Opinion
Case No. C-3-97-447
July 7, 1999
Gary J. Leppla for plaintiff.
Shelley A. Reed for defendant.
This litigation stems from the Defendant's termination of an "enhanced" life insurance benefit that Sally Syska, a former employee of the NCR Corporation (NCR), had elected prior to her death. Syska's executrix and heirs brought this action for breach of contract and for violations of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001, et seq. In a December 14, 1998, Entry (Doc. #26), the Court directed the parties to file memoranda addressing whether the captioned cause should be triedde novo, or decided based only upon an administrative record. This issue has been fully briefed (Doc. #27, 28, 29), and it is pending before the Court for resolution.
In their respective memoranda, the parties vigorously dispute the merits of the Plaintiff's legal claims, but they cite little legal authority regarding the propriety of either conducting a trial de novo, or relying solely upon the administrative record. (Id.). To the extent that the memoranda do address this issue, the Defendant simply contends that the administrative record is sufficiently developed for the Court to resolve the pending claims, whereas the Plaintiffs argue that it is not. After conducting its own review of the record and pertinent legal authority, the Court finds neither argument entirely persuasive.
In a September 14, 1998, Decision and Entry, the Court construed the Plaintiffs' Complaint as setting forth three claims under ERISA. (Doc. #20 at 11). First, the Complaint contains a state-law breach of contract claim, which the Court treated as an ERISA claim to recover benefits under 29 U.S.C. § 1132(a)(1)(B). (Id. at 9). Second, the Complaint contains an ERISA claim for failure to provide adequate benefits. (Id.). Third, the Complaint contains a claim for failure to disclose plan information adequately. (Id.) The Court construed this claim as alleging a violation of NCR's duty, under 29 U.S.C. § 1021, et seq., to furnish a summary plan description and other information to ERISA plan participants and beneficiaries. (Id.).
In its prior Decision and Entry (Doc. #20), the Court sustained the Defendant's Motion to Dismiss (Doc. #4), insofar as it was directed toward the Plaintiffs' second claim (failure to provide adequate benefits). (Id. at 9, 11). In so doing, the Court noted that "ERISA imposes no duty upon employers to provide insurance benefits or, if provided, to offer benefits above a threshold level." (Id. at 9). The only remaining claims, then, are: (1) the Plaintiffs' claim for plan benefits under 29 U.S.C. § 1132(a)(1)(B); and (2) their claim alleging a violation of 29 U.S.C. § 1021, et seq. Based upon applicable Sixth Circuit law, the Court concludes that its review of the former claim must be confined to the administrative record developed before NCR's Pension and Benefit Committee. The Court's review of the latter claim, however, is not limited to the administrative record. With respect to the Plaintiff's claim alleging a violation of 29 U.S.C. § 1021, et seq., the Plaintiffs are entitled to a trial de novo.
Before setting forth reasoning in support of the foregoing conclusion, the Court first must express its views regarding ERISA's applicability in the captioned cause. In its September 14, 1998, Decision and Entry, the Court assumed, without deciding, that the NCR benefit plan at issue qualified as an "ERISA plan." (Doc. #20 at 7). In so doing, the Court noted the Plaintiffs' contention that the NCR plan did not qualify as an ERISA plan. (Id. at 5). The Court declined to resolve the issue, however, because "neither party ha[d] submitted evidence regarding the NCR benefits program or the plan itself." (Id. at 6). The Court notes, however, that NCR has now filed an authenticated copy of its Group Benefits Plan, along with its Memorandum in support of a decision based solely upon the administrative record. (Doc. #27 at Exh. #3). A review of that document persuades the Court, as a matter of law, that the NCR plan qualifies as an "employee welfare benefit plan" under ERISA.
Title 1 of ERISA defines an "employee welfare benefit plan,"inter alia, as any plan, fund, or program established by an employer to provide, through the purchase of insurance or otherwise, medical, surgical, or hospital care or benefits. 29 U.S.C. § 1002(1). When determining whether a welfare benefit plan is an ERISA-governed plan, a District Court must undertake a three-step factual inquiry. Thompson v. American Home Assurance Co., 95 F.3d 429, 434 (6th Cir. 1996). "First, the court must apply the so-called `safe-harbor' regulations established by the Department of Labor to determine whether the program was exempt from ERISA. [citations omitted]. Second, the court must look to see if there was a `plan' by inquiring whether `from the surrounding circumstances a reasonable person [could] ascertain the intended benefits, the class of beneficiaries, the source of financing, and procedures for receiving benefits.' [citations omitted]. Finally, the court must ask whether the employer `established or maintained' the plan with the intent of providing benefits to its employees." Id. at 435.
With the foregoing considerations in mind, the Court finds that the NCR plan qualifies as an ERISA plan and, therefore, that it is governed by 29 U.S.C. § 1001, et seq. First, the NCR plan does not qualify for the DOL "safe harbor" provision, which excludes a plan from ERISA's reach if "(1) the employer makes no contribution to the policy; (2) employee participation in the policy is completely voluntary; (3) the employer's sole functions are, without endorsing the policy, to permit the insurer to publicize the policy to employees, collect premiums through payroll deductions and remit them to the insurer; and (4) the employer receives no consideration in connection with the policy other than reasonable compensation for administrative services actually rendered in connection with payroll deduction." Id. at 435, citing 29 C.F.R. § 2510.3-1(j). A policy is exempt from ERISA only if it satisfies all of the foregoing requirements. Id.
In the present case, the NCR plan expressly represented itself as an "ERISA plan," NCR functioned as the plan administrator, and benefit claims were submitted through NCR. (Doc. #20 at Exh. 4, p. 18-19). Consequently, the NCR plan fails the third "safe harbor" requirement, because the Defendant did more than simply permit an insurer to publicize its policy and collect premiums. Cf. Thompson, 95 F.3d at 436 (noting that the "safe harbor" provision does not apply when "there is some factual showing on the record of substantial employer involvement in the creation or administration of the plan"; and recognizing that when plan documents state "that the plan is governed by ERISA, the employee is entitled to presume that the employer's actions indicate involvement sufficient to bring the plan within the ERISA framework"); Arbor Health Care Co. v. Sutphen Corp., 1999 WL 282667 (6th Cir. April 30, 1999) ("We also note that the third criterion for ERISA exclusion cannot be met because Sutphen `endorsed' the employee health benefit plan, it is named as the plan administrator, and [an employee] submitted claims for plan benefits through Sutphen personnel. Accordingly, Sutphen's role was more than simply publicizing the plan and collecting payroll deductions.").
Although NCR's status as the plan administrator alone demonstrates the inapplicability of the "safe harbor" provision, the Court also notes that the plan fails the first "safe harbor" requirement, because the company made contributions to the policy on behalf of its employees. Specifically, the company provided its employees with "benefit credits" to "spend on health care and credits to be used for other benefit [c]hoices." (Doc. #20 at Exh. 4, p. 1). Additionally, enrollment in the NCR plan occurs automatically on an employee's first day of employment. (Id.). Consequently, the plan fails the second "safe harbor" provision as well.
Regarding the second step in the Court's three-part inquiry, NCR's insurance coverage qualifies as a "plan," because the company's employees can ascertain all relevant coverage information by examining the plan documents. As noted, supra, such relevant information includes the intended benefits, beneficiaries, source of financing, and procedures for receiving benefits. International Resources v. New York Life Ins. Co., 950 F.2d 294, 297 (6th Cir. 1991). In the present case, the intended benefits are, inter alia, health and life insurance coverage. The beneficiaries are NCR employees. The source of financing is NCR and its employees. The procedure for receiving benefits is the submission of a claim. (Doc. #20 at Exh. 4). Consequently, the NCR plan qualifies as a "plan" under ERISA. Cf. Madonia v. Blue Cross Blue Shield of Virginia, 11 F.3d 444, 447 (4th Cir. 1993).
With respect to the third and final step in the Court's inquiry, NCR undeniably established or maintained its welfare benefit plan for the purpose of providing benefits to its employees. In fact, as noted, supra, the company provided its employees with "credits" to ensure that they received certain basic levels of coverage. (Doc. #20 at Exh. 1). Cf. Arbor Health Care, 1999 WL at *5 (finding the third part of the three-part inquiry satisfied when the employer "`established or maintained the plan' by paying 80% of the premiums for covered employees and their dependents with the intent of providing benefits to them"). Accordingly, the Court concludes that the NCR plan at issue is governed by ERISA.
Having found that the NCR plan qualifies as an "ERISA plan," the Court next will examine Sixth Circuit ERISA jurisprudence to determine whether the Plaintiffs' legal claims may be decided through a trial de novo, or whether they must be resolved based upon the administrative record developed before the NCR Pension and Benefit Committee. As set forth above, the Court previously construed the Plaintiffs' Complaint as alleging two viable claims: (1) a claim for benefits under 29 U.S.C. § 1132(a)(1)(B); and (2) a claim that the Defendant violated its obligation, under 29 U.S.C. § 1021, et seq., to furnish certain plan information.
In Wilkins v. Baptist Healthcare System, Inc., 150 F.3d 609 (6th Cir. 1998), the court recently held that "a district court should not adjudicate an ERISA action [under § 29 U.S.C. § 1132(a)(1)(B)] as if it were conducting a standard bench trial under [Fed.R.Civ.P.] 52." Id. at 618. In support of its ruling, the court reasoned that "[s]uch a proceeding would inevitably lead to the introduction of testimonial and/or other evidence that the administrator had no opportunity to consider."Id. The court's ruling in Wilkins is consistent with other Sixth Circuit precedent, holding that a District Court may not consider evidence beyond the administrative record when deciding a claim for benefits brought under 29 U.S.C. § 1132(a)(1)(B). See Killian v. Healthsource Provident Administrators, 152 F.3d 514, 522 (6th Cir. 1998) ("There can be no dispute that in this circuit, in an ERISA claim contesting a denial of benefits, the district court is strictly limited to a consideration of the information actually considered by the administrator."); Wulf v. Quantum Chemical Corp., 26 F.3d 1368, 1376 (6th Cir. 1994) ("Unlike some courts, we have held that a court conducting a de novo review in an ERISA case is confined to evidence that was included in the record upon which the administrator based its decision."); Perry v. Simplicity Engineering, 900 F.2d 963, 966 (6th Cir. 1990) ("Nothing in the legislative history suggests that Congress intended that federal district courts would function as substitute plan administrators, a role they would inevitably assume if they received and considered evidence not presented to the administrators concerning an employee's entitlement to benefits.").
The Wilkins court defined the phrase "ERISA action," for purposes of its analysis, as a claim for benefits brought under 29 U.S.C. § 1132(a)(1)(B). Wilkins, 150 F.3d at 617.
In light of the foregoing authority, the Court concludes that the Plaintiffs' claim for ERISA benefits under 29 U.S.C. § 1132(a)(1)(B) must be decided based solely upon the evidentiary materials contained in the administrative record. Furthermore, the Court notes that such a record does exist in the present case. (See Defendant's Exhibits in Support of Decision on the Administrative Record, accompanying Doc. #27). If, as the Plaintiffs allege, the existing administrative record is insufficient to support the denial of their claim for enhanced life insurance benefits, then the plan administrator's denial may be found to have been "arbitrary and capricious." Conversely, if, based upon the administrative record, the Defendant articulates a reasoned explanation for its denial of benefits, then that decision may not be found to have been "arbitrary and capricious." At this time, however, the Court expresses no opinion on the merits of the Plaintiffs' claim. Rather, the Court notes only that, when deciding the Plaintiffs' 29 U.S.C. § 1132(a)(1)(B) claim for plan benefits, it may not admit or consider any evidence not presented to the NCR plan administrator.Wilkins, 150 F.3d at 619.
"The only exception to the above principle of not receiving new evidence at the district court level arises when consideration of that evidence is necessary to resolve an ERISA claimant's procedural challenge to the administrator's decision, such as a lack of due process afforded by the administrator or alleged bias on its part." Wilkins, 150 F.3d at 618. The Plaintiffs make no such challenge in the present case.
In its Memorandum in support of a decision based upon the administrative record, the Defendant argues that the plan administrator's claim denial is subject to an "arbitrary and capricious" standard of review. (Doc. #27 at 8-9). In their Memorandum contra, the Plaintiffs do not dispute applicability of the "arbitrary and capricious" standard. Rather, they argue that administrator's denial of Syska's claim for enhanced life insurance benefits was arbitrary and capricious. Based upon the language of the NCR plan, the "arbitrary and capricious" standard does appear applicable to the Court's review of the plan administrator's decision. The "arbitrary and capricious" standard applies in ERISA cases only when a benefit plan "gives the plan administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the plan's terms." Perry, 900 F.2d at 965. In the present case, the NCR plan provides:
The Plan Administrators and other fiduciaries of the Plan have the maximum discretionary authority to determine the eligibility for benefits under the Plan, to construe the Plan's terms and to otherwise carry out their Plan responsibilities. The decisions of the Plan Administrators and other such fiduciaries are subject to review only under the arbitrary and capricious standard. Their actions shall be overturned only for abuse of the wide discretion granted to them under the Plan.
(Doc. #20 at Exh. 4, p. 18). Given the foregoing language granting the NCR plan administrators discretionary authority, application of the deferential "arbitrary and capricious" standard of review appears appropriate.
The Court reaches a different conclusion, however, with respect to the Plaintiffs' second claim, namely that "[t]he inclusion of a summary of life insurance benefits in a six-page document concerning health care coverage is inadequate, as a matter of law, to properly discharge NCR's duty to Ms. Syska." (Doc. #1, Complaint at ¶ 24). As noted above, the Court previously construed this claim as alleging a violation of ERISA's notice and disclosure requirements, as set forth in 29 U.S.C. § 1021, et seq. (Doc. #20 at 12). The Plaintiffs have not disputed the Court's characterization of their claim. To the contrary, in their present Memorandum, the Plaintiffs specifically allege that NCR has violated ERISA's notice provisions, including § 1021, § 1022, § 1024, and § 1025. (Doc. #28 at 6). This assertion does not constitute a challenge to the NCR plan administrator's denial of a claim for plan benefits under 29 U.S.C. § 1132(a)(1)(B). Indeed, "[n]othing in § 1132 suggests that a plan beneficiary should receive a benefit award based upon a plan administrator's failure to disclose required information." Lewandowski v. Occidental Chemical Corp., 986 F.2d 1006 (6th Cir. 1993). Consequently, such a claim falls outside the scope of the Sixth Circuit case law discussed above. As noted, supra, a District Court must rely upon the administrative record when reviewing a challenge to the denial of a claim for benefits under 29 U.S.C. § 1132(a)(1)(B). See, e.g.,Wilkins, 150 F.3d at 617-619; Killian, 152 F.3d at 522 ("There can be no dispute that in this circuit, in an ERISA claim contesting the denial of benefits, the district court is strictly limited to a consideration of the information actually considered by the administrator.").
Given that the Plaintiffs' claim, alleging a violation of 29 U.S.C. § 1021, is not a claim for "benefits," however, Sixth Circuit law does not require the Court to confine itself to the administrative record when deciding the merits of this claim. Indeed, ERISA's entire administrative scheme, by its own terms, applies only to claims brought for plan benefits.Miller v. Metropolitan Life Ins. Co., 925 F.2d 979, 986 (6th Cir. 1991); see also 29 U.S.C. § 1133 (stating 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").
Parenthetically, the Court notes that the Sixth Circuit consistently has denied substantive remedies for violations of ERISA's notice provisions. See, e.g., Lake v. Metropolitan Life Ins. Co., 73 F.3d 1372, 1378 (6th Cir. 1996) ("Moreover, the Lake Plaintiffs would not be entitled to recover substantive damages even if we found that the SPDs violated § 1022(a)(1) because violations of the procedural sections of ERISA do not give rise to claims for substantive damages."); Lewandowski, 986 F.2d at 1010 (concluding that a plan administrator's failure to provide a beneficiary with plan documents as required by 29 U.S.C. § 1021, 1022, 1024, and 1025 does not give rise to a damages award);Crawford v. Roane, 53 F.3d 750, 757 (6th Cir. 1995); see also DiMarco v. Michigan Conference of Teamsters Welfare Fund, 861 F. Supp. 599, 610-611 (E.D.Mich. 1994); Bright v. SKW Alloys Group Ins. Plan, 823 F. Supp. 428, 430 n. 3 ("Failure to comply with ERISA's notice requirements does not provide a basis for a substantive remedy under § 1132(a)(1)(B)."). The remedy for violations of ERISA's notice provisions is found in 29 U.S.C. § 1132(c), which provides statutory penalties for various violations of ERISA's disclosure requirements.
Based upon the foregoing analysis, the Court concludes that its review of the Plaintiffs' claim under 29 U.S.C. § 1132(a)(1)(B) must be limited to the administrative record. The Court is not confined to the administrative record, however, in its review of the Plaintiffs' second claim, which alleges a violation of 29 U.S.C. § 1021, et seq.
With respect to the Plaintiffs' claim under 29 U.S.C. § 1132(a)(1)(B), the parties are directed to file, within forty-five days of this Entry, a joint "administrative record," containing all documents and materials that were considered by the plan administrator when it denied Syska's claim for enhanced insurance benefits. The Plaintiffs shall file, within forty-five days thereafter, a Memorandum in support of their claim for benefits. The Defendant then shall file, within thirty days, a Memorandum in opposition to the Plaintiffs' claim for plan benefits. The Plaintiffs may file a reply Memorandum, within fifteen days thereafter. The foregoing Memoranda shall address the evidence contained in the administrative record, and no discovery shall be conducted on the Plaintiffs' claim for benefits under 29 U.S.C. § 1132(a)(1)(B).
With respect to the Plaintiffs' "notice" claim under 29 U.S.C. § 1021, et seq., counsel will take note that a conference call has been set for Friday, July 23, 1999, to determine a trial date and other dates leading to the resolution of this claim.