Opinion
Civil Action No: SA-04-CA-0333-XR.
September 30, 2004
ORDER ON DISMISSAL
On this date the Court considered (1) Plaintiff's Alternative Motions to Abate, or to Toll the Statute of Limitations (docket no. 4); (2) Defendants' Motion to Dismiss or, Alternatively, to Stay Proceedings (docket no. 16); (3) Plaintiff's Motion for Extension of Time for Service of Summons Upon the Unidentified Fiduciaries of the SBC Pension Benefit Plan (docket no. 13); (4) Plaintiff's Request for Entry of Default and Default Judgment (docket no. 17) and (5) the Parties' Joint Motion Requesting the Court Enter an Order Striking Plaintiff's Request for Entry of Default and Default Judgment (docket no. 28). Because these motions concern the same issue, exhaustion of administrative remedies, the analysis will be combined. After considering the motions, as well as the various responses, replies, and surreplies to each, the Court is of the opinion that this case should be DISMISSED without prejudice.
I. Factual and Procedural Background
Plaintiff, Laura Galvan, and her former husband, Stanley Davis, were divorced in Missouri in 1995. Davis was, at the time, an employee of SBC Communications, Inc. and a participant in the SBC Pension Benefit Plan. In the Missouri divorce action, the Missouri court entered a separation agreement, which awarded Plaintiff an interest in Davis's benefits under the SBC Pension Benefit Plan ("the Plan"), pursuant to a qualified domestic relations order. The order awarded Plaintiff fifty percent of Davis's benefit in the Plan as of March 16, 1995, fifty percent of any early retirement subsidy that Davis might receive from the Plan as a result of a decision to take early retirement, and certain survivorship rights. After examining the qualified domestic relations order, the Secretary of the Employees' Benefit Committee for the Plan notified Plaintiff that she was entitled to fifty percent of Davis's accrued benefit as of March 16, 1995, which was calculated as a monthly annuity equal to $639.61 per month. Nothing was mentioned of any other benefit, however.
On November 15, 2000, Davis voluntarily elected to retire from the Plan prior to normal retirement age and elected to be paid an early retirement subsidy. On February 8, 2001, Plaintiff sent a letter to SBC, administrator of the Plan, requesting information on the subsidy paid to Davis. SBC eventually responded, in a letter dated April 10, 2001, and offered Plaintiff a life annuity payable over Davis's lifetime, equal to $639.91, with a lump sum value of $106,921.74.
On March 5, 2004, after subsequent correspondence between the parties had failed to resolve anything, Plaintiff submitted a claim for benefits to SBC, seeking a portion of the early retirement benefits provided to Davis, as well as other benefits. The claim letter was apparently sent to the wrong address and the claim was not received in the correct office, as listed in the Plan materials, until March 22, 2004. The SBC Pension and Savings Plan Service Center sent a claim receipt confirmation to Plaintiff dated March 24, 2004, stating that Plaintiff "will receive a written response within ninety days from receipt of your claim." On April 20, 2004, Plaintiff filed the instant suit, ostensibly to preserve its claims against any statute of limitations claims. On June 22, 2004, 92 days after the date the Plan received her claim, the Plan sent a letter, dated June 15, 2004, stating that it required an additional 90 days to research and respond to Plaintiff's claim. On June 24, 2004, Plaintiff filed alternative motions to either abate or toll the statute of limitations, alerting the Court to the fact that it had failed to fully exhaust administrative remedies. On August 30, 2004, Defendants filed a motion to dismiss, or alternatively to stay, the proceedings until Plaintiff has fully exhausted her administrative remedies. Plaintiff has responded that Defendants have failed to follow the procedures outlined in the Plan and in the ERISA regulations, and that she has therefore fully exhausted her administrative remedies.
The language of the benefit plan also states that a claimant "may appeal a decision if no reply is received after 90 days."
II. Analysis
A. Procedural Compliance
Strict procedural compliance is generally not required of a Plan under ERISA. Courts have been willing to overlook administrators' failures to meet certain procedural requirements when the administrator has substantially complied with the regulations and the process as a whole fulfills the broader purposes of ERISA and its accompanying regulations. See, e.g., Gilbertson v. Allied Signal, Inc., 328 F.3d 625, 634-35 (10th Cir. 2003); Kent v. United of Omaha Life Ins. Co., 96 F.3d 803, 807-08 (6th Cir. 1996); Sheppard Enoch Pratt Hosp. Inc. v. Travelers Ins. Co., 32 F.3d 120, 127 (4th Cir. 1994); Halpin v. W.W. Grainger, Inc., 962 F.2d 685, 690 (7th Cir. 1992).
Under 29 C.F.R. § 2560.503-1(f)(1), "[i]f the plan administrator determines that additional time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 90-day period." 29 C.F.R. § 2560.503-1(1) states that if the plan administrator fails to follow the claims procedure required, then the claimant is deemed to have exhausted administrative remedies. Plaintiff argues that because the Plan administrator sent the letter notifying Plaintiff of Defendants' intentions to take additional time for processing, Defendants have failed to follow the claims procedure as required under section 2560.503-1(f)(1). Plaintiff argues that her claim is therefore valid as she should be deemed to have exhaustive remedies. While the Court does not condone the practice of a party filing a required document a day late, or even on the absolute last day allotted, the fact that this letter was sent but a day late is sufficient to find that Defendants acted in substantial compliance with the claims procedure. Deeming Plaintiff as having exhausted administrative remedies when Defendants have sent a sufficient notice of an extension of time, which they are entitled to under the same regulations Plaintiff points to as establishing strict requirements, would frustrate the broader purposes of ERISA and its accompanying regulations by circumventing the administrative process on a mere technicality. As Judge Kozinski of the Ninth Circuit has put it:
The final day of the 90-day deadline actually fell on June 20, 2004, a Sunday. Therefore, the last available day that Defendants could have mailed the letter within the deadline would have been Monday, June 21, 2004.
An altogether frustrating and all too common practice observed in courtrooms today.
While both the Plan itself and the letter initially sent to Plaintiff speak in terms of "receipt" by the Plaintiff, both parties discuss the issue of notification furnished to Plaintiff as required by section 2560.503-1(f)(1) in terms of the date the letter was mailed. Without determining what is required by the term "furnished," the Court has decided the issue in accordance with the parties' arguments.
The Fifth Circuit has noted that the primary purposes of the exhaustion requirement are to: "(1) uphold Congress's desire that ERISA trustees be responsible for their actions, not the Federal Court; (2) provide a sufficiently clear record of the administrative action if litigation should ensue; and (3) assure that any judicial review of fiduciary action (or any action) is made under the arbitrary and capricious standard, not de novo." Dentum v. First National Bank of Waco, Texas, 756 F.2d 1295, 1300 (5th Cir. 1985); see also Hall v. National Gypsum Co., 105 F.3d 225, 231 (5th Cir. 1997).
In simple English, what this regulation calls for is a meaningful dialogue between ERISA plan administrators and their beneficiaries. If benefits are denied . . . the reason for denial must be stated in reasonably clear language, . . . if the plan administrators believe that more information is needed to make a reasoned decision, they must ask for it. There is nothing extraordinary about this: it's how civilized people communicate with each other regarding important matters.Booton v. Lockheed Medical Benefit Plan, 110 F.3d 1461, 1463 (9th Cir. 1997). Requiring exhaustion in this case allows for this "meaningful dialogue" to take place.
Accordingly, because Defendants have acted in substantial compliance with the procedural requirements of the ERISA regulations, the Court finds that Plaintiff has failed to exhaust her administrative remedies. Defendants should be given an opportunity to respond and decide Plaintiff's claim in the first instance. The Court is convinced that the Plan administrator will comply with the ERISA regulations as well as all other requirements necessary to validate Plaintiff's interest in her former husband's pension plan. The question remains, however, whether the Court should stay the litigation in this Court or dismiss the case without prejudice until Plaintiff has exhausted her administrative remedies.
B. Stay vs. Dismissal
Defendants ask the Court to dismiss this case for Plaintiff's failure to exhaust administrative remedies. Plaintiff asks the Court to stay the litigation, or in the alternative to hold that the ERISA statute of limitations should be tolled during the period in which Plaintiff is required to exhaust her administrative remedies. In Radford v. General Dynamic Corp., 151 F.3d 396, 400 (5th Cir. 1998), the Court found that the ERISA limitations requirement that suit must be brought before the earlier of six years after the last violation or three years after discovery of the violation, see 29 U.S.C. § 1113, should be interpreted as a statute of repose that could not be equitably tolled. See also Davis v. Johnson, 158 F.3d 806, 811 (5th Cir. 1998). No cause of action accrues under ERISA until an application is filed and denied. Paris v. Profit Sharing Plan, 637 F.2d 357, 361 (5th Cir. 1981). A claim for a breach of fiduciary duty, like all claims under ERISA, are subject to the exhaustion requirement. Simmons v. Willcox, 911 F.2d 1077 (5th Cir. 1990); D'Amico v. CBS Corp., 297 F.3d 287 (3rd Cir. 2002). It is generally considered that failure to exhaust administrative remedies under ERISA causes a court to lose jurisdiction. See, e.g., Midpoint Serv. Provider, Inc. v. Connecticut General Life Ins. Co., 152 F. Supp.2d 306 (S.D.N.Y. 2001). Dismissal without prejudice is the appropriate disposition where a plaintiff has failed to exhaust administrative remedies. Simmons, 911 F.2d at 1081 (affirming summary judgment, but discussing dismissal); McGaskey v. Hosp. Housekeeping Sys. of Houston, Inc., 942 F. Supp. 1118 (S.D. Tex. 1996) (dismissal without prejudice). Accordingly, the Court finds that Plaintiff's claim should be dismissed without prejudice. Should further litigation ensue after the Plan administrator's decision, whether the statute of limitations has passed will be a determination to be made at that time.
III. Conclusion
Plaintiff's claims are barred by the requirement of exhaustion of administrative remedies. Defendants have substantially complied with the procedural requirements of the ERISA regulations. Allowing Plaintiff to go forward with this suit would frustrate the broader purposes of ERISA and the requirement that administrative remedies be exhausted. Plaintiff's motion to abate, or alternatively to toll the statute of limitations is DENIED. (docket no. 4). Defendant's motion to dismiss is GRANTED. (docket no 16). Plaintiff's claim is DISMISSED without prejudice. All other motions pending before this Court, including docket nos. 13, 17, 28, are DENIED as moot.
JUDGMENT IN A CIVIL CASE
Jury Verdict. This action came before the Court for a trial by jury. The issues have been tried and the jury has rendered its verdict.[X] Decision by Court. This action came on for consideration before the Court. The issues have been considered and a decision has been rendered.
IT IS ORDERED AND ADJUDGED
Order on Dismissal: Plaintiff's claims are barred by the requirment of exhausion of administrative remedies. Plaintiff's motion to abate, or alternatively to toll the statute of limitaions is DENIED. Defendant's motion to dismiss is GRANTED. Plaintiff's claim is DISMISSED without prejudice.
JUDGMENT IN A CIVIL CASE
Jury Verdict. This action came before the Court for a trial by jury. The issues have been tried and the jury has rendered its verdict.[X] Decision by Court. This action came on for consideration before the Court. The issues have been considered and a decision has been rendered.
IT IS ORDERED AND ADJUDGED
Order on Dismissal: Plaintiff's claims are barred by the requirment of exhausion of administrative remedies. Plaintiff's motion to abate, or alternatively to toll the statute of limitaions is DENIED. Defendant's motion to dismiss is GRANTED. Plaintiff's claim is DISMISSED without prejudice.