United States Court of Appeals,
Fifth Circuit.
No. 93-9132.
Mary Nell HINES, Guardian of Bobby Alan Parker, Plaintiff-
Appellant,
v.
MASSACHUSETTS MUTUAL LIFE INS. CO., et al., Defendants,
GECO Geophysical Co., Inc., Defendant-Appellee.
Feb. 1, 1995.
Appeal from the United States District Court for the Northern
District of Texas.
Before WISDOM and DUHÉ, Circuit Judges.1
DUHÉ, Circuit Judge:
Mary Nell Hines, the guardian of Bobby Alan Parker, appeals
the district court's grant of summary judgment in favor of GECO
Geophysical Co., Inc. (GECO). Hines had asserted discrimination,
breach of fiduciary duty, and wrongful denial of benefits claims
under the Employee Retirement Income Security Act of 1974 (ERISA),
29 U.S.C. §§ 1001-1461 (1988). We affirm.
BACKGROUND
Parker was an employee of GECO in 1982. A GECO Group Medical
Plan (the "Plan"), helped full-time employees with hospitalization
and medical costs. Until September 30, 1982, the Plan consisted of
a group insurance policy written by Massachusetts Mutual Life
Insurance Company (the "Mass. policy"), which allowed for
1
The third member of the panel, Judge King, recused herself
at oral argument. The decision of the remaining two members of
the panel constitute a quorum. See 28 U.S.C. § 46(d) (1988).
1
discontinuation of insurance at any time. On that date, GECO
cancelled the Mass. policy and replaced it with a policy written by
Connecticut General Life Insurance Company (the "Conn. policy").
Parker was a participant in the Plan on April 14, 1982, at
which time he sustained totally disabling injuries in an automobile
accident. When GECO switched policies four and one-half months
later, Parker's condition was not covered under the Conn. policy
because it excluded preexisting conditions. Nevertheless, the
Mass. policy covered Parker for one year after its termination.
Thereafter, GECO paid Parker's medical bills until September 30,
1988.
Parker has not returned to work, and Hines has been his
guardian since 1988. After GECO stopped paying benefits in 1988,
Hines brought this action against GECO on behalf of Parker.2 She
asserts four discrimination claims under Section 510 of ERISA, 29
U.S.C. § 1140, three breach of fiduciary duty claims under Section
404, 29 U.S.C. § 1104, and two wrongful denial of benefit claims
under Section 502, 29 U.S.C. § 1132. GECO moved for summary
judgment, which the district court granted. Hines appeals.
DISCUSSION
Summary judgment is appropriate when "there is no genuine
issue as to any material fact." Fed.R.Civ.P. 56(c). Our review is
de novo and we consider all the facts contained in the summary
judgment record and the inferences to be drawn therefrom in the
2
Hines also named Massachusetts Mutual as a defendant, but
the life insurance company is not a party to this appeal because
it settled with Hines.
2
light most favorable to the non-moving party. Weyant v. Acceptance
Ins. Co., 917 F.2d 209, 212 (5th Cir.1990).
I. Section 510 claims
Hines raises four claims under ERISA Section 510:3
1. That GECO unlawfully interfered with Parker's rights under
the Plan by singling him out not to be covered under the Conn.
policy;
2. That GECO unlawfully interfered with Parker's rights under
the Plan by singling him out not to have benefits after
October 1, 1988;
3. That GECO interfered with Parker's rights under the Plan by
failing to keep him covered under the Plan; and
4. That GECO interfered with Parker's rights under the Plan by
failing to keep him covered under the policy after his
disability, while still covering similarly situated employees.
Essentially, Hines concentrates on two actions taken by GECO: (1)
the September 30, 1982 switch in Plan coverage from the Mass.
policy to the Conn. policy; and (2) the October 1, 1988
termination of benefits paid to Parker.
The district court granted summary judgment on Hines's
discrimination claims for two reasons. First, Hines failed to
provide evidence of GECO's specific intent to interfere with
Parker's purported rights. Second, Hines failed to establish any
3
Section 510 provides in relative part:
It shall be unlawful for any person to discharge,
fine, suspend, expel, discipline, or discriminate
against a participant or beneficiary for exercising any
right to which he is entitled under the provisions of
an employee benefit plan ... or for the purpose of
interfering with the attainment of any right to which
such participant may become entitled under the Plan....
29 U.S.C. § 1140 (1988).
3
existing or entitled rights with which GECO purportedly interfered.
The district court's first reason applies to GECO's switch in
policies. The second reason applies to the termination of
payments.
Hines contends that GECO switched policies in 1982 with the
specific intent of discriminating against Parker. An essential
element of a Section 510 claim is proof of defendant's specific
discriminatory intent. McGann v. H & H Music Co., 946 F.2d 401,
404 (5th Cir.1991). Hines contends that she has created a fact
issue by showing that Parker was treated differently than other
similarly situated employees. The district court disagreed with
her because Hines's evidence of disparate treatment consisted
solely of deposition testimony by GECO employees who stated that
they did not know whether Parker was the only employee affected by
the switch in policies.
In McGann, the employer limited the plan's $1,000,000
life-time coverage to $5000 for AIDS-related claims. An employee
who discovered his affliction with AIDS several months earlier
brought suit under Section 510. The employer's stated purpose for
changing the coverage was to reduce costs. We determined that
McGann failed to show that the employer's reduction in coverage,
except for its effect, specifically intended to deny him medical
coverage. Id. In this case, the switch in policies affected
Parker because his condition was not covered under the new policy.
Nevertheless, Hines offers no positive evidence to prove a specific
intent to discriminate against Parker. Under McGann, her evidence
4
of a specific intent to discriminate cannot withstand summary
judgment.
On the termination of benefits, Hines fails to establish a
right to which Parker is entitled. Hines contends that the Mass.
policy remains GECO's Plan because GECO did not properly amend the
Plan.4 As inferential proof of an improper amendment, Hines points
to the fact that Parker never received notice of the switch in
policies. Nevertheless, the record directly shows that GECO gave
written notice of termination to Massachusetts Mutual on September
29, 1982, and obtained the Conn. policy as a replacement. As a
result, Parker had no rights under the Mass. policy when GECO
terminated payments on October 1, 1988. We conclude that the
district court properly granted summary judgment on the Section 510
claims.5
4
"ERISA precludes oral modifications to benefit plans."
Degan v. Ford Motor Co., 869 F.2d 889, 895 (5th Cir.1989).
5
Two circuits have restricted the scope of § 510 to acts
that affect the employer-employee relationship; in other words,
plan amendments by themselves cannot be actionable under § 510.
See Haberern v. Kaupp Vascular Surgeons Ltd. Defined Benefit
Pension Plan, 24 F.3d 1491, 1504 (3d Cir.1994), petition for
cert. filed, 63 U.S.L.W. 3477 (Nov. 17, 1994) (No. 94-1037);
McGath v. Auto-Body North Shore, 7 F.3d 665, 670 (7th Cir.1993);
see also West v. Butler, 621 F.2d 240, 245 (6th Cir.1980)
(reviewing ERISA's legislative history and explaining that § 510
was "aimed primarily at preventing unscrupulous employers from
discharging and harassing their employees in order to keep them
from obtaining vested pension rights"). But see Vogel v.
Independence Fed. Sav. Bank, 728 F.Supp. 1210, 1225-26
(D.Md.1990) (denying summary judgment because termination of
coverage only affected beneficiary); see also Aronson v. Servus
Rubber, Div. of Chromalloy, 730 F.2d 12, 16 (1st Cir.)
(suggesting in dictum that a plan could be discriminatorily
modified), cert. denied, 469 U.S. 1017, 105 S.Ct. 431, 83 L.Ed.2d
357 (1984).
5
II. Section 404 claims
Hines makes three breach of fiduciary duty claims under ERISA
Section 404:6
1. That GECO violated a statutory fiduciary duty by failing to
keep Parker covered under the Plan;
2. That GECO breached reporting and disclosure requirements
under ERISA by failing to notify Parker in writing about
modification of the Plan in connection with the 1982 change in
group insurance carriers;
We expressly reserved the question of § 510's scope in
a previous case. See McGann, 946 F.2d at 405-06 & n. 8;
see also Owens v. Storehouse, Inc., 984 F.2d 394, 399-400
(11th Cir.1993) (following McGann ). Because the scope of §
510 was not raised in the district court and because we
agree with the district court's conclusions, we need not
address the question and again reserve it.
6
Section 404(a)(1) provides:
[A] fiduciary shall discharge his duties with respect
to a plan solely in the interest of the participants
and beneficiaries and—
(A) for the exclusive purpose of:
(i) providing benefits to participants and their
beneficiaries; and
(ii) defraying reasonable expenses of
administering the plan;
(B) 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;
....
(D) in accordance with the documents and
instruments governing the plan insofar as such
documents and instruments are consistent with
[ERISA].
11 U.S.C. § 1104 (1988).
6
3. That GECO failed to report a modification of the Plan in
connection with Parker's change in status resulting from the
switch in group insurance carriers.
The district court denied summary judgment on GECO's statute of
limitations defense. Nevertheless, the court granted summary
judgment for three reasons: (1) ERISA does not provide relief for
complaints about the design of the Plan; (2) breach of procedural
duties do not give rise to a substantive damage remedy; and (3)
recovery for breach of fiduciary duty under ERISA is to the Plan,
not to a participant or beneficiary.
The district court's first ground for granting summary
judgment applies to Hines's first claim. The district court
determined that GECO's decision to switch policies and leave
Parker's condition without coverage was a design complaint and not
actionable under ERISA. We agree. An employer that amends a Plan
"does not act as a fiduciary, and thus cannot violate its fiduciary
duty, provided that the benefits reduced or eliminated are not
accrued or vested at the time, and that the amendment does not
otherwise violate ERISA or the express terms of the Plan."
Izzarelli v. Rexene Prods. Co., 24 F.3d 1506, 1524 (5th Cir.1994).
Parker had no vested benefits at the time of the switch in
policies. The switch in policies did not violate ERISA. Lastly,
because the Mass. policy could be terminated at any time, the
switch in policies did not violate the express terms of the Plan.
GECO did not violate any statutory fiduciary duty by not covering
Parker's condition under the Conn. policy.
Likewise, Hines cannot recover for GECO's failure to fulfill
7
procedural requirements. Failure to fulfill procedural
requirements generally does not give rise to a substantive damage
remedy. Lewandowski v. Occidental Chem. Corp., 986 F.2d 1006, 1008
(6th Cir.1993); Blau v. Del Monte Corp., 748 F.2d 1348, 1353 (9th
Cir.), cert. denied, 474 U.S. 865, 106 S.Ct. 183, 88 L.Ed.2d 152
(1985). The exception occurs when the violations are continuous
and amount to substantive harm. See Blau, 748 F.2d at 1353.
GECO's failure to notify Parker of the switch in policies does not
amount to a continuous procedural violation. Furthermore, Parker
suffered no substantive harm from the lack of notice since he
received benefits from GECO for five years after his benefits under
the Mass. policy terminated. We conclude that the district court
properly granted summary judgment on the breach of fiduciary duty
claims.7
III. Wrongful denial of benefits claims
Hines raises two claims under ERISA Section 502:8
1. That GECO wrongfully failed to keep Parker insured; and
2. That GECO wrongfully failed to continue benefits for Parker
after October 1, 1988.
The district court noted that, in addition to equitable relief,
7
Because we agree with the district court's first two
grounds for granting summary judgment on the breach of fiduciary
duty claims, we need not reach its third ground.
8
Section 502(a) allows a civil action to be brought by a
participant or beneficiary "to recover benefits due to him under
the terms of his Plan, to enforce his rights under the terms of
the Plan, or to clarify his rights to future benefits under the
terms of the Plan" or "(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." 29
U.S.C. § 1132(a)(1), (3) (1988).
8
Section 502(a) allows recovery, enforcement, or clarification of
specific rights or benefits to which plan beneficiaries and
participants are entitled under the terms of a plan. Because
Parker was not entitled to benefits when GECO terminated payments
on October 1, 1988, the district court granted summary judgment on
Hines's Section 502 claims.
We agree with the district court's assessment of these claims.
Parker received all the benefits to which he was entitled under the
Mass. policy. Hines has not shown that Parker is entitled to any
further benefits. Parker may have had unlimited coverage under the
Mass. policy when it was in effect, but that coverage was not
permanent because GECO could amend or terminate that policy at any
time. Thus, GECO broke no promise to Parker. See McGann, 946 F.2d
at 405 (noting that ERISA does not require vesting of medical
benefits once they are included in a welfare plan). We conclude
that the district court properly granted summary judgment on
Hines's Section 502 claims.
CONCLUSION
For the foregoing reasons, the district court's judgment is
AFFIRMED.
9