The opinion of the court was delivered by: KNAPP
The Sixty-Five Security Plan ("Security Plan") is a program, established pursuant to the Labor Management Relations ("Taft-Hartley") Act, 29 U.S.C. § 186,
to provide health and welfare benefits to members of District 65, United Automotive Workers, AFL-CIO.
In 1975, Security Plan entered into an agreement with Blue Cross and Blue Shield of Greater New York ("Blue Cross"). The precise nature of this agreement is disputed by the parties: Blue Cross contends that it is embodied in the written contracts which the parties signed every year until 1980; while Security Plan insists that Blue Cross assured it that these written contracts were formalities to which no attention would be paid, and relies instead upon the oral and written agreements ("the oral agreements")
which preceded the signing of the first contract.
Under either the written or the oral agreements, Blue Cross was to assume responsibility for various aspects of the health care program previously administered by Security Plan. Blue Cross's duties included: reviewing claims submitted to it and, where it deemed appropriate, granting them; reviewing and judging the propriety of the length of participants' hospital stays; negotiating reimbursement rates with participating hospitals; and instituting and maintaining administrative systems, including computer programs, for the administration of the program. Security Plan agreed to pay Blue Cross a percentage of all claims granted by it. Security Plan reserved the right to review Blue Cross's performance and to hear appeals on any claims denied by Blue Cross. Security Plan paid sums of money to Blue Cross on a regular basis, which Blue Cross was to apply to the payment of claims and to its own fees, returning the rest.
On December 15, 1980, Blue Cross and Security Plan simultaneously instituted actions against each other. Blue Cross's complaint, filed in the Supreme Court of the State of New York, alleged that Security Plan had breached the written contracts by failing to pay to Blue Cross the fees set forth therein. Security Plan's action was commenced in this Court under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1461, which provides for federal jurisdiction of any action instituted by a participant, beneficiary or fiduciary of an employee benefit plan, to redress or enjoin any violation of that statute's substantive provisions. Security Plan asserted in its complaint that Blue Cross was a fiduciary, as defined by ERISA, with respect to its relationship to the health care plan, and that it had violated both its fiduciary duties under that statute and the oral agreements between the parties. In addition, Security Plan asserted that Blue Cross had made various fraudulent representations as to its capabilities and future actions on Security Plan's behalf. Blue Cross counterclaimed with essentially the same allegations raised by it in its State Court complaint; Security Plan similarly counterclaimed in the State action.
Upon application by Security Plan by notice of removal dated January 14, 1981, Blue Cross's action was removed to this court. By our Order of May 14, 1981 the two cases were consolidated.
Blue Cross has now moved for summary judgment on both its claim and counterclaim, and for dismissal of Security Plan's claims and counterclaims.
Alternatively, Blue Cross has moved to strike Security Plan's demand for a trial by jury on its ERISA claims; and to strike a claim by Security Plan that Blue Cross's "rate of retention," or fee on claims paid, constituted an impermissible inherent conflict of interest under ERISA.
SUBJECT MATTER JURISDICTION
1. Security Plan's Status as "Participant"
Initially, we note that the recent opinion by the Court of Appeals in Pressroom Unions - Printers League Income Security Fund v. Continental Assurance Co. (2d Cir. 1983) 700 F.2d 889, decided after we heard oral argument on the instant motion, has altered our view of Security Plan's complaint. In Pressroom Unions, the Court of Appeals held that ERISA provided it with no subject-matter jurisdiction over the complaint of a pension fund. The parties agree that the complaint of Security Plan is in no way distinguishable from that of the pension plan in Pressroom Unions, and we therefore find that we have no jurisdiction over it. The complaint of Security Plan is accordingly dismissed.
We find, however, that this action is properly before us on the complaint of David Livingston, Director of Security Plan and a beneficiary of and participant in it. Section 1132(e)(1) provides in pertinent part that "the district courts of the United States shall have exclusive jurisdiction of civil actions under this subchapter brought by . . . a participant, beneficiary, or fiduciary." Although Livingston asserts no individual cause of action, this is perfectly consistent with ERISA. Section 1132(a) sets forth, in the alternative, several forms of relief which may be sought by a beneficiary or participant, among them that a fiduciary in breach of its obligations
be [held] personally liable to make good to [a] plan any losses to the plan resulting from each . . . breach, and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary.
Section 1109(a) (emphasis supplied).
ERISA thus provides in no uncertain terms that an individual beneficiary of or participant in a plan need not allege any direct personal damage, or seek to enforce personal rights, in order to invoke "ERISA jurisdication" under § 1132(a). Contrary to Blue Cross's contention, this is not belied by Pressroom Unions, supra. Although the Court there denied a motion to substitute certain participants in a pension fund as plaintiffs in the stead of the fund, it did so on the following rationale:
"[I]f jurisdiction is lacking at the commencement of [a] suit, it cannot be aided by the intervention of a [plaintiff] with a sufficient claim." [Citations omitted.] . . . In this case the Fund seeks not to remedy inadequate jurisdiction allegations, but rather to substitute a new action over which there is jurisdiction for one where it did not exist. . . . Moreover, the Rheingold opinion [Rheingold Breweries Pension Plan v. Pepsico, Inc. (S.D.N.Y. 1981) 2 Empl. Ben. Case. 2406], filed before the Fund's suit was commenced, should have put the Fund in this case on notice that it would have difficulty in pressing its claims under its own name. . . . If the Fund was aware of [the Rheingold ] ruling, it has advanced no reason for its original failure to name alternative plaintiffs in the event that [it was not allowed] to sue in its own name.
The instant action, by contrast, has from its inception included such an "alternative plaintiff" in the person of Livingston. Although the Court of Appeals did not address the issue directly (not being required to do so), it seems to us that the Court would not have given the quoted reason for declining to permit the addition of a new plaintiff unless it believed that such plaintiff would otherwise have been entitled to press a claim on behalf of the Fund.
2. Blue Cross's Status as "Fiduciary"
We turn now to a second, more complex, challenge to our subject-matter jurisdiction. Blue Cross contends that it was not a "fiduciary" of the health care plan as that term is defined by ERISA and had no fiduciary duties under that statute; hence, it contends, any claim on Security Plan's behalf cannot be based upon an alleged violation of any provision of ERISA, but ...