BRIEF AMICUS CURIAE OF AARP IN SUPPORT OF PETITION FOR HEARING EN BANC OF PLAINTIFFS-APPELLANTS

Transcription

1 No In The United States Court Of Appeals For The Seventh Circuit KATHLEEN G. SCHULTZ and MARY KELLY, on their behalf and on behalf of a class of all persons similarly situated, Plaintiffs-Appellants, v. AVIALL, INC. LONG TERM DISABILITY PLAN and PERKINS COIE LONG TERM DISABILITY PLAN, on their own behalf and on behalf of a Defendant class of ERISA plans insured by Prudential Insurance Company of America containing substantially identical offset language as described in complaint, Defendants-Appellees. On Appeal from the United States District Court for the Northern District of Illinois No. 09-cv-2387 Honorable Ruben Castillo, Judge presiding BRIEF AMICUS CURIAE OF AARP IN SUPPORT OF PETITION FOR HEARING EN BANC OF PLAINTIFFS-APPELLANTS November 23, 2011 Mary Ellen Signorille AARP FOUNDATION Melvin Radowitz AARP 601 E St., NW Washington, DC (202) Attorneys for Amicus Curiae AARP

2 Appellate Court No CORPORATE DISCLOSURE STATEMENT Short Caption: Schultz v. Aviall, Inc. Long Term Disability Plan The undersigned counsel of record for Amicus Curiae AARP, on its own behalf, furnishes the following list in compliance with Circuit Rule 26.1 and Fed. R. App. P. 26.1: A. The full name of every party or amicus the attorney represents in this case: AARP B. If such party or amicus is a corporation: A. Its parent corporation, if any: N/A B. A list of stockholders which are publicly held companies owning 10% or more of the stock in the party or amicus: N/A C. The names of all law firms whose partners or associates have appeared for the party in the case or are expected to appear for the party in this court: Mary Ellen Signorille Melvin Radowitz Dated: November 23, 2011 /s/ Mary Ellen Signorille Mary Ellen Signorille Attorney for Amicus Curiae i

3 TABLE OF CONTENTS CORPORATE DISCLOSURE STATEMENT... i TABLE OF AUTHORITIES... iii INTEREST OF AMICUS CURIAE...1 ARGUMENT...2 I. HEARING EN BANC IS WARRANTED BECAUSE SEVENTH CIRCUIT DECISIONS HOLDING THAT ONLY THE PLAN IS THE PROPER PARTY DEFENDANT IN AN ERISA CLAIM FOR BENEFITS IS AT ODDS WITH SUPREME COURT JURISPRUDENCE STRICTLY CONSTRUING ERISA S CIVIL ENFORCEMENT PROVISIONS...2 II. HEARING EN BANC IS WARRANTED BECAUSE MARKETPLACE AND DEMOGRAPHIC TRENDS SUPPORT RECONSIDERATION OF THE SEVENTH CIRCUIT S JURISPRUDENCE...4 CONCLUSION...7 CERTIFICATE OF COMPLIANCE...8 CIRCUIT RULE 31(e) CERTIFICATION...9 CERTIFICATE OF SERVICE...10 ii

4 TABLE OF AUTHORITIES FEDERAL CASES Cyr v. Reliance Standard Life Ins., Co., 642 F.3d 1202 (9th Cir. 2011)...4 Gelardi v. Pertec Computer Corp., 761 F (9th Cir. 1985)...4 Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002)...2 Hardt v. Reliance Std. Life Ins. Co., 130 S. Ct (2010)...2 Harris Trust & Sav. Bank v. Salomon Smith Barney Inc., 530 U.S. 238 (2000)...2, 3 Jass v. Prudential Health Care Plan, Inc., 88 F.3d 1482 (7th Cir. 1996)...4 LaRue v. DeWolff, Boberg & Assocs., 552 U.S. 248 (2008)...2 Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134 (1985)...2, 3 Mertens v. Hewitt Assocs, 508 U.S. 248 (1993)...3 Varity Corp. v. Howe, 516 U.S. 489 (1996)...3 FEDERAL STATUTES Employee Retirement Income Security Act (ERISA) of U.S.C et seq , 29 U.S.C (a), 29 U.S.C. 1132(a) (a)(1), 29 U.S.C. 1132(a)(1) (a)(1)(B), 29 U.S.C. 1132(a)(1)(B)...3, 4 502(a)(2), 29 U.S.C. 1132(a)(2)...2, 3 502(a)(3), 29 U.S.C. 1132(a)(3)...2, 3 iii

5 502(a)(5), 29 U.S.C. 1132(a)(5) (a)(6), 29 U.S.C. 1132(a)(6) (d), 29 U.S.C. 1132(d) (d)(2), 29 U.S.C. 1132(d)(2) (g)(1), 29 U.S.C. 1132(g)(1)...2 Labor-Management Reporting and Disclosure Act 482, 29 U.S.C. 402 (1959)...3 FEDERAL RULES Fed. R. Civ. P. 29(c)(4)...1 FEDERAL REGULATIONS Claims Procedures for Employee Benefit Plans, 62 Fed. Reg (proposed Sept. 8, 1997)...5 Notice of Hearing on Reasonable Contracts or Arrangements for Welfare Benefit Plans under Section 408(b)(2)--Welfare Plan Fee Disclosure, 75 Fed. Reg (Nov. 5, 2010)...5 MISCELLANEOUS AUTHORITIES America s Health Insurance Plans, Guide to Disability Income Insurance (2009), America s Health Insurance Plans, Trends and Innovations in Disability Income Insurance (Jan. 2010), /pdfs/trends_di_insurance_ Dec09.pdf....5 American Society of Clinical Oncology, Studies Focus on Cancer as a Chronic Disease (June 5, 2011), News+Releases /ASCO+News/STUDIES+FOCUS+ON+CANCER+AS+A+ CHRONIC+DISEASE...5 Jane Brody, Cancer as a Disease, not a Death Sentence, N.Y. TIMES (June 17, 2008), 6 Congressional Budget Office, Disability and Retirement: The Early Exit of Baby Boomers from the Labor Force (Nov. 2004), available at /doc6018/11-22-laborforce.pdf...6 Employee Benefits Research Institute, Facts: Retirement Trends in the United States Over the Past Quarter-Century (June 2007), /facts/0607fact.pdf...5 iv

6 W. L. Erickson & S. Von Schrader, 2008 Disability Status Report: the United States (Cornell University Rehabilitation Research and Training Center on Disability Demographics and Statistics 2010), available at Kevin Floyd, et al. A 30-Year Perspective ( ) Into the Changing Landscape of Patients Hospitalized with Initial Acute Myocardial Infarction, 2 CIRCULATION: CARDIOVASCULAR QUALITY AND OUTCOMES 88 (2009), journals.org/content/2/2/88.full...6 Kaiser Family Foundation, U.S. Health Care Costs: What are the major proposals to contain costs?(mar. 2010), Costs/Background-Brief.aspx...5 U.S. Census Bureau, Statistical Abstract of the United States: 2011, /compendia/statab/2011/tables/11s0103.pdf...5 Tim Zayatz, Social Security Administration, Social Security Disability Insurance Program Worker Experience, Actuarial Study No. 18 (SSA Pub. No June 2005)...6 v

7 INTEREST OF AMICUS CURIAE 1 AARP is the largest non-partisan, non-profit organization dedicated to representing the needs and interests of people age fifty and older, with millions of members living within the jurisdiction of the Seventh Circuit. Almost half of AARP s members are employed full or parttime, with many of those members working for employers which provide pension, health and disability plans covered by the Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C et seq. One of AARP s primary objectives is to foster the economic security of individuals as they age by attempting to ensure the availability, security, equity, and adequacy of public and private pension, health insurance, and other employee benefits through educational and advocacy efforts. Participants in private, employer-sponsored employee benefit plans rely on ERISA to protect their rights under those plans. In particular, ERISA's protections, and the ability to enforce these protections, are of vital concern to older workers, retirees, and the disabled since the quality of their lives depends heavily on their eligibility for and the amount of their benefits. Thus, resolution of the issues in this case will have a significant impact on the integrity of the administration of employee benefit plans and the ability of AARP members and other plan participants to have benefit claims fully and fairly reviewed as ERISA requires. In light of the significance of the issues presented by this case, AARP respectfully submits this brief amicus curiae to facilitate a full consideration of these issues. 1 Pursuant to FED. R. CIV. P. 29(c)(4), counsel for AARP states that she authored the brief in whole, and neither party s counsel nor the parties themselves made a monetary contribution intended to fund the preparation or submission of this brief. No person other than amicus, its members, or its counsel made a monetary contribution to the preparation or submission of this brief. Counsel for plaintiff-appellant has consented to the filing of this brief, while counsel for defendants-appellees has not. AARP has filed a motion for leave to file this brief requesting that if leave is granted, this brief be considered filed as of the date leave is granted. 1

8 ARGUMENT I. HEARING EN BANC IS WARRANTED BECAUSE SEVENTH CIRCUIT DECISIONS HOLDING THAT ONLY THE PLAN IS THE PROPER PARTY DEFENDANT IN AN ERISA CLAIM FOR BENEFITS IS AT ODDS WITH SUPREME COURT JURISPRUDENCE STRICTLY CONSTRUING ERISA S CIVIL ENFORCEMENT PROVISIONS. The Supreme Court interprets ERISA 502(a) using canons of statutory construction. See, e.g., Hardt v. Reliance Std. Life Ins. Co., 130 S. Ct. 2149, 2156 (2010). In its interpretation of ERISA s civil enforcement provisions, the Court repeatedly has looked at the plain language of ERISA, the evident care with which it was crafted, the structure of the statute, and the policies underlying ERISA. See Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 147 (1985) (this Court is reluctant to tamper with an enforcement scheme crafted with such evident care as the one in ERISA ). The Court has concluded numerous times that the precise language of the statute must be followed. See Hardt, 130 S. Ct. at 2156 (concluding the Fourth Circuit could not create requirements on the court s discretion regarding fees because [w]e must enforce the plain and unambiguous statutory language [of 502(g)(1)] according to its terms ); LaRue v. DeWolff, Boberg & Assocs., 552 U.S. 248, (2008) (Thomas, J. concurring) (finding a plan participant s 502(a)(2) suit against a fiduciary appropriate because the statute provides remedies for losses to the plan, including individual plan accounts); Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 209 (2002) (prohibiting an insurance company from seeking third-party reimbursement from a plan participant under 502(a)(3) because Congress did not intend [the Court] to authorize other remedies that it simply forgot to incorporate expressly ); Harris Trust & Sav. Bank v. Salomon Smith Barney Inc., 530 U.S. 238, 244 (2000) (finding a suit against a non-fiduciary party in interest appropriate under 502(a)(3) because ERISA liability does not depend on whether ERISA s substantive provisions impose a specific duty on the party 2

9 being sued ); Varity Corp. v. Howe, 516 U.S. 489, 511 (1996) (allowing 502(a)(3) suit against an employer and administrator acting as a fiduciary because the statute s express limitations did not contain the exclusive set of remedies for every kind of fiduciary breach ); Mertens v. Hewitt Assocs, 508 U.S. 248, 262 (1993) (rejecting a 502(a)(3) suit against a non-fiduciary for money damages because the statute expressly limits remedies to equitable relief); Russell, 473 U.S. at 144 (rejecting petitioner s claim for extra contractual damages under 502(a)(1)(B) because nothing in the text supported her assertion that a delay in awarding benefits created a cause of action). As a result, the Court has refused to infer claims for relief and remedies which are not specifically enumerated in these civil enforcement provisions. Mertens, 508 U.S. at 253; Russell, 473 U.S. at 147. Conversely, the Court has refused to read in limitations to these civil enforcement provisions where there are none stated in 502(a)(2). Harris Trust, 530 U.S. at 246. Indeed, Congress was extremely specific about who could sue for each causes of actions. Compare 502(a)(1) (only participants or beneficiaries) with 502(a)(2) (participants, beneficiaries, fiduciaries and the Secretary of Labor) with 502(a)(5) & (6) (only the Secretary of Labor). Congress also specified the type of relief each subsection provided. Compare 502(a)(1)(B) (benefits) with 502(a)(2) (appropriate relief under 409) with 502(a)(3) (appropriate equitable relief) with 502(a)(6) (civil penalties). However, nowhere in ERISA s civil enforcement scheme does it specify who may be sued. 2 But, Congress has so provided in other statutes. Compare, e.g., Section 482 of the Labor-Management Reporting and Disclosure Act, 29 U.S.C. 402 (1959) (the Secretary of Labor may sue a labor organization as an entity ). 2 By its terms, section 502(d) provides that [a]n employee benefit plan may sue or be sued under this subchapter as an entity. This provision merely ensures that a plan can be sued as an entity, but does not provide any limitations on the list of possible defendants. Further, 502(d)(2) provides that money judgments will be enforced only against the plan as an entity unless liability of another party is separately established. This provision implicitly provides that persons other than the plan may be subject to suit. 3

10 The absence of limiting language in 502(a)(1)(B) provides strong evidence that Congress did not intend to limit the defendants who may be sued for a denial of a benefits claims. Interpretation of 502(a)(1)(B) should not be treated any differently than the Supreme Court s interpretation of ERISA s civil enforcement provisions in other cases. Accordingly, in order to be consistent with Supreme Court jurisprudence and other circuit court decisions on this issue, see Plaintiffs-Appellants Petition for Hearing En Banc Pursuant to Fed. R. App. P. 35 at 1-2 for circuit court cases, no limitation should be read into 502(a)(1)(B) concerning who may be sued as a party defendant. AARP submits that this court should reassess its jurisprudence on this issue by granting appellant s petition for hearing en banc. II. HEARING EN BANC IS WARRANTED BECAUSE MARKETPLACE AND DEMOGRAPHIC TRENDS SUPPORT RECONSIDERATION OF THE SEVENTH CIRCUIT S JURISPRUDENCE. In Jass v. Prudential Health Care Plan, Inc., 88 F.3d 1482, 1490 (7th Cir. 1996), the Seventh Circuit relied on an earlier Ninth Circuit decision, Gelardi v. Pertec Computer Corp., 761 F , 1324 (9th Cir. 1985), and held that only a plan can be a proper party in a benefits claim suit. Since 1985, not only has the Ninth Circuit reversed its position, see Cyr v. Reliance Standard Life Ins., Co. 642 F.3d 1202, 1207 (9th Cir. 2011), but important marketplace and demographic trends have developed, making the correct statutory interpretation as to who may be subject to suit ever more important. If the remedial objectives of ERISA are to be realized, the district court s decision, and the circuit court precedent it relied upon, must be reversed. Since the passage of ERISA, the employee benefit plan marketplace has changed significantly. The manner in which retirement and health benefits are provided has been transformed, 3 resulting in various entities which may now make the decision to grant or deny 3 Retirement plans have shifted from defined benefit plans to defined contribution plans; health plans have shifted from fee-for-service to various forms of managed care; and disability plans are focused on 4

11 participant benefit claims, ranging from the plan itself, to a benefits committee, to a claims administrator, to the plan administrator. See, e.g., Claims Procedures for Employee Benefit Plans, 62 Fed. Reg (proposed Sept. 8, 1997); Notice of Hearing on Reasonable Contracts or Arrangements for Welfare Benefit Plans under Section 408(b)(2)--Welfare Plan Fee Disclosure, 75 Fed. Reg (Nov. 5, 2010). Despite this range of parties making claims determinations, the Seventh Circuit s bar on suits against non-plan parties would leave each of them free from judicial scrutiny. Conversely, the only party open to suit may not have any actual authority over the claim decision. In addition, individuals are living longer with a much higher chance of developing a disability during their work life. According to the U.S Census Bureau, average life expectancy between 1970 and 2007 increased nearly seven years, from 70.8 in 1970 to 77.9 in 2007; the increase between 1985 and 2007 is 3.2 years. This trend is not expected to level off, and the average life expectancy is expected to approach seventy-nine years by 2015 and eighty by U.S. Census Bureau, Statistical Abstract of the United States: 2011, Consistent with increased life expectancy are statistics showing that individuals are surviving diseases that before would have been a death sentence. While in the past individuals would be more likely to die from certain diseases or conditions such as cancer and heart attacks, now these are treated and managed as chronic diseases. E.g., American Society of Clinical managing chronic diseases. Employee Benefits Research Institute, Facts: Retirement Trends in the United States Over the Past Quarter-Century (June 2007), Kaiser Family Foundation, U.S. Health Care Costs: What are the major proposals to contain costs?(mar. 2010), Care-Costs/Background-Brief.aspx; America s Health Insurance Plans, Trends and Innovations in Disability Income Insurance 3, 5 (Jan. 2010), /pdfs/trends_di_insurance_dec09.pdf. 5

12 Oncology, Studies Focus on Cancer as a Chronic Disease (June 5, 2011), /ASCOv2/Press+Center/Latest+News+Releases/ASCO+News/STUDIES+FOCUS+ON+CANC ER+AS+A+CHRONIC+DISEASE; Kevin Floyd, et al. A 30-Year Perspective ( ) Into the Changing Landscape of Patients Hospitalized with Initial Acute Myocardial Infarction, 2 CIRCULATION: CARDIOVASCULAR QUALITY AND OUTCOMES (2009), journals.org/content/2/2/88.full; Jane Brody, Cancer as a Disease, not a Death Sentence, N.Y. TIMES (June 17, 2008), dy.html. Not surprisingly, [t]he incidence of disability increases considerably among workers beginning at age 50. Tim Zayatz, Social Security Administration, Social Security Disability Insurance Program Worker Experience, at 7, Actuarial Study No. 18 (SSA Pub. No June 2005); accord, W. L. Erickson & S. Von Schrader, 2008 Disability Status Report: the United States, at (Cornell University Rehabilitation Research and Training Center on Disability Demographics and Statistics 2010), available at (disability more than doubles between the ages and 65-74). Accordingly, the National Association of Insurance Commissioners has found that the risk of disability is greater than the risk of death during an individual s work life. America s Health Insurance Plans, Guide to Disability Income Insurance at 3 (2009), The importance of employer-sponsored disability benefits cannot be overstated. People not in the labor force due to a disability generally have much lower income, higher poverty rates and fewer assets than those persons who retire. Congressional Budget Office, Disability and Retirement: The Early Exit of Baby Boomers from the Labor Force at 2 (Nov. 2004), available at Consequently, it is 6

13 imperative that a participant should be able to sue the party who has actual decision-making authority in order to obtain benefits to which they may be entitled. CONCLUSION For the foregoing reasons, the Court should grant the petition for hearing en banc of plaintiffs-appellants and reverse the district court s decision on the issue of who may be sued as a proper party defendant. Dated: November 23, 2011 Respectfully submitted, s/mary Ellen Signorille Mary Ellen Signorille AARP Foundation Litigation Melvin Radowitz AARP 601 E Street, NW Washington, DC Telephone: (202) msignorille@aarp.org Attorneys for Amicus Curiae AARP 7

14 CERTIFICATE OF COMPLIANCE PURSUANT TO RULE 32 I certify that pursuant to Circuit Rule 32, the undersigned declares: 1. This document contains 2,051 words; 2. This document was prepared using Microsoft Word 2010; 3. The font type used throughout this brief is Times New Roman, and the font size used throughout is 12-point for the text and 11-point for the footnotes. 4. I relied on the word count feature of Microsoft Word 2010 in preparing this certificate. I declare under penalty of perjury that the foregoing is true and correct. Dated: November 23, 2011 s/ Mary Ellen Signorille Mary Ellen Signorille Attorney for Amicus Curiae 8

15 CIRCUIT RULE 31(e) CERTIFICATION The undersigned hereby certifies that she has filed electronically, pursuant to Circuit Rule 31(e), versions of the foregoing brief in non-scanned PDF format. Dated: November 23, 2011 /s/mary Ellen Signorille Mary Ellen Signorille Attorney for Amicus Curiae 9

16 CERTIFICATE OF SERVICE I hereby certify that on November 23, 2011, I electronically filed the foregoing with the Clerk of the Court for the United States Court of Appeals for the Seventh Circuit using the appellate CM/ECF system. I certify that all participants in the case are registered CM/ECF users and that service will be accomplished by the appellate CM/ECF system. Dated: November 23, 2011 s/ Mary Ellen Signorille Mary Ellen Signorille Attorney for Amicus Curiae 10