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Eileen M. Huss, Individually and As v. Ibm Medical and Dental Plan and

April 13, 2011


Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 07 C 7028-James B. Zagel, Judge.

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


Before KANNE, WILLIAMS, and TINDER,Circuit Judges.

Eileen Huss, who recently retired from International Business Machines Corporation ("IBM"), sought to enroll her dependent adult child, Joseph Huss, in the IBM Medical and Dental Plan (the "Plan"). The Plan's administrator, R. A. Barnes, found Joseph ineligible under the Plan's governing documents and denied his enrollment. Huss sued Barnes and the Plan (the "Defendants") under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. The district court found that Barnes's decision was arbitrary, capricious, and unreasonable. It granted Huss's motion for summary judgment, having determined that Joseph was entitled to be enrolled in the Plan immediately. The district court also imposed statutory penalties on the Defendants for their failure to abide by ERISA's document-disclosure obligations. The district court then awarded attorney's fees to Huss under ERISA's fee-shifting provision. Barnes and the Plan appealed each of the district court's decisions.

We affirm in part and vacate in part. Because Barnes based her denial on the incorrect Plan document, her decision was unreasonable. Yet the record does not compel the conclusion that Joseph was entitled to enrollment. We therefore vacate the district court's judgment awarding benefits and remand the case with instructions to return it to Barnes and the Plan for further consideration. We also reverse a portion of the district court's statutory penalties award because some of the documents for which the penalty was imposed do not fall within ERISA's disclosure requirements. In light of these holdings, we vacate the attorney's fees award and remand for redetermination by the district court in the first instance.


Huss retired from IBM on December 31, 2006. IBM provides medical and disability insurance benefits to its active and retired employees through the Plan. The Plan's program of benefits is governed by ERISA. The Plan was administered by Barnes, who had the ultimate authority and discretion to make final decisions regarding the eligibility of employees and their relatives under the Plan.

Huss has an adult son, Joseph, who was born on August 8, 1981. Due to a congenital mental disability, Joseph is and always has been dependent upon his parents for care and support. Joseph had been enrolled in the Plan from birth until age sixteen, at which time he was enrolled in his father's health plan.

Because she intended to re-enroll Joseph in the Plan upon her retirement, Huss wanted to make sure that Joseph would be covered under the Plan at that time. Huss contacted the Plan's Customer Service Center in late 2005, explaining Joseph's circumstances and asking Customer Service Specialists what she needed to do to enroll Joseph in the Plan when she retired. Various specialists told Huss during multiple calls that Joseph would be eligible for enrollment and that she did not need to take further action until her retirement.

Yet in January 2007, Customer Service Specialist Todd Rogers told Huss that Joseph was ineligible for enrollment in the Plan. According to Rogers, the Plan documents required Huss to have submitted a written application before June 9, 2004-at least sixty days before Joseph's twenty-third birthday-to now be able to enroll Joseph in the Plan.

Huss emailed Rogers requesting a summary of the Plan, the policy language involving adult child eligibility for the Plan, and any associated materials. Rogers responded on the same day, saying that the only available document was the 2006 Summary Plan Description ("SPD") that Huss had already received. Rogers then spoke with Huss a week later and told her the 2006 SPD was the only document she needed if she wanted to appeal Joseph's exclusion from the Plan. Huss responded by requesting the Plan language that would have been in effect in 2004, as that would have been the controlling language at the time Joseph turned 23. Rogers's email response stated that there was no such policy or contract information to send.

Huss then retained counsel to assist her in her appeal. On March 27, 2007, her counsel sent Barnes a written request for further review of the enrollment denial. That letter also asked for the previously requested Plan language and all documents for the Plan in effect in 2004, 2005, 2006, and 2007. Barnes denied Joseph's enrollment in a response letter dated April 26, 2007: "In order to enroll Joseph in IBM benefit coverage, the Over Age 23 Disabled Child Application had to be submitted to the IBM Employee Services Center no less than 60 days prior to Joseph reaching age 23." This denial was based upon the language in the 2006 SPD. The letter was accompanied by some of the additional documents requested by Huss's counsel, including the 2003 SPD in effect 60 days before Joseph's twenty-third birthday.

Huss-through her counsel-submitted her final appeal to the Defendants on June 12, 2007. She based her arguments on the 2003 SPD. Barnes again denied Huss's appeal, finding that the 2006 SPD controlled the determination. According to Barnes, the 2006 SPD clearly indicated both that Huss must have requested continuation of coverage before Joseph had turned twenty-three and also that Joseph must have been enrolled at that time for coverage to be continued. Because Huss had not requested coverage for Joseph until after he was twenty-five, Barnes found Joseph ineligible for enrollment. Barnes also noted that, despite any Customer Service Specialist's contrary representations, the Plan documents would control Joseph's eligibility.

Huss believed that the SPD language in effect on June 9, 2004, should have controlled the determination. That language would have required only a request by phone, as opposed to a written request for coverage extension. Accordingly, Huss sued the Plan and Barnes under ERISA's civil enforcement provision in the United States District Court for the Northern District of Illinois. Her amended complaint sought an award of benefits for her son under 29 U.S.C. § 1132(a)(1)(B) (Count I) and statutory damages for the Defendants' failure to provide requested documents as required by 29 U.S.C. § 1024(b)(4) (Count II). In the proceedings below, Huss testified that she had called and inquired about Joseph's con tinued eligibility at least once and likely on multiple occasions prior to June 9, 2004. IBM could neither verify nor refute any of those phone calls because it had not retained records of its employees' conversations from that long ago.

The district court granted Huss's motion for summary judgment on both counts. It found that Barnes's decision to deny Joseph enrollment in the Plan was arbitrary and capricious and that Joseph was entitled to immediate enrollment in the Plan. The district court also assessed statutory penalties against the Defendants in the amount of $15,200 for failing to timely turn over Plan documents Huss had requested in writing. In a post-judgment order, the district court awarded attorney's fees and non-taxable expenses to Huss in the amount of $86,906.04 under 29 U.S.C. § 1132(g)(1).

The Defendants timely appealed the district court's judgments on Counts I and II. Following the district court's post-judgment order, the Defendants again appealed to challenge the attorney's fees award. We have consolidated the appeals here.


Barnes and the Plan present three issues on appeal. First, they contend that the district court erred by concluding that their decision to deny Joseph enrollment in the Plan was arbitrary, capricious, and unreasonable. Second, they contend that the district court abused its discretion by assessing statutory penalties against them for their putative failure to produce documents according to their ERISA obligations. Third, they contend that the district court abused its discretion by awarding attorney's fees to Huss despite their litigation position being substantially justified. We will address each issue in turn.

A. Review of Enrollment Denial

We review the district court's grant of summary judgment de novo. Holmstrom v. Metro. Life Ins. Co., 615 F.3d 758, 766 (7th Cir. 2010). We examine the record and controlling law anew while applying the same standards the district court was bound to apply. Swaback v. Am. Info. Techs. Corp., 103 F.3d 535, 540 (7th Cir. 1996). As in other contexts, summary judgment in an ERISA case is proper only if no genuine issue of material fact appears upon review of the administrator's decisions. Sellers v. Zurich Am. Ins. Co., 627 F.3d 627, 631 (7th Cir.2010).

The parties agree that the Plan's clear language vests its administrator with the discretion to construe policy terms and to make final eligibility determinations. Barnes's decision to deny Joseph's enrollment in the Plan was premised on her interpretation of the Plan's requirements for the eligibility and enrollment of adult children. Accordingly, we apply an arbitrary and capricious standard of review to the administrator's determination. See id. The administrator's decision will not be disturbed if "(1) it is possible to offer a reasoned explanation, based on the evidence, for a particular outcome, (2) the decision is based on a reasonable explanation of relevant plan documents, or (3) the administrator has based its decision on a consideration of the relevant factors that encompass the important aspects of the problem." Ponsetti v. GE Pension Plan, 614 F.3d 684, 691 (7th Cir. 2010) (quoting Williams v. Aetna Life Ins. Co., 509 F.3d 317, 321-22 (7th Cir.2007)).

The Defendants argue that the district court failed to give due deference to their decision regarding Joseph's eligibility for enrollment in the Plan. But deference to plan administrators does not require us to surrender our role as reviewers and rubber stamp their decisions. See Speciale v. Blue Cross & Blue Shield Ass'n, 538 F.3d 615, 621 (7th Cir. 2008). Where an administrator's interpretation of a plan's language defies common sense, courts must overturn the decision as being "downright unreasonable." Dabertin v. HCR Manor Care, Inc., 373 F.3d 822, 828 (7th Cir. 2004). Ultimately, if Barnes based her decision to deny ...

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