Opinion
NO. 1:00-CV-800
November 13, 2001
Jane Swearingen Brown of Provost Umphrey, Beaumont, TX, for Plaintiffs.
Atofina Petrochemicals Stanley Weiner, Christine Lynn Palmer, And Michelle A. Morgan of Jones Day, Dallas, TX, Kirksey E. Martin of Jenkins Martin, Beaumont, TX, Hartford Life Accident Thomas E. Sanders of Akin, Gump, Strauss, Ins. Comp. Hauer Feld, San Antonio, TX, Ray B. Jeffrey of Stumpf, Craddock, Massey And Pulman, San Antonio, TX, for Defendants.
REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
This case is assigned to Hon. Thad Heartfield, United States district judge, who referred pretrial matters to the undersigned. Defendant, Hartford Life and Accident Insurance Co. ("Hartford") moves for entry of summary judgment. Judge Heartfield's referral order directs the undersigned to address the motion and make recommendations for its disposition. This report fulfills that requirement.
Referral of pretrial case management to United States magistrate judges is authorized by 28 U.S.C. § 636(b)(1)(A) and E.D. Tex. R. app. B (Rule 1(D)(1)). Generally, such references contemplate that magistrate judges shall rule on all pretrial matters that Congress authorizes magistrate judges to hear and determine, and conduct hearings when necessary, and submit written reports containing proposed findings of fact, conclusions of law, and recommendations for disposition of all other pretrial motions.
I. Parties and Nature of Suit
Plaintiff, Rebecca Aucoin ("Aucoin") resides in Nederland, Jefferson County, Texas. She is a former employee of one defendant, and a former participant in an employee benefit plan administered by the other.
Defendant Atofina Petrochemicals, Inc. ("Atofina") is a corporation with a petrochemical refining facility located in Jefferson County, Texas. Atofina is Aucoin's former employer.
Defendant Hartford is a corporation with headquarters located in Hartford, Connecticut. Hartford issued a group insurance policy to Atofina and administered an employee benefit plan for Atofina employees. The plan provided long term disability benefits for eligible employees.
Hartford considered and denied a claim for disability benefits submitted by Aucoin. In this suit, Aucoin alleges Atofina and Hartford violated the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., by wrongfully depriving Aucoin of long term disability ("LTD") benefits under "The Group Insurance Policy," issued by Hartford to Atofina. In addition, Aucoin alleges Atofina and Hartford breached a duty of good faith and fair dealing in handling Aucoin's LTD benefits claim, violated fiduciary duties pursuant to ERISA, and further that Atofina engaged in fraud and negligent misrepresentations in violation of state law that interfered with Aucoin's right to obtain LTD benefits.
At the time the Group Insurance Policy was entered into, Atofina Petrochemicals, Inc. was known as Fina Oil and Chemical Co.
The nature of suit against Atofina is a moot issue as Aucoin and Atofina have settled their differences.
II. Factual Background A. Aucoin's Employment with Atofina
This report generally adopts the version of facts advocated by plaintiff (the non-movant), or as recited by defendant without opposition from plaintiff. When considering a motion for summary judgment, the court must view all evidence in the light most favorable to the non-moving party. Celotex Corp. v. Catrett, 477 U.S. 317, 322-24 (1986).
While on leave, she bid for and was awarded a position of #2B Refinery Operator. She returned to work on November 4, 1992. Upon resuming duties, she experienced lingering pain from her back injury. She asked to be excused from one of the duties of a #2B Refinery Operator, viz., working in the fire brigade. When Atofina denied her request, she filed a grievance under her collective bargaining agreement, a complaint with the Equal Employment Opportunity Commission ("EEOC"), and a lawsuit alleging violation of the Americans With Disabilities Act. Eventually, these proceedings were settled before trial, and Atofina allowed Aucoin an accommodation to work temporarily as a #2B Refinery Operator without having fire brigade duties until she regained her ability to work on the fire brigade.
The record does not contain any reference to this lawsuit. Aucoin merely mentions that it was brought in response to Atofina's refusal to allow her the accommodation from the #2 Refinery Operator position in 1992. Aucoin's Resp. to Defts.' Atofina and Hartford Mots. Summ J., p. 2. (Docket No. 29).
Aucoin successfully performed her duties as a #2B Refinery Operator position, with the accommodation, from November 4, 1992, to May 24, 1996, when she left work due to a case of Herpes Zoster (Shingles). She returned to work on July 1, 1996. The next day, July 2, 1996, the union representing Aucoin went on strike.
The union strike ended on August 5, 1996, and Aucoin reported back to work. However, before allowing Aucoin to resume her duties, Atofina referred her to a functional capacity evaluation to determine her physical status, and, specifically, whether she had recovered from her previous back injury sufficiently to resume fire brigade duties. Aucoin initially refused the evaluation. Consequently she was placed on unpaid, unexcused absence from August 5 to August 11, 1996.
From August 13 through August 15, 1996, Aucoin took paid, earned vacation leave. During that time, on August 14, 1996, she submitted to a functional capacity evaluation. However, she allegedly failed to complete all the tasks satisfactorily in the evaluation. The examiner wrote that Aucoin was "uncooperative or inconsistent and did not appear to work to his/her maximum ability." Hartford Mot. Summ. J., Ex. B, p. 93. (Docket No. 25).
Atofina then enrolled Aucoin in a "Workable Program" (a vocational rehabilitation work hardening program) at the Southeast Texas Rehabilitation Hospital in order to determine Aucoin's physical capabilities and continue Aucoin's employment with Atofina. On October 28, 1996, Aucoin began at the Southeast Texas Rehabilitation Workable Program. However, while participating in the program, Aucoin sustained an injury on October 29, 1996, and withdrew from further participation on November 4, 1996.
Aucoin did not work from August 19 (after unsuccessfully completing the functional capacity evaluation) through October 27, 1996. Her employment records reflect that she was again listed as being on unpaid, unexcused absence.
Aucoin contends the injury sustained was an aggravation of the back injury sustained in 1992. Pl. Resp. to Defs.' Atofina and Hartford Mot. for Summ. J. (Docket No. 29).
Aucoin's employment with Atofina was subsequently terminated on November 15, 1996. Atofina stated its basis for the termination in a November 15, 1996 letter: "Since you continue to refuse to cooperate in these efforts to determine your physical capabilities, we have no alternative but to terminate your employment, effective this date." Atofina Mot. Summ J., Ex. 3, p. 2. (Docket No. 27).
Shortly thereafter on December 16, 1996, Aucoin filed a lawsuit against Atofina alleging violation of the Americans With Disabilities Act. For the second time, Aucoin and Atofina settled their differences, and a written settlement agreement was entered into on August 19, 1998. In consideration of the mutual promises between Aucoin and Atofina, Aucoin agreed to dismiss the lawsuit, and Atofina agreed to pay Aucoin certain financial benefits, and to "[n]ot oppose Ms. Aucoin's application for long-term disability benefits through the applicable insurance carrier(s), and, at Ms. Aucoin's request, provide to said carrier(s) any information regarding Ms. Aucoin that it has in its possession." Aucoin's Resp. to Defts.' Atofina and Hartford Mots. Summ. J., Ex. B, p. 4. (Docket No. 29).
Aucoin v. Fina Oil and Chem. Co., No. 1:96-CV-769 (E.D.Tex. filed Dec. 16, 1996).
B. Aucoin's Application for Disability Benefits
On January 1, 1995, Hartford issued "The Group Insurance Policy" ("Plan") to Atofina, providing coverage, including long term disability benefits, to Atofina's employees. The Plan states that, in order to be eligible for benefits, a person must be totally or partially disabled — as defined — and must be an active, full-time employee. The Plan defines active, full-time employee as one who works for the employer on a regular basis in the usual course of the employer's business, and who works the number of hours in the employer's normal work week. Eligibility for coverage may terminate upon the occurrence of several events, including the date the employee ceases "to be an active, full-time employee in an eligible class including: (a) temporary layoff; (b) leave of absence; or (c) a general work stoppage (including a strike or lockout)."
On October 14, 1998, — approximately two years after being terminated but only two months after entering into the settlement agreement with Atofina — Aucoin applied for the LTD benefits, listing October 28, 1996 as her last day worked, and October 29, 1996 as her disability date. On her application, Aucoin listed "pain in shoulder and right arm" as the source of disability.
Aucoin indicated she first noticed symptoms on October 29, 1996, and had not had the injury before. Additionally, Aucoin noted on the application that the injury occurred on October 29, 1996, while at the Southeast Texas Rehabilitation Workable Program. Finally, Aucoin listed three doctors that had been treating her with respect to the alleged disability. These were Dr. Stephen O'Neil, M.D., Dr. Paul Proffitt, D.O., and Dr. Mohamed Beck, M.D..
In her application for LTD benefits, Aucoin listed Dr. Stephen O'Neil's specialty as "psychologist", Dr. Paul Proffitt's as neurology, and Dr. Mohamed Beck's as "neurology surgion" [sic].
Hartford denied Aucoin's request for benefits. In a March 15, 1999, letter to Aucoin, Hartford explained that Aucoin did not qualify for benefits under the Plan because she was not an active, full-time employee on October 29, 1996, when the disabling injury occurred. Hartford Mot. Summ. J., Ex. B, p. 16. Specifically, Hartford determined that Aucoin's coverage under the plan terminated as a result of the union strike in which Aucoin participated (July 2, 1996, through August 5, 1996), and her subsequent failure to return to work thereafter.
Aucoin appealed the denial on April 27, 1999. In a letter informing Hartford of the appeal, counsel for Aucoin indicated Aucoin received paychecks from August 18, 1996, through November 10, 1996, and additionally, paid premiums for LTD benefits through payroll deductions during that time. Accordingly, counsel argued that Aucoin was an active employee on October 29, 1996.
In a September 2, 1999, letter, Hartford indicated it had come to the conclusion its original denial was the appropriate disposition. However, Hartford admitted that premiums for LTD benefits should not have been paid on Aucoin's behalf or collected from her paycheck. As a result, Hartford notified Atofina to refund them.
III. Proceedings
Aucoin filed this action in the 58th Judicial District Court of Jefferson County, Texas, on October 6, 2000. Aucoin alleged Atofina and Hartford violated the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., by wrongfully depriving Aucoin of long term disability ("LTD") benefits under "The Group Insurance Policy." In addition, Aucoin alleges Atofina and Hartford breached a duty of good faith and fair dealing in handling Aucoin's LTD benefits claim, violated fiduciary duties pursuant to ERISA, and further that Atofina engaged in fraud and negligent misrepresentations in violation of state law that interfered with Aucoin's right to obtain LTD benefits.
Defendant Atofina, with Hartford's consent, removed the case to the United States District Court for the Eastern District of Texas on November 21, 2000. After removal from state court, the action was assigned to Judge Heartfield who conducted a management conference on February 21, 2001. Two days later, Judge Heartfield entered a docket control order, and also an order referring pretrial matters to the undersigned.
A management conference serves the same purpose as a scheduling conference within the meaning of Fed.R.Civ.P. 16.
A docket control order serves the same purpose as a scheduling order within the meaning of Fed.R.Civ.P. 16.
Order titled "Referral of Pretrial Matters to United States Magistrate Judge," February 23, 2001. (Docket No. 17).
On May 24, 2000, Hartford filed a motion for entry of a summary judgment. Plaintiff responded, and Hartford replied to the response. Accordingly, the motion is ripe for decision.
IV. The Motion for Summary Judgment and Response
Hartford moves for summary judgment on two grounds. First, Hartford argues that it is entitled to dismissal of Aucoin's ERISA claim. Second, Hartford alleges Aucoin's state law claims of breach of duty of good faith and fair dealing in handling Aucoin's LTD benefits claim should be dismissed as preempted by ERISA.
Regarding Aucoin's ERISA-based claim, Hartford avers that under governing precepts, it may be held liable in this private suit for damages only upon a showing that its denial of Aucoin's LTD benefits claim was an arbitrary and capricious abuse of its discretion. Hartford directs the court's attention to the plan's explicit provisions (a) making active, full-time employment a prerequisite to eligibility, and (b) providing that coverage terminates in the event of a strike or leave of absence. Hartford then argues that it cannot be found to have acted arbitrarily and capriciously in determining Aucoin ineligible because Aucoin's application and the records supplied by Atofina reflect that beginning on July 2, 1996, and continuing until October 29, 1996 — the date of onset of the alleged disability — Aucoin was away from work either due to strike or unauthorized leave of absence. Hence, on the alleged onset date of disability, she was not a full-time employee and did not meet eligibility requirements.
Aucoin opposes the motion, and advances an argument not presented in her administrative appeal. Aucoin contends that Hartford's decision to deny LTD benefits was arbitrary and capricious because Hartford did not make an appropriate decision based on all the necessary information. Specifically, Aucoin argues that she suffers from a mental disability, for which she has been under the care of a Dr. Jackson T. Achilles, M.D., since December 18, 1991. Aucoin alleges Dr. Achilles determined on July 12, 1995, Aucoin was psychologically disabled from working on the fire brigade. Aucoin alleges Hartford did not take into account the opinion of Dr. Achilles. Finally, Aucoin also attempts to rebut Hartford's assertion that her state law claims are preempted by ERISA.
Hartford replies by stating that it is too late to submit a disability claim based on psychological disability primarily because the claim was not raised in Aucoin's application for LTD benefits or appeal, and secondarily, because administrative remedies for that claim have not been exhausted. Further, in any event, Hartford contends Aucoin's claim for LTD benefits based on the psychological disability would fail pursuant to the guidelines of the Plan. Finally, while acknowledging that federal preemption of state law claims is not absolute, Hartford argues that federal preemption completely covers state law claims related to ERISA claims. As a result, Hartford asserts that Aucoin's state law claims are ERISA-related, and are therefore preempted.
V. Principles of Analysis
The instant motion requires application of both substantive and procedural rules. This section outlines these rules and governing interpretive precedent:
A. Summary Judgment
A party may move a court to enter a summary judgment. Fed.R.Civ.P. 56(a) and (b). Summary judgment is appropriate when, viewing the evidence in the light most favorable to the non-moving party, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-24 (1986);see also Fed.R.Civ.P. 56(c). An issue is genuine if the evidence is sufficient for a reasonable jury to return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255-56 (1986). The admissibility of evidence is subject to the same standards and rules that govern the admissibility of evidence at trial. Donaghey v. Ocean Drilling Exploration Co., 974 F.2d 646, 650 n. 3 (5th Cir. 1992).
Summary judgment is proper after "adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322. The moving party bears the initial burden of demonstrating an absence of evidence supporting the non-movant's case. Id. at 325. The moving party accomplishes this by affirmatively offering evidence which undermines one or more of the essential elements of the non-moving party's case, or the moving party may simply demonstrate that the evidence in the record falls short of establishing an essential element of the non-moving party's case. Id. at 323.
After the movant meets its burden, the non-movant must designate specific facts showing there is a genuine issue for trial. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Although the court considers the evidence and all reasonable inferences to be drawn therefrom in the light most favorable to the non-movant, the non-movant may not rest on the mere allegations or denials of its pleadings, but must respond by setting forth specific facts indicating a genuine issue for trial. Webb v. Cardiothoracic Surgery Assocs. of North Texas, P.A., 139 F.3d 532, 536 (5th Cir. 1998). However, "[a]ny reservations the court has concerning the evidence will preclude summary judgment." Int'l Shortstop, Inc., 939 F.2d at 1264.
Local court rules also govern consideration of motions for summary judgment. Local Rule CV-56(b) states:
Any party opposing the motion should serve and file a response that includes in the text of the response or as an appendix thereto, a "Statement of Genuine Issues." The response should be supported by appropriate citations to proper summary judgment evidence as to which it is contended that a genuine issue of material fact exists. Proper summary judgment evidence should be attached to the response in accordance with the procedure contained in section (d) of this rule.
B. The Employment Retirement Income Security Act of 1974
Congress enacted the Employee Retirement Income Security Act of 1974 in response to numerous abuses of and fraudulent practices surrounding private pension plans. Thomas W. Jennings, Introduction, in ERISA: A Comprehensive Guide 1, 1-8 (Martin Wald David E. Kenty eds., 1991). Though the abuses and fraudulent practices had gone on for decades, public outcry for reform came to a head as a result of a few specific instances in the 1960s. Id. at 4-5. However, what ultimately provided the final impetus was in fact a bitter election for the presidency of the United Mine Workers of America and the murder of the losing candidate, Joseph Yablonski, Jr.. Id. The death propelled an investigation by a Senate Labor Subcommittee into charges of misuses of funds during the reelection of the incumbent president, and provided a stage for members of Congress to highlight the numerous egregious stories of countless people who had been left with little or no pension. Id. at 5-6. As a result, Congress passed the Employee Retirement Income Security Act of 1974 to
protect . . . participants in employee benefit plans and their beneficiaries, by requiring the disclosure and reporting to participants and beneficiaries of financial and other information with respect thereto, by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts.29 U.S.C. § 1001(b).
ERISA regulates employee welfare benefit plans that "through the purchase of insurance or otherwise," provides care, or benefits in the event of sickness, accident, disability or death. Pilot Life Inc. Co. v. Dedeaux, 481 U.S. 41, 44 (1987). As a method of insuring uniform enforcement among the fifty states, Congress provided a preemption of all state laws that relate to employee benefit plans. Another important change enacted by ERISA was that pension plan participants were no longer left to police their own plans; rather the administration of ERISA was to be shared by the Internal Revenue Service and the Secretary of Labor, with the Secretary of Labor authorized to enforce ERISA through civil actions. Jennings, at 7.
See part D of this section for discussion of Federal preemption of ERISA-related claims.
In addition, one of ERISA's objectives is furthered by conferring upon participants and beneficiaries of employee benefit plans the right of a private cause of action to recover benefits due under the plan and to enforce or clarify rights to future benefits. 29 U.S.C. § 1132(a)(1)(B). Such actions, in effect, require judicial review of employee benefit plans' determinations.
C. Judicial Review of ERISA Determinations
ERISA in and of itself does not specify or provide guidance with regard to the standard of review to be employed by the federal courts. InFirestone Tire Rubber Co. v. Bruch, the Supreme Court articulated the standard of review to be applied by federal courts. 489 U.S. 101 (1989). The Court held that "denial of benefits challenged under § 1132(a)(1)(B) generally is to be reviewed under a de novo standard." Id. at 115. However, when the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan, the administrator's decision is reviewed under an "abuse of discretion" or "arbitrary and capricious" standard. Id. Thus, "when the plan administrator is vested with discretionary authority to construe the terms of the plan and determine eligibility for benefits . . . the decisions of the plan administrator can only be reversed if found to be arbitrary and capricious." Switzer v. Wal-Mart Stores, Inc., 52 F.3d 1294, 1298 (5th Cir. 1995).
In this circuit, the terms "abuse of discretion" and "arbitrary and capricious" are used interchangeably. Matassarin v. Lunch, 174 F.3d 549, 563 (5th Cir. 1999) ("The 'arbitrary and capricious' review amounts to an abuse-of-discretion standard."); McDonald v. Provident Indemnity Life Ins. Co., 60 F.3d 234, 236 n. 11 (5th Cir. 1995).
"Arbitrary and capricious" means that federal courts owe due deference to the administrator's factual conclusions which reflect reasonable and impartial judgment. Southern Farm Bureau Life Ins. Co. v. Moore, 993 F.2d 98, 101 (5th Cir. 1993); Pierre v. Connecticut General Life Ins. Co./Life Ins. Co. of North America, 932 F.2d 1552, 1562 (5th Cir. 1991) ("[F]or factual determinations under ERISA plans, the abuse of discretion standard of review is the appropriate standard; that is, federal courts owe due deference to an administration's factual conclusions that reflect a reasonable and impartial judgment.").
"The touchstone of 'arbitrary and capricious' conduct is unreasonableness. Our inquiry is not whose interpretation of plan documents is most persuasive, but whether the plan administrator's interpretation is unreasonable." Barnett v. Kaiser Foundation Health Plan, Inc., 32 F.3d 413, 416 (9th Cir. 1994). "[A] decision is not arbitrary and capricious if it is based on a reasonable interpretation of the plan's terms and made in good faith." 2 Ronald J. Cooke, ERISA Practice and Procedure § 8:14 (2d ed. 1995). "The standard exists to ensure that administrative responsibility rests with those whose experience is daily and continual, not with the judges whose exposure is episodic and occasional." Murphy v. Wal-Mart Associates' Group Health Plan, 928 F. Supp. 700, 705-06 (E.D.Tex. 1996).
In cases involving interpretation of a plan, the abuse of discretion analysis can involve a two-step process. "First, a court must determine the legally correct interpretation of the plan . . . [i]f the administrator did not give the plan the legally correct interpretation, the court must then determine whether the administrator's decision was an abuse of discretion." Wildbur v. Arco Chemical Co., 974 F.2d 631, 637 (5th Cir. 1992). In this case, though the parties contend whether Aucoin was an active, full-time employee at the time of her injury, this contention does not arise from a conflict over interpretation of the phrase "active, full-time employee." Rather, the contention is a factual dispute over the circumstances leading up to and during Aucoin's enrollment in the Workable Program.
When reviewing an administrator's decision, a court is to focus on "whether the record adequately supports the administrator's decision."Vega v. National Life Ins. Servs., Inc., 188 F.3d 287, 298 (5th Cir. 1999). However, this does not require a showing that the administrator reasonably investigated a claim, even in cases where the administrator has a potentially conflicted interest. Id. The administrator "has no duty to contemplate arguments that could be made by the claimant." Id. at 299 (emphasis added). Further, the administrator's decision is "to be based on evidence, even if disputable, that clearly supports the basis for its denial" and the administrator "has the obligation to identify the evidence in the administrative record. . . ." Id. "[T]he claimant may then contest whether that record is complete." Id. A decision by the administrator is not arbitrary and capricious if the decision is "supported by substantial evidence and is not erroneous as a matter of law. . . ." Wildbur v. Arco Chemical Co., 974 F.2d 631, 637 (5th Cir. 1992).
When an employer contracts with a third party that both insures and administers the plan, the amount of deference given to the administrator's decision can be constricted. The Fifth Circuit recognizes such situations present a conflict of interest because the plan administrator can be self-interested, in that the administrator potentially benefits from every denied claim. Vega, at 295. As a result, the Fifth Circuit uses a "sliding scale" approach where the abuse of discretion standard is used, but less deference is given to the administrator in proportion to the administrator's apparent conflict, and courts are "less likely to make forgiving inferences when confronted with a record that arguably does not support the administrator's decision."Id. at 296-99.
Finally, the Fifth Circuit has held that claimants " must present their strongest available case to the plan administrator, because the primary decision is made at that point." Duhon v. Texaco, Inc., 15 F.3d 1302, 1309 (5th Cir. 1994). Further in Duhon, the Fifth Circuit noted:
Congress' apparent intent in mandating these internal claims procedures was to minimize the number of frivolous ERISA lawsuits; promote the consistent treatment of benefit claims; provide a nonadversarial dispute resolution process; and decrease the cost and time of claims settlement.Id. An attempt to circumvent congressional mandate by failing to fully argue a claim and provide supporting evidence thereafter, hoping the case would be decided in the federal courts, must fail. Id. A reviewing court may "consider only the evidence that was available to the plan administrator. . . ." Vega, 188 F.3d at 300.
D. Federal Preemption of ERISA-Related Claims
When creating ERISA, Congress intended to bring the many employee benefits plans in existence at the time under federal control in order to establish uniform nationwide "'standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, . . . appropriate remedies, sanctions, and access to the federal courts'" Moffitt v. Blue Cross Blue Shield of Miss., Inc., 722 F. Supp. 1391, 1393 (N.D. Miss 1989) (citing 29 U.S.C. § 1001(b)). To achieve this end, Congress specifically provided a preemption of "all state laws insofar as they may now or hereafter relate to any employee benefit plan. . . ." 29 U.S.C. § 1144(a). The Supreme Court has held this to be a broad scope of preemption in that a "law 'relates to' an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan." Shaw v. Delta Air Lines, 463 U.S. 85, 96-97 (1983). "The preemption provision was intended to displace all state laws that fall within the sphere, even including state laws that are consistent with ERISA's substantive requirements." Id. at 98-99.
ERISA provides a "saving clause" that excepts from the preemption a state law that "regulates insurance, banking, or securities." 29 U.S.C. § 1144(b)(2)(A). Further, ERISA establishes a "deemer clause" that provides a state law that "purport[s] to regulate insurance" cannot deem an employee benefit plan to be an insurance company. 29 U.S.C. § 1144(b)(2)(B).
V. Application A. Was Hartford's Decision An Abuse of Discretion?
All parties agree that the Plan gives Hartford discretionary authority to determine eligibility for benefits and to construe the terms of the Plan. As such, Hartford's decision is reviewed under the "abuse of discretion" or "arbitrary and capricious" standard described in the preceding section. However, this case does involve an employer contracting with a third party that both insures and administers the plan; therefore, the amount of deference given to the potentially conflicted administrator's decision may be constricted if there is evidence with respect to the degree of conflict. Vega, 188 F.3d at 295. Similar toVega, Aucoin has presented a minimal amount of evidence with respect to the degree of conflict, namely, Hartford benefits from a denial of a claim. As a result, Hartford's decision will be reviewed with only a "modicum less deference" than the court would ordinarily afford. Id. at 301.
1. Mental Disability
Even if Hartford completely ignored evidence of mental disability, its refusal to award benefits on that basis would not constitute arbitrary and capricious action. As noted above, claimants " must present their strongest available case to the plan administrator, because the primary decision is made at that point," and cannot attempt to circumvent congressional mandate by failing to fully argue a claim and provide supporting evidence thereafter, hoping the case would be decided in the federal courts. Duhon, 15 F.3d at 1309. In addition, in the exercise of judicial review, this court may "consider only the evidence that was available to the plan administrator. . . ." Vega, 188 F.3d at 300.
Accordingly, as mental disability was never raised in the initial application, nor raised on the appeal of Hartford's decision, the attempt to raise it in the federal court must fail. Counsel for Aucoin suggests that Aucoin's omission of the mental disability on her initial application should be excused in this instance because of her mental disability and general distrust of Atofina and Hartford. However, counsel provides only this conclusory assertion and no established legal basis for this proposition. As a result, that argument must also fail. Therefore, entry of summary judgment on the mental disability ground for Hartford would be appropriate.
Aucoin's mental disability claim might fail in any event. First, Hartford argues that Aucoin has not exhausted her administrative remedies under the Plan, therefore making it untimely to initially be raised at the federal court level.
Second, under the Plan itself the claim may fail. Aucoin claims she was mentally disabled since July 12, 1995, from working on the fire brigade. Despite this alleged disability, Aucoin continued to be paid full earnings while maintaining her #2B Refinery Operator position until her termination on November 15, 1996. To be classified as totally disabled, an employee must earn less than twenty percent of pre-disability earnings; and to be classified as partially disabled, an employee cannot earn more than eighty percent of pre-disability earnings. Pl. Resp. to Defs.' Atofina and Hartford Mot. Summ J., Ex. H. Aucoin has not indicated she had reduced amounts of earnings, rather Aucoin has indicated she was being regularly paid up to her date of termination.
2. Employment Status
The issue is more clouded with regard to Hartford's primary reason for denying benefits, i.e., its determination that Aucoin was not an active, full-time employee at the time of the accident and, therefore, was ineligible to receive LTD benefits. To be sure, Hartford received some information from Atofina supporting this determination. Specifically, Atofina filled out the employer's portion of Aucoin's application for benefits, and stated that Aucoin's last day of employment was July 1, 1996, with the reasons for her not working thereafter as a "union strike" and "did not return for company evaluation of her restriction due to 1992 injury." Hartford Mot. Summ. J., Ex. B, p. 185.On the other hand, Hartford received from Atofina several additional items of information suggesting that Atofina's unequivocal statement on Aucoin's application might be incorrect. For example, in a letter from Atofina to Hartford, Atofina reported that Aucoin was on paid vacation during August 13 through August 15, 1996. Pl. Resp. to Defs.' Atofina and Hartford Mot. for Summ. J., Ex. J. Additionally, Atofina informed Hartford that Aucoin "started the work hardening program [the Workable Program] for which she received sick pay from 10/28/96 through 11/05/96."Id. Further, Aucoin's employment records reflect that Atofina required Aucoin to attend the Workable Program, and enrolled her in it, as indicated in her termination letter.
Thus, when making its decision to deny the LTD benefits claim, Hartford was aware that despite Aucoin's being on unpaid, unexcused absence for considerable time between August 5, 1996, and November 5, 1996, she was participating in the Workable Program at Atofina's direction from October 28, 1996, to November 5, 1996, and was being paid at the time of her injury on October 29, 1996. While Aucoin was not at her place of employment on October 29, 1996, performing normal duties, she was following the direction of her employer and participating in a work hardening program when she was injured. This evidence, together with earlier evidence presented by Aucoin during her administrative appeal (receiving pay and having LTD benefit premiums being deducted, when she was injured on October 29, 1996,) raised a genuine issue as to whether Aucoin was indeed an active, full-time employee at the time of her second injury.
The present record does not reflect that Hartford considered or weighed this conflicting evidence. Nor does the record reflect that Hartford expressed a principled reason for rejecting evidence favoring Aucoin while fully crediting the disqualifying version stated by Atofina on the application. Under this circumstance, a neutral fact finder, mindful of an obligation to review the plan administrator's decision for an abuse of discretion with a "modicum less deference," might find it disingenuous of Hartford to determine Aucoin was not an active, full-time employee. The fact finder might also reasonably infer that the administrator/insurer acted out of self interest rather than applying reasonable, good faith, and impartial judgment.
At a plenary trial, at which the court considers and weighs all relevant evidence, Hartford may be able to convince the trier of fact that it considered all evidence presented by Aucoin. Hartford may also show that under the circumstances, its determination that Aucoin was not an active full-time employee on the alleged date of disability was a reasonable conclusion and within the considerable discretion afforded to ERISA plan administrators by the law. However, for reasons stated earlier, the court cannot say in advance of trial that — as a matter of law — Hartford's decision denying benefits represented a reasonable, good faith, and impartial judgment. Accordingly, under the present record a genuine issue of material fact exists as to whether Hartford's determination was arbitrary or capricious. This precludes granting a summary judgment on this issue.
B. Are State Law Claims Preempted?
As noted above, state law is preempted by ERISA if it "relates to" an employee benefit plan, in that it has a connection with or reference to such a plan. The Supreme Court has held a state law claim of breach of fiduciary relates to an employee benefit plan in that it has a connection with or reference to the plan and, hence, is preempted by ERISA. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47-48 (1987). Additionally, the Fifth Circuit has specifically held the state law claim of breach of good faith and fair dealing to be preempted by ERISA, as this type of claim addresses the employee's right to receive benefits under the terms of an ERISA plan. McNeil v. Time Ins. Co., 205 F.3d 179, 191 (5th Cir. 2000);see also Hollis v. Provident Life and Accident Ins. Co., 259 F.3d 410, 415 (5th Cir. 2001); Hogan v. Kraft Foods, 969 F.2d 142, 144-45 (5th Cir. 1992); Hermann Hospital v. MEBA Med. Benefits Plan, 845 F.2d 1286, 1290 (5th Cir. 1988) (holding breach of fiduciary duty preempted by ERISA). As a result, Aucoin's state law claims of breach of good faith and fair dealing and violation of fiduciary duties are preempted by ERISA.
RECOMMENDATIONS
Hartford's motion for summary judgment should be partially granted with respect to
(a) Aucoin's long term disability benefits claim based on mental disability, and
(b) Aucoin's federally preempted state law claim of breach of good faith and fair dealing and violation of fiduciary duties; and
The motion for summary judgment should be partially denied with respect to the decision denying Aucoin's long term disability benefits claim based on a physical disability because a genuine issue of material fact exists as to whether Hartford's determination that Aucoin's employment status made her ineligible for benefits was arbitrary and capricious.
OBJECTIONS
Objections must be: (1) specific, (2) in writing, and (3) served and filed within ten days after being served with a copy of this report. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 1(a), 6(b), and 72(b).A party's failure to object bars that party from: (1) entitlement to de novo review by a district judge of proposed findings and recommendations, Rodriguez v. Bowen, 857 F.2d 275, 276-77 (5th Cir. 1988), and (2) appellate review, except on grounds of plain error, of unobjected-to factual findings and legal conclusions accepted by the district court, Douglass v. United Servs. Auto. Ass'n., 79 F.3d 1415, 1417 (5th Cir. 1996) (en banc).