Transamerica Occidental Life Ins. Co. v. Digregorio

• Decision Date: 02 March 1987
• Docket Number: No. 85-2831,85-2831
• Parties: , 8 Employee Benefits Ca 1675 TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY, a Corporation, Plaintiff- Appellant, v. Linda Ann DIGREGORIO, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1249

811 F.2d 1249

55 USLW 2488, 8 Employee Benefits Ca 1675

TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY, a Corporation, Plaintiff- Appellant, v. Linda Ann DIGREGORIO, Defendant-Appellee.

No. 85-2831.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Oct. 1, 1986.

Decided March 2, 1987.

Robert H. Roe, San Francisco, Cal., for plaintiff-appellant.

Michael F. O'Leary, San Francisco, Cal., for defendant-appellee.

Appeal from the United States District Court for the Northern District of California.

Before SNEED, KENNEDY and BEEZER, Circuit Judges.

SNEED, Circuit Judge:

Transamerica Occidental Life Insurance Company (Transamerica) brought suit in federal court pursuant to the Employee Retirement Income Security Act (ERISA), 29 U.S.C. Secs. 1001-1461, for a declaration that its policy did not provide double indemnity to a particular beneficiary. The district court dismissed on the ground that it lacked subject matter jurisdiction or, alternatively, that it had discretion to defer to pending state court litigation. Transamerica appeals. We hold that there was federal jurisdiction but affirm on the alternative ground.

I. FACTS

An employee of the Bank of America died of heat stroke. The bank's employee welfare plan included a life insurance policy worth some $50,000, with double indemnity in the event of death by "external, violent, and accidental means." Transamerica, the insurer, paid the decedent's estate single coverage, denying that the double indemnity clause applied to heat stroke. Defendant, the decedent's daughter and successor to the estate, threatened to sue; Transamerica responded by seeking a declaratory judgment in federal district court. About one month later, defendant filed suit in state court. Her complaint raised exclusively state law claims, including an action for bad faith. She then successfully moved in the district court to dismiss Transamerica's action.

II. SUBJECT MATTER JURISDICTION

This is not a simple case. That this is so is a tribute to the intricate interplay of federal and state laws, including those fixing the jurisdiction of federal and state courts. What ought to be a fairly simple problem of interpreting an insurance policy turns out to be a complex case requiring the analysis of complicated statutes and the subtle distinctions that might be drawn between numerous judicial opinions. Reflection prompts this thought. Federalism within the United States is passing from the realm of common understanding to that of lawyers and judges, and even our grip on its meaning may be slipping. No one is to blame; it is just happening.

a. Section 502(a)(3).

Transamerica bases its claim to a federal forum on section 502(a)(3) of ERISA, ¹ which permits an ERISA fiduciary to bring a civil action:

(A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan.

29 U.S.C. Sec. 1132(a)(3) (emphasis added). The parties have been helpful and have stipulated that the bank's welfare plan is an ERISA plan, and that Transamerica is a fiduciary thereof. Transamerica argues that its action seeks "equitable relief ... to enforce" the terms of this plan, which entitles it to be in federal court. Transamerica points to the settled law that section 502(a)(3)(B) can be the jurisdictional basis for some declaratory judgment actions. See Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 26-27, 103 S.Ct. 2841, 2855, 77 L.Ed.2d 420 (1983). The issue, however, is whether Transamerica's suit is an action either to obtain "equitable" relief or to "enforce" the terms of the plan.

A declaratory judgment does not necessarily constitute a form of "equitable" relief. "[D]eclaratory relief is neither strictly equitable nor legal...." E. Borchard, Declaratory Judgments 399 (2d ed. 1941); e.g., Hartford Fin. Sys. v. Florida Software Servs., 712 F.2d 724, 727 & cases cited (1st Cir.1983); see 10A C. Wright, A. Miller, & M. Kane, Federal Practice and Procedure Sec. 2769, at 758 (1983) [hereinafter Wright & Miller ]. A particular declaratory judgment draws its equitable or legal substance from the nature of the underlying controversy. Pacific Indem. Co. v. McDonald, 107 F.2d 446, 448 (9th Cir.1939); see Wallace v. Norman Indus., 467 F.2d 824, 827 (5th Cir.1972). Defendant's contractual claim to benefits, the source of Transamerica's case, is clearly a legal one. ² Had Transamerica's suit gone to trial, defendant could have demanded a jury. See, e.g., Hartford Fire Ins. Co. v. Herrald, 483 F.2d 425, 426 (9th Cir.1973) (per curiam). Not so, generally speaking, were it an equitable action. Transamerica's suit essentially presents a legal claim, albeit an inverted one.

Moreover, even if all declaratory judgments were considered "equitable" in nature, at least for the purposes of section 502(a)(3), we would still hold that Transamerica is not seeking to "enforce" the terms of its plan. A declaratory judgment may be said to "enforce" ERISA or the terms of an ERISA plan where it seeks to establish the primacy of an ERISA obligation over some independent, potentially conflicting federal or state law duty. Thus in Franchise Tax Board, the Court stated that section 502(a)(3)(B) authorized "a declaratory judgment action in federal court to determine whether the plan's trustees may comply with a state levy on funds held in trust." 463 U.S. at 27, 103 S.Ct. at 2855; see also United Food & Commercial Workers Trust v. Pacyga, 801 F.2d 1157 (9th Cir.1986) (jurisdiction assumed without discussion; declaration sought by fiduciary that state anti-subrogation law did not apply to ERISA insurance plan specifically calling for subrogation in some circumstances). A declaratory judgment might also be sought to "enforce" an ERISA term by establishing that the party against whom it is brought is charged with carrying out an ERISA duty which that party is allegedly disregarding. See, e.g., Pacyga, 801 F.2d at 1159 (beneficiary allegedly had obligation under plan that she sought to avoid). The instant case fits neither of these categories.

The truth of the matter is that Transamerica seeks a federal forum to interpret its contract. It seeks to clarify its obligations as an insurer, not to uphold its ERISA obligations in the face of a competing, independent duty. Nor does the defendant, the beneficiary, have ERISA obligations that this suit seeks to have her fulfill. We are not the first court to draw a distinction between an insurer's suit to interpret its policy and an action "to enforce" an ERISA term within the special authorization of section 502(a)(3)(B). See Northeast Dep't ILGWU Health & Welfare Fund v. Teamsters Local Union No. 229 Welfare Fund, 764 F.2d 147, 153-54 (3d Cir.1985) (holding that an ERISA insurer's declaratory suit seeking a favorable interpretation of a standard policy clause, against a party having no obligations under the plan, was not an action to "enforce" the plan terms).

The statutory language preceding section 502(a)(3) fortifies our conclusion. In subsection (a)(1), Congress authorizes an ERISA participant or beneficiary, but not a fiduciary, to bring suit

(B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.

29 U.S.C. Sec. 1132(a)(1)(B) (emphasis added). Congress has distinguished here between enforcement and clarification of rights. If required to choose between clarification and enforcement, we would characterize Transamerica's suit as one seeking clarification.

The defendant, on the other hand, could have sued under the provisions of subsection (a)(1)(B). See Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 146, 105 S.Ct. 3085, 3093, 87 L.Ed.2d 96 (1985). According to section 502(e)(1), she would have been permitted to bring this action in state or federal court, whereas Transamerica's suit, were it to fall within section 502(a)(3), could be heard only in federal court. See 29 U.S.C. Sec. 1132(e)(1). This strongly suggests that section 502(a)(3) should be construed against permitting an insurer to transform a case over which Congress has authorized state court jurisdiction, when the insured seeks recovery, into a case over which there is only federal court jurisdiction, when the insurer sues. Standard policy terms such as Transamerica's double indemnity clause--even though the clause happens to figure in an ERISA plan--implicate no federal interests of such gravity as to warrant exclusive federal interpretation.

We hold, therefore, that Transamerica's suit does not fall within the ambit of section 502(a)(3).

b. Declaratory Judgment Act.

Nevertheless, we conclude that the district court erred in determining that it lacked subject matter jurisdiction. We find that jurisdiction was plainly available by way of the Declaratory Judgment Act, 28 U.S.C. Sec. 2201. This follows from the fact that to ascertain the presence of federal jurisdiction in a declaratory judgment action, it is necessary to determine whether the defendant against whom declaratory judgment is sought could have asserted his rights in a federal court. See Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671-72, 70 S.Ct. 876, 878-79, 94 L.Ed. 1194 (1950). "If ... the declaratory judgment defendant could have brought a coercive action in federal court to enforce its rights, then we have jurisdiction...." Janakes v. United States Postal Serv., 768 F.2d 1091, 1093 (9th Cir.1985). As noted above, defendant's claim to double indemnity benefits is at the heart of this case, and ERISA would have permitted her to sue on this claim in federal court. ³ Thus the district court without doubt had federal question jurisdiction to hear Transamerica's suit....