Estate of Bruce Barton v. Adt Security Services Pension , 820 F.3d 1060 ( 2016 )


Menu:
  •                      FOR PUBLICATION
    UNITED STATES COURT OF APPEALS
    FOR THE NINTH CIRCUIT
    ESTATE OF BRUCE H. BARTON,*                        No. 13-56379
    Plaintiff-Appellant,
    D.C. No.
    v.                           2:12-cv-06971-
    BRO-CW
    ADT SECURITY SERVICES PENSION
    PLAN, a pension plan; TYCO
    INTERNATIONAL MANAGEMENT                             OPINION
    COMPANY, as plan sponsor; TYCO
    INTERNATIONAL MANAGEMENT
    COMPANY, LLC, Administrative
    Committee,
    Defendants-Appellees.
    Appeal from the United States District Court
    for the Central District of California
    Beverly Reid O’Connell, District Judge, Presiding
    Argued and Submitted
    October 23, 2015—Pasadena, California
    Filed April 21, 2016
    Before: Alex Kozinski, Sandra S. Ikuta, and John B.
    Owens, Circuit Judges.
    *
    The Estate of Bruce H. Barton is substituted as Plaintiff-Appellant
    pursuant to Fed. R. App. P. 43(a).
    2                  ESTATE OF BARTON V. ADT
    Opinion by Judge Owens;
    Dissent by Judge Ikuta
    SUMMARY**
    Employee Retirement Income Security Act
    The panel reversed the district court’s judgment after a
    bench trial in favor of the defendants in an action under the
    Employee Retirement Income Security Act, challenging a
    denial of pension benefits on the basis that the plaintiff did
    not have sufficient years of service with an employer or its
    affiliates.
    The panel held that the burden of proving entitlement to
    benefits was not properly placed on the plaintiff because the
    defendants were in a better position to ascertain whether an
    entity was a participating employer in the ERISA plan. The
    panel held that when a claimant has made a prima facie case
    that he is entitled to a pension benefit but lacks access to the
    key information about corporate structures or hours worked
    needed to substantiate his claim, and the defendant controls
    such information, the burden shifts to the defendant to
    produce this information. The panel remanded the case to the
    district court to apply the correct burden of proof.
    Dissenting, Judge Ikuta wrote that the majority’s burden-
    shifting rule was contrary to the abuse of discretion review
    applicable to the plaintiff’s claim.
    **
    This summary constitutes no part of the opinion of the court. It has
    been prepared by court staff for the convenience of the reader.
    ESTATE OF BARTON V. ADT                       3
    COUNSEL
    Morris S. Getzels (argued), Morris S. Getzels Law Office,
    Tarzana, California, for Plaintiff-Appellant.
    Stuart D. Tochner (argued), Ogletree, Deakins, Nash, Smoak
    & Stewart, P.C., Los Angeles, California, for Defendants-
    Appellees.
    OPINION
    OWENS, Circuit Judge:
    Bruce Barton appeals from the district court’s judgment
    concluding that the ADT Security Services Pension Plan
    Administrator did not abuse its discretion in denying Barton’s
    request for pension benefits. Because the district court did
    not have the benefit of our analysis regarding the burden of
    proof in a case such as this, we reverse and remand for
    proceedings consistent with this opinion.
    I. BACKGROUND
    A. Barton’s Employment History
    The parties dispute Bruce Barton’s employment history
    with the American District Telegraph Company (ADT)
    and/or its affiliates (ADT-related entities). Barton asserts that
    he worked for ADT from November 1967 until he resigned
    in September 1986. The parties agree that he also worked for
    4                  ESTATE OF BARTON V. ADT
    a moving company for a short period in 1968 and served in
    the Marine Reserves from 1965–1971.1
    The three named defendants in this case—ADT Security
    Services Pension Plan (pension plan), Tyco International
    Management Company (plan sponsor), and Tyco
    International Management Company, LLC Administrative
    Committee (plan administrator)—maintain that they have
    access to the pension records passed on by ADT, Inc., which
    Tyco acquired in 1997.
    B. Relevant Pension Plans
    Because Barton’s employment spanned eighteen years,
    two different plans govern his eligibility for a pension
    benefit: the plan in effect January 1, 1968 (1968 Plan) and the
    plan in effect January 1, 1985 (1985 Plan). Under the terms
    of the 1985 Plan, the 1968 Plan governs Barton’s service
    through December 31, 1975, and the 1985 Plan governs his
    service as of January 1, 1976. Barton maintains that his right
    to a pension vested because, although he stopped working
    before normal retirement age, he completed at least ten years
    of “continuous service” with the company.
    The 1985 Plan defines “Company” as “American District
    Telegraph Company and such of its Affiliated Companies as
    1
    Contrary to the dissent’s characterization of Barton’s “sporadic” work
    history, Barton’s FICA records indicate that he received consistent wages
    from an ADT-related entity from the fourth quarter of 1967 through his
    resignation in 1986. See Dissent at 24. Through 1971, he received
    additional wages from his service in the Marine Reserves. Also while
    employed at an ADT-related entity, in the fourth quarter of 1968 he
    worked briefly for a moving company to earn $162.72 in extra “Christmas
    money.”
    ESTATE OF BARTON V. ADT                      5
    have adopted the Plan and have been admitted to participation
    therein by the Board or any one or more of them, and any
    corporation succeeding to the rights and assuming the
    obligations of any such company.” An “Affiliated Company”
    is “a company which is a member of a controlled group of
    corporations of which the American District Telegraph
    Company is also a member.” The 1968 Plan defines
    “Company” as the “American District Telegraph Company
    and those controlled companies authorized by the Board of
    Directors to participate in the Plan.”
    The 1985 Plan defines “Continuous Service” as follows.
    For employment through December 31, 1975, “Continuous
    Service shall be that service determined under the terms of
    the Plan as it was constituted on December 31, 1975.” After
    January 1, 1976, “[o]ne year of Continuous Service shall be
    recorded for any Plan Year during which an Employee has
    1,000 or more Hours of Service.” A plan year in which an
    employee works 500 hours or less is considered a “break in
    service.” Additionally, to the extent required by ERISA or
    determined by the Board of Directors, if an employee
    transfers to a participating company from an affiliated
    company after January 1, 1976, he will receive credit for his
    continuous service to that affiliate prior to 1976, even if the
    affiliate had not adopted the Plan.
    The 1968 Plan does not define “continuous employment,”
    save for the following provision regarding absence without
    pay:
    Any absence from the service without pay . . .
    shall be considered as a break in the
    continuity of service, and persons re-
    employed after such a break shall be
    6               ESTATE OF BARTON V. ADT
    considered as new employees and the term of
    employment reckoned from the date of such
    re-employment; except that any such person
    reemployed for at least ten continuous years
    after such a break shall have his term of
    employment reckoned from the date of his
    initial employment less the entire period of
    such break.
    C. Barton’s Request for Pension Benefits
    In 2010, Barton reached age sixty-five and contacted the
    pension record keeper about benefits. A December 13, 2010
    letter from a pension benefit administrator in response stated
    that the administrator “could not find any information on
    [Barton’s] employment with ADT Security Services, Inc.,”
    and enclosed instructions for navigating the pension claim
    procedure. Barton then provided documentation regarding
    his employment with ADT-related entities. In a June 24,
    2011 letter, the pension record keeper said the documents
    Barton had sent failed to establish that he had a vested
    pension, and that if Barton had additional documentation—
    for example, a letter of vested benefits—he could file a claim
    with the Employee Benefits Committee. In response to a
    telephone inquiry, Barton was again informed that he was
    ineligible for a pension benefit.
    Barton filed a claim with the Committee on October 3,
    2011. He stated that two former colleagues from the ADT
    office in Portland, Maine had provided similar documentation
    and received ADT pensions. He included copies of
    correspondence from the pension record keeper and the
    following documents:
    ESTATE OF BARTON V. ADT                            7
    •   November 11, 1977 letter from R.B. Carey, Jr.,
    President of ADT, on ADT letterhead listing an
    address of One World Trade Center, Suite 9200, NY,
    NY, addressed to “Mr. B. N. Barton, American
    District Telegraph Company” at the same World
    Trade Center address and suite.           The letter
    congratulates Barton on his completion, on November
    13, 1977, of ten years of service as a “member of the
    ADT organization.”
    •   Copies of key cards and identification/business cards
    issued by “ADT.”
    •   W-2 statements from 1980–1983 and 1986, listing
    employer as “American District Telegraph Co.” at
    1 World Trade Center, NY, NY and showing an X
    marking the “Pension Plan” box.
    •   Pay stubs from 1981 and 1985 listing “American
    District Telegraph” at the bottom.
    •   Personnel Data Maintenance forms from 1984, 1985,
    and 1986 listing Barton’s current annual salary, raise,
    and new annual salary.
    •   Social Security Administration documentation
    summarizing Federal Insurance Contributions Act
    (FICA) withholding from 1968–1980.2
    2
    Barton provided more detailed FICA records during his administrative
    appeal.
    8               ESTATE OF BARTON V. ADT
    D. Committee’s Denial of Barton’s Claim
    The Committee denied Barton’s claim on January 10,
    2012. It reported that it had reviewed the documents listed
    above as well as the following documents that Barton had
    provided earlier:
    •   Barton’s September 11, 1986 resignation letter on
    ADT letterhead.
    •   September 12, 1986 Memorandum on ADT letterhead
    confirming receipt of a credit card, tools, and
    company truck.
    •   Barton’s September 12, 1986 Exit Interview
    Questionnaire that listed a November 10, 1967 date of
    employment.
    •   Handwritten telephone conversation record describing
    Barton’s July 6, 2011 call to the pension record
    keeper.
    The Committee detailed the relevant plan provisions and
    wrote:
    [T]here are no Plan records indicating your
    eligibility for participation in the Plan, your
    actual participation in the Plan, or your
    eligibility for benefits under the Plan. In
    addition, it was unclear from the information
    you provided whether you had a continuous
    term of employment or earned the required
    service to earn at least 10 Years of Continuous
    Service so as to be vested in a Plan benefit.
    ESTATE OF BARTON V. ADT                       9
    The Committee further explained that it was “not clear based
    on the information” that Barton provided that he met the
    terms of continuous employment. In particular, the
    Committee noted that the FICA records and W-2s did not
    cover each year of claimed employment, and that some
    documents lacked identifying information. Such information
    “did not override or contradict the Plan records.” The letter
    detailed the appeals procedure and suggested Barton could
    “supply copies of any further evidence . . . that would indicate
    that [he is] entitled to a Plan benefit, such as certified Social
    Security records for the entire period of time from 1967
    through 1986 or a pension benefit statement or written
    evidence that [he was] eligible to receive a Plan benefit.”
    On January 19, 2012, Barton responded and requested
    copies of “all plan documents, records and other information
    affecting the claim per your document concerning Applying
    for Benefits and Claim and Appeal Procedures.” He
    specifically requested a Tyco International Summary Plan
    Description booklet, the Committee’s copy of the Social
    Security records, an example of a pension benefit statement
    and written evidence statement, and “application forms that
    should have been provided by the service center.” The
    Committee responded by letter and enclosed a memorandum
    prepared by outside counsel summarizing key provisions of
    the 1968 and 1985 Plans, and the full text of the Plans.
    Nothing in the record indicates that the Committee included
    the full 1983 Summary Plan Description (SPD) (referenced
    in the memorandum drafted by outside counsel) or exemplars
    of a pension benefit statement or “written evidence
    statement” as Barton requested.
    10               ESTATE OF BARTON V. ADT
    E. Barton’s Appeal of the Committee’s Denial
    Barton appealed the Committee’s denial on April 29,
    2012. He presented additional FICA records, broken down
    quarterly from 1967–1977 when he was an hourly employee
    and annually from 1978–1986 when he was a salaried
    employee.
    The Committee denied Barton’s appeal on June 29, 2012.
    The Committee again noted there was no official record of
    Barton’s participation in the Plan and that the documentation
    he submitted “was insufficient to override the Plan records.”
    As with the initial denial, the appeal notice stated that “[i]t is
    not clear based on the information you provided that you
    were continuously employed with American District
    Telegraph Company.” The Committee also noted that the
    FICA records revealed that Barton had worked for companies
    in addition to ADT, which “could indicate that [he] did not
    have a continuous term of employment.” (emphasis added).
    In other words, because Barton could not document that he
    worked 1000 hours or more for each of the nearly twenty
    years he was employed by ADT and its affiliates, or that his
    employers participated in the Plans, he could not prove he
    was entitled to a pension.
    F. Procedural History
    On August 13, 2012, Barton filed suit in the Central
    District of California pursuant to the Employee Retirement
    Income Security Act of 1974 (ERISA), 
    29 U.S.C. § 1132
    . He
    sought (1) declaratory relief that he was entitled to a pension;
    (2) pension benefits based on his employment with ADT;
    and (3) recovery of statutory penalties under 29 U.S.C.
    ESTATE OF BARTON V. ADT                       11
    § 1132(c)(1) based on the pension administrator’s failure to
    comply with ERISA’s disclosure obligations.
    After a bench trial, the district court issued its Findings of
    Fact and Conclusions of Law on July 19, 2013. It held that
    the applicable standard of review was abuse of discretion and
    that the Committee did not abuse its discretion in denying
    Barton pension benefits. It declined to award Barton
    statutory penalties, holding that he lacked standing to assert
    a violation of ERISA’s disclosure requirements because he
    did not have a colorable claim to pension benefits. Barton
    timely appealed.
    II. ANALYSIS
    A. Standard of Review
    “We review de novo a district court’s choice and
    application of the standard of review to decisions by
    fiduciaries in ERISA cases. We review for clear error the
    underlying findings of fact.” Abatie v. Alta Health & Life Ins.
    Co., 
    458 F.3d 955
    , 962 (9th Cir. 2006) (en banc) (citation
    omitted). We also review de novo a district court’s allocation
    of the burden of proof. See Molski v. Foley Estates Vineyard
    & Winery, LLC, 
    531 F.3d 1043
    , 1046 (9th Cir. 2008) (citing
    Ferrari, Alvarez, Olsen & Ottoboni v. Home Ins. Co.,
    
    940 F.2d 550
    , 555 (9th Cir. 1991)).
    B. Burden of Proof
    The district court faithfully applied our precedent in
    reviewing the Committee’s denial of benefits for abuse of
    discretion. See Abatie, 
    458 F.3d at
    963 (citing Firestone Tire
    & Rubber Co. v. Bruch, 
    489 U.S. 101
    , 115 (1989)). But
    12                 ESTATE OF BARTON V. ADT
    because the district court incorrectly placed the burden of
    proof on Barton for matters within defendants’ control, we
    remand to the district court in light of this opinion. We
    express no view on Barton’s eligibility for pension benefits.3
    A claimant may bear the burden of proving entitlement to
    ERISA benefits. See, e.g., Muniz v. Amec Constr. Mgmt.,
    Inc., 
    623 F.3d 1290
    , 1294–95 (9th Cir. 2010) (holding that
    where a court reviews a plan administrator’s decision de
    novo, the claimant has the burden of proof). This rule makes
    sense in cases where the claimant has better—or at least
    equal—access to the evidence needed to prove entitlement.
    For example, where an employee must establish an illness to
    qualify for disability benefits, the burden lies most sensibly
    with the claimant, who can provide test results, physician
    reports, and other evidence about her condition. See, e.g., 
    id. at 1298
     (holding that the claimant failed to establish he was
    “totally disabled” within the meaning of a long-term
    disability insurance plan). But in other contexts, the
    defending entity solely controls the information that
    determines entitlement, leaving the claimant with no
    meaningful way to meet his burden of proof. This is one of
    those cases.
    3
    Although not central to our resolution of this case, we note that on
    remand, the district court also may wish to consider whether defendants
    met the standard of meaningful dialogue in the administrative claims
    process, including whether the Committee’s denial letters dated January
    10, 2012 and June 29, 2012 were written in common-sense language that
    a lay person could understand or respond to, and whether the Committee
    sought the information it needed to make a reasoned decision. See Booton
    v. Lockheed Med. Benefit Plan, 
    110 F.3d 1461
    , 1463 (9th Cir. 1997); see
    also Saffon v. Wells Fargo & Co. Long Term Disability Plan, 
    522 F.3d 863
    , 870–74 (9th Cir. 2008).
    ESTATE OF BARTON V. ADT                            13
    The district court placed the burden of proof on Barton to
    establish that his various ADT-related employers participated
    in defendants’ Plan, and that he worked the requisite hours
    per year. There are two problems with this approach. First,
    defendants are in a far better position to ascertain whether an
    entity was a participating employer. After all, they determine
    which employers participate in the plan. Indeed, both Plans
    state that affiliates or controlled companies may only
    participate if the company’s Board of Directors authorizes
    them to do so. Yet defendants asserted in the district court
    that they “have no records indicating whether the entities
    [identified as Barton’s employers in the Social Security
    records] were Participating Subsidiaries in the Plan at any
    time.” If Barton has made a prima facie case that he is
    eligible for a pension, his claim does not fail simply because
    he cannot initially prove whether defendants’ Board of
    Directors authorized his employers to participate in the Plans.
    Defendants never explain how the long-retired Barton could
    possibly answer this question if even they have no relevant
    records, particularly when, during his many years of
    employment, the corporate sub-entities were not evident from
    the company materials provided to Barton.4 It is illogical and
    unfair for us to require Barton to close this gap, and the
    dissent points to nothing in ERISA that supports such a
    Kafkaesque regime where corporate restructuring can license
    a plan administrator to throw up his hands and say “not my
    problem.”
    4
    Defendants argue that the absence of recorded service by Barton in
    their records proves that he did not work for a participating employer and
    is not entitled to a pension benefit. But they fail to explain why they
    cannot identify which affiliated companies they approved to participate in
    their Plans, nor how Barton could obtain such information.
    14              ESTATE OF BARTON V. ADT
    It should not greatly burden an ERISA-compliant entity
    to determine what companies were authorized as
    “participating employers,” so the entity, not the claimant,
    should bear the risk of insufficient records. See, e.g.,
    Anderson v. Mt. Clemens Pottery Co., 
    328 U.S. 680
    , 687
    (1946) (“When the employer has kept proper and accurate
    records the employee may easily discharge his burden by
    securing the production of those records. But where the
    employer’s records are inaccurate or inadequate and the
    employee cannot offer convincing substitutes a more difficult
    problem arises.”). As we explained in Brick Masons Pension
    Trust v. Industrial Fence & Supply, Inc.:
    The records that employers are required to
    keep by the FLSA [Fair Labor Standards Act]
    and by ERISA may be the only evidence
    available to employees to prove that their
    employers have failed to compensate them in
    accordance with the statute. An employer
    cannot escape liability for his failure to pay
    his employees the wages and benefits due to
    them under the law by hiding behind his
    failure to keep records as statutorily required.
    
    839 F.2d 1333
    , 1338 (9th Cir. 1988).
    This shift also follows naturally from ERISA’s disclosure
    requirements. Section 502(c)(1) provides for the imposition
    of penalties on a plan administrator who has not complied
    with disclosure requirements. 
    29 U.S.C. § 1132
    (c)(1). One
    such requirement, section 104(b)(4), mandates supplying
    participants with certain plan information, such as the
    summary plan description, annual report, or “other
    instruments under which the plan is established or operated.”
    ESTATE OF BARTON V. ADT                            15
    
    29 U.S.C. § 1024
    (b)(4). These disclosure requirements and
    the corresponding penalties function to ensure that an
    individual is duly informed of basic information relating to
    his pension plan:
    As the legislative history bears out, the
    documents contemplated by § 104(b)(4) are
    those that allow “the individual participant
    [to] know [ ] exactly where he stands with
    respect to the plan—what benefits he may be
    entitled to, what circumstances may preclude
    him from obtaining benefits, what procedures
    he must follow to obtain benefits, and who are
    the persons to whom the management and
    investment of his plan funds have been
    entrusted.”
    Hughes Salaried Retirees Action Comm. v. Adm’r of Hughes
    Non-Bargaining Ret. Plan, 
    72 F.3d 686
    , 690 (9th Cir. 1995)
    (en banc) (quoting S. Rep. No. 127, 93d Cong., 2d Sess.
    (1974), reprinted in 1974 U.S.C.C.A.N. 4838, 4863).5
    It follows that if Barton has made a prima facie case that
    he is entitled to pension benefits, it is properly defendants’
    burden to clarify what entities are covered under the Plans in
    the first instance. Employers, plans, and plan administrators
    must know the terms and conditions of the benefits they offer
    5
    Section 104(b) illustrates ERISA’s underlying policies of “promoting
    informed financial decision making” and “protecting the reliance interests
    of plan participants and beneficiaries.” Peter Joseph Wiedenbeck, ERISA
    in the Courts 17 (Federal Judicial Center 2008). We do not address
    whether the plan administrator here failed to comply with the specific
    disclosure requirements of section 104(b).
    16                   ESTATE OF BARTON V. ADT
    and be able to identify covered employers and participating
    employees.6 Cf. Cent. States, Se. & Sw. Areas Pension Fund
    v. Cent. Transp., Inc., 
    472 U.S. 559
    , 572 (1985) (“[ERISA’s]
    reporting and disclosure standards require benefit plans to
    furnish all participants with various documents informing
    them of their rights and obligations under the plan . . . a task
    that would certainly include the duty of determining who is
    in fact a plan participant.” (citation omitted)).
    Additionally, the district court faulted Barton for not
    proving that he worked over 1000 hours a year for the twenty
    years he was employed by ADT or its affiliates. But
    requiring Barton to prove his hours over the course of two
    6
    Defendants cite several cases to argue that Barton has the burden “to
    provide the Committee with information sufficient to show an entitlement
    to a benefit under the plan.” These cases are inapposite. In Mitchell v.
    Eastman Kodak Co., 
    113 F.3d 433
    , 439 (3d Cir. 1997), the plan itself
    allocated the burden to the claimants. Defendants assert for the first time
    in their supplemental briefing that the 1985 Plan similarly allocates the
    burden of proof to the claimant. Their argument is based solely on
    language contained in an informational document entitled “Applying for
    Benefits and Claim and Appeal Procedures.” While it is not clear from
    the record whether this document provides terms of the 1985 Plan, it is
    clear that defendants waived this argument when they failed to raise it in
    their answering brief. See, e.g., United States v. McEnry, 
    659 F.3d 893
    ,
    902 (9th Cir. 2011) (holding an argument waived when available at the
    time an answering brief is filed but not raised in it). In the other cases, the
    district court found that the plaintiffs bore the burden of providing
    evidence of a personal medical problem—information within their
    possession—to claim disability benefits. See Schwartz v. Metro. Life Ins.
    Co., 
    463 F. Supp. 2d 971
    , 982 (D. Ariz. 2006); Jordan v. Northrop
    Grumman Corp. Welfare Benefit Plan, 
    63 F. Supp. 2d 1145
    , 1157 (C.D.
    Cal. 1999), aff’d, 
    370 F.3d 869
     (9th Cir. 2004) (holding that it was not
    improper to place the initial burden on the claimant where the insurance
    company informed her of the information it needed and advised her to call
    them if she had questions).
    ESTATE OF BARTON V. ADT                      17
    decades is unreasonable and inconsistent with the goals of
    ERISA. That is especially so where, as here, nothing
    indicates that Barton was warned at the start of his career that
    he needed to retain a log of his hours to obtain pension
    benefits a generation or two later. We have previously
    shifted the burden of proving the number of hours an
    employee works where the calculation of damages is
    uncertain due to defendants’ failure to keep statutorily
    required records. Brick Masons, 
    839 F.2d at
    1337–39.
    We find the reasoning of Brick Masons persuasive in this
    context. Brick Masons involved two wholly owned
    subsidiaries of one parent company. 
    Id. at 1335
    . One,
    Industrial, had a collective bargaining agreement requiring it
    to contribute to the union’s fringe benefit trust funds (Trust)
    based on hours that union employees worked. 
    Id.
     The other,
    Harris, was non-union. 
    Id.
     The Trust sued to recover
    contributions for hours that Harris masons had worked on
    Industrial jobs. 
    Id.
     It was undisputed that non-union masons
    had performed work for Industrial, but the Trust could not
    prove the exact number of hours because Industrial had failed
    to maintain certain records required under ERISA. 
    Id.
     at
    1337–38. This court held that “once the Trust Funds proved
    the fact of damage and Industrial’s failure to keep adequate
    records, the burden shifted to Industrial to come forward with
    evidence of the extent of covered work performed by the 35
    Harris employees.” 
    Id.
     at 1338–39. Industrial could not do
    so, and consequently was required to pay contributions for all
    hours that non-union masons worked during the time period
    where they were shown to have performed some covered
    work. 
    Id. at 1339
    .
    The Brick Masons court also found support in Anderson
    v. Mt. Clemens Pottery Co. There, the Supreme Court held
    18                 ESTATE OF BARTON V. ADT
    that where an employer fails to keep adequate records of
    hours worked as required by FLSA, the employee carries his
    burden of establishing damages “if he proves that he has in
    fact performed work for which he was improperly
    compensated and if he produces sufficient evidence to show
    the amount and extent of that work as a matter of just and
    reasonable inference.” 
    328 U.S. at 687
    . The Court reasoned
    that, where it was the employer’s duty to keep the relevant
    records, the employer could not complain that the related
    damages were inexact. 
    Id. at 688
    .
    Accordingly, we hold that where a claimant has made a
    prima facie case that he is entitled to a pension benefit but
    lacks access to the key information about corporate structure
    or hours worked needed to substantiate his claim and the
    defendant controls such information, the burden shifts to the
    defendant to produce this information.7 Assuming that
    Barton can establish a prima facie case on remand, defendants
    will then bear the burden of production as to whether he
    worked sufficient hours for a participating employer to
    collect a pension.
    We recognize that fiduciaries of a defined benefit pension
    plan have a duty to protect the pooled funds and distribute
    benefits only to those who qualify. See, e.g., Boyd v. Bert
    Bell/Pete Rozelle NFL Players Ret. Plan, 
    410 F.3d 1173
    ,
    1178 (9th Cir. 2005) (“An ERISA fiduciary is ‘obligated to
    guard the assets of the [Plan] from improper claims, as well
    7
    This does not require defendants to produce records listing entities not
    covered by their pension plans. Cf. Dissent at 25–26, 27. It requires only
    that they reveal which companies did in fact participate in their
    plans—information they must know to fulfill their fiduciary duty to only
    distribute pension funds to qualified individuals.
    ESTATE OF BARTON V. ADT                     19
    as to pay legitimate claims.’” (alteration in original) (quoting
    Brogan v. Holland, 
    105 F.3d 158
    , 164 (4th Cir. 1997))). We
    do not suggest that anyone can force a company to produce
    this corporate information by merely asserting that he is owed
    a pension—a plaintiff must put forth objective proof. See,
    e.g., Nigro v. Sears, Roebuck & Co., 
    784 F.3d 495
    , 497 (9th
    Cir. 2015) (“[A] self-serving declaration does not always
    create a genuine issue of fact for summary judgement: The
    district court can disregard a self-serving declaration that
    states only conclusions and not facts that would be admissible
    evidence.”).
    Where a claimant, through documentary or other
    objective evidence, has made a prima facie case that he is
    entitled to a pension but has no means except for information
    in the defendant’s control to establish that his work was for
    a “covered employer” and of sufficient duration, the burden
    then shifts to the defendant to produce such information. A
    plaintiff claiming pension benefits will often have access to
    at least some objective documentation of prior
    employment—such as Social Security records, W-2
    statements, income tax returns, and pay stubs—to make his
    prima facie case. Cf. Motion Picture Indus. Pension &
    Health Plans v. N.T. Audio Visual Supply, Inc., 
    259 F.3d 1063
    , 1066–67 (9th Cir. 2001) (holding that the burden does
    not shift under Brick Masons where the plaintiff did not
    produce sufficient evidence to meet the required threshold
    showing).
    We leave it to the district court to determine in the first
    instance whether Barton has established a prima facie case.
    In doing so, it can consider the evidence available at trial,
    such as Barton’s Social Security records, W-2 statements, pay
    20              ESTATE OF BARTON V. ADT
    stubs with the pension box marked, and letter thanking him
    for ten years of service.
    C. Statutory Penalties
    The district court correctly held that to recover statutory
    penalties based on a plan administrator’s refusal to comply
    with ERISA’s disclosure obligations, a plaintiff must qualify
    as a plan participant. See 
    29 U.S.C. § 1132
    (c)(1). Thus, if
    Barton does not set forth a colorable pension claim, he cannot
    assert a violation of ERISA’s disclosure requirements. See
    Johnson v. Buckley, 
    356 F.3d 1067
    , 1077 (9th Cir. 2004). As
    this issue turns on the ultimate merits of Barton’s claim for
    pension benefits, we reverse the judgment for defendants.
    III. CONCLUSION
    This case ultimately is about burdens—to qualify for his
    pension, must a former employee who quit working for the
    company more than twenty-five years ago decipher the
    corporate structure of his former employer from documents
    that were not disclosed to him? Should he have saved all of
    his pay stubs in the off chance that his employer would
    demand proof that he met the hours requirement for obtaining
    a pension? Or should the corporate defendant bear this load?
    ERISA, our precedent, and common sense dictate that the
    corporate defendant should not lay that arduous task at the
    feet of former employees. To hold otherwise would
    essentially reward Lucy for pulling the football away from
    Charlie Brown, something that we do not believe Congress
    intended when it enacted ERISA. See It’s Your First Kiss,
    Charlie Brown (CBS television broadcast Oct. 24, 1977).
    ESTATE OF BARTON V. ADT                     21
    Accordingly, we REVERSE the judgment and
    REMAND this matter to the district court so it can apply the
    now-clarified burden of proof in this case.
    IKUTA, Circuit Judge, dissenting:
    Today the majority goes off the rails. Its one-off burden-
    shifting rule, apparently specially designed to let Barton win
    on one element of his claim for benefits under an ERISA
    plan, is not only contrary to the Supreme Court’s direction
    that courts should not make “ad hoc exceptions” to the broad
    abuse of discretion standard applicable in this context,
    Conkright v. Frommert, 
    559 U.S. 506
    , 513 (2010), but it
    also does damage to our precedent and basic principles
    of ERISA law. Under the abuse of discretion review
    applicable to Barton’s claim, Barton must show that the plan
    administrator’s decision was “(1) illogical, (2) implausible, or
    (3) without support in inferences that may be drawn from the
    facts in the record.” Salomaa v. Honda Long Term Disability
    Plan, 
    642 F.3d 666
    , 676 (9th Cir. 2011). There is no other
    burden of proof. And even when de novo review is
    applicable, we have held that only the claimant—not the plan
    administrator—has the burden of proof. Muniz v. Amec
    Constr. Mgmt., Inc., 
    623 F.3d 1290
    , 1294–95 (9th Cir. 2010).
    I dissent.
    I
    Under our precedent, when a claimant challenges the
    denial of benefits under 
    29 U.S.C. § 1132
    (a)(1) and the
    ERISA plan at issue grants discretion to the plan
    administrator, the district court conducts a bench trial to
    22              ESTATE OF BARTON V. ADT
    determine if the plan administrator abused its discretion.
    Abatie v. Alta Health & Life Ins. Co., 
    458 F.3d 955
    , 962–65
    (2006). The scope of evidence considered at such a trial is
    generally limited to the administrative record. 
    Id. at 970
    (“Today, we continue to recognize that, in general, a district
    court may review only the administrative record when
    considering whether the plan administrator abused its
    discretion, but may admit additional evidence on de novo
    review.”). There are exceptions to the rule, as when the
    district court needs to consider extrinsic evidence to
    determine how much weight to give to a claimed conflict of
    interest on the part of a plan administrator, or when the
    administrator failed to follow procedural requirements, 
    id. at 970
    , 972–73, but the majority does not suggest that these
    exceptions are applicable here.
    In reviewing the plan administrator’s decision in light of
    the administrative record, a court may not “substitute [its]
    view for that of the factfinder.” Salomaa, 
    642 F.3d at 676
    .
    Rather, the scope of review is limited: the court may
    consider only whether the plan administrator’s decision
    was “(1) illogical, (2) implausible, or (3) without support
    in inferences that may be drawn from the facts in the
    record.” 
    Id.
     This standard of review applies to the plan
    administrator’s factual determinations as well as its ultimate
    decision. Walker v. American Home Shield Long Term
    Disability Plan, 
    180 F.3d 1065
    , 1069–70 (9th Cir. 1999).
    Under deferential review, a district court considers only
    whether the claimant showed that the plan administrator’s
    benefit decision was unreasonable, and the court must uphold
    ESTATE OF BARTON V. ADT                             23
    the decision so long as it is logical, plausible, and supported
    by the record, id; there is no other burden of proof.1
    Only when a district court reviews a plan administrator’s
    decision denying benefits under a de novo standard of review
    does our precedent require a district court to impose the
    proper burden of proof. Doing so makes sense in this
    context: instead of deferring to the plan administrator’s
    decision, the district court must evaluate the evidence de
    novo, and therefore must determine which party has the
    burden of establishing each fact required for eligibility under
    an ERISA plan. Under such de novo review, the burden of
    proof remains firmly on the claimant. Muniz, 
    623 F.3d at
    1294–95 (“As concluded by other circuit courts which have
    addressed the question, when the court reviews a plan
    administrator’s decision under the de novo standard of
    review, the burden of proof is placed on the claimant.”). And
    we have rejected the argument that the claimant may shift the
    burden of proof to the plan administrator. 
    Id.
     (rejecting the
    claimant’s argument that once he met the initial burden of
    proving disability, the burden of proof shifts to the plan to
    justify its decision to terminate benefits).
    II
    The district court correctly followed our precedent. It
    first determined that the plan gave discretion to the
    administrators. The majority concedes that determination
    1
    Different rules may apply when there is evidence that “a plan
    administrator’s self-interest caused a breach of the administrator’s
    fiduciary obligations to the claimant,” see Tremain v. Bell Indus., Inc.,
    
    196 F.3d 970
    , 976 (9th Cir. 1999), but this case does not give rise to such
    an issue, and the majority does not hold otherwise.
    24              ESTATE OF BARTON V. ADT
    was correct. Maj. op. at 11. It then reviewed the evidence of
    conflict of interest and concluded that it would review the
    plan administrator’s decisions with a low level of skepticism.
    The majority does not say this was in error. Id. at 13.
    Finally, the court determined that there were no procedural
    irregularities present. Therefore, the district court correctly
    limited its review to the administrative record.
    The plans at issue here require a claimant to establish,
    among other things, that: (1) he worked for one or more
    covered employers, as defined in the plans, (2) for a
    continuous term of at least ten years. The evidence in the
    administrative record showed that Barton was employed by
    various ADT companies, as well as other companies, from
    1967 to 1986, but did not show that he had continuous service
    for ten years with any ADT company, nor that any of the
    ADT companies were “covered” as required by the Plan.
    Specifically, documents in the record showed that in 1967,
    Barton started working at ADT of Maine. From 1967 to
    1976, Barton received sporadic wages from ADT of
    Massachusetts, Mittman Realty Co, Inc., Pentate Filtration,
    Inc., the Marine Reserves, and Ginn-Marvin Moving &
    Storage Co. In 1982 he started working for ADT Diversified
    Service, Inc., in New Jersey, where he worked until 1985. In
    1985, Barton worked for ADT of Illinois, where he stayed
    until he resigned on September 11, 1986. His resignation
    took effect on September 25, 1986.
    The administrative record also included evidence that the
    plan administrator had a system to maintain and update
    records regarding pension benefit eligibility for employees
    and had an incentive for keeping accurate records. A
    declaration from a member of the plan administration
    committee stated that those records contained no evidence
    ESTATE OF BARTON V. ADT                     25
    that Barton was a participant in the pension plan or that ADT
    of Massachusetts or ADT of Maine were participating
    employers. The declaration also set forth the committee’s
    determination that Barton’s evidence was inconsistent with a
    claim of continuous employment by a participating entity
    with no break in service.
    Based on its review of the administrative record, the court
    made the factual finding that Barton did not establish that he
    had worked for a ten-year continuous period for a covered
    employer. This factual finding is not clearly erroneous.
    Accordingly, the court’s conclusion that the plan
    administrator’s benefits denial was not illogical, implausible,
    or without support in inferences that may be drawn from the
    facts in the record is correct.
    Indeed, there is no way to reach a different conclusion
    under our precedent. Although in Salomaa we concluded that
    a plan administrator’s decision to deny benefits was illogical,
    implausible, and without support in the record where virtually
    all the evidence in the record pointed in the other direction,
    Salomaa, 
    642 F.3d at 676
    , the evidence here is more than
    adequate to support the plan administrator’s decision. Nor
    could we reverse the district court’s decision on the ground
    that the plan administrator abused its discretion because it
    knew or should have known of additional information that
    would substantiate Barton’s claim. See, e.g., Hess v.
    Hartford Life & Accident Ins. Co., 
    274 F.3d 456
    , 462–63 (7th
    Cir. 2001). Even if we adopted such a standard, no one has
    argued that the plan administrator is aware of evidence that
    would identify Barton’s employers as “covered employers.”
    Indeed, given ADT’s multiple acquisitions, mergers, and
    divisions since 1986, it would be unsurprising if the plan
    26                 ESTATE OF BARTON V. ADT
    lacks records proving that certain ADT entities were not
    covered during the period from 1967 to 1986.
    Nor did ADT have a legal duty to maintain such
    information. As the majority implicitly acknowledges, no
    ERISA provision requires a plan administrator to maintain a
    record of covered companies. Maj. op. at 15 n.5. The
    majority suggests that 
    29 U.S.C. § 1024
    (b)(4) illustrates the
    recordkeeping and disclosure requirements imposed on a plan
    administrator, Maj. op. at 14–16, but by its terms it does not
    require a plan administrator to keep the sorts of records at
    issue here.2 The administrative record shows that the plan
    administrator provided the information required under
    § 1024(b)(4) to the extent Barton requested it and the
    majority does not suggest otherwise, see Maj. op. at 15 n.5.
    III
    Rather than follow our ERISA precedent, which requires
    us to affirm the district court, the majority abandons it
    entirely.
    First, the majority invents a burden-of-proof standard
    (along with a burden-shifting approach) that is in direct
    conflict with our abuse of discretion standard. The majority
    holds that: “Where a claimant, through documentary or other
    objective evidence, has made a prima facie case that he is
    entitled to a pension but has no means except for information
    2
    
    29 U.S.C. § 1024
    (b)(4) provides that “[t]he administrator shall, upon
    written request of any participant or beneficiary, furnish a copy of the
    latest updated summary, plan description, and the latest annual report, any
    terminal report, the bargaining agreement, trust agreement, contract, or
    other instruments under which the plan is established or operated.”
    ESTATE OF BARTON V. ADT                             27
    in the defendant’s control to establish that his work was for
    a ‘covered employer’ and of sufficient duration, the burden
    then shifts to the defendant to produce such information.”
    Maj. op. at 19. Under this rule, if Barton has established a
    “prima facie case that he is entitled to a pension” (and the
    majority does not specify what this means), the burden shifts
    to the plan administrator to prove that the claimant’s work
    was not “for a covered employer.”3 If the plan administrator
    does not have information relevant to the claimant’s work
    history, this may mean (again, the majority is unclear) that the
    claimant prevails, and the district court must invalidate the
    plan administrator’s denial of benefits even if the plan
    administrator’s decision was not illogical, implausible, or
    without support in the record. This is directly contrary to our
    deferential standard, Abatie, 
    458 F.3d at 965
    , and contrary to
    the Supreme Court’s direction that courts should not make
    “ad hoc exceptions” to the abuse of discretion standard,
    Conkright, 
    559 U.S. at 513
    .
    Here, for instance, if the district court on remand
    determined that Barton has made a “prima facie case that he
    is entitled to a pension,” and the plan administrator cannot
    introduce any extrinsic evidence establishing that ADT of
    Massachusetts, ADT of Maine, or ADT of Illinois were not
    “covered employers” as defined in the plans,4 the district
    3
    Of course, such a burden-shifting approach is contrary to our burden
    of proof standard even under de novo review, see Muniz, 
    623 F.3d at
    1294–95, let alone on abuse of discretion review, where the court does not
    assign a burden of proof at all.
    4
    The majority’s burden-shifting rule presumably contemplates that the
    plan administrator will have an opportunity to introduce extrinsic evidence
    on this issue, which is also contrary to our precedent. Abatie, 
    458 F.3d at 970
    , 972–73.
    28                 ESTATE OF BARTON V. ADT
    court would have to credit Barton’s allegations that these
    companies are covered employers, which could compel the
    conclusion that Barton is entitled to benefits under the plan.5
    But such a result would be directly contrary to our and
    Supreme Court case law, see Conkright, 
    559 U.S. at 513
    ;
    Abatie, 
    458 F.3d at 965
    , because it would require the plan
    administrator to provide benefits to Barton even though the
    plan administrator did not abuse its discretion in determining
    that Barton did not work for covered employers for ten years
    of continuous service.
    The majority argues that its new burden-shifting rule does
    not require the plan administrator to carry the burden of
    producing “records listing entities not covered by their
    pension plans,” but rather requires the plan administrator to
    “reveal which companies did in fact participate in their
    plans.” Maj. op. at 18 n.7. According to the majority, plan
    administrators must know this information in order to “fulfill
    their fiduciary duty to only distribute pension funds to
    qualified individuals.” 
    Id.
     But the plan administrator here
    elected to fulfill its fiduciary duty by maintaining and
    updating a record of past and present employees who are
    entitled to pensions, rather than by listing covered companies.
    The majority provides no explanation as to why this approach
    breached the plan administrator’s fiduciary duty or what
    authority required the plan administrator to maintain a
    5
    The majority is unclear whether a determination that some of Barton’s
    former employers must be deemed to be “covered employers” under a
    burden-shifting approach also compels the conclusion that Barton is per
    se entitled to benefits. Since the plan requires Barton to have engaged in
    ten years of continuous service with a covered employer, such a ruling
    would directly contradict the terms of the plans.
    ESTATE OF BARTON V. ADT                     29
    complete list of covered companies in order to comply with
    the majority’s unprecedented new rule.
    Moreover, assuming that administrators of multi-
    employer plans like this one (ADT instituted its first plan on
    April 1, 1913) frequently lack information about which
    historical companies are “covered” as defined in the plan, the
    majority’s new rule does not just shift a burden, but as a
    practical matter, could make the claimant eligible for benefits
    whenever the historical information is scanty or unavailable.
    Putting the “risk of insufficient records” on the ERISA plan,
    as required by the majority, enhances the risk that uninsured
    claimants will draw funds away from the legitimate
    beneficiaries. That risk is in derogation of one of ERISA’s
    core policies: to protect the “soundness and stability of plans
    with respect to adequate funds to pay promised benefits.”
    
    29 U.S.C. § 1001
    (a); see also Boyd v. Bert Bell/Pete Rozelle
    NFL Players Ret. Plan, 
    410 F.3d 1173
    , 1178 (9th Cir. 2005)
    (holding that fiduciaries of benefit plans are “obligated to
    guard the assets of the Plan from improper claims”) (internal
    quotation marks and alteration omitted).
    Lacking any support for its new rule in our ERISA case
    law, the majority is forced to justify its rule by reference to
    cases addressing inapposite issues. See Brick Masons
    Pension Trust v. Industrial Fence & Supply, Inc., 
    839 F.2d 1333
    , 1337–39 (9th Cir. 1988); see also Anderson v. Mt.
    Clemens Pottery Co., 
    328 U.S. 680
    , 686–87 (1946).
    In Brick Masons, a masonry company entered into a
    contract to make contributions to multi-employer welfare
    plans based on hours worked by covered employees.
    
    839 F.2d at 1335
    . The welfare plans proved that during the
    relevant time period, the company had breached the contract
    30              ESTATE OF BARTON V. ADT
    by using covered employees to perform covered work and
    failing to make the required contributions, which resulted in
    damage to the welfare plans. 
    Id.
     Although there was only
    limited evidence as to the extent of the covered work (and
    hence, limited evidence of the amount of the missing
    contributions), the welfare plans proved that this data was
    unavailable because the company had violated a statutory
    requirement to keep adequate records of its employees’ hours.
    
    Id. at 1338
    . We held that because the welfare plans had
    proved “the fact of damage” and had also proved that the
    company failed to keep statutorily required records, the
    burden shifted to the company to come forward with evidence
    that would show the extent of damages. 
    Id.
     at 1338–39.
    Because the company did not have records regarding the
    amount of covered work performed by the covered
    employees, this in effect required the company to pay the full
    amount estimated by the welfare plans. 
    Id.
    The majority also cites Anderson v. Mt. Clemens Pottery
    Co., 
    328 U.S. 680
    , 686–87 (1946), which involved a suit by
    employees under the Fair Labor Standards Act claiming that
    they were deprived of overtime compensation. 
    Id. at 684
    .
    The Court held that where an employee proved that he “has
    in fact performed work for which he was improperly
    compensated,” and “the amount and extent of that work,” but
    the employer violated its statutory duty to keep adequate and
    accurate records, the burden shifted to the employer to
    disprove the employees’ estimate of the work performed. 
    Id.
    at 686–88.
    Brick Masons and Mt. Clemens have nothing to do with
    the question presented here, whether a plan administrator
    abused its discretion in denying a claimant’s demand for
    benefits. The district courts in Brick Masons and Mt.
    ESTATE OF BARTON V. ADT                      31
    Clemens were not considering whether a plan administrator’s
    decision was illogical, implausible, or without support in the
    record, but rather were conducting a de novo review of the
    amount of damages to which claimants were entitled. The
    courts shifted the burden to the defendant to show the extent
    of damages only after the plaintiffs had both: (1) successfully
    proven all elements of their claims; and (2) established that
    the defendant’s violation of a statutory requirement to
    maintain necessary records precluded them from proving the
    precise amount of damages caused by the defendant. Here,
    by contrast, Barton has not successfully proven any element
    of his claim: The question is not the “amount of damages”
    owed to Barton, but rather whether he is owed anything at all.
    Moreover, Barton has not pointed to any violation of a
    statutory recordkeeping requirement. Even if the majority’s
    Brick Masons theory were otherwise applicable in the context
    of abuse of discretion review, the lack of any statutory
    violation would preclude a court from shifting the burden of
    proof. See Motion Picture Indus. Pension & Health Plans v.
    N.T. Audio Visual Supply, Inc., 
    259 F.3d 1063
    , 1066–67 (9th
    Cir. 2001) (noting that the “first threshold burden” for
    switching the burden of proof under Brick Masons is proving
    that the plan administrator “failed to keep adequate records”
    under ERISA).
    IV
    In short, the majority’s ad hoc rule designed to help
    Barton in this case is a disaster. The majority’s requirement
    that the district court allocate a burden of proof when it is
    supposed to be reviewing a plan administrator’s decision
    for abuse of discretion makes no sense and is contrary to
    our case law. And the rule itself, which verges on the
    incomprehensible, will defy district courts’ efforts to apply it.
    32              ESTATE OF BARTON V. ADT
    Given that this rule was apparently developed to help a single
    claimant, one can only hope that this strange rule will be
    confined to the limited facts of this case. I dissent.
    

Document Info

Docket Number: 13-56379

Citation Numbers: 820 F.3d 1060

Filed Date: 4/21/2016

Precedential Status: Precedential

Modified Date: 1/12/2023

Authorities (24)

Schwartz v. Metropolitan Life Insurance , 463 F. Supp. 2d 971 ( 2006 )

George W. Mitchell v. Eastman Kodak Company , 113 F.3d 433 ( 1997 )

Vicki Jordan v. Northrop Grumman Corporation Welfare ... , 370 F.3d 869 ( 2004 )

Salomaa v. Honda Long Term Disability Plan , 642 F.3d 666 ( 2011 )

Susan E. Hess v. Hartford Life & Accident Insurance Company , 274 F.3d 456 ( 2001 )

zeffie-r-brogan-v-michael-h-holland-paul-r-dean-marty-d-hudson-elliot , 105 F.3d 158 ( 1997 )

steffany-tremainplaintiff-appellant-v-bell-industries-inc-a-california , 196 F.3d 970 ( 1999 )

Saffon v. Wells Fargo & Co. Long Term Disability Plan , 522 F.3d 863 ( 2008 )

Marjorie Booton v. Lockheed Medical Benefit Plan , 110 F.3d 1461 ( 1997 )

Brent Boyd v. Bert Bell/pete Rozelle Nfl Players Retirement ... , 410 F.3d 1173 ( 2005 )

Molski v. Foley Estates Vineyard and Winery, LLC , 531 F.3d 1043 ( 2008 )

ferrari-alvarez-olsen-ottoboni-a-california-professional-corporation , 940 F.2d 550 ( 1991 )

nedra-johnson-deborah-nelson-michael-friend-carol-larsen-v-james-buckley , 356 F.3d 1067 ( 2004 )

the-brick-masons-pension-trust-the-brick-masons-health-and-welfare-trust , 839 F.2d 1333 ( 1988 )

Hughes Salaried Retirees Action Committee Peter Formo ... , 72 F.3d 686 ( 1995 )

karla-h-abatie-v-alta-health-life-insurance-company-a-delaware , 458 F.3d 955 ( 2006 )

United States v. McENRY , 659 F.3d 893 ( 2011 )

Muniz v. Amec Construction Management, Inc. , 623 F.3d 1290 ( 2010 )

Motion Picture Industry Pension & Health Plans v. N.T. ... , 259 F.3d 1063 ( 2001 )

Jordan v. Northrop Grumman Corp. Welfare Benefit Plan , 63 F. Supp. 2d 1145 ( 1999 )

View All Authorities »