The Colorado Supreme Court’s decisions upholding the dismissal of claims against two separate disability plans under ERISA may be under review by the Supreme Court, following submission of the joint petition for a writ of certiorari filed in Olivar v. Public Serv. Employee Credit Union Long Term Disability Plan and Burton v. Colorado Access a/k/a Colorado Access Long Term Disability Plan, No. 17-1543.
Both petitioners claimed that they were improperly denied disability benefits under insured plans. Each filed a complaint against their respective ERISA benefit plan and served the complaint on the Secretary of the U.S. Department of Labor under the belief that the plans had not effectively designated an agent for service of process. The Secretary of Labor did not forward these complaints to the plans. When neither plan responded, each petitioner obtained a default judgment. Ultimately, the trial courts held the default judgments to be void because service of process through the Secretary of Labor was improper. The plans were then granted summary judgment on the grounds that they were not proper parties. Both the Colorado Court of Appeals and the Colorado Supreme Court upheld the grants of summary judgment. Olivar v. Public Serv. Employee Credit Union Long Term Disability Plan, No. 14CA1734, 2016 Colo. App. LEXIS 54 (Colo. Ct. App. Jan. 21, 2016), aff’d by 410 P.3d 1255 (Colo. 2018); Burton v. Colorado Access, No. 14CA0728, 2015 Colo. App. LEXIS 1210 (Colo. Ct. App. Aug. 13, 2015), aff’d by 410 P.3d 1255 (Colo. 2018).
Petitioners asked the Supreme Court to review the following two issues: (1) a Circuit split regarding whether and when an ERISA benefit plan is a proper defendant in a benefit claim; and (2) whether an ERISA plan’s agent for service of process must be an actual human or can be a group, corporation or other entity.
Proper Party Defendant: Circuit Split
The Colorado Supreme Court upheld the dismissal of the plan in each underlying case, holding that the proper party defendant in a 29 U.S.C. § 1132(a)(1)(B) benefit claim was the insurer who would be obligated to pay any benefits. Petitioners argued that ERISA provides that “[a]n employee benefit plan may sue or be sued under this subchapter as an entity” (29 U.S.C. § 1132(d)(1)), and therefore, the Colorado Supreme Court’s decision was in error.
The petition cited a conflict among various Circuit Courts of Appeal regarding whether, and when, the plan is a proper party in a benefit claim:
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The Second and Tenth Circuits, as well as the New Mexico Court of Appeals, hold that the plan is always a proper party. Geddes v. United Staffing Alliance Employee Medical Plan, 469 F.3d 919, 931 (10th 2006) (“ERISA statute is clear: ERISA beneficiaries may bring claims against the plan as an entity and plan administrators”); Chapman v. Choicecare Long Island Term Disability Plan, No. 01-7282, 2002 U.S. App. LEXIS 24460, at *6-*9 (2d Cir. Apr. 29, 2002) (rejecting defendant plan’s argument that it was not a proper party defendant based on express provisions of ERISA 29 U.S.C. §§ 1132(d)(1), 1132(d)(2)); Kirby v. TAD Resources Int’l Inc., 95 P.3d 1063 (N.M. Ct. App. 2004), rev’d and remanded on other grounds 148 N.M. 106 (N.M. 2010).
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The Eleventh Circuit holds that the plan is never a proper party if benefits are insured. Hunt v. Hawthorne Assocs., Inc., 119 F.3d 888, 908 (11th 1997) (finding that the order enjoining payment of benefits “must be directed to a person or entity other than the plan itself,” and specifically rejecting “the notion that an injunctive order to pay benefits under section 502(a)(1)(B) of ERISA can issue solely against an ERISA plan as an entity”); Milton v. Life Ins. Co. of N. Am., CV-12-BE-864-E, 2012 U.S. Dist. LEXIS 85561, at *3 (N.D. Ala. June 20, 2012) (holding that ERISA benefit claim may not be brought against the fully insured plan where insurer had “decisional control over the Plaintiff’s benefits claim.”)
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The First and Sixth Circuits hold that the proper party is the entity that controls administration of the plan. Gomez-Gonzalez v. Rural Opportunities, Inc., 626 F.3d 654, 665 (1st 2010) (the “proper party defendant in an action concerning ERISA benefits is the party that controls administration of the plan”); Daniel v. Eaton Corp., 839 F.2d 263, 266 (6th Cir. 1988) (the proper party defendant is limited to the entity “shown to control administration of a plan”).
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The Ninth Circuit holds that the insurer, the plan administrator, and/or the plan itself are proper parties. Cyr v. Reliance Standard Life Ins. Co., 642 F.3d 1202, 1206-1207 (9th 2011) (concluding that an ERISA benefit action “should not be limited to plans and plan administrators” and noting that § 1132(d)(2) contemplates that “parties other than plans can be sued for money damages under other provisions of ERISA, such as § 1132(a)(1)(B), as long as that party’s individual liability is established”).
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The Seventh Circuit, with limited exception, generally held that suits for benefits were permitted “only against the Plan as an entity.” Jass v. Prudential Health Care Plan, Inc., 88 F.3d 1482 (7th 1996). More recently, the court held that the insurer could be a proper party. Larson v. United Healthcare Ins. Co., 723 F.3d 905, 915-16 (7th Cir. 2013) (a suit for benefits under ERISA §1132(a)(1)(B) is properly brought against the insurance company that “decides all eligibility questions and owes the benefits” of the insurance-based ERISA plan).
Petitioners cited the Seventh Circuit’s Larson decision, as well as the Colorado Supreme Court’s decision as against them, as clearly demonstrating a widening Circuit split and confusion.
Petitioners’ writ sought Supreme Court review to address “the hopelessly divergent and contradictory holdings of courts throughout the country,” which if left unresolved would require that “almost every ERISA case [be] needlessly burdened with three or more defendants . . . . [which] needlessly increases the cost and complexity of litigation and causes more entities than necessary to be named defendants.”
Service of Process
ERISA permits service of process on the Secretary of Labor where “a plan has not designated an individual as agent for the service of legal of process.” 29 U.S.C. § 1132(d)(1) (emphasis added). And ERISA defines a “person” as “an individual, partnership, joint venture, corporation, mutual company, joint-stock company, trust, estate unincorporated organization, association or employee organization.” 29 U.S.C. § 1002(9). Petitioners argue that, because “individual” and “corporation” are separate terms included in the definition of “person,” the use of “individual” cannot include entities such as corporations, and must only refer to “an actual human being.”
The Colorado Supreme Court acknowledged the “strong textual arguments for why ‘individual’ in § 1132(d)(1) refers only to a natural person.” Burton, 410 P.3d at 1261. But the court found that reading ERISA that way “yields an absurd result: Why would Congress expressly allow a plan to designate a corporation as agent for service of process . . . and then, simultaneously, allow the plaintiff to ignore the designated agent . . . because it’s a corporation?” Id.
The case was distributed for conference on June 13, 2018, during which time the Supreme Court ordinarily determines whether it will choose to hear a case. Generally, in civil cases, a brief in opposition to the petition for writ of certiorari is not mandatory, and the respondents did not prepare a written response in Olivar. However, the Court’s docket reveals that, on June 25, 2018, the Court requested a response, which signals the Justices’ interest in hearing more about the issues before deciding whether to grant certiorari. The Court could still deny the petition and choose not to hear this particular case, but for now, the decision of certiorari remains an open, live question.
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