Court Opinion

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Opinions of the United
2007 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

1-29-2007

Miller v. Fortis Benefits Ins
Precedential or Non-Precedential: Precedential

Docket No. 05-2539

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Recommended Citation
"Miller v. Fortis Benefits Ins" (2007). 2007 Decisions. Paper 1699.
http://digitalcommons.law.villanova.edu/thirdcircuit_2007/1699

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                                                  PRECEDENTIAL

             UNITED STATES COURT OF APPEALS
                  FOR THE THIRD CIRCUIT

                            No. 05-2539

                          PAUL MILLER

                             Appellant

                                 v.

FORTIS BENEFITS INSURANCE COMPANY and RESORTS
             INTERNATIONAL HOTEL

           On Appeal from the United States District Court
                     for the District of New Jersey
                        (D.C. No. 03-cv-04428)
            District Judge: Honorable Stanley S. Brotman

                    Argued September 14, 2006

  Before: FUENTES, FISHER, and McKAY,* Circuit Judges.

                      (Filed: January 29, 2007)

       *
        The Honorable Monroe G. McKay, Senior Judge,
United States Court of Appeals for the Tenth Circuit, sitting by
designation.
Robert P. Merenich (Argued)
Gemmel, Todd & Merenich
767 Shore Road
P.O. Box 296
Linwood, NJ 08221

       Counsel for Appellants

Randi F. Knepper
Joshua A. Zielenski (Argued)
McElroy, Deutsch, Mulvaney & Carpenter
1300 Mount Kemble Avenue
P.O. Box 2075
Morristown, NJ 07962

       Counsel for Appellees

                             ________

                   OPINION OF THE COURT
                         ________

Fuentes, Circuit Judge.

        Appellant Paul Miller appeals the District Court’s dismissal
of his complaint under Federal Rule of Civil Procedure 12(b)(6).
The focus of Miller’s appeal is the accrual date of his cause of
action to recover benefits under the Employee Retirement Income
Security Act (“ERISA”). We must determine whether his cause of
action accrued in 1987, when he first began receiving a
miscalculated benefit award, or in 2003, when his request to correct
that award was first denied. For the reasons that follow, we
conclude that his cause of action accrued in 1987, when he first
received the erroneously calculated award. Because Miller did not
file his claim within the applicable statutory period, we will affirm
the order of the District Court.

                          I. Background

      Paul Miller became disabled on October 6, 1986 after
undergoing heart surgery. About fourteen months before the

                                 -2-
surgery, Miller was employed by Resorts International Hotel
(“Resorts”) as a casino floor worker making $690 per week.
However, immediately before becoming disabled, he worked as an
outside marketing salesman earning $768 per week. In April 1987,
he filed a claim for employee disability benefits under a long term
disability policy (“the LTD plan”) issued by Mutual Benefit Life
Insurance Company (“Mutual Benefit”). Under the LTD plan,
Miller was entitled to ongoing disability payments of sixty percent
of his current salary until he reached the age of sixty-five.
According to Miller’s complaint, when Resorts reported his salary
to Mutual Benefit, it mistakenly stated that he still held his old
position as a casino floor worker earning $690. In April 1987,
Miller began receiving disability payments erroneously based on
this former salary.

       It was not until 2002, about fifteen years after he began
receiving benefits, that Miller realized the calculation was
incorrect. On November 12, 2002, after consulting with an
accountant, he sent a letter to Fortis Benefits Insurance Company
(“Fortis”), which had acquired Mutual Benefit, seeking an upward
adjustment to reflect his 1987 salary. Fortis agreed to investigate
the matter, but subsequently informed Miller by letter that the
relevant pay records were no longer available. According to Fortis,
since Resorts kept pay information for only seven years, it no
longer had the information needed to determine the merits of
Miller’s claim.

       In August 2003, Miller filed a complaint in New Jersey
Superior Court which was removed to the District of New Jersey.
In his amended complaint, Miller alleged, under 29 U.S.C. §
1132(a)(1)(B), that Fortis and Resorts unlawfully denied him
disability benefits, and, under 29 U.S.C. § 1132(a)(3), that they
breached a fiduciary duty to him by misrepresenting his proper
salary and failing to investigate thoroughly his claim for
adjustment. Resorts and Fortis moved to dismiss Miller’s
complaint for failure to state a claim upon which relief could be
granted. Specifically, they contended that Miller’s claims were
barred by a six-year statute of limitations which began to run in
1987.

       Miller conceded that the six-year limitations period applied,

                                -3-
but disagreed with Fortis about the appropriate date of accrual.1
The District Court ruled that the six-year statute of limitations
began to run in July 1987, based on the following language in the
LTD plan:

       Proof of Loss

       Written proof of loss must be given to Us at Our
       Home Office or one of Our Regional Group Claim
       Offices. For any loss for which the Policy provides
       periodic payment, the written proof of loss must be
       given within 90 days after the end of the first month
       or lesser period for which We may be liable. After
       that, proof must be given at such intervals as We
       may reasonably require. For any other loss, the
       written proof of loss must be given within 90 days
       after the date of loss.

       ...

       Legal Actions

       No action at law or in equity may be brought to
       recover on the Policy any earlier than 60 days after
       the required proof of loss has been given. No action
       may be brought after the expiration of the statute of
       limitations in the state having jurisdiction. In no
       event may action be brought any later than 6 years
       after the time required for submitting the proof has
       elapsed.

       1
          Although the parties agreed that a six-year statute of
limitations applied to Miller’s claim, they disagreed on the source
of that limitations period. Fortis appears to have cited the six-year
limitations period contained in the LTD plan, whereas Miller
referenced the six-year period for contract actions in New Jersey
set forth in N.J.S.A. § 2A:14-1. Since there is no dispute about the
length of the limitations period, we need not determine the source
from which it derives.

                                 -4-
(Appendix at 57-58.) Relying on the LTD plan, the District Court
reasoned:

       The “Proof of Loss” section refers to the end of the
       “first month . . . for which we may be liable.” The
       policy establishes that the insured must be totally
       disabled for six months before benefits are payable.
       Since Miller was disabled on October 6, 1986, Fortis
       would first become liable in March or April 1987.
       The policy also provides that the proof of loss must
       be sent in writing to Fortis within 90 days of the
       period that Fortis first became liable. Thus, if Fortis
       first became liable in March or April of 1987 then
       the time that Miller needed to provide written proof
       of loss expired in June or July of 1987.
       Consequently, the plan dictates that Miller had six
       years from this time, in June or July of 1987, to file
       a claim.

Miller v. Fortis Benefits Ins. Co., 363 F. Supp. 2d 700, 704-05
(D.N.J. 2005). Since Miller filed his complaint more than six years
after 1987, the District Court dismissed the case. This appeal
followed.

           II. Jurisdiction and Standard of Review

       The District Court had jurisdiction pursuant to 28 U.S.C. §
1441(a), because of “original jurisdiction” under § 502(e) of
ERISA. 29 U.S.C. § 1132(e). This Court has jurisdiction pursuant
to 28 U.S.C. § 1291. We exercise plenary review over a grant of
a motion to dismiss. Brown v. Card Servs. Ctr., 464 F.3d 450, 452
(3d Cir. 2006). When considering an appeal from a Rule 12(b)(6)
dismissal, our review is limited to “the contents of the complaint
and any attached exhibits.” Yarris v. County of Delaware, 465
F.3d 129, 134 (3d Cir. 2006). We accept as true all well-pled
allegations in the complaint and draw all reasonable inferences in
favor of the non-moving party. In re Rockefeller Ctr. Props., Inc.
Sec. Litig., 311 F.3d 198, 215 (3d Cir. 2002).

                         III. Discussion

                                 -5-
       A.      Construing Miller’s Claim

        ERISA provides plan beneficiaries with both fiduciary and
non-fiduciary causes of action. Miller’s complaint does not make
clear whether he is pursuing both types of claim. In Count I, he
seeks an adjustment of benefits under 29 U.S.C. § 1132(a)(1)(B),
which provides a non-fiduciary cause of action 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.” In Count II, Miller seeks equitable relief
under 29 U.S.C. § 1132(a)(3), which provides a general cause of
action “(A) to enjoin any act or practice which violates any
provision of this subchapter or the terms of the plan, or (B) to
obtain other appropriate equitable relief (i) to redress such
violations or (ii) to enforce any provisions of this subchapter or the
terms of the plan.” Also under Count II, Miller asserts that Resorts
“intentionally misrepresented” his salary to Mutual Benefit in 1986
and failed to investigate fully his 2002 claim that he had been
underpaid. Yet, nowhere in his complaint does Miller mention
what substantive provision of ERISA his § 1132(a)(3) claim relies
on, nor does he state the elements of a fiduciary cause of action.
See Burstein v. Ret. Account Plan For Employees of Allegheny
Health Educ. and Research, 334 F.3d 365, 387 (3d Cir. 2003)
(reciting the elements of an ERISA fiduciary duty claim).

       Read as a whole, Count II suggests an attempt to make out
a fiduciary claim under 29 U.S.C. § 1104(a), which imposes a
standard of care on plan fiduciaries. See Meagher v. Int’l Ass’n of
Machinists and Aerospace Workers Pension Plan, 856 F.2d 1418,
1423 (9th Cir. 1988) (evaluating underpayment of benefits as
violation of 29 U.S.C. § 1104(a)); George L. Flint, ERISA:
Fumbling the Limitations Period, 84 Neb. L. Rev. 313, 354-55
(2005) (arguing that federal courts should construe all claims for
benefits due as fiduciary claims). Even so, we need not address
whether Miller has properly asserted a fiduciary claim under
ERISA because, on appeal, Miller only pursues a non-fiduciary
claim for benefits under § 1132(a)(1)(B). His brief mentions
neither ERISA’s fiduciary provisions nor § 1132(a)(3).
Furthermore, Miller cites only case law pertaining to non-fiduciary
claims, even though fiduciary claims are governed by separate
precedent. Accordingly, we consider any fiduciary or § 1132(a)(3)

                                  -6-
claims to be waived on appeal and therefore limit our discussion to
his non-fiduciary claim for benefits under § 1132(a)(1)(B).

       B.     Accrual Date of a Non-Fiduciary ERISA Claim

        The parties agree that a six-year statute of limitations
applies, but dispute the relevant date of accrual.2 Fortis contends
that the District Court was correct in utilizing the terms of the LTD
plan in determining the accrual date. Fortis relies principally on
Doe v. Blue Cross & Blue Shield United of Wisconsin, 112 F.3d
869, 873-75 (7th Cir. 1997), in which the Seventh Circuit held that
an agreed-upon limitations period, embodied in an ERISA plan,
will control if the court considers it to be reasonable. Fortis’s
reliance on Doe, however, is misplaced. In Doe, the court
determined the applicable statute of limitations for a non-fiduciary
ERISA claim—here, we must determine the proper accrual date.

        As we have explained previously, the accrual date for
federal claims is governed by federal law, irrespective of the source
of the limitations period. See Romero, 404 F.3d at 221. To
determine the accrual date of a federal claim, we utilize the federal
“discovery rule” when there is no controlling federal statute. Id. at
222. Under this rule, a statute of limitations begins to run when a
plaintiff discovers or should have discovered the injury that forms
the basis of his claim. Id.

      In the ERISA context, the discovery rule has been
“developed” into the more specific “clear repudiation” rule

       2
        ERISA contains a statute of limitations for claims alleging
a breach of fiduciary duty, but no limitations period for non-
fiduciary claims. Syed v. Hercules Inc., 214 F.3d 155, 158-59 (3d
Cir. 2000). Moreover, ERISA, enacted in 1974, is not subject to 28
U.S.C. § 1658, which prescribes a default, four-year limitations
period for claims arising under acts of Congress enacted after
December 1, 1990. Id. at 158. For non-fiduciary claims, the
applicable statute of limitations is that of “the forum state claim
most analogous to the ERISA claim at hand.” Romero v. Allstate
Corp., 404 F.3d 212, 220 (3d Cir. 2005) (quoting Gluck v. Unisys
Corp., 960 F.2d 1168, 1180 (3d Cir. 1992)).

                                 -7-
whereby a non-fiduciary cause of action accrues when a claim for
benefits has been denied. Id. Notably, a formal denial is not
required if there has already been a repudiation of the benefits by
the fiduciary which was clear and made known the beneficiary. Id.
at 222-23; see also Carey v. Int’l Bhd. of Elec. Workers Local 363
Pension Plan, 201 F.3d 44, 48 (2d Cir. 1999) (“We . . . follow the
Seventh, Eighth, and Ninth Circuits in holding that an ERISA
claim accrues upon a clear repudiation by the plan that is known,
or should be known, to the plaintiff—regardless of whether the
plaintiff has filed a formal application for benefits.”). In other
words, some “event other than a denial of a claim” may trigger the
statute of limitations by clearly alerting the plaintiff that his
entitlement to benefits has been repudiated. Cotter v. E.
Conference of Teamsters Ret. Plan, 898 F.2d 424, 429 (4th Cir.
1990).

        Relying on Romero, Miller asserts that the clear repudiation
rule requires a formal denial of benefits to trigger the statute of
limitations. He contends that, since his application for upward
adjustment was not formally denied until March 2003, his cause of
action did not accrue until that time. This argument misconstrues
Romero, since the clear repudiation rule does not require a formal
denial to trigger the statute of limitations. To the contrary, the rule
includes other forms of repudiation when a beneficiary knows or
should know he has a cause of action. As Romero clearly states,
the clear repudiation rule “avoids a myriad of ills that would
accompany any rule that required the denial of a formal application
for benefits before a claim accrues.” Romero, 404 F.3d at 223
(emphasis added). We therefore reject Miller’s proposed
application of the clear repudiation rule.

        Still, we consider the clear repudiation concept to be useful
in this case, as it represents a refinement of the federal discovery
rule in the context of ERISA claims for benefits. Even though we
know of no case applying the concept directly to a benefit award,
we believe that the principles articulated in clear repudiation cases,
which reflect the federal discovery rule, are applicable here.3 With

       3
        We recognize that it slightly strains the word “repudiation”
to use it in the context of a benefit award, but we believe it

                                  -8-
this in mind, we now consider whether, before Miller’s claims were
formally denied, his rights under the LTD plan were “clearly
repudiated.”

       C.      Application of the Clear Repudiation Rule

        Applying the clear repudiation concept here, we observe
that an erroneously calculated award of benefits under an ERISA
plan can serve as “an event other than a denial” that triggers the
statute of limitations, as long as it is (1) a repudiation (2) that is
clear and made known to the beneficiary. Cf. Romero, 404 F.3d at
220-26 (applying the clear repudiation rule to plan amendment
resulting in a reduction in benefits). Regarding the first
requirement, an underpayment can qualify as a repudiation because
a plan’s determination that a beneficiary receive less than his full
entitlement is effectively a partial denial of benefits. Like a denial,
an underpayment is adverse to the beneficiary and therefore
repudiates his rights under a plan.              Cf. 29 C.F.R. §
2560.503-1(m)(4) (defining “adverse benefit determination” to
include “a denial, reduction, or termination of, or a failure to
provide or make payment (in whole or in part) for, a benefit”)
(emphasis added). Regarding the second requirement, repudiation
by underpayment should ordinarily be made known to the
beneficiary when he first receives his miscalculated benefit award.
See Gluck, 960 F.2d at 1180-81 (“[A]n employee’s receipt of
diminished payment gives immediate, obvious notice to an
employee that something is amiss . . . .”). At that point, the
beneficiary should be aware that he has been underpaid and that his
right to a greater award has been repudiated. See Cotter, 898 F.2d
at 429 (suggesting that benefit award can constitute a repudiation
of further benefits for purposes of accrual). The beneficiary should
exercise reasonable diligence to ensure the accuracy of his award.

         Based on this view of the clear repudiation rule, we hold
that Miller’s cause of action to adjust benefits accrued upon his
initial receipt of the erroneously calculated award. The award he
began receiving in 1987 constituted a repudiation of his right to

appropriate in order to preserve consistency with cases addressing
non-fiduciary claims for benefits.

                                  -9-
greater payment under the LTD plan. This repudiation should have
been clear to him upon initial receipt of payment in 1987—monthly
checks based on a simple calculation of sixty percent of his salary
should have alerted him that he was being underpaid. Miller
provides no basis for us to infer that the repudiation was unclear to
him at that time.4

        Our holding reflects the underlying goals of statutes of
limitations. As we noted in Romero, statutes of limitations are
intended to encourage “rapid resolution of disputes, repose for
defendants, and avoidance of litigation involving lost or distorted
evidence.” Romero, 404 F.3d at 223. These aims are served when
the accrual date anchors the limitations period to a plaintiff’s
reasonable discovery of actionable harm. This ensures that
evidence is preserved and claims are efficiently adjudicated. In
contrast, a statute of limitations not based on reasonable discovery
is effectively no limitation at all. Such would be the case if we
held that Miller’s cause of action accrued only upon Fortis’s formal
denial of his adjustment claim. Under this rule, a plaintiff could
receive benefit checks for decades before deciding to investigate
the accuracy of his award—a plaintiff could thereby trigger the
statute of limitations at his own discretion, creating an indefinite
limitations period. We decline to invite such a result.

        Relatedly, we decline to adopt a “continuing violation
theory” whereby a new cause of action would accrue upon each
underpayment of benefits owed under the plan. See Meagher, 856
F.2d at 1422-23 (holding that “issuance of each check” commenced
a new statute of limitations period). Cognizant of the purpose of
statutes of limitations, we have rejected this type of approach in
other ERISA cases. See Vernau v. Vic’s Mkt., Inc., 896 F.2d 43,
47 n.7 (3d Cir. 1990) (concluding that plaintiffs were on “inquiry
notice” of breach upon initial notice of calculation error); Gluck,
960 F.2d at 1181 (rejecting accrual rule that would “open the door
to a 48-year limitations period”); Henglein v. Colt Indus. Operating

       4
         Significantly, at oral argument, Miller’s attorney could
point to no facts that he would pursue in discovery upon remand to
help establish that Miller had reason to be unaware in 1987 that
there was an error.

                                -10-
Corp., 260 F.3d 201, 213-14 (3d Cir. 2001) (relying on Vernau and
Gluck to reject continuing violation approach because it would
give rise to indefinite limitations period).

       Our application of the clear repudiation rule is consistent
with the broad, beneficiary-protective goals of ERISA. We noted
in Romero that ERISA does not require “plan participants and
beneficiaries likely unfamiliar with the intricacies of pension plan
formulas and the technical requirements of ERISA, to become
watchdogs over potential plan errors and abuses.” Romero, 404
F.3d at 224 (internal quotation marks omitted). But this concern is
not implicated here. Miller does not complain about the notice
provided to him of his rights or entitlements under the LTD plan.
Instead, it is apparent that Miller simply failed to investigate his
benefit determination for fifteen years. Requiring him to do so
within six years of an erroneous payment does not impose on him
a burdensome oversight role. Instead, the need for Miller to be
vigilant was triggered only when his receipt of benefits alerted him
that his award had been miscalculated. Such vigilance does not
make Miller a “watchdog” for potential plan errors and abuses.5

        Finally, we recognize that our application of the clear
repudiation rule diverges from that of other courts confronting the
same issue. For example, in Miele v. Pension Plan of New York
State Teamsters Conference Pension Plan & Ret. Fund, 72 F. Supp.
2d 88 (E.D.N.Y 1999), the court required that a plan formally deny
plaintiff’s adjustment application before the statute of limitations
would begin to run. In Miele, like here, plaintiff alleged that plan
administrators erroneously calculated his benefits under an ERISA
plan. During litigation, the defendant argued that “a miscalculation
claim accrues on the date that a plaintiff is clearly and
unequivocally informed of the amount of his benefit.” Id. at 99.

       5
         We note that Miller’s conclusory assertion that an
intentional misrepresentation gave rise to the miscalculation does
not provide a basis for finding his claim timely. In the context of
his non-fiduciary claim for benefits, Miller’s vague allegation of
misrepresentation—based on a single mistaken communication
between Resorts and Mutual Benefit, and without any suggestion
of ongoing concealment—does not alter our analysis.

                               -11-
Although recognizing the “logic and appeal” of such a rule, the
district court rejected it. It explained that a miscalculation involved
an award rather than a denial of benefits, making it less likely that
a plaintiff would be “on notice of a possible claim.” Id. Therefore,
it held that a miscalculation claim would accrue only when a
plaintiff “inquire[s] about the amount of . . . benefits and [is] told
. . . that those benefits [were] correctly computed.” Id. (quoting
Kiefer v. Ceridian Corp., 976 F. Supp. 829, 843 (D. Minn. 1997)
(alterations in original); see also Novella v. Westchester County,
443 F. Supp. 2d 540, 545 (S.D.N.Y. 2006) (applying rule that
claim does not accrue until beneficiary “inquires about the
calculation of his benefits and the Plan rejects his claim that the
benefits were miscalculated”).

        We are not persuaded by this approach. We do not believe
that the accrual date in this case should derive from a bare
assumption that benefit recipients are ill-equipped to safeguard
their rights. Indeed, we require beneficiaries to safeguard those
rights upon a denial of benefits, and this case provides no
compelling reason to require less diligence after an award. Of
course, it is possible that a denial of benefits is more likely to incite
a beneficiary to action than an award; however, that possibility
alone cannot justify years of inaction. Moreover, we do not believe
that for there to be a clear repudiation, a plan must “confirm” a
benefit award to the beneficiary. Without any indication of
deficient notice, a beneficiary’s receipt of an award is sufficient to
inform him that the plan has determined his entitlement. Further
assurances should not ordinarily be necessary to make clear that a
plan believes its benefit determination is accurate.

                           IV. Conclusion

       In sum, when Miller began receiving benefits in April 1987
based on a salary of $690 per week, his right to receive benefit
payments based on a salary of $768 per week was clearly
repudiated. Therefore, his cause of action for adjustment of
benefits accrued in April 1987. Miller had until April 1993 to file
his complaint for adjustment of benefits. Since he did not do so
until 2003, his claim is time barred. Accordingly, we will affirm.

                                  -12-