Kane v. UPS Pension Plan Board of Trustees

Filing 25

MEMORANDUM OPINION. Signed by Judge Richard D Bennett on 11/19/12. (apls, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
GREGORY KANE,

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Plaintiff,

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v.

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UPS PENSION PLAN
BOARD OF TRUSTEES,

Civil Action No. RDB-11-03719

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Defendant.
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MEMORANDUM OPINION
Plaintiff Gregory Kane (“Plaintiff” or “Kane”) has brought this action against UPS
Pension Plan Board of Trustees (“Defendant” or “the Board”) for alleged violations of the
Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq.
Specifically, Plaintiff alleges that the Board improperly denied his benefit claim based on a
miscalculation of the total number of hours he worked as a part-time employee of United
Parcel Service (“UPS”).1 Pending before this Court is Plaintiff Gregory Kane’s Motion for
Limited Discovery beyond the administrative record (ECF No. 15).

Also pending is

Defendant UPS Pension Plan Board of Trustees’ Motion to File the Administrative Record
Under Seal (ECF No. 21). The parties’ submissions have been reviewed and no hearing is
necessary. See Local Rule 105.6 (D. Md. 2011). For the reasons that follow, Plaintiff’s
Motion for Limited Discovery (ECF No. 15) is GRANTED in part and DENIED in part.

The Complaint also alleged that the Board breached its fiduciary duties under ERISA in failing to administer
the pension plan in a prudent manner consistent with ERISA and the plan’s terms. However, this claim was
dismissed by stipulation of the parties pursuant to Rule 41(a)(1)(A)(ii) of the Federal Rules of Civil Procedure
on March 12, 2012 (ECF No. 5).

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Specifically, Plaintiff may seek extra-record discovery with respect to records or evidence
that he may then submit to this Court in order to permit this Court to evaluate and weigh
the extent to which Defendant’s structural conflict of interest may have influenced Plaintiff’s
denial of benefits. Plaintiff shall not be permitted to seek discovery into Defendant’s
records of Plaintiff’s employment history not included in the administrative record and not
related to the structural conflict of interest issue.

Defendant’s Motion to File the

Administrative Record Under Seal (ECF No. 21) is GRANTED.
BACKGROUND
According to the Complaint, Plaintiff Gregory Kane (“Plaintiff” or “Kane”) first
became employed with the United Parcel Service (“UPS”) in 1980 as a part-time preloader.
Pl.’s Compl. ¶ 13, ECF No. 1. UPS is a well-known United States package delivery company
which is the “plan sponsor” of the “employee benefit plan,” Teamsters Local Union No. 992
Health & Welfare and Pension Fund (“Teamsters Funds”), at issue in this case. Id. ¶¶ 7-9,
26. Defendant UPS Pension Plan Board of Trustees (“Defendant” or “the Board”) is the
“fiduciary” of that employee benefit plan in accordance with ERISA § 3, 29 U.S.C. § 1002.2
Id. ¶ 10.
Upon being hired as a part-time employee, Plaintiff became eligible for a UPS Parttime Pension Plan. Id. ¶ 14. Under this plan, Plaintiff could earn service credit based on the
number of hours worked. Id. ¶ 15. Specifically, no service credit would be earned for less
than 375 hours worked. Id. Then, a part-time employee could earn a six months service
In its response, Defendant contends that the Board of Trustees only provides benefits to Plaintiff based on
his tenure as a UPS part-time employee. Def.’s Opp’n to Pl.’s Mot. for Disc. at 1, ECF No. 16. Defendant
further argues that the Hagerstown Motor Carriers and Teamsters Pension Plan is responsible for Plaintiff’s
benefits associated with his employment as a full-time package car driver. Id.
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credit for 375 to 500 hours worked, a nine months service credit for 501 to 740 hours
worked, and a one year service credit for more than 750 hours worked. Id. Plaintiff’s parttime hours for 1980 to 1983 are not at issue in this case.3 Id. ¶¶ 16-19; Def.’s Answer ¶¶ 1619 ECF No. 7. The dispute giving rise to this action however centers on his hours worked
in 1984.
According to Plaintiff, from January 1, 1984 to March 22, 1984, prior to seeking a
full-time package car driver position, Plaintiff worked 302 hours. Pl.’s Compl. ¶¶ 20-22.
This full-time position allegedly required that an employee “log 30 days of work within a 90day period” before being considered as a full-time employee and “achieving full-time
seniority.” Id. ¶ 22. Plaintiff allegedly began this qualifying period in April 1984 and
completed it sometime in the middle of May 1984. Id. ¶ 23. His “full-time classification”
allegedly began on or about May 8, 1984. Id. Accordingly, Plaintiff claims that during the
months of April and May 1984, while he was still considered to be a part-time employee, he
worked at least 73 hours for UPS. Id. ¶ 24. Plaintiff further alleges that “[d]uring the
qualifying period, [his] contractual benefits including insurance, vacation days, sick days, and
personal holidays were based on his part-time employee status.” Id. ¶ 25.
As a full-time employee, Plaintiff became eligible for the Teamsters Fund and UPS
made its first contribution to that fund in late May 1984. Id. ¶¶ 26-27. Plaintiff remained a
full-time package car driver until retiring in 2011. Id. ¶ 28. In the months leading up to his
retirement, plaintiff received a statement from his pension plan concerning the credit hours
he had earned as a part-time employee. Id. ¶ 29. This statement reflected that he had earned
On the basis of his hours worked those years, plaintiff has earned three years of service credit. Pl.’s Compl.
¶¶ 16-19.

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three years of service credit as opposed to the three years and six months to which he alleges
he is entitled. Id. Upon requesting a review of his service credit, Plaintiff was informed that
according to the Board, he had only worked 302 hours in 1984 and therefore he had not
earned any service credit for that year. Id. ¶ 30. Plaintiff appealed this decision by requesting
that the hours he worked while qualifying as a full-time driver be included in the 1984 hours
worked calculation. Id. ¶ 31.
On June 6, 2011, the Board denied his appeal and concluded that the hours worked
while qualifying for the full-time position were not “covered employment” under the plan
“because Plaintiff was considered as a full-time employee.” Id. ¶ 32. On July 11, 2011,
Plaintiff filed for reconsideration of the denial of his appeal but the Board reaffirmed its
decision not to award part-time service credit to Plaintiff for the hours he worked while
qualifying for the full-time package car driver position. Id. ¶¶ 34-35. As a result, Plaintiff
brought this action against the Board of Trustees for alleged violations of the Employee
Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq. on December
23, 2011. Following a period of discovery, on May 29, 2012, Plaintiff filed the subject
Motion for Limited Discovery outside the administrative record (ECF No. 15), specifically
requesting discovery into whether Defendant breached its fiduciary duty in determining his
benefits, including discovery into a potential conflict of interest, and further requesting
Defendant’s records as to Plaintiff’s employment history and the Board of Trustees’
processes in determining whether an employee is classified as part-time or full-time. On
November 9, 2012, this Court held a telephonic hearing on the record during which the
parties were ordered to disclose the administrative record in this case to allow this Court to
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rule on the motion for extra-record discovery. Pursuant to this Court’s Letter Order (ECF
No. 19) the parties filed the full administrative record under seal.
ANALYSIS
On November 13, 2012, Defendant UPS Pension Plan Board of Trustees (“the
Board”) entered a Motion to File Plaintiff’s Administrative Record Under Seal (ECF No. 21)
pursuant to Local Rule 105.11 (D. Md. 2011). Defendant contends that filing Plaintiff
Gregory Kane’s (“Plaintiff” or “Kane”) administrative record under seal is justified because
it contains confidential and personal information belonging to the Plaintiff. While Local
Rule 105.11 does not permit this Court to issue a ruling “on the motion until at least
fourteen (14) days after it is entered on the public docket to permit the filing of objections
by interested parties,” the parties were instructed to come to an agreement prior to the filing
of the administrative record and Plaintiff has indicated that he does not oppose this motion.
Accordingly, Defendant UPS Pension Plan Board of Trustees’ Motion to File the
Administrative Record Under Seal (ECF No. 21) is GRANTED.
Turning now to Plaintiff’s Motion for Limited Discovery (ECF No. 15) outside the
administrative record, Plaintiff seeks discovery with respect to the Board’s potential
structural conflict of interest and also with respect to the completeness of the record and the
process used to determine a participant employee’s part-time or full-time classification. The
Board opposes this motion and argues that under the law Plaintiff is not entitled to any
discovery outside the administrative record. The Board further argues that even if additional
discovery was permitted the requested information would not be relevant because it based its

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decision not to award service credit for hours worked full-time on the amount of hours
worked by Plaintiff and the records of these hours are included in the administrative record.4
As this Court has previously noted, in cases brought under the Employee Retirement
Income Security Act (“ERISA”), “the scope or availability of discovery is tied to the
standard of review applied’ ” to such cases. Bartel v. Sun Life Assurance Co. of Canada, 536 F.
Supp. 2d 623, 627 (D. Md. 2008). In reviewing a claim asserting a wrongful denial of
benefits under ERISA, a court must engage in a two-part inquiry. First, a court must decide,
as a matter of de novo contract interpretation, whether the ERISA plan at issue vested
discretion in the plan administrator with respect to the contested benefits. Firestone Tire &
Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989); Booth v. Wal-Mart Stores, Inc. Assocs. Health &
Welfare Plan, 201 F.3d 335, 340-41 (4th Cir. 2000).

“[A] plan’s intention to confer

discretionary authority must be clear and unambiguous.” Bartel, 536 F. Supp. 2d at 627
(citing Gallagher v. Reliance Standard Life Ins. Co., 305 F.3d 264, 268-69 (4th Cir. 2002).
Second, if the administrator’s decision was discretionary, a court must determine whether the
denial of benefits abused that discretion. Booth, 201 F.3d at 341-42. In this case, the pension
plan at issue has not as of yet been made available and this Court is therefore unable to
determine whether it vested discretion in the Board with respect to the contested benefits.
However, the parties contend that the Board had the discretionary authority to determine
benefits.

Defendant notes that the Board interpreted the Plan as not awarding service credit to employees on fulltime schedule during the full-time position qualification period. Def.’s Opp’n to Pl.’s Mot. for Disc. at 7,
ECF No. 16. Defendant further indicates that “if the months of April and May of 1984 are not counted,
Plaintiff’s Service Credit was properly calculated; if his hours in April and May of 1984 should have been
included, his Service Credit was not properly calculated” and he should receive an additional six months of
service credit. Id. at 7-8.

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Assuming that the plan in fact confers discretionary authority to the Board, “[i]t has
long been settled law in this circuit that a district court reviewing a plan administrator’s
under a deferential standard may consider only the evidence before the administrator at the
time of decision.” Bernstein v. CapitalCare, Inc., 70 F.3d 783, 788 (4th Cir. 1995). Thus, extrarecord discovery “generally is not available when the court’s review is for abuse of
discretion.” Abromitis v. Continental Cas. Co., 261 F. Supp. 2d 388, 390-91 (W. D. N. C. 2003);
see also McCready v. Standard Ins. Co., 417 F. Supp. 2d 684, 687 n. 2 (D. Md. 2006) (“[i]t is well
established that review of an administrator’s decision for reasonableness is based on the
evidence before the administrator at the time of the determination.’). Nevertheless, this
Court has previously stated that “the Supreme Court’s decision in Metropolitan Life Ins, Co. v.
Glenn, 554 U.S. 105 (2008), may have opened the door to additional discovery under certain
conditions.” Clark v. Unum Life Ins. Co. of America, 799 F. Supp. 2d 527, 531 (D. Md. 2011).
While the Court of Appeals for the Fourth Circuit has not addressed the effects of Glenn on
extra-record discovery in ERISA cases, “[t]he majority of other circuit courts . . . have found
that it ‘fairly can be read as contemplating some discovery on the issue of whether a
structural conflict has morphed into an actual conflict.’ ” Patel v. United of Omaha Life Ins. Co.,
DKC-12-0880, 2012 WL 2370129, at * 2 (D. Md. June 21, 2012) (quoting Denmark v. Liberty
Life Assurance Co. of Boston, 566 F.3d 1, 10 (1st Cir. 2009)).

Specifically, where an

administrator “both evaluates and pays claims for benefits” there is a structural conflict of
interest which entitles courts to “determine the likelihood that an administrator’s conflict of
interest influenced its decision.” Id. at 531, 33 (citing Glenn, 554 U.S. 105). To make this
determination, a court “may consider such extrinsic facts as an administrator’s history of
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biased claims administration and any active steps it has taken to reduce bias or improve
accuracy.” Id. (citing Firestone, 489 U.S. at 117). This Court has additionally stated that “this
determination can be made by reviewing evidence regarding the administrator’s past dealings
and claim review process.”

Clark, 799 F. Supp. 2d at 532.

The presence of a plan

administrator’s conflict of interest does not alter the abuse of discretion standard of review,
Glenn, 554 U.S. at 117, rather, it is weighed as “but one among many factors in determining
the reasonableness of the Plan’s discretionary determination.” Champion v. Black & Decker
(U.S.) Inc., 550 F.3d 353, 359 (4th Cir. 2008).
In terms of the scope of discovery into the conflict of interest, this Court has held
that where the record contains sufficient “information to allow the court to properly weigh
[a d]efendant’s admitted conflict of interest . . . no discovery will be necessary because
information beyond the record would not be relevant.” Clark, 799 F. Supp. 2d at 533.
Where “additional information is needed, then discovery will be allowed to proceed on the
specific issue of the effect of Defendant’s conflict on its benefits decision.” Id. A review of
the administrative record in this case does not provide sufficient evidence to address the
potential of bias in the UPS Pension Plan Board of Trustees’ claim administration.
Moreover, the record does not contain evidence as to the Board’s past dealings and
information concerning its claim review process is scarce. As a result, this Court is unable to
determine the extent, if any, to which the Board’s conflict of interest influenced the decision
to deny Plaintiff’s benefits.

Accordingly, Plaintiff’s extra-record discovery request is

GRANTED with respect to records or evidence that will allow this Court to evaluate and
weigh the extent to which Defendant’s structural conflict of interest may have influenced
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Plaintiff’s denial of benefits. As mentioned above, this includes evidence regarding the
“administrator’s history of biased claim administration” or attempts at reducing bias as well
as “evidence regarding the administrator’s past dealings and claim review process.” Clark,
799 F. Supp. 2d at 532. However, Plaintiff’s request for discovery into Defendant’s records
of Plaintiff’s employment history not included in the administrative record and not related to
the structural conflict of interest issue is DENIED.
Nevertheless, under the abuse of discretion standard, “the district court functions as a
deferential reviewing court with respect to the ERISA fiduciary’s decision.” Evans v. Eaton
Corp., 514 F.3d 315, 321 (4th Cir. 2008). Thus, an administrator’s “discretionary decision will
not be disturbed if reasonable, even if the court itself would have reached a different
conclusion.” Smith v. Cont’l Cas. Co., 369 F.3d 412, 417 (4th Cir. 2004) (quoting Booth, 201
F.3d 335, 341 (4th Cir. 2000)). In assessing the reasonableness of a plan administrator’s
decision, courts should consider the language of the plan, and whether the decision “is the
result of a deliberate, principled reasoning process and if it is supported by substantial
evidence.” Smith, 369 F.3d at 417 (quoting Bernstein, 70 F.3d at 788). Substantial evidence is
defined as “the quantum and quality of relevant evidence that is more than a scintilla but less
than a preponderance and that a reasoning mind would accept as sufficient to support a
particular conclusion.” Donnell v. Metro. Life Ins. Co., 165 Fed. App’x 288, 295 (4th Cir.
2006)(quotation omitted). In addition to the effect of a structural conflict of interest, the
Fourth Circuit has identified eight nonexclusive factors that bear on whether an abuse of
discretion occurred:

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(1) the language of the plan; (2) the purposes and goals of the plan; (3)
the adequacy of the materials considered to make the decision and the
degree to which they support it; (4) whether the fiduciary’s
interpretation was consistent with other provisions in the plan and with
earlier interpretations of the plan; (5) whether the decisionmaking
process was reasoned and principled; (6) whether the decision was
consistent with the procedural and substantive requirements of ERISA;
(7) any external standard relevant to the exercise of discretion; and (8)
the fiduciary’s motives and any conflict of interest it may have.
Booth, 201 F.3d at 342-43. At this time, this Court notes that the administrative record filed
in this case lacks the information necessary to properly assess these factors.
CONCLUSION
For the reasons stated above, Plaintiff’s Motion for Limited Discovery (ECF No. 15)
is GRANTED in part and DENIED in part. Specifically, Plaintiff may seek extra-record
discovery with respect to records or evidence that he may then submit to this Court in order
to permit this Court to evaluate and weigh the extent to which Defendant’s structural
conflict of interest may have influenced Plaintiff’s denial of benefits. Plaintiff shall not be
permitted to seek discovery into Defendant’s records of Plaintiff’s employment history not
included in the administrative record and not related to the structural conflict of interest
issue. Defendant’s Motion to File the Administrative Record Under Seal (ECF No. 21) is
GRANTED.
A separate Order follows.
Dated:

November 19, 2012

/s/_______________________________
Richard D. Bennett
United States District Judge

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