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Dylla v. Aetna Life Ins. Co.: US District Court : ERISA - exhausation requirement not excused; futility not shown

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
John Dylla,
Plaintiff,
Civ. No. 07-3203 (RHK/JSM)
MEMORANDUM OPINION
AND ORDER
v.
Aetna Life Insurance Co.,
Defendant.
Stuart L. Goldenberg, Goldenberg & Johnson PLLC, Minneapolis, Minnesota, for
Plaintiff.
Andrew J. Holly, Stephen P. Lucke, Dorsey & Whitney LLP, Minneapolis, Minnesota,
for Defendant.
INTRODUCTION
In this action, Plaintiff John Dylla has sued the administrator of his employeedisability
benefit plan (the Plan), Aetna Life Insurance Co. (Aetna), seeking to
recover unpaid benefits after Aetna denied his claim for continued long-term disability
(LTD) benefits. Aetna now moves for summary judgment. For the reasons set forth
below, the Court will grant the Motion.
BACKGROUND
The pertinent factual background of this case is set forth in detail in the Courts
prior opinion, see Dylla v. Aetna Life Ins. Co., Civ. No. 07-3203, 2007 WL 4118929 (D.
2
Minn. Nov. 16, 2007), and will not be repeated here; familiarity with the Courts prior
opinion is assumed.
STANDARD OF DECISION
Summary judgment is proper if, drawing all reasonable inferences in favor of the
nonmoving party, there is no genuine issue as to any material fact and the moving party is
entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett,
477 U.S. 317, 322-23 (1986). The moving party bears the burden of showing that the
material facts in the case are undisputed. Id. at 322; Mems v. City of St. Paul, Dep=t of
Fire & Safety Servs., 224 F.3d 735, 738 (8th Cir. 2000). The Court must view the
evidence, and the inferences that may be reasonably drawn from it, in the light most
favorable to the nonmoving party. Graves v. Ark. Dep=t of Fin. & Admin., 229 F.3d 721,
723 (8th Cir. 2000); Calvit v. Minneapolis Pub. Schs., 122 F.3d 1112, 1116 (8th Cir.
1997). The nonmoving party may not rest on mere allegations or denials, but must show
through the presentation of admissible evidence that specific facts exist creating a
genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986);
Krenik v. County of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995).
ANALYSIS
3
Aetna argues that the present action must be dismissed because Dylla failed
to exhaust his administrative remedies before its commencement. (Def. Mem. at
9-13.) Dyllas claim for past unpaid LTD benefits falls under the purview of the
Employee Retirement Income Security Act of 1974 (ERISA). 29 U.S.C.
1132. While ERISA does not expressly require that employees exhaust
contractual remedies prior to bringing suit, the Eighth Circuit has recognized a
judicially created exhaustion requirement. Wert v. Liberty Life Assur. Co. of
Boston, Inc., 447 F.3d 1060, 1062 (8th Cir. 2006). Thus, benefit claimants must
exhaust [administrative remedies] before bringing claims for wrongful denial to
court. Galman v. Prudential Ins. Co. of Am., 254 F.3d 768, 770 (8th Cir. 2001).
The purposes served by this exhaustion rule are many and include giving claims
administrators an opportunity to correct errors, promoting consistent treatment of
claims, providing a non-adversarial dispute resolution process, decreasing the cost
and time of claims resolution, assembling a fact record that will assist the court if
judicial review is necessary, and minimizing the likelihood of frivolous lawsuits.
Id.
Dylla does not dispute that he failed to pursue an administrative appeal of
his ineligibility determination. He argues instead that the failure to exhaust his
administrative remedies should be excused under two alternative theories: (1) he
was unable to comprehend complex financial and legal issues as a result of his
4
mental incapacity; and (2) even if he were psychologically capable of exhausting
administrative remedies, such remedies were futile.1
A. Mental Incapacity
Dylla argues that mental incapacity should be recognized by the Court as an
exception to the ERISA exhaustion rule. (Mem. in Oppn at 13-16.) This
proposed exception however, has not been recognized by the Eighth Circuit or the
Supreme Court. Indeed, Dylla has not cited, and this Court has not found, any
federal case acknowledging a mental-incapacity exception to the ERISA
exhaustion rule. Therefore, this Court declines the invitation to create such an
exception in this case.
Even if the Court were to create a mental incapacity exception to the
ERISA exhaustion rule, Dylla has put forth scant evidence that he would qualify
for such an exception. Dylla had the mental capacity to file the initial claim for
LTD benefits and then to file for continuing benefits. The Court finds no reason to
consider Dylla mentally incapacitated for the purpose of his administrative appeal.
1 In his brief and at oral argument, Dylla suggests that he did not receive notice of his
right to an administrative appeal. (Mem. in Oppn at 4-5.) However, Dylla does not
argue that his failure to exhaust administrative remedies should be excused for lack of
notice, and he cites no case law on the issue. Accordingly, the Court need not address
this question. Nevertheless, the Court notes that there is no genuine issue of material fact
with regard to whether Dylla received notice of his appeal right. There is no dispute that
Aetna sent a letter informing Dylla of his right to an administrative appeal. (Mem. in
Oppn at 4.) Moreover, Aetna has supplied phone records indicating that Mrs. Dylla was
directly informed of her husbands administrative appeal right. (Capozzi Aff. 4-5;
Admin. R. at 100120.) While Mrs. Dylla does not recall this conversation, a prior
statement indicates that Mrs. Dylla did not pursue an administrative appeal not because
she was unaware of the appeal right, but rather because it was too stressful. (L. Dylla
Dep. Tr. at 69; J. Dylla Dep. Tr. Ex. 9.)
5
B. Futility
Dylla next argues that even if he had been mentally competent to pursue an
administrative appeal of his ineligibility determination, such an appeal would have
been futile because he was lacking information to rebut defendants position that
his disability was psychological in nature. (Mem. in Oppn at 17.) Dylla is
correct that futility is a recognized exception to the ERISA exhaustion rule.
Wert, 447 F.3d at 1065 (citing Back v. Danka Corp., 335 F.3d 790, 792 (8th Cir.
2003)). However, the Eighth Circuit has yet to give the term futility a clear
definition.
Other courts have applied the futility exception in only the most
exceptional circumstances. Peter Kiewit Sons Co. v. U.S. Army Corps of
Engrs, 714 F.2d 163, 168-69 (D.C. Cir. 1983) (internal quotations and citation
omitted). The Tenth Circuit recognizes futility only when resort to administrative
remedies would be clearly useless. McGraw v. Prudential Ins. Co. of Am., 137
F.3d 1253, 1264 (10th Cir. 1998) (quoting Commcns Workers of Am. v. AT & T,
40 F.3d 426, 432 (D.C. Cir. 1994)). According to the Eleventh Circuit, the test for
futility is not whether the employee[s] claims would succeed, but whether the
employee[] could have availed [himself] of the grievance procedure. Mason v.
Contl Group, Inc., 763 F.2d 1219, 1224 (11th Cir. 1985) (citing Republic Steel
Corp. v. Maddox, 379 U.S. 650, 659 (1965)). Finally, the Seventh Circuit requires
a plaintiff asserting futility to demonstrate that it is certain that [the] claim will be
denied on appeal, not merely that he doubts that an appeal will result in a different
6
decision. Zhou v. Guardian Life Ins. Co. of Am., 295 F.3d 677, 680 (7th Cir.
2002) (internal quotations and citation omitted). Thus, if a party has proffered no
facts indicating that the review procedure that he initiated will not work, the
futility exception does not apply. Id.
Although the Eighth Circuit has not adopted a definition of futility, the
consensus among the circuits is that administrative remedies are not futile unless
the evidence clearly demonstrates that the remedy would be of no avail and would
certainly result in an unfavorable decision. Under this definition, which the Court
finds appropriate and likely to be adopted by the Eighth Circuit, Dyllas
administrative remedies were not futile.
In support of his futility claim, Dylla relies upon Ruttenberg v. United
States Life Insurance Company. 413 F.3d 652 (7th Cir. 2005). In Ruttenberg, a
futility determination was found not to be an abuse of discretion when [t]he
history of [the] matter, both before the district court and in administrative
proceedings, [provided] ample support for the notion that further administrative
appeal was futile. Id. at 663. This history included a protracted, two-year
administrative claim process where the insurance company contested every
medical opinion favorable to the claimant. Id. In contrast, Dylla has provided no
evidence demonstrating futility in this case. Instead, Dylla claims that exhaustion
was futile because he was lacking information to rebut Aetnas position that his
disability was psychological in nature. (Mem. in Oppn at 17.) Nevertheless, this
argument is without merit because Dylla has put forth no evidence demonstrating
7
that he was somehow precluded from attaining such information in a timely
fashion. Indeed, there is no reason why evidence currently possessed by Dylla
regarding the physical impetus of his disability could not have been obtained four
years ago in connection with his administrative appeal.
There is no genuine issue of material fact to lead the Court to excuse the
exhaustion requirement in this case. Even if an unfavorable decision upon
administrative appeal were extremely likely, Dylla has not submitted any evidence
demonstrating that such a decision was a foregone conclusion. Therefore,
exhaustion of administrative remedies was not futile and Aetnas Motion for
Summary Judgment must be granted.2
CONCLUSION
Based on the foregoing, and all the files, records and proceedings herein,
IT IS ORDERED that Defendants Motion for Summary Judgment (Doc. No. 22)
2 Because Dylla has failed to exhaust his administrative remedies, the Court need not
address the merits of his underlying claim for continued LTD benefits. Nevertheless, the
Court notes, without deciding the issue, that Dylla would be unlikely to succeed on the
merits of his claim if they were to be reached by the Court. A review of the
administrative record reveals ample evidence indicating that the administrators
determination was not an abuse of discretion. Evidence outside the administrative record
would not be considered by the Court. See Maune v. Intl Bhd. of Elec. Workers, Local
No. 1, Health & Welfare Fund, 83 F.3d 959, 963 (8th Cir. 1996). Additionally, Dyllas
argument that the summary plan language should control is equally dubious because he
cannot demonstrate detrimental reliance as required by Eighth Circuit precedent. See
Anderson v. Alpha Portland Indus., Inc., 836 F.2d 1512, 1520 (8th Cir. 1988) (quoting
Lee v. Union Elec. Co., 789 F.2d 1303, 1308 (8th Cir. 1986)).
8
is GRANTED and Plaintiffs Complaint (attached as Ex. 1, Doc. No. 1) is
DISMISSED WITH PREJUDICE.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: December 22, 2008 /Richard H. Kyle
RICHARD H. KYLE
United States District Judge
 

 
 
 

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