Godfrey v. Bellsouth

United States Court of Appeals,

Eleventh Circuit.

No. 95-6480.

Barbara Carol GODFREY, Plaintiff-Appellee, Cross-Appellant,

v.

BELLSOUTH TELECOMMUNICA-
TIONS, INC.; South Central Bell,
Defendants-Appellants, Cross-Appellees.

July 26, 1996.

Appeals from the United States District Court for the Northern
District of Alabama. (No. CV94-C-1386-S), U.W. Clemon, Judge.

Before CARNES, Circuit Judge, and FAY and GIBSON*, Senior Circuit
Judges.

FAY, Senior Circuit Judge:

An employee of BellSouth Telecommunications ("BST") brought

suit against the company to enforce the provisions of her sickness

and disability benefit plans. The District Court found that the

plaintiff was disabled under the terms of the plan contracts, and

that the plan administrators had arbitrarily and capriciously

rejected her claims. We affirm.

I. BACKGROUND

Carol Godfrey began working for BellSouth in 1963. By 1990

she had earned several promotions. However, in June of 1990 she

became ill. Her family doctor referred her to several specialists,

who diagnosed her with: fibromyalgia; a thirty degree angle of

pressure on the spine; lumbar disc syndrome; rotator cuff

disease; severe sciatic pain and sacral pain; chronic dorsal

*
Honorable John R. Gibson, Senior U.S. Circuit Judge for the
Eighth Circuit, sitting by designation.
lumbar strain; and joint swelling pain. The District Court found

that the evidence conclusively proved that her pain was severe and

disabling.

Ms. Godfrey was treated with several very potent drugs which

she had to take on a daily basis, including: Lorcet Plus, a

narcotic pain medication whose main side effect is drowsiness;

Flexeril, a muscle relaxer whose main side effect is drowsiness;

and Donnatal, an anti-colonurgic medicine whose main side effect is

blurred vision. In addition, she had to undergo regular physical

therapy.

In June of 1990, when she first started to experience the

debilitating pain, Ms. Godfrey submitted a claim for benefits under

BST's Sickness and Accident Disability (SAD) Plan. The District

Court found that she provided BST with more than ample evidence of

her disability, including physician's certificates from at least

four doctors. BellSouth's manager denied Sickness Benefits and the

review committees denied Ms. Godfrey's appeals.

In January of 1991, BST informed Ms. Godfrey that she would

have to return to work or be discharged. At that point, according

to the District Court:

[w]ith a dependent son, the plaintiff had no real choice other
than to dope herself up with the medications that had been
prescribed for her and get in the car, contrary to medical
advice, drive herself to work, and then work while under the
influence of a combination of very potent drugs.

Despite the debilitating pain, Ms. Godfrey was physically able to

show up for work on a fairly regular basis. However, the District

Court found that on some days she simply could not get to work.

Because of her sickness, her attendance record was the worst of any
employee in the unit, and she was disciplined for her absences.

Because she returned to work, however, she did not become eligible

for benefits under the Long-Term Disability Plan (LTD), which

requires the exhaustion of fifty-two weeks of disability benefits

under the sickness plan.

Ms. Godfrey filed complaints of discrimination and harassment

with BST in November of 1991 and January of 1992. In addition, she

filed grievances with the union. On January 20, 1993, all of her

complaints were denied, except BST reduced one of her suspensions

by two days. She filed suit on May 5, 1994 in state court.

The case was removed to federal court. Godfrey amended her

complaint to add a claim under ERISA, the Employee Retirement

Income Security Act of 1974, 29 U.S.C. §§ 1001-1461. The District

Court ruled that Godfrey was not entitled to extra-contractual or

punitive damages under 29 U.S.C. § 1132(a)(1)(B), § 1132(a)(3), or

§ 1140. After a bench trial, the court found that Godfrey was

disabled under the terms of the sickness and disability benefit

plans from June of 1990 to October 1, 1993. The court issued an

injunction ordering BST to comply with ERISA and pay Godfrey

$58,300.50 in benefits. BST appealed the judgment. Godfrey

cross-appealed the District Court's determination that she was not

entitled to extra-contractual or punitive damages.

II. STANDARD OF REVIEW

We review conclusions of law de novo but do not disturb

findings of fact unless they are clearly erroneous. See U.S. v.

Thomas, 62 F.3d 1332, 1336 (11th Cir.1995), cert. denied, --- U.S.

----, 116 S.Ct. 1058, 134 L.Ed.2d 202 (1996). Equitable remedies
will not be disturbed unless the District Court abused its

discretion or made an error of law, or unless the findings of fact

are not supported by the evidence. See Planned Parenthood Ass'n of

Atlanta Area, Inc. v. Miller, 934 F.2d 1462, 1471 (11th Cir.1991).

Where the administrator of an ERISA benefits plan has

discretionary authority to determine eligibility for benefits, a

court reviews that determination under the arbitrary and capricious

standard. Brown v. Blue Cross and Blue Shield of Alabama, 898 F.2d

1556, 1559 (11th Cir.1990). However, such a determination is not

entitled to as much deference where the administrator has a

conflict of interest. Id. at 1566.

[A] wrong but apparently reasonable interpretation is
arbitrary and capricious if it advances the conflicting
interest of the fiduciary at the expense of the affected
beneficiary or beneficiaries unless the fiduciary justifies
the interpretation on the ground of its benefit to the class
of all participants and beneficiaries.

Id. At 1566-67.

[T]he fiduciary's interpretation first must be "wrong" from
the perspective of a de novo review ...

Id. at 1566, n. 12.

III. ANALYSIS

A. The District Court did not err when it found that Godfrey was
denied benefits under the Sickness and Accident Disability Plan in
violation of ERISA Sections 502(a)(1)(B) and (a)(3), 29 U.S.C. §
1132(a)(1)(B) and § 1132(a)(3).

Using the test outlined above, we review the decision in this

case under the arbitrary and capricious standard. Brown, 898 F.2d

at 1559. However, such a determination is not entitled to as much

deference if the administrator had a conflict of interest. Brown,

898 F.2d at 1566. In such a case, we first conduct a de novo

review to decide if the determination was wrong. Id.
 BST argues that there was no conflict of interest, even

though BST self-administered the plan and paid benefits from its

operating expenses. According to BST, it would have had to pay

Godfrey regardless of the determination by the plan administrator;

either it would have paid Godfrey benefits or it would have paid

her wages. In addition, according to BST, it did not save the cost

of a replacement worker because it did not hire a replacement

worker when Godfrey was out, and it might not have hired one if she

had been granted benefits. However, if BST granted benefits to

Godfrey, it would have either had to hire a replacement worker or

lose the services of an employee in that position. The BST plan

administrators had a conflict of interest.

Because of this conflict of interest, BST's determination

could be arbitrary and capricious even if it was only "a wrong but

apparently reasonable interpretation." Brown, 898 F.2d at 1566.

The District Court found that the determination was indeed wrong,

and that Godfrey was disabled under the terms of the ERISA benefit

plans.

Ms. Godfrey sought benefits under two benefit plans. In order

to receive benefits under the first plan, the Sickness and Accident

Disability Plan, a participant must fulfill five requirements. The

only one that BST claimed that Godfrey did not meet was the

requirement that the plan participant furnish satisfactory evidence

of her disability. The plan did not specifically define

disability, but paid benefits when a participant was "temporarily

disabled from work by reason of sickness."

BST argues that this language required Godfrey to show that
she had a loss of function which would prevent her from doing her

job duties. Thus BST's Medical Director considered that Ms.

Godfrey was able to move her extremities without constraint despite

the fusion in her spine. The plan administrators testified that

they accepted the diagnoses of Godfrey's condition from her

doctors, but, as one of BST's medical consultants stated, "pain

alone does not substantiate disability."

The plan is designed to pay benefits when a participant is

"disabled from work by reason of sickness." Nothing in the plan

requires BST's narrow interpretation of the language. "Disabled

from work" can mean more than physical paralysis or limited limb

movement.

Dr. McLain, one of Godfrey's treating physicians, testified

that fibromyalgia can be severely disabling and can only be

diagnosed by an examination of the patient. The court found that

BST's physicians arbitrarily rejected the clear medical evidence

she submitted without even examining her themselves or seeking the

treatment notes of her doctors. Moreover, they ignored the effects

of the medication that Godfrey had to take on a daily basis due to

her condition.

It seems to the court that the only rational explanation for
the failure of the defendant's physicians to follow up on
evidence which they did have and to ignore the effects of the
medications that the plaintiff was taking is that they knew
that in fact the plaintiff was disabled and following up leads
and considering the effect of the medications would only
confirm what any reasonable doctor would have already known.

Thus the court found that BST's wrong determination "advance[d] the

conflicting interest of the fiduciary at the expense of the

affected beneficiary." Brown, 898 F.2d at 1567. Because BST could
not justify its determination "on the ground of its benefit to the

class of all participants," id., the denial of benefits was

arbitrary and capricious and violated ERISA Sections 502(a)(1)(B)

and (a)(3), 29 U.S.C. § 1132(a)(1)(B) and (a)(3). The District

Court determined that from June 15, 1990 until January 21, 1991,

Ms. Godfrey was disabled and out of work and that she was entitled

to benefits under the SAD plan for that time period. The record

fully supports this finding.

B. The District Court did not err when it found that BST violated
Section 510 of ERISA, 29 U.S.C. § 1140.

After BST arbitrarily and capriciously denied Godfrey benefits

under the sickness plan, BST required the disabled plaintiff to

return to work or lose her job. The District Court found that:

[w]ith a dependent son, the plaintiff had no real choice other
than to dope herself up with the medications that had been
prescribed for her and get in the car, contrary to medical
advice, drive herself to work, and then work while under the
influence of a combination of very potent drugs.

Thus the court found that although Godfrey was disabled under the

terms of the sickness plan, she was physically able to show up at

her place of employment. However, her attendance record was the

worst of any employee in her unit due to her disability, and she

was disciplined for her absences. Because she returned to work in

January of 1991 and because thereafter she was suspended and

threatened with discharge whenever she stayed home, she lost her

eligibility for benefits under the SAD plan and she did not become

eligible for benefits under the Long-Term Disability (LTD) Plan.

Section 510 of ERISA makes it:

unlawful for any person to discharge, fine, suspend, expel,
discipline, or discriminate against a participant or
beneficiary for exercising any right to which he is entitled
 under the provisions of an employee benefit plan, ... or for
the purpose of interfering with the attainment of any right to
which such participant may become entitled under the plan.

29 U.S.C. § 1140.

Of course an employer may demand that an employee return to

work after determining that the employee is not disabled, and then

discipline that employee for unexcused absences. The employer does

not violate ERISA Section 510 just because a court later determines

that the employer's good faith disability determination was wrong.

However, ERISA Section 510 does prohibit an employer from

threatening to fire a disabled1 employee in order for the employer

to avoid paying further benefits.

In this case, the District Court specifically found: that

BST threatened to discharge Godfrey if she stayed home and

disciplined her when she did stay home, even though she had the

right to stay home under the benefit plans; that BST did so, at

least in part, in order to prevent Godfrey from becoming eligible

for further benefits; and that from January 21, 1991 until October

1, 1993, Godfrey was disabled and BST unlawfully acted to prevent

her from obtaining benefits under the SAD plan and from becoming

eligible for benefits under the LTD plan. The record fully

supports these findings.

BST argues that Godfrey's claim under Section 510 was barred

by the two year statute of limitations. 2 BST threatened to

1
Using the definition of disability in the relevant benefit
plan.
2
The applicable statute of limitations for this case is two
years. See Musick v. Goodyear Tire & Rubber Co., 81 F.3d 136,
137 (11th Cir.1996).
discharge Godfrey in January of 1991 and she was suspended for

excessive absenteeism in 1991, but she did not bring suit until May

5, 1994. Godfrey counters, however, that she had to exhaust any

administrative remedies before she could bring suit, see Springer

v. Wal-Mart Associates' Group Health Plan, 908 F.2d 897, 899 (11th

Cir.1990), and so the statute of limitations did not begin to run

until she did so on January 20, 1993.

Godfrey did file complaints of discrimination and harassment

with BST in November of 1991 and January of 1992. In addition, she

filed grievances with the union. On January 20, 1993, all of her

complaints were denied, except BST reduced one of her suspensions

by two days.

These administrative procedures were not specifically

provided for in the benefit plans, and BST argues on appeal that

Godfrey was not required to file an administrative appeal in this

case. However, BST argued in its motion for summary judgment

before the District Court that Godfrey had failed to exhaust her

administrative remedies in regard to the Section 510 claim because

her administrative complaint dealt only with the denial of benefits

and not with any retaliation. BST argued in the District Court

that Godfrey was required to seek administrative remedies before

she could file this suit. Accepting such a position, the final

action here was on January 20, 1993, and the suit was filed well

within the statute of limitations. BST cannot raise for the first

time on appeal the argument that Godfrey did not have to complain

administratively in this case, see FDIC v. Verex Assurance, Inc.,

3 F.3d 391, 395 (11th Cir.1993), and so we must conclude that BST's
final action was on January 20, 1993. The suit was filed within

the statute of limitations.3
C. The District Court did not err in refusing to set off
Godfrey's benefits award by the wages she received.

Although the District Court found that Godfrey was disabled,

she did return to work on January 21, 1991 and received wages from

that point on. Those wages would normally prevent her from

receiving benefits under the SAD plan or the LTD plan, but because

BST violated Section 510 of ERISA the District Court could order

BST to pay benefits for that period. However, BST contends that

those benefits should be offset by the wages that Godfrey was paid

by BST. Those wages exceed the amount of benefits that Godfrey

would have received, and so BST argues that even if it did violate

ERISA Sections 502 and 510, Godfrey is entitled to no relief.

Normally, of course, a disabled employee will not collect

wages. In this case, however, the District Court found that Ms.

Godfrey was disabled under the terms of the benefit plans, even

though she was able to physically show up for work and earn wages.

Under ERISA Section 502(a)(3), 29 U.S.C. § 1132(a)(3), the court

has the power to grant equitable relief to redress violations of

ERISA or violations of the benefit plan. In this case, BST

arbitrarily and capriciously determined that Godfrey was not

disabled, and threatened to fire her if she did not come back to

work. The District Court found that Godfrey had no real choice but

to return to work.

3
We express no opinion on whether a participant in an ERISA
plan must exhaust administrative remedies available to her
through her employer but not specified in the ERISA plan itself.
 Because of BST's arbitrary and capricious determination,

Godfrey had to show up for work while disabled under the terms of

her benefit plan. BST's decision was not only wrong, but arbitrary

and capricious. We cannot say that the District Court abused its

decision when, under the equitable power of ERISA Section

502(a)(3), it refused to offset the benefits award by the amount

Godfrey received in wages. BST was wrong, and the court did not

have to give it credit for being wrong. If the benefits award was

offset by her wages, then BST (and other companies that

self-administer their ERISA plans) would have an incentive to do

the same thing in the future: if the employer could threaten or

cajole a disabled4 employee into returning to work, it could obtain

the rewards of having an employee in that position without hiring

a replacement and without paying anything in benefits.5

D. The District Court did not err in holding that compensatory
and punitive damages are not available under ERISA Sections 502 or
510, 29 U.S.C. § 1132 or § 1140.

In Bishop v. Osborn Transportation, Inc., 838 F.2d 1173 (11th

Cir.), cert. denied, 488 U.S. 832, 109 S.Ct. 90, 102 L.Ed.2d 66

(1988), this Court held that ERISA Sections 502(a)(1)(B),

502(a)(3), and 510, 29 U.S.C. § 1132(a)(1)(B), § 1132(a)(3), or §

1140, do not provide for extra-contractual or punitive damages. As

this Court later noted in McRae v. Seafarers' Welfare Plan, 920

4
Using the definition of disability in the relevant benefit
plan.
5
We do not suggest that an employer or the administrator of
an ERISA plan should not make an informed decision concerning the
ability of an employee to work. However, if such a decision is
thereafter found to be arbitrary and capricious (wrong) there may
well be financial consequences.
F.2d 819, 821 (11th Cir.1991), the holding in Bishop was not

affected by Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 111

S.Ct. 478, 112 L.Ed.2d 474 (1990). The District Court did not err

in holding that extra-contractual damages are not available in this

case; a plan beneficiary can sue to enforce her rights under the

plan and under ERISA, and for equitable relief, but not for

punitive or compensatory damages.

IV. CONCLUSION

We conclude that the District Court applied the correct rules

of law and the appropriate standards when it found that BST

violated ERISA Sections 502 and 510, when it refused to offset the

benefits award, and when it denied Godfrey extra-contractual

damages. The judgment is AFFIRMED.