Daul et al v. PPM Energy, Inc.

Filing 59

OPINION AND ORDER - The Court finds that applicable standard for reviewing PPM's denial of benefits to Plaintiffs is de novo. Signed on 8/14/09 by Magistrate Judge John V. Acosta. (peg)

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I N T H E U N I T E D STATES D I S T R I C T C O U R T F O R T H E DISTRICT OF OREGON

TY DAUL and RAIMUND GRUBE, Plaintiffs,

CV 08-524-AC OPINION AND ORDER

v.
P P M ENERGY, INC., n o w known as I B E R D R O L A R E N E W A B L E , I N C . , a n d the CHANGE IN CONTROL S E V E R A N C E ENHANCEMENTS F O R K E Y P P M E M P L O Y E E S PLAN, Defendants.
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A C O S T A , M a g i s t r a t e Judge:
Introduction

Currently before the court are memoranda regarding the standard o f review to be applied in this case submitted by Plaintiffs T y Daul and Raimund Grube (collectively "Plaintiffs") and by Defendants PPM Energy, Inc., n o w known as Iberdrola Renewable, Inc., ("PPM") and the Change {CK}

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in Control Severance E n h a n c e m e n t s for Key P P M Employees Plan (the " P l a n " ) (collectively "Defendants"). Plaintiffs argue t h a t the court should apply de novo review o f D e f e n d a n t s ' denial o f benefits to Plaintiffs because the Plan does n o t unambiguously grant discretionary authority to a plan fiduciary to make benefits decisions o r construe the terms o f the Plan. Plaintiffs further argue that D e f e n d a n t s ' a l l e g e d l y w h o l e s a l e and f l a g r a n t v i o l a t i o n s o f P l a i n t i f f s ' p r o c e d u r a l r i g h t s u n d e r t h e federal Employment R e t i r e m e n t I n e o m e Security A c t (29 U.S.C. §§ 100 I et seq. (2006)) ("ERISA") mandate the application o f de novo review. In contrast, Defendants argue t h a t the applicable standard o f review i n this case is abuse o f discretion because the P l a n was, in fact, an amendment to the P P M Energy Severance P l a n (the "Existing Plan") which expressly vests the administrator with discretionary authority to make benefit determinations and construe the terms o f the Existing Plan. Furthermore, D e f e n d a n t s argue that P P M provided Plaintiffs w i t h a full and fair review p r o c e s s a n d e n g a g e d i n a n " o n g o i n g , g o o d f a i t h e x c h a n g e o f i n f o r m a t i o n " w i t h P l a i n t i f f s and t h a t Plaintiffs failed to c o m e forward w i t h any evidence o f a " f l a g r a n t " v i o l a t i o n that would mandate the application o f de novo review. F o r reasons s e t forth below, this courts finds that de novo review applies to the denial o f benefits to Plaintiffs under the Plan.

Background
T h e b a c k g r o u n d o f this l i t i g a t i o n r e c i t e d i n t h e F i n d i n g s a n d R e c o m m e n d a t i o n filed on August 7, 2008 (#26) will n o t be repeated here. 1 Additional background pertinent to the instant m o t i o n is set o u t below. O n November 15, 2007, Plaintiffs informed P P M o f their intent to invoke a Qualifying

T h o s e Findings a n d R e c o m m e n d a t i o n were adopted and c a n be found at 2008 WL 4283262 (D. Or. Sept. 1 7 , 2 0 0 8 ) . Since then, the p a r t i e s have consented to jurisdiction by a m a g i s t r a t e j u d g e p u r s u a n t t o 28 U . S . C . § 6 3 6 ( c ) ( 1 ) .
I

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Employee-Initiated Resignation under the Plan ( P i s . ' Mem. Appl. Stnd. Rev. ( " P i s . ' Mem.") Ex. 5 at I ) and d i s c u s s c d their positions with Martin Mugica, a scnior vice president o f PPM. ( P P M ' s M e m . Stnd. R e v . ( " P P M ' s M e m . " ) E x . I a t 2 . ) O n Dceember 5, 2007, Linda Wah, P P M ' s vice president o f h u m a n resources, responded to Plaintiffs and indicated that she disagreed w i t h Plaintiffs' assertions that the constructive dismissal o r m a t e r i a l a l t e r a t i o n s in c o m p e n s a t i o n h a d o c c u r r e d , m a k i n g P l a i n t i f f s i n e l i g i b l e f o r s e v e r a n c e benefits under the Plan. ( P l . ' s Mem. Ex. 7 at I . ) Ms. Wah addressed e a c h o f P l a i n t i f f s ' claims and explained why s h e did n o t agree w i t h them. (Id. at 1-3.) In the closing paragraph o f h e r letter, Ms. W a h wrote: This company is open to discussing your conce1'lls as they relate to y o u r continued employment a n d w o u l d like to schedule a meeting with y o u in the near future to begin t h o s e d i s c u s s i o n s . I f t h e r e are s p e c i f i c a c t i o n s y o u b e l i e v e t h e c o m p a n y s h o u l d t a k e t h a t w o u l d c u r e y o u r c l a i m u n d e r t h e P r o g r a m , p l e a s e p r o v i d e us w i t h t h o s e i n writing by n e x t week.
(Jd. at 3 (emphasis added).) O n D e c e m b e r 7, 2007, Ms. W a h sent an email to Plaintiffs proposing

a mecting in Pennsylvania w i t h Alvaro Delgado, P P M ' s human resources director, o n December 18, 2007. ( P P M ' s Mem. Ex. 2.) In that e m a i l . M s . W a h indicated that " [ s h e did] n o t know the process but will keep [Plaintiffs] apprised i f there [was] clarity o v e r the n e x t w e e k . " (Jd.) O n D e c e m b e r 17, 2007, Ms. Wah asked Plaintiffs to come to the following d a y ' s meeting prepared to discuss, among o t h e r t h i n g s , w h a t c a u s e d P l a i n t i f f s t o s u b m i t t h e i r n o t i c e o f r e s i g n a t i o n . ( P P M ' s M e m . E x . 3 . ) She also asked for proposals o f t e n l l s mutually agreeable to both Plaintiffs a n d PPM. (Jd.) Ms. Wah indicated that P P M did not feel that Plaintiffs had triggered the severance provisions under the Plan a n d was n o t willing to s p e n d a n y more t h a n what Plaintiffs were already entitled to u n d e r their e x i s t i n g c o m p e n s a t i o n p a c k a g e . ( l d . ) Ms. W a h a l s o noted:

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[PPM has] not heard any compelling reasons w h y wc should negotiate different terms t h a n w h a t y o u already have. You should spend this mccting getting the company to understand w h y you believe y o u n e e d to leave the company o r what it w o u l d take to motivate y o u to stay.
(Id. (emphasis added») O n D c c e m b e r 20, 2007, Ms. Wah em ailed Plaintiffs a summary outlining

P P M ' s proposal i n response to Plaintiffs' proposal. ( P P M ' s Mem. Ex. 4 at 1.) The summary i n c l u d e d p r o p o s e d b o n u s e s and other a m e n d m e n t s t o P l a i n t i f f s ' e x i s t i n g c o m p e n s a t i o n packages i f they would c o m m i t to continuing their employment through D e c e m b e r 31, 2008, at a minimum. ( P P M ' s Mem. Ex. 4 at 2.) O n D e c e m b e r 26, 2007, Plaintiffs emailed to Ms. W a h and Mr. Delgado their c o u n t e r - p r o p o s a l f o r c o n t i n u i n g e m p l o y m c n t w i t h P P M . ( P P M ' s M e m . Ex. 5 a t 2-3.) The p a r t i e s c o u l d n o t r e s o l v e t h e i r d i s a g r e c m e n t s , and P l a i n t i f f s ' e m p l o y m e n t w i t h P P M e n d e d o n January 1 4 , 2 0 0 8 .

L e g a l Standards
A. Grant o f Discretion to the P l a n Administrator I. T h e R e q u i s i t e L a n g u a g e T h e default standard for r e v i e w i n g the denial o f benefits under a plan that is subject to ERISA is de novo. Firestone Tire & R u b b e r Co. v. Bruch, 489 U.S. 101, 115 (1989). I f the plan unambiguously provides the administrator authority to determine cligibility for benefits o r to construe the terms o f the plan, the standard o f review is altered from the default de novo standard to the more lenient abuse o f discretion standard. Abatie v. A l t a Health & Life Ins. Co., 458 F . 3 d 9 5 5 , 963 (9th Cir. 2006) (en bane). While no " m a g i c " words are required, thc N i n t h Circuit has held that wording which grants the p o w e r to interpret plan terms a n d to make final benefits determinations confers discretion o n the administrator. Id. O n the other hand, p l a n terms which merely identifY the

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administrator's tasks but b e s t o w no p o w e r to interpret the plan are insufficient to confer discretionary authority o n the administrator. I n g r a m v. 1v1artin M a r i e t t a L o n g Term D i s a b i l i t y I n c o m e Plan, 244 F . 3 d 1109, 1113 ( 9 t h Cir. 2001). 2. Amendment o f a Plan The requisite grant o f discretion to the administrator m a y be derived from any number o f plan documents. K l e b e v. Mitre G r o u p H e a l t h Care Plan, 894 F. Supp. 8 9 8 , 9 0 2 (D. Md. 1995). " E R I S A p r o v i d e s a n e m p l o y e r with b r o a d a u t h o r i t y t o amend a p l a n and d o e s not s u g g e s t t h a t a n a m e n d m e n t creating a new benefit structure also creates a second plan." H u g h e s A i r c r a f t Co. v. J a c o b s o n , 522 U.S. 432, 442 (1999). However, while E R I S A does not require employers to m e e t difficult standards in order to amend a welfare benefit plan, i t does provide minimal procedures that m u s t be followed.
C o f f i n v. Bowater, Inc., 501 F.3d 80, 90 (1st Cir. 2007). 2 9 U.S.C. § 1102(b)(3) requires "[e]very

employee benefit p l a n shall . . . provide a procedure for amending s u c h plan, and for identifying the persons who have authority to amend the p l a n . . . . " A m o n g other things, the language o f an ERISA plan amendment must clearly alert the parties t h a t the p l a n is being amended so that disputes between employees and their cmployers m a y be resolvcd by reference to the documents that govern the plan. Coffin, 501 F.3d at 90-91. B. Flagrant Violations I f t h e plan a d m i n i s t r a t o r ' s procedural violations are flagrant, de n o v o review applies. A b a t i e , 458 F . 3 d at 973. " P r o c e d u r a l violations o f ERISA do not alter thc standard o f review unless those v i o l a t i o n s are s o f l a g r a n t a s t o a l t e r t h e s u b s t a n t i v e r e l a t i o n s h i p b e t w e e n t h e e m p l o y e r a n d e m p l o y e e , t h e r e b y causing the beneficiary substantive harm." G a t t i v. R e l i a n c e S t a n d a r d L i f e Ins. Co., 415 F . 3 d 978, 985 (9th Cir. 2005). " W h e n an administrator engages i n wholesale a n d flagrant violations

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of the procedural requiremcnts o f ERISA, and thus acts in utter disrcgard o f the undcrlying purposcs o f the plan," de novo r e v i e w o f the administrator's decision to deny benefits is appropriate. Abatie, 458 F.3d at 971. E R I S A is designed to promote a good faith bilateral exchange o f information on the mcrits o f claims between the administrator and the claimant. Jebian v. Hewlett-Packard Co. Employee Benefits Org. Income Prot. Plan, 349 F.3d 1098, 1107 (9th Cir. 2003). Therefore, in the context o f an ongoing, good faith exchange o f information, "inconsequential violations o f the deadlines o r other procedural irregularities would not entitle the claimant to de novo review." Gilbertson v. A l l i e d Signal, Inc., 328 F.3d 625, 635 (lOth Cir.2003)(emphasis added). Discussion

A. Grant o f Discretion to the Plan Administrator
P P M d o e s n o t d i s p u t e the a b s e n c e o f the n e c e s s a r y l a n g u a g e c o n f e r r i n g the d i s c r e t i o n a r y authority to the administrator in the Plan itself. Instead, P P M contends that the Plan is an amendment ( P P M ' s Mem. a t 1-2) o r "inextricably tied" ( P P M ' s Sur-Reply Stnd. Rev. ( " P P M ' s SurReply") at 3) to the Existing Plan and that the provisions in the Existing Plan, such as an express grant o f discretionary authority to the administrator, apply to the Plan. (ld.) In support o f this proposition, P P M cites to Conley v. Kemper Ins. Co., 2005 WL 2230153 (N.D. Cal. 2005) and Whi(lield v. Torch Operating Co., 935 F. Supp. 822 (E.D. La. 1996). In Conley, the district court found an employer's letter to certain key employees, offering to modifY an existing benefit plan to provide "enhanced severance" benefits, was a part o f the underlying plan. Conley, 2005 WL 2230153 at * I , *5. The court reasoned that " [ t ] h e letter specifically stated that it was not a new employment agreement, and importantly, expressly incorporated the underlying plan [by stating] 'the terms o f the [underlying p l a n ] s h a l l remain in e f f e c t . ' " lei. at *5 (emphasis in original). The court Page 6 - OPINION AND O R D E R {CK}

further explained that the letter explicitly contemplated situations where the terms o f t h e underlying plan were to apply to determine whether an employee was entitled to the enhanced amount. An Eighth Circuit o p i n i o n cited by Conley, Stearns v. NCR Cmp., 297 F . 3 d 706 (8th Cil'. 2002), also made a s i m i l a r finding. T h e E i g h t h Circuit found that an enhanced benefit program contained in documents advising beneficiaries to " r e f e r to [an existing plan] booklet . . . for the details o f the [program]" merely a m e n d e d the existing plan. ld. at 711. The appellate court also noted that the document by which the employer adopted the enhanced benefit program confirmed that it was an amendment to the e x i s t i n g plan. ld. In addition, the district court in Whitfield found that a later s e v e r a n c e p a c k a g e w h i c h i n c l u d e d l a n g u a g e s t a t i n g t h a t " t h e e m p l o y e e a g r e e s t o r e l e a s e [the employer] from ' a n y and a l l c l a i m s to different or additional severance benefits . . . ' " was an a m e n d m e n t o f the existing plan. Whitfield, 935 F. Supp. at 830 n.19 (emphasis in original). Here, the references to the Existing Plan in the Plan do not have the level o f specificity found i n the foregoing cases. First, unlike the amendments found in Conley and Stearns, the Plan does not specifically state that it is n o t a new agreement o r that it is a n a m e n d m e n t o f the Existing Plan. Instead, the Plan a n d the m e m o r a n d u m accompanying the P l a n include contradicting phrases to distinguish the P l a n from o t h e r plans. The Plan states "[t]hese severance enhancements are in lieu of, not in addition to, any severance benefits for which the Participants may otherwise be eligible for u n d e r a n y o t h e r p o l i c y , p l a n , o r i n d i v i d u a l a r r a n g e m e n t " ( P I s . ' M c m . E x . I a t 3), w h e r e a s t h e memorandum provides that " [ i ] n addition to these enhanced severance benefits and terms, you will also be eligible to receive o t h e r severance benefits which would otherwise be available to you under the regular severance terms . . . . " (ld. at 1.) The court need not delve into the significance o f the contradiction which the phrases present because the court finds that neither phrase clearly identifies

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the P l a n as an amendment t o the Existing Plan. Second, the P l a n docs not expressly incorporate the Existing Plan by making direct reference to the efficacy o f the Existing Plan. For instance, the amendment in Conley made clear that the terms o f the existing plan were to remain in effect. The amendment in Stearns directed beneficiaries to refer to the existing p l a n ' s booklet for the details o f the program. O n the other hand, the Plan indicates that the severance p a y awarded under the Plan m a y o r may not be based o n the calculation using the terms o f t h e E x i s t i n g Plan. ("Severance pay will be based on the greater o f severance pay as calculated u n d e r the terms o f the [Existing Plan], or the P a r t i c i p a n t ' s base pay and target bonus for twelve (12) months." (PIs.' Mem. Ex. I at 5.» Third, unlike the a m e n d m e n t i n Whitfield, the Plan docs not include a release through which an employee affirmatively releases any and all claims under different o r additional severance benefits. Again, the references to other severance benefits or plans in the P l a n arc contradictory and arc ambiguous as to whether the Plan entitles PlaintilIs to other severance benefits or not. Also, as Plaintiffs correctly point out, the instant case is distinguishable from Whitfield, where the issue was not whether a later severance package was a separate plan, but instead whether the plaintiffs were entitled to benefits u n d e r a p r i o r plan that had been expressly superseded. (PIs.' Reply App!. Stnd. Rev. at 8.) P P M argues that because the P l a n docs not include any claims and appeal procedure in its three-page document, it is reasonable to assume that the intent was for the claims procedures and the grant o f discretion under the Existing P l a n to apply to claims u n d e r the Plan. ( P P M ' s Sur-Reply at 3.) B u t this argument is not supported by the contemporaneous record. Ms. W a h ' s statement in her email dated December 7, 2007, that she "[does not] know the process but will keep [Plaintiffs]

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apprised i f there is any clarity o v e r the next week" demonstrates that P P M ' s own vice president o f h u m a n resources did not k n o w h o w claims, such as Plaintiffs', were to be processed under the Plan. This level o f uncertainty by the P P M employee who, logically, should k n o w w i t h certainty how. Plaintiffs' claims should be processed conclusively rebuts P P M ' s argument that the claims procedure and the grant o f discretion under the Existing P l a n were intended to apply to claims under the Plan. The Existing P l a n ' s language reinforces this conclusion: the vice president o f human resources is identified as the administrator who has the exclusive authority to interpret provisions as well as to make determinations about the facts and other information related to claim and appeals. (Pis.' Mem. Ex. 4 at 16, 17.) Thus, P P M ' s argument o n this point is without merit. Lastly, P P M focuses o n the use o f the word "enhancement" in the title o f the Plan, and contends that such use confirms that the Plan is an amendment. ( P P M ' s Mem. at 4.) The court dismisses this argument without further analysis for none o f the cases cited by P P M indicates the use o f word "enhancement" is dispositive i n concluding thc plan in qucstion to be an amendment o f an existing plan. Furthermore, in the context o f thc other ambiguities alrcady discusscd, the term is simply inadequate to link the Plan with the Existing Plan and its procedures. B. Flagrant Violations Even i f the court were to find that the P l a n was an amendment to the Existing Plan and that the express grant o f discretion to the fiduciary also applies to the Plan, the court finds that de novo review o f Defendants' decision to deny benefits to Plaintiffs is nevertheless appropriate. " W h e n a decision by an administrator utterly fails to follow applicable procedures, the administrator is not, in fact, exercising discretionary powers under the plan, and its decision should be subject to de novo r e v i e w . " Aba/ie, 458 F . 3 d at 959. " W h e n a n administrator engages in wholesale and flagrant

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violations o f the procedural requirements o f ERISA, and thus acts in utter disregard o f the underlying purpose o f the plan as well, we review de 1101'0 the administrator's decision to deny benefits." ld. at 971. The court finds that P P M failed to follow the applicable procedures and that such failures were wholesale and flagrant violations o f ERISA, subjecting P P M ' s decision to de 1101'0 review. 1. P P M Failed to F o l l o w Applicable Procedures. The Code o f Federal Regulations requires the notification o f benefit determination set forth, in a manner calculated to b e understood by the claimant, certain information including: (iii) A description o f any additional material or information necessary for the claimant to perfect the claim and an explanation o f why such material o r information I S necessary; (iv) A description o f the p l a n ' s review procedures and the time limits applicable to such procedures, including a statement o f t h e c l a i m a n t ' s right to bring a civil action under section 502(a) o f the Act following an adverse benefit determination o n reVIew. 29 C.F.R. § 2560.503-1 (g)(I). Furthermore, 29 C.F.R. § 2560.503-1 (h) sets forth the requirements f o r t h e a p p e a l o f a d v e r s e b e n e f i t d e t e r m i n a t i o n s a n d p r o v i d e s , i n p e r t i n e n t part:
( I ) I n g e n e r a l . E v e r y e m p l o y e e b e n e f i t p l a n shall e s t a b l i s h a n d m a i n t a i n a p r o c e d u r e by which a claimant shall have a reasonable opportunity to appeal an adverse benefit determination . . . .

(2) Full and fair review. E x c e p t as provided in paragraphs (h)(3) and (h)(4) o f this section, the claims procedures o f a plan will not be deemed to provide a claimant with a reasonable opportunity for a full and fair review o f a claim and adverse benefit determination unless the claims procedures -(i) Provide claimants at least 60 days following receipt o f a notification o f an adverse benefit determination within which to appeal the determination[.] 29 C.F.R. § 2560.503-1 (h). Except for a b r i e f description o f the applicable notice period, the P l a n is silent o n claims and

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appeal procedures. O n the other hand, the Existing Plan outlines claims and appeal procedures consistent with the applicable code. E v e n assuming that the P l a n was an a m c n d m e n t to thc Existing Plan and that the P l a n maintained the necessary claims and appeal procedures, the court finds that P P M failed to follow such procedures w h e n denying Plaintiffs' benefits. First, Ms. W a h ' s Decem ber 5, 2007 letter does n o t include any description o f the P l a n ' s review procedures, the time limits applicable to such procedures, o r a statement o f Plaintiffs' right to bring a civil action under ERISA foHowing an adverse benefit determination o n review. N o w h e r e in the letter does Ms. W a h make reference to a review procedure. Rather, Ms. W a h ' s remarks limit future discussions to Plaintiffs' continued employment. ("This company is open to discussing your concerns a s t h e y relate to y o u r c o n t i n u e d employment and would like to schedule a mceting with you in the near future to begin those discussions." (PIs.' Mem. Ex. 7 at 3 (emphasis added).)) Furthermore, the description o f additional material o r information requested by Ms. W a h from Plaintiffs is n o t required to perfect P l a i n t i f f s ' claims but, rather, was the information necessary for P P M to cure their claims. ( " I f t h e r e are specific actions you believe the company should take that would cure your claim u n d e r the Program, please provide us with t h o s e in writing by n e x t week." (lei. (emphasis added).)) S e c o n d , M s . W a h ' s D e c e m b e r 7 , 2 0 0 7 , e m a i l p r o p o s i n g a m e e t i n g w i t h Mr. D e l g a d o d o e s n o t m e n t i o n a n y r e f e r e n c e s t o c l a i m s o r a p p e a l p r o c e d u r e . I n s t e a d , M s . W a h s t a t e s in h e r e m a i l t h a t she " [ d o e s not] k n o w the process b u t will keep [Plaintiffs] apprised i f there is any clarity o v e r the n e x t week." N o t only is this statement inconsistent with the contention that the Plan was an

amendment to the Existing Plan, as explained earlier, it also is detrimental to Plaintiffs. The Existing P l a n requires a n applicant who has received an initial denial o f his claim for bencfits to request an appeal o f his denied claim w i t h i n 60 days after he receives the written notice o f the denial. (PIs.'

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Mem. Ex. 4 a t 14.) T h e applicant may call thc p l a n administrator to resolve the m a t t e r without filing a formal appeal. (ld.) H o w e v e r , " t h e deadline for [the applicant] to s u b m i t a formal appcal o f [his] claim will not b c e x t e n d e d because o f these informal discussions." (Id.) Thcrcfore, thc time for Plaintiffs to appeal the denial o f benefits is not tolled whilc thc v i c e president o f h u m a n resources attempts to clarify the claims p r o c e s s afforded under the Plan. Third, the only w r i t t e n c o m m u n i c a t i o n that alludes to any type o f r e v i e w o f Plaintiffs , claims is Ms. W a h ' s email d a t c d D e c e m b e r 1 7 , 2 0 0 7 . Yet, this email is also deficient in advising Plaintiffs o f the P l a n ' s r e v i e w p r o c e d u r e s , the t i m e l i m i t s a p p l i c a b l e t o s u c h p r o c e d u r e s , a n d P l a i n t i f f s ' right to bring a civil action u n d e r E R I S A following an adverse benefit d e t e r m i n a t i o n o n review. While M s . W a h p o i n t s o u t t h a t " [ P P M has] n o t h e a r d a n y c o m p e l l i n g r e a s o n s w h y [ P P M ] s h o u l d n e g o t i a t e d i f f e r e n t t e r m s " a n d a s k s P l a i n t i f f s for p r o p o s a l s f o r r e a c h i n g m u t u a l l y a g r e e a b l e t e r m s , M s . W a h d o e s not d i s c u s s w h e t h e r P l a i n t i f f s m a y f o r m a l l y a p p e a l t h e d e n i a l o f t h e i r c l a i m , h o w m u c h t i m e they have to file such a n appeal, o r what Plaintiffs could d o i f t h e appeal were to be denied. Instead, Ms. Wah suggests that Plaintiffs provide diffcrent scenarios u n d e r w h i c h Plaintiffs would be willing to continue their e m p l o y m e n t w i t h P P M or simply resign. F u r t h e r m o r e , the email seems to be focused o n e x p l o r i n g p o s s i b i l i t i e s o f retaining P l a i n t i f f s ' c m p l o y m e n t , n o t r e v i e w i n g Plaintiffs' claims u n d e r the Plan. F o r example, in outlining what Plaintiffs s h o u l d p r e p a r e to discuss during the f o l l o w i n g d a y ' s m e e t i n g w i t h M r . D e l g a d o , M s . W a h l i s t s , a m o n g o t h e r t h i n g s : - w h e t h e r you are c o m m i t t e d to/intercsted i n continuing yoUI' e m p l o y m e n t w i t h [PPM;] - what you would like the c o m p a n y to change in o r d e r for you [sic] want to continue your e m p l o y m e n t w i t h [PPM;] - what caused you to s u b m i t notice o f your resignation, ( P P M ' s M c m . Ex. 3 a t 1.) Finally, Ms. Wah finishcs thc D e c e m b e r 1 7 , 2 0 0 7 , email w i t h " [ y ] o u

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should spend this m e e t i n g getting [PPM] to understand w h y you believe you need to leave the company o r w h a t it would take to motivate you to stay." Hence, although she makes some indirect references to discussing denial o f Plaintiffs' claims, Ms. W a h fails to set forth in her email descriptions o f review procedures as required under ERISA. P P M m a y a r g u e P l a i n t i f f s s h o u l d h a v e r e q u e s t e d s u c h i n f o r m a t i o n . T h e E x i s t i n g P l a n states: " [ i ] f y o u do n o t receive this information i n the notice o f the claims denial, please contact the plan administrator and request this information." Such argument is unavailing because P P M has never asserted that the P l a n was an a m e n d m e n t to the Existing Plan until filing its memorandum regarding the standard o f review. A s mentioned in the earlier section, no documents exist identifying the Plan as an amendment to the E x i s t i n g Plan or directing beneficiaries to refer to the Existing Plan for claims under the Plan. Further, it strains credulity to expect Plaintiffs to have referred to the appeals procedure section in the E x i s t i n g P l a n w h e n P P M ' s o w n vice president o f h u m a n resources did not k n o w w h a t procedures applied to the claims under the Plan. 2. P P M ' s Procedural Violations Were Flagrant. The court finds that P P M ' s procedural violations were so flagrant as to alter the substantive relationship between Defendants a n d Plaintiffs, thereby depriving Plaintiffs o f the opportunity to exercise their right to a n appeal as mandated under E R I S A and causing substantive harm. P P M contends that P P M engaged in a n "ongoing, good faith exchange ofinfot'1nation" with Plaintiffs and that the alleged procedural violations were not "wholesale and flagrant," but mere procedural irregularities. ( P P M ' s M e m . a t 7, 11.) " W h e n an administrator can s h o w that it has engaged i n an ongoing, good faith exchange o f information between the administrator and the claimant, the court s h o u l d g i v e t h e a d m i n i s t r a t o r ' s d e c i s i o n broad d e f e r e n c e n o t w i t h s t a n d i n g a m i n o r i r r e g u l a r i t y . "

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Abatie, 458 F.3d at 972. I n Abatie, the Ninth Circuit found that a plan administrator committed procedural irregularities when tacking o n a n e w reason for denying benefits o n review. Abatie cites Blau v. D e l M.onte Cal]}., 748 F.2d 1348 (9th Cir. 1984), abrogation on o t h e r grounds' recognized by Dytrt v. Mountain State Tel. & Tel. Co., 921 F.2d 889, 894 n. 4 (9th Cir. 1990), as an example o f procedural noncompliance that allows for more stringent judicial review. Abatie, 458 F.3d at 971. In Blew, the administrator kept the policy details secret from the employees, offered them no claims procedure, and did not provide them in writing the relevant plan information. Blel1l748 F.2d at 1353. The court acknowledges that P P M engaged in continuous communication with Plaintiffs. H o w e v e r , t h e c o u r t finds t h a t t h e s e c o m m u n i c a t i o n s w e r e n o t a g o o d f a i t h b i l a t e r a l e x c h a n g e o f information o n the merits o f t h e claim, as ERISA and the case l a w contemplate should be had. The main, i f n o t sole, purpose o f P P M ' s ongoing communication was to explore possibilities for retaining Plaintiffs' employment. T h e reoccurring theme o f the communications was whether, and under what terms, Plaintiffs were willing to continue their employment with PPM; these communications effectively precluded Plaintiffs from exercising their right to a n appeal and eliminated the appeal process for Plaintiffs. T h i s is distinguishable from Abatie where the beneficiary was afforded an additional review in light o f additional evidence and is similar to Blau. Here, P P M kept the details regarding the appeal p r o c e d u r e from Plaintiffs and failed to afford Plaintiffs the requisite appeal procedure or provide them the relevant information in writing. The court finds that the significant procedural irregularities in the review process altered the substantive relationship between Defendants and Plaintiffs, thereby depriving Plaintiffs the right to appeal and causing substantive harm. Such significant procedural irregularities amount to acts in utter disregard o f t h e underlying purposes o f ERISA. Accordingly, the applicable standard o f review

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in the instant case is de 110vo.

Conclusion
F o r t h e r e a s o n s s t a t e d a b o v e , the c o u r t finds t h a t a p p l i c a b l e s t a n d a r d f o r r e v i e w i n g P P M ' s denial o f benefits to Plaintiffs is de 110vo. D A T E D this /

y.;;c

d a y o f A u g u s t , 2009.

(flO
I

J O H N V. A C O S T A t e d States M a g i s t r a t e Judge

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