Rhorer v. Raytheon Engineers & Constructors

• Decision Date: 15 July 1999
• Docket Number: No. 98-20347,98-20347
• Parties: (5th Cir. 1999) SUSAN RHORER, Individually as Independent Executrix of the Estate of James E. Rhorer, as Trustee of the Trusts created under the Last Will of James E. Rhorer, and on behalf of Raytheon Engineers & Constructors, Inc. Basic Life, Optional Life, Accidental Death and Dependent Life Insurance Plan, Plaintiff-Appellant, v. RAYTHEON ENGINEERS AND CONSTRUCTORS, INC., Basic Life, Optional Life, Accidental Death and Dismemberment, and Dependent Life Insurance Plan; RAYTHEON ENGINEERS & CONSTRUCTORS, INC., Defendants-Appellees
• Court: U.S. Court of Appeals — Fifth Circuit

Page 634

181 F.3d 634 (5th Cir. 1999)

SUSAN RHORER, Individually as Independent Executrix of the Estate of James E. Rhorer, as Trustee of the Trusts created under the Last Will of James E. Rhorer, and on behalf of Raytheon Engineers & Constructors, Inc. Basic Life, Optional Life, Accidental Death and Dependent Life Insurance Plan, Plaintiff-Appellant, v. RAYTHEON ENGINEERS AND CONSTRUCTORS, INC., Basic Life, Optional Life, Accidental Death and Dismemberment, and Dependent Life Insurance Plan; RAYTHEON ENGINEERS & CONSTRUCTORS, INC., Defendants-Appellees.

No. 98-20347

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

July 15, 1999

[Copyrighted Material Omitted] Appeal from the United States District Court for the Southern District of Texas

Before HIGGINBOTHAM, DUHE, and DeMOSS, Circuit Judges.

DeMOSS, Circuit Judge:

The plaintiff-appellant, Susan Rhorer ("Rhorer"), appeals the summary judgment dismissal of her suit to recover life insurance benefits under an employee benefits plan governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. 1001 et seq. Rhorer initially filed a claim for benefits with the plan administrator, defendant-appellee, Raytheon Engineers & Constructors ("Raytheon"). Raytheon denied the claim on the ground that her deceased husband had not satisfied a requirement in the policy that required Mr. Rhorer to be actively at work on a full time basis ("the active work requirement"). The main issue in this appeal is whether the district court properly found that there was no triable issue of fact on the question of whether Raytheon abused its discretion in denying her claim. For the following reasons we affirm the district court in part, reverse in part, and remand for further proceedings.

I.

Rhorer's late husband, James E. Rhorer ("Mr. Rhorer"), was the president of Litwin Corporation, an engineering firm, from 1978 until 1995. In May 1995 he was diagnosed with high grade lymphoma and in early July began to work from his home and hospital room. ¹ On July 26, Raytheon purchased Litwin and agreed to retain Mr. Rhorer as a full-time employee at the same title and salary. At the time of the purchase, Raytheon knew of Mr. Rhorer's illness and was aware that he was no longer working from his office.

After purchasing Litwin, Raytheon sent its employees enrollment materials for participation in Raytheon's employee benefits plan. Those materials contained a summary plan description, called Blueprints, but did not include a copy of the plan's group life insurance policy. In August 1995, Mr. Rhorer reviewed those materials, elected $990,000 in optional life insurance coverage, to take effect on September 1, 1995, and began paying the required premiums. ² On November 21, 1995, Raytheon notified Mr. Rhorer by letter that his optional life insurance election would not take effect until he actively returned to work. By that time, Mr. Rhorer was physically unable to return to work. He died on December 1, 1995.

After the death of her husband, Rhorer filed a claim for $990,000 in benefits based on the optional life insurance policy Mr. Rhorer had elected under the plan. Raytheon denied her claim on the ground that Mr. Rhorer had not complied with the active work requirement contained in the insurance policy. That condition of coverage required that participating employees "be actively at work on full time at the business establishment of the Employer or at other locations to which the Employer's business requires the Employee to travel." Rhorer then filed an administrative appeal, which was denied.

On February 4, 1997, Rhorer, as executrix of her husband's estate, sued Raytheon in federal district court seeking to recover the proceeds from her husband's optional life insurance policy. Rhorer, on behalf of the plan, also asserted a claim against Raytheon for breach of its fiduciary duty under ERISA. See 29 U.S.C. 1132(a)(2) & 1109.³ Both claims rested on the contention that the summary plan description failed to adequately disclose the active work requirement, in violation of ERISA and the applicable administrative regulations. Rhorer subsequently moved for partial summary judgment on her benefits claim. Raytheon responded and filed a cross-motion for summary judgment against all of Rhorer's claims. In a memorandum opinion the district court denied Rhorer's partial summary judgment motion, granted Raytheon's motion, and dismissed Rhorer's suit in its entirety. Rhorer appeals. ⁴

II.

We review a district court's grant of summary judgment de novo. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Todd v. AIG Life Ins. Co., 47 F.3d 1448, 1451 (5th Cir. 1995). Summary judgment is appropriate if the record discloses "that there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). In making this determination we must evaluate the facts in the light most favorable to the non-moving party. Matsushita, 475 U.S. at 587; Todd, 47 F.3d at 1451.

III.

A.

The first issue we must consider is the applicable standard for reviewing Raytheon's denial of Rhorer's claim for life insurance benefits. Rhorer asserts that de novo review is the proper standard because this action presents the legal question of whether the summary plan description was sufficiently accurate under ERISA. See Penn v. Howe-Baker Eng'rs, Inc., 898 F.2d 1096, 1100 & n.3 (5th Cir. 1990). When presented with this argument, the district court found that Rhorer's suit was more properly viewed as a challenge to Raytheon's interpretation of the plan's terms. The district court thus held that under Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), Raytheon's decision was governed instead by the abuse of discretion standard.

Rhorer's first amended complaint alleges two separate causes of action under the ERISA statute. In count one Rhorer sues under 1132(a)(1)(B) of ERISA to recover the insurance benefits allegedly owed to her under the plan.⁵ See 29 U.S.C. 1132(a)(1)(B). In count two she asserts a claim under 1132(a)(2), alleging that Raytheon violated its fiduciary duty as plan administrator by publishing a misleading and incomplete summary plan description. ⁶ See 29 U.S.C. 1132(a)(2). We note the distinction between these two claims because each claim, as alleged, requires a different standard of review. Rhorer's claim to recover plan benefits under 1132(a)(1)(B) is a direct challenge to Raytheon's interpretation of the plan's terms. Accordingly, since the plan expressly vests Raytheon with the discretionary authority to construe its terms, under Firestone the applicable standard is whether Raytheon abused its discretion. See Firestone, 489 U.S. at 111-12. In contrast, Rhorer's claim under 1132(a)(2), that Raytheon breached its fiduciary duty, turns on whether the summary plan description complies with ERISA's disclosure requirements. That claim is thus premised on a legal question which we review de novo. Having clarified the appropriate standards of review, we now proceed to the merits of this action. We begin with Rhorer's breach of fiduciary duty claim.

B.

Rhorer argues that Raytheon violated its fiduciary duty as plan administrator by issuing a summary plan description that violates ERISA's disclosure requirements. See 29 U.S.C. 1022(a) ("The summary plan description . . . shall be written in a manner calculated to be understood by the average plan participant, and shall be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan."). Specifically, Rhorer contends that the summary plan description is faulty because it fails to inform plan participants that optional life insurance is restricted by the active work requirement. Her claim is unsustainable in light of the Supreme Court's decision in Varity Corp. v. Howe, 516 U.S. 489 (1996).

In Varity the Supreme Court observed that an ERISA plaintiff may bring a private action for breach of fiduciary duty only when no other remedy is available under 29 U.S.C. 1132. Varity, 516 U.S. at 1077-79; Tolson v. Avondale Indus., Inc., 141 F.3d 604, 610 (5th Cir. 1998). Here, in addition to seeking damages on her claim for breach of fiduciary duty, Rhorer is seeking to recover plan benefits under 1132(a)(1)(B). Indeed, it is readily apparent from Rhorer's complaint that her claim to recover plan benefits is the predominate cause of action in this suit. Accordingly, because 1132(a)(1)(B) affords Rhorer an avenue for legal redress, she may not simultaneously maintain her claim for breach of fiduciary duty. See Tolson, 141 F.3d at 610-11. The district court was correct in dismissing this claim.

C.

The central issue in this appeal is whether the district court properly granted summary judgment on Rhorer's claim to recover plan benefits. To resolve that issue we must review the record to determine whether there is a triable issue of fact as to whether Raytheon abused its discretion in denying Rhorer's claim for insurance benefits.

In this Circuit courts generally employ a two-step analysis for determining whether a plan administrator abused its discretion in denying a participant plan benefits. Spacek v. Maritime Assoc., I L A Pension Plan, 134 F.3d 283, 292-93 (5th Cir. 1998) (citing Wildbur v. Arco Chem. Co., 974 F.2d 631, 637 (5th Cir. 1992)). A court first determines the legally correct interpretation of the plan, and whether the administrator's interpretation accords with the proper legal interpretation. Spacek, 134 F.3d at 292. If the administrator's construction is legally sound, then no abuse of discretion occurred and the inquiry ends. Id. But if the court concludes that the administrator has not given the plan the legally correct interpretation, the court must then determine whether the administrator's interpretation constitutes an abuse of discretion. Id. at 293.

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