On March 15, the U.S. Court of Appeals for the Fifth Circuit withdrew its prior opinion in Cloud v. Bert Bell/Pete Rozelle NFL Player Retirement Plan[1] and replaced it with a new opinion.[2] The outcome remained the same, however.[3]

The court overturned a ruling issued by the U.S. District Court for the Northern District of Texas following a bench trial that contained shocking revelations about how the National Football League adjudicates disability claims filed by football players who have incurred debilitating injuries during their playing careers.

As will be discussed below, the disability benefit plan’s breach of fiduciary duty that it owed to the plan participant was so egregious that the district court’s ruling should have been upheld.

Michael Cloud, who played professional football for eight years as a running back for several NFL teams, suffered multiple concussions while playing, although his injuries occurred before a concussion protocol was established by the league.

Although there was no dispute that Cloud qualified for disability benefits, he was denied the highest level of benefits applicable for players who become disabled while still actively playing football or soon thereafter. The difference was between annual benefits of $135,000 and annual benefits of $265,000, as well as benefits in arrears of over a million dollars.

The reason Cloud’s application was denied was due to his failure to establish “changed circumstances,” which he needed to prove in order to be reclassified.

In its most recent opinion, the Fifth Circuit described the lower court’s findings as “devastating in detail,” and commended the lower court for exposing “the NFL Plan’s disturbing lack of safeguards to ensure fair and meaningful review of disability claims brought by former players who suffered incapacitating on-the-field injuries, including severe head trauma.”

Despite agreeing that Cloud may have been denied a full and fair review, and that he was probably entitled to the highest level of benefits, the court upheld the plan’s finding that Cloud was not entitled to reclassification because he could not show changed circumstances between his 2014 and 2016 benefit applications.

The court discussed the workings of the plan and explained that a player is presumptively entitled to receive total and permanent disability benefits if awarded Social Security disability benefits. However, the plan distinguishes between “active” and “inactive” total and permanent disability benefits.

Active benefits are paid at the highest tier and are available for players who suffer debilitating injuries that preclude them from playing football during or within six months of when a disabling injury occurs on the playing or practice field. The plan also specifies that active football benefits are also payable for a player who becomes disabled due to repetitive concussions.

The court also described the claim process, which was shown at Cloud’s trial to have been mostly outsourced to the Groom Law Group, a private law firm that makes recommendations to the board governing the plan.

The Fifth Circuit described the record as painting “a bleak picture of how the Board handles appeals,” observing that 50 or more cases are decided en masse, with the findings written up by Groom. The court noted, “Board members do not see or review the letters before they are sent to the player.”

The course of Cloud’s claim was then described in detail beginning in 2009 after Cloud experienced multiple concussions and bounced from team to team before he was cut from football altogether. In 2014, after being awarded Social Security disability benefits, Cloud applied for reclassification of his benefits to total and permanent.

Benefits were granted but approved under the “inactive” classification based on a conclusion that Cloud’s disability did not commence shortly after he suffered debilitating injuries. Cloud did not appeal that determination.

Instead, he filed a new application for reclassification to an active football disability in 2016. Cloud submitted the same evidence he had previously submitted, although he added a 2012 doctor report stating he was cut from the NFL due to mental disorders arising from his concussions, as well as additional allegations that were not included in the prior application.

The 2016 application was denied due to Cloud’s failure to show changed circumstances and because Cloud’s Social Security award deemed him disabled on Dec. 31, 2008, which was more than six months after Cloud’s most recently reported concussion in 2004. Cloud appealed to the Fifth Circuit, claiming he did not appreciate the full extent of his disability when he previously applied; however, his appeal was unsuccessful.

Although the appeals court cited the district court’s expose of the multiple errors in the 2014 denial decision, including the absence of board review of the determination, the Fifth Circuit still sided with the NFL due to the absence of changed circumstances supporting a different outcome.

The NFL’s disability benefit plan explicitly states under Section 5.7(b) that a player already awarded total and permanent benefits is not eligible for reclassification “unless the Player shows by evidence found by the Retirement Board or the … Committee to be clear and convincing that, because of changed circumstances, the Player satisfies the conditions of eligibility for a benefit under a different category of T&P benefits.”

Because Cloud failed to make such a showing, the court sided with the defendant.

The Fifth Circuit faulted Cloud for not appealing the 2014 benefit determination, but other than describing what was wrong with that decision and with the claim process, not a word in the opinion mentions the board’s fiduciary responsibilities, which are delineated in Employee Retirement Income Security Act Section 404(a).[4]

As the U.S. Supreme Court pointed out in Metropolitan Life Insurance Co. v. Glenn in 2008,[5] however:

ERISA imposes higher-than-marketplace quality standards on insurers. It sets forth a special standard of care upon a plan administrator, namely, that the administrator “discharge [its] duties” in respect to discretionary claims processing “solely in the interests of the participants and beneficiaries” of the plan, … it simultaneously underscores the particular importance of accurate claims processing by insisting that administrators “provide a ‘full and fair review’ of claim denials,” … and it supplements marketplace and regulatory controls with judicial review of individual claim denials.[6]

What the district court described in Cloud is so shocking and contrary to the goal of accurate claims processing that the outcome of this case turns ERISA’s purpose on its head.

The plan fiduciaries knew they were dealing with a participant who suffered from mental impairments that arose from playing football and who would likely not have understood what he needed to prove to establish entitlement to active total and permanent benefits.

Rather than placing blame on Cloud, the plan’s fiduciary breaches were so egregious that there should have been no obligation to demonstrate changed circumstances because the 2014 decision was defective.

Since the district court’s ruling for Cloud demonstrates the availability of evidence that would have qualified Cloud for “active football” total and permanent benefits, the plan should have advised Cloud what he needed to do to perfect his claim.

A seminal 1990 ruling from the U.S. Court of Appeals for the D.C. Circuit in Eddy v. Colonial Life Insurance Co. of America, imposes an affirmative duty on fiduciaries to communicate material facts affecting a beneficiary’s interests regardless of whether there is a specific inquiry.[7]

Another ruling from the U.S. Court of Appeals for the Eighth Circuit in Kalda v. Sioux Valley Physician Partners Inc. in 2007[8] likewise observed that “a fiduciary has a duty to inform when it knows that silence may be harmful and cannot remain silent if it knows or should know that the beneficiary is laboring under a material misunderstanding of plan benefits,” and “[t]he duty of loyalty requires a fiduciary to disclose any material information that could adversely affect a participant’s interests.”[9]

The Fifth Circuit’s opinion paid no need to those principles and elevated form over substance.

The purpose of the plan was to provide benefits to professional football players who became disabled as a result of injuries they sustained while playing football, and the plan offered different classifications of line-of-duty benefits depending on the degree of impairment and when total and permanent disability first arose.

The opinion in Cloud reported that only 30 former NFL football players receive benefits at the active level. Based on the findings made by the district court, Cloud should have been the 31st.

Mark DeBofsky is a shareholder at DeBofsky Law Ltd.

This article was first published by Law 360 on March 22, 2024.

[1] Cloud v. Bert Bell/Pete Rozelle NFL Player Retirement Plan, 83 F.4th 423 (5th Cir. 2023).

[2] Cloud v. Bert Bell/Pete Rozelle NFL Player Retirement Plan, 2024 U.S. App. LEXIS , 2024 WL 1130511 (5th Cir. March 15, 2024).

[3] See, DeBofsky, “Rare ERISA Trial Shows Judicial Scrutiny Vital in Claim Review,” Law360 (July 20, 2022); available at https://www.law360.com/articles/1512810.

[4] 29 U.S.C. § 1104(a).

[5] Metropolitan Life Insurance Company v. Glenn, 554 U.S. 105, 115 (2008).

[6] Citing 29 U.S.C. §§ 1104(a); 1132(a); and 1133.

[7] Eddy v. Colonial Life Ins. Co. of Am., 919 F.2d 747, 750, 287 U.S. App. D.C. 76 (D.C. Cir. 1990).

[8] Kalda v. Sioux Valley Physician Partners Inc., 481 F.3d 639, 644 (8th Cir. 2007).

[9] Also see Cent. Pa. Teamsters Health & Welfare Fund, 12 F.3d 1292, 1300 (3d Cir. 1993) which similarly noted, “Th[e] duty to inform is a constant thread in the relationship between beneficiary and trustee; it entails not only a negative duty not to misinform but also an affirmative duty to inform when the trustee knows that silence might be harmful. In addition, the duty recognizes the disparity of training and knowledge that potentially exists between a lay beneficiary and a trained fiduciary. Thus, while the beneficiary may, at times, bear a burden of informing the fiduciary of her material circumstance, the fiduciary’s obligations will not be excused merely because she failed to comprehend or ask about a technical aspect of the plan.”

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