Petar Mrkonjic v. Delta Family-Care and Survivor

• Court: Court of Appeals for the Ninth Circuit
• Decided: June 15, 2018
• Docket: 16-56335
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JUN 15 2018 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

PETAR MRKONJIC, No. 16-56335

Plaintiff-Appellant, D.C. No. 2:15-cv-02255-JAK-JC v.

DELTA FAMILY-CARE AND MEMORANDUM* SURVIVORSHIP PLAN, an ERISA plan; et al.,

Defendants-Appellees.

PETAR MRKONJIC, No. 16-56487

Plaintiff-Appellee, D.C. No. 2:15-cv-02255-JAK-JC v.

DELTA FAMILY-CARE AND SURVIVORSHIP PLAN, an ERISA plan; et al.,

Defendants-Appellants,

and

DOES, 1-10, inclusive,

Defendant.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Appeal from the United States District Court for the Central District of California John A. Kronstadt, District Judge, Presiding

Argued and Submitted February 14, 2018 Pasadena, California

Before: BERZON and BYBEE, Circuit Judges, and WOODCOCK,** District Judge.

This case presents three questions spanning two district court litigations: the

proper interpretation of the judgment in the first case, whether an ERISA plan

administrator abused its discretion on remand from the district court in

implementing that judgment, and whether Mrkonjic is entitled to equitable relief.

We conclude that the plan administrator misinterpreted the judgment, that it abused

its discretion in departing from its normal practice for calculating benefits, and that

in any event, the plan administrator may be equitably estopped from collecting

overpayments caused by its mistakes. The parties are familiar with the facts and

the proceedings, and we will not state them except as necessary to explain our

decision.

1. Petar Mrkonjic, a former employee of Delta Air Lines, Inc., brings this

appeal as the latest stage of a complicated employee benefits plan dispute that

** The Honorable John A. Woodcock, Jr., United States District Judge for the District of Maine, sitting by designation. 2 traces its origin to a work injury he sustained in December 2003. The first

improper denial of Mrkonjic’s various claims for benefits occurred in 2005, and

controversies between Mrkonjic and Delta’s plans persisted for the next thirteen

years, including eight years of litigation. Pursuant to the Delta Family-Care

Disability & Survivorship Plan (“D&S Plan”), long-term disability (“LTD”)

benefits are typically offset by any benefits a participant receives from: (1) the

Delta Retirement Plan, (2) Social Security disability, and (3) workers’

compensation.

Mrkonjic opted to receive early retirement benefits from the Retirement Plan

because the Plans wrongfully denied the LTD benefits he sought from the D&S

Plan. Later, the Committee deemed him eligible for LTD benefits but subjected

him to a variety of offsets including the retirement benefits he had received.

Having been declared eligible for LTD benefits, Mrkonjic tried to rescind his early

retirement election but was not permitted to do so. Mrkonjic’s first lawsuit

(Mrkonjic I) resulted in a judgment that, among other things, ordered rescission of

his early retirement election, required the Committee to recalculate certain offsets,

and mandated that the Retirement Plan transfer monies from the D&S Plan Trust to

the Retirement Plan Trust.

On remand, the Committee interpreted the judgment to require

reimbursement to the Retirement Plan Trust of all Mrkonjic’s retirement benefits,

3 and also to require adding up all potentially offsetable outside benefits and

subtracting that sum from the gross LTD benefits due Mrkonjic. This recalculation

resulted in a substantial amount the D&S Plan owed the Retirement Plan, and the

Committee sought to recover this amount by withholding Mrkonjic’s LTD monthly

benefits.

Mrkonjic challenges the Committee’s interpretation of the judgment on two

grounds. First, he disputes the Committee’s view that the judgment required that

he reimburse to the Retirement Plan all the benefits the Retirement Plan paid him.

Second, he argues that because the judgment gave no specific instructions on how

the calculation of offsets was to be done, it should have been done the way offsets

are normally calculated under the D&S Plan. Mrkonjic moved to reopen Mrkonjic

I, but the district court, with a new judge presiding, denied the motion.

Mrkonjic filed a second case in the district court (Mrkonjic II) making

similar arguments. The district court rejected Mrkonjic’s claims. This appeal

followed.

2. De novo is the proper standard of review for questions of law, such as the

proper interpretation of a judgment. See United States v. Lang, 149 F.3d 1044,

1046 (9th Cir. 1998). This Court reviews the Committee’s decisions on remand for

abuse of discretion, because the Plans assign discretionary authority to the

Committee to determine benefits eligibility and construe the Plans’ terms. See

4 Standard Ins. Co. v. Morrison, 584 F.3d 837, 840 (9th Cir. 2009). At the same

time, when an employer controls the plan—rendering the entity determining

eligibility and the entity paying benefits one and the same—the resultant “conflict

of interest is relevant to how a court conducts abuse of discretion review.” Abatie

v. Alta Health & Life Ins. Co., 458 F.3d 955, 965 (9th Cir. 2006). The result is that

the abuse of discretion standard becomes less deferential, and this Court reviews

the Committee’s decisions with “different levels of skepticism on account of

conflicts of interest.” Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666,

674 (9th Cir. 2011); Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 111 (2008); Lang

v. Long-Term Disability Plan of Sponsor Applied Remote Tech., Inc., 125 F.3d

794, 797 (9th Cir. 1997). Here, Delta appointed the Committee and funds the D&S

Plan. An added degree of skepticism is appropriate. Salomaa, 642 F.3d at 674.

3. The operative language from the Mrkonjic I judgment is:

On remand, the recalculation of offsets must eliminate any offset for the receipt of benefits under the Delta Retirement Plan . . . The amount of the offset for Plaintiff’s Delta Retirement Plan benefits that is eliminated shall not be paid to Plaintiff, but shall be transferred from the applicable Trust for the Delta Family-Care Disability & Survivorship Plan to the applicable Trust for the Delta Retirement Plan.

Contrary to the Plans’ assertion, this language does not require that Mrkonjic

reimburse the Retirement Plan for all benefits he received before the district court

granted rescission of his early retirement election. The plain language speaks to

5 transfers of funds—representing offsets eliminated from Mrkonjic’s LTD

benefit—from the D&S Plan to the Retirement Plan. But the judgment does not

mandate that the transferred amount equal all retirement benefits Mrkonjic had

received. Nor does the Mrkonjic I judgment say that the money must come from

Mrkonjic. The plain language of the judgment merely requires transfer from one

plan to the other.

4. “When interpreting an ambiguous prior judgment, the reviewing court

should construe a judgment so as to give effect to the intention of the issuing court.

Where the judgment is ambiguous or fails to express the rulings with clarity, the

entire record before the issuing court and the findings of fact may be referenced in

determining what was decided.” Ruiz v. Snohomish Cnty. Pub. Util. Dist. No. 1,

824 F.3d 1161, 1167 (9th Cir. 2016) (quoting Muckleshoot Tribe v. Lummi Indian

Tribe, 141 F.3d 1355, 1359 (9th Cir. 1998)). The Mrkonjic I summary judgment

orders shed light on the intention behind the judgment.

5. The order denying the Plans’ motion for summary judgment stated:

“[Mrkonjic] is entitled to rescind his early retirement election and to be reinstated

subject to appropriate reimbursement and/or offsets of benefits already paid.” The

word “appropriate” implies that certain reimbursements and/or offsets might be

inappropriate.

6. The order on Mrkonjic’s motion for summary judgment reads:

6 In determining that Plaintiff should be entitled to rescind his early retirement election, the Court clarified that any rescission of his retirement would be “subject to appropriate reimbursement and/or offsets of benefits already paid.” (1/3/13 Order at 15.) Some offsets were contemplated by both the ’94 Plan and the ’04 Plan, so allowing him both to keep the benefits he received initially and to demand a second set of benefits would provide Mrkonjic with an improper double payment. (Id.) Accordingly, and because the Court has already addressed the issue, Plaintiff’s request that the set-off provision be deemed entirely unenforceable must be rejected.

This order clarifies that Mrkonjic was responsible for reimbursing some retirement

money but does not address the amount to be reimbursed or how the reimbursement

was to take place.

The summary judgment order also provides: “Finally, in order to render a

total monetary award as to the disability offsets, the Court would necessarily be

required to determine how much [Mrkonjic] has already received in retirement

benefits.” But again the order does not clarify how the total amount—once

ascertained—would figure into a proper LTD recalculation.

Finally, the summary judgment order states:

The Parties have been unable to agree on a proper method for dealing with some of the more limited benefits he has actually received over the past ten years: whether, and how much, they should be offset against the total now owed him . . . . [T]his Court is not the proper forum to make such a decision in the first instance . . . . [T]he precise amount of benefits due to Mrkonjic is a factual determination related to the implementation of an ERISA plan . . . .

In our view, this language makes clear that the district court did not direct the Plans

7 to make a particular calculation; rather, it ordered the Plans to calculate benefits in

accordance with the Plan provisions.

In short, contrary to the Plans’ interpretation, this cumulative language

establishes that the remand order did not require that Mrkonjic reimburse to the

Retirement Plan all retirement benefits he had received. In our view, the Plans’

conclusion that the judgment in Mrkonjic I required them to treat Mrkonjic in a way

different than they would normally do under the D&S Plan was unreasonable and

constituted an abuse of discretion.

7. The Plans’ misinterpretation came at a price for Mrkonjic. On remand, the

Plans recalculated Mrkonjic’s LTD benefits in a way that varied from their standard

calculation method. Normally, for a given month, the Plans subtract all applicable

offsets from the LTD benefit. If the offsets exceed the benefit, the claimant receives

nothing but does not owe excess offsets back to the Plans. The Plans concede that

they calculated Mrkonjic’s LTD benefits inconsistently with their normal method.

Having concluded that the Mrkonjic I judgment did not require the Plans to vary

from their typical calculation method or to reclaim all Retirement Plan benefits paid

to Mrkonjic as a full credit and withhold the total from future LTD benefits, we turn

to the question of remedy.

8. Mrkonjic wound up in federal court in the first place because the Plans

improperly refused to approve his LTD application. Mrkonjic was forced to elect

8 early retirement solely because the Plans wrongfully denied his LTD benefits.

None of these issues would have arisen but for the Plans’ error. After rectifying

that error, the Plans compounded it. The Plans refused to allow Mrkonjic to

rescind his retirement. In this context, because the situation was unique and caused

by the Plans, the Plans should have implemented the Mrkonjic I judgment so as to

leave Mrkonjic no worse off from their mistakes. Instead they accumulated offsets

and collected an overage, treating him more poorly than other beneficiaries.

9. We remand the matter to the district court to consider the appropriate

remedy in light of our holding that the Plans could not require reimbursement of

the portion of retirement benefits that exceeded Mrkonjic’s monthly LTD benefit

amount, and thus should not have withheld Mrkonjic’s LTD benefits once his

retirement election was rescinded to achieve the reimbursement. The district court

should consider whether to remand the matter to the Plans. If the district court

elects to remand to the Plans, its remand order should be sufficiently specific so

that there is no room for doubt as to what precisely the Plans must do.

Alternatively, the district court may wish to exercise its power of equitable relief

and fashion an order to cut the Gordian knot of this long-litigated matter.

10. We dismiss as moot the Plans’ repayment period argument.

REVERSED.

9 FILED Mrkonjic v. Delta Family-Care and Survivorship Plan, Nos. 16-56335, 16-56487 JUN 15 2018 (February 14, 2018 - Pasadena) MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS BYBEE, Circuit Judge, concurring in the judgment:

I agree with the majority that this case should be remanded to the district

court. However, I disagree with the primary reasoning that the Plans and their

Committee abused their discretion in requiring Mrkonjic, as part of his “un-

retirement,” to reimburse the Retirement Plan for the full amount of early-

retirement pension benefits he had received. The Committee did not “vary” its

method of calculating benefits between the 2007 and 2014 letters; rather, each

letter reflects a different objective.

When the Committee wrote to Mrkonjic in 2007 to inform him that he was

eligible for retroactive LTD benefits, he was receiving monthly pension payments,

Social Security Disability (“SSD”), and workers compensation (collectively

“offsets”). Under the Disability Plan’s terms, these offsets had to be deducted

from his gross amount of LTD benefits—a percentage of Mrkonjic’s pre-

retirement salary—in order to calculate his net LTD benefits. This type of offset

mechanism prevents an employee from recovering more than his total possible

LTD benefits from combined income sources and thus from being given an

incentive not to return to work. But an employee does not owe the Disability Plan

money when his offsets exceed his gross LTD benefits; he is simply owed no monthly disbursement by the Disability Plan. Therefore, only when Mrkonjic’s

offsets totaled to less than his gross LTD benefits—i.e., after the monthly workers-

compensation allocation was expended—was he entitled to a monthly

disbursement from the Disability Plan.

This calculation, however, says nothing about the Committee’s calculations

after the Mrkonjic I judgment, which required the Committee to allow Mrkonjic to

“rescind [his] retirement election and permit him, at a future date, to retire,

consistent with the terms of the Delta Retirement Plan . . . .” In order to

accomplish this unorthodox objective, funds necessarily had to be transferred

between the Retirement and Disability Plans; the former Plan had, for several

years, been paying him benefits that should have come from the latter Plan. Thus,

in order to return everything to square one, as if Mrkonjic had never been forced to

elect early retirement, two things needed to occur: (1) the Disability Plan had to

pay him retroactive benefits and (2) Mrkonjic had to reimburse the Retirement Plan

using these funds.

Indeed, this is what the Mrkonjic I judgment directs. In granting a remand

for the calculation of retroactive LTD benefits, the judgment orders that “the

recalculation of [LTD] offsets must eliminate any offset for the receipt of benefits

under the Delta Retirement Plan” and that this offset “shall not be paid to

2 [Mrkonjic], but shall be transferred from the applicable Trust for the [Disability]

Plan to the applicable Trust for the Delta Retirement Plan.”

The judgment thus achieves Mrkonjic’s unretirement in two steps. First, it

directs the Disability Plan to calculate his net LTD benefits as if he never elected

early retirement—i.e., by deducting only his SSD and workers-compensation

offsets from his gross LTD benefits. Because there would not have been a pension

payment to offset if the Committee had correctly paid Mrkonjic LTD benefits from

2004 onwards, this calculation mirrors exactly what his LTD benefits should have

been. The second step then reimburses the Retirement Plan by transferring the

disregarded pension-payment offsets back to the Retirement Plan. Ultimately,

these calculations are precisely what the Committee’s 2014 letter reflects.

It should have come at no surprise that Mrkonjic ultimately owed the

Retirement Plan a reimbursement. He received nearly twice as much in pension

payments over the years from the Retirement Plan than he would have received in

combined net LTD benefits that only deducted SSD and workers compensation.

Moreover, the Committee illustrated these calculations in its summary-judgment

motion during Mrkonjic I and warned Mrkonjic that he would end up owing the

Retirement Plan money if he sought to unretire. And as the majority

acknowledges, the Mrkonjic I court “clarified that any rescission of [Mrkonjic’s]

3 retirement would be ‘subject to appropriate reimbursement and/or offsets of

benefits already paid.’” The court, however, remanded to the Committee in order

for it “to determine how much [Mrkonjic] ha[d] already received in retirement

benefits.”

Accordingly, when the record and procedural history are considered as a

whole, it is evident that the 2007 and 2014 letters reflect incomparable

calculations. There is thus no basis for concluding that the Committee abused its

discretion.

Nonetheless, I agree with the majority that this case should be remanded in

order for the district court to consider applying an equitable remedy. It was the

Committee’s incorrect interpretation of its own Disability Plan that forced

Mrkonjic to opt for early retirement. As a result, he was set to receive little-to-no

monthly LTD disbursements when the Committee finally offered him retroactive

benefits three years later. He also had no avenue for ever qualifying for a full

retirement and thus receiving higher pension payments. Mrkonjic therefore

initiated two different federal actions in order to place himself in the position he

would have been in fourteen years ago, but for the Committee’s erroneous denial

of LTD benefits.

Mrkonjic has consistently argued over the years that these circumstances

4 justify the application of equity to prevent the Committee and Plans from

recouping their overpayments. He has supported this contention with relevant

authorities that neither district court addressed. I would therefore remand this case

only for the purpose of allowing the Mrkonjic II court to consider in the first

instance whether an equitable remedy is warranted.