Free Reply in Support of Motion - District Court of Arizona - Arizona

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40 North Central Avenue Phoenix, Arizona 85004-4429 Ann-Martha Andrews, State Bar No. 012616 Direct Dial: (602) 262-5707 Direct Fax: (602) 734-3764 EMail: [email protected] Thomas Klinkel, State Bar No. 010955 Direct Dial: (520) 629-4428 Direct Fax: (520) 879-4712 EMail: [email protected] Scott M. Bennett, State Bar No. 022350 Direct Dial: (602) 262-5338 Direct Fax: (602) 734-3816 EMail: [email protected] Attorneys for Defendants

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA David L. Mazet, ) ) Plaintiff, ) ) vs. ) ) Halliburton Company Long-Term Disability ) Plan; Hartford Life & Accident Insurance ) Company, ) ) Defendants. ) ) )

No. CV04-00493-PHX-FJM DEFENDANTS' REPLY IN SUPPORT OF THEIR CROSSMOTION FOR SUMMARY JUDGMENT

The current dispute comes down to a question of which party has the burden of proof. The burden is on Mazet because he is seeking benefits. But he contends that Hartford and the Plan should have sought out the information necessary to establish his claim. That is not the law, and not required by the Plan document. And the documents that Mazet claims that the defendants should have hunted down (his W-2 statements and certain IRS documents) are not part of the administrative record, and also do not prove his claim. In any event, the defendants did research Mazet's predisability income. Hartford contacted Mazet's former employer, Halliburton. The information the Halliburton provided in response demonstrates that Hartford did not underpay Mazet during the initial, 24-month benefit period. It overpaid him. This Court should therefore deny Mazet's motion for summary judgment, and grant the defendants' cross-motion.
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1.

Mazet has the burden of proof. Although the Ninth Circuit apparently has not addressed the issue, at least one

court within the circuit has concluded that a plaintiff who is seeking benefits under an ERISA plan has the burden of proof. See Fulayter v. Prudential Ins. Co. of America, 2007 WL 433580, at *8 (D. Ariz. Feb. 6, 2007) (unpublished) ("an ERISA plaintiff bears the burden of proving his entitlement to contractual benefits") (quotation marks omitted). Other federal courts have reached the same conclusion: · Horton v. Reliance Standard Life Ins. Co., 141 F.3d 1038, 1040 (11th Cir. 1998) (per curiam) ("[The plaintiff's] claim against the defendant insurance companies is brought under section 1132(a)(1)(B) of ERISA. . . . A plaintiff suing under this provision bears the burden of proving his entitlement to contractual benefits."); Farley v. Benefit Trust Life Ins. Co., 979 F.2d 653, 658 (8th Cir. 1992) (holding that a plaintiff seeking benefits from an ERISA plan had the burden to prove that his claim fell within the plan's coverage provisions); Crosswhite v. Reliance Standard Life Ins. Co., 259 F. Supp. 2d 911, 918 (E.D. Mo. 2003) ("a plaintiff suing under ERISA generally bears the burden of proving entitlement to contractual benefits"); McAfee v. Transamerica Occidental Life Ins. Co., 106 F. Supp. 2d 1331, 1337 (N.D. Ga. 2000) ("A plaintiff suing under Section 1132(a)(1)(B) bears the burden of proving his entitlement to contractual benefits.").

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Here, Mazet claims that he is entitled to additional benefits under the ERISAgoverned plan. This means that he has the burden of proof. When a party has the burden of proof on a claim, it must produce the evidence necessary to support that claim. The opposing party does not have to offer any evidence. Haffey v. Generac Portable Products, L.L.C., 171 S.W.3d 805, 809 (Mo. App. S.D. 2005) ("As a general rule, plaintiff has the burden of proof and a verdict for defendant need not be supported by any evidence. Generally, the party not having the burden of proof on an issue need not offer any evidence concerning it.") (quotation marks and citations omitted). Here, Mazet is improperly attempting to shift the burden of proof. It is his burden
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to prove that his "deferred compensation" falls within the plan's definition of "monthly rate of basic earnings." Instead, he argues in his response to the defendants' cross-motion that Hartford had a duty to seek out the evidence necessary to support his claim. (Page 6, line 20--page 7, line 9) He claims that this duty arises from "the claim file and Hartford's own claim documents . . . ." (Page 6, line 28) But he cites no document in support of this claim. This argument is therefore nothing more than a groundless attempt to escape his burden of proof. 2. Mazet has not proved that his "deferred compensation" falls within the policy's definition of "monthly rate of basic earnings." The current dispute between the parties turns on the Plan document's definition of "monthly rate of basic earnings." Here is how the Plan document defines this phrase:

(Ex. 2 of the administrative record at CF-00096)1 Mazet claims that his "deferred compensation" should count as part of his monthly rate of basic earnings. Because he has the burden of proof, he must provide evidence sufficient to demonstrate that his "deferred compensation": 1. 2. 3. 4. 5. is part of his regular pay from Halliburton; does not include overtime pay; does not include any fringe benefit or extra compensation; does not include any commissions; and does not include any bonuses.

In an attempt to meet his burden, Mazet points to the following documents: his
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The administrative record--comprising three exhibits--was filed with this Court on March 9, 2005 (docket No. 20).
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W-2 statements for 1998 and 1999, the IRS's 1999 Instructions for Forms W-2 and W-3, and IRS web site information on 401(k) plans. These documents are not sufficient to meet Mazet's burden. The W-2 Statements. The Court has already ruled that these documents are not part of the administrative record. See Order dated August 18, 2005 (docket No. 40) at 56. Although Hartford was aware that Mazet's attorney had made an argument regarding the W-2 forms to this Court, Mazet never provided the actual W-2 forms to Hartford for consideration during its decision on the remanded issue. Consequently, these documents are still not part of the administrative record, and this Court may not consider them. But even if the Court could consider them, the W-2 statements give no indication of what Mazet's "deferred compensation" includes. To carry his burden of proof, Mazet must prove that his deferred compensation includes only his regular pay from Halliburton, and not any overtime pay, fringe benefits, extra compensation, commissions, or bonuses. But the W-2 forms shed no light on this issue. They indicate only the amount of deferred compensation that Mazet received, not the source of those funds. The IRS W-2 Instructions. The first time that Mazet even mentioned this document was in his response to the defendants' cross-motion for summary judgment. He did not present the document to Hartford during the original claim, to this Court during the original dispositive briefing, to Hartford during the remand, or even in connection with his pending motion for summary judgment on the remanded issue. And these instructions are not something that accompanies the completed W-2 forms that employees receive with their earnings information. The instructions are for employers to use when completing the W-2 forms. The Court has already determined that abuse of discretion is the applicable standard of review. Consequently, this Court may not consider evidence outside of the administrative record. See Jebian v. Hewlett-Packard Co. Employee Benefits Org. Income Prot. Plan, 349 F.3d 1098, 1110 (9th Cir.2003) ("under an abuse of discretion standard our review is limited to the record before the plan administrator"). The W-2
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instructions are not even arguably part of the administrative record, and this Court should not consider them. Even if the standard of review were de novo, evidence outside of the administrative record would still not be admissible. The Ninth Circuit has emphasized that "a district court should not take additional evidence merely because someone at a later time comes up with new evidence that was not presented to the plan administrator." Mongeluzo v. Baxter Travenol Long Term Disability Benefit Plan, 46 F.3d 938, 944 (9th Cir. 1995). Additional evidence is admissible "only when circumstances clearly establish that additional evidence is necessary to conduct an adequate de novo review of the benefit decision." Id. (quoting Quesinberry v. Life Ins. Co. of N. Am., 987 F.2d 1017, 1025 (4th Cir. 1993) (en banc)). Here, there is no reason for the Court to consider this new evidence. Mazet was represented by an attorney both during his original claim and during the more recent administrative remand. He could have presented the new documents to Hartford at that time. During the period allowed for discovery in the pre-remand litigation, Mazet did not produce these documents or seek any other evidence to support his underpayment claim. He similarly did not request any discovery in connection with the remand to Hartford. Instead, he produced these documents for the first time in his response to Hartford's cross-motion. Allowing him to rely on these documents now would undermine ERISA's exhaustion requirement. The IRS Web Site Information. As with the W-2 instructions, Mazet never even mentioned this information to the defendants until his response to their cross-motion. This information is not part of the administrative record. It may not be considered. And even if the Court could consider the information, it simply does not prove that the "deferred compensation" that was deposited in Mazet's 401(k) contains only voluntary deferrals from his regular pay. Another entry on the IRS's web site explains

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that 401(k) accounts can contain funds from a variety of sources.2 This article explains that there are three types of 401(k) plans: traditional, safe harbor, and simple. All three plans allow employees to make pre-tax deferrals of income. But the traditional plan allows--and the other two types require--the employer to make additional or matching contributions to employees' accounts. And these employer contributions clearly do not constitute an employee's regular pay. Consequently, the mere fact that Mazet's deferred compensation was deposited into a 401(k) account does not demonstrate the nature of those funds. The Defendants' Evidence. Whatever Mazet's deferred compensation includes, his own former employer, Halliburton, has taken the position that it is not part of his basic rate of monthly earnings. Mazet has conceded that the monthly earnings figure that Halliburton supplied Hartford on remand--$4,228--does not include deferred compensation.3 Mazet contends that the information supplied by Halliburton on remand is conflicting. In response to Hartford's request for Mazet's monthly rate of basic earnings as of October, 1, 1999, Halliburton provided the following information:

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See Ex. A, 401(k) Resource Guide - Plan Participants - 401(k) Plan Overview, at http://www.irs.gov/retirement/participant/article/0,,id=151753,00.html. 3 See Mazet's Response To Statement Of Facts In Support Of Defendants' Motion For Summary Judgment, docket No. 68, at page 7, ¶ 20.
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Mazet criticizes this document because it says that his pay as of October 1, 1999 was $4228 per month, and it also notes that "his current rate is 16.90 hour at time of separation." Mazet claims these statements are inconsistent. They are not. Hartford asked for Mazet's monthly rate of basic earnings as of October 1, 1999, and Halliburton supplied this information. That is because, under the policy, the relevant monthly rate is the one in effect on the October 1 before an employee becomes disabled. Mazet allegedly became disabled in August 2000. Thus, Hartford must determine his monthly rate of earnings as of October 1, 1999. The response from Halliburton also provides additional information that Hartford had not requested--Mazet's hourly rate as of the last day he worked for Halliburton. After Mazet was injured in August 2000 on an oil platform, he briefly returned to work in April 2001 in a different job--cementer. His hourly rate in that position was $16.90. This is clearly documented in the administrative record, in an e-mail from Barbara Benoit of Halliburton to Cathleen Frieholtz of Hartford:

(Ex. 2 of the administrative record at CF-00607) In short, the information provided by Halliburton on remand is not conflicting. It simply reflects Mazet's rate of pay from two different periods. The relevant one is October 1, 1999. (Mazet undoubtedly agrees with that, because otherwise his monthly rate of basic pay from April 2001 would be considerably lower.) The information that was provided by Halliburton demonstrates that Mazet's monthly rate of basic earnings was actually lower than Hartford had understood during the claim process. Consequently, it appears that Hartford actually overpaid Mazet during the initial, 24-month benefit period.
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3.

The abuse-of-discretion standard governs this case. Mazet is asking this Court to revisit a number of issues that it previously decided,

including the standard of review. The Court previously concluded that the abuse-ofdiscretion standard governs this lawsuit. Mazet contends that the de novo standard should apply instead because Hartford failed to respond to his administrative appeal. The parties previously briefed this issue. Just as he does now, Mazet relied on Jebian v. Hewlett-Packard Co. v. Employee Benefits Org. Income Protection Plan, 349 F.3d 1098 (9th Cir. 2003). And this Court held that Mazet's argument was foreclosed by the Ninth Circuit's subsequent opinion in Gatti v. Reliance Standard Life Ins. Co., 415 F.3d 978 (9th Cir. 2005). See Order dated July 15, 2005, at page 2, lines 4-23 (docket No. 38). That decision is the law of this case. In both Jebian and Gatti, an ERISA plan administrator failed to respond to a claimant's administrative appeal within the time limits imposed by Department of Labor regulations. But in Jebian, the plan document also imposed time limits for the administrator to respond to an administrative appeal, and stated that if the administrator failed to respond on time then the claim was "deemed denied." 349 F.3d at 1102. Jebian reasoned that, because the administrator violated the time limits in both the regulations and the plan document, the de novo standard of review would apply. In the subsequent decision in Gatti, on the other hand, the plan document contained neither time limits nor a "deemed denied" provision. 415 F.3d at 982. The Gatti court held that a failure to comply with the time limits imposed by the ERISA regulations is not enough to shift the standard of review to de novo. Id. This case is like Gatti. Hartford failed to respond to Mazet's administrative appeal within the time limits imposed by the regulations. But the plan document contains neither time limits nor "deemed denied" language. Consequently, the abuse-of-discretion standard continues to apply. Seeking another bite at the apple, Mazet now claims that the legal landscape was altered by Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955 (9th Cir. 2006) (en banc).
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But that is not true. In Abatie, the issue was whether the fact that the insurance company had added a reason for the claim denial during the administrative appeal was sufficient to shift the standard of review from abuse of discretion to de novo. In the course of discussing when procedural violations shift the standard of review, the Abatie court reaffirmed the decisions in both Jebian and Gatti: · Page 972: "In general, we review de novo a claim for benefits when an administrator fails to exercise discretion. See Jebian, 349 F.3d at 1106 (holding that an administrator failed to exercise its discretion when it did not make a benefits decision within the 60 days specified by the terms of the plan and the applicable regulation, so that the ultimate decision rendered was `undeserving of deference')." (emphasis added) Page 971: "We have recently held that an administrator's failure to comply with [ERISA's] procedural requirements ordinarily does not alter the standard of review. See Gatti, 415 F.3d at 985 (holding that an administrator who violates procedural requirements under ERISA usually will not be subject to a different standard of judicial review)."

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Abatie did not alter the holdings of either Jebian or Gatti. Consequently, the law on this issue remains the same. If a plan administrator fails to respond to an administrative appeal within the regulatory time limits, a court must look to the contents of the plan document. If the plan document contains time limits and "deemed denied" language (like in Jebian), then the standard of review shifts to de novo. But if the plan document contains no such language (like the plans in Gatti and the present case), then the abuse-of-discretion standard still applies. Here, Hartford did not abuse its discretion. Mazet failed to provide any probative evidence of the source(s) of his deferred compensation, which was his burden. Hartford therefore reasonably concluded that Mazet's deferred compensation is not part of his basic earnings. That was not an abuse of discretion. 4. Conclusion. It is time for this case to conclude. Mazet is asking the Court to consider evidence (some brand new) that is not part of the administrative record, to revisit its prior decision on the standard of review, and even to allow yet another round of dispositive motions on
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his eligibility of benefits after the 24-month initial period. None of that is necessary. The only issue here is whether Hartford underpaid Mazet during the initial, 24month benefit period. The information supplied by Halliburton on remand demonstrates that Hartford actually overpaid him. And Mazet provided no evidence to Hartford that proves otherwise. He cannot meet his burden of proof on this issue. The defendants are entitled to summary judgment. Mazet will then have the opportunity to appeal this entire case to the Ninth Circuit, if he chooses. RESPECTFULLY SUBMITTED this 28th day of September, 2007. LEWIS AND ROCA LLP

s/ Scott M. Bennett Ann-Martha Andrews Thomas Klinkel Scott M. Bennett Attorneys for Defendants CERTIFICATE OF SERVICE I hereby certify that on September 28, 2007, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing of the following CM/ECF registrants: Randolph G. Bachrach, Esq. Law Offices of Randolph G. Bachrach 5103 East Thomas Road Phoenix, Arizona 85018 Attorneys for Plaintiff s/ Michelle T. Gallegos

By

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