Opinion
Civil No. 04-1598 (DWF/SRN).
October 26, 2004
John J. Curi, Esq., Curi Law Office, 2249 38th Street East, Minneapolis, MN 55407, counsel for Plaintiff.
Deborah A. Ellingboe, Esq. and Steven L. Severson, Esq., Faegre Benson, 90 South 7th Street, Suite 2200, Minneapolis, MN 55402-3901, counsel for Defendants.
MEMORANDUM OPINION AND ORDER
Introduction
The above-entitled matter came on for hearing before the undersigned United States District Judge on July 30, 2004, pursuant to Defendants Minnesota Mining and Manufacturing Company Long-Term Disability Plan/Preferred Works Group's ("3M") and Preferred Works Group's ("the Claims Administrator") motion to dismiss. Plaintiff Joseph F. Barbera opposes this motion. For the reasons stated below, 3M's and the Claims Administrator's motion (collectively "the Defendants") motion is granted in part and denied in part.
Background
In December 1990, Barbera became employed by 3M as a marketing operations director. Barbera's employment with 3M entitled him to certain benefits, including short-term and long-term disability insurance. 3M's disability insurance plan ("the Plan") is governed by the Employee Retirement Income Security Act of 1974 ("ERISA").On July 5, 1994, Barbera became ill and was hospitalized for approximately the next six months. During the first month of his hospitalization, Barbera remained in a comatose or nearly comatose state. Ultimately, Barbera was diagnosed with "severe cardiac dysfunction, enzymes indicative of a heart attack, carcinogenic shock, a weakened immune system, pancreatitis, and diabetes." (Plaintiff's Memorandum Opposing Motion To Dismiss at 2.)
While hospitalized, 3M placed Barbera on short-term disability ("STD"). On December 16, 1994, Barbera received a letter from 3M's Benefits Department stating that Barbera would not be eligible for additional STD benefits until he worked 20 consecutively scheduled work days. The letter does not mention the possible availability of long-term disability ("LTD") benefits.
In January 1995, Barbera returned to work at 3M, despite the fact that Barbera was required to maintain and use percutaneous drainage catheters and had a wire connected to an installed heart monitor protruding from his chest. Barbera worked half days the first three weeks he was back at 3M. Barbera asserts that, as a result of his injuries, he had difficulty remembering information and performing everyday work tasks.
On May 31, 1996, Barbera reported to 3M for his final day of employment. 3M offered Barbera the opportunity to resign his position in exchange for a severance package. Barbera accepted 3M's offer and signed the severance agreement, titled "General Release of All Claims/Covenant Not to Sue" (the "Severance Agreement"). ( See Joseph F. Barbera's Complaint, Exhibit A ("Severance Agreement").) The Severance Agreement states that in exchange for certain consideration Barbera agrees to release all claims he might have against 3M. In describing the scope of the release, the Severance Agreement provides that:
I agree to release all federal, state or local charges, claims, demands, actions or liabilities I now have or might have in the future based on events through the date I sign this Agreement (even if I don't know of them when I sign this Agreement) against 3M of whatever kind including, but not limited to, those related to my employment with 3M or the termination of my employment.
(Severance Agreement at 2.)
On August 20, 1999, Barbera applied for Social Security disability benefits. The Social Security Administration approved Barbera's claim and found he was disabled as of his last day of work at 3M. Barbera alleges that in April 2001 he learned of 3M's LTD policy while he was applying for workers compensation benefits. Therefore, Barbera filed a claim for LTD benefits with the Plan. The Claims Administrator denied Barbera's claim because Barbera had accepted the Severance Agreement and was no longer an employee of 3M.
Barbera appealed the denial of his claim, and the Claims Administrator upheld the denial on September 25, 2001. In his letter to Barbera, the Claims Administrator stated that Barbera's claim was denied because Barbera had not exhausted his STD benefits and Barbera had signed the Severance Agreement releasing all claims against 3M.
On April 16, 2004, Barbera filed suit against the Plan, the Plan Administrator, and the Claims Administrator. Barbera asserts two causes of action in the suit. Barbera asserts that the Plan breached its fiduciary duties by: (1) failing to review his medical records in denying his application for LTD benefits; (2) violating ERISA's ban on exculpatory provisions, 29 U.S.C. § 1110; and (3) failing to send him information about applying for LTD benefits. Barbera also asserts that the Severance Agreement's provision providing that Barbera will pay all costs and expenses 3M incurs with regard to any claim filed by Barbera coercively interferes with his ERISA rights in violation of 29 U.S.C. §§ 1133(2) and 1141.
Discussion
I. Standard of Review
In deciding a motion to dismiss, the Court must assume all facts in the Complaint to be true and construe all reasonable inferences from those facts in the light most favorable to the complainant. See Morton v. Becker, 793 F.2d 185, 187 (8th Cir. 1986). The Court grants a motion to dismiss only if it is clear beyond any doubt that no relief could be granted under any set of facts consistent with the allegations in the Complaint. See id. The Court may grant a motion to dismiss on the basis of a dispositive issue of law. See Neitzke v. Williams, 490 U.S. 319, 326 (1989). The Court need not resolve all questions of law in a manner which favors the complainant; rather, the Court may dismiss a claim founded upon a legal theory which is "close but ultimately unavailing." Id. at 327.
A. Breach of Fiduciary Duty Claims
Barbera asserts that the Claims Administrator breached its fiduciary duty by relying on the Severance Agreement in denying his claim for benefits. Barbera contends that the fiduciary relationship between himself and 3M, the Plan, and the Claims Administrator required the Claims Administrator to obtain and review his medical records and to base any decision on his claim on medical grounds.
Defendants assert that ERISA does not require a plan administrator to determine a disability benefits claim based solely on medical reasons or to analyze a claimant's medical records when the denial of a claim is for non-medical reasons. Defendants further assert that Barbera fails to state an actionable claim under ERISA § 502(a)(3).
The Court finds that Barbera's claim that the Defendants breached their fiduciary duties to Barbera by failing to obtain his medical records or basing their denial on a non-medical rationale is without merit. A claims administrator is bound to act in accordance with the terms of the plan and most plans require that some threshold criteria are met before a claim's merits will be analyzed. In this case, the Claims Administrator determined that Barbera failed to meet certain threshold criteria. As a result, the Claims Administrator denied Barbera's claim without reviewing the claim on its merits. The Court finds that the Claims Administrator did not breach its fiduciary duty when it decided not to obtain Barbera's medical records and based its decision to deny Barbera's application for LTD benefits on a non-medical rationale. Accordingly, the Court grants Defendants' motion for summary judgment as to this claim.
Barbera also asserts that 3M breached its fiduciary duty by requiring him to sign a release of claims in order to obtain severance benefits. Barbera contends that the Severance Agreement's release provision is invalid because it is an impermissible "exculpatory provision" in violation of 29 U.S.C. § 1110. In contrast, Defendants cite to Supreme Court and Eighth Circuit precedent in support of their assertion that an employer is free to condition the payment of benefits on the recipient signing a release of all claims against an employer.
The Court finds that Defendants did not breach their fiduciary duties or otherwise violate ERISA by including the release provision in the Severance Agreement. In Leavitt v. Northwestern Bell Tel. Co., 921 F.2d 160 (8th Cir. 1990), the Eighth Circuit considered whether section 1110 barred private releases of ERISA claims. The Eighth Circuit found that many disputes would never settle without litigation if section 1110 were read to bar the release of breach of fiduciary duty claims under ERISA. See Leavitt, 921 F.2d at 162. As a result, the Eighth Circuit concluded that section 1110 does not bar the release of breach of fiduciary duty claims. See id.
In this case, 3M required Barbera to sign the Severance Agreement in order to receive severance benefits. As previously stated, courts have examined this practice and found it to be an appropriate manner of resolving present or future disputes. See Leavitt, 921 F.2d at 162; see also Mead v. Intermec Tech. Corp., 271 F.3d 715, 717 (8th Cir. 2001). As a result, the Court finds that 3M did not breach its fiduciary duties to Barbera by including a release provision in Barbera's Severance Agreement.
While the Court has found the inclusion of the release provision in the Severance Agreement not to be actionable, the question remains as to whether the release Barbera signed is enforceable. A release is valid so long as it was "knowingly and voluntarily" entered into by the party executing the release. Lancaster v. Buerkle Buick Honda Co., 809 F.2d 539, 541 (8th Cir. 1987). In determining whether a release is knowing and voluntary, a court must apply general principles of contract construction. See Lancaster, 809 F.2d at 541. A court must examine the totality of the circumstances in which the release was executed to ensure that the fiduciary did not violate its duties to the beneficiary. See Leavitt, 921 F.2d at 162 (citations omitted).
In applying these principles to Barbera's case, the Court must consider: (1) Barbera's education and business experience; (2) Barbera's input in negotiating the terms of the Severance Agreement; (3) the clarity of the release provision's language; (4) the amount of time Barbera had for deliberation before signing the Severance Agreement; (5) whether Barbera read the Severance Agreement and considered its terms before signing it; (6) whether Barbera knew of his rights under the Plan and the relevant facts when he signed the Severance Agreement; (7) whether Barbera was given the opportunity to consult with an attorney before signing the Severance Agreement; (8) whether Barbera received adequate consideration for signing the Severance Agreement; and (9) whether Barbera's signing of the Severance Agreement was induced by improper conduct on the part of 3M. See Leavitt, 921 F.2d at 162 (citations omitted).
At this time, the Court is unable to determine whether the Severance Agreement's release provision is enforceable because neither party briefed the issue. However, the Court is skeptical of the release's validity in light of Barbera's allegation that Defendants failed to comply with the Plan's notice requirement regarding the availability of LTD benefits once Barbera had exhausted his STD benefits. Based on Barbera's allegation regarding the Defendants' failure to comply with the Plan's notice provision, the Court finds that Barbera has presented at least a colorable claim of breach of fiduciary duty.
The Court's analysis of Barbera's claims does not end there, however, because Defendants assert that Barbera's claim that Defendants failed to provide the proper notice is barred by the statute of limitations. 29 U.S.C. § 1113, provides that claims for fiduciary breach must be filed "after the earlier of" three years "after the earliest date on which the plaintiff had actual knowledge of the breach or violation" or six years after "the date of the last action which constituted a part of the breach or violation" or "in the case of an omission the latest date on which the fiduciary could have cured the breach or violation." Defendants contend that the date the Severance Agreement was signed was the last day that any alleged breaches could have been cured. As a result, Defendants assert that even if Barbera's claim is considered an omission, the claim was barred as of May 2002.
Defendants also raise the issue of Barbera's standing to pursue claims for fiduciary breach. However, Defendants only did so in their responsive brief which denied Barbera's counsel the opportunity to respond. As such, the Court finds that the issue was not properly raised.
Barbera asserts that the statute of limitations did not begin to run on his claims until April 2001. Barbera contends that Defendants' alleged failure to provide him with information regarding LTD benefits could have been cured anytime before he actually became aware of the availability of the benefits. Because he filed his Complaint within three years of the date on which he became aware of the breach, Barbera contends that his claims were brought within the statute of limitations.
The Court finds that Barbera's claims are not barred by the relevant statute of limitations. Defendants could have cured the alleged LTD disclosure breach up to the time that Barbera became aware of the alleged breach. Defendants did not do so. As a result, the date that Barbera became aware of the availability of the LTD benefits serves as the starting point for statute of limitations purposes. Barbera alleges that he only became aware of the availability of LTD benefits in April 2001. Thus, Barbera's claims were brought within the relevant statute of limitations period.
B. Coercive Interference Claim
29 U.S.C. § 1141, provides that "[i]t shall be unlawful for any person through the use of fraud, force, violence, or threat of the use of force or violence, to restrain, coerce, intimidate, or attempt to restrain, coerce, or intimidate any participant or beneficiary for the purpose of interfering with or preventing the exercise of any right" under ERISA. Section 1141 further provides that willful violations of this section "shall be fined $10,000 or imprisoned for not more than one year, or both."
Defendants cite to a number of district court decisions in which the courts have held that section 1141 is a criminal statute under which no private right of action exists. See Phillips v. Amoco Oil Co., 614 F. Supp. 694, 724 (N.D. Ala. 1985); see also Goins v. Teamsters Local 639 — Employers Health Pension Trust, 598 F. Supp. 1151, 1155 (D.D.C. 1984); Panter v. American Synthetic Rubber Corp., 686 F. Supp. 1210, 1222 (W.D. Ky. 1984). Barbera's counsel did not address this Count of the Complaint in his responsive papers.
The Court finds that section 1141 is a criminal statute meant to give law enforcement officials the right to prosecute individuals who coercively interfere with a beneficiary's rights under a pension plan. Therefore, section 1141's enforcement is the prerogative of the Attorney General. Accordingly, Defendants' motion to dismiss Count Two of Barbera's Complaint is granted.
Conclusion
The Court believes it is in the best interests of the parties to negotiate a resolution of this dispute. As the parties may already be aware, Magistrate Judge Susan Richard Nelson is available to assist in the negotiation of a settlement should the parties find such services to be helpful. If the Court may be of assistance in this matter, the parties should contact Lowell Lindquist, Calendar Clerk for Judge Donovan W. Frank, at 651-848-1296, or Beverly Riches, Calendar Clerk for Magistrate Judge Susan Richard Nelson, at 651-848-1200.
For the reasons stated, IT IS HEREBY ORDERED THAT:
1. Defendants Minnesota Mining and Manufacturing Company Long-Term Disability Plan/Preferred Works Group's and Preferred Works Group's motion to dismiss (Doc. No. 4) is GRANTED in part and DENIED in part, as follows:
a. Defendants Minnesota Mining and Manufacturing Company Long-Term Disability Plan/Preferred Works Group's and Preferred Works Group's motion to dismiss is GRANTED as to Plaintiff Joseph F. Barbera's claims in Count One of his Complaint that Defendants breached their fiduciary duties by denying Barbera's application for LTD benefits without obtaining his medical records and that Defendants violated ERISA's ban on exculpatory provisions, 29 U.S.C. § 1110, ERISA § 410.
b. Defendants Minnesota Mining and Manufacturing Company Long-Term Disability Plan/Preferred Works Group's and Preferred Works Group's motion to dismiss is DENIED as to Plaintiff Joseph F. Barbera's claim in Count One of his Complaint that Defendants breached their fiduciary duties in failing to send Barbera information about applying for LTD benefits.
c. Defendants Minnesota Mining and Manufacturing Company Long-Term Disability Plan/Preferred Works Group's and Preferred Works Group's motion to dismiss is GRANTED as to Plaintiff Joseph F. Barbera's claim in Count Two of his Complaint.