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Zipf v. American Telephone and Telegraph Co.

argued: June 2, 1986.

MONICA M. ZIPF, APPELLANT
v.
AMERICAN TELEPHONE AND TELEGRAPH CO.



On Appeal from the United States District Court For the Western District of Pennsylvania (Pittsburgh), Civil Action No. 84-2245.

Author: Stapleton

BEFORE: GIBBONS, BECKER, and STAPLETON, Circuit Judges.

STAPLETON, Circuit Judge.

In this appeal we are called upon to decide whether a participant in a federally regulated employee benefits plan must exhaust internal administrative remedies before filing suit in federal court for alleged interference with her statutory rights. We find that no exhaustion is required, and so reverse the judgment of the district court.

I

Monica M. Zipf, appellant, was employed by the American Telephone & Telegraph Company, appellee ("AT&T"), from March 21, 1969 until April 5, 1984. In 1981, Zipf was diagnosed as suffering from rheumatoid arthritis. This illness, and its episodic "flare-ups," occasionally caused Zipf's absence from work. Her medical condition led to her taking a disability leave of absence from her employment, beginning on September 27, 1982. She remained on disability leave, which included a period of maternity leave, until, with the permission of her physician, she returned to work in July 1983, Zipf received disability benefits under the terms of AT&T's Sickness and Accident Disability Benefit Plan ("the plan") for at least part of this period.

After Zipf's return to full-time status, she continued occasionally to miss work on account of her illness. On Friday, March 30, 1984, Zipf's rheumatoid arthritis became aggravated and she began a period of absence that continued until the final day of her employment, Wednesday, April 5, 1984. On that day, Zipf's supervisor visited her at home and informed her that a decision had been made to terminate her because of her "excessive absenteeism."

Zipf alleges that under the terms of AT&T's plan, she would have been entitled to disability benefits beginning on the eighth calendar day of absence from work. As an employee with more than fifteen years of service with AT&T, she was potentially eligible for substantial benefits, in an amount equal to her full rate of pay for up to 26 weeks and at half pay for the following 26 weeks. Moreover, if her disability had thereafter continued to prevent her returned to work, she then might have been able to obtain benefits under AT&T's Long Term Disability Plan.

Zipf's eighth day of absence from work as a result of illness would have been April 6, 1984. Zipf asserts that she was terminated on the seventh calendar day of absence, April 5, 1984, to prevent her from potentially qualifying for the substantial benefits for which she would have become eligible on April 6 and to eliminate a "disability problem." Zipf filed complaint against AT&T in the district court, alleging that she had been fired in violation of state law and Section 510 of the Employee Retirement Income Security act of 1974 ("ERISA"), 29 U.S.C. § 1140, the provision of that Act which protects employees from interference with their statutory and plan rights. Zipf sought reinstatement, back-pay and other equitable restitution.

Following discovery, AT&T moved for summary judgment. It argued that Zipf failed to exhaust the internal administrative remedies made available by the plan and that she should not be permitted to bring this suit until she has done so. Second, AT&T asserted that, because there are no genuine issues of material fact, it was entitled to summary judgment as a matter of law.

The district court granted summary judgment to AT&T on its exhaustion theory, without reaching the company's alternative ground, and dismissed the Section 510 claim without prejudice. The court also dismissed Zipf's pendent state law claims as preempted by ERISA. Zipf has appealed the district court's ruling that the failure to exhaust administrative remedies barred her Section 510 suit. She has not appealed the dismissal of the pendent state claim for wrongful discharge.

The parties agree that Zipf was a participant in the Sickness and Accident Disability Benefit Plan, a plan subject to ERISA. As mandated by ERISA Section 503, 29 U.S.C. § 1133, the plan includes claims and appeals procedures which give participants certain rights regarding the determination of eligibility for disability benefits.*fn1 AT& T admits that this plan provides disability benefits beginning on the eighth day of a disability only "so long as said employee remain[s] an employee for that eight (8) day period," a condition that Zipf did not satisfy. Zipf did not seek benefits under the plan before bringing this action.

II

Zipf's federal claim is based upon Section 510 of ERISA ...


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