In Ferguson v. BBVA Compass Bancshares, Inc., et al., No. 2:19-CV-01135-MHH, 2021 WL 662257 (N.D. Ala. Feb. 19, 2021), the district court considered Defendants’ motion to reconsider the court’s previous order denying their motion to dismiss Plaintiffs’ ERISA claim for failure to exhaust administrative remedies. Defendants requested, in the alternative, that the court certify two questions for interlocutory appeal. In denying both motions, the court observed that “BBVA seems to be using exhaustion as a sword rather than a shield.” This decision highlights the importance of plan language regarding ERISA administrative appeals and representations made by plan administrators regarding such procedures. This decision cautions Plan Administrators to respond in writing to claimant questions about the plan’s claim and appeal procedures lest they forfeit an administrative exhaustion argument in litigation.
This case involves allegations made by plaintiffs Gloria Ferguson and Cassandra McClinton, participants in the Compass SmartInvestor 401(k) Plan, that BBVA breached its fiduciary duties of prudence and loyalty by mismanaging money market and mutual funds that were part of the Plan’s investment options. This alleged mismanagement caused plan participants to lose approximately $47 million.
In the Compass SmartInvestor 401(k) Plan document under Article VIII—DISTRIBUTION OF BENEFITS—is Section 8.7, a provision titled “Claim and Review Procedure.” Section 8.7 states that Plan Participants or beneficiaries may submit claims for benefits to the Retirement Committee and appeal decisions of the Retirement Committee. The Plan document does not define the term “claim” or “claim for benefits.”
Prior to filing suit, Ferguson’s attorney sent a letter to BBVA’s Plan Administrator asking for documents to investigate whether the Plan had a prudent methodology for the selection of investment options for the Plan menu. The letter requested various documents, including the Summary Plan Description (SPD) and the Plan document. The attorney also asked about the grievance procedure regarding the Plan, stating: “we are not aware of any provision in the plan documents that provides for grievances regarding the Plan. If there is such a process, please identify it with specificity in your response to this letter, and produce all documents related to the administrative process.” The Plan Administrator did not respond to the question about the Plan’s administrative process for grievances.
After some back and forth regarding the requested documents, Plaintiffs filed suit. They alleged that they had “exhausted all available administrative remedies pursuant to 29 U.S.C. § 1133, prior to the filing of the Complaint (there are none). There are no provisions or procedures in the plan documents to make or appeal the decisions of the Defendant in regard to breach of fiduciary duty claims.” They also alleged that if other procedures exist, such procedures are futile.
BBVA moved to dismiss the complaint for failure to exhaust administrative remedies as required by Section 8.7 of the Plan. Thereafter, counsel for Plaintiffs submitted a letter to BBVA requesting access to the Plan’s administrative remedies. Under protest, Plaintiffs submitted a claim for the relief requested in this civil action. Counsel for Plaintiffs also submitted an identical request for review from another plan participant, Christine Drake. The court denied BBVA’s motion to dismiss, noting the permissive language in the SPD concerning administrative appeals following claim denials and the permissive language concerning a claimant’s ability to file suit in federal court. The court also held to the extent the plaintiffs were required to exhaust available administrative remedies, the failure is excused.
BBVA moved the court to reconsider its decision, arguing that the court used the SPD to circumvent the Plan’s plain terms which require exhaustion, and that Plaintiffs should be required to complete the Plan’s administrative claims process since they started it. The Retirement Committee issued its decision on April 1, 2020 and the 60-day deadline for Plaintiffs to appeal expired on June 1, 2020. Plaintiffs Ferguson and McClinton did not file an administrative appeal, but Drake did. BBVA filed another brief in support of its motion to reconsider. It repeated several of its arguments, including that the Plan required Plaintiffs to exhaust their administrative remedies before filing suit, that the failure to dismiss the complaint would waste resources, that Plaintiffs had no valid excuse for filing suit before exhausting administrative remedies, and that success in its attempted interlocutory appeal would result in the end of the case (implying that the dismissal for failure to exhaust should be dismissal with prejudice).
In addressing BBVA’s arguments for dismissal for failure to exhaust administrative remedies, the court identified some “fundamentals:” (1) the Eleventh Circuit will not enforce an exhaustion requirement when the claimant’s failure to exhaust is the result of language in the SPD that she reasonably interpreted as meaning that she could go straight to court; (2) a district court has significant discretion to apply or not apply the exhaustion of administrative remedies requirement; (3) when plan language is ambiguous, ambiguities are construed against the drafter; and (4) a district court that does not excuse the failure to exhaust may either dismiss the lawsuit without prejudice or stay the litigation to allow exhaustion, not dismiss the claim with prejudice.
The court denied Defendants’ motion for reconsideration for the following reasons:
“In sum, neither the Plan document nor the SPD suggests that BBVA’s General Claims Procedure pertains to anything other than a claim for payment of vested benefits, and there is no language in the SPD or the Plan document that indicates that a claimant must file an administrative appeal before filing a lawsuit concerning a claim for payment of benefits. Were the Court to make an administrative appeal under Section 8.7 a mandatory prerequisite to an ERISA lawsuit, the Court would rewrite the language of the BBVA Plan document in violation of the Supreme Court’s holding in [CIGNA Corp. v. Amara, 563 U.S. 421 (2011)]. Moreover, neither the Plan document nor the SPD contains an express provision describing a procedure for pursuing or exhausting a breach of fiduciary duty claim administratively.”
The court rejected BBVA’s argument that under the Eleventh Circuit’s decision in Lanfear v. Home Depot, Inc., 536 F.3d 1217, 1223 (11th Cir. 2008), a claim for breach of fiduciary duty is, by definition, a claim for benefits so that Plaintiffs’ breach of fiduciary claims are claims for benefits within the meaning of Section 8.7 of the Plan document. The Plan does give the BBVA Retirement Committee “the discretion to construe and interpret the Plan, decide all questions of eligibility, determine the manner and timing of distributions under the Plan, set a funding policy, and select the Plan’s investment options.” While these powers alone may require administrative exhaustion of a breach of fiduciary duty claim, despite the more limiting administrative exhaustion language elsewhere in Plan document and SPD, the court restated its initial holding: “to the extent the plaintiffs were required to exhaust available administrative remedies, the failure is excused.”
The court explained how Ferguson’s attorney asked the Plan Administrator to explain in writing whether there was a grievance policy, and he did not respond to that request. “The Plan Administrator could not hold his cards to his vest and then play them after Ms. Ferguson and Ms. McClinton filed suit. A direct question requires a direct answer from a fiduciary. . . . If a plan administrator wishes to have an opportunity to review and attempt to resolve disputes with plan participants before participants file lawsuits, then plan administrators should respond when a plan participant asks for direction concerning exhaustion of administrative remedies. If the participant asks the plan administrator to identify the plan provision that provides procedures for grievances, the plan administrator should not hide the ball. As this case illustrates, dodging questions from plan participants increases the cost of dispute resolution.”
The court found that Ferguson and McClinton did not have to appeal the denial of their administrative breach of fiduciary claim for two reasons: (1) Section 8.7 states that they “may appeal;” and (2) requiring them to appeal would be a futile exercise because the Retirement Committee already decided Drake’s appeal which involves the same claims and sought-after remedies.
Lastly, the court denied BBVA’s motion for certification of immediate appeal. BBVA asked the court to certify two questions:
(1) Under CIGNA, can Watts excuse an ERISA retirement plan participant’s failure to exhaust available administrative remedies based on a provision within the summary plan document? (2) Is an ERISA retirement plan participant excused from exhausting available administrative remedies based on her attorney’s reliance on the summary plan document, when the Plan unambiguously requires exhaustion?
The court found that BBVA fails to meet the high burden for interlocutory appeal. The “clear abuse of discretion” standard for reversal of a district court’s decision to excuse administrative exhaustion cuts against a request for interlocutory appeal. “And if BBVA had been sincerely interested in materially advancing the resolution of the plaintiffs’ claims for breach of fiduciary duty, BBVA would have answered Ms. Ferguson’s attorney’s question regarding the administrative process for grievances concerning the Plan. An appeal will not materially advance the resolution of this litigation because an appeal, at most, would produce a stay of the litigation for Ms. Ferguson and Ms. McClinton to complete the administrative appeals process.”
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