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December 13, 2001


The opinion of the court was delivered by: Charles R. Norgle, U.S. Senior Judge


Before the court are Defendants' motion for summary judgment and Plaintiffs cross-motion for summary judgment. For the following the reasons, Defendants' motion is granted and Plaintiffs motion is denied.


This case involves claimed violations of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., arising out of the termination of long-term disability benefits. In October of 1985, Plaintiff, James J. Hackett ("Hackett"), began employment with Defendant, Xerox ("Xerox"), as a sales representative. Hackett, within a year of his initial employment, experienced emotional problems and began to see a psychiatrist regularly. By March of 1987 Hackett's emotional problems began to interfere with his ability to work. Frank H. Brunstetter, M.D. ("Dr. Brunstetter"), the disability physician for the office of Clinical and Disability Services at Xerox, after consulting with Hackett's treating psychiatrist, John P. Gerber, M.D. ("Dr. Gerber"), advised Hackett that disability status was appropriate and encouraged him to apply for long-term disability benefits under the Xerox Long-Term Disability ("LTD") Plan. As part of the application for disability benefits, Hackett was reexamined by Dr. Gerber to ascertain a formal diagnosis. Dr. Gerber found that Hackett suffered a serious psychiatric condition, a personality disorder coupled with neurotic depression, which prevented him from doing any type of work. As of March 2, 1987, Hackett qualified for, and began receiving long-term disability benefits from Xerox. Over the next twelve years Hackett saw numerous different psychologists and psychiatrists who all performed evaluations. Each different psychologist or psychiatrist reached varying diagnoses of mental illness, but with the same conclusion that Hackett was unable to work. Hackett continued to qualify and receive full disability benefits under Xerox's LTD Plan.*fn2

In 1989, Xerox advised Hackett that as a condition to his continuing to receive long-term disability benefits he was required to apply for social security disability benefits. After an unsuccessful application for disability benefits to the Social Security Administration, Hackett appealed and in May of 1996 was granted disability status and benefits, retroactive to March 2, 1987. Xerox provided legal counsel to Hackett in connection with the successful application for social security disability benefits. Additionally, the social security disability benefits retroactively awarded were paid to Xerox.

Hackett received LTD benefits and social security disability from May of 1996 until January of 1999. On January 2, 1999, Defendant, Health International ("HI"),*fn3 determined that Hackett was no longer eligible for long-term disability benefits. Hackett appealed this initial determination and on May 5, 1999 a final and binding determination denied disability benefits. The final determination relied upon: (1) medical evaluations from two psychiatrists stating that although Hackett suffered from a mental illness, it did not prohibit him from working; and (2) material contained in the administrative record.

Hackett alleges that the denial of long-term disability benefits is an arbitrary cessation. Hackett filed a six count complaint alleging violations of ERISA by the following actions: (I) failure to timely provide requested documents; (2) breaches of fiduciary duty; (3) failure to follow applicable plan requirements; (4) improper claim and appeal procedures; (5) denial of benefits; and (6) conflict of interest. Both parties now move for summary judgment, arguing that there are no disputed issues of fact, and they are entitled to judgment as a matter of law.


A. Judicial Estoppel

Initially, the court must address the question of judicial estoppel. The doctrine of judicial estoppel provides a party that has won a suit on one ground may not turn around and in another case obtain another judgment on an inconsistent ground. Bethesda Lutheran Home and Services, Inc. v. Born, 238 F.3d 853, 857-58 (7th Cir. 2001) (citing Saecker v. Thorn, 234 F.3d 1010, 1014-15 (7th Cir. 2000); Moriarty v. Sve, 233 F.3d 955, 962 (7th Cir. 2000); Lydon v. Boston Sand & Gravel Co., 175 F.3d 6, 12-13 (1st Cir. 1999)). If such repudiation were permitted, the incentive to commit perjury and engage in other litigation fraud would be greater. McNamara v. City of Chicago, 138 F.3d 1219, 1225 (7th Cir. 1998) (citing Chaveriat v. Williams Pipe Line Co., 11 F.3d 1420, 1428 (7th Cir. 1990)). Judicial estoppel requires, however, that the party sought to be estopped have obtained a favorable judgment or settlement on the basis of a legal or factual contention that the party wants to repudiate in the current litigation. McNamara, 138 F.3d at 1225. The purpose behind judicial estoppel "is to protect the judicial system from being whipsawed with inconsistent arguments and to discourage the form of fraud that consists of withholding your best ground in the first of a series of suits because it is helpful to your opponent in that suit hoping to win that suit on a different ground and then spring your inconsistent best ground in a later suit in order to obtain additional relief" Bethesda Lutheran, 238 F.3d at 858.

Hackett argues that Xerox is judicially estopped from denying him long-term disability benefits based on the fact that Xerox agreed and aided Hackett in successfully applying for social security benefits. (Pl.'s Mem. In Opp'n to Defs.' Mot. for Summ. J. and in Supp. of Cross-Mot. for Summ. J., p.11.) Hackett relies on Ladd v. ITT Corp., 148 F.3d 753 (7th Cir. 1998), for the foundation of his argument. The Ladd case involves an ERISA suit brought by a plan participant who was denied disability benefits. See Ladd, 148 F.3d at 753-755. The plaintiff, Ladd, suffered nerve damage to her neck and both wrists when a shelving unit fell on her at work. Id. Ladd immediately began the process of applying for disability benefits. Id. As part of that process, the defendant, ITT Corporation, encouraged and aided Ladd in applying for social security disability benefits. Id. With legal aid from ITT, Ladd was able to demonstrate to the Social Security Administration she was totally disabled. Id. Within a short period of time after the Social Security Administration's decision, ITT turned around and determined Ladd was not totally disabled and denied her disability benefits. Id. The Seventh Circuit held the denial of disability benefits was arbitrary and "even irrational." Ladd, 148 F.3d at 755. The court stated "no one who examined Ladd, including the doctor selected by [ITT] to examine her, believed that she was capable of working . . . the uncontradicted evidence is that Ladd's condition was worse when [ITT] denied her claim then it had been when the Social Security Administration granted it." Id. at 755-56. In terms of judicial estoppel the court held it was "technically not applicable," because ITT was not a party to a previous action involving Ladd's benefits; rather, it was the spirit of the doctrine that was worthy of consideration. See id. at 756. The court stated the aid of ITT and subsequent granting of social security disability benefits "has an additional significance," but was not the deciding factor. Id. Rather, ITT's actions of helping Ladd obtain social security benefits and then turning around and denying disability benefits "cast[] additional doubt on the adequacy of the evaluation of Ladd's claim even if it [did] not provide an independent basis for rejecting that evaluation." Ladd, 148 F.3d at 756.

A comparison between Ladd and the case at bar reveals several telling differences. First, it must be pointed out that in Ladd the Seventh Circuit did not rule that judicial estoppel applied. See id., 148 F.3d at 756. Rather, it addressed Ladd considering the "spirit" of judicial estoppel. Id. Thus, when Hackett argues that judicial estoppel prevents Xerox from taking such inconsistent positions, there is no authoritative support for such an argument. Xerox was never a party to any previous action involving Hackett's benefits and even though Xerox supported Hackett in his application for disability benefits it is of only "additional significance." See id. Second, the position taken by Xerox is neither inconsistent nor "irrational" as it was in Ladd. Id. at 755. Hackett was determined disabled by the Social Security Administration in May of 1996, but it was not until January of 1999 that Hackett was denied disability benefits by Xerox. (Defs.' Rule 56.1 Statement, ¶ 14, p. 33; Pl.'s Rule 56.1 Statement, ¶ 14, p. 11; R. 52, 85, 108, 109.)*fn4 In that intervening time, Hackett's situation changed. Two separate board certified psychiatrists determined that Hackett was able to work. (R. 002-010, 78, 080-081, 160-166, 193, 234.) Thus, Xerox should not be estopped from denying disability benefits, where circumstances have changed over several years and in light of the current medical evidence. Further, Xerox's position cannot be considered inconsistent, since at the time that Hackett applied for social security disability the medical evidence indicated that he was disabled. (Id.) It was only in January of 1999, again, three years after the award of social security disability, that new medical evaluations determined that Hackett was no longer totally disabled. In conclusion, even though Ladd brings the doctrine of judicial estoppel into the realm of consideration, it is not legally viable, nor is it applicable in spirit when the actions of a party, against whom judicial estoppel is sought are not inconsistent. The court rejects the judicial estoppel argument.

B. Standards for Summary Judgment

Summary judgment is permissible when "there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The nonmoving party cannot rest on the pleadings alone, but must identify specific facts, see Cornfield v. Consolidated High School District No. 230, 991 F.2d 1316, 1320 (7th Cir. 1993), that raise more than a mere scintilla of evidence to show a genuine triable issue of material fact. See Murphy v. ITT Technical Services, Inc., 176 F.3d 934, 936 (7th Cir. 1999); see also Shank v. William R. Hague, Inc., 192 F.3d 675, 682 (7th Cir. 1999) (stating that a party opposing summary judgment must present "what evidence it has that would convince a trier of fact to accept its version of events"). A defendant is entitled to put the plaintiff to his proofs and demand a showing of the evidence. See e.g. Navarro v. Fuji Heavy Industries, Ltd., 117 F.3d 1027, 1030 (7th Cir. 1997). If the plaintiff fails to come up with the required proof, the defendant is entitled to summary judgment. See id. It bears repeating that the plaintiff must present evidence, rather than speculation and conclusions without factual support. See Rand v. CF Industries, Inc., 42 F.3d 1139, 1146-47 (7th Cir. 1994).

In deciding a motion for summary judgment, the court can only consider evidence that would be admissible at trial under the Federal Rules of Evidence. See Bombard v. Fort Wayne Newspapers, Inc., 92 F.3d 560, 562 (7th Cir. 1996). The court views the record and all reasonable inferences drawn therefrom in the light most favorable to the party opposing summary judgment. See Fed. R. Civ. P. 56(c); Perdomo v. Browner, 67 F.3d 140, 144 (7th Cir. 1995). "In the light most favorable" simply means that summary judgment is not appropriate if the court must make "a choice of inferences." See United States v. Diebold, Inc., 369 U.S. 654, 655 (1962); First Nat'l. Bank of Arizona v. Cities Service Co., 391 U.S. 253, 280 (1968); Wolf v. Buss (America) Inc., 77 F.3d 914, 922 (7th Cir. 1996). The choice between reasonable inferences from facts is a jury function. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). The court has one task and one task only: to decide, based on the evidence of record, whether there is any material dispute of fact that requires a trial. Waldridge v. Amercian Hoechst Corp., 24 F.3d 918, 920 (7th Cir. 1994) (citing Anderson, 477 U.S. at 249-50; 10 Charles A. Wright, Arthur R. Miller & Mary K. Kane, Federal Practice and Procedure: Civil § 2712, at 574-78 (2d ed. 1983)).

C. Merits

As part of the court's decision to grant summary judgment in favor of Xerox, an analysis of several issues is necessary. First, the court has to determine what standard of review to apply to the denial of disability benefits under ERISA, de novo or a more deferential standard. This determination is dependent upon the language contained in the LTD plan. In order to identify the correct language, the court must establish the LTD plan that was in effect. The end result is application of the deferential standard of arbitrary and capricious. Application of the arbitrary and capricious standard reveals that Xerox is entitled to summary judgment because the decision to deny disability benefits was not unreasonable. Even with Hackett's numerous collateral challenges to the reasonableness of the decision, including arguments involving full and fair review, violation of a service agreement, failure to provide required plan materials, conflict of interest, and breach of fiduciary duty, Xerox is still entitled to summary judgment.

1. Standard of Review

The initial issue facing the court is what standard of review to apply to Xerox's denial of LTD benefits to Hackett. As mentioned previously, this determination requires the court establish what LTD plan was in effect. It is disputed between the parties exactly which LTD plan was in effect Hackett claims the LTD plan in effect was the 1987 Disability Policy ("1987 Policy"). Xerox claims that the plan in effect was the 1996 LTD Plan ("1996 Plan") which was an amendment to the 1977 LTD Plan ("1977 Plan").*fn5 The court first discusses the general types of judicial review, and then analyzes which plan is in effect.

ERISA was enacted "to promote the interests of employees and their beneficiaries in employee benefit plans," Shaw v. Delta Airlines, Inc., 463 U.S. 85, 90 (1983), and "to protect contractually defined benefits." Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 148 (1985); see generally 29 U.S.C. § 1001 et seq. (setting forth congressional findings and declarations of policy regarding ERISA). ERISA provides "a panoply of remedial devises" for participants and beneficiaries of benefits plans. Firestone Tire and Rubber Co. v. Brunch, 489 U.S. 101, 106 (1989) (citing Massachusetts Mutual Life Ins. Co., 473 U.S. at 146).

The Supreme Court held in Firestone that a "de novo standard of review applies regardless of whether the plan at issue is funded or unfunded and regardless of whether the administrator or fiduciary is operating under a possible or actual conflict of interest." Firestone, 489 U.S. at 115 (citing Restatement (Second) of Trust § 187, Comment d (1959)). Further, the Seventh Circuit has stated "[t]he [Firestone] case makes plenary review the default rule, that is, the rule to govern when the plan documents contain no indication of the scope of judicial review; and it is a natural and modest extension of [Firestone], or perhaps merely a spelling out of an implication of it, to construe uncertain language concerning the scope of judicial review as favoring plenary review as well." Herzberger v. Standard Insurance Co., 205 F.3d 327, 330 (7th Cir. 2000); See also Reilly v. Hartford Life & Accident Ins. Co., ___ F.3d ___, No. 00-3760, 2001 WL 1518765 (7th Cir. Nov. 30, 2001). However "an ERISA plan can likewise specify that the administrator has discretion in interpreting or applying it . . . but the conferral of discretion is not to be assumed." Herzberger, 205 F.3d at 331. Discretion is only entitled when the language of the plan provides it. See id., see also O'Reilly, 2001 WL 1518765 at *2. The Seventh Circuit has suggested such "safe harbor" language that would assure that the administrator has sole discretion, however, such language is not mandatory nor can it be considered magic words. See Herzberger, 205 F.3d at 331 (The `safe harbor' language suggested by the Seventh Circuit is the following: "Benefits under this plan will be paid only if the plan administrator decides in his discretion that the applicant is entitled to them.") Rather, "in some cases the nature of the benefits or the conditions upon it will make reasonably clear that the plan administrator is to exercise discretion." Id. "In others the plan will contain language that, while not so clear as our `safe harbor' proposal, indicates with the requisite of minimum clarity that a discretionary determination is envisaged." Id. If the administrator does have discretion, then the court reviews the administrator's decision from the perspective of an arbitrary and capricious standard. See Herzberger, 205 F.3d 331-32.

Obviously, then the court must look to the language of the plan to determine its standard of review. A significant issue arises when the court looks to the language of the plan to determine the standard of review, namely which LTD plan is in effect.

Judge Posner has written that "this kind of confusion is all too common in ERISA land." Health Cost Controls of Illinois, Inc. v. Washington, 187 F.3d 703, 712 (7th Cir. 1999). The terms of ERISA plans sometimes "must be inferred from a series of documents none clearly labeled as `the plan.'" Id. (referring to Milwaukee Area Joint Apprenticeship Training Comm. v. Howell, 67 F.3d 1333, 1338 (7th Cir. 1995); Horn v. Berdon Inc. Defined Benefit Pension Plan, 938 F.2d 125 (9th Cir. 1991) (per curiam)). In Health Cost Controls, the Seventh Circuit faced the issue as to what was encompassed within the plan. Health Cost Controls, 187 F.3d at 712. The court looked to surrounding evidence to establish the plan. See id.

In this case, the court must consider several factors, including vesting, amendments, and accrual of a cause of action. Welfare plans, such as an LTD, are specifically exempted from vesting requirements to which pension plans are subject. 29 U.S.C. § 1051 (1); see Curtiss-Wright Corp. v. Schoonejngen, 514 U.S. 73, 78 (1995). Employers "are generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare plans. Curtiss-Wright Corp., 514 U.S. at 78. But, employers may provide for the vesting of benefits by written contract, so that the benefits are fixed. See Land v. Chicago Truck Drivers Helpers & Warehouse Workers Union Health & Welfare Fund 1994, 25 F.3d 509, 514 (7th Cir. 1994) (citing Bidlack v. Wheelabrator Corp., 993 F.2d 603, 605 (7th Cir. 1993)); Senn v. United Dominion Indus., Inc., 951 F.2d 806, 814 (7th Cir. 1992). Accordingly, whether welfare benefits have vested must be determined by the text of the governing plan documents. Senn 951 F.2d at 814; Ryan v. Chromalloy Am. Corp., 877 F.2d 598, 602 (7th Cir. 1989).

If a determination is made that a welfare plan does not vest rights and the plan may be amended, it is necessary to establish which plan is in effect. In order to ultimately determine what LTD plan is in effect, the court must identify when Hackett's cause of action arose. See Daill v. Sheet Metal Workers' Local 73 Pension Fund, 100 F.3d 62, 65 (7th Cir. 1996). The Seventh Circuit has stated that an ERISA plan participant's claim for relief accrues when his claim for benefits is denied. See id. Other circuits and district courts have also addressed the issue and have similarly concluded that "an ERISA cause of action based on a denial of benefits accrues at the time the benefits are denied." Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154, 1159 (9th Cir. 2001); see also Podolan v. Aetna Life Insurance Co., 909 F. Supp. 1378, 1384 (D. Idaho 1995) (action of plan administrator in denying benefits is when claim arises); Blessing v. John Deere & Co., 985 F. Supp. 899, 903 (S.D. Iowa 1997) (ERISA cause of action based on a denial of benefits accrues at the time the benefits are denied).

With these principles as a guide, the court examines Xerox's LTD Plans. On October 26, 1978, Xerox executed a document entitled "Xerox Long Term Disability Income Plan," (Compl., Ex. 1, p. 1.), which actually became effective on August 1, 1977. (Id.) The purpose of the 1977 Plan was "to provide disability benefits for covered employees and former employees of Xerox Corporation. . . ." (Id.) Significantly, the plan provides in Article 5, under the heading "Amendment or Termination of the Plan" the following:

The company intends to continue the Plan described herein as a permanent program. However, the Company specifically reserves the right to amend, suspend or terminate the Plan described herein at any time and for any reason, except that no amendment, suspension or termination of the Plan shall affect benefits previously granted to participants, and provided further that no amendment of the Plan may be made which would permit any part of the Trust Fund to be used for or diverted to purposes other than for the exclusive benefit of the participants or which would diminish any rights accrued for the benefit of participants prior to the effective date of the amendment.

(Compl., Ex. 1, p. 6.) Additionally, attached to the 1977 Plan are three documents, entitled Amendment No.1 executed September 20, 1979, Amendment No. 2 executed December 19, 1980, and Amendment No. 3 executed October 31, 1986. The 1977 Plan was amended further in 1996 when a new document entitled "Long-Term Disability Income Plan" became effective. (Compl., Ex. 2, p. 1.)

As stated previously, the court looks to when a claim for benefits is denied to establish the cause of action under ERISA. Daill, 100 F.3d at 65 (citing Tolle v. Carroll Touche, Inc., 977 F.2d 1129, 1138 (7th Cir. 1992)). Hackett originally went on disability in 1987. (See infra pp. 2-3) Hackett was determined disabled by the Social Security Administration in 1996. However, it is not until January of 1999 that Xerox denied Hackett's claim for disability benefits. (See infra, pp. 2-3.) Thus, Hackett's claim for relief against Xerox did not accrue until January of 1999. The plan in effect at that time governs Hackett's benefits, the scope of the administrator's discretion, and this court's review of the administrator's decision.

Following this progression of analysis, the court addresses the 1996 Plan which is entitled "Xerox Corporation Long Term Disability Income Plan." (Compl, Ex. 2, p. 1.) The 1996 Plan states under Section 1.2 the following: "Effective Date. The original effective date of the Xerox Corporation Long-Term Disability Income Plan was August 1, 1977. . . ." (Id.) The 1996 Xerox LTD Plan also contains the following language:

The determination of whether an Employee has incurred a covered disability and has complied with all of the conditions for receiving, and continuation of, benefits shall be made by either the Medical Case Manager or the ...

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