Opinion
CASE NO. 00-CV-71233-DT.
October 4, 2000.
Lira A. Johnson, Esq.
Eric A. Braverman, Esq.
Chester D. Cianforani, Esq.
OPINION
On March 13, 2000, Plaintiff filed a first amended complaint in this Court requesting that the Court determine which of the Defendants is entitled to the funds contained in decedent, Joseph R. Cortese's, employer-sponsored benefit plan. Defendant Angela Cortese, personal representative of decedent's estate, contends that the estate is entitled to the funds, Both Plaintiff and Defendant Gloria Favot, temporary conservator for decedent's mother, Elinore Cortese, contend that under the terms of the benefit plan, decedent's mother is entitled to the funds.
On July 31, 2000, Plaintiff filed a motion for entry of judgment requesting that the Court uphold its construction of the benefit plan and award the funds to decedent's mother. Similarly, on July 31, 2000, Defendant Favot filed a motion for summary judgment and/or judgment on the pleadings seeking the same relief. Defendant Cortese has filed answers to both motions. Oral argument regarding these motions was held on September 28, 2000. For the following reasons, Plaintiff's motion for entry of judgment and Defendant Favot's motion for judgment on the pleadings shall be granted, and judgment shall be entered in favor of Defendant Favot as temporary conservator for decedent's mother, Elinore Cortese.
Plaintiff has concurred in Defendant Favot's motion for summary judgment.
Defendant Favot has filed a motion for summary judgment and/or judgment on the pleadings. The Court notes that summary judgment is not a proper means for evaluating ERISA actions and therefore, will treat Defendant Favot's motion simply as a motion for judgment on the pleadings. See Wilkins v. Baptist Healthcare Sys., Inc., 150 F.3d 609, 619 (6th Cir. 1998).
Background
The decedent, Joseph R. Cortese, participated in the Rouge Steel Company Tax Efficient Savings Plan for Hourly Employees ("the Plan") up until his death on November 23, 1999. Upon notification of Mr. Cortese's death, Plaintiff was obligated to pay the funds in his account to his beneficiary.
Under the terms of the Plan, a member is permitted to designate a specific beneficiary by filing a written designation of beneficiary with the Rouge Steel Company. (Plan §§ XXIV(1) 1 (7)). In the event that a member does not file a written designation of beneficiary, the Plan provides:
In the case of an unmarried Member who does not file a written designation of beneficiary, the Member shall be deemed to have designated as beneficiary or beneficiaries under the plan the person or persons who are entitled in the event of the Member's death to receive the proceeds under the Company's Group Life and Disability Insurance Program if the Member is covered under that Program at the date of his death.
(Id. § XXIV(2)). The Plan further provides that if none of the other beneficiary provisions are met, the proceeds of the Plan are to be delivered to the member's estate. (Id. § XXIV(3)). It is undisputed that decedent was not married at the time of his death, and that decedent had not filed a written designation of beneficiary with Rouge Steel.
Plaintiff determined that decedent's mother, Elinore Cortese, who is the named beneficiary on decedent's company group life and disability insurance plan, was the proper beneficiary. (1st Am. Compl., Ex. 3). Upon learning of Plaintiff's beneficiary designation, Defendant Cortese filed a petition for escrow of the funds in the Wayne County Probate Court, contending that the funds should be paid to decedent's estate.
In a letter dated March 6, 2000, Plaintiff informed Defendant Cortese that although she had never filed a formal request for administrative review of Plaintiff's beneficiary determination, it had nonetheless construed her probate court petition as a claim for benefits on behalf of the estate, and upon reviewing its original beneficiary determination had again determined that decedent's mother was the proper beneficiary under the terms of the Plan. The March 6, 2000 letter also informed Defendant Cortese that she had sixty days within which to seek administrative review of its decision. (1st Am. Compl., Ex. 5).
On March 13, 2000, Plaintiff filed the instant interpleader action under the Employee Retirement Income Security Act ("ERISA"). According to Plaintiff, it filed the instant suit upon the Wayne County Probate Court's refusal to exercise jurisdiction over the controversy as involving an ERISA plan. Plaintiff's complaint specifically noted that Defendant Cortese had until May 7, 2000 to pursue an administrative appeal. (1st Am. Compl. ¶ 18). Furthermore, at a scheduling conference on April 12, 2000, the parties discussed the fact that Defendant Cortese had until May 7, 2000, to exhaust the administrative review process and accordingly, this Court's scheduling order was structured to accommodate such review by setting the close of discovery for July 31, 2000.
On April 19, 2000, Plaintiff received a letter from counsel for Defendant Cortese indicating that she wished to appeal its determination of beneficiary. (Pl.'s Br. Supp. Mot. Entry J., Ex. 6). Plaintiff responded on May 2, 2000, by informing counsel for Defendant Cortese that he was entitled to review all pertinent documents and submit arguments on behalf of Defendant Cortese, extending the deadline for submission of such materials to May 23, 2000. ( Id., Ex. 7). In the same letter, Plaintiff requested that Defendant Cortese seek an extension in writing if unable to meet the May 23 deadline. ( Id.). Counsel for Defendant Cortese, however, did not request an extension, review any materials, or submit any arguments in support of Defendant Cortese's appeal. Therefore, on June 27, 2000, Defendant Cortese was notified that Plaintiff's original determination was being upheld.
Both Plaintiff and Defendant Favot have now filed motions seeking to uphold Plaintiff's determination that decedent's mother, Elinore Cortese, is the proper beneficiary under the Plan.
Discussion
Administrator determinations are reviewed by this Court de novo unless the ERISA plan vests its administrator with the discretionary authority to determine eligibility for benefits and construe the terms of the plan. Hunter v. Caliber Sys., Inc., 220 F.3d 702, 709-10 (citing Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956-57, 103 L.Ed.2d 80 (1989)); see also Perez v. Aetna Life Ins. Co., 150 F.3d 550, 555 (6th Cir, 1998). When an ERISA plan clearly confers discretion upon an administrator, the administrator's determinations are to be reviewed under an "arbitrary and capricious" standard. Id. at 710; see also Wells v. United States Steel Carnegie Pension Fund, Inc., 950 F.2d 1244, 1248 (6th Cir. 1991). Defendant Cortese agrees that Plaintiff's actions in this case are governed by the arbitrary and capricious standard. (Def. Cortese's Answer ¶ l).
"'The arbitrary and capricious standard is the least demanding form of judicial review." Id. at 710. To satisfy the arbitrary and capricious standard, a plan administrator must only "offer a reasoned explanation, based on the evidence, for a particular outcome." Id. (internal quotations omitted). Furthermore, in reviewing an administrator's determination, this Court "may consider the parties' arguments concerning the proper analysis of the evidentiary materials contained in the administrative record, but may not admit or consider any evidence not presented to the administrator." Wilkins v. Baptist Healthcare Sys., Inc., 150 F.3d 609, 619 (6th Cir. 1998).
ERISA requires that a plan administrator discharge his duties "in accordance with the documents and instruments governing the plan." 29 U.S.C. § 1104(a)(1)(D). The Sixth Circuit has interpreted this requirement as "establish[ing] a clear mandate that plan administrators follow plan documents to determine the designated beneficiary." Metropolitan Life Ins. Co. v. Pressley, 82 F.3d 126, 130 (6th Cir. 1996) (discussing McMillan v. Parrott, 913 F.2d 310 (6th Cir. 1990)).
In this case, the Plan specifically provides that in the case of an unmarried participant who fails to file a written designation of beneficiary, the person designated as the participant's beneficiary under the company's group life and disability insurance program shall be deemed the participant's beneficiary under the Plan. (Plan § XXIV(2)). Plaintiff and Defendant Favot contend that in determining that decedent's mother was the proper beneficiary under the terms of the Plan, Plaintiff followed the specific provisions of the Plan and therefore, its determination was, as a matter of law, not arbitrary or capricious. This Court agrees. It is undisputed that decedent had not filed a written designation of beneficiary, and that decedent was unmarried at the time of his death. It is also undisputed that decedent's mother, Elinore Cortese, was the designated beneficiary on decedent's group life and disability insurance plan. Therefore, under the terms of the Plan, decedent's mother was the proper beneficiary.
Defendant Cortese contends that "the Plan account must be paid to the deceased's estate, for to do otherwise would be an arbitrary, capricious and discriminatory beneficiary designation by the Plaintiff." (Def. Cortese's Answer Mot. Summ. J. ¶ 6(b)). Defendant Cortese also contends that "the Plan is arbitrary and capricious because it discriminates against the heirs of a deceased unmarried Plan participant." ( Id. ¶ 6(d)). According to Defendant Cortese, the Plan itself is discriminatory because, with respect to a participant who is married at the time of his death, the benefits pass under the terms of the Plan to the participant's wife, whereas in the case of a participant who is unmarried at the time of his death, the benefits pass to the person named as the beneficiary on the participant's group life and disability insurance policy. (Plan § XXIV).
Plaintiff, however, asserts that Defendant Cortese is barred from asserting her current arguments because she failed to present them during the administrative review process. In response, Defendant Cortese argues that she should not be barred from asserting her arguments in this Court despite the fact that she failed to present any arguments during the administrative review process because "Plaintiff elected to commence this action prior to exhausting [the] administrative process, thereby compelling this Defendant to respond and present her arguments to this Court." (Def. Cortese's Answer Mot. Entry 3. 6 3). The Court notes, however, that Defendant Cortese filed a claim in the Wayne County Probate Court prior to exhausting her administrative remedies and thereby, forced Plaintiff to commence this action.
At oral argument, counsel for Defendant Cortese also contended that although he did not formally submit any arguments in support of Defendant Cortese's administrative appeal, he in essence submitted her arguments during the appeals process by filing an answer to this action, and that tie had no additional documentary evidence to submit. The Court, however, is not persuaded that the filing of an answer to this action fulfilled Defendant Cortese's obligation to provide her arguments and evidence in support thereof during the administrative appeals process.
In any event, the Court is satisfied that Defendant Cortese's contention that the terms of the Plan itself are arbitrary and capricious because they "discriminate" against an unmarried participant is without merit. "[A]n employer is entitled to design a plan any way it likes, as long as it is willing to pay the cost (either directly or in terms of employee morale)." Ames v. American Nat'l Can Co., 170 F.3d 751, 758 (7th Cir. 1999). "ERISA does not mandate that employers provide any particular benefits, and does not itself proscribe I discrimination in the provision of employee benefits." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 91, 103 S. Ct, 2890, 2897, 77 L.Ed.2d 490 (1983).
Furthermore, the Plan at issue in this case specifically provides that a participant may designate a specific beneficiary or beneficiaries simply by filing a written designation of beneficiary form. Therefore, if an unmarried participant wished to ensure that his ex-wife, or children, received such benefits upon his death, all the participant would need to do is file a written designation of beneficiary. In short, Defendant Cortese has failed to convince this Court that the terms of this Plan are discriminatory.
Conclusion
The Court is satisfied that Plaintiff's designation of decedent's mother, Elinore Cortese, as the proper beneficiary under the terms of the Plan was not arbitrary or capricious. Accordingly, Plaintiff's motion for entry of judgment, and Defendant Favot's motion for judgment on the pleadings, shall be granted.
A Judgment consistent with this Opinion shall issue forthwith.