Opinion ID: 2696
Heading Depth: 2
Heading Rank: 1

Heading: The Profit Plan Claim

Text: Strom raises two arguments why the district court should have applied a de novo standard of review to her claim under the Profit Plan. First, relying on this Court's decision in Nichols v. Prudential Insurance Co., 406 F.3d 98 (2d Cir.2005), she contends that the Plan administrators never issued a final decision on its review of her Profit Plan claim, and therefore that this claim should be deemed denied by operation of law. See id. at 106 (strongly suggest[ing] that a plan administrator's failure to comply with certain plan regulations renders the claimant's administrative remedies exhausted by operation of law and consequently permits the claimant to seek review in the federal courts without further delay). A claim deemed denied by operation of law, Strom claims, must be reviewed by the court de novo because the claim denial does not represent any exercise of discretion by plan administrators. Id. at 109. Second, she contends that the Plan administrators operated under a conflict of interest necessitating de novo review by the district court. We hold that the district court erred, and should have reviewed the administrators' decision de novo. The district court stated that it was compelled to defer to the administrators' decision to interpret the terms `salaried associate' and `non-profit sharing associate' to mean attorneys who were neither shareholders nor officers of SFP, but the district court could not defer to an interpretation that the Decision never in fact made or explained. The Plan administrators specifically reserved decision on Strom's claims, observing that in light of her alleged refusal to cooperate during the hearing, it would be impossible and inappropriate for the administrators to reach a final determination on Ms. Strom's claim. We express no opinion concerning SFP's claim that Strom refused to cooperate, but rather observe that the text of the Decision itself makes clear that no actual decision was made. In Nichols, after Prudential failed to timely issue a final decision on Nichols' appeal from a denial of benefits, she went directly to federal court and sued her insurer under ERISA. We held that her claim was deemed denied by Prudential's inaction and that her administrative remedies were exhausted by operation of law. Id. at 104, 109. Based on the Supreme Court's decision in Firestone Tire & Rubber Co., we observed that we may give deferential review only to actual exercises of discretion, and that [a] `deemed denied' claim is not denied by any exercise of discretion, but by operation of law. Id. at 109. We instructed the district court to review the plan administrator's decision de novo because Prudential's inaction le[ft] the court without any decision or application of expertise to which to defer. Id. In the instant case, the Plan administrators explicitly refused to decide Strom's claim, and such a non-decision cannot be deemed an exercise of discretion to which the district court might have deferred. [5] Because a non-existent interpretation cannot be a reasonable one, the district court erred in deferring to the Profit Plan administrators' Decision. Nor could the district court properly rely on the letters that SFP sent to Strom. None of those letters offers an interpretation of the Profit Plan's language. Though SFP's letters about the Cash Plan did state that Strom was not eligible for any Cash Plan benefits because she was neither a shareholder nor an officer  and its June 12, 2001 letter further asserted that Strom was not a partner, see supra  even those statements did not offer any explanation of why this was so, much less one that could be imputed to the terms of the Profit Plan. [6] For these reasons, we vacate the district court's grant of summary judgment dismissing Strom's Profit Plan claim and remand the claim to the district court for further proceedings.