The opinion
United States Court of Appeals,
Fifth Circuit.
No. 93-3543.
Donald J. CHAILLAND, Plaintiff-Appellee,
v.
BROWN & ROOT, INC., Defendant-Appellant.
Feb. 23, 1995.
Appeal from the United States District Court for the Eastern
District of Louisiana.
Before JOLLY, DUHÉ and BARKSDALE, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
Brown & Root, Inc. fired Donald Chailland. Chailland sued
Brown & Root, Inc., alleging that it had fired him to prevent him
from attaining increased benefits under its pension plan, in
violation of § 510 of the Employee Retirement Income Security Act
(ERISA). Brown & Root, Inc. moved to dismiss Chailland's complaint
for failure to exhaust administrative remedies provided by ERISA
and Brown & Root's Employees' Retirement and Savings Plan.
Alternatively, Brown & Root, Inc. moved to stay the proceedings
pending arbitration under the provisions of the plan. The district
court denied the motion. This appeal presents the question whether
Brown & Root, Inc. may raise these exhaustion requirements,
including arbitration, in a suit claiming a violation of ERISA §
510.
I
Upon attaining fifteen years of service with Brown & Root,
Inc., ("Brown & Root") participants in its Employees' Retirement
1
and Savings Plan (the "ER & SP") become entitled to substantially
greater benefits.1 On February 5, 1992, when he was about six
months from that threshold, Brown & Root fired Donald Chailland.
Brown & Root contended that Chailland had been insubordinate, but
Chailland contended that he was fired to prevent his attaining an
increase in benefits under the ER & SP. Without pursuing
administrative remedies provided by the ER & SP, Chailland sued
Brown & Root, alleging illegal termination under ERISA § 510, 29
U.S.C. § 1140.2 Chailland did not sue the ER & SP. In his
complaint, he sought back pay, reinstatement—or, failing that,
front pay—and restitution of the benefits to which he would have
been entitled.3
Brown & Root moved to dismiss Chailland's complaint for
failure to exhaust his administrative remedies under ERISA and the
1
According to the terms of the profit sharing plan,
employees with ten to fourteen years of service are entitled to
share in profits allocated to the plan in a proportion determined
by multiplying their annual earnings by two, but upon reaching
fifteen years of service, the multiplier rises to three. Thus,
upon reaching fifteen years of service, an employee can expect a
fifty percent increase in his benefits from the profit sharing
plan.
2
Among other things, § 510 prohibits an employer from
discharging an employee "for the purpose of interfering with the
attainment of any right to which such participant may become
entitled" under the provisions of an employee benefit plan.
3
Section 510 declares that the provisions of § 1132, ERISA §
502, "shall be applicable in the enforcement of this section."
Section 502 authorizes civil suits by a participant "to recover
benefits due ... under the terms of his plan, to enforce his
rights under the terms of the plan, or to clarify his rights to
future benefits under the terms of the plan"; 29 U.S.C. §
1132(1); and "to obtain ... appropriate equitable relief" to
redress violations of ERISA or an ERISA plan, or to enforce any
of its provisions. 29 U.S.C. § 1132(3).
2
ER & SP. It also moved for a stay pending arbitration, but it
never requested an order compelling arbitration.4 Chailland
contended that the exhaustion requirement did not apply to his
claim under § 510 and that neither the ER & SP's administrative
remedies nor its requirement for arbitration applied to his claim.
The district court agreed with Chailland and denied Brown &
Root's motions. Brown & Root appealed the district court's order
denying arbitration, invoking our jurisdiction under 28 U.S.C. §
1292(a)(1) and the Federal Arbitration Act, 9 U.S.C. § 16(a)(1)(A).
The district court then certified a discretionary appeal under 28
U.S.C. § 1292(b) from its order denying dismissal for failure to
exhaust administrative remedies. Because of the appeal hinging on
arbitration—an appeal of right—we consolidated the two appeals and
carried with the case the petition to grant an appeal on the
exhaustion issue under § 1292(b). We will grant Brown & Root's
petition, and consider the matters together.
II
A
We consider this appeal against the backdrop of three critical
points, which we establish at the outset. First, as Brown & Root
4
According to the terms of the ER & SP, before suing in
federal court, participants must "exhaust the Brown and Root
Appeal and Arbitration Procedure to resolve any disputes." That
procedure is available to a participant "if any benefit is denied
in whole or in part, or if you believe the plan is violating the
law in any way, or if any other dispute arises under the plan
provisions." The procedure is set forth in an amendment to the
plan. Chailland denies that he was ever notified of the
amendment, and therefore argues that he should not be bound by
it. Because we determine that they are not applicable to his
claims for other reasons, we need not consider this argument.
3
admits, the ER & SP is a separate legal entity as a matter of law,
and may sue or be sued in its own right. 29 U.S.C. § 1132(d). At
oral argument, it became clear that in this lawsuit Brown & Root
claims no legal relationship with the ER & SP. The ER & SP is not
an agent of Brown & Root, and Brown & Root is not a third party
beneficiary of any agreement between Chailland and the ER & SP.
Brown & Root would not be obligated to abide by any determination
made by the ER & SP if Chailland had submitted his claim to it.
Second, the arbitration agreement urged in this case derives
solely from the provisions of the ER & SP. At oral argument,
counsel for Brown & Root conceded that the arbitration agreement
applies only to disputes "regarding" the ER & SP, and the duty to
arbitrate arises only after administrative remedies provided by the
ER & SP have been exhausted. In other words, there is no agreement
between Brown & Root and Chailland to arbitrate anything.5 The
only agreement to arbitrate is between Chailland and the ER & SP.
Third, the ER & SP is not a party to this suit. Neither
Chailland nor Brown & Root joined it as a party, and the ER & SP
did not attempt to intervene. Chailland does not contend that the
ER & SP denied him any benefit or violated the law in any way.
Instead, this dispute involves the ER & SP only tangentially, if at
all; Chailland argues only that the terms of the ER & SP provide
the motive for his termination. It is clear, therefore, that this
5
Because no agreement to arbitrate exists between Brown &
Root and Chailland, we hold that the district court properly
denied Brown & Root's motion to stay the lawsuit pending
arbitration.
4
is an action against Brown & Root, Inc., alone. Bearing these
preliminary points in mind, we turn to the question presented by
this appeal.
B
Brown & Root argues that the district court erred when it
denied its motion to dismiss Chailland's complaint for failure to
exhaust administrative remedies under ERISA caselaw and the ER &
SP, which includes binding arbitration. It argues that under the
terms of the ER & SP and the applicable case law, Chailland must
pursue the ER & SP appeal procedures before filing this suit.
Chailland argues that neither the administrative remedies of the ER
& SP nor the exhaustion requirement imposed by our cases apply to
a lawsuit for wrongful termination solely based on the wrongful
conduct of Brown & Root. We agree.
ERISA itself is silent on the question of exhaustion of
administrative remedies under ERISA § 510. Indeed, ERISA contains
no exhaustion requirement whatsoever.6 However, relying upon Amato
v. Bernard, 618 F.2d 559 (9th Cir.1980), plus Congressional intent
and well-settled principles of administrative law, we adopted the
common law rule that a plaintiff generally must exhaust
administrative remedies afforded by an ERISA plan before suing to
obtain benefits wrongfully denied. Denton v. First National Bank,
6
Because exhaustion is not required by ERISA, it is not a
prerequisite to our jurisdiction. See Central States Southeast &
Southwest Areas Pension Fund v. T.I.M.E.-D.C., 826 F.2d 320, 326-
27 (5th Cir.1987).
5
765 F.2d 1295, 1300-1303 (5th Cir.1985).7
Our cases applying this common law exhaustion requirement
presuppose that the grievance upon which the lawsuit is based
arises from some action of a plan covered by ERISA, and that the
plan is capable of providing the relief sought by the plaintiff.8
As our earlier discussion makes clear, neither of these conditions
is present here. First, the decision to fire Chailland, which is
7
The circuits are split on the general issue whether
exhaustion of administrative remedies may be required for an
ERISA § 510 claim. The Third, Ninth, and Tenth Circuits do not
require exhaustion. See Zipf v. American Telephone & Telegraph
Co., 799 F.2d 889, 891-94 (3rd Cir.1986); Amaro v. Continental
Can Co., 724 F.2d 747, 750-52 (9th Cir.1984); Held v.
Manufacturers Hanover Leasing Corp., 912 F.2d 1197, 1204-05 (10th
Cir.1990). The Seventh Circuit, on the other hand, vests
district courts with discretion to require exhaustion. Kross v.
Western Electric Co., 701 F.2d 1238, 1243-45 (7th Cir.1983). The
Eleventh Circuit apparently requires it. Mason v. Continental
Group, Inc., 763 F.2d 1219, 1225-27 (11th Cir.1985), cert.
denied, 474 U.S. 1087, 106 S.Ct. 863, 88 L.Ed.2d 902 (1986). In
Mason, which is the sole instance in which a circuit court
mandated exhaustion of remedies, the pension plan incorporated
into its terms the collective bargaining agreement between the
employer and the former employee's union, and thus provided an
administrative mechanism for resolving the wrongful termination
claims. Id. at 1226. In this case, however, the ER & SP cannot
provide a remedy. In short, none of these cases furnishes a
legal or logical justification for requiring exhaustion of
remedies when, as here, the grievance is completely foreign to
the plan and plan is incapable of providing a remedy.
8
See, e.g., Denton v. First National Bank, 765 F.2d 1295
(5th Cir.1985) (former employee sought lump-sum payment of
benefits from pension plan); Meza v. General Battery Corp., 908
F.2d 1262 (5th Cir.1990) (former employee and union member sought
payment of pension benefits from employer and pension plan, based
on collective bargaining agreement and pension plan); Simmons v.
Willcox, 911 F.2d 1077 (5th Cir.1990) (former employee sought
payment of benefits and further alleged that the plan had
breached its fiduciary duties to her by refusing to pay her
claims for benefits); Medina v. Anthem Life Insurance Co., 983
F.2d 29 (5th Cir.1993) (insured sought payment of a disputed
claim from group health insurer covered by ERISA).
6
the sole grievance presented in this case, was made by Brown &
Root, not by the ER & SP. This lawsuit therefore does not involve
any action of a plan covered by ERISA. In addition, the ER & SP is
not capable of providing the remedy that Chailland seeks. Because
neither of these conditions is present, we hold that our exhaustion
doctrine is simply inapplicable in this case. Indeed, to remit
Chailland's claim to the ER & SP would make absolutely no sense and
would be a hollow act of utter futility. Accordingly, we hold that
the district court properly denied Brown & Root's motion to dismiss
pursuant to our exhaustion of remedies doctrine.9
III
For the above reasons, we hold that the district court
properly denied Brown & Root's motions to dismiss Chailland's
9
Our previous cases have not characterized the exhaustion
requirement as a personal defense that may be raised or waived
only by a particular party, and it is unnecessary to so hold
today. We observe, however, that in substance it is a defense to
litigation, and that the prudential concerns underlying the
exhaustion requirement suggest to us that if it is a defense, it
belongs to the ER & SP, which is not a party to this case.
It is a well-established general rule that parties may
not raise defenses that are not their own. In United States
v. Metropolitan St. Louis Sewer Dist., 952 F.2d 1040 (8th
Cir.1992), for example, a federal case paralleled a
concurrent state proceeding that culminated first in a
consent decree. Intervenors sought to raise the consent
decree approved by the state court to preclude, on the
grounds of res judicata, entry of a consent decree by the
federal court. The Eighth Circuit held that the intervenors
could not assert the defense of res judicata. "This
defense, if it is available at all, may only be raised by
[the original defendant]. [The defendant's] decision not to
assert this defense does not give the intervenors standing
to raise it, as a party may assert a third party's rights
only if, inter alia, the third party is unable to assert its
own rights, a condition not present here." 952 F.2d at
1043.
7
complaint or, in the alternative, to stay his suit pending
arbitration. Accordingly, the judgment of the district court is
affirmed and the case is remanded for further proceedings not
inconsistent with this opinion.
AFFIRMED and REMANDED.
8