United States District Court, N.D. Alabama, Southern Division
For Genetta Brown, individually and as Executrix of the Estate of Enoch Brown, Jr., Plaintiff: Leah O Taylor, Rhonda Pitts Chambers, TAYLOR & TAYLOR, Birmingham, AL.
For Reliance Standard Life Insurance Company, Defendant: Christopher Yeilding, L Conrad Anderson, IV, BALCH & BINGHAM LLP, Birmingham, AL.
R. DAVID PROCTOR, UNITED STATES DISTRICT JUDGE.
This case is before the court on the parties' Cross-Motions for Summary Judgment (Docs. # 22 & # 26), both of which were filed on October 31, 2013. The Motions (Docs. # 22 & # 26) have been fully briefed. (Docs. # 27, # 28, # 33, # 34). For the reasons outlined below, after carefully reviewing the record and briefs and with the benefit of oral argument, Defendant's Motion (Doc. # 22) is due to be granted, while Plaintiff's Motion (Doc. # 26) is due to be denied.
I. Procedural History
This case was originally initiated by Plaintiff Genetta Brown (" Plaintiff" ) on January 3, 2013, in the Circuit Court of Jefferson County, Alabama, Bessemer Division. Plaintiff's Complaint (Doc. # 1 at 13-30) included claims for breach of contract and bad faith. The case was removed to the United States District Court for the Northern District of Alabama upon Defendant Reliance Standard Life Insurance Company's (" Defendant" ) filing of a Notice of Removal (Doc. # 1) on February 6, 2013. Plaintiff challenged Defendant's removal, filing a Motion to Remand (Doc. # 6) -- along with a Motion to Strike Defendant's Affirmative Defenses (Doc. # 7) -- on March 5, 2013. By Order (Doc. # 13) dated April 1, 2013, this court denied the Motions (Docs. # 6 & # 7) and set the case for a status conference. Following that conference, the court permitted the parties to engage in limited discovery on the issue of " whether the Policy at issue is covered by ERISA or is a governmental plan exempt from ERISA coverage," after which the parties were to file dispositive motions on the subject. (Doc. # 14). On October 31, 2013, Defendant filed a Consolidated Motion for Summary Judgment and Brief in Support Thereof Regarding the Applicability of ERISA (Doc. # 22), along with Evidentiary Materials (Doc. # 24). That same day, Plaintiff filed an Amended Initial Brief on the Applicability of ERISA (Doc. #26), which she supplemented with Evidentiary Materials (Doc. # 25). The parties filed their Responses (Docs. # 27 & # 28) on November 14, 2013, and submitted their Replies (Docs. # 33 & # 34) on November 21, 2013, rendering their Cross-Motions (Doc. # 22 & # 26) properly under submission.
During the briefing period, the court also received a Motion for Leave to File Amicus Curiae Brief on the Applicability of ERISA (Doc. # 29) from The Healthcare Authority for Medical West (" Medical West" ), which the court granted over Defendant's Opposition (Doc. # 30) by Order (Doc. # 31) dated November 21, 2013. Thereafter, Medical West filed its Amicus Brief (Doc. # 32), and Defendant filed a Response (Doc. # 36), both of which the court has reviewed and considered in reaching its decision.
Plaintiff Genetta Brown (" Plaintiff" ) brings this suit both individually and as
the executrix of the estate of her late husband, Enoch Brown, Jr. (" Brown" ). In June 2004, Brown began working at Medical West as a supervisor in its Environmental Services Department. (Doc. # 1 at 17). Brown obtained a life insurance policy with Defendant through his employment with Medical West. (Doc. # 25, Ex. M-13, Pennington Dep. at 140-41). In January 2008, Brown was diagnosed with lung cancer. (Doc. # 1 at 18). After Brown's death in February 2011, Plaintiff submitted a claim for death benefits, but it was rejected by Defendant. (Doc. # 1 at 20). Thereafter, Plaintiff brought suit against Defendant, alleging breach of contract and bad faith. (Doc. # 1 at 13-30).
Prior to 2002, Medical West was known as Bessemer Carraway Medical Center (" BCMC" ) and was owned and operated by an Alabama nonprofit corporation of the same name. (Doc. # 25, Ex. K-2). In February 2002, BCMC entered into an Affiliation Agreement with UAB Health System (" UABHS" ), at which point BCMC's name was changed to UAB Medical West. (Doc. # 25, Ex. M-13, Pennington Dep. at 114-16; Doc. # 25, Ex. A-3). UABHS is an Alabama nonprofit corporation that manages hospitals and is comprised of two entities: the Board of Trustees of the University of Alabama (" UA Board" ) and the University of Alabama Health Services Foundation, P.C. (Doc. # 25, Ex. A-2). In December 2005, the UA Board, UABHS, UAB Medical West, and the Western Health Services Foundation (" Foundation" ), an Alabama private nonprofit corporation, entered into a new Affiliation Agreement (Doc. # 25, Ex. D-4), pursuant to which all of UAB Medical West's assets, liabilities, and employees were transferred to a health care authority -- The Healthcare Authority for Medical West, an Affiliate of UAB Health System -- created by the UA Board. ( See generally Doc. # 25, Ex. C-3). The Healthcare Authority for Medical West (" Medical West" ) is controlled by an eleven-member board of directors (six of whom are selected by the UA Board) and is required to pay UABHS twenty-five percent of its net income each year. (Doc. # 25, Ex. C-3; Doc. # 25, Ex. M-13, Pennington Dep. at 125, 128). Like all other health care authorities in the State of Alabama, Medical West was created pursuant to the Health Care Authorities Act of 1982 (the " HCA Act" ), Alabama Code § 22-21-310 et seq. (Doc. # 25, Ex. C-1).
The HCA Act vests counties, municipalities, and educational institutions with the power to create " public corporations whose corporate purpose shall be to acquire, own and operate health care facilities." Ala. Code § 22-21-312. Such corporations are referred to as health care authorities and are vested with numerous powers and quasi-governmental characteristics. Id. § 22-21-318. For instances, health care authorities are exempt from any state, county, or municipal taxes ( id. § 22-21-333), have the power to issue tax-exempt bonds ( id. § 22-21-330), and potentially, have the power of eminent domain ( id. § 22-21-319). Medical West bears all of these hallmarks of a health care authority. (Doc. #25, Ex. C-2 & C-3).
However, a health care authority is distinct in many ways from a quintessential governmental entity. For instance, health care authorities do not have the power to levy taxes (Ala. Code § 22-21-318(d)), they are not subject to Alabama's competitive bid requirements ( id. § 22-21-335), their directors' meetings are not subject to Alabama's
Open Meeting Act ( id. § 22-21-316(c)), and their directors, officers, and employees are not covered by the State's ethics laws ( id. § 22-21-334). Likewise, the debts and obligations of a health care authority are not imputed to the State of Alabama or its political subdivisions. Id. § 22-21-325. And, in this specific instance, Medical West has limited, state-imposed financial reporting requirements ( e.g., it is not required to report its income or expenditures to the state). (Doc. # 25, Ex. M-13, Pennington Dep. at 68-69). Medical West receives no appropriations from the State of Alabama ( id. at 77-78), and Medical West maintains an employee benefits plan that is separate and apart from that applicable to state employees. ( Id. at 37).
After careful review of the parties' briefs and evidentiary submissions, and for the reasons stated below, the court concludes that Defendant's motion should be granted and Plaintiff's denied.
Pursuant to this court's Order (Doc. # 14), the parties engaged in limited discovery on the question of " whether the Policy at issue is covered by ERISA or is a governmental plan exempt from ERISA coverage." (Doc. # 14 at 1). They have since filed dispositive motions (Docs. # 22 & # 26), with Plaintiff arguing that the underlying policy is part of a " governmental plan" (and thus, is exempt from ERISA), and Defendant asserting that it is not (and thus, is subject to ERISA).
Although ERISA casts a wide net, an employee benefit plan can nevertheless evade that broad coverage if it is a statutorily exempt. See 29 U.S.C. § 1003(b). ERISA specifically exempts five categories of employee benefit plans: (1) government plans; (2) church plans; (3) plans established solely for complying with workers' or unemployment compensation or disability insurance laws; (4) plans maintained outside the United States primarily for nonresident aliens; and (5) unfunded excess benefits plans. Id. § 1003(b)(1)-(5). As such, under ERISA, those employee benefit plans that are deemed to be " governmental plans" are exempt from the statute's coverage. Id. § 1003(b)(1). ERISA defines a " governmental plan" as: " A plan established or maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing . . . ." Id. § 1002(32). As the employee benefit plan upon which Plaintiff's suit is based was established by Medical West, the question before this court is whether Medical West is (1) a " political subdivision" or (2) an " agency or instrumentality" for purposes of ERISA's " governmental plan" exemption.
Whether a given entity is a " political subdivision" or " agency or instrumentality" is a question of federal law. Rose v. Long Island R.R. Pension Plan, 828 F.2d 910, 915 (2d Cir. 1987). ERISA fails to define these terms, and the Eleventh Circuit has yet to weigh in on their construction in the context of ERISA's " governmental plan" exception. However, many district courts within the Circuit have grappled with the issue. See, e.g., Williams-Mason v. Reliance Std. Life Ins. Co., (S.D. Ga. June 16, 2006); Germaine v. Unum Life Ins. Co. of Am., (N.D.Ga. Sept. 23, 2004); Dickerson v. Alexander Hamilton Life Ins. Co., 130 F.Supp.2d 1271 (N.D. Ala. 2001); Hutto v. Blue Cross & Blue Shield of Ala., (M.D. Ala. June 9, 1997); Culpepper v. Protective Life Ins. Co.,
938 F.Supp. 794 (M.D. Ala. 1996).
In addition, although the Eleventh Circuit has not addressed this particular question, other courts of appeal have. Those courts have looked elsewhere for guidance in determining the meaning of those terms. For instance, in attempting to define " political subdivision," the Second, Third, and Seventh Circuits have utilized the " NLRB Test,"  which was promulgated by the NLRB and adopted by the Supreme Court in the context of determining what amounts to a " political subdivision" under the National Labor Relations Act. NLRB v. Natural Gas Util. District, 402 U.S. 600, 604-05, 91 S.Ct. 1746, 29 L.Ed.2d 206 (1971). Under the NLRB Test, an entity constitutes a " political subdivision" if it is " either (1) created directly by the state, so as to constitute departments or administrative arms of the government, or (2) administered by individuals who are responsible to public officials or to the general electorate." Id.
Similarly, when attempting to determine whether an entity is a governmental " agency or instrumentality," courts have looked to provisions of the Internal Revenue Code for guidance. See Rose, 828 F.2d at 916; see also Dickerson, 130 F.Supp.2d at 1275; Culpepper, 938 F.Supp. at 797. The Revenue Ruling that accompanies the IRS's " governmental plan" definition -- which is nearly identical to ERISA's governmental plan definition -- ...