Welcome to the inaugural issue of the GWB eRISA Newsletter. The purpose of this newsletter is to provide you with information concerning interesting or significant decisions and developments in ERISA litigation. If you have questions or would like more information about any of the content of this newsletter, please give us a call. And, let us know if there are other members of your team that you would like to add to our mailing list.
Mullins v. AT&T Corp., 2008 WL 4073848 (4th Cir. Sept. 3, 2008): Mullins, participant under a long-term disability plan established by AT&T Corp. and administered by Connecticut General Life Ins. Co. ("Connecticut General"), made a claim for long-term disability benefits. In connection with her claim, Mullins requested copies of the policy and other plan documents. Mullins did not receive a copy of the summary plan description. Connecticut General denied Mullins' claim and she commenced the underlying action alleging that Connecticut General wrongfully denied her claim for benefits and violated ERISA by not providing her with the SPD. During the pendency of the underlying action, Mullins sought discovery of Connecticut General's claims processing manual, protocols, or internal guidelines. The district court denied Mullins' discovery request and granted summary judgment in favor of Connecticut General. However, the district court also determined that Connecticut General violated ERISA by failing to provide her with the SPD as requested and imposed civil penalties upon it.
Mullins appealed the benefits determination and Connecticut General cross-appealed. The Fourth Circuit, without addressing the merits of Mullins' claim or Connecticut General's cross-appeal, remanded the case to the district court. In doing so it ordered the district court to determine whether any documents existed concerning the processing of Mullins' claim for benefits, that any relevant documents pertaining to Mullins' review be produced, that the parties be provided with the time and opportunity to argue the relevancy of the documents and that the district court change its previous decision if necessary. Connecticut General provided the district court with the requested documents. The district court, referring to several of the newly produced documents, granted Connecticut General summary judgment. However, the district court did not allow Mullins to first review the documents or give her an opportunity to argue their relevance.Mullins appealed this determination alleging that the district court erred in failing to allow her to review the documents and argue their relevance. On appeal, the Fourth Circuit agreed that the district court failed to comply with its original mandate. The Fourth Circuit remanded the case yet again to allow Mullins an opportunity to review the documents and argue their relevance. The Court opined that this determination regarding Connecticut General's claims processing procedures must be made before the district court can either affirm its prior opinion granting summary judgment to Connecticut General or make any necessary changes to its ruling. The Fourth Circuit stated that once these issues are resolved, the Court will be able to provide a meaningful appellate review of the denial of Mullins' claim.
White v. Coca-Cola Company, --- F.3d ---, 2008 WL 4149706 (11th Cir. Sept. 10, 2008): This case involves application of an other income benefits offset provision. The plaintiffs, participants in a long term disability plan, challenged the decision to offset social security disability benefits against their LTD benefits because they alleged that the offset resulted in payment of benefits below the default monthly benefit under the plan. The plan's default monthly benefit is 60% of the participant's average compensation. The plan allowed for the reduction of benefits where a participant received disability benefits from other sources, like Social Security, but the total monthly benefit was not to exceed 70% of his average compensation minus the amount of disability benefits from other sources, provided that the offset would not reduce the disability benefit to an amount less than 60% of the participant's average compensation. The plan also allowed for the recoupment of any overpayment of benefits through a reduction of benefit payments.
The plaintiffs argued that the plan was ambiguous in that it called for both a 60% ceiling and a 60% floor on the benefit amount a participant receives. The court agreed that the plan was ambiguous and that ambiguities should be construed against the drafter of the document, but it ultimately determined that the administrator's interpretation and reconciliation of the plan provisions with the summary plan description was reasonable and should be given deference notwithstanding the ambiguity. As such, the administrator was permitted to offset below 60% of a participant's average compensation. In reaching this conclusion, the Court highlighted the fact that the benefits committee consulted outside counsel in resolving the ambiguity. It explained, "'[t]here is no requirement that an administrator. . . seek independent counsel in interpreting and administering an ERISA plan,' but seeking counsel establishes the 'evenhandedness of [the] decision-making process' because it contributes to 'informed and knowledgeable decisions. . . in interpreting the Plan.'" White, at *7. In rejecting the application of contra proferentum, the Court further explained, "We have rejected contra proferentum in ERISA appeals, except during the first step of the Williams analysis, because '[t]he reasonable interpretation' factor and the arbitrary and capricious standard of review would have little meaning if ambiguous language in an ERISA plan were construed against the [plan administrator.]" Id., at *8.
Finally, the Court determined that the benefits committee did not operate under a conflict of interest because benefits were paid from a trust that is funded through periodic contributions such that no immediate expense is incurred as a result of paying benefits. Interestingly, plaintiffs offered evidence that benefits had been paid from the general assets of Coca-Cola based on IRS records from 2003 and 2004. Since, however, there was no evidence that general assets were used to pay benefits in the year when the offset and recoupment provisions were applied, the Court found the evidence unpersuasive. The absence of a conflict was significant because it provided the Court with a basis upon which to ignore the standard of review set forth in Glenn. In determining the standard of review that should apply, the Court described the 6-step analysis outlined in Williams v. BellSouth Telecommunications, Inc., 373 F.3d 1132, 1137-38 (11th Cir. 2004). The Court recognized that Glenn "cast doubt on the sixth step of this procedure," which called for the application of a heightened arbitrary and capricious standard if there was a conflict of interest, but because no conflict existed, the 6-step analysis applied without modification.
Jones v. Mountaire Corp. Long Term Disability Plan, --- F.3d ---, 2008 WL 4163498 (8th Cir. Sept. 11, 2008): In this case, Mountaire and Prudential appealed the district court's grant of summary judgment and award of LTD benefits to the plaintiff, who suffered from emphysema and coronary artery disease. Defendants argued that the court erred by relying on a different job database (Occupational Information Network ("O*Net")), which was raised for the first time in the court's order, and in concluding that Prudential inappropriately used the Dictionary of Occupational Titles ("DOT") to evaluate the plaintiff's job duties. The DOT classified plaintiff's job, sales representative of animal products, as light, whereas the O*Net stated that the job required frequent exposure to pollutants, gases, dust and extremes in temperatures. The Eighth Circuit agreed that the district court erred by failing to give the parties an opportunity to brief the merits of the case and the differences between the two databases, including the reasons Prudential used the DOT instead of the O*Net. Neither party had raised the issue of the DOT versus the O*Net in its briefing. Rather, the district court conducted its own research and identified the potential procedural irregularity. As such, the court should have given the parties an opportunity to address the issue before ruling.
Mountaire and Prudential also argued that the district court erred in applying a de novo standard of review rather than abuse of discretion. The Eighth Circuit described the combination-of-factors standard of review set forth in Metropolitan Life Ins. Co. v. Glenn, 128 S. Ct. 2343 (2008) but declined to apply it and remanded to the district court for reconsideration of the standard.
Roumeliote v. Long Term Disability Plan for Employees of Worthington Industries, 2008 WL 4181187 (6th Cir. Sept. 11, 2008): In this case, the Sixth Circuit concluded that the arbitrary and capricious standard of review applied by the district court in upholding the insurer's denial of benefits was appropriate under Glenn. The Court explained that the Supreme Court (in Glenn) "expressly approved of the approach first enunciated in Firestone. . . and followed by this court in Glenn" indicating a lack of intent to modify the analysis of benefit decisions made in the context of a conflict of interest. The district court properly recognized the potential for an inherent conflict of interest and weighed it as a factor, but found that the other factors tipped the balance in favor of the plan administrator's denial. As such, the plan administrator's decision was not arbitrary and capricious.
Abena v. Metropolitan Life Ins. Co., 2008 WL 4210938 (7th Cir. Sept. 16, 2008): In an action by a plan participant, Abena, against the plan administrator and employer challenging termination of benefits, the district court held that the statute of limitation contained in the Plan was reasonable and that the participant's claim was time barred. The Seventh Circuit agreed. The Plan provided that a participant must commence a legal action no later than three years from the date proof of disability is due. Abena's elimination period ended on August 15, 2000 and she had to submit proof of disability on November 15, 2000. This meant that under the Plan Abena had to file a legal action prior to November 15, 2003. Abena was granted benefits for two years and then on August 8, 2002 she was notified that she was no longer eligible for benefits. She pursued internal reviews which were upheld and affirmed on April 16, 2003. Abena did not file suit until April 17, 2006. The Court determined that the last day she could have brought suit was November 15, 2003 and, even though the internal review process did not end until April 16, 2003, seven months (from April to November) was a reasonable time to file suit. The Court stated that this would not be the holding if the internal review process had not ended until after the November deadline or if there was not a reasonable amount of time after the review process ended to file suit.
Cross v. Metropolitan Life Ins. Co., 2008 WL 4216555 (11th Cir. Sept. 16, 2008): Cross brought this action against MetLife challenging the termination of his long-term disability benefits. The district court held that MetLife's decision to terminate was arbitrary and capricious. On appeal, the Eleventh Circuit agreed. The Court pointed to the following factors as evidence of MetLife's abuse of discretion: (1) MetLife concluded Cross was able to engage in his own occupation but none of MetLife's independent physicians specified the types of activities Cross could perform, (2) MetLife did not order a FCE even after its independent physicians recommended one, (3) MetLife relied on a report where the physician stated that he could not validly assess Cross' limitations, (4) MetLife relied on surveillance which was mere snapshots of Cross' day and (5) MetLife relied on a report that stated that Cross could perform sedentary activities with accommodations but MetLife made no determination of whether these accommodations would be met.
Tate v. Long Term Disability Plan for Salaried Employees of Champion Intern. Corp. No. 506, 2008 WL 4276593 (7th Cir. Sept. 19, 2008): Participant, Tate, brought an action against the plan administrator of her long-term disability plan alleging that it abused its discretion in terminating her benefits. The district court agreed with Tate, granting summary judgment in her favor and remanding the case to the Plan so that it could conclusively determine if she was entitled to benefits. The Plan appealed this ruling. The Seventh Circuit agreed with the district court that the Plan abused its discretion in terminating benefits because it did not consider Tate's qualifications or vocational skills in relation to her medical condition when it concluded that her disability did not render her unable to work. The Court emphasized that there was no explanation or reasoning for the Plan's decision. However, the Court stated that it was not imposing a rule that vocational experts must be hired or a transferable skills analysis must be performed.
Regarding the district court's decision to remand the case, the Court stated that there was a long-standing distinction "between a case dealing with a plan administrator's initial denial of benefits and a case where the plan administrator terminated benefits to which the administrator has previously determined the claimant was entitled." In the first situation, remand is appropriate and in the second situation, reinstatement is appropriate. The Court found that remand was appropriate in this case because Tate's situation was similar to an initial denial of benefits even though she had been paid benefits for four years because the Plan had not explicitly determined that she was eligible for benefits under the "any occupation" standard - she originally was granted benefits under the "own occupation" definition and her benefits merely continued past test change without an official determination.
It should be noted that one day before this decision, the Ninth Circuit in Pannebecker v. Liberty Life Assur. Co. of Boston, 2008 WL 4253640 (Sept. 18, 2008), cited the same distinction as the Seventh Circuit but stated that the test was whether benefits would still be paid absent the arbitrary and capricious conduct of the administrator. Under this test, it would appear that Tate's case would not have been remanded and, instead, benefits would have been reinstated.
Vaughn v. Bay Environmental Management, Inc., 2008 WL 4276603 (9th Cir. Sept. 19, 2008): Former employees sought to recover "losses occasioned by a breach of fiduciary duty that allegedly reduced the amount" of their pension benefits under ERISA. The issue presented to the Ninth Circuit was whether the former employees had standing to sue under ERISA. The Court held that they agreed with the First, Third, Fourth, Sixth, Seventh, and Eleventh Circuits that former employees do have standing to bring suit for breach of fiduciary duty under 29 U.S.C. 1132(a)(2).
Burke v. Pitney Bowes Inc. Long-Term Disability Plan, 2008 WL 4276910 (9th Cir. Sept. 19, 2008): In the underlying action, the district court granted summary judgment to the Plan on Burke's claims arising out of the termination of his long-term disability benefits. The district court, in evaluating the Plan's potential structural conflict of interest, applied the Atwood framework which at that time had been overruled by Glenn and Abatie. The Ninth Circuit held that because the district court did not consider the Plan in light of Glenn and Abatie, it had to be remanded. The Ninth Circuit noted three aspects of the Plan that were to be considered on remand: (1) even though the plan benefits are paid out of a trust, "a structural conflict of interest exists that must be considered as a factor in determining whether there was an abuse of discretion," (2) the fact that employees contribute to the trust mitigates the conflict of interest, and (3) the fact that the plan is administered by the employer increases the structural conflict of interest. The Ninth Circuit also vacated the district court's ruling that it could not consider evidence outside the administrative record. In making its ruling, the Court stated that the district court did not consider the peculiar circumstances of the case - that Burke assumed, through correspondence with the Plan, that the documents she sought to use were actually part of the administrative record. The Court also stated that the evidence outside the record could be used to decide the "nature, extent, and effect" of a conflict of interest and could be considered if "procedural irregularities prevented the full development of the administrative record."
Cromer-Tyler v. Teitel, 2008 WL 4335938 (11th Cir. Sept. 24, 2008): In this case, the plaintiff, a participant in a profit sharing plan and money purchase plan was advised by the custodian of the accounts that she had no vested balance in either plan and was not entitled to any distribution. Plaintiff's counsel requested copies of certain documents and vesting schedules for both retirement plans, and the administrator provided a copy of a prototype profit sharing plan and an adoption agreement for the profit sharing plan only. The Eleventh Circuit upheld the district court's holding that the exhaustion requirement was excused with respect to the money purchase plan since no documentation regarding that plan was ever sent to plaintiff and, therefore, she was not provided meaningful access to the plan's review process. The plaintiff's claim for distribution under the plan was granted and she was awarded statutory penalties, for which the plan administrator was personally liable, as well as attorneys' fees. In addition, the Court reversed the district court's dismissal of plaintiff's claim for a distribution under the profit sharing plan and remanded the case for plaintiff to appeal her claim for a distribution, notwithstanding plaintiff's alleged failure to exhaust administrative remedies. The Court permitted her to do so because it concluded that the letter informing plaintiff that her benefits under the profit sharing plan were terminated was inadequate in that it did not provide the reason for the determination, did not specify the applicable plan provision on which the determination was based, and did not describe the procedures for reviewing the claim. The Court explained that "the appropriate remedy for an inadequate benefits determination letter is 'remand to the plan administrator for an out-of-time administrative appeal.' " Id., at *3, citing Counts v. Am. Gen. Life and Accident Ins. Co., 111 F.3 105, 108 (11th Cir. 1997).
For information about cases decided in August 2008, click here.