Irene Shelden v. Barre Belt Granite Employer Union Pension Fund

Citations: 25 F.3d 74; 1994 U.S. App. LEXIS 11785; 1994 WL 197942Docket: 1134

Court: Court of Appeals for the Second Circuit; May 19, 1994; Federal Appellate Court

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Irene Shelden appeals a judgment from the United States District Court for the District of Vermont, which dismissed her complaint for a declaratory judgment under the Employee Retirement Income Security Act (ERISA) against the Barre Belt Granite Employer Union Pension Fund (the "Fund"). The district court granted the Fund summary judgment, concluding that the denial of benefits—based on the lack of an application made while her husband, Lawrence Alfred Shelden, was alive—was not arbitrary and capricious. On appeal, Shelden argues that the district court's reliance on the lack-of-application ground was inappropriate since it was not the basis for the Fund's denial, and that genuine factual issues existed regarding the denial. The appellate court agrees with Shelden, vacates the district court's judgment, and remands the case for further proceedings.

Shelden had worked as a stone cutter and participated in the Fund's pension plan for approximately 20 years. In February 1991, he was diagnosed with lung cancer, subsequently reducing his work hours and becoming totally disabled by April 1991. He received short-term disability benefits until his death on August 5, 1991. Following his death, Shelden applied for survivor disability pension benefits, which were denied by the Fund based on a provision requiring a participant to be disabled for six months before qualifying for a disability pension. The Fund determined that Lawrence Shelden was not eligible since he did not survive the required six months post-disability.

In April 1992, the plaintiff initiated a legal action for a declaratory judgment regarding her rights under the Barre Belt Granite Employer Union Pension Plan after her request for disability pension payments for Lawrence Alfred Shelden was denied. The Fund stated that Shelden had not met the required waiting period for such payments, as outlined in Section 3.10 of the Pension Plan. The Fund's response to the plaintiff's interrogatories confirmed that Shelden was receiving short-term disability benefits while fulfilling the waiting period, but he did not survive the six-month threshold necessary for the disability pension to commence.

The Fund's affidavit indicated that Shelden never applied for pension benefits during his lifetime, and after his death, his widow sought these benefits. It was noted that a disability pension was the only benefit available to Shelden under the plan. The affidavit further clarified that the disability pension payments could only start after the seventh month of disability, which Shelden did not reach. The combination of short-term insurance and pension benefits was designed to cover the waiting period. In August 1992, the plaintiff filed for summary judgment, which the Fund opposed, arguing that the undisputed facts and applicable law warranted a denial of the plaintiff's motion and a grant of summary judgment in favor of the Fund.

The Defendant's response to the Plaintiff's motion for summary judgment included a brief notice asserting that no genuine issue of material fact exists, and that the Defendant is entitled to judgment as a matter of law. However, the Fund failed to comply with local court rules requiring a separate statement of material facts to accompany the motion. The Defendant's arguments relied on the affidavit of Dennis Minoli, the fund manager, and the pension fund's language, asserting that Lawrence Shelden was entitled to short-term disability benefits, which he would qualify for while waiting for a disability pension. Shelden unfortunately died before fulfilling the waiting period for the disability pension.

Consequently, the Defendant requested the denial of the Plaintiff's motion and the granting of its own. The district court referred the motions to Magistrate Judge Jerome J. Niedermeier, who recommended denying the Plaintiff's motion and granting the Fund's, citing that the Trustees’ decision to deny benefits was not arbitrary or capricious, as the Pension Plan required a written application for benefits to be made during the employee's lifetime. The magistrate noted ambiguity in the plan regarding whether a beneficiary could apply after the employee's death but ultimately upheld the Trustees' interpretation that application must occur while the employee is alive. The magistrate found it unnecessary to evaluate the validity of the waiting-period rationale, as an application for benefits is a prerequisite for receiving any benefits.

The Plaintiff objected to the magistrate's report, arguing that the Fund had not previously cited Shelden's failure to apply for benefits as a reason for denial and that a genuine issue remained regarding whether Shelden had made an application while alive.

Plaintiff provided evidence to support her claim that Shelden was denied a disability pension based on ineligibility due to not living six months after his disability date, as stated in the prelitigation Fund Letter. The Fund's interrogatory response also cited a waiting-period rationale without referencing a lack-of-application reason. Plaintiff contended that even if the lack-of-application was considered, evidence from Shelden's friend, Norman Benoit, indicated that Shelden attempted to apply for a disability pension shortly before his death. Benoit described accompanying Shelden to the union office, where Shelden confirmed he had filed for his pension without detailing whom he spoke with. In response to the plaintiff's arguments, the Fund referenced an affidavit from Minoli stating Shelden had not applied prior to his death, asserting the magistrate judge was justified in ruling the denial was not arbitrary or capricious. The Fund also claimed the plaintiff's supporting affidavits were untimely and lacked competency. The district court, after reviewing the matter, adopted the magistrate's recommendation without further discussion. On appeal, the plaintiff argued that the Fund's denial could not be upheld based on reasons not initially stated and that a factual issue remained regarding Shelden's application. The Fund contended that summary judgment could be justified based on either the court's rationale or the waiting-period requirement. Ultimately, the conclusion was that summary judgment was inappropriate.

The plaintiff asserts that the denial of benefits was not based on the lack of an application from Shelden, as the Fund did not cite this rationale in its communications or interrogatory responses. The Fund's official reason for denial was the failure to meet the waiting period, specifically referencing Section 3.10 of the Plan, which pertains to payment timing, rather than Section 6.01 related to application procedures. The Minoli Affidavit, which noted Shelden's lack of direct application, was deemed irrelevant since it did not indicate that this lack was a reason for denial; it emphasized the waiting period as the cause. Furthermore, the Fund's motion for summary judgment also did not claim that the denial was due to an application failure, but rather indicated that Shelden was eligible for benefits but died before fulfilling the waiting period. The magistrate judge's interpretation that the denial was based on Shelden's lack of application contradicts the Fund's prior statements, making the district court's upholding of the denial improper.

Regarding summary judgment, it can only be granted when there are no genuine material factual disputes. The burden is on the party seeking summary judgment to demonstrate the absence of such disputes, while the opposing party must present evidence—like affidavits or documents—to show that a genuine issue exists. All evidence must be viewed favorably for the opposing party, allowing reasonable factual inferences to be drawn in their favor.

The plaintiff's submission of the Benoit affidavit warranted rejection of the magistrate judge's conclusion that the Fund was entitled to summary judgment, despite the lack-of-application rationale. The Fund incorrectly asserted that the affidavit was not competent evidence against Minoli's claim that Shelden did not apply for benefits. Legal principles support that a plan's existence can indicate that the act occurred, and the plaintiff's own statements can prove this under an exception to the hearsay rule. Specifically, Benoit's testimony that Shelden requested a trip to apply for disability pension benefits, along with details of that trip, should be admissible, allowing the trier of fact to determine the credibility of Benoit versus Minoli's accounts.

The Fund's argument that the Benoit affidavit should be considered untimely is unfounded, given the Fund's failure to comply with local rules and its reliance on the waiting-period rationale instead of the lack-of-application ground, which had not been deemed a material issue until later. The plaintiff's evidence was reasonably presented after the lack-of-application issue emerged in the magistrate's report.

Ultimately, the district court misattributed the reason for the Fund's denial, leading to a material issue requiring trial. Regarding the waiting-period rationale, while the Fund sought to uphold the judgment on this basis, the district court did not address it. Although appellate courts can affirm on any supported ground, the record does not clearly justify a judgment for the Fund regarding the waiting-period issue.

When trustees of an ERISA-covered plan have discretion in granting or denying benefits, their decisions are reviewed under an arbitrary-and-capricious standard. This standard can be met if trustees impose requirements not specified in the plan or interpret the plan contrary to its clear language. In this case, Section 3.07 of the Plan outlines three eligibility criteria for a Disability Pension: total and permanent disability before age 65, a minimum of 10 years of pension credits, and at least one pension credit from covered employment in the 36 months preceding the disability. The Fund acknowledged that Shelden met these criteria but argued that a waiting period of six months constituted an additional eligibility requirement. This waiting period is detailed in Section 3.10, which pertains to the timing of pension payments rather than eligibility itself.

The plaintiff contends that Section 3.10 only relates to payment timing and that Sections 5.02 and 5.04 grant survivor rights. The Fund maintains that interim disability payments were meant to offset the lack of pension payments for the first six months, asserting that no pension would be payable to a participant who died within that period. While the Fund denied allegations regarding Sections 5.02 and 5.04, it did not adequately address the plaintiff's claim of survivor rights related to Shelden's disability pension despite his death occurring less than six months after his disability onset.

The district court did not analyze the interplay among these sections, and the appellate court opts not to do so for the first time on appeal, remanding the matter back to the district court for determination of the Fund's denial of benefits based on the waiting-period argument. The appellate court found the Fund's arguments unpersuasive, vacated the district court's judgment, and instructed that costs be awarded to the plaintiff.