medical costs, alleging that defendant's rescission of plaintiff's coverage under the policy was unjustified. Such a claim is indistinguishable from the type of common law cause of action found to be preempted in Pilot Life. See 481 U.S. at 53-57 (tortious breach of contract). Count II invokes an Illinois statutory cause of action, 215 ILCS 5/155, and seeks attorney's fees in addition to reimbursement for plaintiff's medical costs. Several decisions of the Northern District of Illinois addressing the issue have unanimously agreed that claims under section 5/155, when brought by a participant or beneficiary in regard to an ERISA employee benefit plan, are preempted by section 502(a)'s remedies. See Milano v. Connecticut General Life Ins. Co., No. 92 C 1606, 1992 U.S. Dist. LEXIS 10061 (N.D. Ill. July 10, 1993); Manuel v. Connecticut General life Ins. Co., No. 90 C 02928, 1991 U.S. Dist. LEXIS 2912 (N.D. Ill. March 6, 1991); Goodhart v. Benefit Trust Life Ins. Co., No. 90 C 5110, 1990 U.S. Dist. LEXIS 16044 (N.D. Ill. Nov. 27, 1990); and Buehler Ltd. v. Home Life Ins. Co., 722 F. Supp. 1554 (N.D. Ill. 1989).
The identity of the party seeking to avail himself of the remedies cannot, however, be ignored. Only if a party fits within the definitions of the parties enumerated for particular remedies under ERISA is the party entitled to invoke these remedies. Giardono v. Jones, 867 F.2d 409, 411-14 (7th Cir. 1989). "ERISA carefully enumerates the parties entitled to relief under § 502." Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 27, 77 L. Ed. 2d 420, 103 S. Ct. 2841 (1983). "The phrasing of § 502 is instructive. Section 502(a) specifies which persons--participants, beneficiaries, fiduciaries, or the Secretary of Labor--may bring actions for particular kinds of relief." Id. at 25. Section 502(a) authorizes an ERISA employee benefit plan participant or beneficiary to bring a cause of action "to recover benefits due under the plan, to enforce the participant's rights under the plan, or to clarify rights to future benefits." Pilot Life, 481 U.S. at 53. Under section 502(a), a "participant or beneficiary may also bring a cause of action for breach of fiduciary duty," and in such a suit "a court in its discretion may allow an award of attorney's fees to either party." Id. Thus, the types of remedies plaintiff seeks to invoke are limited to participants and beneficiaries.
An ERISA participant is "any employee or former employee of an employer, or any member of an employee organization, who is or may be eligible to receive a benefit of any type from a benefit plan." 29 U.S.C. § 1002(7). An employee is "any individual employed by an employer." 29 U.S.C. § 1002(6). These definitions are "elusive" and "oblique" when it comes to determining the scope of ERISA coverage. Meredith v. Time Ins. Co., 980 F.2d 352, 355-56 (5th Cir. 1993); see also Nationwide Mutual Ins. Co. v. Darden, 117 L. Ed. 2d 581, 112 S. Ct. 1344 (1992) ("ERISA's nominal definition of 'employee' . . . is completely circular and explains nothing."). At first blush, they appear to leave open the possibility that plaintiff falls within the definition of employee and thus qualifies as a participant. The Seventh Circuit, however, has precluded such an argument.
The Seventh Circuit in Giardono v. Jones, 867 F.2d 409, 411-12 (7th Cir. 1989), held that the owner of a business cannot possess the dual status of both employer and employee in order to avail himself of ERISA's remedies. In rejecting an argument that a party could assert a section 502 claim "as a plan participant, notwithstanding the fact that he is also an employer," the court in Giardono looked to the "fundamental requirement of ERISA that '. . . the assets of a plan shall never inure to the benefit of an employer'" under 29 U.S.C. § 1103(c)(1). Id. When an employer files suit in his own interest, according to Giardono, he impermissibly "risks running afoul of the requirement that the [assets] of the plan may not inure to the benefit of an employer." Id. at 412. As a result, the owner in Giardono did not possess standing to assert ERISA claims under section 502.
Id. at 411-12; see also Kwatcher v. Massachusetts Service Employees Pension Fund, 879 F.2d 957, 959-63 (1st Cir. 1989) (holding "'employee' and 'employer' are plainly meant to be separate animals; . . . the twain shall never meet."); Fugarino v. Hartford Life & Accident Ins. Co., 969 F.2d 178, 186 (6th Cir. 1992), cert. denied, 122 L. Ed. 2d 774, 113 S. Ct. 1401 (1993); and Peckham v. Board of Trustees of Int'l Bhd. of Painters and Allied Trades Union, 653 F.2d 424, 427-28 (10th Cir. 1981).
While the above cases holding that an owner does not qualify as an employee and, therefore, participant capable of asserting section 502(a) remedies address sole proprietors, the same reasoning also applies to partners. Although there is little direct authority on the issue, the Seventh Circuit has in one case broadly stated that "ERISA excludes partners from its protections." Bane v. Ferguson, 890 F.2d 11, 12 (7th Cir. 1989). In doing so, Baner cited 29 C.F.R. § 2510.3-3(c)(2) (1993), which defines "employees" for purposes of determining whether an employee welfare benefit plan has been created. Id. In defining employees for that particular purpose, section 2510.3-3(c)(2) states that a "partner in a partnership and his or her spouse shall not be deemed to be an employee with respect to the partnership." Further, it has been stated that because a partner has more control and input in management decisions, Congress did not intend to extend the benefit plan protections it provided non-partner employees in ERISA to partners. Grantham v. Beatrice Co., 776 F. Supp. 391, 398-99 (N.D. Ill. 1991) (citing Robertson v. Alexander Grant & Co., 798 F.2d 868, 870-71 (5th Cir. 1986) (holding a plan which contains only partners is not covered by ERISA), cert. denied, 479 U.S. 1089, 94 L. Ed. 2d 152, 107 S. Ct. 1296 (1987)).
In addition, while it is equally clear that the inclusion of a single employee under an insurance policy may bring that policy within ERISA's protection in regard to the employee, see 29 C.F.R. § 2510.3-3(b) (1993), such a consideration does not conflict with this court's conclusion that plaintiff is not an employee entitled to invoke ERISA's remedies. The same insurance policy which may establish the existence of an ERISA plan with regard to an employee may simply be an insurance policy with regard to an employer. See Fugarino, 969 F.2d at 185-86 (holding employer may not invoke section 502(a) remedies in dispute over group health insurance policy and also holding ERISA applies in regard to employees covered under the same policy).
Finally, one court confronted with a nearly identical situation has held that while an employer cannot be a participant under an ERISA plan, he may be a beneficiary. In Harper v. American Chambers Life Ins. Co., 898 F.2d 1432, 1433-35 (9th Cir. 1990), the Ninth Circuit held that where two partners, their spouses, and their single employee were covered under a medical insurance policy, if the policy constituted an ERISA plan, the partner could invoke section 502(a) remedies only if he qualified as an ERISA participant or beneficiary. Id. Looking to the "plain terms" of the statute, the Harper court decided that a partner was not an employee and thus could not be a participant for section 502(a) purposes. Id. at 1434. The court also concluded, however, that a partner could be a beneficiary and assert section 502(a) claims on that basis. Id.
While the first two Harper holdings support this court's reasoning in the present case, the last, if followed, would apparently conflict with the reasoning of Giardono, which is binding authority upon this court. Under Giardono, allowing a business owner to qualify as a participant would violate the requirement that ERISA assets not inure to the benefit of an employer. There is no reason that allowing a business owner, in negotiating the terms of the plan, to designate himself as a beneficiary would not also violate the prohibition found in Giardono. Further, the plain meaning analysis relied upon in Harper strains credulity. The word "beneficiary," as it is commonly understood, applies to family members and others whom employees select to benefit from their end of the employer-employee bargain. It is hard to imagine Congress intended an employer to be able to designate himself as his employee's chosen beneficiary. See 29 U.S.C. § 1002(1) (referring to "participants and their beneficiaries" (emphasis added)).
Not surprisingly, the Harper interpretation of "beneficiary" has previously been expressly rejected by a district court bound by appellate authority similar to Giardono. In Kelly v. Blue Cross & Blue Shield, 814 F. Supp. 220, 229 (D.R.I. 1993), the district court held that an owner could not acquire standing to invoke section 502(a) remedies simply by asserting that she was a beneficiary. The Kelly court reasoned that under Harper's rationale every employer would be able to create section 502(a) standing simply by designating himself as a beneficiary, therefore "undermining ERISA's purpose of insuring that benefits do not inure to employers." 814 F. Supp. at 229 n.14 (citing Kwatcher, 879 F.2d at 963).
Thus, in the present case, plaintiff does not qualify as either a participant or beneficiary able to invoke section 502(a)'s remedies. As a result, his state law claims are not preempted. To hold otherwise would be "to strip persons who fail to qualify as participants or beneficiaries of the right to sue for recovery arising out of a clearly established contractual relationship." Kelly, 814 F. Supp. at 230-31 (listing supporting cases). "Put another way, in order for plaintiff's state law claims to be completely preempted . . . he must be entitled to bring an ERISA claim; that is he must have been a 'participant' or 'beneficiary.'" Dodd v. John Hancock Mutual Life Ins., 688 F. Supp. 564, 568 (E.D. Cal. 1988); cf. Pilot Life, 481 U.S. at 52 (agreeing Congress intended the section 502(a) civil enforcement mechanisms to "be the exclusive vehicle for actions by ERISA plan participants and beneficiaries asserting improper processing of a claim for benefits." (emphasis added)).
Because plaintiff's state law claims are not preempted by ERISA, this court finds no grounds for subject matter jurisdiction. Defendant's motion to dismiss is therefore denied, and pursuant to 28 U.S.C. § 1447(c) the case is remanded to the Circuit Court of Stephenson County.
PHILIP G. REINHARD, JUDGE
UNITED STATES DISTRICT COURT
DATED: October 18, 1993