Miller v. Fortis Benefits Ins

Opinions of the United

2007 Decisions States Court of Appeals

for the Third Circuit

1-29-2007

Miller v. Fortis Benefits Ins

Precedential or Non-Precedential: Precedential

Docket No. 05-2539

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 05-2539

PAUL MILLER

Appellant

v.

FORTIS BENEFITS INSURANCE COMPANY and RESORTS

INTERNATIONAL HOTEL

On Appeal from the United States District Court

for the District of New Jersey

(D.C. No. 03-cv-04428)

District Judge: Honorable Stanley S. Brotman

Argued September 14, 2006

Before: FUENTES, FISHER, and McKAY,* Circuit Judges.

(Filed: January 29, 2007)

*

The Honorable Monroe G. McKay, Senior Judge,

United States Court of Appeals for the Tenth Circuit, sitting by

designation.

Robert P. Merenich (Argued)

Gemmel, Todd & Merenich

767 Shore Road

P.O. Box 296

Linwood, NJ 08221

Counsel for Appellants

Randi F. Knepper

Joshua A. Zielenski (Argued)

McElroy, Deutsch, Mulvaney & Carpenter

1300 Mount Kemble Avenue

P.O. Box 2075

Morristown, NJ 07962

Counsel for Appellees

________

OPINION OF THE COURT

________

Fuentes, Circuit Judge.

Appellant Paul Miller appeals the District Court’s dismissal

of his complaint under Federal Rule of Civil Procedure 12(b)(6).

The focus of Miller’s appeal is the accrual date of his cause of

action to recover benefits under the Employee Retirement Income

Security Act (“ERISA”). We must determine whether his cause of

action accrued in 1987, when he first began receiving a

miscalculated benefit award, or in 2003, when his request to correct

that award was first denied. For the reasons that follow, we

conclude that his cause of action accrued in 1987, when he first

received the erroneously calculated award. Because Miller did not

file his claim within the applicable statutory period, we will affirm

the order of the District Court.

I. Background

Paul Miller became disabled on October 6, 1986 after

undergoing heart surgery. About fourteen months before the

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surgery, Miller was employed by Resorts International Hotel

(“Resorts”) as a casino floor worker making $690 per week.

However, immediately before becoming disabled, he worked as an

outside marketing salesman earning $768 per week. In April 1987,

he filed a claim for employee disability benefits under a long term

disability policy (“the LTD plan”) issued by Mutual Benefit Life

Insurance Company (“Mutual Benefit”). Under the LTD plan,

Miller was entitled to ongoing disability payments of sixty percent

of his current salary until he reached the age of sixty-five.

According to Miller’s complaint, when Resorts reported his salary

to Mutual Benefit, it mistakenly stated that he still held his old

position as a casino floor worker earning $690. In April 1987,

Miller began receiving disability payments erroneously based on

this former salary.

It was not until 2002, about fifteen years after he began

receiving benefits, that Miller realized the calculation was

incorrect. On November 12, 2002, after consulting with an

accountant, he sent a letter to Fortis Benefits Insurance Company

(“Fortis”), which had acquired Mutual Benefit, seeking an upward

adjustment to reflect his 1987 salary. Fortis agreed to investigate

the matter, but subsequently informed Miller by letter that the

relevant pay records were no longer available. According to Fortis,

since Resorts kept pay information for only seven years, it no

longer had the information needed to determine the merits of

Miller’s claim.

In August 2003, Miller filed a complaint in New Jersey

Superior Court which was removed to the District of New Jersey.

In his amended complaint, Miller alleged, under 29 U.S.C. §

1132(a)(1)(B), that Fortis and Resorts unlawfully denied him

disability benefits, and, under 29 U.S.C. § 1132(a)(3), that they

breached a fiduciary duty to him by misrepresenting his proper

salary and failing to investigate thoroughly his claim for

adjustment. Resorts and Fortis moved to dismiss Miller’s

complaint for failure to state a claim upon which relief could be

granted. Specifically, they contended that Miller’s claims were

barred by a six-year statute of limitations which began to run in

1987.

Miller conceded that the six-year limitations period applied,

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but disagreed with Fortis about the appropriate date of accrual.1

The District Court ruled that the six-year statute of limitations

began to run in July 1987, based on the following language in the

LTD plan:

Proof of Loss

Written proof of loss must be given to Us at Our

Home Office or one of Our Regional Group Claim

Offices. For any loss for which the Policy provides

periodic payment, the written proof of loss must be

given within 90 days after the end of the first month

or lesser period for which We may be liable. After

that, proof must be given at such intervals as We

may reasonably require. For any other loss, the

written proof of loss must be given within 90 days

after the date of loss.

...

Legal Actions

No action at law or in equity may be brought to

recover on the Policy any earlier than 60 days after

the required proof of loss has been given. No action

may be brought after the expiration of the statute of

limitations in the state having jurisdiction. In no

event may action be brought any later than 6 years

after the time required for submitting the proof has

elapsed.

1

Although the parties agreed that a six-year statute of

limitations applied to Miller’s claim, they disagreed on the source

of that limitations period. Fortis appears to have cited the six-year

limitations period contained in the LTD plan, whereas Miller

referenced the six-year period for contract actions in New Jersey

set forth in N.J.S.A. § 2A:14-1. Since there is no dispute about the

length of the limitations period, we need not determine the source

from which it derives.

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(Appendix at 57-58.) Relying on the LTD plan, the District Court

reasoned:

The “Proof of Loss” section refers to the end of the

“first month . . . for which we may be liable.” The

policy establishes that the insured must be totally

disabled for six months before benefits are payable.

Since Miller was disabled on October 6, 1986, Fortis

would first become liable in March or April 1987.

The policy also provides that the proof of loss must

be sent in writing to Fortis within 90 days of the

period that Fortis first became liable. Thus, if Fortis

first became liable in March or April of 1987 then

the time that Miller needed to provide written proof

of loss expired in June or July of 1987.

Consequently, the plan dictates that Miller had six

years from this time, in June or July of 1987, to file

a claim.

Miller v. Fortis Benefits Ins. Co., 363 F. Supp. 2d 700, 704-05

(D.N.J. 2005). Since Miller filed his complaint more than six years

after 1987, the District Court dismissed the case. This appeal

followed.

II. Jurisdiction and Standard of Review

The District Court had jurisdiction pursuant to 28 U.S.C. §

1441(a), because of “original jurisdiction” under § 502(e) of

ERISA. 29 U.S.C. § 1132(e). This Court has jurisdiction pursuant

to 28 U.S.C. § 1291. We exercise plenary review over a grant of

a motion to dismiss. Brown v. Card Servs. Ctr., 464 F.3d 450, 452

(3d Cir. 2006). When considering an appeal from a Rule 12(b)(6)

dismissal, our review is limited to “the contents of the complaint

and any attached exhibits.” Yarris v. County of Delaware, 465

F.3d 129, 134 (3d Cir. 2006). We accept as true all well-pled

allegations in the complaint and draw all reasonable inferences in

favor of the non-moving party. In re Rockefeller Ctr. Props., Inc.

Sec. Litig., 311 F.3d 198, 215 (3d Cir. 2002).

III. Discussion

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A. Construing Miller’s Claim

ERISA provides plan beneficiaries with both fiduciary and

non-fiduciary causes of action. Miller’s complaint does not make

clear whether he is pursuing both types of claim. In Count I, he

seeks an adjustment of benefits under 29 U.S.C. § 1132(a)(1)(B),

which provides a non-fiduciary cause of action to “recover benefits

due to him under the terms of his plan, to enforce his rights under

the terms of the plan, or to clarify his rights to future benefits under

the terms of the plan.” In Count II, Miller seeks equitable relief

under 29 U.S.C. § 1132(a)(3), which provides a general cause of

action “(A) to enjoin any act or practice which violates any

provision of this subchapter or the terms of the plan, or (B) to

obtain other appropriate equitable relief (i) to redress such

violations or (ii) to enforce any provisions of this subchapter or the

terms of the plan.” Also under Count II, Miller asserts that Resorts

“intentionally misrepresented” his salary to Mutual Benefit in 1986

and failed to investigate fully his 2002 claim that he had been

underpaid. Yet, nowhere in his complaint does Miller mention

what substantive provision of ERISA his § 1132(a)(3) claim relies

on, nor does he state the elements of a fiduciary cause of action.

See Burstein v. Ret. Account Plan For Employees of Allegheny

Health Educ. and Research, 334 F.3d 365, 387 (3d Cir. 2003)

(reciting the elements of an ERISA fiduciary duty claim).

Read as a whole, Count II suggests an attempt to make out

a fiduciary claim under 29 U.S.C. § 1104(a), which imposes a

standard of care on plan fiduciaries. See Meagher v. Int’l Ass’n of

Machinists and Aerospace Workers Pension Plan, 856 F.2d 1418,

1423 (9th Cir. 1988) (evaluating underpayment of benefits as

violation of 29 U.S.C. § 1104(a)); George L. Flint, ERISA:

Fumbling the Limitations Period, 84 Neb. L. Rev. 313, 354-55

(2005) (arguing that federal courts should construe all claims for

benefits due as fiduciary claims). Even so, we need not address

whether Miller has properly asserted a fiduciary claim under

ERISA because, on appeal, Miller only pursues a non-fiduciary

claim for benefits under § 1132(a)(1)(B). His brief mentions

neither ERISA’s fiduciary provisions nor § 1132(a)(3).

Furthermore, Miller cites only case law pertaining to non-fiduciary

claims, even though fiduciary claims are governed by separate

precedent. Accordingly, we consider any fiduciary or § 1132(a)(3)

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claims to be waived on appeal and therefore limit our discussion to

his non-fiduciary claim for benefits under § 1132(a)(1)(B).

B. Accrual Date of a Non-Fiduciary ERISA Claim

The parties agree that a six-year statute of limitations

applies, but dispute the relevant date of accrual.2 Fortis contends

that the District Court was correct in utilizing the terms of the LTD

plan in determining the accrual date. Fortis relies principally on

Doe v. Blue Cross & Blue Shield United of Wisconsin, 112 F.3d

869, 873-75 (7th Cir. 1997), in which the Seventh Circuit held that

an agreed-upon limitations period, embodied in an ERISA plan,

will control if the court considers it to be reasonable. Fortis’s

reliance on Doe, however, is misplaced. In Doe, the court

determined the applicable statute of limitations for a non-fiduciary

ERISA claim—here, we must determine the proper accrual date.

As we have explained previously, the accrual date for

federal claims is governed by federal law, irrespective of the source

of the limitations period. See Romero, 404 F.3d at 221. To

determine the accrual date of a federal claim, we utilize the federal

“discovery rule” when there is no controlling federal statute. Id. at

222. Under this rule, a statute of limitations begins to run when a

plaintiff discovers or should have discovered the injury that forms

the basis of his claim. Id.

In the ERISA context, the discovery rule has been

“developed” into the more specific “clear repudiation” rule

2

ERISA contains a statute of limitations for claims alleging

a breach of fiduciary duty, but no limitations period for non-

fiduciary claims. Syed v. Hercules Inc., 214 F.3d 155, 158-59 (3d

Cir. 2000). Moreover, ERISA, enacted in 1974, is not subject to 28

U.S.C. § 1658, which prescribes a default, four-year limitations

period for claims arising under acts of Congress enacted after

December 1, 1990. Id. at 158. For non-fiduciary claims, the

applicable statute of limitations is that of “the forum state claim

most analogous to the ERISA claim at hand.” Romero v. Allstate

Corp., 404 F.3d 212, 220 (3d Cir. 2005) (quoting Gluck v. Unisys

Corp., 960 F.2d 1168, 1180 (3d Cir. 1992)).

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whereby a non-fiduciary cause of action accrues when a claim for

benefits has been denied. Id. Notably, a formal denial is not

required if there has already been a repudiation of the benefits by

the fiduciary which was clear and made known the beneficiary. Id.

at 222-23; see also Carey v. Int’l Bhd. of Elec. Workers Local 363

Pension Plan, 201 F.3d 44, 48 (2d Cir. 1999) (“We . . . follow the

Seventh, Eighth, and Ninth Circuits in holding that an ERISA

claim accrues upon a clear repudiation by the plan that is known,

or should be known, to the plaintiff—regardless of whether the

plaintiff has filed a formal application for benefits.”). In other

words, some “event other than a denial of a claim” may trigger the

statute of limitations by clearly alerting the plaintiff that his

entitlement to benefits has been repudiated. Cotter v. E.

Conference of Teamsters Ret. Plan, 898 F.2d 424, 429 (4th Cir.

1990).

Relying on Romero, Miller asserts that the clear repudiation

rule requires a formal denial of benefits to trigger the statute of

limitations. He contends that, since his application for upward

adjustment was not formally denied until March 2003, his cause of

action did not accrue until that time. This argument misconstrues

Romero, since the clear repudiation rule does not require a formal

denial to trigger the statute of limitations. To the contrary, the rule

includes other forms of repudiation when a beneficiary knows or

should know he has a cause of action. As Romero clearly states,

the clear repudiation rule “avoids a myriad of ills that would

accompany any rule that required the denial of a formal application

for benefits before a claim accrues.” Romero, 404 F.3d at 223

(emphasis added). We therefore reject Miller’s proposed

application of the clear repudiation rule.

Still, we consider the clear repudiation concept to be useful

in this case, as it represents a refinement of the federal discovery

rule in the context of ERISA claims for benefits. Even though we

know of no case applying the concept directly to a benefit award,

we believe that the principles articulated in clear repudiation cases,

which reflect the federal discovery rule, are applicable here.3 With

3

We recognize that it slightly strains the word “repudiation”

to use it in the context of a benefit award, but we believe it

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this in mind, we now consider whether, before Miller’s claims were

formally denied, his rights under the LTD plan were “clearly

repudiated.”

C. Application of the Clear Repudiation Rule

Applying the clear repudiation concept here, we observe

that an erroneously calculated award of benefits under an ERISA

plan can serve as “an event other than a denial” that triggers the

statute of limitations, as long as it is (1) a repudiation (2) that is

clear and made known to the beneficiary. Cf. Romero, 404 F.3d at

220-26 (applying the clear repudiation rule to plan amendment

resulting in a reduction in benefits). Regarding the first

requirement, an underpayment can qualify as a repudiation because

a plan’s determination that a beneficiary receive less than his full

entitlement is effectively a partial denial of benefits. Like a denial,

an underpayment is adverse to the beneficiary and therefore

repudiates his rights under a plan. Cf. 29 C.F.R. §

2560.503-1(m)(4) (defining “adverse benefit determination” to

include “a denial, reduction, or termination of, or a failure to

provide or make payment (in whole or in part) for, a benefit”)

(emphasis added). Regarding the second requirement, repudiation

by underpayment should ordinarily be made known to the

beneficiary when he first receives his miscalculated benefit award.

See Gluck, 960 F.2d at 1180-81 (“[A]n employee’s receipt of

diminished payment gives immediate, obvious notice to an

employee that something is amiss . . . .”). At that point, the

beneficiary should be aware that he has been underpaid and that his

right to a greater award has been repudiated. See Cotter, 898 F.2d

at 429 (suggesting that benefit award can constitute a repudiation

of further benefits for purposes of accrual). The beneficiary should

exercise reasonable diligence to ensure the accuracy of his award.

Based on this view of the clear repudiation rule, we hold

that Miller’s cause of action to adjust benefits accrued upon his

initial receipt of the erroneously calculated award. The award he

began receiving in 1987 constituted a repudiation of his right to

appropriate in order to preserve consistency with cases addressing

non-fiduciary claims for benefits.

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greater payment under the LTD plan. This repudiation should have

been clear to him upon initial receipt of payment in 1987—monthly

checks based on a simple calculation of sixty percent of his salary

should have alerted him that he was being underpaid. Miller

provides no basis for us to infer that the repudiation was unclear to

him at that time.4

Our holding reflects the underlying goals of statutes of

limitations. As we noted in Romero, statutes of limitations are

intended to encourage “rapid resolution of disputes, repose for

defendants, and avoidance of litigation involving lost or distorted

evidence.” Romero, 404 F.3d at 223. These aims are served when

the accrual date anchors the limitations period to a plaintiff’s

reasonable discovery of actionable harm. This ensures that

evidence is preserved and claims are efficiently adjudicated. In

contrast, a statute of limitations not based on reasonable discovery

is effectively no limitation at all. Such would be the case if we

held that Miller’s cause of action accrued only upon Fortis’s formal

denial of his adjustment claim. Under this rule, a plaintiff could

receive benefit checks for decades before deciding to investigate

the accuracy of his award—a plaintiff could thereby trigger the

statute of limitations at his own discretion, creating an indefinite

limitations period. We decline to invite such a result.

Relatedly, we decline to adopt a “continuing violation

theory” whereby a new cause of action would accrue upon each

underpayment of benefits owed under the plan. See Meagher, 856

F.2d at 1422-23 (holding that “issuance of each check” commenced

a new statute of limitations period). Cognizant of the purpose of

statutes of limitations, we have rejected this type of approach in

other ERISA cases. See Vernau v. Vic’s Mkt., Inc., 896 F.2d 43,

47 n.7 (3d Cir. 1990) (concluding that plaintiffs were on “inquiry

notice” of breach upon initial notice of calculation error); Gluck,

960 F.2d at 1181 (rejecting accrual rule that would “open the door

to a 48-year limitations period”); Henglein v. Colt Indus. Operating

4

Significantly, at oral argument, Miller’s attorney could

point to no facts that he would pursue in discovery upon remand to

help establish that Miller had reason to be unaware in 1987 that

there was an error.

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Corp., 260 F.3d 201, 213-14 (3d Cir. 2001) (relying on Vernau and

Gluck to reject continuing violation approach because it would

give rise to indefinite limitations period).

Our application of the clear repudiation rule is consistent

with the broad, beneficiary-protective goals of ERISA. We noted

in Romero that ERISA does not require “plan participants and

beneficiaries likely unfamiliar with the intricacies of pension plan

formulas and the technical requirements of ERISA, to become

watchdogs over potential plan errors and abuses.” Romero, 404

F.3d at 224 (internal quotation marks omitted). But this concern is

not implicated here. Miller does not complain about the notice

provided to him of his rights or entitlements under the LTD plan.

Instead, it is apparent that Miller simply failed to investigate his

benefit determination for fifteen years. Requiring him to do so

within six years of an erroneous payment does not impose on him

a burdensome oversight role. Instead, the need for Miller to be

vigilant was triggered only when his receipt of benefits alerted him

that his award had been miscalculated. Such vigilance does not

make Miller a “watchdog” for potential plan errors and abuses.5

Finally, we recognize that our application of the clear

repudiation rule diverges from that of other courts confronting the

same issue. For example, in Miele v. Pension Plan of New York

State Teamsters Conference Pension Plan & Ret. Fund, 72 F. Supp.

2d 88 (E.D.N.Y 1999), the court required that a plan formally deny

plaintiff’s adjustment application before the statute of limitations

would begin to run. In Miele, like here, plaintiff alleged that plan

administrators erroneously calculated his benefits under an ERISA

plan. During litigation, the defendant argued that “a miscalculation

claim accrues on the date that a plaintiff is clearly and

unequivocally informed of the amount of his benefit.” Id. at 99.

5

We note that Miller’s conclusory assertion that an

intentional misrepresentation gave rise to the miscalculation does

not provide a basis for finding his claim timely. In the context of

his non-fiduciary claim for benefits, Miller’s vague allegation of

misrepresentation—based on a single mistaken communication

between Resorts and Mutual Benefit, and without any suggestion

of ongoing concealment—does not alter our analysis.

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Although recognizing the “logic and appeal” of such a rule, the

district court rejected it. It explained that a miscalculation involved

an award rather than a denial of benefits, making it less likely that

a plaintiff would be “on notice of a possible claim.” Id. Therefore,

it held that a miscalculation claim would accrue only when a

plaintiff “inquire[s] about the amount of . . . benefits and [is] told

. . . that those benefits [were] correctly computed.” Id. (quoting

Kiefer v. Ceridian Corp., 976 F. Supp. 829, 843 (D. Minn. 1997)

(alterations in original); see also Novella v. Westchester County,

443 F. Supp. 2d 540, 545 (S.D.N.Y. 2006) (applying rule that

claim does not accrue until beneficiary “inquires about the

calculation of his benefits and the Plan rejects his claim that the

benefits were miscalculated”).

We are not persuaded by this approach. We do not believe

that the accrual date in this case should derive from a bare

assumption that benefit recipients are ill-equipped to safeguard

their rights. Indeed, we require beneficiaries to safeguard those

rights upon a denial of benefits, and this case provides no

compelling reason to require less diligence after an award. Of

course, it is possible that a denial of benefits is more likely to incite

a beneficiary to action than an award; however, that possibility

alone cannot justify years of inaction. Moreover, we do not believe

that for there to be a clear repudiation, a plan must “confirm” a

benefit award to the beneficiary. Without any indication of

deficient notice, a beneficiary’s receipt of an award is sufficient to

inform him that the plan has determined his entitlement. Further

assurances should not ordinarily be necessary to make clear that a

plan believes its benefit determination is accurate.

IV. Conclusion

In sum, when Miller began receiving benefits in April 1987

based on a salary of $690 per week, his right to receive benefit

payments based on a salary of $768 per week was clearly

repudiated. Therefore, his cause of action for adjustment of

benefits accrued in April 1987. Miller had until April 1993 to file

his complaint for adjustment of benefits. Since he did not do so

until 2003, his claim is time barred. Accordingly, we will affirm.

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