Gutta v. Standard Select Trust Ins. Plans

• Citation: 530 F.3d 614
• Decision Date: 26 June 2008
• Docket Number: No. 06-3708.,06-3708.
• Parties: Gandhi GUTTA, Plaintiff-Appellant, v. STANDARD SELECT TRUST INSURANCE PLANS, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

530 F.3d 614

Gandhi GUTTA, Plaintiff-Appellant, v. STANDARD SELECT TRUST INSURANCE PLANS, Defendants-Appellees.

No. 06-3708.

United States Court of Appeals, Seventh Circuit.

Argued September 11, 2007.

Decided June 26, 2008.

Mark D. DeBofsky (argued), Daley, Debofsky & Bryant, Chicago, IL, for Plaintiff-Appellant.

W. Sebastian von Schleicher (argued), Michael J. Smith, Smith, von Schleicher & Associates, Chicago, IL, for Defendants-Appellees.

Before RIPPLE, MANION, and WOOD, Circuit Judges.

WOOD, Circuit Judge.

Dr. Gandhi Gutta, a laparoscopic surgeon, suffers from a variety of physical ailments. In August of 2000, he came to the conclusion that he could no longer work in his chosen profession and filed for disability benefits under a group policy with Standard Select Trust Insurance Plans (Standard). Gutta received disability benefits from Standard for two years. At that point, in order to be eligible for continuing benefits under the plan, he had to show not just that he was unable to perform his own occupation, but that he was unable to perform any gainful occupation for which he is suited by education and experience. Standard continued to pay benefits to Gutta for a third year while it investigated his eligibility under the latter, more stringent, criterion. It ultimately decided that Gutta was ineligible for continuing benefits because he was capable of working as a Medical Director.

After exhausting his administrative appeals, Gutta filed suit in district court and moved for summary judgment. He first argued for a favorable standard of review, claiming that the policy does not grant the plan administrators enough discretion to warrant deferential review, and so he was entitled to the de novo standard. He further claimed that even using the more deferential "arbitrary and capricious" standard, the Plan's determination was unreasonable, and therefore arbitrary and capricious.

Standard likewise moved for summary judgment on Gutta's claim; it also filed a counterclaim for restitution of $73,996.75, nearly all the disability benefits that it had paid to Gutta. Standard took the position that Gutta had not been entitled to that sum, because its policy contains an offset provision for benefits received from other group insurance plans. Gutta acknowledged receiving benefits from another plan, but he claimed that it was not a group plan and therefore was not subject to the offset provision.

Finally, Gutta also asked the district court to enforce what he claimed to be a binding settlement agreement, but the court declined to do so, finding that the parties did not reach a meeting of the minds. The court granted summary judgment in Standard's favor on Gutta's claim as well as on Standard's counterclaim, and Gutta now appeals both adverse decisions.

I

We provide here the facts pertinent to the questions whether the district court was correct to apply the deferential "arbitrary and capricious" standard of review to Standard's decisions and whether it correctly rejected Gutta's assertion that the parties had concluded an enforceable settlement agreement. The facts bearing on Gutta's medical conditions and Standard's assessment of his eligibility for disability benefits are thoroughly discussed in the district court's opinion and need not be repeated here. See Gutta v. Standard Select Trust Ins., No. 04 C 5988, 2006 WL 2644955, at *1-12 (N.D.Ill. Sept.14, 2006).

Gutta's Group Policy with Standard contains a section titled "ALLOCATION OF AUTHORITY," which reads as follows:

Except for those functions which the Group Policy specifically reserves to the Policyowner or Employer, Standard has full and exclusive authority to control and manage the Group Policy, to administer claims, and to interpret the Group Policy and resolve all questions arising in its administration, interpretation, and application. Standard's authority includes, but is not limited to:

1. The right to resolve all matters when a review has been requested;

2. The right to establish and enforce rules and procedures for the administration of the Group Policy and any claim under it;

3. The right to determine:

a. Eligibility for insurance;

b. Entitlement to benefits;

c. Amount of benefits payable;

d. Sufficiency and the amount of information we may reasonably require to determine a., b., or c., above.

Subject to the review procedures of the Group Policy any decision Standard makes in the exercise of our authority is conclusive and binding.

(Joint Apx., Ex. A, Group Policy, Amendment 8, p. 2) (emphasis added).

As is true in most litigation, from time to time as this case progressed there was some talk of settlement. Gutta focuses on an exchange of emails that took place on June 1, 2005, to support his claim that the parties reached an enforceable agreement. On that day, Standard sent Gutta an email stating:

Standard's position is that Dr. Gutta is indebted to it in the amount of $73,996.75, hence, Standard's Motion to File its Counterclaim. In other words, Standard's "response" is that it declines Dr. Gutta's offer to settle for its payment to him of $25,000, but Standard would, at this time, entertain resolution of all disputes existing between it and Dr. Gutta on the basis of a "walk-away" whereby each party foregoes prosecution of any further claim against the other under the terms of the Policy and otherwise.

Gutta's lawyer sent an email in response stating, "Given the current posture of the case, your `offer' is accepted." On June 5, 2005, Standard then submitted a draft settlement agreement containing additional terms, which Gutta refused to sign.

II

On the cross-motions for summary judgment with respect to Gutta's claim, appellate review is de novo. Sound of Music Co. v. 3M, 477 F.3d 910, 914 (7th Cir.2007). Similarly, we review de novo the grant of summary judgment in favor of Standard on the counterclaim. Adjudication of these claims, however, was proper only if the parties did not have an enforceable settlement agreement.

A legally binding settlement agreement is a contract, and so it is governed by ordinary principles. Gutta relies on Illinois law to support his argument, without objection from Standard, and so we too will look to that body of substantive law. From a procedural standpoint, however, federal law governs whether a judge or jury resolves any disputed issues. Mayer v. Gary Partners and Co., 29 F.3d 330, 332-33 (7th Cir.1994). When the basic facts are not in dispute, the question whether a contract has come into being is one of law. See Echo, Inc. v. Whitson Co., 121 F.3d 1099, 1102 (7th Cir.1997). If there are disputed facts, FED.R.CIV.P. 56 governs the question whether summary adjudication is permissible or if a trial is necessary.

In Laserage Technology Corp. v. Laserage Labs., 972 F.2d 799 (7th Cir.1992), we reviewed the requirements that Illinois imposes on contract formation in a situation similar to the one we face here:

A settlement agreement is a contract and as such, the construction and enforcement of settlement agreements are governed by principles of local law applicable to contracts generally. Here, we look to Illinois contract law for guidance. In interpreting a contract under Illinois law, "the paramount objective is to give effect to the intent of the parties as expressed by the terms of the agreement." ... Illinois follows the objective theory of intent. As a result, whether [the parties] had a "meeting of the minds" as to security for the purchase of Mr. Byrum's Laserage shares is determined by reference to what the parties expressed to each other in their writings, not by their actual mental processes.

Id. at 802 (citations omitted). If a potential jury could reach only one conclusion about the existence of a meeting of the minds between Gutta and Standard, then the district court had no reason to explore the issue further.

The district court found that the statement in the email that Standard "would `entertain' the idea of a `walkaway' type of settlement [was] not a binding agreement to enter into a settlement agreement containing no terms other than a mutual promise for the parties to dismiss their respective complaint and counterclaim." The court interpreted the statement to mean "precisely what it says it is: an agreement to come to the table to talk about the parameters of an agreement which is premised on both sides walking away as opposed to one side paying the other side some amount of money." Id. It found no genuine dispute over the fact that there was "no meeting of the minds as to an agreement whereby the parties would, without more, dismiss their claims." Id.

Given the language in the email exchange and the fact that the draft settlement agreement of June 5 (an agreement Gutta rejected) contained three full pages of new terms, id. at 53-55, we too see nothing that might give rise to a material dispute of fact. There was no meeting of the minds here, and therefore no enforceable settlement contract came into being. We may thus proceed to the review of the district court's rulings on the motions for summary judgment.

III

On the merits, this case largely turns on whether the language of the Standard plan gives the administrator discretion in determining benefits. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), held that "a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." When discretionary power is conferred on the administrator, her decision is reviewed under the arbitrary and capricious standard, id. at 111, 109 S.Ct. 948, and the district court may consider only evidence that was before the administrator in deciding whether her decision passes muster. Trombetta v. Cragin Fed. Bank for Sav. Employee Stock Ownership Plan,...