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United States District Court, S.D. New York

June 24, 2004.


The opinion of the court was delivered by: FRANK MAAS, Magistrate Judge


This action under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq., is brought by plaintiff Michael Sammarco ("Sammarco"), a participant in the Local 812 Health Fund ("Fund"), to secure health benefits that the defendant Trustees ("Trustees") declined to provide following an accident on January 10, 2002 ("Accident"), in which he was seriously injured. The parties previously consented to my exercise of jurisdiction over this matter pursuant to 28 U.S.C. § 636(c). (See Docket No. 2). They now have cross-moved for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the reasons detailed below, the Trustees' motion is granted, Sammarco's motion is denied, and the complaint is dismissed. I. Factual Background

The following facts are undisputed. In 2002, Sammarco was employed by his own corporation, which was an independent Pepsi Cola distributor. (See Sammarco Aff. ¶¶ 3, 7). As such, he was a member of the Local 812 health plan ("Plan"), which is an ERISA benefit plan. (See id. ¶ 7; Warner Aff. Ex. A at 53). Although Sammarco had the option of also securing Workers' Compensation coverage, his accountant advised him that New York law permits an owner employer not to participate in that coverage. (Sammarco Aff. ¶ 7). He therefore did not purchase any Workers' Compensation coverage for himself. (See id. ¶ 10).

  The Fund's Summary Plan Description which was in effect on the date of the Accident and when Sammarco submitted his claims was the version revised and restated as of June 1, 1996 ("1996 SPD"). (See id. ¶ 7; Warner Aff. ¶ 8, Ex. A). The 1996 SPD contained nearly forty coverage exclusions. (See Warner Aff. Ex. A at 22-25). The third of these exclusions ("Exclusion 3") provided that the Fund would not pay


[c]harges arising out of or in the course of any occupation for wage or profit, or for which the covered person is entitled to benefits under any Worker's Compensation or Occupations Disease Law, or any such similar law[.]
(Id. at 22).

  Following the Accident and Sammarco's submission of his claims, the Fund revised its Summary Plan Description to clarify the Plan's benefits and exclusions effective January 1, 2003 ("2003 SPD"). (See id. Ex. G at 1-2). The 2003 SPD contained a third exclusion substantially similar to Exclusion 3. (See id. at 24). However, the 2003 SPD further described the relationship between the Fund's health benefits and Workers' Compensation coverage as follows:

If you incur a work related injury or illness, any claims related to that injury or illness must be submitted through your employer for Workers' Compensation coverage. No benefits are payable by the Fund for claims related directly or indirectly to a work-related injury or illness unless the claim is denied by Workers' Compensation. Every participant must be covered by Workers' Compensation regardless of whether the law permits a voluntary exemption.
. . .
Where Workers' Compensation would cover your injury or illness and you do not have Workers' Compensation coverage, the Fund will consider your claim as if you did have it and determine benefits accordingly.
(Id. at 29-30) (emphasis added). The 1996 SPD did not contain any comparable explanatory language.

  On the date of the Accident, Sammarco returned to the Pepsi Cola plant from his delivery route at approximately 5:30 p.m. after a twelve-hour shift. (Sammarco Aff. ¶ 3). As was his custom, Sammarco parked his truck at the plant so that Pepsi Cola employees could reload it overnight. (Id.). Sammarco also completed certain necessary paperwork. (Id.). By about 6:15 p.m., his work for the day was done. (Id.).

  At the time, Sammarco was in the process of planning a confirmation party for his son. (Id. ¶ 5). Accordingly, Sammarco went into a "back area" of the plant in an effort to locate Jerry Troyanos, a Pepsi Cola employee who "had a band" (Id.). Although Troyanos was on vacation, Sammarco contacted him by telephone and agreed to meet at the plant at 7 p.m. (Id.; Troyanos Aff. ¶¶ 4-5).

  At approximately 7:15 p.m., while he was in the back area of the plant to meet with Troyano to discuss his need for a band, Sammarco slipped on an oil slick on the floor near several leaking "hi-los." (Sammarco Aff. ¶ 6; Troyanos Aff. ¶ 5). Sammarco suffered a concussion, a right shoulder dislocation, and a collapsed lung, among other injuries, and he underwent surgery. (Sammarco Aff. ¶ 8).

  Sammarco and his health care providers submitted bills to the Fund for his medical care, but the Plan Administrator ("Administrator") denied payment.*fn1 (Id. ¶ 9). At the time, Sammarco's understanding was that the denial was based upon Exclusion 3, even though he did not have Workers' Compensation coverage. (Id. ¶ 10). He later learned from his attorneys that the Fund was rejecting his claims because he "could have obtained [W]orker[s'] [C]ompensation had [he] wanted to." (Id.).

  On May 17, 2002, Sammarco's counsel wrote to the Administrator in an effort to reverse the Administrator's prior decision. In his letter, counsel stated that Sammarco


was injured while at the Pepsi Cola plant but he is not an employee of Pepsi Cola. He therefore has no [W]orkers [C]ompensation benefits available in connection with the injuries he suffered in his [Accident.]
(Saunders Decl. Ex. 1). Counsel also threatened to file a lawsuit unless the Administrator corrected its error "immediately." (Id.).

  On June 4, 2002, counsel again wrote to the Administrator. (See id. Ex. 2). This second letter noted the lack of any response to the May 17th letter. (Id.). Counsel also observed that he previously had advised the Administrator that Sammarco "was an independent trucker who happened to be injured in the Pepsi Cola plant while picking up a load of goods for his distribution." (Id.) (emphasis added).

  Finally, on July 31, 2002, counsel wrote to Pat Paolucci, an officer of the Administrator. (See id. Ex. 3). In that letter, counsel complained that Sammarco's claim had been denied in the mistaken belief that "he should receive [W]orkers' [C]ompensation." (Id.). Counsel indicated that one of his partners had "repeatedly advised" the Administrator's office staff of this error. (Id.).

  The Appeals Committee of the Board of Trustees reviewed all three letters from Sammarco's counsel. (See Saunders Decl. ¶¶ 6-9). Thereafter, on October 10, 2002, the Trustees wrote to Sammarco to advise him that the Trustees had considered his appeal at their September 12, 2002, regular meeting, but had denied his request for reimbursement. (See id. Ex. 4). As the Trustees' letter explained


[A]lthough New York State Labor Law permits you to waive your Workers' Compensation coverage, it does not preclude you from having such coverage. Your failure to obtain the Workers' Compensation coverage to which you are entitled does not make a work related injury reimbursable by this Health Fund. This has always been the position of this Fund. The Trustees have a fiduciary responsibility to administer the Fund in the best interest of all participants. Payment of benefits that should be covered by Workers' Compensation laws will diminish Fund assets.
The . . . [2003] SPD provides that "every participant must be covered by Workers' Compensation regardless of whether the law permits a voluntary exemption." (Page 23). The [2003] SPD further provides "where Workers' Compensation would cover your injury or illness and you do not have Workers' Compensation coverage, the Fund will consider your claim as if you did have it and determine benefits accordingly[.] (Page 24)[.]"

  Having exhausted his available administrative remedies, Sammarco then filed this lawsuit in early January 2003. (See Docket No. 1).

  II. Discussion

  A. Summary Judgment Standard

  Summary judgment is appropriate only when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show 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). The moving party has the initial burden of "informing the district court of the basis for its motion" and identifying the matter that "it believes demonstrate[s] the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the court concludes that "the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no `genuine issue for trial,'" and summary judgment must be granted. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting First Nat'l Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 289 (1968)).

  In deciding a motion for summary judgment, the court must "view the evidence in the light most favorable to the party against whom summary judgment is sought and . . . draw all permissible inferences in favor of that party." Fischl v. Armitage, 128 F.3d 50, 55 (2d Cir. 1997). The Court must accept as true the non-moving party's evidence, if supported by affidavits or other evidentiary material. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254 (1986). Thus, "[t]he court's function is not to resolve disputed issues of fact but only to determine whether there is a genuine issue of material fact to be tried." Fischl, 128 F.3d at 55. "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248. "If the evidence is merely colorable, . . . or is not significantly probative, . . . summary judgment may be granted." Id. at 249-50 (citing Cities Serv. Co., 391 U.S. at 290; Dombrowski v. Eastland, 387 U.S. 82, 87 (1967)).

  The fact that both sides have moved pursuant to Rule 56 does not mean that one side necessarily must be granted summary judgment. Schwabenbauer v. Bd. of Educ., 667 F.2d 305, 313-4 (2d Cir. 1981). "Rather, the court must evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration." Id. at 314.

  B. Sammarco's Motion

  In his complaint, Sammarco seeks to recover damages for "Breach of Contract," alleging that the Trustees "violated 29 U.S.C. § 1022 and Sec. 1024(b), and [have] otherwise breached the contract [Plan]." (Compl. ¶ "Nineteenth") (brackets in original). Sammarco also seeks a mandatory injunction requiring the Trustees to pay any past and future medical bills arising out of the Accident. (Id. ¶ "Twentieth"). Finally, Sammarco's complaint states that he seeks to represent a class consisting of "all those participants or beneficiaries of the Plan who were and are self-employed distributors who were and are employed by their own corporations and who were and are not required to carry [W]orkers' [C]ompensation in New York State during the six years preceding the commencement of this action." (Id. ¶ "Twenty-Second"). It does not appear that this last aspect of his suit was ever pursued.

  Sammarco's statement of undisputed facts pursuant to Local Civil Rule 56.1 contains only two paragraphs. Sammarco first contends that the injuries that he sustained as a result of the Accident did not occur during the course of his work. (Pl.'s R. 56.1 Stmt. ¶ 1). Second, Sammarco alleges that (a) Exclusion 3 did not comply with the requirements of 29 U.S.C. § 1022 because the Workers' Compensation exclusionary language in the 1996 Plan was ambiguous, and (b) the Trustees' denial of his appeal was improperly "based upon the [W]orkers' [C]ompensation exclusionary language contained in the clearer 2003 [SPD]." (See id. ¶ 2).

  ERISA Section 102(a), 29 U.S.C. § 1022(a), requires that the summary plan description of an employee benefit plan "be written in a manner calculated to be understood by the average plan participant, and [that it] . . . be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan." To meet these statutory requirements, a plan administrator usually must limit or eliminate "technical jargon" and "long, complex sentences." Layaou v. Xerox Corp., 238 F.3d 205, 209 (2d Cir. 2001) (quoting 29 C.F.R. § 2520.102-2(a)).

  ERISA Section 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), authorizes a participant in an employee benefit plan to bring a suit in federal court to enforce a right or clarify the right to future benefits under the terms of an ERISA benefits plan. A plan beneficiary, such as Sammarco, who has detrimentally relied on the ambiguous wording of a plan may therefore institute an action to recover any damages resulting from the plan administrator's failure to make adequate disclosure. See Layaou, 238 F.3d at 212 (citing Howard v. Gleason Corp., 901 F.2d 1154, 1159 (2d Cir. 1990)).

  Sammarco argues that Exclusion 3 in the 1996 SPD failed to meet the plain language requirements of Section 102(a) because it did not clearly state that an owner-operator who elected not to secure Workers' Compensation coverage for himself would be ineligible to recover benefits from the Fund. (See Warner Aff. ¶ 12; Pl.'s Mem. of L. in Supp. of Mot. for Summ. J. at 6-9). This contention is at least colorable because Exclusion 3, by its terms, applies to participants who are "entitled" to benefits under a "Worker's Compensation" or similar law. However, because Sammarco failed to secure such coverage for himself, he arguably was not such a person.

  In this case, even if Sammarco were entitled to summary judgment declaring that the Workers' Compensation language in Exclusion 3 is ambiguous, it does not necessarily follow that he is entitled to receive benefits for the medical charges arising out of the Accident because Exclusion 3 also contains another, alternative basis of disqualification. Pursuant to Exclusion 3, the Fund also need not honor Sammarco's claim if the charges for which coverage is sought arose out of or were incurred in the course of "any occupation for wage or profit."

  Sammarco advances two different arguments with respect to this language in Exclusion 3. First, he alleges that the Accident was not work related because he had finished his business at the Pepsi Cola plant and remained there solely for personal reasons. (See Warner Aff. ¶ 11). Second, he argues that the denial of his claim was not based on this provision of Exclusion 3, but, rather, the Workers' Compensation "exclusionary language contained in the clearer 2003 Plan, which was not in effect when [he] submitted his claim for benefits in 2002." (Id. ¶ 12). Sammarco may, in fact, be correct with respect to the first of these contentions. However, as explained in greater detail below, the Court must judge the Trustees' determination on the basis of the administrative record as it existed at the time that Sammarco's claim was denied. Here, that record consisted of the three letters that his lawyer sent to the Administrator (and possibly his medical bills). (See Saunders Decl. ¶¶ 7-9 & Exs. 1-3). Consequently, there is not a scintilla of evidence that Sammarco advised the Administrator or the Trustees prior to the date that the Trustees denied his appeal that the Accident was not work related. Indeed, the only evidence before the Trustees with respect to this issue was the June 4th letter from Sammarco's counsel, which represented that Sammarco was "injured in the Pepsi Cola plant while he was picking up a load of goods for distribution." (Id. Ex. 2). In light of this admission by his attorney, Sammarco plainly is not entitled to summary judgment on the theory that the Trustees improperly found that the Accident was not work related. See, e.g., Ali v. Reno, 22 F.3d 442, 446 (2d Cir. 1994) (appellant is bound by his retained counsel's admission that a timely answer had not been filed); United States v. GAF Corp., 928 F.2d 1253, 1259 (2d Cir. 1991) (quoting United States v. McKeon, 738 F.2d 26, 30 (2d Cir. 1984)) ("statements made by an attorney concerning a matter within his employment may be admissible against the party retaining the attorney").

  Turning to Sammarco's second point, the Trustees' October 10th rejection letter refers to the 2003 SPD, which evidently was intended to clarify the scope of Exclusion 3 under the 1996 SPD and ensure that there would be no further confusion. (See Saunders Decl. Ex. 4). However, the Trustees' letter simply does not state, as Sammarco contends, that the 2003 SPD was the basis for the Trustees' rejection of his claim in September 2002. Instead, the letter plainly describes Sammarco's injury as a "work related injury." Sammarco therefore is not entitled to summary judgment on the theory that his claim was denied in 2002 on the basis of the 2003 SPD.

  C. Trustees' Motion

  Under ERISA, federal courts ordinarily review benefits decisions by fiduciaries or plan administrators using a de novo standard of review. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). Nevertheless, when a benefit plan grants its administrator and trustees the discretion to determine a participant's eligibility or to construe the plan's terms, their actions must be reviewed under the considerably more "deferential arbitrary and capricious standard." Fay v. Oxford Health Paln, 287 F.3d 96, 107 (2d Cir. 2002). Pursuant to that standard, a denial of benefits will be set aside only if it is "without reason, unsupported by substantial evidence or erroneous as a matter of law." Id. (quoting Kinstler v. First Reliance Std. Life Ins. Co., 181 F.3d 243, 249 (2d Cir. 1999) and Pagan v. NYNEX Pension Plan, 52 F.3d 438, 442 (2d Cir. 1995)) (internal quotation marks omitted). The plan administrator bears the burden of proving that the arbitrary and capricious standard applies. Kinstler, 181 F.3d at 249. The 1996 SPD, which governs Sammarco's entitlement to health benefits in connection with the Accident, describes the Trustees' authority in the following terms:

The Board of Trustees . . . is the sole fiduciary of the Plan and has broad discretionary authority to determine eligibility for benefits under the Plan, interpret all of the provisions of the Plan, and to control the operation and administration of the Plan within the limit of the law. All decisions made by the Board of Trustees shall be final and binding on all parties.
(Warner Aff. Ex. A at 54).

  As Sammarco concedes, this broad delegation of authority to the Trustees requires the Court to review their decision to deny Sammarco's claim using the arbitrary and capricious standard. (See Pl.'s Mem. of L. in Supp. of Mot. for Summ. J. at 6). However, under the "arbitrary and capricious" standard of review, the Court must also restrict itself to the administrative record and cannot consider any evidence introduced after the fact. Miller v. United Welfare Fund, 73 F.3d 1066, 1071 (2d Cir. 1995) ("We follow the majority of our sister circuits in concluding that a district court's review under the arbitrary and capricious standard is limited to the administrative record.").

  Sammarco argues that there is "good cause" to expand the record in this case because the Trustees misled him and his counsel into believing that the denial of coverage was based on his lack of Workers' Compensation coverage. (Warner Reply Aff. ¶ 3). The "good cause" exception only applies, however, when the Court's review is de novo. See Krizek v. Cigna Group Ins., 345 F.3d 91, 98 (2d Cir. 2003) (on de novo review of an administrator's eligibility determination, a district court did not err in confining its review to the record before the administrator absent a showing of good cause); DeFelice v. Am. Int'l Life Assurance Co., 112 F.3d 61, 67 (2d Cir. 1997) (on de novo review, a district court's discretion to admit additional evidence beyond the record before administrator "ought not to be exercised in the absence of good cause").

  On the basis of the administrative record, the only reasonable conclusion for the Trustees to have drawn was that the Accident was work related because it occurred while Sammarco was picking up a load of goods for distribution along his route. Consequently, because the administrative record fully supports the Trustees' decision to decline coverage on the basis that Sammarco's injury was work related, Sammarco has not shown, as he must, that their decision was arbitrary and capricious.

  The Trustees are therefore entitled to summary judgment dismissing Sammarco's complaint.

  III. Conclusion

  For the foregoing reasons, the Trustees' motion for summary judgment is granted, Sammarco's cross-motion is denied, and the Complaint is dismissed. The Clerk of the Court is respectfully requested to close this case.


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