Ruling on Motion to Dismiss [Doc. # 15]
Plaintiff, Mortgage Lenders Network USA, LLC ("MLN"), the PlanSponsor and Plan Administrator of a self-funded employee benefithealth plan, brought suit against defendant CoreSource, the PlanSupervisor, alleging breach of contract, breaches of ERISA andcommon law fiduciary duties, and negligence. Defendant CoreSourcehas moved to dismiss the second count of plaintiff's complaint,on grounds that plaintiff has failed to state a claim for reliefunder both ERISA and common law fiduciary duty theories. For thereasons discussed below, defendant's motion is granted in partand denied in part.
In April 1999, MLN adopted its self-funded employee benefithealth plan ("MLN Plan") and entered into an agreement withCoreSource, making CoreSource the Plan Supervisor charged withperforming certain services for the claims administration andoperation of the MLN Plan. See First Amended Complaint [Doc.#12] at ¶¶ 8-9. For example, CoreSource was required to "review claims for benefits," to "provide an appropriate check andexplanation of benefits, and when appropriate, deny claims noteligible," to "communicate with physicians, hospitals, and otherthird party providers . . . in order to clarify or verifybenefits or claims," and to "advise [MLN] as to payments requiredto be made." See id. at ¶ 12 (quoting Agreement for PlanSupervisor [Doc. # 12, Ex. A] at ¶ 3.04). While MLN therebydelegated much of the responsibility for claim processing toCoreSource, MLN retained "final authority to decide the insurance(or reinsurance) company or companies chosen under the Plan, andto choose the benefits and other provisions in the PlanDocument." Agreement for Plan Supervisor [Doc. # 12, Ex. A] at ¶2.06. Section VII of the Agreement also provided that MLNretained ultimate authority for determinations as to benefitpayments, and that "for the purposes of ERISA and any applicableState legislation of similar nature," MLN shall be deemed thePlan Administrator. Id. at ¶ 7.01. Further, the Agreementprovided that CoreSource, "in performing its obligations underthis Agreement is acting only as an agent of the Company, andshall not for any purpose be deemed an employee of MLN or afiduciary of the Plan." Id.
Under the terms of the MLN Plan, non-experimental, medicallynecessary procedures were covered, but experimental procedures,such as those that were still under study or the subject of ongoing Phase I, II, or III clinical trials, were exempted fromcoverage. See First Amended Complaint [Doc. # 12] at ¶¶ 15-16;MLN Plan [Doc. # 12, Ex. B].
MLN purchased stop-loss insurance from Clarendon NationalInsurance Company ("Clarendon"), in which Clarendon agreed to payfor all medical benefits established under MLN's Plan, except for"expenses which are not medically necessary or are in excess of[MLN's] Plan benefits," and "expenses resulting fromexperimental/investigational medical practices or procedures orfor any care, medicine, services, or supplies not consideredlegal in the United States." First Amended Complaint [Doc. # 12]at ¶ 20.
In July 2001, Alyssa Koski, the three year old daughter of MLNemployee James Koski and a covered person under the MLN Plan, wasdiagnosed with Stage IV neuroblastoma. See id. at ¶¶ 24, 26.After Alyssa Koski was evaluated and accepted for a tripleautologous peripheral stem cell transplant at Children's MemorialHospital in Chicago, CoreSource retained an independent physicianto review the proposed treatment in order to determine whetherthe proposed treatment was covered under the MLN Plan. Seeid. at ¶¶ 28-29. On or about October 22, 2001, the independentphysician informed Coresource that the treatment was medicallynecessary, but was considered investigational and/orexperimental, because it was in a Phase II Clinical Trial period and was not considered the standard of care. See id. at ¶ 30.CoreSource therefore advised MLN that the proposed treatmentwould not be covered under the MLN Plan. On October 23, 2001,CoreSource requested that New York Underwriters, the managinggeneral underwriter for Clarendon, review whether Alyssa Koski'sproposed treatment was covered under the Stop Loss Agreement.See id. at ¶ 32. CoreSource was informed by New YorkUnderwriters on October 30, 2001 that the proposed treatment wasnot covered under the Stop Loss Agreement, and in November 2001,CoreSource advised MLN of New York Underwriters' decision. Seeid. at ¶¶ 34, 35. In November 2001, Alyssa Koski's fatherappealed CoreSource's determination, and CoreSource retained asecond independent physician. Although the second independentphysician initially agreed that the proposed treatment wasconsidered experimental, after conferring with Alyssa Koski'sattending physician and receiving supplemental information, thesecond independent physician amended his opinion and reportedthat the proposed treatment was no longer considered experimentalbecause the clinical trials for the procedure had been concludedand a manuscript detailing the results of the study had beenapproved for publication. See id. at ¶¶ 38-41.
On November 26, 2001, CoreSource requested that New YorkUnderwriters review the amended opinion of the second independentphysician. After reviewing the opinion, New York Underwriters informed CoreSource on December 18, 2001 that it had not changedits position that Alyssa Koski's proposed treatment was"experimental/investigational," and therefore not covered underthe Stop Loss Agreement. See id. at ¶¶ 42-43. According toplaintiff's complaint, CoreSource did not inform MLN of thedecision of New York Underwriters. See id. at ¶ 44.
On or about January 11, 2002, New York Underwriters informedCoreSource that it would provide coverage to MLN for a singletransplant and two chemotherapy sessions, but that additionalstem cell support therapies would not be covered. See id. at¶ 45. After again discussing with CoreSource the findings ofCoreSource's second independent physician, on or about January17, 2002, New York Underwriters agreed to further review the casewith Clarendon. See id. at ¶ 47. On the same day, CoreSourceinformed MLN that MLN had a viable claim for coverage under theStop Loss Agreement based on the opinion of its secondindependent physician, which relied on the anticipatedpublication of a new study detailing the results of a clinicaltrial of the proposed treatment for Alyssa Koski. See id. at¶ 48. Based on the information CoreSource provided, MLN approvedAlyssa Koski's triple autologous peripheral stem cell transplant,and on January 21, 2002, Alyssa Koski underwent this procedure.See id. at ¶¶ 58-59.
On January 25, 2002, New York Underwriters again informed CoreSource that it viewed the treatment as"experimental/investigational" under the Stop Loss Agreement. OnFebruary 14, 2002, CoreSource provided MLN with copies of theclinical study, the article for publication, and New YorkUnderwriters' January 25, 2002 denial of coverage. See id. at¶ 61. Alyssa Koski subsequently underwent two more stem cellrescue treatments. See id. at ¶¶ 62, 65.
MLN alleges that Clarendon denied MLN stop-loss coverage forthe second and third stem cell rescue treatments performed onAlyssa Koski, deeming the treatment experimental/investigationaland not medically necessary. See id. at ¶¶ 67, 71. MLNalleges that CoreSource knew that the stop-loss carrier hadrefused to cover certain treatments, yet failed to inform MLN ina timely manner and recommended payment of the treatments despiteits awareness that these treatments were not covered under theStop-Loss Agreement.
Count One of MLN's First Amended Complaint alleges thatCoreSource breached its contractual obligations to MLN under theAgreement for Plan Supervisor. Count Two alleges breaches of bothERISA and common law fiduciary duty. Count Three alleges thatCoreSource was negligent in performing its duties as PlanSupervisor.
CoreSource seeks dismissal of Count Two of MLN's First AmendedComplaint, on grounds that CoreSource was not a fiduciary of the MLN Plan. Focusing on the ERISA claim in Count Two, thedefendant first argues that the Agreement for Plan Supervisorexpressly provides that CoreSource is not a fiduciary of the MLNPlan. Second, defendant argues that CoreSource was not an ERISAfiduciary of the MLN Plan because MLN is "claiming not thatCoreSource breached a fiduciary duty to the MLN Plan, but ratherbreached a fiduciary duty to Plaintiff itself. ERISA does notprovide for such a claim." Defendant's Memorandum of Law inSupport of Motion to Dismiss Count Two of Plaintiff's Complaint[Doc. # 16] at 9. CoreSource next challenges the common lawfiduciary duty claim, arguing that because the parties explicitlycontracted that no fiduciary relationship exists, Connecticut lawwill not impose a common law fiduciary duty. In the alternative,defendant argues that if the Court denies CoreSource's motion asto the ERISA claim in Count II, then it must dismiss the allegedcommon law breach of fiduciary duty claim as preempted by ERISA.
Plaintiff MLN responds by arguing first that Coresource'sarguments cannot be decided at the motion to dismiss stagebecause there is a factual dispute between the parties as toCoreSource's status as a fiduciary. MLN also argues that thedisavowal of the fiduciary relationship in the Agreement for PlanSupervisor does not dispose of its ERISA claim, because afiduciary under ERISA may not contract away its duties andobligations. Plaintiff rejects CoreSource's claim that it was merely an agent of MLN and had no fiduciary duties per the termsof the Agreement, and argues that under both ERISA and commonlaw, CoreSource functioned as a fiduciary to MLN and the MLNPlan, and may be held liable for breaches of fiduciary duties.
When deciding a 12(b)(6) motion to dismiss, the Court mustaccept all well-pleaded allegations as true and draw allreasonable inferences in favor of the pleader. Hishon v. King &Spalding, 467 U.S. 69, 73 (1984). A complaint should not bedismissed for failure to state a claim unless it appears beyonddoubt that the plaintiff can prove no set of facts in support ofhis claim which would entitle him to relief. Swierkiewicz v.Sorema N.A., 534 U.S. 506, 513-14 (2002); Conley v. Gibson,355 U.S. 41, 45-46 (1957). "The issue is not whether a plaintiffwill ultimately prevail but whether the claimant is entitled tooffer evidence to support the claims. Indeed it may appear on theface of the pleadings that a recovery is very remote and unlikelybut that is not the test." Scheuer v. Rhodes, 416 U.S. 232, 236(1974).
The issue of whether Coresource may be deemed a fiduciary ofthe MLN Plan is appropriate for consideration at this motion todismiss stage. "[W]here the facts are not in question, whether aparty is an ERISA fiduciary `is purely a question of law.'" LoPresti v. Terwilliger, 126 F.3d 34, 39 (2d Cir. 1997). Here,as all factual assertions relied on in this Court's decision areas alleged in plaintiff's complaint, or as stated in the relevantplan documents attached to plaintiff's complaint, and as theplaintiffs have not identified any areas in which the facts aredisputed, the issue is appropriately viewed as a question of lawappropriate for disposition on a motion to dismiss.1
A. Existence of Fiduciary Duty to the Plan
The first issue the defendant's motion presents is whetherCoreSource, the Plan Supervisor charged with providingadministrative services to MLN, the ERISA Plan Administrator andnamed fiduciary, can itself be deemed a fiduciary of the ERISAPlan. ERISA "defines `fiduciary' not in terms of formaltrusteeship, but in functional terms of control and authorityover the plan . . ." Mertens v. Hewitt Assocs., 508 U.S. 248,262 (1993) (citation omitted). Under ERISA, a "fiduciary" withrespect to a plan is one who, inter alia, "exercises anydiscretionary authority or discretionary control respecting management of such plan or exercises any authority or controlrespecting management or disposition of its assets," or "who hasany discretionary authority or discretionary responsibility inthe administration of such plan." 29 U.S.C. § 1002(21)(A)."Congress intended ERISA's definition of fiduciary to be broadlyconstrued." LoPresti v. Terwilliger, 126 F.3d 34, 40 (2d Cir.1997) (citations and international quotation marks omitted).
Here, the Plan Supervisor Agreement between CoreSource and MLNexpressly provides that "[t]he Plan Supervisor shall not for anypurposes be deemed an employee of the Company or a fiduciary ofthe Plan." Plan Supervisor Agreement [Doc. # 12, Ex. A] at ¶ 701.Whether CoreSource qualifies as a fiduciary thus turns first onthe question of to what extent this contractual provision may begiven effect. MLN, relying on IT Corporation v. General AmericanLife Insurance Co., 107 F.3d 1415 (9th Cir. 1997), arguesthat a fiduciary duty may not be contracted away. In ITCorporation, the Ninth Circuit concluded that a company hired toadminister IT Corporation's ERISA plan, which had authority toprocess claims, and pay or deny them, was a fiduciary to the Plandespite a contractual provision that "under no circumstancesshall the service contractor be considered the named fiduciaryunder the Plan." Id. at 1418. As the Court in IT Corporationdiscussed, ERISA provides that "any provision in an agreement orinstrument which purports to relieve a fiduciary from responsibility or liability for any responsibility,obligation, or duty under this part shall be void as againstpublic policy." 29 U.S.C. § 1110(a). The Ninth Circuit thusconcluded that if the defendant was in fact a fiduciary of thePlan, then any contractual agreement to exonerate the defendantfrom fiduciary responsibility was without effect. Id. at1418-19.
A disclaimer of the existence of a fiduciary relationship,however, is distinguishable from a disclaimer of liability of anacknowledged fiduciary. See Chicago Bd. Options Exchange, Inc.v. Connecticut, 713 F.2d 254 (7th Cir. 1983) ("[A]though theparties may decide how much authority to vest in any person, theymay not decide how much liability attaches to the exercise ofthat authority."). As a result, ERISA's "void as public policy"provision, in 29 U.S.C. § 1110(a), is not entirely applicable tothe contractual language at issue here. Nonetheless, as ITCorporation recognized, in light of the broad functionalapproach under ERISA to determining which entities arefiduciaries, and in light of ERISA's stated public policy ofenforcing fiduciary duties regardless of contrary contractualagreements, a contractual disclaimer of a fiduciary relationshipcannot be dispositive of whether such a relationship in factexisted. This Court, therefore, will view the contractuallanguage in CoreSource's Plan Supervisor Agreement as relevantto, but not determinative of, whether CoreSource was in fact a fiduciary tothe MLN Plan. See Redall Industries, Inc. v. Wiegand,878 F. Supp. 1026 (E.D. Mich. 1995) (finding disclaimer relevant toissue of whether third party administrator of ERISA plan was afiduciary); Samuels v. PCM Liquidating, Inc., 898 F. Supp. 711(C.D. Cal. 1995) (finding agreement between parties thatdefendant was not a fiduciary of the plan as prima facie evidencethat the defendant did not act as a fiduciary).
The legislative history of ERISA reveals that the definition offiduciary was meant to include "persons who have authority andresponsibility with respect to the matter in question, regardlessof their formal title." H.R. Conf. Rep. No. 1280, 93rd Cong.,2d Sess., reprinted in 1974 U.S.C.C.A.N. 5038, 5103.Particularly illuminating of the issue in this case is theconference report's discussion of the circumstances under which"consultants" or "advisors" may be deemed ERISA fiduciaries: While the ordinary functions of consultants and advisers to employee benefit plans (other than investment advisers) may not be considered as fiduciary functions, it must be recognized that there will be situations where such consultants and advisers may because of their special expertise, in effect, be exercising discretionary authority or control with respect to the management or administration of such plan or some authority or control regarding its assets. In such cases, they are to be regarded as having assumed fiduciary obligations within the meaning of the applicable definition.Id.
Reflecting this legislative history, therefore, a relevantquestion in determining if an advisor to the plan, like CoreSource, has assumed fiduciary obligations is whether thatadvisor has decision-making authority over aspects of the plan or"special expertise" that gives rise to the exercise ofdiscretionary authority.
The Department of Labor has also issued regulations, inquestion and answer form, which further guide the resolution ofthis issue. Under 29 C.F.R. § 2509.75-8, persons who "have nopower to make any decisions as to plan policy, interpretations,practices or procedures, but who perform [certain] administrativefunctions for an employee benefit plan, within a framework ofpolicies, interpretations, rules, practices and procedures madeby other persons" are not fiduciaries with respect to the plan.Among the administrative duties found not to give rise to afiduciary relationship are the "[a]pplication of rulesdetermining eligibility for participation or benefits;""[c]alculation of services and compensation credits forbenefits;" "[c]alculation of benefits;" "[p]rocessing of claims;"and "[m]aking recommendations to others for decisions withrespect to plan administration." 29 C.F.R. § 2509.75-8, ¶ D-2.According to the regulation, these functions are deemed to be"purely ministerial," and non-discretionary. Thus, thedistinction between discretionary and ministerial functions restson whether the functions merely implement plan policy, practice,and procedures, or have the ability to impact, modify, or further the development of plan policy and practice, such as byinterpreting or making decisions about the plan.
The Department of Labor offers as an example the circumstancesin which a "benefit supervisor" may be deemed to performdiscretionary functions as opposed to "purely ministerial" ones.According to the regulation, if the plan designates as a"`benefit supervisor' a plan employee who has the final authorityto authorize or disallow benefit payments in cases where adispute exists as to the interpretation of plan provisionsrelating to eligibility for benefits," then "the benefitsupervisor would be a fiduciary within the meaning of section3(21)(A) of the Act." Id. at ¶ D-3. It is clear from theregulation that a benefit determination based on no more thanapplication of a mathematical formula in accordance with the Planrules is a ministerial, rather than a discretionary act, even ifit is the final decision on the claim. See id. It issimilarly clear that a benefit determination that requiresinterpretation of plan provisions is a discretionary, notministerial, act if it is the final decision on a disputed claimrather than a mere recommendation.
Applying this framework, the Second Circuit in Geller v.County Line Auto Sales, Inc., 86 F.3d 18, 21 (2d Cir. 1996),found that the defendants were not fiduciaries of an ERISA plan,because they merely remitted premiums and confirmed a participant's status as a full-time employee and covered memberof the ERISA plan, actions which the Second Circuit found "cannotbe construed as discretionary." Likewise, in LoPresti,126 F.3d at 40-41, the Second Circuit concluded that a defendant was not afiduciary of an ERISA plan because "[e]ven though he wasauthorized to sign checks on the Company's account and he hadsome general knowledge that deductions were made from employees'wages, . . . he was primarily a production person with noresponsibility for determining which of the company's creditorswould be paid or in what order," and "did not exercise authorityor control regarding the disposition of plan assets." Id. Inboth cases, the lack of discretionary decision-making authorityon plan management or administration in the performance of theirduties led to the conclusion that the defendants were notfiduciaries. Other Circuits have reached similar conclusions.See, e.g. Mich. Affiliated Healthcare Sys. v. CC Sys. Corp.of Mich., 139 F.3d 546, 548 (6th Cir. 1998) (finding PlanSupervisor not to be a fiduciary of the Plan where dutiesincluded "reviewing claims for benefits, determining eligibilityfor benefits, and computing benefits payable," but where PlanSupervisor "referred contested or questionable claims to [PlanAdministrator], which had sole and final discretion to grant ordeny payment of the claim."); Klosterman v. Western Gen. Mgmt.,32 F.3d 1119, 1122-25 (7th Cir. 1994) (concluding that third party administrator was not an ERISA fiduciary where it did nothave authority to make the ultimate decisions in doubtful orcontested claims, and where the eligibility determinations werebased upon a framework established by the employer, despite thefact that the third party administrator created the computerprogram that formed the main method of determining eligibility);Baker v. Big Star Div. of the Grand Union Co., 893 F.2d 288,290 (11th Cir. 1989) ("An insurance company does not becomean ERISA "fiduciary" simply by performing administrativefunctions and claims processing within a framework of rulesestablished by an employer."); see also McManus v. GitanoGroup, Inc., 851 F.Supp. 79, 82 (S.D.N.Y. 1994) (findingthird-party administrator not an ERISA fiduciary where appeals ofdenied claims were referred to the Plan Administrator, not thethird-party administrator); Protocare of Metropolitan v. MutualAssociation Administrators, Inc., 866 F.Supp. 757, 762 (S.D.N.Y.1994) (finding no fiduciary function where defendant made"initial determination of whether a submitted claim should berecognized" by "simply appl[ying] the Plan rules," and where"[f]inal determination of whether a denial of benefits was properrests with the Board of Trustees," not with defendant.).
The issue becomes more complex where, as here, a plansupervisor or third party administrator acts plays a criticalrole in interpreting plan provisions. In Harold Ives Trucking Co. v. Spradley & Coker, Inc., 178 F.3d 523 (8th Cir.1999), the Eighth Circuit, considering a set of facts similar tothis case, concluded that the third party administratorfunctioned as a fiduciary to an ERISA plan. There, Spradley &Coker, the third party administrator of the Harold Ives Plan,determined that a plan participant was not entitled to coveragefor his treatment at a particular rehabilitation facility becausethat facility was not a "covered facility" under the plan. Afteran appeal, Spradley & Coker reversed its earlier decision. Theexcess loss carrier, however, had not changed its mind that thefacility was not covered under the plan. Harold Ives brought suitcharging Spradley & Coker with breach of fiduciary duty underERISA. The Eighth Circuit concluded that Spradley & Cokerfunctioned as a fiduciary, having assumed discretionary authoritywhen it "reversed its original decision that [a planparticipant's hospitalization at a rehabilitation facility] wouldnot be covered by the plan, without consulting the plaintiffs,and in the face of [the excess loss carrier's] "adamant" viewthat the charges would not be covered." Id. at 526. Thus, twofacts were highly relevant to the Eighth Circuit's decision:Spradley & Cokers' determinations were interpretive, andtherefore discretionary, because the eligibility for benefits wasdisputed; and Spradley & Coker decided the claim independently,"without consulting" the plaintiffs. The Ninth Circuit has determined that the interpretation ofplan provisions is alone sufficient to create fiduciary status,even where the entity lacks final decisionmaking authority. InIT Corporation, 107 F.3d at 1420, the defendant, GeneralAmerican, was required to refer disputed cases back to the ITCorporation for final decision. Nonetheless, the Ninth Circuitdetermined that "it is hard to say that General American has nopower to make decisions about plan interpretation, becauseGeneral American has to interpret the plan to determine whether abenefits claim ought to be referred back. No claim is likely tobe known to or disputed by IT Corporation unless and untilGeneral American decides that it is questionable or doubtfulenough to be worth referring back to IT Corporation forinstructions." Id. at 1420. The court, noting that the healthbenefit determinations at issue could not be calculated from amathematical formula, compared the defendant's responsibilitiesin interpreting the plan to those of a judge in applying law tofacts within a framework of statutes, rules, and precedent, andconcluded that "calling interpretation and judgment `purelyministerial' does not make it so." Id. at 1420. Thus, despitethe absence of final authority over the plan, General Americanwas deemed an ERISA fiduciary.
The Eleventh Circuit has concurred that interpretation of aplan's terms requiring more than application of a mathematical formula can create a fiduciary duty, see Newell v. PrudentialIns. Co., 904 F.2d 644 (11th Cir. 1990), and the FifthCircuit has likewise found the existence of a fiduciaryrelationship despite the absence of final authority to grant ordeny claims, see Local 102 Health & Welfare Fund v. EquitableLife Assurance Soc., 841 F.2d 658, 663 (5th Cir. 1988).
This Court concludes that Coresource cannot be deemed an ERISAfiduciary. Like IT Corporation and Harold Ives, here it isapparent that the benefits claim at issue did not lend itself toapplication of a mathematical formula, and whether the proposedtreatment should be deemed experimental was hotly disputed. Thus,the kind of application of plan rules that CoreSource undertookhere could fairly be described as interpretive. Nonetheless, thisCourt disagrees with the Ninth Circuit's conclusion that such arole alone can establish fiduciary status under ERISA.
The Department of Labor's interpretive regulation suggests thatwithout decision-making authority, the mere fact that applicationof rules requires some interpretation is insufficient to create afiduciary status. Among those functions classified as ministerialare "[a]pplication of rules determining eligibility forparticipation or benefits;" and "[m]aking recommendations toothers for decisions with respect to plan administration."29 C.F.R. § 2509.75-8, ¶ D-2. Likewise, while the regulation emphasizes that a "benefit supervisor" who "hasfinal authority to authorize or disallow benefit payments incases where a dispute exists as to the interpretation of planprovisions" id. at D-3, is a fiduciary, it nowhere providesthat recommendations or advice alone creates a fiduciary status.To the extent that ERISA is concerned with the ability to impactthe ERISA Plan itself through policy or interpretative decisions,a Plan Supervisor's interpretation is significant only as a finaldecision, not as a recommendation.
Here, MLN has not alleged, and the Plan documents do notprovide, that CoreSource had any final decision-making authority.To the contrary, in its complaint MLN alleges that "CoreSourceadvised MLN that, based upon Dr. Ketsel's recent study andanticipated publication regarding triple-tandem high dose therapyfor neuroblastoma, such treatment was no longer considered`investigational and/or experimental'" and that "based onCoreSource's independent physician's opinion and the informationCoreSource communicated to MLN . . . MLN approved Alyssa Koski'striple autologous peripheral stem cell transplant." First AmendedComplaint [Doc. # 12] at ¶¶ 48, 58. The overwhelming focus ofCoreSource's breach of fiduciary duty claim, therefore, is basedon CoreSource's failures to "properly advise MLN," to "keep MLNproperly informed," to "timely forward to MLN criticalinformation," and "to properly understand the terms and conditions of the Plan." Id. at ¶ 90. Based on the allegationsin MLN's complaint, it is clear that MLN, not CoreSource, hadfinal decision-making authority over the Plan, and it isCoreSource's deficiencies in supporting MLN's role as thedecision-maker that forms the core of the complaint. Both thePlan Supervisor Agreement and the MLN Plan itself support thisview. See, e.g. Agreement for Plan Supervisor [Doc. # 12, Ex.A] at ¶ 7.01 ("The Plan Supervisor shall not for any purposes bedeemed an employee of the Company or a fiduciary of the Plan. TheCompany hereby delegates to the Plan Supervisor authority to makedeterminations on behalf of the Company with respect to benefitpayments under the Plan and to pay such benefits, subject,however, to a right of the Company to review and modify any suchdetermination."); MLN Plan [Doc. # 12, Ex. B] at § XVI (providingfor first level appeals to be sent to Plan Supervisor(Coresource) and copied to Plan Administrator (MLN), but for the"secondary appeal decision," which "will be final," to berendered by the Plan Administrator.). The fact that the partiesviewed CoreSource's role as administrative and subject tosupervision rather than discretionary, and provided that MLNwould have final authority in the decision-making process,supports the view that CoreSource's functions were not fiduciaryin nature. While it appears that CoreSource, unlike the thirdparty administrators in Michigan Affiliated and Klosterman, investigated in the first instance questionable claims itself andreached conclusions on which it based its recommendations to MLN,MLN has made no allegation that CoreSource itself had theauthority to make any final decisions on disputed claims or madethe final decision on the claim at issue.
The legislative history suggests that fiduciary status may becreated if an advisor to a plan has "special expertise," even ifthe advisor lacks formal decision-making authority. Thus, ifCoreSource had "special expertise" that the Plan Administer wouldof necessity defer to, then the legislative history suggests thatinterpretive guidance, in the form of recommendations, wouldconstitute exercise of discretionary authority. See H.R. Conf.Rep. No. 1280, 93rd Cong., 2d Sess., reprinted in 1974U.S.C.C.A.N. 5038, 5103. Nothing in plaintiffs' complaintsuggests that CoreSource has any "special expertise." Accordingto the complaint, in processing the claim at issue, CoreSourceidentified and hired two independent physicians who offered theiropinions on whether the proposed treatment was experimental,received and reviewed the information on which the physiciansrelied when issuing their opinions, and advised MLN of theirresulting recommendation. While the complaint alleges thatCoreSource had access to information that they did not provide toMLN, it does not suggest that CoreSource had any specialexpertise that MLN did not itself possess over the administration of the plan.
At oral argument, MLN alleged that CoreSource served as a defacto decision-maker on the Alyssa Koski matter, and MLN was amere rubber stamp. But nowhere in its complaint does MLN allegethat CoreSource made ever final decisions or took actions on theAlyssa Koski claim independently of MLN. Thus, regardless ofMLN's acquiescence to CoreSource's recommendation in the claimdetermination at issue, there is no allegation that MLN ceded itsfiduciary role under the plan to CoreSource, or that CoreSourceassumed authority and control of the Plan. Because CoreSource didnot have final decisionmaking authority with respect to the plan,and is not alleged to have had special expertise, this Courtconcludes that any interpretive role that may have gone into itsrecommendation on the benefits claim at issue did not give riseto fiduciary status under ERISA.
B. Common Law Breach of Fiduciary Duty Claim
CoreSource challenges plaintiff's common law breach offiduciary duty claim on grounds that the Plan SupervisorAgreement between the parties expressly provides that CoreSourceis not a fiduciary of the Plan. MLN responds that the partiesalso expressly contracted for North Carolina as the choice oflaw, and that under North Carolina law a disclaimer of fiduciaryliability is not given effect. This Court need not decide thechoice of law issue, because under its express terms, the Plan Supervisor Agreement disclaims CoreSource's status as a fiduciaryto the Plan, not as a fiduciary to MLN itself. See Agreementfor Plan Supervisor [Doc. # 12, Ex. A] at ¶ 7.01 ("The PlanSupervisor shall not for any purposes be deemed an employee ofthe Company or a fiduciary of the Plan."). Indeed, the Agreementprovides that CoreSource is "an agent" of MLN, id. whichclearly implies fiduciary status with respect to MLN. SeeRestatement (Second), 1 Agency § 1 ("Agency is the fiduciaryrelationship which results from manifestation of consent by oneperson to another that the other shall act on his behalf andsubject to his control, and consent by the other so to act.").The breaches of fiduciary duty alleged in the complaint,moreover, are primarily breaches of CoreSource's duties to MLN,not to the ERISA Plan. For example, MLN alleges that CoreSourcebreached its fiduciary duties by "(a) failing to properly adviseMLN that Aylssa Koski's propsed medical treatment was alwaysdeemed an Experimental and/or Investigational form of treatment,and not the standard of care; (b) failing to properly and timelyadvise MLN that Alyssa Koski's proposed medical treatment was inPhase II of a clinical trial until one week after MLN's decisionto authorize treatment; (c) failing to keep MLN properly informedof communications between CoreSource and Clarendon regardingcoverage of Alyssa Koski's proposed medical treatment; (d)failing to timely forward to MLN critical information regardingthe Koski claim . . .; (e) failing to inform MLN that the revised findings of the secondindependent physician advisor were a reversal of an opinionsubmitted one day earlier; (f) failing to inform MLN ofClarendon's refusal to provide coverage until the day of AlyssaKoski's medical treatment; and (g) failing to properly understandthe terms and conditions of the Plan and Stop Loss Agreement andeffectively and timely communicate its coverage analysis to MLN."First Amended Complaint [Doc. # 12] at ¶ 102. Because the partiesagreed that CoreSource was to act as MLN's agent, and because thefiduciary duties owed to MLN are distinct from any duties owed tothe Plan, this Court declines to find that the contractualdisclaimer of fiduciary status with respect to the Plan controls.
C. ERISA Preemption
ERISA expressly preempts "any and all State laws insofar asthey may now or hereafter relate to any employee benefit plan"covered by the statute. 29 U.S.C. § 1144(a). In light of thebroad federal preemption over any claims related to an ERISAPlan, the final issue here is whether MLN's common law breach offiduciary duty claim may stand This Court concludes that thecommon law breach of fiduciary duty claim is insufficientlyrelated to an employee benefit plan, and therefore is notpreempted by ERISA. "ERISA is a remedial statute enacted toprotect the interests of beneficiaries of private retirementplans by reducing the risk of loss of pension benefits."Geller, 86 F.3d at 22. While the reach of ERISA's preemptive effect isbroad, the intent of Congress "was not to foreclose every stateaction with a conceivable effect upon ERISA plans, but tomaintain exclusive federal control over the regulation of suchplans." NYS Health Maintenance Org. Conference v. Curiale,64 F.3d 794, 803 (2d Cir. 1995). Thus, while "ERISA's preemptivebreadth encompasses even a law of general applicability if it hasan impermissible effect on an ERISA plan," it does not extend tolaws of general application if their effect upon ERISA plans isincidental. Id. at 798-99.
In Geller, the Second Circuit found that the plaintiffs'common law fraud claim was not preempted even though it arosefrom the defendant's allegedly improper administration of theplan in identifying an ineligible person as a covered employee.The Court reasoned that "the plaintiffs' common law fraud claim,which seeks to advance the rights and expectations created byERISA, is not preempted simply because it may have a tangentialimpact on employee benefit plans . . . [A]lthough the defendantsimproperly administered the plan, the essence of the plaintiffs'fraud claim does not rely on the pension plan's operation ormanagement. The "bare bones" of the claim are that 1) thedefendants fraudulently misrepresented that Kleppner was afull-time employee and 2) in reliance on the defendants'representation, the plaintiffs paid out more than $104,000 on her behalf. The plan was only the context in which this gardenvariety fraud occurred." Geller, 86 F.3d at 23.
Here, as discussed above, plaintiffs' common law breach offiduciary duty claim is only incidentally connected to the ERISAplan. Much of the claim focuses on CoreSource's alleged failureto fulfill certain duties owed to MLN. Like Geller, the Planwas only the context in which the garden variety breaches offiduciary duty to MLN are alleged to have occurred. Moreover,like Geller, MLN's common law claim would not impact theregulation of the ERISA plan. Accordingly, plaintiffs' common lawbreach of fiduciary duty claim is not preempted by ERISA.
For the foregoing reasons, defendant's motion to dismiss [Doc.# 15] is granted in part as to the ERISA claim in Count Two ofplaintiff's complaint, and denied as to the common law breach offiduciary duty claim in Count Two of plaintiff's complaint.
IT IS SO ORDERED.
1. At oral argument before this Court on August 6, 2004, theparties disputed whether CoreSource was the de factodecisionmaker on benefits determinations. However, nowhere in itscomplaint does MLN allege that CoreSource exceeded its authorityunder the terms of Plan Supervisor Agreement. Thus, as will bediscussed in more detail below, the Court's analysis of whetherCoreSource functioned as a fiduciary to the ERISA plan is notaffected by the allegation that MLN accepted without contestCoreSource's recommendations and served as a mere "rubber stamp"in the Alyssa Koski claim.