Petar Mrkonjic v. Delta Family-Care and Survivor ( 2018 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS JUN 15 2018
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
PETAR MRKONJIC, No. 16-56335
Plaintiff-Appellant, D.C. No.
2:15-cv-02255-JAK-JC
v.
DELTA FAMILY-CARE AND MEMORANDUM*
SURVIVORSHIP PLAN, an ERISA plan; et
al.,
Defendants-Appellees.
PETAR MRKONJIC, No. 16-56487
Plaintiff-Appellee, D.C. No.
2:15-cv-02255-JAK-JC
v.
DELTA FAMILY-CARE AND
SURVIVORSHIP PLAN, an ERISA plan; et
al.,
Defendants-Appellants,
and
DOES, 1-10, inclusive,
Defendant.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Appeal from the United States District Court
for the Central District of California
John A. Kronstadt, District Judge, Presiding
Argued and Submitted February 14, 2018
Pasadena, California
Before: BERZON and BYBEE, Circuit Judges, and WOODCOCK,** District
Judge.
This case presents three questions spanning two district court litigations: the
proper interpretation of the judgment in the first case, whether an ERISA plan
administrator abused its discretion on remand from the district court in
implementing that judgment, and whether Mrkonjic is entitled to equitable relief.
We conclude that the plan administrator misinterpreted the judgment, that it abused
its discretion in departing from its normal practice for calculating benefits, and that
in any event, the plan administrator may be equitably estopped from collecting
overpayments caused by its mistakes. The parties are familiar with the facts and
the proceedings, and we will not state them except as necessary to explain our
decision.
1. Petar Mrkonjic, a former employee of Delta Air Lines, Inc., brings this
appeal as the latest stage of a complicated employee benefits plan dispute that
**
The Honorable John A. Woodcock, Jr., United States District Judge
for the District of Maine, sitting by designation.
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traces its origin to a work injury he sustained in December 2003. The first
improper denial of Mrkonjic’s various claims for benefits occurred in 2005, and
controversies between Mrkonjic and Delta’s plans persisted for the next thirteen
years, including eight years of litigation. Pursuant to the Delta Family-Care
Disability & Survivorship Plan (“D&S Plan”), long-term disability (“LTD”)
benefits are typically offset by any benefits a participant receives from: (1) the
Delta Retirement Plan, (2) Social Security disability, and (3) workers’
compensation.
Mrkonjic opted to receive early retirement benefits from the Retirement Plan
because the Plans wrongfully denied the LTD benefits he sought from the D&S
Plan. Later, the Committee deemed him eligible for LTD benefits but subjected
him to a variety of offsets including the retirement benefits he had received.
Having been declared eligible for LTD benefits, Mrkonjic tried to rescind his early
retirement election but was not permitted to do so. Mrkonjic’s first lawsuit
(Mrkonjic I) resulted in a judgment that, among other things, ordered rescission of
his early retirement election, required the Committee to recalculate certain offsets,
and mandated that the Retirement Plan transfer monies from the D&S Plan Trust to
the Retirement Plan Trust.
On remand, the Committee interpreted the judgment to require
reimbursement to the Retirement Plan Trust of all Mrkonjic’s retirement benefits,
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and also to require adding up all potentially offsetable outside benefits and
subtracting that sum from the gross LTD benefits due Mrkonjic. This recalculation
resulted in a substantial amount the D&S Plan owed the Retirement Plan, and the
Committee sought to recover this amount by withholding Mrkonjic’s LTD monthly
benefits.
Mrkonjic challenges the Committee’s interpretation of the judgment on two
grounds. First, he disputes the Committee’s view that the judgment required that
he reimburse to the Retirement Plan all the benefits the Retirement Plan paid him.
Second, he argues that because the judgment gave no specific instructions on how
the calculation of offsets was to be done, it should have been done the way offsets
are normally calculated under the D&S Plan. Mrkonjic moved to reopen Mrkonjic
I, but the district court, with a new judge presiding, denied the motion.
Mrkonjic filed a second case in the district court (Mrkonjic II) making
similar arguments. The district court rejected Mrkonjic’s claims. This appeal
followed.
2. De novo is the proper standard of review for questions of law, such as the
proper interpretation of a judgment. See United States v. Lang, 149 F.3d 1044,
1046 (9th Cir. 1998). This Court reviews the Committee’s decisions on remand for
abuse of discretion, because the Plans assign discretionary authority to the
Committee to determine benefits eligibility and construe the Plans’ terms. See
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Standard Ins. Co. v. Morrison, 584 F.3d 837, 840 (9th Cir. 2009). At the same
time, when an employer controls the plan—rendering the entity determining
eligibility and the entity paying benefits one and the same—the resultant “conflict
of interest is relevant to how a court conducts abuse of discretion review.” Abatie
v. Alta Health & Life Ins. Co., 458 F.3d 955, 965 (9th Cir. 2006). The result is that
the abuse of discretion standard becomes less deferential, and this Court reviews
the Committee’s decisions with “different levels of skepticism on account of
conflicts of interest.” Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666,
674 (9th Cir. 2011); Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 111 (2008); Lang
v. Long-Term Disability Plan of Sponsor Applied Remote Tech., Inc., 125 F.3d
794, 797 (9th Cir. 1997). Here, Delta appointed the Committee and funds the D&S
Plan. An added degree of skepticism is appropriate. Salomaa, 642 F.3d at 674.
3. The operative language from the Mrkonjic I judgment is:
On remand, the recalculation of offsets must eliminate any offset for
the receipt of benefits under the Delta Retirement Plan . . . The
amount of the offset for Plaintiff’s Delta Retirement Plan benefits that
is eliminated shall not be paid to Plaintiff, but shall be transferred
from the applicable Trust for the Delta Family-Care Disability &
Survivorship Plan to the applicable Trust for the Delta Retirement
Plan.
Contrary to the Plans’ assertion, this language does not require that Mrkonjic
reimburse the Retirement Plan for all benefits he received before the district court
granted rescission of his early retirement election. The plain language speaks to
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transfers of funds—representing offsets eliminated from Mrkonjic’s LTD
benefit—from the D&S Plan to the Retirement Plan. But the judgment does not
mandate that the transferred amount equal all retirement benefits Mrkonjic had
received. Nor does the Mrkonjic I judgment say that the money must come from
Mrkonjic. The plain language of the judgment merely requires transfer from one
plan to the other.
4. “When interpreting an ambiguous prior judgment, the reviewing court
should construe a judgment so as to give effect to the intention of the issuing court.
Where the judgment is ambiguous or fails to express the rulings with clarity, the
entire record before the issuing court and the findings of fact may be referenced in
determining what was decided.” Ruiz v. Snohomish Cnty. Pub. Util. Dist. No. 1,
824 F.3d 1161, 1167 (9th Cir. 2016) (quoting Muckleshoot Tribe v. Lummi Indian
Tribe, 141 F.3d 1355, 1359 (9th Cir. 1998)). The Mrkonjic I summary judgment
orders shed light on the intention behind the judgment.
5. The order denying the Plans’ motion for summary judgment stated:
“[Mrkonjic] is entitled to rescind his early retirement election and to be reinstated
subject to appropriate reimbursement and/or offsets of benefits already paid.” The
word “appropriate” implies that certain reimbursements and/or offsets might be
inappropriate.
6. The order on Mrkonjic’s motion for summary judgment reads:
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In determining that Plaintiff should be entitled to rescind his early
retirement election, the Court clarified that any rescission of his
retirement would be “subject to appropriate reimbursement and/or
offsets of benefits already paid.” (1/3/13 Order at 15.) Some offsets
were contemplated by both the ’94 Plan and the ’04 Plan, so allowing
him both to keep the benefits he received initially and to demand a
second set of benefits would provide Mrkonjic with an improper
double payment. (Id.) Accordingly, and because the Court has
already addressed the issue, Plaintiff’s request that the set-off
provision be deemed entirely unenforceable must be rejected.
This order clarifies that Mrkonjic was responsible for reimbursing some retirement
money but does not address the amount to be reimbursed or how the reimbursement
was to take place.
The summary judgment order also provides: “Finally, in order to render a
total monetary award as to the disability offsets, the Court would necessarily be
required to determine how much [Mrkonjic] has already received in retirement
benefits.” But again the order does not clarify how the total amount—once
ascertained—would figure into a proper LTD recalculation.
Finally, the summary judgment order states:
The Parties have been unable to agree on a proper method for dealing
with some of the more limited benefits he has actually received over
the past ten years: whether, and how much, they should be offset against
the total now owed him . . . . [T]his Court is not the proper forum to
make such a decision in the first instance . . . . [T]he precise amount of
benefits due to Mrkonjic is a factual determination related to the
implementation of an ERISA plan . . . .
In our view, this language makes clear that the district court did not direct the Plans
7
to make a particular calculation; rather, it ordered the Plans to calculate benefits in
accordance with the Plan provisions.
In short, contrary to the Plans’ interpretation, this cumulative language
establishes that the remand order did not require that Mrkonjic reimburse to the
Retirement Plan all retirement benefits he had received. In our view, the Plans’
conclusion that the judgment in Mrkonjic I required them to treat Mrkonjic in a way
different than they would normally do under the D&S Plan was unreasonable and
constituted an abuse of discretion.
7. The Plans’ misinterpretation came at a price for Mrkonjic. On remand, the
Plans recalculated Mrkonjic’s LTD benefits in a way that varied from their standard
calculation method. Normally, for a given month, the Plans subtract all applicable
offsets from the LTD benefit. If the offsets exceed the benefit, the claimant receives
nothing but does not owe excess offsets back to the Plans. The Plans concede that
they calculated Mrkonjic’s LTD benefits inconsistently with their normal method.
Having concluded that the Mrkonjic I judgment did not require the Plans to vary
from their typical calculation method or to reclaim all Retirement Plan benefits paid
to Mrkonjic as a full credit and withhold the total from future LTD benefits, we turn
to the question of remedy.
8. Mrkonjic wound up in federal court in the first place because the Plans
improperly refused to approve his LTD application. Mrkonjic was forced to elect
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early retirement solely because the Plans wrongfully denied his LTD benefits.
None of these issues would have arisen but for the Plans’ error. After rectifying
that error, the Plans compounded it. The Plans refused to allow Mrkonjic to
rescind his retirement. In this context, because the situation was unique and caused
by the Plans, the Plans should have implemented the Mrkonjic I judgment so as to
leave Mrkonjic no worse off from their mistakes. Instead they accumulated offsets
and collected an overage, treating him more poorly than other beneficiaries.
9. We remand the matter to the district court to consider the appropriate
remedy in light of our holding that the Plans could not require reimbursement of
the portion of retirement benefits that exceeded Mrkonjic’s monthly LTD benefit
amount, and thus should not have withheld Mrkonjic’s LTD benefits once his
retirement election was rescinded to achieve the reimbursement. The district court
should consider whether to remand the matter to the Plans. If the district court
elects to remand to the Plans, its remand order should be sufficiently specific so
that there is no room for doubt as to what precisely the Plans must do.
Alternatively, the district court may wish to exercise its power of equitable relief
and fashion an order to cut the Gordian knot of this long-litigated matter.
10. We dismiss as moot the Plans’ repayment period argument.
REVERSED.
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FILED
Mrkonjic v. Delta Family-Care and Survivorship Plan, Nos. 16-56335, 16-56487
JUN 15 2018
(February 14, 2018 - Pasadena)
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
BYBEE, Circuit Judge, concurring in the judgment:
I agree with the majority that this case should be remanded to the district
court. However, I disagree with the primary reasoning that the Plans and their
Committee abused their discretion in requiring Mrkonjic, as part of his “un-
retirement,” to reimburse the Retirement Plan for the full amount of early-
retirement pension benefits he had received. The Committee did not “vary” its
method of calculating benefits between the 2007 and 2014 letters; rather, each
letter reflects a different objective.
When the Committee wrote to Mrkonjic in 2007 to inform him that he was
eligible for retroactive LTD benefits, he was receiving monthly pension payments,
Social Security Disability (“SSD”), and workers compensation (collectively
“offsets”). Under the Disability Plan’s terms, these offsets had to be deducted
from his gross amount of LTD benefits—a percentage of Mrkonjic’s pre-
retirement salary—in order to calculate his net LTD benefits. This type of offset
mechanism prevents an employee from recovering more than his total possible
LTD benefits from combined income sources and thus from being given an
incentive not to return to work. But an employee does not owe the Disability Plan
money when his offsets exceed his gross LTD benefits; he is simply owed no
monthly disbursement by the Disability Plan. Therefore, only when Mrkonjic’s
offsets totaled to less than his gross LTD benefits—i.e., after the monthly workers-
compensation allocation was expended—was he entitled to a monthly
disbursement from the Disability Plan.
This calculation, however, says nothing about the Committee’s calculations
after the Mrkonjic I judgment, which required the Committee to allow Mrkonjic to
“rescind [his] retirement election and permit him, at a future date, to retire,
consistent with the terms of the Delta Retirement Plan . . . .” In order to
accomplish this unorthodox objective, funds necessarily had to be transferred
between the Retirement and Disability Plans; the former Plan had, for several
years, been paying him benefits that should have come from the latter Plan. Thus,
in order to return everything to square one, as if Mrkonjic had never been forced to
elect early retirement, two things needed to occur: (1) the Disability Plan had to
pay him retroactive benefits and (2) Mrkonjic had to reimburse the Retirement Plan
using these funds.
Indeed, this is what the Mrkonjic I judgment directs. In granting a remand
for the calculation of retroactive LTD benefits, the judgment orders that “the
recalculation of [LTD] offsets must eliminate any offset for the receipt of benefits
under the Delta Retirement Plan” and that this offset “shall not be paid to
2
[Mrkonjic], but shall be transferred from the applicable Trust for the [Disability]
Plan to the applicable Trust for the Delta Retirement Plan.”
The judgment thus achieves Mrkonjic’s unretirement in two steps. First, it
directs the Disability Plan to calculate his net LTD benefits as if he never elected
early retirement—i.e., by deducting only his SSD and workers-compensation
offsets from his gross LTD benefits. Because there would not have been a pension
payment to offset if the Committee had correctly paid Mrkonjic LTD benefits from
2004 onwards, this calculation mirrors exactly what his LTD benefits should have
been. The second step then reimburses the Retirement Plan by transferring the
disregarded pension-payment offsets back to the Retirement Plan. Ultimately,
these calculations are precisely what the Committee’s 2014 letter reflects.
It should have come at no surprise that Mrkonjic ultimately owed the
Retirement Plan a reimbursement. He received nearly twice as much in pension
payments over the years from the Retirement Plan than he would have received in
combined net LTD benefits that only deducted SSD and workers compensation.
Moreover, the Committee illustrated these calculations in its summary-judgment
motion during Mrkonjic I and warned Mrkonjic that he would end up owing the
Retirement Plan money if he sought to unretire. And as the majority
acknowledges, the Mrkonjic I court “clarified that any rescission of [Mrkonjic’s]
3
retirement would be ‘subject to appropriate reimbursement and/or offsets of
benefits already paid.’” The court, however, remanded to the Committee in order
for it “to determine how much [Mrkonjic] ha[d] already received in retirement
benefits.”
Accordingly, when the record and procedural history are considered as a
whole, it is evident that the 2007 and 2014 letters reflect incomparable
calculations. There is thus no basis for concluding that the Committee abused its
discretion.
Nonetheless, I agree with the majority that this case should be remanded in
order for the district court to consider applying an equitable remedy. It was the
Committee’s incorrect interpretation of its own Disability Plan that forced
Mrkonjic to opt for early retirement. As a result, he was set to receive little-to-no
monthly LTD disbursements when the Committee finally offered him retroactive
benefits three years later. He also had no avenue for ever qualifying for a full
retirement and thus receiving higher pension payments. Mrkonjic therefore
initiated two different federal actions in order to place himself in the position he
would have been in fourteen years ago, but for the Committee’s erroneous denial
of LTD benefits.
Mrkonjic has consistently argued over the years that these circumstances
4
justify the application of equity to prevent the Committee and Plans from
recouping their overpayments. He has supported this contention with relevant
authorities that neither district court addressed. I would therefore remand this case
only for the purpose of allowing the Mrkonjic II court to consider in the first
instance whether an equitable remedy is warranted.
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