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Jones v. Kohler Co. Pension Plan

United States District Court, E.D. Arkansas, Little Rock Division

December 1, 2016



          Kristine G. Baker United States District Judge.

         Plaintiff Derrick Jones brings this action against defendant Kohler Co. Pension Plan (“Kohler Plan”) to recover disability benefits that he claims are owed to him under a pension plan governed by the Employee Retirement Income Security Act, 29 U.S.C. §§ 1001, et seq. (“ERISA”). Mr. Jones and the Kohler Plan have filed their briefs on this issue, and this matter is ripe for decision (Dkt. Nos. 12; 13). For the following reasons, the Court finds that the plan administrator did not abuse its discretion in denying Mr. Jones's application for disability benefits, and the Court dismisses with prejudice Mr. Jones's claim.

         I. Background

         Mr. Jones worked for Kohler for 17 years at its facility in Searcy, Arkansas (Dkt. No. 12, at 2). During his employment, he was diagnosed with a heart murmur, narcolepsy, chronic paresthesia in his arms and hands, degenerative disk disease, and bilateral osteoarthritis in his knees (Dkt. No. 12, at 2). He ceased working because of his health problems on August 6, 2009, when he was 43 years old (Dkt. No. 13, at 8-9). On August 7, 2009, Mr. Jones applied for disability insurance benefits from the Social Security Administration, and his application was granted on November 5, 2010 (Dkt. No. 12, at 2).

         At all relevant times for the purposes of this action, Kohler maintained an employee benefit plan that is governed by ERISA (Dkt. No. 12, at 1; No. 13, at 4). In 2013, after turning 45, Mr. Jones submitted an application for disability pension benefits under the Kohler Plan (Dkt. No. 13, at 9-10). A copy of the Social Security Administration's Notice of Decision, which found that Mr. Jones had been disabled since August 6, 2009, was attached to Mr. Jones' application. The plan administrator denied Mr. Jones claim, finding that he did not qualify for disability benefits under the Kohler Plan because his “employment records indicate that his active service ended January 4, 2010 at age 43 years, 5 months” and that the Kohler Plan only provides “Disability Retirement Benefits to participants that terminated employment with the company due to a Disability incurred after reaching age 45” (Dkt. No. 13, at 10). Mr. Jones appealed the plan administrator's decision, arguing that the Kohler Plan did not restrict eligibility to only those who become disabled after reaching 45 years of age (Dkt. No. 13, at 11). The plan administrator denied the appeal, and Mr. Jones filed this action (Dkt. No. 13, at 12-13).

         II. Standard Of Review

         For ERISA purposes, Mr. Jones's claim is analyzed as a claim for a disability benefit, rather than as a pension benefit. ERISA treats a disability retirement benefit as part of an employee welfare benefit plan, rather than a pension plan, because the disability retirement benefit provides benefits “in the event of. . . disability.” 29 U.S.C. §1002(1). See also Edwards v. Briggs and Stratton Retirement Plan, 639 F.3d 355 (7th Cir. 2011); Rombach v. Nestle USA, Inc., 211 F.3d 190, 193 (2nd Cir. 2000).

         ERISA does not establish what standard of review courts should use for actions challenging benefit eligibility determinations. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 (1989). However, the Supreme Court has established that courts should use “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. In cases where the plan provides discretionary authority, courts review benefit determinations under the more deferential abuse of discretion standard. Anderson v. U.S. Bancorp, 484 F.3d 1027, 1032 (8th Cir. 2007). Mr. Jones and the Kohler Plan agree that the plan administrator's decision in this case should be reviewed under the abuse of discretion standard (Dkt. No. 12, at 6; No. 13, at 16-17). Under the abuse of discretion standard, the Court must affirm the plan administrator's interpretation of the Kohler Plan unless it is arbitrary and capricious. Midgett v. Wash. Group Int'l Long Term Disability Plan, 561 F.3d 887, 896 - 97 (8th Cir. 2009).

         To determine whether a plan administrator's decision was arbitrary and capricious, the court examines whether the decision was “reasonable.” King, 414 F.3d at 998-99. Any reasonable decision will stand, even if the court would interpret the language differently as an original matter. Id.; see also Rutledge v. Liberty Life Assurance Co., 481 F.3d 655, 659 (8th Cir. 2007) (“[W]e must affirm if a reasonable person could have reached a similar decision, given the evidence before him, not that a reasonable person would have reached that decision.”); Midgett, 561 F.3d at 897. However, this standard does not apply if the plan administrator has committed “a serious procedural irregularity” causing “a serious breach of the plan administrator's fiduciary duty to the claimant, ” in which case the court applies a less deferential standard of review. Pralutsky v. Metro. Life Ins. Co., 435 F.3d 833, 837 (8th Cir. 2006) (internal citations omitted).

         In his complaint, Mr. Jones alleges that, because the decision not to pay benefits was made by the same entity responsible for paying those benefits, there is an inherent conflict of interest in connection with the decision-making activities (Dkt. No. 1, ¶ 16). A conflict of interest exists when a plan administrator holds the dual role of evaluating and paying benefits claims, such as when the employer both determines eligibility for benefits and pays the benefits. Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 113-15 (2008). If such a conflict exists, then a reviewing court should consider that conflict as a factor in determining whether the plan administrator has abused its discretion in denying benefits. The significance of this factor depends on the circumstances of the particular case. Id. at 115-19. When an insurer has a history of biased claims administration, the conflict “may be given substantial weight.” Id. at 117. When an insurer has taken steps to reduce the risk that the conflict will affect eligibility determinations, the conflict “should be given much less weight.” Id.; see also Whitley v. Standard Ins. Co., 815 F.3d 1134, 1140 (8th Cir. 2016) (“An insurer's structural conflict of interest should prove less important (perhaps to the vanishing point) where the administrator has taken active steps to reduce potential bias and to promote accuracy.”) (internal quotation marks omitted).

         Although Mr. Jones does not argue this point in his brief, Kohler addresses it. As an initial matter, the record contains no evidence of biased claims administration. Kohler explains that the plan administrator, Kohler, makes the benefits decisions but that a different entity, a fund Kohler makes non-reversionary payments to according to generally accepted accounting principles, makes benefits payments (Dkt. Nos. 13, at 25; 14, ¶ 6). Further, Kohler submits the Declaration of Daniel J. Velicer, plan administrator (Dkt. No. 14). Mr. Velicer's statements confirm that Kohler has taken action to wall off the plan administrator from those interested in firm finances. He confirms that he is not rewarded monetarily or otherwise, and that he is not evaluated, based on claims he grants or denies or on the basis of any savings that may result from the denial of such claims (Dkt. No. 14, ¶¶ 7, 8). Kohler argues that, to the extent this type of plan structure creates any conflict of interest on the part of the plan administrator, that conflict should be deemed of such little importance to recede “to the vanishing point.” See Glenn, 554 U.S. at 117-118. Further, to the extent a structural conflict of interest can even be said to exist on these facts, the standard of review remains the deferential arbitrary and capricious standard of review. Glenn, 554 U.S. at 115; Wakkinen v. UNUM Life Ins. Co., 531 F.3d 575, 581 (8th Cir. 2008).

         III. Discussion

         A plaintiff suing for benefits under ERISA bears the burden of establishing that he is entitled to benefits. See Farley v. Benefit Trust Life Ins. Co., 979 F.2d 653, 658 (8th Cir. 1992). The parties do not appear to dispute four key facts: (1) Mr. Jones is disabled; (2) before becoming disabled, he had completed more than 10 years of service for Kohler; (3) he became disabled before turning 45; and (4) he applied for disability benefits under the Kohler Plan after turning 45. The plan administrator found that Mr. Jones did not qualify for disability benefits under the Kohler Plan because it interpreted the Kohler Plan as restricting eligibility for benefits to those who became disabled after turning 45. Mr. Jones argues that this interpretation constitutes an abuse of discretion for two reasons.

         A. The Summary ...

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