United States District Court, D. Minnesota
KRISTA M. CASSIDY, Plaintiff,
UNION SECURITY INSURANCE COMPANY, Defendant.
M. NOLAN, NOLAN, THOMPSON & LEIGHTON, PLC, FOR PLAINTIFF.
RUSSELL HEADRICK AND ROBYN L. ANDERSON, LATHROP & GAGE
LLP, AND TERRANCE J. WAGENER, MESSERLI & KRAMER, FOR
REVISED MEMORANDUM OPINION AND ORDER ON REPORT AND
RECOMMENDATION OF MAGISTRATE JUDGE
R. TUNHEIM CHIEF JUDGE UNITED STATES DISTRICT COURT
Krista M. Cassidy (“Cassidy”) seeks payment of
benefits under a long-term disability plan (“the
Plan”) that her employer, Great Northern Bank
(“Great Northern”), purchased from Defendant
Union Security Insurance Company (“Union
Security”) through the Minnesota Bankers Association
Employee Benefits Trust (the “Bankers
Association”). After unsuccessfully appealing an
adverse benefit determination through Union Security's
internal review process, Cassidy filed this action under the
Employee Retirement Income Security Act
(“ERISA”), 29 U.S.C. § 1132(a)(3). (Compl.,
Dec. 15, 2016, Docket No. 1). Subsequently, Cassidy moved for
the Court to review Union Security's determination de
novo. (Mot., Apr. 10, 2017, Docket No. 14.)
States Magistrate Judge Franklin Noel issued a Report and
Recommendation (“R&R”) that the Court grant
Cassidy's motion. (R&R at 6, Aug. 18, 2017, Docket
No. 22.) The Magistrate Judge found that the Bankers
Association, as Plan Administrator, lacked inherent
discretionary authority to delegate to Union Security, that
Union Security therefore lacked such discretionary authority,
and that the Court should therefore review the determination
de novo. (Id. at 5-6.) Union Security
timely objected to the R&R on the grounds that the
Magistrate Judge did not consider whether the Bankers
Association, as Plan Sponsor, had plenary authority to confer
discretionary authority on Union Security. (Objs. to R&R
at 4-8, Sept. 1, 2017, Docket No. 25.) The Court will find
that the Bankers Association, as Plan Sponsor, does have the
authority to bestow discretionary authority, and will return
the matter to the Magistrate Judge to determine whether the
Plan's authority provision was sufficient to do so.
preliminary matter, the parties dispute the proper standard
of review to apply to the R&R. Union Security argues that
the Court should conduct a de novo review under
Federal Rule of Civil Procedure 72(b). Cassidy counters that,
because the underlying motion is not dispositive, this Court
should only determine if the R&R “is clearly
erroneous or is contrary to law” under Rule 72(a).
Neither Rule precisely fits this case: Rule 72(a)
contemplates review of “a written order, ” while
Rule 72(b) contemplates review of R&Rs on
“dispositive motions.” Here, without deciding
whether the underlying motion is dispositive, the Magistrate
Judge issued an R&R stating that the district court would
conduct a de novo review of any
objections. (R&R at 6.) The Court deems it
appropriate under these circumstances to apply a de
novo standard. See Dyrda v. Wal-Mart Stores,
Inc., 41 F.Supp.2d 943, 945 (D. Minn. 1999). In applying
de novo review, “[t]he district judge may
accept, reject, or modify the recommended disposition;
receive further evidence; or return the matter to the
magistrate judge with instructions.” Fed.R.Civ.P.
72(b)(3); accord D. Minn. LR 72.2(b)(3).
to the merits, the Supreme Court has held that courts must
review a determination of ERISA benefits de novo
“unless the benefit plan gives the administrator or
fiduciary discretionary authority to determine eligibility
for benefits or to construe the terms of the plan.”
Firestone Tire & Rubber Co. v. Bruch, 489 U.S.
101, 115 (1989). In keeping with Firestone, the
Magistrate Judge determined that the Bankers Association, as
Plan Administrator, does not have inherent discretionary
authority. Union Security concedes that the Bankers
Association, as Plan Administrator, does not have inherent
discretionary authority - but argues that the Bankers
Association, as Plan Sponsor, has plenary authority to confer
discretionary authority onto an administrator or fiduciary.
Firestone does not spell out the source of authority
for including a grant of discretionary authority in the terms
of a benefit plan. But ERISA itself does.
defines the multiple roles involved in the establishment and
administration of a benefit plan. First, a plan sponsor is an
employer, employee organization, or employer association that
establishes and maintains a benefit plan. 29 U.S.C. §
1002(16)(B). A plan sponsor is analogous to the settlor of a
trust and may adopt, modify, or terminate a benefit plan
however it sees fit. Lockheed Corp. v. Spink, 517 U.S.
882, 890 (1996). Second, a plan administrator is “the
person specifically so designated by the terms of the
instrument under which the plan is operated.” 29 U.S.C.
§ 1002(16)(A)(i). If the terms of the plan do not
identify an administrator, the plan sponsor takes on the
secondary role of administrator by operation of law.
See 29 U.S.C. § 1002(16)(A)(ii);
Firestone, 489 U.S. at 105. And a fiduciary is one
who “exercises any discretionary authority or
discretionary control respecting management of [a] plan or
exercises any authority or control respecting management or
disposition of its assets.” Id. §
1002(21)(A)(i). A plan sponsor takes on the secondary role of
fiduciary to the extent that it exercises discretionary
authority to administer the plan, but not to the extent that
it adopts, modifies, or terminates a plan. That is, the plan
sponsor may take on subsidiary roles, but it simultaneously
remains plan sponsor. Spink, 517 U.S. at 890-91.
interpretation of ERISA would mean that a plan sponsor may
always grant itself discretionary authority - but may never
grant the same authority to a third party unless and until it
grants itself the power to do so. The cases Cassidy cites do
not interpret ERISA to contain such a requirement; indeed,
only one mentions a plan sponsor's grant of authority to
itself. In McKeehan v. CIGNA Life Ins. Co., a plan
sponsor conferred discretionary authority on itself but not
on a fiduciary. Although the court noted the sponsor's
grant to itself, it did not suggest it was required for a
secondary grant to be valid. 344 F.3d 789, 793 (8th
Cir. 2003). Similarly, in Groves v. Metro. Life Ins.
Co., a sponsor conferred discretionary authority on
itself and appointed an administrator to handle claims
“in accordance with the terms of the Plan.” 438
F.3d 872, 874 (8th Cir. 2006). Although the court
held those actions sufficed as a grant of authority to the
administrator, it did not suggest that an express grant to an
administrator would be invalid absent a sponsor's grant
to itself. See id.
source of confusion seems to be that one party filled all
three roles in Firestone: Firestone was
simultaneously plan sponsor, plan administrator, and
fiduciary. 489 U.S. at 105. It was the sole source of funding
and did not outsource its claim management. Id.
Firestone, as plan sponsor, failed to include in its benefit
plan any language granting discretionary authority to
Firestone, as plan administrator, or Firestone, as fiduciary
- or to anyone else. Id. at 112. The Supreme Court
held that this lack of discretion-conferring language in the
Plan required the district court to apply a de novo
standard when reviewing eligibility determinations.
Id. at 115. But Firestone only says that
administrators and fiduciaries lack inherent discretionary
authority absent an express grant. It does not say that a
plan sponsor lacks the authority to make such an express
grant to an administrator or fiduciary. See id.
like in Firestone, the Plan Sponsor and Plan
Administrator are the same. Cf. 489 U.S. at 105.
Plan documents identify the Bankers Association as Policy
Holder, Plan Sponsor, and Plan Administrator. (Aff. of Mark M.
Nolan (“Nolan Aff.”) ¶ 2, Ex. A at 1, Apr.
10, 2017, Docket No. 17; Nolan Aff. ¶ 3, Ex. B at 2.)
But here, unlike in Firestone, a third party is
involved. The Bankers Association, as Plan Sponsor, included
in the Plan a provision purporting to grant Union Security
the authority to determine eligibility for benefits and to
interpret the Plan's terms. (Nolan Aff. ¶ 2, Ex. A at
32.) Because this grant of authority falls under the wide net
of “any discretionary authority, ” Union Security
meets the statutory definition of “fiduciary.”
See 29 U.S.C. § 1002(21)(A)(i).
remaining question is whether the Plan's authority
provision is sufficient to bestow “discretionary
authority to determine eligibility for benefits or to
construe the terms of the plan” upon Union Security as
fiduciary such that de novo review is unwarranted.
See Firestone, 489 U.S. at 115. In the Eighth
Circuit, “when an insurance policy is the ERISA plan,
” that means determining whether the contested
provision uses “explicit discretion-granting
language.” Walke v. Grp. Long Term Disability
Ins., 256 F.3d 835, 839-40 (8th Cir. 2001)
(noting that a provision granting “full”
discretion and authority to determine eligibility for
benefits and to construe ...