United States District Court, W.D. Pennsylvania
August 26, 2005.
EVELYN C. BLAND, Plaintiff,
SMS DEMAG, INC., Defendant.
The opinion of the court was delivered by: TERRENCE F. McVERRY, District Judge
MEMORANDUM OPINION AND ORDER
Before the Court for consideration and disposition are
PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (Document No. 21), with
brief in support (Document No. 22), Defendant's response
thereto (Document No. 25), and Plaintiff's reply (Document No.
29). Also before the Court are DEFENDANT SMS DEMAG INC.'S MOTION
FOR SUMMARY JUDGMENT (Document No. 30), with brief in support
(Document No. 31), Plaintiff's response thereto (Document No.
35), and Defendant's reply (Document No. 38).
After considering the filings of the parties, the evidence of
record and the relevant statutory and case law, Plaintiff's
Motion for Summary Judgment will be granted and Defendant's
Motion for Summary Judgment will be denied.
Plaintiff Evelyn C. Bland ("Mrs. Bland") filed this action
against Defendant SMS Demag, Inc. ("Defendant") pursuant to the
Employee Retirement Income Security Act of 1974 ("ERISA"),
29 U.S.C. § 1001 et seq. Defendant is the Plan Administrator for
the SMS Demag, Inc. Health and Welfare Plan No. 501 ("the Plan").
Pltf's Stmt. of Facts at ¶ 11; Def's Resp. to Pltf's Facts at ¶
11. Defendant has been the Plan Administrator since November of
1999. Pltf's Stmt. of Facts at ¶ 11.
On July 18, 1945, Plaintiff and Ray Bland were married. Pltf's
Stmt. of Facts at ¶ 2. As of November 23, 1987, the approximate
date of his retirement, Ray Bland had been employed by SMS
Sutton, Inc. and its predecessors in interest for approximately
thirty-seven (37) years. Id. at ¶ 4. SMS Sutton, Inc. later
became SMS Eumenco, which is the successor-in-interest to SMS Sutton, Inc. Id. at ¶ 14.
On November 23, 1987, Ray Bland entered into a Severance
Agreement with SMS Sutton, Inc. Id. at ¶ 6. Pursuant to the
Severance Agreement, and in exchange for consideration, SMS
Sutton, Inc. promised that it would "include you [Ray Bland] and
your spouse [Evelyn Bland] in the company medical plans for
life." Pltf's Stmt. of Facts at ¶ 7. Subsequently, SMS Sutton,
Inc. and SMS Eumenco included both Ray Bland and Mrs. Bland in
the company medical plans. Id. at ¶ 8. The parties agree that
"the November 23, 1987 Severance Agreement between Raymond A.
Bland and SMS Sutton, Inc. is a modification to the 1987 Plan."
Def's Resp. to Pltf's Facts at ¶ 12. However, Defendant contends
that Mrs. Bland was never "enrolled in the plan in her own
right," and that "her only status in the Plan was as the
dependent of Ray Bland." Def's Resp. to Pltf's Facts at ¶ 8.
The Blands were continuously married until Ray Bland's death on
July 14, 2003, after a long battle with cancer. Pltf's Stmt. of
Facts at ¶ 2-3. On December 10, 2003 SMS Eumenco notified Mrs.
Bland that her inclusion in the plan ceased with her husband's
death and would be discontinued, but that she would be able to
continue coverage, at her own expense, under COBRA until July of
2006. Def's Resp. to Pltf's Facts at ¶ 14. In a letter dated
December 20, 2003, Mrs. Bland requested that SMS Eumenco, Inc.
reconsider its decision to discontinue her health coverage. See
Def's Resp. to Pltf's Facts, exh. 8. The letter reads, in part,
There must be some mistake. My husband's severance
agreement with the company clearly stated that we
would both be covered for life, not his life, but
both of our lives. My husband realized that his
health insurance benefits were rather unique and he
had been given special consideration in this area. *
When Ray was ill we spoke about the various areas of
my life that would have to change when he was gone.
Missing him was of course the greatest, but other
financial matters also had to be addressed.
Repeatedly he told me that at least I did not have to
worry about my medical benefits, because I would
still be covered with Sutton until my death. He had
mentioned this many times over the years. It was one
area that there would be no change and this gave him
some sense of reassurance knowing that he would not
be there to take care of me any longer. This was my
husband's clear understanding when he retired, and
certainly the intent of Mr. Sutton as he expressed to
Mrs. Bland's request for reconsideration was forwarded to
Defendant, which treated her request as an appeal under ERISA. Def's Stmt. of Facts at ¶ 18.
Peter Fernie ("Fernie"), the Vice-President of SMS Demag., Inc.
and the decisionmaker in this case, reviewed the Master Plan
Document, Defendant's contract with Highmark Blue Cross Blue
Shield ("the Contract"), the 1987 Plan modification set forth in
the Severance Agreement, and the facts submitted by Mrs. Bland.
Id. at ¶ 19. Fernie also considered what Defendant
characterizes as "the Plan's position with respect to providing
insurance to the spouses of retirees, the spouses of deceased
employees and the spouses of deceased retired employees . . ."
Id. at ¶ 20. The Plan Administrator is authorized to "construe
and interpret this Plan and the Plan Programs including, without
limitation, correcting any defect, supplying and omitting and
reconciling any inconsistency . . ." Id. at ¶ 18.
In a letter to Mrs. Bland dated March 12, 2004, Fernie
articulated his determination that Mrs. Bland was no longer
eligible for health coverage under the plan. Def's Appx., exh. F.
Fernie found that "the Master Plan Document defers to the
eligibility provisions established by the Contract," and that
Mrs. Bland did not fulfill the definition of an "Employee" under
the Contract because she was not an hourly or salaried employee.
Id. Fernie also informed Mrs. Bland that she did not qualify
for coverage under the Plan as a dependent because "a dependent
has standing for coverage under the Plan only through the
Employee," and "there is no one to define as an Employee . . ."
Id. Significantly, Fernie's letter makes no reference
whatsoever to either the existence or the language of the 1987
modification to the Plan.
Mrs. Bland's son-in-law requested a reconsideration of the
denial. Def's Stmt. of Facts at ¶ 23. Fernie reconsidered and
reaffirmed his earlier decision. Id. at ¶ 25; see also Def's
Appx., exh. J. This action followed.
Standard of Review
Rule 56(c) of the Federal Rules of Civil Procedure reads, in
pertinent part, as follows:
[Summary Judgment] shall be rendered forthwith if the
pleadings, depositions, answers to interrogatories
and admissions on file, together with the affidavits,
if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled
to judgment as a matter of law. Fed.R.Civ.P. 56(c).
An issue of material fact is genuine only if the evidence is
such that a reasonable jury could return a verdict for the
non-moving party. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242
, 248 (1986). The court must view the facts in a light most
favorable to the non-moving party, and the burden of establishing
that no genuine issue of material fact exists rests with the
movant. Celotex, 477 U.S. at 323. The "existence of disputed
issues of material fact should be ascertained by resolving all
inferences, doubts and issues of credibility against the moving
party." Ely v. Hall's Motor Transit Co., 590 F.2d 62
, 66 (3d
Cir. 1978) (quoting Smith v. Pittsburgh Gage & Supply Co.,
464 F.2d 870
, 874 (3d Cir. 1972)).
A claim for benefits under ERISA, § 502(a)(1)(B) must be
brought against the plan itself or the administrator with
discretionary authority and responsibility for the denial of the
claim. See 29 U.S.C. § 1132(d)(2). Although ERISA does not
provide the standard of review for an action by a participant or
beneficiary alleging that she has been denied benefits, in
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), the
Supreme Court held that the appropriate standard for actions
challenging denials of benefits is a de novo standard unless
the plan gives the "administrator or fiduciary discretionary
authority to determine eligibility for benefits or to construe
the terms of the plan," in which case an abuse of discretion or
arbitrary and capricious*fn1 analysis is appropriate. See
Mitchell v. Eastman Kodak Co., 113 F.3d 433, 437 (3d Cir. 1997)
(citing Firestone, 489 U.S. at 115). The Firestone court
qualified its holding by noting that, "if 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
factor" in determining whether there is an abuse of discretion. Firestone, 489 U.S. at 115.
Neither party has addressed whether the Plan Administrator
acted under a conflict of interest; both simply argue that
Fernie's decision was, or was not, arbitrary and capricious.
Moreover, the Court has found no evidence of record which
suggests that the Plan Administrator acted under a conflict of
interest. Therefore, the Court will review the merits of Fernie's
decision under the traditional arbitrary and capricious
The Court finds and rules that Fernie's decision that Mrs.
Bland is not eligible for health coverage under the Plan is
arbitrary and capricious. First, as mentioned above, in Fernie's
March 12, 2004 letter to Mrs. Bland, he did not address the
meaning of the 1987 Plan modification, which promised that both
Mr. & Mrs. Bland would be included "in the company medical plans
for life." The 1987 Plan modification is also not referenced or
analyzed in the subsequent letter to Mrs. Bland's son-in-law. In
the Court's view the meaning of the 1987 Plan modification is
plain and requires no interpretation: Ray and Evelyn Bland were
to be included in the company medical plans for life, and Mrs.
Bland's coverage was not dependent upon whether Ray Bland was
alive. See Dewitt v. Penn-Del Directory Corp., 106 F.3d 514,
517 (3d Cir. 1997) ("Because we believe that the Plan
Administrator's interpretation of the Plan . . . controverts the
plain language of the Plan, we conclude that the Administrator
acted arbitrarily and capriciously."). Moreover, there is no
doubt that Ray Bland believed that his wife would be covered by
the Plan until her death when he entered into the Severance
Agreement with SMS Sutton, Inc., regardless of when he may die.
Defendant's argument, distilled to its essence, is that
Fernie's decision cannot be arbitrary and capricious because he
had the discretion to construe and interpret the Plan, and
because he considered the Master Plan Document, the Contract and
other information when he made his decision. See Def's Brief in Support of its Motion for Summary
Judgment at 9-12. The Court does not agree. In the Court's view
Fernie has given undue weight to Plan documents which became
effective over a decade after the 1987 Plan modification was
contracted. Indeed, it appears that Fernie has endeavored to
interpret the 1987 Plan modification to not exist because his
interpretation is not consistent with later definitions of
"employee" or "dependent" under later Plan documents.*fn3
Therefore, the Court will reverse the decision of the Plan
Administrator and order that Mrs. Bland's health care coverage
under the Plan be reinstated.
For the reasons hereinabove stated, Plaintiff's Motion for
Summary Judgment will be granted and Defendant's motion for
summary judgment will be denied. An appropriate Order follows. ORDER OF COURT
AND NOW, this 26th day of August, 2005, in accordance with the
foregoing Memorandum Opinion it is hereby ORDERED, ADJUDGED and
DECREED as follows:
1) Plaintiff's Motion for Summary Judgment (Document
No. 21) is GRANTED;
2) Defendant SMS Demag Inc.'s Motion for Summary
Judgment (Document No. 30) is DENIED;
3) Defendant is hereby ORDERED to reinstate full
health care coverage for Evelyn C. Bland under the
SMS Demag, Inc. Health and Welfare Plan No. 501 as it
existed prior to the death of Ray Bland, and
Defendant is prohibited from terminating or reducing
Plaintiff's coverage in the future; and
4) Plaintiff may submit an appropriate petition and
brief in support of her request for an award of
monetary damages and prejudgment interest, as well as
attorney's fees and costs pursuant to
29 U.S.C. § 1132(g)(1), on or before September 9, 2005. Defendant
may file a response and brief in opposition within
ten (10) days of Plaintiff's filing.
© 1992-2005 VersusLaw Inc.