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Hayes v. Twin City Carpenters & Joiners Pension Plan

United States District Court, D. Minnesota

July 10, 2019

Steven Hayes, Plaintiff,
v.
Twin City Carpenters & Joiners Pension Plan, et al. Defendants.

          Gregory R. Merz and John M. Nichols, Gray Plant Mooty, Minneapolis, MN for Plaintiff Steven Hayes.

          Amanda R. Cefalu and Henry M. Helgen, III, Kutak Rock, Minneapolis, MN for Defendants Twin City Carpenters & Joiners Pension Plan, et al.

          OPINION AND ORDER

          Eric C. Tostrud, United States District Court.

         In this ERISA lawsuit, Plaintiff Steven Hayes seeks to recover pension benefits from Defendant Twin City Carpenters & Joiners Pension Plan (“the Plan”). The Plan began paying Hayes a monthly retirement benefit in March 2011. The Plan suspended his benefits in October 2013, after receiving information suggesting Hayes may have violated a Plan rule that prohibited pensioners from working in certain employment for forty hours or more per month. Following a lengthy administrative-appeal process, the Plan's Claim Appeals Committee affirmed the initial decision to suspend Hayes's benefits. Hayes and Defendants have filed cross-motions for summary judgment. Should their summary-judgment motion be denied with respect to Hayes's benefit claim, Defendants alternatively seek remand of that claim. Defendants' summary-judgment motion will be granted against Hayes's breach-of-fiduciary duty claim. The benefits claim will be remanded to the Committee for further consideration consistent with this Opinion and Order and in all other respects, the Parties' summary-judgment motions will be denied. To summarize, the administrative process that led to the decision to suspend Hayes's benefits was flawed, though not so seriously as to warrant heightened or de novo review of the Committee's final decision. But the Committee's decision cannot survive abuse-of-discretion review. This is because the Committee adjudicated Hayes's claim under inapplicable Plan terms, nothing about the Committee's decision or adjudicative process suggests it considered or construed applicable terms that, when examined closely, are materially different from the terms the Committee considered, and the terms the Committee should have applied pose significant interpretive challenges. Because it remains unclear whether Hayes is entitled to the benefits he seeks, a remand is the appropriate remedy.

         I[1]

         December 2010 to March 1, 2011-Hayes applies for, and is approved to receive, unreduced early retirement benefits under the Plan.

         The Plan is a multi-employer pension fund, Compl. ¶¶ 2, 7 [ECF No. 1]; Answer ¶ 2 [ECF No. 9], and Hayes is a participant in the Plan, Compl. ¶¶ 6, 13; Answer ¶¶ 6, 13. In December 2010, Hayes applied to the Plan for “Unreduced Early Retirement Benefit[s]” commencing March 1, 2011. AR 423-25, see also AR 755, 1192-93; Defs.' Mem. in Supp. at 4 [ECF No. 39]; Pl.'s Mem. in Supp. at 4 [ECF No. 40]. In his application, Hayes identified February 28, 2011, as the last date he “worked, or will work, in the Construction Industry.” AR 423. The Plan prohibited retired participants who received benefits from being employed or engaging in work under certain circumstances. AR 770-74, 1194-97. The Plan referred to this generally as “Disqualifying Employment”-as in, employment that, if engaged in by the retiree, might disqualify the retiree from receiving benefits. AR 770, 1194-95.[2] In his application for benefits, Hayes acknowledged his obligation to comply with these limitations. AR 425. The Plan approved Hayes's claim and began paying a monthly benefit effective March 1, 2011. AR 422.

         October 2013-The Plan suspends Hayes's benefits for engaging in Disqualifying Employment.

         In a letter dated October 15, 2013, the Plan, through its Fund Administrator, notified Hayes that it had “been informed that [he was] performing Disqualifying Employment while continuing to receive [his] pension, ” and that as a result his pension benefits would be “suspended effective November 1, 2013.” AR 329-31. Under the Plan, as the Administrator explained in the letter, “Disqualifying Employment” was: “Any employment of forty (40) hours or more in a one (1) month period in Covered Employment (defined as Employment for which an Employer has agreed to contribute to the Pension Fund pursuant to the terms of a written Collective Bargaining Agreement or Participation Agreement).” AR 330. The Administrator also quoted an “exception” to the general suspension-of-benefit rule as follows:

Effective April 1, 2007, if you work more than forty (40) hours per month in Covered Employment, the Plan will not suspend your benefit unless your work in Covered Employment in that month and the previous eleven (11) months totals more than four hundred eighty (480) hours. If you have worked or been paid for four hundred eighty (480) or more hours in Covered Employment in the last twelve (12) months, your benefit will be suspended. If you have worked or been paid for any Disqualifying Employment that is not Covered Employment during the twelve (12) month period, you are not eligible for this exception to the rule and the Plan will suspend your benefit for any month in which you work more than forty (40) hours in Disqualifying Employment.

Id. The Administrator did not say whether it had considered this exception in Hayes's case. See AR 329-31. The Administrator notified Hayes that, to obtain reinstatement of his pension benefit, he “must cease working in Disqualifying Employment and notify [the Plan] in writing that [he had] done so.” AR 331. The Administrator requested copies of Hayes's tax returns for the years 2011, 2012, and 2013, and notified Hayes “that any pension payments [he] previously received while working in Disqualifying Employment will need to be reimbursed to the Plan.” Id. The Administrator explained that, if he believed the suspension of his benefits was erroneous, Hayes could “contact the Administrator to provide any information [he] may have to assist in resolving this issue.” Id. The Administrator also informed Hayes that he had “the right to appeal this decision to the Board of Trustees” and referred Hayes to the appeal-rights provisions of the Summary Plan Description. Id. The Administrator did not describe in this letter the information or rationale upon which it based its decision to suspend Hayes's benefits. See AR 329-31.

         November 2013-Hayes disagrees with the Plan's suspension of his benefits; the Plan responds and clarifies its explanation for suspending benefits, and Hayes appeals.

         Hayes responded to the Administrator in a letter dated November 4, 2013. AR 333. In his letter, Hayes wrote that he disagreed with the determination that he was performing Disqualifying Employment and requested copies of “all documents, records, and other information relevant to [his] claim, ” as permitted by the Plan. Id. (emphasis omitted). In a letter dated November 8, the Administrator denied Hayes's request for documents relevant to his claim. AR 334-35. The Administrator explained that Hayes's request for documents could be approved only if he appealed the decision to suspend his benefits and that, before the Plan would permit him to appeal, Hayes must first “explain ‘why the determination should be reviewed.'” AR 334. The Administrator also explained that, before he would be allowed to appeal, Hayes must provide information regarding (what the Administrator previously determined to be) his Disqualifying Employment. Id. Finally, the Administrator took the position that, because in its view Hayes had failed to notify the Plan of the Disqualifying Employment, the Plan was “entitled to ‘presume that [Hayes had] worked for at least forty (40) hours in that month and any subsequent month'” and that Hayes now had the burden of “demonstrating to the satisfaction of the Trustees” that his benefits should not have been suspended under the Plan. AR 334-35. Hayes responded with a letter to the Administrator on November 14. AR 336. In it, he wrote that he disagreed with the Administrator's determination and that “the purpose of this letter is to file a formal appeal of that determination.” Id. Hayes requested that his appeal include “a more thorough investigation that includes information from me and my employer, which it does not appear was part of the original determination.” Id. In a second letter dated November 18, Hayes provided information regarding his continued employment in response to the Administrator's request. AR 337. Hayes identified his employer as Alltech Engineering Corporation in Mendota Heights, Minnesota, id.-the same employer for whom Hayes had worked before he retired, AR 378. He described his job title as “Project Manager” and his duties as sales, estimating, and managing industrial projects. AR 337.

         December 2013-Hayes retains counsel, who contacts the Plan and elicits additional explanation for the Plan's decision to suspend Hayes's benefits.

         Hayes retained counsel, who wrote to the Administrator on December 19, 2013, repeating Hayes's request for records. AR 338-39. Hayes's lawyer explained that his “objective in assisting Mr. Hayes [was] to facilitate a resolution of this issue, and to provide a clearer understanding for both parties as to the limited nature of Mr. Hayes' employment with a contributing employer, so as to avoid issues in the future.” AR 339. The Plan responded through its counsel in a letter dated December 30. AR 340-42. In that letter, the Plan's counsel wrote that, owing to the “confusing” procedural posture of Hayes's claim and “due to some loose usage of terms in communications between the parties, ” counsel would “explain the Plan's position on the issue.” AR 340. The Plan's counsel disclosed that “a routine payroll audit of Alltech” showed that Hayes had “done some work for pay” at Alltech after his pension benefits commenced. Id. Counsel summarized a Plan term that he characterized as requiring retirement-benefit recipients “to notify the Plan if he or she is starting any type of work that is or may be disqualifying even if he or she does not expect to work 40 or more hours per month, ” and noted that the Plan had no record showing Hayes had notified it of his continued employment with Alltech. Id. “In such a case, ” the Plan's counsel wrote, the Plan's “Trustees are entitled to ‘presume that you [the participant] have worked for at least forty (40) hours in that month and any subsequent month.'” AR 340-41. Counsel explained that the Plan “relied on the evidence that Mr. Hayes performed some work for Alltech in applying the above presumption[] to suspend his benefit, ” and that Hayes now had “the burden of ‘overcom[ing] the[ ] presumption[] by demonstrating to the satisfaction of the Trustees that they are not correct and that benefits should not actually be suspended under the rules of the Plan.'” AR 341 (second alteration in original) (citation omitted). The Plan's counsel concluded his letter by asserting that “this matter is not subject to appeal until Mr. Hayes has fulfilled his obligation to provide the requested documents and has either provided evidence to rebut the above presumption or has declined in writing to do so.” Id. (Counsel separately noted that Hayes's retiree health coverage was also “cancellable due to work in prohibited employment, ” but directed Hayes's counsel to the Health Plan's trustees to address this issue. Id.) Hayes's counsel responded by letter the next day (December 31) and committed to “work[ing] with Mr. Hayes to collect the requested information” and submit it to the Plan. AR 343-44.

         January 2014 to October 2014-Hayes's counsel and the Plan communicate in an effort to identify, gather, and submit information relevant to Hayes's benefit claim.

         In January 2014, Hayes and the Plan began an information-gathering process that would last for over two years. (The Plan's Claim Appeals Committee did not issue a final decision on Hayes's appeal until June 2, 2016, AR 951-57, but more on that later.) This information-gathering process included several more significant moments during its first several months. In mid-January 2014, Hayes's counsel submitted Hayes's 2011 and 2012 tax returns. AR 345-50. Two months later, in mid-March, Hayes's counsel provided the Plan with an affidavit of Alltech's CEO, Robert Lawrence. AR 352-55. In his affidavit, Lawrence testified about the nature of Hayes's post-retirement work, its significance to Alltech, and Hayes's compensation. See Id. Lawrence testified that Hayes had “been paid his regular wage rate as a Project Manager for 39 hours of work per month.” AR 353. Lawrence acknowledged that Hayes's income was “greater than what would seem to correspond to an employee working 39 hours per month, ” but attributed this to discretionary bonus payments Alltech had made to Hayes in consideration for his “unique circumstances as an employee.” AR 355. In August 2014, Hayes notified the Plan that he was returning to work at Alltech on a full-time basis effective September 1, 2014. AR 360. Though Hayes's return to full-time work meant his right to claim pension benefits would cease at that time, Hayes made clear that he intended that his “appeal remain[] active for the suspension of benefits from November 1, 2013 through August 31, 2014.” Id. Hayes also notified the Plan that he had terminated his relationship with the first lawyer who represented him in his administrative appeal. Id. In October 2014, Hayes wrote to the Plan asking about the status of his appeal. AR 361. At some point, Hayes also submitted his 2013 tax returns. AR 362-65.

         November 2014 to January 2016-Hayes retains a new lawyer, who continues the process of gathering and submitting relevant information to the Plan.

         In November 2014, Hayes retained new counsel, AR 373, and the information-gathering process continued. The next month, in December, Hayes's new attorney requested and received a copy of Hayes's “pension file” from the Plan. AR 369, 371-72. On March 3, 2015, Hayes's counsel submitted to the Plan a memorandum and exhibits “as a supplement to the claim submitted by Mr. Hayes on 14 November 2013.” AR 240-51. In the memorandum, Hayes's counsel argued that Hayes's challenge to the decision terminating his benefits was timely and sufficient, that Hayes had notified the Plan of his continued employment at Alltech, that the Plan was incorrect to apply the forty-hour presumption to Hayes's claim, and that, presumption or not, Hayes had provided sufficient evidence to show that he never worked more than thirty-nine hours per month for Alltech. See AR 240-50. Having received no “formal response” to his March 3 submission, Hayes's attorney emailed the Plan's counsel on July 14, 2015. AR 942. In his email, Hayes's attorney described his understanding that the Plan's “Appeals Committee was seeking additional evidence [beyond what was submitted with the March 3 memorandum] of the hours Mr. Hayes had worked, ” asked what kind of evidence the Plan sought, offered to facilitate the Plan's efforts to audit Alltech's records of Hayes's employment, and requested “any details” the Plan could provide regarding “undocumented reports” that Hayes had worked more than thirty-nine hours per month. Id. The Plan's counsel responded the next day, identifying categories of additional evidence the Plan believed would be probative of Hayes's claim. AR 941-42. On January 13, 2016, Hayes's counsel provided the Plan with specific information responsive to the categories of evidence identified by the Plan. AR 944. At the same time, Hayes's counsel also submitted documents showing Hayes's expense records (i.e., gas receipts, automobile maintenance expenses, telephone records, hotel receipts, etc.) associated with his post-retirement Alltech employment. AR 3-165.

         April 2016 to June 2016-The Plan's Claim Appeals Committee affirms the initial decision to suspend Hayes's benefits, but bases its decision on inapplicable Plan terms.

         At its meeting of April 21, 2016, the Appeals Committee decided to affirm the Administrator's initial decision to suspend Hayes's retirement benefits, and the Plan's counsel explained the decision in a letter dated June 2, 2016. AR 951-57. In the letter, the Plan's counsel reviewed the evidence the Committee considered in reaching its decision, AR 951-52, quoted what counsel described as the “relevant provisions of the Plan Document . . . in respect to suspension of benefits, ” AR 952-54, and explained the rationale underlying the Committee's decision, AR 954-57. In fact, the suspension-of-benefit provisions quoted in the letter as having been considered by the Committee did not apply to Hayes's claim. The letter quoted the suspension-of-benefits provisions applicable to “Normal Retirement Benefit[s], ” AR 952-54, when it should have cited separate suspension-of-benefits rules applicable to Unreduced Early Retirement Benefits, AR 1194-97, the type Hayes had received and which were at issue in his claim. Leaving this error aside for now, counsel explained that the Committee's decision proceeded essentially in two steps. First, the Committee determined Hayes had violated a Plan term requiring the submission of written notice to the Plan “within thirty (30) days after starting work of a type that is or may be Disqualifying Employment.” AR 953-54. In other words, the Committee determined that the Plan required Hayes to submit written notice within thirty days of the date he commenced his post-retirement employment with Alltech-March 1, 2011-of the fact that he was continuing to work there, but that Hayes had not provided this notice. AR 954. The Committee determined that, as a consequence of this failure, the Committee was “entitled to presume Mr. Hayes was engaged in Disqualifying Employment to such an extent that his benefit is subject to suspension from March 1, 2011 through August 31, 2014 (when Mr. Hayes advised the Plan he had returned to full time employment and voluntarily suspended his benefit).” Id. Thus, the Committee determined, the burden fell to Hayes to “prove ‘to the satisfaction of the Trustees that his work was not, in fact, an appropriate basis, under the Plan, for suspension of benefits.'” Id. (citation omitted). Second, the Committee reviewed the evidence before it and determined Hayes had failed to meet his burden. AR 954-57. The Committee determined that much of the evidence before it-including cell-phone records, receipts relating to vehicle usage, and income-tax records-was not probative of whether Hayes had worked more than thirty-nine hours per month for Alltech. AR 955-56. The Committee noted the absence of some information “likely to be probative, including payroll summaries and paycheck or electronic deposit stubs; emails; credit card statements, and; [sic] job sign in sheets and records, ” and inferred that “these documents, if disclosed, would not support Mr. Hayes's claim.” AR 956. The Committee discounted affidavits attesting that Hayes had worked thirty-nine hours every month at Alltech after March 1, 2011, as “self-serving and unsupported by any objective documentary evidence.” Id. Though the Committee had received “anecdotal evidence from other Alltech employees, who reported anonymously that Mr. Hayes was regularly employed for much more than 39 hours per month during the relevant period, ” it “did not rely upon the anonymous reports that Mr. Hayes was working significantly above 40 hours per month due to the fact these accounts were from sources whose credibility could not be verified.” AR 956-57. The Plan's counsel closed the letter by advising Hayes that, because his “appeal was denied, ” he had the right to receive access to documents and other information relevant to his benefit claim and that he had the right to bring a civil action under ERISA. AR 957.

         December 2016-Hayes retires again, and the Plan begins recouping overpaid benefits.

         Hayes retired again effective December 31, 2016. AR 192. Hayes's retirement triggered the reinstatement of his pension benefits. However, the Committee's determination that Hayes had engaged in Disqualifying Employment while receiving retirement benefits between March 2011, and the suspension of his benefits effective November 1, 2013, meant the Plan believed it had overpaid benefits to Hayes in the amount of $233, 508.48. AR 192-93. The Plan contained a provision addressing this situation: “Overpayments attributable to payments for any month or months for which you engaged in Disqualifying Employment will be deducted from pension payments otherwise paid or payable subsequent to the period of suspension of benefits.” AR 774. In a letter dated December 8, 2016, the Administrator notified Hayes that the Plan would recoup the overpayment by deducting amounts from his monthly pension benefits until the full amount of the overpayment had been recovered. AR 192-93.

         November 2017-Hayes commences this action. Hayes commenced this action on November 29, 2017.

         See Compl. In his complaint, Hayes named as Defendants the Plan, the Board of Trustees of the Plan, the Claims Appeals Committee, and individuals who served on the Board of Trustees and Appeals Committee. Compl. ¶¶ 2-5. Hayes has since agreed “to not pursue claims against the Individual Defendants.” Stipulation ¶ 3(a) [ECF No. 22]. Hayes asserts claims under just the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. (“ERISA”). See Compl. ¶¶ 63, 67, 71. He seeks recovery of pension benefits the Plan did not pay him in the amount of “at least $79, 781.50.” Id. ¶ 61. Hayes also seeks relief with respect to benefits the Plan determined were improperly paid and therefore have been, or will be, recovered by the Plan through offset. Id. ¬∂ 65. Hayes alleges that ‚ÄúDefendants wrongfully have recovered and continue to recover from Plaintiff's past and future pension benefits alleged overpayments of pension benefits paid to Plaintiff from March 1, 2011 through October 31, 2013, which such amount Defendants have determined ...


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