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Smith v. Bayer Corporation Long Term Disability Plan

October 26, 2006

TERRY SMITH, PLAINTIFF
v.
BAYER CORPORATION LONG TERM DISABILITY PLAN AND BAYER CORPORATION, DEFENDANTS



The opinion of the court was delivered by: James H. Jarvis United States District Judge

MEMORANDUM OPINION

Plaintiff filed this action pursuant to the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq., to recover long-term disability (LTD) income and other benefits from defendant Bayer Corporation Long Term Disability Plan (the Plan) [see Doc. 1].*fn1 On July 31, 2006, this court entered a memorandum opinion which held, among other things, that the Plan's rejection of plaintiff's LTD claim was arbitrary and capricious and directed that plaintiff be awarded those benefits [see Doc. 29]. That same day, the Clerk entered a judgment which indicated that plaintiff would be "AWARDED a judgment for his ... LTD[] benefits, plus interest from the date on which the benefit payment ceased, as well as partial disability benefits beginning on May 5, 2004, with the cost of this action to be taxed against defendants." [Doc. 30].

This matter is presently before the court on the following motions filed by plaintiff:

(1) Motion for order of benefits and other damages to be payable by defendants pursuant to the court's order of judgment [Doc. 31]; and

(2) Motion for attorney fees [Doc. 33].

The issues raised by these motions have been well briefed by plaintiff [see Docs. 32 and 34]*fn2 ; however, defendants have failed to file any timely response to these motions,*fn3 see E.D.TN. LR 7.1(a), and are therefore deemed to have waived any opposition to the relief sought. E.D.TN. LR 7.2. For the reasons that follow, plaintiff's motions will be granted.

I. Procedural Issue

Before addressing the merits of plaintiff's motions, the court must turn first to the unusual procedural posture of this case which, it must be emphasized, has occurred through no fault of the parties whatsoever. When this court entered its memorandum opinion [Doc. 29] on July 31, 2006, thereby denying defendants' motion for judgment on the ERISA administrative record [Doc. 22] and granting plaintiff's motion for judgment on the record [Doc. 24], it was anticipated that a judgment for a sum certain would be entered. In the context of ERISA cases, it has been the court's experience that oftentimes the parties will tender a proposed agreed judgment for the court's consideration; on other occasions, plaintiff will file a motion for entry of judgment along with a supporting memorandum and affidavit, which is precisely what has occurred in this case.

Before either one of these events transpired, however, the Clerk entered a judgment, presumably pursuant to Fed. R. Civ. P. 58(a)(2)(A). However, that rule provides no mechanism for entry of such a judgment when the court has granted plaintiff relief in this ERISA action; it would, of course, have allowed for the entry of such a judgment had the court granted defendants' motion for judgment on the ERISA administrative record, thereby denying plaintiff's motion for judgment on that same record. See Fed. R. Civ. P. 58(a)(2)(A)(iii) ("unless the court orders otherwise, the clerk must, without awaiting the court's direction, promptly prepare, sign and enter the judgment when ... the court denies all relief[.]"). Because the Clerk entered that judgment, it is understandable that defendants filed a notice of appeal even though no judgment for a sum certain has yet been entered. Therefore, in view of the above, this court will vacate the Clerk's judgment and will further order, as it should have done on July 31, 2006, that defendants' motion for judgment on the ERISA administrative record be denied and that plaintiff's motion for judgment on that same record be granted. Once that is done, this court will then have the requisite authority to enter an appropriate judgment so that defendants can then file a notice of appeal from what is truly a final judgment.*fn4

II. Motion for Order of Benefits and Other Damages

A. Monthly Benefit Amount and the Period for Which It Is Payable

The record reflects that plaintiff applied for disability benefits under the Plan and that he last worked for Bayer Corporation (Bayer) on or about September 3, 2002 [AR 034]. The Plan provides, "LTD benefits begin on the later of: The first day of the 27th week after your disability begins or [t]he first day after short-term disability benefits stop." [AR 098]. Consequently, the first day of the 27th week after plaintiff's disability began was March 10, 2003; however, because plaintiff's STD benefits did not cease until April 2, 2003, his date of entitlement to LTD benefits would have to be April 3, 2003 [AR 045].

The record further reflects that plaintiff was enrolled in the 70% option of the LTD Plan [see Doc. 32-2]. That enrollment would entitle plaintiff to 70% of his "[b]ase salary," which is defined in the Plan as "your base annual compensation ...." [AR 093]. In the case of a salesperson, like the plaintiff, the Plan also provides that "your 'base salary' is considered to be your base salary plus commissions earned in the prior calendar year." [Id.]. Here, plaintiff's base salary plus commissions for the relevant time period was $60,171.00 or $5,014.25 per month. [See Doc. 32-2]. Therefore, plaintiff's gross monthly LTD payment would be 70% of that amount, i.e., $3,509.98.

The record further supports a finding that plaintiff is entitled to the full gross monthly LTD benefit from April 3, 2003, through May 5, 2004, the date on which he began working for Target Stores in Cape Girardeau, Missouri [see Doc. 32-3]. After May 5, 2004, plaintiff is entitled to a reduced LTD benefit equal to his gross LTD payment, minus 50% of his income from working while disabled. [AR 099]. The record reflects that plaintiff's earnings at Target are approximately $1,083.33 per month. As 50% of that amount is $541.67, plaintiff's partial disability payment from the Plan would be $2,968.31 ($3,509.98 less $541.67). Plaintiff also contends that these benefits should continue at this level as long as he remains disabled under the terms of the Plan or until age 65. The court agrees [id.]. Furthermore, if plaintiff's disability earnings change, then his partial disability benefit should be adjusted accordingly.

B. Prejudgment Interest

Plaintiff next seeks an award of prejudgment interest. "Although ERISA does not mandate the award of prejudgment interest to prevailing plan participants, [the Sixth Circuit has] long recognized that the district court may do so at its discretion in accordance with general equitable principles." Ford v. Uniroyal Pension Plan, 154 F.3d 613, 616 (6th Cir. 1998). An award of prejudgment interest is simply one mechanism to compensate plaintiff for the delay in receipt of his income. See Caffey v. Unum Life Ins. Co., 302 F.3d 576, 586 (6th Cir. 2002). Here, as noted above, plaintiff has been deprived of his LTD benefits since April 3, 2003. Because plaintiff has been compelled to undertake a menial job at Target in order to make ends meet, the court is of the opinion that an award of prejudgment interest in this case is supported by the record.

In determining an appropriate rate of prejudgment interest, the Caffey court endorsed the use of a "stream-of-benefits" model, i.e., calculating the interest due on each monthly payment of disability benefits beginning with the date that each payment was due. Id. at 585. Thus, Caffey endorsed the district court's "use of a blended rate of interest, which averaged the 52-week United States Treasury Bill interest rate over the relevant time period." Id. Employing the method endorsed by Caffey, plaintiff contends that he is entitled to an interest rate of 2.71%.*fn5 The court agrees that this is an appropriate rate of prejudgment interest.*fn6

In order to apply that rate to the facts of this case, the record indicates first that before plaintiff began his employment at Target, he was entitled to $3,509.98 per month in LTD benefits from April 3, 2003, through May 5, 2004. This represents 13.1 months of LTD benefits totaling $45,980.74 before prejudgment interest is calculated. After interest in the amount of 2.71% is calculated to each monthly benefit as of the date it becomes due, this amount increases, according to plaintiff, to $49,575.13.*fn7

The record also indicates that after plaintiff began his employment at Target, he is entitled to $2,968.31 in partial disability benefits from May 5, 2004, through the date of this court's decision on July 31, 2006. This represents 26.87 months of partial disability benefits totaling $79,748.60 before interest is calculated. After interest in the amount of 2.71% is calculated as to each monthly benefit as of the date it became overdue, this amount increases to $82,202.38.*fn8 ...


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