Conley (Plaintiff) brought suit against his employer, Pitney Bowes (Defendant), after being denied continued disability benefits for a claim arising from injuries suffered in an automobile accident. The case was removed to federal district court because the suit related to benefits under the Employee Retirement Income Security Act (ERISA).
“In bilateral contracts for an agreed exchange of performances… where one party’s performance is to be rendered prior in time to that of the other, it is a constructive condition precedent to the latter’s duty.”
ERISA does not explicitly require exhaustion of administrative or plan remedies, so the terms of the individual policy are controlling. The particular plan in this case required a written notification of the denial that included “an explanation of the claim appeal procedure.”
The district court granted summary judgment to the Defendant.
Must a claimant exhaust administrative procedures when, contrary to the requirements of his plan, the letter denying him benefits does not inform him of appeal procedures?
Reversed and remanded.
Because the Defendant was obligated to inform the Plaintiff of the appeal procedure at the time they denied him benefits, their performance had necessarily to precede exhaustion by the Plaintiff. Therefore, a defense under the exhaustion clause could not be asserted absent performance of the notice clause, since they are presumed to be the subject of promises made in exchange for each other.
The judgment of the district court should be affirmed. The Plaintiff let his attorney handle the case, and the attorney dropped the ball. The benefits plan book stated the appeals procedure clearly, and the majority elevated form over substance in their holding.
· This was a bilateral contract case (an agreement where future promises of performance are exchanged).
The majority felt that the freedom of contract between parties is a more important principle than the judicially created doctrine of exhaustion