FILED
United States Court of Appeals
PUBLISH Tenth Circuit
June 1, 2012
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
TENTH CIRCUIT Clerk of Court
TOMMY E. SPRADLEY, an
individual resident of Wagoner
County, Oklahoma,
Plaintiff–Appellee, No. 10-7100
v.
THE OWENS-ILLINOIS HOURLY
EMPLOYEES WELFARE BENEFIT
PLAN, an entity amenable to suit
pursuant to 29 U.S.C. 1132(d)(1),
Defendant–Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF OKLAHOMA
(D.C. No. 6:09-CV-00460-RAW)
Brian T. Ortelere of Morgan, Lewis and Bockius LLP, Philadelphia, Pennsylvania
(Kevin D. Gordon and Alison M. Howard of Crowe & Dunlevy, P.C., Oklahoma
City, Oklahoma; Joseph B.G. Fay and Erica E. Flores of Morgan, Lewis and
Bockius LLP, Philadelphia, Pennslyvania, with him on the briefs) for
Defendant–Appellant.
James W. Dunham, Jr., Tulsa, Oklahoma, for Plaintiff–Appellee.
Before LUCERO, McKAY, and TYMKOVICH, Circuit Judges.
McKAY, Circuit Judge.
This is an ERISA case in which the district court overturned an employee
benefit plan’s denial of a former employee’s claim for permanent and total
disability life insurance benefits. On appeal, Defendant Owens-Illinois Hourly
Employees Welfare Benefit Plan contends the district court erred in rejecting
Defendant’s argument that the employee was not eligible for this benefit under
the Plan’s life insurance coverage provisions because his PTD life insurance
claim was not filed until after he retired.
B ACKGROUND
Plaintiff Tommy Spradley worked for Owens-Illinois, Inc., for nearly
thirty-seven years before a disability caused him to take an early retirement in
May 2008 at the age of fifty-five. Approximately nine months after he retired,
Plaintiff submitted a written claim to the Plan administrator, the Owens-Illinois,
Inc. Employee Benefit Committee. Plaintiff informed the Committee that the
Social Security Administration had found him to be permanently and totally
disabled as of March 1, 2008, and he accordingly asserted a claim for the Plan’s
permanent and total disability life insurance benefit. The Committee denied his
claim both initially and on administrative appeal.
At this point, we must pause to describe the salient features of the Plan,
particularly the PTD life insurance benefit. The Summary Plan Description
contains five sections delineated by headings of equal size and prominence:
“Healthcare Benefits,” “Life and Accident Insurance Benefits,” “Disability
Benefits,” “Retirement Benefits,” and “Other Important Information.” (See
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Appellant’s App. at 23-28.) A subsection within the “Disability Benefits” section
provides for PTD life insurance benefits. This subsection states in part:
Permanent and total disability (PTD) life insurance benefits are paid
if:
• You become permanently and totally disabled before you reach
age 65, and
• File a claim within 12 months after you stop active work with
the Company, and
• You are unable to work for the rest of your life at any gainful
occupation for which you are fitted by your education,
training, or experience or for which you could reasonably
become fitted.
Alternatively, you can qualify for PTD benefits if, on or after April
1, 1999, you are under age 65 and receive an award for Social
Security Disability benefits. That award must be submitted to the
insurance company responsible for making the PTD award decisions.
Claim filing must meet the requirements described in PTD Benefit
Claims and Appeals on [the following page].
(Id. at 121.) The next page contains more information about the PTD life
insurance benefit, including the following information about claim-filing
requirements:
PTD Benefit Claims and Appeals
Claims for PTD benefits must be filed within 12 months from the last
day worked. If you are receiving Worker’s Compensation or if you
have a disabling condition that may change dramatically, you will be
required to document your medical condition with the Company
before the expiration of one year from your last day worked, but you
could then apply for PTD within five years from your last day
worked.
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The Company sends a notice by registered mail on or about 90 days
before the end of the one-year application period. The notice advises
you to file a PTD claim or provide evidence of your medical
condition before the 12-month anniversary of your last day worked.
(Id. at 122.) This subsection of the Plan contains no cross-references to any other
Plan provisions.
In his claim for benefits, Plaintiff argued he qualified for this benefit
because he was under age sixty-five, he had received and submitted to Defendant
his award of Social Security Disability benefits, and he had submitted his claim
for PTD benefits within twelve months after his last day worked. The
Committee’s initial denial letter said nothing about any of the PTD provisions.
Instead, the letter simply stated that Plaintiff’s benefit coverage ended on the last
day of the month in which his employment ended. For support, the letter cited
only to the third page of the Summary Plan Description. This page, which is part
of the “Healthcare Benefits” portion of the Plan, describes when “coverage under
the medical and dental plans” begins, then states that “[c]overage for you and
your dependents ends at the end of the month in which [y]our employment with
the Company ends.” (Id. at 32.) In context, it is clear these provisions refer only
to coverage for Owens-Illinois’s healthcare program. Nothing on page three of
the Summary Plan Description has any relevance to the PTD life insurance benefit
sought by Plaintiff.
Plaintiff appealed the denial of benefits, citing again the pertinent language
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of the PTD life insurance provision and arguing he had fulfilled all of the
requirements to qualify for this benefit. On appeal, the Committee reviewed its
earlier decision, then sent Plaintiff a one-page letter reiterating that Plaintiff’s
benefit coverage ended on the last day of the month in which his employment
ended. This time, the Committee cited for support to the first page of the
Summary Plan Description. Page one of the Summary Plan Description states,
“You are eligible to participate in the Company’s healthcare program if you are a
full-time active hourly employee of this Company.” (Id. at 30.) Again, this
provision is part of the “Healthcare Benefits” section of the Plan and clearly has
no relevance to the PTD life insurance benefit Plaintiff sought. The Committee
cited to no other Plan provisions or sections to support its decision.
After his administrative appeal was denied, Plaintiff filed suit under the
Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq
(ERISA). He again asserted he was entitled to benefits under the Plan’s PTD life
insurance provision. 1 In response, Defendant filed a motion for judgment on the
administrative record. In this motion, Defendant did not rely on either of the
provisions the Committee had relied on in the administrative proceedings; rather,
1
Plaintiff also raised a second claim regarding Defendant’s alleged failure
to timely comply with his request for copies of the plan documents. The district
court denied this claim, concluding that Plaintiff had suffered no prejudice from
any failure to respond on Defendant’s part. This ruling is not challenged on
appeal.
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Defendant now argued Plaintiff’s coverage had ended based on provisions located
within the “Life and Accident Insurance Benefits” section of the Summary Plan
Description. Specifically, Defendant argued the PTD life insurance benefit was
part of the Plan’s life insurance coverage and was thus governed by a coverage
provision found in the earlier “Life and Accident Insurance Benefits” section of
the Summary Plan Description. This provision states that “life insurance
coverage ends at the end of the month in which” an employee retires. (Id. at
107.) In its motion for judgment on the administrative record, Defendant finally
addressed the specific PTD provisions Plaintiff had urged throughout the
administrative proceedings. According to Defendant, these provisions only
created a twelve-month application window for PTD life insurance claims to be
filed by disabled employees who had stopped active work but had not retired or
otherwise terminated their employment.
The district court rejected Defendant’s arguments, concluding that Plaintiff
was entitled to benefits under the unambiguous language of the Plan or,
alternatively, that Defendant’s interpretation of ambiguous Plan terms was
arbitrary and capricious. The district court accordingly remanded the case for the
Committee to reconsider Plaintiff’s claim in accordance with this conclusion.
This appeal followed.
D ISCUSSION
As an initial matter, we must consider the question of our appellate
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jurisdiction. “Aside from a few well-settled exceptions, federal appellate courts
have jurisdiction only over appeals from ‘final decisions of the district courts of
the United States.’” Rekstad v. First Bank Sys., Inc., 238 F.3d 1259, 1261 (10th
Cir. 2001) (quoting 28 U.S.C. § 1291) (emphasis in original). “We analyze the
finality of an ERISA remand order . . . on a case-by-case basis applying well-
settled principles governing final decisions.” Metzger v. UNUM Life Ins. Co.,
476 F.3d 1161, 1164 (10th Cir. 2007) (quotation marks omitted). Analogizing to
remand orders in the administrative agency context, we have held that ERISA
remand orders will not be considered final where there are still issues to be
resolved on remand and the parties’ legal arguments can be considered in a future
appeal after these issues are resolved. See Rekstad, 238 F.3d at 1262 (holding
that an ERISA remand order was not final where “the appropriate award, if any
[was not] self-evident” and the district court expressly stated that either party
could obtain court review of the administrator’s determination); Graham v.
Hartford Life & Accident Ins. Co., 501 F.3d 1153, 1158-59 (10th Cir. 2007)
(holding that a remand order was not final where the district court did not decide
whether the claimant was eligible for benefits and where the claimant could seek
judicial review of an unfavorable administrative decision on remand). However,
we have noted that a remand order in the administrative agency context may be
considered final when the district court “essentially instructs the agency to rule in
favor of the plaintiff.” Rekstad, 238 F.3d at 1262. Analogously, a remand order
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in the bankruptcy context will be considered final where the bankruptcy court on
remand “ha[s] only to effectuate a ministerial task[] or conduct additional
proceedings involving little judicial discretion.” In re Jones, 9 F.3d 878, 879
(10th Cir. 1993) (quotation marks omitted). In such cases, the policies behind the
finality doctrine—“controlling piecemeal adjudication and eliminating delays
caused by interlocutory appeals”—are not implicated. In re Magic Circle Energy
Corp., 889 F.2d 950, 953 (10th Cir. 1989).
In this case, the district court held that Plaintiff was eligible for benefits
under the plain language of the Plan, and the court’s order left no room for the
Plan administrator to question this holding on remand. Further, the terms of the
Plan clearly define how much of a benefit an eligible employee in Plaintiff’s
position should receive. Thus, the district court’s order essentially left the Plan
administrator with nothing to do on remand but award the requested benefits, a
ministerial task involving no discretion on the Plan administrator’s part. In
accordance with our treatment of the finality requirement in other contexts, we
conclude that the court’s remand order in this case was a final decision for
purposes of our appellate jurisdiction.
Exercising jurisdiction over this appeal pursuant to 28 U.S.C. § 1291, we
review the district court’s decision de novo. As for the Plan administrator’s
underlying denial of benefits, we apply a deferential standard of review to the
extent the administrator actually exercised a discretionary power vested in it by
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the terms of the Plan. See Rasenack ex rel. Tribolet v. AIG Life Ins. Co., 585 F.3d
1311, 1315 (10th Cir. 2009). However, “when reviewing a plan administrator’s
decision to deny benefits, we consider only the rationale asserted by the plan
administrator in the administrative record and determine whether the decision,
based on the asserted rationale, was arbitrary and capricious.” Flinders v.
Workforce Stabilization Plan of Phillips Petroleum Co., 491 F.3d 1180, 1190
(10th Cir. 2007), abrogated on other grounds by Metro. Life Ins. Co. v. Glenn,
554 U.S. 105 (2008).
A plan administrator is required by statute to provide a claimant with the
specific reasons for a claim denial. 29 U.S.C. § 1133. The Department of
Labor’s implementing regulations further explain that the notice of a claim denial
must contain, inter alia, “[t]he specific reason or reasons for the adverse
determination” and “[r]eference to the specific plan provisions on which the
determination is based.” 29 C.F.R. § 2560.503-1(g). These regulations “further
the overall purpose of the internal review process: ‘to minimize the number of
frivolous lawsuits; promote consistent treatment of claims; provide a
nonadversarial dispute resolution process; and decrease the cost and time of
claims settlement.’” Glista v. Unum Life Ins. Co., 378 F.3d 113, 129 (1st Cir.
2004) (quoting Powell v. AT&T Comm., Inc., 938 F.2d 823, 826 (7th Cir. 1991)).
“Those goals are undermined where plan administrators have available sufficient
information to assert a basis for denial of benefits, but choose to hold that basis in
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reserve rather than communicate it to the beneficiary. Such conduct prevents
ERISA plan administrators and beneficiaries from having a full and meaningful
dialogue regarding the denial of benefits.” Id. Thus, the federal courts will
consider only “those rationales that were specifically articulated in the
administrative record as the basis for denying a claim.” Flinders, 491 F.3d at
1190. “The reason for this rule is apparent[:] we will not permit ERISA claimants
denied the timely and specific explanation to which the law entitles them to be
sandbagged by after-the-fact plan interpretations devised for purposes of
litigation.” Id. at 1191 (quotation marks and brackets omitted). A plan
administrator may not “treat the administrative process as a trial run and offer a
post hoc rationale in district court.” Id. at 1192.
Defendant argues we should overturn the district court’s decision in this
case because the district court failed to apply the appropriate deference to the
Committee’s interpretation of the Plan’s life insurance coverage provisions. This
argument is premised on a fundamental misrepresentation of the record. As
discussed in the recitation of facts above, the Committee’s denial of benefits was
based only on provisions located within the “Healthcare Benefits” section of the
Plan. The Committee’s denial letters never even suggested the PTD benefit
sought by Plaintiff and described in the “Disability Benefits” section of the Plan
might be governed by the coverage provisions located within yet another section
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of the Plan, the “Life and Accident Insurance Benefits” section. 2 Framing the
Committee’s administrative denial and Defendant’s litigation position in very
broad terms, Defendant asserts it has relied on the same rationale throughout the
process—the rationale that Plaintiff’s coverage for the PTD life insurance benefit
terminated when he retired. However, viewing the denial in such broad terms is
contrary to the specificity required by 29 U.S.C. § 1133 and 29 C.F.R. §
2560.503-1(g). The specific reasons and specific provisions supporting
Defendant’s broad coverage argument have changed, and we will not permit
Defendant to sandbag Plaintiff with its after-the-fact interpretation of an entirely
different section of the Plan. Cf. Glista, 378 F.3d at 128 (refusing to consider a
second rationale for applying a plan’s pre-existing condition exclusion where the
2
We note the administrative record includes an unidentified, undated
document beginning with the phrase “Thomas Spradley – Talking points.”
(Appellant’s App. at 477.) This document states: “It should be noted, when Mr.
Spradley retired from O-I, he was no longer covered under the O-I group
insurance program. Accordingly he was not eligible for a PTD benefit under the
O-I group insurance program at a later date when he was awarded Social Security
Disability Benefits.” (Id.) To the extent this document can be taken as evidence
of the Committee’s interpretation of the Plan’s life insurance provisions at the
administrative level, this document still fails to preserve this interpretation for
review in federal court, since there is no evidence it was ever provided to
Plaintiff. If anything, this document cuts against Defendant, since it suggests that
the Plan administrator may have been aware of this potential basis for denying
coverage but chose to hold it in reserve until after the federal litigation
commenced, contrary to ERISA’s requirements. See Glista, 378 F.3d at 130
(“[I]nternal documents cannot satisfy ERISA’s requirement that the specific
reasons for the denial be articulated to the claimant. Indeed [the plan
administrator] violated ERISA and its regulations by relying on a reason in court
that had not been articulated to the claimant during its internal review.”).
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plan administrator relied on a different portion of this exclusion in the
administrative process). The Committee’s denial letters cannot reasonably be
interpreted as denying coverage on the basis that the PTD life insurance benefit is
governed by the Plan’s separate life insurance coverage provisions, which is the
specific argument Defendant relies on in this litigation. Thus, not only was the
district court not required to defer to Defendant’s post hoc interpretation of these
newly asserted provisions, but the district court should not even have considered
this interpretation in the first place.
Consistent with our precedent, we will consider only the specific basis
upon which the Plan administrator relied in its administrative denial of benefits.
We note that the PTD life insurance provisions appear on their face to cover
claimants who, like Plaintiff, are under the age of sixty-five, provide proof that
they were awarded Social Security Disability benefits, and submit their claims for
PTD benefits within twelve months after they stop working. In the face of
Plaintiff’s plausible claim for relief pursuant to these provisions, the Committee
asserted that Plaintiff’s coverage for PTD life insurance benefits terminated after
his retirement based on two Plan provisions regarding healthcare coverage. After
reviewing the pertinent provisions, we conclude that the Committee’s asserted
basis for denying Plaintiff’s claim was arbitrary and capricious under the terms of
the Plan.
Having so held, we must now consider the question of the appropriate
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remedy. The dissent cites to our statement in Flinders that remand to the
administrator will be appropriate if the administrator “failed to make adequate
factual findings or failed to adequately explain the grounds for the decision.” 491
F.3d at 1194. However, we conclude that the case before us does not involve
inadequate findings or an inadequate explanation of the grounds for the decision;
rather, the Plan administrator gave a reason for denying benefits that was simply
incorrect under the terms of the Plan, then later tried to come up with a more
plausible reason for the denial of benefits. We do not read Flinders to mandate
that a Plan administrator be given interminable opportunities to search for
alternative grounds to deny benefits.
We faced the same type of after-the-fact rationale in our recent case of
Kellogg v. Metropolitan Life Insurance Co., 549 F.3d 818 (10th Cir. 2008). In
Kellogg, the claimant’s husband was a participant in an accidental death and
dismemberment policy that included an exclusion for losses caused or contributed
to by physical illness. The claimant filed a claim for benefits after her husband
crashed his car into a tree while having a seizure, then died from injuries
sustained in the crash. In litigation, the claims administrator relied both on the
physical illness exclusion and on the plan’s definition of an “accident” as being
“independent of other causes.” Id. at 828 (internal quotation marks omitted).
However, we rejected the administrator’s argument that it had raised both grounds
for denial below, concluding that the administrator’s denial letter “c[ould] not
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reasonably be interpreted as denying AD & D coverage on the basis that [the
decedent] was not involved in, or injured as a result of, an ‘accident.’” Id. at 829.
Reviewing the ground the claims administrator had relied on in its denial letter,
we concluded that the physical illness exclusion was inapplicable because the
proximate cause of the loss was the car crash, not the decedent’s seizure. We
held that the physical illness exclusion applied only to losses caused by an illness,
not to losses caused by an accident that resulted from an illness. As for the
claims administrator’s argument that the crash was not an accident because it was
not “independent of other causes,” we refused to consider this ground for denial
because the claims administrator had not relied on this ground below. We then
stated, “Having rejected the sole basis upon which Met-Life grounded its denial
of AD & D benefits, we must reverse the judgment of the district court and
remand with directions to enter judgment in favor of Kellogg on the
administrative record.” Id. at 833.
We conclude the same remedy is appropriate in this case. As in Kellogg,
we have rejected the sole basis upon which the administrator grounded its denial
of Plaintiff’s plausible claim for benefits, and we will not permit the
administrator to rely on new grounds for denial in this litigation or in further
administrative proceedings.
C ONCLUSION
For the foregoing reasons, we conclude that the district court should have
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entered judgment in favor of Plaintiff on the administrative record rather than
remanding for further administrative proceedings. We therefore REMAND with
directions for the district court to modify its order and enter judgment in favor of
Plaintiff. The district court should also consider on remand whether Plaintiff is
entitled to attorney fees and prejudgment interest.
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10-7100, Spradley v. Owens-Illinois
Tymkovich, J., dissenting.
I disagree with the majority because I believe this case should be remanded
to the plan administrator.
“When a plan administrator’s decision is overturned as arbitrary and
capricious, we may either remand the case to the plan administrator for a renewed
evaluation of the claimant’s case or we may order an award of benefits.” Flinders
v. Workforce Stabilization Plan of Phillips Petroleum Co., 491 F.3d 1180, 1194
(10th Cir. 2007). “Which of these two remedies is proper in a given case,
however, depends upon the specific flaws in the plan administrator’s decision. If
the plan administrator failed to make adequate factual findings or failed to
adequately explain the grounds for the decision, then the proper remedy is to
remand the case for further findings or additional explanation.” Id. (citations and
quotations omitted). “In contrast, a retroactive reinstatement of benefits is proper
where, but for the plan administrator’s arbitrary and capricious conduct, the
claimant would have continued to receive the benefits or where there was no
evidence in the record to support a termination or denial of benefits.” DeGrado v.
Jefferson Pilot Fin. Ins. Co., 451 F.3d 1161, 1176 (10th Cir. 2006) (quotation
omitted).
Here, it appears to me that at least one of the denial letters referred to a
portion of the benefits plan addressing life insurance coverage as well as citing to
the provisions addressing health benefits. According to that denial letter, the plan
administrator explained:
I have been asked to respond to your letter dated December 12, 2008
in which you claim your client, Tommy Spradley, is entitled to a
Permanent and Total Disability (PTD) life insurance benefit from the
Owens-Illinois Hourly Employees Welfare Benefit Plan. . . . Please
note that Mr. Spradley’s benefit coverage under the Owens-Illinois,
Inc. Hourly Employees Welfare Benefit Plan ended as of the last day
of the month (April 30, 2008) in which his employment with Owens-
Illinois ended . . . (page 3) . . . Once he retired and terminated his
employment with Owens-Illinois, he was no longer eligible to apply
for and receive a PTD life insurance benefit . . . .
App. 464. The denial letter went on to explain that had Mr. Spradley applied for
and qualified for this benefit at the proper time, he would have been required to
elect the mix of benefits offered for disability rather than the mix of benefits
offered for early retirement. He would not have been eligible for the “level-
income” option that equalizes payments before and after the retiree becomes
eligible for social security. App. 465.
Thus, even with the incorrect page references mentioned by the majority,
Mr. Spradley and his lawyer had sufficient information to understand the gist of
Owen-Illinois’s decision to include the life insurance provisions of the benefits
package. Since I do not think the record mandates an award of benefits, and the
record does not support a finding of bad faith on the part of the plan administrator
in denying the benefits, a remand to the plan administrator is the proper course of
action.
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