Andrews v. Blue Cross Blue Shield of Nebraska Employee Group Long Term Disability Insurance Plan

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
February 3, 2006
FOR THE TENTH CIRCUIT Elisabeth A. Shumaker
Clerk of Court
CHRISTY O. ANDREWS,
Plaintiff-Appellant,
v. No. 05-1278
(D.C. No. 01-CV-1020 MSK/MJW)
BLUE CROSS BLUE SHIELD OF (D. Colo.)
NEBRASKA EMPLOYEE GROUP
LONG TERM DISABILITY
INSURANCE PLAN; JEFFERSON
PILOT FINANCIAL LIFE
INSURANCE COMPANY, a Nebraska
Corporation formerly known as
Guarantee Mutual Life Co.,
Defendants-Appellees.
ORDER AND JUDGMENT *
Before KELLY, PORFILIO, and BRORBY, Circuit Judges.
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument.
This case arises under the Employee Retirement Income Security Act of
1974, 29 U.S.C. §§ 1001-1461 (ERISA). Plaintiff Christy O. Andrews appeals
from the district court’s entry of judgment on stipulated facts in favor of
defendants Blue Cross Blue Shield of Nebraska Employee Group Long Term
Disability Insurance Plan (Blue Cross) and Jefferson Pilot Financial Life
Insurance Company (Jefferson Pilot), formerly known as Guarantee Mutual Life
Company (GMLC). We have jurisdiction pursuant to 28 U.S.C. § 1291 and
AFFIRM.
I. Background
From May 1995 to the end of 1996, Andrews worked for a subsidiary of
Blue Cross, Corporate Diversified Services, Inc. (“Diversified”). She participated
in an employee welfare benefit plan insured by a policy administered by GMLC,
now Jefferson Pilot. She was paid a monthly salary and a commission on sales.
In November and December 1996, Diversified paid her $2,120.84 in commissions.
On January 1, 1997, she became a direct employee of Blue Cross. She
participated in the same employee welfare benefit plan insured by the same policy
(Plan). She received a monthly salary of $595 and was placed on a different
commission structure than she had with Diversified. On October 21, 1997,
-2-
Andrews stopped performing work for Blue Cross because of her health, and she
officially resigned her position on December 31, 1997. During the ten-month
period beginning on January 1, 1997, and ending on October 31, 1997, Blue Cross
paid her $5,950 in base salary and $36,931.36 in commissions. In November and
December of 1997 as well as in 1998, Blue Cross paid her additional commissions
totaling $15,603.76 for work she performed prior to October 21, 1997.
In September 1999, Andrews filed a claim under the Plan for long-term
disability (LTD) benefits. Jefferson Pilot denied the claim and three appeals. On
May 7, 2001, Andrews filed this lawsuit. In a letter dated September 10, 2001,
one of her doctors, Dr. Murray, concluded that Andrews did not have multiple
sclerosis or neuropathy (earlier tentative diagnoses), but that her central nervous
system “problem is most likely secondary to small vessel cerebral ischemic
vascular disease, i.e., she has a cerebral vasculopathy [1] . . . . She clearly could be
disabled secondary to this affecting her overall cognitive functioning.” Aplt.
App. Vol. IV at 1354. Based at least in part on Dr. Murray’s report, Jefferson
Pilot concluded in a letter dated September 24, 2001, that Andrews was entitled to
LTD benefits from January 18, 1998, to March 19, 2001, and reserved judgment
1
According to Dr. Murray, a cerebral vasculopathy is a “hardening of the
arteries present in the cerebral vasculature.” Aplt. App. Vol. IV at 1358.
-3-
as to whether she was entitled to benefits for an additional period until obtaining
further medical documentation.
With the question of liability in large part resolved, the focus of this case
turned to how to calculate the benefit to be paid. Under the Plan, the amount of
the monthly benefit requires a determination of Andrews’ “basic monthly
earnings,” defined as:
BASIC MONTHLY EARNINGS or PREDISABILITY INCOME
means the Insured Employee’s monthly rate of earnings from the
Employer in effect:
1. just prior to the date the Elimination Period
begins; or
2. just prior to the date an approved leave of absence
begins, if the Elimination Period begins while the
Insured Employee is continuing coverage during a
leave of absence.
It does not include bonuses, overtime pay and other extra
compensation other than commissions. Commissions will be
averaged over the 12 month period prior to the date the Elimination
Period begins. It will not exceed the amount which is shown in the
Employer’s payroll records; or for which premium has been paid
(whichever is less).
Aplt. App. Vol. III at 896. 2
The term “earnings” is not defined separately in the Plan. The parties
advanced different interpretations of “earnings,” particularly as it encompasses
2
The “Elimination Period” referred to is a ninety-day period calculated from
the first day of disability during which no benefits are payable. See Aplt. App.
Vol. III at 895, 897. There appears to be no dispute that the Elimination Period in
this case began on October 21, 1997.
-4-
commissions. Defendants argued that the commissions portion of Andrews’
“basic monthly earnings” should be calculated by adding up the amount of
commissions she was actually paid during the twelve-month period commencing
November 1, 1996, and ending on October 31, 1997. Andrews argued that
“earnings” should be interpreted to include any commissions she “earned” prior to
her last day of work for Blue Cross even though she was not paid those amounts
until after the Elimination Period began.
Finding “earnings” to be ambiguous, the district court agreed with
defendants that it included only those commissions actually paid to Andrews
during the twelve-month period that ended on October 31, 1997. The court
therefore entered judgment in favor of defendants. The court also concluded that,
under the circumstances of the case, Andrews was not entitled to an award of
attorney’s fees and costs pursuant to 29 U.S.C. § 1132(g). This appeal followed.
II. Interpretation of the Plan
When, as here, an ERISA plan does not give the administrator discretionary
authority to determine eligibility for benefits or to construe the terms of the plan,
a district court reviews the denial of benefits de novo. DeBoard v. Sunshine Min.
& Ref. Co., 208 F.3d 1228, 1241 (10th Cir. 2000). Likewise, “we apply a de novo
standard of review to [q]uestions of law, such as a court’s interpretation of an
ERISA plan.” Id. at 1242 (alteration in original) (quotation omitted).
-5-
“Questions involving the scope of benefits provided by a plan to its
participants must be answered initially by the plan documents, applying the
principles of contract interpretation.” Chiles v. Ceridian Corp., 95 F.3d 1505,
1515 (10th Cir. 1996). We give the language of an ERISA plan “its common and
ordinary meaning as a reasonable person in the position of the [plan] participant,
not the actual participant, would have understood the words to mean.” Id. at 1511(alteration in original) (quotation omitted). “If we determine the plan language is
ambiguous, we may look at extrinsic evidence.” DeBoard, 208 F.3d at 1240(quotation omitted).
We begin our inquiry by examining the definitions of “earnings” and
related terms from two dictionaries, one lay and one legal. Webster’s defines
“earnings” as “something (as wages or dividends) earned as compensation for
labor or the use of capital.” Webster’s Third New Int’l Dictionary of the English
Language (unabridged) 714 (1993). In turn, to “earn” is “to receive as equitable
return for work done or services rendered: have accredited to one as
remuneration.” Id. (emphasis added). Black’s defines “earnings” as “[r]evenue
gained from labor or services, from the investment of capital, or from assets. See
INCOME.” Black’s Law Dictionary 548 (8th ed. 2004). Black’s defines
“income” as “[t]he money or other form of payment that one receives, usu[ally]
periodically, from employment, business, investments, royalties, gifts, and the
-6-
like. See EARNINGS.” Id. at 778 (emphasis added). Webster’s defines
“income” as “a gain or recurrent benefit that is usu[ally] measured in money and
for a given period of time . . . but excludes unrealized advances in value.”
Webster’s at 1143 (emphasis added).
The recurring theme in these definitions is receipt. Although Webster’s
also defines “earn” as “to come to be duly worthy of or entitled to as
remuneration for work or services,” id. at 714, and Black’s also defines “earn” as
“[t]o do something that entitles one to a reward or result, whether it is received or
not,” Black’s at 547, we think that the common and ordinary meaning of
“earnings” in the employment context requires receipt. Consequently, the
commissions that are averaged over the twelve-month period prior to the
beginning of the Elimination Period are those commissions that Andrews actually
received during that period. This monthly average of commissions actually
received, when combined with Andrews’ monthly salary rate just prior to the
beginning of the Elimination Period, produces the “monthly rate of earnings”
referred to in the definition of “basic monthly earnings.”
This interpretation is supported by and consistent with other language in
the Plan. In particular, the term “predisability income” (which figures into other
types of benefits payments, see, e.g., Aplt. App. Vol. III at 909-10, 912) shares
the same definition in the Plan as “basic monthly earnings,” see id. at 896. Based
-7-
on the definitions of “income” noted above, we interpret “predisability income” to
include the average of commissions actually received during the twelve-month
period prior to the beginning of the Elimination Period. Interpreting “basic
monthly earnings” to include unpaid but “earned” commissions, as Andrews
suggests, would lead to inconsistent applications of the same definition.
Furthermore, the Plan places two limitations on “basic monthly
earnings,” that “[i]t will not exceed the amount which is shown in the Employer’s
payroll records; or for which premium has been paid (whichever is less).” Id. at
896. The amount of the premium is calculated as a percentage of the “Total
Covered Payroll per Month.” Id. at 893. “Total Covered Payroll is the total
amount of Basic Monthly Earnings for all Employees insured under [the Plan].”
Id. at 899 (capitalization omitted). Thus, to calculate “Total Covered Payroll per
Month” and the corresponding premium payment, one must look to the amount of
“basic monthly earnings” for all covered employees as reflected in the payroll
records.
The term “payroll records” is not defined in the Plan. However, the record
contains a series of documents entitled “Payroll Register with DIV/DPT Totals,”
Aplt. App. Vol. II at 554-602. These documents show that Blue Cross made
semi-monthly payments of salary and commissions to Andrews from January
through October 1997. The record contains no other evidence that shows
-8-
commissions were paid or considered “earned” (i.e., that the employee was
entitled to be paid for the underlying work) on any other basis. Nor is there
anything in the record that suggests premium payments were based on anything
other than amounts, including commissions, actually paid to covered employees in
any particular month. Based on the record evidence, the amount of the premium
and both limitations on “basic monthly earnings” depend upon the amount
actually paid to employees during any one month, including commissions, as
reflected in Blue Cross’s payroll register. This does not include commissions to
be paid in the future that derive from work performed during an earlier pay
period. Accordingly, whether, as Andrews suggests, her W-2 forms for 1997 and
1998 are “payroll records” is irrelevant to the extent they include commissions
paid after October 31, 1997.
Our interpretation of the term “earnings” is not undermined by Jefferson
Pilot’s inclusion in its calculation of Andrews’ “basic monthly earnings” the
commission payment documented in the payroll register dated October 31, 1997,
which was ten days after the beginning of the Elimination Period. Contrary to
Andrews’ argument, Jefferson Pilot’s inclusion of this commission payment as the
final one for deriving the twelve-month average does not establish a “practice” of
including commissions paid after the onset of disability. Rather, the October 31
payroll register covers a period of time prior to the beginning of the Elimination
-9-
Period, October 16-20, during which Andrews continued to work. Commissions
paid for this period, therefore, are distinguishable from those commissions
Andrews later received during periods wholly after the beginning of the
Elimination Period, which Jefferson Pilot excluded from the calculation. 3
III. Attorney’s Fees and Costs
In any action brought by an ERISA plan participant, the court has
discretion to award “a reasonable attorney’s fee and costs of action to either
party.” 29 U.S.C. § 1132(g)(1). Andrews contends the district court improperly
denied her request for attorney’s fees and costs. We review this denial for abuse
of discretion. Gordon v. U.S. Steel Corp., 724 F.2d 106, 108 (10th Cir. 1983).
“To hold that the district court abused its discretion, we must have a definite
conviction that the court, upon weighing relevant factors, clearly erred in its
judgment.” Id.ERISA is silent as to whether a party must be a “prevailing party” in order
to obtain an award of attorney’s fees and costs. This circuit’s precedent suggests
that a party must prevail in order to be considered for an award of attorney’s fees
and costs under ERISA. See, e.g., Chambers v. Family Health Plan Corp.,
3
Based on our disposition, we need not reach the question of whether the
doctrine of contra proferentem, a doctrine of last resort under which ambiguities
in a document are construed unfavorably to the drafter, is applicable in ERISA
cases subject to a de novo standard of review.
-10-
100 F.3d 818, 828 (10th Cir. 1996) (recognizing the statute permits an award to
either party but declining to award fees or remand for the district court to
determine the issue because the plaintiff did not prevail on any of his claims);
Arfsten v. Frontier Airlines, Inc. Ret. Plan for Pilots, 967 F.2d 438, 442 n.3
(10th Cir. 1992) (stating that arguments on attorney’s fees were moot where party
did not prevail); Morgan v. Indep. Drivers Ass’n Pension Plan, 975 F.2d 1467,
1471-72 (10th Cir. 1992) (declining to remand on attorney’s fees issue for district
court merely to state that the requesting party had not prevailed); Anderson v.
Emergency Med. Assocs., 860 F.2d 987, 992 (10th Cir. 1988) (characterizing a
request for attorney’s fees and costs by a party that did not prevail as
“unsupportable”). But see Gibbs v. Gibbs, 210 F.3d 491, 503 (5th Cir. 2000)
(holding that “there is no absolute requirement that a party prevail in order to
recover attorneys’ fees” under ERISA).
It appears that the district court considered each party to have prevailed in
part, Andrews as to liability and defendants as to the benefit calculation. This
equipoise, combined with the fact that the bulk of the litigation was devoted to an
issue on which Andrews did not prevail, namely, the benefit calculation, were the
governing considerations in the district court’s decision not to award attorney’s
fees and costs to Andrews. Under such circumstances, we cannot say that the
district court clearly erred in denying attorney’s fees and costs to Andrews.
-11-
The judgment of the district court is AFFIRMED.
Entered for the Court
Paul J. Kelly, Jr.
Circuit Judge
-12-