This is an action brought under the federal Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. Plaintiff was a firefighter with the city of Tracy, and a participant in the long-term disability plan (the "Plan") offered by defendant California Association of Professional Firefighter ("CAPF"); defendant California Administration Insurance Services, Inc. ("CAIS") administered the Plan. (Collectively, CAPF and CAIS are referred to as "defendants.") Plaintiff seeks damages in the form of long-term disability ("LTD") payments plaintiff maintains defendants improperly withheld from him. Defendants maintain they granted plaintiff's claim for LTD benefits, but properly offset the amount of benefits due plaintiff in accordance with the express terms of the Plan. Presently before the court are the parties' cross motions for summary judgment (ECF 75-1 and 78, respectively). Also before the court is plaintiff's motion for summary judgment on defendant's counterclaim (ECF 77). For the reasons set forth below, the parties' cross motions for summary judgment are granted in part and denied in part. Plaintiff's motion for summary judgment on defendant's counterclaim is granted in part and denied in part.
Plaintiff filed his complaint on March 6, 2008, seeking injunctive relief and damages for alleged violations of ERISA. (Pl.'s Compl. ("Compl."), ECF 2.) Defendants answered the complaint on May 12, 2008. (Defs.' Answer, ECF 7.) On May 8, 2009, plaintiff moved for judgment on the administrative record. (ECF 14.) Defendants filed a cross-motion for summary judgment on May 15, 2009, arguing plaintiff's claims should be dismissed because he failed to exhaust his administrative remedies. (ECF 18.) The court issued a memorandum and order on June 23, 2006, granting defendants' cross-motion for summary judgment and denying plaintiff's motion for judgment on the administrative record. (See Order, ECF 31.) The court dismissed plaintiff's complaint "without prejudice for plaintiff's failure to exhaust administrative remedies," without reaching the merits of plaintiff's claims for benefits. (Id. at 15:20-21.)
Plaintiff appealed to the Ninth Circuit on August 21, 2009. (ECF 40.) On July 25, 2011, the Ninth Circuit issued a published opinion, reversing the court's determination that plaintiff failed to exhaust his administrative remedies. See Barboza v. Cal. Ass'n Prof'l Firefighters, 651 F.3d 1073 (9th Cir. 2011). The court specifically held that the Plan failed to comply with department of labor regulations regulations by not rendering a decision on plaintiff's claim for long-term disability benefits within 90 days. See id. at 1080. Plaintiff's claims were therefore deemed exhausted. Id. The Ninth Circuit remanded to this court to address plaintiff's claims on the merits.
On January 27, 2012, defendants filed a motion for leave to file a counterclaim under 29 U.S.C. § 1132(a)(3)(B), "which allows plan fiduciaries to obtain equitable relief." (Mot. for Leave to Amend, ECF 58 at 2:2-3.) At the hearing on defendants' motion, the court granted defendants' leave to amend to file a counterclaim. (Transcripts of Proceedings, ECF 65 at 11:15-19.) Defendants filed their counterclaim on March 2, 2012 (ECF 64), and plaintiff answered on March 23, 2012 (ECF 66).
Defendants filed their motion for summary judgment on April 11, 2012. (Defs.' Mot. for Summ. J. ("Defs.' MSJ"), ECF 75-1.) On April 13, 2012, plaintiff filed its cross-motion for summary judgment. (Pl.'s Mot. for Summ. J. ("Pl.'s MSJ"), ECF 78.) Plaintiff also filed its motion for summary judgment on defendants' counterclaim on April 13, 2012. (Pl.'s Mot. for Summ. J. on Defs.' Countercl. ("Pl.'s CC MSJ"), ECF 77.) Each of the aforementioned motions is opposed.
The court, in its order on the parties' original cross-motions for summary judgment, recounted the relevant facts of this case in detail, as follows:
CAPF offers a long term disability plan to eligible firefighters in California. CAIS is the independent third-party administrator for the CAPF Plan. Prior to March 2006, plaintiff was a firefighter for the City of Tracy and a participant in the CAPF Plan. Plaintiff held the rank and position of Battalion Commander and, in that position, did not routinely respond to fires. In or about December 2005, the City decided to eliminate the Battalion Commander position. By letter dated March 2, 2006, plaintiff was given an official notice of layoff from the City Manager. According to the letter, plaintiff had four choices: (1) he could retire if eligible by virtue of his age and years of service; (2) he could accept a layoff effective March 21, 2006; (3) he could resign from the Tracy Fire Department, or (4) if determined by the Personnel Manager to be qualified, he could accept a demotion to Fire Captain.
Plaintiff was too young to retire and did not want to accept a layoff or resign. He was also not physically qualified to accept the Fire Captain position. Plaintiff injured his back in 1993 or 1994 and filed a claim for benefits under the workers' compensation system. His disability was found to be permanent and stationary, and he was given a permanent work restriction for "no very heavy lifting" by his doctor. Plaintiff was able to continue work, and he received regular treatments from a chiropractor, but his back never got better. In 1999, he was promoted to Division Chief, but the pain from his prior back injury was getting worse. The position changed to Battalion Commander in 2003, a position that was primarily a supervisory one involving mostly desk work. Despite this change, the pain in plaintiff's neck, back and shoulders became more of a problem in 2003-2004. The pain was spreading down his back and he developed peripheral neuropathy in his legs, which caused pain, numbness and tingling. In 2005, he was rated "marginal" in his mandatory agility testing.
In early March 2006, Tracy Fire Chief Bosch called plaintiff in for a meeting to inquire whether in light of his physical condition, plaintiff could safely do the job of Fire Captain. Plaintiff told Bosch he did not know if he could safely perform the job physically and asked if there were any other positions available. Chief Bosch said that there were not and sent plaintiff to Dr. Patel to determine if he was physically qualified to perform the duties of the Fire Captain position.
Plaintiff reported to work as a Fire Captain on or about March 21, 2006. He was subsequently evaluated by Dr. Patel on March 27, 2006. Dr. Patel found plaintiff physically unqualified for the Fire Captain position due to his previously sustained back injury and peripheral neuropathy. Dr. Patel placed permanent work restrictions on plaintiff that prevented him from repetitive lifting above 40 pounds, repetitive bending at the waist, and repetitive stooping, and he could only occasionally work at height or climb a ladder.
The City placed plaintiff on administrative leave the following day. After two months of paid administrative leave, the City gave plaintiff a disability retirement from the position of Fire Captain.
On or about March 29, 2006, plaintiff contacted CAIS to discuss filing a long-term disability claim because he was physically unable to perform the duties of Fire Captain. CAIS advised plaintiff to review the benefits available to him under California Labor Code § 4850, as CAIS understood plaintiff's acceptance of retirement benefits may preclude him from receiving benefits under Section 4850, and that any long-term disability claim made under the CAPF Plan would be offset by the benefits available to him under that code section. CAIS also advised plaintiff to file a workers' compensation claim for cumulative trauma to his back. Defendants assert plaintiff advised CAIS that he would have his workers' compensation attorney file a workers' compensation claim for cumulative trauma and seek benefits under Section 4850. As such, defendants maintain they believed that plaintiff would receive these benefits. Plaintiff contends, to the contrary, that he told CAIS that he would receive Section 4850 pay only until his disability retirement went through, as his physical condition was permanent and stationary, thereby precluding him from receiving Section 4850 benefits. Plaintiff filed a workers' compensation claim, and CAPF subsequently filed a lien in the workers' compensation proceeding. Plaintiff disputes that defendants' lien was properly filed and perfected.
Plaintiff did not pursue the statutory benefits available under Section 4850 and, instead, accepted retirement due to permanent disability. He was granted disability retirement by the City effective May 16, 2006. On May 31, 2006, he filed a written claim for disability benefits under the CAPF Plan. After receiving plaintiff's claim, CAIS asserts it made several attempts to communicate with plaintiff and his attorney to discuss the issue of Section 4850 benefits, but it received no response. As a result, CAIS presumed that plaintiff had applied for and was receiving the Section 4850 benefits it believed he was entitled to, and thus, there was no immediate need for a determination on plaintiff's long-term disability claim. Plaintiff contends CAIS's presumption was unreasonable since it knew plaintiff had been retired for a permanent disability since May 16, 2006, which plaintiff contends made him ineligible for Section 4850 benefits. Plaintiff asserts he was entitled under the Plan to a claims decision within 45 days of filing his claim.
On October 7, 2006, plaintiff faxed a letter to CAIS complaining that he had not been given any explanation for why he was not being paid long-term disability benefits from defendants and requesting payment of his benefits because his injuries were permanent. CAIS responded on October 13, 2006, stating that plaintiff needed to obtain legal advice immediately before allowing his first PERS retirement payment to be deposited in his account, as CAIS believed plaintiff could no longer receive further Section 4850 benefits once he began receiving PERS payments. CAIS attempted to contact plaintiff's attorney to discuss this issue with him as well, but counsel never responded to CAIS.
On May 2, 2007, CAPF received a letter from plaintiff inquiring why he was not receiving benefits for his claim. This was the first time since October 2006 that CAPF had been contacted by plaintiff. On May 18, 2007, CAIS denied plaintiff's claim for disability benefits on the ground there was "no documentation on file to show that [plaintiff was] disabled from [his] Own Occupation as a chief officer and you were able to work full duty as a Battalion Chief until the city discontinued this position."
Plaintiff appealed CAIS's decision on July 31, 2007. On November 16, 2007, plaintiff submitted additional medical evidence in support of his disability claim. [On the day before the hearing, CAPF notified plaintiff that it would be addressing Section 4850 pay. (Supplemental Decl. of Geoffrey White, ECF 16 ¶ 3.)] *fn1 On February 20, 2008, the Claims Committee of the Board of Directors ("Claims Committee") heard plaintiff's appeal. Both plaintiff and his attorney attended the hearing. At the conclusion of the hearing, the Claims Committee took the appeal under submission and advised plaintiff it would issue a decision forthwith.
On March 6, 2008, two weeks following the appeal hearing and before the Claims Committee rendered its decision, plaintiff filed the instant lawsuit against defendants. The CAPF Plan, however, required an additional appeal to the CAPF Executive Board and then a 30-day period of good-faith negotiation to work out any disputes prior to filing suit on a claim.
On April 21, 2008, the Claims Committee issued its decision, granting plaintiff's disability claim but paying benefits subject to the offsets permitted by the Plan, which included payments under Section 4850 that plaintiff was entitled to, and any other income and/or workers' compensation settlement amounts plaintiff may receive.
Thereafter, plaintiff settled his workers' compensation claim with the City through a compromise and release. He settled this claim without notifying CAPF. The parties dispute whether CAPF was entitled to participate in the settlement negotiations. Defendants contend that under the provisions of the Plan, CAPF must be a party to and approve of all settlements; in the event it is not included, the Plan provides that CA[PF] may take an offset of the entire settlement, even if that settlement is characterized as a buy-out of future medical payments. Defendants assert that despite CAPF's lien and their attorney specifically advising plaintiff's counsel of these provisions of the Plan, plaintiff settled his claim with the City without notifying CAPF. Thus, defendants argue they may properly offset plaintiff's benefits by the entire settlement amount of $18,000.00. Defendants also emphasize that plaintiff signed a Benefit Election Form expressly acknowledging his obligation to repay any amounts received from a workers' compensation settlement, and that these settlement proceeds would be taken as an offset to any benefits payable under the Plan. (Order, ECF 31 at 2:23-9:16; Barboza v. California Ass'n of Prof'l Firefighters, 2009 WL 1770429, at *1-4 (E.D. Cal. June 23, 2009) (internal citations omitted).)
Summary judgment is appropriate when the moving party demonstrates no genuine issue as to any material fact exists, and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). Under summary judgment practice, the moving party always bears the initial responsibility of informing the district court of the basis of its motion, and identifying those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file together with the affidavits, if any," which it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). "[W]here the nonmoving party will bear the burden of proof at trial on a dispositive issue, a summary judgment motion may properly be made in reliance solely on the 'pleadings, depositions, answers to interrogatories, and admissions on file.'" Id. at 324. Indeed, summary judgment should be entered against a party who does not make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Id. at 322. In such a circumstance, summary judgment should be granted, "so long as whatever is before the district court demonstrates the standard for entry of summary judgment, as set forth in Rule 56(c), is satisfied." Id. at 323.
If the moving party meets its initial responsibility, the burden then shifts to the opposing party to establish that a genuine issue as to any material fact actually does exist. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87 (1986); First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 288-289 (1968). In attempting to establish the existence of this factual dispute, the opposing party may not rely upon the denials of its pleadings, but is required to tender evidence of specific facts in the form of affidavits, and/or admissible discovery material, in support of its contention that the dispute exists. Fed. R. Civ. P. 56(c). The opposing party must demonstrate that the fact in contention is material, i.e., a fact that might affect the outcome of the suit under the governing law, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986), and that the dispute is genuine, i.e., the evidence is such that a reasonable jury could return a verdict for the nonmoving party, Id. at 251-52.
In the endeavor to establish the existence of a factual dispute, the opposing party need not establish a material issues of fact conclusively in its favor. It is sufficient that "the claimed factual dispute be shown to require a jury or judge to resolve the parties' differing versions of the truth at trial." First Nat'l Bank, 391 U.S. at 289. Thus, the "purpose of summary judgment is to 'pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial.'" Matsushita, 475 U.S. at 587 (quoting Rule 56(e) advisory committee's note on 1963 amendments).
In resolving the summary judgment motion, the court examines the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any. Rule 56(c); SEC v. Seaboard Corp., 677 F.2d 1301, 1305-06 (9th Cir. 1982). The evidence of the opposing party is to be believed, and all reasonable inferences that may be drawn from the facts placed before the court must be drawn in favor of the opposing party. Anderson, 477 U.S. at 255. Nevertheless, inferences are not drawn out of the air, and it is the opposing party's obligation to produce a factual predicate from which the inference may be drawn. Richards v. Nielsen Freight Lines, 602 F. Supp. 1224, 1244-45 (E.D. Cal. 1985), aff'd, 810 F.2d 898 (9th Cir. 1987).
Finally, to demonstrate a genuine issue that necessitates a fact finder, the opposing party "must do more than simply show that there is some metaphysical doubt as to the material facts. . . . Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no 'genuine issue for trial.'" Matsushita, 475 U.S. at 586-87, 106 S. Ct. at 1356.
III. Cross-Motions for Summary Judgment
Plaintiff contends the standard of review in this case should be de novo because "[d]efendants violated DOL regulations in failing to provide a decision on Barboza's [a]ppeal within 90 days," as required by 29 C.F.R. § 2560. (Pl.'s MSJ at 12:6-8.) This, plaintiff maintains, was a blatant procedural violation necessitating de novo review, as explained in Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955 (9th Cir. 2006). Plaintiff also argues review should be de novo because, "by raising th[e] issue regarding Section 4850 pay at the last minute on the day before the hearing, the Plan prevented full development of the administrative record and did not provide Barboza with a full and fair hearing." (Id. at 13:9-11.)
Defendants argue there is no valid reason to alter the standard of review. Specifically, citing the Supreme Court's decision in Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (2008), and this court's decision in Duvall v. Reliance Std. Life Ins. Co., 646 F. Supp. 2d 1188, 1198 (E.D. Cal. 2009), defendants maintain any delay in providing a decision on appeal should not alter the standard of review because "[d]efendants acted in good faith in terms of complying" with the deadline and "therefore, did not commit any egregious procedural violation." (Defs.' Opp'n to Pl.'s MSJ ("Def.s' Opp'n"), ECF 83 at 3:1-3.) Defendants note that cases from the Eastern District have held that "failure to adhere to the deadlines set forth in the regulations will not alone warrant the use of a de novo standard of review." (Id. at 3:22-23.) Defendants argue that offsetting plaintiff's LTD benefits under Section 4850 was not a "new reason" to deny benefits; indeed, defendants maintain plaintiff admits the administrator brought up the issue of 4850 benefits long before the appeal. (Id. at 7:9-11.) Finally, defendants point to the fact that, in Duvall, the court declined to alter the standard of review where plaintiff sought de novo review for virtually the same reasons plaintiff seeks de novo review here. See Duvall,646 F. Supp. 2d at 1199-1203.
Where a plan's language expressly confers discretionary authority upon the Plan administrator, a federal court will review the administrator's decision for abuse of discretion. Abatie, 458 F.3d at 967. While a conflict of interest in the Plan administrator - that is, where the administrator both funds a plan and evaluates claims for benefits - will not alter the standard of review, the court must consider any conflict as a factor in determining whether the administrator abused its discretion. Metro. Life Ins. Co., 554 U.S. at 115-16. However, the standard of review will rise to de novo "where the administrator violates the procedures mandated by ERISA in a way that is 'so flagrant so as to alter the substantive relationship between the employer and employee, thereby causing the beneficiary substantive harm.'" Duvall, 646 F. Supp.2d at 1198 (quoting Gatti v. Reliance Standard Life Ins. Co., 415 F.3d 978, 985 (9th Cir. 2005)).
Here, plaintiff does not dispute that the plain language of the Plan expressly confers discretion on the plan administrator. (Pl.'s MSJ at 11:17-19.) However, plaintiff asserts that defendants' alleged procedural misconduct has altered the standard of review from abuse of discretion to de novo. Plaintiff's argument in this regard, however, runs afoul of relevant precedent.
First, this court's decision in Duvall undercuts plaintiff's contention that the court should review de novo CAPF's decision regarding 4850 benefits because the Plan's decision on plaintiff's appeal was untimely. Beyond the legal rules set forth in Duvall, as set forth above, the facts of that case are similar to the facts of this case. Specifically, in Duvall, the court held that even though the plan administrator "failed to adhere to its own deadlines and ERISA regulations in rendering the appeal," mere "failure to adhere to the regulations' deadlines does not alone merit the use of a de novo standard of review." Duvall, 646 F. Supp.2d at 1199, 1202.
Second, plaintiff's contention that the standard of review should be de novo because defendants "rais[ed] the issue regarding Section 4850 pay at the last minute on the day before the hearing" is contrary to binding precedent. (Pl.'s MSJ at 13:9-10.) Plaintiff relies on language from Saffon v. Wells Fargo Long-Term Disability Plan, 522 F.3d 863, 872 (9th Cir. 2008), which states, "[a]fter all, coming up with a new reason for rejecting the claims at the last minute suggests that the claim administrator may be casting about for an excuse to reject the claim rather than conducting an objective evaluation." Plaintiff omits, however, pertinent language directly preceding that quote, explaining that where an administrator does not give ample notice of the basis for a denial or offset, "[t]his procedural violation must be weighed by the district court in deciding whether [the administrator] abused its discretion." Id. at 871-72 (quoting Abatie, 458 F.3d at 974). As was the case with defendants' alleged lack of adherence to ...