Lyday v. Conoco Phillips et al

Filing 27

MEMORANDUM DECISION AND ORDER denying 14 Motion for Judgment on the ERISA Administrative Record: complaint is dismissed with prejudice. Signed by Judge David Nuffer on 3/26/13 (alt)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, CENTRAL DIVISION

JIM LYDAY,
Plaintiff;
vs.

CONOCOPHILLIPS, CONOCO
PHILLIPS LONG TERM DISABILITY
PLAN, METROPOLITAN LIFE
INSURANCE COMPANY;

MEMORANDUM DECISION AND
ORDER DENYING PLAINTIFF'S
MOTION FOR JUDGMENT ON THE
ERISA ADMINISTRATIVE RECORD
Case No. 1:08CV144DN
District Judge David Nuffer

Defendants.

Plaintiff Jim Lyday has moved for recovery of employee benefits allegedly owed to him
under the ConocoPhillips Long Term Disability Plan (the “ConocoPhillips Plan”), and “benefits
attendant to long-term disability coverage,” including the medical insurance, dental insurance, and
life insurance offered to ConocoPhillips' employees. 1 The plaintiff's claims are brought pursuant
to the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001 &
1132(a)(1)(B). 2
Lyday moved for summary judgment on the administrative record. 3 In support of the
motion, Lyday filed portions of the administrative record reviewed by defendant ConocoPhillips
and by the ConocoPhillips Plan administrator, defendant Metropolitan Life Insurance Company
(“MetLife”).
1

Doc. No. 2 at ¶ 47. The plaintiff’s complaint also lists “pension credit” as a benefit associated with receiving
long-term disability benefits under the ConocoPhillips Plan. But based on the evidence of record, the plaintiff never
requested “pension credit” as part of his underlying ERISA claim, and his briefs do not mention a “pension credit”
claim for recovery. Therefore, the “collateral benefits,” (using plaintiff’s terminology, see, e.g., Doc. No. 15 at 28 of
37), at issue in this case include medical, dental, and life insurance, but not “pension credit.”
2

Doc. No. 15 at 2 of 37.

3

Doc. No. 14.

As noted in plaintiff's brief,
By administrative record, Mr. Lyday refers primarily to his applications for
short-term disability and long-term disability benefits and the correspondence
between himself and his employers, Conoco Phillips and Holly Corporation, and
the correspondence between himself and the long-term disability
carrier/administrator, MetLife, relating to his applications for benefits. 4
Explaining that the full administrative record is voluminous, the defendants have likewise
submitted only excerpts from the administrative record. 5
The administrative record filed does not include any plan documents describing: 1) how
and when an employee receiving long-term disability (“LTD”) is entitled to medical, dental, and
life insurance at employee rates;

2) the benefits afforded ConocoPhillips' retirees; 3) the

definition of “retiree” for the purpose of access to ConocoPhillips' employee or retiree benefits; 4)
who makes the decisions regarding LTD coverage under the ConocoPhillips Plan or receipt of
medical, dental, and life insurance benefits; and 5) the level of authority and discretion afforded
these decision-makers under the terms of ConocoPhillips' employee and/or retiree benefit plans. 6
Nonetheless, the parties agree the relevant portions of the administrative record have been filed,
and this case can and should be adjudicated on that record. 7
The court has therefore reviewed the parties' briefs and, as to the standard of review, has
accepted their mutual statement that an abuse of discretion standard applies. The court has also
reviewed the record available, and as to the relevant facts, will resolve this case based on the
information in the record and reasonable inferences to be drawn from that record.

4

Doc. No. 15 at 2 of 37, n. 1.

5

Doc. No. 21 at 6-7 of 19.

6

See Doc. Nos. 15 & 21.

7

Doc. No. 21 at 6-7 of 19.
2

FACTUAL BACKGROUND
Lyday became disabled while employed by defendant ConocoPhillips at its Woods Cross
Refinery. He received short-term disability benefits from ConocoPhillips until February 7, 2003,
and received LTD benefits under the ConocoPhillips Plan. Lyday attempted to return to work in
March of 2003, but relapsed within ninety days and was deemed disabled. He began receiving
ConocoPhillips short-term disability benefits again on May 12, 2003. 8
In 2003, ConocoPhillips sold the Woods Cross Refinery to Holly Corporation. As part of
the sale, Holly Corporation agreed to offer employment to ConocoPhillips’ employees, including
short-term inactive employees. 9 Lyday accepted this employment offer. His employment with
ConocoPhillips ended on May 31, 2003, 10 and he became an employee of Holly Corporation on
June 1, 2003. 11
On May 28, 2003, Lyday completed an application requesting commencement of his
ConocoPhillips retirement benefits effective June 2003, 12 and he elected to receive a lump sum
rollover distribution of all of his ConocoPhillips retirement assets. 13 He submitted these forms to
ConocoPhillips Central Administration – Retirement Services on May 28, 2003. As of that date,
the straight line annuity owed under his ConocoPhillips retirement plan was $1685.22 per
month. 14

8

Doc. No. 2 at ¶¶ 2, 17 & 21; Doc. No. 8 at ¶¶ 17 & 21; Doc. No. 15-8 at 2 of 11.

9

Doc. No. 15-1 at 5 of 21.

10

Doc. No. 15-2.

11

Doc. No. 2 at ¶¶ 7, 13.

12

Doc. No. 21-1 at 1 of 22.

13

Doc. No. 21-1 at 3 of 22.

14

Doc. No. 21-1 at 2 of 22.
3

On June 12, 2003, Lyday filed a charge of discrimination against ConocoPhillips, alleging
he was subjected to disparate treatment, age-based and disability-based harassment, and a hostile,
intimidating and offensive work environment while employed at ConocoPhillips. 15
Lyday’s financial planner contacted ConocoPhillips on July 2, 2003, and requested
information about medical and life insurance options available to Lyday through ConocoPhillips.
Representatives at ConocoPhillips advised the financial planner, and ultimately Lyday himself,
that based on the paperwork Lyday submitted before leaving, Lyday retired from ConocoPhillips
as of June 1, 2003. Lyday claimed he did not intend to retire, but after further discussion with
ConocoPhillips' representatives, appeared to understand that he had, in fact, retired from
ConocoPhillips when he submitted his retirement papers for a June 1, 2003 retirement date. 16
On July 15, 2003, Holly Corporation advised Lyday that he was eligible to receive Holly
Corporation’s short-term disability benefits. Holly Corporation’s letter stated:
Holly Refining and Marketing Company will allow you to begin STD benefit
payments effective June 1, 2003. The full benefits available under Holly Refining
and Marketing Company's plan will be available for 26 weeks beginning on May 18,
2003 and will end on or before November 14, 2003. Since you have been
employed for more than 10 years, Holly Refining and Marketing Company’s STD
plan will pay full pay for the periods necessary or until November 14, 2003,
whichever comes first. If you cannot return to work by November 14, 2003, your
employment will be terminated.
Since your STD (UAB) benefits started while employed by ConocoPhillips, any
claim for Long Term Disability will need to be filed with the carrier and plan in
place for ConocoPhillips. 17

15

Doc. No. 15-8 at 4 of 11.

16

Doc. No. 21-1 at 10 of 22.

17

Doc. No. 2 at ¶¶ 7, 13; Doc. No. 15-2 at 7 of 15.
4

Lyday received STD benefits from Holly Corporation dating back to the first day of his
employment at that company. By July 24, 2003, he had also elected to receive medical, dental,
LTD, and AD & D coverage through Holly Corporation. 18
In November of 2003, Lyday submitted claims for LTD coverage under both the
ConocoPhillips Plan and the Holly Corporation Plan. MetLife is the claim administrator for both
plans. 19 After reviewing Lyday’s disability onset date, the date he returned to work, and the date
he again went on disability, MetLife approved Lyday’s claim for LTD benefits under the
ConocoPhillips Plan.20 Lyday’s claim for LTD coverage under the Holly Corporation Plan was
denied. 21
Lyday contacted ConocoPhillips and Holly Corporation on November 10, 2003, to ask how
his medical, dental, and life insurance benefits would be provided after he started receiving LTD
benefits. 22 Lyday explained his interpretation of available benefits as follows:
Under ConocoPhillips or Holly Corp. LTD plans, medical insurance benefits and
life insurance benefits premiums would be paid out as follows: 23
• Medical
• Dental
• Life Insurance

$ 109.00 I pay for first 24 months
Carried same as paying now
Same as I am paying now

Holly Corporation responded by confirming that Lyday’s employment with Holly
Corporation was officially terminated as of the close of business on November 14, 2003, and
Lyday was thereafter entitled to COBRA benefits for medical and dental insurance. 24

18

Doc. No. 15-2 at 14 of 15.

19

Doc. No. 2 at ¶ 18.

20

Doc. No. 2 at ¶ 27; Doc. No. 15-3 at 1of 15..

21

Doc. No. 2, ¶ 19; Doc. No. 15-3 at 13 of 15.

22

Doc. No. 15-3 at 4 of 15; Doc. No. 21-1 at 17 of 22.

23

Doc. No. 21-1 at 17 of 22.

24

Doc. No. 15-3 at 5, 11 of 15.
5

MetLife advised Lyday that he was eligible for LTD benefits under the ConocoPhillips
Plan, but the monthly benefit payment would be zero dollars. MetLife explained that under the
terms of the ConocoPhillips Plan, the LTD payment owed is calculated by subtracting certain
listed sources of income received by the LTD recipient from his or her monthly benefit available
under the plan. If a LTD beneficiary received a lump sum settlement from the Phillips Retirement
Income Plan, the monthly LTD benefit owed “will be reduced by the amount of the straight-life
annuity used to compute the lump sum,” 25 “whether you are actually receiving [retirement
benefits] or not).” 26 Moreover, the monthly LTD payment was further reduced by the amount the
LTD recipient was estimated to receive under Social Security. 27 As applied to Lyday, MetLife
explained:
Your monthly benefit [under the ConocoPhillips Plan] will be $2,122.47, gross,
from that we will reduce your benefit by your other current income benefit
adjustments. These adjustments include Social Security Disability Income in the
amount of $1,650.00 per month and Pension/Retirement benefits from
ConocoPhillips in the amount of$ 1,685.22 per month. According to your plan once
your LTD benefit is reduced for retirement benefits (whether you are actually
receiving them or not), the minimum monthly benefit no longer applies.
Therefore, your LTD benefit will be $0.00 beginning 12/1/03. 28
Regarding Lyday’s claim for medical, dental and life insurance as benefits attendant to
receipt of LTD, ConocoPhillips explained Lyday was not a company employee receiving LTD
benefits, but rather a retired employee. As such, Lyday was entitled to receive insurance benefits
at retiree rates provided he timely requested those benefits. Since Lyday had cancelled his
personal accident insurance, and did not timely elect to receive Group Term Life Insurance or
medical, dental and Flexible Spending Account benefits under COBRA, Lyday was not entitled to

25

Doc. No. 21-1 at 13 of 22.

26

Doc. No. 21-1 at 12 of 22..

27

Doc. No. 21-1 at 13 of 22.

28

Doc. No. 2 at ¶ 30; Doc. No. 15-5 at 2 of 7.
6

receive life insurance or COBRA benefits through ConocoPhillips.29 However, as to his request
for medical insurance, ConocoPhillips acknowledged receipt of that request on November 26,
2003, and implemented the benefits to begin on December 1, 2003. However, since the medical
insurance benefits were available to Lyday “as a retiree of the Company,” and not as
ConocoPhillips employee receiving LTD while employed but on a leave of absence from the
company, Lyday was required to pay retiree rates, not the lower employee rates, for the
insurance. 30
On April 29, 2004, while Lyday’s discrimination claim against ConocoPhillips was still
pending before the EEOC, Lyday filed a civil ERISA action against ConocoPhillips, the
ConocoPhillips Plan, Holly Corporation, the Holly Corporation Long Term Disability Plan, and
the MetLife Long Term Disability Plan. 31 At a mediation held on November 18, 2004, Mr. Lyday
settled his claims against Holly Corporation. He dismissed the remainder of his lawsuit without
prejudice. 32
On May 9, 2005, Lyday asked the EEOC to issue a Notice of Right to Sue letter so he could
pursue his discrimination action against ConocoPhillips. Lyday received the letter on June 25,
2005, 33 and on September 27, 2005, he filed a lawsuit against ConocoPhillips, the ConocoPhillips
Plan, the Holly Corporation Long Term Disability Plan, and Metropolitan Life Insurance
Company. 34 Upon review of the defendants’ motions to dismiss and for summary judgment, all
of Lyday’s claims were dismissed with prejudice save one: Lyday's Third Cause of Action

29

Doc. No. 21-1 at 19-20 of 22.

30

Doc. No. 15-6 at 3 of 9.

31

Lyday v. ConocoPhillips, et. al,, 1:04CV00061-PCG (D. Utah 2004).

32

Doc. No. 15-8 at 5-6 of 11.

33

Doc. No. 15-8 at 4.of 11.

34

Lyday v. ConocoPhillips, et. al,, 1:05CV116-PGC (D. Utah 2005).
7

against the ConocoPhillips Plan, and MetLife Insurance as the claim administrator/insurer of the
ConocoPhillips Plan, was dismissed without prejudice to re-filing after Lyday exhausted the
administrative procedures required under ERISA. 35
Lyday filed the above-captioned lawsuit on December 1, 2008. The complaint alleges the
ConocoPhillips Plan and MetLife violated ERISA by depriving him of LTD coverage and
insurance benefits attendant to LTD coverage, including medical insurance, dental insurance, life
insurance, and pension credit afforded under the ConocoPhillips Plan. 36
ISSUES PRESENTED
Lyday’s motion for judgment on the administrative record alleges the defendants erred in
concluding: 1) Lyday retired from his employment at ConocoPhillips; 2) Lyday’s monthly LTD
payment is subject to an offset for retirement monies Lyday rolled over, but is not actually
receiving, from his ConocoPhillips Retirement Plans; and 3) Lyday is not entitled to group health,
dental, and life insurance as a LTD recipient because he retired from ConocoPhillips. Lyday’s
motion and initial brief claimed the foregoing decisions were arbitrary and capricious, and the
defendants abused their discretion when they made these decisions. 37
After further consideration, however, Lyday has abandoned his claim that the LTD monthly
benefit owed was improperly calculated. Lyday’s reply brief states:
Having carefully considered this particular issue, Mr. Lyday is no longer
challenging the impact of rolling over the funds in his retirement accounts on his
receipt of long-term disability benefits (or non-receipt of such benefits) from
MetLife.
Such [a] reduction of benefits (when Mr. Lyday was not actually receiving any
retirement benefits on a monthly basis) is certainly unfair and nobody told him that
this would happen to him. But the plan documents do provide that MetLife can
35

Doc. No. 15-8 at 4, 8 of 11.

36

Doc. No. 2 at ¶¶ 47-48.

37

Doc. No. 14.
8

reduce the long-term disability benefits which Mr. Lyday was entitled to receive by
payments from the Phillips Retirement Income Plan, even if he was “receiving”
such payments in the form of a lump sum settlement.
. . . [T]he plan documents seem to control the outcome here. Unfortunately, they
dictate a very harsh result for Jim Lyday. 38
Based on the concessions in Lyday's reply brief, the court's inquiry is limited to deciding
whether Lyday is entitled to receive medical, dental, and life insurance at rates offered to LTD
employees employed by the company, or whether Lyday is a “retiree” and must pay retiree rates
for the requested insurance benefits.
STANDARD OF REVIEW
A denial of benefits challenged under 29 U.S.C. 1132(a)(1)(B) must be reviewed under a
de novo standard “unless the benefit plan grants the administrator or fiduciary discretionary
authority to determine eligibility for benefits or to construe the terms of the plan.” 39 Although the
parties have not filed the ConocoPhillips Plan language discussing the administrator’s duties and
authority, based on their briefs, the parties agree that the court must determine whether the denial
of Lyday’s claims was arbitrary and capricious and an abuse of discretion. 40 The court is not
determining whether Lyday was, in the district court’s view, entitled to LTD and associated
insurance benefits. 41
An employer who not only determines benefit eligibility under ERISA, but also pays any
approved claims has a conflict of interest. Similarly, an insurance company plan administrator
who serves the dual role of both evaluating and paying ERISA claims has a conflict of interest.42
38

Doc. No. 25 at. 8-9 of 13.

39

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989).

40

Doc. No. 15 at 23-25 of 37.

41

Sandoval v. Aetna Life & Cas. Ins. Co., 967 F.2d 377, 381 (10th Cir. 1992).

42

Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105, 112 (2008); Foster v. PPG Industries, Inc., 693 F.3d 1226, 1232
(10th Cir. 2012).
9

Any conflict of interest by those evaluating a claim must be weighed as a factor, but it is only one
factor a reviewing judge takes into account when determining if the administrator’s decision was
arbitrary and capricious. 43 The court uses a “combination-of-factors method of review that
allows judges to take account of several different, often case-specific, factors, reaching a result by
weighing all together.” 44 Id. When a conflict of interest exists, the court uses “a sliding scale
approach where the reviewing court will always apply an arbitrary and capricious standard, but
will decrease the level of deference given in proportion to the seriousness of the conflict.”. 45
ANALYSIS
The plaintiff states the “key to unraveling [this] case is deciding . . .whether Mr. Lyday
retired or did not retire from ConocoPhillips.” 46 The precise issue before this court is actually
narrower than plaintiff’s description. That is, this court need not decide whether Lyday retired,
but rather whether the defendants abused their discretion when they decided Lyday retired from
ConocoPhillips in May of 2003. 47
While employed for ConocoPhillips, Lyday’s employee benefits included medical, dental,
life insurance, and personal accident insurance at reduced rates, and LTD coverage through the
ConocoPhillips Plan. If Lyday received LTD benefits while actively employed but on a leave of
absence from the company, he was entitled to continue receiving medical insurance at the cost of
$109.00 per month for the first 24 months, and life and dental insurance at the employee rate.48

43

Glenn, 554 U.S. at 116.

44

Foster, 693 F.3d at 1232.

45

Scruggs v. ExxonMobil Pension Plan, 585 F.3d 1356, 1361 (10th Cir. 2009).

46

Doc. No. 25 at 12 of 13.

47

Scruggs v. ExxonMobil Pension Plan, 585 F.3d 1356, 1363 (10th Cir. 2009) (holding the plan administrator did not
abuse its discretion by finding a claimant was not an “employee,” but rather a “contractor,” and was therefore not a
plan participant entitled to ERISA benefits).
48
Doc. No. 21-1 at 17 of 22.
10

However, if he received LTD benefits while retired and not actively employed by ConocoPhillips,
any medical and life insurance was available at retiree rates. 49
Lyday’s employment with ConocoPhillips was scheduled to end on May 31, 2003, when
ownership of the Woods Cross Refinery was transferred to Holly Corporation. Although Lyday
states he did not retire from ConocoPhillips, and was therefore entitled to insurance rates afforded
to ConocoPhillips employees even after June 1, 2003, the evidence of record overwhelmingly
supports the opposite conclusion. Whether by virtue of his retirement or a sale of corporate
assets, as of June 1, 2003, Lyday was no longer employed by ConocoPhillips. And on June 12,
2003, he was reminded of this fact when he received his notice from ConocoPhillips for selection
of medical or dental insurance benefits under COBRA (Consolidated Omnibus Budget
Reconciliation Act). Therefore, irrespective of the whether Lyday intended to “retire” from
ConocoPhillips as of May 31, 2003, he was not entitled to insurance benefits afforded to
ConocoPhillips' employees after that date.
Assuming it makes a difference whether Lyday’s employment status ended by retirement
or by job elimination, the ConocoPhillips representatives who investigated and evaluated the
retirement issue considered the following information: 1) On May 28, 2012, Lyday completed
forms requesting commencement of retirement benefits on June 1, 2003, 50 selected between
receiving retirement income as a straight life or as a 50% joint and survivor annuity, completed
forms to roll his ConocoPhillips retirement account assets to another fund, 51 and submitted these
documents to ConocoPhillips Central Administration – Retirement Services; 52 and 2) upon
leaving ConocoPhillips’ employment, Lyday received the Retiree Life Insurance Plan Summary
49

Doc. No. 21-1 at 19 of 22.

50

Doc. No. 21-1 at 1 of 22.

51

Doc. No. 21-1 at 3-4 of 22.

52

Doc. No. 21-1 at 2 of 22.
11

Plan, and using one of the forms included in the packet, cancelled his Personal Accident Insurance
and did not elect to continue receiving group life insurance. 53 On July 1, 2003, Lyday was
advised, both directly and through his financial planner, that ConocoPhillips considered him
retired and entitled to insurance benefits at retiree rates. When Lyday contacted ConocoPhillips
to challenge this statement, the basis for his retiree status was explained and he understood and
accepted the decision. 54.
ConocoPhillips never denied Lyday’s request for medical, dental and life insurance
benefits; rather, ConocoPhillips offered the benefits at retiree rates. Lyday failed to timely
request life insurance, but was provided medical coverage at retiree rates, along with a copy of the
Retiree Medical Benefits Summary Plan Description, within five days after ConocoPhillips
received Lyday’s written request for such benefits. 55
ConocoPhillips’ conflict of interest played no role in deciding Lyday was not entitled to
insurance benefits as an active employee receiving LTD. The evidence of record strongly
supports ConocoPhillips’ conclusion that Lyday asked to be, was, and is a ConocoPhillips retiree.
To the extent he timely and appropriately requested medical, dental, and life insurance benefits
through ConocoPhillips, he must pay for those benefits at retiree rates, and not at the rates offered
to LTD recipients who are actively employed by ConocoPhillips but on a leave of absence. 56

53

Doc. No. 21-1 at 19 of 22.

54

Doc. No. 21-1 at 10 of 22.

55

Doc. No. 21-1 at 19 of 22.

56

See, e.g., McKay v. Reliance Standard Life Ins. Co., 2009 WL 5205375 (E.D.Tenn. 2009)(holding an ERISA
insurer’s denial of coverage was not arbitrary and capricious where the claimant had the flu and was working from
home when a long-term disability policy was implemented, and policy coverage was not available unless the claimant
was active at work when the policy went into effect).
12

CONCLUSION AND ORDER
Plaintiff's motion for summary judgment is DENIED, and his complaint is dismissed with
prejudice. A separate JUDGMENT in favor of the defendants will be entered in accordance with
this order. The clerk is directed to close the case.
DATED this 26th day of March, 2013.

DAVID NUFFER
United States District Judge

13