Imler v. Southwestern Bell Tel. Co., 53510

Decision Date02 September 1982
Docket NumberNo. 53510,53510
Citation650 P.2d 712,8 Kan.App.2d 71
Parties, 3 Employee Benefits Cas. 2147 Dorothy M. IMLER, Appellant, v. SOUTHWESTERN BELL TELEPHONE COMPANY, Appellee.
CourtKansas Court of Appeals

Syllabus by the Court

1. The district courts of the State of Kansas have jurisdiction over civil actions brought by a participant or beneficiary under any plan governed by the Employee Retirement Income Security Act of 1974 (ERISA), where the purpose of such action is to recover benefits due, enforce rights accrued or clarify rights to future benefits, under the terms of the plan; such jurisdiction is concurrent with that of the federal district court. In all other civil actions under ERISA, the district courts of the United States have exclusive jurisdiction. 29 U.S.C. § 1132.

2. Under federal law, the scope of appellate review over private administrative agency action is the same as that applied in review of governmental administrative agency actions. The inquiry is generally limited to whether the decision is supported by substantial evidence and whether it is arbitrary and capricious. This is substantially the same scope of review prevailing in the State of Kansas.

3. In enacting ERISA, it was the intent of Congress that the courts develop a body of federal substantive law to deal with issues involving rights and obligations under private welfare and pension plans.

4. As a general rule, when a state court entertains an action based on federal law, then the federal rules should be applied.

5. Both the legislative history and the text of ERISA indicate that Congress intended to grant to the courts authority to apply the exhaustion doctrine in suits under the act, and sound policy requires its application in such suits.

6. A primary reason for the exhaustion requirement in suits under ERISA is that prior fully considered actions by pension plan trustees interpreting their plans and perhaps also further refining and defining the problem in given cases, may well assist the courts when they are called upon to resolve the controversies.

7. In an appeal from a summary judgment in a civil case for damages brought under ERISA, the record is examined and it is held, the court did not err (1) in assuming jurisdiction over the suit; (2) in its application of a limited scope of review; or (3) in granting summary judgment in favor of appellee, based on appellant's failure to exhaust her administrative remedies.

Philip R. Herzig, Salina, for appellant.

Ruth A. Sears, and Lawrence A. Dimmitt, Topeka, and Jeffrey E. King, of King, Stokes, Nitz & Adrian, Chartered, Salina, for appellee.

Before SWINEHART, P. J., and SPENCER and MEYER, JJ.

MEYER, Judge:

This is a contract action concerning the Employee Retirement Income Security Act (ERISA) plan. Summary judgment was granted in favor of defendant Southwestern Bell Telephone Company (appellee). The employee, Dorothy M. Imler (appellant), appeals.

Appellant's disability benefits were paid through appellee's ERISA plan. The plan provided for administrative review of any denial of benefits. Appellant was terminated and denied further benefits on February 15, 1975. Appellant and appellee had no further contact until August 1978, when appellant's attorney contacted appellee to inquire why disability payments were not being made. Appellee's committee reconsidered their February 1975 decision on May 12, 1980, and notified appellant on June 5, 1980, through her attorney, that the benefits were again being denied. At the same time, appellant was notified, through her attorney, that administrative review was available. The name and address of the person necessary to contact in order to seek review were provided. Appellant, however, declined to pursue administrative remedy, filing suit instead.

Appellee sought summary judgment on grounds that appellant failed to exhaust administrative remedies and that the decision of the committee was not, as a matter of law, arbitrary and capricious. The trial court granted the motion, hence this appeal.

Appellant's first issue involves the district court's jurisdiction in reviewing the action of the Employees' Benefit Committee.

It appears that the plan from which the appellant seeks benefits was instituted under the Employee Retirement Income Security Act of 1974 (ERISA). This act is found at Chapter 18 of Title 29 of the United States Code and cited as 29 U.S.C. §§ 1001 et seq.

29 U.S.C. § 1132(e)(1) states:

"Except for actions under subsection (a)(1)(B) of this section, the district courts of the United States shall have exclusive jurisdiction of civil actions under this subchapter brought by the Secretary or by a participant, beneficiary, or fiduciary. State courts of competent jurisdiction and district courts of the United States shall have concurrent jurisdiction of actions under subsection (a)(1)(B) of this section."

29 U.S.C. § 1132(a)(1)(B) states:

"(a) A civil action may be brought--

(1) by a participant or beneficiary--

"(B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan...."

It appears the appellant's claim falls within 29 U.S.C. § 1132(a)(1)(B). Thus, the trial court had jurisdiction to consider the case, and this court has jurisdiction over this appeal.

Appellant's second issue involves the appropriate scope of review to be applied by the district court. The trial court set forth the following standard of review:

"I find as a matter of law that the scope of the Court's jurisdiction in such a case is to review the action of the Employee's Benefit Committee to determine if:

1. They acted fraudulently, arbitrarily or capriciously;

2. If their findings are substantially supported by evidence, and;

3. If their action was within the scope of their authority."

This general statement is in accord with the scope of review traditionally applied by Kansas courts in cases involving appeal from administrative rulings. See Gillett v. U.S.D. No. 276, 227 Kan. 71, 79, 605 P.2d 105 (1980); and Moore v. Adkins, 2 Kan.App.2d 139, Syl. p 1, 576 P.2d 245 (1978).

Our research discloses no Kansas case directly in point with the present appeal. There are, however, federal cases which limit the scope of review of "private" administrative action under ERISA plans to that same scope of review applied to actions by governmental administrative agencies--whether the action is supported by substantial evidence and whether it is arbitrary and capricious. See Lazur v. United Mine Workers, 471 F.Supp. 114 (D.D.C. 1979). The federal courts have also noted that, in enacting ERISA, it was the intent of Congress that the courts develop "a body of Federal substantive law ... to deal with issues involving rights and obligations under private welfare and pension plans." Amato v. Bernard, 618 F.2d 559, 567 (9th Cir. 1980). See also 120 Cong. Rec. 29942 (1974).

As a general rule, when a State court entertains an action based on federal law, then the federal rules should be applied. Wright, Federal Courts § 60 (3rd ed. 1976). It might be argued that whether the federal scope of review is substantive or procedural is a necessary determination in this case; we choose not to make this an issue, however. First, the line between substantive law and procedural law has become invariably blurred. Hanna v. Plumer, 380 U.S. 460, 471, 85 S.Ct. 1136, 1144, 14 L.Ed.2d 8 (1965); Wright, Federal Courts § 59 (3rd ed. 1976). And second, the question is academic, as the scope of review applied in federal courts is substantially identical to that prevailing in the courts of Kansas.

Given the above, appellant's argument that the trial court should have applied a scope of review allowing de novo determination of all issues of fact is not compelling. De novo review is not favored by the law of this state, and the courts have been reluctant to permit it. See Brinson v. School District No. 431, 223 Kan. 465, 467-70, 576 P.2d 602 (1978). We conclude ...

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    ...as to judicial review of a trustee's discretion. Id. 576 P.2d at 250 (citations omitted); see also Imler v. Southwestern Bell Telephone Co., 8 Kan.App.2d 71, 650 P.2d 712, 714-15 (1982); cf. Pioneer Container Corp. v. Beshears, 235 Kan. 745, 684 P.2d 396, 398 (1984) (district court's standa......
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