Opinion
No. 99-2135; Section "T"(1).
November 8, 2000.
This cause came for hearing on a previous date upon the Motions for Summary Judgment by one Defendant, F.A. Richard Associates, Inc. ("Richard"), by the other Defendant, The Canada Life Assurance Company ("Canada Life"), and by the Plaintiff, Mildred H. Arnold ("Arnold") in a suit seeking judicial review of a denial of her claim for disability benefits. In addition, Canada Life has moved for a Protective Order to prohibit further discovery by Arnold. Finally, both of the Defendants have filed Motions to Strike Arnold's Jury Demand. The Court, having studied the legal memoranda and exhibits submitted by the parties, the record, and the applicable law, is fully advised in the premises and ready to rule.
ORDER AND REASONS
I. Background
Arnold was employed by Richard as a clerk from approximately January of 1988 until August of 1998. As an employee, Arnold was insured under the group benefits plan offered by Richard. This plan included benefits for short term and long term disabilities under policies purchased from Canada Life. According to the plan, Richard was the sponsor and Canada Life was the claims administrator. (Canada Life's Memorandum in Support of Motion for Summary Judgment, pp. 2-3).
During Arnold's employment in May of 1998, she took leave from work claiming that she injured her back while ironing. In June of 1998, Arnold filed a claim for disability benefits that Canada Life denied in July of that same year. (Id.) After an administrative appeal in which Arnold submitted additional medical documentation, including evidence that Dr. Montz, her orthopedist, considered Arnold to be disabled and unable to resume work, Canada Life again denied her claim. (Canada Life's Memorandum in Support of Motion for Summary Judgment, Exh.1A, pp. 14, 18). It is from this denial that the present action arises.
II. Arguments of the Parties
Richard claims that, as an Employee Retirement Income Security Act of 1974 ("ERISA") plan sponsor with no discretion to grant or deny claims, it is not an ERISA fiduciary and therefore not a proper party to this suit according to ERISA's exclusive remedy statute. The other defendant, Canada Life, asserts that as an ERISA claims administrator with a contractual right of discretion in granting or denying disability claims, it was within its discretion to assess and deny Arnold's claims. It also claims that Arnold never requested long term, but only short term disability benefits.
Furthermore, Canada Life argues that this Court must give great deference to its denial decision under an abuse of discretion standard of review, that the review of such denial should be limited to evidence contained in the administrative record, that there is a significant factual basis upon which the insurer denied Arnold's claim, and that Canada Life did not abuse its discretion in denying this claim for disability benefits. Consequently, Canada Life requests that this Court issue a protective order limiting all discovery to evidence contained in its administrative record, and both Defendants individually move this Court to grant motions for summary judgment dismissing all of Arnold's claims against each of them.
Arnold claims that her employer, Richard, did in fact exert some influence in the decision to deny her claims and thus is a proper party to this suit. She also asserts that she intended to file claims for both short term and long term benefits, but the claims representative for Canada Life completed only the short term application. Moreover, Arnold claims that although Canada Life was vested by the plan with discretion to deny claims, it has a conflict of interest in that it is both the administrator and the insurer of the plan, and thus, this Court should review its denial of her claim under a sliding scale standard of review giving little deference to the discretionary denial.
Furthermore, Arnold argues that the denial was based on selective facts that are not truly representative of her basis for claiming disability, that Canada Life and its employees may have been financially biased in denying her claim for the disability benefits that it would have to pay, that Canada Life abused its discretion in denying her claims, and that therefore, Canada Life and Richard breached their fiduciary duties as defined by ERISA. Consequently, Arnold requests that she be allowed further discovery beyond the administrative record to attempt to prove her allegations, and she moves this Court to grant her Motion for Summary Judgment or alternatively to deny the defendants' Summary Judgment Motions and/or to continue the matter until completion of further discovery.
III. Legal Analysis
A. Law on Summary Judgment
The Federal Rules of Civil Procedure provide that summary judgment should be granted only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. Civ. P. 56(c). The party moving for summary judgment bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the record which it believes demonstrate the absence of a genuine issue of material fact.Stults v. Conoco, Inc., 76 F.3d 651, 655-56 (5th Cir. 1996) (citing Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 912-13 (5th Cir.) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)), cert. denied, 506 U.S. 832 (1992)). When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts. The nonmoving party must come forward with "specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (emphasis supplied); Tubacex, Inc. v. M/V RISAN, 45 F.3d 951, 954 (5th Cir. 1995).
Thus, where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no "genuine issue for trial." Matsushita Elec. Indus. Co., 475 U.S. at 588. Finally, the Court notes that substantive law determines the materiality of facts and only "facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 248 (1986).
1) Richard's Motion for Summary Judgment and Request for Fees and Costs
Congress intended ERISA's civil enforcement remedies to be exclusive and to allow Plaintiffs to bring suits to recover benefits only against the plan or its fiduciary administrators.See 29 U.S.C. § 1132(a)(1)(B); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987). Essentially, ERISA dictates that "a person is a fiduciary with respect to a plan to the extent" that he or she "exercises any discretionary authority or discretionary control respecting management" of the plan or "has any discretionary authority or discretionary responsibility in the administration" of the plan. 29 U.S.C. § 1002(21); Varity Corp. v. Howe, 516 U.S. 489 (1996) (holding that employer was acting as ERISA "fiduciary" when it misrepresented plan benefits to its employees).
Additionally, ERISA grants a Court the discretion to award attorneys' fees and costs in some cases. See 29 U.S.C. § 1132 (g). The Court should consider the following factors in determining whether such award is appropriate: (1) the degree of the opposing party's culpability or bad faith; (2) the ability of the opposing party to satisfy an award of attorneys' fees; (3) whether an award of attorneys' fees against the opposing party would deter other persons acting under similar circumstances; (4) whether the party requesting attorneys' fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA itself; and (5) the relative merits of the parties' positions. See Todd v. AIG Life Ins. Co. 47 F.3d 1448, 1458 (5th Cir. 1995) (citing Iron Workers Local No. 272 v. Bowen, 624 F.2d 1255, 1266 (5th Cir. 1980)).
In this case, Richard is designated as the plan administrator. However, the terms of the plan provide Richard with no discretion in the determination of eligibility or for liability for payments of benefits. Both the short term and the long term plans definitively state that "Canada Life will make the final decision on the claim." (Richard's Memorandum in Support of Motion for Summary Judgment, Short Term Plan, p. 36, Long Term Plan p. 35). The terms of the plans are undisputed. Arnold claims that input from her supervisor at Richard may have been considered by Canada Life in denying her disability claim. (Arnold's Opposition to Motion for Summary Judgment, pp. 13-14). Even if true, however, this input would not constitute discretionary authority sufficient to cause Richard to be an ERISA fiduciary. Consequently, as this case arises under ERISA, Richard is not a proper party to this suit because it is not a fiduciary of the plan, and any and all claims against Richard are either preempted by federal ERISA law or precluded by ERISA's exclusive remedy statute. Accordingly, there is no relevant fact at issue, nothing for the trier of fact to determine, and Richard's motion for summary judgment must be GRANTED.
Additionally, Richard requests attorneys' fees incurred in bringing its Motion for Summary Judgment claiming that because Arnold brought this action against Richard who is not a proper party under ERISA, she acted in bad faith. Although this Court has determined that Richard is not a proper party to this suit, there is no evidence that Arnold's claim was brought in bad faith. Likewise, there is no evidence before this Court that Arnold is able to pay these fees, that an order to pay fees and costs would deter claims of similarly situated beneficiaries, or that Richard was acting to benefit all of the plan's beneficiaries or to resolve a significant legal question regarding ERISA. Moreover, it appears that Arnold's claim against Canada Life does have some merit and that the claim against Richard was not frivolous. Therefore, considering the applicableBowen factors, this Court determines that Richard's request for attorneys' fees and costs must be DENIED.
2) Canada Life's Motion for Summary Judgment
Generally, "a denial of benefits challenged under § 502(a)(1)(B) of ERISA is to be reviewed under a de novo standard unless the benefits plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). If discretion is given in the plan to either determine eligibility or to construe its terms, then the standard of review is the more lenient "abuse of discretion." Id.
However, the existence of a conflict of interest is a factor to be considered in determining whether the plan administrator abused its discretion in denying a claim under the ERISA plan.See Vega v. National Life Ins. Services, Inc. 188 F.3d 287, 295 (5th Cir. 1999) (en banc). A conflict exists when the administrator "both insures and administers the plan," because it is "self interested, i.e., the administrator potentially benefits from every denied claim." Id. The Fifth Circuit held in Vega that a District Court should review an administrator's denial of a claim under a sliding scale standard: the greater the evidence of conflict on the part of the administrator, the less deferential the Court's abuse of discretion standard. See 188 F.3d at 299. The Vega en banc panel determined that a wholly-owned subsidiary was self-interested to "some degree" less so than if an insurer and administrator operated within the same entity, and so, that panel reviewed the administrator's decision with "only a modicum less deference." Id. at 301. However, when faced with such a conflicted, single-entity administrator and insurer, that en banc panel stated that it would be "less likely to make forgiving inferences when confronted with a record that arguably does not support the administrator's decision," and that it would "expect the administrator's decision to be based on evidence, even if disputable, that clearly supports the basis for its denial." Id.
In Arnold's case the plan grants Canada Life discretion to deny claims; thus, this Court must review the claim denial under an abuse of discretion standard. (Canada Life's Memorandum in Support of Motion for Summary Judgment, Exs. 1-B, 1-C). However, Canada Life is both the claim insurer as well as the claim administrator, which means that it could potentially benefit financially from each denied claim, and that creates a conflict of interest for Canada Life. Moreover, as Canada Life's conflict exists within the same entity, the Court should review the denial with less deference than was allowed the subsidiary in Vega. Consequently, this Court reviews the denial of benefits under a sliding scale standard giving less deference to the insurer's discretion.
In her administrative appeal to Canada Life, Arnold offered evidence that Dr. Montz, her orthopedist, considered Arnold to be disabled and unable to resume work. (Canada Life's Memorandum in Support of Motion for Summary Judgment, Exh. 1A, pp. 14, 18). However, Arnold contends that Canada Life's Nurse Wallace selectively omitted these physician recommendations, choosing instead to rely on Arnold's supervisor's suspicions that the disability was fraudulent and choosing to rely on her ear, nose, and throat doctor's statement, which did not address her back pain, that she could return to work. (Arnold's Opposition to Motion for Summary Judgment, pp. 3-5). Considering these physicians' statements, the evidence arguably does not support Canada Life's decision to deny Arnold's claims. Moreover, the record as a whole does not clearly support Canada Life's basis for denial: that Arnold had not provided evidence to support her claim that she could not return to work.
Because Canada Life is a self-interested, single entity administrator, this Court owes little deference to its denial of Arnold's claim for disability, and the evidence does not "clearly support" Canada Life's decision. Moreover, as there are two disparate versions of the reasons for denial of Arnold's disability claims, this Court is of the opinion that relevant issues of material fact are in dispute. Consequently, summary judgment is not appropriate at this time, and Canada Life's motion must be DENIED.
There is also dispute as to whether Arnold applied only for short term disability benefits or for both short and long term disability benefits. (Arnold's Opposition to Motion for Summary Judgment, p. 5). Because it is alleged that this application may also have been solely within the control of Canada Life, the Court will allow Arnold to go forward with claims to all disability benefits at this time.
3) Arnold's Motion for Summary Judgment
Arnold also moves this Court to grant summary judgment in her favor and requests that this Court order Canada Life to pay her long and short term disability benefits under the Plan. As stated above, there are disputed issues of relevant material facts yet to be decided, and therefore, summary judgment is not appropriate at this time. Arnold's motion must be DENIED.
B. Motion for Protective Order
A District Court, when reviewing a denial of benefits by an administrator governed by ERISA, generally may not stray from the evidence that is in the administrative record. See Vega, 188 F.3d at 299. However, a District Court may go beyond the administrative record in certain limited exceptions. See id. (citing Wildbur v. Arco Chemical Co., 974 F.2d 631 (5th Cir. 1992). Wildbur set forth a two-step review of benefit determination stating that it is "obvious that some evidence other than that contained in the administrative record may be relevant at both steps of this process." Wildbur, 974 F.2d at 638. Moreover, when reviewing questions of lack of good faith, the Court may appraise evidence that was not presented to the administrator.See id. Finally, with regard to discovery, "an ERISA fiduciary cannot assert the attorney-client privilege against a plan beneficiary about legal advice dealing with plan administration."Id. at 644. So, the Court may, in instances where the administrator of an ERISA plan may have abused its discretion or where there are issues regarding lack of good faith, allow more evidence than that contained in the administrative record, including legal advice dealing with plan administration.
In this case, as discussed above, there are issues of fact that have yet to be resolved regarding Canada Life's conflict of interest, its factual basis for denial of Arnold's claim, and its inclusion of all relevant evidence in the administrative record. Moreover, Arnold has called into question Canada Life's good faith in denying the long and short term disability claims. Because there are disputed issues that are sufficient to deny Canada Life's motion for summary judgment, and because it would be unreasonable to require Arnold to attempt to prove bad faith, inconsistent plan interpretation, and conflict of interest without allowing Arnold the opportunity to develop evidence to support those claims, Canada Life must respond to all discovery requests that are not otherwise privileged. Thus, Canada Life's motion for a protective order must be DENIED.
C. Motion to Strike Jury Demand
"The weight of authority is that there is no right to a jury trial in an action by a participant or beneficiary to recover benefits due him under the terms of his plan." 60A Am. JUR. 2D Pensions and Retirement Funds § 1186 (1988). As actions that are primarily equitable in nature, suits governed by ERISA do not entitle claimants seeking disability benefits to a trial by jury.See Borst v. Chevron Corp., 36 F.3d 1308 (5th Cir. 1994); Salameh v. Provident Life Accident Insurance Co., 23 F. Supp.2d 704 (E.D. La. 1998).
Here, Arnold's long and short term benefits plans are undisputedly governed by ERISA. (Arnold's Memorandum in Opposition to Defendants' Motions for Summary Judgment). Therefore, Arnold has no right to a jury trial, and Richard's and Canada Life's motions to strike Arnold's jury demand must be GRANTED.
IV. Conclusion
This Court is of the opinion that Arnold has offered a sufficient factual basis upon which a finder of fact could infer that Canada Life, as a self-interested party, may have acted in bad faith or abused its discretion in denying her claim. Therefore, Arnold deserves the opportunity to develop evidence beyond the administrative record, and Canada Life's Motion for a Protective Order must be denied. Likewise, as discovery is not yet complete and as there are issues of fact yet to be determined, this Court will not grant a Motion for Summary Judgment in favor of either Canada Life or in favor of Arnold at this time. However, under ERISA's exclusive remedy statute, Arnold may not sue her employer, F.A. Richard Associates, and a summary judgment dismissal of that claim is appropriate. Finally, ERISA generally does not entitle a plaintiff the right to a jury trial; therefore, Canada Life's and Richard's Motions to Strike Arnold's Jury Demand must be granted.
Accordingly,
IT IS ORDERED that F.A. Richard Associates, Inc.'s Motion for Summary Judgment (Doc.29) be, and the same hereby is GRANTED.
IT IS FURTHER ORDERED that Mildred H. Arnold's claims with regard to F.A. Richard Associates, Inc. be, and the same hereby are DISMISSED WITH PREJUDICE.
IT IS FURTHER ORDERED that F.A. Richard Associates, Inc.'s request for attorney's fees and costs (Doc.29) be, and the same hereby is DENIED.
IT IS FURTHER ORDERED that The Canada Life Assurance Company's Motion for Summary Judgment (Doc.28) be, and the same hereby is DENIED AT THIS TIME. IT IS FURTHER ORDERED that Mildred H. Arnold's Motion for Summary Judgment (Doc.40) be, and the same hereby is DENIED AT THIS TIME.
This order does not preclude Arnold or Canada Life from moving for summary judgment after further discovery.
IT IS FURTHER ORDERED that The Canada Life Assurance Company's Motion for a Protective Order (Doc.44) be, and the same hereby is DENIED.
IT IS FURTHER ORDERED that The Canada Life Assurance Company comply with Mildred H. Arnold's discovery requests upon execution of this order.
IT IS FURTHER ORDERED that both F.A. Richard Associates, Inc.'s and The Canada Life Assurance Company's Motions to Strike Mildred H. Arnold's Jury Demand (Docs. 30, 31) be, and the same hereby are GRANTED.