Source: https://docs.justia.com/cases/federal/district-courts/california/candce/5:2010cv01242/225724/89
Timestamp: 2017-12-18 18:39:35
Document Index: 469157206

Matched Legal Cases: ['§ 1002', '§ 1101', '§ 205', '§ 1055', 'Art. 14', 'Art. 21', '§ 22', 'Art. 25', '§ 502', '§ 1132', '§ 2560', '§ 4', '§ 2560', '§ 2560', 'Art. 24', 'Art. 27', '§ 401', '§ 502', '§ 502']

ORDER Granting 70 Defendants' Motion for Summary Judgment; Denying 74 Plaintiffs' Motion for Summary Judgment for Nalbandian et al v. Lockheed Martin Corporation et al :: Justia Dockets & Filings
Justia Dockets & Filings Ninth Circuit California California Northern District Court Nalbandian et al v. Lockheed Martin Corporation et al Filing 89
ORDER Granting 70 Defendants' Motion for Summary Judgment; Denying 74 Plaintiffs' Motion for Summary Judgment. The Clerk shall close the file. Signed by Judge Koh on 9/1/2011. (lhklc3, COURT STAFF) (Filed on 9/1/2011)
1 2 3 4 5 6 7 8 9 United States District Court For the Northern District of California 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION ) ) ANDREW J. NALBANDIAN, JR., an individual; GREGORY M. NALBANDIAN, ) ) an individual; and THE ESTATE OF ) ANDREW J. NALBANDIAN, SR., deceased, ) ) Plaintiffs, ) v. ) ) ) ) LOCKHEED MARTIN CORPORATION, a ) Maryland corporation, as Administrator and ) Fiduciary of the LOCKHEED MARTIN ) CORPORATION SALARIED EMPLOYEE ) RETIREMENT PROGRAM; LOCKHEED ) MARTIN CORPORATION SALARIED ) EMPLOYEE RETIREMENT PROGRAM, an ) Employee Pension Plan within the meaning of ) ) 29 U.S.C. §§ 1002(2)(a) and 1002(35); and ) DOES 1 through 50, inclusive, ) ) Defendants. ) ) Case No.: 10-CV-1242-LHK ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT 26 27 28 1 Case No.: 10-CV-01242-LHK ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT 1 This is an action for retirement benefits pursuant to the Employee Retirement Income 2 Security Act of 1974, 29 U.S.C. § 1101 et seq. (“ERISA”). Before the Court are the parties’ cross- 3 motions for summary judgment. The Court held a hearing on the parties’ motions on August 25, 4 2011. Having considered the parties’ submissions and arguments, the Court GRANTS Defendants’ 5 motion for summary judgment and DENIES Plaintiffs’ motion for summary judgment. 6 I. Background 7 Andrew J. Nalbandian, Sr. (Mr. Nalbandian, Sr.) was employed by Lockheed Martin 8 Corporation (Lockheed) for forty two years. Dkt. No. 75, Declaration of Gina L. Moyles in 9 Support of Plaintiffs’ Motion (Moyles Decl.), Ex. 1, at 22-24. Mr. Nalbandian, Sr. worked well United States District Court For the Northern District of California 10 past his retirement date, and received formal recognition as an outstanding engineer via his 11 continued employment as a “Lockheed Fellow.” Id. Mr. Nalbandian, Sr. passed away on February 12 22, 2009. Dkt. No. 71, Declaration of Kathleen Roos in Support of Defendants’ Motion (Roos 13 Decl.), Ex. 1, LMC 00029 (Certificate of Death). The central dispute in this case is whether Mr. 14 Nalbandian, Sr.’s sons, Andrew and Gregory Nalbandian, are entitled to benefits as beneficiaries of 15 Mr. Nalbandian, Sr. under Lockheed’s employee retirement plan. 16 17 A. The Plan Mr. Nalbandian, Sr. participated in the Lockheed Martin Corporation Salaried Employee 18 Retirement Program (Plan), a defined benefits program which the parties agree is governed by 19 ERISA. The Plan is a defined benefits plan, in which a participant receives a fixed level of 20 retirement income based on the participant’s years of service and compensation. See Roos Decl., 21 Ex. 2, LMC 296-99 (Art. V, “Amount of Benefit”). Unlike a defined contribution plan, the amount 22 of the benefit does not depend on the amount of a participant’s contributions. See id. Instead, the 23 Plan provides certain automatic benefits for spouses of deceased participants. See id., LMC 312-13 24 (Art. VII (“Pre-Retirement Surviving Spouse Benefits”)); id., LMC 301 (Art. VI(1) (“Automatic 25 and Optional Forms of Payment – Joint and Survivor Annuity”)). These benefits are required 26 under ERISA § 205(a)(2). See 29 U.S.C. § 1055 (a)(2). 27 The Plan separately provides Participants with the option of designating non-spouse 28 beneficiaries of their choice. See Roos Decl., Ex. 2, LMC 302 (Art. VI(3)(“Guaranteed Payments 2 Case No.: 10-CV-01242-LHK ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT 1 Option”). These non-spouse beneficiaries may receive the retirement benefits of a deceased 2 participant for either five or ten years after the participant’s Benefit Commencement Date, 3 depending on the retirement plan selected by the participant. See id. If an unmarried participant 4 does not select an optional form of payment, the default form of payment is the Lifetime of the 5 Participant Only Option. See id., LMC 00303 (Art. VI(5)). The selection of a Guaranteed Option 6 is completely within the discretion of a Plan participant. Mr. Nalbandian, Sr. selected the 7 retirement payment option of “Life with 5 Year Guarantee,” designating his sons, Andrew J. 8 Nalbandian, Jr. and Gregory M. Nalbandian (Plaintiffs), as beneficiaries. 9 The Plan defines “Benefit Commencement Date” as “[t]he effective date on which payment United States District Court For the Northern District of California 10 of a Participant’s retirement benefit commence in accordance with the terms of the Plan...” Id. at 11 LMC 272 (Art. I(3)). For a Participant who continues working past his Normal Retirement Date 12 (e.g., past 65 years old), the Plan states that the participant “shall receive his retirement benefit on 13 the first day of the month following Termination of Employment.” Id. at LMC 00296-97 (Art. 14 V(3)(a)-(b)). The Plan defines “Termination of Employment” as occurring at the first of: (1) death, 15 (2) resignation, (3) involuntary termination, or (4) eligibility for long term disability. Id. at 282 16 (Art I(28)). Here, Mr. Nalbandian, Sr. terminated his employment on February 9, 2009. 17 Art. V(3)(c) provides for other “benefits” paid to a Participant who continues working past 18 age 70.5, even while the Participant continues working. Id. at LMC 00297. These benefits are 19 Minimum Required Distributions, which are payable to Participants who have accumulated an 20 interest via their employment. See id., LMC 304-09 (Art. VI-A); see also id., LMC 303-04 (Art. 21 VI(6)(e)). These Minimum Required Distributions are mandated by Internal Revenue Code § 22 401(a)(9). The Plan provides for payment of a deceased Participant’s interest in Minimum 23 Required Distributions to a spouse or designated beneficiary. See id., LMC 305 (Art. VI- 24 A(b)(2)(“Death of a Participant Before Distribution Begins”); see also id., LMC 303-04 (Art. 25 VI(6)(e)). In the case of a surviving spouse, the payment occurs after the Participant would have 26 turned 70.5, but the Plan provides for this distribution to an heir in the absence of a surviving 27 spouse or designated beneficiary. See id. .”). Here, there is no dispute that Mr. Nalbandian, Sr. 28 3 Case No.: 10-CV-01242-LHK ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT 1 was “receiving MRD [Minimum Required Distribution] payments through the end of the February 2 2009.” Moyles Decl. Ex. 34, p. 2-3 (final denial letter). 3 B. Mr. Nalbandian, Sr. 4 On August 9, 2008, Mr. Nalbandian, Sr. had to take leave from work, and went on short 5 term disability due to leukemia. Moyles Decl., Ex. 2, at 17-18, Ex. 3, NAL 00002. According to 6 Plaintiffs, Mr. Nalbandian, Sr. could only remain on short term disability for six months, and 7 would have to terminate his employment on or around February 9, 2009. See Moyles Decl., Ex. 8; 8 Plaintiffs’ Motion for Summary Judgment (Plaintiffs’ MSJ) at 3. 9 On or about August 9, 2008, Mr. Nalbandian, Sr. told his son Andrew Nalbandian, Jr. that United States District Court For the Northern District of California 10 he wanted to retire between January 1, 2009 and the early February expiration of his short term 11 disability. Declaration of Andrew J. Nalbandian, Jr. in Support of Motion (A. Nalbandian Decl.) 12 ¶¶ 2-3. Mr. Nalbandian, Sr. requested retirement information from Lockheed around September 13 15, 2008, and thereafter, Lockheed sent him a pension estimate based upon a Benefit 14 Commencement Date of February 1, 2009. See Moyles Decl., Ex. 4, LMC 938-43. 15 Mr. Nalbandian, Sr. contacted Lockheed by phone on January 9 and January 22, 2009, 16 again seeking retirement information. See Moyles Decl., Exh. 5-6, 8. He was particularly 17 concerned that his employee medical coverage would run out on February 9, 2009, the first of three 18 consecutive days of scheduled chemotherapy. See Plaintiffs’ MSJ at 3. A Lockheed employee, 19 Dana Robinson, explained that if Mr. Nalbandian, Sr.’s last day as an employee were February 9, 20 the earliest date that Mr. Nalbandian, Sr. could receive his retiree benefits (“benefits 21 commencement date”) was March 1, 2009. Moyles Decl., Ex. 8, at 16-17. According to 22 Plaintiffs, Ms. Robinson did not raise the possibility of adopting a January 2009 Termination of 23 Employment, which would have pushed up the Benefits Commencement Date. See Moyles Decl., 24 Ex. 8. 25 Mr. Nalbandian, Sr. received his retirement paperwork on January 29, 2009. See Moyles 26 Decl., Ex. 10. On February 5, 2009, he again contacted Lockheed to ensure that he would have 27 medical insurance between his scheduled Termination of Employment on February 9 and his 28 Benefit Commencement Date on March 1. See Moyles Decl. Exh. 11, 14. The Lockheed 4 Case No.: 10-CV-01242-LHK ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT 1 employees in the Benefits Department that spoke to Mr. Nalbandian, Sr. were uncertain whether he 2 could still obtain a February 1 Benefit Commencement Date. One employee explained to Mr. 3 Nalbandian, Sr. that a March 1 Benefit Commencement Date was guaranteed, while a February 1 4 Benefit Commencement Date was uncertain. See Moyles Decl., Ex. 14, at 3-4. The employee also 5 explained that he thought Mr. Nalbandian, Sr. could receive medical coverage for his February 10 6 and 11, 2009 chemotherapy sessions. Id. 7 Mr. Nalbandian, Sr. signed his retirement benefits paperwork on February 9, 2009 and 8 selected the payment option of “Life with 5 Year Guarantee,” designating his sons, Andrew J. 9 Nalbandian, Jr. and Gregory M. Nalbandian (Plaintiffs), as beneficiaries. See Roos Decl., Ex. 1, United States District Court For the Northern District of California 10 LMC 00031-37 (Pension Benefit Election Form contained in the Administrative Record). Mr. 11 Nalbandian Sr.’s son, Andrew J. Nalbandian, Jr., helped his father complete the benefit package. 12 A. Nalbandian Decl. ¶ 6. Mr. Nalbandian, Sr. passed away on February 22, 2009, prior to his 13 March 1, 2009 Benefit Commencement Date. 14 On March 11, 2009, Lockheed sent Plaintiffs a tentative Benefits Summary indicating that 15 Plaintiffs would receive survivor benefits as the beneficiaries of Mr. Nalbandian, Sr. However, 16 Lockheed later sent Plaintiffs a revised summary explaining that, because Mr. Nalbandian, Sr. had 17 died before his March 1, 2009 Benefit Commencement Date, no survivor benefits were payable to 18 Plaintiffs. On April 7, 2009, Lockheed sent Plaintiffs an Updated Benefits Summary indicating 19 that no survivor benefits would be paid, and instead Plaintiffs would receive $50,000 in life 20 insurance. See Moyles Decl., Exh. 21-23 (Lockheed internal correspondence and resulting 21 Benefits Summaries); Moyles Decl., Exh. 25-27. (Lockheed internal correspondence and resulting 22 Updated Benefits Summaries). Lockheed denied Plaintiffs’ request for benefits in April 20, 2009 23 letter, and denied Plaintiffs’ appeal in a June 19, 2009 letter. See Moyles Decl., Ex. 28 (denial of 24 benefits request); Moyles Decl., Ex. 34 (denial of benefits appeal). Plaintiffs timely brought this 25 civil action against Lockheed and the Plan (Defendants), alleging claims under ERISA and 26 equitable estoppel. Before the Court are the parties’ cross-motions for summary judgment. 27 28 5 Case No.: 10-CV-01242-LHK ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT 1 2 3 II. Legal Standards A. Standard of Review in ERISA Cases Under ERISA § 502, a beneficiary or plan participant may sue in federal court “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or 5 to clarify his rights to future benefits under the terms of the plan.” 29 U.S.C. § 1132(a)(1)(B); see 6 also CIGNA Corp. v. Amara, 131 S.Ct. 1866, 1871 (2011); Aetna Health Inc. v. Davila, 542 U.S. 7 200, 210 (2004). A claim of denial of benefits in an ERISA case “is to be reviewed under a de 8 novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to 9 determine eligibility for benefits or to construe the terms of the plan.” Firestone Tire & Rubber 10 United States District Court For the Northern District of California 4 Co. v. Bruch, 489 U.S. 101, 115 (1989); Montour v. Hartford Life & Acc. Ins. Co., 588 F.3d 623, 11 629 (9th Cir. 2009). If the plan confers such discretion, then the denial is reviewed for an abuse of 12 discretion. Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105, 110–11 (2008). The parties agree 13 that the abuse of discretion standard is appropriate for the case at hand. 14 Under an abuse of discretion review, the dispositive issue is whether the denial of benefits 15 was reasonable. Firestone, 489 U.S. at 111; Salomaa v. Honda Long Term Disability Plan, 642 16 F.3d 666, 675 (9th Cir. 2011). A plan administrator’s decision was unreasonable if it “was (1) 17 illogical, (2) implausible, or (3) without support in inferences that may be drawn from the facts of 18 the record.” Salomaa, 642 F.3d at 676. If the Court is “left with a definite and firm conviction that 19 [such] a mistake has been committed,” it must find that the plan administrator abused its discretion. 20 Id. at 676 (quoting United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009)). 21 A plan administrator’s conflict of interest is weighed as a factor when reviewing its 22 decisions for abuse of discretion. Glenn, 554 U.S. at 111–12. Where there is a structural conflict 23 of interest because the claim fiduciary is also the funding source for the Plan, that conflict does not 24 lead to a less deferential standard of review; rather, like most procedural violations, the conflict is 25 merely one additional factor to be considered in determining whether a fiduciary abused its 26 discretion. Id.; see also Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 972 (9th Cir. 2006) 27 (holding that most violations of the ERISA procedures for processing benefits claims are merely 28 weighed as a factor during review for abuse of discretion). 6 Case No.: 10-CV-01242-LHK ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT 1 B. Summary Judgment Standard of Review. 2 Summary judgment should be granted if there is no genuine issue of material fact and the 3 movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 4 477 U.S. 317, 321 (1986). Material facts are those which may affect the outcome of the case, and a 5 dispute as to a material fact is “genuine” only if there is sufficient evidence for a reasonable trier of 6 fact to decide in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 7 (1986). On a motion for summary judgment, the Court draws all reasonable inferences that may be 8 taken from the underlying facts in the light most favorable to the nonmoving party. Matsushita 9 Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). “[T]he district court does United States District Court For the Northern District of California 10 not assess credibility or weigh the evidence, but simply determines whether there is a genuine 11 factual issue for trial.” House v. Bell, 547 U.S. 518, 559–560 (2006). 12 In ERISA actions, however, where the plaintiff is challenging the plan administrator’s 13 denial of benefits and the district court has already determined that the review is for abuse of 14 discretion, “a motion for summary judgment is merely the conduit to bring the legal question 15 before the district court and the usual tests of summary judgment, such as whether a genuine 16 dispute of material fact exists, do not apply.” Bendixen v. Standard Ins. Co., 185 F.3d 939, 942 17 (9th Cir.1999), overruled in part on other grounds by Abatie, 458 F.3d at 966–69; see also Nolan v. 18 Heald College, 551 F.3d 1148, 1154-55 (9th Cir.2009). Thus, a summary judgment motion resting 19 on the administrative record is not a typical summary judgment, but rather, is a procedural vehicle 20 for determining whether benefits were properly granted or denied. On the other hand, the 21 traditional rules of summary judgment do apply to evidence outside of the administrative record, 22 including the requirement that the evidence must be viewed in the light most favorable to the non- 23 moving party.1 Nolan, 551 F.3d at 1150. 24 25 26 27 28 1 The Court notes that expert reports prepared for litigation are not part of the administrative record. See Moyles Decl., Exh. 37-39 (Report of Mark Johnson). To the extent that extrinsic evidence is admissible regarding the claims at issue, the Court notes that Plaintiffs’ expert has submitted a report largely limited to a review the factual record and legal conclusions regarding interpretation of the Plan, functioning at best as supplemental briefing for the Plaintiffs. See id. At the August 25, 2011, counsel for Plaintiffs conceded that Mr. Johnson’s report contained little more than legal conclusions and a summary of the record already in evidence. Thus, the Court will not rely upon the expert reports in its abuse of discretion review. 7 Case No.: 10-CV-01242-LHK ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT 1 Thus, in evaluating Plaintiffs’ equitable estoppel claim the Court will apply standard Rule 2 56 analysis. Similarly, the Court will apply standard Rule 56 analysis when it determines the 3 degree of skepticism to apply to its ultimate abuse of discretion analysis by reviewing extrinsic 4 evidence on structural conflict of interest and evidence of bias. See Nolan, 511 F.3d at 1154-55. 5 However, the Court will decide abuse of discretion by weighing evidence in the administrative 6 record, including evidence of procedural violations. Id. 7 III. Discussion 8 9 A. Standard of Review for Plaintiffs’ Claims The parties agree that, because Lockheed both funds and administers the Plan, a structural United States District Court For the Northern District of California 10 conflict of interest exists. A structural conflict of interest without further evidence of bias, 11 however, only slightly increases the Court’s level of skepticism during review for abuse of 12 discretion. See Ramos v. Bank of Am., Case No. C 08-1375 PJH, 2011 WL 900365 at *19 (N.D. 13 Cal., Mar. 15, 2011). There is little, if any, evidence of actual bias in the claims review process. 14 There were, however, potential procedural errors that suggest a slightly higher degree of 15 skepticism. Abatie, 458 F.3d at 972 (procedural violations are factors “to be weighed in deciding 16 whether an administrator’s decision was an abuse of discretion.”). 17 ERISA requires plan administrators to follow certain practices when processing and 18 deciding plan participants’ claims. See 29 C.F.R. § 2560.503–1; Abatie, 458 F.3d at 971. As 19 explained by the Ninth Circuit in Mitchell v. CB Richard Ellis Long Term Disability Plan, “ [not] 20 requiring that plan administrators provide a participant with specific reasons for denial would allow 21 claimants, who are entitled to sue once a claim had been ‘deemed denied,’ to be ‘sandbagged’ by a 22 rationale the plan administrator adduces only after the suit has commenced.” 611 F.3d 1192, 1199 23 n. 2 (9th Cir. 2010) (quoting Jebian, 349 F.3d at 1104). Mitchell was confronted with a new 24 argument during district court proceedings: that he had submitted his benefits request to the wrong 25 institution. Mitchell, 611 F.3d at 1197. Had this argument been accurate and timely raised during 26 administrative review, Mitchell likely could have taken corrective action by submitting a benefits 27 request to the correct institution. Thus, like Abatie, Mitchell addressed a plan administrator who 28 untimely raised an entirely new rationale for denial and thereby blocked potential substantive 8 Case No.: 10-CV-01242-LHK ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT 1 responses that would otherwise have been available to the beneficiary. Mitchell, 611 F.3d at 1197; 2 Abatie, 458 F.3d at 974. 3 Here, Plaintiffs have correctly noted Defendants’ failure to fully comply with 29 C.F.R. § 4 2560.503–1 (g), which provides that when rejecting a claim for benefits, the plan administrator 5 must provide “(i) The specific reason or reasons for the adverse determination; (ii) Reference to the 6 specific plan provisions on which the determination is based; (iii) A description of any additional 7 material or information necessary for the claimant to perfect the claim and an explanation of why 8 such material or information is necessary; (iv) A description of the plan’s review procedures and 9 the time limits applicable to such procedures, including a statement of the claimant’s right to bring United States District Court For the Northern District of California 10 a civil action under section 502(a) of the Act following an adverse benefit determination on 11 review.” 12 Defendants complied with some provisions of 29 C.F.R. § 2560.503–1 (g). For example, 13 Plaintiffs do not dispute that Defendants complied with (g)(iii) and (g)(iv). Furthermore, the Court 14 finds that Defendants complied with (g)(i) by consistently explaining to Plaintiffs that because Mr. 15 Nalbandian, Sr. was unmarried and passed away before his March 1, 2009 Benefits 16 Commencement Date, no benefits were payable to the sons under the Plan. See Moyles Decl., Ex. 17 28, p. 2 (initial denial letter, as quoted in Plaintiffs’ Motion of Summary Judgment at 13) (“Given 18 that Mr. Nalbandian passed away prior to his BCD [Benefit Commencement Date] . . . [and] is not 19 survived by a Spouse at the time of his death, no benefits are payable from the Plan.”); Moyles 20 Decl. Ex. 34, p. 2-3 (final denial letter) (“In summary, Mr. Nalbandian, Sr. was receiving MRD 21 [Minimum Required Distribution] payments through the end of the February 2009. Following his 22 Termination of Employment on February 10, 2009 he elected to retire on a Benefit 23 Commencement Date of March 1, 2009, but died on February 22, 2009 prior to commencing his 24 retirement benefits. Since Mr. Nalbandian, Sr. died prior to March 1, 2009 and was unmarried, 25 there are no benefits payable to any surviving beneficiaries. Therefore, the Committee has denied 26 Mr. Nalbandian Jr.’s claim on appeal in accordance with Article IX(2)(a).”). 27 28 Plaintiffs note that Defendants’ denial letters did not reference all of the Plan provisions that support the stated basis for denial. See Plaintiff’s Reply at 5-6. These provisions, discussed 9 Case No.: 10-CV-01242-LHK ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT 1 below, are within Article VI (“Automatic and Optional Forms of Payment”). Id. at 6. Defendants 2 did point out other Plan provisions which they contend support their denial, like Article IX(2)(a). 3 See Moyles Decl., Ex. 28, p. 1; Moyles Decl., Ex. 34, p. 1 (both denial letters quoting Article 4 IX(2)(a)) (“the retirement benefit payable hereunder to a Participant shall be payable in monthly 5 installments commencing, if he shall be living, as of the first day of the month following the latest 6 of (i) [his] actual retirement date . . . (ii) the date specified in the application . . . as the date [his] 7 retirement shall commence, or (iii) the date on which [he] shall have furnished the Plan 8 Administrator the information necessary to determine his benefit and make payment.”). 9 Defendants’ failure to cite to all of the provisions in the Plan that support denial could be viewed as United States District Court For the Northern District of California 10 a procedural violation. 11 The Court, however, disagrees and finds that Defendants substantially complied with 29 12 C.F.R. § 2560.503–1 (g) by citing provisions supporting the determination that survivor benefits 13 were not payable to Mr. Nalbandian, Sr.’s sons. Plaintiffs rely heavily on the Ninth Circuit’s 14 decision in Mitchell, which, as discussed above, emphasized the need to prevent administrators 15 from “sandbagging” claimants with untimely disclosed rationales for denial. Mitchell, 611 F.3d at 16 1199 n. 2. Despite Plaintiffs’ protests to the contrary, Plaintiffs have clearly not been sandbagged. 17 The denial of benefits has always rested upon two facts: (1) Mr. Nalbandian, Sr.’s Termination of 18 Employment was February 10, 2009, resulting in a March 1, 2009 Benefit Commencement Date; 19 (2) he passed away February 22, 2009, prior to the March 1, 2009 Benefit Commencement Date. 20 See Roos Decl. Ex. 1, LMC 00029, 00037-38 (evidence of Mr. Nalbandian, Sr.’s termination of 21 employment and of his passing, contained in the administrative record). Plaintiffs have repeatedly 22 been put on notice that they could rebut Defendants’ rationale for denial by challenging these facts. 23 See Moyles Decl., Ex. 28, p. 2; Moyles Decl., Ex. 34, p. 2-3 (as quoted above). Indeed, Plaintiffs 24 argued against a March 1, 2009 Benefit Commencement Date in their initial appeal of denial. See 25 Roos Decl. Ex. 1, LMC 00003 (letter from Plaintiffs’ attorney appealing denial of benefits, 26 including a section entitled “Mr. Nalbandian, Sr. Died after his Benefit Commencement Date”). 27 Defendants repeatedly cited Article IX(2)(a) as supporting their rationale and to the extent that 28 10 Case No.: 10-CV-01242-LHK ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT 1 Defendants now specifically reference additional supporting provisions did not prevent Plaintiffs 2 from perfecting their claim for benefits. 3 4 5 6 In sum, the Court will apply an abuse of discretion standard, with only a slight increase in the level of skepticism. B. Defendants’ denial of survivor benefits was not unreasonable. Article VI sets forth Plan participants’ “Automatic and Optional Forms of Payment.” Article VI(5) explains that “for a Participant who does not have a Spouse on his Benefit 8 Commencement Date” the “Lifetime of Participant Only Option” (Lifetime Only Option) is the 9 “automatic form of payment.” See Roos Decl., Exh. 3, at LMC 00302. The Lifetime Only Option 10 United States District Court For the Northern District of California 7 provides that “retirement benefit[s are]... payable only during the lifetime of the Participant with no 11 further payments to anyone after his death.” Id. 12 Mr. Nalbandian, Sr. selected the 5-Year Guaranteed Option set forth in Article VI(3); 13 however Article VI(6)(b) provides that “[t]he election of an option form [of payment] shall become 14 effective on the Participant’s Benefit Commencement Date.” See Roos Decl., Ex. 1, LMC 00031- 15 37 (Pension Benefit Election Form contained in the Administrative Record); Roos Decl., Ex. 3, at 16 LMC 00302 (Art. VI(6)(b)). Thus, under the terms of the Plan, Mr. Nalbandian, Sr.’s selection of 17 the Guaranteed Option had not “become effective” when he passed away prior to his March 1, 18 2009 Benefit Commencement Date. Rather, as Defendants contend, Mr. Nalbandian was still 19 covered by the automatic Life Only Option. 20 Plaintiffs argue that Mr. Nalbandian, Sr.’s actual Benefit Commencement Date occurred 21 before his death, because he had begun receiving benefits under Article V(3)(c). The Plan defines 22 “Benefit Commencement Date” as “[t]he effective date on which payment of a Participant’s 23 retirement benefit commence in accordance with the terms of the Plan...” Id. at LMC 272 (Art. 24 I(3)). For a Participant like Mr. Nalbandian, Sr. who continues working past his Normal 25 Retirement Date (e.g., age 65), the Plan states that he “shall receive his retirement benefit on the 26 first day of the month following Termination of Employment.” Id. at LMC 00296-97 (Art. 27 V(3)(a)-(b)). The Plan defines “Termination of Employment” as occurring at the first of: (1) death, 28 (2) resignation, (3) involuntary termination, or (4) eligibility for long term disability. Id. at 282 11 Case No.: 10-CV-01242-LHK ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT 1 (Art I(28)). It is undisputed that Mr. Nalbandian, Sr.’s Termination of Employment occurred by 2 resignation on February 9, 2009. As such, Mr. Nalbandian, Sr.’s Benefit Commencement Date was 3 March 1, 2009. 4 The Plan provision setting forth the Guaranteed Option supports the already unambiguous 5 determination that no payments can be due under the Guaranteed Option when a Participant passes 6 away prior to his Benefit Commencement Date. Article VI(3) states, “[a] Participant may . . . elect 7 to receive [an actuarially reduced] retirement benefit . . . payable during his lifetime with the 8 provision that if he shall die after the Benefit Commencement Date and before 60 or 120 monthly 9 payments have been made . . . such payments . . . shall continue for the remainder of such 60- United States District Court For the Northern District of California 10 month or 120-month period to the Beneficiary of the Participant.” Id. at LMC 00301 (Art. VI(3)) 11 (emphasis added). Article VI(6)(b) provides that “[t]he election of an option form [of payment] 12 shall become effective on the Participant’s Benefit Commencement Date.” Under these two 13 provisions, non-spouse beneficiaries of a participant that dies before his Benefit Commencement 14 Date are not entitled to survivor retirement benefits. Id. Thus, Article VI(3) set forth the same 15 unambiguous rule as Article VI(5) and VI(6)(2): no payments are due to the non-spouse 16 beneficiaries under the Guaranteed Option if a Plan participant dies prior to his Benefit 17 Commencement Date. 18 A recent case, Matlock v. Pitney-Bowes, Inc., 751 F. Supp. 2d 823 (M.D.N.C. 2010), 19 involved nearly identical factual circumstances. In Matlock, an employee undergoing cancer 20 treatment received disability payments up until September 2006. In September 2006, the employee 21 filed papers terminating his employment, but passed away prior to his October 1 retirement / 22 annuity commencement date. The Matlock Plan provided that no benefits were payable to an 23 employee if he were unmarried and passed away before his benefit commencement date. In 24 Matlock, the court found that the employee’s estate was not entitled to the lump sum benefit he had 25 selected because the employee passed away prior to October 1, 2006, the date his benefits were set 26 to commence. 27 28 Here, as in Matlock, the Plan participant “simply misjudged how long he could continue to remain an active employee and receive these benefits before making his retirement election 12 Case No.: 10-CV-01242-LHK ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT 1 effective.” Id. at 833. However, as described above, the Plan terms are clear: Mr. Nalbandian, 2 Sr.’s election of the “Life with 5 Year Guarantee” Option did not become effective because Mr. 3 Nalbandian, Sr. died before his Benefit Commencement Date. Defendants’ decision denying 4 benefits was not illogical, unreasonable, or without support from facts in the record. Indeed, as 5 discussed previously, the relevant facts are clear in the administrative record: (1) Mr. Nalbandian, 6 Sr.’s termination of employment was February 10, 2009; (2) he passed away February 22, 2009, 7 prior to his March 1, 2009 Benefit Commencement Date. See Roos Decl. Ex. 1, LMC 00029, 8 00037-38. 9 The rationale for a defined benefits plan, such as the “Life with 5 year Guarantee” Option United States District Court For the Northern District of California 10 chosen by Mr. Nalbandian, Sr., is to provide stable retirement benefits to retired employees, and 11 pursuant to federal statute, to the spouses of those retired employees. This contrasts with defined 12 contribution plans, which provide retirement benefits based upon an employee’s deposits during 13 active employment. Further, an employee who works for enough years accrues an entitlement to 14 Minimum Required Distributions from the pension fund. These Minimum Required Distributions 15 are calculated and timed as mandated by Internal Revenue Code § 401(a)(9), which is designed to 16 prevent participants’ retirement benefits from accumulating unpaid. The parties do not dispute that 17 Mr. Nalbandian, Sr. received these payments of Minimum Required Distributions. Nor do the 18 parties dispute Plaintiffs’ entitlement to $50,000 in life insurance proceeds. 19 In sum, Defendants’ decision to deny survivor benefits was not unreasonable in light of the 20 Plan terms and retirement option selected by Mr. Nalbandian, Sr. Accordingly, Defendants are 21 entitled to summary judgment on Plaintiffs’ claim for Plan benefits under ERISA § 502(a). 22 23 C. Plaintiffs equitable estoppel claim. A claim for equitable estoppel for violation of ERISA has five elements: (1) a material 24 misrepresentation, (2) reasonable and detrimental reliance upon the representation, (3) 25 extraordinary circumstances, (4) that the provisions of the plan at issue were ambiguous such that 26 reasonable persons could disagree as to their meaning or effect, and (5) that representations were 27 made involving an oral interpretation of the plan. Spink v. Lockheed Corp., 125 F.3d 1257, 1262 28 (9th Cir. 1997). Consistent with this rule, the Supreme Court has held that equitable estoppel 13 Case No.: 10-CV-01242-LHK ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT 1 claims brought under ERISA § 502 (a)(3) require a showing of detrimental reliance. Amara, 131 2 S.Ct. at 1881. Further, Amara suggested that all estoppel claims require a showing of detrimental 3 reliance. Id. (“when equity courts used the remedy of estoppel, they insisted upon a showing akin 4 to detrimental reliance . . . although this showing is not always necessary for other equitable 5 remedies”). As the Court explained above, the terms of the Plan are not ambiguous and are in 6 favor of Defendants. For this reason alone, Plaintiffs cannot satisfy an essential element of an 7 equitable estoppel claim, and Defendants are entitled to summary judgment.2 8 Moreover, Plaintiffs’ references to alleged inconsistencies in the Summary Plan Description 9 (“SPD”) are unavailing. Under the U.S. Supreme Court’s recent decision in Amara, the SPD is not United States District Court For the Northern District of California 10 part of the Plan. See Amara, 131 S.Ct. at 1877-78. In any event, the SPD here is not actually 11 inconsistent with the Plan. For example, a section of the SPD on “Late Retirement” reads, “If you 12 continue to work after age 65, your pension benefit will be deferred to the first of the month after 13 the date you actually retire. However, even if you are still working, the Plan requires that you 14 begin to receive your pension benefits by April 1 after the year in which your reach age 70-1/2.” 15 Moyles Decl., Ex. 36, LMC 12. This language is perfectly consistent with the Plan terms for a 16 Benefit Commencement Date on the first of the month after a participant’s termination of 17 employment, even if some participants could be confused by the distinction between pension- 18 funded retirement benefits and pension-funded Minimum Required Distributions. See id., Ex. 36, 19 LMC 00467; Roos Decl., Ex. 2, LMC 00296-97 (Art. V(3)); Roos Decl., Ex. 2, LMC 00303-09 20 (Art. VI(6)(e), Art. VI-A). 21 Plaintiffs’ claim for equitable estoppel also faces other challenges. It does not appear that 22 Mr. Nalbandian, Sr. reasonably and detrimentally relied on any misrepresentation when selecting a 23 February 9, 2009 termination of employment and a March 1, 2009 Benefit Commencement Date. 24 During Mr. Nalbandian, Sr.’s phone calls with the Lockheed’s benefits department, he was largely 25 concerned with maintaining his medical insurance and still considered coming back to work. For 26 example, during a January 22, 2009 call, Mr. Nalbandian, Sr. stated, “You know, I wasn’t planning 27 28 2 At the August 25, 2011 hearing, counsel for Plaintiffs conceded that if the Court determines that the Plan provisions are not ambiguous, Plaintiffs’ equitable estoppel claim necessarily fails as well. 14 Case No.: 10-CV-01242-LHK ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT 1 on taking medical retirement - or retirement. I wanted to come back to work. If I can get over this 2 chemo and I feel good, then I’d like to come back to work for a while and then retire.” Moyles 3 Decl., Ex. 14, at 4-5. Defendants informed Mr. Nalbandian, Sr. that, as an employee with 42 years 4 of service, Mr. Nalbandian, Sr. would be entitled to retiree medical benefits. See Moyles Decl., Ex. 5 8, at 2. Also on January 22, 2009, Lockheed Benefits employee Dana Robinson simply stated that 6 given a February 9, 2009 termination of employment, Mr. Nalbandian, Sr. would begin receiving 7 retirement benefits on March 1, 2009. See id. at 16-17. Pursuant to the Plan terms, that statement 8 was accurate. Similarly, the alleged February 5, 2009 misrepresentation that a request for a 9 February 1, 2009 Benefit Commencement Date was unlikely to succeed is not inaccurate – under United States District Court For the Northern District of California 10 the retirement plan he selected, Mr. Nalbandian, Sr. could not commence receiving retirement 11 benefits on a date that had already passed. See Moyles Decl., Ex. 14, at 3-4. 12 Thus, on the record before the Court, Mr. Nalbandian, Sr. was not misled into a delayed 13 termination of employment date. Mr. Nalbandian explicitly chose a February 9, 2009 termination 14 of employment date for his own personal reasons, and was told that he would have retiree medical 15 benefits if he had selected an earlier termination of employment. Accordingly, Defendants are also 16 entitled to summary judgment on Plaintiffs’ equitable estoppel claim. 17 18 IV. Conclusion Because Defendants did not abuse their discretion by denying retirement benefits to 19 Plaintiffs, and because no genuine issue of material fact exists regarding Plaintiffs’ equitable 20 estoppel claim, the Court GRANTS Defendants’ motion for summary judgment and DENIES 21 Plaintiffs’ motion for summary judgment. The Clerk shall close the file. 22 IT IS SO ORDERED. 23 24 Dated: September 1, 2011 _________________________________ LUCY H. KOH United States District Judge 25 26 27 28 15 Case No.: 10-CV-01242-LHK ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT