Opinion ID: 2787077
Heading Depth: 2
Heading Rank: 2

Heading: The District Court Properly Excused the

Text: Employees from Exhausting Plan Remedies. United argues that it was entitled to summary judgment because the named plaintiffs failed to exhaust the remedies available to them under the Plan. See, e.g., Harrow v. Prudential Ins. Co. of Am., 279 F.3d 244, 249 (3d Cir. 2002). The Employees do not dispute that ordinarily the named plaintiff in an ERISA class action must exhaust plan remedies before bringing suit and that Cottillion and Beverly Eldridge did not, but they argue that: (1) they were not required to exhaust remedies because of the nature of their claim; (2) exhaustion is an affirmative defense and United has not met its burden of persuasion on the issue; and (3) there is undisputed record evidence that exhaustion would have been futile. While we review de novo the legal standard that a district court applies in determining whether an employee must exhaust plan remedies before coming to federal court, 9 the court’s ultimate decision whether to require a plaintiff to exhaust is committed to its sound discretion. Harrow, 279 F.3d at 248; see also D’Amico v. CBS Corp., 297 F.3d 287, 290 (3d Cir. 2002); Dishman v. UNUM Life Ins. Co. of Am., 269 F.3d 974, 984 (9th Cir. 2001); Stevens v. EmployerTeamsters Joint Council No. 84 Pension Fund, 979 F.2d 444, 459 (6th Cir. 1992); Springer v. Wal–Mart, 908 F.2d 897, 899 (11th Cir.1990); Janowski v. Int’l Bhd. of Teamsters Local No. 710 Pension Fund, 673 F.2d 931, 935 (7th Cir. 1982), judgment vacated on other grounds, 463 U.S. 1222 (1983). The Employees argue that the exhaustion requirement does not apply to their anti-cutback claim based on 29 U.S.C. § 1054(g), as there is “a distinction . . . between claims based on pension rights created by contract, which must be [exhausted if the plan provides for remedies], and claims based on purely statutory rights created by ERISA, which may be asserted in federal court directly.” Delgrosso v. Spang & Co., 769 F.2d 928, 932 (3d Cir. 1985). We need not resolve whether in general the exhaustion requirement applies to an anti-cutback claim or whether this particular suit states “a simple contract claim artfully dressed in statutory clothing.” Drinkwater v. Metro. Life Ins. Co., 846 F.2d 821, 826 (1st Cir. 1988). As discussed below, the District Court did not abuse its discretion in holding that exhaustion would prove futile. The Employees misconstrue the futility exception to the exhaustion requirement when they argue that, because exhaustion is an affirmative defense, United bears the burden of proving that it would not be futile. True, “[t]he exhaustion requirement is a nonjurisdictional affirmative defense” for United. Metro. Life Ins. Co. v. Price, 501 F.3d 271, 280 (3d Cir. 2007). Yet futility is an exception to the exhaustion requirement, and “[a] party invoking this exception must provide a clear and positive showing of futility before the 10 District Court.” D’Amico, 297 F.3d at 293; accord Harrow, 279 F.3d at 249. Therefore, this argument against dismissal for failure to exhaust also fails. In any event, the District Court held that the Employees had shown exhaustion of their Plan remedies would have been futile. As we wrote in Harrow: Whether to excuse exhaustion on futility grounds rests upon weighing several factors, including: (1) whether plaintiff diligently pursued administrative relief; (2) whether plaintiff acted reasonably in seeking immediate judicial review under the circumstances; (3) existence of a fixed policy denying benefits; (4) failure of the [defendant] to comply with its own internal administrative procedures; and (5) testimony of plan administrators that any administrative appeal was futile. Of course, all factors may not weigh equally. 279 F.3d at 250. The District Court excused the Employees from the exhaustion requirement because they showed that United had a fixed policy of denying benefits. Cottillion v. United Ref. Co., No. 1:09-cv-140, 2013 WL 1419705, at – (W.D. Pa. Apr. 8, 2013). The Employees made this showing by supplying the District Court with extensive correspondence between Loughlin and aggrieved TVPs. Loughlin sent form letters out to all TVPs apprising them of the reduction in their benefits. When anyone wrote back to him to complain, Loughlin would reply that the change in benefits was mandated by the IRS. Many of the letters failed to inform recipients of the possibility of an appeal. There is no 11 evidence in the record that any TVP got anywhere by seeking further review from Loughlin, and that United continues to adhere to the position that TVPs are only entitled to actuarially reduced benefits further supports the inference that exhaustion was futile. At least one TVP (Frederick Hane) followed the instructions in Loughlin’s letter and the 1987 Plan’s appeals procedures. But rather than demonstrate that the issues raised in Hane’s letter were considered an appeal of an earlier determination, Loughlin (on behalf of the retirement committee) treated Hane’s objections as “questions” and offered him no relief or opportunity for further review. The failure of Hane’s appeal, the existence of a fixed policy denying benefits as evidenced by the correspondence between Loughlin and the many TVPs with letters in the record, and the absence of any evidence before us to suggest that an appeal from Loughlin’s letter was anything other than time wasted, lead us to conclude that the District Court did not abuse its discretion in applying the futility exception to the exhaustion requirement. Thus we continue.