Litigation - Exhaustion of ERISA Plan Remedies

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2015.Jul.31  Top Hat Claims Dismissed for Failure to Exhaust - or to Show Futility. In this E.D. Louisiana case (Owens v. Western & Southern), the district court granted summary judgment for the employer, and remanded -- for consideration under an ERISA top hat plan's claims procedure -- the claims by former employees that forfeiture of their benefits should not have occurred due to their post-employment work for a competitor.  The employer had provided notice of the forfeiture through a letter to the former employees.  The district court found that the employer's mere act of providing notice of the forfeiture neither constituted a claim denial requiring particularized information under ERISA, nor established futility excusing exhaustion of the plan's claims procedures. 

2013.Jan.29  "Baffling" Plan Terms Excuse Exhaustion of Remedies. In Kirkendall v. Halliburton, the Second Circuit considered a former employee's argument that exhaustion of plan remedies is not required where the plan "provides no procedure for filing a claim, such as hers, for clarification of future benefits."  The 2nd Circuit agreed, and explained as follows: "Two of our sister circuits have held that, where a plaintiff reasonably interprets plan terms not to require exhaustion and, as a result, does not exhaust her administrative remedies, the case may proceed in federal court." [Citing:Gallegos v. Mount Sinai Med. Ctr., 210 F.3d 803, 810 (7th Cir. 2000) and Watts v. BellSouth, 316 F.3d 1203, 1209-10 (11th Cir. 2003).] The plan text that the Second Circuit found "unclear" as applied to the participant began innocuously with "To file a benefit claim." To quote the court, "compounding the confusion" was the employer's reference to an "Application for Retirement Benefits" as a "claims" form. 

Employers should take heed: the words used in communications with plan participants should correspond with applicable plan terms. Otherwise, employers risk having ambiguities not only be interpreted against them, but also derail an otherwise applicable exhaustion of remedies requirement.  
As a result, employers should preserve their ERISA litigation defenses against benefit claims as possible by assuring that their plans and SPDs set forth claims procedures in terms that are both --  

  • broad enough to cover claims for current and future benefits, and
  • understandable enough to avoid ambiguities. 

2006   No Addition of Claims Procedures after Lawsuit Commences (2nd Cir.)  A company cannot amend its top-hat plan to retroactively add an exhaustion of administrative remedies requirement after a lawsuit for benefits had been filed. Eastman Kodak Company v. STWB, Inc., 452 F.3d 215, 38 EBC 1098 (2d Cir. 2006). The employer's top-hat arrangement omitted a claims procedure at the time the participant applied for benefits, with the Second Circuit holding as follows:

  • For the reasons given above, we hold that, under the “deemed exhausted” provision of 29 C.F.R. § 2560.503-1(l ), 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.