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LESSARD v. METROPOLITAN LIFE INS. CO.12/28/1989
Plan benefit amount
until the overpayment balance was satisfied.
Plaintiffs' complaint contains eight counts. Counts I and IV state causes of action based on ERISA, alleging that Metropolitan wrongfully withheld benefits in violation of both its fiduciary duties and the terms of the Plan; count II alleges that Metropolitan's practice of recouping overpayments by withholding benefits violated a provision of the Social Security Act, 42 U.S.C. § 407 (1982 & Supp. 1987); count III seeks return of attorney fees expended by plaintiffs in prosecuting their Social Security appeals; count V alleges that the challenged practice violated New York Insurance Law § 3212(c)(1) (McKinney 1985); finally, counts VI, VII and VIII state common law causes of action in contract and for conversion and bad faith, respectively. The parties agree that New York law controls the state law issues.
The Superior Court granted summary judgment in favor of defendant on counts I, II, IV, V, VI, VII and VIII, and denied plaintiffs' cross-motion for summary judgment on counts I, II, IV, V and VI. Plaintiffs challenge the order granting defendant's motion for summary judgment and denying their own.
ERISA Counts
i. Jurisdiction
Counts I and IV of plaintiffs' complaint state causes of action based on ERISA, 29 U.S.C. § 1132(a)(1)(B) (1982 & Supp. 1987) (civil enforcement provision allowing for recovery of Plan benefits wrongfully withheld). Jurisdiction is based on 29 U.S.C. § 1132(e)(1) (granting concurrent jurisdiction over subsection (a)(1)(B) actions to state courts of competent jurisdiction). See also White v. Enron Corp. Merger Severance Plan, 686 F. Supp. 582, 583 (N.D. Texas 1988); Hoffman v. Chandler, 431 So.2d 499, 503 (Ala. 1983) (state court has subject matter jurisdiction of § (a)(1)(B) actions even where complaint includes count questioning fiduciary responsibilities as long as gravamen of complaint is suit for benefits wrongfully withheld).
ii. Standard of Review
In deciding the ERISA counts, the Superior Court reasoned that the Plan interpretation at issue was not that of Metropolitan, who was a named ERISA fiduciary for claims administration purposes only. The court noted that Metropolitan's discretion was limited to making claims decisions on whether a particular individual was entitled to benefits under the terms of the Plan. Rather, the interpretation at issue was that of the Plan Administrator, the Borden Employee Benefits Committee, who served at the pleasure of Borden's CEO and who had "the exclusive right to interpret the Plan, to compromise claims and to decide any and all matters arising thereunder. . . ." Borden Plan § 7.4. Thus, "Metropolitan had no authority to challenge a decision of the Plan Administrator, and with respect to the creation of an overpayment and its recovery through offsetting of benefits, Metropolitan was simply complying with the interpretation of the Plan Administrator."
The Superior Court applied a modified arbitrary and capricious standard of review to the Plan Administrator's interpretation. The court correctly reasoned that the presence of a Plan provision granting to the Plan Administrator exclusive authority over Plan interpretation created the classic trust situation. See Firestone Tire and Rubber Company v. Bruch, ___ U.S. ___, 109 S.Ct. 948, 954, 103 L.Ed.2d 80 (1989) (arbitrary and capricious standard appropriate where plan gives administrator discretionary authority to construe terms of plan). Recognizing, however, that the Plan Administrator was to some extent operating under a conflict of interest, the court modified the arbitrary and capricious standard to provide a heightened level of s
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