Kelly v. Reliance Standard Life Insurance Company et al

MOTION for Summary Judgment

D.N.J.April 21, 2017

KELLY LAW OFFICES, LLC 3000 ATRIUM WAY - SUITE 291 MOUNT LAUREL, NEW JERSEY 08054 (609) 261-6100 (609) 261-6105 (Fax) Attorneys for Plaintiff UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY THOMAS P. KELLY Jr., : : Plaintiff : : v. : : RELIANCE STANDARD : Civil Action No. 2:09-cv-02478 LIFE INSURANCE COMPANY, : (KSH-CLW) : and, : : Motion Date: May 15, 2017 THE PENN MUTUAL : LIFE INSURANCE COMPANY, : : Defendants : PLAINTIFF’S NOTICE OF MOTION FOR SUMMARY JUDGMENT AS TO COUNTS I & II OF THE AMENDED COMPLAINT To: Joshua Bachrach, Esquire Wilson, Elser, Moskowitz, et al. Independence Sq. West The Curtis Center Suite 1130 East Philadelphia, PA 19106-3308, Attorneys for Co-Defendant Reliance Standard Life Ins. Co.; and Case 2:09-cv-02478-KSH-CLW Document 211 Filed 04/21/17 Page 1 of 2 PageID: 2752 Louis P. DiGiaimo, Esquire McElroy, Deutsch, Mulvaney, et al. 1300 Mount Kemble Avenue P.O. Box 2075 Morristown, New Jersey 07962-2075, Attorneys for Co-Defendant Penn Mutual Life Ins. Co. PLEASE TAKE NOTICE, that on May 15, 2017, at nine o’clock in the forenoon, or as soon thereafter as undersigned counsel may be heard, plaintiff Thomas P. Kelly Jr. (“Mr. Kelly” or “Plaintiff”) shall move before the United States District Court for the District of New Jersey, the Honorable Katharine S. Hayden, U.S.D.J. presiding, for an Order granting summary judgment against both defendants, in Plaintiff’s favor, as to Counts I & II of his Amended Complaint. Plaintiff shall additionally move for leave to appropriately supplement and amend his 2012 Motion for Counsel Fees. PLEASE TAKE FURTHER NOTICE that, in support of his Motion for Summary Judgment, plaintiff also relies on the Memorandum of Law enclosed herewith and incorporated herein by reference, and shall also rely on the Administrative Record and all materials that have been filed in this matter. Respectfully submitted, KELLY LAW OFFICES, LLC, By: Thomas P. Kelly III Dated: April 21, 2017 Case 2:09-cv-02478-KSH-CLW Document 211 Filed 04/21/17 Page 2 of 2 PageID: 2753 KELLY LAW OFFICES, LLC 3000 ATRIUM WAY - SUITE 291 MOUNT LAUREL, NEW JERSEY 08054 (609) 261-6100 (609) 261-6105 (Fax) Attorneys for Thomas P. Kelly Jr., Plaintiff UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY THOMAS P. KELLY Jr., : : Plaintiff : : v. : : RELIANCE STANDARD : Civil Action No. 2:09-cv-02478 LIFE INSURANCE COMPANY, : (KSH-PS) : and, : : Motion Date: THE PENN MUTUAL : LIFE INSURANCE COMPANY, : : Defendants : MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF’S THIRD MOTION FOR SUMMARY JUDGMENT REGARDING COUNTS I AND II OF THE AMENDED COMPLAINT Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 1 of 42 PageID: 2754 ii Table of Contents Statement of Jurisdiction................................................................................................................. 5 Statement of Undisputed Material Facts ......................................................................................... 5 Standard of Review for Plaintiff’s ERISA Claim on Summary Judgment ..................................... 5 A. Standard of Review for Motions for Summary Judgment, Generally .............................. 5 B. Standard of Review for an Administrator’s Determination Under ERISA ...................... 6 Legal Argument .............................................................................................................................. 7 1. The termination of plaintiff’s disability claim was arbitrary and capricious because RSL waited four years to administer the claim; conducted an inappropriately selective review of evidence; placed unreasonable emphasis on the reports of consultants who never examined the plaintiff; relied on information outside the Administrative Record; chose not to use an independent medical examiner; and failed to engage in any meaningful analysis of the plaintiff’s claim. ................................................................................................................... 7 A. Inappropriately Selective Evaluation of Objective Medical Evidence ............................ 7 B. Improper Reliance on Information Outside the Administrative Record ........................ 10 C. RSL’s Inappropriately Selective Evaluation of Other Evidence .................................... 12 2. RSL Failed to Provide Mr. Kelly With a Full and Fair Review of His Claim for Benefits Beyond May 25, 2008, in violation of 29 USC §1133, Because the Company Did Not Provide Timely Notice of its Adverse Benefits Determination After Being Presented With a Claim for Those Benefits on January 10, 2011, as Required by Federal Regulation 29 C.F.R. 2560.503-1(f)(iii)(3), Until the Claim Was First Denied on September 14, 2015................................................................................................................................... 15 3. It was arbitrary and capricious for RSL to withhold payment of benefits due beyond May 25, 2008 because the long-term disability policy does not automatically terminate a claim after the twenty-fourth month of eligibility. ..................................................................... 24 4. It Was Improper for RSL to Terminate Mr. Kelly’s Monthly Benefit on September 15, 2015 Under the Pretext That He Had Been Uncooperative Because the Monthly Benefit Should Have Automatically Stopped on August 24, 2012 , the Date of Normal Retirement Age, as Defined in the “Maximum Duration of Benefits” Page of the RSL Policy. ............................................................................................................................... 25 5. The Court should exercise its authority, pursuant to §502(a)(3)(B) of ERISA enter judgment against RSL and in favor of the plaintiff in an amount sufficient to restore the status quo. ......................................................................................................................... 28 A. Interest due on delayed payment of disability benefits. ................................................. 28 B. Equitable Relief of Restitution and Surcharge for interest rate losses in Plaintiff’s PML Retirement and Savings Plan from the date he ceased to be a plan participant on August 24, 2012 until anticipated judgment in July 2017. .......................................................... 30 C. Equitable restitution for effective tax rate losses resulting from lump sum payment. ... 34 Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 2 of 42 PageID: 2755 iii 6. Recognizing that the plan administrator violated the December 22, 2011 Order to pay benefits and continue the administration of plaintiff’s claim over a period of several years, the Court should order the plan administrator to pay sanctions in a sufficient amount so as to deter similar future conduct. ........................................................................................... 35 Conclusion .................................................................................................................................... 35 Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 3 of 42 PageID: 2756 iv Table of Authorities CASES Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986) ------------------------------------------ 6 Anthuis v. Colt Industries Operating Corp., 971 F.2d 999, 1010 (3d Cir.1992) -------------------- 32 Chambers v. NASCO, Inc., 501 U.S. 32, 45-46 (1991) ------------------------------------------------- 40 Dandridge v. Raytheon Co., No. CIV. A. 08-4793 (WJM, 2010 WL 376598, at *2–3 (D.N.J. Jan. 26, 2010) ---------------------------------------------------------------------------------------------------- 14 Elliot v. Metro. Life Ins. Co., 473 F.3d 613, 621 (6th Cir. 2006) ---------------------------------- 11 Estate of Schwing v. Lilly Health Plan, 562 F.3d 522, 526 (3d Cir. 2009) ---------------------- 8 Fakete v. Aetna, Inc., 308 F.3d 335, 337 (3d Cir. 2002) ---------------------------------------------- 6 Fellheimer, Eichen & Bravernman P.C. v. Charter Techs, Inc., 57 F.3d 1215, 1224 (3d Cir. 1995) -------------------------------------------------------------------------------------------------------- 40 Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989) ----------------------------------- 7 Fotta v. Trustees of United Mine Workers of Am., 319 F.3d 612, 616 (3d Cir. 2003) ------------- 32 Funk v. CIGNA Group Ins., 648 F.3d 182, 191 n.11 (3d Cir. 2011) ------------------------------- 8 Glenn v. MetLife, 461 F.3d 660, 674 (6th Cir. 2006) ---------------------------------------------- 7, 8 Great-W. Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 209 (2002) ---------------------- 35, 38 Grossmuller v. Int'l Union, 715 F.2d 853, 857 (3d Cir.1983) ------------------------------------ 14, 22 Johnson v. UMWA Health & Ret. Funds, 125 Fed. Appx. 400, 405 (3d Cir.2005) ----------------- 13 Knopick v. Connelly, 639 F.3d 600, 606 (3d Cir. 2011) -------------------------------------------------- 6 Maness v. Meyers, 419 U.S. 449, 458–59 (1975) -------------------------------------------------------- 24 Mertens v. Hewitt Assocs., 508 U.S. 248 (1993) --------------------------------------------------------- 35 Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105 (2008) ---------------------------------------- 7, 11 Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 4 of 42 PageID: 2757 v M ichaels v. Equitable Life Assur. Soc., 305 Fed. App‘x 896, 906–07 (3d Cir. 2009) --------- 10 Miller v. Am. Airlines, Inc., 632 F.3d 837, 845 n.2 (3d Cir. 2011) ----------------------------- 7, 9 Mitchell v. Eastman Kodak Co., 113 F.3d 433, 440 (3d Cir.1997) ----------------------------------- 13 Moskalski v. Bayer Corp., 2008 WL 2096892 at *4 (W.D. Pa. May 16, 2008) -------------------- 8 Moskalski v. Bayer Corp., et al., 2008 WL 2096892 at *9 (W.D. Pa.) ------------------------------- 11 Post v. Hartford Ins. Co., 501 F.3d 154, 166 (3d Cir. 2007) ---------------------------------------- 11 Schwarzwaelder v. Merrill Lynch & Co., Inc., 606 F. Supp. 2d. 546, 557 (W.D. Pa. 2009) -- 7, 11 Skretvedt v. E.I. DuPont De Nemours, 372 F.3d 193, 208 (3d Cir. 2004) ------------------ 34, 36, 37 Sun Ship, Inc. v. Matson Navigation Co., 785 F.2d 59, 63 (3d Cir.1986) ---------------------------- 35 STATUTES 18 U.S.C. §401(1) -------------------------------------------------------------------------------------------- 41 29 U.S.C. 1133 ------------------------------------------------------------------------------------------------ 21 29 U.S.C. §1001, et seq. ------------------------------------------------------------------------------------- 11 29 U.S.C. §1132 ---------------------------------------------------------------------------------------------- 11 29 U.S.C. §1132(a)(1)(b) ------------------------------------------------------------------------------------ 11 29 U.S.C. §1132(e)(1) --------------------------------------------------------------------------------------- 11 29 U.S.C. § 1133 ---------------------------------------------------------------------------------------- 22, 25 OTHER AUTHORITIES A Call for the Overhaul of ERISA: How the Employee Retirement Income Security Act of 1974 Rewards Employers for Bad Faith Denials of Legitimate Claims for Employee Disability Benefits, A Multi-Case Study Involving One Philadelphia-Based Insurance Carrier," Seton Hall Legislative Journal: Vol. 37: Iss. 2, Article 4 ------------------------------------------------------------ 10 Black’s Law Dictionary, 6 th ed. ---------------------------------------------------------------------------- 38 Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 5 of 42 PageID: 2758 vi RULES Fed. R. Civ. P. 56(c) ----------------------------------------------------------------------------------------- 12 L.R.Civ.P. 56.1(a) -------------------------------------------------------------------------------------------- 11 TREATISES George E. Palmer, Law of Restitution § 1.4, at 17 (1978) ---------------------------------------------- 38 Restatement of Restitution § 160 cmt. a, at 641–42 (1936) --------------------------------------- 38, 39 REGULATIONS 20 C.F.R. §404.1560(c) ----------------------------------------------------------------------------------- 9, 19 29 C.F.R. §2560.503–1(h) ---------------------------------------------------------------------------------- 13 29 C.F.R. §2560.503-1(h)(2) -------------------------------------------------------------------------- 21, 24 29 C.F.R. §2560.503-1(f)(iii)(3) --------------------------------------------------------------------- passim 29 C.F.R. §404.1566 ------------------------------------------------------------------------------------------ 9 Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 6 of 42 PageID: 2759 Introduction On December 22, 2011 this Court entered an Order awarding summary judgment in favor of plaintiff Thomas P. Kelly Jr. (“Plaintiff” or “Mr. Kelly”), directing defendant Reliance Standard Life Ins. Co. (“RSL”) to pay unspecified long-term disability insurance benefits due under an employer-sponsored long-term disability insurance plan (“LTD Plan”) and to continue the administration of plaintiff’s claim. (Stmt. ¶21) The Court determined that RSL had mishandled the plaintiff’s claim in an arbitrary and capricious manner, in violation of federal law. The December 22, 2011 Order was never stayed or appealed. Nevertheless, RSL refused to pay anything until three years later, on October 9, 2014, when it finally issued a check for less than the amount due. (Stmt. ¶¶53-54) RSL also refused to continue administering of plaintiff’s claim as ordered. Following the Court Order, RSL took no steps to administer the claim until June 5, 2015, discussed, infra. When it issued payment in 2014, RSL included an offset of an amount that it said the plaintiff would have been entitled to receive from the Social Security Administration if he had filed a disability claim with the agency in 2006. However, social security benefits were never received by the plaintiff during the relevant timeframe and the LTD Policy does not require applicants to apply for such benefits in any event. Moreover, the LTD Policy does not permit hypothetical offsets of this type. Therefore, RSL failed to pay the benefits due, in violation of the December 22, 2011 Court Order. When the plaintiff complained about the amount paid by RSL in 2014, the company refused to recalculate his benefits, insisting that the plaintiff had failed to raise his objections within the 180-day timeframe required by ERISA. However, such strict adherence to ERISA deadlines is a double-edged sword for this defendant because 29 C.F.R. 2560.503-1(f)(iii)(3) Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 7 of 42 PageID: 2760 2 requires plan administrators to provide notice of an adverse benefit determination within 45 days. RSL paid nothing after October 9, 2014, waiting until until September 15, 2015 to issue its first adverse benefit determination on remand. It follows that, because RSL did not issue an adverse decision with forty-five days of the initial payment of benefits, the company voluntarily forfeited any right to terminate the plaintiff’s claim twelve months later. It is now known that RSL retained a private investigator to conduct secret surveillance on the plaintiff, his family, and his lawyers, for several weeks in October and November of 2012. RSL kept the investigation hidden from the plaintiff because the investigators did not uncover anything helpful to the defendant’s case. During a 2014 case management conference with the Magistrate Judge, defense counsel lied to the Court, informing Judge Waldor that RSL would not be using an investigator. The 2014 misrepresentation was a lie because defense counsel knew that RSL had already obtained a written surveillance report from Apex Investigation Services in 2012. (Stmt. ¶46) Though not obligated to do so, the plaintiff provided RSL with supplemental information in support of his claim on September 8, 2014. The submission included a record of earnings obtained from the Social Security Administration; Findings of Fact and Conclusions of Law from a federal administrative law judge; and IRS Account Transcripts for the years 2008 thru 2012. When it terminated his claim on September 15, 2015 RSL did not consider any of this information, alleging instead that it was never provided. Indeed, when the company rejected the plaintiff’s administrative appeal on April 21, 2016, there was no reference to his September 8, 2014 submission. When it decided to terminate plaintiff’s disability claim in 2016, RSL stated many of the same bases that this Court had previously determined were violations of ERISA. Specifically, Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 8 of 42 PageID: 2761 3 RSL refused to credit the opinion of plaintiff’s treating physicians and therapists, instead giving undue weight to the opinions of various consultants who conducted a paper review of the claim without examining the plaintiff. Additionally, RSL never requested that the plaintiff undergo an independent medical examination, another significant factor in the Court’s determination the RSL had acted arbitrarily and capriciously. RSL also failed to consider the findings of fact issued by a federal administrative law judge who had determined, after a May 2014 hearing, that “[c]onsidering the claimant’s age, education, work experience, and residual functional capacity, there are no jobs that exist in significant numbers in the national economy that the claimant can perform (20 CFR 404.1560(c) and 404.1566).” (Stmt. ¶98) Records from the administrative hearing were provided to RSL on September 8, 2014 and were used by the company to offset benefits paid on October 9, 2014. Nevertheless, in the denial of plaintiff’s claim, RSL insisted that the plaintiff had refused to provide these records. To be sure, plaintiff is not arguing that RSL was obligated to concur with the Social Security Administration. Rather, it was arbitrary and capricious for RSL to ignore the submission of the ALJ’s findings and to exclude the hearing materials from consideration in the April 21, 2016 denial of plaintiff’s administrative claim. The April 21, 2016 denial of plaintiff’s administrative appeal incorrectly stated, “you never provided our office with an executed Social Security authorization form, which would have allowed us to request information directly from the SSA, despite repeated requests to do so.” Contrary to that statement, the Authorization has always been part of the Administrative Record in this case since it was executed and provided on June 12, 2006. (Stmt. ¶98) There is no question that this plaintiff has been singled out for negative retaliatory treatment by RSL. On December 22, 2011 the Court determined that the defendant had violated Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 9 of 42 PageID: 2762 4 federal law by arbitrarily refusing to pay his claim for benefits. The defendant was ordered to pay the benefits due and to continue payment of benefits and administration of the plaintiff’s claim. RSL refused to comply with the Order because the company knows that in most ERISA cases there is little risk of financial liability exceeding the amount actually owed. That is, if RSL can successfully delay payment of benefits, as it has done here for more than ten years, the company still benefits even if it loses the case in federal court. See, e.g., A Call for the Overhaul of ERISA: How the Employee Retirement Income Security Act of 1974 Rewards Employers for Bad Faith Denials of Legitimate Claims for Employee Disability Benefits, A Multi-Case Study Involving One Philadelphia-Based Insurance Carrier," Seton Hall Legislative Journal: Vol. 37: Iss. 2, Article 4. In this case, RSL withheld benefits, ignored credible objective evidence in the administrative record, disregarded submissions that the plaintiff made in good faith, delayed payment and administration of the claim for several years in violation of a Court Order, misapplied the provisions of the LTD Policy at issue, and recently lied to the Court about its actions. In addition to ordering the defendant to pay benefits due under the LTD Policy from May 28, 2008 thru the Maximum Duration of Benefits (i.e. the plaintiff’s sixty-sixth birthday on August 24, 2012), it is respectfully submitted that RSL should be directed to pay punitive damages as a sanction for willfully violating the December 22, 2011 Order to continue administering the plaintiff’s claim and to pay benefits due. When this Court directed RSL to continue administering the claim, it surely did not intend for the defendant to wait five years before deciding to comply. Indeed, the defendant’s conduct shows an obvious distain for the Court’s authority and for the Orders of a federal judge. For this reason, the Court should also award punitive damages against RSL, using its inherent authority to enforce decisions and Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 10 of 42 PageID: 2763 5 sanction violators for contempt. No plan administrator should be allowed to ignore a Court Order for almost five years without serious consequences. Statement of Jurisdiction This Court has jurisdiction over the within matter, pursuant to 29 U.S.C. §1132, because Plaintiff raises claims under the Employee Retirement Income Security Act, 29 U.S.C. §1001, et seq. (“ERISA”). Plaintiff’s claims include a demand for the recovery of benefits from an employee welfare benefit plan; a demand for enforcement of his rights under the terms of the plan; and for clarification of his rights to future benefits under the terms of the plan, pursuant to 29 U.S.C. §1132(a)(1)(b). Section 502(e)(1) of ERISA, 29 U.S.C. §1132(e)(1) provides that this Court shall have original jurisdiction over actions brought by a participant to recover the benefits due them under the terms of an employee welfare benefit plan. Statement of Undisputed Material Facts For a thorough recitation of the undisputed factual history of this case, Mr. Kelly respectfully refers the Court to his Statement of Undisputed Material Facts, submitted herewith and incorporated as though fully set forth herein, in accord with L.R.Civ.P. 56.1(a). Standard of Review for Plaintiff’s ERISA Claim on Summary Judgment A. Standard of Review for Motions for Summary Judgment, Generally Summary judgment may be granted when there is no genuine issue regarding any material fact and where the moving party is entitled to a judgment as a matter of law. Fed. R. Civ. P. 56(c). The role of the Court is not to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). A factual dispute is genuine if a reasonable jury could find Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 11 of 42 PageID: 2764 6 in favor of the nonmoving party and it is material only if it bears on an essential element of the plaintiff’s claim. Fakete v. Aetna, Inc., 308 F.3d 335, 337 (3d Cir. 2002). When deciding a summary judgment motion, a court must view the record and draw all inferences in a light most favorable to the opposing party. Knopick v. Connelly, 639 F.3d 600, 606 (3d Cir. 2011). B. Standard of Review for an Administrator’s Determination Under ERISA In cases where a benefit plan vests the claim administrator with discretion to make the claim determination, its interpretations of plan language and benefit determinations are generally subject to an ‘abuse of discretion’ or ‘arbitrary and capricious’ standard of review. Schwarzwaelder v. Merrill Lynch & Co., Inc., 606 F. Supp. 2d. 546, 557 (W.D. Pa. 2009)(citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)). In the ERISA context, the arbitrary and capricious and abuse of discretion standards of review are essentially identical. Miller v. Am. Airlines, Inc., 632 F.3d 837, 845 n.2 (3d Cir. 2011). Both of these phrases are understood to require the Court to uphold the Administrator‘s decision unless an underlying interpretation or benefit determination was unreasonable, irrational, or contrary to the language of the plan. Schwarzwaelder, 606 F. Supp. 2d. at 557. The court‘s assessment involves evaluating the quality and quantity of the medical evidence and the opinions on both sides of the issues. Otherwise, courts would be rendered to nothing more than rubber stamps. Glenn v. MetLife, 461 F.3d 660, 674 (6th Cir. 2006), aff’d by Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105 (2008). The burden here rests with the plaintiff to demonstrate that RSL’s denial of benefits was arbitrary and capricious. Schwarzwaelder, 606 F. Supp. 2d. at 558 (citing Moskalski v. Bayer Corp., 2008 WL 2096892 at *4 (W.D. Pa. May 16, 2008)). Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 12 of 42 PageID: 2765 7 Because benefits determinations arise in many different contexts and circumstances, the factors to be considered [in reviewing a plan administrator's exercise of discretion] will be varied and case-specific. Estate of Schwing v. Lilly Health Plan, 562 F.3d 522, 526 (3d Cir. 2009) (internal quotations omitted). When, as here, the ERISA plan administrator is responsible for both determining eligibility for benefits and paying the benefits awarded, an inherent conflict of interest arises. Glenn, 554 U.S. at 114. The Supreme Court has directed that this conflict of interest be viewed as one of the several factors considered in evaluating whether the administrator has abused its discretion. Id. at 117. The focus of review is the plan administrator's final, post-appeal decision. Funk v. CIGNA Group Ins., 648 F.3d 182, 191 n.11 (3d Cir. 2011)(citing 29 C.F.R. §§ 2560.503–1(h), 2560.503–1(h)(2)(i)–(ii), 2560.503–1(h)(2)(iv) & (3)(ii)). The Court may, in the course of its review, consider prior decisions as evidence of the decision-making process that yielded the final decision, and it may be that questionable aspects of or inconsistencies among those pre-final decisions will prove significant in determining whether a plan administrator abused its discretion. Id. (citing Miller, 632 F.3d at 855–56). Legal Argument 1. The termination of plaintiff’s disability claim was arbitrary and capricious because RSL waited four years to administer the claim; conducted an inappropriately selective review of evidence; placed unreasonable emphasis on the reports of consultants who never examined the plaintiff; relied on information outside the Administrative Record; chose not to use an independent medical examiner; and failed to engage in any meaningful analysis of the plaintiff’s claim. A. Inappropriately Selective Evaluation of Objective Medical Evidence When it denied plaintiff’s administrative appeal on April 21, 2016, RSL repeated conduct that this Court had already determined was arbitrary and capricious, in violation of ERISA. Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 13 of 42 PageID: 2766 8 Specifically, RSL ignored the medical findings of plaintiff’s treating physician, Dr. Walter Dearolf, and plaintiff’s physical therapists at Cornerstone Physical Therapy, in favor of opinions from consultants who never met with or examined the plaintiff. Regarding this conduct, the Court previously held, “Reliance‘s decision to accept the conclusions of one physician‘s paper review, and to discount Kelly‘s account of his pain which is supported by the observations of the treating physician and physical therapist, further demonstrates that its exercise of discretion in deciding Kelly‘s claim was arbitrary and capricious.” [December 22, 2011 Opinion, Document 106 at 16] Dr. Dearolf’s medical diagnosis is based on objective medical evidence that he referenced when reaching his conclusions about the plaintiff’s disability. All of this information is contained in the Administrative Record available to RSL for review. Specifically, Dr. Dearolf explained that an MRI scan taken shortly after plaintiff’s automobile accident revealed that he had aggravated a significant preexisting spinal cord injury, stating: MRI scan at that time [November 2005] revealed his previous compression fracture at T12 with degeneration of the disc T12-L1 and T11-T12. There was also a posterior spur at the T11-12 interspace with a gibbus deformity. This was unchanged by previous but was aggravated by the motor vehicle accident. In addition, there was a left-sided disc herniation at L5-S1. He was seen by me during this period. He had radicular symptoms along with limited motion in his lumbar and thoracic spine, lumbar sprain and strain, lumbar radiculopathy and degenerative joint disease in his back. Since that period of time, he has been unable to return to his previous occupation as a compliance officer for Penn Mutual Life Insurance Company. In addition, he has been unable to sit for any prolonged period of time or stand for any prolonged period of time making him incapable of performing sedentary work. Driving for any period of time also aggravates his symptoms. It is my medical opinion that he is unable to perform sedentary and non-sedentary duties associated with his regular occupation or with any occupation at this time. His symptoms will be on a permanent basis and unlikely to improve over time. [Id., emphasis added]. In its termination of plaintiff’s claim on April 21, 2016 RSL rejected Dr. Dearolf’s opinion in favor of reports authored by consultants who never physically examined the plaintiff. Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 14 of 42 PageID: 2767 9 (Stmt. ¶¶24, 95, Document 203-2 at 80) The same reports from the same consultants were rejected by this Court in its December 22, 2011 Opinion regarding RSL’s mishandling of the plaintiff’s claim. Indeed, the Court devoted at least four pages of its Opinion to a discussion regarding RSL’s improper reliance on the same opinions referenced in its April 21, 2016 denial of plaintiff’s appeal on remand. An administrator may not arbitrarily refuse to credit a claimant‘s reliable evidence, including the opinions of treating physicians. M ichaels v. Equitable Life Assur. Soc., 305 Fed. App‘x 896, 906–07 (3d Cir. 2009) (questioning administrator’s choice to give determining weight to the conclusions of experts paper review reports over the conclusions of claimant‘s treating physicians); Moskalski v. Bayer Corp., et al., 2008 WL 2096892 at *9 (W.D. Pa.) ([T]he selective, self-serving use of medical information is evidence of arbitrary and capricious conduct.) Reported decisions reflect that courts are troubled where a plan administrator denies a claim by relying on the paper-review reports of consultants that oppose the conclusions of treating physicians. Schwarzwaelder, 606 F. Supp. 2d. at 559. A strong emphasis on paper review reports is of even greater concern where, as in this case, the plan administrator had the discretion to supplement the record by requiring an independent medical evaluation (IME) but chose not to. See Schwarzwaelder, 606 F. Supp. 2d. at 558–9. The decision to forgo an IME and conduct only a paper review, while not rendering a denial of benefits arbitrary per se, is another factor to consider in the Court‘s overall assessment of the reasonableness of the administrator‘s decision-making process. Id. at 559 (citing Glenn, 461 F.3d at 671). See also Post v. Hartford Ins. Co., 501 F.3d 154, 166 (3d Cir. 2007), abrogated on other grounds by Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (2008) (noting that while a plan administrator is not required to give treating physicians‘ opinions special Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 15 of 42 PageID: 2768 10 weight, courts must still consider the circumstances that surround an administrator ordering a paper review.); Elliot v. Metro. Life Ins. Co., 473 F.3d 613, 621 (6th Cir. 2006) ([A] plan's decision to conduct a file-only review—especially where the right to conduct a physical examination is specifically reserved in the plan—may, in some cases, raise questions about the thoroughness and accuracy of the benefits determination. (internal quotations omitted)). Here, the opinions of third-party consultants, prepared from a paper file review, totally discount Dr. Dearolf‘s conclusions about the plaintiff’s condition with little or no explanation, and appear to selectively ignore the treatment information in the reports of plaintiff’s physical therapist which detail his pain and progress. It is especially curious that, knowing the Court’s opinion regarding this type of review, RSL did not require the plaintiff to undergo an IME. The December 22, 2011 Opinion was completely ignored by RSL when it repeated the same unlawful actions during the handling of plaintiff’s claim on remand. Any allegation that RSL was denied access to information that it needed to determine the plaintiff’s eligibility for benefits as of May 28, 2008 is pure nonsense. The Administrative Record includes a valid written authorization for release of medical records from the plaintiff. All medical records thru at least January 10, 2011 were provided to RSL when the plaintiff submitting a Supplemental Certification after the first court-ordered remand to the carrier. Finally, RSL could have, but did not, require plaintiff to undergo an IME. Plaintiff ceased to be an active plan participant on August 24, 2012. In conclusion, RSL always had all of the information that it required to determine the plaintiff’s medical condition and likewise always had the means to obtain additional information and/or to physically examine the plaintiff, if necessary. B. Improper Reliance on Information Outside the Administrative Record Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 16 of 42 PageID: 2769 11 In its April 21, 2016 denial RSL references a medical opinion from another consultant who was not involved with the initial handling of plaintiff’s claim on remand. This person is unknown to the plaintiff and her report is not part of the Administrative Record in this case. Dr. Stephanie Kokseng, is not mentioned in the Administrative Record that was provided to plaintiff on February 1, 2016. RSL never provided the plaintiff with any report from Kokseng and did not reference Kokseng in the September 15, 2015 termination of continued benefits. Plaintiff could not have appealed Kokseng’s conclusions because he was never told about them. Moreover, there is no indication that Kokseng ever reviewed any records from the plaintiff’s treating orthopedic surgeon or those from his physical therapists. The Third Circuit has consistently held that a court's review of a claim for benefits under the arbitrary and capricious standard is “limited to that evidence that was before the administrator when it made the decision being reviewed.” Mitchell v. Eastman Kodak Co., 113 F.3d 433, 440 (3d Cir.1997); Abnathya, 2 F.3d 40, 48 n. 8 (3d Cir.1993); see also Johnson v. UMWA Health & Ret. Funds, 125 Fed. Appx. 400, 405 (3d Cir.2005) (“This Court has made clear that the record for arbitrary and capricious review of ERISA benefits denial is the record made before the Plan administrator, which cannot be supplemented during the litigation.”) The concept of limiting a court's review to the administrative record derives from the nature of an ERISA review proceeding and the administrative appeal process, which is meant to encourage internal and inexpensive resolution of benefit claims. See Grossmuller v. Int'l Union, 715 F.2d 853, 857 (3d Cir.1983). Further, the Third Circuit has required that parties prior to bringing ERISA benefit disputes exhaust their administrative remedies, i.e., administrative appeals, prior to bringing suit. See Harrow v. Prudential Ins. Co. of Am., 279 F.3d 244, 250 (3d Cir.2002). This requirement is meant to ensure a full and complete record and eliminate the need Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 17 of 42 PageID: 2770 12 for further discovery. See O'Sullivan v. Metro. Life Ins. Co., 114 F.Supp.2d 303, 309 (D.N.J.2000) Dandridge v. Raytheon Co., No. CIV. A. 08-4793 (WJM, 2010 WL 376598, at *2– 3 (D.N.J. Jan. 26, 2010). Here, Kokseng’s report is not part of the Administrative Record and therefore cannot be considered by the plan administrator in its decision to terminate disability benefits. The plaintiff was never provided with the complete information that was relied on by the plan administrator when his claim was terminated. Because RSL withheld pertinent information from plaintiff and relied on information outside the Administrative Record, its termination of plaintiff’s claim was arbitrary and capricious, in violation of ERISA. C. RSL’s Inappropriately Selective Evaluation of Other Evidence Following a hearing in 2014 at which a vocational expert and other witnesses testified, a federal administrative law judge determined that, “[b]ased on the application for a period of disability and disability insurance benefits…filed on August 15, 2011, the claimant has been disabled…since November 10, 2005.” (Stmt. ¶58) The ALJ also determined that “[c]onsidering the claimant’s age, education, work experience, and residual functional capacity, there are no jobs that exist in significant numbers in the national economy that the claimant can perform (20 CFR 404.1560(c) and 404.1566).” (Stmt. ¶59) These findings, along with the rest of the social security records, were ignored by RSL during its review of plaintiff’s claim. The opinion of plaintiff’s treating physician and the findings of the ALJ who presided over plaintiff’s social security disability case fully support his claim for benefits from RSL. The defendant’s LTD Policy states, in relevant part, that an Insured will be deemed Totally Disabled in the event that: …after a Monthly Benefit has been paid for 24 months, an Insured cannot perform the material duties of Any Occupation. We consider the Insured Totally Disabled if due to Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 18 of 42 PageID: 2771 13 an Injury or Sickness he or she is capable of only performing the material duties on a part-time basis or part of the material duties on a full-time basis. In its April 21, 2016 denial of plaintiff’s administrative appeal RSL acknowledged that the plaintiff had been awarded social security benefits. (Stmt. ¶95) The plan administrator attempted to deflect attention from that fact by unfairly portraying the plaintiff as uncooperative stating, “[a]lthough we have requested from you on multiple occasions any information which was submitted to or considered by the Social Security Administration (“SSA”) in connection with [plaintiff’s] claim for SSD benefits, we have received nothing from you on the matter. Additionally, you never provided our office with an executed Social Security Authorization form, which would have allowed us to request information directly from the SSA, despite repeated requests to do so.” (Stmt. ¶99(a)) The Administrative Record proves that these accusatory statements are untrue. All of the requested information and forms were provided to the plan administrator by the plaintiff in 2006 and 2014 but were simply ignored during the review of his claim. (Stmt. ¶99(b); AR206-206; Document 29-3, page 106-107) In the same April 21, 2016 letter, RSL also wrote, “[y]ou never provided any of the requested information; furthermore, the only correspondence or information you submitted was a letter dated September 4, 2015, in which you demanded payment through the Maximum Duration of Benefits and did not provide or address any of the requested documentation. As a result, the Claims Department moved forward with the review of Mr. Kelly’s claim based on the available information in the claim file.” (Stmt. ¶95) Again, these statements by RSL are factually incorrect, proving that plan administrator arbitrarily refused to consider relevant portions of the Administrative Record when it terminated plaintiff’s claim. For example, RSL’s statement about “the only correspondence or information you submitted was a letter dated September 4, 2015” proves conclusively that the company overlooked or ignored plaintiff’s Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 19 of 42 PageID: 2772 14 submission a year earlier, on September 8, 2014, when it decided to terminate his claim for benefits. (Stmt. ¶49) On September 8, 2014, in response to requests made during a July 31, 2014 settlement conference with Magistrate Judge Waldor, the plaintiff submitted a thirty-four (34) page letter to RSL, in further support of his claim for benefits beyond May 28, 2008. The September 8, 2014 letter included Findings of Fact and Conclusions of Law from The Honorable Mark G. Barrett, A.L.J., dated August 6, 2014, holding that the plaintiff “has not engaged in substantial gainful activity since November 10, 2005.” (Stmt. ¶52) The September 8, 2014 letter also included a complete history of the plaintiff’s taxable earnings from the Social Security Administration for each year from the 1960s until and including his sixty-sixth birthday on August 24, 2012. (Stmt. ¶51) The September 8, 2014 letter also included copes of Tax Return Transcripts for the years 2008 thru 2012 that the plaintiff obtained from the Internal Revenue Service for the express purpose of complying with a request from RSL. All of this information was provided to the plan administrator in good faith in 2014, notwithstanding the fact that the LTD Policy does not require production of the materials and also notwithstanding the fact that the claim should have been paid thru August 24, 2012 and ended on that date. (Stmt. ¶58) There is no question that RSL had the requested information in its files because the ALJ’s decision was referenced on October 9, 2014 as a basis for offsetting plaintiff’s disability benefits. (Stmt. ¶¶56, 58) Despite relying on the submission in 2014, the April 21, 2016 denial letter from RSL insisted that the September 8, 2014 submission was not considered during the review of plaintiff’s claim. The denial letter also ignores the fact that the plaintiff did indeed provide a Social Security Authorization form on June 12, 2006 that has always been part of the Administrative Record. (Stmt. §99) Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 20 of 42 PageID: 2773 15 It was arbitrary and capricious for RSL to ignore evidence that the plaintiff had obviously provided in good faith on September 8, 2014, asserting instead that he had been uncooperative as a pretext to terminate the claim. From the April 21, 2016 denial letter it is clear that RSL did not take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, as required by 29 C.F.R. §2560.503-1(h)(2)(ii)-(iv). Failure to do so denied the plaintiff a “full and fair review of his claim”, in violation of 29 U.C.S. 1133. The plan administrator’s inappropriately selective reliance on some evidence, coupled with a disregard for other pertinent information in the record, constitutes arbitrary and capricious conduct by a plan administrator, in violation of ERISA. 2. RSL Failed to Provide Mr. Kelly With a Full and Fair Review of His Claim for Benefits Beyond May 25, 2008, in violation of 29 USC §1133, Because the Company Did Not Provide Timely Notice of its Adverse Benefits Determination After Being Presented With a Claim for Those Benefits on January 10, 2011, as Required by Federal Regulation 29 C.F.R. 2560.503- 1(f)(iii)(3), Until the Claim Was First Denied on September 14, 2015. After the plaintiff’s claim was remanded back to RSL in December 2010, the plaintiff tendered a Supplemental Certification and demand for benefits, dated January 10, 2011. As stated supra, the plaintiff expressly demanded benefits under both LTD Policy definitions for “Totally Disabled”. His demand under both definitions was acknowledged by RSL in a letter dated February 11, 2011. However, when the Court granted summary judgment in plaintiff’s favor on December 22, 2011, it only awarded him twenty-four months worth of benefits under the “own occupation” definition. With only a few limited exceptions 29 C.F.R. 2560.503-1(f)(iii)(3) requires plan administrators to provide notice of an adverse benefit determination within 45 days of a claim. Failure to comply with the regulation denies an applicant his right to a full and fair review of the claim for benefits, in violation of 29 U.S.C.A. § 1133. By its own admission, RSL failed to Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 21 of 42 PageID: 2774 16 provide Mr. Kelly with a benefit determination regarding his 2010 claim for benefits owed under the “any occupation” definition until five years later, on September 15, 2015. The plaintiff’s demand was clearly made by the plaintiff, and acknowledged in writing by RSL, but never considered by the plan administrator during its review of his claim for benefits. After concluding that RSL had failed to properly administer the initial claim the District Court remanded the matter for further consideration on December 15, 2010. On January 10, 2011, Mr. Kelly supplemented the Administrative Record with substantial evidence totaling seventy-five (75) pages that supported his ongoing claim for benefits beyond the first twenty- four months. He expressly demanded payment under the “any occupation” definition, in addition to the “own occupation” definition for Total Disability and that demand was acknowledged by RSL, in writing. In its February 18, 2011 letter to the claimant RSL wrote: “On January 11, 2011, you provided an affidavit with Exhibits to support your position that you could not have continued in your previous role with PML from your claimed date of loss, November 26, 2005. You also contend that you currently remain physically unable to work in ‘any occupation that [your] education, training, and experience would otherwise reasonable allow.’ ” [emphasis added] The February 18 th 2011 letter from RSL also stated: “[a]s presented in your affidavit, a combination or orthopedic and cardiac complaints prevents you from working at your regular occupation or any occupation”. After acknowledging that the plaintiff was claiming disability benefits beyond May 25, 2008, under the so-called “any occupation” standard, RSL then failed to issue a determination on that portion of the claim within 45 days, as required by 29 C.F.R. 2560.503-1(f)(iii)(3). Instead, RSL limited its benefit determination to the so-called “own occupation” standard, on which it unlawfully denied the claim, in violation of ERISA. Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 22 of 42 PageID: 2775 17 To avoid liability for payments accrued through the December 22, 2011 Order, RSL has consistently maintained that it only reviewed Mr. Kelly’s claim for benefits under the “own occupation” standard (i.e. the standard that applied during the first twenty-four months of eligibility for benefits). The defendant has maintained this position, notwithstanding the contrary statements contained in its February 18 th 2011 letter to the plaintiff, referenced supra. According to RSL, this is why only twenty-four months of benefits were paid following the December 22, 2011 Order (ignoring the obvious fact that payment was not actually made until October 9, 2014). Accepting the plan administrator’s representation as true, it follows that RSL did not provide a full and fair review of the plaintiff’s January 2011 claim on remand because the company failed to consider a claim for benefits under the “any occupation” standard, after acknowledging the demand on February 18, 2011. The limited consideration was totally irrational, performed in bad faith, and a violation of ERISA. No reasonable person who believe that a claimant demanding benefits in January 2011 would intend to limit his or her claim to benefits due only through 2008. Indeed, ERISA recognizes that fact and requires plan administrators to consider the entire claim made by covered employees. The plaintiff expressly demanded benefits for the period from May 25, 2008 until his sixty-sixth birthday on August 24, 2012, but RSL never communicated an adverse benefit determination on that claim until September 15, 2015. In waiting nearly five years to consider a demand for benefits under the “any occupation” definition for “totally disabled”, RSL denied the applicant a full and fair review of his claim, in violation of 29 C.F.R. §2560.503-1(h)(2)(ii)-(iv) and 29 U.S.C. §1133. RSL was never free to ignore the latter portion of Mr. Kelly’s claim for benefits merely because it chose to unlawfully reject the initial part of his application. The failure to provide a Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 23 of 42 PageID: 2776 18 determination regarding eligibility for benefits due after May 25, 2008 within 45 days was itself a per se violation of federal law and a denial of the plaintiff’s right to a full and fair review of his claim for benefits. 29 C.F.R. 2560.503-1(f)(iii)(3) provides that: In the case of a claim for disability benefits, the plan administrator shall notify the claimant, in accordance with paragraph (g) of this section, of the plan's adverse benefit determination within a reasonable period of time, but not later than 45 days after receipt of the claim by the plan. This period may be extended by the plan for up to 30 days, provided that the plan administrator both determines that such an extension is necessary due to matters beyond the control of the plan and notifies the claimant, prior to the expiration of the initial 45-day period, of the circumstances requiring the extension of time and the date by which the plan expects to render a decision. If, prior to the end of the first 30-day extension period, the administrator determines that, due to matters beyond the control of the plan, a decision cannot be rendered within that extension period, the period for making the determination may be extended for up to an additional 30 days, provided that the plan administrator notifies the claimant, prior to the expiration of the first 30-day extension period, of the circumstances requiring the extension and the date as of which the plan expects to render a decision. In the case of any extension under this paragraph (f)(3), the notice of extension shall specifically explain the standards on which entitlement to a benefit is based, the unresolved issues that prevent a decision on the claim, and the additional information needed to resolve those issues, and the claimant shall be afforded at least 45 days within which to provide the specified information. RSL received the plaintiff’s claim for post-2008 disability benefits on several occasions but never communicated an adverse determination regarding his eligibility until September 15, 2015. The failure to provide an adverse benefit determination regarding the application within 45 days denied the plaintiff a full and fair review of his claim each time the company violated that regulation, in violation of ERISA. In its May 28, 2015 Order denying a request to hold RSL in contempt of court, the Court confirmed that its December 22, 2011 holding extended only to those claims Reliance had already considered – “namely, Kelly’s claim for benefits on account of his inability to perform the duties of his regular occupation.” [Document 186, page 5] Regrettably, the plaintiff’s own April 26, 2011 motion for summary judgment may not have conveyed to the Court with sufficient clarity that he was demanding benefits beyond the “regular occupation period” on the Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 24 of 42 PageID: 2777 19 very basis that RSL had never actually considered his eligibility for those benefits, as the Court concluded in its May 28, 2015 Opinion. Put simply, the plan administrator’s refusal to consider any part of the plaintiff’s claim (as the Court had determined was the case here) was itself a violation of ERISA. In any event, the Court may now take judicial notice of some pertinent undisputed facts. First, it is undisputed that the plaintiff made his claim for benefits under the “any occupation” definition on or before January 10, 2011. This was acknowledged by RSL in its February 18, 2011 denial letter. On September 13, 2014, defense counsel advised the Court that, “[t]here was no determination as to ‘any occupation’ either by my client or the court.” [09/13/2014 Transcript at 45:20-22, Document 177]. It follows that if the claim for benefits under the “any occupation” definition was made on January 10, 2011 but never considered by RSL until September 15, 2015 as its lawyers insist, then the plaintiff has met his burden to show that he was denied a full and fair review of the claim, in violation of 29 C.F.R. 2560.503-1(f)(iii)(3) and 29 U.S.C. 1133. The plaintiff demanded benefits from RSL under the “any occupation” definition when he filed the initial Complaint in 2009; when he submitted the January 10, 2011 Supplemental Certification; when he filed the First Amended Complaint; when he filed the First and Second Motions for Summary Judgment; and when he filed Motions seeking to enforce the rulings of this Court. It is difficult to imagine how the demand could have been clearer. RSL had a legal obligation to evaluate the plaintiff’s claim for post-2008 benefits under the “any occupation” standard, even if the company believed that he did not qualify for the initial twenty-four month period under the “own occupation” standard. See, e.g. Grossmuller v. Int’l Union et al., 715F.2d 853, 857 (3d Cir. 1983)(“To afford a plan participant whose claim has Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 25 of 42 PageID: 2778 20 been denied a reasonable opportunity for full and fair review, the plan's fiduciary must consider any and all pertinent information reasonably available to him.); see also, Miller v. Am. Airlines, Inc., 632 F.3d 837, 858 (3d Cir. 2011). The claimant’s demand for benefits beyond the twenty-fourth month of eligibility was always before the plan administrator. In violation of 29 C.F.R. 2560.503-1(f)(iii)(3), the plan administrator in this case never provided an adverse benefit determination for the “any occupation” portion of the plaintiff’s claim until more than five years after the demand had been made, on September 15, 2015. Because the adverse benefit determination was not communicated within 45 days of the Plan Administrator’s receipt of a claim for benefits under the “any occupation” definition for “Totally Disabled”, the plaintiff was denied a full and fair review of his application as a matter of law. RSL also failed to provide a full and fair review of Mr. Kelly’s claim for benefits due under the “any occupation” standard after the Court ordered it to continue the administration of the claim. On December 22, 2011, the District Court granted Mr. Kelly’s motion for summary judgment, ordering the defendant to pay benefits due and directing the continued administration of his claim. Specifically, the Court held: “On remand, Reliance conducted an inappropriately selective review of the evidence, placed unreasonable emphasis on the reports of consultants who had never examined Mr. Kelly, chose not to use an IME [independent medical examiner], and failed to engage in any meaningful analysis of Mr. Kelly’s material job duties. These deficiencies in the context of Reliance’s inherent conflict of interest and questionable pre-final decision activities amount to an arbitrary and capricious exercise of discretion in violation of ERISA.” When the Court’s decision was issued on December 22, 2011 Mr. Kelly had already been eligible to receive disability benefits for more than sixty-seven (67) months. The administrative record had closed only a few months prior, on January 10, 2011, thereby affording the company Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 26 of 42 PageID: 2779 21 all that it needed to administer the claim from May 25, 2008 through at least January 10, 2011. Under the terms of the LTD Policy, this plaintiff would only remain eligible to receive benefits until his sixty-sixth birthday, August 24, 2011; a mere eight months after the Court issued its Order. Pursuant to 29 C.F.R. 2560.503-1(f)(iii)(3) RSL had, at most, 45 days from December 22, 2011 to provide Mr. Kelly with a determination regarding his demand for benefits beyond May 25, 2008. Instead, RSL did absolutely nothing to continue administering the claim in direct violation of the Order itself. The company did not request additional information, it did not request additional time for consideration of the claim, it never asked the plaintiff to undergo an IME, and it certainly did not issue an adverse decision. The unilateral choice to delay compliance with the December 22, 2011 Order denied Mr. Kelly an opportunity for full and fair review of his ongoing claim for benefits. The defendant will likely point to various disputes regarding settlement, ongoing motion practice, and reservation of various rights as a basis to ignore the December 22, 2011 Order to pay benefits until October 2014 and to continue administration until June 5, 2015. However, nothing excuses the refusal of a party to comply with a valid Order because all orders and judgments of courts must be complied with promptly. The Court’s December 22, 2011 Order was never stayed or appealed by RSL. If a person to whom a court directs an order believes that order is incorrect the remedy is to appeal, but, absent a stay, he must comply promptly with the order pending appeal. Persons who make private determinations of the law and refuse to obey an order generally risk criminal contempt even if the order is ultimately ruled incorrect. Maness v. Meyers, 419 U.S. 449, 458–59 (1975). The orderly and expeditious administration of justice by the courts requires that ‘an order issued Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 27 of 42 PageID: 2780 22 by a court with jurisdiction over the subject matter and person must be obeyed by the parties until it is reversed by orderly and proper proceedings.’ United States v. United Mine Workers, 330 U.S. 258, 293 (1947). In this case, the Court directed RSL to do something on December 22, 2011 and the company delayed compliance until September 15, 2015 without justification. As a result of the defendant’s refusal to comply with a lawful Court Order, this plaintiff was forced to go without income for at least five years, during which time he suffered significant additional damages. This is true for both the amount actually owed under the Order itself and the amount that would become due under the “any occupation” element of the plaintiff’s claim for income benefits. RSL never appealed the December 21, 2011 Order, nor did the company ever request a stay of that Order. Therefore, the Order has always remained valid and enforceable. Therefore, pursuant to 29 C.F.R. 2560.503-1(f)(iii)(3) the company had 45 days from the date of the Order itself to provide an adverse benefit determination regarding Mr. Kelly’s claim for benefits regarding the amount due after May 28, 2008. Instead the company evidently made a private determination that it could delay compliance and, in doing so, denied Mr. Kelly a full and fair review of his continued claim for benefits, in violation of ERISA. The plan administrator’s repeated and willful violations of 29 C.F.R. 2560.503-1(f)(iii)(3) have continued unabated for nearly six years since the Court ordered RSL to administer the claim and more than a staggering ten years since the claim was initially filed. On October 9, 2014, RSL issued a check to Mr. Kelly in the incorrect amount of $180,127.53. The amount paid was not the total due under the policy terms and was therefore a violation of the December 22, 2011 Order because there was absolutely no basis for a social security offset totaling $42,576.00 during years 2005-2008. Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 28 of 42 PageID: 2781 23 The policy at issue did not require the insured to apply for social security benefits. Moreover, RSL is well aware that no such benefits were actually received by the plan participant during the first two years of his claim with the company. For this reason, the offsets to RSL’s October 9, 2014 payment were incorrect and the payment of a reduced amount was a violation of the December 22, 2011 Order. RSL continues to insist that Mr. Kelly’s time to object to the miscalculated amount was limited to 180 days. This, the company says, is despite the fact that payment was not issued for more than four years from the date that RSL was ordered to pay the benefits due. It follows that when RSL issued payment on October 9, 2014, the clock was ticking for the company as well. Therefore, accepting the plan administrator’s argument, RSL had, at most, 45 days from October 9, 2014 in which to reach a determination regarding continued eligibility for benefits beyond May 25, 2008. In violation of both 29 C.F.R. 2560.503-1(f)(iii)(3) and the December 22, 2011 Order, RSL waited until September 15, 2015 to notify Mr. Kelly that benefits due beyond that period would not be forthcoming. From these events the record demonstrates that RSL ignored Mr. Kelly’s 2009 claim for benefits beyond the twenty-fourth month of eligibility under the so-called “any occupation” definition for “total disability”. After the case was remanded by the Court in 2010 the company ignored Mr. Kelly’s January 2011 request for the same benefits. Next, the company ignored a December 2011 Court Order to continue the administration of benefits due beyond the twenty- fourth month. Then, after issuing partial payment in 2014 the company failed to address the demand for post-May 25, 2008 benefits until it denied the claim on September 15, 2015. On any one of these dates RSL could have, and indeed should have, determined whether the plaintiff was entitled to benefits beyond the twenty-fourth month of his claim, pursuant to 29 Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 29 of 42 PageID: 2782 24 C.F.R. 2560.503-1(f)(iii)(3). Instead, RSL never requested a stay of its obligations or advised that the deadlines were being extended for any permissible reason. Because no notice of adverse benefit determination was provided to the applicant on his “any occupation” claim prior to September 15, 2015 the applicant was denied a full and fair review of his claim, in violation of ERISA. 3. It was arbitrary and capricious for RSL to withhold payment of benefits due beyond May 25, 2008 because the long-term disability policy does not automatically terminate a claim after the twenty-fourth month of eligibility. The RSL long-term disability policy establishes two definitions for the term “Total Disability” and/or “Totally Disabled”. The policy does not automatically terminate a claim after the claimant reaches the twenty-fourth month of eligibility. Similarly, the policy does not require an applicant to automatically reapply for benefits after the twenty-fourth month of benefits is paid. Finally, pursuant to the Court’s December 22, 2011 Order, RSL should have continued to pay the plaintiff monthly benefits while it continued to administer his claim, even if the company ultimately decided to terminate the claim at some point. In December 2011 this Court ordered RSL to pay the benefits due and to continue administering plaintiff’s claim for benefits. At a minimum, monthly benefits should have commenced on that date. The plaintiff remained an eligible plan participant for another eight months, until his sixty-sixth birthday on August 24, 2012. It was improper for RSL to wait three years, until October 2014, to issue the first payment and to then wait until September 2015 to notify its insured that no additional benefits would be forthcoming. According to correspondence from Martha L. McCullough dated October 9, 2014, payment was issued in response to the Court’s ruling that benefits be paid from November 26, 2005 to May 25, 2008. (Stmt. ¶54) McCollough did not explain why the company waited three Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 30 of 42 PageID: 2783 25 years to comply with the December 22, 2011 Order. Likewise, her letter failed to explain why RSL did not, as it was required to do, continue to administer the claim between December 22, 2011 and the date of payment. Instead, RSL seems to have adopted the position that it was free to comply with the Order at its convenience. Because RSL was ordered to continue the administration of Mr. Kelly’s claim for benefits on December 22, 2011, it should have immediately done so. The company did nothing to continue the administration of the claim between December 21, 2011 and October 9, 2014 and then waited until September 15, 2015 to terminate the claim without payment of further benefits in the interim. It was improper for RSL to delay compliance with the December 22, 2011 Order and to refuse to continue administering the plaintiff’s claim from the date of the Order onward. As a result of its arbitrary and capricious conduct, RSL should pay the plaintiff disability benefits due for the four-year period from May 25, 2008 up to and including his 66 th birthday on August 24, 2012 when he ceased to be an active plan participant. 4. It Was Improper for RSL to Terminate Mr. Kelly’s Monthly Benefit on September 15, 2015 Under the Pretext That He Had Been Uncooperative Because the Monthly Benefit Should Have Automatically Stopped on August 24, 2012 , the Date of Normal Retirement Age, as Defined in the “Maximum Duration of Benefits” Page of the RSL Policy. At issue is whether the plaintiff was eligible for disability benefits beyond May 25, 2008. RSL was Ordered to continue the administration of plaintiff’s claim on December 22, 2011. The Maximum Duration of Benefits for this claim expired when he turned sixty-six years old, on August 24, 2012. When the Order was issued, the administrative record was already current through at least January 11, 2011. There was, therefore, never any good faith basis for RSL to be asking this plaintiff for current information in June 2015 and for refusing continued benefits on Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 31 of 42 PageID: 2784 26 September 15, 2015 and April 21, 2016, more than three years after the claim should have terminated, pursuant to the terms of the LTD Policy. On September 8, 2014 the plaintiff submitted complete social security records; income tax abstracts; and other information. RSL has always been in possession of Authorization forms that would have permitted disclosure of the plaintiff’s Medical Records and Social Security information. Therefore, plan administrator always had more than enough information to reach a favorable determination. However, RSL is/was attempting to use information that was demanded after the Maximum Duration of Benefits as a pretext to terminate the claim. For example, after telling the Court that it had not done so, RSL hired a private investigator to surreptitiously stalk the plaintiff, his wife, and my law firm for a total of eighteen days in October and November of 2012. Additionally, the investigator contacted the plaintiff’s neighbors about the case during what he referred to as a “neighborhood canvass”. By the time this investigation took place, all of the benefits due should have already been paid. This harassment occurred after RSL had been ordered to pay benefits and after the plaintiff had ceased to be covered under the plan. The timeline of events demonstrates that the company was more active trying to find ways to deny the plaintiff’s claim than it was with efforts to comply with the December 22, 2011 Court Order to pay benefits due and to continue administering the claim. As stated, plaintiff provided substantial information to RSL on September 8, 2014 that was totally ignored during the review of his claim. Indeed, the plan administrator refused to even acknowledge receipt of the materials despite having used some of them when calculating benefits paid on October 9, 2014. Jaqueline Haubrich wrote to the plaintiff on September 15, 2015 stating: “[t]o date, we have not received the above requested information. Therefore, based Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 32 of 42 PageID: 2785 27 on your failure to cooperate and provide requested information, the claim for additional benefits is denied.” The same letter quoted the following language from the applicable disability policy but then proceeded to ignore the referenced provision in the company’s analysis of the plaintiff’s claim: “Termination of Monthly Benefit”: The Monthly Benefit will stop on the earliest of: 1) The date the Insured ceases to be Totally Disabled; 2) The date the insured dies; 3) The Maximum Duration of Benefits, as shown on the Schedule of Benefits page, has ended; or 4) The date the Insured fails to furnish the required proof of Total Disability. [highlighted emphasis included in original] Of course, all of the information requested by the defendant had been provided by the plaintiff on a timely basis, on or before September 8, 2014. The basis for denial referenced in Ms. Haubrich’s letter was factually incorrect and was also totally arbitrary because she ignored other relevant text in the quoted provisions from the LTD Policy. Doing so shows that Haubrich was using the alleged “failure to cooperate” as a pretext upon which to terminate Mr. Kelly’s disability claim, notwithstanding that the claim would have ended three years earlier as a contractual matter. For example, the emphasized portion of text was not the earliest of the four events that could have served as a basis to terminate a plan participant’s monthly benefit. Indeed, the Maximum Duration of Benefits as shown on the Schedule of Benefits page ended for this claim on August 24, 2012, three years before Ms. Haubrich first wrote to Mr. Kelly about his eligibility for post-May 2008 benefits: Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 33 of 42 PageID: 2786 28 Pursuant to the plain language of the policy the plaintiff reached his normal retirement age (i.e. 66) on August 24, 2012. Therefore, the disability benefits should have continued until that date. RSL was not free to ignore that policy language, nor was it free to request information from plaintiff about his claim in 2015. By September 15, 2015 when RSL purportedly terminated the claim, this plaintiff was no longer an active plan participant. Indeed, he had no obligation to RSL beyond his sixty-sixth birthday on August 24, 2012. Ms. Haubrich relied on the wrong provision in the policy in a transparent effort to find a pretext upon which to terminate the claim. In doing so, and by ignoring the plaintiff’s good faith submission on September 8, 2014, she violated the Court’s December 22, 2011 Order and the terms of the LTD Policy itself. 5. The Court should exercise its authority, pursuant to §502(a)(3)(B) of ERISA enter judgment against RSL and in favor of the plaintiff in an amount sufficient to restore the status quo. A. Interest due on delayed payment of disability benefits. Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 34 of 42 PageID: 2787 29 Section 502(a)(3)(B) of ERISA allows a beneficiary of an ERISA plan to sue for “other appropriate equitable relief,” which the Third Circuit has held to include interest on delayed payments. See, e.g., Fotta v. Trustees of United Mine Workers of Am., 319 F.3d 612, 616 (3d Cir. 2003); Anthuis v. Colt Industries Operating Corp., 971 F.2d 999, 1010 (3d Cir.1992). In Count I of his Amended Complaint, the plaintiff demands inter alia, other relief as may be justified”. [Document 5 at 35] An award on any judgment is entirely appropriate here, where the plan administrator has unlawfully kept plaintiff’s money for itself for more than nine years since 2008. To calculate damages with prejudgment interest, the Court should start with the monthly benefit owed by RSL. Pursuant to the LTD Policy, RSL owed plaintiff $8,333.00 per month from May 28, 2008 until August 24, 2012. Pursuant to N.J.R. 4:42-11(b), interest rates in tort actions after January 1, 1988 are the same as the post-judgment interest rates. After September 1, 1996, if the judgment exceeds the monetary limit of the Special Civil Part (currently $15,000), 2% should be added and therefore included in the above interest rate, pursuant to R.4:42- 11(a)(iii). CALCULATION OF PREJUDGEMENT INTEREST YEAR BEG. BALANCE + MONTHLY BENEFIT @ INTEREST = ENDING BALANCE 2008 MAY 0.00 + 8,333.00 X 7MONTHS @ 7.5% = 60,882.00 2009 JAN 60,882.00 + 8,333.00 X 12MONTHS @ 6.0% = 167,429.00 2010 JAN 167,429.00 + 8,333.00 X 12MONTHS @ 3.5% = 274,999.00 2011 JAN 274,999.00 + 8,333.00 X 12MONTHS @ 2.5% = 383,103.00 2012 JAN 383,103.00 + 8,333.00 X 8MONTHS @ 2.5% = 460,610.00 Total disability benefits due for 51 month period May 2008 and August 2012: $8,333.00 X 51 = $424,983.00 Total pre-judgment interest amount due for 51 month period May 2008 and August 2012: $35,627.00 Total benefits due with prejudgment interest applied for the period May 2008 and August 2012: $460,610.00 Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 35 of 42 PageID: 2788 30 B. Equitable Relief of Restitution and Surcharge for interest rate losses in Plaintiff’s PML Retirement and Savings Plan from the date he ceased to be a plan participant on August 24, 2012 until anticipated judgment in July 2017. This plan administrator did not simply refuse to pay benefits due; rather, RSL waited for almost four years after the plaintiff ceased to be an active plan participant, and five years after the company was ordered to administer plaintiff’s claim, until notifying him that benefits were terminated retroactively to May 2008. This means that RSL kept benefits for itself to which plaintiff was entitled for an additional five years after he ceased to be insured, in breach of the fiduciary duties owed, as alleged in ¶166 of the Amended Complaint. For this five year period, application of pre-judgment interest is not alone sufficient to restore the plaintiff to the position that he would have been but-for the defendants’ unlawful refusal to pay benefits when due and to terminate disability benefit payments, in violation of ERISA. That is because the plaintiff was compelled to making substantial withdrawals from his Penn Mutual Retirement and Savings Plan, thereby damaging him at a much higher personalized rate of return. A copy of the most recent statement for the plaintiff’s PML Retirement Savings Account is attached as Exhibit “A”. The Court can take judicial notice that the 5 year return on this account is 11.26%. Plaintiff respectfully notes that five years is, coincidentally, approximately the period that the plan administrator refused to comply with the December 22, 2011 Order to continue administration of his claim. Plaintiff argues that this Court has the equitable authority to restore his retirement and saving plan to the status quo as a remedy for the plan administrator’s refusal to pay benefits, and that doing so is within the sound discretion of the Court and permitted by ERISA. An award of prejudgment interest under federal law is committed to the trial court's broad discretion. Skretvedt v. E.I. DuPont De Nemours, 372 F.3d 193, 208 (3d Cir. 2004); see also Sun Ship, Inc. Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 36 of 42 PageID: 2789 31 v. Matson Navigation Co., 785 F.2d 59, 63 (3d Cir.1986) (“In federal question cases, the rate of prejudgment interest is committed to the discretion of the district court.”) ERISA § 502(a)(3) permits plan participants to bring civil actions to obtain “appropriate equitable relief” to redress violations of the statute or a plan. Mertens v. Hewitt Assocs., 508 U.S. 248 (1993). Specifically, §502(a)(3) authorizes a civil action: “by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates ... the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of ... the terms of the plan.” 29 U.S.C. § 1132(a)(3) (1994 ed.) Great-W. Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 209 (2002). Congress intended “equitable relief” to include types of relief that were typically available in equity, such as injunction, mandamus, and restitution. Id. at 248. The term “restitution” refers to an equitable remedy under which a person is restored to his or her original position prior to loss or injury, or placed in the position he or she would have been, had the breach not of occurred. Black’s Law Dictionary, 6 th ed. at 1313. Restitution in equity was “ordinarily in the form of a constructive trust or an equitable lien, where money or property identified as belonging in good conscience to the plaintiff could clearly be traced to particular funds or property in the defendant's possession.” Great–West, 534 U.S. at 213, (citing 1 Dan B. Dobbs, Law of Remedies: Damages–Equity–Restitution § 4.3(1), at 587–88 (2d ed. 1993) (“Dobbs”); Restatement of Restitution § 160 cmt. a, at 641–42 (1936); George E. Palmer, Law of Restitution § 1.4, at 17 (1978); id. § 3.7, at 262); Skretvedt v. E.I. DuPont De Nemours, 372 F.3d 193, 211 (3d Cir. 2004). Additionally, claimants may seek equitable monetary relief in the form of a surcharge for a breach of fiduciary duty by defendants under § 502(a) (3). See Cigna Corp. v. Amara, 563 Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 37 of 42 PageID: 2790 32 U.S. 421 (2011) (concluding that “for a loss resulting from a trustee's breach of fiduciary duty, or to prevent the trustee's unjust enrichment” monetary relief in the form of a surcharge could fall within the scope of the term “appropriate equitable relief” under ERISA § 502(a)(3)); see also Lipstein v. United Healthcare Ins. Co., No. CIV. 11-1185 FSH PS, 2011 WL 5881925, at *2 (D.N.J. Nov. 22, 2011). Here the breach of fiduciary duty is alleged in the Amended Complaint and certainly proved by the undisputed facts of the case. Pursuant to Cigna and Lipstein the plaintiff is therefore entitled to be made whole, even if doing so requires the Court to surcharge the plan administrator to do so. The Court must determine whether use of the Retirement Plan’s 11.26% interest rate on wrongfully withheld ERISA funds is equitable, as opposed to legal, restitution. In making that determination, the Supreme Court indicated that courts should “consult[ ], as we have done, standard current works such as Dobbs, Palmer, Corbin, and the Restatements, which make the answers clear.” Great–West, 534 U.S. at 217, 122 S.Ct. 708; Skretvedt v. E.I. DuPont De Nemours, 372 F.3d 193, 212 (3d Cir. 2004). According to Dobbs, a constructive trust can be imposed “upon any identifiable kind of property or entitlement in the defendant's hands if, in equity and conscience, it belongs to the plaintiff.” Dobbs § 4.3(2), at 589–90. A constructive trust is “only used when the defendant has a legally recognized right in a particular asset [, which] may even be a fund of money like a bank account.” Id. at 591. The constructive trust has what Dobbs calls the “important characteristic” of allowing a plaintiff to “obtain, not merely what he lost, but gains received by the defendant from the property's increase in value, from its transfer, from its use in a business operation.” Id. at 59; Skretvedt v. E.I. DuPont De Nemours, 372 F.3d 193, 213 (3d Cir. 2004). Dobbs is consistent with the Restatement of Restitution, which suggests that a constructive trust arises “[w]here a Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 38 of 42 PageID: 2791 33 person holding title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it....” Restatement of Restitution § 160, at 640–41; see also Palmer § 1.3, at 12 (“In the cases as a whole, constructive trust is accepted as a technique to be used in working out solutions to problems of unjust enrichment....”). Generally, a constructive trust is imposed “to restore to the plaintiff property of which he has been unjustly deprived and to take from the defendant property the retention of which by him would result in a corresponding unjust enrichment of the defendant....” Restatement of Restitution § 160, cmt. d, at 643. Skretvedt v. E.I. DuPont De Nemours, 372 F.3d 193, 213 (3d Cir. 2004). Next, the Court must determine whether the restitution is with respect to “money or property identified as belonging in good conscience to the plaintiff [that can] clearly be traced to particular funds or property in the defendant's possession.” Great–West, 534 U.S. at 204,; see also Palmer § 3.7, at 262 (in “most of the restitution cases the equitable relief sought by the plaintiff is with respect to specific property, usually to obtain either specific restitution or a lien on the property”). In this case, the Court need not even look to a third-party transferee to find the funds that the plaintiff alleges belong to him. Instead, we need look no further than the Penn Mutual Retirement Savings Plan from which plaintiff was compelled to used funds by virtue of the fact that the Penn Mutual Employee Disability Plan was unlawfully withholding benefits for several years and profiting with respect to the withholding of those benefits. Here, because the plaintiff has sufficiently identified specific funds traceable to the defendant ERISA plans that belong in good conscience to him, the Court should exercise its broad equitable power to compel restoration of plaintiff’s Retirement Savings Plan, retroactive to August 24, 2012, the date on which plaintiff ceased to be insured by the LTD Plan. Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 39 of 42 PageID: 2792 34 If the total amount due on August 24, 2012 was $460,610.00, as explained supra, and that amount was deposited into the Penn Mutual Retirement Savings Plan, his five year rate of return along with the plaintiff’s other savings, the 11.26% five-year rate of return between 2012 and 2017 would have resulted in an ending balance of $782,820.00. Otherwise, the defendants who unlawfully withheld the benefits will enjoy that rate of return on the withheld funds that can be easily traced to plaintiff. Accordingly, plaintiff demands judgment in an amount that is at least equal to $782,820.00 as equitable restitution for losses to his Retirement Savings Plan that resulted from the unlawful withholding of funds that had to be drawn from that account. C. Equitable restitution for effective tax rate losses resulting from lump sum payment. A plan participant such as this plaintiff who receives a monthly benefit of $8,333.00 under the LTD Plan will find himself in a 20% effective federal tax bracket. However, if the defendants are ordered to pay $782,820.00 (or even $460,610.00), then the plaintiff will find himself in a much higher tax bracket simply by virtue of the lump sum amount. Therefore, the Congressional intent underlying ERISA will not be accomplished unless the plan administrator is surcharged because the plaintiff will not otherwise be restored to the status quo. ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), allows a participant or beneficiary to obtain other categories of equitable relief, including a surcharge remedy “extended to a breach of trust committed by a fiduciary encompassing any violation of a duty imposed upon that fiduciary.” CIGNA Corp. v. Amara, 563 U.S. 421, 440-42 (2011); Erwood v. Life Ins. Co. of N. Am., No. CV 14-1284, 2017 WL 1383922, at *7 (W.D. Pa. Apr. 13, 2017). To ensure that plaintiff receives the net amount to which he should be entitled, it will be necessary to consider the effective tax rate. By applying plaintiff’s usual 20% tax rate here (i.e. “the status quo”) he would net $630,000.00 after payment of taxes on $785,287 if that amount was paid over time and accrued in his retirement savings account as it should have been. Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 40 of 42 PageID: 2793 35 However, the effective tax rate on $785,281.00 is a staggering 44%, which would actually result in a loss to the plaintiff if paid in one lump sum. To equalize the effective tax rate here, it is necessary to enter judgment in an amount sufficient for the plaintiff to net what he should have received but-for the defendants’ misconduct, i.e. $630,000.00. For the plaintiff to obtain that amount net of taxes as restitution, it will be necessary for the Court to “gross up” the $785,287.00 to $1,225,000.00 as a matter of equity. That is the amount of the judgment that the plaintiff is seeking here. 6. Recognizing that the plan administrator violated the December 22, 2011 Order to pay benefits and continue the administration of plaintiff’s claim over a period of several years, the Court should order the plan administrator to pay sanctions in a sufficient amount so as to deter similar future conduct. The Court ordered RSL to pay benefits due on December 22, 2011. The defendant was never free to wait until October 9, 2014 to make the first payment owed under the Order. Certainly, the defendant was never free to wait until September 15, 2015 to terminate the claim on remand. Federal courts have the inherent power to sanction parties who have acted in bad faith, veraciously, wantonly, or for oppressive reasons. See, 18 U.S.C.A. §401(1) and (3); see also Fellheimer, Eichen & Bravernman P.C. v. Charter Techs, Inc., 57 F.3d 1215, 1224 (3d Cir. 1995), citing, Chambers v. NASCO, Inc., 501 U.S. 32, 45-46 (1991). It is respectfully submitted that this Court should exercise its inherent power by sanctioning defendant RSL for its wanton refusal to obey the December 22, 2011 Order. Plaintiff submits that a damages multiplier should be applied. Conclusion For the reasons set forth herein, it is respectfully submitted that the Court should enter judgment against the defendants jointly and severally as follows: for disability benefits owed Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 41 of 42 PageID: 2794 36 under the terms of the LTD Plan from May 2007 thru August 2012, along with pre-judgment interest; for equitable restitution related to interest losses in the PML Retirement Savings Plan; for equitable restitution to maintain the status quo as it relates to plaintiff’s effective tax rate following lump sum payment by the defendants; for punitive damages resulting from the violation of a Court Order; and for any additional relief that the Court may impose. Plaintiff also respectfully requests leave to appropriate amend his already-pending application for costs of suit and counsel fees, as permitted by ERISA. Respectfully submitted, KELLY LAW OFFICES, LLC Attorneys for Plaintiff/Movant By: Thomas P. Kelly III Dated: April 21, 2017 Case 2:09-cv-02478-KSH-CLW Document 211-1 Filed 04/21/17 Page 42 of 42 PageID: 2795 KELLY LAW OFFICES, LLC 3000 ATRIUM WAY - SUITE 291 MOUNT LAUREL, NEW JERSEY 08054 (609) 261-6100 (Phone) (609) 261-6105 (Fax) Attorneys for Thomas P. Kelly Jr., Plaintiff UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY THOMAS P. KELLY Jr., : : Plaintiff : : v. : : RELIANCE STANDARD : Civil Action No. 2:09-cv-02478 LIFE INSURANCE COMPANY, : (KSH-PS) : and, : : Motion Date: May 15, 2017 THE PENN MUTUAL : LIFE INSURANCE COMPANY, : : Defendants : PLAINTIFF’S STATEMENT OF UNDISPUTED MATERIAL FACTS IN SUPPORT OF HIS THIRD MOTION FOR SUMMARY JUDGMENT REGARDING COUNTS I & II OF THE AMENDED COMPLAINT, PURSUANT TO L.R.Civ.P. 56.1(a) Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 1 of 24 PageID: 2796 Relevant Undisputed Material Facts and Procedural History 1. Plaintiff was injured in a motor vehicle accident on Monday, November 7, 2015. [December 22, 2011 Opinion Granting Summary Judgment in favor of Plaintiff, Document 106, page 2] 2. At the time of his injury, the Plaintiff was insured under a long-term disability policy (“LTD Policy”) offered by his employer, defendant Penn Mutual Life Ins. Co. (“PML”), and administered by defendant Reliance Standard Life Ins. Co. (“RSL”) [Document 105, page 3] 3. The LTD Policy entitles “Totally Disabled” employees to receive a monthly benefit of 66-2/3% of Covered Monthly Earnings following 180 days of total disability (“the Elimination Period”), until their sixty-sixth (66 th ) birthday. [Document 106, page 3] 4. Plaintiff’s monthly earnings at the time of his accident were $12,500. (AR184; AR193). 5. Therefore, pursuant the terms of the LTD policy, when Plaintiff became totally disabled, he was entitled to receive LTD benefits of $8,325 per month (66.6% of $12,500) or $100,000 per year (2/3 of $150,000), in disability benefits until August 24, 2012. [Document 57-1, page 6] 6. The LTD Policy uses two definitions for determining whether an insured is “totally disabled” and therefore entitled to receive benefits. [Document 5-2, page 23; Document 101-3, page 3]: a. During the Elimination Period and for the first 24 months for which a monthly benefit is payable, the insured cannot perform the substantial and material duties of his/her regular occupation. b. After a monthly benefit has been paid for 24 months, the insured cannot perform the substantial and material duties of any occupation. Any occupation is one that the insured’s education, training, or experience will reasonably allow. The Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 2 of 24 PageID: 2797 insured will be considered totally disabled if, due to an injury or sickness, he/she is capable of only performing the material duties on a part-time basis or part of the material duties on a full-time basis. 7. On January 4, 2011 the plaintiff’s treating board-certified orthopedic surgeon confirmed that plaintiff is physically unable to perform the duties of any occupation and that his condition is not expected to improve. (AR128). 8. RSL never asked the plaintiff to undergo an independent medical examination (“IME”) in the eleven years since the claim was filed in 2006 despite a contractual right to do so. 9. Plaintiff filed a claim for LTD benefits with RSL which was denied on October 23, 2006. [Document 106, page 4] 10. Plaintiff administratively appealed the initial denial of benefits, but RSL upheld its decision in a letter dated March 12, 2007. [Document 106, page 4] 11. Plaintiff filed the initial Complaint in this Court on May 20, 2009, alleging, inter alia, that the defendants were liable to him as co-fiduciaries for violations of the federal Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §1001 et seq., and its associated regulations. [Document 1] 12. Plaintiff filed an Amended Complaint on June 12, 2009. (Document 5) a. Count I of the Amended Complaint alleges, inter alia, that RSL is liable to Plaintiff for disability income and other damages from May 2006, through the date of judgment. (Document 5, page 35)[emphasis added]. 13. The parties filed cross-motions for summary judgment on May 28, 2010. (Document 55, 56, 57) 14. Following oral argument on the parties’ cross-motions, the Court issued an Order on December 14, 2010, denying the defendants’ cross-motions, and remanding the plaintiff’s Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 3 of 24 PageID: 2798 claim, “for further proceedings consistent with the decision and reasoning of the Court on the record.” (Document 87, page 1) 15. In the same Order the Court directed that, “[w]ithin 30 days of the entry of this Order, Plaintiff shall file with [defendant] Reliance any additional evidence to develop the record further.” Id. 16. Plaintiff promptly submitted a seventy (70) page Supplemental Certification in Support of his Application for Long-Term Disability Benefits on January 10, 2011. [Document 101-2, beginning at page 7]. a. Therefore, it is undisputed that RSL had a complete Administrative Record, including all of plaintiff’s medical records and Authorizations for release of medical information current through at least the date of his Supplemental Certification on January 10, 2011. 17. The cover letter enclosing the January 10, 2011 Supplemental Certification stated, in pertinent part, “[p]lease direct your client to approve [the plaintiff’s] application retroactively and immediately forward payment due from March 2006 to present with applicable interest.” [Document 101-2, beginning at page 7]. 18. The Administrative Record includes an Authorization for release of medical records from the plaintiff’s doctors and/or healthcare providers, executed on March 12, 2006. The signed document stated, “[t]his Authorization is valid from the date signed for the duration of the claim.” [Document 29-3, at 88]. (RSL would later untruthfully claim that plaintiff had never provided this Authorization.) 19. In a letter dated February 18, 2011, RSL denied the plaintiff’s claim on remand. [Document 101-3, at page 2] Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 4 of 24 PageID: 2799 20. In the February 18, 2011 denial letter, RSL confirmed its understanding that the plaintiff was seeking long-term disability benefits under both of the contractual definitions for “totally disabled” that are contained in the LTD Policy: a. “On January 11, 2011, you provided an affidavit with Exhibits to support your position that you could not have continued in your previous role with PML from your claimed date of loss, November 26, 2005. You also contend that you currently remain physically unable to work in “any occupation that [your] education, training, and experience would otherwise reasonably allow.” [Document 101-3, page 2][emphasis added] (RSL would later untruthfully claim that it never considered the claim under the “any occupation” definition.) 21. On April 26, 2011, the plaintiff filed a second Motion for Summary Judgment regarding the unlawful denial of his long-term disability claim on remand. [Document 101] 22. The April 26, 2011 Motion expressly demanded disability income benefits “from May 2006 through present” just as the plaintiff had demanded in his January 10, 2011 Supplemental Certification to RSL and also in his Initial and First Amended Complaints. [Document 105-1, pages 4, 13][Emphasis added]. 23. On December 22, 2011, the Court granted plaintiff’s second motion for summary judgment. [Document 106]. 24. In its December 22, 2011 Opinion, the Court determined, inter alia, that: a. On remand, Reliance conducted an inappropriately selective review of the evidence, placed unreasonable emphasis on the reports of consultants who never examined the plaintiff, chose not to use an independent medical examiner, and Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 5 of 24 PageID: 2800 failed to engage in any meaningful analysis of the plaintiff’s material job duties. [Document 106, page 19] 25. In its December 22, 2011 Opinion, the Court also found that the plaintiff was “entitled to receive the LTD benefits owed to him under the Plan,” without specifying the amount due. [Document 106, page 19]. 26. In its accompanying Order the Court remanded the plaintiff’s claim to the plan administrator a second time, directing “continued administration and payment of benefits, consistent with the terms of this Order and the Court’s written opinion.” [Document 107, page 2] 27. The December 22, 2011 Order has never been stayed or appealed and no request for a stay or notice of appeal has ever been made by RSL. 28. On January 14, 2012, the Court ordered the plaintiff and defendant PML to appear at a settlement conference on January 27, 2012 before Hon. Patty Schwartz, U.S.M.J. to discuss the plaintiff’s remaining claims. Upon its request RSL was also granted permission to attend the settlement conference, notwithstanding the judgment already entered against that defendant. [Document 112] 29. On January 20, 2012, with leave granted by the December 22, 2011 Order and pursuant to ERISA, the plaintiff filed a Motion for Attorney Fees, which remains pending. [Document 114] 30. The January 27, 2012 settlement conference was unsuccessful but following subsequent out-of-court negotiations plaintiff’s counsel advised the Court that the claims against RSL appeared to be settled on January 30, 2012. [Document 116] Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 6 of 24 PageID: 2801 31. After RSL attempted to add several new conditions to the tentative agreement plaintiff filed a motion to enforce the agreed-upon provisions. [Document 121] 32. The Court terminated the plaintiff’s Motion to Enforce and instead directed the parties to address their differences with Judge Schwartz at another settlement conference, on March 8, 2012, at which time RSL refused to participate in good faith. [Document 124] 33. After the December 22, 2011 Order granting summary judgment was entered, RSL paid no benefits and refused to administer the plaintiff’s claim as directed. 34. As a result of the March 8, 2012 conference, Judge Schwartz granted the plaintiff permission to re-file his Motion to Enforce the Settlement Terms, in an Order dated March 9, 2012. [Document 125] 35. Plaintiff re-filed his Motion to Enforce Settlement Terms on March 13, 2012. [Document 126] 36. In response to the plaintiff’s Motion, the Court entered an Order on April 12, 2012, referring the case to mediation by retired Appellate Division Judge John E. Keefe, Sr., P.J.A.D. The parties, including the prevailing plaintiff, were directed to split the cost of mediation equally. [Document 130] 37. The parties attended the court-ordered mediation on September 11, 2012. For at least a third time, settlement efforts were unsuccessful because RSL was not prepared to cooperate in good faith. 38. During the five month period between the December 22, 2011 Order and the April 12, 2012 mediation session with Judge Keefe, RSL did not pay any benefits, nor did the company administer the plaintiff’s disability claim as ordered, despite the fact that the plaintiff was still an active plan participant with an active claim for benefits. Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 7 of 24 PageID: 2802 39. On August 24, 2012, the plaintiff reached his sixty-sixth (66th) birthday and ceased to be a plan participant under the terms of the LTD Policy. This is the date on which all dealings between the plaintiff and RSL would have terminated but-for the litigation resulting from RSL’s unlawful handling of the disability claim and its refusal to comply with the December 22, 2011 Order. 40. On September 21, 2012, the plaintiff, who had still not been paid any disability benefits in the ten months following the Court’s December 22, 2011 Order, filed a Motion to Enforce Litigant’s Rights, seeking to compel compliance with the Order itself. Because plaintiff’s coverage ended on August 24, 2012, benefits no longer continued to accrue after that date and his total damages could be easily calculated. [Document 136] 41. On October 2, 2012, the Court struck the plaintiff’s Motion to Enforce Litigant’s Rights [Document 136] because leave to file had not first been obtained. At the same time the Court sua sponte reinstated the plaintiff’s March 13, 2012 Motion to Enforce Settlement Terms [Document 126]. [Document 139] 42. On July 21, 2014, the Court denied the March 13, 2012 Motion to Enforce Settlement Terms and directed the parties to simultaneously file submissions regarding what they perceived to be remaining open issues in the case on Monday, July 28, 2014. [Document 171, page 5] 43. When the Court denied the plaintiff’s Motion to Enforce Settlement Terms on July 21, 2014, the December 22, 2011 Summary Judgment Order had not been stayed or modified. Indeed, at its own peril, no request for modification or stay of the December 22, 2011 Order has ever been made by RSL. Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 8 of 24 PageID: 2803 44. In a July 28, 2014 submission regarding remaining open issues, the plaintiff insisted that the December 22, 2011 Order directing payment of benefits and continued administration of his claims should be enforced. [Document 175, pages 4-5] a. The plaintiff observed that there had been no compliance with the Order; that no benefits had been paid in the three years following the Order; that RSL had not continued to administer the claim as required by the Order; and that the Order remained valid because it had never been stayed, modified, or appealed. Id. b. The plaintiff also reminded the Court that his Motion for Counsel fees remained pending, in the then-current amount of $175,497.19. [Document 175, page 8] c. The plaintiff also sought leave to file a Motion for an Order Granting Relief for Civil Contempt against defendant RSL, in light of the company’s ongoing refusal to comply with a valid Court Order over a period of several years. [Document 175, page 9] 45. A status conference was held before Magistrate Judge Waldor on July 31, 2014. [A complete transcript of that conference can be found at Document 177] 46. During the July 31, 2014 status conference, Judge Waldor suggested that if RSL truly believed the plaintiff was not disabled as he was claiming, then RSL could hire a private investigator to pursue that defense. [Document 177, 76:23-77:02] 47. In response to the Court, defense counsel lied to Magistrate Judge Waldor stating, “[m]y client isn’t going to pursue investigation.” a. When he made that statement, defense attorney Joshua Bachrach knew that his client had already concluded an investigation without finding anything that could be used against this plaintiff. [Document 177, 77:03-06]. Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 9 of 24 PageID: 2804 b. Two years earlier, RSL had secretly obtained a written surveillance report from APEX Investigation. The report was authored by a private investigator that had been paid to spy on the plaintiff, his wife, and his attorneys, over a period of at least two months at their homes in PA and NJ, and at their places of work. The investigator also contacted the plaintiff’s neighbors, staked out the plaintiff’s homes on multiple occasions, followed the plaintiff’s wife in her vehicle on roadways, and even contacted the offices of undersigned counsel under false pretenses, in a failed effort to disprove the plaintiff’s claims. [See Report of Apex Investigation, dated October 9, 2012, at Document 203-1, pages 6-60] c. Daily surveillance reports had been provided by the private investigator to “Senior Benefit Analyst” Gene Shaw of defendant RSL via e-mail over a period of several weeks in October of 2012. Id. d. While Mr. Bachrach’s untruthful statements to Judge Waldor are certainly troubling, they are indicative what the plaintiff has been dealing with for more than a decade. Counsel intentionally withheld pertinent facts from the plaintiff and knowingly lied to Judge Waldor during the July 31, 2014 settlement conference. He intentionally misled the Court, or at least allowed the Court to be misled, by representing that the defendant did not intend to use a private investigator, despite knowing perfectly well that RSL had already done so without any findings that would support the denial of plaintiff’s claim. [Document 177, 77:03-06] i. The defendant also used its private investigator to spy on plaintiff’s attorneys, as evidenced by the production of motor vehicle records, credit Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 10 of 24 PageID: 2805 information, past employment history, residential home ownership information, and history of litigation for undersigned counsel, dating back to the mid-1990s. Id. ii. The report also includes information about the plaintiff’s late wife who died in 2008 when his claim for disability benefits was pending before defendant RSL. Id. iii. It is believed, and therefore averred, that attorney Bachrach lied about the private investigator because he knew that the investigation had been completed without revealing anything that was helpful to his client’s case. Id. 48. The clandestine surveillance activity, coupled with Mr. Bachrach’s untrue statements about that activity, suggest that this plaintiff has been singled out by RSL for negative retaliatory treatment. a. Also, the undisclosed surveillance efforts indicate that the defendant and its lawyers acted in bad faith during the many settlement conferences, negotiations, and mediations that took place in 2012. Instead of paying benefits and administering the plaintiff’s claim as ordered, RSL was busy with efforts aimed against the insured, to whom the company owed a fiduciary duty. 49. On September 8, 2014, in response to requests made during the July 31, 2014 settlement conference with Magistrate Judge Waldor, the plaintiff submitted a thirty-four (34) page letter to RSL, in further support of his claim for benefits beyond May 28, 2008. [Letter from T. Kelly to J. Bachrach, dated 09/08/15, Document 203-2, page 8] Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 11 of 24 PageID: 2806 50. The September 8, 2014 letter noted that RSL was improperly attempting to expand the Administrative Record by requesting additional information about the plaintiff’s claim, six years after it received the plaintiff’s January 10, 2011 Supplemental Certification on remand, four years after it had been ordered to pay benefits and to continue administering his claim; and two years after plaintiff had ceased to be a plan participant on his 66 th birthday. Id. 51. The September 8, 2014 letter included a complete history of the plaintiff’s taxable earnings from the Social Security Administration for each year from the onset of his disability in 2005, up to, and including his sixty-sixth birthday on August 24, 2012. RSL would later falsely claim that the plaintiff had failed to provide information about his earnings as a basis to terminate his claim. Id. at 7. 52. The September 8, 2014 letter also included Findings of Fact and Conclusions of Law by The Honorable Mark G. Barrett, A.L.J., dated August 6, 2014, holding that the plaintiff “has not engaged in substantial gainful activity since November 10, 2005.” These findings were entered after a hearing and upon consideration of evidence in the record by a federal administrative court. RSL would later falsely claim that the plaintiff had failed to provide information about social security disability benefits as a basis to terminate his claim. Id. 53. The September 8, 2014 letter also included copies of Tax Return Transcripts for the years 2008, 2009, 2010, 2011 and 2012 that the plaintiff obtained from the Internal Revenue Service for the express purpose of complying with a request from RSL to provide earnings data, notwithstanding the fact that the LTD Policy does not require production Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 12 of 24 PageID: 2807 of such data. RSL would later falsely claim that the plaintiff had failed to provide tax information as a basis to terminate his claim. Id. 54. On October 9, 2014, three years after the Court had directed payment of benefits; nine years after the benefits had become due; three years after the plaintiff had ceased to be insured under the disability plan; and two years after it had secretly used a private investigator to spy on the plaintiff and his family, RSL wrote a check for benefits due between November 2005 through May 2008. [See Letter from M. McCullough to T. Kelly, dated October 9, 2014, Document 203-2, at 2-6]. 55. According to the October 9, 2014 letter from RSL, benefits were only being paid for the twenty-four month period between November 26, 2005 until May 25, 2008, despite the fact that on January 10, 2011 the plaintiff had expressly demanded benefits beyond that date and had likewise demanded said benefits in his Complaint and Motion for Summary Judgment. [Id.] 56. In violation of the LTD Policy terms, RSL reduced the amount of benefits owed by $42,576.00 as a “social security offset” despite the fact that plaintiff did not actually receive any social security benefits between 2006 and 2008. [Id.] a. “We have subtracted Other Income in the form of Social Security Disability that you would have been eligible to receive if you had applied for benefits timely, in the amount of $1,774.00 per month. We based this amount on the award as granted by the Social Security Administration on August 24, 2014 in the amount of $1,992.00.” Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 13 of 24 PageID: 2808 57. There is no provision in the LTD Policy that requires an applicant to apply for social security disability benefits and there is no provision in the LTD Policy that permits RSL to offset benefits for amounts that were never actually received by a claimant. 58. RSL applied a social security offset to the plaintiff’s disability benefits, basing its decision on ALJ Barrett’s 2014 finding that, “Based on the application for a period of disability and disability insurance benefits…filed on August 15, 2011, the claimant has been disabled…since November 10, 2005.” [Document 203-2 at 5] 59. Although it relied on one portion of ALJ Barrett’s decision when doing so appeared to support offsets to the amount owed to plaintiff, RSL arbitrarily ignored other relevant portions of the same decision that support the plaintiff’s claim for continued benefits: a. “Considering the claimant’s age, education, work experience, and residual functional capacity, there are no jobs that exist in significant numbers in the national economy that the claimant can perform (20 CFR 404.1560(c) and 404.1566).” [Document 203-2 at 21] 60. On November 7, 2014 RSL filed a motion to remand the plaintiff’s disability claim. [Document 179]. 61. The November 7, 2014 motion for remand was unnecessary because the claim had already been remanded three years earlier, by the Court’s December 22, 2011 Order. By asking the Court to remand the claim in 2014 RSL was attempting to divert attention from the failure to act over a period of three years since 2011. [Document 106] 62. Accordingly, the plaintiff filed an Opposition and a Cross-Motion on December 6, 2014, seeking to hold defendant RSL in contempt of court for: (a) refusing to pay benefits due Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 14 of 24 PageID: 2809 beyond May 28, 2008; and (b) refusing to continue to administer the plaintiff’s claim as ordered three years earlier, on December 22, 2011. [Document 184] 63. In its analysis of these motions, the Court observed the following: a. “Reliance noted in the [February 8, 2011] Letter that Kelly claimed entitlement to “any occupation” benefits but, quite clearly, found only that he was not “Totally Disabled” as defined herein – i.e. that he was not incapable of “performing the substantial and material duties of [his] regular occupation.” [emphasis in original]. “The Court subsequently considered this decision and found it to be arbitrary and capricious, but did not – as Kelly suggests – rule that Kelly was entitled to LTD benefits under the “any occupation” standard”. [Document 186, page 4-5]; and b. Judge Hayden also wrote, “[t]he Court held only that Kelly was ‘entitled to LTD benefits owed to him under the Plan.’ Read together with the remainder of the Court’s opinion and the February Letter, it is beyond dispute that the Court’s holding extended only to those claims Reliance had already considered – namely, Kelly’s claim for benefits on account of his inability to perform the duties of his regular occupation.” [Document 186, page 5] 64. RSL waited until June 5, 2015 to make any effort toward the plaintiff’s ongoing claim for benefits, despite a Court Order to do so four years earlier, on December 22, 2011. Specifically, the company wrote to the plaintiff requesting information that it knew had already been provided on September 8, 2014. [Document 203-2 at 42]. 65. On June 11, 2015 the plaintiff moved for reconsideration of the Court’s May 28, 2015 decision. [Document 188, and 188-1]. Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 15 of 24 PageID: 2810 66. The Court denied the Motion for Reconsideration on August 31, 2015. [Document 193] 67. In retrospect, instead of attempting to enforce the December 22, 2011 Order, the plaintiff should have instead requested limited reconsideration of the Order itself. Respectfully, the December 22, 2011 Order appears to have overlooked ERISA regulations that required consideration of the plaintiff’s claim for benefits beyond the first twenty-four months of his disability under the “any occupation” definition for “Totally Disabled” simply because the claim had been made. 68. It makes no difference that RSL denied the plaintiff’s claim under the “own occupation” definition for “total disability”. Notwithstanding that denial, the “any occupation” aspects of his claim should have also been considered. This is true because federal regulations specify the claims procedures that are necessary to meet the ERISA requirements for a “full and fair review,” including, but not limited to the following: [T]he claims procedures of a plan will not be deemed to provide a claimant with a reasonable opportunity for a full and fair review of a claim and adverse benefit determination unless the claims procedures…(ii) Provide claimants the opportunity to submit written comments, documents, records, and other information relating to the claim for benefits; … (iv) Provide for a review that takes into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. [29 C.F.R. §2560.503-1(h)(2)(ii)-(iv)[emphasis added]; see also Gagliano v. Reliance Standard Life Insurance Co., 547 F.3d 230 (4 th Cir. 2008). 69. RSL acknowledged the demand for benefits under the “any occupation” definition, in writing, on February 18, 2011 but, according to the Court’s findings, never considered that demand. In and of itself, the failure to consider the “any occupation” demand was a violation of ERISA, because it deprived plaintiff of his right to a full and fair review of Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 16 of 24 PageID: 2811 the claim for benefits. Otherwise any plan administrator could limit its liability to an applicant by limited review to only a portion of the claim. [Document 101-3, page 2]. 70. Plaintiff continued to demand benefits under the “any occupation” policy definition in his application for benefits, in his administrative appeal, in his Complaint, in his First Amended Complaint, and also in his First and Second Motions for Summary Judgment. Nevertheless, the Court determined that the claim was never considered by RSL. [Document 5, page 35, ¶182; Document 52-2, page 40; Document 101-1, page 22] 71. Applying the federal regulations to the undisputed facts and the Court’s analysis, it follows that if, “Reliance noted in the February Letter that Kelly claimed entitlement to “any occupation” benefits but, quite clearly, found only that he was not “Totally Disabled” as defined herein – i.e. that he was not incapable of “performing the substantial and material duties of [his] regular occupation,” then the company per se denied the plaintiff a full and fair review of his claim, in violation of 29 C.F.R. §2560.503- 1(h)(2)(ii)-(iv), and, in turn, 29 U.S.C. §1133. 72. RSL did not “take into account all comments, documents, records, and other information submitted by the claimant relating to the “any occupation” claim, without regard to whether such information was submitted or considered in the initial benefit determination.” 73. Put another way, because the plaintiff claimed benefits under the “any occupation” definition as he did here, RSL was never free to ignore that claim, regardless of the initial determination of plaintiff’s “own occupation” claim. If any part of the claim is ignored as the Court says it was, then RSL is liable for its failure to fully and fairly review the claim, as a matter of law, according to 29 C.F.R. §2560.503-1(h)(2)(ii)-(iv). Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 17 of 24 PageID: 2812 74. Despite the fact that its December 22, 2011 Order remanding the claim for continued administration has never been amended, the Court nevertheless remanded the plaintiff’s claim back to defendant RSL a third time on its May 28, 2015 Order. [Document 187] 75. The Court’s May 28, 2015 Opinion did not address the defendant’s inexplicable refusal to continue administering the claim on remand between December 22, 2011 and May 28, 2015. [Document 186] 76. In violation of the December 22, 2011 Order, the defendant did nothing to continue administering the plaintiff’s disability claim, until it wrote him on June 5, 2015, advising that “we are in the process of determining whether you are unable to perform the material duties of “any occupation” as required by the policy. [See Letter from J. Haubrich to T. Kelly, dated June 5, 2015, Document 203-2 at 42] 77. RSL’s June 5, 2015 letter was an attempt to expand the Administrative Record for an insured who had already ceased to be an active plan participant on August 24, 2012, under the pretext that RSL was attempting to administer the continuing claim: a. RSL requested plaintiff’s complete social security file, including any medical information that the ALJ had considered when he awarded disability benefits. This request ignored the fact that all of the requested information had already been provided on September 8, 2014. [Id.] b. RSL also requested copies of all tax information from 2006 through 2015 despite the fact that the plaintiff was not insured by RSL in 2013, 2014 or 2015. This request ignored the fact that complete tax transcripts from the IRS had already been provided by the plaintiff on September 8, 2014. [Id.] Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 18 of 24 PageID: 2813 c. RSL also requested a list of all physicians that treated the plaintiff between May 25, 2006 and May 25, 2008 (the initial claim period already decided by the court). This request ignored the fact that plaintiff had already provided complete medical records through at least January 10, 2011 (with his Supplemental Certification). Also, the plaintiff had provided RSL with a signed Authorization for Release of Medical Records that the company had already used to obtain the same information it was now requesting. [Id.] 78. To determine whether the plaintiff was eligible for continued benefits on May 28, 2008, it should not have been unnecessary for RSL to request anything beyond what was already in the Administrative Records that closed on January 10, 2011. 79. On July 22, 2015, RSL made a second request for information that it had already received on September 8, 2014 and threatened to deny plaintiff’s claim if the redundant information was not provided. 80. On September 4, 2015 plaintiff’s counsel wrote to RSL, advising the company that all of the requested information had already been provided on September 8, 2014. Plaintiff also objected to the requests for information beyond 2012 when he had ceased to be a plan participant in August of 2012. [Exhibit A] 81. The case was administratively terminated by the Court on December 21, 2015. [Document n/a] 82. On January 7, 2016, the plaintiff alerted the Court to the fact that at least one motion remained pending (i.e. for counsel fees) and respectfully noted that the case may have been terminated prematurely. [Document 194] Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 19 of 24 PageID: 2814 83. A telephonic status conference was held on January 19, 2016 before Magistrate Judge Waldor at which the parties were informed to report back to the Court after a decision on remand had been reached by defendant RSL. [Document n/a] 84. The plaintiff’s claim on remand was denied by defendant RSL on September 15, 2015, four years after the company had been ordered to continue administering benefits. [203-2 at 50] 85. In the September 15, 2015 denial letter, RSL incorrectly stated that the plaintiff had refused to provide various pieces of requested information the company needed to administer his continued claim for benefits: a. For example, RSL alleged that plaintiff had not provided evidence of wages and earnings. This was absolutely untrue because, on September 8, 2014, plaintiff provided his complete earnings records from the Social Security Administration for the years 1964 thru 2013. [Document 203-2, page 29]. b. RSL also untruthfully alleged that federal tax return information had not been provided. Again, the plan administrator was lying because the plaintiff had also provided complete IRS tax transcripts for years 2008 thru 2012, on September 8, 2014. [Document 203-2, page 31-37.] 86. In any event, RSL was wrong to insist that it would not pay benefits because the LTD Policy states that monthly benefits will stop on the earliest of four enumerated events: (1) the date the Insured ceased to be Totally Disabled; (2) the date the Insured dies; (3) the Maximum Duration of Benefits, as shown on the Schedule of Benefits page, has ended; or (4) the date the Insured fails to furnish the required proof of Total Disability. Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 20 of 24 PageID: 2815 87. In this case, the earliest of these events occurred when the plaintiff reached the Maximum Duration of Benefits, as shown on the Schedule of Benefits page, on his sixty-sixth birthday, August 24, 2011. Therefore, RSL should have paid benefits thru that date, pursuant to the express terms of its own LTD Policy. 88. Notwithstanding the fact that plaintiff ceased to be a plan participant on August 24, 2012, RSL denied his claim on September 15, 2015, on the incorrect basis that he had “failed to cooperate and provide requested information” in July of 2015. 89. Contrary to RSL’s assertions regarding lack of cooperation, the plaintiff had provided the plan administrator with all of the requested materials at least twice – on January 10, 2011 with his Supplemental Certification and again on September 8, 2014 when he provided a good faith response to RSL’s request for additional information. 90. As a practical matter, when this Court awarded summary judgment on December 22, 2011 the plan administrator already had everything that it needed to evaluate the plaintiff’s eligibility for benefits after May 28, 2008 because the Administrative Record had been closed almost three years after that date, on January 10, 2011. RSL’s request for additional information in 2015 was, therefore, merely a pretext to look for any basis on which to deny the plaintiff’s claim for benefits. 91. Nothing in the LTD Policy permits RSL to automatically terminate benefits after the twenty-fourth month of a claim. 92. Nothing in the LTD Policy permits RSL to refrain from continuing to pay benefits payments while it considers an applicant’s entitlement to ongoing benefits. Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 21 of 24 PageID: 2816 93. Although the Court’s December 22, 2011 Order remanded the claim to RSL for “continued administration and payment of benefits” the company did not make any payments after the initial check was issued. [Document 107, page 2] 94. Plaintiff administratively appealed the September 15, 2015 termination of benefits on or about March 4, 2016. [Document 203-2 at 56] 95. RSL upheld its denial in a letter dated April 21, 2016. 96. In its rejection of the plaintiff’s administrative appeal, RSL again knowingly refused to consider relevant information in the Administrative Record and falsely insisted that the plaintiff had failed to provide various things to the plan administrator. Id. 97. For example, with his September 8, 2014 letter to RSL, the plaintiff had provided complete Findings of Fact and Conclusions of Law from a May 6, 2014 hearing before the Social Security Administration related his claim for disability benefits. [Document 203-2, page 16] 98. There is no question that RSL had the social security hearings records in its possession because the company referenced the ALJ decision in its October 9, 2014 letter regarding calculation of income offsets to plaintiff’s LTD benefits. a. RSL knew perfectly well that the plaintiff had been awarded social security benefits by a federal administrative law judge who had reviewed evidence and considered sworn testimony in a federal judicial proceeding. b. RSL also knew that an impartial vocational expert had provided testimony at that hearing. c. Finally, RSL knew that that the ALJ had concluded “Considering the claimant’s age, education, work experience, and residual functional capacity, there are no Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 22 of 24 PageID: 2817 jobs that exist in significant numbers in the national economy that the claimant can perform (20 CFR 404.1560(c) and 404.1566).” 99. Nevertheless, RSL ignored these records that were provided on September 8, 2014 and did not consider anything related to the social security claim or the administrative findings when it terminated the plaintiff’s claim beyond May 28, 2008. a. The April 21, 2016 denial of plaintiff’s formal appeal also falsely stated, “you never provided our office with an executed Social Security authorization form, which would have allowed us to request information directly from the SSA, despite repeated requests to do so.” b. The statement in RSL’s April 21, 2016 letter was yet another lie by this corrupt plan administrator. The plaintiff did indeed provide the executed authorization form, which has been part of the Administrative Record in this case since it was signed on June 12, 2006. [See, AR206-206; Document 29-3, page 106-107] 100. From these undisputed facts the Court can plainly see that RSL was directly provided with records from the social security administration proceedings and was further provided with a signed authorization to obtain any records that it believed were relevant to the plaintiff’s claim. 101. The contrary statement and exclusion of these items from consideration in RSL’s April 21, 2016 denial of the plaintiff’s administrative appeal is proof that the plan administrator did not provide a review that took into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination, in violation of 29 C.F.R. §2560.503-1(h)(2)(ii)-(iv). Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 23 of 24 PageID: 2818 102. Plaintiff wrote to the Court on September 28, 2016 to request that the case be reopened to address the refusal to pay benefits beyond May 28, 2008 and to address whether RSL complied with the December 22, 2011 Order regarding the manner in which it handled the plaintiff’s claim on remand. [Document 197]. Respectfully submitted, KELLY LAW OFFICES, LLC Attorneys for Plaintiff/Movant By: Thomas P. Kelly III Dated: April 21, 2017 Case 2:09-cv-02478-KSH-CLW Document 211-2 Filed 04/21/17 Page 24 of 24 PageID: 2819 KELLY LAW OFFICES, LLC 3000 ATRIUM WAY - SUITE 291 MOUNT LAUREL, NEW JERSEY 08054 (609) 261-6100 (Phone) (609) 261-6105 (Fax) Attorneys for Thomas P. Kelly Jr., Plaintiff UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY THOMAS P. KELLY Jr., : : Plaintiff : : v. : : RELIANCE STANDARD : Civil Action No. 2:09-cv-02478 LIFE INSURANCE COMPANY, : (KSH-PS) : and, : : Motion Date: May 15, 2017 THE PENN MUTUAL : LIFE INSURANCE COMPANY, : : Defendants : PLAINTIFF’S NOTICE OF MOTION FOR SUMMARY JUDGMENT Dated: December 2, 2014 Thomas P. Kelly Case 2:09-cv-02478-KSH-CLW Document 211-3 Filed 04/21/17 Page 1 of 1 PageID: 2820