PRECEDENTIAL

U N IT E D STATES COURT OF APPEALS

F O R THE THIRD CIRCUIT

N o . 05-2927

M E T R O P O L IT A N LIFE INSURANCE COMPANY,

Appellant,

v. S A N D R A PRICE; SHANNON PRICE; ANDRE PRICE.

O n Appeal from the United States District Court

f o r the District of New Jersey

(N o . 04-cv-05044)

D istrict Judge: Honorable Faith S. Hochberg

S u b m itte d Under Third Circuit LAR 34.1(a)

T h u rs d a y, January 25, 2007

B e f o re : SCIRICA, Chief Judge, FUENTES and CHAGARES,

C irc u it Judges.

(F ile d September 4, 2007)

R a n d i F. Knepper, Esq.

M c E lro y, Deutsch, Mulvaney & Carpenter, LLP

1 3 0 0 Mount Kemble Ave.

P .O . Box 2075

M o rris to w n , NJ 07962-2075

C o u n s e l for Appellant O P IN I O N OF THE COURT C H A G A R E S , Circuit Judge.

A p p e lla n t Metropolitan Life Insurance Company (" M etL if e " ) is the claims fiduciary of an "employee welfare benefit p la n ." See Employee Retirement Income Security Act of 1974 (" E R IS A ") § 3(1), 29U.S.C. § 1002(1). After one of the plan's p a rtic ip a n ts died, MetLife received competing claims to the d e c e d e n t's life-insurance benefits. It responded by filing this in te rp le a d er action against the competing claimants. The District C o u rt raised the issue of subject matter jurisdiction sua sponte and d is m is s e d . In our view, however, the District Court had federal q u e s tio n jurisdiction. Accordingly, we will vacate and remand.

I.

T h e New Jersey Transit Corporation sponsors a Basic Life P la n for the benefit of its employees. The plan is funded through a group life insurance policy issued by MetLife to New Jersey T ra n sit. MetLife is the plan's "claims fiduciary." Paul Price was a participant in the plan. He was a bus driver w ith New Jersey Transit and had enrolled for $20,000 in life in s u ra n c e benefits. In May 2002, Paul passed away. He was s u rv i v e d by his widow, Sandra Price, and his children from a p re v io u s marriage, Shannon and Andre Price.

After Paul's death, his widow and his children submitted c o m p e tin g claims for the life insurance benefits. MetLife in v estig ated the matter and discovered that, in or around February 2 0 0 0 , Paul designated his widow as the primary beneficiary.

M e tL if e then informed the children's attorney that it was denying th e ir claims. MetLife explained that it had a fiduciary duty "to a d m i n is te r claims in accordance with ERISA and the terms of the p la n ." Appendix ("App.") 62-63. As such, it had to "pay the p ro c e e d s to the named beneficiary only." T h e children's attorney requested a review of the claim.

P a u l's first marriage had ended in 1995 with a final judgment of d iv o rc e in New Jersey Superior Court. Paragraph 11 of that ju d g m e n t specifically referenced Paul's life insurance: T h e Husband currently has life insurance upon his life . The Husband shall amend these policies in o rd e r to name the children of the marriage as irrev o ca b le beneficiaries until such time as Andre P r ic e , the son of the marriage[,] is emancipated. The H u s b a n d shall name the Wife as trustee.

A p p . 69. Since Andre remained unemancipated at the time of P a u l's death, the children claimed they were the rightful b e n e f ic ia rie s under the divorce judgment's plain terms.

This left MetLife in a quandary. Under ERISA, it had a d u ty to administer claims "in accordance with the documents and in stru m en ts governing the plan." 29U.S.C. § 1104(a)(1)(D).

T h ese documents instructed MetLife to pay the benefits to Paul's d e sig n a te d beneficiary--his widow. Under the New Jersey divorce judg m ent, however, the children were to be designated "irrevocable b e n e f ic ia rie s ." Normally, ERISA preempts any state law that "relate[s] to" a n employee benefit plan. 29U.S.C. § 1144(a); Egelhoff v. E g e lh o f f , 532 U.S. 141, 147-48 (2001). However, ERISA (as a m e n d e d by the Retirement Equity Act of 1984) contains an e x c ep tio n from this general rule for "qualified domestic relations o rd e rs" ("QDROs"). 29U.S.C. §§ 1144(b)(7), 1056(d)(3)(B)-(E); s e e Boggs v. Boggs, 520 U.S. 833, 846-47 (1997). A QDRO "a ssig n s to an alternate payee the right to . . . receive all or a p o rtio n of the benefits payable with respect to a participant under a plan." 29U.S.C. § 1056(d)(3)(B)(i).1 M e tL if e informed the competing claimants that it could not te ll "whether a court would find that th[e] divorce decree is a Q D R O ." App. 73. It noted that if the New Jersey judgment is a Q D R O , 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 w id o w is entitled to the money.2 MetLife stated that if the 1056(d)(3)(C), the domestic relations order must "clearly specif[y]" th e following: (i) the name and the last known mailing address (if a n y) of the participant and the name and mailing a d d re ss of each alternate payee, (ii) the amount or percentage of the participant's b e n e f its to be paid by the plan to each such alternate p a ye e , or the manner in which such amount or p e rc e n ta g e is to be determined, (iii) the number of payments or period to which such o rd e r applies, and ( iv ) each plan to which such order applies.

§ 1056(d)(3)(C). And under § 1056(d)(3)(D), a domestic relations o rd e r will be considered a QDRO "only if" it: (i) does not require a plan to provide any type or f o r m of benefit, or any option, not otherwise p ro v id e d under the plan, (ii) does not require the plan to provide increased b en ef its (determined on the basis of actuarial value), and (iii) does not require the payment of benefits to an a l te r n a te payee which are required to be paid to a n o th e r alternate payee under another order p re v io u sly determined to be a qualified domestic relatio n s order.

§ 1056(d)(3)(D).

2 E v e ry Court of Appeals to address the question has held th a t "the § 1144(b)(7) exception to ERISA preemption applies to c laim a n ts did not resolve the matter amicably, it would bring suit.

P r ic e 's widow and the children negotiated, but they failed to reach a n agreement. The children's attorney then asked MetLife to " [ k ]in d ly initiate an interpleader action." App. 75.

MetLife obliged, bringing this suit in the United States D is tric t Court for the District of New Jersey. On its own motion, th e District Court raised the issue of subject matter jurisdiction and d is m is s e d . This appeal followed. We review de novo the District C o u rt's dismissal for lack of subject matter jurisdiction. IFC In te rc o n su lt, AG v. Safeguard Int'l Partners, LLC, 438 F.3d 298, 3 0 9 (3d Cir. 2006).

II.

T h e equitable remedy of interpleader allows "a person h o ld in g property to join in a single suit two or more persons a ss e rtin g claims to that property." NYLife Distrib., Inc. v. A d h e re n c e Group, Inc., 72 F.3d 371, 372 n.1 (3d Cir. 1995). The p lain tiff in an interpleader action is a stakeholder that admits it is liab le to one of the claimants, but fears the prospect of multiple lia b ility. Interpleader allows the stakeholder to file suit, deposit the p ro p e rty with the court, and withdraw from the proceedings. The c o m p e t in g claimants are left to litigate between themselves. See Z e c h aria h Chaffee, Jr., The Federal Interpleader Act of 1936: I, 45 Y a le L.J. 963, 963 (1936). The result is a win-win situation. The sta k e h o ld e r avoids multiple liability. The claimants settle their d is p u te in a single proceeding, without having to sue the s ta k e h o ld e r first and then face "the difficulties of finding assets and le v yin g execution." Id. at 964.

There are two methods for bringing an interpleader in all QDROs, whether they involve either pension or welfare plans." M etro . Life Ins. Co. v. Bigelow, 283 F.3d 436, 440 n.3 (2d Cir. 2 0 0 2 ) ; Metro. Life Ins. Co. v. Pettit, 164 F.3d 857, 863 n.5 (4th C ir. 1998); Metro. Life Ins. Co. v. Marsh, 119 F.3d 415, 421 (6th C ir. 1997); Metro. Life Ins. Co. v. Wheaton, 42 F.3d 1080, 1 0 8 3 -8 4 (7th Cir. 1994); Carland v. Metro. Life Ins. Co., 935 F.2d 1 1 1 4 , 1119-20 (10th Cir. 1991). f e d e ra l court. The first is the interpleader statute, 28U.S.C. § 1 3 3 5 . District Courts have subject matter jurisdiction under this p ro v isio n if there is "minimal diversity" between two or more a d v e rs e claimants, and if the amount in controversy is $500 or m o re . See State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523, 5 3 0 -3 1 (1967). The second is Federal Rule of Civil Procedure 22.

U n lik e its statutory counterpart, rule interpleader is no more than a procedural device; the plaintiff must plead and prove an in d e p e n d en t basis for subject matter jurisdiction. See NYLife, 72 F .3 d at 372 n.1; Commercial Union Ins. Co. v. United States, 999 F .2 d 581, 584 (D.C. Cir. 1993).

In this case, MetLife does not rely on the interpleader s ta tu t e , nor could it, as the adverse claimants are all New Jerseyans.

R a th e r, it has styled its lawsuit as a rule interpleader action.

M e tL if e argues that jurisdiction exists under the federal question s ta tu te , 28U.S.C. § 1331, and ERISA's jurisdictional provision, 29 U .S .C . § 1132(e).

A federal question interpleader is a rarity. See 7 Charles A la n Wright et al., Federal Practice & Procedure § 1710 (3d ed.

2 0 0 1 ); see also Donald L. Doernberg, What's Wrong with this P ic tu re ? : Rule Interpleader, the Anti-Injunction Act, In Personam J u ris d ic tio n , and M.C. Escher, 67 U. Colo. L. Rev. 551, 565 n.56 (1 9 9 6 ) ("The dearth of reported cases involving interpleader and f e d era l question jurisdiction implies that although such cases can a ris e , they will be a small proportion of all federal interpleader a c tio n s." ). Statutory "arising under" jurisdiction requires that a f e d era l question appear on the face of the plaintiff's well-pleaded c o m p la in t. See Louisville & Nashville R.R. v. Mottley, 211 U.S.

1 4 9 , 152 (1908). This requirement poses a problem for an in te rp l e a d e r plaintiff, as all the complaint seeks is an order re lea sin g and discharging the plaintiff from liability. It is difficult to characterize such a request "as asserting either federal or state rig h ts ." Morongo Band of Mission Indians v. Cal. State Bd. of E q u a liz a tio n , 858 F.2d 1376, 1383 (9th Cir. 1988) (quoting Banco d e 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.

B u t only at first blush. Some interpleader actions do raise f e d era l questions. Indeed, our sister courts of appeals have re c o g n iz e d that an interpleader "arises under" federal law when b ro u g h t by an ERISA fiduciary against competing claimants to plan b e n e fits . See, e.g., Metro. Life Ins. Co. v. Bigelow, 283 F.3d 436, 4 3 9 -4 0 (2d Cir. 2002); Aetna Life Ins. Co. v. Bayona, 223 F.3d 1 0 3 0 , 1033-34 (9th Cir. 2000); Metro. Life Ins. Co. v. Marsh, 119 F .3 d 415, 418 (6th Cir. 1997).

W e agree with these courts. Federal question jurisdiction e x is ts when the plaintiff's well-pleaded complaint establishes that " f ed e ra l law creates the cause of action." Franchise Tax Bd. v. C o n str. Laborers Vacation Trust, 463 U.S. 1, 27-28 (1983).3 M e tL if e 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 f id u c ia rie s "to obtain . . . appropriate equitable relief . . . to enforce a n y 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 in terc o n n ec tio n between the basis of the District Court's ju ris d ic tio n -- E R IS A -- a n d the elements of [an] ERISA claim[] m a k e s it easy to confuse the question of the court's subject matter ju ris d ic tio n with the question of the plaintiff's ability to state a c la im ." Carlson v. Principal Fin. Group, 320 F.3d 301, 307 (2d C ir. 2003). The test we must apply is a familiar one. For ju risd ictio n a l purposes, the issue is not whether MetLife will u ltim a te ly be successful in sustaining its cause of action under sec tio n 502(a)(3). See Bell v. Hood, 327 U.S. 678, 681-82 (1946).

R a th e r , "[d]ismissal for lack of subject-matter jurisdiction because o f the inadequacy of the federal claim is proper only when the c la im is `so insubstantial, implausible, foreclosed by prior decisions o f [the Supreme] Court, or otherwise completely devoid of merit as n o t to involve a federal controversy." Steel Co. v. Citizens for a B e tte r Env't, 523 U.S. 83, 89 (1998) (quoting Oneida Indian N a t io n of N.Y. v. County of Oneida, 414 U.S. 661 , 666 (1974)); se e also Primax Recoveries, Inc. v. Gunter, 433 F.3d 515, 519 (6th C ir. 2006) ("An ERISA claim can be non-frivolous (or sufficiently s u b s ta n tia l) even if it is unsuccessful and possibly verging on the f o o lh a rd y in light of prior precedent barring the relief sought.") (q u o tatio n marks omitted); Cement Masons Health & Welfare T ru st Fund for N. Cal. v. Stone, 197 F.3d 1003, 1008 (9th Cir. 1 9 9 9 ) ("[D]ismissal of an ERISA claim under § 1132(a)(3) is p ro p e rly a dismissal on the merits rather than a dismissal for want o f subject matter jurisdiction.").

Here, MetLife brings suit as a fiduciary, and it adequately in v o k e s the District Court's subject matter jurisdiction by seeking " a p p ro p ria te equitable relief . . . to enforce any provisions of this s u b c h a p te r or the terms of the plan." ERISA § 502(a)(3), 29 U .S .C . § 1132(a)(3). Specifically, MetLife seeks interpleader, w h ic h is a form of "equitable relief." See U.S. Fire Ins. Co. v. A sb e sto sp ra y, Inc., 182 F.3d 201, 208 (3d Cir. 1999). Through its in te rp le a d er action, MetLife seeks to enforce the provisions of E R IS A and the plan by ensuring that funds are disbursed to the p ro p e r beneficiary. See Aetna Life, 223 F.3d at 1034. MetLife th u s presents a substantial, non-frivolous claim for relief under s e c tio n 502(a)(3). This is enough to confer subject matter ju ris d ic tio n under ERISA. See Bell, 327 U.S. at 681-82.4 judgment action. Both the declaratory judgment statute and Rule 2 2 are purely procedural. See NYLife, 72 F.3d at 372 n.1; Aetna L if e Ins. Co. v. Haworth, 300 U.S. 227, 240 (1937). Neither p ro v is io n enlarges the subject-matter jurisdiction of the federal c o u rts . Compare Fed. R. Civ. P. 82 ("These rules shall not be c o n stru e d to extend . . . the jurisdiction of the United States district co u rts . . . ."), with 28U.S.C. § 2201 (authorizing a federal court to issue a declaratory judgment "[i]n a case of actual controversy w ith in its jurisdiction") (emphasis added). Rather, both simply p ro v id e plaintiffs with a means to "anticipate and accelerate . . . c o e rc iv e action[s] by . . . defendant[s]." Bell & Beckwith v. United S ta te s , 766 F.2d 910, 914 (6th Cir. 1985). Based on these s im ila r itie s , some courts have held that the jurisdictional test a p p lica b le in declaratory judgment cases applies equally to a rule in te rp le a d er. See, e.g., Commercial Nat'l Bank of Chicago v. D e m o s , 18 F.3d 485, 488 (7th Cir. 1994); Commercial Union Ins.

C o . v. United States, 999 F.2d 581, 585 (D.C. Cir. 1993); Morongo B a n d of Mission Indians v. Cal. State Bd. of Equalization, 858 F.2d 1 3 7 6 , 1384 (9th Cir. 1988); Bell & Beckwith, 766 F.2d at 913-14.

In the declaratory judgment context, "[f]ederal courts have re g u la rly taken original jurisdiction over . . . suits in which, if the d e c lar a to ry judgment defendant brought a coercive action to e n f o rc e its rights, that suit would necessarily present a federal q u e s tio n . " Franchise Tax, 463 U.S. at 19; see also Richard H.

F a llo n , Jr., et. al, Hart & Wechsler's Federal Courts 900 (5th ed.

2 0 0 3 ) (stating that Franchise Tax "appears to endorse" an approach th a t "would uphold jurisdiction over a declaratory action if ju ris d ic tio n would exist in a hypothetical nondeclaratory action b ro u g h t by either party against the other."); but see Textron L yc o m i n g Reciprocating Engine Div., Avco Corp. v. UAW, 523 U .S . 653, 659-60 (1998) (expressing doubt about whether a "d eclaratory-ju d g m e n t complaint raising a nonfederal defense to an a n tic ip a te d federal claim . . . would confer § 1331 jurisdiction") (e m p h a s is in original). If the practice described by Franchise Tax is correct, and if the principle extends to rule interpleader, then ju ris d i c t io n exists whenever one of "the coercive actions a n tic ip a te d by the [interpleader] complaint would arise under f e d era l law." Morongo, 858 F.2d at 1385.

M e tL if e 's interpleader complaint anticipates coercive I I I.

P r e su m a b l y, the District Court agreed that MetLife's cause o f action arises under federal law. Its jurisdictional inquiry focused o n a different issue: exhaustion. "Except in limited c irc u m s ta n c es ," we have held, "a federal court will not entertain an E R IS A claim unless the plaintiff has exhausted the remedies a v a ila b le under the plan." Harrow v. Prudential Ins. Co. of Am., 2 7 9 F.3d 244, 249 (3d Cir. 2002) (quotation omitted). Relying on th a t rule, the District Court noted that MetLife "assert[ed] federal ju ris d ic tio n under ERISA despite . . . having made no initial d e te rm in a tio n about which potential plan beneficiaries should be p aid . " 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 p la n administrator's duty to make its own initial determination re g a rd in g who should be paid." Id. at 1-2. Absent such a d eterm in atio n , there was "no administrative record for th[e] Court to review." Id. at 2. Thus, the District Court held that jurisdiction w a s lacking.

T h e District Court's gloss on the exhaustion requirement raises two questions. First, should courts label ERISA's e x h a u s tio n requirement as a jurisdictional prerequisite to federal c o u r t adjudication? Second, labels aside, is there a "reverse e x h a u stio n " requirement that limits a fiduciary's ability to bring an in te rp le a d er action? We address these questions in turn. A.

A recent series of Supreme Court decisions provides helpful g u id a n c e on the uses and misuses of the word "jurisdiction." See B o w le s 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. U n ite d States, 546 U.S. 12 (2005) (per curiam); Kontrick v. Ryan, 5 4 0 U.S. 443 (2004). These cases clarify that nonstatutory claimp ro c e ss in g rules are not properly labeled "jurisdictional." True " ju ris d ic tio n a l" limitations are set by the Constitution and by C o n g re ss , not by rules of procedure or judge-made doctrine. See K o n tric k , 540 U.S. at 452 ("Only Congress may determine a lower f e d era l court's subject-matter jurisdiction."); see also Bowles, 127 S . Ct. at 2364-65 & n.3 (same). Nonstatutory rules, "even if u n a ltera b le on a party's application, can nonetheless be forfeited if th e party asserting the rule waits too long to raise the point." See K o n tric k , 540 U.S. at 456.

As it explained these principles, the Supreme Court noted th at its own past decisions had sometimes mislabeled nonstatutory ru le s as "jurisdictional." The Court described these casual in v o c a tio n s of the term as "drive-by jurisdictional rulings that s h o u ld be accorded no precedential effect on the question whether th e federal court had authority to adjudicate the claim in suit." A rb a u g h , 126 S. Ct. at 1242-43 (quotation marks omitted).

I n f o r m e d by the Supreme Court's instruction, we must a ss e ss whether ERISA's exhaustion doctrine is a "jurisdictional" m a n d a te . Certainly, it is an important legal rule. We have r e c o g n i z e d that requiring exhaustion of plan remedies helps to " ` r e d u c e the number of frivolous lawsuits under ERISA; to p ro m o te the consistent treatment of claims for benefits; to provide a nonadversarial method of claim settlement; and to minimize the c o sts of claims settlement for all concerned.'" Harrow, 279 F.3d at 249 (quoting Amato v. Bernard, 618 F.2d 559, 567 (9th Cir. 1 9 8 0 )). In addition, exhaustion enhances the ability of fiduciaries " `to expertly and efficiently manage their funds by preventing p re m a tu re judicial intervention in their decision-making p ro c e ss e s.'" Id. (quoting Amato, 618 F.2d at 567). It also has the s a lu ta ry effect of "refining and defining the problem" for final ju d ic ia l resolution. Amato, 618 F.2d at 568.

But as important as the rule may be, "ERISA nowhere m e n tio n s the exhaustion doctrine." Id. at 566. It is a judicial in n o v a tio n fashioned with an eye toward "sound policy." Id. at 5 6 7 . We have not required exhaustion where the claim seeks to en fo rce a statutory right under ERISA. Zipf v. AT&T, 799 F.2d 8 8 9 , 891-92 (3d Cir. 1986). In addition, the failure to exhaust will b e excused in cases where a fact-sensitive balancing of factors re v e als that exhaustion would be futile. See Harrow, 279 F.3d at 2 4 9 -5 0 .

This is not the stuff of a jurisdictional rule. Congress has e x p re s s ly provided for jurisdiction over ERISA cases in 29U.S.C.

§ 1132(e). Neither that provision nor any other part of ERISA c o n ta in s an exhaustion requirement. Thus, as a judicially-crafted d o ctrin e, exhaustion places no limits on a court's adjudicatory p o w e r. See Arbaugh, 126 S. Ct. at 1245; Kontrick, 540 U.S. at 4 5 2 ; see also Paese v. Hartford Life & Accident Ins. Co., 449 F.3d 4 3 5 , 445 (2d Cir. 2006) ("[ERISA exhaustion] is purely a judgem a d e concept that developed in the absence of statutory language d e m o n s tra tin g that Congress intended to make [it] a jurisdictional re q u ire m e n t." ); Chailland v. Brown & Root, Inc., 45 F.3d 947, 950 n .6 (5th Cir. 1995) (same).

Furthermore, even aside from the Supreme Court's in s t r u c tio n , our own cases carefully distinguish "between p ru d e n tia l exhaustion and jurisdictional exhaustion." Wilson v. M V M , Inc., 475 F.3d 166, 174 (3d Cir. 2007); see also Zipes v. T ra n s World Airlines, Inc., 455 U.S. 385, 393 (1982). Prudential e x h a u stio n "is generally judicially created." Wilson, 475 F.3d at 1 7 4 . It reflects a judicial desire to "respect[] agency autonomy by a llo w in g it to correct its own errors." Id. Unlike a rigid ju risd ictio n a l rule, prudential exhaustion provides flexible ex ce p tio n s for "waiver, estoppel, tolling or futility." Id. ERISA's e x h a u s tio n requirement bears all the hallmarks of a n o n ju ris d ic tio n a l prudential rule. In addition to being judge-made, th e doctrine's futility exception involves a discretionary balancing o f interests. Judicial prudence, not power, governs its application in a given case.

In reaching this conclusion, we have not overlooked the s e v e ra l cases that refer to ERISA exhaustion as "jurisdictional." 5 T w o are particularly noteworthy. In Wolf v. National Shopmen P e n s io n Fund, 728 F.2d 182 (3d Cir. 1984), we described our a n a lys is as a "jurisdictional inquiry" and classified exhaustion as a necessary predicate to "federal jurisdiction." Id. at 186-87. In a d d itio n , the leading case in this area, Amato v. Bernard, 618 F.2d 5 5 9 (9th Cir. 1980), referred to the exhaustion of plan remedies in "ju risd ictio n [a l]" terms. Id. at 566. Neither case, however, e x p la in e d why or how a doctrine borne of "sound policy" qualified a s "jurisdictional." Amato, 618 F.2d at 568. The opinions simply s p rin k le d their analyses with offhanded references to the term. See A rb a u g h , 126 S. Ct. at 1242-43. They do not alter our conclusion t h a t ERISA's exhaustion doctrine places no limits on a federal c o u rt's subject matter jurisdiction.

MetLife brought this interpleader action against Paul Price's w id o w and his children. Before the widow and the children ever f ile d a responsive pleading, the District Court acted in the name of s u b j e c t matter jurisdiction and dismissed on exhaustion grounds.

T h is was error. The exhaustion requirement is a nonjurisdictional a f firm a ti v e defense. See Paese, 449 F.3d at 446; cf. Williams v. R u n yo n , 130 F.3d 568, 573 (3d Cir. 1997).

B.

T h e question remains whether the affirmative defense of e x h a u stio n bars MetLife's interpleader action. As noted above, our c a se s hold that persons claiming plan benefits must generally " e x h au s t their administrative remedies before seeking judicial relief ." Berger v. Edgewater Steel Co., 911 F.2d 911, 916 (3d Cir. 1 9 9 0 ) . Of course, MetLife is not a person claiming plan benefits.

I t is a fiduciary attempting to interplead the competing claimants.

T h e re is no Third Circuit precedent addressing the applicability of e x h a u stio n principles in this context. The question for us, then, is w h e th e r a so-called "reverse exhaustion" requirement bars a plan f id u c ia r y from bringing an interpleader action without first d e v e lo p in g a record and rendering a final benefits decision.

T h e consensus view is that a fiduciary need not make a final b e n e fits decision. Many courts have allowed the use of in te rp le a d er in ERISA benefits cases. See, e.g., Alliant T e c h sys te m s , Inc. v. Marks, 465 F.3d 864 (8th Cir. 2006); Metro.

L if e Ins. Co. v. Parker, 436 F.3d 1109 (9th Cir. 2006); Guardian L if e Ins. Co. of Am. v. Finch, 395 F.3d 238 (5th Cir. 2004); Metro.

L if e Ins. Co. v. Bigelow, 283 F.3d 436 (2d Cir. 2002); Aetna Life I n s . Co. v. Bayona, 223 F.3d 1030 (9th Cir. 2000); Metro. Life Ins.

C o . v. Marsh, 119 F.3d 415 (6th Cir. 1997). Almost none of them e v e n mention the possibility of using exhaustion principles to bar in ter p lea d e r actions. The prevailing view is that "[i]nterpleader is a valuable procedural device for ERISA plans who are confronted w ith conflicting multiple claims upon the proceeds of an in d iv id u a l's benefit plan." Trustees of Directors Guild of Am.

P r o d u c e r Pension Benefits Plans v. Tise, 234 F.3d 415, 426, as am en d ed upon denial of reh'g, 255 F.3d 661 (9th Cir. 2000). If c o u rts demanded a fully developed record and a final benefits d e c isio n , ERISA plans might face exposure to multiple lawsuits f r o m disappointed claimants. Most courts allow fiduciaries to a v o id this quandary by filing an interpleader complaint. See id.

But there are three reported decisions that, to varying d e g re e s , support a reverse-exhaustion requirement in at least some in ter p lea d e r cases. The first is Life Insurance Company of North A m e ric a v. Nears, 926 F. Supp. 86 (W.D. La. 1996). There, a p a rtic ip a n t 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 th e policies contained a "facility of payment" clause. It stated that " [ a]n y amount of your . . . benefits for which there is no designated . . . beneficiary will be paid, at [the insurer's] option, to any of your f o llo w in g living relatives: spouse, mother, father, child, or c h ild re n , or to the executors or administrators of your estate." Id. a t 89. Because the plan did not "rank the classes of relatives in any o rd e r or preference," the court "decline[d] to impose its subjective p re f ere n c e . . . where the insurer ha[d] clearly contracted for the d is c re tio n to exercise its own judgment." Id. The court thus d e n ie d the motion for interpleader as to that policy.

F o rcie r v. Forcier, 406 F. Supp. 2d 132 (D. Mass. 2005), a ls o involved competing claims to a life-insurance policy with no d e s ig n a te d beneficiary. The court noted that since exhaustion is a p r e re q u is ite to claims for plan benefits, "[a]rguably . . . the inverse s h o u l d be true" for interpleaders brought by plan fiduciaries: " a b se n t good cause, insurers or plan administrators with d isc re tio n a ry power under ERISA plans should be required to e x e rc is e that discretion, and make a decision, before seeking ju d ic ia l relief." Id. at 140-41. The court stated that this "reverse e x h a u stio n approach ha[d] considerable superficial appeal." Id. at 1 4 1 . The insurer had contracted to make a benefits decision "under a policy that it wrote and that it administer[ed]." Id. Having a f e d e ra l court "step into the shoes of the insurer" might well " im p e d e cost-effective administration." Id. But despite this c o n c e r n , the court decided that reverse exhaustion was merely " p re f era b le ," not mandatory. Id. Interpleader, it reasoned, served th e interests of both participants and beneficiaries by ensuring p ro m p t, fair resolutions of competing claims. Id. at 142. The court d e ter m in e d that to dismiss on reverse-exhaustion grounds would o n ly prolong disputes, as disappointed claimants would likely seek re v ie w in federal court. Id.

On appeal in Forcier, the Court of Appeals for the First C ircu it declined to address the reverse-exhaustion issue because the p a rtie s had not raised it. See Forcier v. Metro. Life Ins. Co., 469 F .3 d 178, 182 (1st Cir. 2006). Parenthetically, though, the court n o te d that "on a going-forward basis" it might not "look with favor u p o n interpleader actions brought by insurers who, in the last a n a lys is , are seeking to shift their responsibilities to the district c o u rt without any clear demonstration of a need for interpleader re lie f ." Id. at 182 n.3.

In our view, the analyses of both the Nears opinion (which e n d o rs e d a limited form of reverse exhaustion) and the Court of A p p e a ls for the First Circuit's opinion in Forcier (which remained u n c o m m itte d ) are persuasive. Nonetheless, whatever the merits of th e s e opinions' reasoning, both are inapposite. In both cases, p a rtic ip a n ts failed to designate beneficiaries, and the plans vested th e fiduciaries with broad discretionary authority to distribute the p ro c e ed s . See Forcier, 469 F.3d at 185 ("MetLife contracted for an e x tre m e ly free hand in deciding to whom . . . the policy's proceeds w o u ld be paid in the absence of a designated beneficiary."); Nears, 9 2 6 F. Supp. at 89 ("[T]he insurer has clearly contracted for the d is c r e t io n to exercise its own judgment."). The sound judicial p o lic y that animates the exhaustion doctrine applies with particular f o rc e when fiduciaries are exercising discretion granted by plan d o c u m e n ts . Courts review such decisions under the deferential a rb itra ry and capricious standard. See Firestone Tire & Rubber Co. v . Bruch, 489 U.S. 101, 115 (1989); McLeod v. Hartford Life & A c c id e n t Ins. Co., 372 F.3d 618, 623 (3d Cir. 2004). This d e f ere n c e insulates the decision from undue judicial second g u e s s in g and increases the likelihood that exhaustion (or reverse e x h a u stio n ) will weed out frivolous claims, "`promot[ing] the c o n sis te n t treatment of claims for benefits,'" and encouraging n o n a d v e rs a ria l claim settlement. See Harrow, 279 F.3d at 249 (q u o tin g Amato, 618 F.2d at 567).

U n lik e the discretionary question at issue in Nears and F o r c ie r, MetLife's decision in this case would receive no deference f ro m a federal court. The dispute between Price's widow and his c h i ld r e n turns on whether the New Jersey divorce judgment is a Q D R O . That is a question "of statutory construction over which re v iew in g courts exercise de novo review." Files v. ExxonMobil P e n sio n Plan, 428 F.3d 478, 486 (3d Cir. 2005), cert. denied 126 S.

C t. 2304 (2006). In light of that standard, the policy considerations u n d e rlyin g the exhaustion doctrine do not apply. First, mandating re v e rs e exhaustion would do little to reduce frivolous lawsuits. See H a rro w , 279 F.3d at 249. Persons with frivolous claims could still g e t a plenary "second look" in federal court. Second, reverse e x h a u stio n in these circumstances is unlikely to produce a sig n if ica n t reduction in costs or an increase in nonadversarial claim s e ttle m e n t. See id. On the contrary, with plenary review in the o f f in g , the disappointed claimant will have every incentive to c o n tin u e the battle in federal court. Third, little is gained by having f id u c ia r i e s "refin[e] and defin[e] the problem" for final judicial reso lu tio n . See Amato, 618 F.2d at 568. Questions of statutory in te rp re ta tio n fall within the "peculiar expertise" of the courts, and th e fiduciary's position on the matter will be of limited utility. Cf.

Z ip f v. AT&T, 799 F.2d 889, 893 (3d Cir. 1986). In short, even if " so u n d policy" supports the imposition of a reverse-exhaustion re q u ire m e n t in some cases, that policy does not apply when the q u e s tio n centers on the existence of a QDRO.

Policy aside, litigants in at least one case have argued that 2 9U.S.C. § 1056(d)(3)(G)(i)(II) prohibits interpleaders filed before a n initial QDRO decision by the fiduciary. See Metro. Life Ins.

C o . v. Bigelow, 283 F.3d 436, 442 (2d Cir. 2002). Section 1 0 5 6 (d )(3 )(G )(i)(II) states that "within a reasonable period after" re c e iv in g a domestic relations order, "the plan administrator shall d e te rm in e whether such order is a qualified domestic relations o rd e r and notify the participant and each alternate payee of such d e ter m in a tio n ." The Court of Appeals for the Second Circuit held th a t bringing an interpleader complaint is an acceptable way to " d e te rm in [ e ]" an order's QDRO status. Bigelow, 283 F.3d at 442.

W e agree. A plan administrator's interpretation and application of th e statutory QDRO requirements is no more authoritative (and no le ss final) than that of the competing claimants. An interpleader c o m p la in t effectuates a prompt, final determination of the QDRO iss u e . As the Court of Appeals for the Second Circuit pointed out, c u ttin g off the use of interpleader "would assist none of the in te re ste d parties." Bigelow, 283 F.3d at 442. It would also make it far more difficult for administrators to "determin[e]" c o n c lu s iv e ly an order's QDRO status "within a reasonable period." S e e § 1056(d)(3)(G)(i)(II). We therefore hold that neither ERISA n o r the prudential doctrine of exhaustion bars MetLife's in te rp le a d er action.

IV .

In sum, the District Court erred when it dismissed MetLife's c o m p lain t for want of subject matter jurisdiction. MetLife's wellp le a d ed complaint establishes that its cause of action arises under E R IS A . The exhaustion requirement is a nonjurisdictional af firm ativ e defense, and that affirmative defense did not require M e tL if e to make a decision on the QDRO issue before seeking in terp lea d er in federal court. We will vacate the District Court's ju d g m e n t and remand for further proceedings consistent with this o p in io n .

1 A domestic relations order is a QDRO if it meets the req u irem en ts of 29U.S.C. §§ 1056(d)(3)(C) & (D). Under § 3 This so-called "creation test" is "[t]he most familiar d e f i n itio n of the statutory `arising under' limitation." Franchise T a x , 463 U.S. at 8-9; see American Well Works Co. v. Layne & B o w le r Co., 241 U.S. 257, 260 (1916) (Holmes, J.) ("A suit arises u n d e r the law that creates the cause of action."). However, as J u d g e Friendly famously pointed out, "[i]t has come to be realized th a t Mr. Justice Holmes' formula is more useful for inclusion than f o r the exclusion for which it was intended." T.B. Harms Co. v. E lisc u , 339 F.2d 823, 827 (2d Cir. 1964). Jurisdiction also exists w h e r e "some substantial, disputed question of federal law is a n e c e s s a r y element of . . . [a] well-pleaded state claim[]." Franchise T a x , 463 U.S. at 13. And if federal law completely preempts a s ta te claim, "the result is to convert complaints purportedly based o n the preempted state law into complaints stating federal claims f ro m their inception." In re Cmty. Bank of N. Va., 418 F.3d 277,

2 9 0 (3d Cir. 2005) (quotation marks omitted); see, e.g., Metro. Life In s. Co. v. Taylor, 481 U.S. 58, 66-67 (1987). For purposes of this c a s e , Justice Holmes' rule of inclusion is sufficient.

4 Even apart from MetLife's cause of action as a fiduciary, th e re may be an additional basis for subject matter jurisdiction in th is case. A rule interpleader is quite similar to a declaratory actions by both Price's widow and his children. Both hypothetical c la im s would seek to recover "benefits due . . . under the terms of [ a ] plan," 29U.S.C. § 1132(a)(1)(B), and would necessarily present f e d era l questions. See Taylor, 481 U.S. at 66-67. Thus, the a p p ro a c h adopted by our sister courts of appeals in cases like Bell & Beckwith and Morongo might provide an alternative basis for s u b je c t matter jurisdiction. Nonetheless, in light of our d e t e r m i n atio n that federal law creates MetLife's cause of action, w e need not take a position on the propriety of those decisions.

5 See, e.g., Peterson v. Cont'l Cas. Co., 282 F.3d 112, 117 (2 d Cir. 2002) ("[A]bsent a determination by the plan a d m in istra to r, federal courts are without jurisdiction to adjudicate w h e th e r an employee is eligible for benefits under an ERISA p la n ." ); Duffie v. Deere & Co., 111 F.3d 70, 72 n.2 (8th Cir. 1997) (p e r curiam) (referring to "the jurisdictional argument that [the claim an t] failed to exhaust his remedies"); White v. Jacobs Eng'g G ro u p Long Term Disability Benefit Plan, 896 F.2d 344, 346 (9th C ir. 1990) ("[A]ppellant did not exhaust his administrative re m e d ies , and jurisdiction in the district court was improperly g ra n te d ." ).