United States Court of Appeals
For the First Circuit
No. 13-2090
THOMAS W. VANDER LUITGAREN,
Plaintiff, Appellant,
v.
SUN LIFE ASSURANCE COMPANY OF CANADA,
Defendant, Appellee,
SUN LIFE ASSURANCE COMPANY OF CANADA (US)
AND SUN LIFE FINANCIAL, INC.,
Defendants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. F. Dennis Saylor, IV, U.S. District Judge]
Before
Torruella and Selya, Circuit Judges,
and McAuliffe,* District Judge.
Stuart T. Rossman, with whom Arielle Cohen, The National
Consumer Law Center, John C. Bell, Jr., Lee W. Brigham, Bell &
Brigham, M. Scott Barrett, and BarrettWylie LLC were on brief, for
appellant.
Byrne J. Decker, with whom Catherine R. Connors, Gavin G.
McCarthy, and Pierce Atwood LLP were on brief, for appellee.
August 26, 2014
*
Of the District of New Hampshire, sitting by designation.
SELYA, Circuit Judge. Our system of justice is
precedent-based. Once we have decided a legal question and
articulated our reasoning, there is usually no need for us to
repastinate the same soil when another case presents essentially
the same legal question.1 So it is here.
In Merrimon v. Unum Life Insurance Co., ___ F.3d ___ (1st
Cir. 2014) [Nos. 13-2128, 13-2168, slip op.], we recently held that
an insurer, acting in the place and stead of a plan administrator,
properly discharges its duties under the Employee Retirement Income
Security Act (ERISA), 29 U.S.C. §§ 1001-1461, when it pays a death
benefit by establishing a retained asset account (RAA) as long as
that method of payment is called for by the terms of the particular
employee welfare benefit plan. See id. at ___ [slip op. at 20,
24]. This case and Merrimon are fair congeners; and for the most
part, this case can be decided on the basis of our opinion in
Merrimon. We write separately only to cover points not squarely
addressed in Merrimon.
To assure the reader that this case and Merrimon are cut
from the same cloth, we briefly sketch the largely undisputed
facts. Plaintiff-appellant Thomas Vander Luitgaren is the
beneficiary of an employee welfare benefit plan (the Plan)
sponsored by his late brother's employer. The employer funded the
1
There are, of course, exceptions to this "law of the
circuit" rule. See San Juan Cable LLC v. P.R. Tel. Co., 612 F.3d
25, 33 (1st Cir. 2010). No such exception pertains here.
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Plan by arranging with defendant-appellee Sun Life Assurance
Company of Canada for group life insurance. The employer, as the
Plan administrator, delegated authority to Sun Life to make claim
determinations.
Following his brother's demise, the appellant submitted
a claim for death benefits to Sun Life, which promptly approved the
claim and paid the death benefit. Its method of payment lies at
the heart of this case: through a contractor, Sun Life established
an RAA at State Street Bank; credited the full amount of the death
benefit ($151,000) to that account; and mailed the appellant a book
of drafts that he could use to withdraw the credited funds.
The RAA funds earned interest for the appellant at a rate
of two percent per annum — an interest rate set by Sun Life.2 As
long as the funds remained unliquidated, Sun Life kept them in its
general account and invested them to its own behoof.
As in Merrimon, it is uncontroverted that the appellant
had the right to withdraw all or any part of his RAA funds at any
time or times; provided, however, that no withdrawal could be for
less than $250. Sun Life retained the right to close the RAA if
the balance dipped below $250. In that event, it was obligated to
remit the balance to the appellant.
2
Although Sun Life retained the right to adjust the rate
prospectively, the record does not indicate that any interest rate
adjustment was made during the period with which we are concerned.
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The appellant's RAA proved fleeting: within a matter of
days, the appellant withdrew the full $151,000. Sun Life then
closed the account and mailed the appellant a check for the
interest earned: $74.48.
That was not the end of the matter. The appellant sued
Sun Life in the United States District Court for the District of
Massachusetts. This suit, filed on behalf of the appellant and a
putative class of similarly situated beneficiaries, alleged that
Sun Life's use of RAAs as a method for paying death benefits
transgressed its ERISA-inspired fiduciary duties in two ways.
First, this method was said to constitute self-dealing in plan
assets in violation of ERISA section 406(b). See 29 U.S.C.
§ 1106(b). Second, this method was said to contravene Sun Life's
obligation under ERISA section 404(a) to act "solely in the
interest of the participants and beneficiaries." Id. § 1104(a)(1).
These are essentially the same claims advanced, on strikingly
similar facts, by the Merrimon plaintiffs. See Merrimon, ___ F.3d
at ___ [slip op. at 4-6].
In due course, the parties cross-moved for summary
judgment. On November 19, 2012, the district court granted partial
summary judgment in Sun Life's favor on the section 406(b) claim.
See Vander Luitgaren v. Sun Life Assurance Co. (Vander Luitgaren
I), 966 F. Supp. 2d 59, 68-69 (D. Mass. 2012). The court reasoned
that the assets backing the appellant's RAA were not plan assets
-4-
and, thus, Sun Life was not dealing with plan assets when it
retained and invested the RAA funds. See id. But the court
withheld summary judgment on the section 404(a) claim, suggesting
that "[f]urther factual development [was] necessary." Id. at 71.
While the litigation was continuing, the Third Circuit
rejected a nearly identical claim. See Edmonson v. Lincoln Nat'l
Life Ins. Co., 725 F.3d 406, 423-24 (3d Cir. 2013), cert. denied,
134 S. Ct. 2291 (2014). At that point, the district court wisely
revisited the matter and granted summary judgment in favor of Sun
Life on the section 404(a) claim. See Vander Luitgaren v. Sun Life
Assurance Co. (Vander Luitgaren II), No. 09-11410, 2013 WL 4058916,
at *5 (D. Mass. Aug. 9, 2013). The court's order disposed of the
last remaining claim, setting the stage for this timely appeal. We
have jurisdiction under 28 U.S.C. § 1291.
Most of the issues raised by the appellant duplicate
issues that were decided in Merrimon, and it would serve no useful
purpose to retrace our steps. We therefore affirm substantially on
the basis of Merrimon, limiting our further discussion to two
issues that were not decided in Merrimon.
Sun Life mounts a challenge to the appellant's statutory
standing. No comparable challenge was seasonably raised in
Merrimon. See ___ F.3d at ___ [slip op. at 11 n.3].
Constitutional standing differs from statutory standing.
Constitutional standing goes to the power of the court: the
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question is whether the parties have presented the kind of case or
controversy that the Constitution allows federal courts to hear.
See Katz v. Pershing, LLC, 672 F.3d 64, 71, 75 (1st Cir. 2012). In
contrast, statutory standing "is simply statutory interpretation:
the question it asks is whether Congress has accorded this injured
plaintiff the right to sue the defendant [under the particular
statute] to redress his injury." Graden v. Conexant Sys. Inc., 496
F.3d 291, 295 (3d Cir. 2007) (emphasis in original).
As framed by Sun Life, the statutory standing inquiry
here turns on whether the appellant "falls within the class of
plaintiffs whom Congress has authorized to sue under" ERISA.
Lexmark Int'l, Inc. v. Static Control Components, Inc., 134 S. Ct.
1377, 1387 & n.4 (2014); see Radha A. Pathak, Statutory Standing
and the Tyranny of Labels, 62 Okla. L. Rev. 89, 94 (2009). The
appellant purposes to sue under ERISA section 502(a)(3), which
authorizes a "beneficiary" to sue to obtain "appropriate equitable
relief" for certain ERISA violations. 29 U.S.C. § 1132(a)(3).
Inasmuch as ERISA defines a beneficiary as "a person designated by
a participant . . . who is or may become entitled to a benefit"
under a benefit plan, id. § 1002(8), the appellant would, at first
blush, appear to satisfy this definition.
But appearances can be deceiving, cf. Aesop, The Wolf in
Sheep's Clothing (circa 550 B.C.), and Sun Life argues cleverly
that because the appellant received the full amount of the death
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benefit when that sum was credited to the RAA, he is no longer
entitled to a benefit under the Plan. On this basis, Sun Life
suggests that the appellant lacks standing to sue under the
statute.
This suggestion need not detain us. Unlike
constitutional standing, statutory standing is part and parcel of
the merits of a particular claim. See Katz, 672 F.3d at 75. It
follows that, in certain circumstances, we may bypass a statutory
standing inquiry and resolve the dispute on the merits.3 See
United States v. Moloney (In re Price), 685 F.3d 1, 13 n.15 (1st
Cir. 2012), cert. denied, 133 S. Ct. 1796 (2013); Nisselson v.
Lernout, 469 F.3d 143, 151 (1st Cir. 2006). This is such a case.
Accordingly, we take no view of whether the appellant has statutory
standing at the threshold but, rather, dive directly into the
merits. See Faber v. Metro. Life Ins. Co., 648 F.3d 98, 103 (2d
Cir. 2011) (adopting this approach in a substantially similar
case).
Merrimon, without more, resolves the appellant's section
406(b) claim. We held there that "the funds backing the
plaintiffs' RAAs were not, and never became, plan assets," so that
3
We need not decide whether, strictly speaking, questions of
statutory standing are jurisdictional questions. That issue is
complicated. Courts have sometimes treated statutory standing as
jurisdictional, particularly in the ERISA context. See Pathak,
supra, at 106 & n.81, 111 & n.105 (collecting cases). But the
Supreme Court has recently cast doubt on that proposition. See
Lexmark, 134 S. Ct. at 1387 n.4.
-7-
"there was no showing of self-dealing [in plan assets] sufficient
to ground a section 406(b) claim." Merrimon, ___ F.3d at ___ [slip
op. at 20]. We premised this holding on the principle that the
assets of a policy-issuing insurer are not plan assets, see 29
U.S.C. § 1101(b)(2), and are not transformed into plan assets by
the establishment of an RAA. See Merrimon, ___ F.3d at ___ [slip
op. at 16, 18] (explaining that determining whether an item is a
plan asset will often turn on "ordinary notions of property
rights"). These conclusions apply unreservedly in the instant
case.4
This leaves the appellant's section 404(a) claim.
Section 404(a) directs generally that "a fiduciary shall discharge
his duties with respect to a plan solely in the interest of the
participants and beneficiaries." 29 U.S.C. § 1104(a)(1). The
appellant contends that when Sun Life paid him by establishing an
RAA, its decision was not made solely for his benefit.
In Merrimon, we rejected a virtually identical
contention. See ___ F.3d at ___ [slip op. at 21-22, 24]. We held
that a life insurer's payment of death benefits by means of an RAA
4
The appellant may have preserved here an argument not
preserved in Merrimon premised on the acknowledged status of the
policy as a plan asset. See 29 U.S.C. § 1101(b)(2); see also
Merrimon, ___ F.3d at ___ [slip op. at 19-20]. Assuming for
argument's sake that this argument was preserved, it is essentially
duplicative of the appellant's other arguments and wholly
unpersuasive.
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does not violate its ERISA-inspired fiduciary duties when the Plan
promises payment in that manner. See id. at 23-24.
But this case may be distinct because here, unlike in
Merrimon, the Plan did not state in haec verba that benefits would
be paid by means of an RAA. In the circumstances of this case,
however, this is a distinction without a difference.
The Plan at issue here states: "The Death Benefit may be
payable by a method other than a lump sum. The available methods
of payment will be based on the benefit options offered by Sun Life
at the time of election." It is undisputed that, at the relevant
time, the establishment of an RAA was among the payment options
offered by Sun Life. See Vander Luitgaren I, 966 F. Supp. 2d at
68.
The district court correctly held that Sun Life did not
violate any fiduciary duties owed to the appellant when it chose to
pay benefits through an RAA. See Vander Luitgaren II, 2013 WL
4058916, at *4; see also Edmonson, 725 F.3d at 422. After all,
plan sponsors have "considerable latitude" to set the terms of a
plan, including terms that spell out how benefits are to be paid.
Merrimon, ___ F.3d at ___ [slip op. at 23]. The Supreme Court has
explained that "ERISA's principal function [is] to protect [those]
contractually defined benefits." US Airways, Inc. v. McCutchen,
133 S. Ct. 1537, 1548 (2013) (internal quotation marks omitted).
Consequently, a fiduciary "must act in accordance with the
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documents and instruments governing the plan insofar as they accord
with the statute." Id. (internal quotation marks omitted).
These principles are controlling here. Since payment
through an RAA is not per se prohibited by the statute, see
Edmonson, 725 F.3d at 423-24, our inquiry necessarily focuses on
the terms of the Plan. The Plan promises a guaranteed benefit to
the appellant and specifies that the benefit may be paid other than
by means of a lump sum.
This specification has got to mean something. The
appellant urges us to read it as providing for payment by a mode
other than lump sum only as long as the choice of an alternative
does not benefit Sun Life. But nothing in the Plan language
suggests so curious a restriction, and we therefore reject the
appellant's embellishment.
In our view, a better reading of the phrasing is that Sun
Life can discharge its obligations to the beneficiary by paying the
promised benefit through any one of a range of recognized payment
modalities; provided, however, that the chosen modality does not
unfairly diminish, impair, restrict, or burden the beneficiary's
rights. The focus, we think, is on how the method of payment
affects the beneficiary — not on how it affects the insurer. So
viewed, Sun Life's choice to pay the appellant through the medium
of an RAA was a permissible step that comported with the Plan
terms. See id.
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The short of it is that, in the circumstances presented
here, Sun Life's choice to pay by means of an RAA did not violate
its fiduciary duties. See id. This result is entirely consistent
with Merrimon. There, we found that the insurer was free to pay
the death benefit by means of an RAA when that was the method of
payment specified in the plan documents. See Merrimon, ___ F.3d at
___ [slip op. at 23-24]. We do not believe that a legally
significant difference exists where, as here, the Plan documents,
instead of singling out RAAs as the exclusive method of payment,
allowed the insurer to pay other than by a lump sum.5
ERISA section 404(a) does not require a fiduciary to don
the commercial equivalent of sackcloth and ashes. What it does
require is that the fiduciary not place its own interests ahead of
those of the Plan beneficiary. An example may help to illustrate
the point. Suppose the Plan specifies that the death benefit may
be paid other than in American dollars. If, in a particular case,
it makes no practical difference to the beneficiary whether she
receives her promised benefit in dollars or euros, but it is to the
fiduciary's advantage to pay in euros, it could not rationally be
argued that payment in euros was a breach of the fiduciary's duty
5
The result that we reach is also consistent with our
decision in Mogel v. Unum Life Insurance Co., 547 F.3d 23 (1st Cir.
2008). There, the plan language specified that benefit payments
would "be made in one lump sum," and we held the insurer to that
language. See id. at 25-26; see also Merrimon, ___ F.3d at ___
[slip op. at 18] (discussing and distinguishing Mogel).
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under section 404(a). When the fiduciary's payment of a benefit
does not unfairly diminish, impair, restrict, or burden the
beneficiary's rights, section 404(a) is not transgressed.
Let us be perfectly clear. Our decision turns on two
important considerations: the language of the Plan and the fact
that Sun Life gave the appellant immediate and unfettered access to
the promised benefit in its entirety. If either of those
considerations were not present, this would be a different case.
We need go no further. For the reasons elucidated above,
the judgment of the district court is affirmed.
Affirmed.
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