Pietz argued the cause for appellants. With him on the briefs were Philip Friedman, Michael P. Malakoff, Marc A. Wites, and Alejandro Perez.

Leon Dayan argued the cause for appellees. With him on the brief were Douglas L. Greenfield and Karen M. Wahle. Julia P. Clark entered an appearance.

Before: SENTELLE and ROGERS, Circuit Judges, and SILBERMAN, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge ROGERS.

ROGERS, Circuit Judge.

This case concerns a transfer of money from the Prudential Life Insurance Company to the National Education Association Members Insurance Trust ("NEA Trust") when Prudential converted from a mutual life insurance company — where the insured mutually own the company — into a stock life insurance company. On appeal from the dismissal of the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), the trustees of the estate of Philip A. Stewart ("Stewart") contend that he is entitled to benefit from the demutualization. Stewart maintains that the district court erred in ruling that the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., applied to the NEA insurance benefit plan and, alternatively, that he failed to state a cause of action under ERISA for benefits and for breach of fiduciary duty. In view of the allegations in the amended complaint, Stewart is estopped from arguing that ERISA does not apply to the NEA insurance benefit plan. Further, Stewart identifies no term of the Group Contract that entitles him to receive the demutualization proceeds, which represent the capitalization of future dividends, as a benefit. Additionally, because Stewart does not allege that he was entitled to the demutualization proceeds as a dividend, but only that no provision in the Group Contract allowed the NEA Trust to take control of the insureds' alleged equity interest in the demutualization proceeds, he cannot show that the NEA or NEA Trust (collectively, "the NEA") breached a fiduciary duty under ERISA. Accordingly, we affirm.

I.

The NEA is a national organization of education professionals. In 1978, it established a Members Insurance Plan ("Plan") to operate voluntary programs providing benefits in the event of a death, accident, sickness, disability, or other occurrence affecting participants or their families, either through self-funding the benefits or by buying group insurance policies. At the same time, the NEA set up the NEA Trust to hold the Plan's assets. The Plan is governed by a "Plan Document" and the Trust is governed by a "Trust Agreement." The NEA Trust entered into a group life insurance contract ("Group Contract") with Prudential to provide insurance to participating NEA members ("Member-Insureds"). The Group Contract incorporates a Group Insurance Certificate and Member-Insureds' individual applications and provides that the NEA Trust is the contract holder.

NEA members are eligible for life and accident insurance coverage under the Group Contract, subject to approval by Prudential. Under the terms of the Group Contract, Prudential fixes the premium amount, which the Member-Insured pays to the NEA Trust, which in turn makes a group payment (equal to the sum of those premiums) to Prudential. Claims are submitted directly to Prudential. In recognition of the ownership stake of Prudential's policyholders, the Group Contract further provides that "Prudential will determine the share, if any, of its divisible surplus allocable to the Group Contract as of each Contract Anniversary." At some point, Prudential maintained separate accounts for each Member-Insured, crediting "Paid Up Life Insurance" with a "Cash Surrender Value" to each account. The Group Contract gave Member-Insureds the right to obtain an individual insurance contract if the Group Contract was terminated.

In December 2000, Prudential approved a plan to convert from mutual ownership to stock ownership. The reorganization plan was approved by the State of New Jersey, where Prudential is domiciled. See Plan of Reorganization of the Prudential Ins. Co., Order No. A01-153 (N.J. Dep't of Banking & Ins. Oct. 15, 2001), http://www.state.nj.us/dobi/a01_153.htm. When the conversion occurred on December 13, 2001, Prudential's mutual insurance policies were converted to non-participating policies in the name of the new stock company. At this time, Prudential transferred to the NEA Trust $17 million in "demutualization proceeds," which Stewart describes as "the residual value of Member-Insureds' prior premium payments." Appellants' Br. at 8. The NEA Trust treated the demutualization proceeds as a general Plan asset to be used for the benefit of all Plan participants, regardless of whether they participated in the Prudential Group Contract. Because the Plan's documents did not specifically refer to the treatment of demutualization proceeds, the NEA amended the Plan Document to specify how such a transfer of money was to be treated.

Stewart sued the NEA in a putative class action on behalf of other Member-Insureds in the same Prudential life insurance program sponsored by the NEA. Stewart's basic claim was that the demutualization proceeds constituted the share of Prudential attributable to premiums from Group Contract participants and that the NEA Trust accordingly was required to distribute the funds to the individual Member-Insureds or to segregate the funds for their benefit. The NEA Trust had treated the funds as Plan assets that could be used for the benefit of Plan members not participating in the Group Contract. Stewart also claimed that the demutualization terminated the preexisting policies, triggering Member-Insureds' privilege to convert their Group Contract certificates to individual insurance contracts. In the alternative, Stewart alleged claims under ERISA, federal common law, and state law. Appended to the amended complaint were the Group Contract, the Group Insurance Certificate, the Individual Contract Enrollment Form and Certificates, the Plan Document with its 2002 amendment, and the Trust Agreement. Upon the NEA's motion, the district court dismissed all of Stewart's claims, ruling that ERISA applied and preempted the six state-law claims and that Stewart failed to state a claim under ERISA. Stewart v. Nat'l Educ. Ass'n, 404 F.Supp.2d 122 (D.D.C. 2005). Stewart appeals the dismissal of the two ERISA and the state-law counts.

II.

ERISA sets out an "interlocking, interrelated, and interdependent remedial scheme," Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 146, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985), for violations of its substantive regulatory requirements relating to employee benefit plans. When ERISA applies, it "supersede[s] any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). The district court found that it was "factually undeniable that the Group Contract and the Plan are `employee welfare benefit plans' within the meaning of ERISA" and that each of Stewart's state-law causes of action "relate[d] to" the plan such that they were preempted by ERISA's federal causes of action. Stewart, 404 F.Supp.2d at 137-39. On appeal, Stewart challenges whether his pleadings require the conclusion that the Group Contract is an employee benefit plan covered by ERISA. He does not challenge whether the state-law causes of action "relate to" those plans.

We review de novo both the district court's statutory interpretation, see Kaseman v. District of Columbia, 444 F.3d 637, 640 (D.C.Cir.2006), and its dismissal of the complaint for failure to state a cause of action, see Barr v. Clinton, 370 F.3d 1196, 1201 (D.C.Cir.2004). Of course, a complaint should not be dismissed unless the plaintiff can prove no set of facts that would entitle the plaintiff to relief, see Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), construing the complaint liberally in the plaintiff's favor with the benefit of all reasonable inferences derived from the facts alleged, see Kowal v. MCI Commc'ns Corp., 16 F.3d 1271, 1276 (D.C.Cir.1994). But the court need not "accept legal conclusions cast in the form of factual allegations." Id. In determining whether a complaint states a claim, the court may consider the facts alleged in the complaint, documents attached thereto or incorporated therein, and matters of which it may take judicial notice. See EEOC v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624-25 (D.C.Cir.1997).

ERISA "shall apply to any employee benefit plan if it is established or maintained . . . by any employee organization or organizations representing employees." 29 U.S.C. § 1003(a). "The terms `employee welfare benefit plan' and `welfare plan' mean any plan, fund, or program . . . established or . . . maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise . . . benefits in the event of sickness, accident, disability, death or unemployment . . . ." Id. § 1002(1). Stewart's complaint, on its face, places the Plan, and the Group Contract, within ERISA's ambit. He alleges that the NEA is an organization representing school teachers, that "the NEA established the Members Insurance Plan" of which the Group Contract is part, and that the NEA was "an administrator of the Plan." This ends the matter, as the district court concluded, because Stewart has affirmatively pleaded the...