Jerry Harris v. Epoch Group

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 03-2006
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Jerry Harris, *
*
Appellant, *
*
v. * Appeal from the United States
* District Court for the
The Epoch Group, L.C.; Barnes- * Eastern District of Missouri.
Jewish Christian Hospitals, doing *
business as BJC Healthcare & *
Associated Entities Plan, *
*
Appellees. *
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Submitted: November 21, 2003

Filed: February 6, 2004
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Before WOLLMAN, BYE, and SMITH, Circuit Judges.
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BYE, Circuit Judge.

Jerry Harris appeals the dismissal of his claim for health benefits as time-
barred. We conclude Harris brought the claim in a timely manner, and therefore
reverse and remand.
 I

Harris fell from a tree and broke his right foot and left femur on August 4,
1994. He made a claim for benefits through a self-funded health plan governed by
the Employment Retirement Income Security Act (ERISA) and established by his
wife's employer, Barnes Hospital (now Barnes-Jewish Christian Hospitals). The plan
denied his claim on February 8, 1995.

In February 2002, he brought suit in Missouri state court against the plan and
its administrator, The Epoch Group, L.C. The defendants removed the suit to federal
district court and moved to dismiss the complaint arguing, among other things, the
claim for benefits was time-barred under the terms of the plan. The pertinent plan
language provides:

No action at law or in equity shall be brought to recover under the Plan
. . . unless brought within three years from the expiration of the time
within which proof of claim is required in accordance with the Plan's
claims procedures or such longer period as required by applicable state
laws.

Add. at 11. The plan was contracted-for and issued in Missouri, and another part of
the plan provided it would be construed according to federal law and ERISA "and
secondly, in accordance with the laws of the state of Missouri." App. at 137. Thus,
the parties do not dispute the "applicable state laws," if any, are those of the state of
Missouri.

Harris resisted the motion to dismiss because the plan expressly provided suit
could be brought within three years "or such longer period as required by applicable
state laws," and argued his claim was timely under Mo. Rev. Stat. § 516.110(1),
Missouri's ten-year statute of limitations for the enforcement of a defendant's written
promise for the payment of money. Harris relied upon the Eighth Circuit's en banc

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decision in Johnson v. State Mut. Life Assurance Co. of Am., 942 F.2d 1260 (8th Cir.
1991), which held § 516.110(1) was the statute of limitations applicable to a claim
for ERISA benefits in Missouri when a plan did not otherwise provide for a time
limitation on bringing claims. Id. at 1266.

The district court disagreed. Relying upon Northlake Reg'l Med. Ctr. v. Waffle
House, 160 F.3d 1301, 1303-04 (11th Cir. 1998), and Doe v. Blue Cross & Blue
Shield United of Wis., 112 F.3d 869, 874-75 (7th Cir. 1997), the district court
reasoned parties may, in an ERISA case, contractually bind themselves to a shorter
statute of limitations than required by state law, and Harris contractually agreed to a
three-year limitations period. The district court rejected Harris's reliance upon the
plan language which provided "or such longer period as required by applicable state
laws," stating "[t]he choice of the appropriate limitations period for a federal cause
of action when Congress has not spoken is a matter of federal common law, not state
law." Add. at 8.

Harris filed a timely appeal contending the district court erred by ignoring the
plain language of the plan which allowed a longer period under state law.

II

"We review de novo a district court's grant of a motion to dismiss for failure
to state a claim under Rule 12(b)(6)." Krentz v. Robertson, 228 F.3d 897, 905 (8th
Cir. 2000).

The district court discounted the plan language which referred to a longer
limitations period under state law, reasoning the choice of a limitations period is
governed by federal common law, not state law. We do not agree. Although parties
may not agree an ERISA plan shall be construed according to the principles of state
law rather than principles of the federal common law, see Prudential Ins. Co. of Am.

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v. Doe, 140 F.3d 785, 791 (8th Cir. 1998), the appellees have not brought to our
attention any principle which prohibits parties from borrowing from state law when
drafting the substantive terms of an ERISA-governed benefit plan. In this case, the
parties specifically chose to incorporate state law when drafting the substantive terms
of the plan setting forth the time limitations for bringing claims against the plan.

Nothing in the federal common law prohibits an ERISA plan from
contractually incorporating a state statute of limitations period. The cases relied upon
by the district court, Northlake and Doe v. Blue Cross & Blue Shield, are
distinguishable because the plan language in those cases did not contain the disputed
phrase involved here, i.e., "or such longer period as required by applicable state
laws." This is not a case where plan participants contractually bound themselves to
a shorter limitations period than that required by state law. Rather, this is a case
where the plan specifically gave its participants the benefit of the full limitations
period allowed by state law. Neither is this a matter of federal law preempting state
law. Instead, this is simply a matter of straightforward contract interpretation. The
only issue, therefore, is what the parties meant when they said the limitations period
was "three years . . . or such longer period as required by applicable state laws."

In a slight variation on the district court's reasoning, the plan and its
administrator contend the phrase "or such longer period as required by applicable
state laws" is mere surplusage in this particular contract. They contend there are no
"applicable" state laws because this is a health plan governed by ERISA and federal
law. We disagree. The federal courts apply federal common law rules of contract
interpretation to discern the meaning of the terms in an ERISA plan, e.g., Pitcher v.
Principal Mut. Life Ins. Co., 93 F.3d 407, 411 (7th Cir. 1996), and under federal
common law "a contract should be interpreted as to give meaning to all of its terms
– presuming that every provision was intended to accomplish some purpose, and that
none are deemed superfluous." Transitional Learning Cmty. at Galveston, Inc. v.
United States Office of Personnel Mgmt., 220 F.3d 427, 431 (5th Cir. 2000). We

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reject the argument advanced by appellees because it would render the disputed
phrase superfluous.

Instead, we decide the phrase means exactly what it says. The plan says three
years, or longer if required by state law. Thus, the parties intended to give plan
participants a minimum of three years within which to bring suit, even if state law
might provide for a shorter period. But if state law provided for a longer period, plan
participants got the benefit of the longer period.

We must next decide what limitations period is required by state law. On this
score, the en banc court has already done our work. See Johnson v. State Mut. Life
Assurance, 942 F.2d at 1266 (deciding the ten-year period under Mo. Rev. Stat. §
516.110(1) is the most analogous statute of limitations under Missouri law for a claim
for ERISA benefits).

The plan and its administrator claim a different Missouri statute is more
analogous than § 516.110(1). See Mo. Rev. Stat. § 376.426(14) (requiring group
health insurance policies to include a provision stating "that no action at law or in
equity shall be brought to recover on the policy . . . unless brought within three years
from the expiration of the time within which proof of loss is required by the policy.").
They recognize Johnson may preclude us from considering this argument, but contend
we are not bound by Johnson because the defendant there did not argue for the
application of § 376.426(14). Furthermore, they argue the en banc court had
"considerable reservations" about adopting § 516.110(1)'s ten-year period. We do not
believe these arguments permit us to ignore the holding in Johnson.

First, "[p]recedents do not cease to be authoritative merely because counsel in
a later case advance a new argument." United States v. Hill, 48 F.3d 228, 232 (7th
Cir. 1995). We are not free to disregard Johnson simply because the plan and its
administrator are advancing an argument about § 376.426(14) not raised in Johnson.

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We believe that argument must be made to the court sitting en banc. Second, the
"reservations" expressed in Johnson were not about whether § 516.110(1) was the
most analogous limitations period to apply to ERISA claims, but rather about
Missouri's wisdom in choosing a statute of limitations as long as ten years. See
Johnson, 942 F.2d at 1266. In fact, the en banc court expressly noted the length of
the limitations period was an issue for the Missouri legislature (or Congress by
amending ERISA) and not for the judiciary. Id. Therefore, we conclude Johnson is
binding and precludes us from considering whether § 376.426(14) is more analogous
than § 516.110(1).

During oral argument, the plan and its administrator advanced a different
reason why this panel is not bound by Johnson. The Missouri legislature enacted §
376.426(14) in 1985, and thus the insurer could have argued for its application in
Johnson (which was decided in 1991). But Mr. Johnson the plaintiff died in 1979,
before § 376.426(14) became law. The plan and its administrator argue Mr. Johnson
obtained a vested right to the application of the ten-year statute at the time of his
death, and therefore the Johnson court could not have applied § 376.426(14) even if
the insurer had argued that statute was the most analogous for ERISA purposes. They
therefore contend this panel is now free to consider whether § 376.426(14) is more
analogous to ERISA claims than § 516.110(1).

We have considerable reservation about the soundness of appellees' argument,
but decline to address it because we would have to resolve a number of issues which
have not been fully briefed by the parties.1 Instead, we reject appellees' reliance upon

1
Mr. Johnson did not obtain a vested right to the ten-year statute of limitations
upon his death, because the Missouri legislature may shorten the time for suing on an
existing claim if it affords persons with pending claims a reasonable time within
which to bring suit. Swartz v. Swartz, 887 S.W.2d 644, 650 (Mo. Ct. App. 1994)
(citing Goodman v. St. Louis Children's Hosp., 687 S.W.2d 889, 891 (Mo. banc
1985)). The Missouri courts will not apply a shortened limitations period to a

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§ 376.426(14) for a different reason. Section 376.426(14) governs group health
insurance policies. Where an ERISA plan is self-funded, as this one is, it is not a
group health insurance policy and therefore not governed by § 376.426(14). Thus,
Harris's claim for benefits more resembles a straightforward contract action than a
claim for benefits under an insurance policy. With respect to this plan, then, we
would conclude § 516.110(1) is more analogous than § 376.426(14) even if we were
not bound by Johnson. See, e.g., I.V. Servs. of Am., Inc. v. Inn Dev. & Mgmt., Inc.,
7 F. Supp. 2d 79, 86 (D. Mass. 1998) (concluding a general contract statute of
limitations, as applied to a self-funded plan, is more analogous for ERISA purposes
than a statute governing insurance policies).

pending claim, however, unless the statute has some "saving language" in it providing
for a reasonable time in which to file suit on existing claims. Id. at 651.
Thus, in order to determine the binding nature of Johnson if we were to address
appellees' argument, it would seem the issue turns on whether § 376.426(14) contains
saving language giving persons affected by the statute a reasonable time in which to
file suit upon existing claims. That is the point at which we have difficulty with the
argument. Section 376.426(14) is not a statute of limitations in the traditional sense,
but a part of the state's insurance laws dictating what terms must be included in group
health policies. As such, we question whether it could impact claims existing at the
time of its passage (rather than merely claims brought under policies issued in 1985
or thereafter which included the terms required by the statute), and whether the
Missouri legislature would have had reason to include any saving language in the
statute. This dilemma raises the more general concern about whether provisions in
state insurance codes, such as § 376.426(14), should even be considered "analogous"
statutes of limitation for ERISA purposes. See Wetzel v. Lou Ehlers Cadillac Group
Long Term Disability Ins. Program, 222 F.3d 643, 647-48 (9th Cir. 2000) (holding
such statutes are not "analogous" statutes of limitation for ERISA purposes). As
stated above, however, we decline to address this issue because none of the
aforementioned has been briefed by the parties.

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 III

For the reasons stated herein, we reverse the district court's judgment of
dismissal and remand for further proceedings.
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