High v. E-Systems Inc.

• Decision Date: 03 August 2006
• Docket Number: No. 05-10637.,05-10637.
• Court: U.S. Court of Appeals — Fifth Circuit
• Parties: Henry Thomas HIGH, Plaintiff-Appellant, v. E-SYSTEMS INC., Long Term Disability Income and Death Benefit Plan, Raytheon Employees Disability Trust and Metropolitan Life Insurance Company, Defendants-Appellees.

Page 573

459 F.3d 573

Henry Thomas HIGH, Plaintiff-Appellant, v. E-SYSTEMS INC., Long Term Disability Income and Death Benefit Plan, Raytheon Employees Disability Trust and Metropolitan Life Insurance Company, Defendants-Appellees.

No. 05-10637.

United States Court of Appeals, Fifth Circuit.

August 3, 2006.

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John Steven Dwyre (argued), John Dwyre & Associates, San Antonio, TX, for Plaintiff-Appellant.

John Bruce Shely, Mary Katherine Strahan (argued), Andrews & Kurth, Houston, TX, for Defendants-Appellees.

Appeal from the United States District Court for the Northern District of Texas.

Before SMITH and STEWART, Circuit Judges, and CRANE, District Judge.^*

CARL E. STEWART, Circuit Judge:

Plaintiff-Appellant Henry Thomas High ("High") appeals the district court's grant of summary judgment. High, an employee of E-Systems and a participant in the E-Systems Benefit Plan, later managed by MetLife, initiated this proceeding in the district court, alleging that when Met-Life became the plan's claims administrator in 1998, it improperly began reducing his monthly plan disability payments by the amount of Veterans Administration ("VA") benefits he was receiving. The district court disagreed, granting summary judgment in favor of E-Systems after finding that MetLife did not abuse its discretion or act arbitrarily or capriciously in modifying High's disability benefits payments. Because the record suggests that (1) the district court did not err in granting summary judgment to E-Systems and determining that MetLife did not abuse its discretion when it offset High's monthly disability benefits by his VA benefits; and (2) High does not meet the requisite elements to support this court finding that the doctrine of ERISA-estoppel or waiver applies, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

This case involves an employee welfare benefit plan governed by ERISA. High was hired by E-Systems in September of 1982. He had been receiving monthly VA benefits prior to being hired and he continued to receive these VA benefits throughout his employment; this fact was fully disclosed to E-Systems. Through his employer, High elected to contribute to the E-Systems Plan in case he were no longer able to work due to a permanent disability.

On July 1, 1998, the E-Systems Plan, merged into the Raytheon Company Long Term Disability Benefits Plan ("Raytheon Plan"); Raytheon Company is the plan administrator, but the E-Systems Plan still governs the terms of High's monthly benefits under the Raytheon Plan. All benefits payable under the E-Systems Plan are funded exclusively by employee contributions. MetLife provides claims administrative services to the plans and the plans grant MetLife broad authority to construe plan terms.

In 1992, High became unable to work and began receiving long-term disability payments under the E-Systems Plan without offset for his VA benefits. These monthly disability payments under the E-Systems Plan continued until 1998 when MetLife became the new claims administrator. At that time, after an extensive investigation, MetLife notified High that his benefits would be offset by his VA benefits, determining that even though the policy did not specifically include VA benefits as a source for offset, it was suggested by the language of the E-Systems Plan. High then appealed this decision to Raytheon Company; it agreed that the VA benefits should be offset. High appealed again, and again his request to reinstate the original amount of his disability benefits was denied. Accordingly, High's disability payments were reduced from just over $1,200 per month to $50 per month, beginning in September of 1998.

As a result, High filed suit in Texas state court on September 27, 2004, complaining that when MetLife became the plan's claims administrator in 1998, it improperly began reducing his monthly plan disability payments by the amount of the monthly VA benefits he was receiving. He sought past and future benefits. The case was removed to federal court because it involves an ERISA plan and is, therefore, governed by federal law.

On March 27, 2004, E-Systems moved for summary judgment asserting that the plan administrator was granted discretion to make benefit decisions under the plans and that the decision to reduce High's payments per his VA benefits was not arbitrary or capricious. High responded that the adverse decision was an abuse of discretion because it contradicted the plain language of the E-Systems Plan. Agreeing with E-Systems, the court granted its motion for summary judgment holding that the claims administrator had discretion to make an adverse benefit determination. It entered judgment against High on February 8, 2005. Thereafter, High filed a motion to alter or amend the judgment; the court denied his motion and High appealed.

DISCUSSION

A. Whether the District Court Erred in Granting Summary Judgment

1. Standard of Review

The standard of review for a district court's grant of summary judgment is de novo. Facility Ins. Corp. v. Employers Ins. of Wausau, 357 F.3d 508, 512 (5th Cir.2004) (citing Gowesky v. Singing River Hosp. Sys., 321 F.3d 503, 507 (5th Cir. 2003)). Summary judgment is only appropriate if the evidence shows that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Id.; Fed. R.Civ.P. 56(c)LQ. When, as here, the language of the plan grants discretion to an administrator to interpret the plan and determine eligibility for benefits, a court will reverse an administrator's decision only for abuse of discretion. Meditrust Fin. Servs. Corp. v. Sterling Chems., Inc., 168 F.3d 211, 213 (5th Cir.1999). In the summary judgment context, to avoid reversal, the ERISA administrator's decision must be supported by substantial evidence in the administrative record. Ellis v. Liberty Life Assurance Co., 394 F.3d 262, 273 (5th Cir.2004). Substantial evidence is that which a reasonable mind might.accept as sufficient to support a conclusion. Id.

2. Analysis

One of the underlying principles of ERISA is to ensure that employee benefits are given as promised and as expected. Lockheed Corp. v. Spink, 517 U.S. 882 887, 116 S.Ct. 1783, 135 L.Ed.2d 153 (1996). Therefore, ERISA has specific provisions regarding decisions that may affect these expectations. For example, an adverse benefit determination is "any of the following: a denial, reduction, or termination of, or a failure to provide or make payment (in whole or part) for, a benefit." 29 C.F.R. 2560.503-1(m)(4) (2004). "In the case of a claim for disability benefits, the plan administrator shall notify the claimant ... 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." 29 C.F.R. 2560.503-1(f)(3) (2006).¹

On the other hand, even though Congress strictly guards ERISA plans, where an ERISA plan gives an administrator discretionary authority to determine eligibility for benefits and to construe terms, courts may not reverse the administrator's benefits determinations absent an abuse of discretion. Meditrust, 168 F.3d at 213. The E-Systems Plan provides discretionary authority to the plan administrator, as does the subsequent Raytheon Plan. Accordingly, we may apply a two-step analysis to determine whether the administrator in this case abused its discretion, first determining whether the administrator's decision was legally sound and, if it is not, determining whether the decision was an abuse of discretion in any event. Duhon v. Texaco, 15 F.3d 1302, 1307 n. 3 (5th Cir.1994).² This court, however, is not confined to this test; we may skip the first step if we can determine the decision was not an abuse of discretion. Id.; see MacLachlan v. ExxonMobil Corp., 350 F.3d 472, 481 (5th Cir.2003); Sweatman v. Commercial Union Ins. Co., 39 F.3d 594, 602-03 (5th Cir.2003) (concluding that an ERISA administrator's determination was not an abuse of discretion and affirming judgment on that basis without considering whether the administrator's determination was legally correct). Accordingly, in assessing whether MetLife abused its discretion in applying the offset, our analysis bypasses whether MetLife's determination was legally correct, as the record reflects that it has not abused its discretion.

High asserts that the six year gap during which he received both VA benefits and benefits under the E-Systems plan was an unreasonable amount of time for E-Systems to delay adjusting his entitlements. The time lapse that occurred in this case, however, is only one variable in the equation that we consider; thus the regulations, referred to by High and cited above, delineating a "reasonable time" are not instructive. This situation is not one where MetLife knew about the improper disability benefits and then, six years later, applied an offset provision; this is a situation where once MetLife took over as claims administrator, it reviewed the policy provisions and disability payments it would be making, immediately found a discrepancy in High's disability payments, conducted a thorough investigation, contacted the former plan administrator for an opinion, considered whether other participants in the E-Systems Plan had their benefits offset under the provision, allowed High to appeal (twice) its decision to offset VA benefits, and then made an ultimate determination to (a) offset VA benefits and (b) not attempt to collect retroactively the benefits inadvertently paid from 1992-1998. We hold that this scenario constitutes careful deliberation on MetLife and E-Systems's part and does not evidence arbitrary or capricious decision-making. The record reflects that there is a "rational connection between the known facts and the [ultimate] decision." Meditrust, 168 F.3d at 215. Thus, MetLife's determination was reasonable.

On appeal, High cites to Barnett v. Aetna Life Insurance Co.,...