Summary
granting Novella summary judgment as to claim that defendants' application of two different benefit rates to his pension violated Plan terms; dismissing WC Claim for failure to exhaust administrative remedies
Summary of this case from Novella v. Empire State Carpenters Pension FundOpinion
No. 02 Civ. 2192 (MBM).
August 2, 2004
EDGAR PAUK, ESQ., New York, NY, Attorney for Plaintiff.
ROBERT T. McGOVERN, ESQ., Meyer Suozzi, English Klein, Mineola, NY, Attorney for Defendants.
OPINION AND ORDER
Plaintiff Carlo Novella sues defendants, the Westchester County, New York Carpenters' Pension Fund ("Westchester Fund") and its Board of Trustees ("the Trustees"), on the ground that they refused to award him a pension in the amount to which he was entitled. Novella claims that defendants miscalculated his pension in two ways: (1) by using two different benefit rates to calculate the amount of his pension, and (2) by failing to award him pension credits for 501 hours during which he collected workers' compensation benefits. According to Novella, defendants' actions violated both the terms of the Westchester Fund's pension plan ("the Westchester Plan") and requirements of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. (2000). Both parties now move for summary judgment on all claims. For the reasons stated below, Novella's motion for summary judgment is granted as to his claim that defendants' application of two different benefit rates to his pension violated the terms of the Westchester Plan, and his claims that this practice also violated ERISA are therefore dismissed as moot. Novella's claims arising from defendants' failure to award pension credits while he collected workers' compensation benefits, by contrast, are dismissed without prejudice because Novella has not yet exhausted them.
This case was initially presented to the court as a class action, but because Novella never sought class certification, this judgment resolves only his claims and not the claims of other potential members of the uncertified class.
I.
The following facts are undisputed.
From 1962 through 1995, Carlo Novella worked as a carpenter in Westchester County and New York City. (See Affidavit of Carlo Novella ("Novella Aff.") ¶¶ 3-4, 6) He was a participant in the Westchester Fund, and his pension benefits from the Fund are determined under the Westchester Plan, which has been in effect since January 1, 1986. (Affidavit of Patrick B. Morin ("Morin Aff.") ¶¶ 5, 50) Westchester Plan participants earn pension credits based on their hours of service in jobs that are covered by the Plan. (See Novella Aff., Ex. C ("Westchester Plan") § 4.01) Novella earned 13.20 pension credits from 1962 through 1981 and 6.30 pension credits from 1987 through 1995. (Morin Aff., Ex. 1) He earned no pension credits from 1982 through 1986; during that period he worked exclusively in jobs that were covered by a different pension plan, the New York City District Council of Carpenters Pension Plan ("New York City Plan"). (Id.; Novella Aff. ¶ 4)
On March 22, 1995, Novella suffered a disabling accident at work, and on April 24, 1995, he began receiving workers' compensation benefits, retroactive to March 27, 1995. (Novella Aff. ¶ 6; Novella Aff., Ex. A) Novella also applied for and was awarded an Early Retirement Pension from the Westchester Fund. (Novella Aff. ¶¶ 7-8) To calculate the amount of this pension, defendants applied a benefit rate of $17 per credit to the 13.20 pension credits Novella had earned between 1962 and 1981, and a second benefit rate of $40 per credit to the 6.30 pension credits he had earned between 1987 and 1995. (Id. ¶ 8; Novella Aff., Ex. B; Morin Aff. ¶ 52) Novella's pension was changed to a Disability Pension in May 1996, but defendants still calculated its amount by applying two different benefit rates to the pension credits Novella earned before 1982 and after 1986. (Novella Aff. ¶ 15; Novella Aff., Ex. H)
$17 per credit is the benefit rate that was in effect in 1981. (Morin Aff. ¶ 52)
$40 per credit is the benefit rate that was in effect in 1994. (Morin Aff. ¶ 52)
When he first learned that his pension would be calculated using two different benefit rates, Novella immediately sought clarification from defendants and was told that the different rates were being applied because he had a break in service from 1982 through 1986, when all his jobs were covered by the New York City Plan instead of the Westchester Plan. (Novella Aff. ¶ 9) Novella repeatedly appealed this determination to the Trustees, but his appeals were denied. (See id. ¶ 11, 14, 16-22; Novella Aff., Exs. D, I, J, K, N, O) The Trustees referred Novella to § 3.07 of the Westchester Plan and explained that, according to that provision, a Deferred Pension is calculated by applying different benefit rates to pension credits that were accumulated before and after a break in service. (Novella Aff., Ex. O)
Defendants do not claim that Novella has ever collected a Deferred Pension instead of an Early Retirement Pension or a Disability Pension.
II.
Novella's initial claims arise from defendants' decision to calculate his Disability Pension by applying two different benefit rates to pension credits he earned before 1982 and after 1986 rather than applying the higher benefit rate to both types of credits. Novella first claims that this decision violated the terms of the Westchester Plan, and, in the alternative, that if the Plan allows defendants to apply two benefit rates to his pension, the Westchester Plan and its Summary Plan Description violate assorted ERISA requirements. Because I find that defendants' interpretation and application of the Westchester Plan was arbitrary and capricious in this case, Novella is entitled to summary judgment as to his first claim, and the other claims in this group, which are premised on the assumption that the terms of the Westchester Plan support defendants' decision, are dismissed as moot.
This claim is listed as the Sixth Claim for Relief in the Amended Complaint. (See Amended Complaint ("Am. Compl.") ¶¶ 32-33)
These claims are listed as the Third, Fourth, Fifth, and Seventh Claims for Relief in the Amended Complaint. (See Am. Compl. ¶¶ 21-31, 34-36)
A.
A denial of pension benefits should be reviewed de novo unless the benefit plan gives its administrator discretionary authority to determine eligibility for benefits or to construe the terms of the plan. Mario v. P C Food Markets, Inc., 313 F.3d 758, 763 (2d Cir. 2002). If the plan does include such a grant of discretionary authority, a reviewing court should defer to that authority and evaluate the plan administrator's decisions under an arbitrary-and-capricious standard. Id. The scope of judicial review under an arbitrary-and-capricious standard is narrow: "A court may overturn a plan administrator's decision to deny benefits only if the decision was `without reason, unsupported by substantial evidence or erroneous as a matter of law.'" Celardo v. GNY Auto. Dealers Health Welfare Trust, 318 F.3d 142, 146 (2d Cir. 2003) (quoting Pagan v. NYNEX Pension Plan, 52 F.3d 438, 442 (2d Cir. 1995)). "[W]here the trustees of a plan impose a standard not required by the plan's provisions, or interpret the plan in a manner inconsistent with its plain words, or by their interpretation render some provisions of the plan superfluous, their actions may well be found to be arbitrary and capricious." Gallo v. Madera, 136 F.3d 326, 330-31 (2d Cir. 1998) (internal quotation marks omitted).
In this case, Novella argues that defendants' interpretation and application of the Westchester Plan should be reviewed de novo, while defendants claim that the arbitrary-and-capricious standard applies. (Compare Plaintiff's Memorandum of Law in Opposition to Defendants' Motion for Summary Judgment ("Pl. Opp'n Memo.") at 8-9 with Defendants' Memorandum of Law in Support of Motion for Summary Judgment ("Def. Memo.") at 21-22) However, because Novella would prevail under either a de novo or an arbitrary-and-capricious standard, I need not determine which standard is applicable here. See Burke v. Kodak Retirement Income Plan, 336 F.3d 103, 110 (2d Cir. 2003) (declining to resolve applicable standard when ERISA plaintiff would prevail on claim under either standard).
B.
The plan administrators acted in an arbitrary and capricious manner by awarding Novella a pension that was calculated using two different benefit rates because their decision was based on an interpretation of the Westchester Plan that is inconsistent with the plain words of that Plan. Nothing in the provisions of the Westchester Plan on which defendants rely states or implies that a Disability Pension may be calculated using two different benefit rates when a participant has had a break in service. Indeed, the Westchester Plan plainly provides that a participant who collects a Disability Pension should be entitled to the amount of a Regular Pension, which is calculated at one benefit rate. (See Westchester Plan §§ 3.03, 3.10) Because defendants' decision to deny Novella the amount of a Regular Pension therefore is contrary to the terms of the Westchester Plan, that denial of benefits must be overturned under either a de novo or an arbitrary-and-capricious standard.
Because Novella has been collecting a Disability Pension since 1996 (see Novella Aff., Ex. H), the amount of his pension should be determined under § 3.10 of the Westchester Plan, which explains how to calculate a Disability Pension. According to § 3.10, "[t]he Disability Pension amount shall be equal to the Regular Pension amount for which the Employee would have been eligible if he had been age 65 when he became disabled," so long as the participant had at least 10 units of pension credit at the time of his disability. (Plan § 3.10) Because Novella had 19.50 units of credit at the time of his disability (see Novella Aff., Ex. B), the amount of Novella's Disability Pension plainly should have been determined by looking at "the Regular Pension amount for which [Novella] would have been eligible if he had been age 65 when he became disabled." (Plan § 3.10) However, instead of calculating the amount of the Regular Pension to which Novella was entitled, the administrators instead awarded him benefits on the basis of § 3.07, which explains how to calculate the amount of a Deferred Pension and allows for the application of two benefit rates. (See Novella Aff., Ex. O) Nothing in § 3.10 states or implies that plan administrators may consider the amount of a Deferred Pension, rather than the amount of a Regular Pension, when calculating the amount of a Disability Pension.
In an attempt to justify the plan administrators' decision to use the amount of a Deferred Pension to calculate a Disability Pension, defendants argue that the plan administrators could not have based Novella's Disability Pension on "the Regular Pension amount for which [he] would have been eligible" (Plan § 3.10) because, as a result of his non-continuous employment, Novella did not satisfy the eligibility requirements for a Regular Pension at the time of his disability. (Defendants' Reply Memorandum of Law in Support of Motion for Summary Judgment at 4-5) According to defendants, the plan administrators could not use a Regular Pension amount to calculate Novella's Disability Pension if Novella was not eligible to retire on a Regular Pension, and so the plan administrators made a reasonable improvisation when they used a Deferred Pension amount instead because Novella would have been eligible to retire on a Deferred Pension. (See id. at 4-5)
A plan participant is eligible for a Deferred Pension, rather than a Regular Pension, if he has at least 10 Pension Credits (or at least 10 years of service) but has had a period of three or more consecutive years in which he earned less than 3/10 of a unit of credit. (Plan § 3.06)
Under the Westchester Plan, a Disability Pension is subject to eligibility requirements different from those that govern a Regular Pension. (Compare Plan § 3.02 with § 3.08) Nothing in § 3.08, which describes the eligibility requirements for a Disability Pension, or § 3.10, which describes the amount of a Disability Pension, states that a plan participant must satisfy the eligibility requirements for a Regular Pension, as laid out in § 3.02, in order to collect a Disability Pension in the amount described in § 3.10. Although defendants rely heavily on § 3.10's use of the word "eligible" in the phrase "the Regular Pension amount for which the Employee would have been eligible," they ignore the fact that this phrase refers to a "Regular Pensionamount," rather than simply to a "Regular Pension." (Plan § 3.10) (emphasis added) The amount of a Regular Pension for which a participant is eligible is determined by § 3.03 of the Westchester Plan and not by the threshold eligibility requirements contained in § 3.02, which are unrelated to calculating the Regular Pension amount. Furthermore, the second sentence of § 3.10 explains that plan participants who have accumulated fewer than 10 pension credits — and thus would be ineligible to retire on a Regular Pension under § 3.02 — may nonetheless collect a Disability Pension that is "the Regular Pension amount reduced by 1/2% for each month he is under age 65 on the Effective Date of his pension. . . ." (Plan § 3.10) Based on this sentence, it is plain that § 3.10 contemplates that a plan participant's Disability Pension will be calculated on the basis of the Regular Pension amount he could have collected at 65 even if he did not satisfy the eligibility requirements for a Regular Pension at the time of his disability. For all of these reasons, § 3.10 cannot fairly be read as requiring that a plan participant be eligible to retire on a Regular Pension in order to collect a Disability Pension in the amount of a Regular Pension.
In addition to relying on the eligibility requirements for a Regular Pension, defendants argue that the application of two benefit rates to Novella's pension is justified by § 3.16 of the Westchester Plan. (Def. Memo. at 20-21) I note that the Trustees did not refer to § 3.16 when they provided Novella with an explanation for the denial of his appeal (see Novella Aff., Ex. O), and this justification for their decision appears to have been raised for the first time in litigation. In any event, § 3.16 reads as follows:
Application to Benefit Increases
The pension to which a Participant is entitled shall be determined under the terms of the Plan and the benefit level as in effect at the time the Participant last separates from Covered Employment.
A Participant shall be deemed to have last separated from Covered Employment on the last day of Work which is followed by three consecutive calendar years of less than 1,000 hours of Covered Employment in each year. . . .
(Plan § 3.16) The title of § 3.16, "Application to Benefit Increases," illuminates the purpose of this provision: to explain what happens in the event that benefit levels are increased after a plan participant begins collecting his pension. In that situation, § 3.16 provides that the participant's pension should be calculated "under . . . the benefit level as in effect at the time the Participant last separates from Covered Employment," rather than under the new, higher benefit level. (Plan § 3.16)
Although defendants argue that § 3.16 authorizes plan administrators to apply multiple benefit levels when calculating the pension of a plan participant who has had a break in service, the text of § 3.16 does not reasonably allow such an interpretation. Section 3.16 contemplates that a pension will be calculated on the basis of only one benefit level, "the benefit level as in effect at the time the Participant last separates from Covered Employment." (Plan § 3.16) Defendants suggest that a plan participant can have more than one "last" separation from Covered Employment, and hence more than one applicable benefit level (see Def. Memo. at 21), but this argument is inconsistent with the plain meaning of "last". There can be only one "last" separation frm Covered Employment. Section 3.16 therefore suggests that pensions should be calculated on the basis of only one benefit level, and defendants cannot reasonably invoke it to support the plan administrators' decision to award Novella a pension that was calculated using two different benefit rates.
I note that the text also does not support Novella's interpretation of § 3.16 as a provision that governs the amount of benefits for inactive plan participants who would not be considered "Employees" under the plan. (See Pl. Opp'n Memo. at 2-4)
As the above discussion indicates, the Westchester Plan provides no basis for the defendants' decision to award Novella a Disability Pension that was calculated at two benefit rates, and indeed this decision runs counter to the plain meaning of the Westchester Plan. Because defendants thus acted in an arbitrary and capricious manner by denying Novella a Disability Pension in the amount of a Regular Pension, which is calculated using one benefit rate, this denial must be overturned. Novella is therefore entitled to summary judgment as to his claim that defendants' decision to apply two benefit rates violated the Westchester Plan, and his other claims challenging this decision are dismissed as moot because they presuppose that defendants' decision was authorized by the Plan.
III.
Novella's other two claims arise from defendants' refusal to credit him with hours of service, and therefore pension credits, during the time he received workers' compensation benefits. (See Amended Complaint ¶¶ 13-20) Because Novella has failed to exhaust these claims by presenting them to the plan administrators, these claims are dismissed without prejudice, and the court makes no determination of their merits.
ERISA empowers this court to review decisions reached by plan administrators, but it "provides no authority for a court to render a de novo determination of an employee's eligibility for benefits." Peterson v. Cont'l Cas. Co., 282 F.3d 112, 117 (2d Cir. 2002). "Therefore, absent a determination by the plan administrator, federal courts are without jurisdiction to adjudicate whether an employee is eligible for benefits under an ERISA plan." Id. Accordingly, before bringing ERISA-based benefits claims in federal court, plaintiffs first must exhaust them by pursuing "all administrative remedies provided by their plan pursuant to statute, which includes carrier review in the event benefits are denied." Chapman v. ChoiceCare Long Island Term Disability Plan, 288 F.3d 506, 511 (2d Cir. 2002). A plaintiff's failure to exhaust will be excused only if the plaintiff makes "a clear and positive showing that pursuing available administrative remedies would be futile." Kennedy v.Empire Blue Cross and Blue Shield, 989 F.2d 588, 594 (2d Cir. 1993) (internal quotation marks omitted). Whether Novella exhausted his administrative remedies under ERISA is a question of law that must be reviewed de novo. Burke, 336 F.3d at 107.
There is nothing in the record to suggest that the plan administrators ever determined, or even had an opportunity to determine, whether Novella was entitled to pension credits based on his receipt of workers' compensation benefits. Indeed, nothing in the record suggests that Novella ever told the plan administrators that he was collecting workers' compensation benefits. (See Pl. Opp'n Memo. at 24-25; Morin Aff. ¶ 68) Accordingly, although the plan administrators reached a determination about the benefits rates that applied to Novella's pension credits, they never had the occasion to determine whether Novella's pension credits should have been increased based on the fact that, unbeknownst to them, Novella was collecting workers' compensation benefits. The plan administrators therefore did not make a determination about Novella's entitlement to pension credits based on his receipt of workers' compensation benefits, and this court lacks jurisdiction to adjudicate this claim because it would have to render a de novo determination of Novella's eligibility for this benefit. See Peterson, 282 F.3d at 117.
Although Novella argues that the Trustees should have deduced that Novella might be entitled to workers' compensation because they knew that he "was hurt on the job and forced into early retirement," he has presented no evidence to support the conclusion that the Trustees actually knew that he was receiving workers' compensation benefits. (Novella Aff., Ex. D; see Pl. Opp'n Memo. at 24-25)
Novella presents several arguments in an attempt to persuade this court that he actually has exhausted his claim for pension credits based on workers' compensation benefits, but none is persuasive. First, Novella contends that courts have imposed only a "claim exhaustion" requirement on ERISA benefits claims, rather than an "issue exhaustion" requirement, and he characterizes his workers' compensation benefits argument as another "issue" in support of his claim for a larger pension. (Pl. Opp'n Memo. at 23-24) Although Novella may be right that ERISA requires only claim exhaustion, rather than issue or theory exhaustion, see Wolf v. Nat'l Shopmen Pension Fund, 728 F.2d 182, 186 (3d Cir. 1984), an issue or theory that is raised in court proceedings must be based on information or evidence that was actually before the plan administrators. See Bahnaman v.Lucent Techs., Inc., 219 F. Supp.2d 921, 925 (N.D. Ill. 2002).Cf. Miller v. United Welfare Fund, 72 F.3d 1066, 1071 (2d Cir. 1995) ("[A] district court's review under the arbitrary and capricious standard is limited to the administrative record."). Novella's failure to inform the Trustees that he was receiving workers' compensation benefits means that that fact was not before them, and precludes him from now bringing a claim for pension credits on the basis of that fact even if, as he claims, he was not required to exhaust with the plan administrators every argument that would enable him to collect a larger pension.
Second, Novella contends that the plan administrators had a fiduciary duty to ask him about his workers' compensation benefits if those benefits were relevant to calculating his pension credits, and their failure to pursue this line of inquiry should excuse his own failure to exhaust. (Pl. Opp'n Memo. at 24-25) However, Novella has presented no evidence about what the plan administrators did or did not ask him when he applied for pension benefits; Novella's pension application is not in the record, and neither is any other evidence about whether the plan administrators asked participants about their receipt of workers' compensation benefits when they applied for pension benefits. Because there is thus no basis for concluding that the plan administrators failed to elicit information about workers' compensation benefits from plan participants, this argument remains hypothetical, and therefore the court need not consider whether the plan administrators would have breached their fiduciary duty in this hypothetical situation.
Novella's final argument, mentioned in passing, is that an attempt to exhaust would be futile because defendants "have taken the position in this litigation that they are not going to credit workers' compensation benefits." (Pl. Opp'n Memo. at 27) "Defendants' position in this lawsuit does not establish futility." Davenport v. Harry N. Abrams, Inc., 249 F.3d 130, 134 (2d Cir. 2001). Accordingly, Novella's claims are not deemed exhausted on the ground that exhaustion would be futile.
As the above discussion indicates, Novella must exhaust his workers' compensation-based claims with the plan administrators by informing them that he received workers' compensation benefits and asking for pension credits on that basis. Accordingly, these claims are dismissed without prejudice to enable Novella to exhaust.
* * *
For the reasons stated above, Novella's motion for summary judgment is granted as to his claim that defendants' application of two benefit rates to his pension violated the terms of the Westchester Plan, and his claims that this practice also violated ERISA requirements are therefore dismissed as moot. Novella's other claims are unexhausted and dismissed without prejudice.SO ORDERED.