Metro Life Ins Co v. Price

Opinions of the United

2007 Decisions States Court of Appeals

for the Third Circuit

9-4-2007

Metro Life Ins Co v. Price

Precedential or Non-Precedential: Precedential

Docket No. 05-2927

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

No. 05-2927

____________

METROPOLITAN LIFE INSURANCE COMPANY,

Appellant,

v.

SANDRA PRICE; SHANNON PRICE; ANDRE PRICE.

___________

On Appeal from the United States District Court

for the District of New Jersey

(No. 04-cv-05044)

District Judge: Honorable Faith S. Hochberg

Submitted Under Third Circuit LAR 34.1(a)

Thursday, January 25, 2007

Before: SCIRICA, Chief Judge, FUENTES and CHAGARES,

Circuit Judges.

____________

(Filed September 4, 2007)

Randi F. Knepper, Esq.

McElroy, Deutsch, Mulvaney & Carpenter, LLP

1300 Mount Kemble Ave.

P.O. Box 2075

Morristown, NJ 07962-2075

Counsel for Appellant

_________

OPINION OF THE COURT

____________

CHAGARES, Circuit Judge.

Appellant Metropolitan Life Insurance Company

(“MetLife”) is the claims fiduciary of an “employee welfare benefit

plan.” See Employee Retirement Income Security Act of 1974

(“ERISA”) § 3(1), 29 U.S.C. § 1002(1). After one of the plan’s

participants died, MetLife received competing claims to the

decedent’s life-insurance benefits. It responded by filing this

interpleader action against the competing claimants. The District

Court raised the issue of subject matter jurisdiction sua sponte and

dismissed. In our view, however, the District Court had federal

question jurisdiction. Accordingly, we will vacate and remand.

I.

The New Jersey Transit Corporation sponsors a Basic Life

Plan for the benefit of its employees. The plan is funded through

a group life insurance policy issued by MetLife to New Jersey

Transit. MetLife is the plan’s “claims fiduciary.”

Paul Price was a participant in the plan. He was a bus driver

with New Jersey Transit and had enrolled for $20,000 in life

insurance benefits. In May 2002, Paul passed away. He was

survived by his widow, Sandra Price, and his children from a

previous marriage, Shannon and Andre Price.

After Paul’s death, his widow and his children submitted

competing claims for the life insurance benefits. MetLife

investigated the matter and discovered that, in or around February

2000, Paul designated his widow as the primary beneficiary.

MetLife then informed the children’s attorney that it was denying

their claims. MetLife explained that it had a fiduciary duty “to

administer claims in accordance with ERISA and the terms of the

2

plan.” Appendix (“App.”) 62-63. As such, it had to “pay the

proceeds to the named beneficiary only.”

The children’s attorney requested a review of the claim.

Paul’s first marriage had ended in 1995 with a final judgment of

divorce in New Jersey Superior Court. Paragraph 11 of that

judgment specifically referenced Paul’s life insurance:

The Husband currently has life insurance upon his

life. The Husband shall amend these policies in

order to name the children of the marriage as

irrevocable beneficiaries until such time as Andre

Price, the son of the marriage[,] is emancipated. The

Husband shall name the Wife as trustee.

App. 69. Since Andre remained unemancipated at the time of

Paul’s death, the children claimed they were the rightful

beneficiaries under the divorce judgment’s plain terms.

This left MetLife in a quandary. Under ERISA, it had a

duty to administer claims “in accordance with the documents and

instruments governing the plan.” 29 U.S.C. § 1104(a)(1)(D).

These documents instructed MetLife to pay the benefits to Paul’s

designated beneficiary—his widow. Under the New Jersey divorce

judgment, however, the children were to be designated “irrevocable

beneficiaries.”

Normally, ERISA preempts any state law that “relate[s] to”

an employee benefit plan. 29 U.S.C. § 1144(a); Egelhoff v.

Egelhoff, 532 U.S. 141, 147-48 (2001). However, ERISA (as

amended by the Retirement Equity Act of 1984) contains an

exception from this general rule for “qualified domestic relations

orders” (“QDROs”). 29 U.S.C. §§ 1144(b)(7), 1056(d)(3)(B)-(E);

see Boggs v. Boggs, 520 U.S. 833, 846-47 (1997). A QDRO

“assigns to an alternate payee the right to . . . receive all or a

portion of the benefits payable with respect to a participant under

a plan.” 29 U.S.C. § 1056(d)(3)(B)(i).1

1

A domestic relations order is a QDRO if it meets the

requirements of 29 U.S.C. §§ 1056(d)(3)(C) & (D). Under §

3

MetLife informed the competing claimants that it could not

tell “whether a court would find that th[e] divorce decree is a

QDRO.” App. 73. It noted that if the New Jersey judgment is a

QDRO, then in all likelihood the children should get the $20,000.

It further noted that if the judgment is not a QDRO, then Price’s

widow is entitled to the money.2 MetLife stated that if the

1056(d)(3)(C), the domestic relations order must “clearly specif[y]”

the following:

(i) the name and the last known mailing address (if

any) of the participant and the name and mailing

address of each alternate payee,

(ii) the amount or percentage of the participant’s

benefits to be paid by the plan to each such alternate

payee, or the manner in which such amount or

percentage is to be determined,

(iii) the number of payments or period to which such

order applies, and

(iv) each plan to which such order applies.

§ 1056(d)(3)(C). And under § 1056(d)(3)(D), a domestic relations

order will be considered a QDRO “only if” it:

(i) does not require a plan to provide any type or

form of benefit, or any option, not otherwise

provided under the plan,

(ii) does not require the plan to provide increased

benefits (determined on the basis of actuarial value),

and

(iii) does not require the payment of benefits to an

alternate payee which are required to be paid to

another alternate payee under another order

previously determined to be a qualified domestic

relations order.

§ 1056(d)(3)(D).

2

Every Court of Appeals to address the question has held

that “the § 1144(b)(7) exception to ERISA preemption applies to

4

claimants did not resolve the matter amicably, it would bring suit.

Price’s widow and the children negotiated, but they failed to reach

an agreement. The children’s attorney then asked MetLife to

“[k]indly initiate an interpleader action.” App. 75.

MetLife obliged, bringing this suit in the United States

District Court for the District of New Jersey. On its own motion,

the District Court raised the issue of subject matter jurisdiction and

dismissed. This appeal followed. We review de novo the District

Court’s dismissal for lack of subject matter jurisdiction. IFC

Interconsult, AG v. Safeguard Int’l Partners, LLC, 438 F.3d 298,

309 (3d Cir. 2006).

II.

The equitable remedy of interpleader allows “a person

holding property to join in a single suit two or more persons

asserting claims to that property.” NYLife Distrib., Inc. v.

Adherence Group, Inc., 72 F.3d 371, 372 n.1 (3d Cir. 1995). The

plaintiff in an interpleader action is a stakeholder that admits it is

liable to one of the claimants, but fears the prospect of multiple

liability. Interpleader allows the stakeholder to file suit, deposit the

property with the court, and withdraw from the proceedings. The

competing claimants are left to litigate between themselves. See

Zechariah Chaffee, Jr., The Federal Interpleader Act of 1936: I, 45

Yale L.J. 963, 963 (1936). The result is a win-win situation. The

stakeholder avoids multiple liability. The claimants settle their

dispute in a single proceeding, without having to sue the

stakeholder first and then face “the difficulties of finding assets and

levying execution.” Id. at 964.

There are two methods for bringing an interpleader in

all QDROs, whether they involve either pension or welfare plans.”

Metro. Life Ins. Co. v. Bigelow, 283 F.3d 436, 440 n.3 (2d Cir.

2002); Metro. Life Ins. Co. v. Pettit, 164 F.3d 857, 863 n.5 (4th

Cir. 1998); Metro. Life Ins. Co. v. Marsh, 119 F.3d 415, 421 (6th

Cir. 1997); Metro. Life Ins. Co. v. Wheaton, 42 F.3d 1080,

1083-84 (7th Cir. 1994); Carland v. Metro. Life Ins. Co., 935 F.2d

1114, 1119-20 (10th Cir. 1991).

5

federal court. The first is the interpleader statute, 28 U.S.C. §

1335. District Courts have subject matter jurisdiction under this

provision if there is “minimal diversity” between two or more

adverse claimants, and if the amount in controversy is $500 or

more. See State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523,

530-31 (1967). The second is Federal Rule of Civil Procedure 22.

Unlike its statutory counterpart, rule interpleader is no more than

a procedural device; the plaintiff must plead and prove an

independent basis for subject matter jurisdiction. See NYLife, 72

F.3d at 372 n.1; Commercial Union Ins. Co. v. United States, 999

F.2d 581, 584 (D.C. Cir. 1993).

In this case, MetLife does not rely on the interpleader

statute, nor could it, as the adverse claimants are all New Jerseyans.

Rather, it has styled its lawsuit as a rule interpleader action.

MetLife argues that jurisdiction exists under the federal question

statute, 28 U.S.C. § 1331, and ERISA’s jurisdictional provision, 29

U.S.C. § 1132(e).

A federal question interpleader is a rarity. See 7 Charles

Alan Wright et al., Federal Practice & Procedure § 1710 (3d ed.

2001); see also Donald L. Doernberg, What’s Wrong with this

Picture?: Rule Interpleader, the Anti-Injunction Act, In Personam

Jurisdiction, and M.C. Escher, 67 U. Colo. L. Rev. 551, 565 n.56

(1996) (“The dearth of reported cases involving interpleader and

federal question jurisdiction implies that although such cases can

arise, they will be a small proportion of all federal interpleader

actions.”). Statutory “arising under” jurisdiction requires that a

federal question appear on the face of the plaintiff’s well-pleaded

complaint. See Louisville & Nashville R.R. v. Mottley, 211 U.S.

149, 152 (1908). This requirement poses a problem for an

interpleader plaintiff, as all the complaint seeks is an order

releasing and discharging the plaintiff from liability. It is difficult

to characterize such a request “as asserting either federal or state

rights.” Morongo Band of Mission Indians v. Cal. State Bd. of

Equalization, 858 F.2d 1376, 1383 (9th Cir. 1988) (quoting Banco

de Ponce v. Hinsdale Supermarket Corp., 663 F.Supp. 813, 816

(E.D.N.Y. 1987)). Thus, at least at first blush, it is hard to see how

a request for interpleader could raise a federal question.

6

But only at first blush. Some interpleader actions do raise

federal questions. Indeed, our sister courts of appeals have

recognized that an interpleader “arises under” federal law when

brought by an ERISA fiduciary against competing claimants to plan

benefits. See, e.g., Metro. Life Ins. Co. v. Bigelow, 283 F.3d 436,

439-40 (2d Cir. 2002); Aetna Life Ins. Co. v. Bayona, 223 F.3d

1030, 1033-34 (9th Cir. 2000); Metro. Life Ins. Co. v. Marsh, 119

F.3d 415, 418 (6th Cir. 1997).

We agree with these courts. Federal question jurisdiction

exists when the plaintiff’s well-pleaded complaint establishes that

“federal law creates the cause of action.” Franchise Tax Bd. v.

Constr. Laborers Vacation Trust, 463 U.S. 1, 27-28 (1983).3

MetLife brings this suit under section 502(a)(3) of ERISA, 29

U.S.C. § 1132(a)(3). That provision creates a cause of action for

fiduciaries “to obtain . . . appropriate equitable relief . . . to enforce

any provisions of this subchapter or the terms of the plan.” 29

U.S.C. § 1132(a)(3)(B)(ii). As courts have noted, “[t]he

interconnection between the basis of the District Court’s

jurisdiction—ERISA—and the elements of [an] ERISA claim[]

makes it easy to confuse the question of the court’s subject matter

3

This so-called “creation test” is “[t]he most familiar

definition of the statutory ‘arising under’ limitation.” Franchise

Tax, 463 U.S. at 8-9; see American Well Works Co. v. Layne &

Bowler Co., 241 U.S. 257, 260 (1916) (Holmes, J.) (“A suit arises

under the law that creates the cause of action.”). However, as

Judge Friendly famously pointed out, “[i]t has come to be realized

that Mr. Justice Holmes’ formula is more useful for inclusion than

for the exclusion for which it was intended.” T.B. Harms Co. v.

Eliscu, 339 F.2d 823, 827 (2d Cir. 1964). Jurisdiction also exists

where “some substantial, disputed question of federal law is a

necessary element of . . . [a] well-pleaded state claim[].” Franchise

Tax, 463 U.S. at 13. And if federal law completely preempts a

state claim, “the result is to convert complaints purportedly based

on the preempted state law into complaints stating federal claims

from their inception.” In re Cmty. Bank of N. Va., 418 F.3d 277,

290 (3d Cir. 2005) (quotation marks omitted); see, e.g., Metro. Life

Ins. Co. v. Taylor, 481 U.S. 58, 66-67 (1987). For purposes of this

case, Justice Holmes’ rule of inclusion is sufficient.

7

jurisdiction with the question of the plaintiff’s ability to state a

claim.” Carlson v. Principal Fin. Group, 320 F.3d 301, 307 (2d

Cir. 2003). The test we must apply is a familiar one. For

jurisdictional purposes, the issue is not whether MetLife will

ultimately be successful in sustaining its cause of action under

section 502(a)(3). See Bell v. Hood, 327 U.S. 678, 681-82 (1946).

Rather, “[d]ismissal for lack of subject-matter jurisdiction because

of the inadequacy of the federal claim is proper only when the

claim is ‘so insubstantial, implausible, foreclosed by prior decisions

of [the Supreme] Court, or otherwise completely devoid of merit as

not to involve a federal controversy.” Steel Co. v. Citizens for a

Better Env’t, 523 U.S. 83, 89 (1998) (quoting Oneida Indian

Nation of N.Y. v. County of Oneida, 414 U.S. 661, 666 (1974));

see also Primax Recoveries, Inc. v. Gunter, 433 F.3d 515, 519 (6th

Cir. 2006) (“An ERISA claim can be non-frivolous (or sufficiently

substantial) even if it is unsuccessful and possibly verging on the

foolhardy in light of prior precedent barring the relief sought.”)

(quotation marks omitted); Cement Masons Health & Welfare

Trust Fund for N. Cal. v. Stone, 197 F.3d 1003, 1008 (9th Cir.

1999) (“[D]ismissal of an ERISA claim under § 1132(a)(3) is

properly a dismissal on the merits rather than a dismissal for want

of subject matter jurisdiction.”).

Here, MetLife brings suit as a fiduciary, and it adequately

invokes the District Court’s subject matter jurisdiction by seeking

“appropriate equitable relief . . . to enforce any provisions of this

subchapter or the terms of the plan.” ERISA § 502(a)(3), 29

U.S.C. § 1132(a)(3). Specifically, MetLife seeks interpleader,

which is a form of “equitable relief.” See U.S. Fire Ins. Co. v.

Asbestospray, Inc., 182 F.3d 201, 208 (3d Cir. 1999). Through its

interpleader action, MetLife seeks to enforce the provisions of

ERISA and the plan by ensuring that funds are disbursed to the

proper beneficiary. See Aetna Life, 223 F.3d at 1034. MetLife

thus presents a substantial, non-frivolous claim for relief under

section 502(a)(3). This is enough to confer subject matter

jurisdiction under ERISA. See Bell, 327 U.S. at 681-82.4

4

Even apart from MetLife’s cause of action as a fiduciary,

there may be an additional basis for subject matter jurisdiction in

this case. A rule interpleader is quite similar to a declaratory

8

judgment action. Both the declaratory judgment statute and Rule

22 are purely procedural. See NYLife, 72 F.3d at 372 n.1; Aetna

Life Ins. Co. v. Haworth, 300 U.S. 227, 240 (1937). Neither

provision enlarges the subject-matter jurisdiction of the federal

courts. Compare Fed. R. Civ. P. 82 (“These rules shall not be

construed to extend . . . the jurisdiction of the United States district

courts . . . .”), with 28 U.S.C. § 2201 (authorizing a federal court

to issue a declaratory judgment “[i]n a case of actual controversy

within its jurisdiction”) (emphasis added). Rather, both simply

provide plaintiffs with a means to “anticipate and accelerate . . .

coercive action[s] by . . . defendant[s].” Bell & Beckwith v. United

States, 766 F.2d 910, 914 (6th Cir. 1985). Based on these

similarities, some courts have held that the jurisdictional test

applicable in declaratory judgment cases applies equally to a rule

interpleader. See, e.g., Commercial Nat’l Bank of Chicago v.

Demos, 18 F.3d 485, 488 (7th Cir. 1994); Commercial Union Ins.

Co. v. United States, 999 F.2d 581, 585 (D.C. Cir. 1993); Morongo

Band of Mission Indians v. Cal. State Bd. of Equalization, 858 F.2d

1376, 1384 (9th Cir. 1988); Bell & Beckwith, 766 F.2d at 913-14.

In the declaratory judgment context, “[f]ederal courts have

regularly taken original jurisdiction over . . . suits in which, if the

declaratory judgment defendant brought a coercive action to

enforce its rights, that suit would necessarily present a federal

question.” Franchise Tax, 463 U.S. at 19; see also Richard H.

Fallon, Jr., et. al, Hart & Wechsler’s Federal Courts 900 (5th ed.

2003) (stating that Franchise Tax “appears to endorse” an approach

that “would uphold jurisdiction over a declaratory action if

jurisdiction would exist in a hypothetical nondeclaratory action

brought by either party against the other.”); but see Textron

Lycoming Reciprocating Engine Div., Avco Corp. v. UAW, 523

U.S. 653, 659-60 (1998) (expressing doubt about whether a

“declaratory-judgment complaint raising a nonfederal defense to an

anticipated federal claim . . . would confer § 1331 jurisdiction”)

(emphasis in original). If the practice described by Franchise Tax

is correct, and if the principle extends to rule interpleader, then

jurisdiction exists whenever one of “the coercive actions

anticipated by the [interpleader] complaint would arise under

federal law.” Morongo, 858 F.2d at 1385.

MetLife’s interpleader complaint anticipates coercive

9

III.

Presumably, the District Court agreed that MetLife’s cause

of action arises under federal law. Its jurisdictional inquiry focused

on a different issue: exhaustion. “Except in limited

circumstances,” we have held, “a federal court will not entertain an

ERISA claim unless the plaintiff has exhausted the remedies

available under the plan.” Harrow v. Prudential Ins. Co. of Am.,

279 F.3d 244, 249 (3d Cir. 2002) (quotation omitted). Relying on

that rule, the District Court noted that MetLife “assert[ed] federal

jurisdiction under ERISA despite . . . having made no initial

determination about which potential plan beneficiaries should be

paid.” District Court Order at 1. It reasoned that a federal court

“sits in review of a decision of a plan administrator,” and “it is the

plan administrator’s duty to make its own initial determination

regarding who should be paid.” Id. at 1-2. Absent such a

determination, there was “no administrative record for th[e] Court

to review.” Id. at 2. Thus, the District Court held that jurisdiction

was lacking.

The District Court’s gloss on the exhaustion requirement

raises two questions. First, should courts label ERISA’s

exhaustion requirement as a jurisdictional prerequisite to federal

court adjudication? Second, labels aside, is there a “reverse

exhaustion” requirement that limits a fiduciary’s ability to bring an

interpleader action? We address these questions in turn.

actions by both Price’s widow and his children. Both hypothetical

claims would seek to recover “benefits due . . . under the terms of

[a] plan,” 29 U.S.C. § 1132(a)(1)(B), and would necessarily present

federal questions. See Taylor, 481 U.S. at 66-67. Thus, the

approach adopted by our sister courts of appeals in cases like Bell

& Beckwith and Morongo might provide an alternative basis for

subject matter jurisdiction. Nonetheless, in light of our

determination that federal law creates MetLife’s cause of action,

we need not take a position on the propriety of those decisions.

10

A.

A recent series of Supreme Court decisions provides helpful

guidance on the uses and misuses of the word “jurisdiction.” See

Bowles v. Russell, 551 U.S. ---, 127 S. Ct. 2360 (2007); Arbaugh

v. Y&H Corp., 546 U.S. 500, 126 S. Ct. 1235 (2006); Eberhart v.

United States, 546 U.S. 12 (2005) (per curiam); Kontrick v. Ryan,

540 U.S. 443 (2004). These cases clarify that nonstatutory claim-

processing rules are not properly labeled “jurisdictional.” True

“jurisdictional” limitations are set by the Constitution and by

Congress, not by rules of procedure or judge-made doctrine. See

Kontrick, 540 U.S. at 452 (“Only Congress may determine a lower

federal court’s subject-matter jurisdiction.”); see also Bowles, 127

S. Ct. at 2364-65 & n.3 (same). Nonstatutory rules, “even if

unalterable on a party’s application, can nonetheless be forfeited if

the party asserting the rule waits too long to raise the point.” See

Kontrick, 540 U.S. at 456.

As it explained these principles, the Supreme Court noted

that its own past decisions had sometimes mislabeled nonstatutory

rules as “jurisdictional.” The Court described these casual

invocations of the term as “drive-by jurisdictional rulings that

should be accorded no precedential effect on the question whether

the federal court had authority to adjudicate the claim in suit.”

Arbaugh, 126 S. Ct. at 1242-43 (quotation marks omitted).

Informed by the Supreme Court’s instruction, we must

assess whether ERISA’s exhaustion doctrine is a “jurisdictional”

mandate. Certainly, it is an important legal rule. We have

recognized that requiring exhaustion of plan remedies helps to

“‘reduce the number of frivolous lawsuits under ERISA; to

promote the consistent treatment of claims for benefits; to provide

a nonadversarial method of claim settlement; and to minimize the

costs of claims settlement for all concerned.’” Harrow, 279 F.3d

at 249 (quoting Amato v. Bernard, 618 F.2d 559, 567 (9th Cir.

1980)). In addition, exhaustion enhances the ability of fiduciaries

“‘to expertly and efficiently manage their funds by preventing

premature judicial intervention in their decision-making

processes.’” Id. (quoting Amato, 618 F.2d at 567). It also has the

salutary effect of “refining and defining the problem” for final

11

judicial resolution. Amato, 618 F.2d at 568.

But as important as the rule may be, “ERISA nowhere

mentions the exhaustion doctrine.” Id. at 566. It is a judicial

innovation fashioned with an eye toward “sound policy.” Id. at

567. We have not required exhaustion where the claim seeks to

enforce a statutory right under ERISA. Zipf v. AT&T, 799 F.2d

889, 891-92 (3d Cir. 1986). In addition, the failure to exhaust will

be excused in cases where a fact-sensitive balancing of factors

reveals that exhaustion would be futile. See Harrow, 279 F.3d at

249-50.

This is not the stuff of a jurisdictional rule. Congress has

expressly provided for jurisdiction over ERISA cases in 29 U.S.C.

§ 1132(e). Neither that provision nor any other part of ERISA

contains an exhaustion requirement. Thus, as a judicially-crafted

doctrine, exhaustion places no limits on a court’s adjudicatory

power. See Arbaugh, 126 S. Ct. at 1245; Kontrick, 540 U.S. at

452; see also Paese v. Hartford Life & Accident Ins. Co., 449 F.3d

435, 445 (2d Cir. 2006) (“[ERISA exhaustion] is purely a judge-

made concept that developed in the absence of statutory language

demonstrating that Congress intended to make [it] a jurisdictional

requirement.”); Chailland v. Brown & Root, Inc., 45 F.3d 947, 950

n.6 (5th Cir. 1995) (same).

Furthermore, even aside from the Supreme Court’s

instruction, our own cases carefully distinguish “between

prudential exhaustion and jurisdictional exhaustion.” Wilson v.

MVM, Inc., 475 F.3d 166, 174 (3d Cir. 2007); see also Zipes v.

Trans World Airlines, Inc., 455 U.S. 385, 393 (1982). Prudential

exhaustion “is generally judicially created.” Wilson, 475 F.3d at

174. It reflects a judicial desire to “respect[] agency autonomy by

allowing it to correct its own errors.” Id. Unlike a rigid

jurisdictional rule, prudential exhaustion provides flexible

exceptions for “waiver, estoppel, tolling or futility.” Id. ERISA’s

exhaustion requirement bears all the hallmarks of a

nonjurisdictional prudential rule. In addition to being judge-made,

the doctrine’s futility exception involves a discretionary balancing

of interests. Judicial prudence, not power, governs its application

in a given case.

12

In reaching this conclusion, we have not overlooked the

several cases that refer to ERISA exhaustion as “jurisdictional.” 5

Two are particularly noteworthy. In Wolf v. National Shopmen

Pension Fund, 728 F.2d 182 (3d Cir. 1984), we described our

analysis as a “jurisdictional inquiry” and classified exhaustion as

a necessary predicate to “federal jurisdiction.” Id. at 186-87. In

addition, the leading case in this area, Amato v. Bernard, 618 F.2d

559 (9th Cir. 1980), referred to the exhaustion of plan remedies in

“jurisdiction[al]” terms. Id. at 566. Neither case, however,

explained why or how a doctrine borne of “sound policy” qualified

as “jurisdictional.” Amato, 618 F.2d at 568. The opinions simply

sprinkled their analyses with offhanded references to the term. See

Arbaugh, 126 S. Ct. at 1242-43. They do not alter our conclusion

that ERISA’s exhaustion doctrine places no limits on a federal

court’s subject matter jurisdiction.

MetLife brought this interpleader action against Paul Price’s

widow and his children. Before the widow and the children ever

filed a responsive pleading, the District Court acted in the name of

subject matter jurisdiction and dismissed on exhaustion grounds.

This was error. The exhaustion requirement is a nonjurisdictional

affirmative defense. See Paese, 449 F.3d at 446; cf. Williams v.

Runyon, 130 F.3d 568, 573 (3d Cir. 1997).

B.

The question remains whether the affirmative defense of

exhaustion bars MetLife’s interpleader action. As noted above, our

5

See, e.g., Peterson v. Cont’l Cas. Co., 282 F.3d 112, 117

(2d Cir. 2002) (“[A]bsent a determination by the plan

administrator, federal courts are without jurisdiction to adjudicate

whether an employee is eligible for benefits under an ERISA

plan.”); Duffie v. Deere & Co., 111 F.3d 70, 72 n.2 (8th Cir. 1997)

(per curiam) (referring to “the jurisdictional argument that [the

claimant] failed to exhaust his remedies”); White v. Jacobs Eng’g

Group Long Term Disability Benefit Plan, 896 F.2d 344, 346 (9th

Cir. 1990) (“[A]ppellant did not exhaust his administrative

remedies, and jurisdiction in the district court was improperly

granted.”).

13

cases hold that persons claiming plan benefits must generally

“exhaust their administrative remedies before seeking judicial

relief.” Berger v. Edgewater Steel Co., 911 F.2d 911, 916 (3d Cir.

1990). Of course, MetLife is not a person claiming plan benefits.

It is a fiduciary attempting to interplead the competing claimants.

There is no Third Circuit precedent addressing the applicability of

exhaustion principles in this context. The question for us, then, is

whether a so-called “reverse exhaustion” requirement bars a plan

fiduciary from bringing an interpleader action without first

developing a record and rendering a final benefits decision.

The consensus view is that a fiduciary need not make a final

benefits decision. Many courts have allowed the use of

interpleader in ERISA benefits cases. See, e.g., Alliant

Techsystems, Inc. v. Marks, 465 F.3d 864 (8th Cir. 2006); Metro.

Life Ins. Co. v. Parker, 436 F.3d 1109 (9th Cir. 2006); Guardian

Life Ins. Co. of Am. v. Finch, 395 F.3d 238 (5th Cir. 2004); Metro.

Life Ins. Co. v. Bigelow, 283 F.3d 436 (2d Cir. 2002); Aetna Life

Ins. Co. v. Bayona, 223 F.3d 1030 (9th Cir. 2000); Metro. Life Ins.

Co. v. Marsh, 119 F.3d 415 (6th Cir. 1997). Almost none of them

even mention the possibility of using exhaustion principles to bar

interpleader actions. The prevailing view is that “[i]nterpleader is

a valuable procedural device for ERISA plans who are confronted

with conflicting multiple claims upon the proceeds of an

individual’s benefit plan.” Trustees of Directors Guild of Am.

Producer Pension Benefits Plans v. Tise, 234 F.3d 415, 426, as

amended upon denial of reh’g, 255 F.3d 661 (9th Cir. 2000). If

courts demanded a fully developed record and a final benefits

decision, ERISA plans might face exposure to multiple lawsuits

from disappointed claimants. Most courts allow fiduciaries to

avoid this quandary by filing an interpleader complaint. See id.

But there are three reported decisions that, to varying

degrees, support a reverse-exhaustion requirement in at least some

interpleader cases. The first is Life Insurance Company of North

America v. Nears, 926 F. Supp. 86 (W.D. La. 1996). There, a

participant in two ERISA-controlled life-insurance policies failed

to designate a beneficiary. When presented with competing claims

to the benefits, the insurer brought an interpleader action. One of

the policies contained a “facility of payment” clause. It stated that

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“[a]ny amount of your . . . benefits for which there is no designated

. . . beneficiary will be paid, at [the insurer’s] option, to any of your

following living relatives: spouse, mother, father, child, or

children, or to the executors or administrators of your estate.” Id.

at 89. Because the plan did not “rank the classes of relatives in any

order or preference,” the court “decline[d] to impose its subjective

preference . . . where the insurer ha[d] clearly contracted for the

discretion to exercise its own judgment.” Id. The court thus

denied the motion for interpleader as to that policy.

Forcier v. Forcier, 406 F. Supp. 2d 132 (D. Mass. 2005),

also involved competing claims to a life-insurance policy with no

designated beneficiary. The court noted that since exhaustion is a

prerequisite to claims for plan benefits, “[a]rguably . . . the inverse

should be true” for interpleaders brought by plan fiduciaries:

“absent good cause, insurers or plan administrators with

discretionary power under ERISA plans should be required to

exercise that discretion, and make a decision, before seeking

judicial relief.” Id. at 140-41. The court stated that this “reverse

exhaustion approach ha[d] considerable superficial appeal.” Id. at

141. The insurer had contracted to make a benefits decision “under

a policy that it wrote and that it administer[ed].” Id. Having a

federal court “step into the shoes of the insurer” might well

“impede cost-effective administration.” Id. But despite this

concern, the court decided that reverse exhaustion was merely

“preferable,” not mandatory. Id. Interpleader, it reasoned, served

the interests of both participants and beneficiaries by ensuring

prompt, fair resolutions of competing claims. Id. at 142. The court

determined that to dismiss on reverse-exhaustion grounds would

only prolong disputes, as disappointed claimants would likely seek

review in federal court. Id.

On appeal in Forcier, the Court of Appeals for the First

Circuit declined to address the reverse-exhaustion issue because the

parties had not raised it. See Forcier v. Metro. Life Ins. Co., 469

F.3d 178, 182 (1st Cir. 2006). Parenthetically, though, the court

noted that “on a going-forward basis” it might not “look with favor

upon interpleader actions brought by insurers who, in the last

analysis, are seeking to shift their responsibilities to the district

court without any clear demonstration of a need for interpleader

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relief.” Id. at 182 n.3.

In our view, the analyses of both the Nears opinion (which

endorsed a limited form of reverse exhaustion) and the Court of

Appeals for the First Circuit’s opinion in Forcier (which remained

uncommitted) are persuasive. Nonetheless, whatever the merits of

these opinions’ reasoning, both are inapposite. In both cases,

participants failed to designate beneficiaries, and the plans vested

the fiduciaries with broad discretionary authority to distribute the

proceeds. See Forcier, 469 F.3d at 185 (“MetLife contracted for an

extremely free hand in deciding to whom . . . the policy’s proceeds

would be paid in the absence of a designated beneficiary.”); Nears,

926 F. Supp. at 89 (“[T]he insurer has clearly contracted for the

discretion to exercise its own judgment.”). The sound judicial

policy that animates the exhaustion doctrine applies with particular

force when fiduciaries are exercising discretion granted by plan

documents. Courts review such decisions under the deferential

arbitrary and capricious standard. See Firestone Tire & Rubber Co.

v. Bruch, 489 U.S. 101, 115 (1989); McLeod v. Hartford Life &

Accident Ins. Co., 372 F.3d 618, 623 (3d Cir. 2004). This

deference insulates the decision from undue judicial second

guessing and increases the likelihood that exhaustion (or reverse

exhaustion) will weed out frivolous claims, “‘promot[ing] the

consistent treatment of claims for benefits,’” and encouraging

nonadversarial claim settlement. See Harrow, 279 F.3d at 249

(quoting Amato, 618 F.2d at 567).

Unlike the discretionary question at issue in Nears and

Forcier, MetLife’s decision in this case would receive no deference

from a federal court. The dispute between Price’s widow and his

children turns on whether the New Jersey divorce judgment is a

QDRO. That is a question “of statutory construction over which

reviewing courts exercise de novo review.” Files v. ExxonMobil

Pension Plan, 428 F.3d 478, 486 (3d Cir. 2005), cert. denied 126 S.

Ct. 2304 (2006). In light of that standard, the policy considerations

underlying the exhaustion doctrine do not apply. First, mandating

reverse exhaustion would do little to reduce frivolous lawsuits. See

Harrow, 279 F.3d at 249. Persons with frivolous claims could still

get a plenary “second look” in federal court. Second, reverse

exhaustion in these circumstances is unlikely to produce a

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significant reduction in costs or an increase in nonadversarial claim

settlement. See id. On the contrary, with plenary review in the

offing, the disappointed claimant will have every incentive to

continue the battle in federal court. Third, little is gained by having

fiduciaries “refin[e] and defin[e] the problem” for final judicial

resolution. See Amato, 618 F.2d at 568. Questions of statutory

interpretation fall within the “peculiar expertise” of the courts, and

the fiduciary’s position on the matter will be of limited utility. Cf.

Zipf v. AT&T, 799 F.2d 889, 893 (3d Cir. 1986). In short, even if

“sound policy” supports the imposition of a reverse-exhaustion

requirement in some cases, that policy does not apply when the

question centers on the existence of a QDRO.

Policy aside, litigants in at least one case have argued that

29 U.S.C. § 1056(d)(3)(G)(i)(II) prohibits interpleaders filed before

an initial QDRO decision by the fiduciary. See Metro. Life Ins.

Co. v. Bigelow, 283 F.3d 436, 442 (2d Cir. 2002). Section

1056(d)(3)(G)(i)(II) states that “within a reasonable period after”

receiving a domestic relations order, “the plan administrator shall

determine whether such order is a qualified domestic relations

order and notify the participant and each alternate payee of such

determination.” The Court of Appeals for the Second Circuit held

that bringing an interpleader complaint is an acceptable way to

“determin[e]” an order’s QDRO status. Bigelow, 283 F.3d at 442.

We agree. A plan administrator’s interpretation and application of

the statutory QDRO requirements is no more authoritative (and no

less final) than that of the competing claimants. An interpleader

complaint effectuates a prompt, final determination of the QDRO

issue. As the Court of Appeals for the Second Circuit pointed out,

cutting off the use of interpleader “would assist none of the

interested parties.” Bigelow, 283 F.3d at 442. It would also make

it far more difficult for administrators to “determin[e]”

conclusively an order’s QDRO status “within a reasonable period.”

See § 1056(d)(3)(G)(i)(II). We therefore hold that neither ERISA

nor the prudential doctrine of exhaustion bars MetLife’s

interpleader action.

IV.

In sum, the District Court erred when it dismissed MetLife’s

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complaint for want of subject matter jurisdiction. MetLife’s well-

pleaded complaint establishes that its cause of action arises under

ERISA. The exhaustion requirement is a nonjurisdictional

affirmative defense, and that affirmative defense did not require

MetLife to make a decision on the QDRO issue before seeking

interpleader in federal court. We will vacate the District Court’s

judgment and remand for further proceedings consistent with this

opinion.

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