Foster v. Sedgwick Claims Mgmt. Servs., Inc.

• Citation: 842 F.3d 721
• Decision Date: 29 November 2016
• Docket Number: No. 15-7150,15-7150
• Parties: Kelly Foster, Appellant v. Sedgwick Claims Management Services, Inc., and Sun Trust Bank Short And Long Term Disability Plans, Appellees
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

842 F.3d 721

Kelly Foster, Appellant

v.Sedgwick Claims Management Services, Inc., and Sun Trust Bank Short And Long Term Disability Plans, Appellees

No. 15-7150

United States Court of Appeals, District of Columbia Circuit.

Argued September 19, 2016

Decided November 29, 2016

Denise M. Clark argued the cause and filed the briefs for Appellant.

Gregory L. Arbogast argued the cause for Appellees. With him on the brief was James T. Heidelbach, Baltimore, MD.

Before: Rogers and Tatel, Circuit Judges, and Edwards, Senior Circuit Judge.

Edwards, Senior Circuit Judge:

This appeal raises two issues regarding the reach and application of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. , with respect to private benefit plans. The first issue concerns the definition of "payroll practices" that are exempt from ERISA. The second addresses whether terms of the ERISA plan at issue in this case grant discretion to the plan administrator sufficient to warrant deferential review of the administrator's benefit determinations.

In July 2014, Appellant, Kelly Foster, sued Sedgwick Claims Management Services, Inc. ("Sedgwick") and Sun Trust Bank Short and Long Term Disability Plans (together "Appellees") under ERISA, 29 U.S.C. § 1132(a), to enforce her rights under short-term and long-term disability benefit plans that had been adopted by her employer, Sun Trust Bank ("SunTrust"). The District Court found that the short-term plan was a "payroll practice" exempted from ERISA's ambit by a Department of Labor regulation. Appellant initially conceded this point. Foster v. Sedgwick Claims Mgmt. Servs., Inc. , 125 F.Supp.3d 200, 205 (D.D.C. 2015). Because Appellant's sole cause of action with respect to the short-term plan rested on ERISA, the District Court rejected Appellant's claim. The District Court additionally found that the long-term plan gave Sedgwick, the plan administrator, sole discretion to "evaluate" an employee's medical evidence and "determine" if the employee's condition meets the plan's definition of disability. Id. at 206–07. The District Court accordingly applied a deferential standard of review to Sedgwick's denial of long-term disability benefits sought by Appellant and concluded that the administrator had neither abused its discretion nor acted arbitrarily or capriciously in assessing Appellant's claim for benefits. Id. at 206–11. The District Court granted summary judgment to Appellees and dismissed Appellant's complaint. Id. at 211.

Appellant filed a motion for reconsideration. She admitted she had conceded that the short-term disability plan was exempt from ERISA during summary judgment, but argued that the District Court's embrace of this position constituted an error of law. The District Court rejected Appellant's attempt to raise a new legal theory in a motion for reconsideration when the same claim could have been asserted during summary judgment. The District Court denied the motion for reconsideration. Foster v. Sedgwick Claims Mgmt. Servs., Inc. , 159 F.Supp.3d 11, 13–16 (D.D.C. 2015).

We affirm the District Court at each turn. First, we affirm the District Court's finding that the short-term disability plan is an ERISA-exempt "payroll practice" under Department of Labor regulations. Second, we hold that the District Court appropriately applied a deferential standard of review to the administrator's denial of benefits under the long-term disability plan because the terms of the plan unambiguously grant the administrator, and the administrator alone, the power to construe critical terms of the plan and to decide an employee's eligibility for benefits. Finally, we hold that the District Court did not abuse its discretion in denying Appellant's motion for reconsideration.

I. BACKGROUND

A. Statutory and Regulatory Background

Congress enacted ERISA to "promote the interests of employees and their beneficiaries in employee benefit plans and to protect contractually defined benefits." Firestone Tire & Rubber Co. v. Bruch , 489 U.S. 101, 113, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989) (citations and internal quotation marks omitted). It found that employee benefit plans "affect[ ] the stability of employment and the successful development of industrial relations ... [and are] an important factor in commerce because of the interstate character of their activities." 29 U.S.C. § 1001(a). Under ERISA, a benefit plan participant may sue "to recover benefits due to him under the terms of his plan, [or] to enforce his rights under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B). Overall, ERISA represents a " ‘careful balancing’ between ensuring fair and prompt enforcement of rights under a plan" and encouraging the creation of such plans. Conkright v. Frommert , 559 U.S. 506, 517, 130 S.Ct. 1640, 176 L.Ed.2d 469 (2010) (citation and internal quotation marks omitted).

Under 29 U.S.C. § 1135, the Secretary of Labor is authorized to prescribe regulations deemed necessary or appropriate to carry out the provisions of ERISA. Pursuant to this authority, Department of Labor regulations exempt certain "payroll practices" from ERISA's ambit. An exempt payroll practice includes "[p]ayment of an employee's normal compensation, out of the employer's general assets, on account of periods of time during which the employee is physically or mentally unable to perform his or her duties, or is otherwise absent for medical reasons." 29 C.F.R. § 2510.3–1(b)(2).

B. Factual and Procedural Background

We review de novo the District Court's order granting summary judgment. See Lopez v. Council on Am.–Islamic Relations Action Network, Inc. , 826 F.3d 492, 496 (D.C. Cir. 2016). In doing so, we view the evidence and draw all reasonable inferences in favor of the non-moving party. See id. The material facts in this case, which are undisputed, are summarized below.

SunTrust provides its employees with both short-term and long-term disability benefit plans. Appellee Sedgwick administers both plans on behalf of SunTrust. According to SunTrust's Health and Welfare Benefits Handbook ("Benefits Handbook"), Joint Appendix ("JA") 19–36, 45–59, SunTrust's short-term disability plan "provides benefits if an eligible employee is unable to work because of an approved disability." Id. at 25. Benefits are paid from SunTrust's "general assets." Id. "Full-time employees receive a combination of [short-term] benefits paid at 100% and 60% of base pay for their first illness/injury occurrence in each calendar year." Short–Term Disability Summary, JA 38. Employees are deemed to have an approved disability if they are "not able, solely because of disease or injury to perform the material duties of their own occupation." Id. at 39. Employees' claims for short-term disability must be supported by "objective medical documentation." Id. The claims administrator determines whether employee claimants meet the definition of "disability" and whether their medical documentation is sufficient to support a claim for benefits. Id. at 38.

SunTrust's long-term disability plan, which is part of a larger Employee Benefit Plan and funded through a trust, "provides financial assistance to eligible employees who are totally unable to work, as determined by the claims administrator, due to an illness or injury after 180 days." Benefits Handbook, JA 46. The long-term plan uses substantially the same definition of disability as the short-term plan, but requires an employee to be "totally disabled as determined by the claims administrator" for 180 days. Id. To make this determination, the "claims administrator will evaluate the medical documentation submitted on [the employee's] behalf and determine if [his/her] condition meets the Plan's definition of Total Disability." Id. at 48. Sedgwick approves a claim for long-term disability benefits "[o]nce satisfactory proof that [the employee] ha[s] been Totally Disabled for 180 calendar days has been provided to the claims administrator." Id. at 56. If Sedgwick denies a claim, it must give the specific reason for denial and the "specific Plan or policy provisions on which the denial is based." Id. Employees have a right to appeal Sedgwick's initial denial of a claim to a different decision-maker at Sedgwick, who makes a final decision. See id. at 56–57.

SunTrust employed Appellant Kelly Foster as a Mortgage Loan Closer until September 2012. In January and August 2012, Appellant submitted claims for short-term disability benefits for missing work due to a variety of ailments. Sedgwick denied her claims, citing Appellant's failure to provide sufficient "objective medical documentation" in support of her claims. SunTrust terminated Appellant on September 25, 2012, because of her absences from work. Appellant appealed Sedgwick's denial of her short-term disability benefits claim. Sedgwick upheld its denial on March 29, 2013. In October 2013, Appellant submitted a claim for long-term disability benefits. Sedgwick denied this claim, as well, and Appellant appealed again. Sedgwick upheld this denial on January 27, 2014.

In July 2014, Appellant sued Appellees under ERISA, 29 U.S.C. § 1132(a), to enforce her rights under both the short-term and long-term disability benefit plans. Appellees moved for summary judgment. Appellees argued, and Appellant conceded, that the short-term disability plan was an ERISA-exempt payroll practice and thus Appellant could not seek review of her denial under ERISA. The District Court independently found that since the short-term disability plan was paid from SunTrust's general assets and was "entirely separate" from the Employee Benefits Plan, it was "properly characterized as a payroll practice" and exempt from ERISA. Foster , 125 F.Supp.3d at 205. Since Appellant's "Complaint expressly invoke[d] ERISA alone," id. the District Court had no alternative cause of action to adjudicate, and it granted Appellees summary judgment as to the short-term disability plan, see id. at 205–06.

As to the long-term...