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Hansen v. International Painters And Allied Trades Industry Pension Plan

United States District Court, E.D. Pennsylvania

October 11, 2017

NORMAN HANSEN, Plaintiff,
v.
INTERNATIONAL PAINTERS AND ALLIED TRADES INDUSTRY PENSION PLAN and BOARD OF TRUSTEES OF THE INTERNATIONAL PAINTERS AND ALLIED TRADES INDUSTRY PENSION PLAN, Defendants.

          MEMORANDUM

          ROBERT F. KELLY, Sr. J.

         Plaintiff Norman Hansen (“Plaintiff”) filed suit in this Court under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001, et seq., seeking disability pension benefits that he believes were wrongfully denied by Defendant International Painters and Allied Trades Industry Pension Plan (the “Pension Plan” or “Pension Fund”) and Defendant Board of Trustees of the International Painters and Allied Trades Industry Pension Plan (the “Board”) (collectively, “Defendants”). Plaintiff also claims a document penalty under ERISA for failure to provide plan documents, a breach of fiduciary duty, and equitable relief.

         Presently before the Court are Plaintiff's and Defendants' Cross-Motions for Summary Judgment, along with numerous briefs in support and opposition to the respective motions. For the reasons noted below, Plaintiff's Motion for Summary Judgment is denied. However, as it relates to Count I of the Complaint, this matter is remanded to the Board of Trustees for consideration of whether a collective bargaining agreement (“CBA”) between Plaintiff's employer and the International Union of Painters and Allied Trades (“IUPAT”) obligates the employer to contribute to the Pension Plan for hours for workers' compensation, unemployment compensation, and vacation time. Defendants' Motion is granted as to Counts II, III, and IV, but is denied as it pertains to Count I.

         I. BACKGROUND

         Plaintiff worked as a painter and was an active member of the IUPAT from 1982 to 2012. (Compl. ¶ 9.) He was a vested participant in the Pension Fund, which was established to provide retirement benefits for employees covered under CBAs between employers and the IUPAT. (Id. ¶ 2; Def.'s Mem. Support Mot. Summ. J. at 1 (citing Administrative Record (“AR”) 32, 157, 160).)[1] The Pension Plan is a multiemployer defined benefit plan for purposes of ERISA. (Compl. ¶ 2.) The Board of Trustees, which is composed of an equal number of IUPAT and employer representatives, administers the Plan and is the “named fiduciary” under ERISA. (Id. ¶ 3; see also AR 479.)

         On January 12, 2012, Plaintiff fell off of a ladder and injured his right knee while working for Circle Wallcoverings, Inc. (Compl. ¶ 10.) Plaintiff and Circle Wallcoverings, Inc. executed a Workers' Compensation Compromise and Release Agreement on August 8, 2013 for an agreed-upon amount in settlement of all wage, medical, and specific loss benefits related to the work injury. (Id. ¶ 12.) Plaintiff also sought disability benefits from the Social Security Administration. (See AR 20.) By letter dated February 2, 2015, an administrative law judge determined that Plaintiff was disabled under the meaning of the Social Security Act beginning on September 23, 2013.[2] (AR 27.) Plaintiff agreed to the September 23, 2013 determination for purposes of establishing disability under the Social Security Act. (Compl. ¶ 16.)

         On February 14, 2015, Plaintiff applied for disability pension benefits from the Pension Fund. (Id. ¶ 13.) On March 10, 2015, the Pension Fund acknowledged receipt of his application and requested a copy of the Social Security Administration award to evaluate his claim. (Id. ¶ 14; see also AR 12.) The Pension Fund denied Plaintiff's application for benefits on April 1, 2015 because he did not meet the requirement of Article 6, Section 6.12(4), which provides that a claimant must have “at least 1, 000 Hours of Service in Covered Employment in the two Calendar Years prior to the year in which he or she became disabled.” (AR 33.)

         Plaintiff timely appealed the denial by letter dated May 7, 2015. (See Compl. ¶ 19; AR 102-03.) The letter also included a request for copies of the IUPAT Pension Plan and any summaries; Plaintiff's disability pension application; annual statements of Plaintiff's pension benefits for 2011 and 2012; all records used to calculate Plaintiff's covered service for calendar years 2011 and 2012; and all other records related to Plaintiff's disability retirement application. (See AR 102.) In a letter dated May 27, 2015, Plaintiff reiterated his request for the various documents. (Compl. ¶ 20; AR 107.) On June 5, 2015, Plaintiff was provided with the 2015 Summary Plan Description (“SPD”) of the IUPAT Pension Plan, his disability pension application and supporting documents, his pension statements from years 2011 and 2012, and “all other documents in the Fund's possession related to [his] benefit application and benefit calculation.” (Compl. ¶ 21; AR 110.) The only document not provided to Plaintiff was the actual IUPAT Pension Plan itself. Plaintiff's appeal for review of the denial of benefits was scheduled for the September 2015 Board of Trustees meeting. (Compl. ¶ 23.)

         On August 27, 2015, Plaintiff submitted a memorandum to Corinne M. Koch, the Pension Fund Administrator at the time, in support of his appeal. (AR 43-55.) The memorandum advanced several arguments for the basis of awarding benefits. First, Plaintiff claimed he had accumulated 998 hours for work in 2011 and 2012 and that Defendants should have rounded-up to 1, 000 hours to ensure he would meet the 1, 000 hour requirement. (AR 48-51.) He further argued that Defendants “cherry-picked” information because they had used his earned hours for 2011 and 2012, which equates to 894 hours, instead of his paid hours in 2011 and 2012, which equates to 998 hours. (Id.) Second, Plaintiff contended that Defendants refused to give him additional benefit hours with respect to workers' compensation, unemployment compensation due to layoff, vacation pay, all of which were allegedly in violation of the service crediting rules in 29 C.F.R. § 2530.200b-2. (AR 51-54.) On September 24, 2015, the Pension Fund postponed Plaintiff's appeal to the December 2015 meeting of the Board of Trustees. (AR 150.) On October 2, 2015, the Pension Fund provided to Plaintiff via email the IUPAT Pension Plan in effect as of January 2010 and January 2015. (AR 153.) Plaintiff's counsel requested hard copies of the documents, and the Pension Fund provided them on October 27, 2015. (AR 155.)

         The Board of Trustees denied Plaintiff's appeal at the December 2015 meeting. The Board mailed their decision to Plaintiff by letter dated December 22, 2015, concluding that he lacked the required work credit in years 2011 and 2012 because his benefit hours totaled 894. (AR 157-59.) The Board of Trustees further stated that he was not entitled to additional credit for workers' compensation, unemployment compensation, vacation payments because pursuant to the Pension Plan, “[t]here [was] no indication that [Plaintiff's] employer was obligated to make contributions to the Plan for [those] payment[s].” (AR 158.) As mentioned above, Section 6.12(a)(4) of Article 6 provides that a claimant must have “at least 1, 000 Hours of Service in Covered Employment in the two Calendar Years prior to the year in which he or she became disabled.” (AR 33.) As applicable to Plaintiff, the Board of Trustees relied on subsection (a) of the definition of “Covered Employment, ” which is “work or leave time that is . . . Hours of Service for which an Employer is obligated to make contributions to the Plan or the Trust for credit to the Plan.” (AR 421.) In denying credit for workers' compensation, unemployment compensation, and vacation payments, the Board of Trustees concluded there was no indication that Plaintiff's employer was obligated to make contributions to the Pension Plan for the additional hours he sought.

         Plaintiff filed a four-count Complaint in this Court on September 20, 2016. Count I is a claim for benefits pursuant to 29 U.S.C. § 1132(a)(1)(B); Count II is a failure to provide plan documents claim in violation of 29 U.S.C. § 1132(c)(1); Count III is a breach of fiduciary duty claim under 29 U.S.C. § 1132(a)(2); and Count IV is a request for equitable relief under 29 U.S.C. § 1132(a)(3). The parties filed Cross-Motions for Summary Judgment on August 4, 2017.

         II. LEGAL STANDARD

         A. Rule 56(a) Standard

         Federal Rule of Civil Procedure 56(a) states that summary judgment is proper “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The Court asks “whether the evidence presents a sufficient disagreement to require submission to the jury or whether . . . one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). The moving party has the initial burden of informing the court of the basis for the motion and identifying those portions of the record that demonstrate the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). “A fact is material if it could affect the outcome of the suit after applying the substantive law. Further, a dispute over a material fact must be ‘genuine, ' i.e., the evidence must be such ‘that a reasonable jury could return a verdict in favor of the non-moving party.'” Compton v. Nat'l League of Prof'l Baseball Clubs, 995 F.Supp. 554, 561 n.14 (E.D. Pa. 1998) (quoting Liberty Lobby, 477 U.S. at 255).

         Summary judgment must be granted “against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex, 477 U.S. at 322. Once the moving party has produced evidence in support of summary judgment, the non-moving party must go beyond the allegations set forth in its pleadings and counter with evidence that presents “specific facts showing that there is a genuine issue for trial.” See Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1362-63 (3d Cir. 1992). “More than a mere scintilla of evidence in its favor” must be presented by the non-moving party in order to overcome a summary judgment motion. Tziatzios v. United States, 164 F.R.D. 410, 411-12 (E.D. Pa. 1996). If the court determines that there are no genuine disputes of material fact, then summary judgment will be granted. Celotex, 477 U.S. at 322.

         B. Denial of Benefits Under ERISA

         A plan administrator's denial of benefits is reviewed under a de novo standard unless “the plan document ‘gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.'”[3] Dowling v. Pension Plan For Salaried Emps. of Union Pac. Corp. & Affiliates, --F.3d--, No. 16-1977, 2017 WL 4079460, at *4 (3d Cir. Sept. 15, 2017) (quoting Conkright v. Frommert, 559 U.S. 506, 512 (2010)). “If the plan gives the administrator or fiduciary discretionary authority to make eligibility determinations, [a court] review[s] its decisions under an abuse-of-discretion (or arbitrary and capricious) standard.” Viera v. Life Ins. Co. of N. Am., 2 F.3d 407');">642 F.3d 407, 413 (3d Cir. 2011) (citing Glenn, 554 U.S. at 111 (2008); Doroshow v. Hartford Life & Accident Ins. Co., 574 F.3d 230, 233 (3d Cir. 2009)) (footnote omitted). The abuse-of-discretion standard of review is used interchangeably with the arbitrary and capricious standard of review in the ERISA context. Id. at 413 n.4 (citing Howley v. Mellon Fin. Corp., 625 F.3d 788, 793 n.6 (3d Cir. 2010)). “Under the abuse-of-discretion standard, [a court] may overturn an administrator's decision only if it is ‘without reason, unsupported by substantial evidence or erroneous as a matter of law.'” Id. (citing Miller, 632 F.3d at 845).

         “ERISA plan administrators are fiduciaries, and ‘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 facto[r] in determining whether' the administrator's benefits decision should stand.” Dowling, 2017 WL 4079460, at *8 (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)) (alteration in original). “The factors may include procedural concerns about the administrator's decision-making process and structural concerns about the conflict of interest inherent in the way the ERISA-governed plan was funded.” Patrick v. Devon Health Servs., Inc., 828 F.Supp.2d 781, 793 n.14 (E.D. Pa. 2011). “‘[T]he procedural inquiry focuses on how the administrator treated the particular claimant.'” Miller, 632 F.3d at 845 (quoting Post v. Hartford Ins. Co., 501 F.3d 154, 162 (3d Cir. 2007)). “Specifically, in considering the process that the administrator used in denying benefits, we have considered numerous irregularities to determine whether, in this claimant's case, the administrator has given the court reason to doubt its fiduciary neutrality.” Id. (quoting Post, 501 F.3d at 165) (internal quotation marks omitted). However, the lawfulness of the administrator's decision will rest on case-specific factors that must be weighed together. See id. (quoting Glenn, 554 U.S. at 117).

         “In applying the arbitrary and capricious standard in ERISA actions, a court is limited to reviewing the evidence contained within the administrative record.” Clauss v. Plan, 196 F.Supp.3d 463, 469 (M.D. Pa. 2016) (citing Abnathya v. Hoffman-La Roche, Inc., 2 F.3d 40, 48 n.8 (3d Cir. 1993), abrogated on other grounds by Glenn, 554 U.S. at 105); see also Mitchell v. Eastman Kodak Co., 113 F.3d 433, 440 (3d Cir. 1997).

         III. DISCUSSION

         A. The Appropriate Standard of Review and Whether a Conflict of Interest Exists

         A de novo standard of review of the administrator's denial of benefits is appropriate unless the terms of the plan give the administrator discretionary authority to determine benefits eligibility or to construe the terms of the plan. See Dowling, 2017 WL 4079460, at *4 (citation omitted). If the terms of the plan give the administrator such discretion, then the arbitrary and capricious standard is applicable. See Viera, 642 F.3d at 413.

         There is no question that the Board of Trustees is authorized with the exclusive right of discretion to construe the terms of the IUPAT Pension Plan and determine eligibility for benefits.[4] (See AR 391-92.) Accordingly, the Court will review the Board of Trustees' denial of Plaintiff's disability benefits under the arbitrary and capricious standard.

         What the parties dispute, however, is if there is a conflict of interest that the Court should weigh as a factor when determining whether the Board of Trustees' decision was arbitrary and capricious. Plaintiff argues there is a structural and procedural conflict of interest that must be taken into account in this case. (See Pl.'s Mem. Opp'n Defs.' Mot. Summ. J. at 5-9.) Defendants respond by claiming that multiemployer benefit plans, by their very nature, do not have conflicts of interest within the meaning of Glenn. (See Defs.' Mem. Support Mot. Summ. J. at 7-8.) Importantly, the mere presence of a conflict does not change the standard of review from arbitrary and capricious to de novo. See Dowling, 2017 WL 4079460, at *8 (citing Glenn, 554 U.S. at 115).

         In Glenn, the Supreme Court agreed to answer the questions as to whether a plan administrator that both evaluates and pays claims is operating under a conflict of interest, and if so, how such a conflict should be taken into account when there is judicial review of a discretionary benefit determination. See Glenn, 554 U.S. at 110. In answering the first question, the Supreme Court held that a conflict of interest exists when a plan administrator both evaluates and pays claims for benefits. See id. at 112. In a more narrow statement, the Court then provided that the “answer is clear where it is the employer that both funds the plan and evaluates the claims.” Id. at 112. As to the second question the Court agreed to answer, if a conflict does indeed exist, it is simply “one factor among many that a reviewing judge must take into account.” Id. at 116; see also Dowling, 2017 WL 4079460, at *8.

         The IUPAT Pension Plan is a multiemployer defined benefit plan that is funded through contributions employers make pursuant to CBAs between the IUPAT and the employers. (See AR 565.) The Board, which is composed of an equal number of employer and union representatives, is the plan administrator and named fiduciary of the Pension Plan under ERISA. (See AR 329, 563, 565.) As mentioned above, they have discretion to interpret the Pension Plan and make benefit eligibility determinations. (See AR 391-92.)

         There appears to be a circuit split regarding whether multiemployer pension plans such as this are conflicted within the meaning of Glenn, and the Third Circuit has not yet spoken on this issue. As articulated in Glenn, the first step of the conflict analysis turns on whether the plan administrator is both evaluating and paying claims. See Glenn, 554 U.S. at 112. In Durakovic v. Bldg. Serv. 32 BJ Pension Fund, the United States Court of Appeals for the Second Circuit (“Second Circuit”) held that multiemployer benefit plans are conflicted because the evaluation of claims is “entrusted (at least in part) to representatives of the entities that ultimately pay the claims allowed.” 609 F.3d 133, 139 (2d Cir. 2010). While the employer representatives have fiduciary interests that weigh in favor of the trusts' beneficiaries, they also have interests that weigh to the contrary by virtue of them representing the employer. See id. The fact that the board was evenly balanced between union and employer representatives had no influence on whether a conflict existed, and the existence of union representation is something that a court should consider at the second step of the Glenn analysis, which is determining how heavily to weigh the conflict. See id.

         Conversely, in Anderson v. Suburban Teamsters of N. Ill. Pension Fund Bd. of Trustees, the United States Court of Appeals for the Ninth Circuit (“Ninth Circuit”) held that multiemployer benefit trust funds are not conflicted within the meaning of Glenn. 588 F.3d 641, 648 (9th Cir. 2009); see also Tompkins v. Cent. Laborers' Pension Fund, 712 F.3d 995, 1000-01 (7th Cir. 2013) (“We held that a conflicts analysis was not necessary when the plan at issue was a multi-employer welfare plan whose trustees consisted of an equal number of union and employer representatives, whose union representatives had ‘no discernible incentive to rule against an applicant, ' and whose trustees were unanimous in their ruling.”); Klein v. Cent. States, Se. & Sw. Areas Health and Welfare Plan, 346 F. App'x 1, 3 (6th Cir. 2009) (not precedential). The Anderson court reasoned that the trustees had no personal economic interest in the decision to grant or deny benefits because participating employers, not the trustees, fund the plan. See Id. Further, the court found persuasive the fact that the trustees were composed of an equal number of union and employer representatives. See id.

         We find the Second Circuit's decision in Durakovic more persuasive. In Anderson, the Ninth Circuit relied on Glenn for the proposition that “[a] conflict of interest exists ‘where it is the employer that both funds the plan and evaluates the claims.'” Id. (quoting Glenn, 554 U.S. at 112). Of course, that proposition is a correct statement of law. But the Supreme Court's holding in Glenn went beyond whether a conflict exists when it is the employer that evaluates and pays the benefits claims. In Glenn, the Court addressed the issue very succinctly: “whether the fact that a plan administrator both evaluates claims for benefits and pays benefits claims creates . . . a conflict of interest. . . . In our view, it does.” Glenn, 554 U.S. at 112 (internal quotation marks omitted). The initial determination of the existence of a conflict of interest is quite simple. According to the first step of a Glenn conflict analysis, a court must ask if it is the plan administrator that both evaluates benefit eligibility and pays the benefits. See Durakovic, 609 F.3d at 138. If so, a structural conflict of interest exists that the court must weigh in determining whether the administrator's decision to deny benefits was arbitrary and capricious. See id. at 138-39. The cases Defendants rely on fail to take into account the more expansive nature of Glenn. Accordingly, because the Board of Trustees both evaluates claims and the funds are paid out of the Plan, there is a conflict of interest pursuant to Glenn.

         The second step in the Glenn analysis focuses on how heavily to weigh the conflict of interest identified. See Glenn, 554 ...


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