Ruling on Defendant's Motion for Summary Judgment [Doc. # 18]
Plaintiff Gilbert E. Linder ("Linder"), a former employee andparticipant in two pension plans sponsored by BYK-Chemie USA Inc., broughtsuit under the Employee Retirement Income Security Act of 1974("ERISA"), 29 U.S.C. § 1132, seeking the inclusion of stock optioncompensation he received in 2001 in the calculation of his pensionbenefits. Defendant BYK-Chemie USA, Inc., in its capacity as Plan Sponsorof the Retirement Plan of BYK-Chemie USA, Inc., and the SupplementalRetirement Plan of BYK-Chemie USA, Inc. ("Byk-Chemie") has now moved forsummary judgment on all of plaintiff's claims, arguing that plaintifffailed to exhaust administrative remedies. For the reasons discussedbelow, defendant's motion is denied.
The parties agree that no material facts are in dispute. Gilbert Linderis a former employee of BYK-Chemie, who was terminated from his position effective January 31, 2002 as part of thecorporate reorganization of the company. See Affidavit of Gilbert E.Linder, June 13, 2003 [Doc. # 23, Ex. 9] at ¶ 2. Following histermination, Linder was provided with information about his retirementbenefits under both the Retirement Plan of BYK-Chemie USA Inc.("Retirement Plan") and the Supplemental Retirement Plan of BYK-ChemieUSA Inc. ("SERP"), which are employee pension benefit plans as defined bySection 3(2) of ERISA. See Letter from Gilbert Linder to Roland Peter,May 29, 2002 [Doc. # 18, Ex. 3]; Retirement Plan [Doc. # 23, Ex. 10];SERP [Doc. # 23, Ex. 13]. Upon review, Linder challenged the Plan'sfailure to include the compensation he received in 2001 through theexercise of nonqualified stock options in the calculation of hisretirement benefits. In a letter to the Administrative Committee of theRetirement Plan of BYK-Chemie ("Committee") dated May 29, 2002, Linderinformed the Committee that he believed he was entitled to the inclusionof his stock options compensation in the calculation of his pensionbenefits. See Letter from Gilbert Linder to Roland Peter, May 29, 2002[Doc. # 18, Ex. 3]. This letter was treated as a formal claim forbenefits, and on June 13, 2002, Carol Foley of the AdministrativeCommittee responded by inviting Linder to submit additional informationwithin ten days and providing an excised portion of the Plan. See Letterfrom Carol Foley, Administrative Committee to Gilbert Linder, June 13, 2002 [Doc. # 18, Ex. 4].1 OnJune 18, 2002, Lawrence Lissitzyn, counsel retained by Linder, wrote toCarol Foley, stating that the claims procedure was not described in theportion of the Plan provided with the June 13 letter, and that ten dayswas not a reasonable period of time to provide additional information.See Letter from Lawrence Lissitzyn to Carol Foley, June 18, 2002 [Doc. #18, Ex. 5]. Saul Ben-Meyer, counsel for defendant, responded on behalf ofCarol Foley in a letter dated June 27, 2002, which stated that theopportunity to submit additional information was offered as a courtesy,and that the Committee would make its determination based on theinformation it had in its possession if Linder did not submit additionalinformation by July 1, 2002. See Letter from Saul Ben-Meyer to LawrenceLissitzyn, June 27, 2002 [Doc. # 18, Ex. 7]. Enclosed with the letter wasa copy of the Plan's claims procedure that the Committee previouslyneglected to provide. See id. On the same day, Linder's counsel wrote toCarol Foley with a detailed analysis of the facts and legal argumentssupporting the inclusion of Linder's stock option compensation in the calculation of his pension benefits. See Letter fromLawrence Lissitzyn to Carol Foley, June 27, 2002 [Doc. # 18, Ex. 8].After failing to receive a response from the Committee, Lissitzyn wroteto Carol Foley on September 16, 2002, stating that Linder's June 27, 2002letter constituted an appeal and, having received no response, he wastherefore free to bring suit in federal court.2 See Letter ofLawrence H. Lissitzyn to Carol Foley, September 16, 2002 [Doc. # 18, Ex.9]. Following the receipt of this letter, Ben-Meyer telephoned Lissitzynand informed him that his June 27, 2002 letter did not constitute anappeal under the Pension Plan, because it simply provided the additionalinformation requested by the Committee before making its initial decisionon Linder's claim. See Affidavit of Saul Ben-Meyer, May 23, 2003 [Doc. #18, Ex. 10] at ¶ 8. Defendant's counsel also suggested expediting theappeal process by characterizing Linder's claim as "deemed denied" as ofAugust 29, 2002. See id. at ¶ 9; Plaintiff's Local Rule 9(C)(2)Statement [Doc. # 24] at ¶ A.4. In an e-mail dated October 21, 2002, Lissitzynwrote to Ben-Meyer that BYK-Chemie's response to his June 27, 2002 letteron Linder's behalf was "long overdue," and requested a response as soonas possible. See E-mail from Lawrence Lissitzyn to Saul Ben-Meyer [Doc. #18, Ex. 11]. Lissitzyn received no response to this e-mail. On November4, 2002, plaintiff filed suit in this Court, seeking to have his benefitsunder the Retirement Plan and the SERP calculated to take into accounthis stock option compensation in 2001.
Summary judgment is appropriate where "there is no genuine issue as toany material fact and . . . the moving party is entitled to a judgment asa matter of law." Fed.R.Civ.P. 56(c). When deciding a motion for summaryjudgment, "`the inferences to be drawn from the underlying facts . . .must be viewed in the light most favorable to the party opposing themotion.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,587-588 (1986) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655(1962)). Here, the parties are in agreement that there is no issue ofmaterial fact in dispute. While not required to accept the parties'agreement, see Heublein, Inc. v. United States, 966 F.2d 1455, 1461 (2dCir. 1993) (citation omitted), the Court sees no disputed material issuesprecluding disposition of the exhaustion issue. III. Discussion
At issue is whether Linder properly exhausted his administrativeremedies prior to filing this suit. ERISA requires every employee benefitplan to "afford a reasonable opportunity to any participant whose claimfor benefits has been denied for a full and fair review by theappropriate named fiduciary of the decision denying the claim."29 U.S.C. § 1133(2). Therefore, although ERISA itself does not include anexhaustion requirement, there is a "firmly established federal policyfavoring exhaustion of administrative remedies in ERISA cases." Kennedyv. Empire Blue Cross and Blue Shield, 989 F.2d 588, 594 (2d Cir. 1993)(quoting Alfarone v. Bernie Wolff Construction, 788 F.2d 76, 79 (2d Cir.1986)). The exhaustion requirement serves important purposes, includingto "(1) uphold Congress' desire that ERISA trustees be responsible fortheir actions, not the federal courts; (2) provide a sufficiently clearrecord of administrative action if litigation should ensue; and (3)assure that any judicial review of fiduciary action (or inaction) is madeunder the arbitrary and capricious standard, not de novo."3 Davenportv. Abrams, Inc., 249 F.3d 130, 133 (2d Cir. 2001) (citations and internal quotation marks omitted).
The defendant argues that Linder failed to exhaust his administrativeremedies because (1) Linder did not "perfect" his formal claim forbenefits until June 27, 2002 when he provided the Committee withadditional information; (2) under the Plan's claims procedures, theCommittee had 90 days to respond to Linder's "perfected" claim, that is,until September 27, 2002, and (3) after Linder's counsel threatened tobring suit because of the Committee's failure to respond, the defendant'scounsel offered to forego the initial claims review and "deem"plaintiff's claim denied, thus allowing him to proceed directly to theadministrative appeal stage. Because Linder brought suit without everfiling an administrative appeal, defendant concludes that he failed toproperly exhaust his administrative remedies.
Linder argues, however, that under the Department of Labor regulationsin effect since January 1, 2002, administrative remedies are deemed to beexhausted if the Plan Administrator fails to respond to a claim forbenefits within 90 days. He argues that the Plan's claims procedures,which provide that a claimant may administratively appeal if the PlanAdministrator fails to respond within 90 days, are invalid, as they failto comply with ERISA's procedural requirements. The Court agrees. Under the express terms of the regulations, Linder's claim is deemedexhausted, and he is entitled to bring suit in federal court. See29 C.F.R. § 2560.503-1(1).
ERISA requires "adequate notice in writing to any participant orbeneficiary whose claim for benefits under the plan has been denied,setting forth the specific reasons for such denial." 29 U.S.C. § 1133(1).As the implementing regulations provide, this notice of denial must beprovided within "90 days after receipt of the claim by the plan, unlessthe plan administrator determines that special circumstances require anextension of time for processing the claim." 29 C.F.R. § 2650.503-1 (f).The 90 day time period is calculated to "begin at the time a claim isfiled in accordance with the reasonable procedures of a plan, withoutregard to whether all the information necessary to make a benefitdetermination accompanies the filing." 29 C.F.R. § 2560.503-1(f)(4).
Here, it is undisputed that Linder submitted a formal claim forbenefits on May 29, 2002, see Defendant's Local Rule 9(C)(1) Statement[Doc. # 19] at ¶ 2, and that the Committee to date has not issued adecision on Linder's claim. See Deposition of Carol Foley, April 11, 2003[Doc. # 23, Ex. 2] at 60-61. While BYK-Chemie argues that Linder did not"perfect" his claim until June 27, 2002, the regulations are clear thatthe provision of additional information would not restart the 90-day clock.4 Inany event, the June 27, 2002 date is irrelevant, because BYK-Chemie doesnot argue that the 90-day period for deciding his claim should have beentolled after June 27, 2002, and the facts of this case would not supportsuch an argument.
Linder filed suit on November 4, 2002, well over 90 days after hisclaim for benefits was filed, having received no written decision fromthe Committee. The ERISA regulations are clear that claimants are "deemedto have exhausted administrative remedies" in such circumstances. As28 C.F.R. § 2560.503-1(1) provides: In the case of the failure of a plan to establish or follow claims procedures consistent with the requirements of this section, a claimant shall be deemed to have exhausted the administrative remedies available under the plan and shall be entitled to pursue any available remedies under section 502(a) of the Act on the basis that the plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim.The defendant notes that the parties agreed during a telephoneconversation between counsel in September 2002 to "deem" Linder's claimto be denied in order to allow Linder to expedite his administrativeappeal. See Affidavit of Saul Ben-Meyer, May 23, 2003 [Doc. # 18, Ex. 10]at 1 9. Such a "deemed denial", however, is not an actual denial incompliance with the terms of ERISA. See 29 U.S.C. § 1133(1) (requiringwritten notice setting forth specific reasons for denial);29 C.F.R. § 2560.503-1(g) (providing manner and content of notificationof benefit determination). Instead, the suggestion for a "deemed denial"referred to the regulatory procedures in effect prior to 2002, whichprovided that a claim that received no response would be "deemed deniedunder and Plan and ERISA," and which required a claimant to then file anadministrative appeal. See J.E. Hickmon and B. Randolph Wellford, CurrentConsiderations in Adopting New Employee Benefit Plan Claims Procedures,30 Tax Mgmt. Comp. Plan. J. 131 (2002) [Doc. # 23, Ex. 14] at 9 (citing29 C.F.R. § 2560.503.1(e)(2) (1977)). The regulations effective fromJanuary 2002, however, removed the language of "deemed denial," and replaced itwith the "deemed exhaustion" approach, which explicitly gives theclaimant the right to bring suit to pursue legal remedies if theadministrator fails to respond within the requisite time period. Seeid.; see also 29 C.F.R. § 2560.503-1 (1); Michael Snyder, No More "DeemedDenials," 6 No. 7 Compensation & Benefits Update 1 (2002) [Doc. # 23,Ex. 15] at 1. Under the current regulatory scheme, Linder's claim isproperly before this Court.
In its reply, BYK-Chemie asserts that its failure to issue a decisionon Linder's claim was a result of confusion over the review process, itsefforts to accommodate Linder's submission of additional information, anddefendant's reliance on the agreement between counsel to informally deemLinder's claim denied. BYK-Chemie also argues that a technical violationof claims regulation does not excuse exhaustion unless the claimant candemonstrate that he was prejudiced by the defect.
However well-meaning the Committee, the regulation is unequivocal thatany failure to adhere to a proper claims procedure is sufficient to deemadministrative remedies exhausted. Moreover, the regulation contains noexception for lack of prejudice, and the cases defendant cites, allissued prior to 2002, have no bearing on the case at hand. In Perrino v.Southern Bell Tel & Tel Co., 209 F.3d 1309, 1316-1317 (11th Cir. 2000), for example, the Eleventh Circuit concluded that the PlanAdministrator's failure to follow some of ERISA's technicalrequirements, such as creating a summary plan description or informingemployees about their specific appeal rights, did not excuse the failureto exhaust administrative remedies where a claims procedure remainedavailable to the claimants. Similarly, in Heller v. Fortis Benefits Ins.Co., 142 F.3d 487, 492-93 (B.C. Cir. 1998), the D.C. Circuit declined toexcuse the failure to exhaust administrative remedies because althoughthe initial benefits denial was not in compliance with the regulations,the claimant was otherwise made aware of the reasons for her denial andthe right to appeal. In contrast to those cases relied on by thedefendant, here the issue is not whether the failure to exhaustadministrative remedies should be excused by the Court as an equitablemeasure; under the facts of this case, 29 C.F.R. § 2560.503-1(1) hasdeemed administrative remedies exhausted. IV. Conclusion
For the foregoing reasons, defendant's motion for summary judgment isDENIED.
IT IS SO ORDERED.
1. While the letter stated that a copy of the claims procedure wasenclosed, the section of the Plan included with the letter stated onlythe following about the claims procedure: "9.10 Claims Procedure. TheCommittee shall establish a claims procedure in accordance withapplicable law and shall afford a reasonable opportunity to anyParticipant whose claim for benefits has been denied for a full and fairreview of the decision denying such claim." See Enclosure to Letter fromCarol Foley to Gilbert Linder, June 13, 2002 [Doc. # 18, Ex. 4].
2. The letter misstates the legal standard, citing29 C.F.R. § 2560.503-1(1), which refers to the time for the Plan'sresponse to a request for review of an adverse decision, when theCommittee had not yet reached an initial decision on Linder's claim. Theparties do not now dispute that the Plan Committee had not reached aninitial decision at the time of Linder's June 27, 2002 letter. SeeDefendant's Local Rule 9(C)(1) Statement [Doc. # 19] at ¶ 4; Plaintiff'sLocal Rule 9(C)(2) Statement [Doc. # 24] at 11 A.4; see also DepositionTranscript of Carol Foley, April 11, 2003 [Doc. # 23, Ex. 2] at 60-61("The committee never denied the claim, and the next we heard of it therewas a lawsuit pending. So we never denied the claim.").
3. A denial of benefits is normally reviewed under an abuse ofdiscretion standard if the retirement plan gives the administrator the"authority to determine eligibility for benefits or to construe the termsof the plan." Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 115(1989). Although the Retirement Plan here gives the AdministrativeCommittee the power to interpret the terms of the Plan, no administrativedetermination had been made at the time Linder filed suit. Review ofmerits of his claim therefore would appear to be de novo. See id.
4. At most the 90-day time period would be tolled from the date anextension was requested until the date the additional information wasprovided, which in this case would be approximately 14 days between June13, 2002, when the administrative committee invited Linder to submitadditional information, and June 27, 2002, when Linder responded. Theregulations, however, do not expressly allow for tolling under the factsof this case, as tolling is expressly referenced for those claims undergroup health plans and disability benefit plans in which additionalinformation from the claimant is required before the claim can beprocessed. See 29 C.F.R. § 2560.503-1(f)(4)(providing for the tolling ofthe 90-day period "from the date on which the notification of theextension is sent to the claimant until the date on which the claimantresponds to the request for additional information."). In this case,there is no evidence in the record to suggest that Linder's submission ofadditional information was required before the claim could be decided.The Committee simply invited Linder to provide additional information ifhe so desired. See Letter from Carol Foley to Gilbert Linder, June 13,2002 [Doc. # 18, Ex. 4]. Moreover, because the letter inviting Linder toprovide additional information nowhere states that an extension of timewas necessary, and nowhere provides a date by which the plan expected torender a decision, it does not meet the regulation's requirements fornotice of an extension of time to process a claim. See29 C.F.R. § 2560.503-1(f)(1).