Sarah Martin v. Trend Personnel Services, e

Case: 15-11263 Document: 00513660164 Page: 1 Date Filed: 08/31/2016

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

United States Court of Appeals

Fifth Circuit

No. 15-11263 FILED

August 31, 2016

Lyle W. Cayce

SARAH MOZINGO MARTIN; MARY S. MOZINGO, Clerk

Plaintiffs - Appellants

v.

TREND PERSONNEL SERVICES; DAN W. BOBST,

Defendants - Appellees

Appeal from the United States District Court

for the Northern District of Texas

USDC No. 3:13-CV-3953

Before STEWART, Chief Judge, and CLEMENT and HAYNES, Circuit

Judges.

PER CURIAM:*

The Employee Retirement Income Security Act of 1974 (“ERISA”), 29

U.S.C. §§ 1001-1461, governs claims arising out of employee welfare benefit

plans. The sole issue on appeal is whether a Bonus Agreement offered by

employer Trend Personnel Services, Inc. (“Trend”) to a select number of

employees qualifies as an ERISA employee welfare benefit plan. The district

court held that it does not. We affirm.

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not

be published and is not precedent except under the limited circumstances set forth in 5TH

CIR. R. 47.5.4.

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No. 15-11263

I.

Trend is a staffing and recruiting firm owned and operated by Dan W.

Bobst. Between 2000 and 2007, Sam Mozingo worked for Trend as an account

representative. In 2003, Trend purchased life insurance policies for Mozingo

and five other employees, pursuant to Key Employee Restricted Bonus

Agreements. Pursuant to the Bonus Agreements, Trend would hold the

insurance policies and pay the annual premiums for the duration of each key

employee’s employment with the company.

After voluntarily leaving Trend in 2007 and then being diagnosed with

cancer in 2008, Mozingo requested that Trend transfer his insurance policy to

his name. He designated his sister, Sarah Mozingo, as the primary beneficiary

under the policy and his mother, Mary Mozingo, as the contingent beneficiary.

The policy was transferred to Mozingo’s name in August 2009 but lapsed six

weeks later due to a lack of funding. 1 Mozingo died the following year.

The beneficiaries filed claims for breach of fiduciary duty and estoppel

under ERISA. 2 They alleged that Bobst and Trend failed to pay the insurance

policy premium, to keep Mozingo informed about the status of the policy, and

to promptly transfer the policy to Mozingo after he left the company. They

sought to recover as damages the $250,000 death benefit value of the policy.

After a bench trial, the district court determined that the Bonus Agreement

did not qualify as an ERISA employee welfare benefit plan because it was only

offered to a handful of Trend employees and did not necessitate an ongoing

1 Although the annual premium on the policy had last been paid by Trend in May

2006, the cash value of the policy kept the policy in force through July 2009.

2 The beneficiaries filed a previous lawsuit in the United States District Court for the

District of Kansas, asserting similar claims. There, the beneficiaries conceded before the

district court that the Bonus Agreement was not an ERISA employee welfare benefit plan,

but then argued for the first time on appeal that the Bonus Agreement was an ERISA plan.

The courts did not decide the issue.

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administrative scheme. Accordingly, the district court held that ERISA did not

apply and dismissed the beneficiaries’ claims. This appeal followed.

II.

The issue on appeal is whether the Bonus Agreement offered by Trend

qualifies as an ERISA employee welfare benefit plan. “Typically, the existence

of an ERISA plan is a question of fact that we review only for clear error.”

Shearer v. Sw. Serv. Life Ins. Co., 516 F.3d 276, 278 (5th Cir. 2008). “However,

when the facts are undisputed, we treat the issue as one of law and review it

de novo.” Id.

III.

ERISA defines an “employee welfare benefit plan” as

any plan, fund, or program which was . . . established or

maintained by an employer . . . to the extent that such plan, fund,

or program was established or is maintained for the purpose of

providing for its participants or their beneficiaries, through the

purchase of insurance or otherwise, (A) medical, surgical, or

hospital care or benefits, or benefits in the event of sickness,

accident, disability, death or unemployment . . . .

29 U.S.C. § 1002(1). To determine whether a particular plan qualifies as an

ERISA employee welfare benefit plan, this court “ask[s] whether a plan: (1)

exists; (2) falls within the safe-harbor provision established by the Department

of Labor; and (3) satisfies the primary elements of an ERISA ‘employee benefit

plan’—establishment or maintenance by an employer intending to benefit

employees.” Meredith v. Time Ins. Co., 980 F.2d 352, 355 (5th Cir. 1993). “If

any part of the inquiry is answered in the negative, the submission is not an

ERISA plan.” Id. The parties only dispute whether the Bonus Agreement

satisfies the third requirement of the Meredith test. Thus, we must consider

whether the two statutory elements of an ERISA employee welfare benefit plan

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are satisfied: “(1) whether an employer established or maintained the plan; and

(2) whether the employer intended to provide benefits to its employees.” Id. 3

In determining whether an employer “established or maintained” an

employee welfare benefit plan by purchasing insurance for employees, this

court “focus[es] on the employer . . . and [its] involvement with the

administration of the plan.” Gahn v. Allstate Life Ins. Co., 926 F.2d 1449, 1452

(5th Cir. 1991). In a line of cases, this court has held that while

the purchase of insurance does not conclusively establish a plan,

fund, or program, [it] is evidence of the establishment of a plan,

fund, or program [and] the purchase of a policy or multiple policies

covering a class of employees offers substantial evidence that a

plan, fund, or program has been established.

Mem’l Hosp. Sys. v. Northbrook Life Ins. Co., 904 F.2d 236, 242 (5th Cir. 1990);

see also Kidder v. H & B Marine, Inc., 932 F.2d 347, 353 (5th Cir. 1991). In

Memorial Hospital, the court concluded that an employer established and

maintained an ERISA employee welfare benefit plan where it provided group

health care benefits—including life, accidental death and dismemberment,

accident, prescription drug, and comprehensive medical insurance benefits—

for all of its full-time employees and paid one-half of the monthly premiums.

Mem’l Hosp., 904 F.2d at 241-43. Then, in Kidder, the court applied Memorial

Hospital to conclude that an ERISA employee welfare benefit plan existed

where an employer purchased a group health insurance policy that covered all

of its employees and paid a percentage of the monthly premiums. Kidder, 932

F.2d at 349-53. The court, however, did not “adopt the district court’s apparent

reasoning that the payment of premiums alone is sufficient to create a plan.”

Id. at 353.

3 Because our analysis under the first element is dispositive, we do not address the

second element.

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More recently, this court held that the mere payment of insurance

premiums for a select number of employees did not establish an ERISA

employee welfare benefit plan. See Shearer, 516 F.3d at 279-80. In Shearer, the

court held that an employer did not establish or maintain an ERISA employee

welfare benefit plan where it paid the premiums on insurance policies for two

employees but did not provide insurance for any other employees. Id.

Distinguishing the plan in Shearer from those in Memorial Hospital and

Kidder, the court reasoned that because the plans in those cases “were

purchased for all of the company’s employees, [that fact] lends greater support

to the argument that a plan existed.” Id. at 280.

In addition to purchasing insurance for employees, other factors can

provide evidence that an employer established or maintained an employee

welfare benefit plan. See Hansen v. Cont’l Ins. Co., 940 F.2d 971, 978 (5th Cir.

1991). In Hansen, the court held that an employer established an ERISA

employee welfare benefit plan where it issued a booklet encouraging all

employees to participate in a group insurance plan and employed a full time

employee benefits administrator. Id. The court reasoned that even though the

employer “did not purchase the insurance for its employees,” it “assume[d]

some responsibility for the administration of the program.” Id. This court has

“consistently held,” however, that if “an employer does no more than purchase

insurance for its employees and has no further involvement with the collection

of premiums, administration of the policy, or submission of claims, the

employer has not established an ERISA plan.” Shearer, 516 F.3d at 279; see

also Hansen, 940 F.2d at 978 (requiring “meaningful degree of participation by

the employer in the creation or administration of the plan”).

Here, the beneficiaries rely on Memorial Hospital and Kidder to argue

that the Bonus Agreement qualifies as an ERISA employee welfare benefit

plan. They contend that Trend purchased life insurance policies for its six key

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employees and paid annual premiums, which offers “substantial evidence that

a plan, fund, or program has been established.” Mem’l Hosp., 904 F.2d at 242.

They further contend that, as in Hansen, Trend employed a “benefits

administrator” and thus assumed responsibility for administration of the plan.

Trend counters that these cases are distinguishable because the

employers in Memorial Hospital, Kidder, and Hansen offered insurance

benefits to all of their employees. Trend further counters that the Bonus

Agreement is not an ERISA employee welfare benefit plan because making a

once per year premium payment does not constitute an ongoing administrative

scheme. See Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 3, 12 (1987) (holding

that a Maine statute requiring employers to provide a one-time severance

payment to plant employees in the event of plant closure did not establish, or

require employers to maintain, an ERISA plan because “[t]he requirement of

a one-time, lump-sum payment triggered by a single event requires no

administrative scheme whatsoever to meet the employer’s obligation”);

Cantrell v. Briggs & Veselka Co., 728 F.3d 444, 451 (5th Cir. 2013) (holding

that a deferred compensation arrangement did not constitute an ERISA plan

because the amount of compensation was “based on a one-time calculation

using a fixed formula, and writing a check each quarter is hardly an

administrative scheme”) (internal quotation marks omitted).

The beneficiaries are correct that purchasing “a[n] [insurance] policy or

multiple policies covering a class of employees offers substantial evidence that

a plan, fund, or program has been established.” Mem’l Hosp., 904 F.2d at 242.

The court’s more factually similar decision in Shearer, however, controls here.

There, the court held that the mere payment of premiums on policies for two

employees was not sufficient to demonstrate that the employer established or

maintained an ERISA employee welfare benefit plan. Shearer, 516 F.3d at 280.

Similarly here, Trend only paid once-per-year premiums on policies for a small

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number of key employees 4—in contrast to the employers in Memorial Hospital,

Kidder, and Hansen that offered insurance policies to all of their employees.

Further, unlike the employer in Hansen, Trend was not involved in the

administration of the policies or submission of claims and did not employ a

benefits administrator. 5 As in Shearer, Trend “d[id] no more than purchase

insurance for its employees and ha[d] no further involvement with the

collection of premiums, administration of the policy, or submission of claims,”

and therefore “has not established an ERISA plan.” 516 F.3d at 279 (reciting

“rule that the purchase of insurance alone is insufficient to demonstrate an

ERISA plan”).

IV.

We AFFIRM.

4 Bobst testified that in 2009, Trend had more than 350 temporary employees.

5 The beneficiaries characterize former employee Shonda Wigginton as a benefits

administrator for the Bonus Agreement. When asked about the Bonus Agreement at trial,

Wigginton testified that she “didn’t deal with it per se” and that the premium bills went

directly to the accounting department. When notices came from the insurance company,

Wigginton would simply “[p]ut it in the file.” The district court did not clearly err in finding

that Trend did not employ a benefits administrator.

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