Brooks v. Macy's, Inc.

Filing 34

MEMORANDUM OPINION AND ORDER: I write to resolve several discovery disputes that were left open after the conference held in this matter on April 19, 2011 as further set forth within this Memorandum Opinion and Order. (Signed by Magistrate Judge Henry B. Pitman on 5/6/2011) Copies Mailed By Chambers. (jfe)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-----------------------------------X
JOSEPH E. BROOKS,

:
Plaintiff,

MACY'S, INC.

10 Civ. 5304 (BSJ)(HBP)

:

-against-

:

MEMORANDUM OPINION
AND ORDER

:
Defendant.

:

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PITMAN, United States Magistrate Judge:

I write to resolve several discovery disputes that were
left open after the conference held in this matter on April 19,
2011.

This is an ERISA action in which plaintiff alleges that

the medical benefits to which he is entitled under his retirement
plan have been improperly restricted.

Plaintiff, who is 82 years

old, was formerly the Chairman and Chief Executive Officer of
Lord & Taylor (Complaint, dated July 12, 2010 (Docket Item 1)
("Compl."), ¶ 1).

He alleges that since 1983, he and his wife

have received extensive medical benefits under the plan, including reimbursement for expenses such as doctor's visits, transportation to and from those visits, medication, lab fees and gym
memberships (Compl. ¶¶ 1, 29). Plaintiff alleges that all of
these expenses were reimbursed without question through the end
of 2009 (Compl. ¶ 1).

In addition, plaintiff also received

additional cash payments when such payments were necessary to
offset the tax consequences of other payments he received under
the plan.
Plaintiff alleges that in late 2009, after several
mergers, Macy's, as the successor to Lord & Taylor, began to
limit the scope of his benefits under the plan.

According to

plaintiff, "Macy's . . . departed from its long standing practice
of reimbursing Mr. and Mrs. Brooks for the full cost of their
medical and ancillary needs and notified Mr. and Mrs. Brooks that
reimbursement of future claims would be judged under different,
and much more stringent, standards . . ." (Compl. ¶ 2).

The

present action results from Macy's refusal to reimburse plaintiff
for the cost of a live-in home health aide that had been ordered
by plaintiff's physician.
The present discovery dispute arises out of defendant's
responses to plaintiff's request for the production of documents
and interrogatories.

The defendant's principal objections are

relevance and burden.
Defendant's relevance objection is based on its contention that the only relevant evidence are the materials that the
plan administrator considered when it denied plaintiff's claim
for benefits.

I conclude that the law does not support such a

narrow view of relevance in this case.
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The pertinent provisions of the plan in issue are as
follows:
All covered . . . executives are provided Executive Medical Plan coverage at no cost to the individual. [Employer] will pay the executive, upon receipt
of copies of the bills, the full amount of any medical
and dental expenses, including but not limited to
hospitalization and the costs of medicines, incurred by
the executive, his spouse and dependent children up to
age 19, or in the case of dependent children who are
full-time students, up to age 23.
Medical and dental expenses include amounts paid
for the diagnosis, cure, mitigation, treatment or
prevention of disease. The cost of prescribed medicine
and drugs is included. Eyeglasses, elastic stockings,
hearing aids and orthodontic braces would be included,
but toiletries, lotion, toothpaste, brushes and vitamins would be excluded.
At a conference in this matter held on April 19, 2011,
defendant conceded, as it had to, that the plan does not does not
grant the administrator or fiduciary discretionary authority to
determine eligibility or to construe the terms of the plan and,
therefore, the decision to deny benefits to plaintiff is subject
to de novo review.

See Metro. Life Ins. Co. v. Glenn, 554 U.S.

105, 111 (2008); Firestone Tire & Rubber Co. v. Bruch, 489 U.S.
101, 115 (1989); Locher v. Unum Life Ins. Co. of Am., 389 F.3d
288, 293 (2d Cir. 2004).
Central to defendant's relevance argument is the issue
of whether the plan language is ambiguous.

If the plan is

unambiguous, evidence outside of the four-corners of the document
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is irrelevant.

"As a general matter, unambiguous language in an

ERISA plan must be interpreted and enforced in accordance with
its plain meaning."

Aramony v. United Way Replacement Benefit

Plan, 191 F.3d 140, 149 (2d Cir. 1999); accord Perreca v. Gluck,
295 F.3d 215, 223 (2d Cir. 2002).

If, on the other hand the plan

language is ambiguous, extrinsic evidence is admissible as an aid
to interpreting the plan.

Andy Warhol Found. for the Visual

Arts, Inc. v. Federal Ins. Co., 189 F.3d 208, 215 (2d Cir. 1999);
I.V. Servs. of Am., Inc. v. Trustees of the Am. Consulting Eng'rs
Council Ins. Tr. Fund, 136 F.3d 114, 120 (2d Cir. 1998) ("Given
that the Plan language is not, by itself, clear and unambiguous .
. ., matters outside of the contract terms themselves become
relevant.").1

Whether contract language is ambiguous is a ques-

tion of law that is resolved "by reference to the contract
alone."

Burger King Corp. v. Horn & Hardart Co., 893 F.2d 525,

527 (2d Cir. 1990) (citations omitted).

"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 integrated agreement . . . ."'"

1

O'Neil v.

Extrinsic evidence cannot, however, be introduced to modify
or contradict an express provision of an ERISA plan. Moore v.
Metro. Life Ins. Co., 856 F.2d 488, 492 (2d Cir. 1988); Hoffman
v. Empire Blue Cross & Blue Shield, 96 Civ. 5448 (BSJ), 1999 WL
782518 at *7 (S.D.N.Y. Sept. 30, 1999) (Jones, D.J.).
4

Ret. Plan for Salaried Emps. of RKO Gen., Inc., 37 F.3d 55, 59
(2d Cir. 1994), quoting Care Travel Co. v. Pan Am. World Airways,
944 F.2d 983, 988 (2d Cir. 1991).
Because the matter has been referred to me for general
pretrial supervision and not to resolve dispositive motions, I
need not (and cannot) reach the ultimate issue of whether the
plan is actually ambiguous; that will be a matter for Judge Jones
to decide.

At this stage, the issue is only whether plaintiff is

entitled to discover matters that will be relevant if the plan is
found to be ambiguous.

Ordinarily, discovery concerning all

relevant or potentially relevant issues is permitted, even if
some of the discovery may ultimately prove unnecessary.

For

example, a plaintiff alleging that she was wrongfully terminated
from her job is permitted to discover the salary and benefits
paid to her replacement even though such discovery may prove to
be useless if defendant prevails on liability.

Similarly, a

plaintiff alleging copyright infringement is ordinarily allowed
to discover the alleged infringer's profits even before liability
for infringement has been established.

Accordingly, I conclude

that plaintiff here is entitled to take discovery concerning
evidence extrinsic to the plan that may be relevant to the issue
of interpretation so long as it is at least fairly arguable that
the plan is ambiguous.

Any other standard would effectively
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require plaintiff to prove an aspect of his claim before he could
conduct discovery.
Here, it is fairly arguable (at the very least) that
the plan is ambiguous.

The plan provides coverage for "[m]edical

and dental expenses [which] include amounts paid for the diagnosis, cure, mitigation, treatment or prevention of disease."
Among the unanswered questions this language presents are (1)
does it exclude medical expenses necessitated by conditions that
result from accidents as opposed to disease? (2) does it exclude
medical expenses necessitated by conditions that are the result
of normal aging, and, if so, what conditions are the result of
normal aging? (3) are medical expenses limited to expenses
incurred as a result of an order by a health care professional?
(4) do medical expenses include expenses incurred as a result of
a suggestion by a health care professional, e.g., a suggestion by
a physician that a patient join a gym and exercise regularly? (5)
what are "medical" expenses? (6) does the cost of a home health
aide qualify as a medical expense if the aide's services are
ordered by a physician to mitigate the effects of a disease?
There can be little question that plaintiff has at least a fair
argument that the plan is ambiguous.
Defendant's own conduct here also confirms that the
plan is ambiguous and that resort to documents outside the plan
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document itself is necessary to interpret the plan.

For example,

on May 20, 2010, Stephen Von Wahlde, Macy's Vice President of Law
& Retirement Benefits sent plaintiff's counsel a three-page,
single-spaced letter "in an attempt to reach some clarity regarding Macy's obligation to cover certain expenses."

In the letter,

Mr. Von Wahlde refers to (1) a 1986 application for Executive
medical insurance, (2) a summary plan description issued by
Connecticut General Insurance Company in 1986, (3) ADG Board
Minutes from May 1983 and (4) Section 213(d) of the Internal
Revenue Code.

The face of the plan does not refer to any of

these documents.

Mr. Von Wahlde goes on in his letter to propose

certain limitations on benefits which are not clearly set forth
in the plan and states:
Mr. Segal, I believe the above is consistent with the
original intent of the Plan, as can be determined from
the documents that we have. It is consistent with a
plan summary that was provided to Mr. Brooks in 2007
from CIGNA. It is also consistent with the treatment
of other retired executives of ADG; we have been unable
to obtain any documentation to suggest that Mr. Brooks
is entitled to something different.
(Letter from Stephen von Wahlde, Esq. to Michael J. Segal, Esq.,
dated May 20, 2010 and annexed as part of Exhibit A to the Letter
to the undesigned from Danielle C. Lesser, Esq., dated April 29,
2011).

This letter is compelling evidence that Macy's regards

the plan as ambiguous and believes that resort to extrinsic

7

evidence to interpret the plan is appropriate.

If the plan were

unambiguous, it is difficult to understand why Macy's counsel
would need to write to "reach some clarity" regarding Macy's
obligations under the plan.

If the plan were unambiguous, it is

difficult to understand why Macy's counsel would have to refer to
27-year-old board minutes and other documents to garner "the
original intent of the Plan."

If the plan were unambiguous, it

is difficult to understand why Macy's counsel would be referring
to the benefits provided to other participants under the plan as
a guidepost for determining the scope of plaintiff's benefits.
In short, Macy's own reliance on extrinsic evidence to interpret
the plan is compelling evidence that the scope of coverage is not
clear from the face of the plan itself.
Where plan language is ambiguous, courts can consider,
among other things, "(1) evidence of how the [p]lan has been
interpreted by the [p]lan administrators in the past; and (2) who
drafted the contract terms."

I.V. Servs. of Am., Inc. v. Trust-

ees of the Am. Consulting Eng'rs Council Ins. Tr. Fund, supra,
136 F.3d at 120.

Thus, to the extent plaintiff seeks discovery

concerning these items, his requests seek relevant information.
Defendant's second major objection is burden.

Through

its counsel, defendant proffered the following facts at the
conference held in this matter on April 19, 2011.
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The plan was

initially implemented more than twenty years ago when plaintiff
was the Chairman and Chief Executive Officer of Lord & Taylor (a
chain of department stores) which was then owned by Associated
Dry Goods Corporation ("ADG").

Through a number of corporate

transactions, the details of which are not relevant here, defendant assumed the obligations of ADG under the plan.

Due to the

fact that there have been several obligors under the plan, the
plans records, many of which are located in a warehouse in Ohio,
are not well organized.

Many of them are in shrink wrapped boxes

that are not labeled with precision.

There is no claim by

plaintiff and no evidence suggesting that the lack of organized
files is the result of bad faith on the part of Macy's.

Rather

it appears that the lack of organization had its origins long
before this litigation was threatened or commenced and was the
result of the documents having gone through the hands of multiple
custodians who simply did not have the inclination to prepare an
accurate index.

Defendant has not quantified the cost of a

thorough search of the files likely to contain responsive documents.
Although I am sympathetic to defendant's plight, the
burden that results from disorganized record-keeping does not
excuse a party from producing relevant documents.

Overseas

Fashion Indus., Inc. v. River Heights, Inc., 88 Civ. 2450 (RPP),
9

1990 U.S. Dist. Lexis 29 at *5 (S.D.N.Y. Jan. 4, 1990) (Dolinger,
M.J.) ("[A] party's failure to keep its documents in organized
fashion is not ordinarily a basis for excusing production.");
Allarcom Ltd. v. Telemundo Grp. Inc., 88 Civ. 9265 (KMW), 1989
U.S. Dist. Lexis 13612 at *3 (S.D.N.Y. Nov. 16, 1989) (Dolinger,
M.J.) ("[T]he fact that a party maintains its documents in a
manner that makes access more difficult than it otherwise would
be cannot serve as an excuse for not producing relevant documents."); Kozlowski v. Sears, Roebuck & Co., 73 F.R.D. 73, 76 (D.
Mass. 1976) ("To allow a defendant whose business generates
massive records to frustrate discovery by creating an inadequate
filing system, and then claiming undue burden, would defeat the
purposes of the discovery rules."); accord Alliance to End
Repression v. Rochford, 75 F.R.D. 441, 447 (N.D. Ill. 1977); see
also Zubulake v. UBS Warburg LLC, 217 F.R.D. 309, 321 n.68
(S.D.N.Y. 2003) (Scheindlin, D.J.).

Thus, to the extent defen-

dant is objecting to producing document on the ground that it
would be unduly burdensome to review the documents currently
stored in its warehouse, its objection is overruled.
Accordingly, in light of the foregoing discussion,
defendant's objections to Document Request Nos. 1-18, 20, 22-24,
26-31, and 35-36 are overruled.

The documents sought in these

requests will be relevant as aids to interpretation if Judge
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Jones finds the plan language is ambiguous.

Other than

burdensomeness, defendant does not object to Document Request
Nos. 19, 21 and 32-34.

Defendant's objections to Document

Request No. 25 are sustained in part in light of the privacy
interests of other plan participants.

Defendant is directed to

produce the documents responsive to Request No. 25 but may redact
all information that tends to identify the plan participant who
received medical benefits.

Defendant's objections to Document

Request Nos. 37-39 are sustained; these requests are premature.
For the same reasons, defendant's objections to Plaintiff's Interrogatories 1-2 and 5-21 are overruled.

These inter-

rogatories seek the identification of witnesses who are likely to
have testimony relevant to the interpretation of the plan.
Defendant's objections to interrogatories 3 and 4 are sustained.
Defendant is to produce the documents and respond to
plaintiff's interrogatories as directed by this Order within
thirty (30) days of the date of this Order.

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The parties' out

standing dispute concerning documents withheld on the ground of
privilege will be addressed in a separate Order.
Dated: New York, New York
May 6, 2011
SO ORDERED

)~~~

HENRYPI

United States Magistrate Judge
Copies transmitted to:

Danielle C. Lesser, Esq.

Howard S. Wolfson, Esq.

Wendy M. Fiel, Esq.

Morrison Cohen LLP

909 Third Avenue

New York, New York 10022-4784

James R. Williams, Esq.

Michael D. Jacobster, Esq.

Ravindra K. Shaw, Esq.

Jackson Lewis LLP

666 Third Avenue

New York, New York 10017

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