Bauman Ex Rel. Sumner v. Publix Super Markets, Inc. Employee Stock Ownership Plan

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 17-11709
Non-Argument Calendar
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D.C. Docket No. 3:15-cv-00075-WSD
MICHAEL E. BAUMAN,
by and through Michael E. Sumner, Conservator,
Plaintiff-Appellant,
versus
PUBLIX SUPER MARKETS, INC. EMPLOYEE STOCK OWNERSHIP PLAN,
PUBLIX SUPER MARKETS, INC.,
as Plan Administrator,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
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(October 10, 2017)
Before HULL, WILSON, and ANDERSON, Circuit Judges.
PER CURIAM:
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Michael Sumner, on behalf of Michael Bauman, brought suit against Publix
challenging their denial of a claim for the reinstatement of retirement benefits
under ERISA in the Northern District of Georgia. The district court upheld
Publix’s denial of the claim on summary judgment. Bauman timely appealed.
We review the district court’s grant of summary judgment de novo. Carter v.
Galloway, 352, F.3d 1346, 1348 (11th Cir. 2003). We review a district court’s
affirmance of a plan administrator’s ERISA benefits decision by “applying the
same legal standards that governed the district court’s decision.” Blankenship v.
Metro. Life. Ins. Co., 644 F.3d 1350, 1354 (11th Cir. 2011). We affirm the district
court’s grant of summary judgment.
I. Background
Michael Bauman is a fifty-six year old man with developmental disabilities.
He was adjudged incompetent by the Coweta County Probate Court. Bauman
worked for Publix at his local Newnan, Georgia store for seventeen years. In 2010,
Michael Sumner was appointed as Michael’s conservator. Sumner then had a letter
hand-delivered to the Publix store in Newnan, Georgia, at which Bauman worked,
stating Sumner was appointed conservator for Bauman and requested that future
payroll payments be direct deposited in a specific checking account. 1 Letters of
conservatorship were attached to the letter. Four days later, Bauman filled out a
1
Publix has no record of Sumner’s letter, and it is unknown to whom at the store the letter was
delivered.
2
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direct deposit authorization form for the account listed in Sumner’s letter, although
Bauman did not indicate on the form that the account was a conservatorship
account or that Sumner was incompetent or that a court-appointed conservator was
required to manage his property. Publix began depositing Bauman’s paychecks
into the designated account.
Bauman stopped working at Publix in March 2013. He wrote to Publix’s
Retirement Department electing to cash out his ESOP stock benefits. In May,
Publix sent Bauman a check for $78,509, the value of his stock benefits. Within a
month or two, Bauman lost the full amount in an internet scam. Publix’s ESOP
states that “no distribution shall be made of the benefit to which a Participant or
beneficiary is entitled if the Plan Administrator has actual knowledge that such
Participant or beneficiary is legally incompetent.”
A year later, Sumner learned about the disbursement to Bauman and
informed Publix that the distribution should have been made to him, rather than to
Bauman. Publix responded that it had no prior knowledge of the conservatorship or
Bauman’s incompetence. Sumner requested that Publix reinstate Bauman’s
account because the money had been distributed to Bauman rather than to Sumner.
Publix reviewed its decision and denied Sumner’s request. This lawsuit followed.
II. ERISA Review
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The standard we apply to reviewing a decision to affirm or reverse a plan
administrator’s ERISA decision is:
(1) Apply the de novo standard to determine whether the
claim administrator’s benefits-denial decision is “wrong”
(i.e., the court disagrees with the administrator’s
decision); if it is not, then end the inquiry and affirm the
decision.
(2) If the administrator’s decision in fact is “de novo
wrong,” then determine whether he was invested with
discretion in reviewing claims; if not, end juridical
inquiry and reverse the decision.
(3) If the administrator’s decision is “de novo wrong” and
he was vested with discretion in reviewing claims, then
determine whether “reasonable” grounds supported it
(hence, review his decision under the more deferential
arbitrary and capricious standard).
(4) If no reasonable grounds exist, then end the inquiry
and reverse the administrator’s decision; if reasonable
grounds do exist, then determine if he operated under a
conflict of interest.
(5) If there is no conflict, then end the inquiry and affirm
the decision.
(6) If there is a conflict, the conflict should merely be a
factor for the court to take into account when determining
whether an administrator’s decision was arbitrary and
capricious.
Blankenship, 644 F.3d at 1355.
Where a conflict of interest exists, the plaintiff bears the burden of showing
that the decision was arbitrary. Id. “A pertinent conflict of interest exists where the
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ERISA plan administrator both makes eligibility decisions and pays awarded
benefits out of its own funds.” Id.III. Discussion
The dispute in this case comes down to whether the Plan Administrator had
“actual knowledge” that Bauman was incompetent. If they did, then distributing his
ESOP payment to him was in violation of their Plan. If not, then distributing the
money was the correct decision under the Plan. Bauman argues that the letter
Sumner delivered to the Publix where Bauman worked was sufficient to provide
notice to Publix that Bauman was incompetent. Publix replies that the Plan
required that retirement benefits information be sent to Publix’s Retirement
Department in Lakeland (where employees were told to send retirement
information), and that they never received notice that Bauman was incompetent.
Bauman does not actually contend that Sumner’s letter was sent to Publix’s
Retirement Department in Lakeland; however, he contends that the delivery of the
letter to the Publix store where Bauman worked was sufficient to inform Publix
that Bauman was incompetent. Bauman argues that because Publix is the Plan
Administrator, informing any Publix employee is sufficient to provide Publix with
actual notice of Bauman’s incompetency.
Under this logic, because Sumner had the letters of conservatorship attached
to his letter to the Publix where Bauman worked, Publix became actually aware of
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Bauman’s incompetency. However, this would impute to Publix knowledge of
everything that goes on in any of their over 1,100 stores. This would be a
tremendous burden to place on Publix. We hold that actual notice means that
Publix’s Retirement Department became factually aware of Bauman’s
incompetence. Because Bauman points to no evidence that Publix’s Retirement
Department had actual notice of Bauman’s incompetency, the claim
administrator’s decision was de novo correct.
Moreover, even if the decision were not correct, the administrator
undisputedly had discretion in reviewing claims, and there were reasonable
grounds supporting the denial of reinstatement of benefits. The claims
administrator investigated the claim and found no evidence Publix had knowledge
of Bauman’s conservatorship.2 This investigation provided reasonable grounds to
deny the claim.
Bauman argues that Publix has a conflict of interest, which must be a factor
in determining whether the administrator’s decision was arbitrary and capricious.
Publix both administers the plan and pays awarded benefits, so this is a conflict of
interest that we must take into account. Blankenship, 644 F.3d at 1355. However,
this conflict is merely a factor in our analysis, and the plaintiff bears the burden of
2
The claims administrator who investigated the claim could find—either in the Retirement
Department or in the Payroll Department—no records or other information or communication
indicating that Bauman had a conservator.
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showing that the decision was arbitrary. Id. Here, there is no evidence that the
claims administrator’s decision was arbitrary; on the contrary, the evidence
demonstrates that the denial of the claim was based on an investigation that
revealed that Publix did not have actual notice of Bauman’s incompetency. Thus,
even if the Publix Retirement Department’s decision were not correct, and even
though there was a conflict of interest, the decision was not arbitrary and
capricious.
For the foregoing reasons, the district court’s grant of summary judgment is
AFFIRMED.
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