Grant v. Eaton Corporation Long-Term Disability Plan
Filing
40
Memorandum Opinion and Order granting defendant's 28 MOTION for Summary Judgment, denying plaintiff's 20 MOTION for Summary Judgment. Separate judgment to be entered. Signed by District Judge Tom S. Lee on 6/24/11 (LWE)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION
SANDRA GRANT
PLAINTIFF
VS.
CIVIL ACTION NO. 3:10CV164TSL-FKB
EATON DISABILITY LONG-TERM
DISABILITY PLAN
DEFENDNAT
MEMORANDUM OPINION AND ORDER
Plaintiff Sandra Grant filed this action against defendant
Eaton Corporation Long-Term Disability Plan claiming that she was
denied long-term disability benefits to which she was entitled, in
violation of the Employee Retirement Income Security Act of 1974,
29 U.S.C. § 1001 et seq.
The case is presently before the court
on cross-motions for summary judgment filed by the parties.
Each
party has responded to the other’s motion and the court, having
considered the memoranda of authorities, together with
attachments, submitted by the parties, concludes that defendant’s
motion should be granted and plaintiff’s motion denied.
Facts
Plaintiff became employed by Eaton Corporation in September
1981, and remained employed by the company until her termination
in August 2003.
While employed by Eaton, plaintiff was covered
under the Eaton Corporation Disability Plan for U.S. Employees,
which included a Short-Term Disability Plan (STD Plan) and a Long-
Term Disability Plan (LTD Plan).
Eaton Corporation is the
Employer, Plan Administrator and Plan Sponsor of the Eaton LTD
Plan.
At some point, plaintiff was diagnosed with degenerative disk
disease, which she contends forced her to stop working beginning
September 25, 2002.
She applied for benefits under the Eaton STD
Plan, but her claim was denied on November 7, 2002, since
plaintiff failed to present the necessary proof to support her
claim.
Her appeal of this decision was denied on January 28,
2003, and she did not seek further review of this decision.
Plaintiff returned to work on March 13, 2003, after being
released to return to work, with restrictions, by her chiropractor
and physician.
She worked continuously until August 12, 2003,
when Eaton notified her that she was being terminated, effective
immediately, based on performance deficiencies.
Soon after her termination, plaintiff applied for Social
Security Disability benefits.
By letter dated September 10, 2006,
the Social Security Administration (SSA) notified Grant that it
had found her disabled from substantial gainful employment, with
an effective disability onset date of August 12, 2003.
More than
a year later, on October 15, 2007, plaintiff wrote to Eaton’s LTD
Plan Claims Administrator,1 advising she had been approved for
1
Sedgwick CMS was Claims Administrator of the Eaton LTD
Plan.
2
Social Security Disability benefits and requesting an application
for LTD benefits under the Eaton LTD Plan.
An application was
provided, and on December 25, 2007, plaintiff filed an application
for LTD benefits, noting thereon her Social Security Disability
ruling effective August 12, 2003, and asserting a disability onset
date of September 2002 due to multiple conditions, as follows:
“Fibromyalgia (Arthritis), Stress, Chronic Fatigue Syndrome, High
Blood Pressure & Stress), Back Strain and Depression.”
On June 12, 2008, Eaton, through its Claims Administrator,
notified plaintiff her claim was denied, effective March 26, 2003,
for the reason that plaintiff had not satisfied the six-month
waiting period required by the plan in order to be eligible for
LTD benefits.
The denial notice recited:
Your eligibility for benefits under the Plan was
determined under the following Plan provision(s):
“Long term disability payments begin on the day
immediately following a six-month period during which
you have been absent from work due to a covered
disability. The waiting for the start of the LTD
benefits begins on the day you become disabled and
continues for six months.”
This determination is based on the fact that your
absence did not exceed the six month waiting period
required for disability benefits under the Eaton
Corporation Long Term Disability Plan. Your first day
of absence was September 25, 2002 and your Short Term
Disability claim was denied effective September 25,
2002.
3
Plaintiff appealed, and was advised by letter of September 9,
2008 that her appeal was denied, and LTD benefits were not
payable, for essentially the same reason as given initially:
Our records indicate your first day of absence was
September 25, 2002, and your Short Term Disability
benefits were denied September 25, 2002. As you did not
receive six (6) months of approved disability payments
to satisfy the long-term disability waiting period, you
are not eligible to receive long term disability
benefits.
Plaintiff sought reconsideration, and a decision was rendered on
March 16, 2009 on this final level appeal, which reiterated the
reason previously given for denial of her claim:
Although you were absent from September 25, 2002 to
March 12, 2008, your STD benefits were denied for this
time period. This does not represent a continuous
period of disability since your benefits were denied and
you returned to work.
However, a second reason was added:
[T]he forms to receive benefits from the [LTD] Plan must
be completed and returned to the Claims Administrator
within one year of the last day of your active work with
the company. In your case, this date would have been
August 29, 2004.
Plaintiff filed the present action on March 16, 2010,
asserting her claim for benefits under Eaton’s LTD Plan was
wrongly denied.
Defendant has moved for summary judgment, contending
plaintiff is not entitled to benefits under the LTD Plan because
she was not covered under the Plan and/or is otherwise ineligible
for benefits under the terms of the Plan.
4
It urges in support of
its motion that plaintiff is not entitled to benefits both for the
reasons previously identified during the administrative review
process, i.e., that she did not satisfy the six-month waiting
period since she was not continuously disabled for six months
commencing September 25, 2002, and that she failed to timely file
her application for LTD benefits, and for additional reasons, as
follows:
that at the time she filed her application for benefits,
plaintiff was not eligible for coverage since her eligibility
ended on the last day of her employment; and that because
plaintiff returned to work for more than five months after a
period of claimed short-term disability, then under the terms of
the LTD Plan, her claim for LTD benefits was not an extension of
her earlier-claimed short-term disability but rather was a “new”
disability for which she did not satisfy the six-month waiting
period.
Standard of Review
“Where a benefits plan ‘gives the administrator or fiduciary
discretionary authority to determine eligibility for benefits or
to construe the terms of the plan,’ as [Eaton’s] plan does here,
the reviewing court applies an abuse of discretion standard to the
plan administrator's decision to deny benefits.”
Cytec Indus., Inc.,
Anderson v.
619 F.3d 505, 512 (5th Cir. 2010) (quoting
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.
Ct. 948, 103 L. Ed. 2d 80 (1989)).
5
“This is the functional
equivalent of arbitrary and capricious review: ‘[t]here is only a
semantic, not a substantive, difference between the arbitrary and
capricious and the abuse of discretion standards in the ERISA
benefits review context.’” Id. (quotation omitted).
“[T]he plan
administrator's decision to deny benefits (also) must be supported
by substantial evidence,” id. (citation omitted), which is defined
as “more than a scintilla, less than a preponderance, and is such
relevant evidence as a reasonable mind might accept as adequate to
support a conclusion,” id. (quotation omitted).
In addition, the court “must take into consideration the
conflict of interest inherent in a benefits system in which the
entity that pays the benefits-here, [Eaton]-maintains
discretionary control over the ultimate benefits decision.”
Id.
(citing Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 128 S. Ct.
2343, 2348-51, 171 L. Ed. 2d 299 (2008)).
The Fifth Circuit has
held that this does not mean that there is a heightened standard
of review when such a conflict of interest exists, but the court
must “weigh the structural conflict as one of the many factors
relevant to the benefits determination decision.”
Id. (citing
Glenn, 128 S. Ct. at 2351).
Full and Fair Review
Under 29 U.S.C. § 1133, every employee benefit plan must:
(1) provide adequate notice in writing to any
participant or beneficiary whose claim for benefits
under the plan has been denied, setting forth the
6
specific reasons for such denial, written in a manner
calculated to be understood by the participant, and
(2) afford a reasonable opportunity to any participant
whose claim for benefits has been denied for a full and
fair review by the appropriate named fiduciary of the
decision denying the claim.
The purpose of § 1133 is “‘to afford the beneficiary an
explanation of the denial of benefits that is adequate to ensure
meaningful review of that denial.’”
Lafleur v. Louisiana Health
Service and Indem. Co., 563 F.3d 148, 154 (5th Cir. 2009) (quoting
Schneider v. Sentry Long Term Disability, 422 F.3d 621, 627-28
(7th Cir. 2005)).
In view of this purpose, courts, including the
Fifth Circuit, have consistently held that to satisfy this
requirement of “full and fair review,” judicial review must be
"limited to whether the rationale set forth in the initial denial
notice is reasonable."
Thompson v. Life Ins. Co. of N. Am., 30
Fed. Appx. 160, 164 (4th Cir. 2002) (unpublished).
Thus, the
court found in Robinson v. Aetna Life Insurance Co. that Aetna
violated § 1133 when it initially gave the claimant one reason for
terminating his benefits, but upon review, changed its reasoning,
and informed the claimant for the first time in its review letter
that it had determined his benefits should be terminated for a
different reason.
443 F.3d 389, 393 (5th Cir. 2006).
The court
held that “section 1133 requires an administrator to provide
review of the specific ground for an adverse benefits decision,”
id. at 393, explaining as follows:
7
Subsection (1)'s mandate that the claimant be
specifically notified of the reasons for an
administrator's decision suggests that it is those
“specific reasons” rather than the termination of
benefits generally that must be reviewed under
subsection (2). See McCartha v. Nat'l City Corp., 419
F.3d 437, 446 (6th Cir. 2005) (holding that an
administrator failed to substantially comply with
section 1133 where the initial notice of termination
failed to state one of the grounds on which it
ultimately relied). Furthermore, this Court has
previously read the two subsections of section 1133 as
complementing each other. In Schadler v. Anthem Life
Insurance, this Court explained that “the requirement
that the administrator disclose the basis for its
decision is necessary so that beneficiaries can
adequately prepare for any further administrative review
....” 147 F.3d 388, 394 (5th Cir. 1998) (internal
punctuation omitted). The notice requirements of ERISA
help ensure the “meaningful review” contemplated by
subsection (2). Id. (quoting Halpin v. W.W. Grainger,
Inc., 962 F.2d 685, 689 (7th Cir. 1992)); see [Hackett
v. Xerox Corp. Long-Term Disability Income Plan, 315
F.3d 771, 775 (7th Cir. 2003)] (stating that effective
review requires “a clear and precise understanding of
the grounds for the administrator's position”).
Additionally, mandating review of the specific ground
for a termination is consistent with our policy of
encouraging the parties to make a serious effort to
resolve their dispute at the administrator's level
before filing suit in district court. See Vega v. Nat'l
Life Ins. Serv., Inc., 188 F.3d 287, 300 (5th Cir. 1999)
(en banc). Thus, Aetna failed to comply with section
1133(2) when it terminated Robinson's benefits without
reviewing the specific ground for that decision.
Id.
In Robinson, § 1133 was found to have been violated because
Aetna changed its reason for denial at the final appeal level.
the same reasoning, the court, in Lafleur v. Louisiana Health
Service and Indemnity Co., found that “Blue Cross did not
substantially comply with the procedural requirements of ERISA
8
On
because ... it raised new grounds for denial in the federal courts
that were not raised at the administrative level.”
154-55 (5th Cir. 2009).
563 F.3d 148,
The court observed that the alternate
reasons for denial offered to the court
may or may not be legitimate, but the fact remains that
these were not the reasons for denial given at the
administrative level. To ensure the full and fair
review contemplated by ERISA, the specific reason or
reasons for denial must be clearly identified at the
administrative level in order to give the parties an
opportunity for meaningful dialogue. See Robinson, 443
F.3d at 393. Although these various reasons for denial
are all generally based on the Custodial Care exclusion,
the lack of specificity in the denial letters did not
give Lafleur the fair notice contemplated by the ERISA
regulations. See 29 C.F.R. § 2560.503-1(g)(i); see also
McCartha v. Nat'l City Corp., 419 F.3d 437, 446 (6th
Cir.2005) (“[D]efendants were not in substantial
compliance with the requirements of § 1133 because
McCartha was never timely informed that the failure to
provide current medical opinions as to her long-term
disability would be one of the bases for the termination
of her benefits.”) (emphasis added).
Id. at 155-56.
See also Hall v. Metropolitan Life Ins. Co., 259
Fed. Appx. 589, 592-594, 2007 WL 4553952, 3 (4th Cir. 2007)
(holding that “[a] court may not consider a new reason for claim
denial offered for the first time on judicial review.”); Abatie v.
Alta Health & Life Ins. Co., 458 F.3d 955, 974 (9th Cir. 2006)
(holding that "[w]hen an administrator tacks on a new reason for
denying benefits in a final decision, thereby precluding the plan
participant from responding to that rationale for denial at the
administrative level, the administrator violates ERISA's
procedures").
9
Analysis
As in Robinson and Lafleur, Eaton’s violation of § 1133 is
apparent.
In its initial denial notice, and its first-level
appeal, Eaton cited a single reason for denial:
that Grant’s
absence from work from September 25, 2002 to March 13, 2003, for
which she had not been approved for STD benefits, did not satisfy
the six-month waiting period.
However, even under an arbitrary
and capricious standard of review, the court must conclude this
was not a valid basis for denial of Grant’s claim.
The Eaton LTD Plan provides, in relevant part,
Successive periods of disabilities:
The waiting period for the start of LTD benefits begins
on the day you become disabled and continues for six
months. During that time, you may be eligible for
benefits under a Company short term disability program.
If you return to work before LTD benefits payments
begin. If you return to work for three months or less
during the six-month waiting period before LTD payments
begin, you do not have to satisfy a new six-month
waiting period – provided the second period of
disability from the same cause or a cause related to the
first disability. The days you are at work do not count
as part of the six-month waiting period.
The waiting period is handled differently if you return
to work for longer than three months or you experience a
disability from a second, unrelated cause. In that
case, you are considered to have a new disability. The
six-month period starts again with the new disability.
(Emphasis added).
The record clearly shows that following her five-and-a-half month
absence from work from September 25, 2002 to March 13, 2003,
plaintiff “returned to work for longer than three months.”
10
Consequently, under the terms of the LTD Plan, she was “considered
to have a new disability.”
Thus, the fact that she had not been
absent from work a full six months from and after September 25,
2002, and/or that she had not been found entitled to STD benefits
for that period of absence, was irrelevant to the question whether
she was eligible for disability benefits based on a “new”
disability commencing August 12, 2002.
The issue thus arises as to the appropriate remedy for
Eaton’s procedural violation of § 1133 by “tacking on” additional
reasons for denial in the final-level appeal and in this judicial
proceeding.
In Lafleur, in undertaking to identify the scope of
available remedies, the Fifth Circuit held that “[r]emand to the
plan administrator for full and fair review is usually the
appropriate remedy when the administrator fails to substantially
comply with the procedural requirements of ERISA.”
omitted).
Id. (citations
The court explained,
This position is consistent with the default rule of
other circuits and our pronouncement in [Wade v.
Hewlett-Packard Dev. Co. LP Short Term Disability Plan,
493 F.3d 533 (5th Cir. 2007)] that procedural violations
of ERISA generally do not give rise to a substantive
damages remedy. When the procedural violations are
non-flagrant, remand is typically preferred over a
substantive remedy to which the claimant might not
otherwise be entitled under the terms of the plan. See
[Gagliano v. Reliance Standard Life Ins. Co., 547 F.3d
230, 240 (4th Cir. 2008)]; see also Firestone Tire &
Rubber Co. v. Bruch, 489 U.S. 101, 113, 109 S. Ct. 948,
103 L. Ed. 2d 80 (1989) (“ERISA was enacted to promote
the interests of employees and their beneficiaries in
employee benefit plans and to protect contractually
defined benefits.”) (emphasis added) (citation omitted).
11
Id. at 157-58.
However, the court identified two exceptions to
this default rule.
One is “‘where the record establishes that the
plan administrator's denial of the claim was an abuse of
discretion as a matter of law.’”
547 F.3d at 240).
Id. at 158 (quoting Gagliano,
The court stressed this is a narrow exception,
stating:
“A remand for further action is unnecessary only if the
evidence clearly shows that the administrator's actions
were arbitrary and capricious, or the case is so clear
cut that it would be unreasonable for the plan
administrator to deny the application for benefits on
any ground.” Caldwell, 287 F.3d at 1289 (internal
citations and quotation marks omitted). If the
administrative record reflects, at minimum, a colorable
claim for upholding the denial of benefits, remand is
usually the appropriate remedy. See Gagliano, 547 F.3d
at 240.
Id.
Another exception the court recognized is “where remand would
be a useless formality.”
Id. at 158 n.22.
The court noted:
An administrator's failure to substantially comply with
the procedural requirements of ERISA will usually
prevent a plaintiff from adequately developing the
administrative record and presenting his arguments, so
this futility exception should be narrowly construed and
sparingly applied. The court might find that remand
would be a useless formality where “much, if not all,
the objective [] evidence supports the conclusion that
[the] plaintiff [is not covered under the terms of the
policy].” See Kent v. United of Omaha Life Ins. Co., 96
F.3d 803, 807 (6th Cir. 1996). In making this
determination, the court should consider not only the
evidence in the administrative record, but also the
evidence that the plaintiff would have submitted but for
the administrator's procedural violations. The
administrator should not be allowed to hinder the
development of the administrative record through its
procedural violations, and then invoke the futility
12
exception based solely on the limited evidence contained
within that record.
Id.2
In the present case, Eaton belatedly asserted a number of
bases for denial of benefits, in addition to the reason originally
assigned for its decision.
While the same cannot be said of all
these reasons, in the court’s opinion, one of these reasons is so
manifestly well-grounded based on the “objective evidence” that
remand “would be a useless formality.”
That is, it is clear that
under the terms of Eaton’s LTD Plan, Grant's application for LTD
2
The court in Lafleur considered but rejected the
claimant’s suggestion of changing the standard of review from a
deferential abuse of discretion standard to de novo review as a
potential remedy for the administrator’s violation of § 1133,
noting that while it had “never definitively rejected the
availability of this remedy, [it had] previously refused to apply
it[,]” id. (citing Wade v. Hewlett-Packard Dev. Co. LP Short Term
Disability Plan, 493 F.3d 533, 538 (5th Cir. 2007), and noting
further that even the Ninth Circuit, which had approved such a
remedy, reserved its use for flagrant procedural violations, which
was not the case with Aetna’s procedural error. Id.
The court identified two other remedies that it noted were
supported by persuasive precedent: striking evidence, id. at 160
(citing Bard v. Boston Shipping Ass’n, 471 F.3d 229, 244-46 (1st
Cir. 2006) (where “procedural irregularities [] were serious, had
a connection to the substantive decision reached, and call[ed]
into question the integrity of the benefits-denial decision
itself,” court struck evidence supporting denial and awarded
benefits to the plaintiff based on the remaining evidence); and
retroactively reinstating benefits, id. (citing Wenner v. Sun Life
Assurance Co. of Canada, 482 F.3d 878, 883-84 (6th Cir. 2007), and
Schneider v. Sentry Group Long Term Disability Plan, 422 F.3d 621,
629-30 (7th Cir. 2005), where the respective courts held that
retroactive reinstatement of benefits was an appropriate remedy
for procedural violations in cases where the administrators had
terminated benefits that had already been granted).
None of these potential remedies is implicated by the
circumstances of the case at bar.
13
benefits was untimely.
The Plan explicitly establishes a "filing
deadline," stating,
The forms to receive
Disability Plan must
Claims Administrator
active work with the
filing deadline, you
long term disability
benefits under the Long Term
be completed and returned to the
within one year of your last day of
Company. If you do not meet this
will not be eligible to receive
benefits.
Plaintiff was terminated effective August 12, 2003, and was paid
through August 30, 2003.
“Active work” is not defined, but
obviously, plaintiff’s “last day of active work” was no later than
August 30, 2003.
Accordingly, she had until August 29, 2004 to
submit a claim for LTD benefits in order to be eligible to receive
such benefits.
She did not file her application until December
25, 2007, more than three years after the last possible date on
which she could have made a timely claim.
In her response to defendant’s motion, Grant does not offer
any evidence to show that she filed (or even attempted to file) a
claim for benefits on or before August 29, 2004.
Had any such
claim been filed, presumably there would be evidence of it in the
record, or plaintiff would have offered such evidence to the
court.
She has not done so.
Nor has she suggested how her claim,
which by both plaintiff’s and defendant’s accounts was first filed
on December 25, 2007, could possibly be considered timely under
the terms of the Plan.
Under these limited circumstances, the
court considers that remand is unnecessary and concludes that
defendant is entitled to summary judgment.
14
See Horn v. Owens-Ill.
Employee Benefits Committee, 2011 WL 1664443, 3-4 (5th Cir. May 2,
2011) (ERISA plan participant's claims for disability benefits
following SSA award of benefits held untimely where plan required
that claims be filed within twelve months of last day worked, and
claimant did not make his first claim following SSA award until
nearly three years after his last day of work).
Accordingly, based on the foregoing, it is ordered that
plaintiff’s motion for summary judgment is denied, and it is
ordered that defendant’s motion for summary judgment is granted.
A separate judgment will be entered in accordance with Rule
58 of the Federal Rules of Civil Procedure.
SO ORDERED this 24th
day of June, 2011.
/s/ Tom S. Lee
UNITED STATES DISTRICT JUDGE
15
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