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
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
Prudential began insuring eligible DNLP employees, and DNLP
premiums in consideration of that coverage, on January 8, 1993.
(Rado Aff. at ¶ 7.) In September, 1993, Prudential presented DNLP
with a draft "Benefit Booklet" for "Contract No. GW-22581,"
setting forth a detailed summary of the terms governing coverage
under all of the insurance and benefits plans comprising the DNLP
Benefits Program. (Prudential's Rule 56.1 Statement, Exh. I.) The
draft Benefit Booklet contains a description of the "Offset
Amount" applicable to awards of long-term disability benefits
under the Plan, which makes clear that such awards will be
reduced by amounts received under workers' compensation laws, and
the United States Social Security Act, inter alia. (Id. at
7-8, 15-17.) The Benefits Booklet also contains this passage,
pertinent to the dispute between the parties concerning the
significance of the "Reimbursement Agreement" Prudential asks
long-term disability beneficiaries to sign:
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.
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
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
provisions applicable to long-term benefits. (Pocchia Aff. at ¶
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
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
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 ...