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November 5, 1999


The opinion of the court was delivered by: Glasser, District Judge.


Plaintiffs in these consolidated actions are former full-time employees of defendant Daily News, L.P. ("DNLP"), who, since 1994, have been receiving benefits under a long-term disability plan (the "LTD Plan," or the "Plan"), which is one of the benefits made available to employees under the Daily News, L.P. Benefits Program (the "DNLP Benefits Program," or the "Program"), also a defendant in this case. Benefits under the LTD Plan are provided and underwritten by defendant insurer, Prudential Insurance Company ("Prudential"). Plaintiffs allege that their rights under the LTD Plan and under controlling provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. § 1001 et seq., were violated when defendants reduced, or sought to reduce, their Plan benefits by the amount they were receiving in disability benefits from other sources, including Workers' Compensation and Social Security. Defendants allege in response that those reductions in benefits are binding on the plaintiffs, pursuant to offset provisions specifically set forth in the terms of the contract between DNLP and Prudential under which the Plan was made available to plaintiffs, and under settled principles of ERISA jurisprudence. Accordingly, the defendants have interposed counterclaims against plaintiffs Pocchia and Molina seeking return of excess payments made before offset amounts had been calculated.*fn1

Plaintiffs here seek summary judgment on their claims, and dismissal of defendants' counterclaims. Defendants move in turn for summary judgment dismissing plaintiffs' claims, and granting their counterclaims. Prudential also seeks a judgment, pursuant to 28 U.S.C. § 2201, declaring that its reductions of plaintiffs' benefits pursuant to the Plans offset provisions have been proper, and an award of costs, and attorneys' fees pursuant to 29 U.S.C. § 1132(g). For the reasons that follow defendants' motions for summary judgment dismissing plaintiffs' claims and granting their counterclaims are granted in their entirety; plaintiffs' motion for summary judgment is denied, and their action is dismissed; Prudential's action for a declaratory judgment is granted to the extent that the judgment they seek is set forth in this memorandum and order; and Prudential's motion for an award of costs and attorneys' fees is denied.


A. The DNLP Benefits Program

Plaintiffs were all longtime employees of DNLP and its predecessors, who left full-time employment at different times in 1994 and were subsequently awarded disability benefits. Plaintiffs were non-union, supervisory employees, and as such, their benefits were administered under the DNLP Benefits Program. The Program's benefits package includes medical and dental insurance, life insurance, a 401(k) program, and both short-term and long-term disability plans.

In 1991, following a strike by delivery drivers against the Daily News, the paper was acquired by Robert Maxwell. By 1993, Maxwell had run the Daily News into bankruptcy, and it was acquired by its current publisher, DNLP. The DNLP Benefits Program was established at that time, under new insurance contracts with Prudential, to replace the benefits program that had existed during the years of Maxwell's proprietorship. (DNLP's Rule 56.1 Statement at ¶¶ 3-5; Prudential's Rule 56.1 Statement, Exh. I.) Part of DNLP's motivation in contracting for a new employee benefits regime was to cut costs. Thus, under the new Plan, long-term disability benefits were capped at 60 percent of income. Under the previous long-term disability plan, that figure had been 66 2/3 percent. (Id. at ¶ 7.)*fn2

  Until you give Prudential written proof that you have
  completed [the process of applying for and securing
  Social Security benefits, or appealing any denial of
  such benefits through the Administrative Law Judge
  level], Prudential may: (1) estimate your monthly
  Social Security benefit; and (2) use that amount to
  determine your Adjusted Benefit. But, Prudential will
  not estimate Social Security benefits while your
  application and appeals are pending if you sign
  Prudential's Reimbursement Agreement.

(Id. at 16.) It is not disputed that the Benefits Booklet dated September 1993 was not distributed to DNLP employees covered by the DNLP Benefits Program. The parties also agree that no subsequent draft of the Benefits Booklet (there were several generated between September, 1993, and November, 1996) was distributed to eligible DNLP employees. (Rumeld Aff., Exh. D, Wooley Dep. at 64; Rado Aff. at ¶¶ 8-10.)

In July, 1997, Prudential and DNLP executed Group Contract No. GW-22581. (Prudential's Rule 56.1 Statement, Exh. J.) The Group Contract is dated and expressly takes effect on January 8, 1993, and specifically incorporates by reference draft of the Benefits Booklet dated October 6, 1995 (hereinafter, the "Contract Benefits Booklet"), setting forth the terms of the different kinds of coverage available under the Contract, through the DNLP Benefits Program. (Id. at PRU 00003, 00016, 00055, 00061.) The Contract Benefits Booklet provides that long-term disability coverage is to be made available to eligible participants in the Program in amounts equal to the difference between 60 percent of the covered employee's pre-disability monthly salary, and the total of certain "Periodic Benefits." (Id. at 00071-72, 00078-80.) These "Periodic Benefits" are defined under the Contract as including benefits received under any Workers' Compensation law, and the United States Social Security Act, among other sources. (Id. at 00079.) The Contract Benefits Booklet also contains language identical to that just quoted concerning the role of the "Reimbursement Agreement" in the determination of long-term disability benefits under the Plan. (Id.)

The parties agree that under the long-term disability plan in effect during the period of Maxwell's ownership of the paper, long-term disability benefits were subject to offsets equal to any sums received from Workers' Compensation or Social Security. (Rado Aff. ¶ 5, Exh. A at 2, 5-6; Pocchia Aff. at ¶ 4.) The parties disagree sharply, however, over whether the LTD Plan established by DNLP in 1993 should be construed to contain a similar provision.

According to plaintiff Pocchia, non-union employees were told about the LTD Plan early in 1993, at a meeting with the DNLP's Benefits Manager Linda Rado. Pocchia says that they were told of the reduction in benefits from 66 2/3 percent to 60 percent of salary at the time of disability, and that employee contributions would no longer be required. (Pocchia Aff. at ¶ 5; Rado Aff. at ¶ 6.) He also says that no mention was made at the meeting of offset provisions applicable to long-term benefits. (Pocchia Aff. at ¶ 4.)

Pocchia and Feifer recall that Rado distributed a document at the meeting, entitled "Daily News, L.P. Benefits Program Summary." (Pocchia Aff. at ¶ 5; Feifer Aff. at ¶ 4.) The same document was apparently also circulated around that time as an attachment to an inter-office memorandum to all "Exempt Employees" (meaning, all employees covered under the benefits program for non-union employees). (Rado Aff. at ¶ 8; Molina Aff. at ¶ 4.) The document contains three passages relevant to these proceedings. First, at the foot of the first page, in bold print and a font slightly smaller than the text above it, a disclaimer reads:

  This summary is for informational purposes only and
  is not intended to cover all details of the Plan. The
  actual provisions of the Plan will govern in settling
  any questions that may arise.

(Rado Aff., Exh. C.) Second, the section on long-term disability benefits, which broadly describes eligibility for the program and notes that "[t]he Company pays for the cost of a Long Term Disability benefit equal to 60% of your Basic Monthly Compensation," contains no mention of offsets that will apply against payments received from Workers' Compensation and Social Security. (Id.) Finally, the section on short-term disability does contain this provision concerning offsets:

  Short-term disability benefits will be offset by any
  payments for which you are eligible under the State
  Disability Benefit Law or the Workers' Compensation

(Id.) Plaintiffs state, and defendants do not dispute, that between January, 1993, and the various dates on which they filed for disability benefits in 1994, they received no description of the terms of the LTD Plan, other than the summary distributed in January 1993. (Pocchia Aff. at ¶ 7; Molina Aff. at ¶ 6; Feifer Aff. at ¶ 6.)

B. Plaintiffs' Disability Claims

1. Pocchia

In August 1993, Pocchia became disabled as a result of a work-related accident. He applied for and received benefits under the short-term disability plan, which were offset by the amounts he also received from Workers' Compensation. After receiving short-term benefits for the maximum six months, he applied for and received long-term disability benefits. At around the same time, he also applied for and received Social Security benefits. (Pocchia Aff. at ¶¶ 8-10.) Specifically, Pocchia was awarded $2,530 in monthly benefits under the LTD Plan, which when added to the $650 he received monthly from Workers' Compensation, came to 60 percent of his salary at the time of disability. (Rado Aff. at ¶ 12; Second Amended Complaint at 20.)

In October, 1995, Prudential sent a letter to Pocchia's attorney at the time, explaining that under the insurance contract governing the LTD Plan, Pocchia's benefits were subject to an offset for any amounts received from Social Security. (Rado Aff., Exh. F.) The letter enclosed a "Reimbursement Agreement" for Pocchia's signature, and further explained the terms of that agreement. By signing, the letter says, Pocchia agrees to reimburse Prudential for any amounts subsequently received from Social Security. The letter goes on to say that should Pocchia fail to sign, Prudential would reduce his LTD benefits by an amount equal to its best estimate of his Social Security benefit. (Id.) In the event, Pocchia never returned a signed Reimbursement Agreement to Prudential, and as a result, Prudential reduced his monthly LTD award by its estimate of his Social Security award, $1,148.*fn3 Upon learning that his Social Security benefits were slightly ...

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