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Cramer v. Appalachian Regional Healthcare, Inc.

United States District Court, Sixth Circuit

September 27, 2013

JOSEPH H. CRAMER, Plaintiff,


KAREN K. CALDWELL, District Judge.

This matter is before the Court on Plaintiff Joseph H. Cramer's Motion for Judgment Reversing Administrative Decision. (DE 27). On August 21, 2013, the Court heard oral arguments on this motion from Cramer and from Defendant Appalachian Regional Healthcare ("ARH"). For the reasons that follow, the Court will deny the motion.


This dispute arises from a denial of benefits under a supplemental pension plan. Cramer, who was employed by ARH from 1981 until 2007, seeks to reverse ARH's administrative decision concerning the amount of benefits to which he is entitled. In 1995, Cramer was promoted and became eligible for ARH's Supplemental Executive Retirement Plan ("SERP"), which was created in 1986. The Court previously determined this plan qualifies as a "top hat plan." (DE 26). As a top hat plan, the SERP is exempt from certain provisions of ERISA, including "the vesting or nonforfeitability requirements." Bakri v. Venture Mfg. Co., 473 F.3d 677, 678 (2007). The 1986 SERP defined years of service to include all years in which the participant was employed at ARH. According to a 2006 benefit statement, Cramer would be entitled to receive a monthly benefit of $1, 009.34 at age 65 under the 1986 SERP. In reliance on this statement and others, Cramer resigned from ARH on July 1, 2007. He was 48 years old.

In early 2008, Cramer attempted to receive an updated estimate of his benefits. An ARH representative told Cramer that because his other benefits exceeded the SERP-defined minimum, 42% of final pay, he was not entitled to SERP benefits. To find out more, Cramer contacted ARH's chief executive officer and other officials, and ARH interpreted these actions as an appeal of the initial decision regarding his SERP benefits. On July 21, 2009, the Committee of the ARH SERP (the "Committee") issued a letter formally denying Cramer's appeal, but this was later considered the initial denial of Cramer's claim. As a result, after seeking more documentation from ARH, Cramer began his formal administrative appeal.

Meanwhile, on November 7, 2008, the ARH Board of Trustees resolved to terminate the SERP. On December 31, 2008, ARH adopted an Amendment and Restatement of the SERP ("2008 SERP"). The 2008 SERP changed the years-of-service definition to include only the years an employee was eligible for SERP, not the years an employee was employed by ARH but ineligible for SERP. Applying the 2008 SERP to Cramer, the Committee determined that Cramer would be entitled to a credit of twelve years of service. Thus, the Committee concluded that Cramer was not entitled to a supplemental benefit and denied his appeal on November 20, 2010. Cramer, however, contends that his claim should have been governed by the 1986 SERP, which he argues would have entitled him to the supplemental benefits equal to 55% of his final pay.

On January 28, 2011, Cramer filed the instant action bringing four causes of action: (1) a claim for Employee Retirement Income Security Act (ERISA) benefits pursuant to ERISA § 502(a)(1)(B); (2) violations of ERISA's vesting and anti-kickback requirements pursuant to ERISA § 502(a)(3); (3) breach of fiduciary duty pursuant to ERISA § 502(a)(2); and (4) equitable estoppel. Because the Court previously determined that the SERP is a top hat plan, Cramer has only two claims remaining: his claim for benefits and his equitable estoppel claim.


I. Cramer's Claim for Benefits Under ERISA Section 502(a)(1)(B)

A. Standard of Review

The Court will apply an arbitrary and capricious standard of review to the Committee's decision regarding Cramer's plan benefits. A benefits claim "is to be reviewed under a standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). The Court of Appeals for the Sixth Circuit found that a plan containing "a broad grant of discretionary authority to determine eligibility for benefits and to construe the terms of the plan" justified review under the arbitrary and capricious standard. Board v. Hardy, Lewis, Pollard & Page, P.C., 138 F.3d 1062, 1066-68 (6th Cir. 1998). Under this "highly deferential" standard, administrative decisions are upheld if "rational in light of the plan's provisions." (quoting Miller v. Metropolitan Life Ins. Co., 925 F.2d 979, 983-84 (6th Cir. 1991)). In other words, the Court "must accept a plan administrator's rational interpretation of a plan even in the face of an equally rational interpretation offered by the participants." Solomon v. Med. Mut. of Ohio, 411 Fed.App'x 788, 792 (6th Cir. 2011) (quoting Morgan SKF USA, Inc., 385 F.3d 989, 992 (6th Cir. 2004)). This is the "least demanding form of judicial review of administrative action." Schwalm v. Guardian Life Ins. Co. of Am., 626 F.3d 299, 308 (6th Cir. 2010) (quoting Shields v. Reader's Digest Ass'n, Inc., 331 F.3d 536, 541 (6th Cir. 2003)).

In this case, both the 2008 and 1986 SERP included the necessary grant of discretionary authority. Cramer concedes that the 2008 SERP contains this language, but argues that the 1986 SERP does not. Section 7.02, the relevant portion of the 1986 SERP, states that "[t]he Committee shall have the authority to interpret the Plan, to adopt and review rules relating to the Plan and to make any other determinations for the administration of the Plan." The Sixth Circuit previously found that similar language granted the necessary discretionary authority to merit a deferential standard of review. See Borda, 138 F.3d at 1066. In Borda, the relevant terms of the plan provided that "[t]he Administrator shall have the power to make determinations with respect to all questions arising in connection with the administration, interpretation, and application of the Plan." See id. Like Borda, the language in the 1986 SERP grants complete authority to both interpret and administer the plan, and therefore should be similarly construed as a broad grant of discretionary authority.

The Sixth Circuit has held that courts must sometimes abandon a deferential standard of review when plan administrators do not comply with proper procedures. See Stoll v. W. & S. Life Ins. Co., 64 Fed.App'x 986, 991 (6th Cir. 2003); Sanford v. Harvard Indus., Inc., 262 F.3d 590, 597 (6th Cir. 2001) (applying a de novo standard "when an unauthorized body makes the decision denying the benefits claim"). In this vein, Cramer points to several procedural irregularities to argue that the Court should adopt a de novo standard of review. First, Cramer argues that the Committee violated procedures when it refused to provide interpretations of the earlier versions of the SERP, including the annual actuarial reports and valuations. This information, however, was not relevant to the Committee's decision that the 2008 SERP applied to Cramer's claim and thus did not have to be provided. See 29 C.F.R. § 2560.503-1(h)(2)(iii). Second, Cramer argues that the Committee violated the SERP procedures because "no meeting was held to review [his] claim or appeal, and no formal record of the Committee's review and decision were apparently maintained." The SERP provides that the Committee can act with unanimous consent in writing without a meeting, (AR 429-30), and while the Committee decided Cramer's claim and appeal by unanimous consent, it failed to provide a writing. Still, the Committee substantially complied with the procedural requirements. Third, Cramer argues that ARH's refusal to provide information regarding its review and determination of his claim, including communications between Committee members, amounts to a procedural violation.

In determining whether the alleged procedural violations require the Court to abandon the arbitrary and capricious standard of review, this Court must determine whether the Committee was in "substantial compliance" with ERISA's procedures. See Stoll, 64 Fed.Appx. at 991 (citing Kent v. United of Omaha Life Ins. Co., 96 F.3d 803, 807-08)). The United States Court of Appeals has stated that it "will not disturb a benefits decision based on a procedural defect when the underlying purposes of 29 U.S.C. § 1133, to ensure notice and an opportunity for review, are fulfilled." See id. Here, Cramer contends that the alleged procedural defects are "egregious" and "gross departures from ERISA's required claims procedures" (DE 29 p. 1). He does not argue, however, that the alleged defects deprived him of adequate notice or an opportunity for review. In fact, the administrative record makes clear that Cramer was afforded adequate notice of the Committee's decision and his subsequent right to pursue a civil action, along with opportunity for review of his claim. Even if this Court found that Cramer was entitled to further ...

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