Leonard v. Southwestern Bell Corp. Disability

• Decision Date: 02 September 2003
• Docket Number: No. 02-3559.,02-3559.
• Parties: Marion LEONARD, Plaintiff-Appellant, v. SOUTHWESTERN BELL CORPORATION DISABILITY INCOME PLAN; Southwestern Bell Corporation Pension Benefit Plan; Southwestern Bell Corporation, as Plan Administrator and a Named Fiduciary of Southwestern Bell Corporation Disability Income Plan and of Southwestern Bell Corporation Pension Benefit Plan, also known as SBC Communications, Inc.; Benefit Plan Committee of Southwestern Bell Corporation Disability Income Plan, as Fiduciaries of Southwestern Bell Corporation Disability Income Plan; Benefit Plan of Southwestern Bell Corporation Pension Benefit Plan, as Fiduciaries of Southwestern Bell Corporation Pension Benefit Plan; Southwestern Bell Telephone, L.P., as a participating company and a Named Fiduciary in the Southwestern Bell Corporation Disability Income Plan and Southwestern Bell Corporation Pension Benefit Plan; Benefit Plan Committee of Southwestern Bell Telephone Company, as the Named Fiduciary designated by Southwestern Bell Telephone Company with respect to claims and administration of benefits of employees of Southwestern Bell Telephone Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

341 F.3d 696

Marion LEONARD, Plaintiff-Appellant, v. SOUTHWESTERN BELL CORPORATION DISABILITY INCOME PLAN; Southwestern Bell Corporation Pension Benefit Plan; Southwestern Bell Corporation, as Plan Administrator and a Named Fiduciary of Southwestern Bell Corporation Disability Income Plan and of Southwestern Bell Corporation Pension Benefit Plan, also known as SBC Communications, Inc.; Benefit Plan Committee of Southwestern Bell Corporation Disability Income Plan, as Fiduciaries of Southwestern Bell Corporation Disability Income Plan; Benefit Plan of Southwestern Bell Corporation Pension Benefit Plan, as Fiduciaries of Southwestern Bell Corporation Pension Benefit Plan; Southwestern Bell Telephone, L.P., as a participating company and a Named Fiduciary in the Southwestern Bell Corporation Disability Income Plan and Southwestern Bell Corporation Pension Benefit Plan; Benefit Plan Committee of Southwestern Bell Telephone Company, as the Named Fiduciary designated by Southwestern Bell Telephone Company with respect to claims and administration of benefits of employees of Southwestern Bell Telephone Company, Defendants-Appellees.

No. 02-3559.

United States Court of Appeals, Eighth Circuit.

Submitted: April 17, 2003.

Filed: September 2, 2003.

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S. Sheldon Weinhaus, argued, St. Louis, MO, for appellant.

Richard J. Pautler, argued, St. Louis, MO, for appellee.

Before MORRIS SHEPPARD ARNOLD, BEAM, and MELLOY, Circuit Judges.

MELLOY, Circuit Judge.

Appellant Marion Leonard sued Appellees¹ alleging that they violated the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461, by interpreting two employee benefit plans in a manner that reduced Leonard's benefits. In particular, Leonard challenged Appellees' contention that plan benefits may be reduced by the entire amount of a 1996 worker's compensation award that Leonard received. The district court granted Appellees' motions for summary judgment, and in doing so, denied Leonard's request to prohibit Appellees from offsetting the benefits owed under the plans. We affirm in part, but reverse the district court's decision to approve the offset amount. The offset amount should not include attorneys' fees and costs that Leonard incurred to obtain her 1996 worker's compensation award.

I. Background

It is undisputed that Marion Leonard is entitled to disability benefits for injuries suffered while working for Southwestern Bell. Leonard was placed on leave in 1995 because of her injuries. She hoped to receive compensation for these injuries from two sources: worker's compensation and two employee benefit plans. The employee benefit plans in which she participated were the Southwestern Bell Corporation Disability Income Plan ("Disability Plan") and the Southwestern Bell Corporation Pension Benefit Plan ("Pension Plan"). After being placed on leave, Leonard initially received disability benefits from both plans. However, Southwestern Bell later decided that benefits owed under the Disability and Pension Plan should be reduced by the entire amount of Leonard's worker's compensation award. Leonard was informed that she would not receive any further benefits under the plans until the entire amount of her worker's compensation award had been withheld.

Leonard brought this action, and the district court ruled on two separate motions for summary judgment. The first motion for partial summary judgment, decided on May 30, 2001, considered whether Southwestern Bell was estopped from arguing that ERISA plan benefits could be reduced by the amount of Leonard's worker's compensation. Leonard's estoppel arguments were based on Southwestern Bell actions in the "Hechenberger Trilogy"² of cases.

The district court determined that the Hechenberger Trilogy of cases did not address the type of offsets at issue in Leonard's case. The Hechenberger Trilogy directly concerned only reductions of worker's compensation payments by the amount of ERISA benefits that had already been paid ("counterclockwise offsets"), not reductions of ERISA benefits by the amount of worker's compensation payments that had been received ("clockwise offsets"). While the district court acknowledged that the net result of both practices was the same, i.e., in both situations the employees received the same amount of compensation, it determined that the distinction between clockwise and counterclockwise offsets was a distinction that mattered (at least when considering the Hechenberger Trilogy's preclusive effect). As a result, the district court granted Southwestern Bell's first motion for partial summary judgment and determined that the Hechenberger Trilogy did not preclude Southwestern Bell from arguing that clockwise offsets were acceptable under the terms of the Disability and Pension Plans.

The district court allowed discovery to continue and, on September 11, 2002, granted Southwestern Bell's second motion for summary judgment. In doing so, the district court approved the decision to reduce benefits owed under the plans by the entire amount of Leonard's worker's compensation award. The district court determined that Southwestern Bell did not abuse its discretion when it determined that worker's compensation payments were of the "same general character" as the disability benefits provided by the plans. Additionally, the district court declined to consider whether attorneys' fees should have been included in the offset because the attorneys' fees issue had not been properly raised.

On appeal, there are three issues this Court must decide. The first is whether the district court properly determined that the Hechenberger Trilogy only addressed counterclockwise offsets and therefore did not prevent Southwestern Bell from arguing that clockwise offsets were permissible. The second issue is whether the plan administrators' determination that worker's compensation awards were of the "same general character" as plan benefits constituted an abuse of discretion. The final issue is whether Southwestern Bell abused its discretion by including in the offset amount the attorneys' fees and costs Leonard paid to obtain her worker's compensation award.

II. Standard of Review

"We review a grant of summary judgment de novo, applying the same standard as that applied by the district court." Hossaini v. Western Mo. Med. Ctr., 140 F.3d 1140, 1142 (8th Cir.1998).

This circuit has not clearly stated whether we review a district court's decision on the applicability of the collateral or judicial estoppel doctrines under an abuse of discretion or de novo standard of review. Other courts that considered this issue reached conflicting opinions. See Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure: Civil 3d § 4416 n. 35-37 (describing the differing opinions on how issue preclusion/collateral estoppel should be reviewed); § 4477 n. 9 (providing differing opinions on how judicial estoppel should be reviewed). We need not resolve the standard of review issue at this time. Even under the less deferential standard of review, the de novo standard, we do not find that collateral or judicial estoppel applies.

By contrast, we have clearly defined the standard for evaluation of a district court's review of an ERISA plan's administration. In Sahulka v. Lucent Techs., Inc., 206 F.3d 763, 767 (8th Cir.2000), we stated:

[T]his Court reviews de novo the district court's determination of the appropriate standard of review under ERISA. Woo v. Deluxe Corp., 144 F.3d 1157, 1160 (8th Cir.1998).

Under ERISA, a plan beneficiary has the right to judicial review of a benefits determination. See 29 U.S.C. § 1132(a)(1)(B). The court reviews the denial of benefits for abuse of discretion when a plan gives the administrator "discretionary authority to determine eligibility benefits or to construe terms of the plan .... Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989)." Under the abuse of discretion standard, "the plan administrator's decision to deny benefits will stand if a reasonable person could have reached a similar decision." Woo v. Deluxe Corp., 144 F.3d 1157, 1162 (8th Cir.1998) (citation omitted). In evaluating reasonableness, the court determines "whether the decision is supported by substantial evidence, which is more than a scintilla but less than a preponderance." Id. (quotation omitted).

Id. at 767-768; see also Shelton v. Conti-Group Co., Inc., 285 F.3d 640, 642 (8th Cir.2002) (discussing the standard of review under ERISA). In this case, both plans provide the plan administrators³ with discretionary authority to determine eligibility and interpret the terms of these plans. As such, the appropriate standard of review for evaluating the decision to reduce plan benefits by the entire amount of the 1996 worker's compensation award is whether the plan administrators abused their discretion.

III. Estoppel Arguments

Leonard argues that, based on principles of collateral and judicial estoppel, Southwestern Bell's actions in the "Hechenberger Trilogy" should preclude clockwise offsets (reducing plan benefits by the amount of worker's compensation received). We agree with the district court's rejection of Leonard's argument. The Hechenberger Trilogy dealt only with counterclockwise offsets (reducing worker's compensation benefits by the amount of plan benefits received), not with clockwise offsets like those at issue in this case.

The principle of collateral estoppel is part of a doctrine often referred to as preclusion or res judicata. The Supreme Court explained the characteristics of the res judicata doctrine in Baker by Thomas v. General Motors Corp.:

"Res judicata" is the term traditionally used to describe two discrete effects: (1) what we now call claim preclusion (a valid final adjudication of a claim precludes a second action on that claim or any part of it) and ... (2) issue preclusion, long called "collateral...