White v. Jacobs Engineering Group Long Term Disability Ben. Plan

• Decision Date: 14 February 1990
• Docket Number: No. 88-6485,88-6485
• Citation: 896 F.2d 344
• Parties: 11 Employee Benefits Ca 1961 Cecil WHITE, Plaintiff-Appellant, v. JACOBS ENGINEERING GROUP LONG TERM DISABILITY BENEFIT PLAN, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 344

896 F.2d 344

11 Employee Benefits Ca 1961

Cecil WHITE, Plaintiff-Appellant, v. JACOBS ENGINEERING GROUP LONG TERM DISABILITY BENEFIT PLAN, et al., Defendants-Appellees.

No. 88-6485.

United States Court of Appeals Ninth Circuit.

Argued and Submitted May 3, 1989.

Decided Oct. 6, 1989.

As Amended on Grant of Rehearing

Feb. 14, 1990.

Ronald Dean, Pacific Palisades, Cal., for plaintiff-appellant.

David L. Bacon, Adams, Duque & Hazeltine, Los Angeles, Cal., for defendants-appellees.

Appeal from the United States District Court for the Central District of California.

Before FLETCHER, NELSON and NORRIS, Circuit Judges.

NELSON, Circuit Judge:

Overview

Defendant Jacobs Engineering Group Long Term Disability Plan ceased paying benefits to Plaintiff-Appellant White after notifying him that he was no longer entitled to them because he did not meet the plan's definition of total disability. White sued defendants to recover benefits allegedly due to him and for reinstatement of benefit payments. The district court granted summary judgment to the defendants on the ground that White failed to exhaust his administrative remedies by filing a written appeal within 60 days after receiving notice of denial of benefits. It also granted summary judgment to the defendants on their counterclaim for benefits paid while White allegedly was not totally disabled. White argues that the Plan does not establish a 60-day limit on the appeal period because the appeal period is mentioned only in the Summary Plan Description and in letters sent to recipients terminating benefits; that even if there is a 60-day time bar, the benefit termination letters to White did not trigger it because they failed adequately to notify White of the specific reasons for termination, as required by ERISA and Department of Labor (DOL) regulations; and that the defendants were not entitled to recover on their counterclaim because they failed to submit any evidence supporting the amount claimed. We find that although the Plan establishes a 60-day time bar, it was not triggered by the inadequate termination notice. Therefore, appellant did not exhaust his administrative remedies, and jurisdiction in the district court was improperly granted. We reverse both grants of summary judgment and remand to the district court with instructions to remand to the plan appeals board for a determination on the merits.

Factual and Procedural Background

Appellant is a former employee of Jacobs Engineering and was, until the events that gave rise to this action, a participant of Jacobs Engineering Group Long Term Disability Benefit Plan, which is governed by ERISA. The plan was administered by an outside firm named Self Insurance Programs, Inc. (SIP), later called Adjustco.

In October, 1980, appellant filed a claim for long term disability benefits because of a heart condition. His claim, after an initial denial, was approved, and the plan paid benefits to appellant retroactively to December, 1980. In May, 1983, the Plan withheld benefits pending a medical update and proof of continued receipt of social security benefits. In July, 1983 appellant provided this information and the plan reinstated his benefits. In December, 1983, Adjustco wrote to appellant requesting another copy of his Social Security check. Appellant did not respond, and Adjustco wrote to him again in January, 1984 requesting information. At this time, Adjustco retained an investigatory agency, Equifax, to locate appellant and determine whether he continued to qualify for disability benefits. On February 3, 1984, Adjustco wrote to White saying that it had "information about [his] activities as they relate to possible gainful employment," that it had decided to withhold benefits pending the outcome of an investigation, and that "any information [he wished] to provide concerning [his] activities over the past few years" was welcome. The letter did not relate any of the specific information Equifax had obtained. On February 7, 1984, appellant telephoned Adjustco in response to its letter and the cessation of benefits payments to ask what information Adjustco wanted. Appellant denied that he had been gainfully employed, that he owned a working farm, and that he was involved in oil leasing. The Adjustco representative told appellant to send everything he had regarding clarification.

In June, 1984, Adjustco wrote a letter to Jacobs Engineering summarizing its conclusions based on Equifax's investigation of appellant. The letter stated in part: "There are indications of his employment in running a gas station/store, oil leasing and farming/cattle raising. Of special significance is the indication that his income in 1981 was in excess of $63,000.00." On July 20, 1984, five months after ceasing to pay him benefits, Adjustco wrote to appellant, stating that "information in [its] file" indicated that appellant was engaged in gainful employment and that it had concluded that he was not entitled to benefits. Again, the letter failed to refer to the specific activities Adjustco believed appellant had engaged in or to specific evidence on which Adjustco relied. The letter stated that Adjustco was denying further benefits and stated that it had overpaid benefits at least in the amount of $11,568, the amount it had paid during 1981. Receiving no response, Adjustco wrote to White again on October 22, 1984. Adjustco wrote another letter to White dated March 20, 1985, which he received on April 1, 1985. The letter enclosed copies of the previous letters and informed White that he had 60 days to appeal.

White did not file a written appeal within 60 days, but attempted to find a lawyer. On June 28, 1985--twenty-nine days late--an appeal was filed. Jacobs Engineering replied several weeks later, stating that the appeal would not be considered because it was 29 days late, and again requesting that White pay the benefit plan $11,568. White filed suit in 1987.

Discussion

I. Sixty-day time bar on filing an appeal

The DOL regulations authorize "[a] plan [to] establish a limited period within which a claimant must file any request for review of a denied claim." 29 C.F.R. Sec. 2560.503-1(g)(3). The summary plan description given to Jacobs Engineering employees and the termination letter sent to appellant state that plan participants have 60 days from the date of receiving notice of an adverse decision to appeal. Appellant appealed 89 days after receiving notice of benefits termination. Appellant argues that his claim is not time-barred because the plan itself does not establish a 60-day appeal period. Appellant does not argue that he was unaware that the termination letters and summary plan description mentioned a 60-day limit; nor does he argue that he knew or relied on the fact that the document to which he refers as the plan, which was not distributed to employees, does not limit the period of appeal. Rather, he contends that the plan itself does not contain a provision limiting the appeal period, that the summary plan description misconstrues the plan document by adding the limitation, and that his claim therefore is not time-barred.

Appellant relies on language in ERISA and the DOL regulations mandating that the summary plan description describe the plan's provisions accurately. ERISA requires that the summary plan description "be sufficiently accurate and comprehensive to reasonably apprise ... participants and beneficiaries of their rights and obligations under the plan." 29 U.S.C. Sec. 1022(a)(1). The DOL regulations interpreting this statutory provision state that the "summary plan description must accurately reflect the contents of the plan." 29 C.F.R. Sec. 2520.102-3. If the summary plan description must reflect the contents of the plan accurately, appellant's logic goes, the summary cannot add new provisions.

Appellees, on the other hand, argue that the "plan" consists of a series of documents that includes the summary plan description. Therefore, they argue, the 60-day limitation in the summary is part of the plan and may be imposed on appellant.

Appellant's argument that the regulations allow the summary plan description only to describe and not to supplement the plan fails. As both parties neglected to note, the DOL regulations explicitly recognize that a summary plan description may include a modification of the plan terms; indeed, the regulations excuse separate filing of the modification when the modification is "[i]ncorporated in a summary plan description or supplement" properly filed with the Secretary of Labor. 29 C.F.R. Sec. 2520.104a-4(b)(2)(i). Therefore, the inclusion in the summary plan description of a new plan term that otherwise meets the filing and disclosure requirements for modifications of ERISA plans does not violate the statutory and regulatory provisions mentioned above requiring summary plan descriptions to be accurate. This accords with the legislative history of 29 U.S.C. Sec. 1022(a)(1), which reveals that the legislators were concerned with the problem of employee reliance on summary plan descriptions that omit or mischaracterize plan terms when they drafted the accuracy requirement. See, e.g., H.Rep. No. 93-533, 93rd Cong., 2d Sess. 3, reprinted in 1974 U.S.Code Cong. & Admin.News 4639, 4646. ¹ The legislators did not express concern over the "problem" of using the summary plan description as a vehicle by which to notify participants fully and accurately of new plan provisions.

Thus, a provision in the summary plan description can establish a new plan term if it meets all the statutory, regulatory, and plan requirements for modifying the plan. The provision in the summary contested in this case, the 60-day appeal period, meets all the statutory and regulatory requirements for modification. ERISA requires that the plan administrator file modifications with the Secretary of the Department of Labor. 29 U.S.C. Sec. 1021(b)(3). "Any material modification in the terms of the...