Metropolitan Life Insurance v. Price
501 F.3d 271, 41 Employee Benefits Cas. (BNA) 1673, 2007 U.S. App. LEXIS 21076 (2007)
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Rule of Law:
Federal courts have subject matter jurisdiction over interpleader actions brought by ERISA fiduciaries seeking equitable relief under 29 U.S.C. § 1132(a)(3). The ERISA exhaustion requirement is a non-jurisdictional affirmative defense that does not apply to a fiduciary's interpleader action seeking a determination of a Qualified Domestic Relations Order (QDRO), as such a determination is a question of statutory construction reviewed de novo.
Facts:
- New Jersey Transit Corporation sponsored a Basic Life Plan for its employees, funded through a group life insurance policy issued by Metropolitan Life Insurance Company (MetLife), which served as the plan’s claims fiduciary.
- Paul Price was a participant in the plan, enrolled for $20,000 in life insurance benefits.
- Paul Price passed away in May 2002, survived by his widow, Sandra Price, and his children from a previous marriage, Shannon and Andre Price.
- After Paul’s death, Sandra Price and his children submitted competing claims for the life insurance benefits.
- MetLife investigated and discovered that Paul had designated his widow, Sandra Price, as the primary beneficiary in February 2000.
- Paul's first marriage had ended in 1995 with a New Jersey Superior Court divorce judgment, which stated that Paul “shall amend these policies in order to name the children of the marriage as irrevocable beneficiaries until such time as Andre Price... is emancipated” and name his first wife (the children's mother) as trustee.
- Andre Price remained unemancipated at the time of Paul’s death.
- The competing claimants failed to resolve the matter amicably after MetLife informed them that it could not determine whether the divorce decree constituted a Qualified Domestic Relations Order (QDRO) under ERISA.
Procedural Posture:
- Paul Price's widow, Sandra Price, and his children from a previous marriage, Shannon and Andre Price, submitted competing claims to MetLife for his life insurance benefits.
- MetLife informed the children's attorney that it was denying their claims, stating its fiduciary duty to pay the named beneficiary (Sandra Price).
- The children's attorney requested a review of the claim, asserting their right to benefits under Paul Price's 1995 divorce judgment.
- MetLife informed the claimants that it could not determine whether the divorce decree constituted a Qualified Domestic Relations Order (QDRO) and stated that if the matter was not resolved amicably, it would initiate a lawsuit.
- The claimants negotiated but failed to reach an agreement, after which the children's attorney requested MetLife to initiate an interpleader action.
- MetLife filed an interpleader action in the United States District Court for the District of New Jersey against Sandra Price, Shannon Price, and Andre Price.
- The District Court, acting sua sponte (on its own motion), raised the issue of subject matter jurisdiction and dismissed the case, reasoning that MetLife had not made an initial determination about which potential beneficiaries should be paid, thereby lacking an administrative record for judicial review.
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Issue:
Does a federal court have subject matter jurisdiction over an interpleader action brought by an ERISA plan fiduciary seeking a determination of competing claims to benefits when one claim is based on a domestic relations order, and does the ERISA exhaustion doctrine require the fiduciary to make an initial determination of QDRO status before filing suit?
Opinions:
Majority - Chagares, Circuit Judge
Yes, a federal court has subject matter jurisdiction over an interpleader action brought by an ERISA plan fiduciary, and the ERISA exhaustion doctrine does not require the fiduciary to make an initial QDRO determination. Federal question jurisdiction exists because MetLife, as an ERISA fiduciary, brought suit under section 502(a)(3) of ERISA (29 U.S.C. § 1132(a)(3)) to obtain appropriate equitable relief to enforce the plan terms, and interpleader is a recognized form of equitable relief. MetLife's claim is substantial and non-frivolous, which is sufficient for federal question jurisdiction. The court clarified that the ERISA exhaustion requirement is a judicially created, non-jurisdictional affirmative defense, not a statutory mandate, and thus does not limit a court’s adjudicatory power; it can be forfeited and allows for exceptions like futility. Furthermore, the concept of “reverse exhaustion” (requiring a fiduciary to make a decision before interpleading) is inapplicable when the core dispute centers on whether a domestic relations order is a QDRO. This is because QDRO determinations are questions of statutory construction, which courts review de novo, not under a deferential “arbitrary and capricious” standard. In such cases, the policy goals underlying the exhaustion doctrine (e.g., reducing frivolous lawsuits, promoting consistent treatment, minimizing costs, leveraging fiduciary expertise) are not served. Moreover, 29 U.S.C. § 1056(d)(3)(G)(i)(II) requires a plan administrator to “determine” QDRO status, and bringing an interpleader action is an acceptable and efficient way to effectuate a prompt and final determination, benefiting all interested parties.
Analysis:
This case significantly clarifies the scope of federal jurisdiction for ERISA interpleader actions and definitively characterizes the ERISA exhaustion requirement as a non-jurisdictional, prudential affirmative defense. It provides a crucial pathway for ERISA fiduciaries, like MetLife, to resolve competing benefit claims that involve potentially conflicting state domestic relations orders and federal ERISA preemption, without being compelled to make a potentially legally complex and non-deferential determination themselves. The ruling establishes a key distinction: while discretionary benefits decisions might warrant prior administrative exhaustion, legal questions, such as QDRO status, which are reviewed de novo by courts, do not benefit from a prior administrative decision. This approach promotes judicial efficiency, protects fiduciaries from the risk of multiple liabilities, and ensures the prompt and impartial resolution of benefit disputes.
