Foster v. Sedgwick Claims Management Services, Inc.
842 F.3d 721
| D.C. Cir. | 2016Background
- Kelly Foster worked for SunTrust and claimed denials of short-term and long-term disability benefits administered by Sedgwick.
- SunTrust’s short-term benefits were paid from the employer’s general assets and the plan required "objective medical documentation."
- SunTrust’s long-term plan was part of an ERISA-covered Employee Benefit Plan, funded through a trust; the claims administrator (Sedgwick) evaluated medical proof and determined eligibility after 180 days.
- Sedgwick denied Foster’s short-term and then long-term claims; Foster sued under ERISA § 1132(a)(1)(B) seeking review of both denials.
- The district court held the short-term plan was an ERISA-exempt "payroll practice," applied deferential (abuse-of-discretion) review to the long-term denial based on the plan terms, granted summary judgment for appellees, and denied Foster’s motion for reconsideration.
- The D.C. Circuit affirmed: short-term plan falls within the Department of Labor payroll-practice exemption; long-term plan unambiguously vested Sedgwick with discretionary authority; reconsideration denial was not an abuse of discretion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SunTrust’s short-term disability plan is exempt from ERISA as a "payroll practice" | Foster: plan is part of an ongoing administrative scheme and thus not exempt | Sedgwick/SunTrust: plan matches 29 C.F.R. § 2510.3-1(b)(2) (normal compensation from general assets for medical absences) and is exempt | Short-term plan is an ERISA-exempt payroll practice; exemption applies and district court correct |
| Appropriate standard of review for long-term denial (de novo vs. deferential) | Foster: denial should be reviewed de novo | Sedgwick: plan gives administrator discretion to determine eligibility and construe terms, so abuse-of-discretion review applies | Plan language unambiguously vests Sedgwick with discretionary authority; deferential (abuse-of-discretion) review applied and upheld |
| Whether plan language actually grants discretionary authority without magic words | Foster: plan does not clearly grant discretion | Sedgwick: multiple provisions (evaluate, determine, approve, decide) vest discretion | Court: ordinary contract/trust-law principles permit implied discretionary powers; provisions sufficient to trigger Firestone deference |
| Whether denial of reconsideration was improper | Foster: concession that short-term plan was exempt was error of law and merits reconsideration | Sedgwick: Foster conceded at summary judgment; no new evidence or controlling law to justify reconsideration | Denial of reconsideration affirmed — motion reargued an earlier, unavailing theory and did not meet the standard for reconsideration |
Key Cases Cited
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (establishes de novo review unless plan vests discretionary authority in administrator)
- Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105 (confirms deference where plan grants discretion and discusses conflict-of-interest concerns)
- Conkright v. Frommert, 559 U.S. 506 (analyzes trust-law background and scope of deferential review under plan terms)
- Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (distinguishes one-time statutory benefits from ERISA plans)
- Massachusetts v. Morash, 490 U.S. 107 (upholds payroll-practice regulatory exemption)
- CIGNA Corp. v. Amara, 563 U.S. 421 (treats Summary Plan Description’s legal effect and use in interpretation)
- Pettaway v. Teachers Ins. & Annuity Ass’n of Am., 644 F.3d 427 (permitting examination of Summary Plan Description to inform standard of review)
- Block v. Pitney Bowes Inc., 952 F.2d 1450 (survey of plan-language sufficiency to confer discretion)