:: ERISA Plan Claims Dismissed As Jurisdictionally Flawed

Plaintiff also claims it is a fiduciary. However, Plaintiff has offered no authority for this claim, nor does the amended complaint contain allegations that would support this contention. Plaintiff merely alleges that it is an employee welfare benefit plan established and maintained to provide insurance and related benefits to participants and beneficiaries. (Plaintiff’s Amended Complaint, P 9.)  Nowhere did Plaintiff allege that it is its own fiduciary.

Nat’l Prod. Workers Union Ins. Trust v. Harter, 2008 U.S. Dist. LEXIS 99986 (N.D. Ill. Dec. 10, 2008)

Is a plan a proper plaintiff to assert breach of fiduciary claims?  That was the issue before the district court in the Harter case.  The facts involved various allegations of misfeasance and professional malpractice against a set of consultants and insurance brokers.

The plan made the following jurisdictional allegations:

Trust makes the following allegations.

That it is an employee welfare benefit plan within the meaning of ERISA, 29 U.S.C. § 1002(1), which was maintained for the purpose of providing insurance and related benefits to eligible participants and beneficiaries.

That the Defendants fraudulently concealed their relationships and failed to objectively advise Trust in the management of the employee benefit plan in order to receive unreasonable compensation.

That the Court has subject matter-jurisdiction over the ERISA claims pursuant to 29 U.S.C. § 1132(e)(1).

Trust alleges that each Defendant was a fiduciary under ERISA and alleges five counts under ERISA, including three counts of breach of fiduciary duty, one count of prohibited transactions, and a count of investment advice.

Trust also alleges five supplemental state claims pursuant to 28 U.S.C. § 1367. These supplemental claims include fraud, breach of contract, negligence, and two counts of malpractice.

The defendants raised a question of subject matter jurisdiction – and the district court ruled in their favor.  To frame the argument, here is the relevant statutory grant of jurisdiction:

(e) Jurisdiction

(1) Except for action under subsection (a)(1)(B) of this section, the district courts of the United States shall have exclusive jurisdiction of civil actions under this subchapter brought by the Secretary or by a participant, beneficiary, fiduciary, or any person referred to in section 1021(f)(1) of this title.

29 U.S.C. § 1132(e)(1) 

(Note that employee benefit plans are not included in that provision.)

The court observed that the district courts are courts of limited jurisdiction (citing, Amalgamated Industrial Union Local 44-A Health and Welfare Fund v. Webb, 562 F. Supp. 185, 187 (N.D. Ill. 1983)), and that the language of Section 1132(e)(1) was an exclusive grant of subject-matter jurisdiction for an ERISA claim.  Thus, under a long line of Seventh Circuit decisions interpreting 29 U.S.C. § 1132(e)(1), employee benefit plans do not have standing to sue under ERISA.  

Furthermore, the district court held that the plan was not a fiduciary, stating:

Plaintiff also claims it is a fiduciary. However, Plaintiff has offered no authority for this claim, nor does the amended complaint contain allegations that would support this contention. Plaintiff merely alleges that it is an employee welfare benefit plan established and maintained to provide insurance and related benefits to participants and beneficiaries. (Plaintiff’s Amended Complaint, P 9.) Nowhere did Plaintiff allege that it is its own fiduciary.

Note:  The cases relied on by the defendants were:

 Giardono v. Jones, 867 F.2d 409, 413 (7th Cir. 1989); Financial Institutions Employee Benefit Trust v. Financial Ins. Serv. Consultants, Inc., Case No. 92 C 0620, 1992 U.S. Dist. LEXIS 14252, 1992 WL 245527 (N.D. Ill. Sept. 21, 1992); Contract Cleaning Maintenance, Inc. Defined Benefit Plan v. Marks, Case No. 94 C 7204, 1995 U.S. Dist. LEXIS 11879, 1995 WL 495922 (N. D. I11. Aug. 16, 1995); Chicago District Council of Carpenters Pension Fund v. Reinke Insulation Co., Case No. 94 C 2296, 1995 U.S. Dist. LEXIS 8727, 1995 WL 383007 (N.D. Ill. June 23, 1995).

Leave To Amend –  All was not lost, however.  Though the allegations in the plaintiff’s complaint failed to show that it had standing to sue under ERISA, the court granted leave to file a second amended complaint.