Jenkins v. International Association of Bridge, Structural, Ornamental and Reinforcing Ironworkers Local No. 79 Pension Fund et al
Filing
37
OPINION & ORDER : Withholding 24 Motion ; Denying 27 Motion for Protective Order; Granting in Part and Denying in Part 16 Motion to Dismiss for Failure to State a Claim. The parties were ORDERED to submit briefs on the issue of the appli cable standard of review. Defendants were provided fifteen (15) days from the date of the hearing to file their initial brief. Plaintiff was provided eleven (11) days to file a response, and Defendants were provided three (3) days thereafter to fi le a rebuttal. In considering Plaintiffs arguments, as well as the applicable legal standards, the Court ruled that DISCOVERY IS APPROPRIATE under either standard of review as to those areas argued for by Plaintiff. The Court, therefore, DENIED Def endants' Motion for Protective Order and declines to enter such at this time. The Court PERMITTED discovery in the areas outlined by Plaintiffs counsel at the March 19, 2015 hearing, and the permitted discovery SHALL run concurrently with the parties briefing deadlines regarding the applicable standard of review. It is so ORDERED. Signed by District Judge Henry C. Morgan, Jr and filed on 3/20/15. Copies distributed to all parties 3/20/15. (ldab, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Norfolk Division
ALLAN JENKINS,
Plaintiff,
Civil Action No. 2:14cv526
INT'L ASS'N OF BRIDGE, STRUCTURAL,
ORNAMENTAL & REINFORCING
IRONWORKERS LOCAL NO. 79
PENSION FUND et al.,
Defendants.
OPINION & ORDER
This matter is before the Court upon Defendants' Partial Motion to Dismiss Amended
Complaint ("Motion to Dismiss"), Doc. 16, Defendants' Motion to Modify Rule 26(0 Pretrial
Order ("Rule 26(f) Motion"), Doc. 24, and Defendants' Motion for Protective Order, Doc. 27.
This is Defendants' second Motion to Dismiss pursuant to Federal Rules of Civil Procedure
12(b)(6) and 12(b)(5) respectively. See Doc. 7. Defendants' first Motion to Dismiss was never
addressed by this Court as Plaintiff instead opted to file the Amended Complaint. Doc. 12. A
hearing was held to address all pending motions on Thursday, March 19, 2015 at 2:30 p.m., and
the Court ruled from the bench as follows:
As to Defendants' Motion to Dismiss, the Court GRANTED the Motion IN PART and
herein DENIES the Motion IN PART.
The Court DISMISSED WITHOUT PREJUDICE Count One of the Amended
Complaint only as to individual Defendants Thomas Bell, Tony W. Crosby, William B.
Kuhlman, and Brian S. Olson.
The Court DISMISSED WITHOUT PREJUDICE Count Two of the Amended
Complaint as to all Defendants. As such, individual Defendants Thomas Bell, Tony W. Crosby,
William B. Kuhlman, and Brian S. Olson are DISMISSED from this case WITHOUT
PREJUDICE.
The Court DENIES as MOOT Defendants' Motion to Dismiss in so far as it seeks the
dismissal of the Amended Complaint as to Tony W. Crosby under Rule 12(b)(5).
The Court GRANTED Plaintiff LEAVE TO AMEND his Amended Complaint, Doc.
12, to allege a claim for health benefits against the Local No. 79 Health Fund within eleven (11)
days of the hearing, if he is inclined to do so. If so inclined, Defendants SHALL have eleven
(11) days to respond to the newly amended complaint.
As to Defendants' Rule 26(1) Motion, the Court WITHHELD ruling pending further
briefing by the parties. The parties were ORDERED to submit briefs on the issue of standard of
review. Defendants were provided fifteen (15) days from the date of the hearing to file their
initial brief. Plaintiff was provided eleven (11) days to file a response, and Defendants were
provided three (3) days thereafter to file a rebuttal.
As to Defendants' Motion for Protective Order, the Court DENIED the Motion and
declines to enter a protective order at this time. The Court PERMITTED discovery in the areas
outlined by Plaintiffs counsel at the March 19, 2015 hearing, and such discovery is permissible
under either applicable standard of review. As such, the permitted discovery SHALL run
concurrently with the parties briefing deadlines regarding the applicable standard of review.
The Courtnow issues this Opinion and Order explaining its reasoning and detailing its
rulings.
I. BACKGROUND
A. Factual Allegations
This is an action for recovery of benefits and equitable relief under the Employee
Retirement Income Security Act ("ERISA").
Plaintiff was a member of the International
Association of Bridge, Structural, Ornamental and Reinforcing Ironworkers Local No. 79
("Local 79") labor organization from 1974 until 2013. Am. Cotnpl. at 3. Plaintiff was a
participant in Local 79's pension benefit plan ("Pension Plan") at all times during his
membership in the organization. Id. On July 1, 2008, Plaintiff took early retirement under the
Pension Plan, which permitted him to work full-time for five years while still receiving benefits.
Id. Before those years expired, the Pension Plan was amended to discontinue eligibility for
retirement benefits for those, such as Plaintiff, who continued to work full-time. Id. As such,
Plaintiff stopped receiving retirement benefits in March 2011. Id.
Plaintiff continued to work full-time subject to a collective bargaining agreement
("CBA") between Local 79 and the Virginia Association of Contractors, Inc., as well as the
Pension Plan, until April 1, 2013. His employers continued to make contributions to the Pension
Plan during that time. Id at 3, 4. From April 1, 2013 forward, Plaintiff worked part-time for a
new employer that was not subject to the CBA, and accordingly, all further contributions for
pension benefits under the Pension Plan ceased. Id. at 4. Plaintiff applied for benefits under the
Pension Plan, in accordance with ERISA requirements, around April 1, 2013. M. Defendants',
however, denied Plaintiff benefits under the Pension Plan, stating that he was engaged in
disqualifying work. Defendants' denied Plaintiffs appeal.
Id.
Plaintiff has exhausted all
administrative remedies in regards to the Pension Plan and appeals to this Court for relief.
B. Procedural History
Plaintiff has made two claims against Defendants.
Count One of the Amended
Complaint seeks benefits wrongfully denied pursuant to 29 U.S.C. § 1132(a)(1)(B) ("Section
1132(a)(1)(B)"), and Count Two seeks equitable remedies pursuant to 29 U.S.C. § 1132(a)(3)
("Section 1132(a)(3)").
Id. at 5.
This matter was referred for a Rule 16(b) Scheduling
Conference on November 19, 2014, and the Amended Complaint was filed on December 1,
2014. Doc. 12. On December 18, 2014, Defendants'filed their Motion to Dismiss. Doc. 16.
Two days before the Scheduling Conference, Defendants' filed the Rule 26(0 Motion, Doc. 24,
stating, in essence, that discovery and trial are inappropriate in this case as Plaintiffs claims are
brought under Section 1132(a)(1)(B) of ERISA. Id at 1.
While the Rule 26(0 Motion was pending, the February 27, 2015 deadline for Defendants to
object to Plaintiffs discovery was looming, so Defendants filed the Motion for Protective Order
to postpone discovery deadlines until after the Court rules on the Rule 26(0 Motion and relieve
them from all future discovery obligations beyond the administrative record. Doc. 27 at 2. A
hearing was held on Thursday March 19, 2015 at 2:30 p.m, and each Motion was addressed in
turn.
II. MOTION TO DISMISS
A. Procedural History
In their Motion to Dismiss, Defendants sought (1) dismissal of Count One pursuant to
Rule 12(b)(6) as to individual Defendants Thomas Bell, Tony W. Crosby, William B. Kuhlman,
and Brian S. Olson ("Trustees"); (2) dismissal of Count Two pursuant to Rule 12(b)(6) as to all
Defendants; and (3) dismissal of Counts One and Two pursuant to Rule 12(b)(5) as to Defendant
Tony W. Crosby for lack ofservice ofprocess.1 As to Count One, Defendants alleged that "[t]he
Fourth Circuit has adopted the position that only the plan itselfor a party with control over the
administration of the plan is a proper defendant under § 1132(a)(1)(B)." Doc. 17 at 3. As to
Count Two, Defendants alleged that it is merely "an attempt to recast a claim for benefits" as an
equitable claim under Section 1132(a)(3), which is improper if the reliefsought can be redressed
by Section 1132(a)(1)(B). Id at 5-7.
In response to the first claim, Plaintiff contended that because the "Trustees are
fiduciaries under the Plan, are the sole individuals empowered to make rules and prescribe
procedures for the administration of the Plan, and have the final decision-making authority as to
the administration of the Plan," they are proper Defendants. Doc. 20 at 1-2. In response to the
second claim, Plaintiff alleged that the relief sought under Section 1132(a)(3), prejudgment
interest, restitution for lost retiree health benefits, and other make whole relief, is different than
the relief sought under Section 1132(a)(1)(B), and therefore, proper. Doc. 20 at 5; Am. Compl.
at 5. Each claim shall be addressed in turn.
B. Legal Standards
/'. Motion to Dismiss for Failure to State a Claim
A Rule 12(b)(6) motion to dismiss tests the sufficiency of a complaint; "it does not
resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses."
Republican Party of North Carolina v. Martin. 980 F.2d 943, 952 (4th Cir. 1992). "To survive a
motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a
claim to relief that is plausible on its face.'" Ashcroft v. Iabal. 556 U.S. 662, 678 (2009) (quoting
1In their Memorandum in Support of Defendanls' Partial Motion to Dismiss Amended Complaint, Doc. 17,
Defendants admit that "120 days has not lapsed since summonses were issued, but raise this argument now to avoid
any possibility of waiver at a later date." Doc. 17 at 8, n.3. Defendant Crosby, however, was timely served on
January 10, 2015. Doc. 23. This issue is, therefore, moot.
Bell Atl. Com, v. Twomblv. 550 U.S. 544, 570 (2007)). Although a court must accept as true all
well-pleaded factual allegations, the same is not true for legal conclusions. Iqbal, 556 U.S. at
678. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice." Id.
In deciding the motion, a court may consider the facts alleged on the face of the
complaint as well as "'matters of public record, orders, items appearing in the record of the case,
and exhibits attached to the complaint.'" Moore v. Flagstar Bank, 6 F. Supp. 2d 496, 500 (E.D.
Va. 1997) (quoting 5A Charles A. Wright & Arthur R. Miller, Fed. Prac. & Proc. § 1357 (1990)).
The Court may look to documents attached to the complaint and those incorporated by reference
without converting a Rule 12(b)(6) motion into a Rule 56 motion for summary judgment. See
Pueschel v. United States. 369 F.3d 345, 353 n.3 (4th Cir. 2004) (citations omitted).
//. Motion to Dismissfor Insufficient Service ofProcess
A Rule 12(b)(5) motion to dismiss for insufficient service of process permits "the
defendant to challenge departures from the proper procedure for serving the summons and
complaint." 5B Charles A. Wright, Arthur R. Miller, et al., Fed. Prac. & Proc. Civ. § 1353 (3d
ed. 2014). Pursuant to Federal Rule of Civil Procedure 4(m), "[i]f a defendant is not served
within 120 days after the complaint is filed, the court . . . must dismiss the action without
prejudice against that defendant or order that service be made within a specified time."
B. Analysis
/. Dismissing the Individual Trustees as to Counts One and Two
The United States Court of Appeals for the Fourth Circuit has not definitively addressed
ERISA claims brought against Trustees in their individual capacity. Although the Fourth Circuit
has provided some general guiding principles, this particular matter appears to be an issue of first
impression.
To begin, Section 1102 of ERISA states that every benefits plan "shall provide for one or
more named fiduciaries who jointly or severally shall have authority to control and manage the
operation and administration of the plan." 29 U.S.C. § 1102(a)(1). Furthermore, 29 U.S.C.
§ 1132(d)(2) ("Section 1132(d)(2)") states, "[a]ny money judgment under this subchapter against
an employee benefit plan shall be enforceable only against the plan as an entity and shall not be
enforceable against any other person unless liability against such person is established in his
individual capacity under this subchapter." Accordingly, "[ujnder ERISA the defendants cannot
be held personally liable for money damages absent a showing of individual misconduct. See 29
U.S.C. § 1132(d)(2) (2000). This, however, does not preclude a court from providing plaintiffs
with declaratory and injunctive relief if the defendants breached their fiduciary duties." Keegan
v. Steamfitters Local Union No. 420 Pension Fund. 174 F. Supp. 2d 332, 340 (E.D. Pa. 2001).
"To state a claim for breach of fiduciary duty under ERISA, the plaintiff must allege: (1)
that the defendant was a fiduciary, (2) who was acting within his fiduciary capacity, and (3)
breached his duty." Guardian Life Ins. Co. of America v. Reinaman, No. WDQ-10-1374, 2011
WL 2133703, at *7 (D.Md. May 26, 2011) (quoting Cuthie v. Fleet Reserve Ass'n. 743
F.Supp.2d 486, 494 (D.Md. 2010)) (internal quotation marks omitted). According to the United
States District Court for the District of Connecticut,
ERISA imposes "a number of detailed duties and responsibilities" on those who are—
or who function as—fiduciaries, the breach of which gives rise to personal liability
under the statute. Mertens. 508 U.S. at 251, 113 S.Ct. 2063. As relevant here, an
ERISA fiduciary has (1) a duty of loyalty, which requires that he "discharge his
duties with respect to a plan solely in the interest of the participants and
beneficiaries," 29 U.S.C. § 1104(a)(1)(A); and (2) a duty of prudence, which requires
that the fiduciary act "with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims," 29 U.S.C. § 1104(a)(1)(B).
Haddock v. Nationwide Fin. Servs.. Inc.. 293 F.R.D. 272, 283 (D. Conn. 2013). In the current
matter, Plaintiff is not claiming breach of fiduciary duty by any individual Defendant, nor has
Plaintiff alleged facts to support the notion that such a breach occurred.
In Gluth v. Wal-Mart Stores. Inc.. No. 96-1307, 1997 WL 368625 (4th Cir. July 3, 1997)
(per curiam), a case in which the Fourth Circuit has addressed the issue of proper defendants in
ERISA actions, the plaintiff sued "Wal-Mart Group Health and Welfare Trust" ("The Trust"), as
well as the pertinent group health plan, when he was denied medical coverage after an
emergency surgery. Id at *1. On appeal, the Fourth Circuit dismissed The Trust as a defendant,
stating that because The Trust was only the funding mechanism for the plan and had no control
over the actual administration of the plan, it was not a proper defendant in the action. Id. at *6.
Furthermore, the Court noted
that Gluth named the wrong defendant from the beginning by initially bringing this
action against his employer, Wal-Mart, who had no control over the administration of
the Plan. See Daniel v. Eaton Corp., 839 F.2d 263, 266 (6th Cir. 1988) (unless an
employer is shown to control administration of an employee benefit plan, it is not a
proper defendant in an ERISA action seeking benefits; rather, the plan is the proper
party).
Id. at *6, n.8. Gluth was distinguished by Clark v. Nationwide Mutual Ins. Co., 933 F. Supp. 2d
862, 872 (4th Cir. 2013), in which the Fourth Circuit held that Nationwide, even though not the
named plan administrator, was a proper defendant in a Section 1132(a)( 1)(B) action because
Nationwide appeared "to have had adequate control over Clark's claim to justify being named as
the defendant."
Defendants argued that, in light of Gluth, the only proper defendants are the Pension Plan
and Board of Trustees because the Pension Plan itself states, "[t]he Plan shall be administered by
8
the Trustees, who are fiduciaries under this Plan," Compl. at 1, Ex. 1 § 11.1,2 and "[t]he term
'Trustees' shall mean the Employer Trustees and the Union Trustees, collectively, who have been
appointed in accordance with the provisions of the Trust Agreement to serve thereunder," id. §
1.34. Doc. 17 at 4.
Plaintiff contended that the individual Trustees are proper Defendants
because they are the Trustees referred to under the Pension Plan, and in turn, fiduciaries who
control benefits decisions. Doc. 20 at 4. Plaintiff is relying on the Fourth Circuit's "adequate
control" principle as set forth in Nationwide, but has not alleged facts sufficient to support such a
claim.
Firstly, Plaintiff has sued the Trustees in their individual capacity and not as
administrators or fiduciaries under the Pension Plan. This tends to neutralize Plaintiffs argument
that the individual Trustees arc proper defendants because they are acting as fiduciaries when he
is not claiming they breached any specific fiduciary duty.
Based on a reading of Section
1132(d)(2), as well as case law from other circuits, this is not proper absent a showing of
individual misconduct, i.e., breach of a fiduciary duty.
Plaintiff has not claimed breach of
fiduciary duty here. Secondly, Plaintiff has not made a showing that any of the individual
Trustees, as opposed to the collective "Board of Trustees,"3 had adequate control over the
Pension Plan such that this matter would fall under the principles of Nationwide.4 The Pension
" The Exhibits contained in the Complaint, Doc. 1, were incorporated by reference in the Amended
Complaint, Doc. 12.
5 Although the Pension Plan uses the terminology "Employer Trustees and the Union Trustees,
collectively" as opposed to the term "Board of Trustees," both in their briefs and during the respective hearing
Defendants refer to this body as the "Board of Trustees" and concede that the "Board of Trustees" is the
administrator of the Pension Plan and a proper party to the Section 1132(a)(1)(B) action.
4 In Nationwide, the Fourth Circuit held that, even though not the official plan administrator, when
Nationwide staffing forms were used to summarize the benefits denial, Nationwide employees were involved in the
benefits decisions, Nationwide employees controlled the plaintiffs benefits file, and the Nationwide logo and
Nationwide letterhead were used in communications with plaintiff regarding the benefit's decision, Nationwide
appeared "to have had adequate control over Clark's claim to justify being named as the defendant." 933 F.Supp.2d
at 871-72.
Plan clearly states it is to be administered by the Trustees in their collective capacity. It does not
provide for individual administration. Defendants' admitted that both the Board of Trustees and
the Pension Plan are proper Defendants to this action, but challenge the sufficiency of the
complaint as to the individual Trustees.
As a matter of law, Section 1132(d)(2) prohibits holding an individual defendant
personally liable for money damages absent a showing of individual misconduct. Accordingly,
Plaintiff has not plead facts sufficient to state a claim for relief as to the individual Trustees in
either Counts One or Two.
For this reason, the Court GRANTED Defendants' Motion to
Dismiss, DISMISSING WITHOUT PREJUDICE individual Defendants Thomas Bell, Tony
W. Crosby, William B. Kuhlman, and Brian S. Olson from the present action.
//'. Dismissing Count Two as to all Remaining Defendants
"Individualized equitable relief under § 1132(a)(3) is normally appropriate only for
injuries that do not find adequate redress in ERISA's other provisions." Korotynska v.
Metropolitan Life Ins. Co.. 474 F.3d 101, 102 (4th Cir. 2006); see also Varitv Corp. v. Howe.
516 U.S 489, 515 (1996). According to the Fourth Circuit in Korotynska.
the great majority of circuit courts have interpreted Varitv to hold that a claimant
whose injury creates a cause of action under § 1132(a)(1)(B) may not proceed
with a claim under § 1132(a)(3) . . . These courts have not allowed claimants to
proceed with § 1132(a)(3) claims where relief was potentially available to them
under § 1132(a)(1)(B), because, in Varitv, "[t]he Supreme Court clearly limited
the applicability of § 1132(a)(3) to beneficiaries who may not avail themselves of
§ 1132's other remedies." Wilkins. 150 F.3d at 615. A plaintiff whose injury
consists of a denial of benefits "has adequate relief available for the alleged
improper denial of benefits through his right to sue [the benefit plan] directly
under section 1132(a)(1)," and thus "relief through the application of Section
1132(a)(3) would be inappropriate." Tolson. 141 F.3d at 610. To allow a claim
under § 1132(a)(3) would permit "ERISA claimants to simply characterize a
denial of benefits as a breach of fiduciary duty, a result which the Supreme Court
expressly rejected." Wilkins. 150 F.3d at 616. We join our sister circuits ....
10
474 F.3d at 106-07. Nonetheless, if a plaintiff is alleging alternate theories of recovery, some
district courts have held he may be able to proceed under both Section 1132(a)(1)(B) and Section
1132(a)(3) if the injuries are distinct and the plaintiff is not seeking to "repackage" a benefits
claim. See Guardian Life. 2011 WL 2133703, at *9; England v. Marriott Int'L Inc.. 764 F. Supp.
2d 761, 779 (D.Md. 2011). Korotynska, however, is the controlling case in this Circuit.
In light of these principles, Plaintiff alleged he is entitled to the following equitable relief
that is "not recoverable under the terms of the Plan:" (1) prejudgment interest on the benefits
withheld; (2) restitution for lost retiree health benefits; and (3) other make whole relief. Doc. 12
at 5.
The first two claims will be addressed in turn to determine if relief is recoverable under
Section 1132(a)(3). In regards to the third claim for "other make whole relief," Plaintiff has plead
no factual matter in support of the relief sought. It is a mere recital, and as such, will not survive
Defendants Rule 12(b)(6) Motion on its own accord.
Firstly, Plaintiff claims he is entitled to prejudgment interest on the potentially
recoverable pension benefits of $2,722.50 per month under Section 1132(a)(3).
Id.
In
Ouesinberrv v. Life Ins. Co. of North America. 987 F.2d 1017, 1030-31 (4th Cir. 1993), the
Fourth Circuit stated that because ERISA does not provide for prejudgment interest, the district
court can exercise discretion in awarding such in order to compensate a plaintiff for loss of his
pension funds. As a matter solely within the discretion of the Court, a request for prejudgment
interest cannot be categorized as an individual claim for equitable relief when it can be
adequately redressed by Section 1132(a)(1)(B). If Plaintiff succeeds in recovering benefits under
Section 1132(a)(1)(B), the Court may award prejudgment interest. As such, as a matter of law,
prejudgment interest is available under ERISA's other provisions and CANNOT sustain an
individual claim brought under Section 1132(a)(3).
11
Secondly, Plaintiff seeks "restitution for lost retiree health benefits" and pleads as
follows: "but for Defendants wrongful denial of benefits, Plaintiff would be receiving retiree
health benefits under the Local No. 79 Health Fund ... As a result of Defendants' wrongful
denial of pension benefits to Plaintiff, Plaintiff is not eligible for and is not receiving health
benefits . . . ." Am. Compl. at 5. Accepting this statement as true, the Court must determine if
Plaintiff has made a plausible claim for relief under Section 1132(a)(3). "[Generally a claimant
must exhaust the administrative remedies provided in an employee benefit plan before
prosecuting an ERISA claim in federal court. . . However, a 'clear and positive' showing that
such exhaustion would be futile will circumvent this requirement." DuPerry v. Life Ins. Co. of
North America. 632 F.3d 860, 875 (4th Cir. 2011) (citations omitted).5
Plaintiff has not alleged he exhausted the administrative remedies available to him
regarding Local No. 79's Health Fund ("Health Fund"), and Defendants claim the proper
approach would have been for Plaintiff to exhaust his administrative remedies under the Health
Fund and, if denied, seek redress for denial of benefits under Section 1132(a)(l)(3). Doc. 21 at
3-4.
Plaintiff, however, is essentially contending that such actions would have been futile
because, once denied pension benefits, Plaintiff is no longer eligible to receive benefits under the
Health Fund. Am. Compl. at 5. Again, accepting these facts as true, the questions now become
(1) whether such relief can be granted by the named Defendants and (2) whether such relief can
be obtained through Section 1132(a)(3).
According to Defendants, Plaintiff has sued the wrong plan.
Doc. 21 at 3. If he is
seeking lost health benefits then the proper Defendant is the Health Fund, not the Pension Plan.
]± Should Plaintiffs Section 1132(a)(1)(B) claim prove successful, he would be entitled to the
It is important to note, however, that the above-referenced standard announced in DuPerry was laid down in
response to an action filed under Section 1132(a)(1)(B), not Section 1132(a)(3).
12
pension benefits wrongfully denied him and, in theory, the opportunity to apply for and receive
health benefits under the Health Fund. The Health Fund, however, would be permitted to deny
Plaintiff health benefits under the terms of the Health Plan so long as Plaintiff was not receiving
pension benefits. For this reason, Plaintiff is seeking restitution for those health benefits he
would have been receiving were it not for the denial of pension benefits at issue in the Section
1132(a)(l)(3) claim.
In summary, Plaintiffs logic was as follows: (1) applying for health benefits under the
Health Fund would have been futile because Plaintiff had already been denied pension benefits
under the Pension Plan, which has substantial bearing on Health Fund decisions; (2) by filing a
claim against the Health Fund for denial of benefits under Section 1132(a)(1)(B), Plaintiff would
have to clearly prove futility because the Health Fund would have defended on the ground that
Plaintiff never exhausted its administrative remedies, and more importantly, Plaintiff would not
have been entitled to those benefits under the very terms of the health plan so long as he was not
receiving pension benefits; as such, (3) Plaintiff filed the instant action seeking restitution for
lost health benefits under Section 1132(a)(3) from the Pension Plan as a means of circumventing
what would have been the traditional approach, to exhaust all administrative remedies (or prove
futility) and bring a claim against the Health Fund under Section 1132(a)(1)(B).
In unraveling this web, the Fourth Circuit's reasoning in Korotynska provides substantive
guidance. In Korotynska, the Fourth Circuit states,
[i]t may be that plaintiff perceives in § 1132(a)(3) a clearer path to §
1132(a)(1)(B) relief while possibly circumventing § 1132(a)(l)(B)'s standard of
review of abuse of discretion. But Varitv allows equitable relief when the
available remedy is inadequate, not when the legal framework for obtaining that
remedy is, to the plaintiffs mind, undesirable.
13
474 F.3d at 108. Plaintiff seems to be doing exactly this, circumventing review under Section
1132(a)(1)(B) by bringing an equitable claim for relief in this matter under Section 1132(a)(3).
The Fourth Circuit makes clear, however, that when another remedy is available under ERISA,
i.e., exhausting administrative remedies before, or proving futility after, bringing a claim for
relief under Section 1132(a)(1)(B), equitable claims under Section 1132(a)(3) are not
appropriate.
The proper approach carved out for plaintiffs who find themselves in such
situations is to rely on the futility exception for claims brought pursuant to Section 1132(a)(1)(B)
and allow the Court, viewing the claims holistically, to determine if benefits had been or would
have been wrongfully denied.
If Plaintiff believes it will be futile to apply for health benefits under the Health Fund
upon denial of his pension benefits, then he may utilize the futility exception and join the Health
Fund as a defendant under the Section 1132(a)(1)(B) claim. Plaintiffs claims for equitable relief
under Section 1132(a)(3) are simply "repackaged" denial of benefits claims against the Health
Fund, and therefore, not properly before this Court.
Plaintiff cannot circumvent Section
1132(a)(1)(B) by bringing what amounts to a denial of benefits claim under Section 1132(a)(3).
The Court in Korotynska anticipated Plaintiffs actions here, and as such, this Court GRANTED
Defendants' Motion as to Count Two, DISMISSING the claim WITHOUT PREJUDICE as to
all parties but WITH LEAVE TO AMEND the Amended Complaint, Doc. 17, to allege a claim
for health benefits against the Health Fund within eleven (11) days of the hearing, if he is
inclined to do so. If so inclined, Defendants SHALL have eleven (11) days to respond to the
newly amended complaint.
14
///'. Dismissal of the Amended Complaint as to Defendant Tony W. Crosby pursuant to Rule
12(b)(5)
Defendants admitted that, at the time they filed their Motion to Dismiss, 120 days had not
elapsed since the summons was issued as to Defendant Crosby, but that they were including the
argument so as to avoid possible waiver at a later date. Doc. 17 at 8, n.3. Defendant Crosby was
timely served on January 10, 2015. Doc. 22. As such, Defendants' third claim for lack of service
of process under Rule 12(b)(5) is DENIED as MOOT.
III. RULE 26(f) MOTION & MOTION FOR PROTECTIVE ORDER
A. Procedural History
Two days before the Rule 16(b) Scheduling Conference, Defendants' filed their Rule
26(1) Motion, stating in essence, that discovery and trial are inappropriate in this case as
Plaintiffs claims are brought under Section 1132(a)(1)(B) of ERISA. Doc. 24 at 1. Defendants
requested that a briefing schedule for summary judgment motions based only on the
administrative record instead be established. Jd. Defendants, however, had not yet produced the
administrative record in the case.
Plaintiff contended that discovery and trial were proper
because there are disputed issues of fact requiring adjudication by the fact-finder. Doc. 26 at 4.
While the Rule 26(f) Motion was pending, Defendants filed the Motion for a Protective Order
requesting the Court postpone discovery deadlines until after it ruled on the Rule 26(f) Motion
and relieve them from all future discovery obligations beyond the administrative record. Doc. 27
at 2.
B. Legal Standards
"As an initial matter, the Court must address the standard of review to be applied to a
claim of wrongful denial of benefits under ERISA because 'the scope or availability of discovery
is tied to the standard of review applied.'" Bruce v. Hartford. 21 F.Supp.3d 590, 594 (E.D.Va.
15
2014) (quoting Bartel v. Sun Life Assurance Co. of Canada, 536 F.Supp.2d 623, 627 (D.Md.
2008)); see also Woods v. Prudential Ins. Co. of America. 528 F.3d 320, 321 (4th Cir. 2008).
Firstly, the Court must review de novo the language at issue in the ERISA plan to determine if
the plan administrator was vested with the necessary discretion to grant or deny an application
for benefits. ]± at 595. "[A] denial of benefits ... is to be reviewed under a de novo standard
unless the benefit plan gives the administrator or fiduciary discretionary authority to determine
eligibility for benefits or to construe the terms of the plan." Woods, 528 F. 3d at 322 (quoting
Firestone Tire & Rubber Co. v. Bruch. 489 U.S. 101, 115 (1989)) (emphasis added) (internal
quotation marks omitted).
The Fourth Circuit has held that an ERISA plan can confer
discretionary authority in one of two ways: "(1) by language which 'expressly creates
discretionary authority,' and (2) by terms which 'create discretion by implication.'" M. (quoting
Feder v. Paul Revere Life Ins. Co., 228 F.3d 518, 522-23 (4th Cir. 2000)).
If the grant of
discretion is not clear, then the Fourth Circuit requires a de novo standard of review. Id.
In Woods, the Fourth Circuit held that language which simply confers the administrator
authority to make "determinations" regarding eligibility is not sufficient to put the employee on
notice '"that the plan administrator is to make a judgment largely insulated from judicial
review'." Id (quoting Herzberger v. Standard Ins. Co.. 205 F.3d 327, 332 (7th Cir. 2000)). The
relevant contractual phrases at issue in Woods were "when Prudential determines" and
"determined by Prudential." Id (internal quotation marks omitted). Here, the court made clear
that a grant of authority to make determinations regarding eligibility, which is a necessary part of
the administrative process, is not akin to a grant of discretionary authority. Id. This language
was not considered sufficient to trigger the abuse of discretion standard, and the court required
de novo review. Id. at 324
16
When the standard of review for Section 1132(a)(1)(B) claims is de novo, the Fourth
Circuit has adopted a "limited discretionary approach" to discovery outside of the administrative
record. Ouesinberrv v. Life Ins. Co. of North America, 987 F.2d 1017, 1025 (4th Cir. 1993).
This Circuit "permits the district court in its discretion to allow evidence that was not before the
plan administrator . . . only when circumstances clearly establish that additional evidence is
necessary to conduct an adequate de novo review of the benefit decision." Id. In Ouesinberrv,
the Court provided a list of examples that might warrant the introduction of additional evidence,
such as "the necessity of evidence regarding interpretation of the terms of the plan rather than
specific historical facts." Id at 1027. Furthermore, "in determining whether to grant such a
motion, the district court should address why the evidence proffered was not submitted to the
plan administrator." Id The Fourth Circuit, however, made clear that the introduction of
additional evidence in such cases was not required, but rather permissible if the requisite
necessity is established. Id
If it is found that the contractual language in a benefits plan is sufficient to confer
discretionary authority on the administrator to determine eligibility or construe terms, then the
applicable standard of review is abuse of discretion. Firestone, 489 U.S. at 115. "In the Fourth
Circuit, discovery is generally not available in ERISA cases where the district court reviews the
administrator's decision for abuse of discretion." Stanley v. Metropolitan Life Ins. Co., 312 F.
Supp.2d 786, 789 (E.D.Va. 2004). However, this is not an absolute bar to admissibility. The
Fourth Circuit has recognized the following general exceptions: (1) When there is a conflict of
interest such as "where the plan administrator 'both evaluates claims for benefits and pays
benefits claims...'," Bruce, 21 F.Supp.3d at 595 (quoting Metropolitan Life Ins. Co. v. Glenn,
554 U.S. 105, 112 (2008)); (2) when the Court is evaluating what information was known to the
17
administrator in rendering his or her decision as opposed to what was contained in the record,
Helton v. AT&T Inc.. 709 F.3d 343, 352 (4th Cir. 2013); and (3) when additional information is
necessary for the Court to properly evaluate and balance the non-exhaustive list of factors set
forth in Booth v. Wal-Mart Stores. Inc. Associates Health & Welfare Plan. 201 F.3d 335, 342-43
(4th Cir. 2000), such as "... (3) the adequacy of the materials considered to make the decision
and the degree to which they support it; (4) whether the fiduciary's interpretation was consistent
with other provisions in the plan and with earlier interpretations of the plan;... (7) any external
standard relevant to the exercise of discretion; and (8) the fiduciary's motives and any conflict of
interest it may have." Discovery is permissible under either applicable standard of review if
necessary to properly evaluate the Booth factors.
C. Analysis & Conclusion
/. Rule 26(f) Motion
In their Rule 26(f) Motion, Defendants have put the proverbial cart before the horse. In
the Motion they, without any reference to or discussion regarding the matter, assume an abuse of
discretion standard of review. Doc. 24; Doc. 25. This assumption is premature, as the language
at issue in the present contract states only that "[t]he Trustees shall make a determination as to
the right of any person to a benefit." Compl. at 49, Ex. A at 44. Until the proper standard of
review is determined, Defendants' Rule 26(0 Motion is not ripe for review. Accordingly, the
Court WITHHELD ruling on Defendants Rule 26(0 Motion pending further briefing by the
parties. The parties were ORDERED to submit briefs on the issue of the applicable standard of
review. Defendants were provided fifteen (15) days from the date of the hearing to file their
initial brief. Plaintiff was provided eleven (11) days to file a response, and Defendants were
provided three (3) days thereafter to file a rebuttal.
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/;'. Motionfor Protective Order
In their Motion for Protective Order, Defendants requested "[permanent relief from
discovery obligations extending beyond the administrative record pursuant [to] ERISA
principles." Doc. 27 at 1. In accordance with the legal standards outlined herein, such broad-
sweeping relief is not appropriate. At the hearing, Plaintiff requested the Court grant him limited
discovery pursuant to four of the individual factors as set forth in Booth. If granted, such
discovery would be permissible regardless of the standard of review eventually applied in this
case. Plaintiff requested the following.
Firstly, he requested that discovery be permitted under the third Booth factor, addressing
the adequacy of the materials considered in making the benefits decision, because Plaintiff had in
his possession at least one relevant written statement from Plaintiff to Trustee Thomas Bell that
was not contained in the administrative record provided. Secondly, Plaintiff requested discovery
under the fourth Booth factor in order to determine if the reasons for Plaintiffs denial of benefits
were consistent with earlier interpretations of the Pension Plan. Thirdly, Plaintiff requested
discovery under the seventh Booth factor, regarding any external standards used in making the
benefits determination, as the collective bargaining agreement, which would have been
applicable to interpreting the term "trader craft," was not included in the administrative record.
Lastly, Plaintiff requested discovery under the eighth Booth factor, relating to possible conflicts
of interest, because there is speculation that the Pension Plan is financial unstable, and this
instability may have played a role in denying Plaintiff benefits.
In considering Plaintiffs arguments, as well as the applicable legal standards, the Court
ruled that DISCOVERY IS APPROPRIATE under either standard of review as to those areas
argued for by Plaintiff. The Court, therefore, DENIED Defendants' Motion for Protective Order
19
and declines to enter such at this time. The Court PERMITTED discovery in the areas outlined
by Plaintiffs counsel at the March 19, 2015 hearing, and the permitted discovery SHALL run
concurrently with the parties briefing deadlines regarding the applicable standard of review.
The Clerk is REQUESTED to mail a copy of this Order to all counsel of record.
It is so ORDERED.
/s/
Henry Coke Morgan, Jr.
Senior United States District Judge jajuh
HENRY COKE MORGAN, JR.rW'*
SENIOR UNITED STATES DISTRICT JUDGE
Norfolk, VA
March 2 0,2015
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