Court: District Court, N.D. California; May 7, 2018; Federal District Court
On April 25, 2018, U.S. District Judge Phyllis J. Hamilton granted the Life Insurance Company of North America's (LINA) motion for summary judgment in a case brought by plaintiff Brenda Spies. Spies was employed by Staples Inc. from September 3, 2013, to February 4, 2014, and after being hospitalized on February 5, 2014, for health issues, she submitted a claim for short-term disability (STD) benefits. LINA initially approved her STD benefits through August 10, 2014, and subsequently determined she was eligible for long-term disability (LTD) benefits starting August 11, 2014. Despite an administrative error in failing to verify her enrollment in the LTD plan, Spies received nearly two years of LTD benefits until June 2016, when LINA concluded, based on an independent medical examination, that she could work full-time in a sedentary position and thus was no longer entitled to LTD benefits.
Upon investigation, LINA, confirmed by Staples, found that Spies had never elected or paid for voluntary LTD coverage. As a result, LINA argued it had no obligation to continue her LTD benefits, and principles of equitable estoppel did not apply. Staples' benefits plan automatically enrolled employees in certain benefits, but participation in the LTD plan required affirmative election, which Spies did not complete.
An employee must actively choose to enroll in Long-Term Disability (LTD) insurance, which requires authorization for payroll deductions that will be reflected on paychecks. The cost is $0.364 per $100 of covered pay monthly. Staples conducts an open enrollment period annually from May to June, during which employees receive a "Benefits Guide" detailing available benefits and enrollment procedures. While Short-Term Disability (STD) coverage is provided at no cost, employees must purchase LTD coverage. After each enrollment period, Staples issues a "Confirmation of Elections Statement" documenting the benefits selected by employees. Newly hired employees receive a personalized benefits worksheet outlining coverage options, including LTD insurance, and are granted access to an online benefits portal.
When Spies was hired on September 3, 2013, she received the benefits worksheet and selected other voluntary benefits like dental and vision insurance, but waived LTD insurance. Staples sent her a Confirmation Statement on September 19, 2013, confirming her elections, which did not include LTD coverage. Spies' paychecks reflected deductions for the elected benefits but not for LTD. During Staples' 2014 open enrollment, while on STD leave, Spies received the Benefits Guide and a Confirmation Statement, but made no changes. Even if Spies had chosen to enroll in LTD coverage then, it would not have been effective since she did not return to Staples as a full-time employee. The definition of "Active Service" stipulates that coverage becomes effective only upon returning to full-time employment. Spies' declaration lacks sufficient evidence to dispute her non-enrollment in the LTD plan, as it only indicates she does not remember the enrollment process.
Summary judgment is appropriate when the moving party demonstrates that no genuine dispute exists regarding any material fact, entitling them to judgment as a matter of law, as per Fed. R. Civ. P. 56(a). The initial burden lies with the moving party to show the absence of a genuine issue of material fact, without needing to disprove claims on which the non-moving party will bear the burden of proof at trial. After this showing, the burden shifts to the non-moving party to present specific facts that indicate a genuine issue for trial, as established in Celotex Corp. v. Catrett. The non-moving party must provide more than mere speculative evidence; there must be sufficient evidence for a reasonable jury to find in their favor. Courts must view evidence favorably to the non-moving party and defer credibility determinations and evidence weighing to the jury. Conclusory or speculative testimony cannot defeat summary judgment, and all evidence must be admissible. In ERISA cases, summary judgment on an affirmative defense is permissible if it does not address the merits of the claim, as seen in cases like Gordon v. Deloitte, Touche, LLP.
Regarding standing, the defendant contends that the plaintiff lacks standing to sue as she is not a participant in the long-term disability (LTD) plan, while the plaintiff asserts she does have standing due to her involvement in the ERISA claim related to a group benefit. The court sides with the defendant, clarifying that under 29 U.S.C. 1132(a)(1)(B), only "participants" are authorized to sue. The Supreme Court has defined "participants" as current employees or former employees with a reasonable expectation of returning to employment or having a claim to vested benefits, rejecting broader interpretations of participation.
To establish eligibility for benefits, a claimant must demonstrate a "colorable claim" either by showing they will likely prevail in a benefits suit or that they will meet eligibility requirements in the future. A former employee without a reasonable expectation of returning to covered employment or a colorable claim to vested benefits does not qualify for potential eligibility. The determination of a plaintiff's status as a plan participant is made at the time of the lawsuit. If an employee mistakenly believes they are a participant but is not, this does not provide a colorable claim for vested benefits under ERISA. Under Ninth Circuit law, actual participation in a benefits plan is required to bring a suit under ERISA; thus, if an employee never elected coverage, they cannot claim standing based on that plan. In this case, Spies did not elect Long-Term Disability (LTD) coverage and consequently was never a participant, leading to the court granting summary judgment in favor of LINA due to the plaintiff's lack of standing.
Even if standing were assumed, the court ruled that the defendant is not obligated to continue LTD benefits based on equitable estoppel, as the plaintiff did not satisfy the Ninth Circuit's requirements for such a claim. For equitable estoppel to apply, a plaintiff must show: (1) knowledge of the facts by the party to be estopped; (2) intent for their conduct to be relied upon; (3) ignorance of the true facts by the relying party; and (4) reliance leading to injury. Additionally, three ERISA-specific criteria must be met: (1) extraordinary circumstances; (2) ambiguity in the plan provisions; and (3) representations made were interpretations of the plan, not amendments. The court granted summary judgment on this alternative basis as well.
Plaintiff failed to satisfy the specific requirements under ERISA, which is sufficient to grant defendant's summary judgment motion. The Ninth Circuit has established that a federal equitable estoppel claim in an ERISA context cannot be maintained if it contradicts the plan's written provisions. The relevant provision states that coverage requires an authorized electronic payroll deduction. Plaintiff did not provide evidence of any representation by LINA regarding this provision, nor did she identify ambiguous language that could support her claims. Even if Spies’ receipt of LTD benefits due to an administrative error were considered, it would not warrant estoppel since a plaintiff cannot expand their rights beyond the unambiguous plan language.
Additionally, traditional equitable estoppel requirements were not met, as Spies was repeatedly informed of the need to elect LTD coverage and confirmed her non-election during the hiring process. Her paychecks reflected no deductions for LTD coverage, contradicting her claims of ignorance. The court found that Spies received $11,000 in LTD benefits mistakenly, and since she was not a participant in the LTD plan, she lacked standing to claim reinstatement of benefits. The court granted the defendant's motion for summary judgment on these grounds and denied the request for attorney fees, noting that a successful claim must demonstrate some degree of success on the merits. The court also clarified that statutory standing pertains to the ability to state a claim rather than jurisdiction, and equitable estoppel is analyzed under appropriate equitable relief provisions of ERISA.
