Court Opinion

ID: 4026598
Source: CourtListenerOpinion
Date Created: 2016-08-19 17:00:27.164591+00
Date Added: 2024-06-11T12:17:09.339274
License: Public Domain

NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                                _______________

                                      No. 15-2813
                                    _______________

            LOU ANN WOERNER, as the beneficiary of Michael J. Woerner,
                                       Appellant

                                             v.

               FRAM GROUP OPERATIONS, LLC; THAT CERTAIN
           EMPLOYEE WELFARE BENEFIT PLAN SPONSORED BY FRAM
           OPERATIONS GROUP LLC c/o FRAM OPERATIONS GROUP LLC
                  ________________________________________

                     On Appeal from the United States District Court
                             for the District of New Jersey
                         (D.C. Civil Action No. 2-12-cv-06648)
                           District Judge: Stanley R. Chesler
                    ________________________________________

                       Submitted under Third Circuit LAR 34.1(a)
                                   on June 7, 2016

               Before: CHAGARES, KRAUSE, SCIRICA, Circuit Judges

                            (Opinion Filed: August 19, 2016)

                                       ___________

                                        OPINION
                                       ___________

KRAUSE, Circuit Judge

       
        This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7
does not constitute binding precedent.
      Lou Ann Woerner appeals a District Court order granting summary judgment in

favor of FRAM1 on her claim for benefits brought under the civil enforcement provision

of the Employee Retirement Income Security Act (ERISA). For the reasons set forth

below, we will vacate and remand.

                                            I.

      Mrs. Woerner’s husband, Michael Woerner, was diagnosed with brain cancer

while working at Honeywell International, Inc. and elected to take disability leave

beginning on June 24, 2011. Shortly thereafter, FRAM acquired Mr. Woerner’s business

unit from Honeywell, making him an employee of the new company.

      As part of its acquisition, FRAM decided to offer a CIGNA life insurance plan

(hereinafter “FRAM Plan” or “the Plan”) to its new employees, and on October 21, 2011,

FRAM distributed an email entitled “Message from FRAM Group HR – Benefits Update

for FRAM Group Employees” informing employees about the FRAM Plan. J.A. 273-74.

The email announced that “in the coming weeks all new plan options and details will be

communicated to you.” J.A. 273. “Once you receive and review the benefits details, you

may elect the plan of your choosing.” J.A. 273.

      1
        We use FRAM to refer collectively to Defendant-Appellees FRAM Group
Operations, LLC and That Certain Employee Welfare Benefit Plan Sponsored by FRAM
Operations Group LLC.
                                            2
       One week later, on October 28, FRAM sent a follow-up email containing a “brief

overview” of the Plan.2 J.A. 107. Coverage would be provided at the election of the

employee, and premiums would be set based on “[the] amount of coverage purchased and

[the] age [of the employee or spouse].” J.A. 108. The maximum electable coverage

would be equal to the lesser of “5 times [the employee’s] base salary” or $1,500,000.

J.A. 108. Employees would be permitted to “[p]urchase coverage for [their] spouse[s] in

$5,000 increments up to a maximum 50% of [their] coverage amount not to exceed

$250,000” and “for [their] children up to a maximum of $20,000.” J.A. 108. And

employees would be required to complete a health questionnaire and provide evidence of

insurability to qualify for coverage in excess of the “[g]uarantee [i]ssue amount” of

$350,000 for employees and $50,000 for spouses. J.A. 108. This overview did not,

however, contain the key term at issue here—an active-service condition that prescribed

that life insurance coverage would not begin until an employee completed one day

“performing his or her regular occupation for the Employer on a Full-time basis.” J.A.

132.

       Mr. Woerner enrolled in the FRAM Plan and selected coverage of $198,000. On

December 7, 2011, he received a confirmation statement listing Mrs. Woerner as his

       2
         In addition to the October 28 email, FRAM sent a subsequent email with
instructions on selecting coverage. That email informed employees that open enrollment
would run from November 30, 2011 to December 12, 2011, but it contained no additional
information regarding the terms of the Plan, such as the active-service condition.
                                             3
beneficiary and January 1, 2012 as the effective date of coverage and setting premiums at

$16.91 per pay period.

         The following day, Mrs. Woerner emailed Eric Schueneman, FRAM’s Director of

Compensation, Benefits & HRIS at FRAM, asking for further information about the Plan.

In her email, she requested “a copy of the 2012 Summary Plan Description” (SPD)3 and

inquired about the “guaranteed coverage” amount. J.A. 122. FRAM never responded to

these inquiries.

         Mr. Woerner passed away on February 24, 2012. It is undisputed that the

Woerners did not receive notice of the active-service condition while Mr. Woerner was

alive, and were not provided an SPD. The record also includes a number of internal

communications within FRAM and emails and documents exchanged between FRAM

and CIGNA containing information that was not shared with employees during Mr.

Woerner’s lifetime. In fact, CIGNA did not deliver a final copy of the SPD to FRAM

until March 2012, about a month after Mr. Woerner’s death, and the written contract

between FRAM and CIGNA was not executed until September 2012, another six months

later.

         In the interim, in April 2012, Mr. Schueneman sent Mrs. Woerner a copy of the

SPD and indicated that Mr. Woerner did not qualify for coverage because he never

         3
         An SPD is the primary means of disclosing the terms of an employee benefit
plan to its participants and beneficiaries. Curtiss-Wright Corp. v. Schoonejongen, 514
U.S. 73, 83 (1995) (stating that the purpose of an SPD is “to communicate . . . the
essential information about [a] plan”). The content of SPDs is governed by 29 U.S.C.
§ 1022 and 29 C.F.R. § 2520.102-3.
                                             4
returned to active service. Several weeks later, CIGNA officially denied Mrs. Woerner’s

claim for benefits in a letter that stated the following:

       Michael Woerner last worked on June 23, 2011 and was not in active
       service on January 1, 2012. The confirmation statement you submitted
       shows the effective date of his election of Voluntary Group Term Life
       Insurance under Policy FLX 964429 as January 1, 2012. Policy FLX
       964429 requires that an employee be actively at work in order for his
       coverage to be effective under the Policy.

       Therefore, since you have already received payment for Michael Woerner’s
       Basic Group Term Life Insurance [that he had as an employee of
       Honeywell International] under policy CWL 2000 and his election of
       Voluntary Group Term Life Insurance under Policy FLX 964429 never
       became effective, because he was never actively at work from January 1,
       2012[,] through his death on February 24, 2012, no Group Term Life
       Insurance is payable to you under Policy FLX 964429.

J.A. 128.

       On June 7, 2012, CIGNA sent a subsequent letter to Mrs. Woerner further

explaining the active-service condition and informing her of her right to appeal the denial

in writing within 60 days of receiving the denial letter. The letter provided an address

and indicated that the appeal could include the reason for the appeal, Mr. Woerner’s

name and social security number, and documentation that Mr. Woerner returned to active

service on or after January 1, 2012.

       Mrs. Woerner did not submit a written appeal and instead, on October 22, 2012,

filed suit against FRAM in the District of New Jersey raising various claims under

ERISA’s civil enforcement provision, 29 U.S.C. § 1132. She then filed an amended

complaint raising a single claim for recovery of benefits pursuant to ERISA §

502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B). The parties filed cross-motions for summary
                                               5
judgment, which the District Court granted in FRAM’s favor, concluding that the active-

service condition barred Mrs. Woerner from recovering benefits. Woerner v. FRAM Grp.

Operations, LLC, No. 12-6648 SRC, 2015 WL 3970199 (D.N.J. June 30, 2015). Mrs.

Woerner filed a timely appeal.

                                               II.

       The District Court had jurisdiction over this matter pursuant to 28 U.S.C. § 1331

and 29 U.S.C. § 1132(e), and we have jurisdiction pursuant to 28 U.S.C. § 1291.

We exercise plenary review over the District Court’s grant of summary judgment,

Smathers v. Multi–Tool, Inc./Multi–Plastics, Inc. Emp. Health and Welfare Plan, 298
F.3d 191, 194 (3d Cir. 2002), which is appropriate only if, viewing the facts in the light

most favorable to the non-moving party, “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.

       The parties do not dispute that FRAM established an ERISA-governed employee

welfare benefit plan, or even that the active-service requirement was part of the Plan in its

final form.4 Rather, the primary issue raised on appeal is what terms were part of the

       4
         In proceedings before the District Court, the parties stipulated that an ERISA
plan, offered by FRAM, existed as of January 1, 2012. The District Court should not
have accepted this stipulation as true because the existence of a plan is not a purely
factual question but a mixed question of law and fact. See Montrose Med. Grp.
Participating Sav. Plan v. Bulgar, 243 F.3d 774, 783 (3d Cir. 2001) (“[T]hough the
question whether a particular plan is covered by ERISA may not be one of pure law, it is
also not a ‘purely factual matter’ . . . .”). Parties are free to stipulate to the “‘surrounding
circumstances’” indicating the existence and terms of an insurance plan, Shaver v.
Siemens Corp., 670 F.3d 462, 475 (3d Cir. 2012) (quoting Donovan v. Dillingham, 688
                                                6
FRAM Plan at the time of Mr. Woerner’s death. According to the District Court, the

choice we are presented with is necessarily binary: either the terms disclosed to the

Woerners prior to Mr. Woerner’s death were sufficient to constitute an ERISA plan, such

that Mrs. Woerner prevails, or the formal Plan finalized and executed between FRAM

and CIGNA well after this date precludes Mrs. Woerner from recovering benefits. The

District Court concluded that because the disclosed terms were insufficient to constitute

an ERISA plan, the formal FRAM Plan containing the active-service requirement

necessarily controlled and FRAM was entitled to summary judgment.

       We disagree with this analysis for two reasons. First, the District Court applied

the incorrect standard to determine that the disclosures and representations made to

employees as of January 1, 2012 could not constitute an ERISA plan. Second, the

District Court erred in then resorting to a document that, according to the record, was not

even in FRAM’s possession until well after Mr. Woerner’s death.

       As to the first point, the District Court erred in treating the requirements detailed

in 29 U.S.C. § 1102(b) as the applicable test for determining whether particular terms can

be said to constitute an ERISA plan. ERISA contains an abundance of regulations

governing the form and function of employee benefit plans, such as those set forth in

§ 1102(b). But we have declined to construe an employer’s failure to conform to these

regulations as defeating employee claims as to the existence of a plan and their

F.2d 1367, 1373 (11th Cir. 1982) (en banc)), but they cannot stipulate to the ultimate
legal conclusion that the plan is governed by ERISA.
                                              7
entitlement to benefits. Rather, we have upheld even unwritten plans lacking these

requirements “in order not to frustrate the legitimate expectation of employees.” See

Frank v. Colt Indus., Inc., 910 F.2d 90, 97 (3d Cir. 1990).

       We have joined other Circuits in adopting the standard developed by the Eleventh

Circuit in Donovan v. Dillingham, 688 F.2d 1367 (11th Cir. 1982) (en banc), “to

determine whether informal written or oral communications . . . constitute a plan.”

Shaver v. Siemens Corp., 670 F.3d 462, 475 (3d Cir. 2012); see also Deibler v. United

Food & Commercial Workers’ Local Union 23, 973 F.2d 206, 209 (3d Cir. 1992). An

ERISA plan “is established if from the surrounding circumstances a reasonable person

can ascertain the intended benefits, a class of beneficiaries, the source of financing, and

procedures for receiving benefits.” Shaver, 670 F.3d at 475 (quoting Donovan, 688 F.2d

at 1373). In Gruber v. Hubbard Bert Karle Weber, Inc., we agreed with the Ninth Circuit

that this standard is not stringent and that “[a]n employer . . . can establish an ERISA plan

rather easily.” 159 F.3d 780, 789 (3d Cir. 1998) (quoting Credit Managers Ass’n of S.

Cal. v. Kennesaw Life & Accident Ins. Co., 809 F.2d 617, 625 (9th Cir. 1987)); see also

Winterrowd v. Am. Gen. Annuity Ins. Co., 321 F.3d 933, 939 (9th Cir. 2003) (“Very few

offers to extend benefits will fail the test laid out in Donovan, which requires neither

formalities nor elaborate details.”). The Donovan test does not even require that the

factors be satisfied by way of terms made explicit to employees; a plan exists if, from the

“surrounding circumstances,” such terms can be inferred. Deibler, 973 F.2d at 210

(quoting Donovan, 688 F.2d at 1373).

                                              8
       We cannot accept the District Court’s approach to ascertaining the terms of the

Plan for a second reason. After concluding that the documents disclosed to the Woerners

before Mr. Woerner’s death were “too unsubstantial to constitute an ERISA plan,” the

District Court turned to the provisions of the formal plan finalized and executed after Mr.

Woerner’s death as “the only terms that [it] ha[d] as a basis for a ruling” on the

applicability of the active-service requirement. Woerner, 2015 WL 3970199, at *8. This

turn cannot be reconciled with our precedent requiring consideration of “all . . . evidence

that would indicate the presence or absence of an informal employee benefit plan,” such

as “internal or distributed documents, oral representations, existence of a fund or account

to pay benefits, actual payment of benefits, a deliberate failure to correct known

perceptions of a plan’s existence, the reasonable understanding of employees, and the

intentions of the putative sponsor.” 5 Henglein v. Informal Plan for Plant Shutdown

Benefits for Salaried Emps., 974 F.2d 391, 400 (3d Cir. 1992); see also Kenney v. Roland

       5
           Mrs. Woerner asserts that Henglein offers guidance for ascertaining only the
existence of an ERISA plan and not its terms. It would make little sense, however, for a
court to rely on the factors detailed in Henglein to determine whether a plan exists, only
to then conclude that those factors have no bearing on the plan’s content. That said, we
recognize that there is some tension in our case law as to the significance of an
employer’s disclosures for purposes of ascertaining the terms of an ERISA plan. As
FRAM argues, an employer’s failure to properly disclose to its employees an amendment
to a formal plan does not itself render the new provisions inoperative and is, indeed,
“irrelevant in determining [the employees’] entitlement to benefits under the terms of the
. . . plan.” Hozier v. Midwest Fasteners, Inc., 908 F.2d 1155, 1170 (3d Cir. 1990). But
where, as here, the inquiry is whether a de facto employee benefit plan exists and what it
contains, the substance of the communications between the employer and employees and
the reasonable employee understandings that result are evidence from which the terms of
a plan may be inferred under the Donovan test. See Henglein, 974 F.2d at 399.
                                             9
Parson Contracting Corp., 28 F.3d 1254, 1258 (D.C. Cir. 1994) (describing distribution

of a plan summary and withholding of employee wages as among the “‘surrounding

circumstances’ from which a court—like the employees—could reasonably infer that [the

employer] established or maintained a plan subject to ERISA”) (quoting 29 U.S.C.

§ 1002(2)(A)). Moreover, the version of the Plan delivered to and executed by FRAM

after Mr. Woerner’s death cannot provide a basis for ascertaining Mrs. Woerner’s

benefits simply by virtue of the fact it was eventually finalized, nor does anything in the

record support rewarding FRAM’s dilatory practices in this manner.6 See Butero v.

       6
          On this record, we cannot agree with FRAM that Mrs. Woerner failed to exhaust
her administrative remedies by filing suit in the District of New Jersey instead of
appealing her denial of benefits to CIGNA. Although “[t]he courts of appeals have
uniformly required that participants exhaust internal review before bringing a claim for
judicial review under § 502(a)(1)(B),” Heimeshoff v. Hartford Life & Accident Ins. Co.,
134 S. Ct. 604, 610 (2013), “where a plaintiff reasonably interprets the plan terms not to
require exhaustion and, as a result, does not exhaust her administrative remedies, the case
may proceed in federal court,” Kirkendall v. Halliburton, Inc., 707 F.3d 173, 180 (2d Cir.
2013); accord Watts v. BellSouth Telecomms., Inc., 316 F.3d 1203, 1209 (11th Cir.
2003). Here, Mrs. Woerner appears to have reasonably believed she was not bound by
the claims procedure, not only because the procedure was not communicated to her until
after her husband’s death (when she was sent the SDP in March 2012 and the CIGNA
denial letter in June 2012), but also because, as far as she knew, it was not part of the
Plan under which she contends she is entitled to benefits. See 29 C.F.R. § 2560.503–1(l)
(providing that a claimant “shall be deemed to have exhausted the administrative
remedies available under the plan and shall be entitled to pursue any available remedies
under section 502(a) . . . [if] the plan has failed to provide a reasonable claims procedure
that would yield a decision on the merits of the claim” (emphasis added)); see also Zupa
v. Gen. Elec. Co., No. 3:16-CV-00217 (CSH), 2016 WL 3976544, at *3 (D. Conn. July
22, 2016) (“Reference to the plan document when assessing a claimant’s exhaustive
efforts is necessary . . . because ‘exhaustion in the context of ERISA requires only those
administrative appeals provided for in the relevant plan or policy.’” (quoting Thomas v.
Verizon, No. 04-5232CV, 2005 WL 3116752, at *1 (2d Cir. Nov. 22, 2005) (in turn
quoting Kennedy v. Empire Blue Cross & Blue Shield, 989 F.2d 588, 594 (2d Cir. 1993)).
These are unusual circumstances and we decline to address whether the same result
                                                10
Royal Maccabees Life Ins. Co., 174 F.3d 1207, 1214–15 (11th Cir. 1999) (holding that an

ERISA plan existed notwithstanding underwriter’s refusal to issue life insurance policy

months after coverage putatively began, because “whether a plan is ‘established’ is

determined by the employer’s conduct, not that of any other ERISA entity” and “[the]

employer represented to employees that life insurance was available, took payroll

deductions to pay premiums, in fact paid premiums, and obviously intended for life

insurance to take effect”) (citing, among other cases, Henglein, 974 F.2d 391; Donovan,

688 F.2d 1367)).

                                      *      *      *

       For the foregoing reasons, we will vacate the District Court’s grant of summary

judgment to FRAM and remand for application of the correct standard as to the existence

and terms of the Plan at the time that Mrs. Woerner’s benefits, if any, vested.

would be warranted in other cases, such as where a plan is in effect and merely amended
as to the claims procedure after a claimant is denied benefits but before she commences
legal action. Cf. Eastman Kodak Co. v. STWB, Inc., 452 F.3d 215, 223 n.10 (2d Cir.
2006) (holding that “an ERISA benefits claimant is not required to exhaust a claims
procedure that was adopted only after a suit to recover benefits has been brought” but
“express[ing] no view as to whether 29 U.S.C. § 2560.-503-1(l-) applies . . . where an
ERISA-compliant claims procedure is adopted after benefits are first sought, but prior to
the filing of suit”).
                                            11