Obaid v. Building Service 32BJ Pension Fund et al

Filing 36

MEMORANDUM OPINION AND ORDER. The plaintiff is entitled to a judgment equal to the disability pension benefits withheld from the date of entitlement to the date of judgment, minus all long term disability benefits and early retirement pension benefit s actually paid to Obaid. The plaintiff is also entitled to disability pension benefits going forward. However, neither party has briefed (a) the precise dollar amount of disability benefits that was improperly withheld from Obaid, (b) whether Obaid is entitled to attorneys fees and costs, (c) the proper amount, if any, of the fees and costs, (d) whether Obaid is entitled to pre-judgment interest, and (e) the applicable pre-judgment interest rate. Therefore, this opinion concerns only the defend ants' liability. Obaid may move, with supporting evidence, for the Court to determine the dollar amount of disability benefits that were improperly withheld from Obaid and to award pre-judgment interest, attorneys fees, and costs. (Signed by Judge John G. Koeltl on 12/1/2014) (rjm)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
────────────────────────────────────
ABDO OBAID,
13 Civ. 0241 (JGK)
Plaintiff,
MEMORANDUM OPINION AND
ORDER

- against BUILDING SERVICE 32BJ PENSION FUND
ET AL.,
Defendants.
────────────────────────────────────
JOHN G. KOELTL, District Judge:

Plaintiff Abdo Obaid commenced this action under the
Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §
1132(a)(1)(B).

He alleges that defendants Building Service 32BJ

Pension Fund (the “Pension Fund”) and the Board of Trustees of
Building Service 32BJ Pension Fund (the “Trustees”) wrongfully
denied him disability benefits.

The parties agreed to try this

action as a non-jury trial based on a stipulated Administrative
Record (“AR”) and their trial briefs.

Endorsed Letter, May 28,

2013, ECF No. 13; Endorsed Letter, Mar. 26, 2013, ECF No. 7.
Based on that procedure, and pursuant to Rule 52(a) of the
Federal Rules of Civil Procedure, the Court makes the following
findings of fact and conclusions of law.
FINDINGS OF FACT
1.

From 1975 to 2009, Obaid worked as a custodian in office

buildings in New York City.

AR 356.

He was a member of the

Service Employees International Union, Local 32BJ (or its
1

predecessor in interest) during that time and was a participant
in the Pension Fund.
education.

AR 343.

See AR 272, 374.

He has a third grade

Obaid’s last date of covered employment was

on or about September 19, 2009.

AR 401.

In March 2010, Obaid

submitted a claim for disability benefits to the Pension Fund.
AR 272, 329.
2.

The Pension Fund is a multi-employer benefit fund

established pursuant to the Taft-Hartley Act, 29 U.S.C. §
186(c)(5).

AR 5–6.

The Fund is jointly administered by an

equal number of management and union trustees and is governed by
an Agreement and Declaration of Trust.
3.

AR 12.

The Pension Plan provides that to be eligible for a

permanent disability pension, a participant must be “permanently
and totality disabled,” must have at least 120 months of service
credits, and must have become disabled while working in covered
employment.
4.

AR 66. 1

Under the Pension Plan, a participant is “permanently and

totality disabled” if he is found “totally and permanently
unable, as a result of bodily injury or disease, to engage in

1

The Pension Plan was amended as of December 1, 2010, to
provide that a participant will be deemed totally disabled if he
presents a “certification of a permanent disability award from
the Social Security Administration.” AR 112. However, that
provision only applies to participants who filed an application
for benefits on or after August 1, 2010, id., and Obaid filed
his application in March 2010. AR 272, 329.
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any further employment or gainful pursuit.”
167.

AR 66; see also AR

The Pension Plan affords the “Trustees or their authorized

delegate(s) . . . sole and absolute discretion” to determine
whether a participant is totally and permanently disabled.

AR

66; see also AR 16, 81.
5.

At the time that Obaid submitted his application, the

Pension Fund had delegated to MetLife the authority to make
clinical determinations related to disability pension
applications and appeals.
6.

AR 256, 259B–60.

In support of his disability pension application, Obaid

submitted a letter from his primary physician, Dr. Iraj Akhavan.
The letter identified a number of conditions that Obaid suffered
from, including hip joint arthritis and cartilage loss.

Dr.

Akhavan considered Obaid “totally disable[d] and unable to do
any type of job related activities.”

AR 277.

Obaid also

submitted MRI results, blood test results, x-rays,
prescriptions, and notes from Dr. Akhavan.
7.

AR 278–98.

In a letter dated July 12, 2010, MetLife informed Obaid

that his application for disability pension benefits had been
denied.

In relevant part, the denial letter stated:

The medical records submitted do support your inability
to function in any capacity at the present time.
However, they do not support a permanent condition . .
. .
Based on the information provided by Dr. Iraj
Akhavan, you may require hip surgery in the future. As
a result, you will have limitations and restrictions

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that would preclude your abilities [sic] to return to
work as a [c]ustodian.
In conclusion, based on the restrictions and limitations
identified, you may not be able to return to your job as
a [c]ustodian, but you may have sedentary work capacity
in the future. Therefore, you do not meet the definition
of totally disabled . . . and it is recommended that
your claim be denied. AR 312–13.
8.

The denial letter does not identify what “sedentary work”

that Obaid was qualified to perform.
9.

In a letter also dated July 12, 2010, MetLife approved

Obaid’s “claim for long Term Disability (LTD) Benefits from the
Building Service 32BJ Health Fund.”

AR 309.

This benefit is

provided to covered employees who become “totally disabled while
working in covered employment.”
10.

Def’s. Opening Br. App. A.

Obaid timely appealed by a letter dated July 20, 2010.

AR

374.
11.

MetLife submitted Obaid’s appeal to Dr. Robert Broghammer,

who then wrote a “Peer Review Report.”

AR 405.

The Peer Review

Report concluded that medical evidence showed that Obaid had
“functional limitations” but that he was capable of “working an
eight hour day.”

AR 407.

However, the Report does not identify

what type of sedentary work Obaid is qualified to do.

Dr.

Broghammer also noted that Obaid’s “arthritis is a permanent
condition.

If it advances enough, the claimant would be a

candidate for a total hip arthroplasty which itself would also
likely result in some permanent restrictions.”
4

Id.

12.

A copy of the Peer Review Report was sent to Dr. Akhavan

for comment.

In a letter dated September 20, 2010, Dr. Akhavan

responded by noting that Dr. Broghammer’s report assumed that
Obaid performed “desk work[].”

Dr. Akhavan explained that Obaid

was a custodian, which is more physically demanding than
sedentary work.
13.

AR 317.

On September 21, 2010, Dr. Broghammer issued an addendum to

the Peer Review Report.

The addendum stated that “[t]he

claimant is capable of frequent (up to 2/3 of the day)
standing/walking in an 8 hour day.

There is no support for

restrictions on lifting and carrying.”
14.

AR 428.

MetLife denied the appeal in a letter dated September 28,

2010.

In relevant part, the letter stated:

The
Occupational
Medicine
[independent
medical
consultant (IPC)] opined that the medical information
did support functional limitations beyond September 19,
2009, but that you were capable of working an eight hour
day.
The IPC indicated you did have evidence of hip
arthritis that was mild in nature and would be expected
to result in intermittent symptoms and would cause some
mild
functional
limitations
in
your
ability
to
stand/walk for prolonged period of times and in your
ability to squat and climb ladders/stairs . . . .
In summary, we have evaluated this claim for Disability
Pension Benefits for the time period beyond September
18, 2009, and we have concluded that we are without
medical information which provides proof of a total and
permanent inability to engage in any further employment
or gainful pursuit beyond this date[.] . . . [W]e have
determined that the information fails to support the
continued need for restrictions and limitations that
would have prevented you from performing any occupation.
Although you may be disabled from performing your
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custodial
position,
given
your
restrictions
and
limitations as noted above, you are able to perform other
occupations.
Therefore, you do not satisfy the above
definition of disability for pension benefits. AR 320–
21.
15.

The appeal denial letter does not identify what “other

occupations” that Obaid could perform.
16.

Obaid filed a complaint in this Court on January 1, 2013,

pursuant to § 1132(a)(1)(B).

The complaint requests all

disability pension benefits wrongfully withheld from Obaid from
April 2010 to the date of judgment, minus all long term
disability benefits and early retirement pension benefits
actually paid to Obaid.

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Compl. ¶ 24.

The complaint also

requests disability pension benefits “going forward,” attorney’s
fees, and costs.
17.

Compl. ¶ 25–26.

The parties agreed to try this action as a non-jury trial

based on a stipulated administrative record and their trial
briefs.

Endorsed Letter, May 28, 2013, ECF No. 13; Endorsed

Letter, Mar. 26, 2013, ECF No. 7.

2

The Pension Plan prohibits participants from receiving both
a disability pension and a health fund benefit. If a
participant is awarded retroactive disability benefits, “the
retroactive benefits payable to the Participant shall be offset
by the actual amount of Health Fund benefits that were paid to
the Participant for such periods of time.” AR 68.
6

CONCLUSIONS OF LAW
1.

To the extent any of the foregoing findings of fact is a

conclusion of law, it is hereby adopted as a conclusion of law,
and vice versa.
2.

The Court has jurisdiction pursuant to 28 U.S.C. § 1331 and

29 U.S.C. § 1132(e)(1) and (f).
3.

Under ERISA, a plan participant may sue “to recover

benefits due to him under the terms of his plan, to enforce his
rights under the terms of the plan, or to clarify his rights to
future benefits under the terms of the plan.”

29 U.S.C. §

1132(a)(1)(B).
4.

The parties agree that the Pension Plan is an “employee

welfare benefit plan” subject to ERISA.

See 29 U.S.C. §§

1002(1), 1003(a).
5.

Obaid filed the complaint within the applicable six-year

statute of limitations.

See Hirt v. Equitable Ret. Plan for

Emps., 450 F. Supp. 2d 331, 333 (S.D.N.Y. 2006).
6.

The Court reviews the denial of benefits de novo “unless

the benefit plan gives the administrator or fiduciary
discretionary authority to determine eligibility for benefits.”
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989).
If the plan grants the administrator such authority, the Court
reviews the administrator’s decision for abuse of discretion.
See id. at 111.
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7.

The Pension Plan affords the “Trustees or their authorized

delegate(s) . . . sole and absolute discretion” to determine
whether a participant is totally and permanently disabled.

AR

66; see also AR 16, 81.
8.

However, when a plan administrator has a conflict of

interest, that conflict is a factor that should be weighed “as a
factor by the reviewing court in determining whether the plan
administrator abused its discretion in denying benefits.”

Petri

v. Sheet Metal Workers’ Nat’l Pension Fund, No. 07cv6142, 2009
WL 3075868, at *6 (S.D.N.Y. Sept. 28, 2009) (citing Metro. Life
Ins. Co. v. Glenn, 554 U.S. 105, 112–15 (2008)).

The Supreme

Court in Glenn held that “the fact that a plan administrator
both evaluates claims for benefits and pays benefits claims”
creates a conflict of interest that may affect the applicable
standard of review.

554 U.S. at 112.

The Second Circuit Court

of Appeals held that even when, as here, a board of trustees is
“(by requirement of statute) evenly balanced between union and
employer,” a plan administrator that evaluates claims and pays
benefits has a conflict of interest.

Durakovic v. Bldg. Serv.

32 BJ Pension Fund, 609 F.3d 133, 139 (2d Cir. 2010).

And

courts must weigh the impact of that conflict of interest on a
case-by-case basis.
9.

Id. at 139–40.

The defendants note that the Trustees delegated to MetLife

the authority to make disability benefit determinations, and
8

that the Pension Fund pays MetLife a flat fee for each benefits
application, regardless of whether MetLife awards or denies
benefits.

AR 259B–60.

This, according to the defendants,

obviated any potential conflict of interest.

Obaid agrees that

the Trustees have the power to delegate the authority to
adjudicate disability benefits applications.

However, Obaid

insists that there is no evidence that the Trustees properly
delegated this authority to MetLife.

See generally McDonnell v.

First Unum Life Ins. Co., No. 10cv8140, 2013 WL 3975941, at *7–
11 (S.D.N.Y. Aug. 5, 2013).
10.

The Court need not resolve this argument.

Under the

standard of review requested by the defendants—arbitrary and
capricious review—the denial of disability pension benefits was
erroneous as a matter of law.
11.

Section 4.08 of the Pension Plan provides that a

participant is entitled to a disability pension if “he is
permanently and totally disabled (as defined in Section 4.10),”
“he has at least 120 months of Service Credits,” and “he became
permanently and totally disabled while working in Covered
Employment.”

AR 66.

The defendants do not dispute that Obaid

has at least 120 months of service credits and became disabled
while working in covered employment.
12.

But the defendants do dispute that Obaid is “permanently

and totally disabled (as defined in Section 4.10).”
9

Section

4.10 of the Pension Plan provides that a participant is totally
and permanently disabled “if, on the basis of medical evidence
satisfactory to the Trustees, he is found to have become, while
working in Covered Employment, totally and permanently unable,
as a result of bodily injury or disease, to engage in any
further employment or gainful pursuit.”

AR 66.

The Summary

Plan Description (“SPD”) similarly provides that “[t]otal and
permanent disability is the permanent inability to work in any
capacity, as determined by the Trustees or persons they
designate.

You will not satisfy this definition of total and

permanent disability just because you are unable to continue in
your usual occupation; you must be forever unable to perform any
gainful employment to meet this Plan requirement.”
13.

AR 167.

In Demirovic v. Building Service 32 B-J Pension Fund, 467

F.3d 208 (2d Cir. 2006), the Second Circuit Court of Appeals
interpreted the SPD and Pension Plan language at issue here.
The Court of Appeals held that the phrase “‘any gainful
employment’ . . . may not reasonably be read as denying benefits
to a person who is physically capable of any employment
whatsoever, so long as it earns a nominal profit.

Nor may it be

read as allowing an administrator to disregard a claimant’s
individual vocational circumstances.”

Id. at 215.

The Court

further explained that a “finding that a claimant is physically
capable of sedentary work is meaningless without some
10

consideration of whether she is vocationally qualified to obtain
such employment, and to earn a reasonably substantial income
from it, rising to the dignity of an income or livelihood,
though not necessarily as much as she earned before the
disability.”

Id.

Thus, the Court of Appeals held that failing

to conduct a “non-medical assessment as to whether” the claimant
“has the vocational capacity to perform any type of work—of a
type that actually exists in the national economy—to earn a
reasonably substantial income” is arbitrary and capricious.

Id.

The nature of the vocational assessment “will be within the plan
administrators’ broad discretion,” but “a complete absence of
consideration of [the claimant’s] vocational circumstances” is
an abuse of discretion.

Id. at 215–16; see also Durakovic, 609

F.3d at 141–42 (holding that the Pension Fund abused its
discretion by concluding that an office cleaner in her late
fifties could perform semi-skilled work).
14.

Here, neither the initial application denial letter nor the

appeal denial letter considered whether Obaid is vocationally
capable of earning a reasonably substantial income.

The denial

letter states that Obaid “may not be able to return to [his] job
as [c]ustodian, but [he] may have sedentary work capacity in the
future.”

AR 313.

And the appeal letter states that “[a]lthough

you may be disabled from performing your custodial position,
given your restrictions and limitations as noted above, you are
11

able to perform other occupations.”

AR 320–21.

At no point

does either letter identify any “sedentary” employment for which
Obaid was qualified or that actually existed.

Compare Kagan v.

Unum Provident, 775 F. Supp. 2d 659, 679–80 (S.D.N.Y. 2011)
(approving a vocational analysis that identified seven
occupations the claimant could perform within his local labor
market), with Karce v. Bldg. Serv. 32B J Pension Fund, No.
05cv9142, 2006 WL 3095962, at *9 (S.D.N.Y. Oct. 31, 2006)
(holding that the Pension Fund abused its discretion by failing
to identify what “sedentary work” a claimant could perform).
15.

This error was not harmless.

Obaid by phone on June 17, 2010.

A nurse clinician interviewed
AR 355.

According to her

interview notes, Obaid explained that he previously held two
full time jobs, that both jobs involved maintenance and
custodial work, that he had performed only maintenance and
custodial work since 1975, and that he has no experience working
with computers.

AR 356.

“what he could do.”

Id.

He explained that he was not sure
And in his description of his

“activities of daily living,” Obaid informed MetLife that he had
a third grade education.

AR 343.

Despite having this

information, MetLife failed to conduct a vocational analysis.
16.

The defendants now agree that Obaid is totally disabled but

argue that he failed to prove that his disability is permanent.

12

In their briefs, the defendants insist that had Obain elected to
have hip surgery, he could have continued working.
17.

There is no evidence in the record to support this

argument.

The claim denial letter states that “you may require

hip surgery in the future.

As a result, you will have

limitations and restrictions that would preclude your abilities
[sic] to return to work as a [c]ustodian.”

AR 313.

And the

appeal denial letter simply states that Obaid’s injuries would
not prevent him from “performing any occupation.

Although you

may be disabled from performing your custodial position[,] . . .
you are able to perform other occupations.”

AR 320–21.

Indeed

the Peer Review Report, upon which the appeal denial letter
relied, states that “[t]he claimant’s hip arthritis is a
permanent condition.

If it advances enough, the claimant would

be a candidate for total hip arthoplasty which itself would also
likely result in permanent conditions.
arthritis is a permanent condition.
time and will likely progress.”

The claimant’s hip

It will not get better with

AR 407 (emphasis added).

There

is no basis for the defendants’ speculation that if only the
plaintiff has a hip replacement, then all will be better.

And

that was not the basis on which the plaintiff was denied
benefits.
18.

If a plan administrator’s decision was arbitrary and

capricious, courts often remand with instructions to consider
13

additional evidence. See Pepe v. Newspaper and Mail Deliveries’Publishers Pension Fund, 559 F.3d 140, 149 (2d Cir. 2009).
However, remanding is not appropriate “where the difficulty is
not that the administrative record was incomplete but that a
denial of benefits based on the record was unreasonable.”
Zervos v. Verizon N.Y., Inc., 277 F.3d 635, 648 (2d Cir. 2002)
(internal quotation marks omitted) (quoting Zuckerbrod v. Phx.
Mut. Life Ins. Co., 78 F.3d 46, 51 n.4 (2d Cir. 1996)).
19.

Based on the record, the denial of benefits was

unreasonable.

The defendants have not identified potential

evidence that would justify withholding benefits, let alone
argued that remand is the correct remedy.

Obaid provided the

defendants with his relevant work and educational history; since
1975, he has worked as a custodian, and he has a third grade
education.

It is difficult to see what, if any, sedentary jobs

that Obaid is qualified to perform.

Moreover, the Pension Fund

can hardly claim that it was unaware that it must determine
whether a claimant is qualified for other employment.

The two

leading Second Circuit Court of Appeals opinions on that
question involved this Fund.
Durakovic, 609 F.3d at 133.

See Demirovic, 467 F.3d at 208;
Indeed, in Durakovic, where the

Pension Fund failed to conduct an adequate vocational analysis
for an office cleaner in her fifties, the Second Circuit Court

14

of Appeals appeared to remand for the district court to award
the claimant disability benefits.

609 F.3d at 142.

CONCLUSION
The plaintiff is entitled to a judgment equal to the
disability pension benefits withheld from the date of
entitlement to the date of judgment, minus all long term
disability benefits and early retirement pension benefits
actually paid to Obaid.

The plaintiff is also entitled to

disability pension benefits going forward.
However, neither party has briefed (a) the precise dollar
amount of disability benefits that was improperly withheld from
Obaid, (b) whether Obaid is entitled to attorney’s fees and
costs, (c) the proper amount, if any, of the fees and costs, (d)
whether Obaid is entitled to pre-judgment interest, and (e) the
applicable pre-judgment interest rate.

Therefore, this opinion

concerns only the defendants’ liability.
Obaid may move, with supporting evidence, for the Court to
determine the dollar amount of disability benefits that were
improperly withheld from Obaid and to award pre-judgment
interest, attorney’s fees, and costs.
SO ORDERED.
Dated:

New York, New York
December 1, 2014

____________/S/_____________
John G. Koeltl
United States District Judge

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