860 F.2d 1089
NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.
Thomas W. NELSON, Plaintiff-Appellant,
WICK BUILDING SYSTEMS, INC., a Wisconsin corporation,
United States Court of Appeals, Ninth Circuit.
ARGUED AND SUBMITTED JULY 13, 1988.
DECIDED Oct. 4, 1988.
Before POOLE, CANBY and LEAVY, Circuit Judges.
Nelson appeals from the district court's grant of summary judgment in favor of his former employer, Wick Building Systems (Wick), in his suit alleging that Wick violated Montana state law by refusing to pay his medical expenses and by misrepresenting or failing to disclose facts relating to its ERISA-governed medical insurance plan. The district court found Nelson's claims preempted by ERISA and granted summary judgment in favor of Wick. We affirm.
FACTS AND PROCEEDINGS BELOW
Nelson worked for Wick as a part-time employee between October and December 1983, then as a full-time employee until the beginning of June 1984. As a full-time employee he became eligible to participate in Wick's self-funded group medical insurance plan beginning March 1, 1984. Nelson temporarily left work in early June 1984, with the understanding that when he returned he would work on a part-time, as-needed basis as he had in 1983. This change in status was made at Nelson's request. Nelson returned to work later in June and continued until he was injured while participating in a rodeo on July 3.
As a result of the rodeo accident Nelson was hospitalized and incurred medical expenses of approximately $54,000. He testified that while he was hospitalized his supervisor from Wick visited him and said that he would check into whether Nelson was covered under the company's medical insurance plan. Nelson further testified that the supervisor never got back to him. Wick ultimately denied benefits under the plan on the grounds that Nelson's coverage terminated with the pay period ending June 2, 1984, after he resigned as a full-time employee and ceased making contributions to the plan.
Nelson then filed suit in Montana state court alleging breach of employment and insurance contracts and breach of the implied covenant of good faith and fair dealing. He alleged that Wick had denied him benefits under the medical insurance plan despite his eligibility, and he sought damages for medical costs, mental anguish and "great pain of body and mind," as well as punitive damages. Nelson did not assert any claims under the Employee Retirement Income Security Act of 1974 (ERISA). Wick removed to district court on diversity and federal question grounds, then moved for summary judgment. The district court found Nelson's state law claims pre-empted by ERISA, but observed that he had a federal cause of action for denial of benefits under ERISA Sec. 502(a)(1)(B), 11 U.S.C. Sec. 1132(a)(1)(b). The court then found that there were no triable issues of fact and ruled against Nelson on the ERISA claim on the grounds that Wick had a rational basis for denying benefits in that Nelson was not an active, full-time employee at the time of the accident, as required for eligibility. The district court granted summary judgment in favor of Wick, and Nelson appeals.
District Court Jurisdiction
Nelson's state court complaint alleged only state causes of action, which the district court determined were pre-empted by ERISA. This raises a question whether removal was precluded by the "well-pleaded complaint" rule on the grounds that ERISA pre-emption is merely a federal defense. The answer is no. First, removal was based on diversity jurisdiction under 28 U.S.C. Sec. 1332, as well as federal question jurisdiction under 28 U.S.C. Sec. 1331. Hence, the district court had jurisdiction whether or not a federal question would have appeared on the face of a well-pleaded complaint. Furthermore, where, as here, state law claims are not only pre-empted by ERISA but also come within the scope of the civil enforcement provisions of ERISA Sec. 502(a), the action is "necessarily federal in character by virtue of the clearly manifested intent of Congress" and is properly removable to federal court. Metropolitan Life Ins. Co. v. Taylor, 107 S.Ct. 1542, 1548 (1987). Nor was the district court required to dismiss the action under the derivative jurisdiction doctrine, as state and federal courts have concurrent jurisdiction over claims under 11 U.S.C. Sec. 1132(a)(1)(B) for the denial of benefits. 29 U.S.C. Sec. 1132(e). Because Nelson's complaint was properly construed as one for relief under this section, the state court had jurisdiction over the action prior to removal.
It is clear that ERISA pre-empts state tort and contract actions, including breach of the implied covenant of good faith and fair dealing, against ERISA fiduciaries arising from improper handling of claims, wrongful denial or termination of benefits, or interference with the right to benefits. Pilot Life Ins. Co. v. Dedeaux, 107 S.Ct. 1549 (1987); Nevill v. Shell Oil Co., 835 F.2d 209, 212 (9th Cir.1987); Sorosky v. Burroughs Corp., 826 F.2d 794, 799-800 (9th Cir.1987); Moore v. Provident Life & Accident Ins. Co., 786 F.2d 922, 926 (9th Cir.1986); Clorox Co. v. United States Dist. Court for the N. Dist. of Cal., 779 F.2d 517, 521 (9th Cir.1985).
Nelson attempts to distinguish these cases and avoid ERISA pre-emption by arguing that his claim is based on Wick's conduct as an employer, not as a fiduciary or administrator of the plan. He maintains that causes of action based on such conduct do not "relate to" the employee benefit plan and therefore are not pre-empted by ERISA. See 29 U.S.C. Sec. 1144(a). State law causes of action "relate to" an employee benefit plan if they have "a connection with or reference to such a plan." Sorosky, 826 F.2d at 799-800. State law is pre-empted if the regulated conduct is part of the administration of the benefit plan or if its effect is to regulate "matters regulated by ERISA: disclosure, funding, reporting, vesting, and enforcement of benefit plans." Nevill, 835 F.2d at 212.
The specific acts or omissions on which Nelson bases his claim are his supervisor's failure to let him know whether he was covered by the medical plan, as allegedly promised, and, more generally, Wick's failure to personally notify him when he no longer met the plan's eligibility requirements and its failure to inform him that he had 31 days in which to apply for an individual policy after his coverage terminated. Nelson concedes that he had access to the plan document, where both the eligibility requirements and the 31-day provision were set forth, and that he "probably looked at it once." He does not claim that Wick breached its duty under 11 U.S.C. Sec. 1132(c) to supply requested information or its duty under 11 U.S.C. Sec. 1021(a)(1) to furnish a summary plan description. Nor does he claim that his supervisor affirmatively represented to him that he was covered at the time of the accident. The damage Nelson views as stemming from Wick's alleged misconduct is Nelson's personal responsibility for $54,000 in medical costs and resulting mental anguish.
Wick's state law claims clearly "relate to" the employee benefit plan because they concern disclosure and enforcement of the plan provisions--areas regulated by ERISA. Sorosky is not to the contrary. In that case the plaintiff pleaded six causes of action against his employer-administrator, including wrongful discharge, breach of the duty of good faith and fair dealing, and conspiracy to interfere with a protected property interest. Each of these causes of action involved several different theories, some of which had no relationship to the employee benefit plan. This court held that the claims were not pre-empted to the extent that they relied on "theories independent of the benefit plan." 826 F.2d at 800. This is of no aid to Nelson, because he does not allege wrongful termination or any other claims independent of the benefit plan. The district court correctly ruled that his state claims were pre-empted and displaced by ERISA.
Nelson cannot avoid ERISA pre-emption by relying on 29 U.S.C. Sec. 1144(b)(2)(A) (savings clause). Even were we to agree that Wick's plan was subject to state insurance regulation by virtue of having purchased stop-loss insurance (a question which we do not reach), this argument would be unavailing. Causes of action based on the state law of bad faith, which is not specifically directed at the insurance industry, is not encompassed by the savings clause. Dedeaux, 107 S.Ct. at 1553-58.
Although Nelson never amended his complaint to allege an ERISA violation, the district court construed his claim as one for denial of benefits under 11 U.S.C. Sec. 1132(a)(1)(B). Nelson now claims it was error to grant summary judgment against him on the claim so construed. We do not agree. Wick denied Nelson's claim for medical benefits because he was not a full-time employee, and therefore was not eligible to participate in the plan on the date of his accident. Nelson essentially argues that Wick has misinterpreted the plan in reaching this conclusion. He relies on the following provision in the plan summary:
Employees: Active full-time Employees of Gallatin Homes in Belgrade, Montana working at least 30 hours per week are eligible for coverage on the first day of the month following 30 days of continuous service with the Employer.
Nelson appears to view the phrase "working at least 30 hours per week" as a complete definition of the term "full-time Employees." He claims eligibility because he worked more than 30 hours the week before his accident. Wick, on the other hand, views full-time employee status as an eligibility requirement independent of or in addition to the 30-hour per week requirement.
An ERISA plan administrator's eligibility decisions are entitled to deference and must be upheld unless "arbitrary, capricious or made in bad faith, not supported by substantial evidence, or erroneous on a question of law." Jung v. FMC Corp., 755 F.2d 708, 711 (9th Cir.1985). Even in cases involving employer administrators who are financially affected by their own decisions, their interpretation of ambiguous plan provisions must be upheld if reasonable and made in good faith. Fielding v. Int'l Harvester Co., 815 F.2d 1254, 1256 (9th Cir.1987). Nelson concedes that he was employed on a part-time, as-needed basis after he returned in June 1984 and that there were no deductions from his pay for contributions to the medical plan during that time or during 1983 when he was a part-time employee. Clearly Wick distinguished between full-time and part-time employees apart from the number of hours worked during a given pay period. Under these circumstances, we do not regard Wick's interpretation of the plan language as unreasonable or in bad faith.
Nelson also argues that the denial of benefits was arbitrary and capricious because Wick failed to notify him when his coverage terminated. He believes the following provision in the plan summary required Wick to notify him:
Plan Termination. The Employer may terminate the Plan at any time encumbered only by those benefits clearly and specifically negotiated by Collective Bargaining Units.... Any termination of the Plan will be communicated to participants.
Wick interprets this provision to require notification only when the plan is terminated, not when an individual's coverage under the plan ceases. We agree. The provision simply is not amenable to the interpretation Nelson urges.
Nelson's other points on this issue require little discussion. It is immaterial that Wick could have reinstated him as full-time employee eligible to participate in the plan; he does not even allege that Wick had a duty to do so. Nor is it material that at different times Wick stated two different dates for termination of Wick's coverage; Nelson concedes that both dates were prior to the accident.
Nelson's final argument is that summary judgment was inappropriate because there were genuine issues of material fact. The "facts" he points to are: his eligibility on the day of the accident; his entitlement to payment under the plan; whether Wick's behavior was arbitrary and capricious; and, the meaning of the termination provision in the plan summary. These are not questions of fact, but rather legal questions or questions of the inferences to be drawn from established facts. Nelson failed to proffer evidence sufficient to put the underlying facts in dispute.
As we concluded earlier, Wick's interpretation of the "full-time employee" eligility requirement was reasonable and must be upheld. In order to be eligible for medical benefits, it was not sufficient that Nelson work 30 hours per week. He also had to be a full-time employee. In support of summary judgment Wick submitted Nelson's deposition in which Nelson admitted that he terminated his full-time position with Wick and returned to work on a part-time basis. There was also evidence that Nelson received paychecks with no deductions for employee benefits once he changed to part-time status. Nelson has not directed us to any contradictory evidence. A non-moving party may not rest upon mere allegations or denials, but must present significant probative evidence from which a jury could return a verdict in his favor. Fed.R.Civ.P. 56(e); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). The only evidence on which Nelson relies is Wick's inconsistent statements about the date his eligibility terminated, and he does not actually dispute either date (because both were prior to the accident) but rather points to this as evidence of ambiguity in the plan. Even if the inconsistency was the result of ambiguity, Wick's interpretation of the plan must be upheld if reasonable. Nelson has simply failed to raise any genuine issues of fact on this point. Summary judgment was appropriate.
The judgment is AFFIRMED.
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3