Opinion ID: 215106
Heading Depth: 2
Heading Rank: 3

Heading: The Dispute Under the Boston Mutual Plan

Text: In February 2001, shortly after D & H obtained the Boston Mutual policy, Dolan underwent orthopedic surgery. When she returned to work in August 2001, she worked fewer hours and received less salary. In January 2002, Boston Mutual approved Dolan's claim under the policy and began dispensing benefits. These benefits continued until 2006, when Boston Mutual's third-party claims administrator, Disability Reinsurance Management Services (DRMS), conducted an audit. Based on the audit, DRMS concluded that Dolan's benefit payments had not properly taken account of business profits she received as a principal of D & H and another entity, Associated Professional Management, Inc. With those profits included, DRMS calculated Dolan's pre-disability monthly earnings to be $5,833.33 and her post-disability monthly earnings in 2002 to be $7,670.67. In an August 2006 letter, Boston Mutual informed Dolan of the audit and asserted its right under the policy to recover overpayments due to fraud or error. Dolan, through her attorney, contested this finding. She argued that this business income fell outside the definition of earnings relevant for determining eligibility under the policy. Notwithstanding Dolan's objections, by an October 2006 letter Boston Mutual discontinued her benefits and reasserted its demand that she repay past benefits. The letter stated that the benefits Dolan had received since January 2002 had resulted in an overpayment of $145,958.32. Dolan twice appealed the termination determination, and in each case DRMS denied the appeal. In her appeals, Dolan argued that she had disclosed her ownership interests at all relevant times and that the intention of D & H and its principals in purchasing the policy had been to protect W-2 earnings. She did not submit evidence that Boston Mutual had represented to D & H that the policy would protect W-2 earnings in this fashion. After DRMS denied these appeals, Dolan filed this lawsuit. In the district court, Dolan challenged her benefit termination under ERISA's civil enforcement provision, 29 U.S.C. § 1132. She argued that (1) the plain language of the plan renders non-salary income irrelevant for benefit eligibility, and (2) Boston Mutual should be equitably estopped from asserting otherwise given Liszanckie's representations to Havunen. In the alternative, Dolan argued that D & H was fraudulently induced to purchase the Boston Mutual plan and sought damages in tort under state law. As a remedy for fraudulent inducement, Dolan argued that she was entitled to the benefits she would have received under the Guarantee Life policy had D & H renewed it. Dolan also asserted state law contract claims, but later conceded that these claims are preempted by ERISA. Boston Mutual counterclaimed, demanding reimbursement under the plan for $163,661.57 in overpaid benefits. [3] The parties cross-moved for summary judgment on Dolan's claims and Boston Mutual's counterclaim. Three arguments Boston Mutual made before the district court are relevant on appeal. First, it argued that its determination that Dolan had not been eligible for benefits was reasonable and within the discretion afforded to certain plan administrators under ERISA. Second, it argued that the district court could not consider four affidavits Dolan submitted concerning purported misrepresentations because they had not been part of the administrative record. [4] Third, it argued that ERISA preempts Dolan's state claim for fraud in the inducement. Initially, the district court granted Boston Mutual's motion for summary judgment on Dolan's claims but denied both parties' motions for summary judgment on Boston Mutual's counterclaim. Boston Mutual moved for reconsideration of the denial of summary judgment as to its counterclaim in light of a Supreme Court decision, Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 356, 126 S.Ct. 1869, 164 L.Ed.2d 612 (2006), on permissible relief under ERISA that the district court had not considered. Dolan moved for reconsideration of her claims in light of a recent decision of this court, Denmark v. Liberty Life Assurance Co. of Boston, 566 F.3d 1 (1st Cir.2009), concerning conflicts of interest in certain discretionary decisions by ERISA plan administrators. The district court reaffirmed its grant of summary judgment for Boston Mutual on Dolan's claims. On reconsideration, however, it granted Dolan's motion for summary judgment on Boston Mutual's counterclaim. In the two decisions, the district court held (1) Boston Mutual's eligibility determination was reasonable and thus entitled to deference under ERISA, (2) ERISA preempts Dolan's claim for fraud in the inducement under 29 U.S.C. § 1144(a), and (3) Boston Mutual's claim for reimbursement for overpaid benefits is not appropriate equitable relief under 29 U.S.C. § 1132(a)(3). The district court did not expressly address Dolan's equitable estoppel argument. It also did not address Boston Mutual's motion to strike the four contested affidavits, as the motion was deemed moot in light of the court's grant of summary judgment for Boston Mutual. In the present cross-appeals, Dolan appeals the district court's grant of summary judgment for Boston Mutual on her claims and Boston Mutual appeals the district court's grant of summary judgment for Dolan on its counterclaim.