Eileen M. Huss v. IBM Medical and D ( 2011 )

In the
United States Court of Appeals
For the Seventh Circuit
Nos. 10-1061 & 10-2749
E ILEEN M. H USS, individually and as
Guardian for JOSEPH R. H USS, JR.,
Plaintiff-Appellee,
v.
IBM M EDICAL AND D ENTAL P LAN and
R. A. B ARNES, in her capacity as
Plan Administrator,
Defendants-Appellants.
Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 07 C 7028—James B. Zagel, Judge.
A RGUED N OVEMBER 30, 2010—D ECIDED A PRIL 13, 2011
Before K ANNE, W ILLIAMS, and T INDER, Circuit Judges.
K ANNE, Circuit Judge. Eileen Huss, who recently retired
from International Business Machines Corporation
(“IBM”), sought to enroll her dependent adult child,
Joseph Huss, in the IBM Medical and Dental Plan (the
2 Nos. 10-1061 & 10-2749
“Plan”). The Plan’s administrator, R. A. Barnes, found
Joseph ineligible under the Plan’s governing documents
and denied his enrollment. Huss sued Barnes and the Plan
(the “Defendants”) under the Employee Retirement
Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001
et seq. The district court found that Barnes’s decision
was arbitrary, capricious, and unreasonable. It granted
Huss’s motion for summary judgment, having deter-
mined that Joseph was entitled to be enrolled in the
Plan immediately. The district court also imposed
statutory penalties on the Defendants for their failure
to abide by ERISA’s document-disclosure obligations.
The district court then awarded attorney’s fees to Huss
under ERISA’s fee-shifting provision. Barnes and the
Plan appealed each of the district court’s decisions.
We affirm in part and vacate in part. Because Barnes
based her denial on the incorrect Plan document, her
decision was unreasonable. Yet the record does not
compel the conclusion that Joseph was entitled to en-
rollment. We therefore vacate the district court’s judg-
ment awarding benefits and remand the case with in-
structions to return it to Barnes and the Plan for
further consideration. We also reverse a portion of the
district court’s statutory penalties award because some
of the documents for which the penalty was imposed
do not fall within ERISA’s disclosure requirements. In
light of these holdings, we vacate the attorney’s fees
award and remand for redetermination by the district
court in the first instance.
Nos. 10-1061 & 10-2749 3
I. B ACKGROUND
Huss retired from IBM on December 31, 2006. IBM
provides medical and disability insurance benefits to
its active and retired employees through the Plan. The
Plan’s program of benefits is governed by ERISA. The
Plan was administered by Barnes, who had the ulti-
mate authority and discretion to make final deci-
sions regarding the eligibility of employees and their
relatives under the Plan.
Huss has an adult son, Joseph, who was born on
August 8, 1981. Due to a congenital mental disability,
Joseph is and always has been dependent upon his
parents for care and support. Joseph had been enrolled in
the Plan from birth until age sixteen, at which time he
was enrolled in his father’s health plan.
Because she intended to re-enroll Joseph in the Plan
upon her retirement, Huss wanted to make sure that
Joseph would be covered under the Plan at that time.
Huss contacted the Plan’s Customer Service Center in
late 2005, explaining Joseph’s circumstances and asking
Customer Service Specialists what she needed to do
to enroll Joseph in the Plan when she retired. Various
specialists told Huss during multiple calls that Joseph
would be eligible for enrollment and that she did not
need to take further action until her retirement.
Yet in January 2007, Customer Service Specialist Todd
Rogers told Huss that Joseph was ineligible for
enrollment in the Plan. According to Rogers, the Plan
documents required Huss to have submitted a written
application before June 9, 2004—at least sixty days before
4 Nos. 10-1061 & 10-2749
Joseph’s twenty-third birthday—to now be able to
enroll Joseph in the Plan.
Huss emailed Rogers requesting a summary of the
Plan, the policy language involving adult child eligibility
for the Plan, and any associated materials. Rogers re-
sponded on the same day, saying that the only available
document was the 2006 Summary Plan Description
(“SPD”) that Huss had already received. Rogers then
spoke with Huss a week later and told her the 2006 SPD
was the only document she needed if she wanted to
appeal Joseph’s exclusion from the Plan. Huss responded
by requesting the Plan language that would have been
in effect in 2004, as that would have been the controlling
language at the time Joseph turned 23. Rogers’s email
response stated that there was no such policy or
contract information to send.
Huss then retained counsel to assist her in her appeal.
On March 27, 2007, her counsel sent Barnes a written
request for further review of the enrollment denial. That
letter also asked for the previously requested Plan lan-
guage and all documents for the Plan in effect in 2004,
2005, 2006, and 2007. Barnes denied Joseph’s enroll-
ment in a response letter dated April 26, 2007: “In order
to enroll Joseph in IBM benefit coverage, the Over Age 23
Disabled Child Application had to be submitted to the
IBM Employee Services Center no less than 60 days
prior to Joseph reaching age 23.” This denial was
based upon the language in the 2006 SPD. The letter
was accompanied by some of the additional docu-
ments requested by Huss’s counsel, including the 2003
Nos. 10-1061 & 10-2749 5
SPD in effect 60 days before Joseph’s twenty-third birth-
day.
Huss—through her counsel—submitted her final
appeal to the Defendants on June 12, 2007. She based
her arguments on the 2003 SPD. Barnes again denied
Huss’s appeal, finding that the 2006 SPD controlled
the determination. According to Barnes, the 2006 SPD
clearly indicated both that Huss must have re-
quested continuation of coverage before Joseph had
turned twenty-three and also that Joseph must have
been enrolled at that time for coverage to be continued.
Because Huss had not requested coverage for Joseph
until after he was twenty-five, Barnes found Joseph
ineligible for enrollment. Barnes also noted that, despite
any Customer Service Specialist’s contrary representa-
tions, the Plan documents would control Joseph’s eligi-
bility.
Huss believed that the SPD language in effect on June 9,
2004, should have controlled the determination. That
language would have required only a request by phone,
as opposed to a written request for coverage extension.
Accordingly, Huss sued the Plan and Barnes under
ERISA’s civil enforcement provision in the United States
District Court for the Northern District of Illinois. Her
amended complaint sought an award of benefits for
her son under 29 U.S.C. § 1132(a)(1)(B) (Count I) and
statutory damages for the Defendants’ failure to provide
requested documents as required by 29 U.S.C. § 1024(b)(4)
(Count II). In the proceedings below, Huss testified
that she had called and inquired about Joseph’s con-
6 Nos. 10-1061 & 10-2749
tinued eligibility at least once and likely on multiple
occasions prior to June 9, 2004. IBM could neither verify
nor refute any of those phone calls because it had not
retained records of its employees’ conversations from
that long ago.
The district court granted Huss’s motion for sum-
mary judgment on both counts. It found that Barnes’s
decision to deny Joseph enrollment in the Plan was arbi-
trary and capricious and that Joseph was entitled to
immediate enrollment in the Plan. The district court also
assessed statutory penalties against the Defendants in
the amount of $15,200 for failing to timely turn over
Plan documents Huss had requested in writing. In a post-
judgment order, the district court awarded attorney’s
fees and non-taxable expenses to Huss in the amount
of $86,906.04 under 29 U.S.C. § 1132(g)(1).
The Defendants timely appealed the district court’s
judgments on Counts I and II. Following the district
court’s post-judgment order, the Defendants again ap-
pealed to challenge the attorney’s fees award. We have
consolidated the appeals here.
II. A NALYSIS
Barnes and the Plan present three issues on appeal. First,
they contend that the district court erred by concluding
that their decision to deny Joseph enrollment in the
Plan was arbitrary, capricious, and unreasonable. Second,
they contend that the district court abused its discretion
by assessing statutory penalties against them for their
Nos. 10-1061 & 10-2749 7
putative failure to produce documents according to
their ERISA obligations. Third, they contend that the
district court abused its discretion by awarding attor-
ney’s fees to Huss despite their litigation position being
substantially justified. We will address each issue in turn.
A. Review of Enrollment Denial
We review the district court’s grant of summary judg-
ment de novo. Holmstrom v. Metro. Life Ins. Co., 615 F.3d
758, 766 (7th Cir. 2010). We examine the record and con-
trolling law anew while applying the same standards the
district court was bound to apply. Swaback v. Am. Info.
Techs. Corp., 103 F.3d 535, 540 (7th Cir. 1996). As in other
contexts, summary judgment in an ERISA case is proper
only if no genuine issue of material fact appears upon
review of the administrator’s decisions. Sellers v. Zurich
Am. Ins. Co., 627 F.3d 627, 631 (7th Cir. 2010).
The parties agree that the Plan’s clear language vests
its administrator with the discretion to construe policy
terms and to make final eligibility determinations.
Barnes’s decision to deny Joseph’s enrollment in the
Plan was premised on her interpretation of the Plan’s
requirements for the eligibility and enrollment of adult
children. Accordingly, we apply an arbitrary and capri-
cious standard of review to the administrator’s determina-
tion. See id. The administrator’s decision will not be dis-
turbed if “(1) it is possible to offer a reasoned explanation,
based on the evidence, for a particular outcome, (2) the
decision is based on a reasonable explanation of relevant
plan documents, or (3) the administrator has based its
8 Nos. 10-1061 & 10-2749
decision on a consideration of the relevant factors that
encompass the important aspects of the problem.” Ponsetti
v. GE Pension Plan, 614 F.3d 684, 691 (7th Cir. 2010)
(quoting Williams v. Aetna Life Ins. Co., 509 F.3d 317, 321-22
(7th Cir. 2007)).
The Defendants argue that the district court failed to
give due deference to their decision regarding Joseph’s
eligibility for enrollment in the Plan. But deference to
plan administrators does not require us to surrender our
role as reviewers and rubber stamp their decisions. See
Speciale v. Blue Cross & Blue Shield Ass’n, 538 F.3d 615, 621
(7th Cir. 2008). Where an administrator’s interpretation of
a plan’s language defies common sense, courts must
overturn the decision as being “downright unreasonable.”
Dabertin v. HCR Manor Care, Inc., 373 F.3d 822, 828 (7th
Cir. 2004). Ultimately, if Barnes based her decision to
deny Joseph’s enrollment on an interpretation that con-
troverted the plain meaning of the Plan, her actions
were arbitrary and capricious. Swaback, 103 F.3d at 540.
1. Determination of the Controlling Plan Version
The Defendants acknowledge that their denial decision
was based on the 2006 SPD, which reflected the Plan’s
language that was in effect when Huss, upon her retire-
ment, attempted to enroll Joseph in the Plan. Huss
argues that the 2003 SPD, which contained the Plan
language in effect on June 9, 2004, should have governed
her application for benefits, especially given that Rogers
indicated she had to have acted prior to that date to
Nos. 10-1061 & 10-2749 9
enroll Joseph. Each SPD may have required a Plan par-
ticipant to act at least sixty days prior to her adult child’s
twenty-third birthday in order to ensure continued eligi-
bility for enrollment—an issue that we will discuss
later. But the two SPDs diverged in one important sense:
the 2006 SPD required a written application to re-
quest continuation, while the 2003 SPD only required
the participant to call the Customer Service Center to
make the request.
The Defendants cite Hackett v. Xerox Corp. Long-Term
Disability Income Plan, 315 F.3d 771 (7th Cir. 2003), in
support of their argument that the 2006 SPD controlled.
In Hackett we held that “absent any language sug-
gesting ambiguity on the vesting question, the con-
trolling plan must be the plan in effect at the time the
benefits were denied.” Id. at 774. But the issue in
Hackett involved determining which of two sequential
plans was applicable in the context of a plan administra-
tor’s decision to terminate Hackett’s benefits. Id. at 773-
74. We noted that Hackett’s rights to benefits had not
vested prior to the enactment of the new plan language
and that his employer was therefore able to change
the plan, so we concluded that “the controlling plan will
be the plan that is in effect at the time a claim for
benefits accrues.” Id. at 774.
Despite Hackett’s sweeping language, we are uncon-
vinced that the case supports the Defendants’ position.
Huss has not, for example, challenged an administrator’s
rejection of a claim for health benefits allegedly owed
her for medical treatment she received in 2006. Rather,
10 Nos. 10-1061 & 10-2749
she challenges the Defendants’ decision to deny Joseph’s
enrollment based on her failure to fulfill a putative condi-
tion precedent that sprang into existence after her
window of opportunity to meet the condition closed in
2004. Hackett does not stand for the proposition that ERISA
plan administrators can avoid providing coverage for
participants by grafting already-insurmountable con-
ditions precedent into superseding plan documents.
Accord Dabertin, 373 F.3d at 831 (“[T]he Committee im-
posed new requirements on Plan participants that were
not part of the plain language of the Plan. An ERISA
benefit cannot be a moving target where the plan ad-
ministrator continues to add conditions precedent to
the award of benefits.”) (internal citation omitted);
Swaback, 103 F.3d at 542 n.14 (“Where the Trustees impose
a standard not required by the pension plan itself, . . . such
action would result in an unwarranted and arbitrary
construction of the plan.”) (quoting Morgan v. Mullins,
643 F.2d 1320, 1321 (8th Cir. 1981)).
We agree with the very able district judge that “[t]he
nature of the dispute dictates whether the plan admin-
istrator must turn to an earlier version of an SPD.” Huss v.
IBM Medical and Dental Plan, 2009 WL 780048, at *7 (N.D.
Ill. Mar. 20, 2009). We hold that if a plan participant’s
application for benefits is denied for her failure to fulfill
a condition precedent to her eligibility for benefits, the
operative plan language is the language that was in
effect at the time the opportunity to fulfill the con-
dition precedent expired. In order for the Defendants’
denial decision to be reasonable, then, they must have
based their final decision on the Plan language in effect
Nos. 10-1061 & 10-2749 11
at the time Huss purportedly failed to meet the necessary
condition. Given that any such condition must have
been fulfilled no later than June 9, 2004, the 2003 SPD
language controls this dispute.
Because Barnes acknowledges that her denial decision
was based on the 2006 SPD language—that is, on Huss’s
failure to file a written application—Barnes acted in an
arbitrary and capricious manner by failing to consider
the relevant document in her decision. See Speciale, 538
F.3d at 621 (noting that administrators’ decisions must
be based on a reasonable explanation of relevant plan
documents in order to be upheld). It was unreasonable
for the Defendants to deny Joseph’s enrollment in the
Plan merely for Huss’s failure to fulfill a condition that
did not exist on the critical date.
We pause at this point to briefly address the Defendants’
ancillary argument that the district court erred by con-
sidering the 2003 SPD because it should have limited
its review of Huss’s claim to the information considered
by the Defendants when denying Huss’s application.
Because Barnes based her decision upon the 2006 SPD
alone, they allege its consideration of the 2003 SPD was
erroneous. This argument is without merit. Plan admin-
istrators may not insulate controlling plan documents
from reviewing courts’ consideration by deliberately
ignoring them. Giving effect to the Defendants’ argument
would legitimize the very arbitrary and capricious
decision-making ERISA condemns.
12 Nos. 10-1061 & 10-2749
2. Outcome under the 2003 SPD
The Defendants argue that the question of whether the
2003 or 2006 SPD controls is immaterial because Huss’s
application was rightfully denied under either. The
parties acknowledge that Joseph was enrolled in the
Plan at one time, that he was disenrolled to join his
father’s health plan, and that he would be allowed re-
enrollment later if all eligibility criteria were met. The
parties agree that a Plan participant’s child only
remains eligible for participation in the Plan until the
age of twenty-three, unless the child meets four criteria
to qualify as an eligible mentally disabled adult. The
parties also agree that Joseph always met and continues
to meet those four exception criteria. The parties
disagree, however, on two fundamental points. First,
they dispute whether eligibility to enroll after the age
of twenty-three is conditioned upon the parent partici-
pant’s request to continue the adult child’s eligibility.
Second, they dispute whether Huss met the request
obligation if it exists. We examine each in turn.
The 2003 SPD states that “[e]ligible individuals will
receive coverage under the IBM Medical and Dental
Benefits Plan only if and while enrolled for coverage.”
Accordingly, for Joseph to receive any benefits, he must
be enrolled in the Plan. The Plan also allows participants
to change their minds regarding year-to-year enroll-
ment of family members, provided the family members
Nos. 10-1061 & 10-2749 13
remain eligible.1 It is clear that both enrollment and
receipt of benefits are dependent upon an individual’s
eligibility for coverage.
Unfortunately, the SPD introduces some ambiguity
through poor word choice in section 3.1.1.4 of the 2003 SPD
(emphasis added): “A child who was eligible under the
plans immediately before reaching age 23 . . . and who,
but for having reached age 23 would still be eligible, will
be eligible to enroll upon attainment of age 23 . . . and
thereafter to remain continuously eligible to enroll beyond
the age of 23 if, at the time the child enrolls” he meets the
four mental disability criteria. The italicized language
might, at first blush, suggest that a disabled adult’s
eligibility continues beyond his twenty-third birthday
without any act by the Plan participant.
The following two paragraphs cast serious doubt on
that assumption. The first reads:
If you think your child will meet the above criteria
at age 23, you must request continuation of IBM
1
The 2006 SPD explicitly states: “Please note, you may opt out
or waive coverage for your dependent child one year and
re-enroll your child during the next or subsequent annual
enrollment period as long as they continue to meet the
eligibility criteria.” Although the 2003 SPD does not contain
this quotation in any section, the point could be inferred from
a statement in section 2.1: “Each year, during an enrollment
period usually held in the fall, you will have the opportunity
to elect coverage for yourself and any other eligible family
members you wish to enroll for the upcoming plan year. . . .”
(emphasis added).
14 Nos. 10-1061 & 10-2749
health benefits at least 60 days before his or her
23 [sic] birthday. To do so, call the Employee
Services Center. If you are a newly hired employee
with a disabled child who has already reached
age 23 at the time your employment begins, you
should call to request this coverage within 60 days
of your date of hire.
This language clearly shows that if a disabled adult child
is enrolled and receiving benefits, those benefits will
terminate at age twenty-three unless the participating
employee requests continuation. It could also imply that
a continuation request is likewise required to extend
enrollment eligibility. That implication is strongly rein-
forced by the requirement that new employees must
request coverage for disabled adult children within
sixty days, as well as by the succeeding paragraph:
Any determination that a child qualifies for eligi-
bility beyond age 23 will be reviewed periodically.
Once any of the four conditions is not met by
a child beyond the age of 23, coverage will be
discontinued and will not be reinstated, even if
later the child again meets all or any of the four
conditions.
This paragraph indicates that eligibility beyond age
twenty-three is conditioned upon a determination that
the child meets the established criteria. It also shows
that adult children discontinuing receipt of benefits, but
later meeting the criteria, will nevertheless be ineligible
for re-enrollment. These provisions undermine the
premise that eligibility continues automatically for dis-
abled adult children who are not already enrolled.
Nos. 10-1061 & 10-2749 15
Huss chooses to read the language most favorable to
her in isolation: “If you think your child will meet the
above criteria at age 23, you must request continuation
of IBM health benefits at least 60 days before his or her
23 [sic] birthday.” Huss argues that the 2003 SPD there-
fore did not impose an application requirement to
preserve Joseph’s continued eligibility for enrollment
under the Plan, but rather imposed a requirement only
to request a continuation of benefits. Because Joseph was
not already enrolled, her argument posits, the request
requirement did not apply to him. She therefore con-
cludes that Joseph remains eligible for enrollment
during any annual enrollment period.
We are convinced that the provisions we have quoted,
when read in their full context, illustrate the Plan’s struc-
ture of making coverage available to disabled adult
children of Plan participants provided that the partic-
ipants arrange for such coverage prospectively. This
is not a case where the Plan is devoid of latent
ambiguities “once its real-world setting is understood,”
such that no careful administrator could have deter-
mined that a request is necessary to extend eligibility for
enrollment. Orth v. Wis. State Emps. Union Counsel 24, 546
F.3d 868, 872, 875 (7th Cir. 2008). Granted, the inherent
ambiguity of the Plan’s language could conceivably
give rise to an unusual loophole Huss seeks to employ:
unenrolled adult children of long-standing employees
may be enrolled at any time in their adulthood, but
already-enrolled adult children and the adult children
of new employees must meet a stringent timeline or be
16 Nos. 10-1061 & 10-2749
ineligible for coverage. But we doubt the drafters of
the Plan intended this strained result.
Regardless, it is because of such ambiguities in ERISA
plans that we defer to administrators who are granted
interpretive discretion in the plan documents. See Hess
v. Reg-Ellen Mach. Tool Corp., 423 F.3d 653, 662 (7th Cir.
2005). Huss argues that the Defendants failed to give
any weight to how IBM’s own Customer Service Spec-
ialists had interpreted the Plan to permit Joseph’s enroll-
ment. But the Plan vests interpretive discretion in Barnes,
not the Specialists—or the courts. See Dabertin, 373 F.3d at
833 (“[W]e cannot merely apply federal common law
principles of contract interpretation, but rather must
view the contractual ambiguity through a lens that gives
broad discretion to the plan administrator to interpret
the plan.”). Given her range of discretion, it would not be
downright unreasonable for Barnes to conclude that
an employee must take action within sixty days of a
disabled adult dependent’s twenty-third birthday to
secure continued eligibility for enrollment beyond the
age of twenty-three.
We turn then to the question of whether Huss took
sufficient action before June 9, 2004, to ensure Joseph’s
continued eligibility for enrollment. We have already
held that the 2003 SPD controls in the present case. We
next need to determine if the record supports a conclu-
sion that Huss timely called the Customer Service
Center to request extended eligibility for enrollment.
In an affidavit submitted to the district court, Huss
averred that she regularly contacted the Plan’s repre-
Nos. 10-1061 & 10-2749 17
sentatives to inquire about benefits and eligibility before
June 9, 2004. (Huss Aff. ¶ 13) Regarding calls she made
in 1998 while considering transferring Joseph to his
father’s health plan, Huss wrote,
I am almost certain I would have confirmed with
the IBM Plan at that time that I would have the
ability to re-enroll Joseph in the IBM Plan during
a subsequent open enrollment period. . . . It is
probable that I would have expressed my contin-
ued interest in preserving Joseph’s eligibility for
lifetime benefits.
(Id. at ¶ 14) She also argues that neither Barnes nor any
Customer Service Representative checked to see if she
had contacted the Plan to request continued eligibility
for Joseph. The Defendants have not argued that Huss
never made such a phone call, as IBM has not retained
Customer Service Center phone records from that pe-
riod. Instead, the Defendants note that Huss “cannot
recall a specific conversation with an IBM Plan em-
ployee prior to August 2004 in which [she] specifically
said [she] wanted to be sure Joseph could continue to
remain eligible for benefits after he turned age 23.” (Id. at
¶ 12) Rather, she merely stated that “it is probable that
[she] discussed Joseph’s continued eligibility at some
time during or prior to June of 2004.” Id. They also
argue that the district court improperly considered the
affidavit because the information in it was not con-
sidered by Barnes, making it not part of the administra-
tive record.
The district court did not premise its conclusion that
Huss was entitled to immediately enroll Joseph in the
18 Nos. 10-1061 & 10-2749
Plan on Huss having called to request an extension.
Instead, the district court held that such a request was not
required in Joseph’s circumstances because he was not
already enrolled in the Plan. As noted above, we respect-
fully disagree with that conclusion by the learned dis-
trict judge.
Given the uncertainty of Huss’s testimony and the fact
that the Defendants—because they were applying the
incorrect SPD language—did not consider any evidence
of Huss’s calls before June 9, 2004, a genuine issue of
material fact persists as to whether Huss qualifies for the
relief she seeks. Courts should rule directly in the claim-
ant’s favor rather than remanding the case to the plan
administrator only in the rare case where the record
“contains such powerfully persuasive evidence that the
only determination the plan administrator could rea-
sonably make” is in the claimant’s favor. Majeski v. Met.
Life Ins. Co., 590 F.3d 478, 484 (7th Cir. 2009). As we do
not believe this to be one of those rare cases, the
parties should fully develop the record and appro-
priately examine the evidence at the administrative level
in the first instance. See Holmstrom, 615 F.3d at 778. The
appropriate remedy is to remand the case to the Plan
administrator for further proceedings in accordance
with this opinion.
B. Award of Statutory Penalties
The Defendants also appeal the district court’s imposi-
tion of statutory penalties due to their delay in providing
Huss with documents she requested. ERISA imposes
Nos. 10-1061 & 10-2749 19
an obligation on plan administrators to provide partici-
pants, upon written request, with specific information:
“The administrator shall . . . furnish a copy of the latest
updated summary[] plan description, and the latest
annual report, . . . or other instruments under which
the plan is established or operated.” 29 U.S.C. § 1024(b)(4).
The disclosure provision enables participants and benefi-
ciaries to know where they stand with respect to the plan,
including knowing the procedures they must follow
to secure benefits. Mondry v. Am. Family Mut. Ins. Co.,
557 F.3d 781, 793 (7th Cir. 2009). ERISA provides for en-
forcement of the disclosure obligation by authorizing
reviewing courts to impose penalties on reticent admin-
istrators. Administrators who do not “comply with a
[1024(b)(4) request] . . . by mailing the material
requested . . . within 30 days after such request may in the
court’s discretion be personally liable to such participant
or beneficiary in the amount of up to [$110] a day
from the date of such failure or refusal.” 29 U.S.C.
§ 1132(c)(1)(B).2
1. Standard of Review
We review an assessment of statutory penalties for
abuse of discretion. Fenster v. Tepfer & Spitz, Ltd., 301
F.3d 851, 858 (7th Cir. 2002). The district court has discre-
tion both as to the assessment of a penalty and as to the
2
The Secretary of Labor administratively increased the maxi-
mum penalty under this statute to $110 per day (from the
original $100 per day). 29 C.F.R. § 2575.502c-1.
20 Nos. 10-1061 & 10-2749
size of any penalty assessed (up to the regulatory maxi-
mum). Ziaee v. Vest, 916 F.2d 1204, 1210 (7th Cir. 1990).
Before a court may impose penalties, the administrator
must have actually flouted its obligations—that is, it must
have failed to timely send the documents in response to
a valid request, and the documents requested must fall
within the scope of the statute. 29 U.S.C. § 1024(b)(4);
Kleinhans v. Lisle Sav. Profit Sharing Trust, 810 F.2d 618,
622 (7th Cir. 1987); see also Ames v. Am. Nat’l Can Co.,
170 F.3d 751, 758-59 (7th Cir. 1999) (“If it had meant to
require production of all documents relevant to a plan,
Congress could have said so.”). And even if those neces-
sary criteria are met, a fine is not mandatory. Fenster,
301 F.3d at 858. Reviewing courts consider multiple
factors to determine what size penalty, if any, is appro-
priate. These factors include: prejudice to the participant
caused by the delay, see Mondry, 557 F.3d at 806; injury
to the participant, see Ziaee, 916 F.2d at 1210; the number
of requests made by the participant, id. at 1211; the ad-
ministrator’s bad faith or egregious conduct, see Kleinhans,
810 F.2d at 622; the length of and explanation for the delay,
see Krueger Int’l, Inc. v. Blank, 225 F.3d 806, 810-11 (7th
Cir. 2000); the administrators’ lack of resources to comply
with the request, see Lowe v. McGraw-Hill Cos., 361 F.3d
335, 338 (7th Cir. 2004); the nature of the documents
withheld, see Kamler v. H/N Telecomm. Servs., Inc., 305 F.3d
672, 683 (7th Cir. 2002); and particular combinations of
these factors, Leister v. Dovetail, Inc., 546 F.3d 875, 883-
84 (7th Cir. 2008).
In this case, the district court assessed statutory
penalties against the Defendants for their failure to
Nos. 10-1061 & 10-2749 21
comply with two of Huss’s document requests. Pursuant
to 29 U.S.C. §§ 1024(b)(4) and 1132(c)(1)(B), the district
court imposed a statutory penalty of $3,780 for failure
to comply with the first request and $11,440 for the
second. We address each assessment separately.
2. First Statutory Penalty
In an email dated January 23, 2007, Huss asked the
Defendants to send her the 2003 SPD. This request was
founded on Customer Service Representative Rogers’s
statement that Huss needed to have acted prior to June 9,
2004. The 2003 SPD contained the Plan language in
effect on that critical date. The Defendants sent the
2003 SPD to Huss only after sixty-three days.
We find no error in the first award. We have already
determined that the 2003 SPD controls Huss’s applica-
tion. Accordingly, the 2003 SPD Huss requested was
undoubtedly an “instrument[] under which the plan
[was] established or operated” and therefore subject to
section 1024(b)(4)’s disclosure obligation. The Defendants
did not provide the document within the statute’s
allotted thirty days. Further, the 2003 SPD was critically
important to Huss in her administrative appeal. Given
that the document’s language should have guided the
Defendants’ determination in the first instance and in
the administrative appeal, even the relatively brief sixty-
three-day delay was likely prejudicial or injurious to
Huss. In addition, the Defendants rebuffed Huss’s
request by suggesting that only the 2006 SPD was
relevant in her appeal and by representing that no
22 Nos. 10-1061 & 10-2749
policy information from that time was available.
The district court did not abuse its discretion in assessing
a $60-per-day penalty against the Defendants for this
failure to comply with ERISA’s disclosure requirement.
Accordingly, we affirm the first penalty assessment of
$3,780.
3. Second Statutory Penalty
Via her attorney’s letter dated March 27, 2007, Huss
requested copies of nine additional SPDs that were pub-
lished between June 9, 2004, and the date of the letter.
She sought to determine the evolution of the purported
condition precedent to extending Joseph’s enrollment
eligibility. The Defendants fulfilled this second request
only after 104 days.
The district court ruled that the 2004-2007 SPDs fell
within the scope of ERISA’s disclosure obligation because
they were “material to an evaluation of the claimant’s
rights.” Huss, 2009 WL 780048, at *10. It also held
that “common sense confirms that if an earlier version of
an SPD is germane to evaluating a claimant’s rights,
section 1024(b)(4) encompasses those earlier SPDs.” Id.
The court found bad faith in the Defendants’ continued
misrepresentations regarding the relevance and avail-
ability of historical documents, noted the number of
documents in the request, and found that the 104-day
delay was “undeniably egregious.” Without any further
discussion of prejudice to Huss resulting from the
failure to disclose, the district court imposed the maxi-
mum penalty allowable—$110 per day.
Nos. 10-1061 & 10-2749 23
We find the district court’s reasoning as to the second
assessment less convincing. We review the assessment
only for an abuse of discretion, but it is always an abuse
of discretion for a district court to erroneously apply the
law or to base its holding on clearly erroneous character-
izations of the evidence. Gastineau v. Wright, 592 F.3d
747, 748 (7th Cir. 2010). Before a court may impose a
penalty pursuant to section 1132(c)(1), “the participant
must establish (1) that the administrator was required
by ERISA to make available to the participant the infor-
mation the participant requested, and (2) that the partici-
pant requested and the administrator failed or refused
to provide the information requested.” Kleinhans, 810
F.2d at 622. The propriety of the second penalty in this
case turns on the first criterion. We need to determine,
therefore, “how broadly we should construe the catch-all
part of § 1024(b)(4), which requires disclosure of ‘other
instruments under which the plan is established or oper-
ated.’ ” Ames, 170 F.3d at 758.
In Ames, we held that § 1024(b)(4)’s disclosure obliga-
tion “extends only to a defined set of documents,” id. at
759, and does not comprehend every document that may
be relevant to the administration of a plan, id. at
758. Documents that may prove beneficial to plan partici-
pants when developing their litigation positions might
be available in civil discovery, but might nevertheless
remain outside of the statutory confines of ERISA’s dis-
closure obligations. Id. at 759. “[T]he universe of docu-
ments that qualify as ones under which the plan is estab-
lished or operated . . . is small and is limited to
24 Nos. 10-1061 & 10-2749
those documents that formally, i.e., legally, govern the
establishment or operation of the plan.” Mondry, 557
F.3d at 801 (internal quotation marks omitted).
We conclude that, as in Ames, the documents at the
base of the second penalty in this case do not fall within
the scope of section 1024(b)(4). During her appeal, Huss
was already aware that the language in effect on the
critical date did not contain any written-request require-
ment. The sequence and timing of the requirement’s
evolution may have been illuminating, but could not
have been critical to Huss’s evaluation of her rights. The
Defendants here relied on the 2006 SPD to deny Huss’s
application, and we have held that the 2003 SPD
should control. The Defendants did not rely on any of
the interim documents in denying Huss’s applica-
tion, which would have brought them within section
1024(b)(4)’s purview. See Mondry, 557 F.3d at 801.
Huss concedes that “[u]nder the circumstances, the
[2003 SPD] is the only controlling plan document,” but
argues that “the intervening iterations of the SPD are
additional relevant documents under which the IBM
Plan ‘is established or operated.’ ” (Appellee’s Br. at 41
(citing Ames, 170 F.3d at 759)) But Ames plainly held that
not every document relevant to a plan is within ERISA’s
disclosure obligation. Ames, 170 F.3d at 758-59. And we
have previously held that superseded plan descriptions
do not fall into the categories of documents administrators
must provide to inquiring participants. Shields v. Local
705, Int’l Bhd. of Teamsters Pension Plan, 188 F.3d 895, 903
(7th Cir. 1999). We see no principled basis on which to
Nos. 10-1061 & 10-2749 25
hold that the documents comprising Huss’s second
request—documents adopted after the controlling SPD,
then superseded, and never referenced or relied upon
by the Defendants—constitute “the latest updated sum-
mary, plan description, . . . or other instruments under
which the plan is established or operated.” 29 U.S.C.
§ 1024(b)(4). While Huss may have been entitled to
these documents during discovery in the course of her
district court review, see Ames, 170 F.3d at 759, she was
not entitled to automatic disclosure of these documents
within thirty days of her request. Accordingly, the
district court abused its discretion by assessing a penalty
against the Defendants for their delay in sending the
second set of requested documents.3 We vacate the
3
Even if these documents fell within section 1024(b)(4)’s
purview, the assessed penalty may still have constituted an
abuse of discretion. Prejudice is not a requisite to recovery,
Mondry, 557 F.3d at 806, but we find no authority holding
that prejudice premised only on the hiring of an attorney and
time spent disputing a claim suffices for statutory penalties.
Further, there is no indication that Huss would not have
spent the same amount of time on and retained an attorney
to assist her in the appeal if the documents were timely sent.
Finally, the 104-day delay was not negligible, but is well
shy of delays previously found to justify lesser penalties.
E.g., Lowe, 361 F.3d at 337-39 (affirming award of $50 per day
for 731-day delay). It may push or exceed the limits of a
district court’s discretion to assess the maximum penalty given
the weak-to-negligible showing of prejudice and the length
(continued...)
26 Nos. 10-1061 & 10-2749
district court’s award of $11,440 in statutory penalties
to Huss.
C. Award of Attorney’s Fees
The Defendants’ last issue involves the district court’s
award of attorney’s fees to Huss on the basis that their
litigation position was not substantially justified. ERISA
provides that a district court “may allow a reasonable
attorney’s fee and costs of action to either party.” 29 U.S.C.
§ 1132(g)(1). We have identified a modest, but rebut-
table, presumption in favor of awarding fees to prevailing
parties in ERISA cases. Laborers’ Pension Fund v. Lay-Com,
Inc., 580 F.3d 602, 615 (7th Cir. 2009). We review a
district court’s award or denial of attorney’s fees for an
abuse of discretion. Holmstrom, 615 F.3d at 779.
We must first determine whether Huss is eligible for
an award of attorney’s fees. Rather than holding that
Huss is entitled to immediately enroll Joseph in the
Plan, we are remanding the case to the administrator for
further proceedings. In the past, this court held that a
claimant who secures a remand during district court
review of an administrator’s denial of benefits was “not a
prevailing party in the truest sense of the term” and was
therefore not entitled to attorney’s fees. See Quinn v. Blue
3
(...continued)
of delay in this case. The Defendants, however, appeal only
the fact of the penalty, not its amount. We therefore need not
and do not decide this issue today.
Nos. 10-1061 & 10-2749 27
Cross & Blue Shield Ass’n, 161 F.3d 472, 478-79 (7th Cir.
1998); Tate v. Long Term Disability Plan for Salaried Emps. of
Champion Int’l Corp. No. 506, 545 F.3d 555, 564 (7th Cir.
2008). But the Supreme Court recently clarified that
§ 1132(g)(1) does not limit attorney’s fees awards to a
“prevailing party”; rather, it affords district courts
the discretion to award fees to “either party.” Hardt
v. Reliance Standard Life Ins. Co., ___ U.S. ___, ___, 130
S. Ct. 2149, 2157-58 (2010). In doing so, the Court effec-
tively overruled our precedents preventing an ERISA
claimant from receiving attorney’s fees if her case is
remanded to the plan administrator. See Holmstrom, 615
F.3d at 766 n.6. The Supreme Court acknowledged, how-
ever, that a judge’s discretion is still somewhat limited,
holding that “a fees claimant must show some degree
of success on the merits before a court may award attor-
ney’s fees under § 1132(g)(1).” Hardt, ___ U.S. at ___, 130
S. Ct. at 2149 (internal quotation marks omitted).
In this case, Huss has achieved more than “trivial
success on the merits” or a “purely procedural victory.” Id.
(quoting Ruckelshaus v. Sierra Club, 463 U.S. 680, 688 n.9
(1983)). She has secured a reversal of the administrative
denial of benefits, a remand for further proceedings
involving a different controlling document, and the
imposition of a statutory penalty against the Defen-
dants. We easily conclude that this outcome represents
“some success on the merits,” Hardt, ___ U.S. at ___, 130
S. Ct. at 2149, enabling Huss to receive attorney’s fees
under section 1132(g)(1).
We next turn to our review of the actual award.
Even after an eligibility determination under Hardt, we
28 Nos. 10-1061 & 10-2749
still must consider whether an award of attorney’s fees
is appropriate. See Williams v. Metro. Life Ins. Co., 609
F.3d 622, 635 (4th Cir. 2010) (“[W]e conclude that once a
court in this Circuit determines that a litigant in an
ERISA case has achieved some degree of success on the
merits, the court should continue to apply the general
guidelines that we identified . . . when exercising its
discretion to award attorneys’ fees to an eligible party.”
(internal quotation marks omitted)); Simonia v. Glendale
Nissan/Infiniti Disability Plan, 608 F.3d 1118, 1119 (9th Cir.
2010) (“[T]he Supreme Court expressly declined to fore-
close the possibility that, once a court has determined
that a litigant has achieved some degree of success on the
merits, it may then evaluate the traditional five factors . . .
before exercising its discretion to grant fees.”). For an
award of attorney’s fees under § 1132(g)(1) to be appro-
priate, the court must find the non-prevailing party’s
litigation position was not substantially justified. Lowe,
361 F.3d at 339. A five-factor test may inform the
court’s analysis, see, e.g., Quinn, 161 F.3d at 478, but “the
factors in the test are used to structure or implement,
rather than to contradict, the ‘substantially justified’
standard . . . as the ‘bottom-line’ question to be answered.”
Lowe, 361 F.3d at 339. We therefore ask whether the De-
fendants’ litigation position was substantially justified
and taken in good faith or whether they were out to
harass Huss. See Herman v. Cent. States, Se. and Sw. Areas
Pension Fund, 423 F.3d 684, 696 (7th Cir. 2005).
The district court awarded Huss attorney’s fees and
related non-taxable expenses in the amount of $86,906.04.
Although the Defendants challenged the amount of the
Nos. 10-1061 & 10-2749 29
award below, on appeal they challenge only the fact of
the award and argue we must vacate it because their
position was substantially justified. The district court
analyzed Huss’s motion for attorney’s fees in two ways.
It first asked whether the Defendants’ position was sub-
stantially justified and taken in good faith. See, e.g.,
Herman, 423 F.3d at 696. For completeness, it then
applied the five-factor test, though it acknowledged
that the multi-factor test is disfavored in this circuit. See
Sullivan v. William A. Randolph, Inc., 504 F.3d 665, 671-72
(7th Cir. 2007). Under each analysis, the district court
found that the circumstances warranted awarding Huss
attorney’s fees and expenses.
We have found that the Defendants’ decision—requiring
Huss to have submitted a written application to extend
Joseph’s enrollment eligibility when such a requirement
did not exist on the critical date—was arbitrary and
capricious, thus requiring reversal and remand. But we
are hesitant to say their position was not substantially
justified and taken in good faith, especially in light of the
potentially ambiguous directives of our precedents. See,
e.g., Hackett, 315 F.3d at 774 (“[A]bsent any language
suggesting ambiguity on the vesting question, the con-
trolling plan must be the plan in effect at the time the
benefits were denied.”). The Defendants argue that the
district court’s determination of the applicable Plan
language was contrary to circuit precedent and that
Huss would not be entitled to benefits under the Plan
even if the 2003 SPD applied to their dispute. Their
first argument, while incorrect, was plausible; their
second argument had enough force to warrant our
30 Nos. 10-1061 & 10-2749
remand for further proceedings. A position need
not be meritorious to clear the “substantially justified”
threshold.
We also respectfully disagree with the district court’s
somewhat abrupt conclusion that the Defendants’ denial
of eligibility necessarily indicated bad faith. See Prod. &
Maint. Employees’ Local 504 v. Roadmaster Corp., 954
F.2d 1397, 1405 (7th Cir. 1992) (“[L]ack of explanation is
often sufficient in itself to constitute an abuse of discre-
tion where the reasons for a decision left unexplained are
not apparent from the record.”). The Defendants’ denial
may have been erroneous without being the result of
bad faith, and there was no indication that they
intended to harass Huss.
We would be hesitant to conclude that the Defendants’
position, though unsuccessful in significant part, was
so indefensible as to warrant an award of attorney’s fees
to Huss. See Harris Trust and Sav. Bank v. Provident Life
and Acc. Ins. Co., 57 F.3d 608, 617 (7th Cir. 1995). Never-
theless, we need not and do not decide whether the
district court abused its discretion in finding the Defen-
dants’ litigation position not substantially justified. As
we stated above, Huss has achieved some success on the
merits of her case and may therefore be entitled to
some portion of her attorney’s fees request. The Supreme
Court has held that “where the plaintiff achieved only
limited success, the district court should award only
that amount of fees that is reasonable in relation to the
results obtained.” Hensley v. Eckerhart, 461 U.S. 424,
440 (1983).
Nos. 10-1061 & 10-2749 31
Given that we have significantly altered the outcome
of the litigation below, and that the district court is in
the best position to determine any attorney’s fee award,
we choose to vacate the attorney’s fees and expenses
award. We remand the issue to the district court for
reconsideration in light of Hardt, Huss’s degree of
success on the merits, and our discussion and holdings
in this case.
III. C ONCLUSION
For the foregoing reasons, we V ACATE the district court’s
entry of summary judgment in favor of Huss on her
claim for benefits and R EMAND the case to the district
court with instructions to return the matter to IBM for
further proceedings consistent with this opinion. We
A FFIRM the district court’s imposition of a statutory
penalty on the Defendants in the amount of $3,780 for
failure to comply with Huss’s first request for Plan docu-
ments, but R EVERSE the statutory penalty imposed in
the amount of $11,440 for failure to comply with Huss’s
second request. We V ACATE the district court’s award
of attorney’s fees and other expenses and R EMAND the
matter to the district court for redetermination con-
sistent with this opinion.
4-13-11