By: John Murray and Violet Borowski
Is an ERISA plaintiff’s lack of participant standing a question of subject matter jurisdiction that can be raised at any time or simply a defense to the claim that can be waived if not timely raised? For now, the answer to that question depends upon the circuit in which the claim is being litigated.
In, Leeson v. Transamerica Disability Income Plan, Case No. 10-35380 (9th Cir.), the plaintiff, a former employee of Transamerica, brought a lawsuit against Transamerica’s ERISA-governed disability benefit plan, challenging the termination of his long-term disability benefits. On remand, to the district court following proceedings concerning the applicable standard of review, the plan moved to dismiss the lawsuit for lack of subject matter jurisdiction, arguing for the first time that plaintiff was not a “participant” under ERISA because the plan expressly stated that he would be ineligible for benefits while on unpaid leave of absence. The plan also argued that questions of jurisdiction can be raised at any time and are never waived. The district court granted the plan’s motion to dismiss, and the plaintiff appealed to the Ninth Circuit. The question presented on appeal was whether the challenge to the plaintiff’s status as a participant went to the federal court’s subject matter jurisdiction, or merely to the substantive sufficiency of the plaintiff’s claim.
Overruling several earlier contrary holdings it characterized as “drive-by jurisdictional rulings,” the Ninth Circuit held that participant status is merely an element of an ERISA denial of benefits claim, and not a jurisdictional limitation. The court held that ERISA’s definition of the term “participant” is not expressly labeled as jurisdictional or found in the jurisdiction-granting provision of the statute. The court added that it could see no reason necessitating that participant standing be granted jurisdictional status. In this regard , the court noted that a determination that the plaintiff was not a participant would necessarily doom his claim on the merits anyway. The Ninth Circuit vacated and remanded the case, finding that the district court had erroneously dismissed plaintiff’s case for lack of subject matter jurisdiction. On remand, the appeals court ordered the district court to address the plaintiff’s participant status at the summary judgment stage or at trial because his status relates to the merits. The court added that the plaintiff is not foreclosed from arguing either “the equitable principles of estoppel and waiver to bar [the plan’s] challenge to his eligibility as a plan participant” or that that defendant cannot “rais[e] an entirely new eligibility argument, when it failed to do so in the administrative process.”
This case is noteworthy, because, in joining the Seventh and Eleventh Circuits, the Ninth Circuit fueled a growing trend among the circuits finding that participant status goes only to the merits of an ERISA claim and not to the subject matter jurisdiction of the district court. See Lanfear v. Home Depot, Inc., 536 F.3d 1217, 1221-22 (11th Cir. 2008); Harzewski v. Guidant Corp., 489 F.3d 799, 803-04 (7th Cir. 2007). At the same time, the decision makes even more stark the split in the circuits on this question. At least three circuits continue to hold that participant standing is a jurisdictional matter. See Cobb v. Cent. States, 461 F.3d 632, 634-35 (5th Cir. 2006); Miller v. Rite Aid Corp., 334 F.3d 335, 340-41 (3d Cir. 2003); Ward v. Alternative Health Delivery Systems, Inc., 261 F.3d 624, 626 (6th Cir. 2001). Further, the case is an important reminder that arguments concerning eligibility can be waived, and therefore should be asserted at the earliest practicable time—ideally, even during the administrative process.
One final caveat should be added regarding the Leeson case. Although the court clearly purports to hold that participant status is not a question of subject matter jurisdiction, it is at least arguable that the court might reach a different result in a case in which the absence of participant status was more obvious. The court notes that “[b]y asserting a colorable claim that he is a plan participant, Leeson has satisfied the threshold for establishing federal court subject matter jurisdiction.” The Leeson court’s use of the phrase “colorable claim” could imply an openness to addressing more fundamental questions of participant standing as questions of subject matter jurisdiction.