Benefit Plan Fiduciary Does Not Owe A Fiduciary Duty To Benefit Plan Administrator Under ERISA
SHARP ELECTRONICS CORP. v. METROPOLITAN LIFE INSURANCE CO. (August 18, 2009)
Sandra Rudzinski was an active employee of Sharp Electronics when she began experiencing fatigue and headaches. As a Sharp employee, she participated in its disability plan. Under the plan, Sharp paid short-term benefits during an initial 180-day period and Metropolitan Life Insurance Company ("MetLife") paid long-term benefits. Sharp paid premiums to MetLife on behalf of its employees. Rudzinski received short-term benefits from Sharp and applied for long-term benefits from MetLife. MetLife denied her application, first on the ground that she had a pre-existing disability and later on the ground that she had not completed the 180 days of short-term benefits. Rudzinski sued MetLife under ERISA. During the litigation, MetLife told Rudzinski that MetLife also denied her benefits because Sharp stopped remitting premium payments after her employment ended. She added Sharp as a defendant. She accused Sharp of interfering with her benefits, violating fiduciary duties, and for telling her that she could maintain her benefits by obtaining a conversion policy. Sharp cross-claimed against MetLife, alleging breach of fiduciary duty, equitable estoppel and indemnity. Rudzinski voluntarily dismissed her claim against Sharp and the court entered judgment in her favor in her claim against MetLife, leaving only Sharp's cross-claim. Sharp filed an amended complaint, alleging breach of fiduciary duty under ERISA, indemnification, negligence, negligent inducement, negligent misrepresentation, abuse of process and common-law breach of fiduciary duty. The court granted MetLife's motion to dismiss, concluding that MetLife had not breached a fiduciary duty and that the state law claims were preempted by ERISA. Sharp appeals.
In their opinion, Judges Kanne, Rovner and Wood affirmed with respect to ERISA and vacated and dismissed with respect to the state law claims. In order to recover under its ERISA claim, Sharp had to prove that MetLife owed it a fiduciary duty, that it was involved in fiduciary functions when it told Rudzinski about Sharp's failure to pay premiums, and that it was seeking damages for losses suffered by the plan (as opposed to the company). Although the Court agreed that Sharp and MetLife both occupied fiduciary roles, it concluded that MetLife did not owe a fiduciary duty to Sharp. It also concluded that Sharp's only losses were its fees and expenses in defending the suit brought by Rudzinski, losses not recoverable under ERISA. With respect to the state law claims, the Court disagreed with the district court that they were preempted by ERISA. ERISA does not preempt state law claims that are not related to a benefit plan. Here, Sharp's claims relate to its contractual relationship with MetLife. Even though the subject of that relationship is a benefit plan, claims relating to the contract are not preempted. The Court nevertheless dismissed the state law claims based on the lower court's alternative ruling that it would not exercise its discretion to hear the state law claims, considering that the only federal claim was dismissed.
