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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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