Plan Administrator's Interpretation That Contravenes Plain Language Of Plan Is Arbitrary And Capricious
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.
Allied Electric Contractors has been a member of the National Electrical Contractors Association (NECA), an association of union employers, since 2002. It has been making employee benefit contributions to Line Construction Benefit Fund since the 1990s. In 2005, NECA entered into a Collective Bargaining Agreement (CBA) with the union. It set forth the terms of employer contributions to the Fund and increased the hourly contribution by a quarter. By its own terms, it bound all employers who signed a letter of consent. Although Allied did not sign a letter of consent until December of 2006, it continued to make the required contributions, including the extra quarter, until July 2006. It failed to make contributions for July, August, and December of 2006 as well as for January and February of 2007. The Fund brought suit under ERISA. The court denied Allied's motion to dismiss and granted summary judgment to the Fund. Allied appeals.
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..jpg)
Stephen Bandak was employed by an Eli Lilly company in England, his native country, from 1978 to 1995. He participated in the company's retirement plan. He was transferred to the United States in 1995. The company told him, upon his enrollment in the U. S. company's plan, that his benefits in that plan would be based on years of employment retroactive to 1978. The plan also provided that benefits would be reduced by the actuarial equivalence of any other benefits under a “qualified defined benefit plan” maintained by an Eli Lilly company. When Bandak retired in 2004, the company took the position that his benefits under the English company's plan were benefits under a qualified defined benefit plan and were thus properly deducted from his U.S. pension benefits. Bandak sued the company under ERISA. Judgment was entered in his favor for both damages and an injunction relating to future benefit payments. The court also concluded that Lilly's position was not substantially justified and awarded attorneys’ fees. Eli Lilly appeals..jpg)
Thomas Wetzler worked for the Illinois CPA Society for twenty-two years. Throughout his employment, he participated in the Society's Retirement Income Plan (the "Plan"). When he retired, he qualified as a highly-compensated employee ("HCE") under the plan. Wetzler was only the second HCE to retire under the Plan. Although the first was allowed to take a lump-sum payout of Plan benefits, the Plan later determined that the distribution was in error and violated federal regulations. The Plan was amended to require security when an HCE elects a lump-some distribution. When the Plan refused to allow Wetzler to take a lump-sum distribution, he filed suit under ERISA. He alleged that the amendment violated the Act by eliminating a benefit which had been previously available. The district court granted summary judgment to the Plan. Wetzler appeals.
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Elizabeth Black was the executive director of the Milwaukee World Festival, Inc., the organization that operates an annual summer music festival in Milwaukee. In early 2001, she had surgery to repair two aneurysms. She returned to work after several weeks and was well enough to run the festival that summer. Although her contract was not scheduled to expire until the end of 2003, she sought a renewal after the 2001 festival. The organization deferred a decision until 2002. When that time came, many of her relationships with coworkers had deteriorated. She complained, and had several doctors support her complaints, that the stress and abuse of her job was harmful to her health. In July of 2003, the organization elected not to extend her contract. Within a month, Black claimed that she was disabled and could no longer work. She filed a disability claim with the organization's plan. The plan denied the claim, based on a review of the records she submitted. After an administrative appeal, the plan’s underwriter consulted four physicians and a psychiatrist, each of whom reviewed her records and concluded that she was not disabled. The underwriter denied the appeal. Black appealed to the district court, which granted summary judgment to the plan. Black appeals.
King & Larsen, Lord & Essex and Lay-Com are all in the development or construction business. Mike King is the owner of King & Larsen. Lord & Essex and Lay-Com are both owned directly or indirectly by members of the Popp family. King & Larsen had a collective bargaining agreement that required it to make contributions to the plaintiff fund. When it ran into financial difficulty, Lord & Essex and Lay-Com came to its rescue. They loaned money and paid some bills. The companies then entered into a complex series of transactions that resulted in the transfer of most of King & Larsen's assets to a new company, M. A. King. The tax and union pension fund liabilities of King & Larsen remained behind, in an otherwise empty shell. The pension fund sued King & Larsen, M. A. King and Mike King for the unpaid contributions. After obtaining default judgments, the funds added Lay-Com, Lord & Essex, the Lay Trust and John Popp as defendants. The district court found Lay-Com, Lord & Essex and the Lay Trust liable on a veil-piercing theory and dismissed John Popp. All parties appeal.
CenTra, Inc. is a family-owned holding company with several subsidiaries, including the Detroit International Bridge Co. (“DIBC”), which operates the Ambassador Bridge between Detroit and Windsor. Prior to 1995, two of the other subsidiaries were Central Cartage Company and Central Transport, Inc. Each of those subsidiaries had labor agreements with unions and contributed to the defendant's pension fund. The company reorganized in 1995. It created two new subsidiaries to take on the union-trucking operations of Cartage and Transport and a third subsidiary to engage in non-union operations. It then merged Cartage and Transport into the holding company. Those companies ceased to exist. Shortly thereafter, the holding company contributed selected assets and liabilities of the former subsidiaries into the newly formed union-trucking subsidiaries. The stock in the new subsidiaries was sold the following year to U.S. Truck, a company controlled by members of the same family. The new companies did not do well and U.S. Truck was liquidated within a few years. DIBC still had union agreements and contributed to the defendant's pension fund until 1997. Under the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), an employer withdrawing from a multi-employer pension plan must pay a "withdrawal liability," a proportionate share of the plans underfunded, vested benefits. A complex formula for calculating the withdrawal liability is based for the most part on an employer's history of contributions. Here, defendant assessed in excess of $14 million in withdrawal liability against CenTra, including in its calculations the contribution history of Cartage and Transport, the two subsidiaries that ceased to exist in 1995. CenTra challenged the assessment in arbitration and was successful in getting it reduced to under $1 million. The district court reinstated the assessment. CenTra appeals.
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.
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.
After 23 years on the job, Edward Raybourne went on long-term disability. He was about to have the first of four surgeries on the big toe of his right foot. His disability plan provided payments for 24 months upon a showing that he was unable to perform his regular job. After 24 months, he had to show that he was unable to perform any job in order to continue receiving benefits. After an independent medical examination concluded that Raybourne could return to work, Cigna terminated his long-term disability benefits. Raybourne's treating physician continued to state that he was unable to return to work. After his internal appeals were unsuccessful, Raybourne brought suit under ERISA. The district court granted summary judgment to Cigna, concluding that it had not abused its discretion. Raybourne appeals..jpg)
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.
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.
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.
Although Paul Krolnik ceased working because of a hernia and back pain, he failed to return to work because, at least in part, of his depression. Prudential paid him long-term disability benefits for two years. It stopped the benefit stream after two years because the policy at issue caps the benefit at two years if the inability to work is caused, even in part, by a mental illness (including depression). Krolnik brought an ERISA suit against Prudential. The court below barred all discovery on medical issues, struck Krolnik's medical affidavits and granted summary judgment to Prudential.
Charles Jenkins went to work for PricewaterhouseCoopers LLP ("PwC") in 1989. He started experiencing health problems related to HIV in 1993. He suffered from fatigue, nerve damage, decreased sensation, dexterity limitations, and infections. By the end of 1993, he was no longer able to work. He filed a claim under PwC’s long-term disability plan. The plan administrator agreed that he met the definition of "total disability" and paid him benefits from 1994 until 2006. Beginning in 2004, the plan administrator began to review Jenkins' file. After two medical record reviews and an independent medical examination, the plan administrator terminated Jenkins' benefits. The more recent reviews concluded that Jenkins' condition was fairly stable and that he may be capable of performing some jobs. In fact, a rehabilitation specialist identified certain specific positions that fit within Jenkins’ limitations. Jenkins' treating physician disagreed with the conclusion and maintained that he was unable to work. After an unsuccessful internal appeal, Jenkins brought an action under ERISA. The district court granted summary judgment to the plan. Jenkins appeals.
Barry Radcliffe owned Glass Service, Inc. The company made pension contributions as part of a labor agreement. When the company became delinquent, Radcliffe provided his personal guarantee. When he failed to perform on his guarantee, the pension fund sued and obtained a default judgment. Radcliffe requested his own pension benefits from the fund and, shortly thereafter, declared bankruptcy. The fund refused to turn over his benefits. Instead, they said they would apply the money to the default judgment. Radcliffe filed an adversary action in the bankruptcy court. The court ordered the fund to pay damages, interest, punitive damages and attorney's fees. The district court affirmed. The pension fund appeals.
Lisa Leger suffered from osteoarthritis for years. Prior to 1990, she underwent three different arthroscopic procedures but was able to hold a job and engage in a rehabilitative exercise program. However, in 1990, she stopped working for WGN-TV and went on short-term disability. She began receiving long-term disability benefits in December 1990. She continued to receive benefits through 2005. During that time, she continued to have pain and problems with her knees and underwent multiple additional surgeries. The plan administrator reviewed her benefits in 2005 and requested updated information. Her treating physician advised that she was essentially unable to walk. The plan administrator's medical review concluded that she had significant osteoarthritis but that she was not precluded from sedentary work. A vocational rehabilitation consultant identified several employment positions for which she was qualified. The plan administrator therefore terminated her benefits in October of 2005. Leger appealed and provided additional medical information. The plan administrator arranged for another review of the file. That review highlighted some inconsistencies in her records. For example, the records indicated that she could not sit for more than 30 minutes at a time but she nevertheless was wheelchair bound. The plan administrator upheld the decision to terminate her benefits. Leger brought an action pursuant to ERISA’s section 1132 (a)(1)(b) to reinstate her benefits. The lower court granted summary judgment to the plan, stating that it advanced a reasonable explanation for its decision to terminate the benefits. Leger appeals..jpg)
George Klein is the president and sole shareholder of Current Development Corporation (CDC). CDC sponsored two employee benefit plans. The Department of Labor objected to the way Klein ran the plans and filed suit in District Court. In a settlement by consent order, Klein agreed to terminate both plans and distribute their assets -- a vacant parcel of land and almost $900,000 in cash. Klein allowed the plan participants to choose to take their shares in cash or in an ownership interest in the property. Almost everyone selected the cash option. Klein and his wife, themselves plan participants, were left with a 97% interest in the land. While Klein was winding up the plans, unbeknownst to the participants, he was negotiating the sale of the property. He used a property value of $1.7 million in calculating the participants' shares, even though he had already rejected a $2.3 million purchase offer. The Department of Labor found out about these negotiations and returned to court. The court concluded that Klein had breached his duty of loyalty to the participants and removed him as trustee. The court also appointed an independent fiduciary, who soon sold the property for $2.6 million. The independent fiduciary concluded, after a review of CDC's books and records, that Klein owed the plan another $170,000. The court ordered Klein to repay the money, with prejudgment interest. The independent fiduciary then calculated the final asset distribution figures, which the court adopted. Klein appeals..jpg)
Sharon Mondry was an employee of American Family Mutual Insurance Company ("American Family") and participated in its health insurance plan. When her son needed speech therapy, she contacted the company to ascertain the extent of her benefits. After being referred to the Summary Plan Description ("SPD"), she enrolled her son in speech therapy in January 2003. In June 2003, CIGNA, the claims administrator, denied coverage. The letter indicated that the denial was based on CIGNA’s “Benefit Resource Tools guidelines” (“BRT”). The language used in the denial letter and the BRT was not consistent with the SPD, The SPD indicated that speech therapy is typically covered if performed by a certified therapist. Mondry began an effort that lasted over a year to get the documentation that was used by CIGNA to deny the coverage. For months, CIGNA and American Family either ignored or denied her requests. Mondry’s appeal of the denial was upheld in July of 2003. The letter upholding the denial again referenced a document that Mondry had never seen -- the Clinical Resource Tool (“CRT”). Mondry added the CRT to her document request. Her requests continued to go unanswered or denied. In September 2003, Mondry left her employment with American Family and elected not to continue her health coverage. She did continue her efforts to receive a complete set of plan documents and to reverse the denial of coverage. Mondry finally obtained copies of the CRT in July of 2004 in the BRT in October 2004. It became clear that the criteria contained in the CRT and the BRT were different from the criteria contained in the SPD. CIGNA reversed its position and authorized coverage of the speech therapy. Ten months later, CIGNA reimbursed Mondry for most of her out-of-pocket therapy expenses. Mondry filed suit against American Family and CIGNA pursuant to ERISA. She alleged that American Family and CIGNA failed to produce documents as required by the statute and that they both breached fiduciary duties owed to her. The district court dismissed the claims against CIGNA and entered summary judgment for American Family. Mondry appeals.
Deere & Co. sponsors 401(k) plans for its employees. It engaged Fidelity Management Trust Co. (“Trust”) to serve as trustee of two of the plans. Trust administered employees’ accounts, maintained records, and advised Deere regarding investment options to include in the plans. Both plans offered many different investment choices – Fidelity mutual funds, two investment funds managed by Trust, a Deere stock option, and an option that provided a link to over 2500 funds managed by different companies. The plan’s participants managed their own funds from among the choices. Each of the funds imposed a percentage of assets fee upon participants. Fidelity Management & Research Co. (“Research”) is the investment advisor for the Fidelity mutual funds. Research earned revenue from the mutual fund fees and shared it with Trust. Trust’s only compensation for managing Deere’s plans was the fee from Research. Dennis Hecker and other plan participants brought this class action against Deere, alleging that Deere violated its fiduciary duty under ERISA by providing options in the plans that charged excessive fees and by not disclosing the fee structure between Trust and Research. Hecker also sued Trust and Research as functional fiduciaries. The district court granted defendants’ motions to dismiss without addressing the class issue. Hecker appeals.
Anthony Suskovich was a computer programmer and analyst. From 1996 until his unfortunate and sudden death in 2006, he provided services to WellPoint. WellPoint retained Suskovich on many projects with limited duration, although frequently one project rolled over into another. He billed WellPoint on an invoice, was paid by the hour, and his income was reported on a 1099. WellPoint adopted a preferred vendor program around 2000 under which it could only avail itself of Suskovich’s services if they were provided by a preferred vendor. Suskovich began a relationship with Trasys. Suskovich would send an invoice to WellPoint, which in turn would refer them to Trasys for payment to Suskovich. Suskovich’s income was still reported on a 1099. In 2001, Suskovich signed an “independent contractor” agreement. Suskovich worked on many different projects, sometimes on more than one at once. He usually worked at WellPoint’s offices with a computer supplied by WellPoint. In 2005, WellPoint informed Suskovich that they would not be using him anymore and asked him to train a replacement. Later, Suskovich and WellPoint had discussions about the possibility of Suskovich becoming an employee of WellPoint but nothing ever came of them. Before his death, the IRS began an investigation of Suskovich for not filing tax returns. The investigation led to his filing of returns for several years in which he listed himself as self-employed. He still had remaining tax liability when he died. His estate brought an action against WellPoint and Trasys, seeking a declaratory judgment that Suskovich was an employee of WellPoint and Trasys and for compensation under the Fair Labor Standards Act (“FLSA”), benefits under ERISA, and tax indemnity. The district court granted summary judgment for the defendants, holding that Suskovich was an independent contractor. The Estate appeals.