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Ed Miniat Inc. v. Globe Life Insurance Group Inc.

decided: November 5, 1986.

ED MINIAT, INC., SOUTH CHICAGO PACKING COMPANY, RONALD M. MINIAT AND EDMUND M. MINIAT, JR., PLAINTIFFS-APPELLANTS,
v.
GLOBE LIFE INSURANCE GROUP, INC. AND COMBINED INTERNATIONAL CORPORATION, DEFENDANTS-APPELLEES



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 84 C 9781--George N. Leighton, Judge.

Author: Cudahy

Before BAUER, Chief Judge, CUDAHY and RIPPLE, Circuit Judges.

CUDAHY, Circuit Judge

The plaintiffs were participating employers in a Retirement Life Reserve ("RLR") insurance policy issued by the defendants. The plaintiffs allege that the defendants violated their fiduciary duties under ERISA and also make various state claims. The district court dismissed the complaint on the ground that the plan was not established and maintained by an employer or an employee organization and thus was not an employee welfare benefit plan covered by ERISA. We reverse.

I.

The well-pleaded facts in the complaint, which must be accepted as true when considering a motion to dismiss, see LaSalle National Bank v. County of DuPage, 777 F.2d 377 (7th Cir. 1985), are as follows. The plaintiffs are Ed Miniat, Inc., an Illinois corporation ("Miniat"); South Chicago Packing Company, the successor in interest to Miniat; and Ronald and Edmund Miniat, Jr., officers and shareholders of Miniat and South Chicago Packing Company (collectively the "Miniats"). Defendants are Globe Life Insurance Company ("Globe"), which issued the RLR policy to Miniat; Ryan Insurance Group, which owns Globe's stock; and Combined International Corporation, which in turn owns Ryan's stock.

In late 1980 Miniat adopted an employee benefit plan consisting of group life insurance (the "Miniat Plan" or the "Plan").*fn1 The Miniat Plan provided for the acquisition of life insurance for eligible employees that would provide a fully paid policy upon the employee's retirement. The funding provision of the plan provided:

The benefits provided under the Plan are to be funded in their entirety by insurance underwritten by the Globe Life Insurance Company, Executive Life Insurance Company, Guardian Life Insurance Company and Provident Life Insurance Company or any other carrier the Plan Administrator deems acceptable. All of the provisions contained in the policies representing any insurance companies [sic] liabilities are considered part of this Plan. Benefits not payable under such policies shall not otherwise be payable under this Plan.

Plaintiffs' Appendix (hereafter "App.") at 47.

The Miniat Plan was actually funded through Miniat's participation, effective October 1, 1980, in a RLR trust (established to hold premiums) sponsored by Globe.*fn2 Amended Complaint P18. Miniat paid premiums which were accumulated in the RLR trust and which were later to be used to purchase the life insurance coverage provided for the Miniat Plan.

The amended complaint alleges that the RLR policy included clauses that gave Globe the "apparent unilateral right to reduce the rate of return that Globe was to pay on account to Miniat to a scheduled minimum (4% per annum) and to increase significantly the annual premium rates to a scheduled maximum." Amended Complaint P21. Plaintiffs allege that about July 1983 Globe "unilaterally and without justification announced a withdrawal from the RLR insurance business and an abandonment of existing policy holders, by reducing the rate of return paid on account from 10% to 7% to 4% per annum by November 1, 1983 and increasing premium rates to the maximum allowed by the policy." Amended Complaint P24. Miniat then terminated its participation in the RLR Trust. Globe allegedly deducted "front end load" charges when returning the company's accumulated contributions, thus retaining as "overhead more than half of the premiums paid by plaintiffs to fund the plan without having ever issued any insurance under the plan."*fn3 Amended Complaint P35. Plaintiffs allege that Globe's actions were without economic justification and breached Globe's fiduciary duties and obligations under ERISA. Amended Complaint PP34, 36, 37, 49, 50. The complaint also contains state law claims respecting unlawful discrimination in violation of the Illinois Insurance Code, promissory estoppel, breach of contract and unjust enrichment.

The district court granted defendants' motion to dismiss. It found "no evidence of the existence of a plan separate and apart from the RLR trust," District Court Memorandum at 9, and that the RLR trust did not fall within ERISA because the plan was not established and maintained by an employer or an employee organization. District Court Memorandum at 10. The court thus dismissed the allegedly federal claims for lack of subject matter jurisdiction under ERISA and dismissed the state claims for lack of pendent jurisdiction.

On appeal plaintiffs contend that the pleadings adequately allege that the Miniat Plan was separate from the RLR trust and was established by an employer. Defendants argue that the district court's analysis and disposition were correct and further argue that the ...


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