Court Opinion

ID: 2780527
Source: CourtListenerOpinion
Date Created: 2015-02-19 18:00:36.32596+00
Date Added: 2024-06-11T11:26:47.220049
License: Public Domain

NOT PRECEDENTIAL

                     UNITED STATES COURT OF APPEALS
                          FOR THE THIRD CIRCUIT
                             ________________

                                   No. 13-4141
                                ________________

                              PAULA M. CAMPBELL,

                                              Appellant

                                         v.

                 SUSSEX COUNTY FEDERAL CREDIT UNION,
              an employee welfare benefit plan, and Plan Administrator

                    Appeal from the United States District Court
                              for the District of Delaware
                       (D.C. Civil Action No. 1-10-cv-00710)
                   District Judge: Honorable Richard G. Andrews
                                  ________________

                              Argued October 21, 2014

            Before: AMBRO, FUENTES, and NYGAARD, Circuit Judges

                         (Opinion filed: February 19, 2015)

Shannon L. Brainard, Esquire
Richard R. Wier, Jr., Esquire (Argued)
Marshall, Dennehey, Warner, Coleman & Goggin
1220 North Market Street
P.O. Box 8888, 5th Floor
Wilmington, DE 19801

      Counsel for Appellant

Michael A. Graziano, Esquire (Argued)
F. Joseph Nealon, Esquire
Eckert, Seamans, Cherin & Mellott
1717 Pennsylvania Avenue, N.W., 12th Floor
Washington, DC 20006

Brya M. Keilson, Esquire
Gellert Scali Busenkell & Brown
913 North Market Street, 10th Floor
Wilmington, DE 19801

       Counsel for Appellee

                                        OPINION*

AMBRO, Circuit Judge

       Paula Campbell appeals from a judgment dismissing her claim against her former

employer, Sussex County Federal Credit Union (“Sussex”), under the Employee

Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq. The District Court

granted summary judgment for Sussex after concluding Campbell’s top-hat plan1 is

unenforceable for lack of consideration. Because Campbell has raised a triable issue of

fact on this issue, we reverse and remand.

I.     FACTS AND PROCEDURAL HISTORY

       Campbell began working for Diamond State in 1983 and was promoted to the

position of “Manager/President” in 1998. She engaged a lawyer in 2005 to draft a

*
 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
1
 “A top hat plan is a ‘plan which is unfunded and is maintained by an employer
primarily for the purpose of providing deferred compensation for a select group of
management or highly trained employees.’” Miller v. Eichleay Eng’rs, Inc., 886 F.2d 30,
34 (3d Cir. 1989) (quoting 29 U.S.C. §§ 1051(2), 1081(a), 1101(a)(1)).
                                             2
supplemental retirement-benefits plan on her behalf (the “Plan” or the “Campbell Plan”).

The Plan, whose stated “purpose . . . [was] to reward [Campbell] for her loyal and continuous

service to the Company,” required Diamond State or its successor to provide lifetime health-

insurance benefits to Campbell and her husband at its “sole cost and expense” upon

Campbell’s retirement from the Company. When Diamond State’s board of directors

approved the Plan in December 2005, Campbell had no imminent retirement plans. Still, she

believed she could avail herself of the Plan’s benefits even if she “retired the next day.”

         In the fall of 2007, Campbell resigned from Diamond State to accept a position at

Sussex. In addition to her salary, Sussex provided Campbell—as it did all of its active, full-

time employees—with a cafeteria benefits plan allowing her to allot a fixed monthly

allowance of $4502 toward: (1) paying health-insurance premiums, (2) funding a flexible

spending account, (3) funding a 401K plan, and/or (4) receiving additional compensation.

Because Campbell and her husband’s premiums were now covered by Diamond State, she

had no reason to allocate any portion of this allowance toward health insurance. Instead, she

allocated $50 of her 2009 allowance to her flexible spending account and $400 to

compensation, which she did in fact receive through April 2009.

         In November 2008, Sussex and Diamond State entered into a merger agreement under

which Sussex assumed all liabilities of Diamond State on March 31, 2009. Campbell claims

that Sussex’s CEO, Pamela Fleuette, “agreed . . . [both] prior to and after the merger . . . that

th[e Plan] would absolutely be honored” by Sussex as long as Campbell no longer received

additional compensation under Sussex’s cafeteria plan. Fleuette denies promising Campbell

that Sussex would honor the Plan indefinitely but acknowledges telling Campbell that Sussex

2
    The amount of the fixed monthly allowance differed by year; in 2009 it was $450.
                                                3
would pay for the portion of her and her husband’s premium not covered by her monthly

allowance through the end of 2009. After enrolling in Sussex’s group Blue Cross Blue

Shield (BCBS) plan, Campbell no longer received her prior monthly allowance.

       On October 7, Sussex fired Campbell alleging performance reasons. Ten days later it

sent Campbell a letter, signed “John W. Lewis, President,” stating that if she wished to

continue her Sussex health coverage under the Consolidated Omnibus Budget Reconciliation

Act (COBRA), she was required to return her COBRA election and monthly premium. On

October 31, Campbell wrote back to Lewis “to confirm [Sussex’s] intentions regarding [her]

Retirement Plan contract” with Diamond State and to notify him that legal counsel had

advised her that Sussex was obligated to honor the Plan as the successor to Diamond State.

       Sussex’s outside counsel, Eric Howard, replied on Lewis’s behalf on November 6,

stating that “[t]o the extent [Campbell] want[ed] a blanket statement that Sussex . . . w[ould]

honor any and all obligations of Diamond State arising under [the Plan] and then let [her] fill

in the blanks as to what [she] think[s] they are, [he] w[ould] not do that.” Campbell replied

on November 10 to “clarify” her contention that the Plan required Sussex to provide “health

insurance coverage for [herself] and her husband for the rest of [her] life, at its sole expense.”

       On November 16, Howard sent Campbell another letter. He wrote that “[w]hile [she]

again fail[ed] explicitly to state what it is [she] contend[ed] Sussex . . . [was] obligated to

do,” “to the extent [she was] requesting . . . reimburse[ment] for [her] health insurance

premiums, [Sussex] w[ould] not do that.” When negotiations stalled, Campbell’s lawyer sent

Howard “a written request for benefits” asking that he “advise that this request complie[d]

with the requirement [of ¶ 3(a) of the Plan] that the request go to the President of the

Company.” Despite subsequent letters and phone calls, no further response from Howard or
                                                 4
any other Sussex representative was sent to Campbell or her lawyer.

       Campbell filed suit against Sussex alleging violations of ERISA and various state

common-law claims in the U.S. District Court for the District of Delaware in August 2010.

After the District Court dismissed all but Campbell’s non-fiduciary ERISA claim,3 Sussex

moved for summary judgment, arguing (1) the Plan is unenforceable because it lacked

consideration, (2) Campbell failed to exhaust her administrative remedies before filing suit,

and (3) the Plan does not require Sussex to cover Campbell or her husband’s health-

insurance premiums. In September 2013, the District Court granted summary judgment on

the first ground, mooting Sussex’s remaining arguments. This appeal followed.

II.    LEGAL STANDARD

       We have plenary review over the District Court’s grant of summary judgment.

See Atkinson v. LaFayette College, 460 F.3d 447, 451 (3d Cir. 2006). Summary

judgment should be granted only if the record establishes “that there is no genuine issue

as to any material fact and that the movant is entitled to judgment as a matter of law.”

Fed. R. Civ. P. 56(c). Any contested facts will be resolved in the nonmoving party’s

favor. Anderson v. Liberty Lobby, 477 U.S. 242, 255 (1986).

III.   ANALYSIS

       A.     Consideration

       In granting Sussex’s motion for summary judgment, the District Court ruled that

the Plan is unenforceable for lack of consideration because Campbell “was not required

to work for any additional period of time . . . after the Plan was adopted,” and

3
 Campbell does not appeal this dismissal order. Nor does she appeal the District Court’s
denial of her cross-motion for summary judgment.
                                              5
“Campbell’s past performance as an employee [of] Diamond State could not have served

as consideration to support the formation of a contract.” Campbell argues on appeal that

the District Court “came to the wrong conclusion that the Plan’s [only] purpose was to

reward [her] for her past performance.”

       The latter argument is more persuasive. Even if Campbell could have retired

immediately and still received health-insurance benefits, she did not indicate any present

intent to do so at the time of the Plan’s adoption. Further, Diamond State presumably

could have denied Campbell coverage had it fired her before she left the Company.

Because a reasonable trier of fact could find that the consideration for the Plan took the

form of Campbell’s “continuous services and loyalty” up until her actual date of

retirement, see, e.g., Williams v. Wright, 927 F.2d 1540, 1551 (11th Cir. 1991), the

District Court erred in granting Sussex summary judgment on this ground.

       B.     Sussex’s Alternative Arguments for Affirmance

       Sussex makes four alternative arguments for affirmance. As we may affirm the

District Court’s decision “on any ground supported by the record,” Anderson, 477 U.S. at

255, we consider each of these arguments in turn.

              1.     Exhaustion of Administrative Remedies

       First, Sussex asserts that Campbell failed to exhaust her administrative remedies

because neither Campbell nor her lawyer’s letters were sent directly to Sussex’s President

as required by ¶ 3(a) of the Plan, and Campbell never appealed any initial denial of

benefits to Sussex’s Secretary as required by ¶ 3(c). Neither argument is persuasive.

       With respect to Campbell’s failure to address her letter directly to Sussex’s

                                             6
President, Sussex failed to preserve this issue by raising it for the first time in its reply

brief in the District Court.4 See Del. L.R. 7.1.3(c)(2) (“The party filing the opening brief

shall not reserve material for the reply brief which should have been included in a full

and fair opening brief.”). Moreover, Sussex only raised the matter after repeatedly

asserting in its motion papers that it did not “dispute the sufficiency of the October 31,

2009 letter . . . to satisfy [Campbell’s] alleged obligation with regard to paragraph 3(a) of

the Diamond State Plan.”

       Sussex’s argument that Campbell should have appealed any initial denial of

benefits to Sussex’s Secretary also fails to carry the day. Under Department of Labor

regulations, when a plan administrator “fail[s] . . . to establish or follow claims

procedures” in denying a claim for benefits, the “claimant shall be deemed to have

exhausted the administrative remedies under the plan.” 29 C.F.R. § 2560.503(l).

Regardless which letter qualified as Campbell’s initial claim for benefits, Sussex never

complied with ¶ 3(b) of the Plan because it failed to advise Campbell of, among other

things, (1) “the specific reason or reasons for [its] denial [of a claim],” (2) “the specific

reference to pertinent provisions of th[e Plan] on which such denial is based,”

(3) “appropriate information as to the steps to be taken . . . to submit the claim for

review,” and (4) “the time limits for requesting a review.” Thus, Campbell was not

required to exhaust any additional administrative remedies before bringing suit.

              2.      Statute of Limitations

4
 Although waiver is not an issue addressed by the parties, it is “beyond cavil that we
may . . . raise the issue of waiver sua sponte.” United States v. Gimbel, 782 F.2d 89, 92
n.5 (7th Cir. 1986).
                                               7
       Second, Sussex argues that Campbell’s ERISA claim is time-barred and that the

District Court erroneously applied the doctrine of equitable tolling to conclude otherwise.

Other courts of appeals, however, have applied equitable tolling to situations like here

where a plan administrator has failed to comply with regulatory notice requirements in

denying a plan participant’s claim for benefits. See, e.g., Ortega Candelaria v.

Orthobiologics LLC, 661 F.3d 675, 680 (1st Cir. 2011) (concluding that the plaintiff was

entitled to equitable tolling because the defendant failed “to provide [the plaintiff] with

notice of his right to bring suit under ERISA, and the time frame for doing so, when it

denied his request for benefits”); Veltri v. Bldg. Serv. 32B-J Pension Fund, 393 F.3d 318,

322 (2d Cir. 2004) (“[F]ailure to comply with the regulatory obligation to disclose the

existence of a cause of action to the plan participant whose benefits have been denied is

the type of concealment that entitles [the] plaintiff to equitable tolling of the statute of

limitations.”). Hence the District Court did not abuse its discretion in equitably tolling

Campbell’s ERISA claim.

              3.      Successor Liability

       Sussex next asserts that it did not assume liability for the Campbell Plan when it

merged with Diamond State. Although Sussex acknowledges that a surviving

corporation in a merger ordinarily assumes all debts and liabilities under existing pension

plans regardless of pre-merger notice, see Teamsters Pension Trust Fund of Phila. &

Vicinity v. Littlejohn, 155 F.3d 206 (3d Cir. 1998), it contends that “the balance of

equities weighs against imposing successor liability on Sussex for the Campbell Plan.”

       Even if our precedent allows for such an equitable defense to successor liability,

                                               8
“[d]etermining equities in the first instance is a seldom fit grist for the appellate mill.” In

the Matter of Quenzer, 19 F.3d 163, 165 (5th Cir. 1993). It would be particularly

inappropriate to do so in this case because Sussex never moved for summary judgment in

the District Court on this ground.

              4.      Compliance with Contractual Obligations

       Finally, Sussex argues that it is not required to pay for Campbell’s health

insurance because its current BCBS plan bars coverage for all but full-time employees. It

points to ¶ 1(a) of the Plan, which states that “[i]n the event the Company should change

its health plan in the future, it shall provide coverage at least equivalent to the coverage

currently in effect for [Campbell] under its new plan.” (emphasis added). Campbell

responds that ¶ 1(a) requires Sussex to provide coverage to what was “currently in effect”

for Diamond State employees as of the Plan’s adoption date, not what exists for Sussex

employees as of today’s date. Construing the Plan as a whole, we conclude that

Campbell’s reading of the Plan language—Diamond State was required to provide

coverage at least equivalent to what she enjoyed at the time of her Plan’s adoption—is

equally plausible (if not more reasonable) than Sussex’s interpretation.

       We also reject Sussex’s contention that reference to a prior retirement plan of

Diamond State and its former manager Eva Thomas conclusively resolves this ambiguity.

While Sussex contends that a comparison of the two plans’ language supports its

position, these minor wording differences do not allow us to draw any definitive

conclusions about Diamond State’s intent to provide Campbell and Thomas with

different coverage. Indeed, other extrinsic evidence in the record supports the opposite

                                               9
conclusion. See J.A. 330 (noting that at its December 23, 2005 meeting, the Diamond

State board voted “to have the same benefits extended to [Campbell] that ha[d] been

extended to [Thomas]”).

       Because a factfinder must weigh this conflicting evidence at trial, we decline to

use this alternative ground to affirm the District Court’s judgment.

                                     * * * * *

       For the above reasons, we reverse the District Court’s entry of summary judgment

and remand for further proceedings consistent with this opinion.

                                            10