Wicklander v. Defined Benefit Pension of Agc-Int'l Union

Full title: FRANCIS WICKLANDER, Plaintiff, v. DEFINED BENEFIT PENSION PLAN OF…

Court: United States District Court, D. Oregon

Date published: Oct 5, 2004

CV 04-804 AS (D. Or. Oct. 5, 2004)

Opinion

CV 04-804 AS.

October 5, 2004

Megan E. Glor, Swanson, Thomas Coon, Portland, Oregon, Attorneys for Plaintiff.

Bruce A. Rubin, Alyssa E. Tormala, Miller Nash LLP, Portland, Oregon, Attorneys for Defendant.

OPINION AND ORDER

DONALD ASHMANSKAS, Magistrate Judge

Plaintiff Francis Wicklander seeks to recover disability benefits pursuant to the terms of the Defined Benefit Pension Plan of AGC-International Union of Operating Engineers Local 701 Pension Trust Fund ("the Plan"). Plaintiff's brother, Daniel Wicklander ("D. Wicklander"), also seeks disability benefits under the Plan in Daniel Wicklander v. Defined Benefit Pension Plan of AGC-International Union of Operating Engineers Local 701 Pension Trust Fund, United States District Court for the District of Oregon, Portland Division, Civil Case No. 04-CV-805 AS (the "D. Wicklander proceeding".) The cases have been administratively merged for efficiency and economy. Defendant moves to dismiss for failure to state a claim, and in the alternative, for summary judgment.

BACKGROUND

Plaintiffs were members of the International Union of Operating Engineers Local 701 and were participants in the Plan. Plaintiff D. Wicklander filed a claim for disability benefits with the Plan on February 6, 2001. Plaintiff F. Wicklander filed a claim for disability benefits with the Plan on June 3, 1999. The Plan denied both claims. The Plan requires that a participant be totally and permanently disabled to be eligible for benefits. The Plan provides that, if a participant disagrees with the Plan's decision, the participant may appeal that decision to the Plan's Board of Trustees and then to arbitration. Plaintiffs appealed the denials to arbitration.

In a joint arbitration of their claims, Plaintiffs conceded that the Board of Trustees did not err in law, did not act arbitrarily or capriciously, did not abuse their discretion, and that their findings were supported by substantial evidence. These concessions were based on the record before the arbitrator, and without consideration of any additional evidence. Plaintiffs assert that the arbitrator upheld the denial of plaintiffs' claims for disability benefits based on the record that was before the Trustees, following the denial of plaintiffs' motion to compel discovery, and without consideration of evidence outside of the record.

ANALYSIS

I. Defendant's Motion to Dismiss Is Denied

A. Legal Standards

For the purposes of a motion under Fed.R.Civ.P. 12(b)(6), the court views the complaint in the light most favorable to the plaintiff and must generally accept as true the facts alleged. Western Mining Council v. Watt, 643 F.2d 618, 624 (9^th Cir.), cert. denied, 454 U.S. 1031 (1981). The court should dismiss a complaint for failure to state a claim only when it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim which would entitle the plaintiff to relief. Conley v. Gibson, 355 U.S. 41, 45 (1957).

B. Discussion

Defendant argues that the Plan provides that an arbitration award is final and binding and is not reviewable on its merits by this court. Plaintiffs argue that the Plan allows judicial review. The Plan provides:

The decision of the arbitrator shall be final and binding upon the Trustees and upon the appealing party, and upon all other parties whose interests are affected. Any further review, judicial or otherwise, of the decision by the arbitrator shall be limited to whether, in the particular instance, the arbitrator acted arbitrarily or capriciously in the exercise of his or her discretion. In no event shall such further review, judicial or otherwise, be on a de novo basis as the Board of Trustees has discretionary authority to determine eligibility for benefits and to construe the terms of this Plan.

Tormala Decl., Ex. 1, p. 60.

Defendant argues that the Ninth Circuit has enforced mandatory arbitration agreements in the context of claims arising under plans governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 USC § 1001 et seq., citing Graphic Commun. Union No. 2 v. GCIU-Emp. Retirement, 917 F.2d 1184 (9^th Cir. 1990), and Chappel v. Laboratory Corp. of America, 232 F.3d 719 (9^th Cir. 2000).

However, the issue in Graphic Commun. Union No. 2 was "whether the congressional guarantee of ready access to the federal courts renders a mandatory arbitration agreement unenforceable." Graphic Commun. Union No. 2, 917 F.2d at 1185. The plaintiff's claim under a benefit plan governed by ERISA was denied by the plan administrator. The denial was upheld by the plan Trustees. The arbitration agreement provided that parties dissatisfied with a decision by the trustees "shall have the right to appeal the matter to arbitration." Id. at 1186. The parties agreed that the language mandated arbitration, though the court noted that it "did not necessarily agree." Graphic Commun. Union No. 2, 917 F.2d at 1186-87, fn. 3.

The plaintiff brought suit seeking a declaration that the arbitration provision violated ERISA. The defendant plan's motion to dismiss for failure to exhaust remedies was granted in the district court. The Ninth Circuit held that, because the plaintiff's claim for benefits arose under the defendant plan, and not ERISA, the plan could require mandatory arbitration. Graphic Commun. Union No. 2, 917 F.2d at 1188. Whether such mandatory arbitration could also be "final and binding" so as to preclude judicial review was not addressed.

Similarly, the Chappel plaintiff failed to request the mandatory arbitration in a timely manner, and brought suit seeking benefits under the plan and a declaratory judgment that the arbitration clause was invalid because it afforded fewer rights than were available in an ERISA action. The district court dismissed the complaint for failure to state a claim because the plaintiff had failed to exhaust his administrative remedies under the plan. The Ninth Circuit affirmed the dismissal, stating that ". . . if the plan contains an arbitration clause, the plaintiff must arbitrate the dispute in accordance with the clause in order to exhaust his administrative remedies before filing suit in federal court." Chappel, 232 F.3d at 724. The Ninth Circuit noted that:

The arbitration clause in this case purports to foreclose judicial review altogether. We are unaware of any authority allowing an ERISA-governed plan to designate arbitration as the exclusive remedy for an aggrieved claimant and entirely to foreclose judicial review of the arbitrator's decision. This case does not require us to decide whether such a term is permissible, and we therefore do not reach that question. Chappel, 232 F.3d at 724, fn. 1.

In this case, the Plan provides:

The decision of the arbitrator shall be final and binding upon the Trustees and upon the appealing party, and upon all other parties whose interests are affected. Any further review, judicial or otherwise, of the decision by the arbitrator shall be limited to whether, in the particular instance, the arbitrator acted arbitrarily or capriciously in the exercise of his or her discretion. Tormala Decl., Ex. 1, p. 60.

The Plan does not prohibit Plaintiff from bringing a civil action after completing mandatory arbitration. Defendant's motion to dismiss for failure to state a claim is denied.

II. Defendant's Motion For Summary Judgment Is Denied.

A. Legal Standards

Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The moving party bears the initial responsibility of informing the court of the basis of its motion and identifying those portions of "`the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. V. Catrett, 477 U.S. 317, 323 (1986) (quoting Fed.R.Civ.P. 56(c)).

"If the moving party meets its initial burden of showing `the absence of a material and triable issue of fact,' `the burden then moves to the opposing party, who must present significant probative evidence tending to support its claim or defense.'" Intel Corp. v. Hartford Accident Indem. Co., 952 F.2d 1551, 1558 (9^th Cir. 1991) (quoting Richards v. Neilsen Freight Lines, 810 F.2d 898, 902 (9^th Cir. 1987)). The nonmoving party must go beyond the pleadings and designate facts showing an issue for trial. Celotex, 477 U.S. at 322-23. All reasonable doubt as to the existence of a genuine issue of fact must be resolved against the moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986). The court should view inferences drawn from the facts in the light most favorable to the nonmoving party. T.W. Elec. Serv. v. Pacific Elec. Contractors Ass'n., 809 F.2d 626, 630-31 (9^th Cir. 1987).

B. Discussion

Defendant contends that Plaintiffs' concessions establish that there is no genuine issue of material fact and therefore bar the present claims. During arbitration, Plaintiffs sought discovery from Defendant that would allow them to demonstrate that the claims process was not fair or reasonable, and that there was actual taint or bias in the decision-making process. Plaintiffs moved to compel discovery to show taint in the process. The arbitrator stated:

The scope of my arbitration authority is the Defined Benefit Pension Plan. It does not provide specifically for discovery. It specifies that my decision be based solely upon the record before the Trustees (which has been provided). I conclude that the Plan does not give me authority to allow the relief sought.

. . . My powers derive from the Plan, not from ERISA. Hence, I do not address the issue presented by the [case law] cited to me. It should be clear that my ruling is not on the merits, but goes solely to the scope of my authority.

Affidavit of Megan E. Glor ¶ 2, Ex.

Plaintiffs argue that in this judicial proceeding they are entitled to show evidence of taint or bias in the claims handling process, and if successful, the plan administrator is not entitled to the deferential abuse of discretion standard of review, but rather the court's review is de novo.

Where, as here, an ERISA plan vests the administrator with discretionary authority to determine benefit eligibility, the district court must review the administrator's determinations for "abuse of discretion." Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). The Ninth Circuit has established that "the abuse of discretion standard permits the district court to `review only the evidence presented to the [plan] trustees.'" Taft v. Equitable Life Assurance Soc'y, 9 F.3d 1469, 1471 (9^th Cir. 1993) (alteration in the original) (quoting Jones v. Laborers Health Welfare Trust Fund, 906 F.2d 480, 482 (9^th Cir. 1990).

There are two exceptions to the rule that the district court may not hear evidence outside the administrative record. The court may hear such evidence when it must determine whether the administrator's decision was affected by a conflict of interest, or when the standard of review of the administrative decision is de novo. Banuelos v. Construction Laborers' Trust Funds For Southern California, 2004 WL 1879214 (9^th Cir.(Cal.))).

Plaintiffs argue that they are entitled to show that the administrator's decision was affected by personal animus or bias sufficient to constitute a conflict of interest. The Supreme Court has stated that "if a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a factor in determining whether there is an abuse of discretion." Firestone Tire Rubber Co. V. Bruch, 489 U.S. 101, 115 (1989). The Ninth Circuit has determined that an "apparent conflict of interest" exists when a plan administrator has a financial or economic interest in the benefit decisions it makes. Atwood v. Newmont Gold Co., Inc., 45 F.3d 1317, 1322 (9^th Cir. 1995) (plan administrator was also employer). In the present case, the Plan is funded by participating employers, and administered by the board of trustees, which includes members from the employers and from the Union. Tormala Decl., Ex 1, at 10. Thus there is no "apparent conflict" arising from financial or economic interests.

However, financial or economic interests are not the only interests that may constitute an apparent conflict. It is possible to imagine a plan administrator with a non-financial conflict of interest arising out of racism or religious intolerance or personal animus. As the Ninth Circuit stated:

Under the common law of trusts, any action taken by a trustee in violation of a fiduciary obligation is presumptively void. George T. Bogert, Trusts § 95, at 341-342 (6^th ed. 1987). Where the affected beneficiary has come forward with material evidence of a violation of the administrator's fiduciary obligation, we should not defer to the administrator's presumptively void decision. In that circumstance, the plan bears the burden of producing evidence to show that the conflict of interest did not affect the decision to deny benefits. Atwood, 45 F.3d at 1323.

The Ninth Circuit recognizes that the decision of a plan administrator is not arbitrary or capricious if it is a reasonable interpretation of the plan's terms and made in good faith. Jung v. FMC Corp., 755 F.2d 708, 713 (9^th Cir. 1985). Issues of fact as to whether a plan administrator acted in bad faith can preclude summary judgment. Dockray v. Phelps Dodge Corp., 801 F.2d 1149, 1155 (9^th Cir. 1986).

Because plaintiffs have alleged a conflict of interest, it is possible that they will be allowed to obtain discovery of evidence outside the record reviewed by the administrator trustees. Accordingly, their concessions in the arbitration proceeding do not foreclose the possibility of a genuine issue of material fact.

Defendant's motion for summary judgment is denied.