Martinez v. Sun Life Assurance Co. ( 2020 )

United States Court of Appeals
For the First Circuit
No. 18-2127
MARCO MARTINEZ,
Plaintiff, Appellant,
v.
SUN LIFE ASSURANCE COMPANY OF CANADA,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Leo T. Sorokin, U.S. District Judge]
Before
Torruella, Lipez, and Kayatta,
Circuit Judges.
R. Joseph Barton, with whom Colin M. Downes and Block &
Leviton LLP were on brief, for appellant.
Mark Schmidtke, with whom Diane M. Saunders, David L.
Schenberg, and Ogletree, Deakins, Nash, Smoak & Stewart, P.C. were
on brief, for appellee.
January 27, 2020
LIPEZ, Circuit Judge. Appellant Marco Martinez
challenges the decision by Sun Life Assurance Company of Canada
("Sun Life") to offset his benefits under its employer-sponsored
long-term disability insurance policy ("the Plan") by the amount
of his service-connected disability compensation ("Veterans'
Benefits"). The district court found that Sun Life properly
interpreted the language of the Plan to permit the offset and
entered judgment for Sun Life on all counts.
Martinez argues that the district court erred in two
primary ways: by concluding as a matter of law that Veterans'
Benefits unambiguously qualify as a form of "Other Income Benefit"
covered by the Plan's offset provision, and by rejecting as a
matter of law that Sun Life's offset determination was motivated,
at least in part, by his military service in violation of the
Uniformed Services Employment and Reemployment Rights Act
("USERRA").
After careful review of the facts and law, we affirm.
I.
A. Factual Background
The relevant facts are undisputed by the parties.
Martinez is a disabled veteran who suffers from multiple sclerosis.
He was honorably discharged from the United States Army in 1992.
In September 2010, Martinez began work for the Athens Group and
later became a participant in its employee welfare benefit plan,
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which included long-term disability benefits provided pursuant to
an insurance policy issued by Sun Life and governed by the Employee
Retirement Income Security Act of 1974 ("ERISA"). In November
2012, when his health deteriorated, Martinez submitted a claim to
Sun Life for long-term disability benefits. Sun Life approved his
claim. Under the Plan, Martinez was entitled to monthly benefit
payments calculated at sixty percent of his total monthly earnings,
less any "Other Income Benefits." "Other Income Benefits," as
defined by the Plan, include the following:
Other Income Benefits are those benefits
provided or available to the Employee while a
Long Term Disability Benefit is payable.
These Other Income Benefits, other than
retirement benefits, must be provided as a
result of the same Total or Partial Disability
payable under this Policy. Other Income
Benefits include:
1. The amount the Employee is eligible for
under:
a. Workers' Compensation Law; or
b. Occupational Disease Law; or
c. Unemployment Compensation Law; or
d. Compulsory Benefit Act or Law; or
e. any automobile no-fault insurance
plan; or
f. any other act or law of like intent.
. . .
6. The disability or retirement benefits
under the United States Social Security Act,
or any similar plan or act, as follows:
a. Disability benefits the Employee is
eligible to receive.
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After Martinez had been receiving long-term disability
benefits under the Plan for nearly a year, he submitted a claim in
November 2013 to the United States Department of Veterans' Affairs
("the VA") for service-connected disability compensation pursuant
to the Veterans' Benefits Act, 38 U.S.C. § 1110. The VA awarded
Martinez Veterans' Benefits in January 2015, retroactive to July
19, 2013, based on a number of health conditions caused or
aggravated by his military service, including multiple sclerosis.
Martinez promptly notified Sun Life that his claim for Veterans'
Benefits had been granted. By letter dated March 25, 2015, Sun
Life informed Martinez that his Veterans' Benefits were considered
"Other Income Benefits" subject to offset under the Plan and, as
a result, his monthly Plan benefits would be decreased from $2,500
to $465. Sun Life also sought reimbursement of $32,560 for past
overpayments. In describing Martinez's Veterans' Benefits as
"Other Income Benefits," the letter excerpted the entire "Other
Income Benefits" section of the Plan1 without further specifying
which provision authorized the offset. The letter also notified
Martinez of his right to appeal Sun Life's decision.
Martinez responded by asking Sun Life for clarification
of which "Other Income Benefits" provision it relied upon for its
decision. Sun Life referred Martinez to Sections 1.f and 6 of the
1We provide the complete "Other Income Benefits" section of
the Plan as an Appendix to this opinion.
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Plan, quoting both Section 1 and Section 6 in full. Sun Life's
letter bolded the language "any other act or law of like intent"
in subsection 1.f and "or any similar plan or act" in Section 6.
Martinez then submitted a formal appeal of Sun Life's decision,
asserting various reasons for the exclusion of Veterans' Benefits
as "Other Income Benefits" under the Plan, including that such
benefits are not "compulsory" under Section 1.d.
In its letter denying Martinez's appeal, Sun Life again
quoted the entire "Other Income Benefits" section of the Plan and
stated:
Other Income Benefits are defined by the
policy, as noted above. Specifically, Veteran
Benefits would be considered disability or
retirement benefits under the United States
Social Security Act, or any similar plan or
act or any other act or law of like intent.
You are receiving Veteran Benefits due to a
service connection for multiple sclerosis with
the loss of use of both feet. You are
receiving Long Term Disability benefits
because of your multiple sclerosis diagnosis.
Because you are being paid Veteran Benefits,
as a result of your disability, the Veteran
Benefits are considered Other Income.
The letter cited a number of federal cases supporting its decision,
including Holbrooks v. Sun Life Assurance Co. of Canada, 570 F.
App'x 831 (10th Cir. 2014), which held that service-connected
disability benefits are awarded under a "Compulsory Benefit Act or
Law" pursuant to the same policy language as set forth in the Plan.
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See id. at 835. After receiving Sun Life's letter denying his
appeal, Martinez filed the instant action.
B. Procedural History
Martinez's complaint asserts seven counts: Count I
alleges discrimination based on service in the military in
violation of USERRA, 38 U.S.C. § 4311; Count II seeks benefits
pursuant to ERISA, 29 U.S.C. § 1132(a)(1)(B); Count III alleges
that Sun Life breached its fiduciary duty in violation of ERISA,
29 U.S.C. § 1104(a)(1)(A), (B), and (D); Count IV alleges co-
fiduciary liability in violation of ERISA, 29 U.S.C. § 1105(a);
Count V alleges violation of the Veterans' Benefits Act, 38 U.S.C.
§ 5301(a); Count VI seeks declaratory and injunctive relief under
ERISA, 29 U.S.C. § 1132(a)(3), and 28 U.S.C. §§ 2201-02; and Count
VII alleges knowing participation in a fiduciary breach by a non-
fiduciary in violation of ERISA, 29 U.S.C. § 1132(a)(3). Sun Life
filed a motion to dismiss, see Fed. R. Civ. P. 12(b)(6), which the
district court denied without prejudice, instructing the parties
to compile and file the administrative record regarding Martinez's
ERISA benefit claim (Count II). After Sun Life submitted its
complete claim file and applicable policy documents, Martinez
moved for discovery on Count II. The district court denied the
motion, stating that Martinez had not "overcome the strong
presumption against discovery" in ERISA cases.
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Sun Life then filed a motion for summary judgment on
Count II, arguing that Martinez's Veterans' Benefits are "Other
Income Benefits" and thus subject to offset as a matter of law
because he receives them pursuant to a "Compulsory Benefit Act or
Law" and "an act or law of like intent" to Workers' Compensation
Law, both of which it contended are unambiguous terms within the
Plan. In granting the motion, the district court held that the
term "Compulsory Benefit Act or Law" unambiguously includes
Veterans' Benefits like those awarded to Martinez. The court did
not address the additional argument that Martinez's Veterans'
Benefits also are awarded under "an act or law of like intent" to
Workers' Compensation Law.
The district court then ordered the parties to file a
joint report proposing a plan for resolving the remaining issues
in the case. The parties proposed treating Sun Life's previously
filed motion to dismiss as a motion for judgment on the pleadings.
After briefing on the motion was complete, the court granted
judgment for Sun Life on all remaining counts. The court held
that Sun Life did not violate USERRA because Martinez's military
status was not a motivating or substantial factor in the
application of the "Other Income Benefits" provision of the Plan.
The court found that "the plain language of the Plan does not
distinguish between service members and non-service members;"
rather, the Plan uniformly permits Sun Life to offset benefits
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received from third parties for the same disability, including
Social Security disability benefits, which Martinez was also
receiving and which had also been deducted from his Plan benefits.
The district court also found that its prior ruling on Count II,
concluding that Martinez's Veterans' Benefits were plainly
included in the "Compulsory Benefit Act or Law" section of the
Plan, compelled the conclusion that Sun Life did not breach any
duties under ERISA as a fiduciary (Count III), a co-fiduciary
(Count IV), or a non-fiduciary (Count VII) when it determined that
Martinez's Veterans' Benefits were "Other Income Benefits" subject
to offset.2 This appeal followed.
II.
We begin with Martinez's ERISA claims, first addressing
his appeal of the district court's summary judgment for Sun Life
on Count II and then its dismissal of the other ERISA counts.
A. Standards of Review
We review both a grant of summary judgment and a
dismissal based on the pleadings de novo. Stamp v. Metro. Life
Ins. Co., 531 F.3d 84, 87 (1st Cir. 2008) (summary judgment); Mass.
Nurses Ass'n v. N. Adams Reg'l Hosp., 467 F.3d 27, 31 (1st Cir.
2006) (judgment on the pleadings). Because Sun Life has not
identified any language in the Plan granting it discretionary
2The district court also entered judgment on the pleadings
for Sun Life on Counts V and VI, which Martinez did not appeal.
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authority to construe the terms of the Plan, we also review Sun
Life's ERISA benefits determination de novo. See Firestone Tire
& Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). Where, as here,
that determination was based solely on the construction of ERISA
contract language, we may affirm the grant of summary judgment
"only if the meaning of the language is clear" and "there is no
genuine issue as to the inferences which might reasonably be drawn
from the language." Rodriguez-Abreu v. Chase Manhattan Bank, N.A.,
986 F.2d 580, 586 (1st Cir. 1993).
In reviewing a judgment on the pleadings, we accept the
non-movant's well-pleaded facts as true and draw all reasonable
inferences in the non-movant's favor. Mass. Nurses Ass'n, 467
F.3d at 31. We will affirm a judgment on the pleadings "only if
the uncontested and properly considered facts conclusively
establish the movant's entitlement to a favorable judgment."
Aponte-Torres v. Univ. of P.R., 445 F.3d 50, 54 (1st Cir. 2006).
B. ERISA Benefits Claim
Martinez asserts that summary judgment was improper on
Count II based on the "Compulsory Benefit Act or Law" category of
"Other Benefits." He argues that the district court erred by
concluding that Sun Life provided adequate notice of its reliance
on the "Compulsory Benefit Act or Law" provision to justify its
offset of his Veterans' Benefits, and by finding that the phrase
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"Compulsory Benefit Act or Law" unambiguously covers Veterans'
Benefits. We address these contentions in turn.
1. Compliance with ERISA Notice Requirement
Our initial task is to determine whether Sun Life's
alleged failure to clearly disclose in its letters to Martinez
that it relied upon the "Compulsory Benefit Act or Law" provision
for the offset now precludes it from relying on this rationale in
litigation. This argument is premised on ERISA's statutory notice
provision, which requires that an insurer " provide adequate notice
in writing to any participant or beneficiary whose claim for
benefits under the plan has been denied, setting forth the specific
reasons for such denial, written in a manner calculated to be
understood by the participant." 29 U.S.C. § 1133(1).
Sun Life's communications to Martinez complied with this
mandate. Although Sun Life at times highlighted other rationales
for the offset, it indicated to Martinez on multiple occasions
that it intended to rely on the "Compulsory Benefit Act or Law"
provision. The provision was included, albeit not emphasized, in
Sun Life's letter in response to Martinez's request for
clarification as to Sun Life's rationale for the offset. Likewise,
Sun Life's final letter denying Martinez's appeal included a
lengthy discussion of the Tenth Circuit’s Holbrooks decision,
which relied on the "Compulsory Benefit Act or Law" provision to
uphold an offset based on a receipt of Veterans' Benefits. Indeed,
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Martinez clearly understood that the "Compulsory Benefit Act or
Law" provision was pertinent because he addressed the alleged non-
compulsory nature of Veterans' Benefits explicitly in his appeal
letter.
Moreover, even if Sun Life had not adequately disclosed
its rationale to Martinez, barring Sun Life from raising the
"Compulsory Benefit Act or Law" provision now would not be the
proper remedy in this case. See Glista v. Unum Life Ins. Co. of
Am., 378 F.3d 113, 130-31 (1st Cir. 2004) (explaining that under
ERISA, courts have "an array of possible responses when the plan
administrator relies in litigation on a reason not articulated to
the claimant" and that "no single answer fits all cases"). We
typically have only barred a plan from asserting defenses to
coverage not articulated to the insured when the lack of notice
resulted in prejudice to the insured. See Bard v. Bos. Shipping
Ass'n, 471 F.3d 229, 241-45 (1st Cir. 2006) (barring the plan from
relying on a rationale not clearly articulated to the insured
because, if he had been on notice, he would have submitted
different medical documentation); Glista, 378 F.3d at 132 (same).
Given that this case is strictly one of contract interpretation
-- a question of law -- and Martinez has had a full opportunity to
present his arguments on the construction of the Plan's provisions,
we could find no prejudice to Martinez even had Sun Life not
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adequately advanced its present argument in its initial denial.3
Accordingly, we agree with the district court's decision to
entertain Sun Life's arguments premised on the "Compulsory Benefit
Act or Law" provision and will consider those arguments on appeal.
2. Meaning of "Compulsory Benefit Act or Law"
Next, we must determine whether the phrase "Compulsory
Benefit Act or Law" is ambiguous. If so, pursuant to the doctrine
of contra proferentem, the term must be construed in favor of
Martinez, thus barring the offset of his Veterans' Benefits. See
Troiano v. Aetna Life Ins. Co., 844 F.3d 35, 44 (1st Cir. 2016)
(holding that ambiguous policy terms must be strictly construed
against the insurer when its determination is subject to de novo
review).
ERISA-regulated employee benefit plans are interpreted
according to principles of federal common law. See, e.g.,
3 For similar reasons, we also reject Martinez's argument that
the district court abused its discretion when it denied discovery
on Count II before deciding Sun Life's motion for summary judgment.
It is unclear how discovery would help elucidate the plain meaning
of an unambiguous contract term. Martinez's reliance on Taylor v.
Continental Group Change in Control Severance Pay Plan, 933 F.2d
1227 (3d Cir. 1991), is inapt. The Taylor court permitted
discovery in a different procedural posture: after finding that
a term in an ERISA-governed severance plan was ambiguous, it
remanded the case, instructing the district court to consider
interpretive statements, past practices, and other evidence
bearing on the parties' understanding of the relevant term. See
933 F.2d at 1232-33. At the same time, the court noted that where
a plan term is unambiguous, it may be interpreted as a matter of
law, which is exactly what the district court did here. See id.
at 1232.
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Filiatrault v. Comverse Tech., Inc., 275 F.3d 131, 135 (1st Cir.
2001). Under federal common law, plan language should be accorded
its plain and ordinary meaning based on "commonsense principles of
contract interpretation." Id. Courts may refer to dictionaries
to help elucidate the common understanding of terms, although
dictionary definitions are not controlling. See Littlefield v.
Acadia Ins. Co., 392 F.3d 1, 8 (1st Cir. 2004).
ERISA contract language is ambiguous only "if the terms
are inconsistent on their face" or "allow reasonable but differing
interpretations of their meaning." Rodriguez-Abreu, 986 F.2d at
586. The principle of reasonableness is central to our ambiguity
analysis -- courts are not permitted to "torture language in an
attempt to force particular results or convey . . . nuances the
contracting parties neither intended nor imagined." Burnham v.
Guardian Life Ins. Co. of Am., 873 F.2d 486, 489 (1st Cir. 1989).
Applying these principles, we agree with both the
district court and the Tenth Circuit in Holbrooks that "[t]here is
nothing ambiguous about the term 'Compulsory Benefit Act or Law.'"
Holbrooks, 570 F. App'x at 835; see also Martinez v. Sun Life
Assurance Co. of Canada, No. 16-CV-12154-LTS, 2018 WL 2163641, at
*3 (D. Mass. Feb. 14, 2018). The ordinary meaning of "compulsory"
is "required by a law or rule" or "having the power of forcing
someone to do something." See, e.g., Compulsory, Merriam-
Webster's Dictionary Online, https://www.merriam-
- 13 -
webster.com/dictionary/compulsory (last visited Jan. 23, 2020).
Accordingly, a "Compulsory Benefit Act or Law" is an act or law
that requires benefits to be paid to any applicant who meets its
qualifying criteria.
Because the VA was required by law to provide Veterans'
Benefits to Martinez once it determined his eligibility, his
Veterans' Benefits are clearly "compulsory." Accord Holbrooks,
570 F. App'x at 835. The statute governing basic entitlement to
service-connected disability compensation states that "[f]or
disability resulting from personal injury suffered or disease
contracted in line of duty . . . the United States will pay to any
veteran thus disabled . . . compensation as provided in this
subchapter." 38 U.S.C. § 1110 (emphasis added). There is no room
for discretion in this mandate. For this reason, some of our
sister circuits have referred to Veterans' Benefits as "obligatory
compensation for injuries to service men and women during military
duty," Riley v. Sun Life & Health Ins. Co., 657 F.3d 739, 742 (8th
Cir. 2011), and "nondiscretionary, statutorily mandated benefits,"
Cushman v. Shinseki, 576 F.3d 1290, 1298 (Fed. Cir. 2009). See
also Hannington v. Sun Life & Health Ins. Co., 711 F.3d 226, 234
(1st Cir. 2013) (stating that Veterans' Benefits are based solely
on "diseases and injuries incurred by service personnel on account
of their military service").
- 14 -
Ignoring this logic, Martinez asserts that a reasonable
alternative interpretation of "Compulsory Benefit Act or Law" is
a law that requires a third party, not the government, to pay
benefits. Citing two Supreme Court cases that have used the word
"compulsory" to refer to programs of this nature,4 he contends that
the "normal use of the word compulsory suggests a third-party is
compelled, not that one compels oneself to do something." He also
emphasizes that the other benefits programs listed in subsection
1 -- workers' compensation, occupational disease compensation, and
unemployment compensation -- all involve this so-called third-
party form of compulsion.5
There are multiple flaws in this argument. First,
although the Supreme Court has called certain statutes requiring
workers' compensation and minimum standards of healthcare coverage
"compulsory," the Court has never suggested that only those
programs qualify as compulsory.
4 See Metro. Life Ins. Co. v. Massachusetts, 471 U.S. 724,
735 (1985); N.Y. Cent. R. Co. v. White, 243 U.S. 188, 195 (1917).
5 In fact, workers' compensation law, occupational disease
law, and unemployment compensation law do not all fit the same
model of third-party coercion. For example, workers' compensation
laws compel employers to buy insurance to compensate employees for
work-related injuries. However, unemployment compensation laws
compel employers to make financial contributions to a government-
created fund, which is ultimately paid out to unemployed
individuals by the state. See generally 20 C.F.R. §§ 601-604.6.
- 15 -
Second, there is nothing in the text of the Plan to
suggest that a "Compulsory Benefit Act or Law" must be similar in
form to the third-party model of benefits programs enumerated
therein. Other subsections of the Plan do include a "similarity"
requirement -- for example, subsection 6 allows for offset of
"disability or retirement benefits under the United States Social
Security Act, or any similar plan or act." However, the
"Compulsory Benefit Act or Law" provision stands alone without any
language to link the term to the other programs included in the
same subsection.6
Third, by focusing on the form of the specific benefits
plans identified -- i.e., the particular entity that is compelled
to pay benefits to qualified individuals -- Martinez elevates form
over substance. No reasonable reader of the Plan would look at
the term "Compulsory Benefit Act or Law" and ponder over what
specific type of entity is being compelled. The essence of a
6 Thus, contrary to Martinez's assertion, our decision in
Hannington that Veterans' Benefits are not "similar to" Social
Security or Railroad Retirement Act benefits, and hence cannot
offset disability benefits payable under a Sun Life long-term
disability plan, does not control the outcome of this case. See
Hannington, 711 F.3d at 234. Although the plan in Hannington did
contain a provision allowing for offset of "disability benefits
under any compulsory benefit act or law," the insurer did not rely
on that provision for its offset of the plan participant's service-
connected disability benefits. Id. at 228-29, 235. As such, we
had no occasion to opine on the application of that provision to
Veterans' Benefits. See Glista, 378 F.3d at 128 (explaining that
judicial review is limited to the asserted basis for the insurer's
decision).
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compulsory benefit law is that some entity -- be it an employer,
an insurance company, or a government agency -- is required by law
to pay the benefit to all qualified applicants.
We also reject Martinez's contention that "Compulsory
Benefit Act or Law" must be defined in a way that it does not
render superfluous the listing of workers' compensation law,
occupational disease law, and unemployment compensation law in
provisions "a" through "c" of subsection 1 of the Plan. See
Vendura v. Boxer, 845 F.3d 477, 486 (1st Cir. 2017) (noting the
"longstanding principle against reading plan terms to be
superfluous"). The rule against superfluities, as a matter of
statutory interpretation, is not unwavering -- we apply it only if
the resulting construction is "rationally possible." See New Eng.
Carpenters Cent. Collection Agency v. Labonte Drywall Co., 795
F.3d 271, 282 (1st Cir. 2015). Martinez's urged construction is
irrational because it would mean that Sun Life cannot use a generic
description that covers the full range of compulsory benefit
programs contemplated by the Plan if that generic description also
encompasses certain programs that are specifically enumerated in
the Plan. The insurer cannot anticipate every type of program
that might justify an offset. It can supplement the itemization
of programs with generic descriptions whose plain meaning will be
understood by the average plan participant.
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Finally, contrary to Martinez's argument, the fact that
the entire term, "Compulsory Benefit Act or Law," is capitalized
but not explicitly defined in the Plan's definitions section does
not render it ambiguous.7 Though the parties dispute the reach of
"Compulsory Benefit Act or Law," both agree that it is an umbrella
category and does not refer to only one specific act or law. The
phrase also appears in a list of both capitalized and uncapitalized
terms, many of which are also undefined but connote a plain
meaning. Where the only contested word in the phrase --
"compulsory" -- has a plain and unambiguous meaning, we cannot
find the provision ambiguous simply because it is capitalized but
undefined.
We thus conclude that the only reasonable interpretation
of "Compulsory Benefit Act or Law" is a law that requires benefits
be paid to any applicant who meets its qualifying criteria.
Martinez's Veterans' Benefits fall squarely within this
definition.8
7 The cases cited by Martinez, Scottsdale Insurance Co. v.
Torres, 561 F.3d 74 (1st Cir. 2009) and O'Neil v. Retirement Plan
for Salaried Employees of RKO General, Inc., 37 F.3d 55 (2d Cir.
1994), create no such per se rule.
8 Hence, like the district court, we need not consider Sun
Life's alternative argument that Veterans' Benefits also
constitute an "act or law of like intent" to "Workers' Compensation
Law." This argument is premised on subsections 1.a and 1.f of the
"Other Income Benefits" provision of the Plan. Specifically,
section 1.f allows for the offset of benefits awarded under "any
other act or law of like intent" to the previously enumerated laws,
which include "Workers' Compensation Law" in subsection 1.a. Thus,
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C. ERISA Breach Claims
Martinez also argues that the district court erred in
dismissing Counts III, IV, and VII, which allege that Sun Life
breached a fiduciary duty or participated in a fiduciary breach by
construing the Plan to require offset of his Veterans' Benefits
and failing to disclose that Veterans' Benefits constitute "Other
Income Benefits." Martinez's claim for direct breach of fiduciary
duty (Count III) is based on the Plan itself, while the claims for
co-fiduciary (Count IV) or non-fiduciary liability (Count VII) are
premised on the language of the Summary Plan Description ("SPD"),
drafted by Sun Life and delivered by Martinez's employer and Plan
sponsor, the Athens Group.9 Finding that all three claims could
succeed only if Martinez's Veterans' Benefits were not properly
considered "Other Income Benefits" or not clearly disclosed as
such, the district court disposed of them in light of its earlier
ruling that the Plan unambiguously provides for offset of Veterans'
Benefits.
if Veterans' Benefits were awarded pursuant to a law of like intent
to workers' compensation law, Sun Life would, for that reason as
well, be entitled to subtract them from Martinez's ERISA disability
payment as "Other Income Benefits."
9Thus, any primary fiduciary liability for Counts IV or VII
would lie with the Athens Group, and Sun Life could only be liable
as a co-fiduciary (Count IV) or a non-fiduciary who knowingly
participated in a fiduciary breach (Count VII).
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We agree that the fiduciary claims necessarily fail with
the determination that "Compulsory Benefit Act or Law"
unambiguously covers Veterans' Benefits. Properly construing and
following the terms of the Plan does not constitute a breach of
fiduciary duty.10
Nor does the language of the SPD provide any basis for
a claim that the Athens Group breached a fiduciary duty, such that
Sun Life could be liable for participating in that breach as a co-
fiduciary or a non-fiduciary. Given that the SPD contained an
identical definition of "Other Income Benefits" as the Plan, our
conclusion that the Plan language was unambiguous means that we
must also conclude that the SPD was "written in a manner calculated
to be understood by the average plan participant." 29 U.S.C.
§ 1022(a); see id. (further stating that a summary plan description
"shall be sufficiently accurate and comprehensive to reasonably
apprise such participants and beneficiaries of their rights and
obligations under the plan").
10For similar reasons, we also reject the argument that Sun
Life had a fiduciary obligation to affirmatively advise Martinez
that Veterans' Benefits were subject to offset under the Plan as
soon as it learned that Martinez was a veteran. The fiduciary
duty to convey unrequested material information to beneficiaries
"only arises if there was some particular reason that the fiduciary
should have known that his failure to convey the information would
be harmful." Watson v. Deaconess Waltham Hosp., 298 F.3d 102,
114-15 (1st Cir. 2002). In this case, there could be no
anticipated harm, given the Plan's unambiguous inclusion of
Veterans' Benefits within the term "Compulsory Benefit Act or Law."
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In so concluding, we reject Martinez's assertion that
the question of whether the SPD's terms are capable of being
understood by an "average plan participant" is a question of fact
not appropriately decided on a motion for judgment on the
pleadings. Our holding that the phrase "Compulsory Benefit Act or
Law" unambiguously applies to Veterans' Benefits forecloses the
argument that an "average plan participant" would not understand
its meaning. Put differently, our determination that the phrase's
meaning is unambiguous rests on the judgment that an "average plan
participant" would read the provision as we do. See, e.g., Harris
v. Harvard Pilgrim Health Care, Inc., 208 F.3d 274, 278 (1st Cir.
2000) (concluding, in effect, that an "unambiguous" plan provision
reasonably apprises the average plan participant of the plan's
relevant terms).
III.
Martinez claims that Sun Life's offset of Veterans'
Benefits discriminates against employees who have served in the
uniformed services in violation of USERRA, 38 U.S.C. § 4311. In
entering judgment for Sun Life on the USERRA claim, the district
court held that Martinez had not adequately pleaded that his
military status was "at least a motivating or substantial factor"
in Sun Life's decision to offset his Veterans' Benefits. See
Velázquez-García v. Horizon Lines of P.R., Inc., 473 F.3d 11, 17
(1st Cir. 2007). On appeal, Martinez argues that the district
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court misapplied both the standard of review under Federal Rule of
Civil Procedure 12(c) and the substantive standard for violation
of USERRA. Because both arguments turn on our conclusion that the
phrase "Compulsory Benefit Act or Law" is unambiguous as a matter
of law, we address them together.
A. USERRA Framework
By its terms, § 4311 protects any member of the uniformed
services from being denied "any benefit of employment by an
employer on the basis of that membership." 38 U.S.C. § 4311(a).
Specifically, the relevant portion of the statute provides that:
(a) A person who is a member of, applies to be
a member of, performs, has performed, applies
to perform, or has an obligation to perform
service in a uniformed service shall not be
denied initial employment, reemployment,
retention in employment, promotion, or any
benefit of employment by an employer on the
basis of that membership, application for
membership, performance of service,
application for service, or obligation.
. . .
(c) An employer shall be considered to have
engaged in actions prohibited--
(1) under subsection (a), if the person's
membership, application for membership,
service, application for service, or
obligation for service in the uniformed
services is a motivating factor in the
employer's action, unless the employer can
prove that the action would have been taken in
the absence of such membership, application
for membership, service, application for
service, or obligation for service.
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Id. § 4311. Thus, for a claim of discrimination under USERRA to
survive a motion for judgment on the pleadings, an employee must
plausibly allege that military status was "a motivating factor" in
the adverse action taken by the employer. See id.; Velázquez-
García, 473 F.3d at 17. At later stages of the litigation, i.e.,
on a motion for summary judgment or at trial, if the plaintiff
introduces evidence to substantiate his or her plausible
allegations of discrimination, the burden then shifts to the
employer to "prove, by a preponderance of the evidence, that the
action would have been taken despite the protected status."
Velázquez-García, 473 F.3d at 17 (quoting Sheehan v. Dep't of Navy,
240 F.3d 1009, 1014 (Fed. Cir. 2001)).
B. Application of USERRA
Martinez did not meet his initial pleading burden
because his discrimination allegation is implausible as a matter
of law.11 The simple fact that his Plan benefits were reduced by
the amount of his Veterans' Benefits does not mean that Sun Life
11In reaching this conclusion, the district court did not
improperly credit Sun Life's assertion that its interpretation of
the Plan was based on the policy's plain language instead of
crediting Martinez's assertion that the interpretation was an act
of discrimination under USERRA. Rather than crediting any
assertions by Sun Life, the court relied on its previous holding
that, as a matter of law, the language "Compulsory Benefit Act or
Law" unambiguously covers service-connected disability
compensation. This conclusion required no resolution of disputed
facts; it was a legal conclusion based on the court's
interpretation of the Plan's unambiguous language. See supra
Section II.B.
- 23 -
was motivated, at least in part, by his status as a servicemember
to make that reduction. By this logic, any insurance plan that
permits benefits to be offset by service-connected disability
benefits, whether it explicitly lists them as subject to offset or
includes them in a generic term like "Compulsory Benefit Act or
Law," is a per se violation of USERRA. This approach would render
Veterans' Benefits practically untouchable by insurers like Sun
Life, allowing veteran recipients to double-collect disability
benefits for the same underlying condition, even where such
collection is barred for recipients of other forms of disability
benefits. Hence, Martinez's interpretation runs afoul of the
statutory purpose of § 4311, which is to root out unlawful
discrimination on the basis of uniformed service, not provide
preferential treatment to servicemembers. See H.R. Rep. No. 103–
65(I), at 23 (1993), as reprinted in 1994 U.S.C.C.A.N. 2449, 2456
(stating that § 4311(a) is designed to "reenact the current
prohibition against discrimination"); Crews v. City of Mt. Vernon,
567 F.3d 860, 862, 866 (7th Cir. 2009) (holding that a city's
decision to stop providing a work schedule benefit to employees in
the National Guard, which it had never provided to non-Guard
employees, did not violate § 4311 because "USERRA does not require
such preferential treatment"); Rogers v. City of San Antonio, 392
F.3d 758, 768 (5th Cir. 2004) (finding "no intention" in § 4311(a)
"to prohibit neutral labor contracts from treating employees on
- 24 -
military leave equally with those on non-military leave with
respect to the loss of benefits due to absence from work").
Thus, the fundamental problem with Martinez's USERRA
claim is that he does not allege any facts suggesting that Sun
Life was motivated to apply the "Other Benefits" provision to him
because he was receiving military-related benefits.12 Indeed,
Martinez even concedes that Sun Life also offset his Social
Security disability benefits because, like his Veterans' Benefits,
they were awarded for the same disability for which he received
Plan benefits. The only role that Martinez's military status
allegedly played in Sun Life's decision to offset his Plan benefits
is that the source of his "Other Income Benefit[]" was the VA.
That fact alone is not enough to plausibly allege a violation of
USERRA.13 Accordingly, we hold that the district court properly
12 In this respect, the cases cited by Martinez are all
distinguishable, even though they found USERRA violations based on
facially neutral policies. See Erickson v. U.S. Postal Serv., 571
F.3d 1364, 1368 (Fed. Cir. 2009) (employee fired based in part on
his "excessive use of military leave"); Petty v. Metro. Gov't of
Nashville-Davidson Cty., 538 F.3d 431, 447-48 (6th Cir. 2008)
(employee investigated because of concerns related to his military
service); Velázquez-García, 473 F.3d at 17-19 & n.8 (employee
subject to explicitly anti-military comments in the workplace).
13We also reject Martinez's argument that Sun Life's timing
in notifying him that his Veterans' Benefits would be offset
suggests a discriminatory motive. Sun Life was under no obligation
to explain its Plan interpretation to Martinez before Martinez
notified Sun Life that he had been awarded service-connected
disability benefits. Where the phrase "Compulsory Benefit Act or
Law" unambiguously covers those benefits, any earlier
communication would have been duplicative of the Plan's plain
language. Cf. Velázquez-García, 473 F.3d at 20-21 (finding that
- 25 -
granted judgment on the pleadings for Sun Life on Martinez's USERRA
claim.14
Affirmed.
an employer's delay in informing a USERRA plaintiff that his check-
cashing business violated the employer's code of conduct suggested
that its reason for firing him was pretextual, in part because the
code of conduct provision was ambiguous and did not clearly bar
running a check-cashing business). See also supra note 10
(rejecting another version of this argument in a different
context).
14 Because we hold that Martinez failed to state a claim of
USERRA discrimination, and thus affirm judgment on the pleadings
for Sun Life, we do not reach Sun Life's alternative argument that
it is not a proper defendant under USERRA, which defines an
"employer" to include "a person, institution, organization, or
other entity to whom the employer has delegated the performance of
employment-related responsibilities." 38 U.S.C. § 4303(4)(A)(i).
Rather, our analysis assumes without deciding that Sun Life is
subject to suit under USERRA.
- 26 -
Appendix
Other Income Benefits
Other Income Benefits are those benefits provided or available to
the Employee while a Long Term Disability Benefit is payable.
These Other Income Benefits, other than retirement benefits, must
be provided as a result of the same Total or Partial Disability
payable under this Policy. Other Income Benefits include:
1. The amount the Employee is eligible for under:
a. Workers' Compensation Law; or
b. Occupational Disease Law; or
c. Unemployment Compensation Law; or
d. Compulsory Benefit Act or Law; or
e. an automobile no-fault insurance plan; or
f. any other act or law of like intent.
2. The Railroad Retirement Act (including any dependent
benefits).
3. Any labor management trustee, union or employee benefit plans
that are funded in whole or in part by the Employer.
4. Any disability income benefits the Employee is eligible for
under:
a. any other group insurance plan of the Employer;
b. any governmental retirement system as a result of the
Employee's job with his Employer.
5. The benefits the Employee receives under his Employer's
Retirement Plan as follows:
a. any disability benefits;
b. the Employer-paid portion of any retirement benefits.
(Disability benefits that reduce the Employee's accrued
retirement benefit will be treated as a retirement benefit.
Retirement benefits do not include any amount rolled over or
transferred to any other retirement plan as defined in Section
402 of the Internal Revenue Code.)
6. The disability or retirement benefits under the United States
Social Security Act, or any similar plan or act, as follows:
a. Disability benefits the Employee is eligible to receive.
b. Disability benefits the Employee's spouse, child or
children are eligible to receive because of the
Employee's Total or Partial Disability unless the
dependent benefits are paid directly to the divorced
- 27 -
spouse or to the children in custody of the divorced
spouse.
c. Retirement benefits received by the Employee.
d. Retirement benefits the Employee's spouse, child or
children receive because of the Employee's receipt
because of the Employee's receipt of retirement benefits
unless the dependent benefits are paid directly to the
divorced spouse or to the children in custody of the
divorced spouse.
If an Employee's Total or Partial Disability begins after
Social Security Normal Retirement Age, Social Security
Retirement Benefits will not be offset if, prior to his Total
or Partial Disability, he was already receiving Social
Security Retirement Benefits.
7. The amount the Employee receives from any accumulated sick
leave.
8. Any salary continuation paid to the Employee by his Employer
which causes the Net Monthly Benefit, plus Other Income
Benefits and any salary continuation to exceed 100% of the
Employee's Total Monthly Earnings. The amount in excess of
100% of the Employee's Total Monthly Earnings will be used to
reduce the Net Monthly Benefit.
9. Any amount due to income replacement or lost wages the
Employee receives by compromise, settlement or other method
as a result of a claim for any Other Income Benefit.
10. Any amount the Employee receives from a voluntary separation
of employment agreement from the Employer including severance
pay or any other income in settlement of an employment
contract.
Other Income Benefits will include any amount described above which
would have been available to the Employee had he applied for that
benefit.
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