In Their Opinion : Seventh Circuit Court of Appeals Commentary : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

GREEN v. THE UPS HEALTH AND WELFARE PACKAGE (February 10, 2010)

UPS negotiates collective bargaining agreements (CBAs) covering its employees who are members of the International Brotherhood of Teamsters (“IBT”). It actually negotiates with the international union and also directly and separately negotiates with some large locals, including Local 705. Under the 2002-2008 CBA with Local 705, UPS agreed to provide health care to Local 705 retirees. The benefit was outlined in the Summary Plan Description (SPD), which applied to all IBT retirees. The SPD set a monthly contribution for each retiree and provided that, if the cost of coverage exceeded a certain threshold, each retiree would share in the excess cost “by making an additional contribution.” It also stated that additional contributions would not be implemented until after the “current” CBA expired. The cost threshold was exceeded in 2006. In October 2007, UPS issued a Summary of Material Modification (SMM) advising all IBT retirees of that fact and imposing an additional contribution for each retiree effective January 1, 2008. Before implementing the additional contribution, however, UPS agreed with both the international and local unions to delay implementation until their respective CBAs expired. UPS sent a revised SMM to Local 705 retirees in December 2007 advising that increased contributions “well be effective” after the expiration of the “current” CBA. After the Local 705 CBA expired in mid-2008, UPS notified Local 705 retirees that it would implement an additional contribution effective February 2009. Local 705 retirees brought a class action, alleging that the collection of additional contributions violated the Plan and ERISA because a) the retirees were not sharing equally since the international retirees were not yet contributing, and b) the SPD stated that contributions would not be implemented until the expiration of the “current” plan and the Local 705 current plan now expired in 2013. The district court agreed with Local 705 on the first argument but agreed with the Plan on the second – and enjoined further collection of contributions until further order of the court. The retirees and the Plan appeal.

In their opinion, Judges Cudahy, Wood, and Evans affirmed. The Court agreed with the district court that the collection of contributions from Local 705 retirees only controverted the plain language of the Plan and was, therefore, arbitrary and capricious. The Court rejected UPS’ contrary interpretation of the “share equally” language and rejected its plea to consider extrinsic evidence under the doctrine of extrinsic ambiguity. Although the Court was more receptive to the use of the extrinsic ambiguity doctrine with respect to the meaning of “current” in the SPD, it concluded that it need not. Instead, it held that the December 2007 revised SMM modified the SPD and made it clear that the “current” CBA referred to was the 2002 CBA.

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MAJESKI v. METROPOLITAN LIFE INSURANCE CO. (December 29, 2009)

Kirsten Majeski was a nurse consultant for Metropolitan Life Insurance Co. ("MetLife"). Her typical workday involved sitting at a desk, using a phone and computer. In 2006, she was diagnosed with cervical radiculitis, a compression in the upper spinal. MetLife originally approved short-term disability benefits. It later determined that Majeski was not entitled to benefits, concluding that her impairment did not prevent her from performing her job. Majeski appealed and submitted medical evidence from her doctor and physical therapist. The conclusion of the medical evidence was that she had difficulty sitting and using her hands -- and was thus unable to perform her job. MetLife had a physician review the records. He concluded that there were "minimal objective findings" to support the suggested limitations. MetLife rejected the appeal. Majeski brought suit under ERISA. The district court granted summary judgment to MetLife. Majeski appeals.

In their opinion, Judges Wood, Evans and Tinder vacated and remanded. The Court first rejected Majeski's argument that the Supreme Court's decision in Glenn required a heightened standard of review. The Court admitted that it was still undecided on how to weigh a Plan administrator's conflict of interest. In Marrs, the Court concluded that the circumstances of the case should determine the impact of the conflict. The Court also rejected Majeski's argument that the district court should have considered evidence outside of the administrative record. On the merits, however, the Court agreed with Majeski. The physician's report on which MetLife solely relies did not address key findings presented by Majeski's medical evidence. Although the report concludes that there were "minimal objective findings," the Court cited several objective findings contained in Majeski's material that MetLife physician failed to mention or rebut. The failure to address this significant medical evidence amounts to an absence of reasoning and lack of fair review. The Court declined to rule directly in Majeski's favor, concluding that the typical and proper course is to remand to the plan administrator.

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SHARP ELECTRONICS CORP. v. METROPOLITAN LIFE INSURANCE CO. (August 18, 2009)

Sandra Rudzinski was an active employee of Sharp Electronics when she began experiencing fatigue and headaches. As a Sharp employee, she participated in its disability plan. Under the plan, Sharp paid short-term benefits during an initial 180-day period and Metropolitan Life Insurance Company ("MetLife") paid long-term benefits. Sharp paid premiums to MetLife on behalf of its employees. Rudzinski received short-term benefits from Sharp and applied for long-term benefits from MetLife. MetLife denied her application, first on the ground that she had a pre-existing disability and later on the ground that she had not completed the 180 days of short-term benefits. Rudzinski sued MetLife under ERISA. During the litigation, MetLife told Rudzinski that MetLife also denied her benefits because Sharp stopped remitting premium payments after her employment ended. She added Sharp as a defendant. She accused Sharp of interfering with her benefits, violating fiduciary duties, and for telling her that she could maintain her benefits by obtaining a conversion policy. Sharp cross-claimed against MetLife, alleging breach of fiduciary duty, equitable estoppel and indemnity. Rudzinski voluntarily dismissed her claim against Sharp and the court entered judgment in her favor in her claim against MetLife, leaving only Sharp's cross-claim. Sharp filed an amended complaint, alleging breach of fiduciary duty under ERISA, indemnification, negligence, negligent inducement, negligent misrepresentation, abuse of process and common-law breach of fiduciary duty. The court granted MetLife's motion to dismiss, concluding that MetLife had not breached a fiduciary duty and that the state law claims were preempted by ERISA. Sharp appeals.

In their opinion, Judges Kanne, Rovner and Wood affirmed with respect to ERISA and vacated and dismissed with respect to the state law claims. In order to recover under its ERISA claim, Sharp had to prove that MetLife owed it a fiduciary duty, that it was involved in fiduciary functions when it told Rudzinski about Sharp's failure to pay premiums, and that it was seeking damages for losses suffered by the plan (as opposed to the company). Although the Court agreed that Sharp and MetLife both occupied fiduciary roles, it concluded that MetLife did not owe a fiduciary duty to Sharp. It also concluded that Sharp's only losses were its fees and expenses in defending the suit brought by Rudzinski, losses not recoverable under ERISA. With respect to the state law claims, the Court disagreed with the district court that they were preempted by ERISA. ERISA does not preempt state law claims that are not related to a benefit plan. Here, Sharp's claims relate to its contractual relationship with MetLife. Even though the subject of that relationship is a benefit plan, claims relating to the contract are not preempted. The Court nevertheless dismissed the state law claims based on the lower court's alternative ruling that it would not exercise its discretion to hear the state law claims, considering that the only federal claim was dismissed. 

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MARRS v. MOTOROLA, INC. (August 14, 2009)

Years ago, Michael Marrs developed a psychiatric condition that forced him to leave his job at Motorola and go on disability leave. Six years after he started his leave, Motorola amended its disability plan. It imposed a two-year limit on disability benefits resulting from mental, rather than physical, conditions. Marr's benefits were terminated by Motorola two years after the amendment. Marrs brought a class action under ERISA. The district court granted summary judgment to Motorola. Marrs appeals.

In their opinion, Chief Judge Easterbrook and Judges Bauer and Posner affirmed. ERISA limits a plan's ability to amend its terms. It provides that no amendment can adversely affect benefits with respect to periods of disability prior to the date of the amendment. The Court rejected Marrs' interpretation under which a plan could not affect any benefits for a period of disability that began before the amendment, but continues to run. The Court also addressed and rejected Marrs' argument that the Supreme Court's Glenn decision required a different outcome. Normally, the Court stated, if the plan administrator is given discretion to interpret the terms of the plan, a court will only reject its interpretation if it is unreasonable. That discretion exists in Motorola's plan. In Glenn, the Supreme Court addressed the situation when a plan administrator is laboring under a conflict of interest. Here, however, the Court concluded that the record did not establish that the administrator had a serious conflict of interest.
 

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DAUGHERTY v. WABASH CENTER, INC. (August 14, 2009)

Michael Daugherty worked for Wabash Center, Inc. for seven years. He had an excellent employment record. He was promoted on several occasions and always received positive reviews. Things changed in 2006. He started having trouble with his coworkers and his staff. He was given a written reprimand for abusive e-mails and unacceptable management style. Permission for a month-long vacation was revoked. Daugherty immediately visited his doctor and requested two weeks FMLA leave from the Center. His request was granted. In his absence, the Center discovered that he had used the Center's credit card to make at least five unauthorized purchases. It also discovered that he had failed to follow through on some key responsibilities. When Daugherty was due back from his leave, the Center presented him with a corrective action plan -- which he refused to sign. He instead requested additional medical leave. The Center granted his request but asked that he not access the network while on leave and asked him for his keys and passwords. He refused. After further analysis revealed that he had deleted thousands of files while on leave, the Center fired him. Daugherty filed suit, alleging a violation of the FMLA. The court granted summary judgment to the Center. Doherty appeals.

In their opinion, Judges Posner, Kanne and Sykes affirmed. Under the FMLA, the Court stated, an employee is not entitled to any right he or she would otherwise not be entitled to absent the leave. The FMLA does not prohibit an employer from terminating an employee's employment during FMLA leave if it discovers misconduct that justifies the termination. Here, Daugherty admitted most, if not all, of the misconduct. The Center did not violate the FMLA by failing to reinstate Daugherty. The Court also rejected the Daugherty's alternative claim that the Center retaliated against him for taking leave. The undisputed evidence in the record is that the Center fired Daugherty for multiple instances of misconduct. Finding no factual dispute, the Court affirmed the summary judgment for the Center. 

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FISCHER v. LIBERTY LIFE ASSURANCE CO. (August 4, 2009)

After five years as a programmer with Stein Roe, Bruce Fischer complained of memory loss and problems with his attention. He applied for and received short-term disability benefits. A few months later, he submitted a claim for long-term benefits. The three medical reports he submitted with his application contained diagnoses of severe or profound depression. The plan administrator approved his application but informed him of the plan's 24-month maximum benefit period for mental illnesses, including depression. After the 24 months, the plan discontinued Fischer's benefits. Fischer continued to see additional medical personnel during the period of the plan's evaluation and his appeal. In all, at least thirteen physicians reviewed Fischer’s case. There was disagreement among the physicians as to whether Fischer's condition was organic or psychological. Fischer brought an action under ERISA for reinstatement of benefits. The district court granted summary judgment to the plan administrator. Fischer appeals.

In their opinion, Judges Posner, Flaum and Wood affirmed. The Court noted its limited scope of review. Only if the plan's decision is arbitrary and capricious will the court disturb it. The Court noted the "ample evidence" in the record supporting Fischer's contention that his condition is organic, at least in part. It also noted, however, the evidence in the record that concluded that his condition was solely psychological. On that record, applying an arbitrary and capricious standard of review, Fischer cannot prevail.

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LOVE v. NATIONAL CITY CORPORATION WELFARE BENEFITS PLAN (July 23, 2009)

Nancy Love had worked at National City for over twenty years when she was diagnosed with multiple sclerosis. After almost 3 years of receiving long-term disability benefits, the Plan told her she no longer fit their definition of "disabled." The controlling definition, after two years of long-term disability, is that a claimant must not be able to perform any job for which she is or could be qualified. The Plan's assessment concluded that, although she probably suffered from multiple sclerosis, she had never suffered an attack nor exhibited clinical signs. Love appealed the determination. She supported her appeal with several medical reports concluding that she had limited functional ability. The Plan denied her appeal, citing its doctor's conclusion that Love was able to do certain simple jobs. Love sued the Plan under ERISA. The district court granted summary judgment to the Plan. Love appeals.

In their opinion, Judges Ripple, Evans and Sykes reversed and remanded. The court stated that ERISA requires a plan to set forth its specific reasons for any denial of benefits. Love's medical file and her appeal contained multiple medical reports questioning for functional capacity. In fact, each of Love's treating physicians concluded that she was unable to work for more than a few hours a day. The Court noted that neither the initial termination letter nor the letter denying her appeal explained the Plan's reasons for discrediting the reports. The Court concluded that the Plan acted arbitrarily by denying benefits without an adequate explanation. The Court declined, however, to order reinstatement of benefits. Instead, it remanded to the district court with instructions to remand to the Plan Administrator for further proceedings.

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FRY v. EXELON CORPORATION CASH BALANCE PENSION PLAN (July 2, 2009)
 

Exelon Corporation created a defined-benefit pension plan in 2002. In order to be able to distribute the balance of employee's account as if the Plan were a defined-contribution plan, Exelon defined "normal retirement age" to be five years after commencement of employment. Exelon was thus able to avoid what it considered to be a problem with ERISA's treatment of defined-benefit plans (Congress fixed the problem in ERISA in 2006). Thomas Fry retired from Exelon in 2003 at age 55. Fry sued the Plan when it turned over only his account balance rather than his balance plus investment credits through age 65. The lower court held that the Plan satisfied ERISA. Fry appeals.

In their opinion, Chief Judge Easterbrook and Judges Evans and Sykes affirmed. The Court examined the statute. ERISA defines "normal retirement age" as either a) when an employee attains normal retirement age under the plan, or b) the later of i) age 65 or ii) the employee’s fifth anniversary in the Plan. The Court agreed with Exelon that its approach was allowable under the first prong of the definition. It concluded that ERISA did not require a retirement age to be actuarially accurate. Under the statute, an age is a "normal retirement age" if the plan says it is.

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MARRS v. MOTOROLA, INC. (November 7, 2008)

Michael Marrs sued Motorola, Inc. and several of its benefit plans (“Motorola”), alleging violations of ERISA. The parties stipulated to class action certification. Marrs served as the class representative. The district court granted summary judgment to Motorola. Marrs appealed. Marrs moves for leave to correct his notice of appeal.

In their opinion, Judges Cudahy, Posner, and Flaum denied Marrs’ motion. Marrs’ original notice was in his name only. It did not mention other claimants or the class. In fact, it did not indicate that he is appealing in any capacity other than individually. Marrs moved to amend his notice to indicate that he is appealing on behalf of the class. The Court began with Rule 3(c) of the Federal Rules of Appellate Procedure. That rule provides that a notice of appeal in a class action is sufficient if it names one person who is qualified to bring the appeal. It also provides that an appeal should not be dismissed for failure to name a party “whose intent to appeal is otherwise clear from the notice.” The Court cited its decision in Murphy v. Keystone Steel & Wire Co. for the further proposition that the notice of appeal by a class representative must indicate the he is appealing in his representative capacity. One of the reasons the Court limited the appeal in Murphy to the named plaintiffs was the inclusion on the notice of another party who was not a class member. The Court also looked to its decision in Clay v. Fort Wayne Community Schools. In Clay, there were two separate classes. The Court held that the appeal in the name of one class did not support review of the claims of the other. Neither case involved a single class as the only plaintiff. Nevertheless, the Court found the differences “too slight” to warrant a different result.

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TATE V. LONG-TERM DISABILITY PLAN FOR SALARIED EMPLOYEES OF CHAMPION INT’L CORP. #506 (September 19, 2008)

in 1988, Jo Ann Tate left her job with Nationwide Papers as a sales representative because of problems with anxiety and depression. Her employer’s benefits plan (the “Plan”), governed by ERISA, gave her the right to short-term and long-term disability benefits. The long-term disability program was divided into two stages. A person could receive up to two years of long-term disability on a showing that she was unable to perform the duties of her job. After two years, a person had to show that she was unable to perform the duties of any job for which she was or could be qualified. Tate received short-term disability benefits for six months and applied for and was granted long-term disability benefits in 1999. In 2003, the Plan notified Tate that she was no longer eligible for benefits because she did not meet the second stage (i.e., any job) test. The Plan based its decision terminating her benefits on the report of a physician who had not examined Tate but had access to her file. Tate appealed the denial. A second physician reviewed her file and came to the same conclusion. She based her conclusion on the facts that Tate kept her home, complied with her treatment schedule, and experienced some benefit from medication. Tate challenged the determination in district court. On cross motions for summary judgment, the court found that the Plan’s decision to terminate her benefits was arbitrary and capricious in that it consisted only of conclusory statements unsupported by fact. The court specifically noted the absence of any employability review or identification of jobs available to Tate. The Plan appeals. In addition, the court remanded in order for the Plan to make a proper determination of benefits and denied Tate’s request for attorneys’ fees. Tate appeals.

In their opinion, Judges Posner, Kanne, and Williams affirmed all aspects of the district court’s decision. On the Plan’s appeal, the Court noted its de novo review of the district court’s decision and the highly deferential, “arbitrary and capricious,” standard of review of the denial of benefits. Nevertheless, the panel found that it was arbitrary and capricious because neither physician’s report was based on any explanation or reasoning. The first physician apparently did not even review her employment file. The second physician reviewed her employment file but did not tie the conclusion that Tate was unable to work to anything that was relevant to that issue. ERISA requires the Plan to assess her qualifications to work and relate those to jobs she might be able to perform.

Tate’s appeal argued that reinstatement, not remand, was appropriate because the Plan terminated previously awarded benefits, and did not simply deny benefits. Tate relied on the fact that the Plan provided benefits for two years after the “any job” standard took effect. The Court was puzzled by the Plan’s continued payments of benefits after two years without any determination but still found no such determination and held that a remand was proper. The panel also agreed with the district court’s conclusion that obtaining a remand in an ERISA case is not equivalent to “prevailing” for purposes of attorneys’ fees awards. 

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ABENA v. METROPOLITAN LIFE INS. CO. (September 16, 2008)

Albert Abena worked as a dentist for American Dental Partners, Inc. (“ADP”). ADP provided long-term disability benefits to eligible employees through a plan administered by Metropolitan Life Insurance Co. (“MetLife”). An employee seeking benefits had to file a “Proof of Disability” within three months of the end of an “Elimination Period” (a ninety day period from the date of disability during which benefits were not paid). The Plan provided that no legal action could be filed before the sixtieth day after the filing of the Proof of Disability or after three years from the date Proof of Disability had to be filed. Abena submitted a Proof of Disability on October 23, 2000. He asserted that his disability commenced on May 16, 2000. MetLife approved the claim in early 2001 and began paying benefits. After learning that Abena was again working as a dentist, MetLife reviewed his claim and notified him on August 8, 2002 that his benefits would be terminated. Abena took advantage of an internal appeals process. MetLife affirmed its decision on April 16, 2003. Abena filed suit on April 17, 2006 under ERISA against ADP and MetLife. The district court granted summary judgment to the defendants on the ground that the suit was not timely filed. Abena appeals.

In their opinion, Judges Manion, Rovner, and Evans affirmed. The Court agreed with the court below that the issue was controlled by the Court’s 1997 decision in Doe v. Blue Cross Blue Shield United of Wisconsin. In Doe, the Court noted that ERISA did not contain a Statute of Limitations and that the normal practice would be to borrow a limitations period from a closely analogous statute. It also held that a shorter contractual limitations period would be enforced if it was reasonable. Doe dealt with an employer-sponsored health plan. Like the ADP plan, the Doe plan provided that a claimant had to file for reimbursement within ninety days of the date of service and that the claimant could not initiate a suit after three years from the last day a claim could be filed. The plan also required a claimant to pursue an internal appeals process. The appeals process in Doe was concluded with seventeen months left in the three year limitations period. Particularly given that the claimant was represented by counsel, the Court held that the seventeen months was reasonable and enforceable. In applying Doe to Abena’s situation, the three year period expired in November of 2003. MetLife notified him of its affirmance of termination of benefits in April of 2003. Abena, therefore, had seven months to file suit. Abena argues that Doe was an initial claim case and his is a denial of previously granted benefits and therefore distinguishable. The Court agreed that the limitations provision may be better suited to an initial claim but did not see that as a reason to depart from Doe’s holding. The Court also agreed with Abena that a situation could arise in which benefits were paid for thirty nine months before termination, leaving no time to bring suit. Unfortunately for Abena, the Court’s view was that the possibility of that result did not invalidate the limitations period or make a seven month period unreasonable – it merely would have made the application of the provision in that case unreasonable. Abena, too, was represented by counsel. In those circumstances, the Court held that a seven month period was reasonable and enforceable. 
  

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