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Ketchum v. Saint-Gobain Corp.

United States District Court, W.D. Louisiana, Lake Charles Division

July 22, 2019

JOHN R. KETCHUM
v.
SAINT-GOBAIN CORP.

          KAY MAGISTRATE JUDGE.

          MEMORANDUM RULING

          JAMES D. CAIN, JR. UNITED STATES DISTRICT JUDGE.

         Before the Court are cross-motions for summary judgment filed by Plaintiff, John R. Ketchum (#29) and Defendant, Saint-Gobain Corp. Each party maintains that because there is no genuine issue of material fact, they are entitled to judgment as a matter of law pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the following reasons, the motion filed by Plaintiff will be granted, and the motion filed by Defendant will be denied. Because the motions encompass the same issues, they will be addressed concomitantly.

         FACTUAL STATEMENT

         Ketchum began working for what would become Saint-Gobain Corporation on January 13, 1975.[1]Ketchum participated in the Saint-Gobain Retirement Income Plan, CertainTeed Corporation Hourly-Rated Employees' Pension Plan (the "Plan").[2] The parties agree that the Plan is governed by the Employee Retirement Income Security Act ("ERISA").[3]

         On March 1, 2011, Ketchum was injured on the job and received workers' compensation from March 2, 2011, through June 21, 2016.[4] From September 1, 2011, through March 1, 2014, Ketchum received company long-term disability benefits; these benefits were terminated when Ketchum opted to receive a settlement in lieu of monthly payments.[5] Ketchum received an award letter from the Social Security Administration ("SSA") on April 22, 2012, indicating that his disability was retroactive to March 1, 2011.

         Ketchum received a letter from the Benefits Committee (hereinafter referred to as the "Committee") dated November 21, 2011, which provided estimated benefit calculations for Early Retirement and Disability Retirement, [6] as well as the requirements to be eligible for Disability Retirement. The letter does not state that a written application is required for eligibility.[7]

         On June 7, 2016, Ketchum notified the Committee that he wished to apply for retroactive retirement disability benefits as of January 1, 2012.[8] On August 4, 2016, the Committee granted Ketchum's request for retirement disability benefits commencing July 1, 2016, but denied his request for the additional retroactive payments.[9] On August 24, 2016, Ketchum's counsel asked the Committee to pay disability benefits retroactive to April 1, 2011, citing the Plan's 2004 Summary Plan Description ("SPD") for the proposition that "disability requirement benefit[s] will begin on the first day of the month following the date you are last credited with an Hour of Service."[10]

         On November 21, 2016, the Committee denied Ketchum's request for retroactive application of disability benefits to April 1, 20 ll.[11] The denial letter advised Ketchum that although the 2004 SPD provided that disability benefits would begin the first day of the month following the last credited Hour of Service, the SPD also provided that a participant "need[s] to apply for [his] benefits no more than 90 days before [he] want[s] payments to begin."[12] The letter further noted that the "Situations that Could Affect Your Benefits" section provides that a "participant's benefits may be lost, reduced, or suspended if the participant 'fail[s] to make proper application for benefits----'"[13] Relying on these two provisions, the letter informed Ketchum that to "receive disability benefits commencing April 1, 2011, Mr. Ketchum should have applied for benefits during the 90-day period ending on April 1, 2011."[14]

         The letter also referred Ketchum to the Plan itself, noting that:

The last sentence of Section 4.3(a) of the Plan permits disability benefits to begin on the first day of the following month following the date the participant was last credited with an hour of service, but only if the participant 'meets all of the above requirements/ including the requirement in the first sentence of this section that the participant complete an application for benefits.[15]

         The letter noted that under Section 8.12(a)-(b), the Plan also provides that '"benefits shall not commence until proper written application for same is received by the Benefits Committee'" and that '"no payments shall be made for the period in which benefits would have been payable pursuant to SectionD...4.3. [disability benefits], if the Participant or Spouse had made timely application....'"[16] In other words, this provision prohibits retroactive disability benefits.

         Under Section 4.3(a) of the Plan, Ketchum's "disability benefits will continue until he reaches his normal retirement date (i.e. the first day of the month following his 65thbirthday or August 1, 2017)...."[17] The letter further advised that "following the cessation of disability benefits, Mr. Ketchum may elect a retirement benefit from the Plan."[18] On March 31, 2017, the Committee denied Ketchum's final appeal under Sections 4.3 and 8.12 of the Plan, which the Committee interpreted to prohibit retroactive disability benefits.[19]

         Ketchum maintains that the Committee wrongfully denied his claim for retroactive disability benefits.[20] First, Ketchum argues that there are ambiguities throughout the Summary Plan Description ("SPD") and the Plan as well as conflicts between the two. Next, Ketchum argues that the Committee's reading of the Plan leads to an unexpected and unreasonable outcome which does not achieve the goals of ERISA, and finally, the Committee's interpretation of the Plan is unfair.

         SUMMARY JUDGMENT STANDARD

         Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, when viewed in the light most favorable to the non-moving party, indicate that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.[21] A fact is "material" if its existence or nonexistence "might affect the outcome of the suit under governing law."[22] A dispute about a material fact is "genuine" if the evidence is such that a reasonable jury could return a verdict for the non-moving party.[23]As to issues which the non-moving party has the burden of proof at trial, the moving party may satisfy this burden by demonstrating the absence of evidence supporting the non-moving party's claim."[24] Once the movant makes this showing, the burden shifts to the non-moving party to set forth specific facts showing that there is a genuine issue for trial.[25] The burden requires more than mere allegations or denials of the adverse party's pleadings. The non-moving party must demonstrate by way of affidavit or other admissible evidence that there are genuine issues of material fact or law.[26] There is no genuine issue of material fact if, viewing the evidence in the light more favorable to the non-moving party, no reasonable trier of fact could find for the non-moving party.[27] If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.[28] The court will construe all evidence in the light most favorable to the nonmoving party, but will not infer the existence of evidence not presented.[29]

         Ketchum has the burden of proof at trial, thus he bears the burden of producing evidence to support the essential elements of his claim.[30]

         LAW AND ANALYSIS

         In the ERISA context, courts review an administrator's denial of benefits de novo unless the plan grants the administrator discretion to determine a claimant's eligibility of benefits, in which case the administrator's decision is reviewed for an abuse of discretion.[31] The parties have stipulated that the Plan grants the administrator discretion to determine a claimant's eligibility for benefits.[32]

         With respect to reviewing an administrator's discretionary interpretation of its own ERISA plan, the Fifth Circuit applies a two-step analysis. First, a court must determine the legally correct interpretation of the plan and whether the administrator gave the plan a legally correct reading.[33] The interpretation of the plan involves balancing several factors- (1) whether the administrator has given the plan a uniform construction, (2) whether the interpretation is consistent with a fair reading of the plan, and (3) any unanticipated costs resulting from different interpretations of the plan.[34]

         When interpreting an ERISA plan, the Court must "give its language the ordinary and generally accepted meaning."[35] If the administrator's interpretation was legally incorrect, the court must ask whether the administrator's decision constituted an abuse of discretion. This latter determination turns generally on the balance of three factors' "(1) the internal consistency of the plan under the administrator's interpretation; (2) any relevant regulations formulated by the appropriate administrative agencies,' and (3) the factual background of the determination and any inferences of lack of good faith."[36]

         An abuse of discretion occurs only when "the plan administrator acted arbitrarily and capriciously."[37] A plan administrator abuses its discretion where the decision is not based on evidence, even if disputable, that clearly supports the basis for denial.[38]

         Did the Defendant abuse its discretion by treating similarly situated Plan participants differently?

         Ketchum argues that Defendant abused its discretion because of its inconsistent treatment of similar Plan participants. Ketchum relies on the Committee's denial letter which acknowledged that it had made retroactive disability benefits to another Plan participant.[39] That letter acknowledged that the "Plan has not fully implemented the 2006 elimination of retroactive disability benefits. The extent to which retroactive disability payments were mistakenly paid is not fully known and the Plan may need to look at its options for recovering any such overpayments depending on the outcome of this claim."[40]

         Ketchum relies on the Committee's admission that it had "mistakenly" paid retroactive benefits to at least one other worker (a "Plan participant") that was similarly situated as Ketchum. Thus, Ketchum accuses the Committee of disparate treatment and bad faith. Ketchum cites Encompass Office Solutions, Inc. v. Louisiana Health Service & Indemnity Co., [41]wherein the Fifth Circuit found that defendant had abused its discretion by denying plaintiffs claims for covered services, as shown by its inconsistent treatment of similar providers. The Court finds that the Encompass case is not applicable here.

         That case involved the intentional decision to deny coverage for services even though the insurer could cite no plan language that authorized it to limit payment based on who provided the services, nor was there any written internal policy that would explain why it treated similar providers inconsistently.

         Defendant remarks that Ketchum has failed to provide evidentiary support, and/or the Administrative Record is devoid of any evidence that the Plan participant that mistakenly received retroactive benefits, requested those benefits under identical circumstances. In other words, there is no evidence in the record that the Plan participant was injured on the same date, under the same plan version, and applied for benefits on the same time-line as Ketchum. Defendant asserts that there is no evidence to suggest that this individual picked the same path as Ketchum in attempting to circumvent Plan rules to obtain additional benefits.

         Defendant argues that even if retroactive benefits were mistakenly paid, the Committee acknowledged its mistake and made clear it was analyzing its options for recovering mistakenly paid benefits. Defendant asserts that Ketchum's request would in effect cause the Plan to pay out retroactive benefits it has expressly prohibited under the 2006 Amendments, ad infinitum. Moreover, because the Plan Administrator has a fiduciary obligation to pay Plan benefits in accordance with its terms, it must take steps to address any incorrect benefit payments.

         The Court agrees with Defendant that there are not sufficient facts regarding Ketchum's co-worker to make a comparative analysis, and even if the circumstances were exactly the same, the Court finds that an alleged mistaken payment of benefits should not be deemed a gateway to retroactive disability benefits for all future participants.

         Was the Committee's decision to deny Plaintiff retroactive disability benefits legally correct?

         This step of the analysis requires the Court to determine if the interpretation is consistent with a fair reading of the Plan. Basic contract interpretation principles can be utilized to determine the meaning of a plan and "ambiguities in insurance policies are construed against the insurer."[42]

         Ketchum maintains that that the Plan is not fair because there are ambiguities and inconsistencies between the Summary Plan Description ("SPD") and the Plan. Ketchum argues that the SPD does not require a written application for the worker to qualify for benefits noting that the "eligibility section/idea is completely separate from the application section/idea."[43] Ketchum acknowledges that the SPD states that "[y]our benefits may be lost, reduced or suspended in the following circumstances:... You fail to make proper application for benefits or fail to provide the necessary information." Thus, Ketchum argues that the SPD does not require a written application to qualify for benefits because the language is permissive and not mandatory.

         Next, Ketchum points to the Plan language and maintains that the only requirement for eligibility for disability benefits is that the Participant be credited with at last 15 years of Service, be declared disabled by the Social Security Administration and a qualified physician appointed by the Benefits Committee. Ketchum acknowledges the first sentence of § 4.3 (a) which states that "[e]xcept as otherwise provided in an applicable Appendix, by written application delivered to the Benefits Committee as described in Section 8.12, a Participant who satisfies the following requirements may elect to receive the Disability benefit described in this Section. . ."[44]

         Ketchum relies heavily on § 4.3 (b) which provides in pertinent part that "[e]ffective January 1, 1990, Disability benefits shall commence on the first day of the month next following the date he was last credited with an Hour of Service-----" Ketchum then argues that if a written application is indeed a requirement for eligibility, the last quoted language of the Plan would indeed be meaningless surplusage. Thus, Ketchum argues that the two provisions in § 4.3 ((a) and (b)) conflict with each other and are not consistent with the SPD. Ketchum suggests that the only logical interpretation of the Plan is that "once a Participant has qualified for Disability Benefits, and decides he wishes to receive those benefits, he must submit a written application to start the ball rolling, following which the Benefits Committee should pay retroactive benefits."[45]

         Defendant argues that Ketchum conveniently leaves out a portion of § 4.3(b) as well as the cross-reference to § 8.12. Section 4.3(b) includes "provided he meets all of the above requirements." Defendant argues that there is an additional requirement to be eligible for disability benefits expressed in § 4.3(a), which states "by written application delivered to the Benefits Committee as described in Section 8.12." Section 8.12 provides as follows:

         Application and Forms for Benefits.

(a) Application Required. The Benefits Committee shall require a Participant, or a Spouse entitled to a survivor benefit under Section 4.4(a), to file with it an application for a benefit, and to furnish all pertinent information requested by it... Except as provided in paragraph (b), benefits shall not commence until proper written application for same is received by the Benefits Committee.

Section 8.12 (b) provides, in pertinent part, that "[n]o payments shall be made for the period in which benefits would have been payable pursuant to Sections 4.1, 4.2 4.3 or 4.4(a) if the Participant or Spouse had made timely application...

         " Ketchum argues that § 8.6(a) the Plan is ambiguous and contradicting which must be resolved in his favor. That provision (Claims Procedure and Filing of a Claim) states that any Participant or Spouse "may file a written claim. In other words, this language is discretionary as opposed to mandatory.

         Ketchum also argues that § 11.5 of the Plan is ambiguous. That provision states that:

Inability to Locate Payee. Each person entitled to receive benefits under the Plan shall be responsible for informing the Benefits Committee of his mailing address for purposes of receiving such benefits. If the Benefits Committee is unable to locate any person entitled to receive benefits under this Plan, such benefits shall not be forfeited but shall be carried as a contingent liability of the Plan and shall be payable when a proven and legitimate claim therefor has been submitted to the Benefits Committee. (Emphasis added)

         Ketchum argues that the language emphasized hereinabove creates an ambiguity and interprets the provision to mean that the Committee intended that all retirement benefits be non-forfeitable. The Court disagrees. The title of the provision indicates that § 11.5 ...


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