Kaufmann v . Prudential Ins. Co. CV-11-119-PB 1/5/2012 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Deborah J. Kaufmann

v. Case N o . 11-cv-119-PB Opinion N o .

Prudential Insurance Company of America

MEMORANDUM AND ORDER

A claimant in an action for benefits under the Employment

Retirement Income Security Act (“ERISA”) ordinarily must timely

exhaust administrative remedies before commencing an action in

this court. The question presented by the defendant’s motion

for summary judgment is whether such a claimant must comply with

an administrative appeal procedure that is included in an ERISA

plan’s Summary Plan Description (“SPD”) but not in the written

instrument that establishes the plan.

I. BACKGROUND

A. Kaufmann’s Claim

Deborah J. Kaufmann was employed as an administrative

assistant at Goss International Americas Inc. (“Goss”) until

March 7 , 2005, when she stopped working due to back and neck pain. Goss provides its employees with both Short Term

Disability (“STD”) and Long Term Disability (“LTD”) benefits

under a welfare plan governed by ERISA and insured by the

Prudential Insurance Company of America (the “Plan”). Kaufmann

applied for and was awarded STD benefits based on her inability

to perform her duties as an administrative assistant. After she

reached her maximum STD benefits in August 2005, Kaufmann began

to receive LTD benefits. She continued to receive LTD benefits

for approximately seven months.

On February 2 3 , 2006, Prudential informed Kaufmann that it

was terminating her LTD benefits effective April 1 , 2006,

because it determined that she was no longer disabled. D.’s Ex.

4 at D0898, Doc. N o . 49-2. The letter informed Kaufmann of her

right to appeal the unfavorable decision and that the appeal

“must be submitted within 180 days of the date of your receipt

of this letter.”

at D0899. The letter also provided the

address where the written appeal should be submitted and the

information to be included in the appeal.

On August 2 1 , 2006, Kaufmann’s attorney wrote a letter to

Prudential requesting a number of documents and indicating that

an appeal would be forthcoming. D.’s Ex. 9 at D0083, Doc. N o .

2 49-2. Kaufmann, however, did not submit the appeal until

February 1 7 , 2009, approximately two-and-a-half years after the

appeal deadline had passed. D.’s Ex. 12 at D0096, Doc. N o . 49-

2. The next day, she commenced this action.1 On February 2 6 ,

2009, Prudential informed Kaufmann that it would not consider

her appeal because it was untimely. D.’s Ex. 13 at D0890-91,

Doc. N o . 49-2.

B. Plan Documents

The documents that establish the Plan do not require that a

claimant exhaust administrative appeals before proceeding with a

claim for benefits in court. Instead, they state that “[y]ou

can start legal action regarding your claim 60 days after proof

of claim has been given and up to 3 years from the time proof of

claim is required, unless otherwise provided under federal law.”

D.’s Ex. 1 at D0463, Doc. N o . 49-3.

The SPD for the Plan states at the outset: “The Summary

Plan Description is not part of the Group Insurance Certificate.

1 Kaufmann sued Prudential rather than Goss even though the SPD identifies Goss as the Plan administrator. Prudential does not argue that it is not a proper defendant and, in any event, it appears that it was the correct party to sue because the Plan documents establish that Prudential “is the party that controls administration of the plan.” Terry v . Bayer Corp.,

8 , 36 (1st Cir. 1998). 3 It has been provided by your Employer and included in your

Booklet-Certificate upon the Employer’s request.”

at D0470.

The SPD also establishes procedures that claimants must follow

to appeal adverse determinations. The relevant language

provides that “[i]f your claim for benefits is denied . . . , you

or your representative may appeal your denied claim in writing

to Prudential within 180 days of the receipt of the written

notice of denial . . . .”

at D0473. If the appeal is

denied, the claimant may submit “a second, voluntary appeal of

[the] denial” or may “elect to initiate a lawsuit without

submitting to a second level of appeal.”

at D0474. “If

[the claimant] elect[s] to initiate a lawsuit without submitting

to a second level of appeal, the plan waives any right to assert

that [she] failed to exhaust administrative remedies.”

II. STANDARD OF REVIEW

Summary judgment is appropriate when the record reveals “no

genuine dispute as to any material fact and that the movant is

entitled to judgment as a matter of law.” Fed. R. Civ. P.

56(a). The evidence submitted in support of the motion must be

considered in the light most favorable to the nonmoving party,

4 drawing all reasonable inferences in its favor. See Navarro v .

Pfizer Corp.,

0 , 94 (1st Cir. 2001).

A party seeking summary judgment must first identify the

absence of any genuine issue of material fact. Celotex Corp. v .

Catrett,

1 7 , 323 (1986). The burden then shifts to

the nonmoving party to “produce evidence on which a reasonable

finder of fact, under the appropriate proof burden, could base a

verdict for i t ; if that party cannot produce such evidence, the

motion must be granted.” Ayala-Gerena v . Bristol Myers-Squibb

Co.,

6 , 94 (1st Cir. 1996); see Celotex,

.

III. ANALYSIS

Prudential bases its motion for summary judgment on the

undisputed fact that Kaufmann failed to comply with the 180-day

administrative appeal period established by the SPD. Kaufmann

responds by claiming that the administrative appeal period is

unenforceable because it was never properly made a part of the

plan. I agree with Kaufmann.

Every ERISA plan must be “established and maintained

pursuant to a written instrument.”

(a)(1). A

5 key congressional report explains the purpose of this

requirement: “A written plan is to be required in order that

every employee may, on examining the plan documents, determine

exactly what his rights and obligations are under the plan.”

Curtiss-Wright Corp. v . Schoonejongen,

3 , 83 (1995)

(quoting H.R. Rep. N o . 93-1280, at 297 (1974), reprinted in 1974

U.S.C.C.A.N. 4639, 5077-78); see also Fenton v . John Hancock

Mut. Life Ins. Co.,

3 , 88-89 (1st Cir. 2005) (“The

purpose of [the written instrument] requirement is to ensure

that participants know their rights and obligations under the

plan, and to provide some degree of certainty in the

administration of benefits.”) (internal citations omitted).

The written instrument constituting the plan must contain

“the basic terms and conditions of the plan.” CIGNA Corp. v .

Amara, 131 S . C t . 1866, 1877 (2011) (citing

).

As the statutory scheme makes plain, the requisite terms include

procedures for appealing a denial or termination of benefits.

Section 1133 provides, in pertinent part:

In accordance with regulations of the Secretary [of Labor], every employee benefit plan shall— (2) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.

6

. Pursuant to the Secretary’s regulation,

“every [ ] plan shall establish and maintain reasonable

procedures governing the . . . appeal of adverse benefit

determinations . . . .”

(b). Here,

however, the written instrument constituting the Plan does not

establish any procedures for appealing adverse decisions that

must be exhausted before a lawsuit may be filed. Instead, it

clearly states that a lawsuit may be filed challenging a denial

of benefits “60 days after proof of claim has been given and up

to 3 years from the time proof of claim is required, unless

otherwise provided under federal law.” D.’s Ex. 1 at D0463,

Doc. N o . 49-3.

Prudential acknowledges that the SPD is the only plan

document that contains appeal procedures. Prudential maintains,

however, that the appeal provisions in the SPD constitute the

terms of the Plan. This position is untenable for a number of

reasons. First, the SPD expressly declares that its provisions

are not part of the Plan. See

at D0470. Second, the

Supreme Court in Amara expressly rejected the argument that “the

terms of the [SPD] are terms of the plan.” 131 S . C t . at 1877.

After examining the relevant statutory provisions, the Court 7 concluded that “the summary documents, important as they are,

provide communication with beneficiaries about the plan, but

that their statements do not themselves constitute the terms of

the plan . . . .” Id. at 1878 (emphasis in original).

By including the appeal procedures only in the SPD, the

Plan administrator here effectively sought to amend the written

instrument constituting the Plan without following the Plan’s

procedure for making amendments. It had no authority to do s o .

See id. at 1877. As Justice Breyer remarked in Amara, ERISA

does not give plan administrators “the power to set plan terms

indirectly by including them in the summary plan descriptions.”

Id. Only the plan sponsor can set the terms of the plan and it

must do so in the written instrument establishing the plan. Id.

Although here the same entity is listed as both the Plan sponsor

and the Plan administrator, as was the case in Amara, the

Supreme Court has made it clear that ERISA preserves the

distinction between the two roles. See id. The SPD, which the

Plan administrator is responsible for distributing to

participants, therefore, cannot graft onto the Plan procedures

that must be in the written instrument constituting the Plan.

Here, the SPD purports to add terms establishing administrative

8 appeal procedures. Because the written instrument constituting

the Plan does not require that administrative appeals be pursued

before a lawsuit is filed, those SPD provisions are ineffective.

Prudential’s argument that it was required to place the

appeal procedures in the SPD and, therefore, did not have to

include them in the written instrument constituting the Plan, is

unpersuasive. The regulation governing claim procedures does

provide that to be “reasonable,” a “description of all claims

procedures . . . and the applicable time frames” must be

“included as part of a summary plan description . . . .”

(b)(2). Requiring inclusion of claims

procedures in the SPD, however, does not mean that they need not

be in the written instrument establishing the Plan. Rather,

inclusion of the procedures in the SPD is an additional

disclosure requirement, designed to communicate to plan

participants information about their appeal rights and

procedures established in the written instrument constituting

the Plan.

More importantly, ERISA requires the SPD to include “the

remedies available under the plan for the redress of claims

which are denied in whole or in part . . . .”

9 1022(b). The Court in Amara interpreted a similar provision and

concluded that “[t]he syntax of that provision, requiring that

participants and beneficiaries be advised of their rights and

obligations ‘under the plan,’ suggests that the information

about the plan provided by [the SPD] is not itself part of the

plan.” See 131 S . C t . at 1877 (emphasis in original). The SPD,

therefore, cannot establish appeal procedures that are not

included in the written instrument constituting the Plan.

Other courts that have analyzed provisions included in the

SPD but not in the written instrument constituting the plan have

come to similar conclusions. See, e.g., Merigan v . Liberty Life

Assurance C o . of Boston, N o . 2009–11087–RBC,

, at

*7 (D. Mass. Nov. 3 0 , 2011) (concluding that an appeal deadline

contained in the SPD but not in the written instrument

constituting the plan is unenforceable under Amara); Shoop v .

Life Ins. C o . of N . Am., N o . 4:10CV125,

, at *5

(E.D. V a . July 1 9 , 2011) (“[E]ven though the SPD states that

[defendant] has sole discretion to interpret the terms of the

Policy, the fact that this language is not included in the

Policy itself, means [that the defendant’s] administrative

interpretation of the Policy terms is due no deference.”); Spain

10 v . Prudential Ins. C o . of Am., N o . 09-cv-608 JPG,

, at *6 (S.D. Ill. Feb. 2 2 , 2010) (“[T]he SPD cannot add a

mandatory administrative appeal process to the Plan where the

Plan is silent and then argue that [plaintiff] failed to exhaust

those administrative remedies.”); see also Schwartz v .

Prudential Ins. C o . of Am.,

9 7 , 698-99 (7th Cir. 2006)

(defendant could not rely upon language in the SPD granting it

discretionary decision-making authority “which the plan itself

does not confer”). But see Tetreault v . Reliance Standard Life

Ins. Co., N o . 10-11420-JLT (D. Mass. Nov. 2 8 , 2011) (a pending

Report and Recommendation advising the district judge to whom

the case is assigned to grant defendants’ motion for summary

judgment because plaintiff failed to comply with the 180-day

appeal deadline contained only in the S P D ) .

Although here the SPD states that the Plan’s participants

have 180 days to appeal a denial or termination of benefits, the

fact that this language is not included in the written

instrument constituting the Plan renders the appeal deadline

unenforceable. The SPD cannot add a mandatory appeal procedure

when the Plan is silent on the subject. Therefore, Kaufmann did

not fail to exhaust the Plan’s administrative remedies by

11 appealing the termination of her LTD benefits after the 180-day

deadline had expired.2

IV. CONCLUSION

For the reasons provided above, I deny Prudential’s motion

for summary judgment (Doc. N o . 4 9 ) .

SO ORDERED.

/ s / Paul Barbadoro Paul Barbadoro United States District Judge

January 5 , 2011

cc: Jonathan M . Feigenbaum Joseph C . Galanes Patrick C . DiCarlo Byrne J. Decker

2 Prudential briefly argues that the appeal provisions in the SPD are enforceable even if they are not established in the written instrument constituting the Plan because Kaufmann cannot show “significant reliance” and “prejudice” to be exempt from the SPD’s requirements. The cases Prudential cites, however, merely recognize that a claimant cannot base a claim on language in an SPD that differs from the underlying plan without proof of reliance on the SPD. See Bachelder v . Commc’ns Satellite Corp.,

(1st Cir. 1988); see also Morales-Alejandro v . Med. Card Sys., Inc.,

(1st Cir. 2007). They simply do not support the very different proposition that a claimant cannot rely on language in a plan that differs from the SPD without proof of reliance on the plan. 12