Paula Campbell v. Sussex County Federal Credit U

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
________________
No. 13-4141
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PAULA M. CAMPBELL,
Appellant
v.
SUSSEX COUNTY FEDERAL CREDIT UNION,
an employee welfare benefit plan, and Plan Administrator
Appeal from the United States District Court
for the District of Delaware
(D.C. Civil Action No. 1-10-cv-00710)
District Judge: Honorable Richard G. Andrews
________________
Argued October 21, 2014
Before: AMBRO, FUENTES, and NYGAARD, Circuit Judges
(Opinion filed: February 19, 2015)
Shannon L. Brainard, Esquire
Richard R. Wier, Jr., Esquire (Argued)
Marshall, Dennehey, Warner, Coleman & Goggin
1220 North Market Street
P.O. Box 8888, 5th Floor
Wilmington, DE 19801
Counsel for Appellant
Michael A. Graziano, Esquire (Argued)
F. Joseph Nealon, Esquire
Eckert, Seamans, Cherin & Mellott
1717 Pennsylvania Avenue, N.W., 12th Floor
Washington, DC 20006
Brya M. Keilson, Esquire
Gellert Scali Busenkell & Brown
913 North Market Street, 10th Floor
Wilmington, DE 19801
Counsel for Appellee
OPINION*
AMBRO, Circuit Judge
Paula Campbell appeals from a judgment dismissing her claim against her former
employer, Sussex County Federal Credit Union (“Sussex”), under the Employee
Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq. The District Court
granted summary judgment for Sussex after concluding Campbell’s top-hat plan1 is
unenforceable for lack of consideration. Because Campbell has raised a triable issue of
fact on this issue, we reverse and remand.
I. FACTS AND PROCEDURAL HISTORY
Campbell began working for Diamond State in 1983 and was promoted to the
position of “Manager/President” in 1998. She engaged a lawyer in 2005 to draft a
*
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
1
“A top hat plan is a ‘plan which is unfunded and is maintained by an employer
primarily for the purpose of providing deferred compensation for a select group of
management or highly trained employees.’” Miller v. Eichleay Eng’rs, Inc., 886 F.2d 30,
34 (3d Cir. 1989) (quoting 29 U.S.C. §§ 1051(2), 1081(a), 1101(a)(1)).
2
supplemental retirement-benefits plan on her behalf (the “Plan” or the “Campbell Plan”).
The Plan, whose stated “purpose . . . [was] to reward [Campbell] for her loyal and continuous
service to the Company,” required Diamond State or its successor to provide lifetime health-
insurance benefits to Campbell and her husband at its “sole cost and expense” upon
Campbell’s retirement from the Company. When Diamond State’s board of directors
approved the Plan in December 2005, Campbell had no imminent retirement plans. Still, she
believed she could avail herself of the Plan’s benefits even if she “retired the next day.”
In the fall of 2007, Campbell resigned from Diamond State to accept a position at
Sussex. In addition to her salary, Sussex provided Campbell—as it did all of its active, full-
time employees—with a cafeteria benefits plan allowing her to allot a fixed monthly
allowance of $4502 toward: (1) paying health-insurance premiums, (2) funding a flexible
spending account, (3) funding a 401K plan, and/or (4) receiving additional compensation.
Because Campbell and her husband’s premiums were now covered by Diamond State, she
had no reason to allocate any portion of this allowance toward health insurance. Instead, she
allocated $50 of her 2009 allowance to her flexible spending account and $400 to
compensation, which she did in fact receive through April 2009.
In November 2008, Sussex and Diamond State entered into a merger agreement under
which Sussex assumed all liabilities of Diamond State on March 31, 2009. Campbell claims
that Sussex’s CEO, Pamela Fleuette, “agreed . . . [both] prior to and after the merger . . . that
th[e Plan] would absolutely be honored” by Sussex as long as Campbell no longer received
additional compensation under Sussex’s cafeteria plan. Fleuette denies promising Campbell
that Sussex would honor the Plan indefinitely but acknowledges telling Campbell that Sussex
2
The amount of the fixed monthly allowance differed by year; in 2009 it was $450.
3
would pay for the portion of her and her husband’s premium not covered by her monthly
allowance through the end of 2009. After enrolling in Sussex’s group Blue Cross Blue
Shield (BCBS) plan, Campbell no longer received her prior monthly allowance.
On October 7, Sussex fired Campbell alleging performance reasons. Ten days later it
sent Campbell a letter, signed “John W. Lewis, President,” stating that if she wished to
continue her Sussex health coverage under the Consolidated Omnibus Budget Reconciliation
Act (COBRA), she was required to return her COBRA election and monthly premium. On
October 31, Campbell wrote back to Lewis “to confirm [Sussex’s] intentions regarding [her]
Retirement Plan contract” with Diamond State and to notify him that legal counsel had
advised her that Sussex was obligated to honor the Plan as the successor to Diamond State.
Sussex’s outside counsel, Eric Howard, replied on Lewis’s behalf on November 6,
stating that “[t]o the extent [Campbell] want[ed] a blanket statement that Sussex . . . w[ould]
honor any and all obligations of Diamond State arising under [the Plan] and then let [her] fill
in the blanks as to what [she] think[s] they are, [he] w[ould] not do that.” Campbell replied
on November 10 to “clarify” her contention that the Plan required Sussex to provide “health
insurance coverage for [herself] and her husband for the rest of [her] life, at its sole expense.”
On November 16, Howard sent Campbell another letter. He wrote that “[w]hile [she]
again fail[ed] explicitly to state what it is [she] contend[ed] Sussex . . . [was] obligated to
do,” “to the extent [she was] requesting . . . reimburse[ment] for [her] health insurance
premiums, [Sussex] w[ould] not do that.” When negotiations stalled, Campbell’s lawyer sent
Howard “a written request for benefits” asking that he “advise that this request complie[d]
with the requirement [of ¶ 3(a) of the Plan] that the request go to the President of the
Company.” Despite subsequent letters and phone calls, no further response from Howard or
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any other Sussex representative was sent to Campbell or her lawyer.
Campbell filed suit against Sussex alleging violations of ERISA and various state
common-law claims in the U.S. District Court for the District of Delaware in August 2010.
After the District Court dismissed all but Campbell’s non-fiduciary ERISA claim,3 Sussex
moved for summary judgment, arguing (1) the Plan is unenforceable because it lacked
consideration, (2) Campbell failed to exhaust her administrative remedies before filing suit,
and (3) the Plan does not require Sussex to cover Campbell or her husband’s health-
insurance premiums. In September 2013, the District Court granted summary judgment on
the first ground, mooting Sussex’s remaining arguments. This appeal followed.
II. LEGAL STANDARD
We have plenary review over the District Court’s grant of summary judgment.
See Atkinson v. LaFayette College, 460 F.3d 447, 451 (3d Cir. 2006). Summary
judgment should be granted only if the record establishes “that there is no genuine issue
as to any material fact and that the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(c). Any contested facts will be resolved in the nonmoving party’s
favor. Anderson v. Liberty Lobby, 477 U.S. 242, 255 (1986).
III. ANALYSIS
A. Consideration
In granting Sussex’s motion for summary judgment, the District Court ruled that
the Plan is unenforceable for lack of consideration because Campbell “was not required
to work for any additional period of time . . . after the Plan was adopted,” and
3
Campbell does not appeal this dismissal order. Nor does she appeal the District Court’s
denial of her cross-motion for summary judgment.
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“Campbell’s past performance as an employee [of] Diamond State could not have served
as consideration to support the formation of a contract.” Campbell argues on appeal that
the District Court “came to the wrong conclusion that the Plan’s [only] purpose was to
reward [her] for her past performance.”
The latter argument is more persuasive. Even if Campbell could have retired
immediately and still received health-insurance benefits, she did not indicate any present
intent to do so at the time of the Plan’s adoption. Further, Diamond State presumably
could have denied Campbell coverage had it fired her before she left the Company.
Because a reasonable trier of fact could find that the consideration for the Plan took the
form of Campbell’s “continuous services and loyalty” up until her actual date of
retirement, see, e.g., Williams v. Wright, 927 F.2d 1540, 1551 (11th Cir. 1991), the
District Court erred in granting Sussex summary judgment on this ground.
B. Sussex’s Alternative Arguments for Affirmance
Sussex makes four alternative arguments for affirmance. As we may affirm the
District Court’s decision “on any ground supported by the record,” Anderson, 477 U.S. at
255, we consider each of these arguments in turn.
1. Exhaustion of Administrative Remedies
First, Sussex asserts that Campbell failed to exhaust her administrative remedies
because neither Campbell nor her lawyer’s letters were sent directly to Sussex’s President
as required by ¶ 3(a) of the Plan, and Campbell never appealed any initial denial of
benefits to Sussex’s Secretary as required by ¶ 3(c). Neither argument is persuasive.
With respect to Campbell’s failure to address her letter directly to Sussex’s
6
President, Sussex failed to preserve this issue by raising it for the first time in its reply
brief in the District Court.4 See Del. L.R. 7.1.3(c)(2) (“The party filing the opening brief
shall not reserve material for the reply brief which should have been included in a full
and fair opening brief.”). Moreover, Sussex only raised the matter after repeatedly
asserting in its motion papers that it did not “dispute the sufficiency of the October 31,
2009 letter . . . to satisfy [Campbell’s] alleged obligation with regard to paragraph 3(a) of
the Diamond State Plan.”
Sussex’s argument that Campbell should have appealed any initial denial of
benefits to Sussex’s Secretary also fails to carry the day. Under Department of Labor
regulations, when a plan administrator “fail[s] . . . to establish or follow claims
procedures” in denying a claim for benefits, the “claimant shall be deemed to have
exhausted the administrative remedies under the plan.” 29 C.F.R. § 2560.503(l).
Regardless which letter qualified as Campbell’s initial claim for benefits, Sussex never
complied with ¶ 3(b) of the Plan because it failed to advise Campbell of, among other
things, (1) “the specific reason or reasons for [its] denial [of a claim],” (2) “the specific
reference to pertinent provisions of th[e Plan] on which such denial is based,”
(3) “appropriate information as to the steps to be taken . . . to submit the claim for
review,” and (4) “the time limits for requesting a review.” Thus, Campbell was not
required to exhaust any additional administrative remedies before bringing suit.
2. Statute of Limitations
4
Although waiver is not an issue addressed by the parties, it is “beyond cavil that we
may . . . raise the issue of waiver sua sponte.” United States v. Gimbel, 782 F.2d 89, 92
n.5 (7th Cir. 1986).
7
Second, Sussex argues that Campbell’s ERISA claim is time-barred and that the
District Court erroneously applied the doctrine of equitable tolling to conclude otherwise.
Other courts of appeals, however, have applied equitable tolling to situations like here
where a plan administrator has failed to comply with regulatory notice requirements in
denying a plan participant’s claim for benefits. See, e.g., Ortega Candelaria v.
Orthobiologics LLC, 661 F.3d 675, 680 (1st Cir. 2011) (concluding that the plaintiff was
entitled to equitable tolling because the defendant failed “to provide [the plaintiff] with
notice of his right to bring suit under ERISA, and the time frame for doing so, when it
denied his request for benefits”); Veltri v. Bldg. Serv. 32B-J Pension Fund, 393 F.3d 318,
322 (2d Cir. 2004) (“[F]ailure to comply with the regulatory obligation to disclose the
existence of a cause of action to the plan participant whose benefits have been denied is
the type of concealment that entitles [the] plaintiff to equitable tolling of the statute of
limitations.”). Hence the District Court did not abuse its discretion in equitably tolling
Campbell’s ERISA claim.
3. Successor Liability
Sussex next asserts that it did not assume liability for the Campbell Plan when it
merged with Diamond State. Although Sussex acknowledges that a surviving
corporation in a merger ordinarily assumes all debts and liabilities under existing pension
plans regardless of pre-merger notice, see Teamsters Pension Trust Fund of Phila. &
Vicinity v. Littlejohn, 155 F.3d 206 (3d Cir. 1998), it contends that “the balance of
equities weighs against imposing successor liability on Sussex for the Campbell Plan.”
Even if our precedent allows for such an equitable defense to successor liability,
8
“[d]etermining equities in the first instance is a seldom fit grist for the appellate mill.” In
the Matter of Quenzer, 19 F.3d 163, 165 (5th Cir. 1993). It would be particularly
inappropriate to do so in this case because Sussex never moved for summary judgment in
the District Court on this ground.
4. Compliance with Contractual Obligations
Finally, Sussex argues that it is not required to pay for Campbell’s health
insurance because its current BCBS plan bars coverage for all but full-time employees. It
points to ¶ 1(a) of the Plan, which states that “[i]n the event the Company should change
its health plan in the future, it shall provide coverage at least equivalent to the coverage
currently in effect for [Campbell] under its new plan.” (emphasis added). Campbell
responds that ¶ 1(a) requires Sussex to provide coverage to what was “currently in effect”
for Diamond State employees as of the Plan’s adoption date, not what exists for Sussex
employees as of today’s date. Construing the Plan as a whole, we conclude that
Campbell’s reading of the Plan language—Diamond State was required to provide
coverage at least equivalent to what she enjoyed at the time of her Plan’s adoption—is
equally plausible (if not more reasonable) than Sussex’s interpretation.
We also reject Sussex’s contention that reference to a prior retirement plan of
Diamond State and its former manager Eva Thomas conclusively resolves this ambiguity.
While Sussex contends that a comparison of the two plans’ language supports its
position, these minor wording differences do not allow us to draw any definitive
conclusions about Diamond State’s intent to provide Campbell and Thomas with
different coverage. Indeed, other extrinsic evidence in the record supports the opposite
9
conclusion. See J.A. 330 (noting that at its December 23, 2005 meeting, the Diamond
State board voted “to have the same benefits extended to [Campbell] that ha[d] been
extended to [Thomas]”).
Because a factfinder must weigh this conflicting evidence at trial, we decline to
use this alternative ground to affirm the District Court’s judgment.
* * * * *
For the above reasons, we reverse the District Court’s entry of summary judgment
and remand for further proceedings consistent with this opinion.
10