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United States District Court, Southern District of New York

May 15, 2003


The opinion of the court was delivered by: Lewis A. Kaplan, District Judge.

ORDER (Corrected)
Plaintiff seeks reconsideration of so much of the Court's April 24, 2003 order as declined to vacate so much of the judgment as dismissed the second claim for relief on the ground that the Court overlooked controlling matters.

The second claim for relief seeks to recover benefits under an ERISA plan, benefits that the plan administrator denied on the ground that plaintiff was not an "employee." The April 24, 2003 order declined to reinstate that claim on the ground that the complaint did not allege that the plan's determination was arbitrary and capricious. Plaintiff now contends that this was error because the complaint alleges that plaintiff was an employee, that the plan knew it, and that the determination of employee status is a question of law which is reviewed de novo rather than under an arbitrary and capricious standard.

Plaintiff misstates the cases it cites for the proposition that employee status is a question of law subject to de novo review.*fn1 The Weil case stands only for the proposition that courts will review de novo plan decisions that turn on a question of law, in that case the meaning of Section 1 411 of the Internal Revenue Code. 913 F.2d at 1049. It did not deal with employee status at all. And while Gustafson at least addresses the issue, it held only that the plan erred as a matter of law in determining employee status by focusing "almost exclusively" on the label used by the parties rather than balancing the factors set forth in Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 323 (1992). 171 F. Supp.2d at 320-21. Significantly, however, it did not go on to determine whether the plaintiff actually was an "employee," thus perhaps implying that the balancing of the Darden factors was for the plan, at least in the first instance. Rather, it upheld the plan's determination on other grounds. Thus, the error of law identified in Gustafson was the application of an erroneous legal standard in the determination of employment status, not an erroneous determination vel non.

Although plaintiff's papers, even on the motion for reconsideration, do not so disclose, there in fact is a circuit conflict on the scope of review of plan determinations of employee status. Compare Hockett v. Sun Co., 109 F.3d 1515, 1521-22 (10th Cir. 1997) (plan determination of employee status is question of fact reviewable for clear error), and Roth v. American Hospital Supply Corp., 965 F.2d 862, 865 (10th Cir. 1992) (same), with Holt v. Winpisinger, 811 F.2d 1532, 1536 (D.C. Cir. 1987) (plan determination of employee status is question of law reviewable de novo). The Second Circuit has yet to decide the question. The closest it has come is to hold, in the Fair Labor Standards Act context, that a district court's determinations with respect to factors relevant to distinguishing between employees and independent contractors are findings of fact reviewable only for clear error while the ultimate conclusion to be drawn from those facts is a question of law that is reviewable de novo. Brock v. Superior Care, Inc., 840 F.2d 1054, 1058-59 (2d Cir. 1988). Brock thus suggests that a plan's determination of the facts pertinent to reaching an ultimate conclusion on employee status will be disturbed only if those factual determinations themselves are arbitrary and capricious.*fn2 In consequence, a legally sufficient complaint challenging a plan's denial of benefits on the ground that the applicant was not an employee must allege at least (1) that there was an application for benefits, (2) the nature of the record before the plan decision maker, (3) the plan's determination and any basis given for it, and (4) that the determination was arbitrary and capricious in light of the information before the decision maker.

The amended complaint in this case alleges that the plan administrator excluded plaintiff as a participant on the ground that he was not an employee. (Am Cpt ¶¶ 43-44, 50) It further alleges that he appealed that determination unsuccessfully pursuant to the plan's claims review procedure. (Id. ¶¶ 51-52) But it neither sets forth nor attaches the record that was before the plan administrator and the appellate decision maker nor alleges that the decisions were arbitrary and capricious or affected by any error of law. It does not allege the terms of or attach the plan. It alleges simply that plaintiff actually was an employee (id. ¶ 45) and should have received benefits.

In these circumstances, the Court is not persuaded that it overlooked anything, let alone anything that plaintiff brought to its attention on the prior motion. See S.D.N.Y. CIV. R. 6.3. The second claim for relief does not state a claim upon which relief may be granted.

Nor is there any merit to plaintiff's tendentious argument that the Court should not have considered the legal sufficiency of the second claim for relief in deciding whether to grant relief under Rule 60(b). It is difficult to conceive of a legitimate purpose that would be served by vacating a judgment as to a claim that then would have to be dismissed for legal insufficiency. Regardless of whether a showing of merit is necessary in other circumstances in which relief is sought from an order or judgment on the ground of excusable neglect, it would be the height of foolishness to ignore a patent lack of merit in this circumstance.

The motion for reconsideration is denied. The Court expresses no opinion as to the sufficiency of any subsequent amended pleading that plaintiff, should he have the right or obtain leave to amend, might file. The Court notes also that this case now has been pending for over eight months, a time long enough to have litigated the case fully on the merits, during which virtually nothing of substance has been accomplished. This lengthy delay has been largely a consequence of oversights and unproductive motion practice by the plaintiff, who should have every interest in moving forward. It is time to get to the merits.


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