Opinion
No. 12-cv-01373-JAM-AC
03-27-2013
DANIELA ROBINSON, Plaintiff, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant. METROPOLITAN LIFE INSURANCE COMPANY, Counterclaimant, v. DANIELA ROBINSON, Counterdefendant.
MOTION DENYING
DEFENDANT/COUNTERCLAIMANT'S
MOTION FOR SUMMARY JUDGMENT
Presently before the Court is Defendant/Counterclaimant Metropolitan Life Insurance Company's ("Defendant") Motion for Summary Judgment (Doc. #16). Plaintiff/Counterdefendant Daniela Robinson ("Plaintiff") opposes the motion (Doc. #19).
This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was originally scheduled for March 6, 2013.
BACKGROUND
This matter concerns the payment of disability benefits under a long term disability plan sponsored by Catholic Healthcare West (the "CHW Plan"). Defendant is the plan administrator. Plaintiff participated in the CHW Plan as a nurse employee at St. Joseph's Medical Center, a subsidiary or division of Catholic Healthcare West, now known as Dignity Health ("CHW"). Plaintiff stopped working on June 18, 2007. On April 18, 2008 she submitted a claim to Defendant for benefits under the CHW Plan. Defendant approved the claim and paid benefits for over two years.
The CHW Plan became effective January 1, 2002 and continued through the relevant time period. The CHW Plan contains the following definition of disability:
"Disabled" or "Disability" means that, due to Sickness or as a direct result of accidental injury:Broadwater Decl. (Doc. 16-1) Ex. A, Administrative Record (hereinafter cited as "Admin."), at 23. The 180 day elimination period is the 180 days after the onset of disability. Admin. 21. Unless a claimant is continuously disabled for 180 days, he or she will not receive payments under the CHW Plan.
• You are receiving Appropriate Care and Treatment and complying with the requirements of such treatment; and
• You are unable to earn:
• During the [180 day] Elimination Period [during which no benefits are paid] and the next 24 months of Sickness or accidental injury, more than 80% of Your Predisability Earnings . . . .
Plaintiff's claim was initially approved in April 2008 with an initial payment date of December 16, 2007. Admin. 769. This is because under the CHW Plan, the elimination period ran from her last day of work in June 2007 through December 2007.
On October 15, 2007, CHW elected pursuant to 26 U.S.C. § 410(d) ("§ 410(d)") to treat the CHW Plan as governed by and subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). The election was attached to CHW's Internal Revenue Service ("IRS") Form 5500 for the 2006 plan year.
Plaintiff's complaint (Doc. #1) contains two state law claims against Defendant for 1) Breach of the Duty of Good Faith and Fair Dealing, and 2) Breach of Contract. Defendant answered the complaint and included counterclaims for 1) Equitable Relief Under ERISA, 2) Declaratory Relief, 3) and Unjust Enrichment. Defendant's motion for summary judgment only references Plaintiff's claims, not Defendant's counterclaims. Accordingly, the only issue presently before the Court is whether or not Defendant is entitled to judgment on Plaintiff's affirmative claims. This Court has jurisdiction pursuant to either 28 U.S.C. § 1331 if Defendant is correct that ERISA preempts Plaintiff's state law claims or 28 U.S.C. § 1332 based on the diversity of citizenship of the parties.
OPINION
Legal Standard
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The purpose of summary judgment "is to isolate and dispose of factually unsupported claims or defenses." Celotex v. Catrett, 477 U.S. 317, 323-324 (1986).
The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). If the moving party meets its burden, the burden of production then shifts so that "the non-moving party must set forth, by affidavit or as otherwise provided in Rule 56, 'specific facts showing that there is a genuine issue for trial.'" T.W. Electrical Services, Inc. v. Pacific Electric Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (quoting Fed. R. Civ. P. 56(e)). The Court must view the facts and draw inferences in the manner most favorable to the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962). "[M]ere disagreement or bald assertion that a genuine issue of material fact exists will not preclude the grant of summary judgment". Harper v. Wallingford, 877 F. 2d 728, 731 (9th Cir. 1987).
The mere existence of a scintilla of evidence in support of the non-moving party's position is insufficient: "There must be evidence on which the jury could reasonably find for [the non-moving party]." Anderson, 477 U.S. at 252. This Court thus applies to either a defendant's or plaintiff's motion for summary judgment the same standard as for a motion for directed verdict, which is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. Discussion
1. Applicability of the CHW Plan's 26 U.S.C. § 410(d) Waiver
For purposes of the present motion only, the parties agree that the CHW Plan is a "church plan" as defined by 29 U.S.C. § 1002(33)(A), and that church plans are generally exempt from ERISA pursuant to 29 U.S.C. § 1003(b)(2). The parties also agree that under certain circumstances, an election made pursuant to 26 U.S.C. § 410(d) permits a church plan to opt in to the ERISA regulatory scheme. It is undisputed that such an election would operate along with ERISA's broad preemption provision to bar state law claims such as Plaintiff's if they relate to the CHW Plan. See Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139 (1990).
Defendant argues in support of this motion that the CHW Plan operates under a valid election, that the election applies to Plaintiff's benefits, and therefore ERISA is the only authority that applies to this dispute. Plaintiff, on the other hand, argues that a church plan can only make an election pursuant to § 410(d) if it is a pension plan, not a welfare benefit plan like the CHW Plan at issue in this case. Plaintiff does concede that if the § 410(d) election is valid and applicable to her claim, then ERISA preempts her state law claims. In order to determine what law applies to this motion, the Court must first determine if a welfare benefit plan can make an election pursuant to 26 U.S.C. § 410(d), and if so, whether or not the CHW Plan made a valid election such that ERISA applies to the parties' claims.
a. Applicability of § 410(d) Elections to Welfare Benefit Plans
Defendant contends that any church plan, whether it is welfare, pension, or both, may elect to be governed by ERISA by following the procedure in 26 U.S.C. § 410(d). Defendant relies on one case from the District of Maine, Catholic Charities of Me., Inc. v. City of Portland, 304 F. Supp. 2d 77 (D. Me. 2004), and a plain reading of the applicable statutes to support its position. Plaintiff responds that the Catholic Charities case was wrongly decided, that the case is only persuasive authority, and § 410(d) should be correctly read as only applying to pension plans. Plaintiff therefore contends that 29 U.S.C. § 1003(b)(3) only authorizes a § 410(d) election for pension plans, even if the statute does not explicitly limit the election.
Neither the Ninth Circuit nor the Supreme Court has decided whether or not a church welfare benefit plan can make a § 410(d) election. Accordingly, this is a matter of first impression within this Circuit. As the Plaintiff correctly points out, the only authority squarely on point consists of the Catholic Charities decision, which is not binding on this Court, and the statutory text. See Boyd v. Benton Cnty., 374 F.3d 773, 781 (9th Cir. 2004) (holding that only decisions of the Supreme Court and Ninth Circuit constitute binding authority).
In construing the provisions of a statute, a court must first look to the statute itself to see whether its language has a plain meaning. Satterfield v. Simon & Schuster, Inc., 569 F.3d 946, 951 (9th Cir. 2009) (citing McDonald v. Sun Oil Co., 548 F.3d 774, 780 (9th Cir. 2008)). If the statutory language is unambiguous, the inquiry ends and the court applies the statute as it is written. Id.
29 U.S.C. § 1003(b)(2) is located within the "General Provisions" subtitle of ERISA. It states, "The provisions of this subchapter shall not apply to any employee benefit plan if . . . such plan is a church plan (as defined in section 1002(33) of this title) with respect to which no election has been made under section 410(d) of Title 26 . . . ." 29 U.S.C. § 1003(b)(2). That section is certainly plain - church plans are not governed by ERISA unless they make a § 410(d) election. 26 U.S.C. § 410(d) is located within a part of the Internal Revenue Code ("IRC") titled, "Pension, Profit-Sharing, Stock Bonus Plans, Etc." That section provides, "If the church . . . makes an election under this subsection [pursuant to regulation], then the provisions of this title relating to participation, vesting, funding, etc. . . . shall apply to such church plan as if such provisions did not contain an exclusion for church plans." There are two possible points of ambiguity in § 410(d). First, it is located within a section of the IRC that seems to apply only to deferred compensation plans. Second, it contains an enumeration concluded by a necessarily ambiguous "etc." It is these potential ambiguities that Plaintiff relies on to argue that Congress only wished to allow pension plans to make a § 410(d) election.
This Court is not persuaded by Plaintiff's argument. First, the IRC defines exactly what a church plan is for its purposes. A church plan is one whose "principal purpose or function . . . is the administration or funding of a plan or program for the provision of retirement benefit or welfare benefits, or both . . . ." 26 U.S.C. § 414(e)(3)(a) (emphasis added). Section 410(d) is only ambiguous when analyzed without the definitions also provided in the IRC. The relevant regulations adopted by the Treasury Department support this interpretation. 26 C.F.R. § 1.410(d)-1 states that any church plan can make a § 410(d) election. The regulation refers to the definition in 26 U.S.C. § 414(e), which includes welfare benefit plans. Second, the operative statutory section for the present motion is 26 U.S.C. § 1003(b)(2), which contains no ambiguity. That section simply states that any church employee benefit plan that chooses to make a § 410(d) election is thereafter governed by ERISA. Since ERISA clearly applies to pension and welfare benefit plans, there is no principled basis for excluding welfare plans from § 1003(b)(2). The Court is required to presume that Congress meant what it said in § 1003(b)(2), and it is improper to seek out ambiguities in order to change the plain meaning of a statute. Satterfield, 569 F.3d at 951.
Plaintiff's remaining arguments are equally unpersuasive. Plaintiff argues that Congress only made the exception for pension plans because it wanted them to be able to opt-in to oversight by the Secretary of the Treasury and be eligible for federal pension insurance. Plaintiff contends that no such exception is necessary for welfare plans because the states generally regulate the insurance companies that provide employee welfare benefits. Plaintiff's argument ignores the whole point of ERISA, which was to provide a comprehensive federal scheme to regulate employee benefit plans, including welfare benefit plans. If Plaintiff's position were correct, then Congress would have only included pension plans in ERISA generally, and no provisions at all related to welfare benefit plans.
For the foregoing reasons, it is the finding of this Court that ERISA applies to church welfare benefit plans that make a valid election pursuant to 26 U.S.C. § 410(d).
b. Validity of the CHW Plans § 410(d) Election
Having determined that a church welfare benefit plan can make an election under § 410(d) to opt in to ERISA's regulatory scheme, the next issue is whether or not the CHW Plan made such an election. Defendant argues that the CHW Plan made a § 410(d) election by attaching an "ERISA Election" to its 5500 Form for plan year 2006. Defendant argues that the election is irrevocable under 26 U.S.C. § 410(d), and it is therefore still in effect. Plaintiff responds, citing 26 C.F.R. § 1.410(d)-1(c)(2), that the election is properly made by attaching it to a form required under 26 U.S.C. § 6058, but the CHW Plan made the election improperly through attachment to a Form 5500. Plaintiff alternatively argues that even if an election was made, it was deficient because the CHW Plan, by its terms, is subject to change and the plan is therefore revocable in violation of § 410(d).
Plaintiff's position relies on the lack of an attachment to a Form 6058, but it is impossible for the CHW Plan to file a Form 6058 because such a form does not exist. The proper form filed pursuant to the requirements in 26 U.S.C. § 6058 is Internal Revenue Service Form 5500. 26 C.F.R. § 301.6058-1(a). The unrebutted evidence before the Court is that the CHW Plan made a § 410(d) election through attachment to its 2006 plan year Form 5500 filing. Zelenak Decl. ¶ 4, Ex. A. Plaintiff's argument related to the CHW Plan's ability to change at any time is also unavailing. Plaintiff takes the position that once an election is made under § 410(d), plan terms are irrevocable and unable to change. Plaintiff cites no authority for this position, and the clear language of § 410(d) indicates that only the election itself is irrevocable. The section does not mention and therefore does not apply to a plan's terms.
Based on the unrebutted evidence before the Court, there is no genuine dispute as to whether or not the CHW Plan made a § 410(d) election. The election attached to the 2006 Form 5500 satisfies 26 U.S.C. § 410(d) and the CHW Plan is therefore governed by ERISA.
c. Applicability of § 410(d) Election to Plaintiff's Claims
Finally, Plaintiff argues that the § 410(d) election does not apply to her claim because it arose before the election was made. It is undisputed that Plaintiff became disabled on June 19, 2007, and that the § 410(d) election was executed on October 15, 2007. The parties agree that under the terms of the plan, Plaintiff was not entitled to benefits until a 180 exclusion period expired on December 16, 2007. Defendant does not argue that a § 410(d) election applies retroactively, but argues that the election applies because Plaintiff was not due any payments until after the election took effect. Defendant takes the position that in order for any rights to accrue under the CHW Plan, Plaintiff had to be receiving benefit payments. Plaintiff takes the position that the claim arose, at the latest, when Plaintiff became disabled on June 19, 2007. Plaintiff argues that it would be unfair to allow Defendant to change the law applicable to her claim during the elimination period by filing an election.
Plaintiff relies on Geter v. St. Joseph Healthcare Sys., Inc., 575 F. Supp. 2d 1244 (D.N.M. 2008), to support her position. Geter dealt with a § 410(d) election that was made after the claimant was receiving benefits. Id. at 1249. The court rejected the plan's argument that the § 410(d) election applied, even though the plan was permitted to retroactively file tax forms for years prior to the claimant's disability. Id. at 1251. The Geter court reasoned that the plain language of the applicable statute, 29 U.S.C. § 1003, does not allow retroactive ERISA preemption. Id. at 1250. Further, the court pointed out that permitting such preemption would be anomalous because the plan would benefit from ERISA's preemption provision for years that it was not compelled to comply with any of ERISA's mandatory reporting, disclosure, and fiduciary requirements. Id.
This Court agrees with the Geter court's holding. The plain text of 29 U.S.C. § 1003(b)(2) states that a church plan is exempt from ERISA until it makes a § 410(d) election. There is no reference to retroactive ERISA coverage, and no basis for inferring it. Disability claims arising before the election are therefore not governed by ERISA, and claims arising after the election are. The remaining issue for purposes of the present summary judgment motion is therefore whether or not Plaintiff's claim began when she became disabled or when she began to receive benefit payments at the end of the 180 day elimination period.
Plaintiff relies heavily on the terms of the CHW Plan itself to support its position. Plaintiff points out that the CHW Plan defines "disability" to include the elimination period. Admin. 23. Plaintiff also points out that once a person is disabled, their benefits under the CHW Plan remain unchanged even if the insurance policy ends or is amended. Admin. 36, 41. Based on the language of the Plan, Plaintiff essentially argues there is a claim that accrues when the insured becomes disabled and a separate plan benefit that begins to accrue at the end of the elimination period. While benefits require a valid claim, a valid claim does not necessarily lead to benefit payments because the 180 day elimination period may not be satisfied. Other terms of the CHW Plan support Plaintiff's position. For instance, an initial claim is generally supposed to be filed within 90 days of a loss, not when a person becomes eligible to receive benefits. Admin. 47. Legal suits related to the CHW Plan are able to be filed as soon as 60 days of when the proof of a claim is filed, not when benefits begin to accrue. Admin. 48.
Defendant's position is "that the Election took effect before [P]laintiff ever had a claim, because she had no claim unless she was 'disabled' under the Plan for at least 180 days. . . ." Reply, at 16. That position, however, is not based on any legal authority and it contradicts the terms of the CHW Plan. The CHW Plan clearly describes a situation where a claim accrues at the point of disability, and further provides that benefits begin to pay at the end of the 180 day elimination period. Disability under the CHW Plan includes the 180 day elimination period. Admin. 23 ("Disabled or Disability means that, due to Sickness or as a direct result of accidental injury . . . You are unable to earn during the Elimination Period and the next 24 months of Sickness or accidental injury . . . .") Based on the CHW Plan's definition of disability, it is clear that disability occurs when the covered person is unable to earn, not at the end of the elimination period. The contention that a § 410(d) election applies to a claim for which the underlying disability has already started is inconsistent with the terms of the plan that guarantee coverage once a person becomes disabled, even if the policy expires or changes. The only operative date that the terms of the CHW Plan contemplate for purposes of claim accrual is the date of onset of disability.
Due to the lack of applicable legal authority and evidence supporting Defendant's position that the § 410(d) election should apply to Plaintiff's claim, judgment on this issue in Defendant's favor is denied. The remainder of Defendant's motion assumes that ERISA is binding on Plaintiff's claim. Since the Court has found otherwise, and Defendant has not produced authority, evidence, or argument showing that it is entitled to judgment on Plaintiff's state law claims on their merits, the remainder of the motion is also denied.
PAGE LIMIT SANCTIONS
Defendant's Reply Brief (Doc. #23) is twelve pages long in violation of this Court's Order Re Page Limits (Doc. #5-2). Accordingly, Counsel for Defendant is ordered to pay a $100 sanction ($50 per page) to the Court within ten days of the date of this Order.
ORDER
For the foregoing reasons Defendant's Motion for Summary Judgment is DENIED. Defendant is to pay a $100 sanction within ten days.
IT IS SO ORDERED.
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JOHN A. MENDEZ,
UNITED STATES DISTRICT JUDGE