A
recent ruling from Texas discussed a vexing
issue that often arises in benefit claim
litigation brought under the Employee
Retirement Income Security Act, 29 U.S.C. §
1001 et seq.
In Franklin v. AT&T
Corp., 2008 U.S.Dist.LEXIS 99128 (N.D.Tex.
Dec. 9), Metropolitan Life Insurance
Company, which administers AT&T's long-term
disability plan, sought dismissal from a
lawsuit brought by Laura Franklin, an AT&T
employee who suffered from multiple
illnesses including Crohn's disease and
breast cancer.
Franklin qualified for
disability benefits from AT&T for more than
two years; and she had also been awarded
Social Security disability benefits, after
which she reimbursed MetLife for over
$37,000 in claimed ''double payments'' due
to plan provisions coordinating long-term
disability payments and Social Security.
However, just a few months after Franklin
reimbursed MetLife, the insurer deemed her
ineligible for additional benefits and
terminated her monthly disability income
payments. After exhausting pre-suit appeals,
Franklin sued AT&T and MetLife seeking
restoration of her benefits.
MetLife moved for
dismissal, arguing it was not a proper
defendant. Plaintiff countered that MetLife
was properly sued as plan administrator. In
resolving the dispute, the court relied
heavily on a ruling issued by another judge
within the Northern District of Texas,
Bernstein v. Citigroup, Inc, No.
3:06-CV-209-M, 2006 WL 2329385 at 7 (N.D.
Tex. July 5, 2006), which concluded that a
''plan administrator'' was a proper
defendant in a suit under ERISA seeking
restoration of plan benefits.
Further, in deciding
MetLife's status as ''plan administrator,''
the court interpreted the statutory
definition of that term (29 U.S.C. §
1002(16)(A)) as encompassing any entity that
''actually controls administration of the
plan.'' (citing Bernstein and Garren v.
John Hancock Mut. Life Ins. Co., 114
F.3d 186, 187 (11th Cir. 1997); Am. Med.
Assoc. v. United Healthcare Corp.,
00Civ.2800(LGG)(GWG), 2002 WL 31413668 at *6
(S.D.N.Y. Oct. 23, 2002) (''Insofar as any
of the insurance company defendants in this
action actually controlled the distribution
of funds and decides whether or not to grant
benefits under one of the plans, these
entities may be sued as plan
administrators.'')).
MetLife asserted that it
was not the plan administrator, but was
merely the ''claims administrator,'' a term
not defined by the ERISA statute. However,
MetLife's contract with AT&T undermined that
argument. The administration agreement
defined the insurer's role as claims
administrator to encompass:
• ''[T]he authority to
evaluate disabilities, resolve claims and
appeals and administer the Plan on behalf of
the Company'';
• The sole authority to
determine whether an employee is disabled
under the plan;
• The ability to deny
benefits if the employee is not following
''a course of treatment acceptable to the
Claims administrator'';
• ''[S]ole and complete
discretionary authority to determine
conclusively for all parties … any and all
questions arising from administration of the
Plan and interpretation of all Plan
provisions … and eligibility for benefits,
determination of all relevant facts, the
amount and type of benefits payable … and
construction of all terms of the Plan … '';
• The responsibility for
issuance of benefit checks.
The court also noted that
the contract contemplated that MetLife could
be sued in relation to administration of
benefit claims; and MetLife agreed to be
responsible for all legal costs incurred in
defending such a suit.
Thus, even though AT&T,
not MetLife paid benefits, the court
determined that ''an entity that is
functionally a plan administrator is a
proper defendant in a Section 1132(a)(1)(B)
suit [claim for benefits].'' (citing
Sleater v. Boy Scouts of America, No.
3:01-CV-2097-G, 2002 WL 663563 at 3, n.3
(N.D. Tex. April 19, 2002)). Because MetLife
''had substantial, if not total,
responsibility in evaluating what benefits
were payable under the Plan,'' the court
found the insurer was acting as plan
administrator and denied the motion to
dismiss on that basis.
The court also easily
disposed of MetLife's final argument that it
could not be sued as plan administrator
because the plan named AT&T as plan
administrator. The court explained, ''the
test used to determine whether an entity is
a plan administrator is how the entity
actually functions vis-a-vis the plan, not
how that entity is denominated in the
applicable documents.'' Accordingly, the
court found MetLife acted as plan
administrator.
While the points made in
this ruling seem self-evident, there are a
host of cases ruling that only a benefit
plan may be sued under ERISA even though the
''plan'' is nothing more than pieces of
paper. See, e.g., Ford v. MCI, 399
F.3d 1076 (9th Cir. 2005).
This case presents a
somewhat closer question than the typical
situation where the insurer not only
administers claims, but funds the benefit
plan as well. In such cases, there is an
even stronger argument against dismissal of
the insurer. That reasoning was provided by
famed bank robber Willie Sutton who, when
asked why he robbed banks, responded,
"Because that's where the money is."
Note: Copies of this
ruling can be obtained by e-mailing me at
mdebofsky@ddbchicago.com.
