USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
_________________________
No. 95-1002
JAMES JOHNSON,
Plaintiff, Appellee,
v.
WATTS REGULATOR COMPANY, ET AL.,
Defendants, Appellants.
_________________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Joseph A. DiClerico, Jr., U.S. District Judge] ___________________
_________________________
Before
Selya, Circuit Judge, _____________
Campbell, Senior Circuit Judge, ____________________
and Cyr, Circuit Judge. _____________
_________________________
Eleanor H. MacLellan, with whom Sean M. Dunne, Ross M. _____________________ _______________ ________
Weisman, and Sulloway & Hollis were on brief, for appellants. _______ _________________
Christopher J. Seufert, with whom Seufert Professional ________________________ _____________________
Association was on brief, for appellee. ___________
_________________________
August 23, 1995
_________________________
SELYA, Circuit Judge. This appeal requires us to SELYA, Circuit Judge. ______________
address, for the first time, a "safe harbor" regulation
promulgated by the Secretary of Labor (the Secretary) as a means
of exempting certain group insurance programs from the strictures
of the Employee Retirement Income Security Act of 1974 (ERISA),
29 U.S.C. 1001-1461. Determining, as we do, that the district
court appropriately applied the regulation, and discerning no
clear error in the court's factual findings on other issues in
the case, we affirm the judgment below.
I. BACKGROUND I. BACKGROUND
Plaintiff-appellee James Johnson worked as a forklift
operator at the Webster Valve division of defendant-appellant
Watts Regulator Co. (Watts) in Franklin, New Hampshire. While so
employed, plaintiff elected to participate in a group insurance
program made available to Watts' employees by defendant-appellant
CIGNA Employee Benefit Company d/b/a Life Insurance Company of
North America (CIGNA). Under the program plaintiff received
insurance protection against accidental death, dismemberment, and
permanent disability. He paid the premium through a payroll
deduction plan. Watts, in turn, remitted the premium payments to
CIGNA.
On June 15, 1990, while a participant in the program,
plaintiff sustained a severe head injury in a motorcycle
accident. He remained disabled for the ensuing year, and, having
crossed the policy's temporal threshold, he applied for benefits
on July 17, 1991. CIGNA turned him down, claiming that he
2
retained the residual capacity to do some work. Plaintiff then
sued Watts and CIGNA in a New Hampshire state court. Postulating
the existence of an ERISA-related federal question, the
defendants removed the action to the district court.
Following an evidentiary hearing, the district court
ruled that ERISA did not pertain. See Johnson v. Watts Regulator ___ _______ _______________
Co., No. 92-508-JD, 1994 WL 258788 (D.N.H. May 3, 1994). ___
Nevertheless, the court denied plaintiff's motion to remand,
noting diverse citizenship and the existence of a controversy in
the requisite amount. See 28 U.S.C. 1332(a). The parties ___
subsequently tried the case to the bench. The judge heard the
evidence, perused the group policy, applied New Hampshire law,
found plaintiff to be totally and permanently disabled, and
awarded the maximum benefit, together with attorneys' fees and
costs. See Johnson v. Watts Regulator Co., No. 92-508-JD, 1994 ___ _______ ___________________
WL 587801 (D.N.H. Oct. 26, 1994). This appeal ensued.
II. THE ERISA ISSUE II. THE ERISA ISSUE
The curtain-raiser question in this case involves
whether the program under which Johnson sought benefits is
subject to Title I of ERISA. Confronting this issue requires
that we interpret and apply the Secretary's safe harbor
regulation, 29 C.F.R. 2510.3-1(j) (1994). We divide this part
of our analysis into four segments. First, we explain why the
curtain-raiser question matters. Second, we limn the applicable
standard of review. Third, we discuss the regulation itself and
how it fits into the statutory and regulatory scheme. Fourth, we
3
scrutinize the record and test the district court's conclusion
that the program is within the safe harbor.
A. The ERISA Difference. A. The ERISA Difference. ____________________
From the earliest stages of the litigation, a
controversy has raged over the relationship, if any, between
ERISA and the group insurance program underwritten by CIGNA.
This controversy stems from perceived self-interest: if ERISA
applies, preemption is triggered, see 29 U.S.C. 1144(a), and, ___
in many situations, the substitution of ERISA principles (whether
derived from the statute itself or from federal common law) for
state-law principles can make a pronounced difference. For
example, ERISA preemption may cause potential state-law remedies
to vanish, see, e.g., Carlo v. Reed Rolled Thread Die Co., 49 ___ ____ _____ ___________________________
F.3d 790, 794 (1st Cir. 1995); McCoy v. Massachusetts Inst. of _____ _______________________
Technology, 950 F.2d 13, 18 (1st Cir. 1991), cert. denied, 504 __________ _____ ______
U.S. 910 (1992), or may change the standard of review, see, e.g., ___ ____
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1988), ____________________________ _____
or may affect the admissibility of evidence, see, e.g., Taft v. ___ ____ ____
Equitable Life Ins. Co., 9 F.3d 1469, 1471-72 (9th Cir. 1993), or _______________________
may determine whether a jury trial is available, see, e.g., Blake ___ ____ _____
v. Unionmutual Stock Life Ins. Co., 906 F.2d 1525, 1526 (11th _________________________________
Cir. 1990).
We are uncertain which of these boggarts has captured
the minds of the protagonists in this case. But exploring that
question does not strike us as a prudent use of scarce judicial
resources. Given the marshalled realities the parties agree
4
that the ERISA difference is of potential significance here; they
successfully persuaded the district court to that view; and it is
entirely plausible under the circumstances of this case that the
applicability vel non of ERISA makes a meaningful difference we ___ ___
refrain from speculation about the parties' tactical goals and
proceed directly to a determination of whether the court below
correctly concluded that state law provides the rule of decision.
B. Standard of Review. B. Standard of Review. __________________
The question of whether ERISA applies to a particular
plan or program requires an evaluation of the facts combined with
an elucidation of the law. See, e.g., Kulinski v. Medtronic Bio- ___ ____ ________ ______________
Medicus, Inc., 21 F.3d 254, 256 (8th Cir. 1994) (explaining that ______________
the existence of an ERISA plan is a mixed question of fact and
law); Peckham v. Gem State Mut., 964 F.2d 1043, 1047 n.5 (10th _______ _______________
Cir. 1992) (similar). For purposes of appellate review, mixed
questions of fact and law ordinarily fall along a degree-of-
deference continuum, ranging from plenary review for law-
dominated questions to clear-error review for fact-dominated
questions. See In re Extradition of Howard, 996 F.2d 1320, 1327- ___ ___________________________
28 (1st Cir. 1993). Plenary review is, of course,
nondeferential, whereas clear-error review is quite deferential.
See id. Both standards are in play here. ___ ___
The interpretation of a regulation presents a purely
legal question, sparking de novo review. See, e.g., Strickland ___ ____ __________
v. Commissioner, Me. Dep't of Human Serv., 48 F.3d 12, 16 (1st _______________________________________
Cir. 1994); Liberty Mut. Ins. Co. v. Commercial Union Ins. Co., ______________________ __________________________
5
978 F.2d 750, 757 (1st Cir. 1992). Once the meaning of the
regulation has been clarified, however, the "mixed" question that
remains the regulation's applicability in a given case may
require factfinding, and if it does, that factfinding is reviewed
only for clear error. To that extent, the existence of an ERISA
plan becomes primarily a question of fact. See Wickman v. ___ _______
Northwestern Nat'l Ins. Co., 908 F.2d 1077, 1082 (1st Cir.), _____________________________
cert. denied, 498 U.S. 1013 (1990); Kanne v. Connecticut Gen. _____ ______ _____ _________________
Life Ins. Co., 867 F.2d 489, 492 (9th Cir. 1988), cert. denied, ______________ _____ ______
492 U.S. 906 (1989).
C. Statutory and Regulatory Context. C. Statutory and Regulatory Context. ________________________________
Congress enacted ERISA to protect the interests of
participants in employee benefit plans (including the interests
of participants' beneficiaries). See 29 U.S.C. 1001(a) & (b); ___
see also Curtiss-Wright Corp. v. Schoonejongen, 115 S. Ct. 1223, ___ ____ ____________________ _____________
1230 (1995); Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 15-16 ________________________ _____
(1987). ERISA safeguards these interests in a variety of ways,
e.g., by creating comprehensive reporting and disclosure
requirements, see 29 U.S.C. 1021-1031, by setting standards of ___
conduct for fiduciaries, see id. 1101-1114, and by ___ ___
establishing an appropriate remedial framework, see id. 1131- ___ ___
1145. An integral part of the statutory scheme is a broadly
worded preemption clause that, in respect to covered employee
benefit plans, sets to one side "all laws, decisions, rules,
regulations, or other State action having the effect of law, of
any State." Id. 1144(a). The purpose of the preemption clause ___
6
is to enhance the efficient operation of the federal statute by
encouraging uniformity of regulatory treatment through the
elimination of state and local supervision over ERISA plans. See ___
Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142 (1990); McCoy, __________________ _________ _____
950 F.2d at 18.
For an employee welfare benefit plan or program to come
within ERISA's sphere of influence, it must, among other things,
be "established or maintained" by an employer,1 an employee
organization, or both. See 29 U.S.C. 1002(1); see also ___ ___ ____
Wickman, 908 F.2d at 1082 (enumerating necessary components of an _______
ERISA plan); Donovan v. Dillingham, 688 F.2d 1367, 1370 (11th _______ __________
Cir. 1982) (en banc)(same). The parties agree that the group
insurance program that CIGNA wrote for Watts' employees, covering
accidental death, dismemberment, and permanent disability,
qualifies as a "program" of employee welfare benefits as that
term is used in the statute. See generally 29 U.S.C. 1002(1). ___ _________
Hence, the ERISA question reduces to whether the program is one
"established or maintained" by an employer.
To address this very requirement, the Secretary of
Labor, pursuant to 29 U.S.C. 1135 (authorizing the Secretary to
promulgate interpretive regulations in the ERISA milieu),
promulgated a safe harbor regulation describing when (and to what
extent) an employer or a trade union may be involved with an
____________________
1The statute also requires that the employer be "engaged in
commerce" or in an industry or activity affecting commerce. 29
U.S.C. 1003(2). It is undisputed that Watts meets this
criterion.
7
employee welfare benefit program without being deemed to have
"established or maintained" it. See 40 Fed. Reg. 34,527 (1975) ___
(explaining the rationale underlying the safe harbor regulation);
see also Silvera v. Mutual Life Ins. Co., 884 F.2d 423, 426 (9th ___ ____ _______ ____________________
Cir. 1989); see generally Ronald J. Cooke, ERISA Practice and ___ _________ ___________________
Procedure 2.06 (1994). The regulation provides in relevant _________
part that the term
"employee welfare benefit plan" shall not
include a group or group-type insurance
program offered by an insurer to employees or
members of an employee organization, under
which:
(1) No contributions are made by an employer
or employee organization;
(2) Participation [in] the program is
completely voluntary for employees or
members;
(3) The sole functions of the employer or
employee organization with respect to the
program are, without endorsing the program,
to permit the insurer to publicize the
program to employees or members, to collect
premiums through payroll deductions or dues
checkoffs and to remit them to the insurer;
and
(4) The employer or employee organization
receives no consideration in the form of cash
or otherwise in connection with the program,
other than reasonable compensation, excluding
any profit, for administrative services
actually rendered in connection with payroll
deductions or dues checkoffs.
29 C.F.R. 2510.3-1(j). A program that satisfies the
regulation's standards will be deemed not to have been
"established or maintained" by the employer. The converse,
however, is not necessarily true; a program that fails to satisfy
8
the regulation's standards is not automatically deemed to have
been "established or maintained" by the employer, but, rather, is
subject to further evaluation under the conventional tests. See ___
Hansenv. Continental Ins. Co., 940 F.2d 971, 976 (5th Cir. 1991). ______ ____________________
Here, we need not proceed beyond the regulation itself.
The safe harbor dredged by the regulation operates on the premise
that the absence of employer involvement vitiates the necessity
for ERISA safeguards. In theory, an employer can assist its work
force by arranging for the provision of desirable coverage at
attractive rates, but, by complying with the regulation, assure
itself that, if it acts only as an honest broker and remains
neutral vis-a-vis the plan's operation, it will not be put to the
trouble and expense that meeting ERISA's requirements entails.
Failure to fulfill any one of the four criteria listed in the
regulation, however, closes the safe harbor and exposes a group
insurance program, if it otherwise qualifies as an ERISA program,
to the strictures of the Act. See Qualls v. Blue Cross of Cal., ___ ______ ___________________
Inc., 22 F.3d 839, 843 (9th Cir. 1994); Fugarino v. Hartford Life ____ ________ _____________
& Accident Ins. Co., 969 F.2d 178, 184 (6th Cir. 1992), cert. ____________________ _____
denied, 113 S. Ct. 1401 (1993); Memorial Hosp. Sys. v. Northbrook ______ ___________________ __________
Life Ins. Co., 904 F.2d 236, 241 n.6 (5th Cir. 1990); Kanne, 867 _____________ _____
F.2d at 492.
In the instant case, the first, second, and fourth
criteria are not in dispute. Plaintiff paid the premium without
the employer's financial assistance; the decision to purchase the
coverage was his and his alone; and Watts received no forbidden
9
consideration. We concentrate, therefore, on the regulation's
third facet. This is a fitting focus, as the Department of Labor
has called the employer neutrality that the third facet evokes
"the key to the rationale for not treating such a program as an
employee benefit plan . . . ." 40 Fed. Reg. 34,526.
In dealing with the regulation, courts have echoed the
agency's view of the importance of employer neutrality. See, ___
e.g., Hensley v. Philadelphia Life Ins. Co., 878 F. Supp. 1465, ____ _______ ___________________________
1471 (N.D. Ala. 1995); du Mortier v. Massachusetts Gen. Life Ins. __________ ____________________________
Co., 805 F. Supp. 816, 821 (C.D. Cal. 1992). But as the ___
regulation itself indicates, remaining neutral does not require
an employer to build a moat around a program or to separate
itself from all aspects of program administration. Thus, as long
as the employer merely advises employees of the availability of
group insurance, accepts payroll deductions, passes them on to
the insurer, and performs other ministerial tasks that assist the
insurer in publicizing the program, it will not be deemed to have
endorsed the program under section 2510.3-1(j)(3). See Kanne, ___ _____
867 F.2d at 492; du Mortier, 805 F. Supp. at 821. It is only ___________
when an employer purposes to do more, and takes substantial steps
in that direction, that it offends the ideal of employer
neutrality and brings ERISA into the picture. See, e.g., Kanne, ___ ____ _____
867 F.2d at 492-93 (holding that an employer group crossed the
line when it established a trust entity in its name for purposes
of plan administration); Brundage-Peterson v. Compcare Health _________________ _______________
Servs. Ins. Corp., 877 F.2d 509, 510-11 (7th Cir. 1989) (finding __________________
10
that an employer who determined eligibility, contributed
premiums, and collected and remitted premiums paid for dependents
did not qualify for the safe harbor exemption); Shiffler v. ________
Equitable Life Assur. Soc. of U.S., 663 F. Supp. 155, 161 (E.D. ___________________________________
Pa. 1986) (finding that an employer that touted a group policy to
employees as part of its customary benefits package, and that
specifically endorsed the policy, did not qualify for the safe
harbor exemption), aff'd, 838 F.2d 78 (3d Cir. 1988). This case _____
falls between these extremes, and requires us to clarify the
standard for endorsement under section 2510.3-1(j)(3).
The Department of Labor has linked endorsement of a
program on the part of an employee organization to its engagement
"in activities that would lead a member reasonably to conclude
that the program is part of a benefit arrangement established or
maintained by the employee organization." Dep't of Labor Op. No.
94-26A (1994).2 What is sauce for the goose is sauce for the
gander. Thus, we believe that the agency, in a proper case, will
link endorsement on an employer's part to its engagement in
activities that would lead a worker reasonably to conclude that a
particular group insurance program is part of a benefit
arrangement backed by the company.
This conclusion is bolstered by the Department's stated
rationale to the effect that a communication to employees
____________________
2Opinion letters issued by the Secretary of Labor are not
controlling even in the cases for which they are authored. See ___
Reich v. Newspapers of New Eng., Inc., 44 F.3d 1060, 1070 (1st _____ ______________________________
Cir. 1995). Nonetheless, courts may derive guidance from them.
See id. ___ ___
11
indicating that an employer has arranged for a group or group-
type insurance program would constitute an endorsement within the
meaning of section 2510.3-1(j)(3) if, taken together with other
employer activities, it leads employees reasonably to conclude
that the program is one established or maintained by the
communicator. See id.; see also 40 Fed. Reg. 34,526 (explaining ___ ___ ___ ____
that the current phrasing of the safe harbor provision replaced
an earlier version requiring that the employer make no
representation to its employees that the insurance program is a
benefit of employment because critics found the earlier version
"too vague and difficult to apply"). In short, the agency has
suggested that the employees' viewpoint should constitute the
principal frame of reference in determining whether endorsement
occurred.
The interpretation of the safe harbor regulation by the
agency charged with administering and enforcing ERISA is entitled
to substantial deference. See Berkshire Scenic Ry. Museum, Inc. ___ _________________________________
v. ICC, 52 F.3d 378, 381-82 (1st Cir. 1995); Keyes v. Secretary ___ _____ _________
of the Navy, 853 F.2d 1016, 1021 (1st Cir. 1988). Here, _____________
moreover, the respect usually accorded an agency's interpretation
of a statute is magnified since the agency is interpreting its
own regulation. See Arkansas v. Oklahoma, 503 U.S. 91, 112 ___ ________ ________
(1992); Puerto Rico Aqueduct & Sewer Auth. v. United States EPA, __________________________________ _________________
35 F.3d 600, 604 (1st Cir. 1994), cert. denied, 115 S. Ct. 1096 _____ ______
(1995). So long as the agency's interpretation does not do
violence to the purpose and wording of the regulation, or
12
otherwise cross into forbidden terrain, courts should defer. See ___
Martin v. OSHRC, 499 U.S. 144, 150 (1991); see also Stinson v. ______ _____ ___ ____ _______
United States, 113 S. Ct. 1913, 1919 (1993) (holding that an ______________
agency's interpretation of its own regulations must be given
controlling weight unless plainly erroneous, inconsistent with a
federal statute, or unconstitutional); Kelly v. United States, _____ _____________
924 F.2d 355, 361 (1st Cir. 1991) (similar).
In this instance, we believe that deference is due.
The Secretary's sense of the safe harbor regulation is consonant
with both the regulation's text and the overlying statute. And,
moreover, looking at the employer's conduct from the employees'
place of vantage best ensures that employer neutrality remains a
reality rather than a mere illusion. Phrased another way,
judging endorsement from the viewpoint of an objectively
reasonable employee most efficaciously serves ERISA's fundamental
objective: the protection of employee benefit plan participants
and their beneficiaries.
We rule, therefore, that an employer will be said to
have endorsed a program within the purview of the Secretary's
safe harbor regulation if, in light of all the surrounding facts
and circumstances, an objectively reasonable employee would
conclude on the basis of the employer's actions that the employer
had not merely facilitated the program's availability but had
exercised control over it or made it appear to be part and parcel
of the company's own benefit package.
D. Analysis. D. Analysis. ________
13
Here, the district court interpreted the regulation
correctly and concluded that the company had not endorsed the
group insurance program. This conclusion is fact-driven, and,
thus, reviewable only for clear error.3 See Cumpiano v. Banco ___ ________ _____
Santander P.R., 902 F.2d 148, 152 (1st Cir. 1990); see also Fed. ______________ ___ ____
R. Civ. P. 52(a). Thus, the trier's findings of fact cannot be
set aside unless, on reviewing all the evidence, the court of
appeals is left with an abiding conviction that a mistake has
been committed. See Dedham Water Co. v. Cumberland Farms Dairy, ___ ________________ _______________________
Inc., 972 F.2d 453, 457 (1st Cir. 1992); Cumpiano, 902 F.2d at ____ ________
152-153. Applying this deferential standard, we cannot say that
the trial court's "no endorsement" finding is clearly erroneous.
The anatomy of the court's determination is
instructive. Based primarily on the testimony of two corporate
officials Watts' benefits administrator and Webster Valve's
employee relations manager the court found that the company had
____________________
3The question of endorsement vel non is a mixed question of ___ ___
fact and law. In some cases the evidence will point unerringly
in one direction so that a rational factfinder can reach but one
conclusion. In those cases, endorsement becomes a matter of law.
Cf. Griffin v. United States, 502 U.S. 46, 55 n.1 (1991) ___ _______ ______________
(discussing "adequacy on the proof as made" as meaning not
whether the evidence sufficed to enable an alleged fact to be
found, but, rather, whether the facts adduced at trial sufficed
in law to support a verdict); Anderson v. Liberty Lobby, Inc., ________ ___________________
477 U.S. 242, 251-52 (1986) (describing the appropriate mode of
inquiry for directed verdicts and summary judgments). In other
cases, the legal significance of the facts is less certain, and
the outcome will depend on the inferences that the factfinder
chooses to draw. See, e.g., TSC Indus., Inc. v. Northway, Inc., ___ ____ ________________ ______________
426 U.S. 438, 450 (1976); In re Varasso, 37 F.3d 760, 763 (1st ______________
Cir. 1994). In those cases, endorsement becomes a question of
fact. This case is of the latter type.
14
made its employees aware of the opportunity to obtain coverage,
but had stopped short of endorsing the program. CIGNA drafted
the policy and, presumably, set the premium rates. Although
Watts distributed the sales brochure, waiver-of-insurance cards,
and enrollment cards, those efforts were undertaken to help CIGNA
publicize the program; the documents themselves were prepared and
printed by CIGNA, and delivered by it to Watts for distribution.
Watts recommended enrollment via a cover letter (reproduced as an
appendix hereto) written on the letterhead of Watts Industries
and signed by its vice-president for financial matters. CIGNA
typeset the letter and incorporated it into the cover page of the
brochure. The letter explicitly informed Watts' employees that
the enrollment decision was theirs to make. Watts nowhere
suggested that it had any control over, or proprietary interest
in, the group insurance program. And, finally, neither the
letter nor any other passage in the brochure mentioned ERISA.
The district court also examined Watts' other
activities concerning the program. Watts collected premiums
through payroll deductions, remitted the premiums to CIGNA,
issued certificates to enrolled employees confirming the
commencement of coverage, maintained a list of insured persons
for its own records, and assisted CIGNA in securing appropriate
documentation when claims eventuated. Watts' activities in this
respect consisted principally of filling out the employer portion
of the claim form, inserting statistical information maintained
in Watts' personnel files (such as the insured's name, address,
15
age, classification, and date of hire), making various forms
available to employees (e.g., claim forms),4 and keeping track
of employee eligibility. Watts would follow up on a claim to
determine its status, if CIGNA requested that Watts do so, and
would occasionally answer a broker's questions about a claim. In
sum, Watts performed only administrative tasks, eschewing any
role in the substantive aspects of program design and operation.
It had no hand in drafting the plan, working out its structural
components, determining eligibility for coverage, interpreting
policy language, investigating, allowing and disallowing claims,
handling litigation, or negotiating settlements.
In the last analysis, the district court found that
Watts' cover letter fell short of constituting an endorsement.
The court pointed out that neither the letter nor the brochure
expressly stated that the employer endorsed the program. Apart
from the letter, the court concluded that Watts had performed
only ministerial activities, and that these activities (whether
viewed alone or in conjunction with the cover letter) did not
rise to the level of an endorsement.
We believe that this finding deserves our allegiance.
Drawing permissible inferences from the evidence, the trial court
could plausibly conclude on this scumbled record that an
objectively reasonable employee would not have thought that Watts
endorsed the group insurance program. Several considerations
____________________
4CIGNA prepared and printed all such forms, and sent a
supply of forms to Watts.
16
lead us in this direction. We offer a representative sampling.
First, we think that endorsement of a program requires
more than merely recommending it. An employer's publicly
expressed opinion as to the quality, utility and/or value of an
insurance plan, without more, while relevant to (and perhaps
probative of) endorsement, will most often not indicate employer
control of the plan. Second, the administrative functions that
Watts undertook fit comfortably within the Secretary's
regulation. Activities such as issuing certificates of coverage
and maintaining a list of enrollees are plainly ancillary to a
permitted function (implementing payroll deductions). Activities
such as answering brokers' questions similarly can be viewed as
assisting the insurer in publicizing the plan. Other activities
that arguably fall closer to the line, such as the tracking of
eligibility status, are completely compatible with the
regulation's aims. Under the circumstances, the court lawfully
could find that the employer's activities, in the aggregate, did
not take the case out of the safe harbor.5 See, e.g., Brundage- ___ ____ _________
____________________
5Appellants stress the fact that Watts unilaterally prepared
and filed a Form 5500 with the Internal Revenue Service. This is
an example of the mountain laboring, but bringing forth a mouse.
Such forms are informational in nature and are designed to comply
with various reporting requirements that ERISA imposes. See ___
Cooke, supra, 3.10, at 3-34. But, there is no evidence to _____
suggest that Watts' employees knew of this protective filing, and
it is surpassingly difficult for us to fathom how the filing
makes a dispositive difference. Although the inference that
compiling the tax form demonstrated Watts' intent to provide an
ERISA plan does not escape us, but cf. Kanne, 867 F.2d at 493 ___ ___ _____
(explaining that a brochure describing a plan as an ERISA plan
evidences the intent of the employer to create an ERISA plan, but
the same may not be said of the filing of a tax return), it is
entirely possible, as the plaintiff suggests, that the form was
17
Peterson, 877 F.2d at 510 (assuming that steps such as ________
"distributing advertising brochures from insurance providers, or
answering questions of its employees concerning insurance, or
even deducting the insurance premiums from its employees'
paychecks and remitting them to the insurers," do not force
employers out of the safe harbor provision); du Mortier, 805 F. __________
Supp. at 821 (holding that activities such as maintaining a file
of informational materials, distributing forms to employees, and
submitting completed forms to the insurer, do not transcend the
boundaries of the safe harbor).
In arguing for reversal, appellants rely on Hansen v. ______
Continental Ins. Co., a case that involved a similar situation. _____________________
In Hansen, as here, participation in the plan was voluntary, and ______
premiums were paid by the employees via payroll deduction. See ___
Hansen, 940 F.2d at 973. The employer collected the premiums, ______
remitted them to the insurer, and employed an administrator who
accepted claim forms and transmitted them to the carrier. See ___
id. at 974. In addition, the employees received a booklet ___
embossed with the employer's corporate logo that described the
plan and encouraged employee participation. The court found that
the company had endorsed the plan. See id. ___ ___
Despite the resemblances, there are two critical facts
that distinguish Hansen from the case at bar. First, in Hansen ______ ______
the corporate logo was embossed on the booklet itself, see id., ___ ___
____________________
filed merely as a precaution. In any event, this case turns on
the employer's activities, not its intentions.
18
making it appear that the employer vouched for the entire
brochure (and for the plan). Here, however, only Watts' letter
bore its imprimatur. Second, and perhaps more cogent, the
booklet at issue in Hansen described the policy as the company's ______
plan, see id. ("our plan"), while here, the letter typeset onto ___ ___
the booklet describes the policy as a plan offered by another
organization.6 Though the appellants decry the distinction as
merely a matter of semantics, words are often significant in
determining legal rights and obligations. See generally Felix ___ _________
Frankfurter, Some Reflections on the Reading of Statutes 29 _______________________________________________
(1947) ("Exactness in the use of words is the basis of all
serious thinking.").
In the difference between "our plan" and "a plan" lies
the quintessential meaning of endorsement. If a plan or program
is the employer's plan or program, the safe harbor does not
beckon. See, e.g., Sorel v. CIGNA, 1994 WL 605726, at *2 (D.N.H. ___ ____ _____ _____
Nov. 1, 1994) (holding that statement describing policy as
employer's plan on first page of plan description indicates
endorsement); Cockey v. Life Ins. Co. of N. Am., 804 F. Supp. ______ _________________________
1571, 1575 (S.D. Ga. 1992) (finding that when employer presents a
program to its employees as an integral part of its own benefits
____________________
6There may also be a critical difference between our
approach to the question of endorsement and that adopted in
Hansen. Although the Hansen court did not articulate its ratio ______ ______ _____
decidendi, at least one district court has come to the conclusion _________
that Hansen analyzed the situation from the standpoint of the ______
employer rather than the employee. See Barrett v. Insurance Co. ___ _______ _____________
of N. Am., 813 F. Supp. 798, 800 (N.D. Ala. 1993). This ___________
possibility renders appellants' reliance on Hansen even more ______
problematic.
19
package, the safe harbor is unavailable); Shiffler, 663 F. Supp. ________
at 161 (finding endorsement because policy had been hawked to
employees as a part of the company's benefits package); see also ___ ____
Dep't of Labor Op. No. 94-26A, supra (advising that safe harbor _____
is unavailable when a union, inter alia, describes a group _____ ____
insurance program as its program). When, however, the employer
separates itself from the program, making it reasonably clear
that the program is a third party's offering, not subject to the
employer's control, then the safe harbor may be accessible. See ___
Hansen, 940 F.2d at 977; Kanne, 867 F.2d at 493; Hensley, 878 F. ______ _____ _______
Supp. at 1471.
This distinction is sensible. When an objectively
reasonable employee reads a brochure describing a program as
belonging to his employer, he is likely to conclude that, if he
participates, he will be dealing with the employer and that he
will therefore enjoy the prophylaxis that ERISA ensures in such
matters. When the possessive pronoun is eliminated in favor of a
neutral article, however, the employee's perception is much more
likely to be that, if he participates, he will be dealing
directly with a third party the insurer and that he will
therefore be beyond the scope of ERISA's protections.
To sum up, we are drawn to three conclusions. First,
the district court did not clearly err in finding that Watts had
not endorsed the group insurance program. Second, the court's
fact-sensitive determination that the program fits within the
parameters of the Secretary's safe harbor regulation is
20
sustainable. Third, since ERISA does not apply, the court below
did not blunder in scrutinizing the merits of plaintiff's
contract claim through the prism of state law.
III. THE DISABILITY ISSUE III. THE DISABILITY ISSUE
Appellant asseverates that, even if New Hampshire law
controls, the judgment below is insupportable. We turn now to
this asseveration.
The starting point for virtually any claim under a
policy of insurance is the policy itself. Here, the applicable
rider promises benefits to an insured who has been injured in an
accident, whose ensuing disability is "continuous" and "total"
for a year, and who thereafter remains "permanently and totally
disabled." The rider defines "continuous total disability" as a
disability resulting from injuries sustained in an accident,
"commencing within 180 days after the date of the accident,"
lasting for at least a year, and producing during that interval
"the Insured's complete inability to perform every duty of his
occupation."
If an insured meets this benchmark, he must then prove
that he is "permanently and totally disabled." Under the policy
definitions, this phrase signifies "the Insured's complete
inability, after one year of continuous total disability, to
engage in an occupation or employment for which [he] is fitted by
reason of education, training, or experience for the remainder of
his life." It is against this linguistic backdrop that we
inspect appellants' assertion that the trial court erred in
21
finding plaintiff to be totally and permanently disabled.
A. Standard of Review. A. Standard of Review. __________________
In actions that are tried to the court, the judge's
findings of fact are to be honored unless clearly erroneous,
paying due respect to the judge's right to draw reasonable
inferences and to gauge the credibility of witnesses. See ___
Cumpiano, 902 F.2d at 152 (citing Fed. R. Civ. P. 52(a)); ________
Reliance Steel Prods. Co. v. National Fire Ins. Co., 880 F.2d __________________________ _______________________
575, 576 (1st Cir. 1989). A corollary of this proposition is
that, when there are two permissible views of the evidence, the
factfinder's choice between them cannot be clearly erroneous.
See Anderson v. City of Bessemer City, 470 U.S. 564, 574 (1985); ___ ________ _____________________
Cumpiano, 902 F.2d at 152. In fine, when a case has been decided ________
on the facts by a judge sitting jury-waived, an appellate court
must refrain from any temptation to retry the factual issues
anew.
There are, of course, exceptions to the rule. For
example, de novo review supplants clear-error review if, and to
the extent that, findings of fact are predicated on a mistaken
view of the law. See, e.g., United States v. Singer Mfg. Co., ___ ____ _____________ _______________
374 U.S. 174, 195 n.9 (1963); RCI N.E. Servs. Div. v. Boston _____________________ ______
Edison Co., 822 F.2d 199, 203 (1st Cir. 1987). This does not __________
mean, however, that the clearly erroneous standard can be eluded
by the simple expedient of creative relabelling. See Cumpiano, ___ ________
902 F.2d at 154; Reliance Steel, 880 F.2d at 577. For obvious ______________
reasons, we will not allow a litigant to subvert the mandate of
22
Rule 52(a) by hosting a masquerade, "dressing factual disputes in
`legal' costumery." Reliance Steel, 880 F.2d at 577; accord Dopp ______________ ______ ____
v. Pritzker, 38 F.3d 1239, 1245 (1st Cir. 1994), cert. denied, ________ _____ ______
115 S. Ct. 1959 (1995).
B. Analysis. B. Analysis. ________
Appellants make two main arguments in regard to
plaintiff's disability claim. First, in an effort to skirt Rule
52(a), they assert that the district court committed an error of
law, mistaking the meaning of the phrase "permanently and totally
disabled" as that phrase is used in the policy. We reject the
assertion as comprising nothing more than a clumsy attempt to
recast a clear-error challenge as an issue of law in hope of
securing a more welcoming standard of review. The policy itself
defines the operative term, and the record makes pellucid that
the district judge applied the term within the parameters of that
definition.
Appellants' second contention posits that the district
court misperceived the facts, and that plaintiff was not
sufficiently disabled to merit an award of benefits. This
contention also lacks force. The district court had adequate
grounds for deciding that plaintiff was totally and permanently
disabled. The evidence showed that plaintiff sustained a
devastating brain injury, and that, throughout the year following
his accident, a number of physicians found his disability to be
continuous. By and large, plaintiff's condition did not improve
significantly during that year (or thereafter, for that matter).
23
Without exception, the doctors concluded that he could never
return to work as a forklift driver. To cap matters, the record
contains ample evidence that the plaintiff's disability was
permanent and blanketed the universe of occupations to which
plaintiff a laborer with a high-school education might have
aspired.
We need not cite book and verse. The court made
detailed findings, crediting the conclusions of four doctors who
judged plaintiff to be severely impaired, both mentally and
physically.7 The court also credited an evaluation performed by
Sherri Krasner, a speech and language pathologist, and the
testimony of a vocational rehabilitation counselor, Arthur
Kaufman, who offered an opinion that plaintiff was unable to work
without constant supervision. Kaufman stated that he did not
know of a job suitable for a person in plaintiff's condition.8
____________________
7These experts included the attending physician (Dr.
Martino), a neurologist (Dr. Whitlock), a clinical
neuropsychologist (Dr. Higgins), and a psychologist (Dr. Toye).
A fifth physician, Dr. Michele Gaier-Rush, also evaluated
plaintiff. CIGNA chose Dr. Gaier-Rush as its medical examiner
but neglected to provide her with any of plaintiff's plentiful
prior medical records, despite their availability. She concluded
that plaintiff could not perform his usual job but could perform
a job "requiring more mental capacity than physical capacity."
She noted, however, that plaintiff had no formal training beyond
high school, and conceded that "[t]his will probably be a
permanent disability as there does not seem to have been a
significant improvement in the past year." Consequently, she
found it doubtful that plaintiff could ever work again.
8While Kaufman did say that plaintiff might be able to do
some gainful employment with "excessive supervision," and that
plaintiff, like other patients with traumatic brain injuries,
would probably benefit from vocational rehabilitation, Kaufman
expressed doubt that plaintiff would ever overcome his
impairment. In short, he lacked the "capacity to retain . . .
24
On this record, the trial court's total disability finding is
unimpugnable.
Another wave of appellants' evidentiary attack targets
the district court's finding that plaintiff's disability is
permanent. In this respect, appellants rely mainly on the
physicians' recommendations for rehabilitative therapy as
indicative of the potential for recovery. The district court,
however, found appellants' inference unreasonable in light of the
dim prospects for significant recovery, the duration of
plaintiff's inability to work, and the policy's failure to
require vocational rehabilitation as a precondition to the
receipt of benefits. These are fact-dominated issues, and the
trial court is in the best position to calibrate the decisional
scales. See Cumpiano, 902 F.2d at 152. Having examined the ___ ________
record with care, we have no reason to suspect that a mistake was
committed. See, e.g., Duhaime v. Insurance Co., 86 N.H. 307, 308 ___ ____ _______ _____________
(1933) (explaining that, to be permanently disabled, an insured
need not be in a condition of "utter hopelessness").
IV. CONCLUSION IV. CONCLUSION
We need go no further. ERISA does not apply to the
group insurance program at issue here. Moreover, the district
court's factual findings survive clear-error review.
Consequently, the court's resolution of the case stands.
____________________
employment."
25
Affirmed. Affirmed. ________
26