Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_05-cv-03478/USCOURTS-cand-4_05-cv-03478-1/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 28:1331 Fed. Question

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

JOHN E. KING,

Plaintiff,

v.

GE FINANCIAL ASSURANCE COMPANY,

PHOENIX HOME LIFE MUTUAL COMPANY, THE

SONOMA NATIONAL BANK GROUP LONG TERM

DISABILITY PLAN, and SONOMA NATIONAL

BANK,

Defendants. /

No. C 05-3478 CW

ORDER GRANTING

PLAINTIFF'S

MOTION FOR

JUDGMENT

Plaintiff John E. King has moved for judgment under Federal

Rule of Civil Procedure 52 for disability benefits pursuant to his

rights under the Employee Retirement Income Security Act, 29 U.S.C.

§ 1001 et seq. (ERISA). Defendants GE Financial Assurance Company,

Phoenix Home Life Mutual Insurance Company, The Sonoma National

Bank Group Long Term Disability Plan and Sonoma National Bank

oppose this motion. The matter was decided on the papers. Having

considered all of the papers filed by the parties, the Court GRANTS

Plaintiff's motion for judgment, but denies in part his motion for

injunctive relief.

BACKGROUND

Plaintiff became unable to work and began receiving long-term

disability benefits in 1995. Between 1995 and 1999, numerous

physicians examined Plaintiff and diagnosed him with a variety of

physical ailments and diseases. In March, 1999, Defendants

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United States District Court

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requested that Plaintiff undergo an independent medical examination

by a psychologist. Based on the psychologist's diagnosis that

Plaintiff's disability was caused by, contributed to, or the result

of a mental illness, Defendants notified Plaintiff that his

benefits would be limited to twenty-four months, terminating March

1, 2001. 

After exhausting his administrative appeals, Plaintiff filed a

lawsuit on August 28, 2002 in this Court, King v. GE Financial

Assurance Co., No. C 02-4144 (King I), for violations of his rights

under ERISA. Plaintiff moved for judgment under Federal Rule of

Civil Procedure 52 and Defendants filed a cross-motion for

judgment. The Court ruled in favor of Plaintiff. In its final

written order, the Court found, based on a review of the

administrative record, that "Defendants abused their discretion by

terminating Plaintiff's long-term disability benefits because the

record does not contain sufficient evidence to support their

decision." King I, October 8, 2003, Order Granting Plaintiff's

Motion for Judgment and Denying Defendant's Cross-Motion at 11.

In a July 22, 2003 Order, the Court had noted the parties'

inability to agree upon the form of the judgment. The July 22

Order invited the parties to try to negotiate a proposed form of

judgment and, in the alternative, ordered Plaintiff to submit a

proposed judgment. Plaintiff submitted a proposed judgment on July

28, 2003, to which Defendants did not object. On October 8, 2003,

the Court entered judgment in accordance with Plaintiff's proposal,

allowing Plaintiff to recover benefits withheld by Defendants from

March 1, 2001 to August 31, 2003 in the amount of $31,290.00, plus

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pre-judgment interest and attorneys' fees. 

Defendants appealed the Court's judgment against them. The

Ninth Circuit affirmed the Court's findings, and its mandate was

spread on July 14, 2005. Subsequently, Defendants paid Plaintiff

the total amount of the judgment. However, Defendants refused to

pay Plaintiff any further benefits for the period after August 31,

2003. Defendants did not give Plaintiff notice of a decision to

terminate his benefits again. After discussion with Defendants'

counsel, but without seeking further administrative relief,

Plaintiff filed this second lawsuit on August 26, 2005.

At a case management conference on January 13, 2006, the Court

ordered that the case would be resolved by cross-motions for

judgment pursuant to Federal Rule of Civil Procedure 52. On

January 27, 2006, Plaintiff filed this motion accordingly.

Plaintiff asks the Court to order Defendants to pay benefits

from the date of the award in this Court's prior judgment to the

present. Plaintiff further requests that the Court enjoin

Defendants from terminating his benefits in the future unless they

obtain a judicial determination that they may legally do so. In

their opposition, Defendants argue that Plaintiff's action is

barred by res judicata and, alternatively, that it should be

dismissed for failure to exhaust administrative remedies.

Defendants have attached to their opposition a supplemental

administrative record (SAR) purporting to show that Plaintiff is

not, and perhaps was never, disabled. Plaintiff objects to the SAR

on the grounds that its contents are not authenticated. For the

reasons described in the discussion section below, the Court need

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not yet determine anew Plaintiff's disability status. Plaintiff's

objections are overruled as moot. 

The law requires that ERISA plans provide a participant whose

claim is denied with "adequate notice in writing . . . setting

forth the specific reasons for such denial." 29 U.S.C. § 1133. 

Plans must also "afford a reasonable opportunity to any participant

whose claim for benefits has been denied for a full and fair review

. . . of the decision denying the claim." Id. The Phoenix Home

Life Mutual Insurance Co. Long Term Disability Insurance Policy,

which sets forth the terms of Plaintiff's disability benefits,

likewise states that Plaintiff is entitled to receive notice of and

an opportunity to seek review of a denial of benefits. King I,

Baum Decl., at 23. The policy also sets forth Defendants' right to

require proof of loss "at any reasonable time during the Period of

Disability." Id. at 24.

DISCUSSION

Plaintiff asserts that he is entitled to benefits based on the

Court's prior findings. Although the final judgment in King I did

not explicitly state that Plaintiff's benefits should be

reinstated, the Court's October 8th Order found that the

administrative record provided by Defendants contained insufficient

evidence to show that Plaintiff was not physically disabled. The

Court held that Defendants had abused their discretion by

terminating Plaintiff's benefits. Defendants necessarily continue

to abuse their discretion by failing to pay Plaintiff's benefits

unless and until they reach a new determination, based on

additional evidence and in accordance with ERISA and the terms of

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the policy, that Plaintiff is no longer physically disabled. 

Accordingly, the clear implication of the prior judgment is that

Defendants must continue to pay Plaintiff's benefits from September

1, 2003 until and unless they compile a record that is sufficient

to support a new decision and provide Plaintiff with notice of this

new decision and the new evidence supporting it. Plaintiff must be

allowed an opportunity for full and fair administrative review of

the new decision. 

Thus, Defendants must pay Plaintiff's benefits from September

1, 2003 to the present. See Grosz-Solomon v. Paul Revere Life Ins.

Co., 237 F.3d 1154, 1163 (9th Cir. 2001) (retroactive reinstatement

appropriate in ERISA cases where, "but for [the insurer's]

arbitrary and capricious conduct [the insured] would have continued

to receive benefits"). Because Defendants have yet to give

Plaintiff notice of a new decision that he is not disabled, he is

entitled to continue to receive benefits until such notice is

provided. Once Defendants resume their obligations under the Plan,

they may also ask Plaintiff to provide proof of loss as required

under the Plan.

Defendants argue that Plaintiff's present claim is barred

under the doctrine of res judicata. Under res judicata, a final

judgment on the merits bars further claims by parties or their

privies based on the same cause of action. See Montana v. United

States, 440 U.S. 147, 153 (1979). However, the doctrine is

inapplicable to Plaintiff here, and the cases relied upon by

Defendants, Soseby v. State Farm Mutual Ins. Co., 164 F.3d 1215,

1217 (9th Cir. 1999), and Int'l Union of Operating EngineersCase 4:05-cv-03478-CW Document 34 Filed 03/28/06 Page 5 of 7
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Employees Constr. Indus. Pension, Welfare and Training Trust Fund

v. Karr, 994 F.2d 1426, 1429 (9th Cir. 1993) are inapposite. In

Soseby, the plaintiff sought to bring a bad faith claim against the

defendant insurer after she had unsuccessfully brought the same

claim in a prior proceeding, while Karr involved an attempt to

obtain further relief after a case was dismissed pursuant to a

settlement agreement. Soseby, 164 F.3d at 1217; Karr, 994 F.2d at

1429. In the present case, to the contrary, Plaintiff prevailed in

the prior proceeding and merely seeks to obtain the relief

contemplated by its judgment. If anyone is barred by res judicata

and collateral estoppel, it is Defendants, who are barred from

continuing to deny Plaintiff's benefits based on the decision that

was found to be an abuse of discretion. 

Defendants also argue that, because Plaintiff has not

exhausted his administrative remedies, the Court should dismiss

this action. To the extent that Plaintiff's motion relates to

implementation of the decision addressed in King I, he has already

fulfilled his exhaustion requirement. Moreover, after the Court's

judgment, Defendants did not provide notice of any official

determination of his disability status before refusing to resume

paying Plaintiff's benefits. Therefore, there has not yet been an

affirmative decision for Plaintiff to appeal administratively. 

Accordingly, Plaintiff need not exhaust his administrative remedies

further at this time. If Defendants do terminate Plaintiff's

benefits at a later date, after resuming their obligations to pay

and requesting and reviewing new proof of disability, Plaintiff

must exhaust administrative remedies before challenging that

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decision.

Plaintiff asks that the Court issue an order enjoining

Defendants from terminating his benefits again, even after

complying with the terms of the policy, unless the Court allows it. 

While Defendants' conduct to date might justify such an order, the

Court is unaware of authority for it. Plaintiff of course may file

a new lawsuit and move for a temporary restraining order if

Defendants unjustifiably terminate his benefits again. 

CONCLUSION

For the foregoing reason, Plaintiff's motion for judgment is

GRANTED (Docket No. 16). Defendants are ordered to pay Plaintiff

benefits from September 1, 2003 to present and must continue to pay

them unless and until Defendants have sufficient evidence that

Plaintiff is no longer disabled, and terminate his benefits in

accordance with the policy and after giving him notice as required

by ERISA. Plaintiff shall recover of Defendants pre- and postjudgment interest and attorneys' fees and costs. Plaintiff's

request for additional injunctive relief is denied without

prejudice.

IT IS SO ORDERED.

Dated: 3/28/06

 

CLAUDIA WILKEN

United States District Judge

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