Opinion
Case No. 1:00 CV 00075 B
April 8, 2003
MEMORANDUM OPINION AND ORDER
INTRODUCTION
Plaintiff seeks to recover disability benefits that she argues were improperly denied he by defendant. She sued defendant for violation of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132 (a)(1)(B) and has filed a motion for summary judgment claiming that defendant's decision to terminate her benefits was arbitrary and capricious. Defendant has also filed a motion for judgment on the administrative record or in the alternative for summary judgment. The issues before the Court are 1) whether plaintiff sufficiently exhausted her administrative remedies, and 2) if so, whether defendant's decision to deny benefits was arbitrary and capricious.
Having considered the parties' briefs, oral arguments, and the relevant law, the Court issues the following Memorandum Opinion and Order.
FACTUAL BACKGROUND
Plaintiff Dee A. Spencer has been an employee of Banc One Corporation ("Bank One") in Ogden, Utah for approximately 15 years. As an employer, Bank One enrolled plaintiff in a comprehensive employee benefit plan ("Plan") with defendant Prudential Insurance Company. The Plan provided, among other things, short-term disability ("STD") and long-term disability ("LTD") benefits should plaintiff ever become disabled as defined by the Plan.
Most recently plaintiff held the job title of "Relationship Banker," or Loan Officer, where she performed tasks such as opening new accounts, making loans, and selling other investment products. Her position is sedentary, requiring her to make many outbound phone calls, but her employer states that she "is not restricted to a sitting position and can move about at will." (Admin. R. at PRUS0016.) On January 11, 1999 plaintiff initially contacted defendant to make a claim for disability benefits. Roughly two weeks later, on February 1, 1999, plaintiff stopped going to work at Bank One due to symptoms relating to fibromyalgia, chronic headaches, depression, and other medical conditions. She reported that these conditions were lifelong and that she first consulted a doctor regarding her symptoms in October 1995. She also underwent back surgery in 1987 that she claims exacerbated these conditions.
Under the Plan, defendant acted as the claims administrator for both STD and LTD benefit claims. As such, defendant determined, initially and upon review, whether claimants were in fact disabled as contemplated by the Plan, and therefore qualified to receive benefits. (Admin. R. at PRUS446.) Plaintiff's employer, Bank One, acted as Plan administrator, ensuring that the Plan was funded and managing its application to employees. (Admin. R. at PRUS517.) After a review of plaintiff's application for benefits, which included statements by her attending physician, defendant concluded that plaintiff qualified for STD benefits through June 30, 1999. As plaintiff's condition persisted, defendant determined that plaintiff was eligible for LTD benefits. However, she had improved enough to return to work two days per week on June 1, 1999, and her physician had noted some encouraging progress in her condition so defendant reduced the amount of those benefits to $1000 per month.
Based on the encouraging information from plaintiff's attending physician and the fact that she was able to work two days per week, defendant asked plaintiff to submit to an Independent Medical Evaluation ("IME") in November 1999. In light of the results of this IME, the encouraging statements by plaintiff's own attending physician, and the fact that plaintiff had returned to work part-time, defendant determined that plaintiff was no longer disabled under the definition of the Plan. Thereafter, plaintiff's benefits were terminated effective January 1, 2000.
THE PLAN AND ADMINISTRATIVE HISTORY
Pursuant to the terms of the Plan, a claimant may appeal the administrator's decision to deny or terminate benefits according to an appeals process consisting of three levels of review as follows: 1) call the Customer Service or Member Service Department to ask for a review of the claim decision; 2) if the administrator, upon review, denies the claim, request a formal appeal by writing to the claim administrator; 3) if the claim is again denied by the claim administrator, request a review of the denied claim by writing to Bank One's Benefits Review Committee. (Admin. R. at PRUS0518-19.)
The Plan's requirement that a claimant exhaust three "levels" of review in appealing a denial or termination of benefits will be discussed in greater detail below.
Defendant called plaintiff on November 23, 1999, and informed her of defendant's decision to terminate her disability benefits. During that phone conversation, plaintiff asked what else could be done to have the decision reconsidered and was told that information regarding an appeal was forthcoming. In a letter dated November 22, 1999, plaintiff was told that she could appeal the decision by sending a written request to defendant along with any other information she wished to be considered in the review. Accordingly, plaintiff filed a written appeal, according to defendant's records, on January 19, 2000 (Admin. R, at PRUS0057, 0072), although no copy of that correspondence can be found in the administrative record. After further review, defendant upheld its earlier decision to terminate benefits in a letter dated April 20, 2000, along with instructions to file a written appeal with defendant if plaintiff wished to have the claim reviewed again. Id.
Attached to plaintiff's reply brief is a letter dated December 30, 1999. It is assumed that this is the correspondence referred to in the administrative record.
On April 26, 2000 plaintiff, through counsel, sent a letter to defendant threatening legal action if defendant did not reinstate LTD benefits and reimburse plaintiff for the four months she had been without disability benefits. (Admin. R. at PRUS0054.) Plaintiff also requested a copy of the policy agreement. Defendant acknowledged receipt of this letter in a correspondence dated May 9, 2000, and considered it as a request for a second level formal appeal. (Admin. R. at PRUS0046.) Defendant also instructed plaintiff that she should contact her employer, the Plan administrator, for copies of the policy agreement.
Before defendant could conclude a second level of review of its decision to terminate plaintiff's disability benefits, plaintiff filed a lawsuit in state court on May 24, 2000. The case was removed to this Court for federal question and diversity jurisdiction. To this point, the Court has made the following rulings: 1) ERISA covers the plaintiff's claims; 2) the Court will review defendant's decision to terminate benefits under an arbitrary and capricious standard; 3) there is no evidence of a conflict of interest; and 4) the scope of the Court's review is limited to the administrative record.
DISCUSSION
I. Use of Summary Judgment to Determine ERISA Claims
As a preliminary matter, defendant argues that summary judgment is an improper procedure for claims arising under ERISA, relying on Wilkins v. Baptist Healthcare System, Inc., 150 F.3d 609 (6th Cir. 1998); therefore defendant has made a motion for Judgment on the Administrative Record. In Wilkins, the court affirmed summary judgment for the defendant plan administrator and ruled that its decision to deny benefits was not arbitrary and capricious. In the concurring opinion, two judges concluded that summary judgment was not an appropriate procedure for ERISA claims. Summary judgment, they argued, is a procedure designed to determine whether there is a genuine issue of material fact for trial.
Judges Oilman and Ryan concurred in the judgment, but disagreed with the analysis used by Judge Cole in the final part of the opinion to apply summary judgment to such a proceeding. Therefore, the concurring opinion represents the opinion of the Court on that issue.
The issue seems to be one of semantics, and the Tenth Circuit Court of Appeals has neither adopted the analysis in Wilkins nor expressed concern in using summary judgment for disposition of actions arising under ERISA. On the contrary, the Tenth Circuit seems to condone its use by continuing to affirm decisions that were rendered pursuant to motions for summary judgment in ERISA cases. See, e.g., Hickman v. Gem Ins. Co., Inc., 299 F.3d 1208 (10TH Cir. 2002), Nance v. Sun Life Assurance Co. of Canada, 294 F.3d 1263 (10TH Cir. 2002), Woods v. Arco Long Term Disability Plan, 23 Fed. Appx. 993, 2002 U.S. App. LEXIS 1006 (10th Cir. Jan. 24, 2002), Wagner-Harding v. Farmland Indus. Inc., 26 Fed. Appx. 811, 2001 U.S. App. LEXIS 26408 (10TH Cir. Dec. 10, 2001). Therefore, absent further direction from the Tenth Circuit Court of Appeals, summary judgment is an appropriate procedural method as applied to this case.
II. Exhausting the Administrative Remedies
Neither party disputes that there were three levels of administrative review required to appeal an adverse benefits decision. However, the parties do disagree as to what constituted a request for formal appeal and whether the full appeals process (i.e., all three levels) was exhausted or excused in this case.
A. Plaintiff's Administrative Appeals
It is well settled that in order to bring an ERISA action in Federal Court, a claimant must first exhaust her administrative remedies. "ERISA exhaustion is a judicial, not contractual, doctrine. . . . [and] we have held that exhaustion of administrative (i.e., company or plan-provided) remedies is an implicit prerequisite to seeking judicial relief." Whitehead v. Oklahoma Gas Electric Co., 187 F.3d 1184, 1190 (10th Cir. 1999) (internal quotations omitted).
Pursuant to the Plan, a claimant must request three levels of review to appeal an adverse benefits decision. First, the claimant must appeal through an informal telephone call to defendant's Customer Service or Member Services Department ("Level 1 Appeal"). Second, if the Level 1 Appeal proves unsuccessful, the claimant must then request a formal appeal in writing ("Level 2 Appeal"). As a last resort, a written appeal must be made to the Benefits Review Committee of Bank One ("Level 3 Appeal"). (Admin. R. at PRUS518-19.) Because these procedures are clearly set forth in the Plan, plaintiff is on notice of these procedures and of the fact that she must exhaust her administrative remedies before seeking judicial redress, This is primarily "[b]ecause ERISA itself does not require the exhaustion of remedies," but rather exhaustion is a judicial doctrine.
See Rando v. Standard Ins. Co., 1999 U.S. App. Lexis 9736 (10th Cir. May 20, 1999) where the Circuit Court notes that it can find no authority for the proposition that an insurer must inform an insured of his responsibility to exhaust his administrative remedies.
Pursuant to federal regulations governing ERISA, a plan administrator who denies benefits must include in the written notice of denial "appropriate information as to the steps to be taken if the participant or beneficiary wishes to submit his or her claim for review." 29 C.F.R. § 2560.503-1 (f)(4); See Guerrero v. Lumbermen's Mut. Cas. Co., 174 F. Supp.2d 1218, 1222 (D. Kan. 2001). Defendant in the present case has complied with this regulation in its letters sent to plaintiff.
Notice of the entire appeals process is provided in the Plan, and plaintiff argues that a phone conversation on November 23, 1999 initiated by defendant satisfies the requirements for a Level 1 Appeal. (Admin. R. at PRUS0007.) The Court finds it appropriate to extend to plaintiff the benefit of the doubt regarding this issue. This phone conversation did not technically comply with the requirements of a Level 1 Appeal, particularly due to the fact that defendant initiated the phone call, and plaintiff had not yet received the letter informing her that her benefits had been cancelled and advising her of further appeals rights. However, a Level 1 Appeal is by nature informal, and because, during the course of the conversation, plaintiff asked if anything could be done to reconsider the decision as soon as she learned her benefits were being terminated the Court finds that a reasonable administrator could have determined that plaintiff satisfied the requirements of a Level 1 Appeal.
In compliance with the instructions contained in the November 23 letter and the Plan, plaintiff next filed a written appeal with defendant on January 19, 2000, seeking formal review of her claim. Defendant then again reviewed plaintiff's claim and upheld the denial in a letter dated April 20, 2000. (Admin. R. at PRUS0056-60.) The Court finds this appeal qualified as a Level 2 Appeal.
The Plan provides that defendant will respond in writing to a Level 2 Appeal within 90 days, 180 days if special circumstances warrant. (Admin. R. at PRUS518.) In this case, 91 days passed from the time defendant received plaintiff's appeal to the time defendant wrote the response letter, meaning more than 90 days had passed from the time plaintiff sent her appeal to the time she received a reply. Evidently, defendant felt that special circumstances warranted the delay, but there is nothing in the record to indicate that defendant informed plaintiff :t would take longer than normal to handle her appeal. Plaintiff does not argue that there was improper delay, and the Court assumes that the delay was justified.
Defendant treated this appeal as a Level 1 Appeal. The Court, having found the informal telephone conversation constituted the Level 1 Appeal finds that the January 19, 2000 written appeal constituted a Level 2 Appeal, thereby extending to plaintiff every reasonable doubt in the administrative appeals process to this point.
In order to comply with the appeals process, plaintiff must have next filed an appeal with the Bank One Benefits Review Committee. This would have constituted compliance with the Level 3 Appeal requirement of the Plan. However, the next correspondence from plaintiff's counsel was a letter dated April 26, 2000, to defendant, not to the Benefits Review Committee. (Admin. R. at PRUS0054) This letter was not an appeal, but rather threatened legal action if benefits were not immediately reinstated and past benefits reimbursed. Although neither side had been perfect in technically identifying the previous appeals, it is reasonable to find that the November 23, 2000 phone conversation and plaintiff's January 19, 2000 letter were satisfactory as Level 1 and 2 Appeals, respectively, under the provisions of the Plan. However, even viewed with the same degree of leniency, and in an effort to view the evidence in a light most favorable to plaintiff, this Court cannot reasonably find that the April 26, 2000 letter sent to the defendant satisfied the requirements of a Level 3 Appeal as plaintiff argues. It is clear that in order to constitute a Level 3 Appeal, plaintiff was required to contact the Benefits Review Committee. Therefore, even extending the benefit of the doubt to plaintiff with regard to the Level 1 and 2 Appeals, she clearly failed to make a Level 3 Appeal to the appropriate authority. Accordingly., the Court finds as a matter of law that plaintiff failed to exhaust her administrative remedies because she did not file a written appeal with the Bank One Benefits Review Committee.
B. Futility
As an alternative, plaintiff argues that she should be excused from exhausting her administrative remedies because any further administrative appeal attempt would have been futile. While it is true that exhaustion is not required if a claimant can prove futility, plaintiff's case falls far short of that standard.
"[T]he futility exception is limited to those instances where resort to administrative remedies would be clearly useless." McGraw v. Prudential Insurance Co. of Am., 137 F.3d 1253, 1264 (10th Cir. 1998) (internal quotations and citations omitted). Futility requires a plaintiff to show that her claim would be denied on appeal, and not just that she thinks a different outcome would be unlikely on appeal. See Lindemann v. Mobil Oil Corp., 79 F.3d 647, 650 (7th Cir. 1996), cited in Getting v. Fords Benefits Ins. Co., 2001 U.S. App. LEXIS 3070, at **6, 5 Fed. Appx 833, at 836, No. 00-3278, 2001 WL 201966, at *2 (10th Cir. Feb. 28, 2001). In McGraw, the Tenth Circuit Court of Appeals found the futility exception applied where the record indicated that Prudential "never evaluated Ms. McGraw's individual case but rubber stamped the `nature' of her condition and denied each subsequent claim." McGraw, 137 F.3d at 1264. There is no indication in the record that defendant acted with similar disregard towards plaintiff's claim. On the contrary, defendant dutifully provided clear and extensive analysis in each of its correspondences with plaintiff, making every effort to help plaintiff understand what was being done with her claim and the reasons behind defendant's actions. Additionally, defendant extended the benefits that it paid to plaintiff, "[a]s a measure of assistance," even after it determined that plaintiff was no longer disabled. (Admin. R. at PRUS0147.) The Court finds defendant acted squarely within the requirements of the Plan and plaintiff has failed to show that her claim would be denied without good faith consideration by the defendant.
Furthermore, plaintiff's argument that it would have been futile to appeal again to defendant says nothing about whether it would have been futile to appeal to the Benefits Review Committee of Bank One, as plaintiff was required to do. See Guerrero, 174 F. Supp.2d at 1223 (the fact that a second claim review would be conducted by different individuals than those that conducted the first review is sufficient to undermine a futility argument). There is absolutely no evidence in the record to indicate that the Benefits Review Committee would have ruled against plaintiff and affirmed the denial of benefits. In fact, her employer had stated its willingness to accommodate all her needs as identified by her own doctor and an independent doctor — an indication that Bank One would act reasonably and with flexibility toward plaintiff, not arbitrarily and capriciously. Such an assertion of futility is therefore unfounded.
Plaintiff's futility argument rests largely on her belief that defendant was being unreasonable by not sending her a copy of the Plan upon request. But, as defendant explained in its May 9, 2000 letter to plaintiff as well as in its brief, Bank One was responsible as the Plan administrator to provide copies of the Plan to interested employees, not the claims administrator. Again, defendant acted in a reasonable manner. It appears that by this point, plaintiff was so involved in filing a lawsuit the original suit was filed on May 24, 2000, less than a month after her attorney sent his letter to defendant — that she neglected to follow the simple instructions that may have resolved her claim less acrimoniously. Accordingly, the Court finds plaintiff was no; excused on the basis of futility from exhausting her administrative remedies.
III. Review of Defendant's Decision Under Arbitrary and Capricious Standard
An arbitrary and capricious standard is extremely deferential. When reviewing an administrator's decision under this standard, the Court need not determine that the decision was "the only logical one nor even the best one. It need only be supported by facts within [the administrator's] knowledge." Kimber v. Thiokol Corp., 196 F.3d 1092, 1098 (10th Cir. 1999) (internal quotations and citations omitted). To reverse the administrator's decision, the Court must find that it was not grounded on any reasonable basis. Id.
According to defendant, the primary factors influencing defendant's decision to terminate benefits were 1) the fact that plaintiff had returned to work two days per week, 2) that Dr. Booth, plaintiff's attending physician, had indicated improvements in plaintiff's condition, 3) that in his IME Dr. Shepherd indicated plaintiff was capable of performing her job functions with some accommodations, and 4) that both doctors indicated plaintiff's tolerances were based on subjective self-reporting, not objective (i.e., medical) criteria. (Def. Br. at 15-16.) Plaintiff argues that the only factor that influenced the decision to terminate her benefits was Dr. Shepherd's IME, which she contends is vague and does not reflect any material changes in her disabled condition.
Essentially, the crux of this case is the fact that plaintiff and defendant disagree in their interpretations of the medical evidence, particularly Dr. Shepherd's IME Plaintiff feels that there is evidence in the record indicating that she continues to be disabled; defendant points to other evidence indicating that she is healthy enough to work and not disabled as that term is defined by the Plan. Unfortunately for plaintiff, if the defendant's interpretation of the evidence is reasonable, it is controlling for purposes of the Plan.
The primary disagreement between the parties concerns interpretation of the IMP performed by Dr. Shepherd. In his evaluation, Dr. Shepherd states that plaintiff "should be able to provide customer service information as long as she is able to sit on an as-needed basis." (Admin. R. at PRUS0052.) As reported by her employer, plaintiff's position allows her to "move about at will" (Admin. R. at PRUS0016), reasonably allowing her an opportunity to sit when needed. In addition, Dr. Shepherd reports that plaintiff "should be able to answer telephones and interact with other people" if she is "allowed to alternate between sifting, standing, and walking every 10 to 30 minutes as needed." (Admin. R. at PRUS0052) The Court finds that plaintiff's job duties would reasonably allow for such accommodations. Granted, there are some statements in the doctor's reports that, if taken in isolation, may support plaintiff's belief that she is disabled. But the fact that there are encouraging reports on plaintiff's condition from her physician and an independent physician, coupled with the fact that she has returned to work on a part-time basis supports the possibility that there could be many reasonable interpretations of those reports regarding disability as defined by the Plan. The Court finds defendant's interpretation was, based on all the evidence in the record, reasonable, and its decision to deny plaintiff disability benefits was not arbitrary and capricious.
CONCLUSION
Based on the foregoing, the Court finds that plaintiff has failed to exhaust her administrative remedies, and such failure was not excused by futility. Furthermore, defendant's decision to terminate benefits was not arbitrary and capricious, but a rational decision based on. a reasonable interpretation of all the evidence contained in the administrative record. Accordingly, defendant's motion for summary judgment is GRANTED and plaintiff's motion for summary judgment is DENIED without prejudice.