Herrell v. Locals 302 & 612 of the International Union of Operating Engineers-Employers Construction Industry Retirement Fund et al
Filing
37
ORDER granting 15 Motion for Summary Judgment and 18 Joinder to Motion; matter remanded to Trustees for further proceedings. Signed by Judge H. Russel Holland on 12/3/13. (PRR, COURT STAFF)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
STACEY HERRELL,
)
)
Plaintiff, )
)
vs.
)
)
LOCALS 302 & 612 OF THE INTER)
NATIONAL UNION OF OPERATING
)
ENGINEERS-EMPLOYERS CONSTRUCTION
)
INDUSTRY RETIREMENT FUND; and
)
WELFARE PENSION ADMINISTRATION
)
SERVICE, INC.,
)
)
Defendants. )
___________________________________)
No. 3:13-cv-0055-HRH
O R D E R
Motion for Summary Judgment
Defendants move for summary judgment for failure to exhaust
administrative remedies.1
This motion is opposed.2
Oral argument
was not requested and is not deemed necessary.
Facts
Plaintiff is Stacey Herrell. Defendants are the Locals 302 and
612 of the International Union of Operating Engineers-Employers
1
Docket Nos. 15 & 18.
2
Docket No. 30.
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Construction Industry Retirement Fund (“the Fund”) and the Welfare
Pension Administration Service, Inc. (“WPAS”).
The Fund is a multiemployer, collectively bargained pension
trust that qualifies as an ERISA “employment pension benefit plan.”
29 U.S.C. § 1002(2)(A).
Trustees.
The Fund is administered by a Board of
WPAS is a third-party administration firm that provides
administrative services to the Fund’s participants and beneficiaries.
The Fund’s benefits are provided under the Locals 302 and 612
of
the
International
Construction
Industry
Union
of
Retirement
Operating
Plan.
Engineers-Employers
Plaintiff
is
a
Plan
participant.
In October 2009, plaintiff became disabled due to chronic neck
and back pain.
She began receiving short-term disability benefits
under the Plan at that time.
In addition to short-term disability benefits, the Plan offers
retirement disability benefits to participants who satisfy the
service requirements and are found to be Totally and Permanently
Disabled.3
Retirement disability benefits are generally paid as a
monthly life annuity, which is calculated by determining the
participant’s accrued benefit payable at normal retirement age (age
60) and then applying reduction factors to the accrued normal
retirement benefit to take into account the participant’s actual age
3
Admin. Rec. at 74, Docket No. 14.
-2-
at retirement.
Prior to January 1, 2010, a participant’s normal
retirement benefit was “reduced by 1/4 of 1 percent for each month
that his Disability Retirement Date precedes his attainment of age
fifty (50).”4 Disability retirement benefits for eligible participants between the ages of 50 and 60 were fully subsidized so that
participants received 100% of their accrued normal retirement
benefits. After January 1, 2010, retirement disability benefits for
eligible participants between the ages of 50 and 60 were reduced by
a flat percentage.5 For example, a 50-year old plan participant who
was eligible for retirement disability benefits would receive 39.08%
of her accrued normal retirement benefits; a 55-year old plan
participant would receive 67.50%.6
On August 14, 2009, the Fund mailed notice to Plan participants
regarding the “increase in the reduction factors used to determine
the Disability Retirement benefit....7
The manager of WPAS avers
that
[b]etween August 14, 2009 and December 31,
2009, WPAS encouraged all applicants who
inquired into the disability application
process, to submit their applications prior to
January 1, 2010, to ensure that if they were
found to be disabled under the terms of the
Plan[,] the benefit would be calculated using
4
Admin. Rec. at 47, Docket No. 14.
5
Admin. Rec. at 102, Docket No. 14.
6
Id.
7
Exhibit A, Declaration of Melinda Stokes, Docket No. 17.
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the disability reduction factors in effect
prior to the amendment.[8]
Plaintiff avers that “[i]n November 2009, [she] was advised by
other union members that disability retirement benefits were going
to be reduced after January 1, 2010.”9
Plaintiff avers that she
contacted WPAS to request a retirement disability application form
in November 2009 but that WPAS advised that it would not send her
a form because she had to wait to six months following the onset of
her disability to file for those benefits.10
Plaintiff avers that
she called the WPAS office several more times in November and
December
2009,
requesting
that
WPAS
send
her
the
retirement
disability application form because her union told her to file her
claim despite what she had been told by WPAS.11
Plaintiff avers that she received the disability retirement
application form “on or about January 5, 2010” and that she filled
the form out and “sent [it] in [on] or around January 13, 2010.”12
Plaintiff avers that WPAS then sent the form back and told her “to
send in
[her]
birth
certificate
and
divorce
papers
with the
8
Stokes Declaration at 2, ¶ 4, Docket No. 17.
9
Affidavit of Stacey Herrell at 3, ¶ 9, Docket No. 31.
10
Id. at ¶ 11. The Plan provides that “[d]isability will not
be considered established unless it has continued for a period of
not less than six consecutive months.” Admin. Rec. at 74, Docket
No. 14.
11
Herrell Affidavit at 3-4, ¶¶ 13-14, Docket No. 31.
12
Id. at 4, ¶¶ 15-16.
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application,” which she did.13 Plaintiff avers that she then called
WPAS in April 2010 to check on the status of her claim, at which
time she was told that WPAS had no record of her claim.14
Plaintiff
avers that she sent a second application to WPAS sometime in June
2010.15
Melinda Stokes, the WPAS manager, avers that WPAS’ records show
that plaintiff first requested a disability retirement application
form on April 30, 2010.16 Stokes avers that WPAS sent plaintiff the
application
form
that
same
day.17
WPAS
received
plaintiff’s
completed application on September 7, 2010.18
On March 14, 2011, plaintiff’s claim was denied. Plaintiff was
advised that she could “request an appeal before the Board of
Trustees” and that such a request “must be received in writing ...
within 180 days after [the] receipt of” the March 14 letter.19
Plaintiff was further advised that “[f]ollowing issuance of the
written decision of the Trustees on an appeal, there is no further
13
Id. at ¶¶ 17-18.
14
Id. at ¶ 19.
15
Id. at ¶ 21.
16
Stokes Declaration at 2, ¶ 5, Docket No. 17.
17
Id.
18
Admin. Rec. at 150, Docket No. 14; see also, Stokes Declaration at 2, ¶ 5, Docket No. 17.
19
March 14, 2011 Letter at 2, attached to Plaintiff’s Notice
of Filing Replacement Copy [etc.], Docket No. 34.
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right of appeal to the Trustees.
Instead, the claimant may bring
a civil action under ERISA 502(a).”20
Plaintiff was advised that
she would have 180 days in which to bring a civil action after the
Trustees issued their decision and that “[f]ailure to file a civil
action within that 180-day period will operate as a waiver of and
bar to the right of review, and the decision of the Trustees will
be final and binding.”21
The appeal procedures set out in the March 14 letter were
consistent with the appeal procedures in the Plan.
provides that
[a]ny Participant or beneficiary who applies
for benefits and is ruled ineligible, or who
believes he did not receive the full amount of
benefits to which he is entitled, or who is
otherwise adversely affected by any action of
the Trustees, shall have the right to appeal to
and request that the Board of Trustees conduct
a hearing in the matter. All such requests for
appeal must be made in writing. In the case of
a claim for Disability Retirement, the written
notice of appeal must be received within 180
days after the notification of the denial of an
application for benefits (or claim).
...
Failure to file a written notice of appeal
within the time period prescribed will operate
as a complete waiver of and bar to the right to
appeal, and the decision or other action of the
Plan Administrator will be final.[22]
The Plan further provides that
20
Id.
21
Id.
22
Admin. Rec. at 83, Docket No. 14.
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The Plan
[f]ollowing issuance of the written decision of
the Trustees on an appeal, there is no further
right of appeal to the Trustees. Instead, the
claimant may bring a civil action under ERISA
§ 502(a). Any action must be brought no later
than 180 days after the date on which the
Trustees’ decision was issued. Failure to file
a civil action within that 180-day period will
operate as a waiver of and a bar to the right
of review, and the decision of the Trustees
will be final and binding. The question for
consideration on review of the Trustees’
decision is whether in the particular instance:
(1) the Trustees were in error upon an issue of
law; (2) the Trustees acted arbitrarily or
capriciously in the exercise of their discretion; or (3) the Trustees’ findings of fact
were supported by substantial evidence.[23]
Plaintiff filed an appeal with the Trustees.
On March 15,
2012, the Trustees advised plaintiff’s counsel that it had decided
to “approve [plaintiff’s] Application for Disability Retirement
Benefits, as it is clear from the evidence presented that [plaintiff] is totally and permanently disabled as defined under the
Plan.”24
The Trustees advised plaintiff that if she was “dissatis-
fied with the written decision of the Trustees,” she was “entitled
to bring a civil action under ERISA § 502(a)....”25
On April 6, 2012, the Fund sent plaintiff a document entitled
“Explanation of Forms of Payment and Election.”26 The document
23
Admin. Rec. at 106, Docket No. 14.
24
Admin. Rec. at 3, Docket No. 14.
25
Id.
26
Exhibit C at 1, Stokes Declaration, Docket No. 17.
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advised plaintiff that her monthly disability retirement payment was
estimated to be $560.31.27
Plaintiff believed that her monthly
benefit was going to be approximately $2600.28
On June 18, 2012, Paula Jacobson, plaintiff’s attorney,29 sent
an email to Jane Ewers, the Fund’s co-counsel.30 Jacobson wrote that
“[i]t
appears
that
[plaintiff’s]
retirement
benefit
may
be
substantially less than she anticipated. I am trying to understand
the method by which the amount was calculated....
Can you give me
the name of someone who can shed some light on this issue?”31
Ewers
advised Jacobson to call Stokes at the “Trust Office.”32
On June 18, 2012, Stokes sent Jacobson an email that read:
Please find attached a copy of a 2009 Summary
of Material Modification that was sent to all
participants in 2009. Please refer to page 3
of the SMM for information on the change to
Disability benefits. If [plaintiff] wishe[s]
to proceed with her Disability retirement,
27
Id. at 2.
28
Herrell Affidavit at 6, ¶ 32, Docket No. 31.
29
In her briefing, plaintiff contends that Jacobson did not
continue to represent her after she received the favorable decision
from the Trustees.
This contention is contrary to plaintiff’s
affidavit, in which she avers that “[u]pon further inquiry by my
attorney, Jacobs[o]n, WPAS explained they were basing the payment
on ‘Fund’ plan language that went into effect on January 1, 2010.”
Id at ¶ 28.
30
Exhibit B, Declaration of Jane P. Ewers [etc.], Docket No.
31
Id. at 2.
32
Id. at 1.
16.
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please have her complete and return her Explanation of Forms of Payment and Election form
along with a copy of the tax and bank forms.
If you have any questions, please feel free to
write or call me.[33]
Stokes avers that she spoke with Jacobson by phone on June 20, 2012
and “reiterated the basis for the calculation of [plaintiff’s]
disability retirement benefits.”34
Plaintiff did not sign the election of benefits form.
And,
there is no evidence that plaintiff contacted WPAS regarding the
amount of her benefits after June 20, 2012.
On March 21, 2013, plaintiff commenced this action, in which
she alleges that she is entitled to receive disability retirement
benefits under the Plan terms that existed prior to January 1, 2010.
Plaintiff seeks “[a]n equitable order requiring [both defendants]
to process and pay [her] disability retirement benefits under the
terms of the 2009 [Plan], retroactive to October 25, 2009, and
continuing, minus amounts previously paid to [her] in disability
retirement benefits.”35 Alternatively, plaintiff seeks “an equitable
order requiring [the Fund] to pay [her] disability benefits under
the terms of the 2009 [Plan], retroactive to October 25, 2009, minus
amounts
previously
paid
to
[her]
in
disability
33
Id.
34
Stokes Declaration at 3, ¶ 10, Docket No. 17.
35
Plaintiff’s Complaint at 8, Docket No. 1.
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retirement
benefits.”36
As
yet
another
alternative,
plaintiff
seeks
an
“equitable order requiring WPAS to pay [her] disability retirement
benefits under the terms of the 2009 [Plan], retroactive to October
25, 2009, minus amounts previously paid to [her] in disability
retirement benefits.”37
As a final alternative, plaintiff requests
“an award against WPAS in an amount sufficient to compensate [her]
for the difference between retirement benefits she would have
received under the terms of the 2009 [Plan], retroactive to October
25, 2009, minus amounts she will receive in disability retirement
benefits under the terms of the 2010 [Plan].”38
Defendants now move for summary judgment dismissing plaintiff’s
complaint for failure to exhaust administrative remedies.
Discussion
Although defendants move for summary judgment, ?failure to
exhaust nonjudicial remedies is a matter in abatement, not going to
the merits of the claim, and as such is not properly raised in a
motion for summary judgment.”
Ritza v. Int’l Longshoremen’s and
Warehousemen’s Union, 837 F.2d 365, 368 (9th Cir. 1988).
?Rather,
failure to exhaust nonjudicial remedies should be raised in a motion
to dismiss, or be treated as such if raised in a motion for summary
judgment.” Id. at 368-69. In deciding such a motion, the court may
36
Id. at 8-9.
37
Id. at 9.
38
Id.
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consider matters outside the pleadings.
Inlandboatmens Union of
Pacific v. Dutra Group, 279 F.3d 1075, 1083-84 (9th Cir. 2002).
“[A]s [a] general rule,” an ERISA “claimant must avail himself
or herself of a plan’s own internal review procedures before
bringing suit in federal court.”
Diaz v. United Agr. Employee
Welfare Ben. Plan and Trust, 50 F.3d 1478, 1483 (9th Cir. 1995).
Although not explicitly set out in the statute,
the exhaustion doctrine is consistent with
ERISA’s background, structure and legislative
history and serves several important policy
considerations, including the reduction of
frivolous litigation, the promotion of consistent treatment of claims, the provision of a
nonadversarial method of claims settlement, the
minimization of costs of claim settlement and
a proper reliance on administrative expertise.
Id. “‘Consequently the federal courts have the authority to enforce
the exhaustion requirement in suits under ERISA, and [] as a matter
of sound policy they should usually do so.’”
Id. (quoting Amato v.
Bernard, 618 F.2d 559, 568 (9th Cir. 1980)). ?[T]he ‘applicability
vel non of exhaustion principles is a question of law....’” Barboza
v. Calif. Ass’n of Professional Firefighters, 651 F.3d 1073, 1076
(9th Cir. 2011)(quoting Diaz, 50 F.3d at 1483).
Defendants
administrative
argue
remedies
that
as
plaintiff
to
the
failed
amount
of
to
exhaust
her
her
retirement
disability benefits as she was required to do under the Plan’s
appeal procedures.
As set out above, the Plan provides that any
participant “who believes [s]he did not receive the full amount of
benefits to which [s]he is entitled” may file an appeal with the
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Board of Trustees.39
If the participant is unhappy with the
Trustees’ decision, she then has 180 days in which to file a civil
suit.40
These procedures are “the sole and exclusive procedure[s]
available to a Participant or beneficiary who is dissatisfied with
an eligibility determination, benefit award, or who is adversely
affected by any action of the Trustees.”41
There is no dispute that plaintiff failed to exhaust her
administrative remedies as to the amount of her benefits award.
After receiving the benefits election form which set forth the
amount of her disability retirement benefits, plaintiff did not file
an appeal with the Trustees nor did she file a lawsuit within 180
days. Rather, plaintiff made some informal inquiries as to how her
benefits had been calculated and then waited almost nine months to
file this lawsuit.
There are, however, exceptions to the requirement that an ERISA
claimant exhaust her administrative remedies prior to bringing a
civil action.
“Inadequacy of remedy is [one] exception to the
exhaustion requirement.”
an exception.
Diaz, 50 F.3d at 1484.
Id. at 1488.
Futility is also
Thirdly, “where a plan fails to
establish or follow ‘reasonable’ claims procedures as required by
ERISA, ‘a claimant shall be deemed to have exhausted the administra-
39
Admin. Rec. at 83, Docket No. 14.
40
Admin. Rec. at 106, Docket No. 14.
41
Admin. Rec. at 86, Docket No. 14.
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tive remedies available under the plan....’”
Vaught v. Scottsdale
Healthcare Corp. Health Plan, 546 F.3d 620, 627 (9th Cir. 2008)
(quoting
29 C.F.R. § 2560.503-1(l)).
It is within the court’s
discretion to decide whether any of these exceptions apply. Amato,
618 F.2d at 569.
Plaintiff argues that an appeal of the amount of her benefits
award would have been both futile and provided an inadequate remedy.
This argument is based on Section 3.03 of the Plan, which provides
that
[a]ny Participant not meeting the requirements
specified herein shall not be entitled to any
benefits under this Plan and, further neither
the Participant nor his Individual Employer
shall be entitled to return of any of the
contributions made to the Fund or any interest
thereon.[42]
Plaintiff argues that since she had not met the requirement to file
a disability retirement application prior to January 1, 2010, any
appeal to the Trustees would have been futile because the Plan does
not provide for exceptions to Section 3.03 in cases of misrepresentation
or
failure
to
provide
applications
to
beneficiaries.
Plaintiff also argues that because there are no exceptions to
Section 3.03, the only way the Trustees could provide the relief she
has requested would be to reform the Plan, which the Trustees have
no authority to do.
Thus, plaintiff argues that an administrative
appeal would have been an inadequate remedy.
42
Admin. Rec. at 33, Docket No. 14.
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Plaintiff’s Section 3.03 argument fails because the remedy that
plaintiff seeks would not require that the Trustees reform the Plan.
The Trustees have already determined that plaintiff is entitled to
retirement disability benefits.
If the facts of this case would
justify such action, the Trustees could treat plaintiff’s application for retirement disability benefits as though it had been filed
prior to January 1, 2010 and grant plaintiff the relief she is
seeking without having to change, modify, or reform the Plan.
Section 3.03 does not in any way limit the Trustees’ ability to
resolve plaintiff’s claim.
But even if an appeal would not have been futile and would have
provided her an adequate remedy, plaintiff argues that her failure
to exhaust her administrative remedies should still be excused
because defendants failed to provide her notice of her right to
appeal the amount of her benefits award. ERISA regulations provide
that “a fiduciary must give written notice to a plan participant or
beneficiary of the ‘steps to be taken’ to obtain internal review....”
Chappel v. Laboratory Corp. of Amer., 232 F.3d 719, 726
(9th Cir. 2000) (quoting 29 C.F.R. § 2560.503-(b)).
Because the
election form that plaintiff received did not contain any information as to how plaintiff could appeal the amount of her benefits
award, plaintiff argues that she should be deemed to have exhausted
her administrative remedies as to the amount of her benefits award.
See Dishman v. UNUM Life Ins. Co. of Amer., 269 F.3d 974, 984-85
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(9th Cir. 2001) (district court did not abuse discretion in excusing
the plaintiff’s failure to exhaust administrative remedies when UNUM
did not give adequate notice of the available appeals procedure);
Chappel, 232 F.3d at 726-27 (fiduciary did not fulfill his duties
if he failed to advise Chappel of an arbitration clause and its
required procedures); White v. Jacobs Engineering Group Long Term
Disability Benefit Plan, 896 F.2d 344, 350 (9th Cir. 1990)(“When a
benefits termination notice fails to explain the proper steps for
appeal, the plan’s time bar is not triggered.”).
Defendants concede that “[i]t is undisputed that [plaintiff’s]
benefit
election
provisions.”43
form
did
not
include
notice
of
the
appeal
But, they argue that there was no reason to provide
notice of appeal rights with the benefit election form because that
form did not constitute a benefit denial.
Rather, defendants
contend that the election form is mandated by Section 205(c) of
ERISA, 29 U.S.C. § 1055(c), and its purpose is to describe the
various benefit payment options (i.e., single life annuity, 100%
joint and survivor annuity, 50% joint and survivor annuity).
Because the election form was not a denial of benefits, defendants
insist that there was no requirement to include appeal procedures.
43
Defendant Fund’s Reply in Support of the Motion for Summary
Judgment [etc.] at 5, Docket No. 35; Defendant Welfare Pension
Administration Service, Inc.’s Joinder in Defendant Fund’s Reply
[etc.], Docket No. 36.
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The problem with defendants’ argument is that the election form
was the only document that plaintiff received that told her what the
amount
of
her
benefits
would
be.
As
defendants
repeatedly
emphasize, the Plan provides that a claimant can file an appeal if
“[s]he did not receive the full amount of benefits to which [s]he
is entitled....”44
If a claimant can appeal the amount of her
benefits award, then it follows that defendants had a fiduciary duty
to advise the claimant of that right when it first advised the
claimant what the amount of her benefit award would be.
It is
disingenuous for defendants to insist that plaintiff had to exhaust
her administrative remedies as to the amount of her benefits award
while at the same time arguing that they did not have to give her
notice as to the procedures by which she could do that.
If notice were required, which it was, then defendants argue
that their failure to provide notice should be excused because
plaintiff had actual notice of the appeal procedures.
Defendants
point out that plaintiff had used the appeal procedures on a prior
occasion and that she had been provided “a copy of the Claims and
Appeal Procedures....”45
Defendants, however, cite to no authority that stands for the
proposition that actual notice, rather than formal notice, is
44
Admin. Rec. at 83, Docket No. 14.
45
March 14, 2011 letter at 2, Plaintiff’s Notice [etc.], Docket
No. 34.
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sufficient for purposes of ERISA. Moreover, the actual notice which
plaintiff received had to do with the denial of her claim, not the
amount of her benefits.
Defendants also suggest that plaintiff knew that disability
retirement benefits were being reduced for applications filed after
January 1, 2010 and thus she could have raised this issue when she
appealed the denial of her claim.
Defendants point out that
plaintiff has averred that she was told about the reductions in
November 2009 and that she knew that she had not filed her
application before January 1, 2010.
Plaintiff may have been aware that the new reductions might
apply to her when she filed the appeal of the denial of her claim.
But, at that point in time, she had not been awarded any benefits.
An argument about how her benefits should be calculated would have
been irrelevant.
In sum, defendants did not give plaintiff notice as to her
right to appeal the amount of her benefits award.
“In cases of
inadequate notice, the usual remedy is to allow the plaintiff to
file a late appeal and to construe it as timely.” Chappel, 232 F.3d
at 727.
Thus, this matter is remanded to the Trustees so that
plaintiff can pursue an appeal of her benefits award. The Trustees
shall treat plaintiff’s appeal as timely, as long as plaintiff’s
appeal is filed within 180 days of the entry of this order.
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Conclusion
Defendants’ motion to dismiss is granted.
remanded to the Trustees for further proceedings.
This matter is
The clerk of
court shall enter judgment dismissing plaintiff’s complaint without
prejudice.
DATED at Anchorage, Alaska, this 3rd day of December, 2013.
/s/ H. Russel Holland
United States District Judge
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