Sedlack v. Braswell Services Group, Inc.

• Decision Date: 12 January 1998
• Docket Number: 96-2651,Nos. 96-2650,s. 96-2650
• Citation: 134 F.3d 219
• Parties: 21 Employee Benefits Cas. 2439, Pens. Plan Guide (CCH) P 23944Q Robert E. SEDLACK, Plaintiff-Appellant, v. BRASWELL SERVICES GROUP, INCORPORATED, a/k/a Braswell Group Inc., Defendant-Appellee. Robert E. SEDLACK, Plaintiff-Appellee, v. BRASWELL SERVICES GROUP, INCORPORATED, a/k/a Braswell Group Inc., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 219

134 F.3d 219

21 Employee Benefits Cas. 2439,

Pens. Plan Guide (CCH) P 23944Q

Robert E. SEDLACK, Plaintiff-Appellant, v. BRASWELL SERVICES GROUP, INCORPORATED, a/k/a Braswell Group

Inc., Defendant-Appellee.

Robert E. SEDLACK, Plaintiff-Appellee, v. BRASWELL SERVICES GROUP, INCORPORATED, a/k/a Braswell Group

Inc., Defendant-Appellant.

Nos. 96-2650, 96-2651.

United States Court of Appeals, Fourth Circuit.

Argued Oct. 29, 1997.

Decided Jan. 12, 1998.

ARGUED: Annette Roney Drachman, Laddaga & Drachman, P.A., Charleston, SC, for Appellant. Robert Thomas Lyles, Jr., Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Charleston, SC, for Appellee. ON BRIEF: Linda C. Garrett, Laddaga & Drachman, P.A., Charleston, SC, for Appellant.

Before WIDENER and ERVIN, Circuit Judges, and PHILLIPS, Senior Circuit Judge.

Affirmed by published opinion. Senior Judge PHILLIPS wrote the opinion, in which Judge WIDENER and Judge ERVIN joined.

OPINION

PHILLIPS, Senior Circuit Judge:

This case arose out of Braswell Group's ("Braswell") handling and denial of Robert E. Sedlack's claims for benefits under an ERISA employee benefit plan sponsored and administered by Braswell ("the Plan"). Sedlack, a former Braswell employee, sued Braswell alleging wrongful denial of benefits, breach of fiduciary duty, failure to provide requested Plan information, and unreasonable claims practices. After a bench trial the district court found for Braswell on all claims except Sedlack's claim for failure to provide requested Plan information, as to which the court found Braswell liable and awarded a statutory penalty. The court then denied Sedlack's motion for attorney's fees. Sedlack appealed, Braswell cross-appealed and we affirm on both the appeal and the cross-appeal.

I

The case originated in Sedlack's allegations of an injury he claimed to have sustained on April 16, 1991, from a slip and fall on a set of stairs on the vessel SNELL where he was working for Braswell. Claiming injury from the incident, Sedlack filed for benefits under the Longshore and Harbor Worker's Compensation Act ("LHWCA"). When Braswell disputed Sedlack's version of the incident, the claim was presented for decision to an Administrative Law Judge ("ALJ"). Among the issues before the ALJ was "[whether] an injury occurred on April 16, 199." On directly conflicting evidence as to whether any slip and fall injury occurred as claimed by Sedlack, the ALJ denied benefits, finding "that the alleged accident did not occur as stated by [Sedlack]."

On September 15, 1994, Sedlack's attorney requested a copy of the Plan from Braswell. A copy was only provided on February 29, 1996. In the meantime, Sedlack had filed with Braswell a claim for benefits under the Plan based upon the injury allegedly sustained in the April 16, 1991 accident. Braswell administratively denied the claim, relying on Sedlack's assertion that the accident was work-related and the Plan's exclusion of benefits for work-related claims. Sedlack then brought this ERISA action under 29 U.S.C. § 1132 claiming that Braswell had (1) wrongfully denied his claims; (2) breached its fiduciary duty to Sedlack; (3) failed to comply with Sedlack's request for a copy of the Plan (" § 1132(c) claim"); and (4) engaged in unreasonable claims practices. The action was tried to the district court without a jury and the district court found against Sedlack on all claims except the § 1132(c) claim; on that claim, the trial court ordered Braswell to pay penalties of $20 per day for the 531 days between September 15, 1994 (when Sedlack requested the Plan) and February 29, 1996 (when Braswell made the Plan available). Following entry of judgment, the district court denied Braswell's motion for reconsideration and Sedlack's motion for attorney's fees.

Sedlack then appealed from those portions of the judgment that rejected his wrongful denial of benefits, breach of fiduciary duty and unreasonable practices claims and that denied his motion for attorney's fees. Braswell cross-appealed from the portion of the judgment allowing the § 1132(c) claim and imposing the penalty as remedy.

II

We review the district court's conclusions of law de novo, its factual findings under the clearly erroneous standard, and its imposition of penalties and refusal to award attorney's fees for abuse of discretion. See West v. Clarke Murphy, Jr. Self Employed Pension Plan, 99 F.3d 166, 167 (4th Cir.1996); Glocker v. W.R. Grace & Co., 974 F.2d 540, 544 (4th Cir.1992) (penalties); Quesinberry v. Life Ins. Co. of N. Am., 987 F.2d 1017, 1028 (4th Cir.1993) (fees).

A

Braswell denied Sedlack's claims for benefits on the grounds that they were excluded by the Plan's work-related claims exclusion. That provision excludes "[c]harges arising out of or in the course of any occupation for wage or profit, or for which the Covered Person is entitled to benefit under any Worker's Compensation or Occupational Disease Law, or any such similar law."

The parties agree that although Braswell had authority to interpret the Plan, it was acting under a conflict of interest and that its decision to deny benefits should therefore be reviewed under a modified abuse of discretion standard. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956-57, 103 L.Ed.2d 80 (1989) ("[I]f a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a facto[r] in determining whether there is an abuse of discretion.") (quotation omitted).

The district court noted that throughout the LHWCA litigation and this case, Sedlack had consistently alleged that he was injured while working for Braswell aboard the SNELL. On that basis, the court concluded that Sedlack's own allegations established the applicability of the work-related claims exclusion. Sedlack challenges that ruling arguing that collateral estoppel bars operation of the work-related claims exclusion to defeat his claim, because the adverse decision in his LHWCA proceeding determined that his alleged injury was not work-related. We disagree.

Collateral estoppel forecloses "the relitigation of issues of fact or law that are identical to issues which have been actually determined and necessarily decided in prior litigation in which the party against whom [issue preclusion] is asserted had a full and fair opportunity to litigate." Ramsay v. INS, 14 F.3d 206, 210 (4th Cir.1994) (quotation omitted). For collateral estoppel to apply, the proponent must establish that: (1) the issue sought to be precluded is identical to one previously litigated; (2) the issue must have been actually determined in the prior proceeding; (3) determination of the issue must have been a critical and necessary part of the decision in the prior proceeding; (4) the prior judgment must be final and valid; and (5) the party against whom estoppel is asserted must have had a full and fair opportunity to litigate the issue in the previous forum. See id.

Sedlack's invocation of issue preclusion fails on the "identity of issues" and "actually determined" requirements. The dispositive issue in the LHWCA proceeding before the ALJ was not whether the accident was work-related, but rather, "[whether] an injury occurred on April 16, 199." Sedlack argues that the ALJ's finding that the accident did not occur as alleged by Sedlack was a finding that the accident was not work-related. The ALJ, however, made no findings as to the work-related or non-work-related nature of the alleged accident. The ALJ found simply "that the alleged accident did not occur as stated by [Sedlack]." Accordingly, the issue whether the injury was work-related was neither before the ALJ nor decided in the LHWCA litigation; collateral estoppel, therefore, cannot bar application of the work-related claims exclusion. ¹

Next, Sedlack argues that judicial estoppel bars Braswell from claiming that he suffered a work-related injury. "Judicial estoppel precludes a party from adopting a position that is inconsistent with a stance taken in prior litigation," John S. Clark Co. v. Faggert & Frieden P.C., 65 F.3d 26, 28 (4th Cir.1995), and is designed to prevent a party from "playing fast and loose" with the courts and "protect the essential integrity of the judicial process." Allen v. Zurich Ins. Co., 667 F.2d 1162, 1166 (4th Cir.1982). Although "[c]ourts have had difficulty in formulating a specific test for determining when judicial estoppel should be applied," at least three elements must always be satisfied. Lowery v. Stovall, 92 F.3d 219, 223-24 (4th Cir.1996), cert. denied, --- U.S. ----, 117 S.Ct. 954, 136 L.Ed.2d 841 (1997). First, the party sought to be estopped must assert a position inconsistent with that taken in prior litigation and the position must be one of fact rather than law or legal theory. Id. at 224. Second, the prior inconsistent position must have been accepted by the court. Id. And third, the party sought to be estopped must intentionally have misled the court to gain unfair advantage. Id.

Here, our inquiry need go no further than the first element. In the LHWCA case, Braswell argued that the accident did not occur. In this litigation, Braswell argued that if the accident occurred, it was work-related Since these positions are not inconsistent, judicial estoppel cannot apply.

Finally, Sedlack argues that Braswell "failed to establish a causal connection between the loss claimed and the exclusion being applied." According to Sedlack, in order for the work-related claims exclusion to apply, Braswell must prove that Sedlack's injury was caused by a work-related accident. Even if such a requirement existed generally, it could not apply where, as here, Sedlack himself alleges his injury was work-related.

B

29 U.S.C. § 1104(a) sets forth the obligations of plan fiduciaries, requiring them to act "solely in the interest of the participants and beneficiaries" and "for the exclusive...