Stachmus v. The Guardian Life Insurance Co ( 2021 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT April 23, 2021
_________________________________
Christopher M. Wolpert
Clerk of Court
MICHAEL ERICK STACHMUS,
Plaintiff - Appellant,
v. No. 20-7019
(D.C. No. 6:19-CV-00071-RAW)
THE GUARDIAN LIFE INSURANCE (E.D. Okla.)
COMPANY OF AMERICA,
Defendant - Appellee.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before MORITZ, BALDOCK, and EID, Circuit Judges.
_________________________________
Michael Erick Stachmus sought a declaratory judgment that he and his son are
the rightful beneficiaries of a life insurance policy administered by The Guardian
Life Insurance Company of America under the Employee Retirement Income
Security Act (ERISA), 29 U.S.C. §§ 1001-1461. The district court entered judgment
in favor of Guardian, and Stachmus now appeals. He also seeks to seal portions of
the appendix containing personally identifying information, while Guardian seeks to
*
After examining the briefs and appellate record, this panel has determined
unanimously to honor the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
submitted without oral argument. This order and judgment is not binding precedent,
except under the doctrines of law of the case, res judicata, and collateral estoppel. It
may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1
and 10th Cir. R. 32.1.
recover its appellate fees and costs. Exercising jurisdiction under 28 U.S.C. § 1291,
we affirm the district court’s judgment, grant Stachmus’s unopposed motion to seal
portions of the appendix, and deny Guardian’s request for fees and costs.
I
Guardian issued the policy to Stachmus’s father (the insured) through his
employer on July 1, 2011. The insured originally designated Stachmus and his son
each 50% beneficiaries, but on May 9, 2012, the insured designated Stachmus a 90%
beneficiary and Stachmus’s step-sister, Andrea, a 10% beneficiary. Shortly after the
insured died on September 4, 2013, Andrea submitted claims to Guardian on behalf
of herself and Stachmus’s step-mother and step-brother (“Andrea’s claims”). She
also sent Guardian a general power of attorney signed by the insured on July 27,
2011 (shortly after the policy was issued and before the May 9, 2012, beneficiary
change) designating Andrea as the insured’s attorney-in-fact, as well as a beneficiary-
change form executed by Andrea on August 27, 2013 (just before the insured died on
September 4). The August 27, 2013, beneficiary-change form designated Andrea a
50% beneficiary and Stachmus’s step-mother and step-brother each 25%
beneficiaries.
Because the power of attorney indicated its “powers [would] not exist after
[the insured] bec[a]me disabled or incapacitated,” Aplt. App., Vol. IV at 161,
Guardian asked Andrea whether the insured was incapacitated at the time she signed
the August 27, 2013, beneficiary-change form. She replied that the insured was not
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incapacitated and that he had specifically directed her to change the designations.
Consequently, Guardian paid Andrea’s claims on October 17, 2013.
Eleven days later, on October 28, 2013, Stachmus wrote to Guardian to inquire
how to begin the claims process, indicating he was aware of two policies, one from
which he had been removed as a beneficiary by the August 27, 2013, beneficiary-
change form and a second that designated him a 90% beneficiary. Guardian replied
that the beneficiary-change form did not distinguish between Basic Life and Optional
Life coverages and thus his previous 90% designation from May 9, 2012, was “null
and void” as to both coverages, id. at 124.
More than two years later, on January 26, 2016, Stachmus, through counsel,
submitted a formal claim to Guardian. He acknowledged Andrea’s claims but
asserted she was prohibited by state law from designating herself a beneficiary; he
also argued that the August 27, 2013, beneficiary-change form was ineffective
because the insured was incompetent at the time. Guardian denied Stachmus’s claim
on March 14, 2016, but directed him to provide additional information if he wished
to appeal the decision.
On May 13, 2016, Stachmus sought review with Guardian’s appeals
committee. Guardian acknowledged the appeal on May 31, 2016, and invited him to
provide additional information to support his claim. Id. at 64-65. Then on July 8,
2016, Guardian once again requested that Stachmus provide additional information to
support his claim. Despite Guardian’s repeated requests for additional information,
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Stachmus provided no further support for his claims. Thus, Guardian denied his
appeal on October 10, 2016.
Stachmus subsequently filed suit in state court. After Guardian removed the
suit to federal court, Stachmus filed an amended complaint seeking declaratory relief
that he and his son were the proper beneficiaries. He alleged that the August 27,
2013, beneficiary-change form was invalid because when Andrea signed it, the
insured was receiving hospice care for cancer, he had suffered a massive stroke, and
he was “completely incompetent,” id., Vol. I at 8. Stachmus initially moved for
partial summary judgment to determine the district court’s standard of review. He
argued that Guardian’s failure to resolve his administrative appeal within the
prescribed regulatory timeline constituted a procedural irregularity that required
de novo review of Guardian’s adverse decision. He then moved for judgment on the
administrative record.1 Although he conceded for purposes of argument that the
power of attorney was genuine, he questioned whether it was valid when Andrea
executed the August 27, 2013, beneficiary-change form. Id., Vol. VII at 60-61. He
asserted that Andrea’s self-dealing shifted the burden to Guardian to ensure that
benefits were paid to the proper beneficiary, asserting Guardian had a fiduciary duty
1
We construe the motion as a motion for summary judgment. “The Federal
Rules of Civil Procedure contemplate no such mechanism as ‘judgment on the
administrative record.’ Parties should avoid the practice of requesting it, and courts
should avoid purporting to grant it. Doing so often creates unnecessary work for an
appellate court in deciding whether to construe such a motion ex post as one for a
bench trial . . . or as one for summary judgment.” Jewell v. Life Ins. Co. of N. Am.,
508 F.3d 1303, 1307 n.1 (10th Cir. 2007) (citations and internal quotation marks
omitted).
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to ensure there was no self-dealing or fraud. He argued that Guardian’s single
question posed to Andrea—whether the insured was competent on August 27, 2013—
was insufficient to satisfy its burden to conduct an adequate investigation into
potential fraud. He also argued that the August 27, 2013, beneficiary-change form
was invalid because the insured’s employer did not have notice of it as required
under the policy.
The district court resolved the case in two separate orders. First, the court
denied the motion for partial summary judgment, ruling it would review Guardian’s
denial of benefits under an arbitrary-and-capricious standard rather than de novo.
Rejecting Stachmus’s procedural-irregularity argument, the court observed that he
waited more than two years to file a formal claim and Guardian sought additional
time to obtain additional information from him.
Second, on the merits, the court entered judgment in favor of Guardian. The
court ruled that Guardian qualified as a fiduciary, but Stachmus, as the claimant, bore
the burden of showing he was entitled to benefits and yet he failed to support his
claim. The court also rejected his argument that the August 27, 2013, beneficiary-
change form was invalid because the insured’s employer did not have notice of the
beneficiary change. The court cited evidence indicating the employer knew about the
beneficiary change, and it also noted that Stachmus admitted knowing about the
beneficiary change in his October 28, 2013, letter to Guardian.
Now on appeal, Stachmus contends:
1. The district court reviewed Guardian’s decision under the wrong standard;
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2. The district court improperly considered arguments that Guardian failed to
preserve during the administrative process, specifically:
a. that the insured’s employer knew about and approved the August 27,
2013, beneficiary change; and
b. that Stachmus admitted in his October 28, 2013, letter that he knew he
was removed as a beneficiary; and
3. The district court should have applied our precedent requiring administrators to
investigate claims of wrongdoing before paying benefits.
We consider these arguments in turn.
II
A. Standard for Reviewing Guardian’s Decision
“We review de novo the district court’s determination of the proper standard to
apply in its review of an ERISA plan administrator’s decision.” Rasenack ex rel.
Tribolet v. AIG Life Ins. Co., 585 F.3d 1311, 1315 (10th Cir. 2009) (italics and
internal quotation marks omitted). An administrator’s denial of benefits is reviewed
de novo unless the “plan gives the administrator or fiduciary discretionary authority
to determine eligibility for benefits or to construe the terms of the plan.” Id. (internal
quotation marks omitted). “Where the plan gives the administrator discretionary
authority, . . . we employ a deferential standard of review, asking only whether the
denial of benefits was arbitrary and capricious.” LaAsmar v. Phelps Dodge Corp.
Life, Accidental Death & Dismemberment & Dependent Life Ins. Plan, 605 F.3d 789,
796 (10th Cir. 2010) (internal quotation marks omitted). Procedural irregularities
such as the failure to render a timely decision within the temporal limits prescribed
6
by the plan or applicable regulations may warrant de novo review. See Rasenack,
585 F.3d at 1315-1316.
It is undisputed that under the plan, Guardian had “discretionary authority to
determine eligibility for benefits and to construe the terms of the plan with respect to
claims.” Aplt. App., Vol. VI at 142 (italics omitted). Consequently, the district court
properly applied the deferential arbitrary-and-capricious standard unless a procedural
irregularity suggests de novo review was required. On this score, Stachmus contends
Guardian delayed processing his administrative appeal, warranting de novo review.
We disagree.
Stachmus submitted his administrative appeal on May 13, 2016. Under
29 C.F.R. § 2560.503-1(i)(1)(i), Guardian had 60 days to render a decision, unless it
determined a 60-day extension was necessary to process the claim, in which case it
was obliged to notify him of the special circumstances requiring an extension and the
date when it expected to render a decision. See LaAsmar, 605 F.3d at 797 (applying
the regulatory timeline to the administrative appeal process). On May 31, 2016,
Guardian acknowledged the appeal, notified Stachmus that it would render a decision
within 60 days, and invited him to provide additional information to support his
claim. Aplt. App., Vol. IV at 64-65.
On July 8, 2016, having received no documentation from Stachmus, Guardian
timely notified him by letter that it “require[d] an extension to allow [him] the time
to provide [it] with [supporting documentation] needed to provide [him] with a full
and fair review.” Id. at 61. Guardian urged him to provide evidence indicating that
7
the August 27, 2013, beneficiary-change form was not valid and that the insured was
incompetent on that date. Guardian also alerted him that if the information was not
received by September 5, 2016, it would issue a decision based on the information it
already possessed. On August 26, 2016, Stachmus responded by letter, arguing that
the power of attorney was void and that Guardian’s payment of Andrea’s claims was
not supported by the record, but once again, he provided no supporting
documentation. See id. at 55-57. Consequently, Guardian denied his appeal on
October 10, 2016.
Stachmus contends Guardian’s denial of his appeal was untimely because it
was rendered more than 60 days after the July 8 notice of extension. However, under
29 C.F.R. § 2560.503-1(i)(4), if there is an extension “due to a claimant’s failure to
submit information necessary to decide a claim, the period for making the benefit
determination on review shall be tolled from the date on which the notification of the
extension [was] sent to the claimant until the date on which the claimant responds to
the request for additional information.” This provision tolled the 60-day period from
July 8—when Guardian notified Stachmus it required additional information from
him to process his claim—until August 26, when he responded with additional
argument but no further information. Guardian’s denial of his appeal on October 10
was therefore timely rendered within the 60-day extension. There was no procedural
irregularity, and we therefore review Guardian’s beneficiary determination under the
deferential arbitrary-and-capricious standard.
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B. Beneficiary Determination
“We review summary judgment orders de novo, using the same standards
applied by the district court.” LaAsmar, 605 F.3d at 795. “Using the arbitrary and
capricious standard, we ask whether the administrator’s decision was reasonable and
made in good faith.” Eugene S. v. Horizon Blue Cross Blue Shield of N.J., 663 F.3d
1124, 1133 (10th Cir. 2011) (internal quotation marks omitted). We will uphold the
decision “so long as it is predicated on a reasoned basis, and there is no requirement
that the basis relied upon be the only logical one or even the superlative one.” Id. at
1134 (internal quotation marks omitted). We examine the record for substantial
evidence to support the administrator’s decision. See id.
1. The District Court Did Not Consider Unpreserved Arguments
Stachmus does not directly contend that Guardian’s decision is unsupported by
substantial evidence. Instead, he contends the district court “exceeded its authority”
by considering two unpreserved arguments that Guardian failed to advance during the
administrative process: 1) that the insured’s employer knew about and approved the
August 27, 2013, beneficiary change, and 2) that Stachmus admitted in his October
28, 2013, letter that he knew he was removed as a beneficiary. Aplt. Br. at 16, 17,
19.
This contention is meritless. The district court did not consider unpreserved
arguments; it rejected Stachmus’s argument that the August 27, 2013, beneficiary
change was invalid because the employer did not have notice of it as required by the
policy. The court cited record evidence indicating the employer had signed the claim
9
form of Stachmus’s step-mother, demonstrating the employer knew the beneficiaries
had been changed. See Aplt. App., Vol. V at 159-60. The court also cited
Stachmus’s October 28, 2013, letter to Guardian in which he indicated he had been
removed as a beneficiary, presumably to show that he, too, knew about the change
and suggest that if he wished to contest its validity, he should have done so sooner.
There was nothing improper about citing record evidence to reject Stachmus’s
arguments.
2. Stachmus Bore the Burden to Show He Was a Beneficiary
Stachmus also contends that Guardian, as a fiduciary, should have conducted a
more rigorous investigation into Andrea’s claims. He acknowledges that claimants
generally bear the burden of establishing entitlement to benefits, see Hodges v. Life
Ins. Co. of N. Am., 920 F.3d 669, 680 (10th Cir. 2019), but Stachmus attempts to shift
the burden to Guardian by arguing under Gaither v. Aetna Life Insurance Co.,
394 F.3d 792 (10th Cir. 2004), that an administrator has a fiduciary duty to
investigate “readily available information,” Aplt. Br. at 22 (internal quotation marks
omitted). He says Guardian breached that duty. We are not persuaded.
In Gaither, we recognized that ERISA generally requires claimants to provide
evidence to support their claims. See 394 F.3d at 804 (“[N]othing in ERISA requires
plan administrators to go fishing for evidence favorable to a claim when it has not
been brought to their attention that such evidence exists.”). Yet we also recognized
in that particular case there was specific plan language authorizing the administrator
to obtain information necessary to resolve a claim—information the administrator did
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not attempt to obtain. See id. at 804-06. Under those circumstances, we concluded
“it was arbitrary and capricious for [the administrator] to dismiss [the] claim . . .
without at least attempting to obtain information . . . .” Id. at 806.
Here, Stachmus refers us to no similar policy language authorizing Guardian to
order and collect information in furtherance of its administrative role in processing
claims. Instead, he merely urges us to adopt a broad reading of Gaither and impose
upon administrators a blanket duty of investigation. But Gaither adopted only a
“narrow principle that fiduciaries cannot shut their eyes to readily available
information when the evidence in the record suggests that the information might
confirm the beneficiary’s theory of entitlement and when they have little or no
evidence in the record to refute that theory.” Id. at 807. There was no evidence
supporting Stachmus’s theory of entitlement, and although he was once a beneficiary,
the evidence—including Stachmus’s own letter—indicated that the insured elected to
change the beneficiary designations. Moreover, Guardian did not shut its eyes to any
new information that might have been available; instead, it repeatedly requested more
information from Stachmus to ascertain the validity of his claim, but he repeatedly
offered nothing. On this record, we cannot say Guardian ignored readily available
information.
C. Motion to Seal
Apart from the merits of his appeal, Stachmus has filed an unopposed motion
to seal the portion of the appendix containing the administrative record because it
includes personally identifying information subject to the district court’s protective
11
order.2 There is a presumption that the public has a common-law right of access to
the records informing this court’s decision, although a party may overcome that
presumption by articulating a “real and substantial interest” in keeping the records
under seal. Eugene S., 663 F.3d at 1135-36 (internal quotation marks omitted). We
have previously granted motions to seal portions of the appendix containing personal
medical information or confidential business records. See id.; Williams v. FedEx
Corp. Servs., 849 F.3d 889, 905 (10th Cir. 2017) (“[W]e have granted motions to seal
medical records and internal confidential business records in other instances.”).
Because Stachmus seeks to seal similar information contained in the administrative
record, we grant the motion to seal volumes II through VI of the appendix.
D. Guardian’s Request for Fees & Costs
Finally, Guardian included in its opening brief a request for appellate fees and
costs. We deny the request.
The relevant statutory provision, 29 U.S.C. § 1132(g)(1), states: “In any
action . . . by a participant, beneficiary, or fiduciary, the court in its discretion may
allow a reasonable attorney’s fee and costs of action to either party.” This provision
“grants district courts discretion to award attorney’s fees to either party.” Hardt v.
Reliance Standard Life Ins. Co., 560 U.S. 242, 252 (2010) (emphasis and internal
quotation marks omitted). Some courts “have held that this section [also] allows the
2
Although Stachmus filed the motion, it indicates that “[t]he arguments
contained herein were provided to [Stachmus’s] counsel by Guardian’s counsel and
are submitted by him on behalf of Guardian, the party asking that the appellate
appendix in this case be filed under seal.” Mot. at. 2.
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court to award attorney’s fees on appeal.” Sokol v. Bernstein, 812 F.2d 559, 560
(9th Cir. 1987); see also, e.g., Schwartz v. Gregori, 160 F.3d 1116, 1119 n.5 (6th Cir.
1998) (noting § 1132(g)(1) “permits recovery of attorney’s fees in connection with
both trial court litigation and appellate litigation”). In considering an award, courts
should evaluate 1) the degree of the opposing parties’ culpability or bad faith; 2) the
opposing parties’ ability to satisfy a fee award; 3) whether a fee award would deter
similar conduct; 4) whether the party requesting fees sought to benefit all plan
participants and beneficiaries or resolve a significant legal question under ERISA;
and 5) the relevant merits of the parties’ positions. Van Steen v. Life Ins. Co. of N.
Am., 878 F.3d 994, 1000 (10th Cir. 2018).
Guardian does not address these factors. Instead, it suggests an award here
would promote the ERISA goals of enhancing administrative efficiency and deterring
protracted litigation. But it does not go so far as to suggest that Stachmus brought
this appeal in bad faith. Indeed, the circumstances surrounding the August 27, 2013,
beneficiary change seem debatable enough that we cannot say Stachmus was
unjustified in challenging it and pursuing his appeal. Further, there is no indication
Stachmus could satisfy any fee award,3 nor do we think a fee award would deter other
potential ERISA claimants from pursuing similar claims. Also, there was no
significant benefit sought or legal question resolved by this appeal, although the
3
Stachmus is presently serving a sentence of life in prison without the
possibility of parole. See Stachmus v. Rudek, 613 F. App’x 691, 692 (10th Cir.
2015).
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merits do weigh in favor of Guardian. Nonetheless, where the balance of these
factors weigh in Stachmus’s favor, we deny Guardian’s request for fees and costs.
III
The judgment of the district court is affirmed. Stachmus’s motion to seal
volumes II through VI of the appendix is granted, and Guardian’s request for fees and
costs is denied.
Entered for the Court
Allison H. Eid
Circuit Judge
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