Shelton v. Contigroup Companies, Inc., 01-2783.

• Decision Date: 01 April 2002
• Docket Number: No. 01-2783.,01-2783.
• Citation: 285 F.3d 640
• Parties: Rick SHELTON, Appellant, v. CONTIGROUP COMPANIES, INC., originally sued as Continental Grain Company, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 640

285 F.3d 640

Rick SHELTON, Appellant, v. CONTIGROUP COMPANIES, INC., originally sued as Continental Grain Company, Appellee.

No. 01-2783.

United States Court of Appeals, Eighth Circuit.

Submitted: January 14, 2002.

Filed: April 1, 2002.

Laura J. McKinnon, Fayetteville, AR, argued, for appellant.

Christopher F. Woomer, Mountainburg, AR, argued (Michael R. Jones, on the brief), for appellee.

Before WOLLMAN,¹ Chief Judge, HANSEN, Circuit Judge, and OBERDORFER,² District Judge.

WOLLMAN, Chief Judge.

Rick Shelton appeals from the district court's grant of summary judgment to the defendants in his action for long-term disability benefits. We reverse and remand for further proceedings.

I.

Shelton was employed at the Wayne Farms LLC poultry processing complex in Danville, Arkansas, beginning on May 18, 1987. Wayne Farms is a division of ContiGroup Companies, Inc. (ContiGroup), formerly known as the Continental Grain Company. While employed there, he participated in The Continental Grain Company Long-Term Disability Benefit Plan (Plan) and The Salaried Retirement Plan (which is not at issue in this appeal). Both plans are governed by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001 et seq., and are funded entirely by ContiGroup. The Plan's administrator is the "Administrative Committee," a group appointed by ContiGroup's Board of Directors.

Section 2.2 of the Plan defines a "Participant" in the Plan as one "whose participation in the Plan has not terminated." Section 3.3 provides that a "Participant's participation in the Plan shall terminate" on "[t]he date the Participant's employment with the Employing Company is terminated (as determined by it) other than by reason of Total Disability."

On August 28, 1987, Shelton injured his right knee while working at Wayne Farms. He received medical treatment from time to time, including having two surgeries on the knee. Ultimately, on November 13, 1996, Shelton was placed on medical leave from Wayne Farms, with medical restrictions of "no prolonged standing or walking indefinitely." He received short-term disability benefits for the prescribed period. On or about February 19, 1997, Shelton submitted an application for long-term disability benefits under the Plan. This application was received and processed by CIGNA, which had contracted with ContiGroup to process claims under the Plan.

On April 23, 1997, while CIGNA was processing Shelton's claim, two Wayne Farms employees, Danny Jones and Anita Vanravensway, went to the Plainview Dairy Bar, a diner owned and operated by Shelton's wife and her mother. Shelton was behind the counter, and when Jones and Vanravensway entered, he stood up, took their order, and accepted their payment. He then sat back down. [Shelton contends that he was not being paid wages while he was at the dairy bar and that taking Jones's and Vanravensway's order was all that he did while there.] Later that day, Jones and Vanravensway reported that they had seen Shelton working at his wife's business, whereupon Wayne Farms immediately terminated Shelton's employment. The next day, Don Bull, manager of the Wayne Farms Danville complex wrote Shelton a letter stating that Shelton had been terminated because "by working and receiving other income from Plainview Dairy Bar, you are violating your medical leave."

The same day that Shelton was terminated, Joellen West, a human resources employee at the corporate offices of ContiGroup's poultry group, sent an intracompany e-mail to ContiGroup Benefits Administrator Frances Pages informing her that Wayne Farms had fired Shelton and stating that she should stop processing his application for long-term disability benefits. The Plan then notified CIGNA to stop processing Shelton's application.

The Administrative Committee did not provide Shelton with written notice of the denial of his claim nor of his appeal rights, as required by the Plan. There is nothing in the record to indicate that the Administrative Committee made any decision regarding Shelton's claim. An affidavit by Jessie Barsin, a member of the Administrative Committee, states that Shelton's claim was not processed because "the LTD Plan was informed that he was no longer employed by Wayne Farms or ContiGroup and informed he had been working while on medical leave and drawing short-term disability benefits."

Shelton sued, claiming that he was entitled to benefits under the Plan. He did not claim that he was wrongfully terminated. The district court granted summary judgment to ContiGroup, holding that Shelton ceased being a participant in the Plan when he was terminated and thus was no longer eligible for benefits.

II.

We review the district court's grant of summary judgment de novo. Henerey v. City of St. Charles, 200 F.3d 1128, 1131 (8th Cir.1999). Summary judgment is proper if the evidence, viewed in the light most favorable to the nonmoving party, demonstrates that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law. Id.; Fed.R.Civ.P. 56(c).

"ERISA provides a plan beneficiary with the right to judicial review of a benefits determination." Woo v. Deluxe Corp., 144 F.3d 1157, 1160 (8th Cir.1998); see 29 U.S.C. § 1132(a). It is undisputed that the Plan gives the administrator discretionary authority to determine eligibility for benefits, so we would ordinarily review the administrator's decision for an abuse of discretion. See Woo, 144 F.3d at 1160. "This deferential standard reflects our general hesitancy to interfere with the administration of a benefits plan." Layes v. Mead Corp., 132 F.3d 1246, 1250 (8th Cir.1998). Under this standard, a reviewing court should consider only the evidence before the plan administrator when the claim was denied. Id. at 1251. We may apply a less deferential standard of review if the plaintiff presents "material, probative evidence demonstrating that (1) a palpable conflict of interest or a serious procedural irregularity existed, which (2) caused a serious breach of the plan administrator's fiduciary duty" to the plaintiff. Woo, 144 F.3d at 1160. An alleged conflict or procedural irregularity must have some connection to the substantive decision reached. Id. at 1161. A claimant must offer evidence that "gives rise to serious doubts as to whether the result reached was the product of an arbitrary decision or the plan administrator's whim" for us to apply the less deferential standard. Layes, 132 F.3d at 1250 (internal quotation marks omitted).

Shelton argues that the district court should have applied a less deferential standard of review to the administrator's decision because of the conflict of interest created by ContiGroup's both funding and administering the Plan and because of the procedural irregularities that occurred in the processing of his claim. It appears from the record, however, that Shelton did not ask the district court to apply a less deferential standard. Normally, we do not consider arguments first raised on appeal. See Colonial Ins. Co. of...