United States District Court, S.D. California
GEOFFREY MOYLE, an individual; PAULINE ARWOOD, an individual; THOMAS ROLLASON, an individual; and JEANNIE SANDERS, an individual, on behalf of themselves, Plaintiff,
LIBERTY MUTUAL RETIREMENT BENEFIT PLAN; LIBERTY MUTUAL RETIREMENT PLAN RETIREMENT BOARD; LIBERTY MUTUAL INSURANCE GROUP, INC., a Massachusetts company; LIBERTY MUTUAL INSURANCE COMPANY, a Massachusetts company, Defendants
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[Copyrighted Material Omitted]
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For Geoffrey Moyle, an individual, on behalf of themselves, Pauline Arwood, an individual, on behalf of themselves, Thomas Rollason, an individual, on behalf of themselves, Jeannie Sanders, an individual, on behalf of themselves, Plaintiffs: Alex M Tomasevic, Matthew B Butler, Mei-Ying M. Imanaka, Tracy J. Jones, LEAD ATTORNEYS, Andrew Cole Myers, Nicholas and Butler LLP, San Diego, CA; Craig McKenzie Nicholas, LEAD ATTORNEY, Nicholas and Butler, San Diego, CA; Jack B Winters, Jr, LEAD ATTORNEY, Law Offices of Winters and Associates, San Diego, CA.
For Liberty Mutual Retirement Benefit Plan, Liberty Mutual Retirement Plan Retirement Board, Liberty Mutual Insurance Company, a Massachusetts company, Defendants: Jennifer L. Santa Maria, LEAD ATTORNEY, Jackson Lewis, LLP, San Diego, CA; Ashley Bryan Abel, PRO HAC VICE, Julia M. Ebert, PRO HAC VICE, Robert M. Wood, PRO HAC VICE, Jackson Lewis LLP, Greenville, SC.
For Liberty Mutual Insurance Group Inc., a Massachusetts company, Defendant: Jennifer L. Santa Maria, LEAD ATTORNEY, Jackson Lewis, LLP, San Diego, CA; Julia M. Ebert, PRO HAC VICE, Jackson Lewis LLP, Greenville, SC.
ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT
[Dkt. Nos. 212, 213.]
HON. GONZALO P. CURIEL, United States District Judge.
Before the Court are the parties' cross-motions for summary judgment, their oppositions and their replies. On June 7, 2013, the Court held a hearing. (Dkt. No. 247.) Matthew Butler, Esq. and Andrew Myers, Esq. appeared on behalf of Plaintiffs and Ashley Abel, Esq. and Jennifer Santa Maria, Esq. appeared on behalf of Defendants. Based on the parties' briefs, supporting documentation and applicable law, the Court GRANTS Defendants' motion for summary judgment; and DENIES Plaintiffs' motion for partial summary judgment.
Prior to the filing of the instant case, on March 14, 2005, Plaintiff Geoffrey Moyle (" Moyle" ) filed a complaint in this Court against Golden Eagle Insurance Corporation (" GEIC" or " New Eagle" ) and Liberty Mutual Insurance Company (" LMIC" ).  (Case No. 05cv507-DMS(WMC), Dkt. No. 1). On August 23, 2005, Moyle filed a first amended complaint adding Defendant Liberty Mutual Retirement Benefit Plan (" Plan" ). On November 14, 2005, District Judge Dana Sabraw granted Defendants' motion to dismiss for failure to exhaust administrative remedies. (Id., Dkt. No. 32.) Plaintiff appealed and on August 23, 2007, the Ninth Circuit affirmed the district court's dismissal requiring Plaintiff to exhaust. Moyle v. Golden Eagle Ins. Corp., 239 Fed.Appx. 362 (9th Cir. 2007).
On January 26, 2008, Moyle filed a claim with Liberty Mutual. (Administrative Record (" AR" ) 783-86.) On July 18, 2008, Plaintiff Thomas Rollason filed a claim. (AR 639-43.) On August 21, 2008, Plaintiff Pauline Arwood filed a claim. (AR 1016-20.) Lastly, on December 4, 2008, Plaintiff Jeannie Sanders filed her claim. (AR 1511-16.)
On April 23, 2008, Moyle's claim and subsequently Rollason, Arwood and Sanders' claims for benefits were initially denied by John R. St. Martin, Manager of Pension and Savings, Benefits at Liberty Mutual. (AR 712-718 (" Moyle" ); 590-96 (" Rollason" ); 991-97 (" Arwood" ); 1497-1503 (" Sanders" )).
On June 20, 2008, Plaintiffs sought review of the initial decision and all four claims were consolidated for purposes of the administrative appeal. (AR 426.) On October 23, 2009, Plaintiffs' appeals were denied by Helen Sayles, Senior Vice President of HR & Administration, on behalf of the Retirement Board. (AR 4365-4414.)
After having exhausted administrative remedies, on October 19, 2010, Plaintiffs Moyle, Arwood, Rollason, and Sanders filed the instant class action complaint against Defendants Liberty Mutual Retirement Benefit Plan (" Plan" ); Liberty Mutual Retirement Benefit Plan Retirement Board (" Board" ); Liberty Mutual Group,
Inc. (" LMGI" ); and Liberty Mutual Insurance Company (" LMIC" ). (Dkt. No. 1.) On October 21, 2010, Plaintiffs filed a first amended complaint. (Dkt. No. 3.) On April 25, 2011, District Judge Dana Sabraw denied Defendants' motion to dismiss the second and third claims; granted in part motion to dismiss improperly named Defendants; denied Defendants' motion to dismiss the first claim as to Plaintiff Moyle and granted Defendants' motion to strike demand for trial by jury. (Dkt. No. 18.) On September 14, 2011, the Court granted Plaintiffs' motion for leave to file a second amended complaint. (Dkt. No. 41.) On September 20, 2011, Plaintiffs filed a second amended complaint. (Dkt. No. 47.)
After briefing by the parties on Plaintiffs' motion for class certification, on April 10, 2012, District Judge Sabraw certified the class as to the first, second, and fourth causes of action to be:
all former employees of Golden Eagle Insurance Company who are or were employed by Liberty Mutual Group Inc. and/or Liberty Mutual Insurance Company starting October 1, 1997, who participated or are participating in the Liberty Mutual Retirement Benefit Plan, and who were or will be denied credit for all years of service with Old Golden Eagle for the purposes of calculating all benefits owed to them under the Plan from October 1, 1997 to the present.
(Dkt. No. 113 at 19.)
On April 24, 2012, Defendants filed a petition for permission to appeal the Court's order granting class certification to the Ninth Circuit. (Dkt. No. 120.) In the meantime, the Court denied Defendants' motion for reconsideration and granted their motion for stay pending appeal. (Dkt. No. 126.) On July 11, 2012, the Ninth Circuit denied Defendants' petition for permission to appeal. (Dkt. No. 128.)
On October 12, 2012, the case was transferred to the undersigned judge. (Dkt. No. 174.) On October 17, 2012, Plaintiffs filed a third amended complaint against Defendants Liberty Mutual Retirement Benefit Plan (" Plan" ); Liberty Mutual Retirement Benefit Plan Retirement Board (" Board" ), the Plan administrator; Liberty Mutual Group, Inc. (" LMGI" ), the Plan sponsor; and Liberty Mutual Insurance Company (" LMIC" ), the entity that purchased OGE, and established GEIC and is a subsidiary of LMGI. (Dkt. No. 178.) The third amended complaint alleges four causes of action: payment of benefits under the Plan pursuant to 29 U.S.C. § 1132(a)(1)(B); equitable relief under 29 U.S.C. § 1132(a)(3); violation of 29 C.F.R. § 2560.503-1(h)(2)(i); and violation of 29 C.F.R. § 2520.102-3(l) and 29 C.F.R. § 2520.102-2(a).
On January 3, 2013, Defendants filed a motion for summary judgment on all four causes of action. (Dkt. No. 212.) On the same day, Plaintiffs filed a motion for partial summary judgment on the second and fourth causes of action and on certain of Defendants' affirmative defenses. (Dkt. No. 213.) On March 8, 2013, both parties filed their respective oppositions to the motions for summary judgment. (Dkt. Nos. 232, 233.) On April 5, 2013, replies by both parties were filed. (Dkt. Nos. 239, 241.)
Plaintiffs Geoffrey Moyle, Pauline Arwood, Thomas Rollason, and Jeannie Sanders are four former employees of Golden Eagle Insurance Company (" Old Golden Eagle" or " OGE" ). (Dkt. No. 233-2, Undisputed Fact No. 2.) On January 31, 1997, the Superior Court of San Diego County placed OGE into conservatorship proceedings under the supervision of the California Insurance Commissioner. (Id., Undisputed Fact No. 5.) The court approved the
sale and transfer of certain OGE assets and liabilities to LMIC on May 30, 1997. (Id.) On October 1, 1997, pursuant to a Rehabilitation Agreement with the State-appointed conservator, LMIC purchased certain assets of OGE and formed and incorporated a new entity, Golden Eagle Insurance Corporation, (" New Golden Eagle" or " GEIC" ), as a subsidiary of LMIC. (Id., Undisputed Fact No. 6.) Article 5.1(c) of the Rehabilitation Agreement states:
As to the employees of [OGE] who become employees of New Eagle or another Subsidiary of LMIC by reason of the transactions contemplated by this Agreement . . . [s]uch employees shall be provided benefits which are at least comparable to those offered by [OGE] and shall be credited for all prior years of service with [OGE] . . . for purposes of eligibility, vesting and early retirement subsidies under the LMIC Retirement Benefit Plan . . . provided, that such period of service with [OGE] will not be credited for purposes of benefits accruals under the LMIC Thrift Incentive Plan and Retirement Benefit Plan . . . .
(Id., Undisputed Fact No. 7; AR 3035-36.) OGE did not offer a traditional defined benefit pension plan to its employees. (Id., Undisputed Fact No. 9.) As former employees of OGE, Plaintiffs had the opportunity to participate in a 401(k) Plan and profit-sharing plan. (Id., Undisputed Fact No. 10.) OGE did not offer any other retirement plans, such as a defined benefit pension plan funded by the employer with benefit accruals based on years of service. (Id., Undisputed Fact No. 11.) OGE did not contribute any assets to the Plan at issue in this case and Plaintiffs did not make any contributions to the Plan. (Id., Undisputed Fact No. 12.)
Plaintiffs claim Defendants sought to retain Old Golden Eagle employees and advised them that if they remained in their positions, they would be eligible to participate in the Plan with credit for their years of service with Old Golden Eagle in addition to their continued time of employment after the acquisition. While Defendants argue that they stated that Old Golden Eagle employees would receive prior service credit for the years of service with Old Golden Eagle under the Plan for purposes of eligibility, participation, vesting, early retirement benefits and spouse's death benefits, they did not expressly state one way or another whether Old Golden Eagle employees would be credited for purposes of calculating pension benefit accrual under the Plan. Plaintiffs remained in their positions after the acquisition and later retired. Upon retirement, their pension benefits were calculated based only on their years of service after the acquisition in October 1997. It is undisputed that years of service with Old Golden Eagle were credited under the Plan for purposes of eligibility, participation, vesting, retirement benefits and spouse's death benefits. However, Plaintiffs and many other Old Golden Eagle employees expected to receive credit also for purposes of calculating their accrued retirement benefit. Therefore, Plaintiffs filed their lawsuit alleging violations of the provisions of ERISA.
A. Legal Standard for Motion for Summary Judgment
Federal Rule of Civil Procedure 56 empowers the Court to enter summary judgment on factually unsupported claims or defenses, and thereby " secure the just, speedy and inexpensive determination of every action." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Summary judgment is appropriate if the " pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show 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." Fed.R.Civ.P. 56(c). A
fact is material when it affects the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
The moving party bears the initial burden of demonstrating the absence of any genuine issues of material fact. Celotex Corp., 477 U.S. at 323. The moving party can satisfy this burden by demonstrating that the nonmoving party failed to make a showing sufficient to establish an element of his or her claim on which that party will bear the burden of proof at trial. Id. at 322-23. If the moving party fails to bear the initial burden, summary judgment must be denied and the court need not consider the nonmoving party's evidence. Adickes v. S.H. Kress & Co., 398 U.S. 144, 159-60, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970).
Once the moving party has satisfied this burden, the nonmoving party cannot rest on the mere allegations or denials of his pleading, but must " go beyond the pleadings and by her own affidavits, or by the 'depositions, answers to interrogatories, and admissions on file' designate 'specific facts showing that there is a genuine issue for trial.'" Celotex, 477 U.S. at 324. If the non-moving party fails to make a sufficient showing of an element of its case, the moving party is entitled to judgment as a matter of law. Id. at 325. " 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 Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). In making this determination, the court must " view the evidence in the light most favorable to the nonmoving party." Fontana v. Haskin, 262 F.3d 871, 876 (9th Cir. 2001). The Court does not engage in credibility determinations, weighing of evidence, or drawing of legitimate inferences from the facts; these functions are for the trier of fact. Anderson, 477 U.S. at 255.
B. ERISA Standard of Review
The United States Supreme Court has held that a denial of benefits is reviewed de novo when the plan does not confer discretion on the administrator " to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). If de novo review applies, no further preliminary analytical steps are required and the court proceeds to evaluate whether the plan administrator correctly or incorrectly denied benefits without regard to whether the administrator operated under a conflict of interest. Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 963 (9th Cir. 2006). If a plan confers discretionary authority as a matter of contractual agreement, then the standard of review shifts to an abuse of discretion. Firestone Tire & Rubber Co., 489 U.S. at 115. The plan must unambiguously provide discretion to the administrator. Id.
Both parties do not dispute that the Plan grants the administrator discretion to interpret the Plan. Defendants argue that an " abuse of discretion" standard applies while Plaintiffs assert a " de novo " or a heightened deferential standard of review applies as there is a substantial conflict of interest.
In applying the abuse of discretion standard, the Court must reverse the determinations of the plan administrator if they are arbitrary and capricious after looking at the plain language of the plan. Canseco v. Constr. Laborers Pension Trust, 93 F.3d 600, 606 (9th Cir. 1996). " A plan administrator's decision to deny benefits must be upheld under the abuse of discretion standard if it is based upon a reasonable interpretation of the plan's terms and if it was made in good faith."
McDaniel v. Chevron Corp., 203 F.3d 1099, 1113 (9th Cir. 2000). The question is not " whose interpretation of the plan documents is most persuasive, but whether the . . . interpretation is unreasonable."
Canseco, 93 F.3d at 606 (citations and internal quotations omitted).
If a plan gives discretion to an administrator who is operating under a conflict of interest, that conflict must be weighed as a 'facto[r] in determining whether there is an abuse of discretion.'" Firestone Tire & Rubber Co., 489 U.S. at 115; see Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105, 108, 128 S.Ct. 2343, 171 L.Ed.2d 299 (2008) (a conflict of interest will be found where the " entity that administers the plan, such as an employer or an insurance company, both determines whether an employee is eligible and pays benefits out of its own pocket." ); Conkright v. Frommert, 559 U.S. 506, 130 S.Ct. 1640, 1646, 176 L.Ed.2d 469 (2010) (When the terms of a plan grants discretionary authority to the plan administrator, a deferential standard of review remains appropriate even in the face of a conflict.)
In following the United States Supreme Court, the Ninth Circuit has held that the " [a]buse of discretion review applies to a discretion-granting plan even if the administrator has a conflict of interest."
Abatie, 458 F.3d at 965. When there is a conflict of interest, such as when a plan administrator both administers the plan and funds it, the Ninth Circuit held that the standard of review is an abuse of discretion review " but a review informed by the nature, extent, and effect on the decision-making process of any conflict of interest that may appear in the record." Id. at 967. " A district court, when faced with all the facts and circumstances, must decide in each case how much or how little to credit the plan administrator's reason for denying . . . coverage." Id. at 968. For instance, if a conflict of interest involves evidence of malice, self-dealing or parsimonious claims-granting history, the court may weigh a conflict more heavily than a conflict of interest without evidence of malice or self-dealing. Id. A court may weigh the conflict more heavily if there's evidence that the administrator has given " inconsistent reasons for denial . . . fails adequately to investigate a claim or ask the plaintiff for necessary evidence . . . fails to credit a claimant's reliable evidence . . . or has repeatedly denied benefits to deserving participants by interpreting plan terms incorrectly or by making decisions against the weight of evidence in the record." Id. at 968-69.
However, if an administrator " engages in wholesale and flagrant violation of the procedural requirements of ERISA and thus acts in utter disregard of the underlying purpose of the plan as well", the Court reviews de novo the administrator's decision to deny benefits.
Abatie, 458 F.3d at 971; see also Gatti v. Reliance Standard Life Ins. Co., 415 F.3d 978, 985 (9th Cir. 2005) ( de novo review applies where the administrator has a serious conflict of interest that the beneficiary can demonstrate with " material, probative evidence, beyond the mere fact of an apparent conflict, tending to show that the fiduciary's self-interest caused a breach of the administrator's fiduciary obligations to the beneficiary." )
Here, while Plaintiffs agree that the Plan  grants the administrator, Liberty
Mutual Retirement Benefit Plan Retirement Board, discretion to interpret the Plan, they argue that there is a structural conflict of interest so a " de novo " or a heightened deferential standard of review applies.
In support of their argument that there was a structural conflict of interest such that a de novo review applies, Plaintiffs assert that John R. St. Martin, a Liberty employee who reported to Helen Sayles, denied the initial claim, and then Helen Sayles, Liberty's Director of Human Resources and a member of the Liberty Mutual Board of Directors reviewed St. Martin's denial and simply rubber stamped it. (Dkt. No. 233-4, Butler Decl., Ex. 40, Sayles Depo. at 10:11-11:25.) In support, Plaintiffs point to Sayles' deposition where she states that " Mr. St. Martin prepared a draft of the document for her review along with other documentation." (Dkt. No. 235-20, Butler Decl., Ex. 40, Sayles Depo. at 177:10-14.) This alone does not demonstrate Sayles rubber stamped the initial denial.
Plaintiffs also argue that there was a structural conflict of interest because both St. Martin and Sayles were witnesses to the underlying facts of Plaintiffs' claims. Both were involved with the 1997 Benefit Enrollment meetings and they drafted various Plan documents, including the Summary Plan Descriptions (" SPD" ) and the Facilitator Guide. Therefore, Plaintiffs argue that they were inherently biased when they reviewed their own communications with employees to determine if their employer should pay more money into the Plan. Defendants argue that Plaintiffs have not provided any evidence they any financial interest or motivation to deny the claims. The Court agrees. While Plaintiffs present general allegations that St. Martin and Sayles were biased because of their positions at Liberty ...