Silvertooth v. Unum Life Insurance Co. of America

Full title: MARGIE A SILVERTOOTH, Plaintiff, v. UNUM LIFE INSURANCE CO. OF AMERICA, et…

Court: United States District Court, N.D. Texas, Dallas Division

Date published: Jan 8, 2001

Civil Action No. 3:99-CV-0519-M (N.D. Tex. Jan. 8, 2001)

Opinion

Civil Action No. 3:99-CV-0519-M.

January 8, 2001.

MEMORANDUM OPINION AND ORDER

Barbara M. G. Lynn, United States District Judge.

Plaintiff Margie A. Silvertooth ("Silvertooth") has filed suit alleging that Defendants Balcor Company ("Balcor") and UNUM Life Insurance Company of America ("UNUM") failed to pay her the benefits that she is entitled to under the Long-term Disability Benefits Plan issued by UNUM (the "UNUM Plan"). Before the Court are UNUM's Motion for Summary Judgment, filed on January 14, 2000, and Balcor's Motion for Summary Judgment, filed February 28, 2000. Having considered the briefs and the applicable law, for the reasons stated below, the Court GRANTS the Motions for Summary Judgment of Defendant Balcor and Defendant UNUM.

I. Background

From October 1991 through June 1994, Silvertooth was employed by Defendant Balcor Property Management, Inc. ("BPMI"),¹ formerly a wholly-owned subsidiary of Balcor, as the manager of the Ridgepoint Way apartment complex ("Ridgepoint").

1 On September 30, 1993, BPMI changed its name to Allegiance Realty Group, Inc. ("ARGI"). Defendant ARGI, which was also a wholly-owned subsidiary of Balcor, was dissolved in December 1994.

During Silvertooth's employment, Balcor provided long-term disability insurance benefits to the employees of its subsidiaries, through a policy issued by UNUM. In December 1993, Silvertooth injured her back, and in March 1994, she filed a claim with UNUM. UNUM approved Silvertooth's claim, and has continuously paid all benefits that it determined were due under the UNUM Plan.

Silvertooth's claim is that UNUM has miscalculated her disability benefits. Beginning in June 1992, BPMI provided Silvertooth with an apartment at Ridgepoint at no cost. Balcor treated the free rent as "extra compensation," provided to Silvertooth in addition to her salary,² and in calculating Silvertooth's disability benefits, UNUM thus concluded that the value of the apartment should not be included in the calculation of Silvertooth's "basic monthly earnings." Silvertooth asserts that the rent-free apartment, valued at approximately $700 per month, is part of her salary, and thus should have been included in UNUM's calculation of her disability benefits.

2 In June 1992, Silvertooth was promoted to Resident Office Manager. In addition to her salary, Balcor gave Silvertooth a rent-free apartment. Balcor did not treat the value of the rent as taxable income or reflect the value of the rent on Silvertooth's W-2 form.

In her First Amended Complaint, Silvertooth alleges that Defendants violated the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1132 (a)(1)(B) ("ERISA"), by failing to pay her the full benefits to which she claims entitlement under the UNUM Plan. Silvertooth also asserts state law claims for breach of contract, estoppel, fraud, breach of fiduciary duty, negligence, and gross negligence.

UNUM filed its Motion for Summary Judgment on January 14, 2000, and Balcor filed its Motion for Summary Judgment on February 28, 2000. Plaintiff did not respond to either Motion.

II. Summary Judgment Standard

UNUM and Balcor are not automatically entitled to summary judgment merely because Silvertooth failed to respond to their motions. John v. Louisiana, 757 F.2d 698, 707-08 (5th Cir. 1985). However, if UNUM and Balcor meet their burden under FED. R. Civ. P. 56, Silvertooth cannot survive their motions merely by resting on allegations in her pleadings. Isquith v. Middle S. Utils., Inc., 847 F.2d 186, 199 (5th Cir.), cert. denied, 488 U.S. 926 (1988). The court may accept as undisputed the facts described in support of UNUM's and Balcor's Motions. Everslay v. MBank Dallas, 843 F.2d 172, 174 (5th Cir. 1988). If UNUM and Balcor have met their Rule 56 burden, summary judgment is appropriate if Silvertooth, as the non-movant, fails to set forth specific facts, by affidavits or otherwise, showing there is a genuine issue of fact for trial. Topalian v. Everman, 954 F.2d 1125, 1132 (5th Cir.), cert. denied, 506 U.S. 825 (1992); see also Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc) (once movant for summary judgment meets burden imposed by Rule 56, non-movant cannot rely on pleadings, but must designate specific facts showing there is a genuine issue for trial).

On the basis of the submissions from UNUM and Balcor, and Silvertooth's failure to designate specific facts showing a genuine issue of material fact for trial, the Court is persuaded that both UNUM and Balcor are entitled to summary judgment and that Silvertooth should take nothing from UNUM or Balcor on her claims.

III. ERISA's Preemption of Silvertooth's State Law Claims

Both UNUM and Balcor offer summary judgment evidence that the UNUM Plan is governed by ERISA. Silvertooth produced no evidence to establish otherwise. Thus, there is no genuine dispute as to whether the UNUM Plan falls within ERISA's ambit. See, e.g., Everslay, 843 F.2d at 174 (accepting as undisputed the evidence and list of undisputed facts presented by defendant in support of its motion for summary judgment when the plaintiff made no opposition to the motion).

Section 514(a) of ERISA states that it "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" covered by ERISA. 29 U.S.C. § 1144 (a). Courts have construed this language broadly, observing that ERISA was designed "to establish pension plan regulation as exclusively a federal concern." Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 138 (1990). Specifically, the Supreme Court has stated that a state law relates to an ERISA plan "in the normal sense of the phrase if it has connection with or reference to such a plan." Shaw v. Delta Air Lines, 463 U.S. 85, 96-97 (1983). Even if a state law does not expressly relate to employee benefit plans, ERISA may still preempt the state law. See Rokohl v. Texaco, Inc., 77 F.3d 126, 129 (5th Cir. 1996).

In determining whether ERISA preempts the state law claims at issue, the ultimate question is whether, "if the [plaintiff's] claims were stripped of their link to the pension plans, they would cease to exist." Id. UNUM and Balcor correctly assert that all of Silvertooth's state law claims relate solely to the issue of whether UNUM correctly calculated Silvertooth's benefits under the UNUM Plan and those claims thus are preempted by ERISA.

In Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 55-56 (1987), the Supreme Court held that state law claims of breach of contract, breach of fiduciary duty, fraud, negligence, and gross negligence were preempted by ERISA when brought by a beneficiary who disputed the benefits paid under an ERISA-governed plan. See also Metropolitan Life Inc. Co. v. Taylor, 481 U.S. 58 (1987) (breach of contract and wrongful termination); Lee v. E.I. DuPont de Nemours Co., 894 F.2d 755, 758 (5th Cir. 1990) (fraud and misrepresention); Ramirez v. Inter-Continental Hotels, 890 F.2d 760, 762-64 (5th Cir. 1990) (breach of contract, breach of fiduciary duty, negligence, and state statutory violations); Hermann Hosp. v. MEBA Med. Benefits Plan, 845 F.2d 1286, 1290 (5th Cir. 1988) (promissory estoppel). Accordingly, all of Silvertooth's state law claims are preempted by ERISA; hence, summary judgment should be granted in favor of UNUM and Balcor on these claims.

IV. UNUM's Liability to Silvertooth under ERISA

Silvertooth brings her ERISA claim against UNUM under 29 U.S.C. § 1132 (a)(1)(B), which provides that "[a] civil action may be brought — by a participant or beneficiary — to recover benefits due [her] under the terms of [her] plan, to enforce [her] rights under the terms of the plan, or to clarify [her] rights to future benefits under the terms of [her] plan. . . ." Before the Court can analyze UNUM's summary judgment motion on this claim, it must first consider under what standard it should review UNUM's refusal to include the free rent as part of Silvertooth's basic monthly earnings, in order to determine Plan benefits.

In Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989), the United States Supreme Court described the applicable standard:

[A] denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility benefits or to construe the terms of the plan.

In Pierre v. Connecticut General Life Insurance Co., 932 F.2d 1552, 1557 (5th Cir. 1991), the applicable standard of review for claims under 29 U.S.C. § 1132 (a)(1)(B) was addressed by the Fifth Circuit:

[B]efore benefits are paid or denied, a plan administrator has to make determinations that may be divided into two general categories. First, he must determine the facts underlying the claim for benefits. Second, he must then determine whether those facts constitute a claim to be honored under the terms of the plan. Bruch addressed the proper standard of review that is to be given to the plan administrator's second determination, Bruch did not speak to the first.

Id. (citations omitted). The first category to be considered, factual determinations, does not involve contract interpretations. Pierre, 932 F.2d at 1558. Factual determinations involve analyses of facts beyond the boundaries of the plan in issue and are, according to Pierre, subject to a deferential, abuse of discretion standard of review. Id. at 1561. In contrast, the second category of determinations by the plan administrator, contract or plan interpretations, apply the underlying facts to the terms of the plan, to determine if a "claim [is] to be honored under the terms of the plan." Id. at 1557.

When analyzed together, Bruch and Pierre instruct that when a plan administrator has discretion to determine eligibility benefits or to construe the terms of the applicable plan, both the administrator's factual determinations and plan interpretations are to be reviewed on an abuse of discretion standard. However, if a plan administrator does not have express discretion under the plan, the abuse of discretion standard applies only to the court's review of factual determinations, as a plan administrator maintains inherent discretion to make factual determinations under 29 U.S.C. § 1102 (a)(1). Pierre, 932 F.2d at 1558. A court's plan interpretations — whether the factual determinations constitute a claim to be honored under the terms of the plan — is to be evaluated de novo.

In the case at hand, UNUM never asserts it has discretionary authority over either the factual findings or interpretation of the UNUM Plan. Hence, UNUM's factual determinations will be reviewed under an abuse of discretion standard, but its plan interpretations will be reviewed de novo.

Thus, the narrow issue for this Court in determining the applicable standard of review is whether UNUM's decision to exclude the free rent in calculating Silvertooth's basic monthly earnings was a construction of the term "basic monthly earnings" in the UNUM Plan to be reviewed de novo, or, alternatively, a determination of fact to be reviewed for abuse of discretion.

The Fifth Circuit addressed a similar issue in Meditrust Fin. Servs. Corp. v. Sterling Chems. Inc., 168 F.3d 211 (5th Cir. 1999). The issue before the court in Meditrust was whether the determination of medical necessity under an ERISA plan was a factual inquiry or a construction of the plan's terms. While the beneficiary's treating physicians argued that the administrator's determination required an interpretation of the terms "medical necessity" and "generally accepted standards," the Plan argued that the decision to deny benefits involved a review of the facts and a determination of whether there was factual support for the claim. See id. at 214. The Meditrust court ultimately affirmed summary judgment for the Plan, concluding that the Plan administrator's decision to deny benefits was a factual determination, to be judged by an abuse of discretion standard of review. See id. at 213-16.

Here, UNUM argues that Silvertooth's ERISA claim involves an analysis of UNUM's factual determination that the free rent was not part of Silvertooth's basic monthly earnings. This Court agrees. UNUM's decision not to consider the free rent as part of monthly earnings involves a review of Balcor's personnel records and the facts relative to the rent award. Therefore, the Court will review the administrator's judgment on an abuse of discretion standard of review.

As long as UNUM's determination that the free rent was not part of "basic monthly earnings" was reasonable, based on facts known to UNUM when it made its determination, UNUM's denial of Silvertooth's claim must be upheld. Pierre, 932 F.2d at 1563. The Court's review of UNUM's factual determination is limited to the administrative record submitted to UNUM. See Meditrust, 168 F.3d at 215.

Under the UNUM Plan, "basic monthly earnings" is defined as:

The insured's monthly rate of earnings from the employer in effect just prior to the date disability begins. It does not include extra commissions, bonuses, overtime pay, and other extra compensation.

The summary judgment evidence confirms that UNUM did not abuse its discretion in concluding that the free rent was not part of Silvertooth's "basic monthly earnings" under the UNUM Plan. Silvertooth did not report the value of the rent-free apartment to the Internal Revenue Service. Silvertooth and other Balcor employees receiving rent-free apartments were not taxed on the value of the rent. Balcor did not report the free rent as compensation for tax purposes, nor did it pay premiums under the UNUM Plan for the value of the rent-free apartment. Thus, neither Silvertooth nor Balcor considered the free rent a part of Silvertooth's "basic monthly earnings," but instead treated it as extra compensation.

Since the administrative record creates a reasonable basis for UNUM's determination that the rent concession was "extra compensation" and not part of Silvertooth's "basic monthly earnings," summary judgment is appropriately granted in favor of UNUM on Silvertooth's ERISA claim.³

3 Even if this Court concluded that UNUM's conclusion regarding the calculation of Silvertooth's "basic monthly earnings" was a plan interpretation, thereby invoking a de novo standard of review, the Court's ruling would be no different. The Fifth Circuit has held that the term "extra compensation," in the context of a calculation of benefits under a disability policy, is not ambiguous. Thus, the UNUM Plan should be given its ordinary and generally accepted meaning. Wegner v. Standard Ins. Co., 129 F.3d 814, 818 (5th Cir. 1997). Under these circumstances, the rental value of Plaintiff's apartment is extra compensation and is thereby excluded from UNUM's calculation of Silvertooth's "basic monthly earnings."

V. Balcor's Liability to Silvertooth under ERISA

Plaintiff also asserts ERISA claims against Balcor, her employer. Although § 1132(a)(1)(B) does not explicitly declare who may be sued for recovery of benefits under an ERISA plan, the statute states that a plaintiff may sue the plan, as an entity. 29 U.S.C. § 1132 (d)(1) (1995); see also Murphy v. Walmart Assoc, Group Health Plan, 928 F. Supp. 700, 709 (E.D. Tex. 1996). However, the statute contains no provision allowing a plaintiff to recover from any other entity for the alleged underpayment of benefits.

Several cases have held that entities such as an employer are proper defendants in an ERISA case only if they maintained control or discretion over the management and administration of the plan (in which case an employer could be sued as a fiduciary under § 1132(a)(2)). See id. However, an employer who does not control or maintain discretionary authority over the plan is not a proper party to an ERISA suit alleging underpayment. See id.

In Section VI, the UNUM Plan provides that only UNUM will make payments to eligible employees, and further provides that under no circumstances will Balcor be deemed an agent of UNUM. The decision to approve Silvertooth's application for disability benefits, and the determination of the amount of such benefits, were decisions made exclusively by UNUM. Therefore, no claims can be asserted against Balcor under ERISA; hence, summary judgment should be granted in favor of Balcor.

VI. Conclusion

The Court concludes that there are no genuine issues of material fact with respect to Plaintiff's claims. For the reasons stated above, both UNUM's and Balcor's Motions for Summary Judgment are GRANTED, and Plaintiff's claims are DISMISSED WITH PREJUDICE. Judgment will be entered by separate document.

SO ORDERED.