Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Reich v. Ladish Company Inc.

October 07, 2002

FREDERICK REICH AND JOANNE C. REICH, PLAINTIFFS-APPELLANTS,
v.
LADISH COMPANY INCORPORATED AND LADISH COMPANY PENSION PLAN, INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS, LOCAL 1862, DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Eastern District of Wisconsin. No. 00 C 319--Aaron E. Goodstein, Magistrate Judge.

Before Rovner, Diane P. Wood and Evans, Circuit Judges.

The opinion of the court was delivered by: Rovner, Circuit Judge

ARGUED APRIL 15, 2002

Frederick and Joanne Reich sued Frederick's former employer, Ladish Company, Inc. ("Ladish"), and its pension plan, Ladish Company Pension Plan, International Association of Machinists and Aerospace Workers, Local 1862 (the "Plan") because the Plan denied Frederick certain disability and health benefits. The district court granted summary judgment in favor of the defendants and the Reichs appeal. We reverse and remand.

I.

Frederick Reich ("Reich") worked as a machinist for Ladish for almost thirty years. In the early 1990s, he was diagnosed with Small Airways Disease and Chronic Obstructive Pulmonary Disease. Because of these illnesses, Ladish periodically placed Reich on paid medical leave over the next few years. In July 1995, Reich's physician released him from one of these leave periods to return to work with certain restrictions. Among other conditions, Reich was limited to light work and required continuous oxygen. Reich's doctor confirmed that these restrictions were permanent. On July 26, 1995, Ladish terminated Reich, stating that the company had determined that there were no jobs within the bargaining unit that Reich could safely perform, even with accommodations, given his medical restrictions.

Reich subsequently sued Ladish for disability discrimination, for failure to accommodate his disability, and for retaliating against him for engaging in protected activity. Ladish was represented by its in-house attorney, Lawrence Hammond. Hammond supervised Gerald Bitters, who worked as Ladish's Manager of Benefits Administration. Bitters was responsible for the day-to-day processing of pension benefit applications. Ladish successfully defended the suit by arguing that Reich's disability prevented him from working safely at Ladish. In the course of the suit Ladish explained that it was not paying Reich disability benefits because the Plan covered only those employees who were found to be disabled by the Social Security Administration ("SSA"). At that time, Reich's petition for Social Security Disability was still pending. In April 1998, the SSA awarded Reich disability benefits based on a disability onset date of August 22, 1994. After receiving this favorable determination from SSA, Reich renewed his application for disability pension benefits with Ladish, attaching a copy of the SSA decision.

Bitters wrote a letter to Reich denying the benefits because Reich was not an employee at the time he received the SSA ruling of disability:

As you are aware, your employment was terminated in July of 1995 for your unavailability for work at the Company. You were advised shortly after your employment terminated that you have a deferred vested benefit for which you are eligible at age 60. The Plan does not provide for a former employee to apply for a disability retirement some two years and nine months after his "employee" status ends. You are therefore not eligible for a disability pension; however, your rights to a deferred vested pension at age 60 remain in force. R. 20, Ex. 7.

In a separate letter, Bitters informed Reich he was not eligible for group health insurance benefits unless he was receiving a disability pension. R. 20, Ex. 8. Reich appealed the decision to Bitters and, in a letter to Reich's attorney, Bitters denied the appeal:

Mr. Reich's approval for Social Security took place several years after his termination of employment at the company. The basis and circumstances for his termination are not issues I am involved with; it is my job to administer the pension plans. Although the administrative law judge awarded Mr. Reich retroactive entitlement to Social Security benefits, this did not change his status with Ladish Co., that is, he was not retroactively reinstated to employee status. Many former employees may become disabled, but they are not Ladish "retirees". As you are undoubtedly aware, during the time when Mr. Reich was employed at the company his petitions for Social Security disability were denied. Our plan requires that, in order to be a "participant" the individual must be a "covered employee", and unfortunately upon the termination of his employment Mr. Reich ceased to be a "covered employee". R. 20, Ex. 12.

Reich subsequently sued Ladish and the Plan pursuant to the Employee Retirement and Income Security Act ("ERISA"), seeking judicial review of the Plan's denial of disability and health insurance benefits, and for Ladish's breach of fiduciary duty.

The district court granted summary judgment in favor of the defendants. Because the Plan granted discretion to the administrator to pay or deny claims, the district court reviewed the Plan's denial of Reich's claim under the arbitrary and capricious standard. Reich argued for closer review because of an alleged conflict of interest between the Plan and Ladish. Because of the structure of benefits, Ladish would have been required to fund health insurance benefits if Reich was found entitled to disability benefits. Reich maintained that Ladish thus had an incentive to deny him disability benefits so that it would not have to pay his health insurance premiums. Because of this alleged conflict of interest, Reich urged the district court to apply a higher level of scrutiny to the decision denying disability benefits. The court declined to apply a higher standard, finding there was no evidence of a significant conflict.

The court similarly declined the defendants' invitation to consider post hoc rationalizations for the decision to deny benefits. At the time of the denial, Bitters relied entirely on the fact that Reich did not have a favorable finding of disability from the SSA at a time when he could be considered a "Participant" under the Plan. The court thus refused to consider the Plan's new argument that Reich's medical conditions did not rise to the level of a disability as defined by the Plan. The court instead focused on whether the Plan administrator acted arbitrarily and capriciously in finding that Reich was not a "Participant" under the Plan because he was not a "Covered Employee" at the time he received a finding of disability from SSA. The court found that the Plan administrator's interpretation of the word "Participant" was ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.