Syed v. Metropolitan Life Insurance Company

• Court: District Court, S.D. California
• Decided: July 14, 2022
• Docket: 3:21-cv-01098
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 BASEEM SYED, Case No.: 3:21-cv-1098-BEN-JLB

12 Plaintiff, ORDER ON PARTIES’ CROSS- 13 v. MOTIONS FOR SUMMARY JUDGMENT 14 METROPOLITAN LIFE INSURANCE

COMPANY, 15 [ECF Nos. 18, 19] Defendant. 16

17 Plaintiff Baseem Syed is suing Defendant Metropolitan Life Insurance Company 18 (“MetLife”) for Defendant’s failure to pay long-term disability (“LTD”) benefits under 19 the terms of Policy 98139-G (the “Plan”). The parties each moved for summary 20 judgment under Federal Rule of Civil Procedure 56 (ECF Nos. 18, 19). Having carefully 21 considered the parties’ arguments, the Administrative Record, and the terms of the Plan, 22 the Court GRANTS Plaintiff’s motion and DENIES Defendant’s motion. 23 I. BACKGROUND 24 This is a case about whether LTD benefits may be reduced by “other income” 25 when an employee moves his own money from an employer plan to an individual 26 retirement account (IRA). The answer turns on whether the employee “received” the 27 money. Plaintiff was a participant in an LTD plan established by his former employer, 28 1 plan. Complaint, ECF No. 3. MetLife issued to Aramco the group policy that funds the 2 LTD benefits of the Plan and the incorporated certificate of insurance (“Certificate”) that 3 together set forth the conditions and terms of coverage. Id. at ¶ 4. Under “Disability 4 Income Insurance: Long Term Benefits,” the Plan states: 5 “If You become Disabled while insured…When We receive Proof, We will review the claim. If We approve the claim, We will pay the Monthly Benefit 6 up to the Maximum Benefit Period shown in the SCHEDULE OF BENEFITS, 7 subject to the DATE THE BENEFIT PAYMENTS END section.” 8 Decl. of Tim Suter, ECF No. 19-2 ¶ 2. 9 Under the heading “DISABILITY INCOME INSURANCE; INCOME WHICH 10 WILL REDUCE YOUR DISABILITY BENEFIT,” the Plan states: 11 “We will reduce Your Disability benefit by the amount of all Other Income. 12 Other Income includes the following:

13 Any income received for disability or retirement under the Policyholder’s 14 Retirement Plan, to the extent that it can be attributed to the Policyholder’s contributions . . . .” 15 ECF No. 19-2, Ex. A at 34 (emphasis added). 16 The Plan also specifies income which will NOT reduce a recipient’s disability 17 benefit. 18 “We will not reduce Your Disability benefit to less than the Minimum Benefit 19 shown in the SCHEDULE OF BENEFITS, or by . . . amounts rolled over to a 20 tax qualified plan unless subsequently received by You while You are receiving benefit payments.” 21 22 Id. at 36 (emphasis added). The Plan further includes a component allowing MetLife to 23 seek recovery for any amounts overpaid to a recipient. Id. at 44-45. 24 Plaintiff ceased working on March 2, 2016 and has been receiving LTD benefits 25 under the policy since September 3, 2016. Complaint, ECF No. 1 ¶ 8. The parties do not 26 dispute Plaintiff’s entitlement to LTD benefits. In May 2018, Plaintiff sought to rollover 27 his Aramco Retirement Income Plan (“RIP”) benefits. In response, Aramco wrote an 28 email to MetLife stating, “The RIP is a defined benefit plan. [Plaintiff] elected to receive 1 his entire benefit as a lump sum rollover in the amount of $301,301.28. This benefit was 2 rolled over to the Saudi Aramco Savings Plan in June 2017. He does not have any 3 employee contributions in the plan.” AR 452. A MetLife representative confirmed via 4 email that this rollover would not result in an offset of Plaintiff’s LTD benefits as “the 5 entire amount was directly rolled into a tax qualified plan [so] it is not considered income 6 that would reduce [Plaintiff's] disability benefit.” AR 368. 7 In December 2018, Plaintiff rolled the money from his Saudi Aramco Saving Plan 8 account into a personal Vanguard IRA. AR 15. This was done by a trustee-to-trustee 9 transfer. In September 2020, Aramco wrote to MetLife: “The participant [Plaintiff] 10 rolled over his RIP benefit in the amount of $301,301.28 to his Saudi Aramco Savings 11 Plan administered by Vanguard. This amount updated on 6/15/2017. The participant 12 then closed his Vanguard account on 12/14/2018 totaling $671,939.98 (portion of this 13 money was his RIP rollover and the remainder was his Saudi Aramco Savings 14 Plan/401k). Out of the $671,939.98 only $658,862.74 was rolled over to a personal IRA 15 and the after tax [amount] of $13,077.24 was paid out to the participant via check. We do 16 not know what he has done with the money that was rolled over to his Vanguard IRA. 17 Nonetheless, he has took [sic] his RIP benefit in June 2017 and closed his Vanguard 18 account in December of 2018. As a result, an offset must be applied to my 19 understanding.” AR 290-91. In October 2020, Plaintiff received a letter from MetLife 20 stating that as a result of other income as defined by the Plan, there was a required 21 overpayment offset that must be repaid to MetLife in the amount of $23,944.61. AR 277. 22 In addition to recouping this overpayment, Plaintiff’s monthly benefit would be reduced 23 by $1,162.36 per month. Id. Plaintiff subsequently appealed this offset determination 24 which was denied by Defendant in April 2021. AR 2-4. This suit followed. 25 II. LEGAL STANDARD 26 Summary judgment is appropriate where “the movant shows that there is no 27 genuine dispute as to any material fact and the movant is entitled to judgment as a matter 28 of law.” Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 1 (1986). A fact is material if it could affect the outcome of the case under governing law. 2 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute of material fact is 3 genuine if the evidence, viewed in light most favorable to the non-moving party, “is such 4 that a reasonable jury could return a verdict for the non-moving party.” Id. The party 5 seeking to defeat summary judgment must come forward with affirmative evidence from 6 which a reasonable jury could render a verdict in that party’s favor. Id. at 252. However, 7 the nonmoving party’s mere allegation that factual disputes exist between the parties will 8 not defeat an otherwise properly supported motion for summary judgment. See Fed. R. 9 Civ. P. 56(c); see also Phytelligence, Inc. v. Washington State Univ., 973 F.3d 1354, 10 1364 (Fed. Cir. 2020) (“Mere allegation and speculation do not create a factual dispute 11 for purposes of summary judgment.”) (quoting Nelson v. Pima Cmty. College, 83 F.3d 12 1075, 1081-82 (9th Cir. 1996)). Additionally, while the Court will draw all reasonable 13 inferences in the non-moving party’s favor and believe the evidence of the non-moving 14 party, the Court will not draw unreasonable inferences and cannot believe evidence that 15 does not exist. Cf. Anderson, 477 U.S. at 255. 16 The interpretation of an ERISA plan in governed by federal common law. Evans 17 v. Safeco Life Ins. Co., 916 F.2d 1437, 1441 (9th Cir. 1990). Courts must “interpret terms 18 in ERISA insurance policies ‘in an ordinary and popular sense as would a [person] of 19 average intelligence and experience.’” Id. (citing Allstate Insurance Co. v. Ellison, 757 20 F.2d 1042, 1044 (9th Cir. 1985)). A court will “not artificially create ambiguity where 21 none exists.” Id. “If a reasonable interpretation favors the insurer and any other 22 interpretation would be strained, no compulsion exists to torture or twist the language of 23 the policy.” Id. An exclusion in an ERISA plan must be “clear, plain, and conspicuous.” 24 Saltarelli v. Bob Baker Grp. Med. Trust, 35 F.3d 382, 387 (9th Cir. 1994). If the 25 language of the exclusion does not negate the insured's “objectively reasonable 26 expectations of coverage,” the exclusion is unenforceable. Id. 27 28 1 III. ANALYSIS 2 a. Plaintiff’s Entitlement to Benefits 3 While the record is replete with a rather robust factual account of the back-and- 4 forth communications between the parties, this case is entirely about the meaning of the 5 word “received.” There is no dispute that Plaintiff moved his money from a company 6 retirement account to an individual Vanguard IRA. The dispute is whether, in the process 7 of arranging this transfer, he “received.” Plaintiff argues that it was a trustee-to-trustee 8 transfer and that he did not actually receive any money; rather it was being held in a 9 separate account no different than the previous Vanguard account. Since he is not 10 collecting from the account, he argues he did not receive, and is not receiving, money that 11 would result in an offset of his LTD. Defendant argues that Plaintiff exercised control 12 over the funds, thus receiving them, and that the account into which the money was rolled 13 over was not listed as an account under the Plan that would not result in an offset of 14 Plaintiff’s LTD benefits. 15 Plaintiff argues the Ninth Circuit case of Blankenship v. Liberty Life Assurance 16 Company of Boston (486 F.3d 620 (9th Cir. 2007)) controls. Defendant argues that the 17 facts of Blankenship are not congruous with the present case, because the LTD plan 18 language was not the same, and thus is not controlling. Def.’s Opp’n, ECF No. 21 at 5. 19 This Court finds the facts of this case similar to Blankenship and, based on the Ninth 20 Circuit’s guidance, concludes judgment is warranted for the Plaintiff. 21 In Blankenship, the Ninth Circuit dealt with what the meaning of “receives” under 22 the parties’ plan. Just like this case, Blankenship rolled his retirement benefits into a 23 Vanguard IRA. 486 F.3d at 623. The plan language in Blankenship also included 24 deductions for benefits the insured “receives” under the plan. Under that plan, the Ninth 25 Circuit ultimately held that since the term “receives” was not defined in the plan, when 26 considered in context, it was ambiguous. The court explained: 27 “We begin by recognizing the term “receives” is not defined by the Disability Plan. On appeal, both parties accept the term “receive” to mean “to take into 28 1 arguing that it means “to accept custody of; collect.” However, a definition of receipt based on possession and one based on control may lead to two 2 separate outcomes. Thus, when considered in the context of the Disability 3 Plan, the term “receives” is ambiguous. We therefore apply the rule of contra proferentem, and we conclude that it supports the district court's 4 determination.” 5 Id. at 624-25. Under the doctrine of contra proferentem, “if after applying the normal 6 principles of contractual construction, the insurance contract is fairly susceptible of two 7 different interpretations, another rule of construction will be applied: the interpretation 8 that is most favorable to the insured will be adopted.” Kunin v. Benefit Trust Life Ins. 9 Co., 910 F.2d 534, 539 (9th Cir. 1990). 10 The court in Blankenship addressed the similarities between an IRA and an 11 employer tax-qualified account, focusing on the nature of the transfer (trustee-to-trustee) 12 and the limitations of the actions that may be taken in order to keep the tax benefits of an 13 IRA. “Blankenship elected to have the retirement funds directly rolled over into his 14 Vanguard IRA. We hold that, under these circumstances, Blankenship did not obtain 15 possession of his retirement funds. We base this determination on Vanguard's status as a 16 trustee under the IRC and the fact that Blankenship's funds were transferred from KPMG 17 to his Vanguard IRA through a trustee-to-trustee transfer. See 26 U.S.C. §§ 18 401(a)(31)(A), 402(e)(6), 408(a).” Blankenship 486 F.3d 620, 625 (9th Cir. 2007) 19 (footnote omitted). 20 The court then distinguishes between Vanguard’s roles as a mere agent (in which 21 the money would be “received”) and as a trustee. 22 “In our view, however, if Vanguard is properly characterized as a trustee, the 23 funds are no more in Blankenship's possession than they were before the transfer, and possession would be gained only at the time the funds were 24 withdrawn from the IRA. In the latter circumstance, the transfer of funds to 25 Vanguard would not constitute actual receipt within the meaning of the Disability Plan . . . . The custodian, acting as a trustee, must ensure that 26 contributions to the account are made in cash; that the contributions not 27 exceed the amount the individual is permitted to contribute each year; that the funds not be commingled with other property except in a common trust or 28 1 that the interest of an individual in the balance of his or her account be nonforfeitable. It is compliance with these requirements that establishes the 2 custodian of an IRA as a trustee.” 3 Id. at 626 (citations omitted). 4 Defendant attempts to distinguish Blankenship in two ways, neither of which are 5 availing. First, Defendant argues the plan language in Blankenship “did not contain any 6 offset exception for rollovers into tax qualified plans, like the Plan at issue here.” Def.’s 7 Opp’n, ECF No. 21 at 6. Defendant points out the specifics of language used in the Plan 8 that will not result in an offset and (“amounts rolled over to a tax qualified plan unless 9 subsequently received by You while You are receiving benefit payments”) and argues 10 that the Plan in this case sufficiently differentiates between “tax qualified plans” which 11 are exempt from offset, versus rollovers to non-tax qualified plans, which are not exempt. 12 Id. at 6-7. 13 Defendant’s focus on the juxtaposition of “tax qualified plan” to “IRA” does not 14 alleviate the ambiguity of the word “received.” First, there are many tax benefits 15 associated with IRA’s that don’t necessarily indicate to a beneficiary that an IRA would 16 not be categorized as a “tax qualified plan.” See Blankenship at 626. This Court also 17 finds persuasive Plaintiff’s argument that because “tax qualified plan” is not defined to 18 mean ERISA qualified plan, it must be construed to mean any plan which an employee 19 could rollover benefits without tax consequences. “If [Defendant] intended to 20 incorporate ERISA requirements into the policy or mandate a rollover to another 21 employer provided plan, it should have - - and could have - - done so. But it didn’t. The 22 policy does not incorporate IRC criteria.” Pl.’s Mot. Summ. J., ECF No. 18-1 at 28 23 (emphasis in original). With that context, a reasonable interpretation of the Plan could 24 remove any plan with special tax treatment plan from offset provisions. The Court is not 25 deciding that either side’s interpretation of the offset and rollover language is necessarily 26 correct, but rather acknowledging the ambiguity that exists. 27 Even MetLife personnel believed the transfer did not result in an offset at the time. 28 1 Aramco regarding Plaintiff’s rollover stating, “I also looked into the pension information 2 that you previously provided. Because the entire amount was directly rolled into a tax 3 qualified plan, it is not considered income that would reduce his disability benefit.” AR 4 368. MetLife’s Long Term Disability Unit Leader responded to an Aramco query about 5 a potential offset of Plaintiff’s LTD benefits: “Based on the information we received[,] 6 [Plaintiff] received his RIP in a Lump Sum and this was immediately rolled over to a tax 7 qualified plan. The email we received from you [] indicated that he received this in a 8 lump sum and did roll it over. If [Plaintiff] was receiving his annuity benefit monthly 9 then yes it would have been an offset.” AR 294-95. Defendant’s argument that there is 10 no ambiguity in the Plan is belied by their own employees. 11 Defendant also attempts to distinguish Blankenship by pointing out that no 12 extrinsic evidence was considered in that case to resolve the ambiguity and that, if 13 considered here, the Court must necessarily conclude that the term “received” has a clear 14 meaning. Def.’s Opp’n at 8. First, the parties dispute whether the Court can consider 15 extrinsic evidence in analyzing the Plan. Here, the Court finds the term “received” is 16 ambiguous. In this situation, the Court looks to the insured’s objectively “reasonable 17 expectations” (Scharff v. Raytheon Co. Short Term Disability Plan, 581 F.3d 899, 904-05 18 (9th Cir. 2009)) and/or extrinsic evidence regarding the contract’s terms. Vizcaino v. 19 Microsoft Corp., 97 F.3d 1187, 1194 (9th Cir. 1996), on reh’g en banc, 120 F.3d 1006 20 (9th Cir. 1997). A reviewing court will then only apply the doctrine of contra 21 proferentem if the ambiguity persists after this review. Id. at 1194. This Court will 22 review the extrinsic evidence in an effort to resolve the ambiguity of “received.” 23 Even this review of the extrinsic documents does not resolve the ambiguity, 24 though. Many of these documents continue to use the word “receive,” but do nothing to 25 define it or clarify the parties’ intent from the Plan. Plaintiff signed a “Benefit Election 26 Form” stating he acknowledged: 27 “I understand that the entire amount of my distribution will be rolled over into the IRA or qualified plan indicated below. Please refer to the Special Tax 28 1 the recipient plan identified below is an IRA or other eligible retirement plan as described in the Special Tax Notice Regarding Plan Payments provided.” 2 AR 253. The juxtaposition of “IRA or other eligible retirement plan” indicates that the 3 IRA is an eligible plan into which Plaintiff could rollover his account without tax penalty, 4 and thus would not be subject to offset from his LTD benefits. The drafting is ambiguous 5 at best. 6 Defendant also points to a Vanguard Disclosure Statement provided to Plaintiff. 7 “If you receive an “eligible rollover distribution” from an “eligible employer 8 plan,” other than a designated Roth account, you may make a tax-free rollover 9 contribution of the distribution to a Vanguard traditional IRA. An “eligible employer plan” includes a plan qualified under section 401(a) of the Code 10 (including a 401(k), pension, profit-sharing, defined benefit, or stock bonus 11 plan), a governmental 457 plan, a 403(a) annuity plan, or a 403(b) plan . . . . If you will be entitled to receive an eligible rollover distribution from an 12 eligible employer plan, you may elect to have the plan roll over all or any part 13 of your distribution directly to your Vanguard traditional IRA as a tax-free rollover contribution on your behalf. If you elect this direct rollover option, 14 no federal income taxes will be withheld from your distribution to the extent 15 it is transferred directly to your Vanguard traditional IRA.”

16 AR 30. While this disclosure uses the word “receive,” it in no way clarifies what that 17 means any more than did the language of the Plan. If anything, the language indicates 18 rolling over the money to an IRA would have no impact on how the funds were treated 19 for tax purposes, and certainly does not indicate it would change the nature of the money 20 as to create an LTD offset. 21 Based on the preceding, the inquiry is complete and this Court need not address 22 Defendant’s further arguments. The Court applies contra proferentem and finds the 23 language “received” in the Plan to mean when the Plaintiff actually receives distributions 24 from the IRA. Absent these distributions, any offsets by the Defendant are contrary to 25 the terms of the Parties’ agreement. 26 b. Prejudgment Interest 27 A district court may award prejudgment interest on an award of ERISA benefits at 28 1 Cir. 2001); Grosz–Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154, 1163–64 (9th 2 Cir. 2001); Blanton v. Anzalone, 813 F.2d 1574, 1575 (9th Cir. 1987). Generally, “the 3 interest rate prescribed for post-judgment interest under 28 U.S.C. § 1961 is appropriate 4 for fixing the rate of pre-judgment interest unless the trial judge finds, on substantial 5 evidence, that the equities of that particular case require a different rate.” Grosz– 6 Salomon, 237 F.3d at 1164 (quoting Nelson v. EG & G Energy Measurements Group, 7 Inc., 37 F.3d 1384, 1391 (9th Cir.1994)). “Substantial evidence” is defined as “such 8 relevant evidence as a reasonable mind might accept as adequate to support a 9 conclusion.” Blanton, 813 F.2d at 1576 (holding that district court abused its discretion 10 by awarding, on an ERISA award, a prejudgment interest rate below the Treasury bill rate 11 without making a finding as to the equities which justified the departure) (citations 12 omitted). The court may compensate a plaintiff for “the losses he incurred as a result of 13 [the defendant's] nonpayment of benefits.” Dishman, 269 F.3d at 988 (holding that the 14 district court abused its discretion in awarding a 16 percent prejudgment interest rate on 15 an ERISA award—double the rate of return on the defendant's investment portfolio— 16 because “[p]rejudgment interest is an element of compensation, not a penalty”). 17 In Blankenship, the Court deviated from the standard Treasury bill rate and 18 awarded Blankenship a 10.01 percent rate. 486 F.3d at 628. There, the “substantial 19 evidence” was in the form of Blankenship’s declaration that as a result of non-payment of 20 benefits, he was forced to replace the money he would have otherwise received with his 21 own personal funds that would have otherwise been invested in a Vanguard account. Id. 22 Here, though, there is no evidence of an appropriate rate of return outside of Plaintiff’s 23 declaration stating the account had a 5.25% rate since he opened it. This is not 24 “substantial evidence” on which this Court can rely to award a rate above the normal 25 Treasury bill rate. Accordingly, the Court awards Plaintiff 3.016% interest rate, the 26 current one-week average of the Treasury bill rate. 27 28 1 |}IV. CONCLUSION 2 For the foregoing reason, the Court orders as follows: 3 1) Plaintiffs Motion for Summary Judgment is granted. 4 2) Defendant’s Motion for Summary Judgment is denied. 5 3) Plaintiff does not “receive” the income from his Vanguard IRA account, and 6 Defendant cannot offset any income from Plaintiff's LTD benefits, until 7 Plaintiff takes contributions therefrom. 8 4) Defendant shall repay Plaintiff the money it claimed for overpayment 9 ($23,944.61) and the money withheld due to the claimed offset ($1,162.36 per 10 month from March 2021 through present day). 11 5) Plaintiff is entitled to recover the amounts listed in item 4 above at the current 12 Treasury bill rate of 3.016% per annum. 13 a. Plaintiffs interest rate on the withheld overpayment is calculated from 14 the time the overpayment was taken by Defendant. 15 b. Plaintiffs interest rate on the offset 1s calculated from the first day of the 16 month following when the payment was due. 17 6) The Court declines to rule on the Plaintiff's request for attorneys’ fees and costs 18 absent further briefing on the matter. 19 7) Plaintiff is ORDERED to submit to this Court within 21 days the following: 20 a. The total amount of benefits owed under item 4. 21 b. The total amount of interest owed under item 5. 22 c. Any motion for attorneys’ fees and costs, including supporting 23 documentation. 24 IT IS SO ORDERED. 25 Dated: July 14, 2022 HON. ROGER T. BENITE United States District Judge 27 28