Opinion
Civil Action No. 99-2211, Section "A"
June 15, 2000
ORDER AND REASONS
This ERISA matter is before the Court on cross-motions for summary judgment filed on behalf of the plaintiff, Amelia Kaler ("Kaler") and the defendants, Metropolitan Life Insurance Company ("MetLife") and American Airlines ("AA"). The cross-motions were opposed and deemed submitted on the briefs. There is no genuine issue of fact that plaintiff's state law claims are preempted and that the suit remaining is a premature one for death benefits under an ERISA plan. For reasons stated below and in light of the ongoing administrative review of plaintiff's claims for death benefits by AA'S Plan Committee, the defendants' Motions for Summary Judgment are GRANTED IN PART and the plaintiff's Motion for Summary Judgment is DENIED.
Employee Retirement Income Security Act of 1974 ("ERISA") 29 U.S.C. § 1001, et seq.
Kaler's Motion for Summary Judgment argues simply that there is no material issue of fact that Kaler was the designated beneficiary under the policies at issue and the plaintiff is entitled to judgment awarding her death benefits and damages pursuant to state law. Counsel for Kaler does not attempt to argue that this is not an ERISA case. To the contrary, counsel for plaintiff implicitly acknowledges that is, arguing the futility doctrine, to explain the plaintiff's failure to exhaust her administrative remedies.
The Court here notes that only recently was American Airlines Group Life and Health Welfare Benefits Plan (i.e., "the Plan") added as a party defendant in this action. Both defendants, AA and MetLife argue inter alia that as a matter of law ERISA preempts the plaintiff's state law claims, and the residual challenge of the denial of death benefits in the case of Kaler is premature considering the ongoing review of Kaler's claim by AA's Plan Committee (the PBAC).
I. BACKGROUND FACTS
This suit involves a claim for benefits under an employee welfare benefit plan governed by ERISA. It is undisputed that American Airlines ("AA") sponsored certain employee welfare benefit plans for its employees, including the decedent pilot, William Bryandt Shepherd ("Shepherd"). AA provides certain benefits to its eligible employees including term life and accidental death and dismemberment coverage. The group of welfare benefit plans sponsored by AA are referred to as the American Airlines Group Life and Health Welfare Benefit Plans.
It is further not disputed that in 1996, the year Shepherd died in a private plane crash, term life and accidental death and dismemberment coverage for pilots and flight engineers was funded by a policy of group insurance issued to AA by the defendant, Metropolitan Life Insurance Company ("MetLife"), policy no. 29900-G. AA provided all of its eligible employees with an Employee Handbook ("Handbook"), which Handbook was also the Plan document for the Term Life and Accidental Death and Dismemberment ("AD D") Plan.
It is further not disputed that on the date of his death, Shepherd was covered for Basic Life benefits in the amount of $70,000.00; Additionally Term Life Insurance for Pilots in the amount of $105,000.00; and AD D benefits in the amount of $10,000.00.
Upon Shepherd's death, AA notified MetLife to that effect, providing some documents relative to the coverage on Shepherd under the Plan. Documents provided to MetLife included the following documents: (1) the most recent Beneficiary Designation, naming Carolyn Jane shepherd (his wife) as beneficiary of the Employee Term Life Insurance and Employee Accident Insurance; (2) a certified copy of Shepherd's death certificate; (3) a Pilot Retirement Benefit Enrollment Form, dated December 14, 1991, naming Mrs. Amelia D'Antonio [Kaler], as beneficiary, along with a sheet noting with respect to the Pilot Retirement Benefit Enrollment Form that:
This revokes all former designations, if any, made by me regarding this Plan. In the event that I (re)marry subsequent to this designation, the designation will be automatically revoked and my spouse will be designated as by beneficiary (unless he/she elects otherwise)
AA was advised by MetLife that it paid Shepherd's widow, Carolyn Shepherd, term life benefits in the amount of $175,000.00. MetLife further advised that it denied the widow's claim for AD D benefits based upon an express policy exclusion.
Section 24 of the Handbook, entitled ERISA, identifies AA as the "Plan Administrator/Employer/Sponsor/Named Fiduciary." The Handbook, which also doubles as the Plan document, further states that AA and other plan "fiduciaries" have "discretionary authority to interpret the terms of the plan and to determine eligibility for and entitlement to plan benefits in accordance with the terms of the plan." See, Handbook, at p. 24-4 (Defendant's Exhibit "B"].
MetLife serves as the claim administrator/fiduciary for claims made by beneficiaries under the term life and accidental death and dismemberment plans. However, AA provides three levels of review for benefit claims. In the event that a claimant feels that a claim should not have been denied, in whole or in part, the claimant has the right to request that the claims processor conduct a second review of the claim denial within 90 days of the denial. If, after evaluating the claim, the claims processor determines that the claimant is still not entitled to the claimed benefit, the claimant may then file an appeal with the AA. After the appeal information is received, the case is reviewed under the guidelines of the Pension Benefits Administration Committee ("PBAC") Appointed officers of AA comprise the PBAC. The case, including evidence submitted by the claimant, will be reviewed by the PBAC or its designees. The decision of the PBAC is final.
Whereas it is clear that the Shepherd's widow submitted a claim for death benefits under the Plan, and MetLife in fact paid benefits to Carolyn Shepherd, it is hotly disputed that the plaintiff in this case, Amelia Kaler, submitted a claim for death benefits. There is no administrative record for this Court to review in the case of plaintiff, Amelia Kaler ("Kaler") — mother of the decedent Shepherd. There is only the summary judgment record and the administrative record with respect to Shepherd's widow's claims. There was no administrative appeal in the case of the award/denial of benefits to the decedent's widow, Carolyn.
Kaler's suit is framed as one for "damages." The damages claimed, however, are term life and AD D benefits under an ERISA employee welfare benefit plan sponsored by AA for eligible pilots. Plaintiff also seeks statutory penalties for unfair trade practices under L.R.S. 51:1401, for failure to act reasonably and promptly in adjusting her claim, and failure to pay death benefits without just cause.
Since the institution of this suit and pursuant to plaintiff's counsel's request, AA's PBAC has agreed to review the plaintiff Kaler's challenge/claim for benefits and is in the process of doing so. As previously mentioned, no final decision has issued denying benefits in the case of Kaler. Without an administrative record or final decision of the PBAC in the case of Kaler, there can be no determination based on a review of an administrative record as to whether the PBAC abused its discretion in denying Kaler any such benefits.
See, Letter of Ernest A. Burguieres, III, dated March 20, 2000 [attached as Exhibit "A" to Opposition to Plaintiff's Motion for Summary Judgment, and Exhibit "A" to Defendants' Memoranda in Support of Motion for Summary Judgment].
The PBAC has been provided with a copy of Amelia Kaler's Motion for Summary Judgment and all of the supporting documents, in addition to MetLife's claim file compiled during its consideration of the widow Carolyn Shepherd's claim for benefits under the Plan. The PBAC's review of plaintiff's claim for benefits is ongoing and not complete. See, Affidavit of Mark Johnson [attached as Exhibit "B" to defendants' Memoranda in Support of Motion for Summary Judgment].
II. ANALYSIS.
A. ERISA preempts plaintiff's state law claims.
Employee benefit plans are regulated by federal law under the Employee Retirement Income Security Act of 1974 ("ERISA"). 29 U.S.C. § 1001 et seq. ERISA's purpose is to promote the interests of employees and their beneficiaries in the administration of employee benefit plans. Shaw v. Delta Airlines, 103 S.Ct. 2890 (1983). Under Section 514(a) of the statute, ERISA expressly supersedes all state laws that regulate employee benefit plans that are also covered by ERISA. Ingersoll-Rand Co. v. McClendon, 111 S.Ct. 478 (1990).
The policies at issue in the instant cause provide death benefits, and are accordingly classified as employee welfare benefit plans. As mentioned above, ERISA's regulations preempt certain state law claims which relate to employee benefit plans regulated by ERISA. The Supreme Court defines the phrase "relate to" very broadly. It is to be "given it broadest common-sense meaning, such that a state law `relates to' a benefit plan, `in the normal sense of the phrase, if it has a connection with or reference to such a plan.'" Metropolitan Life Ins. Co. v. Massachusetts, 105 S.Ct. 2380 (1985). The designation of a beneficiary to the proceeds of an insurance policy has been held to "relate to" an employee benefit plan such that ERISA preempts any state law governing the designation of a beneficiary. Brandon v. Travelers Ins. Co., 18 F.3d 1321, 1325 (5th Cir. 1994); Connecticut Gen. Life Ins. v. Thomas, 910 F. Supp. 297, 301 (S.D. Tex. 1995).
In Williams v. Plumbers Steamfitters Local 60 Pension Plan, 45 F.3d 923, 925 (5th Cir. 1995), the Fifth Circuit determined that a disability insurance plan providing pension, disability and death benefits to eligible employees was an employee welfare benefit plan.
The "savings clause," 29 U.S.C. § 514 (b)(2)(A), however, exempts state laws that regulate insurance. Also, the "deemer clause," 29 U.S.C. § 514 (b)(2)(B), exempts certain plans from ERISA's coverage. For the present, the Court need only be concerned with the scope of Section 514(a), as the other provisions are inapplicable.
The plaintiff has failed to assert the existence of any particular state statute relevant to her action which regulates insurance, plaintiffs' complaint alleges causes of action based upon common law tort and contract theories and unfair trade practices. These theories do not regulate insurance so as to be saved from preemption. See, Metropolitan Life Insurance Co. v. Taylor, 107 S.Ct. 1542 (1987) (common law contract claims are preempted); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549 (1987) (claims for improperly handling and processing benefit claims are preempted).
In Pilot Life Ins. Co., the plaintiff sued the insurance company for breach of contract, breach of fiduciary duty and fraud, seeking to recover the plan benefits, damages for emotional distress, other incidental damages and punitive damages. The trial court granted the insurance company summary judgment on the entire complaint based upon ERISA preemption and the Fifth Circuit reversed. The Supreme Court ultimately reversed the Fifth Circuit's ruling, explaining:
There is no dispute that common law causes of action asserted in Dedeaux's complaint "relate to" an employee benefit plan and therefore fall under ERISA's express pre-emption clause. . . . In particular, we have emphasized that the pre-emption clause is not limited to "state laws" specifically designed to affect employee benefit plans."[citation]. The common law causes of action raised in Dedeaux's complaint, each based on alleged improper processing of a claim for benefits, undoubtedly meet the criteria form pre-emption under § 514(a).
Pilot Life Ins. Co., 481 U.S. at 47, 48.
The Supreme Court in Pilot Life, further held that ERISA civil enforcement provisions have their own "preemptive force," recognizing that Congress intended those provisions to be "the exclusive vehicle for actions by ERISA-plan participants and beneficiaries asserting improper processing of claim for benefits, and that varying state causes of action for claims within the scope of [the civil enforcement provisions] would pose an obstacle to the purposes and objectives of Congress." Pilot Life Ins. Co., 481 U.S. at 52.
The Supreme Court has held that Congress' intent in enacting ERISA was to completely preempt the area of employee benefit plans solely a federal concern. Id. at 41. The Court consistently emphasizes the broad scope of preemption under ERISA. See, e.g., Pilot life, 481 U.S. at 41, 107 S.Ct. at 1549; Metropolitan Life v. Mass., 471 U.S. at 730, 105 S.Ct. at 2384;Shaw, 463 U.S. at 85, 103 S.Ct. at 2890.
Accordingly, the plaintiff's state law claims in the nature of breach of contract, fraud, intentional misrepresentation, unfair trade practices, bad faith and the like, are preempted. Plaintiff's sole remaining claims relate to recovery of contract benefits, which the Court construes as ERISA claims pursuant to 29 U.S.C. § 1132 (a)(1)(B), which claim will not be addressed on the merits at this juncture of the proceedings for the reasons stated below.
B. There is no genuine issue of material fact that plaintiff's ERISA claims are premature.
All ERISA plans are required to provide claims procedures and claims appeal procedures. 29 U.S.C. § 1133. The provision governing claims procedure under ERISA provides that every employee benefit plan shall "afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim." Id. § 1133(2); see also 29 C.F.R. § 2560.503-1 (1997) (outlining the minimum requirements for mandatory review procedures in ERISA cases). It is also well-established that federal courts have the authority to require exhaustion of remedies in suits arising under ERISA. Hall v. National Gypsum Co., 105 F.3d 225, 231 (5th Cir. 1997). The law of the Fifth Circuit is generally that a plaintiff must exhaust administrative remedies afforded by an ERISA plan before suing to obtain benefits allegedly wrongfully denied. Chailland v. Brown Root, Inc., 45 F.3d-947, 950 (5th Cir. 1995).
ERISA itself is silent on the question of exhaustion of administrative remedies under ERISA § 510. Indeed, ERISA contains no exhaustion requirement whatsoever. However, relying upon Amato v. Bernard, 618 F.2d 559 (9th Cir. 1980), plus Congressional intent and well-settled principles of administrative law, we adopted the common law rule that a plaintiff generally must exhaust administrative remedies afforded by an ERISA plan before suing to obtain benefits wrongfully denied. Denton v. First National Bank, 765 F.2d 1295, 1300-03 (5th Cir. 1985).Id. (citations omitted)
In Hall v. National Gypsum Co., 105 F.3d 225 (5th Cir. 1997), the Fifth Circuit reiterated the purposes of the exhaustion requirement, as follows:
In the seminal case on the issue of exhaustion, Amato, the court stated that the purposes of the exhaustion requirement included minimizing the number of frivolous ERISA suits, promoting the consistent treatment of claims, providing a nonadversarial dispute resolution process and decreasing the number of frivolous ERISA suits. In Denton, we additionally noted that the requirement also serves to provide a clear record of administrative action if litigation should ensue, and to assure that judicial review is made under the arbitrary and capricious standard, not de novo. We stated this was necessary "to keep from turning every ERISA action, literally, into a federal case."
Arbitrary and capricious is no longer the applicable standard of review for every challenge of a plan administrator's denial of ERISA benefits in light of Firestone v. Bruch, 109 S.Ct. 948 (1989). Post-Firestone, a denial of benefits challenged under ERISA is reviewed under a de novo standard, except when the administrator has discretionary authority. In cases where the administrator has discretionary authority, the reviewing court should apply an abuse of discretion standard. InWidbur v. ARCO Chemical Co., 974 F.2d 631, 635 n. 7 (5th Cir. 1992), the Fifth Circuit observed the distinction in terms between the "arbitrary and capricious" and the "abuse of discretion" standards, and explained that there is no significant substantive difference between the two. TheWidbur court stated:
Although our pre-Firestone decisions generally employed an "arbitrary and capricious" vernacular, after Firestone, we have usually described this more deferential alternative to de novo review as review under an "abuse of discretion" standard. Nevertheless, both this court and the district courts in this circuit have continued to use both terms to describe the same deferential standard of review. Id.
Hall, 105 F.3d at 231 [citations omitted].
This Court recognizes that there are exceptions to the exhaustion requirement and that they exist when: (1) administrative remedies are either not available or inappropriate to the relief sought; or (2) where the attempt to exhaust would patently be a futile course of action. Although counsel for the plaintiff pleads futility, the Court is not persuaded that the administrative challenge of any denial of benefits which may have occurred in the case of Kaler is a vain and useless effort. Most apparently, AA's PBAC does not consider review of the plaintiff's challenge as redundant since the matter is presently pending administrative review and a final decision in this case should be imminent. Moreover, the Court in its discretion is of the opinion that some administrative record, and more appropriately a cogent administrative record, would best serve the parties, the ends of justice and either put this case in its proper light or resolve the dispute at hand. In any event, a final decision of AA's PBAC in the case of plaintiff Kaler is an utter necessity.
As to the futility doctrine, the Court is convinced that the plaintiff in this case has not made the requisite showing. To come under the futility exception, a plaintiff must make a clear showing that the plan administrator exhibits some personal bias or harbors bitterness or hostility for the claimant. Denton, 765 F.2d at 1302-03 n. 11. The plaintiff must further demonstrate certainty that his or her claim will be denied on appeal, not merely doubt that the appeal will result in a different decision. It was not until most recently (i.e., March 20, 2000), that plaintiff's counsel requested that the Plan Administrator conduct a review of plaintiff's claim for death benefits. It is apparent to the Court and cannot be seriously disputed that AA's PBAC has instituted a review of the plaintiff's claim for benefits and is presently in possession of the universe of documents necessary to make a final decision in Kaler's case.
Just as with claims challenging the denial of benefits, claims of breach of fiduciary duty also require exhaustion. The Fifth Circuit has imposed the exhaustion requirement on suits for an administrator's breach of fiduciary duties under ERISA. See, Simmons v. Wilcox, 911 F.2d 1077, 1081 (5th Cir. 1990); Hall, 105 F.3d at 231 (citations omitted).
The Court has previously determined and there is no genuine issue of material fact that plaintiff's claims in the case at bar arise from the action of a plan covered by ERISA. It is apparent from the plaintiff's complaint that she believes that the Plan is capable of providing the relief sought in the form of payment of death benefits (i.e., "damages") under the Plan.
The record is undisputedly to the effect that the PBAC has not yet rendered its final decision and its review is still pending. The plaintiff has not yet satisfied the exhaustion requirement and her failure to do so cannot be excused as futile. There is no administrative record or final decision of the PBAC denying benefits for this Court to review under any standard — that is, either the de novo or the more deferential "abuse of discretion" standard.
When Congress enacted ERISA, it intended for plan administrators, not the federal courts, to be primarily responsible for claims processing. The summary judgment record demonstrates that only once was the Plan Committee (PBAC) asked to review any denial of plaintiff's claim for benefits. The letter requesting such a review was dated March 20, 2000, and resulted in the institution of the AA's PBAC review of plaintiff's claims. This review is ongoing and includes all of the documentation submitted to this Court in connection with the plaintiff's Motion for Summary Judgment. Considering the PBAC's willingness to review the plaintiff's claims, that its initial review of plaintiff's challenge is ongoing, and that it was not until very recently that the plaintiff availed herself of the Plan's administrative review process, the Court finds plaintiff's challenge of the denial of benefits premature. More to point, the Court does not find that the plaintiff's administrative remedies were exhausted, nor that resort to such remedies would be futile.
Accordingly,
IT IS ORDERED that plaintiff's Motion for Summary Judgment is DENIED.
IT IS FURTHER ORDERED Defendant's Motions for Summary Judgment are GRANTED IN PART — that is, only insofar as defendants' seek dismissal of the plaintiff's state law claims as preempted by ERISA and a determination that plaintiff's ERISA claims are premature. In all other respects the defendants' Motions for Summary Judgment are denied.
IT IS FURTHER ORDERED based on this Court's determination that the plaintiff's ERISA claims are premature and in light of the pending ongoing administrative review of plaintiff's challenge by the AA's PBAC that this action be CLOSED FOR ADMINISTRATIVE PURPOSES to allow plaintiff to pursue her administrative remedies. This action may be reopened upon motion of any party, if necessary, within thirty days following the final disposition of the administrative appeal of plaintiff's claims.
IT IS FURTHER ORDERED that the scheduled trial and pre-trial conference in the fall are hereby CANCELED.