This article has been published in “The Advocate”, a monthly publication of the Arizona Association for Justice/Arizona Trial Lawyers Association, September - October 2015 issue, @2015 by Steven J. Bruzonsky, Esq.
ERISA Liens: The Ninth Circuit Pritchard Case, Part 2
This is the second part of the article in the previous issue discussing the Ninth Circuit decision in Prichard v. Metro. Life Ins. Co., Docket 12-17355 (9th Cir. 4-21-2015. In Pritchard, the Ninth Circuit gives us clear instruction on how to apply dicta in the previous U.S. Supreme Court decisions of CIGNA Corp. v. Amara, 131 S. Ct. 1866, 563 U.S. ___ (2011) and U.S. Airways v. McCutchen, 133 S.Ct. 1537, 569 U.S. ___, 133 S.Ct. 1537 (2013) regarding the Summary Plan Description (SPD) and official governing Plan Document in ERISA lien cases.
Some additional quotes from this Ninth Circuit opinion, discussing ERISA official governing Plan Documents, Summary Plan Descriptions, and that certain plan documents, such as insurance certificates (but not necessarily SPDs) may be incorporated by reference into the official governing Plan Documents, follow:
“ ERISA defines the word "plan" as "an employee welfare benefit plan or an employee pension benefit plan or a plan which is both," 29 U.S.C. § 1002(3), and it requires that a "plan" "be established and maintained pursuant to a written instrument," id. § 1102(a)(1). An SPD, in contrast, is a disclosure meant "to reasonably apprise [plan] participants and beneficiaries of their rights and obligations under the plan." Id. § 1022(a).
Although it would seem "peculiar for a document meant to 'apprise' participants of their rights 'under the plan' to be itself part of the 'plan,'" Amara, 131 S. Ct. at 1882 (Scalia, J., concurring), apparently, particularly in the context of health plans, the SPD is sometimes argued to be the plan; that is, to serve simultaneously as the governing plan document.
For certain types of plans, notably health plans, plan sponsors frequently take a "consolidated" approach to plan document drafting where the plan document and the SPD take the form of a single document. This approach . . . stands in contrast to typical practice for lengthier retirement plans that customarily have a separate SPD document that is distributed . . . apart from the full plan document . . . .
3 ERISA PRACTICE AND LITIGATION § 12:3 8. However, we need not decide here whether we should treat differently those cases in which the ERISA plan is alleged to have embraced this so-called "consolidated" approach. The present case, like Amara, is an "unconsolidated" case in which the ERISA plan has both a governing plan document and an SPD.
Amara concerned an employer's conversion of its traditional pension plan into a cash balance plan. 131 S. Ct. at 1870. The district found that the employer's initial descriptions of its post-conversion plan had been significantly incomplete and misleading to employees. Id. at 1872. The district court therefore ordered the terms of the plan reformed to give the employees their pre-conversion plan benefits plus their post-conversion plan benefits. Id. at 1875. The Second Circuit affirmed. Amara v. CIGNA Corp., 348 F. App'x. 627 (2d Cir. 2009).
The Supreme Court vacated the district court's reformation because it concluded the reformation amounted to an alteration of the plan's governing documents. 131 S. Ct. at 1876-77. The Court held that although ERISA section 502(a)(1)(B) allows a civil action to be brought by a plan beneficiary "to recover benefits due to him under the terms of his plan," this statutory text gives a court power only to enforce the terms of the plan, not to change them. Id. The Solicitor General had argued that the district court was simply enforcing the plan's terms as written, because the court's reformation tracked the SPD's terms, and "the terms of the summaries[were] terms of the plan." Id. at 1877. The Court rejected this argument, however. Id. It held that "the summary documents, important as they are, provide communication with beneficiaries about the plan, but that their statements do not themselves constitute the terms of the plan." Id. at 1878.
For our purposes, it bears observing that Amara's holding assumes the existence of both an SPD and a written plan instrument. That is, Amara addressed only the circumstance where both a governing plan document and an SPD existed, and the plan administrator sought to enforce the SPD's terms over those of the plan document. It did not address the situation MetLife alleges exists here—that a plan administrator seeks to enforce the SPD as the one and only formal plan document.
We are aware that, since Amara, several federal courts have stated that an SPD may constitute a formal plan document, consistent with Amara, so long as the SPD neither adds to nor contradicts the terms of existing Plan documents. See, e.g., Eugene S. v. Horizon Blue Cross Blue Shield of N.J., 663 F.3d 1124, 1131 (10th Cir. 2011) ("We interpret Amara as presenting either of two fairly simple propositions, given the factual context of that case: (1) the terms of the SPD are not enforceable when they conflict with governing plan documents, or (2) the SPD cannot create terms that are not also authorized by, or reflected in, governing plan documents. We need not determine which is the case here, though, because the SPD does not conflict with the Plan or present terms unsupported by the Plan; rather it is the Plan."). MetLife would have us follow the reasoning of such courts and hold that Prichard is bound by the terms of the SPD because the SPD and the Plan allegedly "are one and the same."
However, we need not accept MetLife's suggestion because here the SPD and the Plan are not "one and the same." MetLife's theory is that the SPD is the only formal plan document in the record. MetLife supports its theory almost exclusively with the declaration of Mr. Zychowicz, IBM's manager of Health Benefits Delivery and Operations, which states that "no . . . separate formal plan document exists for the Plan . . . beyond the [SPD] booklet." This statement of IBM's belief is insufficient in the face of contrary indications in what appears to be the only plan document in the record before us.
The only document in the record that contains a clear indication that it is a Plan document is an insurance certificate. It expressly states that the Plan consists only of (1) "the Group Policy and its Exhibits, which include the certificate(s)" (emphasis added); (2) "[IBM] 's application"; and (3) "any amendments and/or endorsements to the Group Policy." The insurance certificate declares that those documents constitute the "entire contract" between IBM and MetLife, under which Prichard is provided insurance. Conspicuously absent from this exclusive list is the SPD. We have previously held that a Plan document's integration clause, which was "[p]lainly . . . intended to keep insureds . . . from binding [the administrator] to promises made in extraneous documents like the Benefit Summary," also precluded the administrator from binding insureds to the Summary's discretion-granting clause because "what is sauce for the gander must be sauce for the goose." Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154, 1161 (9th Cir. 2001) (internal quotation marks omitted). There is no reason to depart from that principle here. We therefore limit our analysis to the documents listed in the insurance certificate's integration clause.
The insurance certificate omits any grant of discretion to MetLife. Of course, the Plan in this case appears to consist of more than just the insurance certificate. It is possible that other official Plan documents outside the record contain discretionary language. But, if so, it was MetLife's burden to place that evidence before the court. Thomas, 228 F.3d at 994. MetLife failed to do so, and we are confined to the record before us.
Metlife would have us dismiss the insurance certificate as containing nothing more than the “terms of the insurance contgract between MetLife and IBM,” under which IBM made an election to have MetLife fund the Plan's benefits. According to MetLife, therefore, the insurance certificate cannot constitute part of—or "supersede"—the terms of the SPD.
However, the terms of the insurance certificate say otherwise. The insurance certificate is issued to and written for IBM's employees and contains the Plan's official terms regarding disability benefits. The certificate's opening page reads: "MetLife . . . certifies that You are insured for the benefits described in this certificate, subject to the provisions of this certificate. This certificate is issued to You under the Group Policy and it includes the terms and provisions of the Group Policy that describe Your [disability] insurance" (emphasis added). The insurance certificate defines "You and Your" as "an employee who is insured under the Group Policy for the insurance described in this certificate." Thus, contrary to MetLife's assertions, the certificate contains the Plan's relevant "terms and provisions" and is clearly issued to and written for IBM's employees who are beneficiaries under IBM's long-term disability plan.
The SPD, in contrast, is not part of the Plan's "written instrument." Compare 29 U. S .C. § 1102(a)(1) with § 1022(a). Indeed, the SPD itself declares that "official plan documents . . . remain the final authority" and "shall govern" in the event the SPD's terms conflict with those of official Plan documents. Accordingly, the district court clearly erred in finding that "the SPD, and not the insurance certificate, constitutes the Plan document."
Although the SPD in this case does indicate that MetLife has discretionary authority, the Supreme Court has made clear that statements made in SPDs "do not themselves constitute the terms of the plan." Amara, 131 S. Ct. at 1878. Because the official insurance certificate contains no discretion-granting terms, we will not, consistent with Amara, hold that the SPD's grant of discretion constitutes an additional term of the Plan. Consequently, the district court erred in applying the abuse of discretion standard of review. We therefore vacate and remand for the district court to review MetLife's denial of benefits de novo.” “