Harthun v. Johnson Controls, Inc.
| Docket Number | 3:20-cv-00036 |
| Decision Date | 31 March 2022 |
| Parties | LUTHER A. HARTHUN, Plaintiff, v. JOHNSON CONTROLS, INC., Defendant. |
| Court | U.S. District Court — Western District of Virginia |
This case is about whether Johnson Controls, Inc. (“JCI”), ran afoul of the Employee Retirement Income Security Act of 1974 (“ERISA”), when it modified its senior executive benefits plan. Previously, JCI directly paid premiums for Medicare Part B and for a supplemental Medicare plan for each of its eligible retirees (including Plaintiff Luther Harthun). In 2020, JCI continued to pay premiums for Medicare Part B for its eligible retirees, but instead provided a Healthcare Reimbursement Account by which they were reimbursed for premiums for the supplemental coverage option they selected. The Court concludes that the Plan Document afforded JCI discretion in administering the plan, and that this was a discretionary decision that was not contrary to the Plan's plain language nor an unreasonable interpretation of the Plan. The Court will award summary judgment to JCI.
Plaintiff Luther Harthun was a senior executive at Figgie International, Inc., until he retired in 1996. Dkt. 1 ¶¶ 6, 8. He was a “Participant” within the meaning of Figgie's Senior Executive Benefits Program, effective on August 28, 1991 (the “Plan Document”). Id. ¶¶ 1, 7; see also Dkt. 1-1 (the Plan Document). After a name change and two mergers, Figgie's corporate successor-in-interest to the Plan Document is Johnson Controls International plc; its subsidiary JCI became plan administrator. Id. ¶¶ 9-12.
Plaintiff alleged that during his time as a Plan Participant until December 31, 2019, “the Plan has paid one hundred percent of Plaintiff's health insurance premiums directly.” Id. ¶ 18. “To the best of Plaintiff's knowledge, he has never paid a health insurance premium under the Plan and has always participated in a health insurance program offered to employees of the Company.” Id.
In an August 2019 letter, JCI informed Plaintiff that his “current retiree health benefit(s) program under Johnson Controls will end on December 31, 2019, ” and the letter “provided [him] with the details on the next steps for enrolling in a Mercer 365+ Retiree benefit plan(s).” Dkt. 1-2 at 2; see also Dkt. 1 ¶ 20. The letter described this as a “private health insurance solution that offers eligible post-65 retirees and their eligible post-65 dependents a variety of health insurance options from which to choose.” Dkt 1-2 at 2. The letter further informed Plaintiff that enrollees through the Mercer Marketplace 365+ Retiree “will pay your premiums directly to the insurance company that you choose for your healthcare coverage.” Id. at 4 (emphasis added). In addition, the letter explained that a healthcare reimbursement account or “HRA account, funded by Johnson Controls will be established for you and your eligible dependent(s) to help you pay for the monthly premiums.” Id.
In Plaintiff's view, this change in terms conflicted with the Plan's language and his “entire history as a Participant in the Plan, in which Plaintiff did not pay any health insurance premiums or bear any administrative burden with respect to such premiums.” Dkt. 1 ¶ 22. Plaintiff complained to JCI about the change. On September 30, 2019, JCI responded in a letter treating Plaintiff's complaint as a claim under ERISA and denying that claim holding that the change “to the manner of [JCI's] providing your health care benefits … do[es] not violate the terms of the Program.” Dkt. 1-3 (letter); Dkt. 1 ¶¶ 23-25. In the letter, JCI specifically noted that in “Section 8.2 of the Program, while JCI must continue secondary medical coverage for you, the amount of such secondary coverage need only be ‘equivalent to' the coverage provided to active company employees; the Program does not require that you be enrolled in an active employee plan.” Dkt. 1-3 (emphasis in original). JCI further explained that it had “carefully considered and determined that the coverage you will be able to obtain via Medicare Part B, and the secondary coverage you will be able to purchase via the Mercer Marketplace 365+ Exchange … using the monthly HRA contribution of $185, is at least equivalent to that of active employees.” Id. Thus, JCI concluded that it had “complie[d] with the terms of the Program.” Id.
JCI advised of Plaintiff's right to appeal the decision. Dkt. 1-3. Plaintiff, through counsel, timely appealed the decision but did not receive any ruling or other communication from JCI in the 90 days following Plaintiff's submission of his appeal. Dkt. 1 ¶¶ 25-26; Dkt. 1-4 (appeal); Dkt. 8 ¶ 26 ().
Plaintiff thereafter brought this ERISA action pursuant to 29 U.S.C. § 1132(a)(1)(B), which permits “a participant or beneficiary” to bring a civil action “to enforce his rights under the terms of the plan.” Dkt. 1 ¶ 32. In the complaint, Plaintiff argued that JCI's change to the Mercer Marketplace program violated Section 8.2 of the Plan Document, which provided that the Company “pay all premiums required to maintain such coverage under the Group Medical Plan.” Id. ¶ 30. In addition, Plaintiff contended that Section 8.2 of the Plan Document required JCI to “continue the coverage of a Participant … under the company's Group Medical Plan, ” which is defined as “any program, plan or insurance contract of the Company, to the extent, if any, that it provides hospitalization, dental, surgical, or major medical benefits for the employees of the Corporate Staff of the Company.” Id. ¶ 28 (emphasis in original). In Plaintiff's view, JCI's decision that “the Program does not require that you be enrolled in an active employee plan” “directly contradicts the plain and unambiguous language” of Section 8.2. Id. Accordingly, Plaintiff sued for a declaration that JCI's letter decision of September 30, 2019, “is contrary to the terms of the Plan Document and therefore void and of no effect.” Id. ¶ 33(a). In addition, Plaintiff sought a declaration that “Plaintiff is entitled to participate in a Group Medical Plan for employees of the Corporate Staff of the Company.” Id. ¶ 33(b). Plaintiff also sought attorney's fees and costs. Id. ¶¶ 33(c)-(d).
Before the Court are the parties' cross motions for summary judgment and the parties' responses thereto. Dkts. 20-23, 25-26. The Court heard argument on the motions, and the matter is ripe for decision.
At the outset, the parties' submissions raise several disputes regarding the applicable standard of review: first, whether an abuse of discretion or de novo standard of review applies; and second, whether a “modified” abuse of discretion standard is appropriate on account of a conflict of interest.
A court is required to “review de novo an ERISA benefits determination unless the plan confers discretionary authority on its administrator.” Woods v. Prudential Ins. Co of Am., 428 F.3d 320, 321 (4th Cir. 2008) (citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989)). An ERISA plan can confer discretion on its administrator expressly by language that creates discretionary authority or implicitly by terms creating such discretion. Id. at 322 (internal quotation marks omitted). Whether express or implicit, the plan must “manifest a clear intent to confer such discretion, ” with ambiguities construed against the drafter. Id. However, if the plan confers discretionary authority on the administrator, “the standard for review under ERISA of a fiduciary's discretionary decision is for abuse of discretion, ” which the court “will not disturb … if it is reasonable.” Booth v. Wal-Mart Stores, Inc. Assocs. Health & Welfare Plan, 201 F.3d 335, 342 (4th Cir. 2000).
On the first question, in their briefs, both sides acknowledged that an abuse of discretion standard applied. See Dkt. 23 at 6-7 (); Dkt. 21 at 8-9 (); Dkt. 26 at 4 (); Dkt. 25 at 2. Plaintiff's argument was that JCI's interpretation of the plan was unreasonable and thus an abuse of discretion under the Booth factors. Dkt. 23 at 7 (“These factors … demonstrate that JCI abused its discretion here.”); Dkt. 26 at 2-4.
At oral argument, Plaintiff appeared to argue for the first time that a de novo standard should instead apply, because one section of the Plan Document cited by JCI as a source of discretionary authority (Section 13.3) only provided for the resolution of ambiguities in the context of an appeal of a denial of benefits. However, as JCI's counsel noted in their response, another part of the plan explicitly provides comparable discretionary authority outside of the context of appeals. Section 13.1 states, in relevant part: “[t]he Compensation Committee shall have the following powers and duties, ” including “[t]o interpret the Program, and to resolve ambiguities, inconsistencies, and omissions, and to determine any question of fact, to determine the right of benefits of, and the amount of benefits, if any, payable to, any person in accordance with the provisions of the Program.” Dkt. 1-1 at 55 (emphasis added). Thus, the Court finds that explicit language sufficiently clear that the Plan Document conveyed discretionary authority on JCI, warranting application of the abuse of discretion standard. See, e.g., Evans v. Eaton...
To continue reading
Request your trial