Custer v. Murphy Oil USA, Inc.

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS 24, 2007
July
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 06-30672
F MICHAEL CUSTER; MARSHA F CUSTER
Plaintiffs - Appellants
v.
MURPHY OIL USA INC, formerly known as Murphy Oil Corp
Defendant - Appellee
Appeal from the United States District Court
for the Eastern District of Louisiana
Before REAVLEY, GARZA, and DENNIS, Circuit Judges.
EMILIO M. GARZA, Circuit Judge:
In December 2003, Michael Custer (“Custer”) had an accident at his home
and, as a result, suffered a ruptured disk in his neck. Custer was totally
disabled and unable to return to work. When Custer inquired about medical
coverage from his employer, Murphy Oil USA, Inc.(“Murphy”), he was informed
that because he was totally disabled his employment would be terminated and
he would no longer qualify for coverage under the Group Insurance Plan for
Employees of Murphy Oil Corp. (“the Plan”). Under the Plan in effect prior to
2003, Custer would have been covered until he turned 65. Murphy contends that
the Plan was modified in January 2003, therefore allowing Custer’s coverage to
end when he was terminated. Custer and his wife, Marsha Custer, (“the
No. 06-30672
plaintiffs”) challenge the modifications to the Plan by alleging that Murphy did
not comply with the Employment Retirement Insurance Security Act (“ERISA”),
29 U.S.C. § 1001 et seq., reporting and disclosure requirements and did not
comply with the Plan’s modification procedures. Further, the plaintiffs allege
that Murphy’s decision to terminate Custer’s employment interfered with
Custer’s attainment of rights protected under ERISA.
I
Custer had worked at Murphy from 1979 to 2004. He started as an H-
operator but, by 1997, he had worked his way up to shift foreman at Murphy’s
plant in Meraux, Louisiana. This promotion made Custer a salaried employee
and he became eligible for the Plan. The Plan is a self-funded group health plan
administered by the Employee Benefit Committee (“Benefit Committee”). In
November 2002, the Benefit Committee met to consider changes to the Plan’s
benefits, specifically relating to the long term benefits for employees who become
totally disabled and are unable to work. At the time, the Plan allowed
employees who became totally disabled, and whose employment was terminated
as a result, to receive benefits until the age of 65.1 The Benefit Committee
agreed to make changes, limiting benefits of totally disabled employees to
COBRA Continuation coverage for 18 months.
Although the Benefit Committee agreed to the changes, they were still
pending approval from the corporate office when the Employee Benefits
Department (“the Benefits Department”) sent Murphy’s annual open enrollment
notice to all eligible employees in November 2002. Instead of announcing the
proposed changes, the notice only announced the possibility that changes will
1
The language of that plan stated, “If the employee is totally disabled and approved
to receive benefits under the Company-sponsored Long Term Disability Plan or Social Security,
the employee and dependents may continue to be covered by this Plan until the employee is
age 65, provided he or she remains disabled and is not eligible for or covered by another group
plan.”
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No. 06-30672
follow. Murphy claims that the corporate office approved the changes in early
December 2002 and that, immediately thereafter, the Benefits Department
mailed a written notice to all active employees notifying them of various changes
to the Plan which would be effective on January 1, 2003. Although Murphy
claims it mailed this notice to Custer at his then-present address, the plaintiffs
contend that they never received the December 2002 notice. In March 2003,
Murphy asserts it mailed a new Summary Plan Description (“SPD”) to all active
employees, which included two sections relating to the coverage for disabled and
terminated employees. The plaintiffs attest that they did not receive the SPD
either.
On December 19, 2003, Custer was injured while moving boxes in his attic.
Apparently, the attic stairs collapsed; he fell eight feet and ruptured the disks
in his neck. As a result of the accident, he was totally disabled and immediately
went on a leave of absence from work. On January 22, 2004, the Benefits
Department sent Custer a letter explaining how some aspects of his benefits
would be affected by his leave of absence, and included some forms which he
filled out and returned on January 28, 2004. On May 25, 2004, the Benefits
Department sent Custer another set of forms, which were returned completed.
In June of 2004, Custer called Murphy to inquire about his benefits and was told
that his employment could be terminated due to his disability and therefore he
would be no longer covered under the Plan, as amended in January 2003.
Custer claims that this was the first he had heard of these amendments.
Eventually, Custer was terminated from his employment on September 30,
2004. The Benefits Department notified Custer that his medical coverage ended
when he was terminated but also informed him that he was eligible for COBRA
Continuation coverage, which ended in April 2006.
The plaintiffs filed suit against Murphy in March 2005, seeking a
declaratory judgment and damages under the pre-2003 version of the Plan.
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No. 06-30672
After delays due to Hurricane Katrina, Murphy moved for summary judgment
in April 2006. The plaintiffs opposed the motion and filed a cross-motion for
summary judgment, but in June 2006 the district court granted summary
judgment to Murphy on all claims and denied the plaintiffs’ cross-motion for
summary judgment.
II
“We review grants of summary judgment de novo, applying the same legal
standard used by the district court.” Chacko v. Sabre Inc., 473 F.3d 604, 609
(5th Cir. 2006). Summary judgment is appropriate if the moving party can show
“that there is no genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(c). In making
this determination, we evaluate the facts in the light most favorable to the non-
moving party))in this case, the plaintiffs. Keszenheimer v. Reliance Std. Life
Ins. Co., 402 F.3d 504, 507 (5th Cir. 2005).
A
The plaintiffs first argue that Murphy’s December 2002 notice did not
comply with ERISA’s reporting and disclosure requirements. ERISA requires
that “[a] summary of any material modification in the terms of the plan . . . shall
be written in a manner calculated to be understood by the average plan
participant and shall be furnished in accordance with section 1024(b)(1) of this
title.” 29 U.S.C. § 1022(a). The plaintiffs argue both that the notice was not
furnished in accordance with § 1024(b)(1) and that it was not written in a
manner calculated to be understood by the average plan participant.
1
Section 1024(b)(1) sets out the requirements for how plan administrators
must notify participants of material changes in the Plan. The statute states that
“a summary description of such [a material reduction in covered services or
benefits] shall be furnished to participants and beneficiaries not later than 60
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No. 06-30672
days after the date of the adoption of the modification or change.” 29 U.S.C.
§ 1024(b)(1). Further, the Secretary of Labor has promulgated regulations
interpreting the disclosure requirements of § 1024(b)(1): “[T]he plan
administrator shall use measures reasonably calculated to ensure actual receipt
of the material by plan participants, beneficiaries and other specified
individuals.” 29 C.F.R. § 2520.104b-1(b)(1). And the regulations indicate that
distribution through first-class mail fulfills the disclosure obligation. Id.
(“Material distributed through the mail may be sent by first, second, or third-
class mail.”); Williams v. Plumbers & Steamfitters Local 60 Pension Plan, 48
F.3d 923, 926 (5th Cir. 1995) (“The plan administrator may send the [summary
of material modification] by mail.”); cf. Degruise v. Sprint Corp., 279 F.3d 333,
336 (5th Cir. 2002) (stating, with respect to a similar provision of COBRA, 29
U.S.C. § 1166, “This does not mean, however, that employers are required to
ensure that plan participants actually receive notice. Rather, it merely obligates
employers to use means ‘reasonably calculated’ to reach plan participants.”)
(footnote omitted). As a result, we look not at whether Custer actually received
the December 2002 notice but instead at the Benefit Committee’s method of
distribution.2
In arguing that it complied with the reporting and disclosure
requirements, Murphy asks this court to apply the “mailbox rule.” The version
of the mailbox rule that Murphy would have us apply “provides that the proper
2
The district court’s order suggests that the plaintiffs may be able to recover damages
by relying merely on prejudice even if Murphy complied with ERISA’s reporting and disclosure
requirements. See District Court Order of June 1, 2006 (“Having concluded Defendant’s notice
satisfies ERISA disclosure requirements, Plaintiffs can only recover if they can show active
concealment, significant reliance, or prejudice resulting from the lack of notice.”) (citing
Godwin v. Sun Life Assurance Co., 980 F.2d 323, 328 (5th Cir. 1992)). However, nothing in
Godwin suggests that an employer can be held liable for a plaintiff’s failure to receive notice
where the plaintiff has not established that the employer violated ERISA’s reporting and
disclosure requirements. Rather, for a plaintiff to obtain a remedy under ERISA, the plaintiff
must establish, at the very least, that the defendant violated some provision of ERISA.
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No. 06-30672
and timely mailing of a document raises a rebuttable presumption that the
document has been received by the addressee in the usual time.” Schikore v.
BankAmerica Supplemental Ret. Plan, 269 F.3d 956, 961 (9th Cir. 2001) (citing
Hagner v. United States, 285 U.S. 427, 430 (1932)); see also Beck v. Somerset
Techs., Inc., 882 F.2d 993, 996 (5th Cir. 1989) (applying the mailbox rule).
Because this mailbox rule functions merely to create a presumption of receipt,
it only comes into play when there is a material question as to whether a
document was actually received. See, e.g., Schikore, 269 F.3d at 963 (“We note
that the Plan requires only actual receipt and does not require any particular
form of mailing.”). However, in this case, the question is not whether there was
actual receipt by the plaintiffs, but rather whether the plan administrator
“use[d] measures reasonably calculated to ensure actual receipt.” 29 C.F.R.
§ 2520.104b-1(b)(1). So the mailbox rule does not operate in this context.
Although the mailbox rule does not operate here to shift burdens and
create presumptions, as Murphy argues, the mailbox rule is still germane to our
analysis. A threshold question for the application of the mailbox rule is whether
there is sufficient evidence that the letter was actually mailed. Because Murphy
contends that the measure the plan administrator used to ensure actual receipt
was distribution by first-class mail, we ask whether there is sufficient evidence
to determine that the plan administrator actually sent the December 2002 notice
to Custer by first-class mail.
The summary judgment record provides no direct evidence that the
December 2002 notices were mailed, such as business records, a signed receipt
from certified mail, or a post-marked envelope. Murphy does not even provide
a sworn statement that the notice was mailed. The only deposition testimony
to support Murphy’s claim that the notices were mailed is provided by Ronald
Smith, the manager of the Benefits Department. Soon after the approval of the
Plan amendment, Smith stated that his department stuffed the December 2002
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No. 06-30672
notice of material modification into envelopes and the envelopes were delivered
to the mail room. But he did not provide evidence that the envelopes were
mailed, or, if they were mailed, to whom. As Smith put it, “My department did
the stuffing. The mail room did the mailing.” While in Smith’s control, the
envelopes were not yet addressed. The addresses were purportedly added at the
mail room based on a computer file provided by Smith, who stated that the
computer file contained a list of current addresses for all active Plan
participants, including Custer.
The individuals actually responsible for addressing and mailing the
envelopes, Anthony Yarborough and David Kilby, provided no evidence to
corroborate Smith’s statement that the notices were mailed or how they were
addressed. Yarborough and Kilby stated that the mail room does not keep, as
a matter of practice, any records, reports, codes, or memoranda concerning what
it sends out; the mail room does not know the contents of sealed envelopes
received from the Benefits Department; and the computers and printers that
would have been used to produce the lists to address the envelopes were
discarded in February 2006. Yarborough and Kilby provided no evidence, either
physical or testimonial, to support Smith’s claim that the notices had been
properly addressed and sent.
The plaintiffs, for their part, do provide evidence beyond mere assertions
of non-receipt. In addition to their claim that they never received the notice,
they produce four other employees of the Meraux plant, also shift supervisors
like Custer, who could not recall receiving the notice. It is, of course, possible
each of these employees received the notice and they just forgot, but the
testimony of these employees reveals individuals who carefully examined and
stored such benefits documents and discussed benefits changes amongst each
other. Three of the four shift supervisors stated they retain benefits documents
in records at their homes, and they expected that if they had received the notice
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No. 06-30672
it would have been in their records; none was able to find the relevant notice in
their personal records. All four stated they regularly discuss changes in the
benefits plans, especially those resulting in reductions of coverage for spouses,
as here, and none could remember discussing these changes until they learned
of Custer’s injury and the denial of benefits he expected to receive. Murphy has
produced no employees of the Meraux plant who claim to have received the
December 2002 notice.
Because Murphy attempts to prove that it mailed the notice without
providing any direct evidence of mailing, it relies on circumstantial evidence,
namely that it sent the December 2002 notice through Murphy’s normal internal
mailing procedures. See, e.g., Wells Fargo Business Credit v. Ben Kozloff, Inc.,
695 F.2d 940, 944 (5th Cir. 1983) (“Placing letters in the mail may be proved by
circumstantial evidence, including customary mailing practices used in the
sender’s business.”); Myer v. Callahan, 974 F. Supp. 578, 584 n.7 (E.D. Tex.
1997) (“Proof of mailing may also be established if the letter was shown to have
been sent through a systematic process at the clerk’s office or through records
at the clerk’s office.”) (citing Knickerbocker Life Ins. Co. v. Pendleton, 115 U.S.
339, 345-46 (1885); Myers v. Moore-Kile Co., 279 F. 233, 234-36 (5th Cir. 1922)).
These cases establish only that the fact finder may use the circumstantial
evidence to infer that a letter placed in a company’s internal mailing system was
properly placed in the mail. Such circumstantial evidence may in some cases be
sufficient to justify a grant of summary judgment, but not in this case where the
plaintiffs have presented more than a mere assertion of non-receipt and the
defendants have presented no evidence about the reliability of its internal
mailing procedures.
Although the plaintiff ultimately bears the burden of demonstrating that
Murphy failed to “use measures reasonably calculated to ensure actual receipt”
of the notice, Murphy, as the party moving for summary judgment, bears the
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No. 06-30672
burden of demonstrating that there is no genuine issue of material fact. See
Harvill v. Westward Commc’ns., L.L.C., 433 F.3d 428, 433 (5th Cir. 2005) (“The
moving party has the burden of demonstrating that there are no genuine issues
of material fact in dispute.”). The plaintiffs have alleged they did not receive the
notice, and that allegation is supported by the other Meraux shift supervisors’
testimony that they could also not recall receiving the notice and that they
regularly retain such notices but could not locate the notice in their records.
Murphy has produced neither testimony or business records that the notice was
sent to individuals at the Meraux plant nor any individual at the Meraux plant
claiming to have received the notice. Taken together, this record demonstrates
that a reasonable jury may think that, at the very least, Murphy did not
distribute the December 2002 notice using methods reasonably calculated to
ensure receipt for the Plan participants at the Meraux plant))so there is a
genuine issue of material fact as to whether Murphy properly mailed the
December 2002 notice to Custer. Therefore, we reverse the district court’s grant
of summary judgment on this issue.3
3
Although we reverse the district court’s ruling on this issue, we make no holding on
the difficult question of what remedy, if any, ERISA provides for a violation of its reporting and
disclosure requirements. This issue was neither briefed by the parties nor considered by the
district court.
The plaintiffs are seeking the benefits that would have been owed to Custer under the
pre-2003 version of the Plan, and they assert that ERISA’s civil enforcement provision, § 1132,
provides them with this remedy. But the plaintiffs have not attempted to identify which
specific subsection of § 1132 provides such a remedy. We have previously considered cases
where a plaintiff has sought some remedy))beyond those limited remedies available in
§ 1132(a)(1)(A)))for technical violations of ERISA’s reporting and disclosure requirements.
See, e.g., Williams, 48 F.3d at 926; Hines v. Mass. Mut. Life Ins. Co., 43 F.3d 207, 211 (5th Cir.
1995); Godwin, 980 F.2d at 328. But in those cases we did not identify the legal basis for such
a remedy, nor did we need to because, in each case, the plaintiffs’ claims were dismissed on
other grounds. Other circuits which have examined the issue of “substantive remedies” for
technical violations of ERISA’s reporting and disclosure requirements have come to different
conclusions. Compare Watson v. Deaconess Waltham Hosp., 298 F.3d 102, 113 (1st Cir. 2002)
(remedy under § 1132(a)(1)(B) available only for “exceptional circumstances”); Panaras v.
Liquid Carbonic Indus. Corp., 74 F.3d 786, 789 (7th Cir. 1996) (same) with Lewandowski v.
Occidental Chemical Corp., 986 F.2d 1006, 1008 (6th Cir. 1993) (no remedy available under
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No. 06-30672
2
The plaintiffs also argue that even if Murphy did use proper methods to
distribute the notice, Murphy was still not in compliance with § 1022 because
the language of the December 2002 notice was not “written in a manner
calculated to be understood by the average plan participant.” 29 U.S.C.
§ 1022(a); see also 29 C.F.R. 2520.104b-3(a).
In November 2002, Murphy sent a notice announcing the Plan’s open
enrollment schedule and stating,
Medical costs have continued to increase nationwide and
unfortunately our Plan has not been immune to this problem. At
present we are still reviewing our plan design and associated cost.
For the time being coverage and premiums will remain unchanged.
However, as soon as our review process has been completed we will
advise of any changes in coverage and/or premium.
Following this notice, Murphy sent the December 2002 notice, which is three
pages long and contains similar language regarding the increasing costs of
medical coverage. But it contains an additional section announcing
modifications to the plan effective January 1, 2003. It is this language,
announcing the modifications, which the plaintiffs claim is not sufficiently clear.
Under a section entitled “MEDICAL PLAN CHANGES,” the notice states,
§ 1132(a)(1)(B)); Hozier v. Midwest Fasteners, Inc., 908 F.2d 1155, 1170 (3d Cir. 1990) (same);
see also Peralta v. Hispanic Bus., Inc., 419 F.3d 1064, 1073 (9th Cir. 2005) (rejecting, for
reporting and disclosure violations,§ 1132(a)(1)(B) and (a)(3) as possible sources for benefits
sought under a version of a plan in effect prior to the plan’s cancellation); Jordan v. Federal
Express Corp., 116 F.3d 1005, 1011 (3d Cir. 1997) (suggesting that § 1132(a)(3) gives rise to
some “substantive remedies” for reporting and disclosure violations in “extraordinary
circumstances”) (citing Ackerman v. Warnaco, Inc., 55 F.3d 117, 124 (3d Cir. 1995)).
When relying on a statutory scheme such as ERISA, where Congress has specifically
enumerated and limited available remedies, parties are encouraged to identify which remedial
provision provides the remedy they seek. See Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134,
146 (1985) (“The six carefully integrated civil enforcement provisions found in § 502(a) of the statute
as finally enacted, however, provide strong evidence that Congress did not intend to authorize other
remedies that it simply forgot to incorporate expressly.”) (emphasis in original).
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No. 06-30672
Disability Termination - When an employee is unable to work
due to an illness or injury, medical coverage is continued for a
period of time at active employee rates while the employee is on
leave of absence. When an employee is unable to return to work due
to disability and is terminated due to disability, again our practice
has been to continue medical coverage for a period of time at active
employee rates. Our employment practice while on leave of absence
will remain unchanged, however, should termination occur due to
disability, our practice will now be that the employee will be
extended COBRA Continuation as required by law. Murphy will
subsidize the COBRA premium cost and the employee will only pay
the active rate for the initial eighteen months under COBRA. All
other terms and conditions under COBRA Continuation provisions
will apply.
This section is then followed by another paragraph discussing increasing medical
costs and responsible use of benefits.
The notice is clearly announcing changes to the Plan, and the section on
disability termination is structured to contrast those benefits previously
available to employees terminated due to disability with those benefits available
to employees terminated due to disability after January 1, 2003. Taken
together, this language is sufficient to communicate to the average plan
participant that beginning January 1, 2003, the Plan’s former disability benefits
would no longer be available, but rather the Plan would only offer COBRA
Continuation coverage. Therefore, we affirm the district court’s finding that the
content of the December 2002 notice complied with ERISA’s disclosure
requirements.4
B
Next, the plaintiffs argue that Murphy discharged Custer for the purpose
of interfering with the plaintiffs’ ERISA rights, in violation of 29 U.S.C. § 1140.
4
Because the plaintiffs did not argue the relevance of the March 2003 SPD before the
district court, we do not now consider whether the language of that document was ambiguous,
whether that document is the controlling description of the Plan’s benefits, or whether the
plaintiffs are required to show reliance on the March 2003 SPD.
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No. 06-30672
“To establish a prima facie case of discrimination under ERISA, a plaintiff must
establish that his employer fired him in retaliation for exercising an ERISA right
or to prevent attainment of benefits to which he would have become entitled
under an employee benefit plan.” Holtzclaw v. DSC Commc’ns. Corp., 255 F.3d
254, 260 (5th Cir. 2001). “An essential element of a [29 U.S.C. § 1140] is proof
of defendant's specific discriminatory intent.” Hines v. Mass. Mut. Life Ins. Co.,
43 F.3d 207, 209 (5th Cir. 1995).
The plaintiffs attempt to show discriminatory intent by arguing that
Murphy terminated Custer two weeks after finding him totally disabled. The
plaintiffs argue that the normal company practice was to terminate an employee
six months after finding him to be totally disabled. But the evidence the
plaintiffs rely on, namely Smith’s testimony, does not establish such a policy.
Rather, the testimony establishes that the Murphy generally waits six months
after an employee is on a medical leave of absence before determining whether
the employee should be terminated because of disability. Custer was placed on
medical leave of absence in December 2003 and terminated in September 2004.
To the extent that Murphy deviated from its general practice, we cannot find
that it was to the detriment of the plaintiffs or that it is evidence of a
discriminatory intent.
All evidence suggests that Custer’s employment was terminated because
he was unable to perform his job function. The plaintiffs do not allege that
Custer was able to perform his job function. In Holtzclaw, we held that
“qualification for the position sought is an element of a prima facie ERISA
claim.” Holtzclaw, 255 F.3d at 261. As a result, we affirm the district court’s
grant of summary judgment to Murphy on the plaintiffs’ retaliation and
interference claim.
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No. 06-30672
C
Finally, the plaintiffs argue that the modifications to the Plan are not
effective because Murphy never formally approved the modifications. “[O]nly an
amendment executed in accordance with the Plan’s own procedures and properly
noticed could change the Plan.” Williams, 48 F.3d at 926. The Plan in effect
prior to the modification stated,
The employer’s board of directors, its president or the Plan
Administrator may modify or amend the Plan from time to time at
its sole discretion. Participants will receive notification of
amendments or modifications that affect their coverage.
The Plan Administrator is the Benefit Committee. It is undisputed that the
Benefit Committee met on November 11, 2002 and approved the Plan
modifications to take effect on January 1, 2003. Murphy has produced the
minutes from that meeting indicating such, and the plaintiffs have produced no
evidence to the contrary. Once the Benefit Committee approved the changes, it
sought corporate approval from Murphy senior management. Although there is
no documentary evidence of senior management’s approval, such evidence is
unnecessary because the terms of the Plan allow the Benefit Committee to
modify the Plan without senior management’s approval. Therefore, we affirm
the district court’s grant of summary judgment on this issue.
III
In conclusion, we AFFIRM the district court’s rulings that the December
2002 notice was sufficiently clear, that Murphy did not discriminate against
Custer or interfere in the exercise of his ERISA rights, and that the December
2002 modifications were properly approved in accordance with the Plan. But we
REVERSE and REMAND because there is a genuine issue of material fact as to
whether Murphy properly distributed the December 2002 notices.
13