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Keith v. Metropolitan Life Insurance Co.

United States District Court, S.D. Texas, Houston Division

June 9, 2017

LINDA KEITH, Plaintiff,
v.
METROPOLITAN LIFE INSURANCE COMPANY, CENTRAL BANK, and CENTRAL BANK WELFARE BENEFIT PLAN, Defendants.

          MEMORANDUM OPINION AND ORDER

          SIM LAKE UNITED STATES DISTRICT JUDGE.

         Plaintiff, Linda Keith, brought this action against defendants, Metropolitan Life Insurance Company ("MetLife"), Central Bank, and Central Bank Welfare Benefit Plan, for breach of fiduciary duty under the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001, et seq. The case was tried to the court on May 15 and May 16, 2017. After carefully considering the evidence and the parties' arguments, the court makes the following findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a) (1) .

         I. Factual Background[1]

         Linda Keith met John P. White in 1995. White was a customer at a restaurant Keith then owned and operated. The two became close friends and remained so until White's death in 2013. White was a regular at Keith's restaurant and sought Keith's occasional assistance in an unsuccessful business venture.

         After White closed his business he was hired by Advantage Business Capital ("Advantage"), a subsidiary of Central Bank. White served as Vice President of Business Development for Advantage from 2008 until 2013. Advantage had fewer than 20 employees, and Central Bank had fewer than 100 employees. White's responsibilities included soliciting customers for Advantage's factoring services. As part of his job White was required to pre-qualify customers, which involved reading and understanding complex financial documents.

         Central Bank was Plan Administrator of the Central Bank Welfare Plan, which provided Central Bank employees with a number of benefits -- including health insurance, supplemental insurance, an employer-matched § 401(k) plan, and life insurance. Descriptions of these benefits were made available to employees online and at annual open enrollment meetings. A life insurance policy covering up to two times the employee's salary was provided at Central Bank's expense.[2] White's ending annual salary was approximately $51, 500, giving him $103, 000 of life insurance coverage.

         From 2008 to 2013 White designated Keith as the beneficiary of his life insurance policy several times. In 2012 White did not designate a beneficiary.[3] Unbeknownst to Keith, White also designated his checking account payable on death to her. During his employment with Central Bank White never purchased supplemental insurance, participated in the employer-matched § 401(k) plan, or elected to increase his life insurance coverage at his own expense.

         In 2010 White began to complain of difficulties using his left hand. White was eventually diagnosed as suffering from monoplegia and amyotrophic lateral sclerosis (ALS), commonly known as Lou Gehrig's disease. As White's physical condition deteriorated, he could no longer perform his job duties at the bank, and a mutual decision was made for White to take a leave of absence. White's last workday at the bank was March 7, 2013, after which he began a leave of absence under the Family Medical Leave Act (FMLA). Central Bank continued to make premium payments for White's group insurance coverages, including his life insurance, while White was on leave.

         Central Bank's long-term disability (LTD) benefits provider and claims administrator was MetLife. On March 17, 2013, White applied for LTD benefits under MetLife's policy. On March 18, 2013, MetLife acknowledged receipt of White's disability application, requested additional information needed to perfect the claim, and advised White that he needed to apply for Social Security disability (SSD) benefits.

         On March 19, 2013, White met with Central Bank's Vice President and Human Resources Manager, Judy Rogers, to discuss his benefits. Rogers confirmed that White wanted to make no changes to his benefits. White reaffirmed his designation of Keith as beneficiary of his life insurance policy. Rogers discussed with White the option of maintaining his life insurance policy after termination at his own expense. Rogers told White that Central Bank would make premium payments on the policy through June 1, 2013, after which White would need to make the payments.[4] White said that he was not interested in maintaining his life insurance policy after his termination, and Rogers therefore did not provide him with the paperwork necessary to do so.[5] Central Bank did not then or at any later time provide White with individual written notice of his right to maintain his life insurance policy. In a March 21, 2013, email, Rogers advised White that after June 30, 2013, he would be responsible for his own health insurance but made no further mention of life insurance.[6]

         After White ceased working Rogers continued to assist him with claims for LTD benefits and SSD benefits. On March 20, 2013, White was interviewed by a MetLife Claim Specialist.[7] White complained about the MetLife representative to Rogers, who then complained to MetLife and subsequently offered to act as a liaison between MetLife and White, instructing MetLife to communicate through her to avoid burdening White.[8]

         White was in frequent contact with both Rogers and MetLife in the months before his death. On March 22, 2013, a MetLife Claim Specialist spoke with White.[9] Rogers emailed White later that day.[10] White emailed Rogers on March 25, 2013, to notify her that he would be "visiting with Social Security" that week and that he had received the paperwork from MetLife.[11] On March 26, 2013, MetLife approved White's application for LTD benefits and advised White that his LTD benefits would begin on June 6, 2013, after a three-month elimination period.[12] White, although not actively working, was to remain employed by Central Bank through June 5, 2013. During this time he used the remainder of his vacation and leave time.

         On April 9, 2013, MetLife internally generated a claim for continuation of group life insurance for White.[13] On May 9, 2013, MetLife sent a letter ("the May 9th letter") to White acknowledging "receipt" of the April 9, 2013, claim.[14] MetLife's May 9th letter stated that White's group life insurance plan included "a provision that continues your coverage while you are not actively at work, " advised White that a representative "may be in contact" and that " [n] o action" was required from White at the time.[15] MetLife did not send the May 9th letter to Central Bank.

         On May 21, 2013, MetLife again wrote to White ("the May 21st letter"), this time copying Rogers, stating that his insurance plan required him to be totally disabled continuously for nine consecutive months before he would be eligible for continuation of group life insurance coverage during his absence from work.[16] The May 21st letter also stated that MetLife would defer making a decision on White's claim for continuation of group life insurance until December 9, 2013, when the nine-month waiting period expired.[17] Neither the May 9th nor the May 21st letter mentioned the need to convert White's life insurance policy or that White could not qualify for continuation of life insurance coverage because he had not become totally disabled before reaching the age of 60.[18]

         On May 28, 2013, MetLife contacted White regarding his LTD insurance.[19] The same day Rogers[20] called MetLife to "get an understanding of the meaning" of the May 21st letter and was told that White would need to convert his life insurance to an individual policy in order to maintain coverage during the waiting period.[21] Rogers did not provide this information to White, and there is no evidence that White inquired about either the May 9th or the May 21st MetLife letter or about any options pertaining to his life insurance policy.[22]

         White was formally terminated from his position with Central Bank at the end of his FMLA leave on June 5, 2013. Central Bank made its final payment on White's life insurance policy on June 1, 2013. White's life insurance coverage ended on June 30, 2013. MetLife's first LTD payment to White was made by check in the latter part of June 2013. Throughout the month of June, White, Rogers, and MetLife communicated to set up direct deposit of White's LTD payments.

         White continued to participate in the benefits process. On July 24, 2013, White drove to the bank to drop off papers for Rogers. White emailed Rogers the following day to say that he had forgotten to give her some documents.[23] MetLife's final communication with White was on September 5, 2013, regarding a reduction of his SSD insurance payment.[24]

         White was found dead on September 14, 2013. Shortly thereafter, Keith notified MetLife of White's death and MetLife instructed her to submit a death claim. On November 25, 2013, MetLife denied Keith's claim for life insurance benefits.[25] Keith appealed the denial of her claim. On May 1, 2014, MetLife denied Keith's appeal because White's coverage ended on June 30, 2013, following the last premium payment on June 1, 2013, and because White was not eligible for continuation of his insurance since he was 60 years old when he became disabled.[26] Keith filed her Original Complaint against defendants on April 21, 2015.[27]

         II. Applicable Law

         An individual plan beneficiary may bring suit for equitable relief for breach of a fiduciary duty under ERISA's so-called "catch-all" provision, which provides:

A civil action may be brought . . . (3) by a participant, beneficiary, or fiduciary (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. § 1132(a)(3). To recover "appropriate equitable relief, " a plaintiff "must establish that the defendant is (a) a plan fiduciary, (b) has breached its fiduciary duties under ERISA, (c) that such a breach caused the plaintiff's injury, and (d) that the equitable relief sought is indeed appropriate." Shonowo v. Transocean Offshore Deepwater. Inc., Civil Action No. 4:10-cv-1500, 2011 WL 3418405, at *5 (S.D. Tex. Aug. 3, 2011) (citing Brosted v. Unum Life Insurance Company of America, 421 F.3d 459, 465 (7th Cir. 2005) (other citations omitted).

         A. Fiduciary Status[28]

         The threshold question in an ERISA claim for breach of fiduciary duty "is not whether the actions of some person employed to provide services under a plan adversely affected a plan beneficiary's interest, but whether that person was acting as a fiduciary (that is, was performing a fiduciary function) when taking the action subject to complaint." Pegram v. Herdrich, 120 S.Ct. 2143, 2152-53 (2000). "[T]he issue of ERISA fiduciary status is a mixed question of fact and law." Reich v. Lancaster, 55 F.3d 1034, 1044 (5th Cir. 1995) . Under ERISA, one is a fiduciary to the extent that:

(i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.

29 U.S.C. § 1002(21) (A). In short, "[a] fiduciary within the meaning of ERISA must be someone acting in the capacity of manager [or] administrator." Pegram, 120 S.Ct. at 2151. Merely performing administrative duties as required by the plan is not a fiduciary function. See 29 C.F.R. § 2509.75-8; Walker v. Federal Express Corp., 492 F.App'x 559, 565 (6th Cir. 2012); Barrs v. Lockheed Martin Corp., 287 F.3d 202, 207 (1st Cir. 2002); Plumb v. Fluid Pump Service, Inc., 124 F.3d 849, 854-55 (7th Cir. 1997).

         B. Breach of Fiduciary Duties

         ERISA Section 404(a) specifies that "a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and their beneficiaries, " and "for the exclusive purpose of: (i) providing benefits to participants; and (ii) defraying reasonable expenses of administering the plan." 29 U.S.C. § 1104(a) (1) (A) . Such duties shall be discharged "with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims." Id. § 1104(a) (1) (B) . "Other than including these general dictates, ERISA does not expressly enumerate the particular duties of a fiduciary, but rather relies on the common law of trusts to define the general scope of a fiduciary's responsibilities." Martinez v. Schlumberger, Ltd., 338 F.3d 407, 412 (5th Cir. 2003) (internal quotation marks omitted). "A trustee has a duty in dealing with a beneficiary to deal fairly and to communicate to the beneficiary all material facts the trustee knows or should know in connection with the matter." Restatement (Third) of Trusts § 78 (2007) .

         Fiduciaries who gratuitously communicate with plan participants may owe a duty to "do so in a manner calculated to avoid confusion and misunderstanding, whether by omission or commission." See Switzer v. Wal-Mart Stores, Inc., 52 F.3d 1294, 1298-1299 (5th Cir. 1995) (holding that the Fifth Circuit "d[id] not necessarily disagree" with the district court's implication). Other circuits have held that a "fiduciary may not, in the performance of [its] duties, 'materially mislead those to whom the duties of loyalty and prudence are owed.'" Adams v. Freedom Forge Corp. 204 F.3d 475, 492 (3d Cir. 2000). Fiduciaries have "not only a negative duty not to misinform, but also an affirmative duty to inform when the trustee knows that silence might be harmful." Unisys Corp. Retiree Medical Benefits Erisa Litigation v. Unisys Corp., 579 F.3d 220, 227 (3d Cir. 2009) (quoting Bixler v. Central Pennsylvania Teamsters Health & Welfare Fund, 12 F.3d 1292, 1300 (3d Cir. 1993)).

         C. Harm/Detrimental Reliance

         If a fiduciary breaches a fiduciary duty, the plaintiff must prove that the breach caused the plaintiff's injury in order to be entitled to equitable relief. Shonowo, 2011 WL 3418405 at *5. "The Fifth Circuit has not squarely addressed what an ERISA beneficiary must establish to recover for misrepresentations by a fiduciary, but ... to recover under an equitable estoppel theory, an ERISA beneficiary 'must establish a material misrepresentation, reasonable and detrimental reliance upon the representation, and extraordinary circumstances.'" Continental Insurance Co. v. Dawson, No. 3:13-CV-04150-M, 2017 WL 1196857, at *6 (N.D. Tex. March 31, 2017) (citing Weir v. Federal Asset Disposition Association, 123 F.3d 281, 290 (5th Cir. 1997)). Fifth Circuit case law consistently and "strongly suggest[s] materiality and detrimental reliance are required in the Fifth Circuit for an ERISA beneficiary to recover for a breach of fiduciary duty." Id. The Seventh Circuit has held that "a plaintiff must demonstrate that: (1) the defendant was 'acting in a fiduciary capacity;' (2) the defendant made 'affirmative misrepresentations or failed to adequately inform plan participants and beneficiaries;' (3) the misrepresentation or inadequate disclosure was material; and (4) the plaintiff detrimentally relied on the misrepresentation or inadequate disclosure." Unisys, 579 F.3d at 228.

         III. Analysis

         A. MetLife

         1. Fiduciary Status

         Keith argues that MetLife acted as a fiduciary when it generated a claim on White's behalf and initiated gratuitous communication with him regarding that claim. MetLife argues that it was acting merely as claims administrator for the Central Bank Plan and not as a fiduciary. Ordinarily, " [a] third-party administrator who merely performs ministerial duties or processes claims is not a fiduciary." Reich, 55 F.3d at 1047. "[A] person who performs purely ministerial functions such as [processing of claims] for an employee benefit plan within a framework of policies, interpretations, rules, practices and procedures made by other persons is not a fiduciary." 29 C.F.R. § 2509.75-8. This is "because such person does not have discretionary authority or discretionary control respecting management of the plan, does not exercise any authority or control respecting management or disposition of the assets of the plan." Id. MetLife argues that the April 9, 2013, internal claim was generated automatically on White's behalf as a result of the determination of White's LTD claim. MetLife's representative testified that its policy is to generate such claims in all such cases. Keith argues that MetLife's actions exceeded the scope of its administrative or ministerial role.

         The court finds that MetLife acted as a fiduciary by generating the internal claim for continuation of White's life benefits. In doing so MetLife acted in its discretion on behalf of a plan participant. MetLife presented no evidence that the plan documents required it to generate a claim on White's behalf or that it was otherwise operating within a framework of policies, interpretations, rules, practices and procedures made by other persons. The evidence indicates that it was MetLife's own internal policy to generate continuation of life insurance claims upon determination of an LTD claim. MetLife appears to have taken a voluntary, discretionary action for the benefit of a Plan participant. By exercising its discretion to assist White in obtaining a potential benefit, MetLife acted as a fiduciary. MetLife therefore owed White a fiduciary duty to act in his best interest and to avoid misinforming him.[29]

         2. Breach of Fiduciary Duties

         MetLife owed White a statutory duty under ERISA to perform its duties with respect to a plan solely in White's interest and to do so with the care, skill, prudence, and diligence called for by the circumstances. It also owed White a duty to communicate with him in a manner calculated to avoid confusion and misunderstanding, and not to materially mislead him. The court finds that MetLife did not breach these fiduciary duties. The evidence establishes that MetLife was acting solely in White's interest by generating the claim for continuation of coverage. MetLife initiated the claims process on White's behalf to make a potential benefit available to him, notwithstanding that White was ultimately ineligible for the benefit described in MetLife's letters.

         Although MetLife's actions could potentially have confused or misled White, sending the May 9th and May 21st letters did not constitute a breach of fiduciary duty because they contained no misinformation. When read in conjunction with the Plan documents, MetLife's letters did not misstate the circumstances regarding White's coverage or the status of the claim. When the letters were sent, White was still employed and his premiums were still being paid by Central Bank. The letters therefore accurately stated that no action was then required by White in order to maintain his coverage. And because MetLife was not the Plan Administrator, it owed ...


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