Rood v. New York State Teamsters Conference Pension and Retirement Fund et al
Filing
21
MEMORANDUM-DECISION and ORDERED, that Defendants Motion (Dkt. No. 15) for summary judgment is DENIED; and it is further ORDERED, that Plaintiffs Motion (Dkt. No. 16) for summary judgment is GRANTED; and it is further ORDERED that it is hereby DECLARE D that the portion of Plaintiffs workers compensation settlement award allocated as a Medicare set-aside constitutes, for the purposes of § 7.03(i) of the Plan, an amount used to offset another payment source to which Plaintiff is entitled; and it is further ORDERED, that Defendants recalculate Plaintiffs disability pension benefits consistent with this Memorandum-Decision and Order, and pay Plaintiff all past due benefits plus prejudgment interest at a rate of 9% per annum; and it is further ORDERED, that, pursuant to 29 U.S.C. § 1132(g), Defendants shall pay Plaintiff attorneys fees and costs in an amount to be determined by the Court at a later date. Plaintiff is ordered to file a motion concerning the amount of attorneys fees and costs for which he seeks reimbursement within fourteen (14) days of the filing date of this Memorandum-Decision and Order. Defendant shall have fourteen (14) days from the filing date of Plaintiffs motion to respond; and it is further ORDERED, that the Clerk enter judgment for Plaintiff and close this case. Signed by Senior Judge Lawrence E. Kahn on August 20, 2014. (sas)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
PAUL J. ROOD,
Plaintiff,
-against-
5:13-CV-0435 (LEK/ATB)
NEW YORK STATE TEAMSTERS
CONFERENCE PENSION AND
RETIREMENT FUND; and THE BOARD
OF TRUSTEES OF THE NEW YORK
STATE TEAMSTERS CONFERENCE
PENSION AND RETIREMENT FUND,
Defendants.
MEMORANDUM-DECISION and ORDER
I.
INTRODUCTION
Plaintiff Paul J. Rood (“Plaintiff”) commenced this action on April 19, 2013, alleging a
claim for disability pension benefits under the Employee Retirement Income Security Act
(“ERISA”), 29 U.S.C. §§ 1001-1461. Dkt. No. 1 (“Complaint”). Plaintiff’s Complaint names the
New York State Teamsters Conference Pension and Retirement Fund (the “Fund”) and its Board of
Trustees (“the Board”) (collectively, “Defendants”) as Defendants. Id. Presently before the Court
are the parties’ Motions for summary judgment. Dkt. Nos. 15 (“Defendants Motion”); 16 (“Plaintiff
Motion”). For the following reasons, Defendants’ Motion is denied and Plaintiff’s Motion is
granted.
II.
BACKGROUND1
A. The Fund
The Fund is a multi-employer plan that provides pension and disability benefits to
employees covered by collective bargaining agreements between contributing employers and
various local unions of the International Brotherhood of Teamsters. Dkt. Nos. 15-5 (“Defendants
SMF”) ¶ 1; 18-1 (“Response to Defendants SMF”) ¶ 1. The Fund pays pension and disability
benefits to eligible participants and beneficiaries pursuant to a written pension plan. Defs. SMF ¶ 3;
Resp. to Defs. SMF ¶ 3; Dkt. No. 15-8 Ex. 2 (the “Plan”).
B. Disability Benefits Under the Plan
Under the Plan, a participant who becomes “disabled” is eligible for a disability benefit
(“Fund Disability Benefit” or “FDB”) if he has earned ten years of Future Service Credit. Plan
§ 7.03(a); Defs. SMF ¶ 7; Resp. to Defs. SMF ¶ 7. A participant is considered “disabled” if he
satisfies the requirements for a Social Security disability award. Plan § 2.15; Defs. SMF ¶ 8; Resp.
to Defs. SMF ¶ 8. The participant’s disability benefit ends when the participant reaches normal
retirement age under the Plan. Plan § 7.03(b); Defs. SMF ¶ 9; Resp. to Defs. SMF ¶ 9.
The monthly Fund Disability Benefit amount is equal to the normal pension benefit the
participant would be entitled to if he had attained the age requirement for a normal pension. Plan
§ 7.03(c); Defs. SMF ¶ 11; Resp. to Defs. SMF ¶ 11. However, the Plan further provides that, if a
1
Ordinarily, on a motion for summary judgment, a court must resolve all ambiguities and
draw all reasonable inferences in favor of the nonmoving party. Reeves v. Sanderson Plumbing
Prods., Inc., 530 U.S. 133, 150 (2000); Nora Beverages, Inc. v. Perrier Grp. of Am., Inc., 164 F.3d
736, 742 (2d Cir. 1998). Where both parties have moved for summary judgment, it may thus be
necessary to distinguish their factual assertions accordingly. See id. However, in this case, the facts
are, in large part, not in dispute, and therefore the Court has consolidated the parties’ factual
statements for purposes of this section.
2
participant is also receiving workers’ compensation (“WC”) benefits due to an occupational
disability, the monthly amount of the Fund Disability Benefit will be reduced by the amount of
monthly WC benefits received. Plan § 7.03(i); Defs. SMF ¶¶ 12-13; Resp. to Defs. SMF ¶¶ 12-13.
But if part of the participant’s WC benefit is “used to offset other payment sources (i.e., Social
Security disability awards, long-term disability, etc.)” to which the participant may be entitled, that
portion of the WC benefit is not included in the reduction of the participant’s monthly Fund
Disability Benefit. Plan § 7.03(i); Defs. SMF ¶¶ 14-16; Resp. to Defs. SMF ¶¶ 14-16.
C. Workers’ Compensation Medicare Set-Aside Arrangements
Medicare is a federally funded program that covers health care costs for certain individuals,
including those who have received Social Security disability benefits for at least twenty-four
months. See 42 U.S.C. § 1395c. Medicare Parts A and B provide hospital and medical care
benefits to individuals by making payments on their behalf directly to health care providers, or, in
some cases, to individual beneficiaries. See generally 42 U.S.C. §§ 1395c, 1395d, 1395g, 1395j1395k.
In 1980, Congress passed the Medicare Secondary Payer Act (“MSPA”), 42 U.S.C. § 1395y.
“In certain circumstances, the MSPA makes Medicare the ‘secondary payer’ in relation to certain
other sources, which are considered ‘primary payers.’” Meek-Horton v. Trover Solutions, Inc., 915
F. Supp. 2d 486, 488 (S.D.N.Y. 2013) (citing 42 U.S.C. § 1395y(b)(2)(A)). For instance, under the
MSPA, Medicare is prohibited from making a payment for a Medicare enrollee’s medical benefits if
“payment has been made or can reasonably be expected to be made under a workmen’s
compensation law or plan of the United States or a State . . . .” 42 U.S.C. § 1395y(b)(2)(A); see also
42 C.F.R. § 411.46 (“If a lump-sum [WC] award stipulates that the amount paid is intended to
3
compensate the individual for all future medical expenses required because of the work-related
injury or disease, Medicare payments for such services are excluded until medical expenses related
to the injury or disease equal the amount of the lump-sum payment.”). Consequently, when
Medicare makes a payment for medical expenses that are covered by a WC award, the Medicare
payment is merely conditional, and Medicare is entitled to reimbursement. 42 U.S.C.
§ 1395y(b)(2)(B). If reimbursement is not made, the MSPA authorizes the federal government to
bring an action for damages against the primary payer, or against entities that receive primary
payments, including the individual Medicare beneficiary. 42 U.S.C. § 1395y(b)(2)(B)(ii)-(iii); 42
C.F.R. § 411.24(e), (g).
Accordingly, when settling a WC claim, the parties may designate and identify the portion of
the settlement amount that is intended to pay for future work-injury-related medical expenses that
are covered and otherwise reimbursable by Medicare. CENTERS FOR MEDICARE & MEDICAID
SERVICES, WORKERS’ COMPENSATION MEDICARE SET-ASIDE ARRANGEMENT (WCMSA)
REFERENCE GUIDE § 3.0 (Feb. 3, 2014). This designated amount is known as a Workers’
Compensation Medicare Set-Aside (“WCMSA” or “MSA”). Id. “The goal of establishing a
WCMSA is to estimate, as accurately as possible, the total cost that will be incurred for all medical
expenses otherwise reimbursable by Medicare for work-related conditions during the course of the
claimant’s life, and to set aside sufficient funds from the settlement, judgment, or award to cover
that cost.”2 Id.
2
The Centers for Medicare and Medicaid Services (“CMS”) provide a process for
submitting a WCMSA arrangement for approval. CMS, WCMSA REFERENCE GUIDE §§ 7.0-9.0.
Although approval is not required, it provides certainty as to the amount of funds that must be
appropriately exhausted before Medicare becomes the primary payer. Id. § 4.1. “If the parties to a
WC settlement stipulate a WCMSA but do not receive CMS approval, then CMS is not bound by
4
D. Plaintiff’s Benefits Claim
Plaintiff was an employee of a contributing employer of the Fund. Defs. SMF ¶ 4; Resp. to
Defs. SMF ¶ 4. On or about October 5, 2009, Plaintiff suffered an injury while on the job. Defs.
SMF ¶ 5; Resp. to Defs. SMF ¶ 5. Plaintiff completed an application for a Temporary Disability
Benefit under the Plan on or about August 12, 2010. Dkt. Nos. 16-1 (“Plaintiff SMF”) ¶ 18; 17-1
(“Response to Plaintiff SMF”) ¶ 18. Plaintiff was awarded Social Security Disability Insurance
benefits (“SSDI”) on August 30, 2010. Pl. SMF ¶ 19; Resp. to Pl. SMF ¶ 19. On October 1, 2010,
the Board approved a Temporary Disability Benefit for Plaintiff effective May 1, 2010. Pl. SMF
¶ 20; Resp. to Pl. SMF ¶ 20. The Board’s calculation of Plaintiff’s Fund Disability Benefit included
an offset for monthly WC payments Plaintiff was receiving. Pl. SMF ¶ 21; Resp. to Pl. SMF ¶ 21.
On May 1, 2011, the Plan recalculated Plaintiff’s Fund Disability Benefit to reflect the fact that
Plaintiff’s SSDI benefits were being reduced to offset his WC payments.3 Pl. SMF ¶ 22; Resp. to
Pl. SMF ¶ 22.
In October 2011, Plaintiff settled his WC claim with Liberty Mutual, his employer’s WC
insurance carrier. Pl. SMF ¶ 24; Defs. SMF ¶ 22; Dkt. No. 1-3 (“WC Settlement Agreement”). The
WC Settlement Agreement provided for a total payment of $214,285, including $12,000 in
the set-aside amount stipulated by the parties, and it may refuse to pay for future medical expenses
in the case, even if they would ordinarily have been covered by Medicare.” Id. § 8.0. However,
CMS only reviews WCMSAs above a certain monetary threshold. Id. § 8.1. In this case, Plaintiff’s
WCMSA did not meet the threshold, and therefore was not submitted for review. See Dkt. No. 1-3
at 4.
3
Federal regulations require the Social Security Administration to partially reduce an SSDI
recipient’s SSDI benefits when the recipient also receives WC payments. 20 C.F.R. § 404.408; see
also SOCIAL SECURITY ADMINISTRATION, HOW WORKERS’ COMPENSATION AND OTHER DISABILITY
PAYMENTS MAY AFFECT YOUR BENEFITS (2011), available at
http://www.ssa.gov/pubs/EN-05-10018.pdf.
5
attorney’s fees and $120,000 paid to Plaintiff up front. WC Settlement Agreement ¶ 2. The
remainder of the settlement payment was devoted to a WCMSA, including $18,535 in seed money
and an annuity paid out in annual contributions of $4,910, with an expected payout of $146,216.06.
Id. The WC Settlement Agreement stipulated that the MSA sum “is allocated for the claimant’s
future related medical expenses in recognition of Medicare interest,” and “is intended directly for
payment of future Medicare covered medical expenses and related prescription medication.” Id. ¶ 8.
The New York State Workers’ Compensation Board approved the WC Settlement Agreement on or
about January 31, 2012. Defs. SMF ¶ 23; Resp. to Defs. SMF ¶ 23.
On May 7, 2012, the Fund notified Plaintiff that it had recalculated his Fund Disability
Benefit based on the WC Settlement Agreement. Defs. SMF ¶ 24; Resp. to Defs. SMF ¶ 24. The
Fund subtracted the $12,000 in attorney’s fees from the total payment of $214,285, and reduced
Plaintiff’s Fund Disability Benefit by this sum of $202,285.00. Defs. SMF ¶ 24; Resp. to Defs.
SMF ¶ 24. Pursuant to Plan rules, this sum was divided by 140—the number of months from the
settlement date through the month Plaintiff would attain age 65—yielding a monthly offset of
$1,444.89. Defs. SMF ¶ 24; Resp. to Defs. SMF ¶ 24.
In May 2012, Plaintiff wrote a letter to the Fund disputing the recalculation of his benefits
and requesting that the portion of the WC lump sum settlement allocated to the MSA not be
included in the offset. Pl. SMF ¶ 34; Defs. SMF ¶ 30. The Fund treated the letter as a “claim for
benefits” under the Fund’s claims and appeals procedure and proceeded to deny Plaintiff’s claim on
May 14, 2012. Pl. SMF ¶ 35; Defs. SMF ¶ 31. Plaintiff appealed the May 14 denial, arguing that
the offset calculation should not include the MSA funds because those funds are segregated and not
otherwise available to him. Pl. SMF ¶ 38; Defs. SMF ¶¶ 32-33; Compl., Ex. I. The Board denied
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Plaintiff’s appeal on June 4, 2012, stating that Plan § 7.03(i) does not provide for exclusion of the
MSA funds from the WC reduction. Pl. SMF ¶ 40; Defs. SMF ¶¶ 35-37; Compl. Ex. J.
E. Procedural History
Plaintiff commenced this action on April 19, 2013, asserting a claim for benefits under
ERISA § 502(a)(1)(B). Compl. Plaintiff seeks an order compelling the Plan to exclude the MSA
funds from the WC reduction to his Fund Disability Benefit, and to pay him properly calculated
benefits plus interest, costs, and attorney’s fees. Id. at 6-7. The parties filed their Motions on
August 30, 2013. Pl. Mot.; Defs. Mot.
III.
SUMMARY JUDGMENT STANDARD
Federal Rule of Civil Procedure 56(a) instructs a court to grant summary judgment if “there
is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Although “[f]actual disputes that are irrelevant or unnecessary” will not preclude summary
judgment, “summary judgment will not lie if . . . the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986); see also Taggart v. Time, Inc., 924 F.2d 43, 46 (2d Cir. 1991).
The party seeking summary judgment bears the burden of informing the court of the basis
for the motion and of identifying those portions of the record that the moving party claims will
demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317,
323 (1986). If the non-moving party will bear the burden of proof on a specific issue at trial, the
moving party may satisfy its own initial burden by demonstrating the absence of evidence in support
of an essential element of the non-moving party’s claim. Id. If the moving party carries its initial
burden, then the non-moving party bears the burden of demonstrating a genuine issue of material
7
fact. Id. This requires the nonmoving party to do “more than simply show that there is some
metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Corp., 475 U.S.
574, 586 (1986). At the same time, a court must resolve all ambiguities and draw all reasonable
inferences in favor of the nonmoving party. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S.
133, 150 (2000); Nora Beverages, Inc. v. Perrier Grp. of Am., Inc., 164 F.3d 736, 742 (2d Cir.
1998). A court’s duty in reviewing a motion for summary judgment is “carefully limited” to finding
genuine disputes of fact, “not to deciding them.” Gallo v. Prudential Residential Servs., 22 F.3d
1219, 1224 (2d Cir. 1994).
IV.
ERISA STANDARD OF REVIEW
“In ERISA cases, the standard for summary judgment must also be viewed in conjunction
with the standard of review of administrative actions under the ERISA guidelines.” Diagnostic
Med. Assocs., M.D., P.C. v. Guardian Life Ins. Co. of Am., 157 F. Supp. 2d 292, 297 (S.D.N.Y.
2001).
ERISA § 502(a)(1)(B), codified at 29 U.S.C. § 1132(a)(1)(B), provides a cause of action “to
recover benefits due” to a participant under the terms of a covered benefits plan. 29 U.S.C.
§ 1132(a)(1)(B). ERISA does not set out the appropriate standard of review for actions for benefits
under § 502(a)(1)(B). Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 108-09 (1989).
However, the Supreme Court has explained “that a denial of benefits challenged under §
1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the
administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe
the terms of the plan.” Id. at 115. When the plan confers upon the administrator discretionary
authority to construe the terms of the plan, a reviewing court should examine the administrator’s
8
decision under an abuse of discretion standard. See Nichols v. Prudential Ins. Co. of Am., 406 F.3d
98, 108 (2d Cir. 2005). Under such a standard, an administrator abuses its discretion only when the
administrator’s actions are arbitrary and capricious. McCauley v. First Unum Life Ins. Co., 551
F.3d 126, 132 (2d Cir. 2008). A denial of a claim is arbitrary and capricious if “there has been a
clear error of judgment.” Jordan v. Ret. Comm. of Rensselaer Polytechnic Inst., 46 F.3d 1264, 1271
(2d Cir. 1995).
Since this is a highly deferential standard of review, a court “may overturn an
administrator’s decision to deny ERISA benefits only if it was without reason, unsupported by
substantial evidence or erroneous as a matter of law.” Hobson v. Metro. Life Ins. Co., 574 F.3d 75,
83-84 (2d Cir. 2009). Applying a deferential standard of review to the administrator’s decision does
not mean the administrator will prevail on the merits. Conkright v. Frommert, 559 U.S. 506, 521
(2010). It means only that the administrator’s interpretation of the plan “will not be disturbed if
reasonable.” Id. (quoting Firestone, 489 U.S. at 111).
A district court’s review under the arbitrary and capricious standard is limited to the
administrative record. Zervos v. Verizon N.Y., Inc., 277 F.3d 635, 646 (2d Cir. 2002); Magin v.
Cellco P’ship, 661 F. Supp. 2d 206, 213 (N.D.N.Y. 2009); Fredericks v. Hartford Life Ins. Co., No.
05–CV–1344, 2009 WL 174952, at *9 (N.D.N.Y. Jan. 23, 2009). The administrative record must
be viewed as a whole in deciding whether the administrator’s decision was without reason,
unsupported by substantial evidence, or erroneous as a matter of law. See, e.g., Cohen v. Metro.
Life Ins. Co., 485 F. Supp. 2d 339, 354 (S.D.N.Y. 2007) (considering “entire administrative record”
and determining as a matter of law that defendant’s invocation of exclusion was arbitrary and
capricious).
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Under both the de novo and arbitrary and capricious standards of review, an administrator’s
conflict of interest may affect how a court reviews the benefits determination. In Metro. Life Ins.
Co. v. Glenn, the Supreme Court held that an administrator who “both evaluates claims for benefits
and pays benefits claims” is conflicted. 554 U.S. 105, 112 (2008). Such a conflict of interest
should be weighed as a factor in a district court’s analysis, but the factor’s weight depends on the
circumstances. Id. at 117. In other words, “[a] plaintiff’s showing that the administrator’s conflict
of interest affected the choice of a reasonable interpretation is only one of several different
considerations that judges must take into account when reviewing the lawfulness of benefit denials.”
Hobson, 574 F.3d at 82-83 (internal quotations omitted) (citing McCauley, 551 F.3d at 133).
In this case, the Plan provides that the Board “shall have the exclusive right to interpret the
Plan and to decide any matters arising thereunder in connection with the administration of the Plan.”
Plan § 9.03; Defs. SMF ¶ 39; Resp. to Defs. SMF ¶ 39. Because the Plan therefore assigns
discretionary authority to determine eligibility for benefits or to construe the terms of the Plan to the
Board, the arbitrary and capricious standard of review applies to Plaintiff’s claim for benefits. See
Nichols, 406 F.3d at 108.
However, the Court is also aware that the Board acts as both the administrator and sponsor
of the Plan. Pl. SMF ¶ 4. The Board is therefore “conflicted” under Glenn, and the Court must
consider this conflict as one factor in evaluating Plaintiff’s claim.4
4
Plaintiff argues extensively that the implementation of a Rehabilitation Plan due to the
Plan’s critical financial status justifies affording the structural conflict of interest significant weight.
Pl. Mem. at 4-8; Pl. SMF ¶¶ 8-17. Defendants counter that little or no weight should be given to the
conflict because Plaintiff has not offered evidence that the Plan’s critical status actually affected the
disposition of Plaintiff’s claim. Dkt No. 17 at 4-5. Because, as explained infra, Defendants’
interpretation of the Plan was unreasonable and therefore arbitrary and capricious, the Court need
not decide whether a Plan’s critical status requires affording a structural conflict of interest
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V.
MERITS
Plaintiff argues that the plain meaning of the Plan language expressly contradicts the Board’s
decision to include the MSA funds in the WC reduction of his Fund Disability Benefit. See Dkt.
No. 16-3 (“Plaintiff Memorandum”) at 14. Defendants argue that the relevant Plan language is
ambiguous, and that deference must be given to the Board’s interpretation because it is reasonable.
See Dkt. No. 15-1 (“Defendants Memorandum”) at 11-14.
A claim for benefits under ERISA is the assertion of a contractual right. See Feifer v.
Prudential Ins. Co. of Am., 306 F.3d 1202, 1210 (2d Cir. 2002). When interpreting an ERISA plan,
courts apply the federal common law of contract, embodied by the “familiar rules of contract
interpretation,” which are in turn “informed by state [contract] law principles.” Lifson v. INA Life
Ins. Co. of N.Y., 333 F.3d 349, 352-53 (2d Cir. 2003). Accordingly, a court deciding a claim for
benefits under ERISA must view the relevant benefits plan as a whole and strive to give its terms
their plain meanings. Fay, 287 F.3d at 104.
Here, the relevant language states that
a Participant who, due to an occupational disability, is receiving compensation benefits
under State or Federal compensation laws, has received a lump sum award for his
compensable disability . . . shall receive the maximum monthly pension . . . less the
amount of any monthly compensation benefits he may be receiving for permanent or
temporary disability under such worker’s compensation laws or less such equitable sum
as may be determined in the event he has received a lump sum award . . . unless such
amounts also are used to offset other payment sources (i.e., Social Security disability
awards, long-term disability, etc.) for which he may be entitled.
Plan § 7.03(i) (emphasis added). The Court finds that the MSA funds constitute an amount of
Plaintiff’s WC award used to offset another payment source, Medicare. Although MSA funds are
significant weight under Glenn.
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not explicitly mentioned in the Plan, Medicare is a “source” of “payment” for medical expenses to
which an individual is “entitled.” See, e.g., 42 U.S.C. § 1395d(a) (“The benefits provided to an
individual by [Medicare Part A] shall consist of entitlement to have payment made on his behalf or .
. . to him” for hospital and home health services.); id. § 1395k(a)(1) (describing an individual’s
Medicare Part B benefits as consisting of “entitlement to have payment made to him or on his behalf
. . . for medical and other health services”). Under the MSPA, an individual’s entitlement to
Medicare payments is “offset”5 by WC payments. See 42 U.S.C. § 1395y(b)(2)(A)(ii); see also
CMS, WCMSA REFERENCE GUIDE § 3.0 (“A [WCMSA] allocates a portion of the WC settlement
for all future work-injury-related medical expenses that are covered and otherwise reimbursable by
Medicare.” (emphasis added)). Accordingly, under the plain meaning of the Plan’s language, the
amount of Plaintiff’s WC award allocated to the MSA should not be considered in reducing his
Fund Disability Benefit due to his receipt of WC.
Citing the principle that “plan language is ambiguous when ‘it is capable of more than one
meaning when viewed objectively by a reasonably intelligent person who has examined the context
of the entire agreement,’” Defendants assert that the words “other payment source” are ambiguous.
Dkt. No. 17 (“Defendants Response”) at 6 (quoting Fay, 287 F. 3d at 104 (alterations omitted)).
Defendants have proffered various explanations for why their interpretation is correct. However,
none of them render their interpretation reasonable.
First, Defendants assert that the MSA funds are “qualitatively different” from SSDI and
long-term disability (“LTD”) payments, which the Plan identifies as examples of “other payment
5
To “offset” means to “balance or calculate against,” or to “compensate for.” BLACK’S LAW
DICTIONARY 1195 (9th ed. 2009).
12
sources” excepted from the WC reduction. Dkt. No. 19 (“Defendants Reply”) at 2; see also Defs.
Mem. at 12; Defs. Resp. at 6-7. According to Defendants, “SSDI and LTD payments are separate
incomes [sic] sources for a participant that can be reduced by operation of Social Security or LTD
plan rules when a participant also receives worker’s compensation.” Defs. Reply at 2. However,
“MSA funds, unlike SSDI payments, were not intended to be a separate income source for
[Plaintiff].” Defs. Mem. at 12; see also Defs. Resp. at 7 (arguing that because the MSA funds are
not “in the nature of income replacement” they are “contextually different from the two examples of
‘other payment sources’ that are referenced in the Plan”).
Defendants have not adequately explained why this distinction between the purposes of
Medicare and SSDI matters under the terms of the Plan. The Plan mentions only “other payment
sources”; it does not say other payment sources in the nature of income replacement. And
Defendants have not identified any other portion of the Plan suggesting that “other payment
sources” has a narrower meaning. Although Plan § 7.03(i) parenthetically identifies SSDI and LTD
as examples of “other payment sources,” these examples are followed by “etc.,” clearly indicating
that SSDI and LTD are not the only benefits that might constitute “other payment sources.”
Moreover, Defendants have not identified any payment sources, other than SSDI and LTD, that
would constitute exceptions to the reduction, suggesting that Defendants’ interpretation, if correct,
might render the word “etc.” superfluous. “Where the trustees of a plan . . . interpret the plan in a
manner inconsistent with its plain words, or by their interpretation render some provisions of the
plan superfluous, their actions may well be found to be arbitrary and capricious.” Frommert v.
Conkright, 738 F.3d 522, 529-30 (2d Cir. 2013). Defendants have failed to explain why the
differing functions of Medicare and SSDI/LTD require construing Plan § 7.03(i) contrary to the
13
plain meaning of its terms, and their interpretation is therefore not entitled to deference.
Second, Defendants attempt to justify their interpretation as consistent with the Plan’s
“inherent logic of treating similarly situated disability participants the same way.” Defs. Mem. at
12. According to Defendants, the purpose of Plan § 7.03(i) is to ensure that participants who are
injured on the job receive the same amount of total disability compensation, i.e., ((FDB – WC) +
WC), as participants who are injured off the job, (FDB). Defs. Mem. at 11. The provision of
§ 7.03(i) excepting “other payment sources” from the WC reduction furthers this purpose. Id. at 1112. If a participant is injured on the job and receives a WC award that partially offsets his SSDI
benefits, § 7.03(i) ensures that he will receive the same total compensation, ((FDB – (WC – SSDI
offset)) + WC + (SSDI – SSDI offset)), as a similarly situated participant who was injured off the
job, (FDB + SSDI). Id. at 12.
Defendants claim that their treatment of Plaintiff’s MSA funds is consistent with this logic,
asserting that the Board “put [Plaintiff] in exactly the same economic position as a similarly situated
person who did not have an MSA account as part of his/her workers compensation settlement.”
Defs. Mem. at 13. However, because Defendants assert that the relevant policy underlying the Plan
is the intention to treat participants injured on the job the same as those injured off the job, a more
probative comparison is one between Plaintiff’s situation and that of an individual injured off the
job.6 An individual injured off the job would receive a Fund Disability Benefit, plus SSDI.
Additionally, the participant might receive Medicare benefits for medical expenses related to the
injury, assuming Medicare remains the primary payer. Therefore, total benefits would equal the
6
Furthermore, as explained infra, Defendants’ assertion that their interpretation treats
Plaintiff the same as a similarly situated participant who receives a WC award without an MSA is
misleading.
14
Fund Disability Benefits, plus SSDI, plus Medicare, (FDB + SSDI + Medicare).
In Plaintiff’s case, under Defendants’ interpretation, he receives smaller amounts of both
Fund Disability Benefits and SSDI, because both are offset by the WC award. Although Plaintiff
also receives WC payments, these payments do not make up the difference, because Plaintiff only
has direct access to the non-MSA portion of his WC award. Dkt. No. 18 (“Plaintiff Response”) at
17. The remaining funds are restricted, and Plaintiff cannot receive Medicare payments for his
injury until he exhausts the MSA funds. Id. Accordingly, under Defendants’ interpretation,
Plaintiff’s total benefits are equal to: (((FDB – (WC – SSDI offset)) + (WC – MSA) + (SSDI –
SSDI offset) + MSA)), which equals (FDB + SSDI). In other words, the similarly situated
individual injured off the job receives benefits equal to Plaintiff’s total benefits, plus Medicare
benefits. Plaintiff does not receive Medicare benefits for his injury until he exhausts the MSA
portion of his WC award; Plaintiff’s Medicare benefits are partially offset by his WC award, but the
Fund’s interpretation fails to account for that offset in calculating Plaintiff’s Fund Disability
Benefits.
Interpreting the Plan based on its plain meaning would avoid this inequity. Excepting the
MSA portion of Plaintiff’s WC award from the WC reduction to his Fund Disability Benefit would
give Plaintiff additional benefits in an amount equivalent to that portion of WC payments that he
cannot access due to the MSA.
Defendants counter that this interpretation would make Plaintiff better off than a similarly
situated participant injured on the job who did not receive an MSA account as part of his WC
settlement. Defs. Mem. at 13. However, the only reason why a participant who receives WC would
not have a portion of the WC settlement allocated to an MSA is if the participant had no expected
15
medical expenses related to the on-the-job injury.7 Such a participant would, in all practical
respects, receive the same benefits as Plaintiff: he would receive his total WC award with no
restrictions, which would make up for the greater offset in Fund Disability Benefits. The total
benefits would consist of: ((FDB – (WC – SSDI offset)) + (WC) + (SSDI – SSDI offset)), which
equals (FDB + SSDI).8
Plaintiff, meanwhile, can use only part of his WC award without restriction, because the
MSA portion is devoted to medical expenses otherwise reimbursable by Medicare. Under the
proper interpretation of the Plan, Plaintiff’s total benefits would consist of: ((FDB – (WC – (SSDI
offset + MSA))) + (WC – MSA) + (SSDI – SSDI offset) + MSA), which equals (FDB + SSDI +
MSA). The only additional benefit Plaintiff receives over the similarly situated individual with no
MSA is the MSA funds. Those funds can only be used to cover medical expenses that Medicare
would otherwise cover. See 42 C.F.R. § 411.46(d)(2) (“If the settlement agreement allocates certain
amounts for specific future medical services, Medicare does not pay for those services until medical
expenses related to the injury or disease equal the amount of the lump-sum settlement allocated to
future medical expenses.”). The reason the similarly situated individual would not receive those
7
It is also possible that an individual injured on the job does not have an MSA allocation
because, contrary to the admonitions of CMS, he failed to consider Medicare’s interest in the WC
funds at the time he settled his WC claim. See CMS, WCMSA REFERENCE GUIDE § 3.0 (“Any
claimant who receives a WC settlement, judgment, or award that includes an amount for future
medical expenses must take Medicare’s interest with respect to future medicals into account.”).
8
Alternatively, the similar situated individual might receive less in WC, i.e., an amount
equal to Plaintiff’s WC award minus the MSA (WC – MSA). See Defs. Mem. at 13. Even under
that hypothetical, Defendants’ interpretation would render that individual better off than Plaintiff.
As Defendants point out, both Plaintiff and the individual with no MSA would “have the same
amount of workers compensation money in their pockets after the future medical bills are paid.” Id.
However, Plaintiff would have less in Fund Disability Benefits in his pocket, because the Plan
would offset the MSA funds against Plaintiff’s Fund Disability Benefits.
16
benefits is that, per the premise of Defendants’ hypothetical, he would not have any future medical
expenses related to the on-the-job injury. Moreover, whereas Plaintiff cannot receive Medicare
benefits for medical expenses related to his on-the-job injury until he exhausts the MSA funds, the
other individual would be able to receive Medicare coverage for all future medical expenses. See
42 C.F.R. § 411.46(d)(1) (“[I]f a lump-sum compromise settlement forecloses the possibility of
future payment of workers’ compensation benefits, medical expenses incurred after the date of the
settlement are payable under Medicare.”). Accordingly, interpreting § 7.03(i) based on its plain
meaning ensures that similarly situated Plan participants are put in the same economic position,
whether they are injured on or off the job, and whether their WC award does or does not pay for
future medical expenses.9
VI.
REMEDIES
A. Remand Unnecessary
If a district court reviewing a claim for benefits under ERISA concludes that the plan
administrator’s decision was arbitrary and capricious, the usual remedy is a remand to the
administrator “with instructions to consider additional evidence[,] unless no new evidence could
produce a reasonable conclusion permitting denial of the claim or remand would otherwise be a
useless formality.” Miller v. United Welfare Fund, 72 F.3d 1066, 1071 (2d Cir. 1995) (internal
quotation marks omitted). Accordingly, “a remand of an ERISA action seeking benefits is
inappropriate ‘where the difficulty is not that the administrative record was incomplete but that a
denial of benefits based on the record was unreasonable.’” Zervos, 277 F.3d at 648 (quoting
9
In their briefs, the parties also debate whether Defendants provided Plaintiff with an
adequate explanation of the reasons for denying his claim. Defs. Mem. at 14-16; Pl. Resp. at 17-19.
Because the reasoning underlying the denial was erroneous, the Court need not decide this question.
17
Zuckerbrod v. Phoenix Mut. Life Ins. Co., 78 F.3d 46, 51 n.4 (2d Cir. 1996)). Here, the
administrative record was complete, and the Board denied Plaintiff benefits based on an
unreasonable, and therefore arbitrary and capricious, interpretation of the Plan. See Frommert v.
Conkright, 738 F.3d 522, 529-30 (2d Cir. 2013). Remand is inappropriate and unnecessary, and the
Court orders Defendants to award Plaintiff the benefits to which he is entitled under the Plan,
consistent with this Memorandum-Decision and Order.
B. Prejudgment Interest
In a suit to enforce a right under ERISA, the question of whether or not to award
prejudgment interest is ordinarily left to the discretion of the district court. Jones v. UNUM Life
Ins. Co. of Am., 223 F.3d 130, 139-40 (2d Cir. 2000). “In exercising such discretion, the court is to
take into consideration (i) the need to fully compensate the wronged party for actual damages
suffered, (ii) considerations of fairness and the relative equities of the award, (iii) the remedial
purpose of the statute involved, and/or (iv) such other general principles as are deemed relevant by
the court.” Id. at 139 (internal quotation marks omitted). “Since prejudgment interest is an element
of the plaintiff’s complete compensation, the same considerations that inform the court’s decision
whether or not to award interest at all should inform the court’s choice of interest rate.” Id. (internal
quotation marks, citation, and alterations omitted).
Here, Plaintiff requests prejudgment interest “at a rate of 9% per annum . . . in accordance
with New York State law, or any controlling provisions of federal law or the Plan.” Compl. at 7.
There is no applicable federal statute establishing a prejudgment interest rate, Alfano v. CIGNA Life
Ins. Co. of N.Y, No. 07 CIV. 9661, 2009 WL 890626, at *7 (S.D.N.Y. Apr. 2, 2009), and the parties
have not identified any relevant Plan provision. Section 5004 of the New York Civil Practice Law
18
and Rules establishes a prejudgment interest rate of 9% per annum, representing “an objective
legislative judgment” that this is an appropriate rate. Alfano, 2009 WL 890626, at *7. Other
district courts have utilized this statutory interest rate in awarding an ERISA claimant wrongfully
denied disability benefits, see, e.g., id.; Levitian v. Sun Life & Health Ins. Co. (U.S.), No. 09 CIV.
2965, 2013 WL 3829623, at *12 (S.D.N.Y. July 24, 2013), report and recommendation adopted, No.
09 CIV. 2965, 2013 WL 4399026 (S.D.N.Y. Aug. 15, 2013), and the Court likewise finds the rate
appropriate in this case.
C. Attorney’s Fees
ERISA’s fee shifting statute provides that “the court in its discretion may allow a reasonable
attorney’s fee and costs . . . to either party.” 29 U.S.C. § 1132(g)(1). “It is well-established that
Congress intended the fee provisions of ERISA to encourage beneficiaries to enforce their statutory
rights.” Donachie v. Liberty Life Assur. Co. of Boston, 745 F.3d 41, 45-46 (2d Cir. 2014) (internal
quotation marks omitted). Accordingly, “granting a prevailing plaintiff’s request for fees is
appropriate absent some particular justification for not doing so.” Id. at 47 (internal quotation
marks omitted). Here, Plaintiff has prevailed on his claim for benefits, and there is no reason to
deny his request for attorney’s fees. The amount of fees and costs to be awarded to Plaintiff will be
determined by the Court on a separate motion to be filed within fourteen days of the date of this
Memorandum-Decision and Order.
VII.
CONCLUSION
Accordingly, it is hereby:
ORDERED, that Defendants’ Motion (Dkt. No. 15) for summary judgment is DENIED;
and it is further
19
ORDERED, that Plaintiff’s Motion (Dkt. No. 16) for summary judgment is GRANTED;
and it is further
ORDERED, that it is hereby DECLARED that the portion of Plaintiff’s workers’
compensation settlement award allocated as a Medicare set-aside constitutes, for the purposes of
§ 7.03(i) of the Plan, an amount used to offset another payment source to which Plaintiff is entitled;
and it is further
ORDERED, that Defendants recalculate Plaintiff’s disability pension benefits consistent
with this Memorandum-Decision and Order, and pay Plaintiff all past due benefits plus prejudgment
interest at a rate of 9% per annum; and it is further
ORDERED, that, pursuant to 29 U.S.C. § 1132(g), Defendants shall pay Plaintiff attorney’s
fees and costs in an amount to be determined by the Court at a later date. Plaintiff is ordered to file
a motion concerning the amount of attorney’s fees and costs for which he seeks reimbursement
within fourteen (14) days of the filing date of this Memorandum-Decision and Order. Defendant
shall have fourteen (14) days from the filing date of Plaintiff’s motion to respond; and it is further
ORDERED, that the Clerk enter judgment for Plaintiff and close this case; and it is further
ORDERED, that the Clerk serve a copy of this Memorandum-Decision and Order on the
parties in accordance with the Local Rules.
IT IS SO ORDERED.
DATED:
August 20, 2014
Albany, New York
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