Swann v. Ryder System, Inc. et al

Filing 28

MEMORANDUM OPINION & ORDER: (1) DENYING pla's 22 Motion for Judgment; (2) GRANTING dft's 25 26 Motion for Judgment. Signed by Judge Joseph M. Hood on 5/23/18.(KJR)cc: COR

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION at LEXINGTON
FREDDIE L. SWANN,

)
)
)
)
)
)
)
)
)
)

Plaintiff,
v.

RYDER SYSTEM, INC.,
et al.,

Civil Case No.
5:17-cv-330-JMH

MEMORANDUM OPINION &
ORDER

Defendants.
***
When Plaintiff Freddie Swann got hurt off the job, he could
no longer work.

Under an employer-sponsored insurance plan, Swann

was entitled to disability benefits. No doubt about that. Indeed,
he received both short-term and long-term benefits.

But upon

receiving his long-term benefits, Swann noticed that the payments
were

substantially

less

than

what

he

expected.

The

claim

administrator, Defendant Liberty Life Assurance Company of Boston
(“Liberty”) explained that the amount reflected 60 percent of
Swann’s “base pay,” as calculated by Liberty and Defendant Ryder
Systems, Inc. (“Ryder”), Swann’s employer, in compliance with the
plan.
Swann

disputes

Defendants’

calculation

of

his

base

pay.

Swann, a truck driver, argues his base pay includes money for
stops, down time, and mileage, which Defendants left out.
difference is thousands of dollars per month.

1

The

But because the

plan grants broad discretion to Defendants to determine Swann’s
long-term benefits, this Court is limited to narrow review of
Liberty’s decision under the Employee Retirement Income Security
Act (“ERISA”).

See Firestone Tire & Rubber Co. v. Bruch, 489 U.S.

101, 115 (1989). And upon examination, the Court finds Defendants’
determination was not arbitrary or capricious.

Thus, for the

reasons stated herein, Plaintiff’s Motion for Judgment [DE 22] is
DENIED and Defendants’ Motions [DE 25, 26] are GRANTED.
I.

Background
Swann drove truck for Ryder.

September 2015.
off the job.

[DE 1-3].

[Id. at p. 6].

Four months later, Swann got hurt

[Id. at p. 7].

His injuries prevented him from

engaging in any gainful full-time work.
for

disability

He began work in

benefits

under

his

[Id.].

So Swann applied

employer-sponsored

group

disability insurance plan.
Initially, things went smoothly.

Swann received short-term

disability benefits for six months—the cap allowed by the plan.
[Id.].

Once six months were up, Swann had to apply for long-term

disability benefits.

He did so, and Liberty began paying long-

term benefits in July 2016.

[Id.].

But the new benefit checks

were substantially less than the short-term benefits.

Swann

wondered why, so checked with Liberty and Ryder.
The confusion stemmed from the calculation of Swann’s “base
pay.”

The plan documents relevant here comprise two documents:
2

(1) The Ryder System, Inc. Summary Plan Description and Benefit
Programs (the “Plan”) and (2) the Liberty Group Disability Income
Policy (the “Policy”).1

[Ryder R. 5, 22, 63].

The official plan

documents include the Plan and “contracts between Ryder System,
Inc. and the benefit administrators” (in this case, Liberty). [Id.
at 22].

When an employee has a question about his plan, the plan

documents—meaning
[Id.].

both

the

Plan

and

Policy—govern

the

issue.

But to the extent the Plan and Policy conflict, language

of the Policy controls. [Ryder R. 5]. Understanding Swann’s claim
requires the Court to look at the Plan and Policy in more detail.
We

start

with

the

Plan,

which

names

Ryder

as

the

Plan

Administrator and grants the administrator broad discretion to
determine “administer, apply and interpret all plans” and to
“decide all factual and legal matters arising in connection with
the operation of administration of the plans.”
particular,

the

Plan

grants

the

[Ryder R. 21].

administrator

In

“absolute

discretional authority to . . . make all decisions (including
factual decisions) with respect to . . . the amount of, benefits
payable under the plans to employees or participants or their
beneficiaries.”

[Id.]. The discretion also extends to decisions

about “legal or factual questions, relating to the calculation and

1

The Administrative Record contains both documents. For ease of reference,
the Court will cite to the Ryder System, Inc. Summary Plan Description and
Benefit Program using “Ryder R.” followed by a page number. The Court will
cite to the Liberty Group Disability Income Policy using “Liberty R.”
followed by a page number.

3

payment of benefits, and all other determinations made under the
plans”

and

resolving

ambiguities,

and

clarifying

inconsistences

and

“any

factual

omissions.”

or

[Id.].

other
Such

discretion is given to Ryder “or, where applicable, any duly
authorized delegee of the plan administrator.”

[Id.].

The Plan names Liberty as the benefits administrator for the
long-term disability benefits plan.

[Id. at 22, 63].

And when

describing long-term disability benefits, the Plan continually
informs employees that the “insurance carrier”—i.e., Liberty—will
be making the decisions.

[Id. at 66, 68, 69, 70, 71, 72].

Indeed,

in a section titled “Who to Send Your Claims and Appeals To,” Ryder
instructs employees to contact Liberty.

[Id. at 55].

Finally, the Plan outlines pay for the purposes of disability
benefits.

The Plan first notes that “each benefit plan provides

a slightly different definition” of earnings and that “earnings
for any given benefit plan shall be defined under the portion of
the SPD describing that plan.”

[Id. at 76].

The Plan then lists

“examples” including base pay, weekly base pay, and monthly base
pay, “for the purposes of the STD plan.” [Id.] (emphasis in
original).

The Plan does not define base pay for the purposes of

the long-term benefits plan.

But it does define “pre-disability

earnings” for the purposes of the long-term plan as “your monthly
rate of average earnings in effect on the day before you became
disabled.

Average earnings means the greater of your base pay or
4

the average of the previous 2 years of total earnings as of August
31, rounded to the next higher thousand.”

[Id.].

Now we turn to the Policy. This first uses the term “base
pay” in its definition of “basic monthly earnings” as the “greater
of the average of the previous two years of frozen pensionable
earnings as of August 31 or frozen base pay established at each
annual enrollment, rounded to the next higher thousand.”

[Liberty

R. 7]. The Policy then provides that an employee’s monthly benefit
under the plan is based on the person’s basic monthly earnings.
[Id. at 21].
discretion

to

And like the Plan, the Policy provides broad
the

administrator:

“Liberty

shall

possess

the

authority, in its sole discretion, to construe the term so this
policy and to determine benefit eligibility hereunder.

Liberty’s

decision regarding construction of the terms of this policy and
benefit eligibility shall be conclusive and binding.”

[Id. at

42].
Although Swann disputed the calculation of base pay, he
continued to receive benefits for five months.
Liberty then terminated the benefits.
however,

Liberty

retroactively.

reinstated

[Id.].

the

[Id.].

benefits

[DE 22, p. 2].

Three months later,
and

paid

benefits

But Liberty did not change its base pay

calculation.
The nature of Swann’s employment agreement was the source of
the “base pay” dispute.

As a truck driver, Swann earned 26 center
5

per mile and $18 per hour for “down time,” as well as a fixed
amount for “stops.”
half

months

$19,644.06.

of

2015

[Id.].

time” and “stops.”
When

[DE 1-3, p. 3].

he

(before

In the final three-and-a-

getting

injured),

Swann

Only 18 percent of his pay came from “down
[Id.].

received

The rest was based on mileage.

short-term

benefits,

Swann’s

included stops and mileage, as provided in the plan.
76].

earned

[Id.].

base

pay

[Ryder R.

When short-term benefits expired, and he began receiving

long-term benefits, Swann’s base pay no longer included mileage
and stops.

Instead, Liberty paid his benefits based on his pay of

$18 per hour.
$37,440.

In so doing, Liberty found his base pay to be

[DE 22, p. 4].

This amounted to a long-term benefit

payment of $1,900 per month.

[Id.].

Swann argues that base pay

should have included mileage and stops and should have been more
than doubled.

[Id.].

Swann filed suit in Madison County Circuit Court in July 2017
court for breach of contract against Ryder and Liberty.
3].

[DE 1-

But because the Employer Retirement Income Security Act

(“ERISA”)

completely

preempts

state

removed the case to federal court.

law,
[DE 1].

Defendants

properly

This is an action

under ERISA’s civil enforcement system, 29 U.S.C. § 1132.

After

the filing of the administrative record, the parties filed cross
motions for judgment making this matter ripe for review.
25, 26, 27]
6

[DE 22,

II.

Standard of Review

As a threshold matter, the parties dispute the standard of
review.

Swann argues the Court must apply de novo review because

Liberty exercised no discretion in calculating his base pay.
22, p. 4].

[DE

Defendants argue arbitrary and capricious review

applies because the policy granted Liberty broad discretion.
An administrator’s decision is normally reviewed de novo.
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989).
“But

if

the

plan

‘gives

the

administrator

or

fiduciary

discretionary authority to determine eligibility for benefits or
to construe the terms of the plan,’ we review such decisions under
the

arbitrary-and-capricious

standard.”

Clemons

v.

Norton

Healthcare Inc. Retirement Plan, --- F.3d ---, 2018 WL 2142640, at
*6 (6th Cir. May 10, 2018) (quoting Firestone, 489 U.S. at 111,
115); see also Moore v. Lafayette Life Ins. Co., 458 F.3d 416,
437–38 (6th Cir. 2006).
Swann argues that Liberty did not exercise discretion because
it calculated his long-term benefit based on information provided
by Ryder.

[DE 22, p. 5].

And because Liberty did not exercise

discretion, Swann asks this court to apply de novo review.

[Id.].

But the triggering event for Firestone deference is contractual
language, not behavior.
words,
applies

to
we

determine
look

to

Clemons, 2018 WL 2142640 at *6.

whether
whether

arbitrary
the
7

words

and
in

In other

capricious
the

contract

review
grant

discretionary

authority

to

the

administrator,

not

how

the

administrator exercised that discretion.
Here, the Policy states Liberty has the “authority, in its
sole discretion, to construe the terms of this policy and to
determine benefit eligibility hereunder.”

[Liberty R. 42].

In

addition, Ryder delegated to Liberty “the authority and discretion
to take all actions and make all decision (including factual
decision) with respect to eligibility for, and the amount of,
benefits payable.”

[Ryder R. 21, 22, 63].

The language in both

the Policy and the Plan invoke Firestone deference.
2018 WL 214264, at *6.
applies.

See Clemons,

Thus, arbitrary and capricious review

In applying arbitrary and capricious review, the Court

will consider whether the administrator operates under a conflict
of interest.

Firestone, 489 U.S. at 115.

Under arbitrary and capricious review, the Court will uphold
the administrator’s decision that is “the result of a deliberate,
principled reasoning process” that is “supported by substantial
evidence.”

Glenn v. MetLife, 461 F.3d 660, 666 (6th Cir. 2006).

So long as the administrator’s “interpretation of the Plan’s
provisions

is

‘reasonable’”

the

administrator’s interpretation.

Court

will

uphold

the

Kovach v. Zurich Am. Ins. Co.,

587 F.3d 323, 328 (6th Cir. 2009).

“The arbitrary and capricious

standard

form

is

the

least

administrative action.”

demanding

of

judicial

review

of

Hunter v. Caliber Sys. Inc., 220 F.3d
8

702, 710 (6th Cir. 2000) (quoting Davis v. Kentucky Fin. Cos.
Retirement Plan, 887 F.2d 689, 693 (6th Cir. 1989)).

Arbitrary

and capricious review “must actually honor an extreme level of
deference to the administrative decision.”

McClain v. Eaton Corp.

Disability Plan, 740 F.3d 1059, 1064 (6th Cir. 2014) (internal
quotations omitted). “Even if the Court would not have come to the
same conclusion as the Plan Administrator, as long as there is a
reasonable basis for the decision, it must be upheld.”

Senzarin

v. Abbot Severance Pay Plan for Employees of KOS Pharms., 361 F.
App’x 636, 640 (6th Cir. 2011).

During review, the Court is

limited to the “consideration of the pre-packaged administrative
record.”

Rochow v. Life Ins. Co. of N. Am., 482 F.3d 860, 865

(6th Cir. 2007).
III. Analysis
A. Proper Defendants
Before turning to the underlying claim, the Court will clarify
the roles of the parties.

The issue arises because Swann names

both Liberty and Ryder as defendants, but at various times refers
to one or the other, but not both.

The two are not interchangeable

for ERISA purposes, and the Court finds it necessary to address
this issue.
ERISA cases often include both a claims administrator and
plan administrator.

See Butler v. United Healthcare of Tn., Inc.,

764 F.3d 563, 570 (6th Cir. 2014).
9

The claim administrator is the

entity that “administers claims for employee welfare benefits plan
and has authority to grant or deny claims.”

Id.

The plan

administrator “is usually the employer who adopted the benefit
plan in question.”

Id.

The “phrase ‘plan administrator’ should

not be confused with the term ‘claims administrator.’” Id.
all

parties

agree

that

Liberty

is

the

claims

(or

administrator, and Ryder is the plan administrator.
5–6; 11, p. 1; 12, p. 2; 22, p. 2].

Here,

benefits)

[DE 1-3, p.

Swann named them both as

defendants.
This case adds an additional wrinkle: the plan documents grant
discretion to both Ryder and Liberty.
42].

[Ryder R. 21; Liberty R.

In an ERISA case it “is not unique to have a situation where

the plan administrator and claim administrator share discretion
over the administration of the plan.”

Fendler v. CAN Grp. Life

Assurance Co., 247 F. App’x 754, 758 (6th Cir. 2007); see also
Butler, 764 F.3d at 570; Rud v. Liberty Life Assurance Co. of
Boston, 438 F.3d 772, 774 (7th Cir. 2006).

When an insurance

company acts as a claim administrator and possesses discretion to
deny or grant claims, it qualifies as an ERISA fiduciary and is a
proper defendant.

Moore v. Lafayette Life Ins. Co., 458 F.3d 416,

438 (6th Cir. 2006).
insurance

company,

Here, Liberty fits the Moore framework: an
acting

as

a

authority to grant or deny claims.
defendant.
10

claims
Id.

administrator,

given

Liberty is thus a proper

That brings us to Ryder.

The company sponsors the plan, and

purchased insurance from Liberty.

This does not mean, however,

that Ryder is necessarily subject to suit.
dismissed

the

employer-sponsor

because

the

In Moore¸ the court
insurance

company

(claims administrator) had authority to adjudicate the plaintiff’s
claims.

Id.

Thus, the claims administrator and not the employer

was “the proper party defendant for a denial of benefits claim by
Plaintiff.”

Id.

(citing Kennard v. UNUM Life Ins. Co., No. 01–

217–B–K, 2002 WL 412067, at *1–3, (D.Me. Mar. 14, 2002)).

In

general, then, when an employer-plan administrator delegates broad
discretion to an insurance company over claims administration, the
insurance company-claims administrator is the proper defendant,
not the plan administrator-employer.
But a plan administrator can still be a proper defendant when
it exercises control over the administration of the plan.
v. Eaton Corp., 839 F.2d 263, 266 (6th Cir. 1988).

Daniel

A claimant

properly sues a plan administrator-employer “only with respect to
those aspects of the plan over which he or she exercises authority
or control.”

Moore, 458 F.3d at 438.

“The question is whether

[the plan administrator-employer] played any role in controlling
or influencing Plaintiff’s benefits decision.”

Ciaramitaro v.

Unum Life Ins. Co. of Am., 521 F. App’x 430, 438 (6th Cir. 2013).
Put

simply,

“[u]nless

an

employer

11

is

shown

to

control

administration of a plan, it is not a proper party defendant in an
action concerning benefits.”
Here,

the

only

Daniel, 839 F.2d at 266.

possible

way

Ryder

controlled

Liberty’s

administration of the long-term disability policy was by providing
salary data on which Liberty relied.

[Liberty R. 57 (informing

Swann’s counsel that he would need to verify with Ryder how “they
are calculating” Swann’s salary)].
to

“controlling

or

This arguably does not amount

influencing”

Ciaramitaro, 521 F. App’x at 438.

the

benefits

decision.

But it is not an argument Ryder

makes. Instead of filing its own response to Swann’s motion, Ryder
incorporated Liberty’s response, which focuses on the standard of
review and whether Liberty’s determination satisfies them.
25, 26].

[DE

Because this issue was never raised and briefed, the

Court will assume that Ryder is a proper party.
B. Determination of Base Pay
Under the “least demanding form of judicial review,” the
determination of Swann’s Basic Monthly Earnings was not arbitrary
and capricious.

Hunter, 220 F.3d at 710.

The Plan and Policy

contain no definition of base pay for the long-term disability
plan.

And the Policy grants Liberty discretion to interpret the

terms of the Policy.

In determining Swann’s Basic Monthly Income,

then, Liberty relied on Swann’s data, which indicated a base pay
of $18 per hour.

[DE 22, 25].

As Liberty argues, it did not have

access to Swann’s records, other than through Ryder; thus, its
12

determination to use the $18 per hour to calculate Swann’s benefits
makes good sense.

Liberty took Swann’s hourly rate, came up with

a monthly amount, and multiplied by 60 percent (as the Policy
requires) to determine Swann’s benefits amount.
Swann argues that base pay should have included money for
mileage, down time, and stops.

[DE 22].

And he points to the

definition of short-term benefits, which specifically includes
those items.

[Ryder R. 76].

But the fact that those payments are

included as part of the definition for short-term benefits, but
excluded in the definition for long-term benefits only strengthens
Defendants’ position that additional payments were not part of
base pay for long-term benefits.

As the Plan states, “earnings”

is defined differently for each plan.

[Id.].

Thus, there is no

reason to think that base pay would be the same for short-term and
long-term plans.
Swann argues that Defendants “cannot arbitrary create [their]
own definition or calculation of base pay.”

[DE 22, p. 6].

He

also argues there “is no evidence in the record to support” the
base pay calculation.

[Id. at p. 8].

Not so.

The calculation

was not pulled out of thin air. Ryder had an agreement with Swann
to pay him $18 per hour.

Email exchanges show Liberty explained

to Swann how the calculation worked.
R. 57].

[Ryder R. 108, 109; Liberty

With discretion to construe basic monthly earning under

the Policy, Liberty acted reasonably in using Swann’s salary
13

information as a basis for his benefits.

This is not arbitrary

and capricious.
Assuming, again, that Ryder is a proper defendant, it did not
act arbitrarily and capriciously.

Ryder supplied data to Liberty,

and Liberty then determined long-term benefits.

Swann argues that

Ryder, by supplying salary information that he earned about $38,000
per year, was unreasonable.

But in fact that is what Swann was

due to make based on his per-hour rate.

True, his total earnings

would be higher because he would receive money for mileage, stops,
and down time.
definition

of

But (1) these payments were never included in the
long-term

benefits,

and

(2)

Defendants

had

discretion to determine base pay for long-term benefits purposes.
The fact that Swann did not like how Defendants exercised their
discretion does not mean that decision is arbitrary and capricious.
Finally,

Swann

conflict of interest.

argues

that

Ryder

was

operating

under

a

This occurs when the administrator is “both

the decision-maker, determining which claims are covered, and also
the payor of those claims.”

Calvert v. Firestar Fin. Inc., 409

F.3d 286, 292 (6th Cir. 2005).

This is a factor that must be taken

into account in determining whether an administrator’s decision is
arbitrary and capricious.

Id.

A party alleging a conflict of

interest, however, must point to something more than the “general
observation that [defendants] had a financial incentive to deny
the claim.”

Judge v. Metropolitan Life Ins. Co., 710 F.3d 651,
14

664 (6th Cir. 2013).

In other words, a plaintiff must point to

some reason why the Court should give the conflict significant
weight other than the mere fact that a defendant is both the
decision-maker and payor.

Gilewski v. provident Life and Accident

Ins. Co., 683 F. App’x 399, 409 (6th Cir. 2017).
Here,

Swann

provides

no

reason

significant weight to any conflict.

for

the

Court

to

give

First, as discussed, Liberty

had the authority to grant or deny claims, not Ryder.

But Swann

claims that Ryder has the conflict. He never identifies a conflict
for Liberty.

And in any event, Swann merely states that Ryder is

the decision-maker and payor, but gives the Court no reason to
think a conflict actually influenced any decision here.
there

is

no

conflict

that

makes

the

administrative

Thus,

decision

arbitrary and capricious.
IV.

Conclusion

Accordingly, for the foregoing reasons, IT IS ORDERED:
(1)

That Plaintiff’s Motion for Judgment [DE 22] is DENIED;

(2)

That Defendants Motion for Judgment [DE 25, 26] is

GRANTED.
This the 23RD day of May, 2018.

15