against defendant NYNEX Service Company alone, Ludwig seeks recovery for the following items: (a) a monthly pension of $ 1,701.60, plus cost-of-living adjustments; (b) long-distance telephone reimbursements; (c) full, no-cost medical insurance coverage for plaintiff and his dependent daughter; and (d) the payment of premiums, retroactive to September 1, 1989, for term life insurance for the remainder of plaintiff's life.
The defendants now move for summary judgment, and offer several arguments in support of their application. First, defendants argue that they were required by both statute and private contract to make plaintiff's pension and other benefits portable, and that plaintiff, as a matter of law, does not have the ability to waive this right. Second, they argue that even if plaintiff, in the abstract, does have the ability to waive his portability rights, he failed to waive them in the instant case because either a waiver was not properly executed, or the waiver, to be effective, had to be in writing, pursuant to either ERISA or the statute of frauds. Further to this point, defendants also contend that the oral waiver or agreement concerning portability that plaintiff alleges would have required an amendment to the defendants' employee benefit plans. Third, defendants argue that even if plaintiff could prevail on its first two arguments, summary judgment should nevertheless be granted because plaintiff has failed to exhaust his administrative remedies under the applicable employee benefit plans. Fourth, the defendants argue that summary judgment is proper because an abuse-of-discretion standard applies for determining the defendants' liability as ERISA plan fiduciaries in this action, and plaintiff, as a matter of law, has been unable to establish an abuse of discretion through the affidavits and accompanying papers that he has submitted in opposition to the defendants' motion. Finally, defendants argue that summary judgment should also be granted with regard to plaintiff's estoppel claim because plaintiff is unable to establish that he reasonably relied upon the defendants' representations concerning plaintiff's portability rights.
A. MOTION TO AMEND ANSWER
Defendants seek to amend their answer to include the affirmative defense of the Statute of Frauds under New York State law. Federal Rule of Civil Procedure 15(a) provides that leave of the Court to amend a pleading "shall be freely given when justice so requires." Fed. R. Civ. P. 15(a). The Second Circuit Court of Appeals has interpreted this rule "to allow a party to amend its pleadings in the absence of a showing by the nonmovant of prejudice or bad faith." See Block v. First Blood Assocs., 988 F.2d 344, 350 (2d Cir. 1993) (citing State Teachers Retirement Bd. v. Fluor Corp., 654 F.2d 843, 856 (2d Cir. 1981)). The Court finds that plaintiff is not prejudiced by the defendants' proposed amendment to their answer, and that the defendants have not proceeded in bad faith. Accordingly, defendants' motion to amend is granted.
B. MOTION FOR SUMMARY JUDGMENT
I. Standards for Granting Summary Judgment
Rule 56(c) of the Federal Rules of Civil Procedure provides that a district court shall grant a notion for summary judgment if it determines that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). Under this standard, summary judgment is proper if "viewing the record in the light most favorable to the nonmoving party, the evidence offered demonstrates that there is no genuine issue of fact and that the moving party is entitled to judgment as a matter of law." Pension Benefit Guar. Corp. v. LTV Corp., 875 F.2d 1008, 1015 (2d Cir. 1989) (internal quotations omitted), rev'd on other grounds, 496 U.S. 633, 110 L. Ed. 2d 579, 110 S. Ct. 2668 (1990). In making this determination, the court's role is not to resolve disputed factual issues, but rather to reach a conclusion as to whether there exists "a genuine and material issue for trial." Hudson Hotels Corp. v. Choice Hotels Int'l, Inc., 995 F.2d 1173, 1175 (2d Cir. 1993).
The mere existence of disputed factual issues is not enough to defeat a motion for summary judgment. See Knight v. United States Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986), cert. denied, 480 U.S. 932, 94 L. Ed. 2d 762, 107 S. Ct. 1570 (1987); Quarles v. General Motors Corp., 758 F.2d 839, 840 (2d Cir. 1985) (per curiam). Rather, "the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986) (emphasis in original). An issue of fact is "genuine" if it provides a basis for "a rational trier of tact to find for the non-moving party." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). With regard to materiality, the substantive law dictates which facts are material. "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Anderson, 477 U.S. at 248.
The party moving for summary judgment bears the initial burden of demonstrating the absence of any genuine issue of material fact. See Consarc Corp. v. Marine Midland Bank, N.A., 996 F.2d 568, 572 (2d Cir. 1993) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 26 L. Ed. 2d 142, 90 S. Ct. 1598 (1970)). This burden may be met by demonstrating that there is a lack of evidence to support the nonmoving party's claim. See Celotex Corp. v. Catrett, 477 U.S. 317, 325, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). Once the moving party satisfies this initial burden, the nonmoving party must set forth "specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e). If the nonmoving party is unable to establish the existence of an element essential to its case on which it bears the burden of proof at trial, a genuine issue of material fact cannot exist "since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Celotex Corp., 477 U.S. at 323.
The above-stated standards for granting summary judgment apply to ERISA actions to the same extent as they do to other civil actions. See Rodriguez-Abreu v. The Chase Manhattan Bank, N.A., 986 F.2d 580, 583 (1st Cir. 1993); Williams v. Caterpillar, Inc., No. 89-16353, 1991 U.S. App. LEXIS 26407, at *4 (9th Cir. Nov. 1, 1991) (citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 105, 103 L. Ed. 2d 80, 109 S. Ct. 948 (1989)); Catania v. NYSA-ILA Severance Benefit Fund, 91 Civ. 3262 (LBS), 1992 U.S. Dist. LEXIS 10985, at *13 (S.D.N.Y. July 15, 1992). In an action brought under ERISA, the contours guiding the court's disposition of the summary judgment motion are necessarily shaped through the application of the substantive law of ERISA. These substantive dimensions begin with a preliminary determination of whether the plaintiff has exhausted her administrative remedies under the applicable ERISA plan, or in the alternative, has raised a genuine issue of fact that could lead the Court to waive the exhaustion requirement. See Kennedy v. Empire Blue Cross and Blue Shield, 989 F.2d 588, 594 (2d Cir. 1993). If this threshold hurdle is overcome, the Court then proceeds to analyze whether the plaintiff has presented a genuine issue of material fact under ERISA's comprehensive civil enforcement scheme. A genuine issue of material fact is not presented to the extent that the facts in controversy pertain solely to a state-law cause of action that is both preempted by ERISA, and without a corresponding remedy under federal law. See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 57, 95 L. Ed. 2d 39, 107 S. Ct. 1549 (1987). It is therefore in this light that the Court examines the record to determine whether any genuine issue of material fact exists in regard to Ludwig's claim that the defendants wrongfully suspended his retirement benefits.
II. Exhaustion of Remedies and Jurisdictional Basis for Review
Defendants contend that summary judgment should be granted because plaintiff has failed to exhaust his administrative remedies under the applicable employee benefit plans. Plaintiff, in turn, argues that he was absolved from exhausting his administrative remedies because such action would have been futile.
In construing Congress's intent in enacting section 503 of ERISA, 29 U.S.C. § 1133 (1988), which requires ERISA-covered benefit plans to provide internal dispute resolution procedures for participants whose claims for benefits have been denied, the courts have "developed the requirement that a claimant should ordinarily follow internal plan procedures and exhaust internal plan remedies before seeking judicial relief under ERISA." John H. Langbein & Bruce A. Wolk, Pension and Employee Benefit Law 588 (1990). The rationale for this requirement rests upon the strong federal interest in encouraging the private resolution of ERISA disputes so as "to minimize the number of frivolous ERISA lawsuits . . . and [to] decrease the cost and time of claims settlement." Makar v. Health Care Corp., 872 F.2d 80, 82-83 (4th Cir. 1989). Although Congress has not articulated an exhaustion requirement within the text of ERISA, the courts have nevertheless insisted upon a showing that all plan remedies have been pursued, or that the facts justify a waiver thereof, as a jurisdictional essential for maintaining a claim for benefits in federal court. See Kennedy v. Empire Blue Cross and Blue Shield, 989 F.2d 588, 594 (2d Cir. 1993); Leonelli v. Pennwalt Corp., 887 F.2d 1195, 1199 (2d Cir. 1989) (noting requirement that ERISA claimants exhaust remedies provided for by their plan).
Nevertheless, under the "futility doctrine," the courts, in certain factual settings, have waived the jurisdictional requirement that a claimant exhaust all of her administrative remedies under an ERISA-covered plan. See Kennedy, 989 F.2d at 594-95. The "futility doctrine" is perhaps best understood as a term of art that considers whether, in light of both the claimant's and the plan administrator's actions, it is fair to require the dismissal of the claimant's suit pending her reapplication for benefits in accordance with the procedures set forth in the summary plan description.
A survey of applicable case law reveals that the federal courts have invoked the futility doctrine, and have thereby waived exhaustion as a precondition for judicial review under ERISA, in the following circumstances: (1) where the claimant brings a claim under section 510 of ERISA, 29 U.S.C. § 1140 (1988), asserting that her employment has been wrongfully terminated by her employer in retaliation for her exercise of the rights granted to her under ERISA, see Novak v. TRW, Inc., 822 F. Supp. 963, 969 (E.D.N.Y. 1993) (plaintiff also maintained that he was never informed of the appeals process); Corbett v. International Ass'n of Bridge, Structural and Ornamental Iron Workers, 90 CV 4161, 1992 U.S. Dist. LEXIS 10990, at *17 (E.D.N.Y. June 25, 1992); Lawford v. New York Life Ins. Co., 739 F. Supp. 906, 912-13 (S.D.N.Y. 1990). But see Byrd v. MacPapers, Inc., 961 F.2d 157, 160 (11th Cir. 1992) (finding that district court did not abuse its discretion in finding that plaintiff failed to plead exhaustion of administrative remedies or impossibility); (2) where, for summary judgment purposes, there is a material issue of fact as to whether the claimant has "properly appealed" a denial of benefits through the specified administrative channels, see Jonas v. The New York State Soc'y of Certified Public Accountants Ins. Plans, CV 91-4399 (ADS), 1992 U.S. Dist. LEXIS 19159, at *10 (E.D.N.Y. Dec. 8, 1992); (3) where the plan has failed to respond to the claimant's, or the claimant's representative's, written request for a review of the plan's benefit eligibility determination, see Ritzer v. National Org. of Indus. Trade Unions Ins. Trust Fund, 807 F. Supp. 257, 260 (E.D.N.Y. 1992) (claim deemed to have been constructively denied on review pursuant to 29 C.F.R. § 2560.503-1(h)(4) (1990)); (4) where there is a material issue of fact as to whether the plaintiff was informed of the appeals process, see Novak, 822 F. Supp. at 969; Clay v. ILC Data Device Corp., 771 F. Supp. 40, 45 (E.D.N.Y. 1991); Kreml v. Diamond Shamrock Corp., 701 F. Supp. 1400, 1403-04 (N.D. Ill. 1988); see also Lee v. The Prudential Ins. Co. of Am., 673 F. Supp. 998, 1003 (N.D. Cal. 1987) (discretionary standard applied); (5) where the plan fiduciary has acted in bad faith, in breach of its fiduciary duties, see Riggs v. A.J. Ballard Tire & Oil Co., No. 91-2130, 1992 U.S. App. LEXIS 31134, at *5 (4th Cir. 1992); Healy v. Axelrod Constr. Co. Defined Benefit Pension Plan and Trust, 787 F. Supp. 838, 842 (N.D. Ill. 1992); and (6) where the plan no longer exists. See Hutchinson v. Wickes Cos., 726 F. Supp. 1315, 1321 (N.D. Ga. 1989).
Turning to the facts of the case at hand, the Court concludes that plaintiff has demonstrated that he falls within the purview of the futility doctrine, and that the Court, therefore, may analyze the substantive merits of his claims. The record reveals that on four separate occasions, Ludwig directed inquiries to NYNEX personnel requesting the reinstatement of his pension. The last two of these inquiries were in writing. NYNEX failed to inform Ludwig of his appeal rights, at any time, in response to Ludwig's requests. In addition, NYNEX failed to respond to plaintiff's counsel's letter to Robert Donovan, NYNEX's Managing Director of Personnel, dated November 10, 1989, which requested a review of NYNEX's portability decision.
Furthermore, a genuine issue of fact exists as to whether the NYNEX defendants provided Ludwig with the applicable summary plan descriptions, as required by section 102 of ERISA, 29 U.S.C. § 1022 (1988). These summary plan descriptions spell out, in plain language, the procedures for filing a claim under each of the NYNEX plans.
All of these facts, considered together, militate in favor of the Court's examination of the substantive merits of the plaintiff's claims. See Novak, 822 F. Supp. at 969 (futility doctrine invoked where genuine issue of fact existed as to whether claimant informed of appeal rights); Clay, 771 F. Supp. at 45 (same); Kreml, 701 F. Supp. at 1403-04 (same); see also Ritzer, 807 F. Supp. at 260 (claim deemed constructively denied on review, pursuant to 29 C.F.R. § 2560.503-1(h)(4) (1990), where plan failed to respond to claimant's request for review of plan's benefit eligibility determination). Cf. Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 144, 87 L. Ed. 2d 96, 105 S. Ct. 3085 (1985) (construing the Regulations promulgated by the Secretary of Labor within 29 C.F.R. § 2560.503-1(h)(1)(i) (1984)--which establish a 120-day maximum period, including extensions, for the processing of a benefits claim--to imply that a claim will be regarded as denied upon the expiration of a 60-day or 120-day period). Therefore, this threshold hurdle having been surmounted, the Court now turns to analyze the substantive merits of plaintiff's claims.
III. Review of NYNEX Benefits Eligibility Determination
Plaintiff argues that the defendants wrongfully suspended his pension and other benefits that he was receiving from AT&T and seeks the restoration of these benefits, and the enforcement and the clarification of his rights under the terms of the NYNEX employee benefit plans, pursuant to ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B) (1988 & Supp. II 1990).
The defendants, in turn, contend that they were merely acting in compliance with the controlling plan documents which incorporate by reference the Mandatory Portability Agreement, to which Ludwig contractually assented through his execution of a release. Accordingly, the Court now endeavors to examine the rights of the parties under the applicable plan documents to determine whether the defendants incorrectly suspended Ludwig's pension. This examination, in turn, requires an analysis of the legal relationship between Ludwig and the defendants, and further involves a threshold determination of the appropriate standard of judicial review to be applied to the decisions of the NYNEX plan fiduciaries. The Court concludes that even though no deference is owed to the defendants in regard to their benefits eligibility decisions, the defendants were correct, pursuant to the terms of the NYNEX Management pension Plan, in suspending the benefits that Ludwig was receiving from AT&T.
A. Scope of Judicial Review
The fundamental divide in the scope "of judicial review is between deferential and nondeferential review, that is, between reversing a tribunal's decision because it is unreasonable and reversing it merely because it is wrong." Van Boxel v. The Journal Co. Employees' Pension Trust, 836 F.2d 1048, 1052 (7th Cir. 1987). Before examining the merits of the defendants' decision to suspend Ludwig's pension, the Court must ascertain whether it will review this decision de novo--that is, without any deference to the conclusions of law or fact that the defendants reached--or under the deferential arbitrary-and-capricious standard. The Court concludes that a de novo review applies in the instant case.
In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 103 L. Ed. 2d 80, 109 S. Ct. 948 (1989), the Supreme Court held that "a denial of benefits challenged under [29 U.S.C.] § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Id. at 115. Citing "established principles of trust law" as the basis for its pronouncement, id., the Court reversed the then-prevailing view of ERISA jurisprudence,
and instituted the de novo standard as the default rule to guide the judicial review of a plan's denial of a claim for benefits.
According to the Supreme Court, the de novo standard would apply unless the plan granted discretionary authority to the plan fiduciary in making benefits eligibility decisions, in which event the arbitrary-and-capricious standard would generally govern. See id.31
A review of the applicable plan documents reveals that the benefit plans in question grant fiduciary discretion to make benefits eligibility decisions and to construe the terms of the plan. The NYNEX Management Pension Plan addresses the matter of fiduciary discretion in benefit eligibility determinations in three separate instances. Section 3.3(c) of the Plan provides:
Any participant whose claim for benefits has been denied shall be notified, and shall have such further rights of review as are provided in Section 503 of [ERISA] and [the] regulations promulgated thereunder, and the [Employee Benefits] Committee, Participating Company Committees or any Departmental or Local Benefit Committee, as applicable, appointed by them shall retain such right, authority and discretion as is provided in or not expressly limited by said Section 503 of [ERISA] and the regulations thereunder.
NYNEX Management Pension Plan § 3.3(c) (emphasis added).
In addition, section 3.4 of the Plan provides that "the Committee shall determine conclusively for all parties all questions arising in the administration of the Plan and any decision of such Committee shall not be subject to further review." Id. § 3.4 (emphasis added). Further, section 6.3(a) of the Plan provides that "in all questions . . . relating to term of employment and rates of pay for determining service pensions and other benefits, the decision of the Committee, as applicable, based upon this Plan and upon the records of the Participating Company last employing such individual and insofar as permitted by applicable law, shall be final. " Id. § 6.3(a) (emphasis added). Moreover, while the summary plan description for the NYNEX Management Pension Plan does not contain similar enabling language, the NYNEX legal information guide that is applicable to each of the defendant employee benefit plans provides that "if there [is] a difference between what [the summary plan description] describes and what's written in a plan document . . ., the language in the plan document . . . is controlling." Flaherty Aff., Exh. G, Highlights of the Legal Information Section, at 4.
While the NYNEX Management Pension Plan's clear grant of fiduciary authority to determine eligibility for benefits and to interpret the provisions of the Plan would generally come within the exception to Bruch, and would thereby warrant the application of an arbitrary-and-capricious standard of review, the Court nevertheless concludes that a de novo standard of review applies because Ludwig's portability status turns on questions of law. Under the law of the Second Circuit, a de novo standard of review applies, notwithstanding grants of discretionary authority within the plan document, where the fiduciaries' benefits eligibility determinations rest upon their resolution of a question of law. See Weil v. Retirement Plan Admin. Committee of the Terson Co., 913 F.2d 1045, 1048 (2d Cir. 1990) (de novo standard of review applied, notwithstanding grants of fiduciary discretion within the plan document, to the plan administrator's determination of a question of law as to whether a partial termination of the plan had occurred). In accordance with Weil, and moreover, in light of the procedural posture of this case whereby the defendants move for summary judgment against the plaintiff, the Court finds that NYNEX's determination of whether Ludwig was eligible for portability of service credit under the Mandatory Portability Agreement sufficiently rests on interpretations of law so as to warrant a de novo standard of review.
Accordingly, the Court now turns to consider whether the NYNEX defendants were correct in suspending the benefits that Ludwig was receiving from AT&T. This issue necessarily involves an analysis of the legal relationship that exists between Ludwig and the NYNEX defendants.
B. Analysis of Legal Relationship between Ludwig and NYNEX Plans and Accuracy of Decision to Suspend Ludwig's Pension
The analysis of the legal relationship between Ludwig and the NYNEX employee benefit plans begins with the settlement of the antitrust lawsuit brought by the United States Department of Justice against AT&T in 1982. The settlement resulted in AT&T's divestiture of the Bell System regional operating companies into eight separate and independent entities. Prior to the break-up of the Bell System, employees who changed jobs from one company within the Bell System to another were afforded full "portability" of their "accrued service credits;" that is to say, a change of jobs between companies within the Bell System did not result in a break-in-service for purposes of determining an employee's credited service under the Bell System's employee benefit plans. Instead, an employee's service credits were simply tacked on, or "bridged," from one Bell System company to another. See McCamphill v. NYNEX Corp., 92 Civ. 0862 (LJF), 1993 U.S. Dist. LEXIS 4831, at *1 (S.D.N.Y. Apr. 12, 1993).
Under the consent decree entered into by AT&T and the United States, the portability of certain employee benefits among the former Bell System companies was only extended for one year beyond the January 1, 1984 divestiture date--through December 31, 1984. See United States v. Western Elec. Co., 569 F. Supp. 1057, 1094 n.158 (D.D.C.), aff'd sub nom. California v. United States, 464 U.S. 1013, 78 L. Ed. 2d 719, 104 S. Ct. 542 (1983). While the Communications Workers of America tried to extend portability beyond this one-year period, Judge Greene refused to do so reasoning that:
The phasing out of unlimited portability is . . . a natural consequence of divestiture, for it would surely be inconsistent with the independence of the Operating Companies from AT&T and from one another to allow employees to rotate among them as freely as if these companies were related entities.