Claims within framework of federal civil procedure

April 18, 2011

By Mark D. DeBofsky

DeBofsky is a name partner of Daley, DeBofsky & Bryant. He handles civil and appellate litigation involving employee benefits, disability insurance and other insurance claims and coverage . He can be reached at [email protected].

Although the Federal Rules of Civil Procedure are all-encompassing when it comes to civil matters adjudicated in federal court, when it comes to employee benefit cases brought under the Employee Retirement Income Security Act (ERISA) statute, 29 U.S.C. § 1132(a), courts often set aside basic federal civil procedure. The recent 2nd U.S. Circuit Court of Appeals ruling in O'Hara v. National Union Fire Ins.Co., 2011 U.S.App.LEXIS 7675 (2nd Cir. April 14, 2011) goes a long way toward restoring ERISA claims litigation within the framework of the Federal Rules of Civil Procedure. In this ruling Patricia O'Hara, a longtime office administrator for ITT Flygt Corp., participated in a voluntary disability plan sponsored by her employer. That plan entitled her to disability benefits if she suffered an accidental injury resulting in total and permanent disability that prevented her from engaging in "each and every occupation or employment … for which [she was] reasonably qualified by reason of [her] education, training or experience" within one year of the accident and such disability continued for a year. In 2001, while at work, O'Hara suffered a head injury when she tripped and fell. Although she returned to work, O'Hara's behavior became unprofessional and she was unable to maintain a satisfactory working relationship with her co-workers. As a result, she received a performance warning and was ultimately fired in June 2002 because of her performance and personal interaction with other ITT employees.

Following the fall, O'Hara underwent neurological evaluation and treatment for headaches, changes in mood and decreased executive functioning. She also had documented complaints about memory and maintaining stamina. Within a month after her discharge from employment, O'Hara's neurologist deemed her completely disabled due to a post-traumatic headache disorder. O'Hara was also treated by a pain specialist who agreed with the neurologist's diagnosis and who reported that treatment had been ineffective. Although two doctors who examined O'Hara in relation to a workers' compensation claim issued relatively benign findings, the New York State Workers' Compensation Board ultimately granted O'Hara disability benefits. O'Hara also filed a claim under the National Union policy in 2004 which was adjudicated by AIG. In processing that claim, O'Hara underwent an independent evaluation performed by a neurologist who concurred that she was disabled from her occupation but suggested she could handle a low stress job on a part-time basis.

Consequently, the claim was denied based on an assertion of a lack of objective evidence of disability from any employment and an absence of certification that O'Hara's disability was permanent. O'Hara appealed and submitted further evidence of total and permanent disability from any employment. Nonetheless, the claim was denied. O'Hara then brought suit; however, the district court granted National Union's motion for summary judgment.

The appeals court reversed. First, the court determined that the district court improperly granted summary judgment. The court recognized that in some ERISA cases the parties make a "motion for judgment on the administrative record;" however, the court reiterated its ruling in Muller v. First Unum Life Ins. Co ., 341 F.3d 119, 124 (2d Cir. 2003) that no such motion is authorized by the Federal Rules of Civil Procedure. Thus, unless the parties stipulate to a bench trial on the papers permitting the court to make findings of fact and enter conclusions of law, under a summary judgment approach, the court must deny the motion if a genuine issue of material fact exists. Since the parties did not enter into a stipulation for a bench trial on the papers, the court concluded that the district court failed to properly apply summary judgment principles. Despite the application of a de novo standard of review where the district court had concluded "the plan administrator's decision was supported by 'sufficient evidence,' " ( O'Hara , 697 F. Supp. 2d at 478-79, 482), the appeals court found the "sufficient evidence" paradigm effectively triggered deferential review. Further, the appeals court held that regardless of whether the ERISA standard of review is de novo or deferential, "a district court may not grant a motion for summary judgment if the record reveals a dispute over an issue of material fact. The critical question for the district court was whether there was a genuine dispute of material fact, not whether the administrator's decision was supported by sufficient evidence on the merits." *15. That error alone triggered the need for a remand to the district court.

However, the court went further and addressed additional issues. First, National Union maintained that the disability onset, if there was a disability, did not occur within one year of the accidental injury since O'Hara had returned to work and was present at work during a period during which she now claimed disability. However, the court rejected that argument based on Locher v. Unum Life Ins. Co. of America , 389 F.3d 288, 297 (2d Cir. 2004). In that case, the claimant for disability benefits was suffering from chronic fatigue syndrome and struggled to keep working. However, as her illness worsened, she was counseled and ultimately fired by her employer for missing work due to unscheduled absences and medical appointments during the workday. The court concluded that the plaintiff was disabled despite her continued employment. The court held:

One may be at one's place of employment but not able to work. An employee's continued presence at her place of employment does not preclude a finding of disability when there is evidence that the employee is incapable of performing her job. If there is a genuine dispute about whether the employee was disabled, this question is for the fact finder.

Nonetheless, because O'Hara was fired nearly 15 months after her accident, the court needed to conduct a further analysis to see whether she presented sufficient evidence to prove she became disabled within 12 months of the accident. The plaintiff pointed to her neurologist's records documenting, within one year of the injury, that she was suffering from severe headaches and memory impairments. The appeals court also pointed to the district judge's findings that the record contained "substantial evidence" that "the onset and intensification of impaired executive functions stemming from her fall … caused her to be disabled from her job as an administrative assistant at ITT on or before March 15, 2002. O'Hara , 697 F. Supp. 2d at 479. The district court had also found that within a few months of the accident, O'Hara had "a marked inability to get along with her own co-workers" and such deficiency was "both pronounced and significant." Id . at 479-80. Hence, a reasonable fact finder could conclude that within one year of the accident, O'Hara's head injury prevented her from "successfully interacting with others in a work environment," thus demonstrated a genuine issue of material fact sufficient to preclude the entry of summary judgment. Although National Union argued in response that there was substantial contrary medical evidence disputing the opinions of the treating doctors, the court found that National Union had not presented "incontrovertible evidence" that "so utterly discredits" Dr. Mann's evaluation that no reasonable fact finder could accept Dr. Mann's opinion as true. See Cameron v. City of New York , 598 F.3d 50, 58 (2d Cir. 2010).

In addition to Locher and this ruling , other courts have concluded that one can be disabled despite being at work. For example, the 7th U.S. Circuit Court of Appeals ruled in Hawkins v. First Union Corp. Long Term Disability Plan, 326 F.3d 914, 918 (7th Cir. 2003) that there was no "logical incompatibility between working full time and being disabled from working full time… " The court added:

A desperate person might force himself to work despite an illness that everyone agreed was totally disabling. Perlman v. Swiss Bank Corp. Comprehensive Disability Protection Plan , 195 F.3d 975, 982-83 (7th Cir. 1999); Wilder v. Apfel , 153 F.3d 799, 801 (7th Cir. 1998); Wilder v. Chater , 64 F.3d 335, 337-38 (7th Cir. 1995); Jones v. Shalala , 21 F.3d 191, 192-93 (7th Cir. 1994). Yet even a desperate person might not be able to maintain the necessary level of effort indefinitely. Hawkins may have forced himself to continue in his job for years despite severe pain and fatigue and finally have found it too much and given it up even though his condition had not worsened. A disabled person should not be punished for heroic efforts to work by being held to have forfeited his entitlement to disability benefits should he stop working. Id.

Another ruling along the same lines is DeLisle v. Sun Life Assur. Co of Canada, 558 F.3d 440 (6th Cir. 2009), where the court found a claimant's work attempts and an application for unemployment compensation following the alleged onset date of disability due to head trauma suffered in a car accident did not undermine the plaintiff's claim.

But the most interesting part of this ruling is the civil procedure discussion. The only direction given to courts as to how ERISA cases are to be litigated is contained in the statute enumerating potential causes of action, which authorizes benefit claimants to bring a "civil action" to redress their grievances. Rule 2 of the Federal Rules of Civil Procedure points out that there is but one form of action, the civil action; and Rule 1 states that the Rules govern all civil actions with certain enumerated exceptions, none of which mention ERISA. This court's recognition of summary judgment jurisprudence that precludes the entry of judgment when genuine issues of fact are in dispute is basic civil procedure. And it offers a directive to the lower courts that many seem to have forgotten. Many ERISA cases can be efficiently adjudicated by a stipulated trial on the papers, but without such a stipulation, disputes in the evidence appearing in the record preclude the entry of summary judgment for either party.