Syed v. Hercules, Inc.

Opinions of the United
2000 Decisions States Court of Appeals
for the Third Circuit
5-31-2000
Syed v. Hercules, Inc.
Precedential or Non-Precedential:
Docket 99-5472
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Filed May 30, 2000
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 99-5472
SAJID L. SYED,
Appellant
v.
HERCULES INC., a Delaware corporation; HERCULES
INCORPORATED INCOME PROTECTION PLAN, an
employee welfare benefit plan; HERCULES
INCORPORATED, Plan Administrator of Disability Plan
ON APPEAL FROM THE
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
(Dist. Court No. 96-62)
District Court Judge: Joseph J. Farnan, Jr., C.J.
Argued January 11, 2000
Before: BECKER, Chief Judge, and ALITO and BARRY,
Circuit Judges.
(Opinion Filed: May 30, 2000)
John M. Stull, Esq. (Argued)
1220 North Market St., Ste. 510
P.O. Box 1947
Wilmington, DE 19899
Counsel for Appellant
Kevin R. Shannon (Argued)
Potter, Anderson & Corroon, LLP
1313 N. Market St.
P.O. Box 951
Wilmington, DE 19899
Counsel for Appellee
OPINION OF THE COURT
ALITO, Circuit Judge:
Sajid Syed ("Syed") injured his back in January 1992,
while working as a chemical operator for Hercules, Inc.
("Hercules"). Syed brought this action under ERISA
S 502(a)(1)(B), 29 U.S.C. S 1132(a)(1)(B), alleging that
Hercules denied him disability benefits owed under the
company's employee benefits plan. In addition to damages,
Syed requested the imposition of sanctions against
Hercules for failure to provide him with the plan document
pursuant to a written request, as required by ERISA
S 502(c), 29 U.S.C. S 1132(c). He also sought redress for
Hercules's failure to give him adequate written notice of the
reasons for the denial of his claim, as required by ERISA
S 503, 29 U.S.C. S 1133. Syed appeals the District Court's
grant of summary judgment in favor of Hercules on all
counts. We affirm.
Hercules discharged Syed on March 4, 1992, effective
March 31, 1992, as part of a reduction in force. Following
his termination, Syed submitted a claim for long-term
disability benefits under the Hercules Incorporated Income
Protection Plan (the "Plan"). His claim was approved on
June 18, 1993, and Syed began receiving benefits
retroactive to April 1, 1992.
Benefits are payable under the Plan when a worker
becomes totally disabled and remains disabled for six
consecutive months.1 See App. at B21. Because Syed was
_________________________________________________________________
1. This six-month period, known as the "elimination period," was
apparently not imposed by Provident in Syed's case. He began receiving
benefits less than three months after his workplace accident.
2
under 62 when he started receiving benefits, he was eligible
to receive benefits for as long as he remained totally
disabled, up to age 65. See id. at B22. The Plan provides
two definitions of total disability, one that applies for the
first 24 months after the "elimination period" and another
that applies thereafter. The Plan states:
During the elimination period, normally 6 months, and
the first 24 months of benefit payments, you are
considered totally disabled if you are not able to
perform your job. You must not engage in any work for
wages or profit during this time.
After receiving 24 monthly payments, you are
considered totally disabled for as long as you are not
able to engage in any employment for wage or profit for
which you are reasonably qualified by training,
education, or experience.
App. at B24.
After paying benefits to Syed for almost two years,
Provident Life and Accident Insurance Co. ("Provident"), the
Claims Fiduciary under the Plan, asked Syed to undergo an
independent medical evaluation in February 1994 to
determine if he was totally disabled under the latter
definition. Dr. Joson, who performed the examination in
March 1994, reported that Syed could not do heavy work,
but that he could do "sedentary to light" work. App. at A4.
Because Syed would no longer qualify for benefits after the
24-month period lapsed, Provident notified Syed that his
benefits would be terminated as of March 31, 1994. See id.
at A6-7.
Syed appealed the decision to terminate his disability
benefits to Provident's ERISA Committee, which upheld its
previous decision. See App. at A19-20. Syed renewed his
appeal to the ERISA Committee on July 27 and October 28,
1994, each time including updated medical reports. The
ERISA Committee sent its final denial of benefits to Syed by
letter dated November 9, 1994. On February 24, 1995, Syed
requested a copy of the plan document that was effective as
of the date he began receiving benefits. Hercules sent him
a document entitled "Summary Plan Description" (SPD).
App. at B15-32.
3
Syed filed suit on February 6, 1996 -- one year and
eleven months after the initial denial of benefits on March
31, 1994, and one year and three months after thefinal
letter from Provident dated November 9, 1994. Shortly
thereafter, he filed a motion for summary judgment seeking
recovery of benefits under ERISA S 502(a)(1)(B), sanctions
under S 502(c) for failure to produce the Plan document in
response to a written request, and a remedy underS 503
for failure to provide written notice of the reasons for
termination of benefits. Hercules made a cross-motion for
summary judgment, claiming that Syed owed money for
overpayments made under the Plan.
The District Court denied Syed's motion. As the Plan gave
the Claims Fiduciary the exclusive discretion to deny claims
for benefits, the District Court reviewed Syed'sS 502(a)(1)(B)
claim under the abuse of discretion standard in accordance
with Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101,
115 (1989); see also Abnathya v. Hoffman-La Roche, Inc., 2
F.3d 40, 45 (3d Cir. 1993). After reviewing the medical
evidence, the District Court found that there was a genuine
issue as to whether Provident acted arbitrarily and
capriciously in terminating Syed's medical benefits.
Nonetheless, after borrowing Delaware's one-year statute of
limitations applicable to claims for "other benefits arising
from . . . work, labor or personal services performed," 10
Del. C. S 8111, the Court granted summary judgment for
Hercules on this claim.
Next, the Court dismissed Syed's S 502(c) claim. ERISA
S 502(c) provides that an administrator must comply with a
request for information by a plan participant and imposes
personal liability for failure to do so. Syed contended that
Hercules improperly sent him the SPD, rather than the
Insurance Policy, see App. at B60, in response to his
request. However, the Court held that the SPD was the
operative plan document for the relevant time period and
therefore granted summary judgment in favor of Hercules
on this count. Likewise, the Court refused to remand Syed's
case to the plan administrator for an out-of-time
administrative appeal for the alleged violation of ERISA
S 503, because Hercules's March 31 letter adequately set
forth the reasons for denying Syed's benefits.
4
Syed makes four arguments on appeal. First, he contends
that his ERISA claim for employee benefits should be
governed by Delaware's three-year statute of limitations for
contract actions, not the one-year statute for claims arising
out of work, labor, or personal services performed. Second,
he maintains that Hercules, as Plan Administrator, should
be subject to sanctions for failing to provide proper
disclosure as required by ERISA S 502(c). Third, Syed
argues that Hercules violated ERISA S 503 both by failing to
provide specific reasons for the denial of his claim and by
neglecting to name any additional material or information
that would have helped him perfect his claim. Finally, Syed
asserts that the District Court should have exercised
plenary review over the Claims Fiduciary's decision to deny
his benefits, rather than reviewing for an abuse of
discretion, as the Plan did not grant discretion to the
Claims Fiduciary to make a disability determination.
Because we hold that Delaware's one-year statute of
limitations governs this action, we affirm the District
Court's grant of summary judgment on Syed's S 502(a)(1)(B)
claim without deciding whether Provident's decision to deny
Syed's benefits was arbitrary and capricious. We likewise
affirm the District Court's dismissal of Syed's claims under
ERISA SS 502(c) and 503.
ERISA S 502(a)(1)(B): Statute of Limitations
The chief issue in this appeal concerns the statute of
limitations that is applicable to Syed's claim for benefits
under ERISA S 502(a)(1)(B).2 Unfortunately, ERISA does not
provide a statute of limitations for suits brought under
S 502(a)(1)(B) to recover benefits, and the new, general
federal statute of limitations set out in 28 U.S.C.S 1658
does not apply in this situation.3 Under these
circumstances, courts generally turn to the most analogous
_________________________________________________________________
2. We exercise plenary review over the District Court's choice of the
applicable statute of limitations. See Nelson v. County of Allegheny, 60
F.3d 1010, 1013 (3d Cir. 1995).
3. This provision, which prescribes a four-year limitations period,
applies
only to claims arising under acts of Congress enacted after December 1,
1990. ERISA was enacted much earlier.
5
state statute of limitations. See DelCostello v. International
Bhd. of Teamsters, 462 U.S. 151, 158-60 (1983). Although
this Circuit has not decided which state statute of
limitations is applicable to ERISA S 502(a)(1)(B),4 every other
circuit to address the issue has applied the statute of
limitations for a state contract action. See Harrison v.
Digital Health Plan, 183 F.3d 1235, 1239-40 (11th Cir.
1999); Daill v. Sheet Metal Workers' Local 73 Pension Fund,
100 F.3d 62, 65 (7th Cir. 1996); Adamson v. Armco, 44
F.3d 650, 652 (8th Cir. 1995); Hogan v. Kraft Foods, 969
F.2d 142, 145 (5th Cir. 1992); Meade v. Pension Appeals &
Review Comm., 966 F.2d 190, 195 (6th Cir. 1992); Held v.
Manufacturers Hanover Leasing Corp., 912 F.2d 1197, 1207
(10th Cir. 1990); Pierce County Hotel Employees &
Restaurant Employees Health Trust v. Elks Lodge, 827 F.2d
1324, 1328 (9th Cir. 1987); Dameron v. Sinai Hosp., 815
F.2d 975, 981 (4th Cir. 1987). Because Delaware, in
essence, has two statutes of limitation for contract
disputes, however, we must determine which is more
appropriate.
Delaware Code S 8106 establishes a three-year statute of
limitations for general actions on a promise. See Goldman
v. Braunstein's, Inc., 240 A.2d 577, 578 (Del. 1968). Section
8106 provides:
No action to recover damages for trespass, no action to
regain possession of personal chattels, . . . no action
based on a promise, . . . shall be brought after the
expiration of 3 years from the accruing of the cause of
such action.
Del. Code Ann. tit. 10, S 8106 (emphasis added). Delaware
also has a more specific statute of limitations covering
employment disputes, S 8111, which provides:
No action for recovery upon a claim of wages, salary, or
overtime for work, labor or personal services
_________________________________________________________________
4. We have previously suggested in dicta that the New Jersey state
statute of limitations for a contract action would apply to claims under
ERISA S 502(a)(1)(B), but we have never squarely decided the issue. See
Connell v. Trustees of the Pension Fund of the Ironworkers Dist. Council
of N. New Jersey, 118 F.3d 154, 156 n.4 (3d Cir. 1997).
6
performed, . . . or for any other benefits arising from
such work, labor or personal services performed . . .
shall be brought after the expiration of one year from
the accruing of the cause of action on which such
action is based.
Del. Code Ann. tit. 10, S 8111 (emphasis added). In this
case, the District Court applied S 8111, relying on Mitchell
v. E.I. DuPont de Nemours & Co., 310 A.2d 641, 642 (Del.
1973).
In Mitchell, the Delaware Supreme Court applied S 8110
(now S 8111) to a claim challenging the denial of benefits
under a disability wage plan. See Mitchell, 310 A.2d at 642.
The Court reasoned that the plan at issue was a"benefit"
arising from work, labor, or services performed within the
meaning of the statute because eligibility for the plan
accrued from tenure on the job. See id. Although the
District Court in the present case mistakenly referred to
Mitchell as an ERISA case (Mitchell was decided in 1973 and
ERISA was not effective until 1974), the application of
S 8111's predecessor in the pre-ERISA context is strong
evidence of its close relationship to the ERISA claim that
Syed asserts. See also Sorenson v. Overland Corp., 142 F.
Supp. 354, 360 (D. Del. 1956) ("The one year statute has a
comprehensive sweep. It was intended to bar all claims
arising out of the employer-employee relationship. The Act
bars claims for ``wages', ``salary', and it likewise applies to
``overtime' and to any other ``benefits' arising from the
corporate-officer employment relationship. The word
``benefits' is embracing and covers all advantages growing
out of the employment.").
The Eighth Circuit dealt with a similar issue in Adamson
v. Armco, 44 F.3d 650 (8th Cir. 1995). There, the Court had
to choose between Minnesota's six-year statute of
limitations governing general contract disputes and the
state's two-year statute of limitations for wage claims. The
Court reasoned that the wage-claim statute of limitations
was the most analogous to the appellant's S 502(a)(1)(b)
claim because Minnesota courts had uniformly applied that
statute broadly to cover all damages arising out of the
employment relationship. See Adamson, 44 F.3d at 652. In
support of its conclusion, the Court noted that pre-ERISA
7
case law in Minnesota had applied the two-year statute of
limitations to cases of unpaid benefits. See id. (citing
Kohout v. Shakopee Foundry Co., 162 N.W.2d 237 (Minn.
1968)).
Syed relies primarily on two cases to bolster his
argument for application of S 8106: Rich v. Zeneca, Inc., 845
F. Supp. 162 (D. Del. 1994) and Shaw v. Aetna Life
Insurance Co., 395 A.2d 384 (Del. Super. Ct. 1978). Rich
held that S 8106 should apply to a claim under ERISA
S 510, 29 U.S.C. S 1140, for wrongful termination based on
a pension-defeating motive. See Rich, 845 F. Supp. at 166
(citing Goldman v. Braunstein, Inc., 240 A.2d 577 (Del.
1968)). The Rich Court chose S 8106 rather than S 8111
because the latter applies to claims for breach of a promise
to pay something already earned, whereas the former
applies to claims for breach of a promise to pay what would
have been earned had employment continued. See id. Since
Syed's disability benefits were already "earned" through his
period of employment at Hercules, Rich does not support
the argument that S 8106 should apply here.
In Shaw, the Delaware Superior Court refused to apply
S 8111 where an employee brought an action under the
employer's voluntary group accident insurance policy.
Shaw, 395 A.2d at 385. The employee was injured in a
workplace injury which resulted in his permanent and total
disability. The employer argued that S 8111 should apply to
the claim because coverage under the policy arose out of
the employment relationship. See id. at 387 (relying on
Mitchell). The Court dismissed defendant's argument
summarily. See id. ("That contention of the defendant is
without merit."). Instead, the Court applied Delaware's two-
year statute of limitations for personal injury claims. Del.
Code S 8119. It is not immediately clear how Shaw is
distinguishable from Syed's case, and Hercules has not
pointed out any meaningful distinction. Nonetheless,
because the Shaw Court failed to explain whyS 8111
should not apply, we find Mitchell to be more persuasive.
Although Syed's S 502(a)(1)(B) claim comes within
Delaware's more specific statute of limitations for claims
arising out of the employer-employee relationship, that does
not conclusively resolve the issue. After all, the selection of
8
an appropriate statute of limitations is a question of federal
law. See United Auto Workers v. Hoosier, 383 U.S. 696, 706
(1966).
Generally, we presume that Congress intended courts to
apply the most closely analogous state statute of
limitations. See DelCostello, 462 U.S. at 158. This principle
rests on the assumption that "Congress would likely intend
that courts follow their previous practice of borrowing state
statutes." Id. at 158-59 n.12. We remain mindful of the
Supreme Court's warning not to apply state statutes of
limitation mechanically since "[s]tate legislatures do not
devise their limitations periods with national interests in
mind, and it is the duty of the federal courts to assure that
the importation of state law will not frustrate or interfere
with the implementation of national policies." Occidental
Life Ins. Co. v. EEOC, 432 U.S. 355, 367 (1977).
Nonetheless, there is no reason to reject the state statute
unless we find it "inconsistent with national labor policy."
Auto Workers, 383 U.S. at 706.
In this case, we recognize that the one-year statute of
limitations of S 8111 is short, but we cannot say that it is
inconsistent with the policy of ERISA. We therefore agree
with the District Court that Syed's claim was governed by
S 8111 and was thus barred.
We are not persuaded by the arguments advanced by the
dissent in support of its position that Syed's claim for
disability benefits is more analogous to an ordinary
contract claim, subject to S 8106, than to a claim for "other
benefits arising from . . . work, labor or personal services,"
subject to S 8111. Noting that the Mitchell court described
the plan at issue there as providing a "fringe benefit," the
dissent argues that "Syed's claim . . . has little or nothing
to do with work or services performed or fringe benefits
. . . .," Dissent at 15, but this is simply not true. First,
Syed's claim was squarely based on his prior employment.
In order to qualify under the long term disability plan, he
had to be "a regular, full-time non-represented employee of
the Company . . . ." Appendix to Answering Brief at B20
(Summary Plan Desciption). Second, ERISA benefits are
often termed "fringe benefits." See, e.g., Bricklayers and
Allied Craftsmen Int'l Union Local 33 Benefit Funds v.
9
America's Marble Source, Inc., 950 F.2d 114, 118 (3d Cir.
1991).5 We are inclined to agree with the dissent that the
one-year limitations period of S 8111 is not optimal, and we
also believe that a uniform, national statute of limitations
for claims such as Syed's would be beneficial. But forced to
identify the most analogous Delaware statute of limitations,
we agree with the District Court that S 8111 is the best fit.6
ERISA S 502(c)
Syed urges the Court to impose sanctions on Hercules for
failing to provide the Plan document pursuant to a written
request. ERISA S 502(c) provides that a plan administrator
must comply with a request for information from a plan
participant within 30 days or face personal liability, at the
Court's discretion, of $100 a day from the date of the
refusal. 29 U.S.C. S 1132(c). The District Court did not
abuse its discretion in refusing to order sanctions against
Hercules, and we affirm the grant of summary judgment on
this issue.
Hercules sent Syed the SPD on March 22, 1995, in
response to his February 24, 1995, written request for "a
complete copy of LTD Plan document effective as of March
4, 1992." App. at A28. Syed contends that a different
document was in effect at the time he was injured and at
the time his benefits were denied. Specifically, he points to
_________________________________________________________________
5. We also note that Delaware's Wage Payment and Collection Act
(WPCA), Del. Code Ann. tit. 19, SS 1101-1115, defines "benefits" as
"compensation for employment other than wages, including, but not
limited to, reimbursement for expenses, health, welfare or retirement
benefits . . . ." Del. Code Ann. tit. 19, S 1109(b). Although the WPCA
does
not provide a statutory remedy for the denial of benefits, its definition
quite clearly encompasses the disability benefits Syed has sued to
recover here.
6. In view of the dissent's reference (Dissent footnote 3) to the
Pennsylvania Wage Payment and Collection Law, 43 P.S. S 260.1 et seq.,
which has a three-year statute, see 43 Pa. Cons. Stat. Ann. S 260.9a(g),
we wish to make it clear that we express no view regarding the statute
of limitations that would apply if a claim such as Syed's were brought in
Pennsylvania. We note, however, that we have held that some ERISA
claims are governed by the WCPL's statute of limitations and others are
not. See Gluck v. Unisys Corp., 960 F.2d 1168, 1180-81 (3d Cir. 1992).
10
the insurance policy used to fund Hercules's long-term
disability plan (LTD). App. at B35-72.
A comparison of the SPD and LTD reveals no material
differences between the two documents. Syed complains
that he was not able to verify "whether the definition of
disability is based on official plan language, SPD language,
or some internal policy, written or unwritten." Appellant's
Br. at 20. This argument lacks merit. For example, the
March 31, 1994, letter denying Syed's benefits, see App. at
A6, quotes the definition of total disability found at page 8
of the SPD, see App. at B24. This definition is exactly the
same as the definition of total disability found on page 3 of
the LTD, see App. at B43, thus belying Syed's assertion
that the two-tier definition of disability did not exist in the
SPD, see Appellant's Br. at 22. The affidavit of Douglas Hill,
Director of Employee Benefits for Hercules, makes clear
that the document Hercules allegedly refused to send to
Syed pursuant to his March 1995 request was, in fact, not
executed until October 1995 (although it was effective
retroactively to July 1990). Because the SPD and the LTD
are identical in all respects material to this dispute, the
District Court properly refused to impose sanctions against
Hercules under ERISA S 502(c), 29 U.S.C. S 1132(c).
ERISA S 503
ERISA S 503 provides, in pertinent part, that every
employee benefit plan shall:
provide adequate notice in writing to any participant or
beneficiary whose claim for benefits under the plan has
been denied, setting forth the specific reasons for such
denial, written in a manner calculated to be
understood by the participant.
29 U.S.C. S 1133(1). Pursuant to this section, the Secretary
of Labor has established that written notice of denial of a
claim must:
provide to every claimant who has been denied a claim
for benefits written notice setting forth in a manner
calculated to be understood by the claimant:
(1) The specific reason or reasons for the denia l;
11
(2) Specific reference to pertinent plan provisi ons on
which the denial is based;
(3) A description of any additional material or
information necessary for the claimant to perfect the
claim and an explanation of why such material or
information is necessary; and
(4) Appropriate information as to the steps to be taken
if the participant or beneficiary wishes to submit his or
her claim for review.
29 C.F.R. S 2560.503-1(f).
We have previously held that S 503 sets forth only the
disclosure obligations of "the Plan" and that it does not
establish that those obligations are enforceable through the
sanctions of S 502(c). See Groves v. Modified Retirement
Plan, 803 F.2d 109, 118 (3d Cir. 1986). Where a
termination letter does not comply with the statutory and
regulatory requirements, the time limits for bringing an
administrative appeal are not enforced against the
claimant. See Epright v. Environmental Resources
Management, Inc. Health and Welfare Plan, 81 F.3d 335,
342 (3d Cir. 1996). Thus, the remedy for a violation of S 503
is to remand to the plan administrator so the claimant gets
the benefit of a full and fair review. See Weaver v. Phoenix
Home Life Mut. Ins. Co., 990 F.2d 154, 159 (4th Cir. 1993).
The March 31, 1994, letter from Provident to Syed began
with a quotation from the Plan's definition of total
disability. See App. at A6. Next, the letter explained
that Syed's benefits were being terminated because the
results of Dr. Joson's independent medical evaluation
demonstrated that Syed was no longer totally disabled as
the term was defined in the Plan. See App. at A6-7. The
letter went on to identify several jobs for which Syed would
be qualified given his present physical condition. See App.
at A7. Provident stated that Syed could submit a request
for reconsideration of the decision, accompanied by
documents from Syed's physician. See id. Lastly, the letter
noted that any information to be considered in connection
with an appeal would have to be received within 60 days of
Syed's receipt of the letter. See id. In short, Provident fully
complied with the statutory and regulatory requirements for
12
notice under ERISA S 503, and Syed has not raised any
genuine issue of material fact to the contrary. Accordingly,
we affirm the District Court's grant of summary judgment
as to Syed's claim under ERISA S 503, 29 U.S.C. S 1133.
13
BARRY, Circuit Judge, concurring and dissenting.
While I agree with much of the majority's opinion, I
cannot agree with the conclusion that the most analogous
state statute of limitations for a S 502(a)(1)(B) claim is found
in Delaware's S 8111. It is on that issue, and that issue
alone, that I dissent.
First, it is clear, as the majority notes, that every circuit
which has addressed this issue has applied the statute of
limitations for a state contract action as most analogous to
an ERISA claim for the denial of benefits. As the majority
also notes, we, too, have suggested, albeit in dicta, that the
state statute of limitations for a contract action would apply
to claims under S 502(a)(1)(B). See Connell v. Trustees of the
Pension Fund of the Ironworkers Dist. Council of Northern
New Jersey, 118 F.3d 154, 156 n.4 (3d Cir. 1997).
Moreover, district courts too numerous to mention have
also concluded that a state contract statute of limitations is
most analogous to a S 502(a)(1)(B) claim. This is, indeed, a
resounding chorus.
The rub here, however, is this. The majority concludes
that "Delaware, in essence, has two statutes of limitations
for contract disputes," specifically S 8106 and S 8111, and
one, of course, must be selected. The majority then selects
S 8111, which relates to claims "for wages, salary, or
overtime for work, labor or personal services performed . . .
or for any other benefits arising from such work, labor or
personal services" as being "more specific" and, thus, most
analogous to a claim for denied disability benefits under
ERISA than S 8106, the statute traditionally used in
Delaware for breach of contract, or breach of promise,
actions. While I agree that S 8111 is "more specific," it
simply does not apply to a claim that ERISA benefits were
wrongly denied.
Delaware courts restrict S 8111 and its one-year statute
to work or services which have already been performed and
apply S 8106 to a promise of compensation for work or
services to be performed. The S 8111 action, in other words,
is based on the services performed rather than on the
original promise while the S 8106 action is based on the
underlying promise with respect to services not yet
14
completed. See Goldman v. Braunstein's, Inc., 240 A.2d
577, 578 (Del. 1968); Brown v. Colonial Chevrolet Co., 249
A.2d 439, 441 (Del. Super. Ct. 1968).1 Moreover, benefits
for work or services which have been performed have been
described in the case on which the majority primarily relies
as "fringe" benefits. Mitchell v. E.I. duPont deNemours & Co.,
310 A.2d 641, 642 (Del. 1973). Claims for fringe benefits
are typically governed by S 8111. See e.g. , Compass v.
American Mirrex Co., 72 F. Supp. 2d 462, 467-68 (D. Del.
1999)(claim for unpaid bonus governed by S 8111); SCOA
Industries, Inc. v. Bracken, 374 A.2d 263, 264 (Del.
1977)(claim for year-end bonus was equivalent of"wages"
and governed by S 8111).
In Mitchell, a pre-ERISA case, the Supreme Court of
Delaware determined that Mitchell's action under
Delaware's Disability Wage Plan was governed byS 8111.
The Disability Wage Plan, however, had one and only one
requirement for eligibility -- "at least one year of
continuous service." The Plan was a "fringe benefit," said
the Court, which accrued to Mitchell simply because she
had worked for the one year -- her "work" had been
"performed." Mitchell, 310 A.2d at 642.
Syed's claim, however, has little or nothing to do with
work or services performed or fringe benefits and has
everything to do with benefits for disability based on an
interpretation and analysis of the Plan documents, akin to
the analysis required in a traditional breach of contract
claim:
The [claimant] has brought this action to recover
benefits allegedly due him under the terms of the
employee pension benefit plan and to enforce and/or
_________________________________________________________________
1. As the majority acknowledges, selecting the appropriate statute of
limitations is a matter of federal, not state, law, and thus our task is
not
to predict which statute of limitations the Delaware Supreme Court
might select for an ERISA claim. Rather, "in borrowing the state statute
of limitations to impose a time limitation on the federal cause of action,
the federal court is ``closing the gap' left by Congress in order to
fashion
a body of federal common law to supplement the federal statutory cause
of action." Harrison v. Digital Health Plan , 183 F.3d 1235, 1238-39 (11th
Cir. 1999).
15
clarify his rights under the terms of that Plan. The
employee pension benefit plan and its predecessor . . .
are in written form. Each of the Plans contain extensive
and detailed terms and conditions governing the rights
and duties of all participants in the fund.
Jenkins v. Local 705 Int'l Bd. of Teamsters Pension Plan,
713 F.2d 247, 252-53 (7th Cir. 1983); see also Hogan v.
Kraft Foods, 969 F.2d 142, 145 (5th Cir. 1992)("[The] claim
involves the interpretation of the annuity contract[.]");
Meade v. Pension Appeals and Review Comm., 966 F.2d
190, 195 (6th Cir. 1992)("[T]he Plan at issue in this case
constitutes a written contract [for disability benefits].");
Johnson v. State Mut. Life Assur. Co. of America, 942 F.2d
1260, 1264 (8th Cir. 1991)(noting that life insurance policy
governed by ERISA "is a written promise to pay money if a
specified condition, accidental death, occurs in the future").
Here, as in Jenkins, it is the Plan which will dictate the
outcome of Syed's claim for unpaid disability benefits.2
There is simply no reasoned basis for concluding that fringe
benefits given by the employer to the employee, i.e.
"benefits arising from . . . work, labor or personal services
performed," should be stretched to include the very
different pension and health benefits governed by an ERISA
plan that is subject to contract interpretation. 3 The
majority's two-fold rejoinder to this is not persuasive. The
majority misses the point by stating the hardly startling
_________________________________________________________________
2. It also bears mention that ERISA plans involve parties outside the
employment relationship such as family members, the insurance
company, and the plan administrator, and for that reason as well a
S 502(a)(1)(B) claim does not fit squarely within S 8111. See Harrison,
183 F.3d at 1241-42 (noting that ERISA claims may involve non-work
related injuries or illnesses and, thus, concluding that state breach of
contract statute was more analogous to S 502(a)(1)(B) claims than
workers compensation statute).
3. Pennsylvania has a similar statute, the Wage Payment and Collection
Law, 43 P.S. S 260.1 et seq. See Ferguson v. Greyhound Retirement and
Disability Trust, 613 F. Supp. 323, 324 (W.D. Pa. 1985)(rejecting use of
wage statute -- and other statutes of limitations-- as most analogous
and stating "[t]his is an action for recovery of benefits due under the
terms of an employee pension benefit plan[.] We believe that the claim is
most analogous to contract law.").
16
proposition that "Syed's claim was squarely based on his
prior employment," "hardly startling" because Syed, of
course, had to have been an employee to have brought an
ERISA claim. Beyond that, the majority's citation to one
case -- a preemption case which emanated from New
Jersey, not Delaware -- for the proposition that ERISA
benefits are "often" termed fringe benefits is somewhat
disingenuous. The category of funds to which the New
Jersey Construction Workers' Fringe Benefit Security Act at
issue in that case applied consisted "largely if not entirely
of employee benefit plans governed by ERISA." Bricklayers
and Allied Craftsmen Int'l Union Local 33 Benefit Funds v.
America's Marble Source Inc., 950 F.2d 114, 118 (3d Cir.
1991).
Mitchell aside, the majority also invokes a 1956 District of
Delaware case which states that S 8111 is meant to
encompass all disputes arising from the employment
relationship. See Sorensen v. Overland Corp., 142 F. Supp.
354 (D. Del. 1956), aff 'd, 242 F.2d 70 (3d Cir. 1959).
Separate and apart from the fact that this sweeping
language emanates from a case decided long before ERISA
was even a twinkle in Congress's eye, the statement which
the majority quotes has been qualified in at least two post-
ERISA District of Delaware cases. In Rich v. Zeneca, Inc.,
845 F. Supp. 162 (D. Del. 1994), relied on by Syed, the
District Court found Mitchell and the "fairly broad"
statement in Sorenson inapplicable to Rich's claim under
ERISA that his employer wrongfully interfered with his
attainment of pension and employment benefits:
S 8111 and its one year statute of limitations for wage,
salary and benefit claims should not be read as being
so comprehensive as to bar all claims arising out of the
employer-employee relationship. Rather [S 8111] is
directed to claims alleging a breach of a duty to pay
wages, salary or overtime for work performed. Where,
as here, a plaintiff alleges that a defendant has
breached a different duty arising out of the employer-
employee relationship, another statute of limitations
may apply to the plaintiff 's claim.
Rich, 845 F. Supp. at 165. The Court concluded that Rich's
claims were most analogous to the breach of contract and
17
breach of promise claims asserted in Goldman and Brown
and, thus, subject to the S 8106 three-year statute of
limitations. See id. at 165-66. Parenthetically, the
majority's effort to distinguish Rich by shoe-horning Syed's
case into "work performed" because his benefits have been
"earned" makes no sense both on its face and because
those contracted-for benefits can only be "earned" when
certain criteria -- criteria stated in the Plan-- are met, a
finding which cannot now be made.4
In the second post-ERISA District of Delaware case, the
Court, referencing what it called the "broad interpretation"
of S 8111 in Sorensen, found that the bonus at issue -- a
clear "fringe" benefit -- was subject toS 8111's one-year
statute of limitations. The Court summarized the
distinction between S 8106 and S 8111:
If a plaintiff alleges a breach of a duty to provide
benefits or to pay wages for work already performed,
then the one year statute of limitations in section 8111
governs. On the other hand, if plaintiff alleges that his
employer breached a different duty arising out of the
employment agreement, then the three year statute of
limitations in section 8106 applies.
Compass, 72 F. Supp. 2d at 467. Just such a"different
duty" has been alleged here. See also DeWitt v. Penn-Del
Directory Corp., 872 F. Supp. 126, 134-35 (D. Del.
1994)(S 8106 is the most analogous statute of limitations
for ERISA S 510 claim).
_________________________________________________________________
4. The majority rejects a second case relied on by Syed primarily because
the Court in that case did not explain why it foundS 8111 inapplicable
to a claim brought under a group accident insurance policy for personal
injuries resulting in disability. See Shaw v. Aetna Life Ins. Co., 395
A.2d
384 (Del. Super. Ct. 1978). It is very clear, however, why the Shaw Court
found as it did: the very specific two-year statute of limitations for
personal injury claims was the perfect fit. I note, for what it is worth,
that by virtue of subsequent amendments to the personal injury
protection ("PIP") provisions of Delaware's No Fault Insurance Statute,
actions for PIP benefits are now statutory causes of action, subject to
the
three-year statute of limitations of S 8106. See Harper v. State Farm Mut.
Auto. Ins. Co., 703 A.2d 136 (Del. 1997).
18
Finally, the majority cites a 1995 Eighth Circuit case
which applied Minnesota's two-year statute of limitations
for wage claims as more analogous to a S 502(a)(1)(B) claim
than the six-year statute of limitations governing contract
disputes. See Adamson v. Armco, Inc., 44 F.3d 650 (8th
Cir.), cert. denied, 516 U.S. 823 (1995). Conceding that
Minnesota courts have not had occasion to determine
whether claims for employee benefits under an ERISA plan
are wage claims, the Adamson Court found the issue
"hardly in doubt," but cited in support of its"hardly in
doubt" conclusion only pre-ERISA cases involving claims
not for disability benefits but for unpaid vacation benefits,
salary increases and "adjustment of all fringe benefits." 447
F.3d at 653. Hardly ringing support.
It is, thus, clear, at least to me, that S 8106's statute of
limitations for contract actions is more analogous to an
ERISA claim for the denial of benefits than that found in
S 8111.5 Moreover, in our search for the most analogous
statute, we are not necessarily limited to reviewing the two
presented to us. It might well be appropriate, therefore, to
consider Delaware's three-year statute of limitations for
claims alleging breach of insurance policies, 19 Del. C.
S 3315. Other circuits have concluded that similar state
statutes are the most analogous to S 502(a)(1)(B) claims and
supply the appropriate statute of limitations. See, e.g., Lang
_________________________________________________________________
5. I note in passing, and only in passing because the parties have not
discussed it, that S 8106 also provides a statute of limitations for
"action[s] based on a statute". Delaware courts have applied the
provision to S 8106/S 8111 disputes. See Johnson v. Williams, 728 A.2d
1185, 1188-89 (Del. Super. Ct. 1998)(concluding that lower court's use
of S 8106 where fireman sought line-of-duty disability benefits pursuant
to state statute as an "action based on statute" was not clearly
erroneous); Vassallo v. Haber Elec. Co., 435 A.2d 1046, 1051 (Del.
Super. Ct. 1981)(applying S 8106 to plaintiff 's claim that based on a
state statute he should have been registered by employer to receive
higher wages). Section 8106 has also been found to provide the statute
of limitations for a federal RICO claim, a claim"based on a statute." See
Creamer v. General Teamsters Local Union 326, 579 F. Supp. 1284, 1290
(D. Del. 1984). Syed's claim is indisputably based on a statute -- ERISA
-- and because the more specific S 8111 simply does not apply, S 8106
is arguably a more appropriate candidate for the most analogous statute
of limitations for this reason as well.
19
v. Aetna Life Ins. Co., 196 F.3d 1102, 1104 (10th Cir. 1999)
("Our duty . . . is to choose the most analogous state
statute of limitation. While plaintiff 's ERISA claim is based
upon a contract, it is more precisely based upon a contract
of insurance. Therefore, we hold that the three-year statute
of limitations applies to plaintiff 's claim."); Nikaido v.
Centennial Life Ins. Co., 42 F.3d 557, 559 (9th Cir.
1994)(using California's "limitations statute specifically for
disability policies" rather than general breach of contract
statute where ERISA Plan contained provision similar to
that of California's insurance code); Duchek v. Blue Cross
and Blue Shield of Nebraska, 153 F.3d 648, 649-50 (8th
Cir. 1998)(applying Nebraska Insurance Statute to action
for benefits under ERISA). As the Duchek Court put it:
[I]t would be anomalous to characterize this suit as a
contract action and then borrow Nebraska's generic
contract statute of limitations rather than the specific
section of the Nebraska insurance laws permitting the
contractual limitation in question.
153 F.3d at 649-50.
The majority, after concluding that Syed's claim comes
within S 8111's statute of limitations, recognizes that that
does not conclusively resolve the issue because the selected
statute of limitations must not be "inconsistent with
national labor policy." It is, indeed, quite clear that a state's
statute of limitations for ERISA claims will only be
borrowed "so long as application of state statute's time
period would not impede effectuation of federal policy."
Pierce County Hotel Employees and Restaurant Employees
Health Trust v. Elks Lodge, 827 F.2d 1324, 1328 (9th Cir.
1987); see also Jenkins, 713 F.2d at 251 ("In determining
the most appropriate state statute of limitations, the court
must be cognizant of and examine the underlying nature of
the federal claim as well as the federal policies involved.").
The majority, while finding S 8111's one-year statute of
limitations to be "short," and while choosing not to discuss
the policy behind ERISA, simply concludes that it"cannot
say" the one-year statute of limitations is inconsistent with
that policy. That conclusion is not so clear to me.
In enacting ERISA, "Congress sought to protect the
20
interests of participants in employee benefits plans by
regulating the administration of such plans and by
providing participants and beneficiaries with a variety of
remedies to assure compliance with the statutory
framework." Harrison, 183 F.3d at 1239; see also Held v.
Manufacturers Hanover Leasing Corp., 912 F.2d 1197, 1202
(10th Cir. 1990)("The principal purpose of ERISA is to
protect employees' rights to benefits under a covered
plan."). While I cannot say that applying S 8111's one-year
statute of limitations (which, it must be remembered, bars
Syed's claim) is so unreasonable as to impede the
effectuation of federal policy, I surely cannot say that we
are furthering Congress's clearly stated goal by concluding
that Delaware's employees have a much shorter period of
time within which to file claims for the wrongful denial of
benefits than employees in virtually every other state.6
Perhaps the Delaware Legislature will feel obliged to
consider this unfortunate result. See Johnson , 942 F.2d at
1266 ("Either Congress, by amending ERISA, or the
Missouri Legislature is free to modify the statute of
limitations. Until such legislative action, we are required to
_________________________________________________________________
6. See e.g., Carey v. Int'l Broth. of Elec. Workers Local 363 Pension
Plan,
201 F.3d 44, 46-47 (2d Cir. 1999)(applying New York's six-year
limitations period); Lang, 196 F.3d at 1104 (applying Utah's three-year
limitations period); Harrison, 183 F.3d at 1239-40 (applying Georgia's
six-year limitations period); Duchek, 153 F.3d at 649-50 (applying
Nebraska's three-year limitations period); Blue Cross & Blue Shield of
Alabama v. Sanders, 138 F.3d 1347, 1357 (11th Cir. 1998)(applying
Alabama's six-year limitations); Daill, 100 F.3d at 65 (applying Illinois'
ten-year limitations period); Nikaido, 42 F.3d at 559 (applying
California's three-year limitations period); Hogan, 969 F.2d at 145(applying Texas' four-year limitations period); Johnson, 942 F.2d at 1263(applying Missouri's ten-year limitations period); Meade 966 F.2d at 193,
195 (applying Ohio's fifteen-year limitations period); Wright v.
Southwestern Bell Telephone Co., 925 F.2d 1288, 1291 (10th Cir.
1991)(applying Oklahoma's five-year limitations period); Pierce, 827 F.2d
at 1328 (applying Washington's six-year limitations period); Hawaii
Carpenters Trust Funds v. Waiola Carpenter Shop, Inc., 823 F.2d 289,
297-98 (9th Cir. 1987)(applying Hawaii's six-year limitations period);
Dameron v. Sinai Hosp. of Baltimore, Inc., 815 F.2d 975, 981-82 (4th Cir.
1987)(applying Maryland's three-year limitations period); Trustees for
Alaska Laborers-Constr. Indus. Health and Sec. Fund v. Ferrell, 812 F.2d
512, 517 (9th Cir. 1987)(applying Alaska's six-year limitations period).
21
hold, consistent with Missouri law, that plaintiff 's claim to
enforce defendant's written promise for the payment of
money is governed by the ten-year statute of limitations.").
One final note. The Supreme Court of Delaware has
instructed that when a Delaware court is in doubt as to
which of two statutes of limitations control, it should
choose the longer. See Sonne v. Sacks, 314 A.2d 194, 196
(Del. 1973). Indeed, we, ourselves, have recognized this
principle in a diversity case dealing with an S 8106 and
S 8111 dispute. See Lindsey v. M.A. Zeccola & Sons, Inc., 26
F.3d 1236, 1245 (3d Cir. 1994). Although we, of course, are
not bound to follow that sensible instruction, choosing the
concededly applicable longer statute of limitations period
would not only further the federal policy behind ERISA but
would bring Delaware into line with all of the other states
in which substantially longer statutes of limitations are
applied than the one-year period deemed applicable here. I
respectfully dissent.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
22