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Pocchia
v. NYNEX Corp., 81 F.3d 275 (2d Cir. 1996) -- Download
in RTF--Plaintiff claimed that Defendants breached a
fiduciary duty owed to him by not informing him at the time he
retired that they had decided to implement or, alternatively,
were considering implementing, an early retirement plan. On May
15, 1989, Pocchia voluntarily resigned from his position at NYNEX
Service Company. Pocchia had worked for NYNEX Corporation or one
of its subsidiary or predecessor corporations since May 1965.
When he resigned, he signed an agreement, the terms of which
entitled him to a lump sum payment of $28,500 and prevented him
from raising certain claims against his former employer. On
December 21, 1989, NYNEX announced its new early retirement
incentive plan. If Pocchia had retired under this new plan, he
would have been entitled to enhanced benefits. Pocchia requested
that he be reinstated and/or included in the new plan. After
Defendant refused, Plaintiff brought this action. Evidence showed
that the Plaintiff had not inquired into the possibility of the
adoption of an early retirement plan. The Court of Appeals held
that though NYNEX had a fiduciary duty not to make affirmative
misrepresentations or omission, a fiduciary is not required to
voluntarily disclose changes in a benefit plan before they are
adopted.
Nowak
v. Ironworkers Local 6 Pension Fund, 81 F.3d 1182 (2d
Cir. 1996) -- Download
in RTF-- Nowak was a member of the Union from September 21,
1955, through June 1, 1973. When Nowak left the Union, the 1973
version of the Plan was in effect; the Plan was later amended in
1985, 1988, and 1993. In January 1993, Nowak applied for long
term disability. Defendant denied his application because he
lacked the five years of credited future service (five years of
service after June 1, 1966) and had incurred a break in service
before completing the requirements for a disability pension.
Defendants removed the case to federal court and filed a motion
to dismiss or, in the alternative, a motion for summary judgment,
arguing that (1) Nowak failed to exhaust his remedies under the
1993 version of the Pension Plan before filing suit and (2) Nowak
was not entitled to benefits under the 1973 Plan because he
failed to accumulate the five years of future service necessary
to entitle him to a Vested Deferred Pension and incurred a break
in service prior to fulfilling the requirements for a Total
Disability Retirement Pension. Nowak filed a cross-motion for
summary judgment on the ground that his claim was governed by the
1973 Plan, under which he claimed that (1) there was no
administrative exhaustion provision and (2) he was entitled to a
disability pension The district court found Nowak's denial of
disability benefits was based on the 1973 Plan's
"break-in-service" provision and therefore, arose or
was based on any act or omission which occurred before January
19, 1975. Consequently, under 29 U.S.C. § 1144(b)(1) ERISA did
not apply to Nowak's action. The magistrate found that subject
matter jurisdiction did not exist and remanded Nowak's state law
claims to state court. However, the district court found it had
supplemental jurisdiction over Plaintiff's state law claims and
because the contract terms were unambiguous, Nowak's claim for
benefits failed. The Court of Appeals found that Nowak's
complaint alleged federal question jurisdiction on the ground
that his claim for benefits "arose under" ERISA, 29
U.S.C. § 1132(a)(1)(B), which gives a plan participant or
beneficiary a cause of action to recover benefits due to him
under the terms of his plan. However, because Nowak failed to
satisfy 29 U.S.C. § 1144 dismissal should be under 12(b)(6) for
failure to state a claim, rather than under 12(b)(1).
Additionally, the court found the terms of the 1973 Plan to be
unambiguous and so refused to reach the issue of contra
proferentum.
United
States of America v. Sokolow, 1996 U.S. App. LEXIS 8432
(3d Cir. 1996) -- Defendant Craig B. Sokolow appealed from his
conviction of 107 counts of mail fraud in violation of 18 U.S.C.
§ 1341 (1988), 17 counts of money laundering in violation of 18
U.S.C. § 1957 (1988), and one count of criminal forfeiture in
violation of 18 U.S.C. § 982 (1988). Sokolow, an attorney and
licensed insurance agent, offered health benefits plans to the
public in Pennsylvania and several other states through a series
of corporations that he established and controlled. In 1987
Sokolow purchased stop-loss coverage from Blue Cross. The
indictment charged that Sokolow falsely represented to the public
that his company was fully-insured by Blue Cross, when, in fact,
it was a self-funded plan, thus defrauding members of their
premiums. In 1988 Blue Cross terminated its service plan when
Sokolow failed to pay approximately $ 2 million in claims for
which Blue Cross sought reimbursement. Sokolow then contracted
with another company for higher stop-loss coverage. The
indictment alleged that Sokolow again misrepresented that the
company was fully insured by the new coverage, when, in fact, it
was self-funded. After receiving complaints concerning the
company's claims administration in late 1988, the Pennsylvania
Insurance Department began to investigate operations and
determined that Sokolow had been operating as an illegal,
unlicensed insurer in Pennsylvania. Sokolow claimed the was a
Multi-Employer Welfare Arrangement ("MEWA") that could
file a benefits plan under ERISA and, thus, was not subject to
state regulation. The Pennsylvania Court found that the company
did not constitute a valid MEWA plan, but was a commercial
enterprise "marketing insurance, without the benefit of a
licensed company status, while purporting to be a valid ERISA
plan, such that state licensing would not be necessary." The
company was liquidated and Sokolow indicted. On appeal, the Third
Circuit affirmed Sokolow's conviction, sentencing, and the order
of forfeiture, but remanded for reconsideration of the
restitution order.
Epright
v. Environmental Resources Management, Inc. Health and Welfare
Plan, 81 F.3d 335 [19 EBC 2936] (3d Cir. 1996) -- On
November 18, 1992, Epright was hired as a temporary employee of
ERM. Porfido, ERM's president, had complete discretion on when to
classify an employee as temporary or permanent. Neither the
Employee Handbook nor the ERM Health and Welfare Plan referred to
temporary employees; only permanent and part-time employment was
addressed. The Handbook stated that "You are a full time
employee of ERM if you work a minimum of 30 hours each week on a
continuous basis and are designated as a full time employee. As a
full time employee you are eligible for group medical, life and
long term disability insurance coverage . . . . You are a part
time employee of ERM if you work less than 30 hours each week on
a continuous scheduled basis or designated as a part time
employee. You are not entitled to participate in group medical,
life, and long-term disability plans." The ERM Health and
Welfare Plan defined "eligible classes" as all
"active, full-time employees" of ERM who have selected
the high option or standard option plan, and stated that the
eligibility date is the "date following 60 consecutive days
of active, full-time employment. The Plan also stated that if an
employee is eligible the coverage will become effective on
"the date eligible if actively at work . . . ." Epright
worked in excess of forty hours each week. On July 31, 1993
Epright was severely injured in a non-work related accident and
denied health and welfare benefits under the ERM employee
benefits plan. The district court entered judgment in favor of
ERM on December 6, 1994, holding that because Epright was a
temporary employee, he was ineligible for Plan benefits. On
appeal, the Circuit Court found the Plan Administrator acted
arbitrary and capricious in denying benefits when the plain
language of the document expressly provided coverage to full-time
employees" who have completed sixty days of
"active" service. ERM argued that the term
"full-time employee" is ambiguous, and that extrinsic
evidence should be used to interpret the term. The court rejected
this argument stating that a definition was provided by the Plan.
The court rejected as moot Epright's argument that a Plan
Administrator who has a conflict of interest should be held to
some form of heightened scrutiny beyond the typical
"arbitrary and capricious." ERM also argued that
because Epright had not completed Plan enrollment forms, nor
designated the type of coverage he desired, he was not entitled
to any Plan benefits. The court stated that because enrollment
forms were not completed as a result of ERM's erroneous
interpretation and not through lack of diligence on Epright's
part, ERM should not now be allowed to benefit from its own
mistake at the expense of its employee. The court also rejected
ERM's argument that Epright had not requested a review of the
denial of benefits in time and was therefore Epright's appeal is
barred. The court found that ERM's initial denial letter fell
short of statutory and regulatory requirements, and as such his
request for review was timely.
Baker v.
BASF Corp., 1996 U.S. App. LEXIS 8750 (4th Cir.) --
Plaintiffs, former salaried, nonunion employees of BASF, alleged
that they were entitled to severance pay from BASF because their
employment with BASF terminated when BASF sold its Williamsburg,
Virginia plant to Mann Industries in November 1989. Plaintiffs
also alleged that BASF violated ERISA's reporting and disclosure
requirements by failing to fully inform them of their severance
benefits rights. Plaintiffs' employment transferred from BASF to
Mann Industries and they continued working without interruption
at the same pay received from BASF. The district court entered
summary judgment for BASF, finding that the written terms of
BASF's severance plan comported with ERISA procedure. The May
1989 plan stated that in order to be eligible for severance as a
result of discontinuance of operations, the continuance of
employment must cease permanently. The Court of Appeals found the
Plan language to be unambiguous and affirmed the district court.
On the issue of whether BASF intentionally and secretly withheld
details of the May 1989 severance plan the court found that BASF
told employees of the existence of the May 1989 severance plan,
explained the schedule of benefits available under the policy,
and explained the circumstances under which benefits would or
would not be provided. In addition, the May 1989 Plan was a
revision, not a new plan; therefore, BASF had 210 days after the
end of the plan year to notify each participant and beneficiary
of modifications and changes under 29 § 1024(b)(1) and BASF had
sold the plant to Mann before the deadline.
Jenkins
v. Montgomery Industries, Inc., 1996 U.S. App. LEXIS 6142
(4th Cir. 1996) - Fourth Circuit granted Montgomery's motion for
rehearing and vacated the earlier opinion reported in Brininger LTD April
1996 ERISA Newsletter.
Kramer
v. Smith Barney, 80 F.3d 1080 (5th Cir. 1996) -- Dr.
Kramer, as an individual and trustee of two pension plans for the
benefit of himself and his employees, brought suit in Texas state
court, alleging fraud, negligence, security violations, and
breach of contract as a result of the purchases of partnership
interests. At the time Kramer opened his accounts with Smith
Barney, he signed an agreement that required that all disputes
were subject to arbitration. Kramer initiated an arbitration
proceeding two years after he discovered the true value of his
investments but more than six years after he purchased most of
them. Rule 605 of the AMEX states that no dispute is eligible for
arbitration where six years have elapsed from the occurrence
giving rise to the dispute. Therefore, Kramer's claims were
stayed by the New York state court. Kramer then filed his claims
in Texas state court and Smith Barney removed to federal district
court. The district court dismissed the action with prejudice on
the grounds that claims made ineligible for arbitration by reason
of their age could not be pursued in court. The Fifth Circuit
found that though ERISA's enforcement provision did not preempt
the Arbitration Act, AMEX Rule 605 did not apply to the
arbitration of Kramer's claims. The court rejected defendants'
contention that Kramer's claims, as trustee, were barred by
collateral estoppel on the basis of the New York court's ruling.
However, the court found that Kramer's personal non-ERISA claims
were subject to AMEX Rule 605 and therefore Kramer was estopped
by the New York judgment from pursuing his claims as an
individual.
Boggs
v. Boggs, 82 F.3d 90 (5th Cir. 1996) -- Sandra Boggs, the
widow and second wife of Isaac Boggs, sought a declaratory
judgment that ERISA preempts Louisiana community property law and
therefore prevents the creation of a community property interest
in ERISA-qualified retirement plans. Boggs was named the
beneficiary of her late husband's benefits plan. Her step sons
sought a portion of their father's pension benefits under
Louisiana's community property laws. The Court of Appeals,
affirming the district court and citing federalist concerns,
concluded that the Louisiana community property law was not
sufficiently related to an employee benefit plan under the facts
of this case to necessitate ERISA preemption.
Metropolitan
Life Insurance Co. v. Pressley, 82 F.3d 126 (6th Cir.
1996) -- The Court of Appeals affirmed the district court's
granting of summary judgment against the estate of Alvin Pressley
in favor of his ex-wife Barbara. Alvin, as an employee of General
Motors, participated in a company life insurance plan. He named
his wife Barbara as the beneficiary of that plan. The couple was
later divorced but Alvin never changed the designated
beneficiary. After Alvin's death a dispute arose over the
proceeds of the life insurance policy. Under the divorce decree
and Michigan law, all rights in life insurance policies of the
other party are extinguished upon divorce. The court found that
the designation of beneficiaries has a connection with or
reference to an ERISA plan, therefore state law is preempted.
Because the ex-spouse did not explicitly waive her rights to the
insurance policy, the plan administrator must discharge his
duties in accordance with the documents and instruments governing
the plan.
Principal
Mutual Life Insurance Co. v. Charter Barclay Hospital, Inc.,
81 F.3d 53 (7th Cir. 1996) -- The claimant under a group policy
submitted a bill from Charter Barclay Hospital (a psychiatric
hospital) for reimbursement which Principal Mutual denied.
Principal Mutual denied the claim on the grounds that the
claimant, the son of the corporation's owner, was not a full time
employee and therefore was not covered under the plan. The
claimant never appealed the denial or paid his hospital bill. The
hospital had verified that the claimant was covered by the plan
when first admitting claimant and argued that it was, as an
assignee, entitled to notice of the claim denial. After
summarizing the lack of evidence of full time employment on the
part of the claimant, the court addressed the issue of what duty
the plan owed to notify unknown assignees of claim denials. The
court also cited the DOL's regulations under ERISA that notice is
required to be provided only to the claimant. The court stated
that medical providers who take assignments are probably entitled
to notice of the denial of a claim of benefits submitted by the
assignor. At the same time, the court said, the entitlement of
notice is dependent on there being a valid assignment and the
insurer or plan administrator having notice of it - of which
there was no proof of in this case. Finally, the court found that
there was no credible evidence submitted by Charter Barclay that
the claimant was ever a full time employee and therefore affirmed
the district court's grant of summary judgment for Mutual.
Thorpe
v. Retirement Plan of the Pillsbury Co., 80 F.3d 439
(10th Cir. 1996) -- Download
in ASCII--The plaintiff was employed by Pillsbury from 1966
to 1991. On June 10, 1991, Pillsbury sold its facility to
Cargill, Inc., discontinued its operations and laid off its
employees; that very day, Cargill took over operation of the
facility and hired new employees, one of whom was plaintiff.
Plaintiff filed a claim under Section 11.3 of the Retirement Plan
provided by Pillsbury and the Union for early retirement
benefits. Section 11.3 provides in pertinent part: A Participant
whose Continuous Service terminates as a result of a plant
closure . . . shall be entitled to receive a special early
retirement benefit for life, if he has completed 25 or more years
of Continuous Service at the time of the plant closure but has
not attained his fifty-fifth birthday, with payments beginning on
the first day of the calendar month during which his Continuous
Service terminates. Pillsbury and the Union amended the
Retirement Plan to provide special benefits to employees who had
25 years of experience with Pillsbury and were under the age of
55. Early retirees who were offered employment by Cargill, such
as Plaintiff, were to receive pension benefits commencing at the
age of 55 and a $10,000 lump sum payment. Thorpe's claim for
early retirement was denied after the Retirement Board determined
that the plant in fact had not closed. The district court granted
Plaintiff's motion for summary judgment on the issue of whether
the plant had closed; dismissed as moot Plaintiff's second claim,
alleging that an amendment to the Retirement Plan violated ERISA
by decreasing his accrued benefits; dismissed as moot Plaintiff's
third claim, alleging that the Retirement and Welfare Plans
violated ERISA by allowing different treatment for similarly
situated employees; granted Defendants' motion for summary
judgment on the issue of whether Defendants' actions constituted
informational violations of ERISA; and denied Plaintiff's motion
for attorney's fees and costs.
The Court of Appeals affirmed the district court's decision
without determining the standard of review, concluding that the
Board's actions, including its interpretation of the plant
closure provision and its denial of early retirement benefits to
Plaintiff, were arbitrary and capricious. The court found the
Defendant's argument that the plant could not have been closed
unless operations were permanently shut down and the plant
dismantled unpersuasive. According to the court, the proper
inquiry requires an analysis of the rights and liabilities
assumed by Cargill, as Pillsbury's successor in interest,
regarding the contractual relationship between Defendants and
Plaintiff. Because the court affirmed the district court's grant
of summary judgment in favor of Plaintiff, they refused to
address Plaintiff's second and third claim. In granting
Defendant's motion for summary judgment regarding informational
violations of ERISA, the court stated that such causes of action
may be brought only against designated plan administrators,
rather than the plan itself or the employer. Finally, the court
found that the district court did not abuse its discretion in
denying Plaintiff attorney's fees and prejudgment interest.
Musick v. Goodyear Tire & Rubber Co., 81 F.3d 136
(11th Cir. 1996) -- In 1994, almost four years after Goodyear had
laid them off from their jobs, Plaintiffs filed suits claiming
that the lay-offs were motivated by Goodyear's desire to deprive
them of retirement benefits and contending that a six-year
statute of limitations governs section 510 actions in Alabama. In
1990, while covered by Goodyear's retirement plan, Plaintiffs
were laid off as a result of a reduction in force. Under that
plan, an employee is eligible for full retirement benefits when:
(a) he reaches age 55 and has 10 years of service; or (b) he has
30 years of service, regardless of age. Plaintiffs were recalled
but were not given credit, for purposes of calculating retirement
eligibility, for the time laid-off. Consequently, retirement
eligibility dates were approximately four years later than they
would have been but for the lay-offs. The district court
determined that a two-year statute of limitations was applicable
to the plaintiffs' lawsuits. The Court of Appeals characterized
the essential nature of the Plaintiffs' section 510 claim as one
for benefits denied by wrongful discharge and affirmed the
district court's ruling. In reaching its decision, the court
relied on Alabama's provision in its workers' compensation
statutes addressing retaliatory discharge, subject to a two-year
statute of limitations and Alabama's two-year statute of
limitations for the recovery of wages.
