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Futility Will Not Excuse Exhaustion Where No Claim Filed – S.D. W. Va.

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  • Futility Will Not Excuse Exhaustion Where No Claim Filed – S.D. W. Va.

    In Carson, et. al. v. International Headquarters Pension and Beneficiaries Plan of the International Union of Operating Engineers, et. al., the plaintiffs are former members of the defendant Union who contend that they should have been allowed to participate in a pension/retirement plan and that they are entitled to benefits as a result. However, none of the plaintiffs ever filed a claim for benefits. Plaintiffs contend that they should be excused under the doctrine of futility because one of the twelve plaintiffs inquired of one of the plan’s trustees about the possibility of filing a claim and was advised that any such claim would be denied. Plaintiff filed suit alleging futility and defendants, obviously, moved to dismiss for failure to exhaust. The court gives a good overview of case law from District Courts in the Fourth Circuit and holds that futility cannot apply where no claim was even filed.

    Courts have, however, created certain exceptions to the general exhaustion requirement, including denial of meaningful access to the administrative process and futility. See, e.g., SunTrust Bank v. Aetna Life Ins. Co., 251 F. Supp. 2d 1282, 1289 (E.D. Va. 2003) (addressing arguments as to both exceptions). To demonstrate futility, a claimant must make “a clear and positive showing that any attempt to pursue the administrative remedy in question would have been futile.” Frye v. Metro. Life Ins. Co., 2010 WL 5343287, at *12 (S.D.W. Va. Dec. 20, 2010) (Chambers, J.) (internal quotation marks omitted). Further, courts apply the futility exception “only when resort to administrative remedies is clearly useless.” Id. (internal quotation marks omitted).

    Not as much Fourth Circuit case law is available with respect to denial of access to administrative procedures. The Northern District of West Virginia noted that other circuit courts “have refused to waive the exhaustion requirement in ERISA cases where the claimant was not adequately informed of claims procedures.” Kern v. Verizon Commc'ns, Inc., 381 F. Supp. 2d 532, 537 (N.D.W. Va. 2005) (citing Davenport v. Harry N. Abrams, Inc., 249 F.3d 130, 133 n. 2 (2d Cir.2001); Bourgeois v. Pension Plan for Employees of Santa Fe Int'l Corps., 215 F.3d 475 (5th Cir.2000)). However, courts have recognized that the exhaustion requirement may be waived when “the plaintiff was denied meaningful access to internal review procedures,” or when the plaintiff was not informed of the appeals process. Trotter v. Kennedy Krieger Inst., Inc., 2012 WL 3638778, at *5(D. Md. Aug. 22, 2012); Hailey v. Commonwealth Aluminum Corp., 903 F. Supp. 910, 912 (D. Md. 1995). In Trotter, the plaintiff alleged that she submitted a claim form, but that the insurance company (and fiduciary) refused to process it. Trotter, 2012 WL 3638778, at *5. Thus, the court found, she had been denied access to the administrative process, and could not be expected to file an appeal of a claim that had not been considered. Id. In Hailey, on the other hand, the plaintiff “never made a claim in the first place,” only informal telephonic inquiries to which she received equally informal responses. Hailey, 903 F. Supp. at 912. Accordingly, the court found that she could not complain of lack of access to the appeals process. Id.

    As in Hailey, the Plaintiffs here did not attempt to utilize the administrative process and cannot now claim that that process would have been futile or that they were denied access to it. They allege that they have not been treated as participants or provided Plan documents and that one Plaintiff had informal conversations in which he was told he would not be permitted to participate. They do not allege that they asked for copies of the Plan documents and were refused. They do not allege that they attempted to file applications for benefits. They do not allege that they asked the Plan Administrator or Trustees how to apply for benefits. They make no allegations to suggest that a majority of the Trustees were even aware of their claims.

    To find that the administrative process would be futile, the Court would have to be certain of the outcome if the claim were properly presented to the Trustees. The Court cannot be certain of the outcome when only one former Trustee stated that a claim would be denied. Even that former Trustee did not have the benefit of a detailed application, supporting information, and further argument on an administrative appeal. Likewise, even if there were an explicit policy in place to deny benefits to former NTF employees like the Plaintiffs, arguments against such a policy must be made first to the Trustees through the administrative process. The statutory requirement that plans have an internal process for appealing claim denials would be rendered meaningless if the Court were to assume that minds could not change after an initial denial or that potentially illegal policies could not be reconsidered and changed when challenged. The internal claim and appeal process is designed to provide the Trustees with all of the information and arguments to make an informed decision. The Plaintiffs, however, have presented claims and argument to this Court for the first time, without ever attempting to access or exhaust the administrative process. Not only would it be improper for the Court to consider claims presented in this posture, it would be impossible to do so under the appropriate standard, because the Court lacks an administrative record. Accordingly, the Defendants’ motion to dismiss must be granted.
    A copy of the decision is attached.
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