Stuart v. Metropolitan Life Ins. Co.

• Decision Date: 14 July 1987
• Docket Number: Civ. No. 85-0318 P,85-0388 P.
• Citation: 664 F. Supp. 619
• Parties: William STUART, Plaintiff, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant. Fernand DANIS, Plaintiff, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Maine

664 F. Supp. 619

William STUART, Plaintiff, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant.

Fernand DANIS, Plaintiff, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant.

Civ. Nos. 85-0318 P, 85-0388 P.

United States District Court, D. Maine.

July 14, 1987.

Jon Holder, Holder & Grover, Portland, Me., for plaintiff.

Howard H. Dana, Jr., Portland, Me., for defendant.

MEMORANDUM OF DECISION AND ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

GENE CARTER, District Judge.

Plaintiffs Stuart¹ and Danis brought suit to challenge the recoupment of benefits by Defendant Metropolitan Life Insurance Company (Metropolitan) in an amount equal to retroactive lump-sum Social Security payments received by each Plaintiff. Jurisdiction is invoked pursuant to 29 U.S.C. § 1132 (1982), 28 U.S.C. § 1331 (1982), and 28 U.S.C. § 1332 (1982). Because the two cases involve nearly identical questions of fact and identical questions of law, the cases have been consolidated for all pretrial purposes.

The Plaintiffs' Amended Complaints² set forth eight counts; of the eight, only three now remain.³ Count II alleges that Defendant breached its duties as an ERISA fiduciary in violation of 29 U.S.C. §§ 1022, 1104 (1982). Count III alleges that Defendant's recoupment breached the anti-assignment provision of the Social Security Act, 42 U.S.C. § 407 (Supp.III 1985). Finally, Count VI alleges a violation of New York Insurance Law § 3212.

Now pending before the Court are the parties' cross-motions for summary judgment on Counts II, III and VI. Both parties have submitted memoranda, as well as Statements of Undisputed Material Facts as required by Local Rule 19(b). The Court also has the benefit of the Magistrate's Memorandum and Recommended Decision. Having considered de novo all of the materials properly before it, Jacobsen v. Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., 594 F.Supp. 583 (D.Me.1984), the Court concludes that Defendant's motion for summary judgment should be granted, and Plaintiffs' motions for summary judgment denied.

I. Facts

Plaintiffs Stuart and Danis both worked as hourly employees of the General Electric Company (GE) at the GE plant in South Portland, Maine. Stuart was employed as an International Association of Machinists and Aerospace Workers-AFL-CIO union member and Danis was a nonunion employee.

In 1970, as part of the collective bargaining process, GE and the unions representing its employees negotiated a Long Term Disability Plan (the Plan). As a result of that process, GE obtained Group Insurance Policy Number 23126-G (the Policy) from Metropolitan. The Policy, which provided long-term disability insurance, incorporated the Plan by reference.⁴ Participation in the Plan was voluntary, and employees paid the entire premium. GE made the Plan available on the same terms to nonunion employees.

Both Plaintiffs purchased coverage under the Plan and both became disabled. The relevant language of the Plan provided that:

Benefits will be paid monthly and will be one twenty-fourth of your normal straight-time annual earnings reduced by ... (2) any primary Social Security benefits.... If the benefits referred to in (2) ... would have been payable to you upon timely application, you will be considered as receiving such benefits. However, in no event, will the reductions referred to in ... (2) ... be used to reduce the monthly benefit otherwise payable to less than $50 a month.

Plaintiff Stuart's Deposition, Exhibit 1-D, at 39; Appendix to Plaintiff Danis' Motion for Summary Judgment, Exhibit 1-F, at 2.

When Stuart and Danis applied for disability benefits under the Plan, GE required each to sign a Reimbursement Agreement. The first paragraph of the Agreement required each Plaintiff to certify that he had made timely application for Social Security benefits. The Agreement then provided that Metropolitan would not deduct estimated Social Security benefits from Plaintiffs' monthly benefits under the Plan if Plaintiffs agreed to reimburse Metropolitan in full upon receipt of any retroactive Social Security payment. The Agreement also authorized Metropolitan to enforce this right to reimbursement, if necessary, by withholding or reducing future long-term disability benefits. Plaintiff Stuart's Deposition, Exhibit 3; Appendix to Plaintiff Danis' Motion for Summary Judgment, Exhibit 3.

Both Plaintiffs applied for and were denied Social Security benefits. Each Plaintiff then signed the Reimbursement Agreement and immediately began receiving benefits under the Plan. The decision denying Social Security benefits was ultimately overturned, and each Plaintiff received a retroactive lump-sum disability payment. Metropolitan requested reimbursement, and when Plaintiffs failed to comply, Metropolitan began to recoup those amounts by withholding monthly benefits under the Plan. In the case of each Plaintiff, the withholding resulted in the loss of all monthly benefits under the Plan.

Plaintiffs then filed suit to challenge Metropolitan's recoupment.

II. Count II: Breach of ERISA Fiduciary Duties

In Count II, Plaintiffs allege that Metropolitan breached the fiduciary duties imposed by 29 U.S.C. § 1104. In particular, Plaintiffs claim that Metropolitan violated 29 U.S.C. § 1022 by failing to explain in the plan summary the provisions now in dispute; Plaintiffs further claim that Metropolitan breached its fiduciary duties by failing to provide benefits as required by the Plan.

The Court rejects Plaintiffs' contention that Metropolitan violated 29 U.S.C. § 1022. The Magistrate correctly recognized that section 1022—which does require that a "summary plan description" (SPD) of any employee benefit plan be furnished to participants and beneficiaries—imposes obligations only on the plan administrator. See 29 U.S.C. §§ 1021, 1022, 1024(b)(1) (1982).⁵ As defined by ERISA, the term "administrator" means "the person specifically so designated by the terms of the instrument under which the plan is operated." 29 U.S.C. § 1002(16)(A)(i). The Plan governing Plaintiffs' benefits specifically provides that GE, not Metropolitan, is the Plan Administrator. Accordingly, section 1022 imposes obligations on GE, and Metropolitan cannot be found to have violated those mandates.

The Court also finds, as did the Magistrate, that summary judgment should be granted for Metropolitan on Plaintiffs' claim that Metropolitan's recoupment of benefits violated its fiduciary duties. The Court, however, reaches this result for a different reason.

The Magistrate cited caselaw for the proposition that exhaustion of administrative remedies is a prerequisite to judicial determination of a claim for breach of ERISA fiduciary obligations. See Denton v. First Nat'l Bank, 765 F.2d 1295, 1300-01 (5th Cir.1985); Amato v. Bernard, 618 F.2d 559, 566-68 (9th Cir.1980); Worsowicz v. Nashua Corp., 612 F.Supp. 310, 314 (D.N.H.1985). The Magistrate then concluded that "it is undisputed that the plaintiffs here did not exhaust their administrative remedies." Magistrate's Memorandum and Recommended Decision at 9 (footnote omitted).

If it was not clear on the record before the Magistrate, it is clear now that Plaintiffs do dispute the issue of exhaustion. Plaintiffs' Revised Memorandum of Law in Support of their Motion for Summary Judgment, at 33-37. Plaintiffs cite correspondence between Metropolitan officials and Plaintiffs' counsel to support their claim that they followed the appeals process established by Metropolitan.⁶ Appendix to Plaintiff Danis' Motion for Summary Judgment, Exhibit 4 (Letter of May 30, 1984 from Delores Randazzo, Claims Supervisor, to Plaintiffs' counsel); Appendix to Plaintiffs' Revised Memorandum of Law in Support of their Motion for Summary Judgment, at 34-35 (Letter of June 12, 1984; same). That correspondence is sufficient to raise a question in the Court's view as to whether Plaintiffs exhausted their administrative remedies.

After reviewing the record as a whole, however, the Court concludes that the question of exhaustion is immaterial, because Plaintiffs are not entitled to relief based on the merits of their claim. An action brought pursuant to 29 U.S.C. § 1132(a)(1)(B) (1982)⁷ for benefits due under a pension plan requires the court to review the plan administrator's determination under an "arbitrary and capricious" standard. This standard has been applied by every federal circuit court of appeals.⁸ Application of the "arbitrary and capricious" standard involves a two-step process: "First, the court must determine the correct interpretation of the Plan's provisions. Second, the court must determine whether the Plan administrators acted arbitrarily or capriciously in light of the interpretation they gave the Plan in the particular instance." Denton v. First Nat'l Bank, 765 F.2d 1295, 1304 (5th Cir.1985).⁹

Initially, then, the Court must examine the language of the Plan and of the SPD¹⁰ to determine whether recoupment was proper under those instruments. As with any contract, the Court must interpret the unambiguous language of the written document according to its plain and commonly accepted meaning. Brackett v. Middlesex Ins. Co., 486 A.2d 1188, 1190 (Me.1985). See also Restatement (Second) of Contracts § 202 (1981).

The plain and unambiguous language of the Plan, set out above, provides that monthly benefits under the Plan will be reduced by any Social Security benefits. The SPD furnished to each Plaintiff also provided that Social Security benefits would reduce the amount of monthly benefits under the Plan.¹¹

Plaintiffs argue, however, that the relevant language says nothing about reducing Plan benefits upon the payment of retroactive Social Security payments such as the Plaintiffs in this case received. Plaintiffs argue further that the documents specifically guarantee "that a disabled insured will receive a continuing monthly income that will not fall below 50% of his pre-disability monthly income in combination with...