Opinion ID: 794475
Heading Depth: 3
Heading Rank: 4

Heading: Eligibility for permanent benefits under the any occupation standard

Text: 24 Having disposed of the majority of Hartford's arguments, we now turn to the key issue in this case. Hartford maintains that the district court did not have jurisdiction to grant Paese permanent long-term benefits under the any occupation standard because he had not exhausted his administrative remedies and had not given Hartford the opportunity, in the first instance, to decide the issue. Initially, we note although ERISA requires that all benefit plans provide for carrier review, see 29 U.S.C. § 1133, it contains no statutory exhaustion requirement. Indeed, section 502(a)(1)(B) of ERISA, under which Paese brought his claim, simply states that [a] civil action may be brought by a participant or beneficiary ... to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan, does not itself include an exhaustion requirement. That said, the federal courts— including this Circuit—have recognized a firmly established federal policy favoring exhaustion of administrative remedies in ERISA cases. Kennedy v. Empire Blue Cross & Blue Shield, 989 F.2d 588, 594 (2d Cir.1993) (internal quotation marks omitted). Thus, the first question we must address is whether a plaintiff's failure to exhaust the remedies provided in an ERISA plan implicates our subject matter jurisdiction, or merely serves as an affirmative defense. 25 As the Supreme Court has recently reminded us in Eberhart v. United States, ___ U.S. ___, 126 S.Ct. 403, 163 L.Ed.2d 14 (2005) (per curiam): `Clarity would be facilitated' ... `if courts and litigants used the label jurisdictional not for claim-processing rules, but only for prescriptions delineating the classes of cases (subject-matter jurisdiction) and the persons (personal jurisdiction) falling within a court's adjudicatory authority.' Id. at 405 (quoting Kontrick v. Ryan, 540 U.S. 443, 455, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004)). In other words, we are called on to address whether the administrative exhaustion requirement under ERISA section 502(a)(1)(B) is truly jurisdictional in the Article III sense, or is more akin to a claim-processing rule, which would be an affirmative defense subject to equitable considerations such as waiver, estoppel or futility. 26 Admittedly, our case law has been somewhat casual when discussing the judicially-created exhaustion requirements under section 502(a)(1)(B). On the one hand, we occasionally use jurisdictional language when discussing the exhaustion requirements. See, e.g., Peterson v. Cont'l Cas. Co., 282 F.3d 112, 117 (2d Cir.2002) ([A]bsent a determination by the plan administrator, federal courts are without jurisdiction to adjudicate whether an employee is eligible for benefits under an ERISA plan.) (emphasis added). On the other hand, we have also stated that absent a clear and positive showing that seeking review by the carrier would be futile, that remedy must be exhausted prior to the institution of litigation. Jones v. UNUM Life Ins. Co. of Am., 223 F.3d 130, 140 (2d Cir.2000) (internal quotation marks omitted) (emphasis added); but see Locher, 389 F.3d at 298 (characterizing Jones as holding that the issue of eligibility for permanent benefits had not ripened into a dispute capable of conferring jurisdiction on a district court until the plan administrator had made a determination in that regard). 27 In our latest (albeit tangential) statement on this subject in Nichols v. Prudential Insurance Co. of America, 406 F.3d 98 (2d Cir.2005), we stated that it was unclear whether a motion to dismiss for failure to exhaust administrative remedies under ERISA section 502(a)(1)(B) is properly brought for failure to state a claim, lack of subject matter jurisdiction, or on some other procedural basis. Nichols, 406 F.3d at 105. We declined to resolve the issue, recognizing that the standard of review was the same ( de novo ) regardless. See id. Moreover, we suggested that a plan administrator's failure to adhere literally to the regulatory deadlines 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. Id. at 106. 28 Our Court has recognized a number of situations where a claim-processing administrative exhaustion requirement is an affirmative defense and not a jurisdictional bar. For instance, we have held that in the employment discrimination context, the exhaustion requirement, while weighty, is not jurisdictional, Boos v. Runyon, 201 F.3d 178, 182 (2d Cir.2000), and is subject to waiver, estoppel, and equitable tolling. See Zipes v. Trans World Airlines, Inc., 455 U.S. 385, 393, 102 S.Ct. 1127, 71 L.Ed.2d 234 (1982); Briones v. Runyon, 101 F.3d 287, 290 (2d Cir.1996). Similarly, under the Labor Management Relations Act of 1947, see 29 U.S.C. § 185, the failure to exhaust labor union grievance procedures is an affirmative defense, rather than a jurisdictional bar. See Sellers v. M.C. Floor Crafters, Inc., 842 F.2d 639, 642 n. 2 (2d Cir.1988); Johnson v. Gen. Motors, 641 F.2d 1075, 1079 (2d Cir. 1981). Also, under the Financial Institution Reform, Recovery, and Enforcement Act of 1989 (FIRREA), 12 U.S.C. § 1821 (1994), we have held that the complete failure to take the appropriate administrative action constituted a jurisdictional bar to suit in federal court, but that the mere late filing of such an action, after the agency's limitation period had expired, did not deprive the district court of jurisdiction. See Carlyle Towers Condo. Ass'n v. FDIC, 170 F.3d 301, 307 (2d Cir.1999) (Although the FIRREA makes exhaustion a jurisdictional requirement, it does not necessarily follow that compliance with time limits imposed by the FDIC [has] the same force.). 2 29 Perhaps our most thorough investigation of the question of whether exhaustion is jurisdictional comes from our recent analysis of the Prison Litigation Reform Act (PLRA), 42 U.S.C. § 1997e(a). See generally Hemphill v. New York, 380 F.3d 680, 686-90 (2d Cir.2004). We concluded that unless the failure to exhaust administrative remedies is `essential to the existence of the claim, or to ripeness, and therefore to the presence of an Article III case or controversy,' the statutory requirement to exhaust administrative remedies under the PLRA did not affect a court's jurisdiction to hear the case. Richardson v. Goord, 347 F.3d 431, 434 (2d Cir.2003) (per curiam) (quoting Perez v. Wis. Dep't of Corr., 182 F.3d 532, 535-36 (7th Cir.1999)). Since Richardson, we have held that a litigant's failure to exhaust in the PLRA context is an affirmative defense that can be waived, and that a defendant's actions may subject him to claims of estoppel. See Giano v. Goord, 380 F.3d 670, 675 (2d Cir.2004); Ziemba v. Wezner, 366 F.3d 161, 163 (2d Cir.2004) (per curiam); Jenkins v. Haubert, 179 F.3d 19, 28-29 (2d Cir.1999); accord Handberry v. Thompson, 436 F.3d 52, 59 (2d Cir.2006). 30 In the PLRA context, courts now perform a three-part inquiry to determine whether a prisoner-plaintiff can successfully rebut an affirmative defense of failure to exhaust: (1) Were the administrative remedies in fact `available' to the prisoner? Hemphill, 380 F.3d at 686 (citing Abney, 380 F.3d at 667-69); (2) Did the defendant forfeit[ ] the affirmative defense of non-exhaustion by failing to raise or preserve it or is he otherwise estopped from raising the defense? Hemphill, 380 F.3d at 686 (citing Johnson v. Testman, 380 F.3d 691, 695-96 (2d Cir.2004) and Ziemba, 366 F.3d at 163); and (3) Have `special circumstances' [ ] been plausibly alleged that justify `the prisoner's failure to comply with administrative procedural requirements'? Hemphill, 380 F.3d at 686 (quoting Giano, 380 F.3d at 676). 31 We believe that these principles, developed in the PLRA context, serve as particularly apt analogs to the administrative exhaustion requirements under ERISA section 502(a)(1)(B). It is certainly true, as described above, that there is a firmly established federal policy favoring exhaustion of administrative remedies in ERISA cases. Kennedy v. Empire Blue Cross & Blue Shield, 989 F.2d 588, 594 (2d Cir.1993) (internal quotation marks omitted). However, we have described the primary purposes of the exhaustion requirement under ERISA as follows: 32 [to] uphold Congress' desire that ERISA trustees be responsible for their actions, not the federal courts; [to] provide a sufficiently clear record of administrative action if litigation should ensue; ... [to] assure that any judicial review of fiduciary action (or inaction) is made under the arbitrary and capricious standard, not de novo[;] ... to help reduce the number of frivolous lawsuits under ERISA; to promote the consistent treatment of claims for benefits; to provide a nonadversarial method of claims settlement; and to minimize the costs of claims settlement for all concerned. 33 Id. (internal quotation marks omitted). 34 These important policy goals have little or no bearing on the existence of a claim, or on ripeness, and therefore have little to do with the presence of an Article III case or controversy. The fact that ERISA, unlike the PLRA, does not even contain a statutory exhaustion requirement, further strengthens our conclusion. Indeed, the requirement is purely a judge-made concept that developed in the absence of statutory language demonstrating that Congress intended to make ERISA administrative exhaustion a jurisdictional requirement. Cf. Richardson, 347 F.3d at 434 (Numerous circuits have pointed out that [the PLRA] lacks the sweeping and direct language that would indicate a jurisdictional bar rather than a mere codification of administrative exhaustion requirements.) (internal quotation marks omitted). For these reasons, we hold that a failure to exhaust ERISA administrative remedies is not jurisdictional, but is an affirmative defense. 35 Having determined that a failure to exhaust ERISA administrative remedies under section 502(a)(1)(B) is an affirmative defense, we now consider whether Hartford can successfully assert it. To begin, Paese argues that Hartford failed to object to the any occupation determination before the district court. In general we refrain from passing on issues not raised below. Virgilio v. City of New York, 407 F.3d 105, 116 (2d Cir.2005) (internal quotation marks omitted); see Singleton v. Wulff, 428 U.S. 106, 120-21, 96 S.Ct. 2868, 49 L.Ed.2d 826 (1976). The law in this Circuit is clear that where a party has shifted his position on appeal and advances arguments available but not pressed below, ... waiver will bar raising the issue on appeal. United States v. Braunig, 553 F.2d 777, 780 (2d Cir.1977), quoted in Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 124 n. 29 (2d Cir.2005). 36 As Paese correctly observes, Hartford knew from the moment they received his complaint in December 2002 that he sought future benefits up until the time of his death based on his permanent disability. Complaint at 7. Yet, prior to the district court's decision, Hartford neglected to raise this issue. 3 Even after the district court's decision, Hartford failed to raise this issue, even though it had numerous opportunities to do so. For instance, Hartford submitted an opposition to Paese's proposed judgment. In this lengthy filing, Hartford objected to Paese's calculations of pre-judgment interest, cost of living adjustments, and purchase of outside insurance, and requested that Paese's recovery be reduced by his receipt of Social Security benefits. However, Hartford did not object to the award of past benefits from October 12, 2001 until April 30, 2004 (which includes the March 8, 2002 transition date), nor to the award of benefit payments into the future. 37 We recognize that we retain broad discretion to consider issues not raised below because the waiver rules are prudential and not jurisdictional. See Westinghouse Credit Corp. v. D'Urso, 371 F.3d 96, 103 (2d Cir.2004). However, when the waived issue involves factual determinations, as is the case here, we are seldom inclined to exercise this discretion. See Baker v. Dorfman, 239 F.3d 415, 420-21 (2d Cir.2000). Thus, because this issue on the transition from the own occupation to the any occupation standard was not raised before the district court, and involves some factual determinations and not merely questions of law, we deem it waived. See Burnette v. Carothers, 192 F.3d 52, 58 (2d Cir.1999) (finding appellants waived a claim where they failed to raise this issue in the district court, even though they were then represented by counsel and no miscarriage of justice will result). 38 Even if this issue had been raised below, we would nonetheless conclude that Hartford could not successfully assert it. Here, the transition from the own occupation standard to the any occupation standard on March 8, 2002 occurred during the pendency of Paese's administrative appeal, and prior to the ERISA Plan's final determination on March 20, 2002. Thus, here we are faced with an appeal process that began during the time period of the own occupation standard, but finally ended during the time period of the any occupation standard. Paese essentially argues both that Hartford's actions estop it from now claiming that he failed to exhaust his administrative remedies with respect to the permanent long-term disability benefits under the any occupation standard, and that any attempt to exhaust his administrative remedies would have been futile. 4 We agree. 39 A party claiming equitable estoppel must have relied on its adversary's conduct in such a manner as to change his position for the worse, and that reliance must have been reasonable in that the party claiming the estoppel did not know nor should it have known that its adversary's conduct was misleading. Becker v. IRS (In re Becker), 407 F.3d 89, 99 (2d Cir.2005) (quoting Heckler v. Cmty. Health Servs. of Crawford County, Inc., 467 U.S. 51, 59, 104 S.Ct. 2218, 81 L.Ed.2d 42 (1984)). Here, Paese claims that he did not formally exhaust his administrative remedies under the any occupation standard because of Hartford's correspondence with him. 40 Hartford's correspondence in effect told Paese that its final administrative determination would encompass both the own occupation and any occupation standards. In a letter dated February 13, 2002, Hartford alerted Paese that 41 [P]er your request we have made attempts to update the medical information in your file by writing to various physicians referenced in your letters. We have given each physician that information was requested from [sic] until March 8, 2002 to respond. At that time, we will have you [sic] claim file reviewed. If you plan on further supplementing your appeal, please do so prior to this date to avoid the need for multiple reviews. Please be aware that we will address and consider your multiple concerns in formulating our final decision. 42 Letter from Robert R. Dombrowski, Jr., Hartford Appeals Specialist, to Paese dated Feb. 13, 2002 (emphasis added). The letter clearly alerted Paese that (1) his final review would occur on or after March 8, 2002— i.e., the transition date from the own occupation to the any occupation standard; (2) he should submit any additional information before March 8, 2002 to avoid the need for multiple reviews; (3) this post-March 8, 2002 review would encompass all his multiple concerns on appeal; and (4) this post-March 8, 2002 review would result in a final decision. Id. 43 On February 16, 2002, in response to the February 13 letter, Paese sent Hartford additional medical reports for inclusion in his file. See Letter from Paese to Hartford LTD/LIFE Appeal Unit—B2E dated Feb. 16, 2002. In this letter, Paese stated I believe that I have and continue to meet the Plan requirements for the initial granting of benefits as well as those post March 8, 2002. Id. (emphasis added). On February 28, Paese sent another letter informing Hartford of the SSA's determination that he was totally disabled from any occupation. Thus, Paese's correspondence clearly alerted Hartford that one of his multiple concerns was his total disability under the any occupation standard. 44 Hartford did not disabuse Paese of his belief that his disability under the any occupation standard was a legitimate concern in his administrative appeal. To the contrary, Hartford's March 20 letter told Paese that it was issuing its final ruling on everything. This letter stated, in part: 45 While your claim was terminated as of October 11, 2001, we have evaluated your entire claim file from your last day worked through the applicable Elimination Period and to the present [i.e., March 20, 2002] to insure a full and fair review.... Please be advised that our claim decision is now final as you have exhausted any administrative remedies available to you under the policy. 46 Letter from Dombrowski to Paese dated Mar. 20, 2002, at 3, 7 (emphasis added). This final determination, by its own terms, evaluated Paese's disability condition up until the present—i.e., March 20, 2002— which Paese reasonably read to mean that Hartford evaluated Paese's disability according to the applicable any occupation standard which applied at that time (post-March 8, 2002). If Hartford did not want to convey to Paese the mistaken impression that his eligibility under the any occupation standard was at issue in its final decision on his appeal, it should have written him a different letter. If Hartford wanted to preserve its rights to make a later determination on under the any occupation standard, it also should have written a different letter. Instead, Hartford told Paese that he had no further administrative remedies, and there was nothing left for him to appeal. 5 47 In addition, Dr. Turner's report dated March 19, 2002, upon which Hartford relied in its final determination of March 20, clearly stated: Therefore, I find that [Paese] should easily be capable of performing his own occupation as of the time of the motor vehicle accident on 8/30/99 through the current time and including through the change in definition to any occupation on 3/8/02.  Thus, Dr. Turner's report suggests that Paese's disability status under the any occupation standard was contemplated and evaluated, and because Hartford relied on this report in making its final determination, Paese could reasonably conclude that his file had been administratively evaluated under the any occupation standard as well. 48 Paese also argues that it would have been futile for him to seek review of his file under the any occupation standard after Hartford issued its March 20 final decision. See Jones, 223 F.3d at 140. This argument finds considerable support in Hartford's March 20 letter to Paese containing its final decision, which, as quoted above, stated that Hartford's claim decision is now final and informed Paese that he had exhausted any administrative remedies available to [him] under the policy. Letter from Dombrowski to Paese dated Mar. 20, 2002, at 7. Moreover, Paese's futility argument is further strengthened by simple logic: Hartford's decision that Paese was not totally disabled from his own occupation necessarily implies a decision that he was not totally disabled from any occupation. In other words, any reasonable person in Paese's situation would necessarily conclude that it would have been futile to return to Hartford to seek administrative review of his claim for permanent disability on the post-March 8, 2002 any occupation standard, if his claim had just been denied on the more lenient own occupation standard.