Northeast Department Ilgwu Health and Welfare Fund and Sol Hoffman v. Teamsters Local Union No. 229 Welfare Fund

BECKER, Before SLOVITER and Cir CU1^ Judges, and FULLAM, District Judge.* ** OPINION OF THE COURT BECKER, Judge. Circuit appeal, arising This dispute from a be- employee tween two plans existing Employee under the Retirement Income Se- Act, curity 1002(1) (3) (ERI- & §§ SA), presents questions. two difficult first concerns the existence of federal sub- ject second, jurisdiction. matter a clas- sic insurance question, requires us to determine which of the two ERISA plans, Department the Northeast Interna- tional Ladies’ Garment Workers’ Union (ILGWU Health Fund) and Welfare Fund plan or the Teamsters Local Union No. 229 (Teamsters Fund) Welfare Fund each of which contains provi- “other insurance” sions, responsible for the medical bills of a woman participant who is a of the former and a of the latter. We conclude that the prop district court erly subject exercised matter over this suit.1 We also conclude that trus employee tees of an have the power incorporate into the “other provisions insurance” doing unless in so fiduciary duty violate ERISA’s stan dard, acting in an arbitrary capricious Finally, and manner. we conclude that the decision of trustees to incorporate escape clause in a benefit plan through plan attempts which the — escape liability participant all if a or benefi ciary plan, regardless another * Fullam, Judges Honorable John P. United States Dis- the views of Sloviter and Becker on one Judge Pennsylva- trict for the Eastern District jurisdictional problem; part facet of the IIB nia, sitting by designation. reflects the views Becker on an- aspect problem; other and the issue is ** opinion except This is of the Court as to explored separate concurring in the further part IIB. See note 1. infra opinions Judges Sloviter and Fullam. panel 1. The is divided as to the basis for that jurisdiction. opinion Part IIA of this reflects provided by

of the level of benefits the was liable for her bills. The court there- arbitrary capri- and suggested, fore agreed, defendants —constitutes (1) cious conduct. We will therefore reverse pay ILGWU Fund would Mrs. judgment of the district court that en- claim, (2) Fazio’s the action brought by provision in escape forced the dismissed, Mrs. Fazio would then be assigned liability for the benefits file, the ILGWU Fund would contempora- to the Teamsters Fund. neously dismissal, with the complaint against federal court the Teamsters Fund

I. BACKROUND FACTS AND seeking a rights declaration of the PROCEDURAL HISTORY obligations of the two regarding funds persons Mrs. Fazio and similarly situated. Leading A. Events to the Present Suit Contentions Parties agreement This promptly was carried out. Federal over the new suit gar- Ruth Fazio is an in the predicated on two of ERI- industry ment and a in the ILG- SA, 29 1132(a)(1)(B) U.S.C. plan, plan WU an §§ within 1132(a)(3). In addition to the meaning ILGWU Fund, Hoffman, 1002(1) (3). Sol husband, Chairman of the & Mrs. Fazio’s Trus- §§ Fazio, Fund, tees of the ILGWU participant Nicholas is a was added as a party-plaintiff. parties stipulated Teamsters which is likewise an em- ployee the facts plan within the and cross-moved meaning summary for judgment. plans pay ERISA. Both Each for medical care fund contended that its respective employees. applicable for their In “other provision, addi- insurance” tion, is, provides language Teamsters Fund medical in its plan pur- benefits exclude, coverage spouse for the porting and children of from coverage persons employees, and Mrs. Fazio position, is thus Mrs. Fazio’s was controlling. a beneficiary of the addition, Teamsters Fund. In the Teamsters argued Fund that, if provision oper- ILGWU Fund’s In March Mrs. Fazio underwent contended, ated as the ILGWU trustees medical subsequently treatment and sub- those acting trustees were arbitrary mitted her medical bills to the ILGWU capricious manner, in violation of their Fund. The ILGWU Fund advised Mrs. Fa- fiduciary duties as set out in ERISA at 29 zio eligible she was not for benefits U.S.C. because were discrimi- under plan because she was covered nating among participants on the basis of plan. Mr. thereupon Fazio sex and marital status. submitted a claim for his wife’s medical Fund, bills to the Teamsters but that fund B. Relevant Terms the Plans advised Mrs. Fazio that pay it would not these bills because she was covered Both the ILGWU and the Teamsters plan. ILGWU plans have “other pro- insurance” clauses viding for situations in participant which a

Faced with one set of medical bills and beneficiary or is covered two another insur- insurers who pay, refused to Mrs. Fa- policy plan. ance Specifically, plan zio filed each suit in the United States District (“COB”) has a coordination of Court for the benefits sec- Middle District Pennsylva- nia, tion that sets naming out when the both funds intends to as defendants. primary be the grounded participant Federal insurer of a on 29 1132(a)(1)(B). beneficiary outset, and when it From the intends to be a secondary was clear that Mrs. Fazio was or excess insurer. entitled to See infra reimbursement notes 9 expenses for her medical & 10. The Teamsters Fund’s COB provision from one of the funds. The district court states that plan cover- “a[nother] thought ing thus it unfair patient directly, for Mrs. Fazio to rather than as an incur counsel fees payment employee’s and to wait for dependent, primary.” is while the court decided which of the funds ILGWU provision ap- Fund COB does not is therefore follows that the ILGWU to the situation which Fund ply spouse’s of a potential has more limited financial resources from also Instead, sepa- has a distributing.”) Finally, which to draw in “Exception Eligibili- rate section labeled rejected the court the Teamsters Fund’s ty,” states: which argument Fund ILGWU discriminatory and in violation of

Exception Eligibility are not eli- —You hospital, medical-surgical, or of ERISA. gible for Major Medical benefits appeals. Although The Teamsters Fund place your spouse’s exists at jurisdic- funds maintain that we have both employment group plan provides suit, expressed tion over this we concern types of family of these argument about this issue at oral and re- long as or more of the benefits so 50% supplemental quested that the funds file family coverage paid cost of such point. support- briefs on this addition to your you than or a member of ing allegation complaint jur- in its family. properly isdiction rests on 1132 of ERI- at 54a. The Teamsters does Id. SA, sup- Fund contended in its any provision comparable to ILG- plemental brief that plan’s “Exception Eligibility” WU also can be based on 28 U.S.C. clause. Opinion Judg- C. District Court II. FEDERAL JURISDICTION ment The first we must address is court, F.Supp. grant- The district cognizable in whether this action is ILGWU, holding summary judgment for ed Although panel court. is unanimous Fund for Mrs. Fazio’s the Teamsters liable properly the district court acted that predicated its medical bills. The court exercising jurisdiction, it is divided as to judgment “Exception on the fact that the IIA for this conclusion. Part basis Eligibility” language in the ILGWU Judges reflects the view Sloviter and coverage employees excludes if there jurisdiction that suit can- Becker over this place employ- spouse’s exists at their through express grant not be obtained group plan provides family a that ment ERISA, Part IIB 29 U.S.C. § coverage, plan pro- the Teamsters whereas theory juris- Judge reflects Becker’s that only that it be an excess insurer vides will upon diction can be founded the federal plan. beneficiary if a is covered another statute, because U.S.C. § that, The court concluded since the Team- the case arises under federal common law. exists, Fund Mrs. Fazio is not covered sters agrees provides Sloviter plan. The by the ILGWU court further subject jurisdiction, matter sets forth but concluded because the Teamsters theory question jurisdiction of federal her coverage purports Fund excess separate separate statement. In his a participant’s spouse a is cover- where concurrence, Judge expresses the Fullam provides primary ed another cognizable this suit is under view otherwise, the Teamsters Fund is 1132(a)(3). of Mrs. Fazio’s medical ex- liable for all penses. Influencing analysis the court’s A. Provisions ERISA Jurisdictional Fund was its concern that the ILGWU jurisdiction Federal over Mrs. Fazio’s ought protect able to its “limited original suit was unassailable. shifting liability to financial resources” 1132, provides, pertinent 29 U.S.C. § Appel- the wealthier Teamsters Fund. See part, that: (“The n. Appendix lant’s at 130a court (a) brought— A civil action generally fact that members recognizes the beneficiary— participant a salaries than of the ILGWU have lower It members of the Teamsters Union.

(B) (7th to recover due to him un- 111 Douglas, benefits 646 F.2d 1211 Cir. plan, 1981), der the terms of to enforce his the Seventh Circuit held union terms of right standing under the or to 1132(a)(1)(B) has to sue under § clarify rights his to future benefits under on behalf of its clarify members order to ... rights their future pen to benefits under a plan. not, however, sion court did Mrs. Fazio is a of the Team attempt to reconcile this result with the participant sters and a of the ILGWU express statutory words of the provision— plan,2 brought and her suit was to recover which do not include among unions benefits, rights, clarify to enforce and to persons or may bring entities that suit. rights to future under benefits the terms upon by The other case relied Thus, if plans. these Mrs. Fazio had and Teamsters Funds is action, Fentron Indus party remained a to this the district Fund, Shopmen tries v. National unquestionably could Pension have exercised (9th Cir.1982). pursuant Fentron, 674 F.2d 1300 1132(a)(1)(B). Circuit, relying the Ninth on Association Processing Organizations, Data Service present Jurisdiction over the suit Camp, Inc. v. 397 U.S. 90 S.Ct. Funds, between the ILGWU and Teamsters (1970), L.Ed.2d 184 party determined that a participation in the absence of the of Mrs. standing has to sue under a federal statute Fazio, problematic. is much more Neither alleged injury his arguably within “fall[s] Fund, Hoffman, its trustee nor protected the zone of interests by the stat the Teamsters Fund is a or ben violated,” allegedly long ute so as “the eficiary under terms of either benefits statute itself preclude does not the suit.” (definitions). supra note 2 test, Using Id. at 1304. the court parties argue district court had employer suing decided that an pension 1132(a)(1)(B) neverthe plan on aggrieved employees behalf of has According less. both ILGWU and standing under ERISA. The court stated Funds, the ILGWU Fund has employers “omission of from 29 capacity to sue under this significant 1132 is not in this re representative participants of all the gard,” 1305, holding id. at that since beneficiaries of the ILGWU Fund who are “[tjhere nothing legislative history also beneficiaries of the Teamsters Fund suggest to parties that ... the list of to sue being are who harmed or who will be exclusive[,] under this section is ... harmed in operation the future of prohibit statute does employers not from interpretation the Teamsters Fund’s of its suing provisions.” to enforce essence, plan. parties In argue [ERISA’s] Id. although claim, longer Mrs. Fazio no has a although procedure express is not During pendency appeal, of this an- ERISA, ly authorized the trustees of panel rejected of this court a liberal one fund can “stand the shoes” of cer reading 1132(a)(1)(B). In Jersey New § aggrieved

tain beneficiaries of another Jersey, State AFL-CIO v. New fund and sue on their behalf. (3d Cir.1984), a labor union sued the Jersey Two cases from other circuits lend some State of New in federal court for a support declaratory judgment to this contention. Jersey Interna- that four New Bridge, tional Association statutes Structural were invalid because were preempted by and Ornamental Iron panel Workers Local No. ERISA. The held "participant” organization, 2. ERISA defines a as such or whose beneficiaries may eligible any be to receive such benefit. any employee employee or former of an em- 1002(7). 29 U.S.C. § A is defined as ployer, any or member or former member of person designated by participant, a a or employee organization, may an who is or be- employee plan, terms of an eligible benefit who is or any type come to receive a benefit of may become entitled to a thereunder. employee from benefit an benefit covers 1002(8). employees employer 29 U.S.C. § of such or members of jurisdic- brought by fund, case did arise this not under the reached this same conclusion.4 provisions of because: tional argue parties in the alternative that only participants may and beneficiaries over this may action be (in bring suit either or federal state predicated 1132(a)(3). on U.S.C. This § court) clarify rights to to future benefits provides section of ERISA that a civil ac- plan. under terms of the U.S.C. may brought: tion 1132(a)(1)(B). The statute defines § (3) by participant, beneficiary, a or fidu- employees or former “participants” as ciary (A) enjoin any practice to act or are, be, eligible employees may who or any provision which violates of this sub- receive benefits ... and “beneficiaries” chapter plan, (B) the terms of the or people designated by appropriate equitable obtain other relief eligible who become to receive bene- (i) (ii) such redress violations or fits____ It is clear the statute from any enforce subchapter this partici- labor unions are neither plan____ or the terms of the conse- pants beneficiaries, nor According ILGWU and Teamsters quently plaintiff does not within fall Funds, can this suit be characterized as one provision. (emphasis this Id. at 892 add- being brought ILGWU trustee Hoff- ed). man, fiduciary who is a under the terms Id., slip op. Although does at AFL-CIO “to enforce” terms of the ILG- directly question whether a control the Fund, plan against WU union) (as opposed fund to a labor it thereby bringing scope within the of this 1132(a)(1)(B),we sue under believe can statutory provision. analysis, This al- implicitly adopted the case view though perhaps superficially appealing, is narrowly 1132 must be read that § legal based on an untenable fiction. The literally.3 reading precludes Such a party Teamsters Fund is not a to the ILG- pension or a interpretation fund WU has not violated or threat- (fiduciary) sue trustee of a fund can under ened to violate terms of that 1132(a)(1)(B) participants on behalf of Thus, be said that the it cannot terms hold that Accordingly, beneficiaries. we being “enforced” predi jurisdiction over this suit cannot against through the Teamsters Fund 1132(a)(1)(B). persons on 29 power cated who have the lawsuit. The Circuit, por- to enforce the relevant duty also faced with suit and the Second whether, sions, given is not an earlier 3. AFL-CIO inconsistent with but the fact that the feder- employer holding of this court that an decision jurisdiction, al courts are courts limited Con- fiduciary authority also be an ERISA can gress express- entities intended other than those 153-154). 1132(a)(3) (see to sue ly infra mentioned to have a cause of ac- Corp. States Steel v. Commonwealth United of tion The under ERISA. court concluded that Commission, Pennsylvania 669 Human Relations grant jurisdiction "specific of in § 1132 is. (3d Cir.1982). 124 That case did not liberal F.2d exclusive,” and that a fund itself cannot sue brought by ly encompass § construe 1132 to suits 893; under the Id. at act. see also Tuvia Conva- Rather, is no employers. it held that there reason Center, Hospital lescent Inc. v. National Union of plain why employer who falls within the lan 726, Employees, and Health Care 717 F.2d 729- ERISA, 1002(21)(A) guage of of which defines § (2d Cir.1983) (employer standing 30 has no to (see 154), “fiduciary" deprived at should infra 1132). sue under § 1132(a)(3) ability pursuant § to sue to of his Unions, In Pressroom the court noted in a foot- merely because he is also an employer. plaintiff note has ”[s]ince not claimed question jurisdiction matter The of federal subject jurisdiction matter under 28 U.S.C. AFL-CIO, by parties not raised nor was it ..., express 1331 we § no views on the by panel. considered possible relevance of that statute.” at League 4. Pressroom Income Unions-Printers n. 7. did the 892 Nor court consider the issue Co., Security Fund v. Continental 700 Assurance in Tuvia. (2d Cir.1983), 889 F.2d where the disa- analysis, greed arguing with the Fentron that the prohibited question Congress key is not whether provi- reading jurisdictional of ERISA’s a broad 154 plan jurisdiction suit, are the ILGWU authorize federal over a

tions of themselves, and the Fund trustees Team- bar, such as the brought pen one a preventing is not them from sters Fund sion against fund and trustee another obligations. out their carrying pension fund.6 parties way have of another charac present attempt in an terizing the suit to “Arising B. Under” Jurisdiction: 1132(a)(3). They within bring it claim § U.S.C. § action can a that this be viewed as suit Hoffman, ERISA, fiduciary argues supple- a to ILGWU Fund in its under en plan— force the terms of the Teamsters mental that if brief this court holds that presently being which contends are he mis present is expressly action not authoriz- deny Mrs. read to benefits to Fazio and of jurisdiction ed federal § persons similarly We situated. believe that may predicated nonetheless be on the fed- interpretation 1132(a)(3) such an of would § question statute, 1331(a): eral 28 U.S.C. § plain language provision. distort the of this original The district courts shall have 1132(a)(3) contemplates Section “fiduciar jurisdiction of all arising civil un- actions suing to ies” enforce the terms of “the Constitution, der the laws or treaties of plan,” meaning terms re the United States. a garding fiduciary duty. Indeed, interpretation compelled is also this According Fund, to fiduciary the fact that one’s status as governs common law outcome this dependent upon under ERISA one’s rela dispute pursuant 1144, to 29 U.S.C. with § particular a tionship pro result that under” laws “arise[s] person fiduciary vides that “a ais jurisdictional pur- the United States for respect to the extent ... he poses. discretionary any authority exercises Although at one time the issue was discretionary respecting control manage doubt, Eliscu, see T.B. Harms Co. v. disposition ment of such or ... of its (2d Cir.1964) J.), (Friendly, F.2d 827-28 1002(21)(A). assets....” U.S.C. Jur longer any predicated isdiction cannot be on the is no mere fiduciary coincidence Hoffman meaning word within “laws” a benefit unrelated to the one which 1331(a) upon embraces claims founded he seeks enforce.5 federal common law. In v. City Illinois Milwaukee, Wisconsin, 406 U.S. reasons, foregoing For the we hold that (1972), express jurisdictional S.Ct. 31 L.Ed.2d 712 the Su provisions of ER- ISA, preme found in 29 definitively do not Court stated: issue, Although parties sue, do not raise the pants including persons and beneficiaries to fiduciary may bring 1132(a)(3) also suit under Second, purporting on to sue their behalf. the in- to enforce the ERISA. For rea- parties tentions of the and the district court re- text, however, sons similar stated in the .those garding jurisdiction are irrelevant to the we do not believe that over this case determination whether such exists. view, ground. Congress can this our rest on Third, not, fact, assign- Fazio did Mrs. make an contemplated fiduciary that there abe relation- Fund, ment of her claim the ILGWU and it is ship bringing fiduciary between suit and the case, litigating far from clear being brought fund sued in all cases pursued rights ILGWU Fund Mrs. Fazio’s 1132(a)(3). Moreover, not also its own interests. even if Mrs. actually assigned Fazio had claim to her juris- 6. Fullam's conclusion. —that there is Fund, IGLWU we have serious doubts whether diction in case 28 U.S.C. assign along rights she could with her substantive 1132(a)(1)(B) Fund § because the ILGWU is the right McSparran her in to sue federal court. Fazio, Cf. "assignee subrogee" infra, or see of Mrs. Weist, (3d Cir.1968) (minor v. 402 F.2d 867 can- J., (Fullam, concurring) appealing at 165 be- —is diversity jurisdiction by ap- not manufacture simplicity, find cause of its but we ourselves un- suit). pointing guardian prosecute out-of-state First, grounds. able to subscribe to it on several Congress simply made no 1132(a)(1)(B) persons partici- other than §

155 States”), give see no reason not to “laws” laws of the United We vacated and ..., meaning grounds, 987, and therefore remanded on other its natural 425 U.S. 2196, jurisdiction sup- denied, 96 S.Ct. 48 L.Ed.2d 812 conclude that 1331 will cert. § 998, 2215, 96 upon U.S. S.Ct. 48 L.Ed.2d port claims founded federal com- (1976). statutory mon law as well as those of a

origin. Although Supreme Court’s decision 100, 92 S.Ct. at 1391. Id. at in Franchise Tax Board the State of v. Construction Laborers Va- Milwaukee, was California Illinois v. Court California, cation Trust Southern faced with a claim the State of Illinois U.S. S.Ct. 77 L.Ed.2d 420 Milwaukee, others, City among that the (1983), applicabili- casts some doubt on the causing public dumping a nuisance ty of the Illinois v. Milwaukee rationale to gallons sewage some 200 million of raw cases, the former ERISA case is distin- daily Michigan. into Lake The state re- guishable. Board, In Franchise Tax a Court, quested original vested with taxing authority brought against state suit jurisdiction over suits in which a state is a ERISA-qualified benefit trust fund in a party, abate the nuisance. The Court de- (1) seeking damages California court for a original jurisdiction, clined to exercise its comply failure to with tax levies issued held that existed in the but under state law and a declaration that appropriate pursuant federal district court authority levy preempted by was not to 28 U.S.C. 1331. The Court noted that § ERISA. The defendant trust fund re- legislated extensively in Congress had moved to federal court. One of the defend- pollution, area of interstate water most proffered ant’s jurisdic- bases for § specifically through the Federal Water Pol- “any tion in federal court was that state Act, lution Control 33 U.S.C. § require court action which would the inter- that under this Act the United States pretation application or of ERISA to a bring was authorized to suits for abate- document ‘arises under’ the laws Nevertheless, pollution. ment of water (quoting United States.” 103 S.Ct. at 2854 Court held that there exists a federal com- 20-21). Appellees Supreme Brief of nuisance, separate mon law of from and agreed Court with the defendants that the scheme, coexisting congressional with the whether the terms of the only governs disputes such but agreement and the of ERISA provides also the “laws” under which such obey permit would the trustees to the tax may meaning actions arise within the levies was a matter common of federal law. § Nevertheless, the Court held that the fed- holding Court’s Illinois v. Mil- eral district court lacked over appears applicable to the case waukee be suit, stating: If at bar. the ILGWU Fund’s claim for 502(a)(3)(B) Under of ERISA [29 declaratory “arises under” relief 1132(a)(3)(B)], participant, benefi- law, express of an common absence ciary, fiduciary of a statutory grant jurisdiction in 1132 of may bring declaratory judg- ERISA is, under the rationale of ERISA Illinois ment action federal court to determine irrelevant, Milwaukee, may and this claim plan’s comply whether trustees adjudicated pursuant federal court levy with a state on funds held in trust. 1331(a). Jersey Central Nevertheless, argu- trust [the fund’s] Light Power & Co. v. Local Unions ment that tax second cause [the board’s] fails____ International Brotherhood Electrical of action arises under ERISA Workers, (3d Cir.1975) carefully parties enumerates the (“inasmuch agreement 502; as the EEOC must entitled to seek relief under according interpreted provide anyone par- to federal sub- than does not law, beneficiaries, Company’s ticipants, ... fiduciaries stantive [common] express joining of action EEOC ‘arises under’ with an cause of action for cause 156 in

declaratory judgment on the issues not of central concern to the federal stat- ute!;] many complete- this case. A suit (cid:127) (cid:127) similar (cid:127) there are reasons relief “arise un- party ly does not unrelated to some of ERISA provision. why may may der’’ that the State not be entitled to seeks”). the relief it (emphasis at added and footnotes Id. 2855 omitted). addition, in opinion In the Court’s Shaw quoted paragraph language of the Airlines, Inc., 85, 103 v. Delta 463 U.S. clear, however, the Court was that makes (1983), 2890, 77 L.Ed.2d 490 decided S.Ct. consider, with, and did not presented not Board, day Tax the same as Franchise possibility that the suit need not have support lends to the view that the latter express statutory provi- arisen under broadly. case should not read too 1132) (§ it to arise under sion of ERISA Shaw, brought the Court entertained a suit words, in federal law. In other Franchise claiming by employers that certain state Board, on the jurisdiction Tax basis preempted by Despite laws were ERISA. in accordance with the federal common law employers explicitly the fact that in Illinois v. Milwaukee Court’s decision (29 in 502 of listed § considered, and so Franchise Tax was not 1132), in a that the court held footnote § Moreover, question open. left this Board jurisdiction there federal over the ac- appears that two other factors Fran- plaintiff injunctive “A re- tion. who seeks made the Court reluctant chise Tax Board ground regulation, lief from state on the jurisdiction, to find federal and these regulation preempted by a that such is First, present factors are not here. which, by federal statute virtue of the Su- part held in an earlier of the Court had Constitution, premacy Clause of the must interpret if as a opinion it were prevail, presents thus a federal arising under 1331 the tax board’s claim § jurisdic- the federal courts have over which that request for a declaration federal law under 28 1331 to resolve.” tion U.S.C. § law, preempt state it would violate does not n. 14. Id. at 2899 pleaded complaint rule.” 103 the “well 2848-52; above, (suggest- S.Ct. at see at 159 reasons set out the rule For the infra ing jurisdiction present federal that over the in Illinois v. Milwaukee should enunciated rule). Second, applicable action does not violate this in ERISA related actions. Thus, tax, Fund’s claim arises ability the suit involved the of a state to law, juris is federal common implicating pri- which the Court viewed as under pursuant this action diction over marily state concerns. Id. 103 at S.Ct. 1331(a).7 (“the right State’s to enforce its tax levies is § Supreme believes scheme —was never cited the Franchise Tax Sloviter Court's decision in Franchise Tax Board fore- Board Court. possibility point, Judge on Regarding closed the the second Sloviter’s may (where law be found the basis of federal common view is that Franchise Tax Board cases. Her view is that this case arising jurisdiction) in ERISA Court found no under purposes be- arises under ERISA for (where arising the Court found under Shaw holding in Shaw. jurisdiction) distinguished the Court's can be on the "basis cause of J., concurring). (Sloviter, I significant infra, inter- at 165 difference between the disagree points. with her on both underlying stake suits.” ests Board, apparently In Franchise Tax the Court decided that Her view At 166. court, determining whether there is the claims in that case did not arise under case, grants an ERISA must dis- but —while it noted that ERISA although power make common cern whether the claim in the courts suit — admittedly merely "tangen- simply federal in nature —is law —it did not address whether payment responsibilities” could arise under the federal common tial to enforcement or claims (in jurisdiction) developed pursuant to ERISA. See 103 which case there is no law Indeed, "brought by responsible pay- or is those for the S.Ct. at 2855. Illinois Milwaukee clarify proposition a case ment of benefits under an ERISA —which stands for the (in obligations pay if it ... benefits” arise under federal common law even their Id., statutory jurisdiction). at 40-41. the related case there does not arise

157 federal “if 29 1144. In Raybestos- An action arises under law Alessi v. § complaint remedy if the seeks a Manhattan, Inc., 504, 451 U.S. 101 S.Ct. expressly granted by a federal law or 1895, (1981), 68 L.Ed.2d 402 the Court read requires the construction of a federal stat- indicating this as that “Congress policy of a federal ute or a distinctive stat- depart previous intended to legisla from its legal requires application ute of federal tion that ‘envisioned the exercise of state principles disposition.” Lindy for its v. regulation power pension over funds’ ... (3d 1367, Cir.1979); Lynn, 501 F.2d 1369 pension and meant to plan regula establish Board, see also Franchise Tax 103 S.Ct. at exclusively tion as a federal concern.” Id. (“Leading sug- 2846 commentators have 523, (citation at 101 S.Ct. at 1906 and foot purposes gested that for 1331 an ac- § omitted). Board, note In Franchise Tax tion ‘arises under’ federal law ‘if in order expanded the Court interpretation, on this plaintiff sought for the to secure the relief stating: obliged to he will be establish both meaning enforceability provi- applicability correctness and the to his case agreement sions in trust Bator, ... proposition [a] of a of federal law.’ P. come[] Mishkin, Wechsler, Shapiro questions P. D. & H. within the class of for which Hart & Wechsler’s The Federal Courts Congress intended that federal courts (2d 889 ed. System and the Federal create federal common law.” 1973)____”). An action thus “arises under” (footnote omitted). 103 at S.Ct. 2855 This if, alia, plain- federal common law inter congressional court has also read the man- requested requires interpre- tiff’s relief 1144(a), in along legislative date with its § application judge- tation and of federal history, to the evolution of a “authorize[] made law. In order to decide whether this pension plans.” federal common law of cognizable general under federal case (3d Murphy Heppenstall, 635 F.2d 233 therefore, question jurisdiction, one must Cir.1980); Barrowclough see also v. Kid- whether there exists a determine der, Co., Inc., Peabody & 936 plans common law Cir.1985). (3d governs dispute between and Teamsters Funds. foregoing In the wake of the cases, can little doubt that 1144(a) states, perti- in Section of ERISA complaint presents ILGWU Fund’s a claim part: nent requires application an of the federal subchapter of this shall common law of funds authorized welfare supersede any all State laws insofar 1144 of ERISA. In order to deter they may § hereafter as now or relate validity mine the of the ILGWU Fund’s any employee in described 1003(a) title contention that the Teamsters Fund should section of this ... held, Judge jurisdiction directly implicates the court because it Sloviter’s view that 1331 depends strength admittedly non- Supremacy on Clause of the Constitution. supported frivolous federal claim is neither jurisdictional claim in Shaw was thus held to be jurisprudence general 1331 nor Shaw it- strength not because of the Shaw, self. In footnote 14 of the Court distin- claim, plaintiff s ERISA Sloviter would guished that case from Franchise Tax Board. it, preemption but because it was a case pointed The Court out that Franchise Tax Board arising under the Constitution. thus Shaw "seeking a that state laws was a case declaration support lends to the view that Franchise Tax pre-empted by ERISA.” 103 S.Ct. at were not possibility Board foreclose the that a did not (emphasis original). n. The Court 14 falling jurisdictional express case not within the Franchise Tax Board that such a had held in grant § 1132 of nevertheless implicate claim fails purposes arise under federal law for Skelly part because it violates the rule of text, jurisdiction. supra. But because 156). (See supra, the Shaw Oil. Supremacy relied on the Clause as the Shaw footnote, contrast, the Court stated claim, pre-emption basis for over a presented claim in Shaw was for a declaration pre-emption and there is no issue in the case pre-empted laws "are ERISA.” 103 that state us, specific before Shaw does not (emphasis original). n. 14 This S.Ct. at 2899 jurisdiction here. rationale for clearly presents question, a federal latter claim Mottley, ville Railroad Co. v. expenses incurred for the medical U.S. be liable (1908). Moreover, 53 L.Ed. 126 persons similarly situ S.Ct. by Mrs. Fazio and “well-pleaded complaint rule” cannot ated, meaning enforceability” “the by invoking circumvented what would seemingly conflicting provisions of two normally complaint be a defense in a for a are funds that covered ERISA declaratory judgment Congress because did certainly interpreted. This must Declaratory Judg not intend the Federal presents a matter of federal concern. Res Act, 2201, ment 28 U.S.C. extend only affect of the issue will not olution Skelly jurisdiction of the federal courts. beneficiaries, whose welfare it interests of Co., Phillips v. Oil Co. Petroleum 339 U.S. purpose pro prime of ERISA to 667, 876, 70 S.Ct. 94 (1950). L.Ed. 1194 The tect, also the interests of benefit trust but unclear, Shelly Oil scope holding of the is funds, solvency of which was a matter subject and has been the of much debate congressional concern. Con of serious Compare among courts and scholars. policies underlying ERISA will versely, the Board, Franchise Tax 103 S.Ct. at 2849-53 conflicting of the inform our construction (action by state tax board for declaration part Feder See infra policy terms. IIIC. (ERISA) preemptive that federal law is not supplies thus the rule of al common law Shelly rule) Oil of state law violates decision in this case. Even this ease Public Wycoff Service Commission v. 344 court, were in a state federal common law 237, 236, (1952) U.S. 73 S.Ct. 97 L.Ed. 291 apply.8 would still (in dictum, declaratory Court states that Because this is an action for a de judgment plaintiff who has federal claratory judgment, an additional line of probably defense does not have basis cases must be considered before one can v. Delta jurisdiction) Shaw conclude that this case arises federal Airlines, Inc., 85, 2890, 463 103 U.S. S.Ct. long It has settled that an ac law. been 14, (1983) (action by 2899 n. 77 L.Ed.2d 490 under” federal tion does not “arise law employers for declaration that state law is purposes preempted by 1331 when law is mere ERISA does not run afoul of Oil) Shelly Engi- raised as defense. Louisville & Nash and Stone & Webster ly 1144(a) 898, (1985) subject following (same). 8. Section ex- S.Ct. 83 L.Ed.2d 914 ception: savings appears inapplicable clause to be to this case, however, (1) [N]othing judge-made subchapter because re- in this shall be con- rules any exempt person garding interpretation strued to or relieve from of insurance contracts any any regulates law of State which insur- regulations are not the kind of state insurance ance, banking, or securities. (2) Congress preserve; intended to Although 1144(b)(2)(A). counsel directly the extent that state insurance laws con- argue point, not raised the one could that state policies, interpreta- flict with ERISA the correct regarding provisions laws "other insurance" 1144(a) interplay tion of the between regulate) laws “which insurance” and were ] 1144(2)(A) is such state laws cannot by Congress therefore intended to be left in (see Attorney stand General v. Insur- Travelers following passage force state of ERISA. If Mass, Co., 732, ance (the 391 at 463 N.E.2d at 550 law were to the rule of decision "save[sj savings preemption clause from case, present question under federal common only those state laws that do not conflict with presented law would and there not be would be ERISA.”)); (3) policies operation hence, "arising jurisdiction; no under” the suit presented question in this case is the of what would have to be dismissed. may regarding do trustees coordination scope "savings clause” is of the state law plans, with other ERISA and thus the determi- presently being Supreme considered question nation that this is a federal does not Attorney Court. General v. Travelers Insurance preempt the state common law of “other insur- Co., 578, 1223, juris prob. 85 Mass. 433 N.E.2d provisions regulates ance" so far law as that Metropolitan noted sub nom. Insurance Co. Life Whaland, (see F.2d insurance 70, Wadsworth v. 562 - Massachusetts, v. U.S. Commonwealth of (1st Cir.1977) (§ 1144(b)(2)(B) 77 -, 320, (1984) (argu- 105 S.Ct. L.Ed.2d 83 258 which states that a benefit cannot be 19, (March reported ment U.S.L.W. 3659 53 company deemed an insurance or insurer for 1985)); Attorney v. Travelers Insurance General law, purposes of state insurance means that a Co., 548, juris, prob. 391 Mass. 463 N.E.2d general subject state such a to its noted sub nom. Travelers Insurance Co. v. Com- laws)). — insurance Massachusetts, U.S.-, monwealth 105 F.2d neering Corp. Ilsey, plans 326- the federal common law of benefit (2d Cir.1982), mem., 463 U.S. by ERISA, the conflict between aff'd 103 S.Ct. L.Ed.2d policies “other insurance” (same); Wright, 10A C. A. generally see arguably that both cover an insured is a Kane, Miller & M. Federal Practice and common occurrence in the insurance indus (2d 1983). ed. Procedure § try subject of extensive state Regardless scope Shelly jurisprudence exact common law and treatise dis Oil, however, is no cussion. The issue has commonly most present not bar the action. This is not does presented been to the courts connection declaratory judgment case in the a which policies, with automobile insurance but dis to obtain federal plaintiff seeks putes health between insurers have recent by raising federal over his suit a defense. See, ly begun to e.g., arise. Starks v. Rather, complaint di- the ILGWU Fund’s Hospital Jersey, Service Plan New 182 of in rectly federal law an effort to invokes N.J.Super. (App.Div. 440 A.2d 1353 relief, and indeed obtain affirmative would 1981). begin analysis by We will our set implicated federal common if it law ting propositions some out basic of the action an had been fashioned as an for determining relevant insurance law and to enjoining the Teamsters Fund from order what extent and in what manner are continuing pay refuse to beneficiaries applicable in setting. the ERISA Fazio, position Mrs. or as an of action general common law rule is that damages paid recover to Mrs. for monies liability “the of overlapping Fazio. insurers under policies governed by is to Finally, finding jurisdiction in cases such by intent of insurers manifested bar on the of as the one at based rule policies which they terms of have is- expand v. Milwaukee would Illinois sued.” on Couch Insurance 2d scope of over ERISA-re- 62:44, (rev’d 1983). “[Wjhere at 480 ed. only minimally because the lated actions involving provisions of such majority ERISA eases contractual are not incon- vast benefits fall under the public policy, they entitlement to will sistent with will be en- express jurisdictional provisions of the stat- Appleman, forced.” 8A Insurance Law Indeed, the ute. instant case would have 4907.65, and Practice at 367. Under had been without law, then, judicial state common “the task court, sympathy not district out of for is to determine from the first contracts Fazio, suggested parties pay Mrs. obligations respective themselves what her and reinstitute suit. For the odd case obligors intended to assume and then to finding fall that does not these determine whether intentions are certainty jurisdiction promotes of federal compatible only each with the other but uniformity having federal courts rights expecta- also with insured’s decide issues of federal common law. controlling tions and with the demands of sum, cognizable this suit is in federal Starks, N.J.Super. public policy.” it court because arises under the federal 351, 440 A.2d at 1358. We believe that this common law of ERISA related analysis fundamentally mode of is sound. plans, which of part is laws context, give In the ERISA courts should purposes the United States feder- effect to intent of the trustees of the question jurisdiction al under 28 U.S.C. competing plans, as evidenced incorporation their of “other insurance” provisions, provisions compatible, if the THE III. LIABILITY OF ILGWU AND doing unless so results the enforcement FUNDS MRS. FAZIO TEAMSTERS TO provision the lan- of a that conflicts with Generally Applicable Principles A. policies guage ERISA. first We turn analysis the “other insurance” present to an Although appears this case an plans. impression issue first context two Competing indicating the fund intends to be Interpreting “Other an B. partic- in all cases in Provisions excess insurer Insurance” is ipant or in the contracts at issue Both insurance insurance, setting it set of rules contains provi- “other at bar insurance” case contain primary fund intends be a out when the matter, insur- general As a “other sions. when intends to be insurer categories: fall into three ance” clauses Starks, secondary insurer. to another rata, excess, escape (or no-liability). pro 344-45, N.J.Super. at A.2d at types are of two of clauses Only the latter (discussing coordination of benefits claus- pur- An excess clause importance here. es). Regarding persons in Mrs. Fazio’s only sec- provide an insured with ports to position, plan’s the Teamsters coordination (or excess) protection when cover- ondary if “an of benefits states that indi- policy is avail- age from another insurance group vidual covered” another insur- clause, hand, on escape An the other able. patient “the ance covers outright cover- provides exception an directly, employee's than as rather de- by another age if the is covered insured pendent,” primary is the insurer Compa- See Insurance policy. insurance and the Fund the excess in- Cas- ny North America Continental Thus, by if Mrs. is covered surer. Fazio (3d F.2d ualty Company, plan, plan the in- the ILGWU Teamsters on Insurance 2d Cir.1978); 16 Couch provide only tends to her with excess cover- 62:48, 63:85. §§ age. presented here a We are conflict plan also The ILGWU has a coordination clause, a excess called a type between provision, applies of benefits which to con clause, es and an coordination of benefits policies except flicts with all insurance cape provision clause. The relevant the group coverage provided by plan, margin,9 is insurance an Teamsters set out the a case, employer.10 In this coordination of benefits clause: rather than other latter dependent, primary ee’s is others The Teamsters "Coordination of Benefits” and the sec- ondary, (2) provides: a child is covered under clause if both (3) parents’ plans, primary, the father’s is if Group a Our Insurance Plan contains non- (1) (2) applies, plan covering neither nor the profit provision coordinating it with other patient longest primary. the is plans which an individual is covered so under secondary plan pay- When and its ours is the that the benefits available will not ex- total primary is to the ment reduced consider expenses. ceed the allowable 100% of benefits, plan's kept a the record is reduc- expense” any necessary, is An "allowable rea- will to tion. This amount be used increase covered, customary expense sonable and at Group payments on our Insurance Plan’s the part, by plans. least in one of the patient's claims in same later the calendar types "Plans” means these of medical and year extent there allowable the are ex- (a) (other coverage —to dental care benefits: than penses fully paid not that would otherwise Medicare) governmental program a or by Group the our Insurance Plan and others. statute, by including provided required no or Id. at 88a. poli- coverage required in fault to the extent by a cies or contracts motor vehicle insurance 10. The Fund Coordination of Benefits ILGWU (b) legislation, group or and statute similar clause in full: states group coverage insurance or other for a individuals, happens you type including coverage What if are for a covered ob- student you also through of benefit under this Plan and tained an educational institution high covered for the same benefits under another above the school level. plan pays primary the When is made claim (1) regard plans. any the without other Benefits under Plan shall coordi- benefits adjust plans secondary plans provided by benefits nated with those other so The their so the amount of available to benefits available will ex- total benefits total your expenses. plan pays you dependent exceed will not those ceed allowable No provided plan that would coordination that would be more than it would without the coordinating pro- pay larger any type provision. plan benefit for of cover- without A plans age. always primary plan. all vision is If (2) “plans” plan covering purpose provision: For of this section have such a types poli- patient employ- following programs, directly, means rather than as an sions, here, “Excep plan provides a clause entitled each primary is relevant coverage Eligibility” applies supersedes plan provides tion unless primary cov- approach.11 erage. circumstances, coordination of benefits Under such discern- “Exception ing Eligibility” language plans is from the This and the escape clause: that the Fund intent of the plan provides an indicates trustees which all escape liability coverage given intends whenever a the existence of plans both simply impossible. is covered is spouse’s group insurer if less than 50% Construing the “other provi insurance” paid is coverage the cost of such determining their compatibility, sions Thus, Fazio is insured.12 Mrs. however, only step the first step of a two Teamsters the ILGWU su analysis. part IIIA, As we stated no coverage intends to her with pra, an “other insurance” clause is en all. forceable if it consonant with the foregoing analysis provisions policies of the two “other of ERISA. are Teamsters insurance” reveals Fund contends that the ILGWU incompatible. escape plainly The Teamsters ex- clause violates ERISA mandate purports primary against arbitrary capricious cess clause to defer liabil- conduct on so, to the If ity for Mrs. Fazio’s bills ILGWU behalf of fund trustees. unenforceable, if the provides ILGWU Mrs. Fa- clause would be the incom coverage. plans es- patibility zio with Under ILGWU between the would disap clause, however, cape plan pro- pear, ILGWU the ILGWU Fund would be Mrs. only if primary to Mrs. Fazio Fazio’s We proceed vides insurer. thus words, In other does not. examination of the escape light provi- of the two insurance” “other clause.13 medical, organizations "Exception Eligibility and des 11. The to clause is set out IB, hospitalization, surgical disability part supra. repeat and bene- it We here for ease of fits: reference: (a) government programs (including medi- Exception Eligibility eligible to are not —You care, medicaid, compensation, worker’s and hospital, medical-surgical, Major for or Medi- occupational compensation); (b) disease plan cal benefits under this if there exists at group programs, including insurance those your spouse’s place employment group of institutions; through students for educational plan provides family coverage for which of (c) no-fault insurance. automobile types long these of so as benefits 50% or more plan particu- If more than covers a one family coverage paid of the cost of such is for type expense, paid by of shall be lar benefits you your other than a member of fami- primary plan coverage you of the until the ly. your dependent plan is under that exhausted. secondary plan pay as The shall benefits the parties stipulated to 12. The the fact that the already has difference between what been coverage paid entire cost of Mr. Fazio's is primary paid plan and what it would Thus, employer. his Fazio Mr. meets the re- primary plan. paid have had it been the To quirement "Exception Eligibili- of ILGWU to primary plan is the determine ty” family clause that 50% or more cost of following apply. rules shall paid by is someone other than the (a) primary; Medicare shall be spouse himself. (b) No-fault insurance shall be automobile primary; escape 13. Because we decide (c) plan of A without coordination benefits unenforceable, part clause is indeed see infra primary; shall be IIIC, we need in this case what not decide to do (d) situations, following In other rules incompatible in the face of two enforceable primary: determine which shall is however, note, clauses. We that other courts (i) plan patient directly, covering incompatible faced with "other insurance" employee’s dependent, than as an is rather frequently clauses have declared the clauses to secondary. primary and the others "mutually repugnant" be and have held both (ii) parents’ under both if a child is covered primarily for the insurers liable insured’s loss plan plans, primary. the father’s pro-rata Appleman, on a 8A Insur- basis. See (iii) (ii) (i) apply, if neither nor (and ance Law and Practice at 477 cases covering primary. patient longest therein). cited Appendix Appellant’s at 53a-54a. ERI- Provisions and Policies much less favorable to the insured. C. See, e.g., Company SA Insurance North America, (“The large 575 F.2d at 1074 n. 6 had much courts have so Because state coverages policies available under both area, it is instructive and experience in this very here tends to obscure the real interest analysis by examining begin our useful of the insured in most situations to secure escape clauses under state treatment policies.”) the benefit of both Many state courts faced law. common an excess and an a conflict between with presented: is thus clause have held the excess escape clause majority should the rule of the state com reasoning that since a prevailing, to be law, escape mon which holds that clauses clause does not cover policy with an excess unenforceable, applied to ERISA loss, policy primary insured’s with plans? In order to answer primary in escape clause must be the question, we start with an examination Grasberger v. Liebert & e.g., surer. See ERISA statute. Inc., (1939); Obert, 335 Pa. 6 A.2d 925 comprehensive statutory ERISA is a (1956).14 Annot., A.L.R.2d 1165-67 designed protect employees scheme en- purported Although these courts pension plans. rolled in Under analysis, appears rely on contract responsibility administering large play a role policy considerations partici- in the best interests of its escape to an give their refusal effect See, pants e.g., Company beneficiaries rests with the Insurance clause. America, trustees, North at 1073. who must act in accordance with Some explicitly fiduciary refused to en a standard of conduct. The fidu- state courts have grounds “public escape ciary force clauses on duties of trustees are set out Rocky Mountain Fire & See Cas policy.” follows, pertinent part: the statute as Co., ualty Co. v. Allstate Insurance discharge fiduciary shall his duties (1971); Apple 8A Ariz. 485 P.2d 552 respect plan solely to a in the inter- Law and Practice man, Insurance participants est of the and beneficiaries short, majority escape rule is that and— are disfavored and are not enforced clauses (A) purpose for the of: exclusive against excess clauses under state com (i) providing participants benefits 1;n. id. at 1073 & 16 Couch mon law. beneficiaries; and their on Insurance 2d Underlying the 62:76. (ii) defraying expenses of reasonable judicial hostility escape ap clauses toward administering plan ... pears to be the sentiment that insureds reasonably expect a level of who certain court has held a decision of This that coverage insurance should not be unex denying participants trustees benefits to coverage pectedly deprived of such when requirements meets the 'of attempts liability by to avoid beneficiaries one insurer policy arbitrary shifting it to another whose terms 1104 unless that decision is and they assume their We do not undertake an examination of the text conclusion when state as provision policy Teamsters COB because the ILGWU premise that with excess clause challenged validity. More- Fund has not primary not cover the insured's does loss. over, nothing on the face of the policy with the excess does not cover the clause indicates that the Teamsters trustees violated primary policy loss with the insured’s their decision to include it in the ERISA in clause, escape escape clause does. But the plan. course, purports deny coverage to the insured presence policy. may in the of the other It be clear, part makes 14. As our discussion in IIIB solely principles that in terms contract solely we doubt that a court can determine from proper when faced with a conflict principles policies, conclusion which of two one contract containing they an between two such clauses is to hold that an excess clause and clause, escape successfully primary (enforcing incompatible. defers liabil- But see text infra ity. the excess clause to be grounds). Courts that hold policy excess clause on ERISA prevailing reasoning in the based on the set out capricious. Jersey inadequacy See Struble v. New of current minimum stan- Fund, dards, Brewery Employees’ Trust stability soundness and Welfare (3d Cir.1984). plans respect 333-34 As we adequate funds to recently pay promised stated in Edwards v. Wilkes- benefits be endan- Trust, Publishing Barre gered; owing Co. Pension that to the termination of (3d Cir.1985): F.2d plans requisite before funds have been accumulated, employees and their benefi- When the amount of benefits which a deprived ciaries have been of anticipated group distinct of beneficiaries is entitled benefits; and that it is therefore issue], pension desir- trustees must neces- [is in able employees interests of sarily and strike a balance inter- between the beneficiaries, their protection for the ests of the beneficiaries who are not____ States, revenue of the United and group beneficiaries who are commerce, for the free flow of Because the trustees in these circum- that minimum provided standards be as- competing stances must reconcile inter- suring equitable character beneficiaries, of such ests of different the trus- plans and their financial soundness. tees’ choice cannot said to violate their fiduciary duty arbitrary unless it is 1001(a). 29 U.S.C. § capricious. Thus, very important one policy underly Id., slip op at 56. An “other insurance” ing employees ERISA is that enrolled in a clause in a plan ERISA-covered benefit plan deprived should not be of com therefore enforceable unless it reflects pensation reasonably anticipate arbitrary capricious judgment by the plan’s purported under the coverage.15 Es plan’s trustees. cape clauses, however, just risk such a clause, escape result. An such as the “Ex incorporation

We believe that the of es- ception cape Eligibility” plans clauses in benefit clause reflects such impermissible major any requirement A does not contain impetus conduct. Congress’s coverage provided by plan enactment of the other alarming frequency employ- comparable coverage with which to the provided by the promised escaping plan ees who had been plan welfare or re- before the latter will by employers addition, tirement benefits liability. were de- defer plans unlike prived anticipated clauses, benefits because of plan escape with excess with an inequitable character or financial insta- provide participants clause does not who bility of their benefit Congress As receive less benefits from the other stated in policy: ERISA’s declaration of opportunity with the to return to the first result, Congress the difference. As a finds that ... the contin- being escape clause, of a security

ued well with an millions of employees dependents and their who thinks that he is are di- rectly expects by [employee affected who to recover medical ex plans]: owing penses ... to the lack of accordance with the terms of that adequate plan, automatically information and safe- loses this guards concerning operation, their presence it is the of another insurance employees desirable in the interests of even if the benefits he is entitled to receive beneficiaries, and their plan and to for under the other are much less favor general view, the welfare and the free flow of able than those of his In own. our commerce, that disclosure be incorporate plan provi made and trustees who in a safeguards provided respect potential be with to sion that has the partici to harm establishment, operation, pants the way and admin- this acted in indeed plans; owing arbitrary istration of such ... that to capricious and manner.16 is, course, policy 15. This the same that under- supra, outside of the ERISA context. judicial hostility against escape the lies clauses 162-163. recognize incorporate

16. We that trustees who arbitrary capricious conduct escape resents hold that the Accordingly, we trustees, in violation of their fidu- plan the employee benefit in ERISA covered clauses 1104; in 29 ciary duties set forth U.S.C. § a matter of unenforceable plans are escape (6) incorporation of an that clause, escape its In the absence of law.17 plan reflects in an clause primary plan is the insurer the ILGWU conduct; (7) arbitrary capricious expenses under medical Mrs. Fazio’s “Exception Eli- Fund’s to that the terms of the terms and own therefore fail. Ac- gibility” clause must district reverse plan. We therefore judgment the district cordingly, judgment favor of court’s reversed and the case remand- court will be Fund.18 judgment enter ed with directions to of the Teamsters Fund. favor IV. CONCLUSION sum, (1) that the district In we hold: SLOVITER, Judge, concurring. Circuit un- no over this suit court had fully portions opinion join I all ERISA, express grant of der the court, join in Part except that I do not 1132; instead that the district represents only Judge II.B. Becker’s question jurisdiction general had view. 1331(a); (3) that pursuant to 28 U.S.C. § aegis of an “other insur- I Fullam’s view under the believe would rep- there is under ERISA provision is enforceable unless ance” remedy, by system- escape plans may, to fashion a lesser how their We decline ever, clauses into First, atically deferring liability plans, for two reasons. we are con to other lower qualified providing coverage participants that even a endorsement of cerned escape the costs of encourage plans might money and use the saved to clauses and beneficiaries or coordination of benefits claus provide area, however, critical with excess better overall. not, replace such clauses with those of the consistent with es to escape variety trustees “fight fiduciary responsibilities, in order to fire with sacrifice the wel- their plans participants would cause un find that fire.” A war between fare of some —who industry potentially coverage provid- certainty in the could are entitled to the inferior participants plan and beneficiaries in the order to benefit other catch ed another —in Second, think it unrealistic to participants crossfire. we and beneficiaries. put partici opinion that this would believe acknowledge participant that a We also pants in the event that their on notice carefully fully un- who reads and liability plan plan attempts another to shift escape clause in his or her bene- derstands benefits, provides lesser protect plan himself or herself fit declining could escaping plan right to return to the has participate plan in a with inferior Plumbing Agro v. Joint the difference. believe, however, coverage. given We Cf. Board, (2d Industry F.2d Cir. law, complexity of "other insurance" 1980) (imposing duty plan pro trustees to on reality participants is that most will not make amendments); plan vide actual notice of Fazio, but, choices like Mrs. will informed Lewis, (D.C.Cir. Kosty surprised when their refuses instead 1963) (same). v. Anheuser- But Michota pay apparently cover- for costs within its cf. Busch, Inc., (3d 1985) F.2d 335-36 Cir. reason, appropriate age. to re- For this it is relations, (because incorpo of nature of labor quire to look out for the welfare the trustees bar amendment in collective ration making by not such choices of their insureds necessary. gaining agreement constitutes constructive Thus, duties). satisfying we trustees' notice disposal are aware that we have at our 17. We that the better course of action is believe put remedies than the total invalidation less drastic escape plans on trustees of with onus could, instance, escape We hold clauses. plans give their clauses to rewrite only to the that such clauses are unenforceable participants proper thereof. notice complaining participant is actu- extent ally harmed, i.e., escape provided by clauses are 18. Because we decide that where the benefits plans unenforceable in ERISA covered benefits are in fact less than the benefits the other law, escape matter of we need not address provided clause. If as a case, remedy Fund’s claims that the ILGWU trus- employed in this we such a fiduciary duties and tees have violated their be different because the record result would 1964, Rights 42 U.S.C. the Civil Act of 703 of 2000(e)-5, § that the Teamsters would indicates clause discrim- equivalent because the ILGWU § Mrs. Fazio with benefits at least gender of and marital status. inates on the basis her under the ILGWU those available to

165 (1983). of that a reasonable construction statute 490 There Court held that Congress jurisdic- jurisdiction had not drafted ERISA’s 1331 extended to suits § precision. brought particular by employers tional with with ERISA covered language plans seeking Since there is no to invalidate the New York falls, agree Disability 1132 into which I grounds this action Benefits Law on the § of Judge with we must preemption.1 Becker that look in- Although employers are not I among stead to 28 find an included plaintiffs U.S.C. 1331. ade- enumerated § quate 1132, jurisdiction basis for under that sec- in ERISA 29 U.S.C. the Court tion, supplied but not on held that 28 expansive jurisdic view of “aris- U.S.C. 1331 ing since it “companies under” federal law. tion was a suit in which common subject regulation” to ERISA “injunc seek view merely Becker’s broad that regulation, tive relief from state on the supplies because federal law common ground that regulation such is pre-empted decision, rule of is “arising under” by a federal statute.” 103 Id. S.Ct. at 2899 jurisdiction under 28 U.S.C. 1331 was 14. n. Supreme expressly before the Court Since Shaw and Franchise Tax rejected in Board Franchise Tax Board v. Con day, they were.decided the same must Trust, struction Laborers Vacation together. Board, read In Franchise Tax 2841, 77 U.S. 103 S.Ct. L.Ed.2d 420 the Court held that there was no federal (1983). The Court stated “CLVT [the jurisdiction over a state tax board’s suit to argues by analogy state tax that board] that right levy declare on a welfare body ERISA ... was meant to create a of preempted by trust fund was not ERISA. law, ‘any common state It summarized its conclusion as follows: require court action which would the inter We hold that a state suit tax pretation application of authori- ERISA to a ties both against to enforce its levies document ‘arises under’ laws of the funds pursuant held in trust to an ERI- United States’ ”. 103 S.Ct. at Id. 2854. SA-covered however, and tó concluded, The Court that this did validity declare the of the levies notwith- subject not suffice to create federal matter standing neither creature of jurisdiction. ERISA itself nor a suit which the Nonetheless, preclude did not Court jurisdiction federal courts will take be- “arising use of jurisdiction under” for cer- cause it question turns on a of federal types tain It ERISA actions. law. analyzed fully possible apply- bases for However, 103 S.Ct. at 2856. Court did ing jurisdiction such the claims of not retract from and indeed reiterated the board, tax suggested state but that a wel- principle well-established fare benefit trust obtain fund could Congress given has the lower federal jurisdiction injunction to seek an an “under courts hear ... those against application to it of state cases in well-pleaded complaint which a regulations require acts inconsistent establishes either that federal law cre- ERISA” even in absence of an plain- ates the cause or that of action express grant under 29 right necessarily depends tiff’s to relief 1132. 103 S.Ct. 2852 & n. 20. on resolution of a substantial analysis “arising under” federal law. jurisdiction that I fits this believe case is Id. governed by Supreme holding Court’s Lines, Inc., distinction, juris- in Shaw v. Delta Air The Court made U.S. n. purposes, S.Ct. 77 L.Ed.2d dictional between state tax a related case that was before the Court of fare trust fund under a established collective Appeals appealed bargaining agreement. but to the was not Su- United Federation Shaw, preme juris- Kramarsky, Court in exercised Teachers Fund v. Welfare (2d Cir.1981). brought by diction over the same claim a wel- contrast, here, plaintiffs In “[p]arties subject to authority those and Hoffman, trustee are regulatory federal fund and ILGWU Sol conflicting and state comparable interest in sort- to those in since have a clear Shaw schemes [who] government’s scope directly subject of each to the of ERISA ing out the they face a authority, especially responsible payment where for the of benefits of feder- liability application if the plan. threat of their This suit under the terms of made clear.” Id. at quickly not al law is originally brought by participant its effort n. The Court described 23. beneficiary of the to recover benefits accommodation “common-sense as one of her, expressly a claim that falls within due kaleidoscopic situations ... judgment to 1132(a)(1)(B). The mere fact 29 U.S.C. § picks the substan- process a selective urging, at the district court’s ILG- lays the of the web and tial causes out agreed pay claim fund to Mrs. Fazio’s WU (quoting at 2852 ones aside.” Id. the Teamsters fund to recover the sue Bank, 299 U.S. National Gully v. First fundamentally changed has not benefits 99-100, 109, 117-18, 81 L.Ed. 57 S.Ct. the character of the action. (1936)). brought by Because this is action holdings in and Fran- The Court’s Shaw responsible payment for the of bene- those may explained on the chise Tax Board clarify their fits under an ERISA significant difference between basis of the obligations pay those benefits to certain underlying in the the interests at stake participants and beneficiaries classes Shaw, subject plaintiffs In were suits. thereby conflicting claims as and to resolve responsible regulation under ERISA responsibilities, I payment to their believe payment of benefits to benefi- for the under” a federal the action “arises law Thus, they held to main- ciaries. were able (ERISA) meaning of within the clarify respon- action to their tain a federal by challenging state action that sibilities payment impinged on their enforcement FULLAM, Judge, concurring: District contrast, responsibilities. In in Franchise tax Board the claims of the state Tax jurisdictional issues which have en- tangential to enforcement or board were my colleagues gaged the attention of —the payment responsibilities. question” jurisdic- “federal extent to which predi- tion under 28 U.S.C. 1331 gov- Tax Board that It was Franchise upon cated federal common law when holding in Jersey our New State erned upon federal common law relied bears (3d 747 F.2d 891 Jersey, v. New AFL-CIO some relation to a federal statute which Cir.1984), juris- that there was no federal interpreted authorizing suit in feder- as a suit a labor union chal- diction over but, view, interesting my al court—are preempted lenging four statutes as state in this case. Mrs. need not be addressed the union neither adminis- ERISA when in the ILGWU Fazio is representa- tered the nor acted as and a of the Teamsters rights any cur- tive beneficiaries’ therefore, my colleagues agree, had vague substantive claim was rent Its plans in right to sue both merely that the cost of dental insurance compli- and to enforce to recover benefits plans would increase under the state stat- of the ance with ERISA. She did so. Each among union was not utes. Since the plans right, had the in that ac- defendant expressly plaintiffs enumerated tion, liability attempt to shift did not dis- and examination of its claim contribution, other, in- by way of whether close that its suit “arose under” demnity, declaratory judgment. law, it, like the state in Fran- we held that short, plainly was federal Board, on this Tax could not sue chise controversy, under aspects all over claim federal court. express jurisdictional grant of 1132(a)(1)(B). REILLY, Appellant, Charles M. procedures is whether the by the district court chosen to resolve the The TIRE FIRESTONE AND RUBBER controversy deprived that court COMPANY, Appellee. Plainly, jurisdiction. neither the district No. 84-5232. any litigants nor intended to United States Court of Appeals, result, thought achieve that or had Third Circuit. too, so. Plainly, done the action had proceeded as on cross-claims the two Argued Oct. 1984. lawsuit, in the Fazio defendants Decided June persisted. my would have view, regard appropriate matter precisely if that is what did occur. Cf. reality every-

28 U.S.C. 1653. The is that

one intended that the sub-

rogated against rights to Mrs. Fazio’s I

Teamsters’ do not this believe deciding

Court should be deterred from

important presented federal issues in this

litigation by procedural formalities un-

fortunately, inadvertently, pursued

the district court. This Court should not tyrannized by so district court docket

numbers. suggest live, respectfully

I is a there

justiciable, controversy in case only against

because of Mrs. Fazio’s claims I

Teamsters fund. do not believe labor

union, ILGWU, such as or the trustee of its standing would judg- to seek a declaring pension

ment some violating ERISA,

plan was unless such

plaintiffs particular- could demonstrate a

ized, concrete, impact upon financial

plaintiff plan. It because the ILG- attempting to recoup

WU claimants are paid

from the Teamsters the amounts justiciable Mrs. Fazio that is a

controversy in this case. Where the en-

titlements an identifiable issue, open the federal courts are

litigation 1132(a)(1)(B), I under U.S.C. §

suggest, regardless of whether action in the name

is maintained of the benefi-

ciary, personal repre- the name of a

sentative, assignee subrogee.

Case Details

Case Name: Northeast Department Ilgwu Health and Welfare Fund and Sol Hoffman v. Teamsters Local Union No. 229 Welfare Fund

Court Name: Court of Appeals for the Third Circuit

Date Published: May 23, 1985

Citation: 764 F.2d 147

Docket Number: 84-5036

Court Abbreviation: 3rd Cir.