     16-712
     Tedesco v. I.B.E.W. Local 1249 Insurance Fund, et al.

                         UNITED STATES COURT OF APPEALS
                             FOR THE SECOND CIRCUIT

                                  SUMMARY ORDER
     RULINGS  BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER
     FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
     APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY
     ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX
     OR AN ELECTRONIC DATABASE (WITH THE NOTATION ASUMMARY ORDER@). A PARTY CITING A SUMMARY
     ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

 1        At a stated term of the United States Court of Appeals for
 2   the Second Circuit, held at the Thurgood Marshall United States
 3   Courthouse, 40 Foley Square, in the City of New York, on the
 4   21st day of December, two thousand sixteen.
 5
 6   PRESENT: DENNIS JACOBS,
 7            ROSEMARY S. POOLER,
 8            PETER W. HALL,
 9                          Circuit Judges.
10
11   - - - - - - - - - - - - - - - - - - - - - -X
12   WENDY A. TEDESCO,
13            Plaintiff-Counter-Defendant
14            -Appellant,
15
16                -v.-                                                  16-712
17
18   I.B.E.W. LOCAL 1249 INSURANCE FUND; JAMES C.
19   ATKINS, WILLIAM BOIRE, CHARLES BRIGHAM,
20   MICHAEL GILCHRIST, SCOTT LAMONT, and EDWIN
21   MOREIRA, JR., as Trustees of the Fund; and
22   DANIEL R. DAFOE, as Administrator of the Fund,
23             Defendants-Counter-Claimants-
24             Appellees.1
25   - - - - - - - - - - - - - - - - - - - - - -X
     1
       The Clerk of Court is respectfully directed to amend the
     caption of the case to appear as above.
                                                1
 1
 2   FOR APPELLANT:                     ERIC S. WEINSTEIN, Ellenoff
 3                                      Grossman & Schole LLP, New
 4                                      York, NY.
 5
 6   FOR APPELLEES:                     JULES L. SMITH, Blitman & King
 7                                      LLP, Rochester, NY.
 8
 9        Appeal from a judgment of the United States District Court
10   for the Southern District of New York (Forrest, J.).

11        UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED AND
12   DECREED that the judgment of the district court be VACATED in
13   part and REMANDED.

14        Plaintiff Wendy Tedesco appeals from the district court’s
15   grant of summary judgment in favor of defendants -- I.B.E.W.
16   Local 1249 Insurance Fund and its Trustees and Administrator
17   -- on claims that they violated ERISA by denying benefits under
18   the I.B.E.W. Local 1249 Insurance Fund Plan (the “Plan”) and
19   by seeking the recovery of alleged overpayments.2 We review de
20   novo “a district court’s decision granting summary judgment in
21   an ERISA action based on the administrative record” and we
22   “apply the same legal standard as the district court.”
23   McCauley v. First Unum Life Ins. Co., 551 F.3d 126, 130 (2d Cir.
24   2008). “Summary judgment is appropriate . . . where the
25   parties’ submissions show that there is no genuine issue as to
26   any material fact and the moving party is entitled to judgment
27   as a matter of law.” Id. (internal quotation marks omitted).
28   We assume the parties’ familiarity with the underlying facts,
29   the procedural history, and the issues presented for review.

30        1. Tedesco’s denial-of-benefits claim was dismissed on
31   the ground that defendants’ adverse benefit decision was not

     2
       Tedesco lodged additional claims for violations of ERISA and
     the Mental Health Parity and Addiction Equity Act of 2008.
     Tedesco does not appeal the district court’s grant of summary
     judgment to defendants on these claims. Nor does she appeal
     the district court’s grant of summary judgment to defendants
     on their counterclaim -- which they later voluntarily dismissed
     -- seeking to recover benefit overpayments (App’x at 185-86).
                                    2
 1   “arbitrary and capricious.” Based on prevailing Second
 2   Circuit case law, the district court and the parties assumed
 3   that that was the applicable standard because the Plan conferred
 4   upon defendants the authority to determine benefit eligibility.
 5   See, e.g., Hobson v. Metro. Life Ins. Co., 574 F.3d 75, 82 (2d
 6   Cir. 2009) (“Although generally an administrator’s decision to
 7   deny benefits is reviewed de novo, where, as here, written plan
 8   documents confer upon a plan administrator the discretionary
 9   authority to determine eligibility, we will not disturb the
10   administrator’s ultimate conclusion unless it is arbitrary and
11   capricious.” (internal quotation marks omitted)). However,
12   after the district court issued its opinion and while this
13   appeal was pending, this Court held in Halo v. Yale Health Plan,
14   Dir. of Benefits & Records Yale Univ., 819 F.3d 42 (2d Cir.
15   2016), that “a plan’s failure to comply with the Department of
16   Labor’s claims-procedure regulation, 29 C.F.R. § 2560.503-1,
17   will result in that claim being reviewed de novo in federal
18   court, unless the plan . . . can show that its failure to comply
19   with the claims-procedure regulation in the processing of a
20   particular claim was inadvertent and harmless.”3 819 F.3d at
21   58 (emphasis in original).

22        On appeal, Tedesco alleges that the adverse benefit
23   notifications she received on October 16, 2013 and January 14,
24   2014 omitted information that was required by 29 C.F.R. §
25   2560.503-1(g). She is correct insofar as these notifications
26   -- which stated that visits with her social worker and more than
27   twice-weekly visits with her psychiatrist were not “medically
28   necessary” -- failed to provide “either an explanation of the
29   scientific or clinical judgment for the determination, applying
30   the terms of the plan to the claimant’s medical circumstances,
31   or a statement that such explanation will be provided free of
32   charge upon request.” 29 C.F.R. § 2560.503-1(g)(1)(v)(B).

33        We remand so that the district court may consider in the
34   first instance whether, under Halo, these procedural
35   deficiencies warrant de novo review of Tedesco’s


     3
       Under ERISA, Congress empowered the Department of Labor to
     issue rules and regulations governing claims procedures for
     employee benefit plans. Halo, 819 F.3d at 45.
                                    3
 1   denial-of-benefits claim, and, if so, whether the claim should
 2   still be dismissed.

 3        We are mindful that, although Tedesco raised this
 4   procedural non-compliance issue in her first amended complaint
 5   (the “complaint”) (ECF No. 9 ¶¶ 13, 14, 33, 35), she did not
 6   do so in her motion for summary judgment papers. In general,
 7   “a federal appellate court does not consider an issue not passed
 8   upon below.” Singleton v. Wulff, 428 U.S. 106, 120 (1976).
 9   “That rule, however, is one of prudence and not appellate
10   jurisdiction. We retain broad discretion to consider issues
11   not raised initially in the District Court.” Lo Duca v. United
12   States, 93 F.3d 1100, 1104 (2d Cir. 1996). In light of the
13   interests at stake, the recent development of the law, and the
14   lack of manifest injustice to the defendants, we exercise our
15   discretion to consider Tedesco’s argument regarding 29 C.F.R.
16   § 2560.503-1(g) and remand for further proceedings. At the
17   same time, we express no view of the merits; the district court
18   is free to proceed in whatever manner it deems best on remand.

19        2. The overpayment claim was dismissed on the ground that
20   Tedesco failed to exhaust her administrative remedies. She
21   contends on appeal that her administrative remedies should be
22   deemed exhausted because the overpayment notifications she
23   received in March 2014 did not comply with 29 C.F.R. §
24   2560.503-1. See 29 C.F.R. § 2560.503-1(l) (“In the case of the
25   failure of a plan to establish or follow claims procedures
26   consistent with the requirements of this section, a claimant
27   shall be deemed to have exhausted the administrative remedies
28   available under the plan[.]”); Halo, 819 F.3d at 56 (explaining
29   that a plan is not entitled to the protections of the exhaustion
30   requirement if the plan does not strictly comply with 29 C.F.R.
31   § 2560.503-1). Although this argument was not pressed below,
32   the overpayment notifications were procedurally deficient.4
33   Specifically, they neglected to include the required
34   “description of the plan’s review procedures and the time limits
35   applicable to such procedures, including a statement of the
36   claimant’s right to bring a civil action under section 502(a)

     4
       Tedesco alleged in her complaint that the notifications were
     procedural deficient (ECF No. 9 ¶¶ 38, 39, 91), but she did not
     raise this argument in her motion for summary judgment.
                                    4
 1   of the Act following an adverse benefit determination on
 2   review.” 29 C.F.R. § 2560.503-1(g)(1)(iv).

 3        Even if Tedesco’s overpayment claim is deemed exhausted,
 4   however, it nonetheless fails on the merits. The Plan provides
 5   that if a member’s spouse declines health insurance coverage
 6   from her employer, as Tedesco did, the Plan treats the spouse
 7   as if she were covered, and provides her with secondary coverage
 8   only. Specifically, the Summary Plan Description states:

 9            [W]here a spouse makes a voluntary election out of
10            their employer’s Group Plan, this Plan will treat the
11            spouse as if they were covered by their employer’s
12            Plan. As a result, there will be subtracted, from
13            what this Insurance Fund would have paid on a spouse’s
14            or dependent’s claim, any amount that would have been
15            paid by the spouse’s employer’s Plan if they had not
16            elected to not be covered.

17   App’x at 120 (bold in original). The Summary Plan Description
18   provides for the recovery of such overpayments:

19            [T]he Trustees have the right to recover any
20            overpayment or mistaken payment made to you or to a
21            third party. The claimant, third party, or other
22            individual or entity, receiving the overpayment or
23            mistaken payment must pay back the overpayment or
24            mistaken payment to the Fund with interest at 2% per
25            month. Such a recovery may be made by reducing other
26            benefit payments made to or on behalf of the claimant
27            (you) or your spouse or dependents, by commencing a
28            legal action or by such other methods as the Trustees,
29            in their discretion, determine to be appropriate.

30   App’x at 126.

31        It is undisputed that Tedesco declined health insurance
32   coverage from her employer starting in January 2013 and
33   continued to receive primary coverage benefits under the Plan.
34   As the district court concluded in connection with defendants’
35   counterclaim, the Trustees therefore have the right to recover,
36   through setoff, any benefit overpayments, meaning “any amount
37   that would have been paid by [Tedesco’s] employer’s Plan if

                                    5
1   [she] had not elected to not be covered.” App’x at 120. We
2   remand for the district court to determine the amount of money
3   the Fund is entitled to recover.

4        Accordingly, the judgment of the district court is hereby
5   VACATED in part and the matter REMANDED for further proceedings
6   consistent with this order. Each side shall bear its own costs.

7                                FOR THE COURT:
8                                CATHERINE O’HAGAN WOLFE, CLERK




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