Court Opinion

ID: 182667
Source: CourtListenerOpinion
Date Created: 2011-01-12 19:49:20+00
Date Added: 2024-06-11T17:26:00.609350
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                             No. 09-1821

JOSEPH S. LEONE,

                Plaintiff - Appellant,

           v.

TYCO ELECTRONICS CORPORATION,

                Defendant - Appellee.

Appeal from the United States District Court for the Eastern
District of North Carolina, at Wilmington. James C. Fox, Senior
District Judge. (5:08-cv-00290-F)

Argued:   December 7, 2010                 Decided:   January 12, 2011

Before MOTZ, AGEE, and KEENAN, Circuit Judges.

Affirmed by unpublished opinion.        Judge Keenan       wrote   the
opinion, in which Judge Motz and Judge Agee joined.

Andrew O. Whiteman, HARTZELL & WHITEMAN, LLP, Raleigh, North
Carolina, for Appellant.    Gregory Phillip McGuire, OGLETREE,
DEAKINS, NASH, SMOAK & STEWART, PC, Raleigh, North Carolina, for
Appellee.

Unpublished opinions are not binding precedent in this circuit.
KEENAN, Circuit Judge:

        Joseph    Leone     brought       this       action       against      his       former

employer, Tyco Electronics Corporation (Tyco).                              Leone alleged

that Tyco breached a contractual provision of its short-term

disability policy by refusing to pay him short-term disability

benefits from June 6, 2007 through December 5, 2007.                             Leone also

alleged that Tyco’s refusal to pay these short-term disability

benefits    violated      the     North    Carolina        Wage    and    Hour    Act      (the

Act), N.C. Gen. Stat. §§ 95-25.1, et seq.

      The district court granted summary judgment in favor of

Tyco on both claims.               On the breach of contract claim, the

district court held that Tyco processed Leone’s application in

compliance with the short-term disability policy, and that Leone

failed to produce evidence that Tyco’s actions in denying the

claim were unreasonable, unfair, or in bad faith.                            The district

court also held that Leone failed to establish a claim for wages

under the Act.       We affirm.

                                               I.

      Between 1996 and 2006, Leone worked as a “mold maker” for

Tyco.      In    November       2006,     he       filed   a   claim     for     short-term

disability benefits.            At that time, Leone was being treated for

a   bipolar      disorder    by    Dr.    Jason       Crandell      and     for      a    sleep

disorder by Dr. Baldwin Smith.                      On November 14, 2006, Tyco’s

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short-term        disability      administrator,             Hoover     Rehabilitation

Services,       Inc.    (Hoover),     informed        Leone    that   his   short-term

disability claim had been approved effective November 7, 2006.

     Leone returned to work without restrictions on May 1, 2007.

One month later, however, he filed a new claim for short-term

disability       benefits.       Upon     receipt       of    Leone’s    application,

Hoover’s       representative         contacted       Tyco’s     corporate      medical

director, Dr. Mark A. Bates, and asked him to review Leone’s

claim.         After    reviewing      Leone’s        medical    documentation     and

speaking       with    Dr.   Smith,    Dr.   Bates      recommended      that   Leone’s

claim     be    denied.         According        to    Dr.     Bates,    the    medical

documentation did not substantiate any change in Leone’s medical

condition that would explain how Leone could have been disabled

from working for almost six months, then able to work without

restrictions for thirty-one days, and immediately thereafter be

unable to work again.           Hoover later informed Leone that Tyco had

denied his claim for short-term disability benefits, and advised

Leone of his appeal rights under Tyco’s short-term disability

policy.

        Leone filed an appeal with Hoover challenging the denial of

his claim.        In support of his appeal, Leone enclosed records

from Dr. Smith and a letter from Leone’s wife.                        These documents

were sent to Dr. Bates for review.

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       After receiving these documents, Dr. Bates contacted Dr.

Smith to discuss Leone’s condition.                      Based on Dr. Bates’ review

of the medical documents and his conversation with Dr. Smith,

Dr. Bates informed Hoover of his opinion that although Leone had

“some sort of sleep disturbance,” there was no change in Leone’s

condition      between       the     period       that    he        was    working      without

restriction and the time that he requested resumption of short-

term disability benefits.               Dr. Bates therefore recommended to

Hoover that Leone’s appeal be denied.                      On July 18, 2007, Hoover

sent   Leone     a    letter    notifying         him    that       his    appeal      had   been

denied.

       After receiving Hoover’s denial letter, Leone asked for the

opportunity to submit additional documentation to support his

claim.      Hoover          agreed    and     conducted         a     review      of    Leone’s

additional documentation, including Leone’s physicians’ letters.

These letters were forwarded to Dr. Bates for further review of

Leone’s claim.         When Dr. Bates again recommended that the claim

be denied, Hoover informed Leone of the final denial of his

claim for a resumption of short-term disability benefits.

       On July 26, 2007, Tyco sent Leone a letter stating that his

employment was terminated, effective June 6, 2007.                                Tyco stated

that its decision was based on the fact that Leone had been

absent    from       work    since    June     6,       2007,       that    his     short-term

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disability claim and appeal had been denied, and that he had

exhausted his leave under the Family Medical Leave Act.

       In June 2008, Leone filed an action against Tyco in Wake

County Superior Court in North Carolina. In the complaint, Leone

alleged that Tyco breached a contractual provision in the short-

term    disability   policy   by   refusing   to   pay   him   short-term

disability benefits.     He also alleged that Tyco’s refusal of his

claim violated the Act.

       Tyco removed the case to the federal district court and

later moved for summary judgment on all of Leone’s claims.            The

district court granted Tyco’s motion for summary judgment on

Leone’s breach of contract claim, holding that “Leone proffered

no evidence that Tyco’s processing of his second [short-term

disability] claim was anything other than compliant with Tyco’s

Policy.”    The district court also granted summary judgment to

Tyco on Leone’s claim under the Act, concluding that Tyco did

not owe Leone wages after the effective date of his termination.

Leone filed a timely an appeal in this court challenging the

district court’s judgment.

                                   II.

       We review an award of summary judgment de novo.           Homeland

Training Ctr., LLC v. Summit Point Auto. Research Ctr., 594 F.3d

285, 290 (4th Cir. 2010).      Under this standard, summary judgment

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is    appropriate       when     “there      is       no    genuine       dispute     as   to    any

material fact and the movant is entitled to judgment as a matter

of law.”         Fed. R. Civ. P. 56(a).

                                             III.

       We first address Leone’s argument that Tyco breached its

contract         by    refusing      to      pay       Leone        short-term        disability

benefits.         The parties agree that we apply North Carolina law to

this breach of contract claim. *

       Under       North      Carolina      law,       Tyco’s       short-term        disability

policy      is    a    unilateral         contract         in     which    Tyco     offered      its

employees an opportunity to apply for and to receive short-term

disability benefits.                See White v. Hugh Chatham Mem’l Hosp.,

Inc.,      387    S.E.2d      80,   81     (N.C.       Ct.      App.      1990);    Hamilton      v.

Memorex       Telex    Corp.,       454    S.E.2d          278,    282-83     (N.C.    Ct.      App.

1995).        A    Tyco    employee        accepts         that     offer     by    entering      or

maintaining employment.              See White, 387 S.E.2d at 81.

       North Carolina law provides that a contract is construed as

a    whole,      and   that    individual         clauses         are     construed    in    their

context.         Sec. Nat’l Bank v. Educators Mut. Life Ins. Co., 143

       *
       The parties agree that Tyco’s short-term disability policy
is not governed by the Employee Retirement Income Security Act
(ERISA) because the policy falls within the “payroll practices”
exception to ERISA’s coverage. See 29 C.F.R. § 2510.3-1(b)(2).

                                                  6
S.E.2d 270, 275 (N.C. 1965).              If a contract provides a party

“discretionary power affecting the rights of others,” then that

party must exercise its discretionary power “in a reasonable

manner based upon good faith and fair play.”                         Mezzanotte v.

Freeland, 200 S.E.2d 410, 414 (N.C. Ct. App. 1973).                      A contract

confers     “discretionary    power”          when      the   contract     language

provides one party with the right to exercise its sole judgment.

See Midulla v. Howard A. Cain Co., 515 S.E.2d 244, 246 (N.C. Ct.

App. 1999).

     We consider the plain language of the short-term disability

contract.     See     Holshouser    v.    Shaner     Hotel    Group   Props.   Ltd.

P’ship, 518 S.E.2d 17, 18 (N.C. Ct. App. 1999).                        The stated

purpose of Tyco’s short-term disability policy is to “establish

the procedure to determine an employee’s eligibility to receive

Short-Term     and      Long-Term        Disability       Benefits       for   non-

occupational illness/injury.”            The policy defines a “Short Term

Disability” as “a condition that renders an employee incapable

of performing the required duties of his/her occupation . . .

due to non-occupational injury or illness.”                   The policy states

that a short-term disability benefit “may” be available to an

employee who has a short-term disability.

     The     policy     includes     a        section     entitled     “Short-Term

Disability Procedure.”        In that section, the policy explains

that an employee must notify his supervisor when he is unable to

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work due to an illness or injury.                         The policy further details

the responsibilities of the supervisor in contacting the short-

term disability “vendor.”              According to the policy, the vendor

is responsible for contacting the employee and the employee’s

medical provider to verify the employee’s medical information.

       The   procedure       section       of       the   policy    also      explains      the

various requirements imposed after the approval or denial of an

employee’s     disability       claim.              For    example,      if   a     claim    is

approved,     the    employee        must   provide            medical   updates      to    the

vendor on a regular basis.              However, if the disability claim is

denied, the employee must return to work immediately or appeal

the denial of the claim within fourteen days.

       A “disclaimer” is provided at the end of the policy.                                 The

disclaimer states that “[t]he Vice President of Human Resources,

or   designee,      whose    decision       shall         be    final,   shall      make    any

interpretation(s) of, or exception(s) to [the] policy.”

       The plain language of Tyco’s policy demonstrates that the

policy does not guarantee that an employee will receive short-

term    disability        benefits    if    the       employee      meets     the    policy’s

requirements        for    establishment             of   a     short-term        disability.

Instead, the policy merely provides that short-term disability

benefits “may” be available to an employee who has a short-term

disability.       This language also must be construed in light of

other    policy      provisions,       including           the     disclaimer       and     the

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statement that a claim may be “approved” or “denied.”                     See Sec.

Nat’l Bank, 143 S.E.2d at 275.

       These provisions, when viewed together, provide employees

alleging    a     disability   with    the    right   to    file   a    claim      for

benefits, and with an established claims procedure that allows

Tyco the right to exercise its judgment when reviewing claims

made under the policy.          This policy language provides Tyco with

“discretionary       power”    to     approve    or      deny   claims.            See

Mezzanotte, 200 S.E.2d at 414.               An employee’s right to short-

term    disability    benefits      therefore   is    contingent       upon   Tyco’s

exercise of its discretionary power.

       We are not persuaded by Leone’s argument that Tyco lacks

discretionary power to approve or deny benefit claims because

such power is not stated expressly in the policy.                  In advancing

this    argument,     Leone    exclusively      relies     on   court    decisions

involving claims brought under the Employee Retirement Income

Security Act (ERISA).          See Gallagher v. Reliance Standard Life

Ins. Co., 305 F.3d 264, 268-69 (4th Cir. 2002); Herzberger v.

Standard Ins. Co., 205 F.3d 327, 331-32 (7th Cir. 2000).                      These

ERISA    cases,    which   reflect    the    fiduciary     relationship       of    an

employer to its employees in certain contexts not applicable

here, are not relevant to our breach of contract analysis.                         See

Griggs v. E.I. Dupont De Nemours & Co., 237 F.3d 371, 379-80

(4th Cir. 2001) (discussing the responsibilities of a fiduciary

                                        9
under   ERISA).        As    explained      above,      we     reach    our    conclusion

concerning     Tyco’s    contractual        authority        upon     consideration        of

the plain language of the entire policy.

      We also observe that, under North Carolina contract law,

Tyco was      required      to   exercise    its       discretionary        power    “in    a

reasonable     manner       based    upon       good     faith       and    fair    play.”

Mezzanotte, 200 S.E.2d at 414.              The evidence in the record shows

that Tyco acted reasonably in reviewing Leone’s second claim for

short-term disability benefits.                 Tyco referred Leone’s claim to

Dr. Bates for multiple reviews, considered Leone’s appeal and

additional     documentation,        and     relied       on    Dr.     Bates’      various

recommendations to deny Leone’s claim.                    Additionally, Leone has

not   presented    any      evidence   that      Tyco    failed        to   exercise   its

discretionary power in a reasonable manner.                       Therefore, we hold

that the district court did not err in granting summary judgment

to Tyco on Leone’s breach of contract claim.

                                           IV.

      Leone     next     challenges        the     district          court’s       decision

awarding summary judgment to Tyco on Leone’s claim for wages

under the Act.         The relevant provision of the Act states that

employers must pay “all wages and tips accruing to the employee

on the regular payday.”             N.C. Gen. Stat. § 95-25.6.                     The Act

further    provides         that    “[e]mployees             whose      employment         is

                                           10
discontinued for any reason shall be paid all wages due.”                                  N.C.

Gen. Stat. § 95-25.7.

        The   Act    defines      “wages”      as    “compensation         for    labor     or

services      rendered      by    an    employee.”          N.C.    Gen.    Stat.      §   95-

25.2(16).        The Act states that a “wage” includes “sick pay,

vacation      pay,   severance         pay,   commissions,         bonuses,      and   other

amounts promised when the employer has a policy or a practice of

making such payments.”            N.C. Gen. Stat. § 95-25.2(16).

     The Act does not require that an employer have a policy

providing wage-related benefits.                    Narron v. Hardees Food Sys.,

Inc., 331 S.E.2d 205, 207 (N.C. Ct. App. 1985).                          However, if the

employer decides to offer wage-related benefits, then the Act

requires,      among      other    things,         that    an   employer      notify       its

employees of the benefits policy, inform its employee of the

conditions that must be met to earn the benefits, and provide

the benefits due when the employee performs the work required to

earn the benefits.          Id.

     Even      if    we     assume,      without       deciding,      that       short-term

disability benefits are considered wage-related benefits payable

as “wages” under the Act, we conclude that Leone does not have a

valid    claim      under   the    Act.       Tyco’s      policy   did     not   guarantee

short-term disability benefits to disabled employees.                            Under the

language of the policy, a claim for benefits accrues after Tyco

approves an employee’s benefits claim.                      Leone’s final claim for

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short-term disability benefits was not approved by Tyco and,

thus,   Leone   never   accrued   short-term   disability   benefits   for

that later time period.           See Moses Cone Mem’l Health Servs.

Corp. v. Triplett, 605 S.E.2d 492, 496 (N.C. Ct. App. 2004).

Therefore, we conclude that the district court did not err in

awarding summary judgment to Tyco on Leone’s claim for wages

under the Act.

     For these reasons, we affirm the district court’s award of

summary judgment to Tyco.

                                                                AFFIRMED

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