Free Motion for Summary Judgment - District Court of Arizona - Arizona

R ANDOLPH G . B ACHRACH
ATTORNEY AT LAW 5103 E. THOMAS ROAD PHOENIX, ARIZONA 85018 (602) 852-9540
(AZ #12621 - CA #93278)

Attorney for Plaintiff

United States District Court
FOR THE DISTRICT OF ARIZONA

DAVID L. MAZET, Plaintiff, vs. HALLIBURTON COMPANY LONGTERM DISABILITY PLAN; and, HARTFORD LIFE & ACCIDENT INSURANCE COMPANY, Defendants.
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No.: CV 04 0493 PHX FJM MOTION FOR SUMMARY JUDGMENT FOLLOWING ADMINISTRATIVE DECISION ON REMAND

Plaintiff respectfully moves for Summary Judgment Following Administrative Decision on Remand ("MSJ"): The undisputed facts establish that Plaintiff is entitled to summary judgment on the issue which this Court remanded to the Plan Administrator ("Hartford"), i.e., whether "Plaintiff's predisability wages were properly determined and if he was underpaid during the initial 24-month period." (Docket #40, pg. 7.) This MSJ is based upon the Administrative Record and the attached Memorandum of Points & Authorities. MEMORANDUM OF POINTS & AUTHORITIES I. Introduction.

Pursuant to this Court's Order on August 18, 2005, i.e., to "remand this case to the Plan administrator solely to determine if Plaintiff's predisability wages were properly determined and if he was underpaid during the initial 24-month period," Hartford issued its

Case 2:04-cv-00493-FJM

Document 57

Filed 07/12/2007

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"Administrative Decision on Remand," on April 30, 2007. (See Plaintiff's accompanying Statement of Facts ("SOF") in support of his MSJ, Exhibit 1.) Hartford claims in its decision that Mr. Mazet's fully self-funded and voluntary contributions from his salary into his 401(k) retirement plan do "not qualify as `Monthly Rate of Basic Earnings' because [Mazet's] deferred compensation is not [his] regular monthly pay from [his] employer." Hartford wrote the Mr. Mazet: Attorney Bachrach argues that your W2 Statements must be viewed as the best evidence of your actual pre-disability earnings; and he argues we failed to include your "deferred compensation" in our calculation of your Monthly Rate of Basic Earnings. Deferred compensation does not qualify as "Monthly Rate of Basic Earnings" because your deferred compensation is not your regular monthly pay from your employer. This argument has been reviewed in accordance with the definition of Monthly Rate of Basic Earnings and we have found that "deferred compensation" is not considered when calculating your Monthly Rate of Basic Earnings. (See, MSJ/SOF, Exh. 1, pg. 1.) This finding by Hartford ignores the plain language of the Plan. Nothing in the Plan definitions support such a finding. Specifically, there is no evidence that any of Mr. Mazet's wages are exempt from being included in the calculation of his predisability earnings. The Plan looks to certain "predisability earnings" in order to determine both the cost of long-term disability ("LTD") coverage and the amount of LTD benefits. (See, MSJ/SOF, Exh. 6.) Hartford and the Plan are required to determine the appropriate "predisability earnings" based upon the W-2 wage statements provided to the claimant by his employer. (See, MSJ/SOF, Exh. 4.) This requirement is logical and reasonable because such W-2 wage statements prepared by the employer as required by federal law constitute the best evidence of an employee's actual and total earnings. Yet, there is no evidence in the administrative record that the employer ever provided Hartford with Mr. Mazet's W-2 wage statements and/or that Hartford utilized Mr. Mazet's W-2 wage statements at any for any purpose. This was an abuse of discretion on the part of ERISA fiduciaries and administrators.

RANDOLPH G. BACHRACH

ATTORNEY AT LAW 5103 E. THOMAS ROAD PHOENIX, ARIZONA 85018 S (602) 852-9540

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RANDOLPH G. BACHRACH
ATTORNEY AT LAW 5103 E. THOMAS ROAD PHOENIX, ARIZONA 85018 S (602) 852-9540

Significantly, Hartford's decision letter (as well, its initial claims decisions) does not reject Mr. Mazet's W-2 wage statements as either inappropriate or not the best evidence under the Plan to determine predisability wages. Rather, it simply ignores such evidence. Given the Plan's specific language found in the administrative record and in Hartford's own Plan-related documents with respect to Mr. Mazet's W-2 wage statements, it is patent error to ignore the W-2 wage statements in this claim and lawsuit. Here, Hartford merely and gratuitously claims that "deferred compensation" is not part of Mr. Mazet's "earnings." This claim is contradicted by the plain language of the Plan: Monthly Basic Earnings Your LTD premiums are based on your Monthly Basic Earnings as of the October 1 before your last day as an active employee prior to your disability. Your Monthly Basic Earnings are your regular monthly pay, and do not include: · Overtime pay; · Any fringe benefit or extra compensation; · Commissions; or · Bonuses. (See, MSJ/SOF, Exh. 6, pg. 103.) Conspicuously absent from this provision in the Plan and Policy is any reference to an exclusion from or exemption to predisability ("Monthly Basic") earnings for the employee's voluntary retirement plan contributions, including, 401(k) contributions. Moreover, on its face, none of the bulleted items (supra) apply to any of Mr. Mazet's predisability earnings. Hartford's decision letter on remand makes no reference to any of exclusions or exceptions related to predisability earnings ("Monthly Basic Earnings"). Ergo, it is patently false and lacks even common sense to claim that an employee's voluntary contributions from his salary to his retirement plan should not be included in total wages and/or do not qualify as predisability earnings. Based on the record, there is a complete absence of evidence supporting this claim and finding by Hartford. If, in fact, Hartford or the

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RANDOLPH G. BACHRACH
ATTORNEY AT LAW 5103 E. THOMAS ROAD PHOENIX, ARIZONA 85018 S (602) 852-9540

Plan had actually intended that an employee's wages used to fund a retirement plan be excluded from his/her predisability earnings calculations, it would not have been very difficult to put such language in the Plan in a clear, concise and conspicuous manner so as to provide notice of same to the participants. At best (even if such a provision were intended) Hartford has itself created an impermissible ambiguity in the language of the Plan and Policy from which it cannot now reasonably or legally claim to benefit. See, Saltarelli v. Bob Baker Group Medical Trust, 35 F.3d 382, 386 (9th Cir. 1994) ("[a]n insurer wishing to avoid liability on a policy purporting to give general or comprehensive coverage must make exclusionary clauses conspicuous, plain, and clear, placing them in such a fashion as to make obvious their relationship to other policy terms, and must bring such provisions to the attention of the insured.") II. "401(k)" contributions are recognized by the Plan as predisability income.

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Mr. Mazet's W-2 wage statements for the pertinent years (especially, 1999), indicate that from his salary he elected to contribute certain amounts to a voluntary retirement plan (401(k)). (See, MSJ/SOF, Exh. 3.) None of these contributions to Mr. Mazet's retirement plan were paid by the employer. All of these contributions were made with pre-tax earnings. Thus, Mr. Mazet's taxable earnings for these years were lower than his total (including, Social Security) earnings. Although, Hartford and the employer have incorrectly ignored Mr. Mazet's total earnings (including his 401(k) contributions) for purposes of determining predisability earnings under the LTD plan, nothing in the Plan permits the Plan Administrators to refuse to acknowledge a claimant's total earnings (including voluntary retirement contributions) for this purpose. In fact, the plain language of the Plan is contra. The Plan and Policy contain a provision for offset to LTD benefits for certain "Other Sources of Income." (See, MSJ/SOF, Exh. 2.) Specifically excepted as offsets (i.e., as "other sources of income") are payments received from voluntary self-funded contributions to a 401(k) plan. (Id., pg. 106.) This is a reasonable and logical exception because such "other income" is derived solely from prior contributions made by the employee from his
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RANDOLPH G. BACHRACH
ATTORNEY AT LAW 5103 E. THOMAS ROAD PHOENIX, ARIZONA 85018 S (602) 852-9540

predisability earnings. Clearly, Hartford's decision and position with respect to Mr. Mazet's 401(k) contributions for purposes of determining his "predisability earnings" is factually and legally inconsistent with the Plan's treatment of such earnings for purpose of determining LTD benefit offset amounts. III. Hartford's own claim documents require utilization of a claimant's W-2 wage statements for purposes of determining predisability earnings.

Contained in the administrative record of this case are written instructions from Hartford to the employer which require that Mr. Mazet's W-2 wage statements be provided to Hartford. (See, MSJ/SOF, Exh. 4.) There is no evidence in the record that the employer either complied with this demand or that Hartford received and utilized these documents for purposes of determining Mr. Mazet's predisability earnings. Based on Hartford's position with respect to the W-2 wage statements taken previously in this lawsuit, and, the conspicuous omission by Hartford of Mr. Mazet's retirement contributions in calculating predisability earnings, it is apparent that the W-2 statements were simply ignored in favor of a much lower undocumented salary amount provided by the employer. (See, MSJ/SOF, Exh. 5.) This constitutes an abuse of discretion by the Plan administrators in calculating predisability earnings which had a double negative effect, i.e., Mr. Mazet's LTD benefit payments were less than they should have been, and, the threshold amount of predisability earnings for purpose of calculating possible ("any occupation") wages was likewise incorrectly employed as a basis to deny Mr. Mazet's claim for continued LTD benefits. With respect to the former, Hartford is required to recalculate Mr. Mazet's LTD benefit payments (using the actual and total wages as reflected in the W-2 statements) during the initial ("own occupation") period and to reimburse him the underpayment of benefits during that period. With respect to the latter, the effect of this mistake is to render all of the wage assumptions relied upon by Hartford in its subsequent decision to deny Mr. Mazet's claim for continuing ("any occupation") LTD benefits, a nullity. The Court also relied upon the miscalculated predisability earnings in its decision to render summary judgment in favor of the Plan.

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RANDOLPH G. BACHRACH
ATTORNEY AT LAW 5103 E. THOMAS ROAD PHOENIX, ARIZONA 85018 S (602) 852-9540

IV.

Conclusion.

Hartford has committed an abuse of discretion in the handling Mr. Mazet's LTD claim as relates to the proper calculation of his predisability earnings. Hartford's actions substantially and adversely affected Mr. Mazet in several ways. First, he was underpaid benefits during the initial ("own occupation") benefit period. Worse, he was denied continuing ("any occupation") benefits based on faulty and inadequate potential earnings calculations related to hypothetical occupations claimed by Hartford as currently available to Mr. Mazet. Mr. Mazet is now entitled to summary judgment on the remand issue of miscalculation of predisability earnings as affecting his initial LTD benefit payments. Moreover, it is clear that this error materially affected the same calculations which were utilized by Hartford in denying Mr. Mazet's claim for continuing ("any occupation") LTD benefits. This error materially affected the Court's previous decision to enter summary judgment in favor of the Plan. Thus, Plaintiff requests that the Court set an additional (summary judgment reconsideration) briefing schedule to revisit and to address the effect that this error had on the Court's previous entry of summary judgment.

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DATED: July 12, 2007

RANDOLPH G. BACHRACH Attorney at Law

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By s/Randolph G. Bachrach Randolph G. Bachrach, Esq. 5103 E. Thomas Road Phoenix, Arizona 85018 Attorney for Plaintiff

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I hereby certify that on July 12, 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 to the following CM/ECF registrants:
Thomas Klinkel Scott Bennett LEWIS & ROCA, LLP 40 N. Central Ave. Phoenix, Arizona 85004-3329 Attorneys for Defendants

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s/Randolph G. Bachrach

RANDOLPH G. BACHRACH

ATTORNEY AT LAW 5103 E. THOMAS ROAD PHOENIX, ARIZONA 85018 S (602) 852-9540

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