Owens et al v. Western & Southern Life Insurance Co. et al
Filing
99
ORDER RE: Motion for Summary Judgment (Doc. #66) is GRANTED, and this matter is REMANDED to the plan administrator for consideration. IT IS FURTHER ORDERED that this matter is STAYED and ADMINISTRATIVELY CLOSED while the plaintiffs pursue the administrative process. Signed by Judge Mary Ann Vial Lemmon.(cbn)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
EARL E. OWENS AND
JOSEPH WAYNE ESPAT
CIVIL ACTION
VERSUS
NO: 13-4782
THE WESTERN & SOUTHERN LIFE
INSURANCE COMPANY AND
THE WESTERN & SOUTHERN LIFE
INSURANCE LONG TERM
INCENTIVE AND RETENTION PLAN
SECTION: "S" (4)
ORDER AND REASONS
IT IS HEREBY ORDERED that Defendants' Motion for Summary Judgment (Doc. #66)
is GRANTED, and this matter is REMANDED to the plan administrator for consideration.1
IT IS FURTHER ORDERED that this matter is STAYED and ADMINISTRATIVELY
CLOSED while the plaintiffs pursue the administrative process.
BACKGROUND
Plaintiffs, Earl E. Owens and Joseph Wayne Espat, are retired former employees of
defendant, The Western & Southern Life Insurance Company. Western & Southern provides
financial services including life and health insurance, retirement savings, and investment products
and services. Both Owens and Espat were participants in the Western & Southern Agency Group
Long Term Incentive and Retirement Plan (the "Plan"), which was "designed to provide an incentive
for selected key field associates of the Western & Southern Agency Group to maximize performance
and remain with the organization." To be eligible for participation in the Plan the employee must
be "in the top 5% of Employees when ranked by annual compensation as measured during the
previous calendar year." In 2006 and 2008, Owens and Espat, respectively, first became eligible to
1
Plaintiffs' Motion for Summary Judgment (Doc. #56) is rendered moot by the remand to the plan
administrator.
participate in the Plan. Kim Chiodi, Senior Vice President of Human Resources for The Western
& Southern Financial Group, declared in her affidavit that it is Western & Southern's practice to
provide the summary plan description, titled "Western & Southern Agency Group Field Long Term
Incentive and Retention Plan Outline" to employees when they first become eligible to participate
in the Plan.
The Plan includes a forfeiture provision, which states, in pertinent part:
4.7 Forfeitures. The contingent right of Participant or
Beneficiary to receive future payments hereunder with respect to both
vested and nonvested Performance Units shall be forfeited upon the
occurrence of any one or more of the following events:
*
(b)
*
*
If the Participant within three years after termination of
employment with the Company or any Affiliate (1) enters
into a business or employment which is competitive with
the business of the Company or any Affiliate, (2) solicits
the Company's or any Affiliates' employees, agents or
clients to work for or buy products from, or (3) acts in
any other way which, had the Participant been employed
with the Company or any Affiliate, would have provided
the Company with "Cause" to terminate such Participant's
employment.
However, the Executive Committee may, in its sole discretion
waive or reduce the forfeiture of payments described above.
The summary plan description states:
Forfeiture, Vested and Unvested Units - A participant's vested and
unvested units will be forfeited if:
*
*
2
*
3) A participant, within three years after termination of service,
including service as a field associate or independent
contractor, (a) engages in a business that competes with any
of the business of the Western & Southern Financial Group,
(b) solicits field associates, agents or clients of the enterprise
for competitive employment or products, or (c) engages in
any activity detrimental to the enterprise in its judgment.
The Plan provides the following Claims Procedures at section 6.5,
(a) If a claim for benefits under the Plan is denied, in whole or in
part, the Executive Committee or its designee will provide a
written notice of the denial within a reasonable period of time,
but not later than 90 days after the claim is resolved. If special
circumstances require more time to process the claim. The
Executive Committee or its designee will issue a written
explanation of the special circumstances prior to the end of the
90-day period and a decision will be made as soon as possible,
but not later than 180 days after the claim is resolved.
The written notice of claim denial will include:
(1) Specific reasons why the claim was denied;
(2) Specific references to applicable provisions of the Plan
document or other relevant records for papers on which
the denial is based, and information about where a
Participant or his or her designated Beneficiary may see
them;
(3) A description of any additional material or information
needed to process the claim and an explanation of why
such material or information is necessary;
(4) An explanation of the claim review proceudre, including
the time limits applicable to such procedure, as well as a
statement notifying the Participant or his or her designed
Beneficiary of their right to file suit if the claim for
benefits is denied, in whole or in part, on review.
Upon request, a Participant of his or her designated Beneficiary
will be provided without charge, reasonable access to, and copies
of, all non-confidential documents that are relevant to any denial
of benefits. A claimant has 60 days from the day he or she
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receives the original denial to request a review. Such request
must be made in writing and sent to the Executive Committee or
its designee. The request should state the reasons why the claim
should be reviewed and may also include evidence or
documentation to support the claimant's position.
The Executive Committee or its designee will reconsider the
claimant's claim, taking into account all evidence, documentation,
and other information related to the claim and submitted on the
claimant's behalf, regardless of whether such information was
submitted or considered in the initial denial of the claim. The
Executive Committee or its designee will make a decision within
60 days. If special circumstances require more time for this
process, the claimant will receive a written explanation of the
special circumstances prior to the end of the initial 60-day period
and a decision will be sent as soon as possible, but not later than
120 days after the Executive Committee or its designee receives
the request.
(b) Exhaustion of Remedies – No legal action for benefits under the
Plan shall be brought unless and until the following steps have
occurred:
(1) The claimant has submitted a written application for benefits;
(2) The claimant has been notified that the claim has been
denied;
(3) The claimant has filed a written request appealing the denial
in accordance with Section 6.5 and
(4) The claimant has been notified in writing that his or her
appeal has been denied or that no action on the appeal has
taken place within the time prescribed by this Section 6.5.
On November 15, 2012, Chiodi wrote to Owens explaining that he forfeited his rights under
the Plan because he "entered into a business relationship or employment" with other insurance
companies within three years after his retirement. The letter directed Owens to re-pay a certain
amount paid to him under the Plan, plus taxes that the Western & Southern paid on the forfeited
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amount, by December 14, 2012. Western & Southern informed Owens that it would "pursue all
legal remedies to which [it] may be entitled," if payment were not received by the appointed date.
Espat received a similar letter from Chiodi that was dated December 26, 2012, informing him
that he forfeited his rights under the Plan by "enter[ing] into a business relationship or employment"
with other insurance companies within three years after his retirement.
The correspondence
directed Espat to re-pay a certain amount paid to him under the Plan, plus taxes that the Western &
Southern paid on the forfeited amount, by December 28, 2012, or an alternative amount by January
18, 2013. Western & Southern informed Espat that it would "pursue all legal remedies to which [it]
may be entitled," if payment were not received by one of the aforementioned dates.
Neither Owens nor Espat responded to the letters. On March 28, 2013, Western & Southern
filed suit against Owens in the Court of Common Please, Hamilton County, Ohio seeking to recoup
the amount that it previously paid to Owens that Western & Southern claims Owens forfeited under
the Plan. Western & Southern alleged claims of breach of contract, promissory estoppel and unjust
enrichment. On April 18, 2014, the court dismissed that suit for lack of jurisdiction, finding that
Western & Southern's claims against Owens arose under an ERISA plan and were preempted by 29
U.S.C. § 1144. On May 8, 2014, Western & Southern appealed that decision to the Court of Appeals
of Hamilton County, Ohio, First Appellate District. The appellate court noted that the parties agreed
that the Plan is a "top-hat" plan, and affirmed the trial court's decision that Western & Southern's
state-law claims were preempted by ERISA.
On June 12, 2013, Owens and Espat filed this action seeking benefits under the Plan. They
allege that the Plan is governed by ERISA, and that they are entitled to an additional $70,000 each
in unpaid benefits under the Plan, which Western and Southern is "refusing to pay . . . without good
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or lawful cause." Defendants filed a motion for summary judgment arguing that plaintiffs' claims
should be dismissed, or remanded to the plan administrator for consideration, because plaintiffs
never pursued the administrative process outlined in the Plan with respect to the claims for benefits
that they raise in this lawsuit.2 Plaintiffs argue that they are not required to engage in the
administrative process because they never received the Plan documents and were unaware of
administrative process, pursuing the administrative process would be futile and the forfeiture letters
failed to include information about the administrative process as required by 29 C.F.R. § 2560.5031(g).3
ANALYSIS
I.
Summary Judgment Standard
Rule 56 of the Federal Rules of Civil Procedure provides that the "court shall grant summary
judgment if the movant shows that there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law." Granting a motion for summary judgment is proper if
the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits filed in
support of the motion demonstrate that there is no genuine issue as to any material fact that the
moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Anderson v. Liberty
Lobby, Inc., 106 S.Ct. 2505, 2509-10 (1986). The court must find "[a] factual dispute . . . [to be]
2
Defendants also argued that they are entitled to summary judgment because plaintiffs clearly
violated the Plan by engaging in competing businesses. This argument need not be addressed because remand
to the plan administrator is appropriate.
3
Plaintiffs filed a motion for summary judgment arguing that they are entitled to benefits under the
Plan as a matter of law because they were not provided with a summary plan description or a copy of the
Plan, were not advised of any provision that would disqualify them from receiving benefits under the Plan,
and their status as independent agents with other insurance companies does not violate the Plan's forfeiture
provision. These arguments need not be addressed because remand to the plan administrator is appropriate.
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'genuine' if the evidence is such that a reasonable jury could return a verdict for the nonmoving party
. . . [and a] fact . . . [to be] 'material' if it might affect the outcome of the suit under the governing
substantive law." Beck v. Somerset Techs., Inc., 882 F.2d 993, 996 (5th Cir. 1989) (citing Anderson,
106 S.Ct. at 2510).
If the moving party meets the initial burden of establishing that there is no genuine issue, the
burden shifts to the non-moving party to produce evidence of the existence of a genuine issue for
trial. Celeotex Corp. v. Catrett, 106 S.Ct. 2548, 2552 (1986). The non-movant cannot satisfy the
summary judgment burden with conclusory allegations, unsubstantiated assertions, or only a scintilla
of evidence. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc). If the
opposing party bears the burden of proof at trial, the moving party does not have to submit ,
evidentiary documents to properly support its motion, but need only point out the absence of
evidence supporting the essential elements of the opposing party’s case. Saunders v. Michelin Tire
Corp., 942 F.2d 299, 301 (5th Cir. 1991).
II.
Administrative Process
Western & Southern argues that dismissal of plaintiffs' claims or remand to the plan
administrator is appropriate because plaintiffs failed to exhaust the Plan's administrative remedies
prior to filing suit.
A person claiming benefits under an ERISA plan must exhaust all administrative remedies
available under the plan prior to bringing an action in court for denial of benefits. Bourgeois v.
Pension Plan for Emps. of Santa Fe Int'l Corps., 215 F.3d 475, 479 (5th Cir. 2000) (citing Denton
v. First Nat'l Bank of Waco, 765 F.2d 1295, 1300 (5th Cir. 1985)). The policies underlying the
exhaustion requirement are to:
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(1) uphold Congress' desire that ERISA trustees be responsible for
their actions, not the federal courts; (2) provide a sufficiently clear
record of administrative action if litigation should ensue; and (3)
assure that any judicial review of fiduciary action (or inaction) is
made under the arbitrary and capricious standard, not de novo.
Meza v. Gen. Battery Corp., 908 F.2d 1262, 1279 (5th Cir. 1990) (citing Denton, 765 F.2d at 1300).
Applying these policies, the United States Court of Appeals for the Fifth Circuit has held that ERISA
claimants are required "to make some attempt at obtaining their benefits trough the administrative
route, or at the very least, to make some effort to learn of the process applicable to them." Id. Thus,
"Meza imposes a duty to seek the necessary information even if it has not been made available,"
because the ERISA claimant "is bound by the plan's administrative procedures and must use them
before filing suit." Bourgeois, 215 F.3d at 480 (citing Meza, 908 F.2d at 1279).
However, futility is an exception to the exhaustion of administrative remedies requirement.
Id. at 479. An ERISA claimant must "show hostility or bias on the part of the administrative review
committee" to prevail on a futility claim. McGowin v. ManPower Int'l, Inc., 363 F.3d 556, 559 (5th
Cir. 2004). Statements made by high-ranking company officers or employees who are not
responsible for adjudicating benefits claims "do not conclusively show that an administrative
committee would reject a claim for benefits," so as to demonstrate futility. Id. (citing Bourgeois, 215
F.3d at 479).
In this case, plaintiffs have not pursued the administrative process. Plaintiffs argue that they
are exempt from doing so because they contend that they did not receive copies of the Plan.
However, when plaintiffs received the forfeiture letters, they were obligated to contact Western &
Southern to seek the necessary information regarding the Plan's administrative process. Bourgeois,
215 F.3d at 480 (citing Meza, 908 F.2d at 1279). Plaintiffs did not respond to Western & Southern's
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forfeiture letters or attempt to discover the administrative process prior to filing this action.
Therefore, plaintiffs are not excused from pursuing the administrative process because they allegedly
did not receive copies of the Plan.
Plaintiffs also argue that pursuing the administrative process would be futile because
Western & Southern sent the forfeiture letters and sued Owens. Neither the forfeiture letters, nor
the lawsuit demonstrate futility. The Plan provides that the "Executive Committee or such other
department or committee of the Company as the Executive Committee shall designate shall have the
discretionary authority to determine eligibility for benefits and construe the terms of the Plan."
Plaintiffs have not demonstrated hostility or bias on the part of the administrative review committee
or that the administrative committee would reach the same conclusion as Chiodi, the Senior Vice
President of Human Resources who sent the forfeiture letters, or the company officials directing the
lawsuit. Also, there is no indication that Chiodi or the company officials directing the lawsuit are
part of the Plan's administrative review committee. Further, Chiodi sent the letter to Owens on
November 15, 2012. Western & Southern's lawsuit against Owens was filed four months later, on
March 28, 2013. Owens had plenty of time to contact Western & Southern and discover and pursue
the administrative process prior to Western & Southern's filing suit. Therefore, plaintiffs have not
demonstrated that the futility exception to the exhaustion requirement applies.
Plaintiffs also argue that they are exempt from the administrative exhaustion requirement
under 29 C.F.R. § 2560.503-1. Section 1133(1), Title 29 of the United States Code provides:
In accordance with regulations of the Secretary, every employee
benefit plan shall - (1) provide adequate notice in writing to any participant or
beneficiary whose claim for benefits under the plan has been denied,
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setting forth the specific reasons for such denial, written in a manner
calculated to be understood by the participant[.]
29 U.S.C. § 1133. The "minimum requirements for employee benefit plan procedures pertaining
to claims for benefits by participants and beneficiaries," is set forth in 29 C.F.R. § 2560.503-1, "[i]n
accordance with the authority of sections 503 and 505 of the Employee Retirement Income Security
Act of 1974 (ERISA or the Act), 29 U.S.C. 1133, 1135[.]" 29 C.F.R. § 2560.503-1(a). Subsection
(l) provides that if the plain fails "to establish or follow claims procedures consistent with the
requirements of this section, a claimant shall be deemed to have exhausted the administrative
remedies available under the plan and shall be entitled to" bring a civil action. Id. at § 2560.503-1(l).
Plaintiffs claim that under subsection (l), they are deemed to have exhausted their
administrative remedies because the forfeiture letters failed to comply with subsection (g)(1)(iv).
Subsection (g)(1)(iv) requires notifications of benefits determinations to include a description of the
plan's review procedures and applicable time limits, and a statement regarding the claimant's right
to bring a civil action following an adverse benefits determination after such review. Id. at §
2560.503-1(g)(1)(iv). The forfeiture letters did not include such a statement. However, section
2560.503-1 does not apply to the forfeiture letters. Subsection (a) specifies that section 2560.503-1
applies to "employee benefit plan procedures pertaining to claims for benefits by participants and
beneficiaries. . ." Id. at § 2560.503-1(a). Subsection (e) defines a "claim for benefits" as "a request
for a plan benefit or benefits made by a claimant in accordance with a plan's reasonable procedure
for filing benefit claims." Id. at § 2560.503-1(e). The forfeiture letters were not issued in response
to a "claim for benefits." Indeed, plaintiffs never made a "claim for benefits" under the Plan.
Therefore, plaintiffs are not deemed to have exhausted their administrative remedies under section
2560.503-1(l) because the forfeiture letters did not conform to subsection (g).
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Because plaintiffs did not exhaust their administrative remedies, and no exception applies,
it is appropriate to remand this action to the plan administrator for a determination. Plaintiffs must
exhaust all administrative remedies outlined in the Plan. Western & Southern may not raise a time
limitation defense because it suggested in this action that remand to the plan administrator is
appropriate. Therefore, Western & Southern's motion for summary judgment is GRANTED, and
this matter is REMANDED to the plan administrator for consideration.
CONCLUSION
IT IS HEREBY ORDERED that Defendants' Motion for Summary Judgment (Doc. #66)
is GRANTED, and this matter is REMANDED to the plan administrator for consideration.
IT IS FURTHER ORDERED that this matter is STAYED and ADMINISTRATIVELY
CLOSED while the plaintiffs pursue the administrative process.
31st
New Orleans, Louisiana, _____ day of July, 2015.
____________________________________
MARY ANN VIAL LEMMON
UNITED STATES DISTRICT JUDGE
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