Opinion
Case Number 02-10153-BC.
June 23, 2003.
OPINION AND ORDER GRANTING DEFENDANT'S MOTION TO AFFIRM ADMINISTRATIVE DECISION
This case presents the question whether an ERISA plan administrator properly relied on a waiver of Extended Disability Benefits which was given as part of a settlement of a workers' compensation claim in denying the plaintiff's later request for those benefits. The defendant has filed a motion to affirm the plan administrator's decision, and a related motion for summary judgment. The plaintiff has responded to the defendants' motions, but has not filed any cross-motions.
I.
The administrative record and the parties' separate proposed findings of fact, in which they substantially concur, disclose the following facts. In February, 2000, the plaintiff filed his Application for Mediation or Hearing with the Bureau of Workers' Disability Compensation contending that he suffered a work-related injury when he developed an emotional disorder due to a confrontation with his superintendent. At that time, the plaintiff was employed by General Motors Corporation at its GM Lake Orion facility. See A.R. at 135. On March 2, General Motors filed its Answer to the Application denying liability. Id. at 136-39.
The plaintiff has last worked for General Motors on May 11, 1999. He had received Sickness and Accident Benefits under the General Motors Life and Disability Benefits Program through October 13, 1999. On that same date, the plaintiff began receiving Extended Disability Benefits ("EDB"). The amount of the monthly EDB payments was initially reduced by Social Security Disability benefits and on March 1, 2000, EDB was further reduced by an estimated disability pension benefit. These reductions are authorized by the Program and not contested in this litigation. Effective March 1, 2000, the plaintiff was entitled to receive $571.01 per month in EDB. Id. at 186-88.
By January 17, 2001, counsel for the plaintiff and counsel for General Motors had negotiated a settlement of the Workers' Compensation claim calling for a redemption in the amount of $40,000. On March 1, 2001, after General Motors had approved the settlement, Attorney McNally, who represented GM, advised Attorney Barry Keller, representing the plaintiff, that the settlement could proceed and enclosed the necessary documents to be signed by the plaintiff. See McNally Letter and attachments, A.R. at 140-44. Those settlement documents included the Agreement to Redeem Liability, the EDB Waiver Form, a resignation form, and the proposed Redemption Order. The EDB Waiver form provided: "I, Earl R. Larremore, agree to waive any EDB benefits I might be entitled to receive as additional consideration for the settlement of my workers' compensation case for $40,000." Attorney Keller was provided with the documents that were to be executed at the Redemption hearing a week in advance, including the EDB Waiver.
The plaintiff signed the settlement documents on March 8, 2001. Attorney Keller witnessed the plaintiff's signature on those document, including the EDB waiver. The Redemption hearing took place before Bureau of Workers' Disability Compensation Magistrate Wierzbicki on that same date. A transcript of those proceedings has been included in the Administrative Record filed by the defendant. See A.R. at 145-62. As reflected in the transcript, the Magistrate reviewed the medical reports and deposition testimony, the plaintiff was questioned regarding the settlement, and the settlement was approved. Hearing Tr. at 4-5, 16, A.R. at 148-49, 160. The plaintiff was specifically advised that he had fifteen days to ask that the settlement be set aside. Hearing Tr. at 9, 14-15, A.R. at 153, 158-59. Attorney Keller witnessed the EDB Waiver Form. Neither the plaintiff nor his attorney sought review of the Redemption Settlement within the fifteen-day period.
On March 30, 2001, Attorney Keller wrote to Attorney Berge (GM's attorney at the redemption hearing), and requested that the EDB Waiver be revoked. Attorney Keller premised his request on an alleged "misunderstanding at the time of the Redemption" and his contention that the plaintiff had inadvertently signed the Waiver of EDB. On April 6, 2001, Attorney Berge responded to Keller, advising that General Motors was not willing to revoke the waiver.
Attorney Keller next wrote to Defendant MetLife on May 29, 2001. Keller explained that the plaintiff had "inadvertently and mistakenly signed a document waiving his rights to extended disability benefits." Keller, apparently disregarding the plaintiff's receipt of $40,000, further contended that there was no consideration for such waiver. See A.R. at 169. MetLife responded to Keller's letter on December 31, 2001, explaining that the GM Program was self-funded, that it served as the Claims Administrator, and that EDB benefits were reduced by Social Security Disability Benefits, GM pension and retirement benefits, and Workers' Compensation benefits. MetLife further explained that it had been furnished the EDB Waiver and as a result, EDB was not payable beyond the date of the redemption settlement. Id. at 186-88.
The parties dispute the nature of the "Waiver" referred to in the transcript of the Redemption proceedings. MetLife contends that said Waiver is the same EDB Waiver discussed above. The plaintiff states that the transcript plainly reflects that his client did not agree with the Waiver in question, see Tr. at 15, A.R. at 159, and that the plaintiff understood that all but $100 of his settlement was allocated to future medical payments to prevent a pension offset, Tr. at 9, A.R. at 153.
The parties agree that MetLife was not a party to the redemption settlement.
II.
The plaintiff contends that the Court should disregard the EDB waiver because it was signed under a "mutual mistake" of fact. Accordingly, the plaintiff argues, he should be receiving his EDB under the express terms of the plan. The defendant counters that if the waiver was mistakenly signed, there was no "mutual" mistake, since the EDB would have been substantially reduced by any workers' compensation payments the plaintiff may have won and waiver of the extended benefits was a material part of the settlement and redemption of the workers' compensation claim. The defendant also argues that the plaintiff may not now attempt to repudiate the waiver — an integral part of the settlement — without first tendering back the consideration. Next, MetLife points out that the plaintiff's dispute over the workers' compensation settlement should be directed to General Motors. MetLife is merely the plan administrator and was not a party to the arrangement which yielded the EDB waiver. For all these reasons, MetLife insists that is was entirely reasonable for it to rely on the EDB waiver when deciding to deny the plaintiff's request for Extended Disability Benefits.
There is no dispute that the GM Plan is an "employee welfare benefit plan" under ERISA, see 29 U.S.C. § 1002(1), that the plaintiff's cause of action is one for benefits under Section 502(a)(1)(B) of ERISA, and that this Court is limited to the evidence presented to the plan fiduciary. The parties also agree that a deferential standard of review applies to the plan administrator's decision in this case. When applying this standard, the Court must determine whether the administrator's decision was reasonable in light of the available evidence. Put another way, if there is a reasonable explanation for the administrator's decision in light of the plan's provisions, then the decision was not arbitrary and capricious. Smith v. Ameritech, 129 F.3d 857, 863 (6th Cir. 1997); Williams v. Int'l Paper Co., 227 F.3d 706, 712 (6th Cir. 2000). The question presented for the Court to decide, therefore, is whether the defendant's refusal to pay long-term disability benefits to the plaintiff after the plaintiff's execution of the EDB Waiver form was arbitrary and capricious. Given the standard of review, this is not a close case. The denial of benefits after March 8, 2001 was not improper.
The defendant has correctly cited the law of accord and satisfaction. "An accord and satisfaction is a separate and new contract that operates to discharge or terminate an existing debt. The prior debt is discharged by a performance different from that which is claimed as due, and acceptance of such substituted performance." Baum's Dairy Farms, Inc. v. United States, 996 F. Supp. 705, 711 (E.D. Mich. 1998). Once tender has been made in "accord" with the parties' settlement agreement, consideration has been exchanged and the agreement cannot be rescinded. Bowater North Am. Corp. v. Murray Mach. Inc., 773 F.2d 71, 75 (6th Cir. 1985). In an unpublished decision, the Sixth Circuit applied the common law of accord and satisfaction as followed by the Michigan Supreme Court to bar an ERISA plan participant's attempt to rescind a waiver on the ground that consideration was not first returned to the Plan. See Samms v. Quanex Corp., No. 95-2173, 1996 WL 599821 (6th Cir. Oct. 17, 1996). The "tender-back" rule is a well-established rule of contract law. See McDonald v. Zinn Drywall, 134 Mich. App. 270, 274-75, 350 N.W.2d 864, 866-67 (1984) (holding that where a plaintiff attempts to set aside a workers' compensation redemption settlement, a plaintiff must, in a case alleging mutual mistake, tender a return of the consideration); Stefanac v. Cranbrook Educ. Cmty., 435 Mich. 155, 176-77, 458 N.W.2d 56, 66 (1990) (holding "that a plaintiff must, in all cases where a legal claim is raised in contravention of an agreement, tender the consideration recited in the agreement prior to or simultaneously with the filing of suit. . . . Although seemingly harsh, we find that this rule is necessary in order to preserve the stability of release agreements"); Leahan v. Stroh Brewery Co., 420 Mich. 108, 112-13, 359 N.W.2d 524, 525-26 (1984) (holding that the plaintiff must return both parties to the financial status quo before commencing suit to revoke a release agreement). See also Small v. Chemlawn Corp., 584 F. Supp. 690, 693 (W.D. Mich. 1984), aff'd, 765 F.2d 146 (6th Cir. 1985) ("Where an accord has been followed by satisfaction, a plaintiff must tender back to the defendant that which he received in return for the accord before commencing suit.").
As for the law concerning mutual mistake, the defendant correctly observes, and the plaintiff does not dispute, that Michigan has not found a unilateral mistake to be a sufficient basis to revoke his waiver. See Solo v. Chrysler Corp., 408 Mich. 345, 292 N.W.2d 438 (1980) (citing Larson, Workmen's Compensation, § 81.52, at 15-545 15-546); McDonald, 134 Mich. App. at 273, 350 N.W.2d at 866 (noting that the Court has the power "to rescind a workers' compensation redemption agreement on the ground of mutual mistake"); Badon v. Gen. Motors Corp., 679 F.2d 93, 96 (6th Cir. 1982) ("Furthermore, the parties were not, as Badon suggests, laboring under any mutual mistake of fact. Any mistake regarding the possible consequences of the redemption was unilateral on Badon's part.").
There can be little doubt that MetLife, as the plan administrator, could have relied — indeed, as a fiduciary, ought to have relied — on the waiver of benefits signed by the plaintiff and witnessed by his attorney. The only basis the plaintiff proffered in his demand letter to MetLife for ignoring the EDB Waiver was his self-serving proclamation that no consideration was received for the EDB Waiver, a rationale not supported by the administrative record. Against this meager showing, the administrator was confronted with evidence of (1) an EDB Waiver form signed by the plaintiff, (2) that was witnessed by the plaintiff's attorney, (3) whose execution was completed on the record before a magistrate, (4) who himself confirmed the plaintiff's consent to the Redemption. With these materials before it, MetLife drew the only reasonable conclusion available, namely that the waiver was properly made, and the problem with the settlement was not of General Motors' making. See A.R. at 173 ("We now know that the employee is very confused. . . . If he didn't explain the EDB waiver properly to the employee, that will be Mr. Keller's problem.").
The plaintiff's basis for urging otherwise is testimony from the Redemption hearing cited out of its proper context. The cited testimony refers to the separate issue of the manner in which the settlement funds will be characterized for tax and future disability offset purchases. That aspect of the settlement issue is quite separate from the EDB Waiver, and certainly does not stand for the proposition that the plaintiff did not receive consideration for any component of the settlement. Even if that testimony was helpful to the plaintiff, all it would mean is that plaintiff's counsel failed to properly advise his client as to the ramifications of the waiver. Having let the fifteen-day revocation period expire, the plaintiff has no recourse against this defendant for his unilateral misunderstanding.
IV.
The Court has determined that the decision of the Plan administrator was reasonable in light of the evidence contained in the administrative record.
Accordingly, it is ORDERED that the defendant's Motion to Affirm the Administrator's Decision [dkt #19] is GRANTED. The defendant's Motion for Summary Judgment [dkt #9] is DENIED as moot.
It is further ORDERED that the plaintiff's complaint is DISMISSED WITH PREJUDICE.