Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_05-cv-01622/USCOURTS-azd-2_05-cv-01622-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1132 E.R.I.S.A.-Employee Benefits

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Linda M. Peterson, 

Plaintiff, 

vs.

Federal Express Corporation Long Term

Disability Plan, et al.,

Defendants. 

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No. CV 05-1622-PHX-NVW

ORDER

The court has before it Plaintiff's Motion for Summary Judgment Regarding Standard

of Review, Doc. # 17; Defendants’ Cross-Motion for Summary Judgement and Response to

Plaintiff’s Motion, Doc. # 20; Plaintiff’s Reply to Defendants’ Motion for Summary

Judgment and a Motion to Stay, Doc. # 24; Defendants’ Reply Regarding Standard of

Review and Response to Plaintiffs’ Motion to Stay Case; Plaintiff’s Statement of Facts, Doc.

# 19; and Defendants’ Statement of Facts, Doc. # 21. 

Peterson brought this action pursuant to the Employee Retirement Income Security

Act of 1974 ("ERISA"). 29 U.S.C. § 1132(a)(1)(B). The issue before the court is the proper

standard of review for determining whether Federal Express erred by denying Peterson’s

disability claim. Peterson argues that the appropriate level of review is de novo while

Federal Express argues that abuse of discretion should be the reviewing standard.

 

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I. Statement of Facts

Peterson filed a claim for short-term disability benefits on November 12, 2001, which

she received until May 12, 2002. Plaintiff’s Statement of Facts (“PSOF”) at ¶ 4. Peterson

then applied for long-term disability benefits, which she received between May 13, 2001, and

July 1, 2002, and between September 3, 2002, and July 13, 2004. Id. On June 4, 2004,

Broadspire, the claims paying administrator for the Federal Express Corporation Long Term

Disability Plan (“Plan”), advised Peterson that her disability benefits would be terminated

on July 13, 2004. PSOF at ¶ 6. Peterson timely appealed on November 30, 2004. PSOF at

¶¶ 7, 8. On December 1, 2004, Broadspire confirmed the receipt of Peterson’s appeal and

informed her that she had until December 7, 2004, to submit any additional medical

information. PSOF at ¶ 9. On December 1, 2004, Peterson submitted additional medical

evidence supporting her disability claim. PSOF at ¶ 10. Broadspire received the additional

evidence by December 6, 2004. On January 5, 2005, the Federal Express Benefit Review

Committee (“Committee”) met and decided to uphold the denial of Peterson’s long-term

disability claim. Defendants’ Statement of Facts (“DSOF”) at ¶ 28. On May 5, 2005,

Federal Express issued a letter to Peterson’s attorney communicating this decision. PSOF

at ¶ 20. Federal Express did not communicate with Peterson between December 6, 2004, and

May 5, 2005. PSOF at ¶ 21. 

On May 31, 2005, Peterson filed her Complaint in federal court. 

II. Standard of Review

A. Standard for Summary Judgment

To defeat a motion for summary judgment, the opposing party must set forth specific

facts showing that there is a genuine issue of material fact in dispute. Fed. R. Civ. P. 56(e);

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). A dispute about a material fact

is genuine “if the evidence is such that a reasonable jury could return a verdict for the

nonmoving party.” Id. at 248 (1986). In the absence of such facts, “the moving party is

entitled to a judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 323

(1986) (citations omitted).

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The party seeking summary judgment bears the initial burden of informing the court

of the basis for its motion, and identifying those portions of the pleadings, depositions,

answers to interrogatories, and admissions on file, together with the affidavits, if any, which

it believes demonstrate the absence of any genuine issue of material fact. Id. Summary

judgment is appropriate against a party who “fails to make a showing sufficient to establish

the existence of an element essential to that party’s case, and on which that party will bear

the burden of proof at trial.” Id. at 322. Although the initial burden is on the movant to show

the absence of a genuine issue of material fact, this burden may be discharged by indicating

to the court that there is an absence of evidence to support the nonmoving party’s claims.

See Singletary v. Pennsylvania Dep’t of Corr., 266 F.3d 186, 193 n.2 (3d Cir. 2001). When

parties file cross motions for summary judgment, a court must determine whether summary

judgment for either party is appropriate. Fair Housing Council of Riverside County, Inc. v.

Riverside Two, 249 F.3d 1132, 1136 (9th Cir. 2001).

 B. Standard of Review for Denial of Benefits 

“A denial of benefits challenged under §1132(a)(1)(B) is to be reviewed under 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.” Firestone

Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). If the plan provides such

discretionary authority to the administrator or fiduciary, the standard of review is abuse of

discretion. Atwood v. Newmont Gold Co., 45 F.3d 1317, 1321 (9th Cir. 1994). 

However, if an affected beneficiary produces material, probative evidence, beyond

the mere fact that an apparent conflict exists, that the plan administrators were breaching

their fiduciary duty, a presumption arises that the administrator breached its fiduciary

obligations to the beneficiary. Hensley v. Northwest Permanente P.C. Retirement Plan &

Trust, 258 F.3d 986, 995 (9th Cir. 2001). “[M]aterial, probative evidence may consist of

inconsistencies in the plan administrator’s reasons, insufficiency of those reasons, or

procedural irregularities in the processing of the beneficiaries claims,” Nord v. Black and

Decker Disability Plan, 356 F.3d 1008, 1010 (9th Cir. 2004), as well as the failure to provide

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a claimant with a full and fair hearing. Friedrich v. Intel Corp., 181 F.3d 1105, 1110 (9th

Cir. 1999). Where a plaintiff meets his initial burden, the administrator “must rebut the

presumption by producing evidence to show that the conflict of interest did not affect its

decision to deny or terminate benefits.” Hensley, 258 F.3d at 995. If the administrator fails

to rebut the presumption, the district court reviews the administrator’s decision to deny

benefits under the de novo standard. Id. 

III. Analysis

 The Plan provides that the Administrator shall have discretion in determining

eligibility benefits. PSOF at ¶ 13. (“The determination shall be made in a fair and consistent

manner in accordance with the Plan’s terms and its decision shall be final, subject only to a

determination by a court of competent jurisdiction that the committee’s decision was

arbitrary and capricious.”). Peterson does not dispute that the Plan confers discretion upon

the Administrator. The standard of review is therefore abuse of discretion unless Peterson

can produce material, probative evidence that the plan administrators breached their fiduciary

duties. 

Peterson argues that de novo review should apply because Federal Express breached

its fiduciary duty by (1) violating ERISA’s procedural requirements and (2) violating its own

internal guidelines as set forth in the Plan. 

B. Procedural Irregularities

1. ERISA

Peterson argues that Federal Express failed to act on her appeal within the ERISAmandated time limit. The relevant provision for time within which an administrator must

issue a decision after receiving an appeal is 29 C.F.R. 2560.503-1(i)(3). Under this

provision, if a multiemployer plan meets regularly and utilizes a committee to make disability

determinations, then the plan administrator must issue a decision within five days of making

a benefit determination. See 29 C.F.R. 2560.503-1(i)(3)(ii). Otherwise, the plan

administrator must issue a decision within forty-five days of receiving an appeal. See 29

C.F.R. 2560.503-1(i)(3)(i). Here, Peterson submitted her appeal on November 30, 2004, the

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1

It is unnecessary to decide whether 29 C.F.R. 2560.503-1(i)(3)(i) or (i)(3)(ii) is the

applicable provision because under either provision, Federal Express failed to act in a timely

manner. 

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Committee met and made its disability determination on January 5, 2005, yet Federal Express

did not render a decision until May 5, 2005. Thus, it is clear that Federal Express failed to

act in a timely manner irrespective of whether 29 C.F.R. 2560.503-1(i)(3)(i) or (i)(3)(ii) is

the applicable provision.1

 

 To the extent Federal Express argues that because the Committee reached a

“determination” of Peterson’s claim on January 5, 2005, Federal Express did not violate

ERISA, this argument is rejected. ERISA requires that a claimant receive notice, in a timely

manner, that a claim has been denied or accepted. Federal Express failed to provide Peterson

with notice of its decision within the requisite amount of time. 

Peterson has therefore established that Federal Express violated ERISA. 

2. The Plan

Peterson also argues that this conduct violated Federal Express’s own internal

guidelines. The Plan’s relevant provision provides: 

The Administrator shall appoint a committee for the purpose of conducting reviews

of denial of benefits and providing the claimant with written notice of the decision

reached by such committee, setting forth the specific reasons for the decision and

specific references to the provisions of the Plan upon which the decision is based. 

The committee shall meet at least quarterly and its decision on review shall be made

no later than the date of its next meeting immediately following the Administrator’s

receipt or a written request for review, unless such request is filed within 30 days prior

to such meeting. In such a case, a decision shall be made no later than the date of the

second meeting following the receipt of the written request for review. However, if

special circumstances, as determined by the Administrator, require a further extension

of time for processing, a decision shall be rendered by the committee not later than

the third meeting following the Administrator’s receipt of the written request for

review.

A.R. at 452. 

Peterson’s claim fails for the reason that Federal Express’s internal guidelines–unlike

the ERISA guidelines set forth above–do not include any requirement that the Committee

provide notice of its disability determination within a fixed amount of time following the

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While the Plan provides that “[t]he appeal committee normally issues a decision on

your case within 90 days of receipt of your request,” A.R. at 385, this provision does not

establish that the Committee violates the Plan by failing to meet the ninety-day time period.

The word “normally” informs a Plan participant that the Committee may or may not render

a decision within the ninety-day period. 

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meeting.2

 Moreover, Peterson has not introduced any evidence that the Committee failed to

decide her claim at the first meeting after when she submitted her appeal and supporting

documents. Indeed, the first page of the administrative record demonstrates that the

Committee met on January 5, 2005, and decided to reject her appeal on that date. 

Peterson has therefore failed to establish that Federal Express violated the terms of

the Plan. However, as discussed below, even if this were a Plan violation, Peterson has not

shown a lack of substantial compliance. 

C. Applicable Standard of Review

Peterson argues that the standard of review should be de novo because of (1) Federal

Express’s violation of ERISA’s Regulations and (2) Federal Express’s failure to follow its

own Plan and internal guidelines regarding the time within which it needed to respond to

Peterson’s appeal. Peterson argues that Jebian v. Hewlett-Packard Co. Employee Benefits

Org. Income Prot. Plan, 349 F.3d 1098 (9th Cir. 2003), is controlling, while Federal Express

argues that Gatti v. Reliance Standard Life Ins. Co., 415 F.3d 978 (9th Cir. 2005), controls.

As discussed below, while neither case is on point, Gatti should apply under the facts of this

case.

1. Jebian

In Jebian, the language of the plan provided that a claim was “deemed to have been

denied on review” if the administrator neither responded to the appeal within sixty days nor

informed the claimant that it needed sixty additional days in which to decide the claim. 349

F. 3d at 1102 (quotations omitted). The plan administrator informed Jebian on the 119th day

that his appeal was still pending because it needed to consider additional medical

documentation. Id. There had been no communication between Jebian and the plan

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administrator until that time. Id. at 1107. The failure to issue a timely benefits determination

or request an extension violated both ERISA and the plan. Id. at 1103. After Jebian filed a

complaint in federal court, the administrator finally issued a decision denying Jebian’s

appeal. Id. at 1102. The administrator asked the court to review its final decision under the

abuse of discretion standard. Id. at 1104. 

The Jebian court concluded that when a plan includes a “deemed denied” provision,

and the administrator does not issue a decision within that period, de novo review applies to

the administrator’s final decision. Id. at 1105-06 (stating “that where the plan itself provides

that a particular procedural violation results in an automatic decision rather than one calling

for the exercise of the administrator’s discretion, that provision is as enforceable as the

provision giving the administrator discretionary authority under other circumstances”).

However, the Jebian court limited its holding by stating that “inconsequential violations of

the deadlines would not entitle the claimant to de novo review in the context of ongoing good

faith exchange of information between the administrator and the claimant.” Id. at 1107

(citations, alterations, and internal quotation marks omitted). The court also stated that de

novo review may not be appropriate when the plan is in “substantial compliance with

prescribed procedures.” Id. at 1107-08. 

Jebian is not controlling here. Unlike in Jebian, here the Plan does not contain a

“deemed denied” provision–a factor that bore heavily upon the Jebian court’s decision not

to defer to the plan administrators. See id. at 1105-06 (“For present purposes, however, we

leave the more general issue open and decide only that where the plan itself provides that a

particular procedural violation results in an automatic decision rather than one calling for the

exercise of the administrator’s discretion, that provision is as enforceable as the provision

giving the administrator discretionary authority under other circumstances.”). Case law

supports this interpretation of Jebian. See Mitchell v. Aetna Insurance Co., 359 F. Supp. 2d

880, 886 (C.D. Cal. 2005) (“First, and most importantly, the actual[] holding of the case

limits stripping the abuse of discretion review from plan administrators to cases when the

plan itself provides that a decision is ‘deemed denied’ if not decided within the deadline.”)

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This provision was amended in 2000 to remove the “deemed denied” language. 

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(emphasis in original); Horn v. Provident Life Ins. Co., 351 F. Supp. 2d 954, 966 n.7 (N.D.

Cal. 2004) (“In contrast to Jebian, the policy at issue here does not include the ‘deemed

denied’ language that appears in the pre-2002 regulations. Thus, the Plan language cannot

provide an independent basis for concluding that plaintiff’s claim was ‘deemed denied’ upon

expiration of the applicable time limit.”) (citations omitted). 

Even if the “deemed denied” language were not considered essential to Jebian,

Peterson has failed to establish that Federal Express violated its Plan. Jebian involved a

situation in which the administrators violated both the plan and the ERISA regulations. By

contrast, here Federal Express only violated ERISA. 

2. Gatti 

In Gatti, the administrator issued a decision 279 days after the claimant had submitted

her request for administrative review, violating ERISA. 415 F.3d at 981. The plan did not

contain either a “deemed denied” clause or time limits specifying when the administrator

needed to determine an appeal. 

The district court, relying on Jebian, concluded that the administrator had violated the

ERISA regulations, that the claim was “deemed denied,” and therefore that de novo review

applied. Id. The Ninth Circuit reversed, holding that “violations of the time limits

established in 29 C.F.R. § 1260.503-1(h) are insufficient to alter the standard of review.” Id.

at 982. The court determined that ERISA’s “deemed denial” language in 29 C.F.R. §

1260.503-1(h)(4) (1998) did not have the same effect on the standard of review as when a

plan contained “deemed denial” language, as was the case in Jebian.

3

 Id. at 983. The Gatti

court then stated that the standard for determining whether an ERISA violation shifts the

standard of review is whether the “violations are so flagrant as to alter the substantive

relationship between the employer and employee, thereby causing the beneficiary harm.”

Id. at 985. The court further distinguished Jebian because it involved a plan administrator

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The parties have not briefed this issue. 

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violating the plan and ERISA, while Gatti only involved a plan administrator violating

ERISA. 

While Gatti appears to apply here, the Gatti court limited its holding to the 1998

version of ERISA. See id. at 982 n1 (9th Cir. 2005) (“We do not address the question of

whether, under the new regulation, claimants who can establish a failure to comply with the

claims procedures established by ERISA regulations are entitled to de novo consideration of

their claims. The earlier version of the regulation applies to Gatti’s claim because her claim

was made prior to 2002.”). In this case, the amended version of 29 C.F.R. § 2560.503-1

applies because Peterson filed her claim in November 2004. The additional ERISA provision

provides: 

In the case of the failure of a plan to establish or follow claims procedures consistent

with the requirements of this section, a claimant shall be deemed to have exhausted

the administrative remedies available under the plan and shall be entitled to pursue

any available remedies under section 502(a) of the Act on the basis that the plan has

failed to provide a reasonable claims procedure that would yield a decision on the

merits of the claim.

29 C.F.R. § 2560.503-1(l). 

This case thus raises the question whether the Gatti court’s analysis should be

extended to cases involving violations of post-1998 versions of the ERISA guidelines. No

circuit court appears to have addressed whether a violation of 29 C.F.R. § 2560.503-

1(l)–which was added to ERISA after 1998–requires courts to review disability

determinations de novo.4

 Moreover, the district courts that have considered this issue have

reached inconsistent results. Compare Reeves v. Unum Life Ins. Co. of Am., 376 F. Supp. 2d

1285, 1293-94 (W.D. Okla. 2005) (holding that under the amended version of ERISA,

violations of the Regulations result in de novo review without an exception for substantial

compliance) with Goldman v. Hartford Life and Accident Ins. Co., 417 F. Supp. 2d 788, 802

(E.D. La. 2006) (concluding that “[a]lthough this change cements the argument that untimely

benefits decisions should presumptively be subject to de novo review,” de novo review

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should not apply when there is no concern about the overall adequacy of the decision-making

process).

Gatti and Jebian demonstrate that it is unlikely the Ninth Circuit would interpret 29

C.F.R. § 1560.503-1(l) as requiring de novo review every time a plan administrator violates

ERISA, no matter how inconsequential the violation. Jebian excuses violations when the

employer “substantially complies” with the Regulations and the governing plan, and Gatti

excuses violations unless they are so flagrant as to affect the substantive relationship between

employer and employee. Therefore, the Ninth Circuit would most likely not interpret C.F.R.

§ 1560.503-1(l) as requiring de novo review for every ERISA violation. However, the

question remains whether Jebian’s “substantial compliance” or Gatti’s requirement that the

violations be flagrant and affect the substantive relationship between employer or employee

should be the governing standard here. 

Because this case involves an ERISA violation but not a violation of the underlying

Plan, the standard enunciated in Gatti should apply. Although this case presents a stronger

argument that de novo review should apply than was present in Gatti (due to the addition of

29 C.F.R. § 1560.503-1(l)), it still falls on the Gatti rather than the Jebian side of the line.

D. Application of Gatti

The remaining question is therefore whether Federal Express’s “violations [were] so

flagrant as to alter the substantive relationship between the employer and employee, thereby

causing the beneficiary harm.”

 Peterson has failed to provide any argument that Federal Express’s ERISA violations

were so flagrant as to alter the substantive relationship between Federal Express and

Peterson. The only identified ERISA violation is Federal Express’s failure to issue its

disability determination within the time specified by ERISA. As the Gatti court stated,

“violations of the time limits established” in the ERISA Regulations are insufficient to alter

the standard of review. 415 F.3d at 982. Therefore, Federal Express’s disability

determination of Peterson’s claim will be reviewed for an abuse of discretion.

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Even if “substantial compliance” were the standard by which to review Federal

Express’s conduct, Peterson has failed to demonstrate that Federal Express did not

substantially comply with ERISA and its internal guidelines as set forth in the Plan.

Broadspire contacted Peterson on December November, 30, 2004, to inform Peterson that

she needed to submit additional medical evidence by December 7, 2004. Peterson submitted

additional evidence on December 1, 2004, and contacted Broadspire on December 7, 2006,

to confirm Broadspire’s receipt of the additional evidence. Peterson also informed

Broadspire that her appeal was complete. The Committee met and decided to uphold the

denial of Peterson’s claim on January 5, 2005, as it was required to do under the Plan.

However, despite meeting on January 5, 2005, Federal Express failed to issue its decision

until May 5, 2005, which clearly violated ERISA. As to the Plan, its language was murky

with regard to deadlines. See A.R. at 385 (“The appeal committee normally issues a decision

on your case within 90 days of receipt of your request.”). 

Peterson’s central argument for why Federal Express did not substantially comply

with ERISA and its internal guidelines is that there was no communication between Peterson

and Federal Express between December 7, 2004, and May 5, 2005. However, there was no

need for communication between Peterson and Federal Express beyond January 5, 2005

(other than to provide notice to Peterson of its denial). Federal Express did not fail to issue

a timely decision because it needed additional medical evidence or more time to review

Peterson’s appeal, as was the case in Jebian. Rather, Federal Express simply failed to

provide timely notice of its January 5, 2005 decision. Therefore, under the facts of this case,

Peterson has failed to demonstrate that Federal Express did not substantially comply with

ERISA or with the language of the Plan. Peterson has not submitted any other arguments for

why Federal Express breached its fiduciary duties. 

IT IS THEREFORE ORDERED that Plaintiff’s Motion for Summary Judgment

Regarding the Standard of Review, Doc. # 17, is denied. 

IT IS FURTHER ORDERED that Defendants’ Cross-Motion for Summary Judgment

Regarding the Standard of Review, Doc. # 20, is granted. 

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IT IS FURTHER ORDERED that Plaintiff’s Motion to Stay, Doc. # 24, is denied. 

IT IS FURTHER ORDERED that the parties brief the merits of the case under the

abuse of discretion standard of review, submitting separate statements of fact following the

procedure prescribed in LRCiv 56.1(a), pursuant to the following schedule:

1. By June 26, 2006: Plaintiff’s opening brief.

2. By July 26, 2006: Defendant’s answering brief.

3. By August 10, 2006: Plaintiff’s reply brief.

The court does not contemplate extending this schedule. 

DATED this 24th day of May 2006.

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