Joseph Peterson recovered short- and long-term disability benefits, as well as his attorneys’ fees, in a lawsuit that ultimately made its way to the Second Circuit Court of Appeals. We represented Mr. Peterson throughout the lawsuit, which included three reported decisions by Judge Colleen McMahon of the United States District Court for the Southern District of New York, as well as a decision from the Court of Appeals.
Judge McMahon’s decisions have provided significant precedent for several legal propositions: (1) that a temporary job accommodation (provided after the onset of a disabling condition) is not a claimant’s “regular occupation” for purposes of determining whether the claimant is unable to perform the duties of his regular occupation; (2) that where a plan defines disability as an inability to perform “the substantial and material duties of one’s regular occupation,” a claimant need not demonstrate incapacity “to carry out each and every job duty, or even a majority of the ordinary job tasks,” but need only show the inability to perform a task or set of tasks that is a prerequisite for competitive employment in that occupation; and (3) attorneys’ fees may be awarded for legal costs expended during the course of a court-ordered remand.
Mr. Peterson was employed for 37 years at CBS, working his way up from the mail room and, by 1997, holding the position of Venue Production Manager. As Venue Production Manager, Mr. Peterson was responsible for organizing and assembling the physical plant necessary to support a CBS broadcast from a remote location. This included: designing and arranging building, office and temporary site spaces; placing and rearranging office furniture and supplies; arranging for and/or handing sanitation requirements; maintaining and supplying safety gear and medical supplies; loading and unloading trucks; operating cars, trucks and forklifts; maintaining, delivering and using weather-related gear and supplies, such as snow shovels and bags of salt; and warehousing, moving and using the physical plant supplies. While in Nagano, Japan, preparing for CBS’ coverage of the 1998 Winter Olympics, he suffered acute pain and numbness in his hands, which was attributed to bilateral carpal tunnel syndrome in both his hands as well as cervical spinal degeneration and cord compression. Due to limitations and restrictions imposed by his physicians, CBS reassigned Mr. Peterson to a desk job in New York City, providing back-up to the person hired to replace him on site. He served in that capacity from September 1997 to March 1998, when the Nagano Olympics ended. In mid-May 1998, Mr. Peterson realized that his condition would not permit him to return to his old job, and he applied for disability benefits from the CBS Short- and Long-Term Disability Plans.
The CBS Short- and Long-Term Disability Plans were insured and administered by Continental Casualty Company (“Continental”), a subsidiary of CNA Financial. Continental approved short-term disability benefits on a preliminary basis, pending its completion of a full investigation of the claim. However, upon completion of its investigation, Continental determined that Mr. Peterson was ineligible for short-term disability benefits because he was purportedly capable of performing the duties of his occupation, which CBS personnel had characterized as a sedentary desk job (the temporary re-assigned position he had been given after his disabling symptoms commenced). Continental also denied long-term disability benefits based on Mr. Peterson’s ineligibility for short-term disability benefits. Our office assisted Mr. Peterson with his appeal, submitted updated medical and occupational information, and argued that Continental’s disability determination was premised on an erroneous categorization of his job as sedentary. Continental denied the appeal.
Mr. Peterson’s lawsuit against Continental had an extended course that included (1) an initial district court ruling that Continental’s decision was arbitrary and capricious; (2) a remand by the court to Continental for further internal claim administration in accordance with its instructions (resulting in a further denial); (3) a ruling by the district court that Continental’s remand denial was also arbitrary and capricious; (4) a decision by the district court awarding short- and long-term disability benefits, interest, and attorneys’ fees; and (5) an appeal by Continental to the Second Circuit Court of Appeals, which sought to overturn a portion of the district court’s award of long-term disability benefits and a portion of the district court’s award of attorney’s fees.
Mr. Peterson’s case was filed in the United States District Court for the Southern District of New York, and was assigned to Judge Colleen McMahon. In her initial decision, Judge McMahon determined that Continental’s denial of short- and long-term disability benefits was arbitrary and capricious because — as Mr. Peterson had argued during the internal administrative appeal — Continental had incorrectly measured his capacity for work against his reassigned back-up duties, not the duties of a venue production manager as he had previously performed them:
Here, Peterson’s “regular occupation” was Venue Production Manager. All the evidence in the administrative record demonstrates that a venue production manager sets up and maintains production facilities for on-location (“venue”) television broadcasts of sporting events. As such, his substantial and material duties included traveling, moving equipment, preparing site space, shooing away vermin, and all the other activities Peterson and Atonellis, his former supervisor, described to the Administrator. It is thus clear that the Administrator was “arbitrary and capricious” in interpreting Peterson’s “regular occupation” as that of a desk clerk assigned to the New York office. This work was both temporary and an accommodation to his physical limitations. Whether or not he could do that job was and is irrelevant under the terms of the plan.
Peterson v. Continental Cas. Co., 77 F. Supp. 2d 420, 428 (S.D.N.Y. Dec. 8, 1999). Judge McMahon further held that because Continental had failed to address the proper occupational requirements, it was appropriate to remand the claim “back to the Claim Administrator, who should determine whether Peterson’s medical condition — evaluated against the duties of his “regular occupation,” rather than his temporary accommodation — entitled him to benefits” under the Short- and Long-Term Disability Plans.
On remand, Mr. Peterson presented additional evidence to Continental, including statements by colleagues and co-workers that documented the physical demands associated with the responsibilities of a venue production manager. Continental again denied Mr. Peterson’s short- and long-term disability claims, choosing to rely on the statements of a CBS Associate Director of Administration who, after initially providing a Physical Demands Analysis that described the job of venue production manager as “anything but sedentary,” later “backtracked” in several respects, including (1) reporting that as a venue production manager, Mr. Peterson’s duties were largely supervisory, and that “physical activity was ‘a very insignificant part of the time and not considered to be a substantial and material duty of his occupation as a Venue Production Manager'”; (2) asserting that Mr. Peterson’s assignment as a venue production manager was, itself, a temporary assignment, and that Mr. Peterson’s permanent occupation was considered by CBS to be as a production manager in the editing department.
Mr. Peterson returned to Judge McMahon to challenge Continental’s denial of benefits on remand. Judge McMahon rejected the notion that Mr. Peterson’s occupation was anything other than a venue production manager, not only because that was a fact Continental had previously conceded, but also because Continental’s reliance on the backtracking opinion of the CBS Associate Director of Administration was unreasonable: “[The Associate Director’s] unsupported and unverified assertions also stood in stark contradiction to all the other evidence in CNA’s claim records, including sworn affidavits that tended to show that, whatever his title, Peterson had served as a manager at remote venues (not as production editor in New York) for many years prior to the 1996 promotion” “[and] there is no evidence in the record to suggest that Peterson was anything other than a Venue Production manager for eighteen months leading up to his disability.” With regard to what constituted the “substantial and material duties” of a venue production manager, the court rejected Continental’s argument that this occupation could be accomplished entirely by supervising others and “merely being present at the remote broadcast site to look things over.” Judge McMahon also rejected Continental’s argument that it didn’t matter if Mr. Peterson was disabled from performing strenuous job duties and that he was disqualified from disability so long as he was able to continue any of the duties of his job:
Other cases interpreting the phrase “substantial and material duties” have similarly held that it does not require a showing that plaintiffs be unable to carry out each and every job duty, or even a majority of the ordinary job tasks….
It is undisputed on the record before me that strenuous physical activities took up some amount of time of Peterson’s regular occupation as a venue production manager. It is also undisputed that, upon learning of Peterson’s disability, CBS flew Peterson back from his venue and assigned him to a sedentary desk job (a job which both sides agree was not the job of venue production manager). Furthermore, there is no evidence in the record that CBS, at any time after September, 1997, asked Peterson to return to Japan, or reinstated any of his previous occupational duties — not even the supervisory and coordinating responsibilities that, according to [the CBS Associate Director of Administration], involved no significant physical demands. The only reasonable conclusion one can draw from CBS’ action, is that Peterson’s physical limitations made him unable to continue to work as a venue production manager, or at least to carry out the duties of the job that made him useful as a supervisor at the “venue.” Having so concluded, it would be manifestly unreasonable to determine — as CNA did — that strenuous physical activity was not “substantial and material” to Peterson’s work as a supervisor at the venue. If it was not “substantial and material,” an accommodation away from the venue site that took away his supervisory responsibilities would not have been necessary.
This finding does not require me to resolve the more precise question of whether strenuous physical activity took up 30%, 50% or some lesser percentage of Peterson’s time. The record is clear that, without the ability to perform whatever physical tasks need to be done at the venue, a venue production manager cannot “get the show on the air.” CBS as much conceded this fact when it transferred Peterson back to New York.
Peterson v. Continental Cas. Co., 116 F. Supp. 2d 532, 542-544 (S.D.N.Y. Oct. 23, 2000). Consequently, the court concluded that Mr. Peterson “met the criteria of the STD and LTD Plans, [and] … is entitled to the benefits he claims.” It also invited Mr. Peterson to “submit a proposed order for costs and reasonable attorneys fees.” Judge McMahon ultimately awarded short-term disability benefits, long-term disability benefits, interest at the rate of 9%, and Mr. Peterson’s attorneys’ fees, including those expended prior to the lawsuit (during the internal administrative appeal), and those expended during the court-ordered remand.
Continental appealed several limited holding of the district court. It accepted the district court’s determination that it had acted arbitrarily and capriciously in denying Mr. Peterson’s disability claim, and that it owed Mr. Peterson his short- and long-term disability benefits, as well as interest, and attorneys’ fees. However, (1) Continental argued that the district court should not have awarded long-term disability benefits beyond the Long-Term Disability Plan’s 24-month “regular occupation” period (i.e., “any occupation” benefits that become payable only after the 24th month of disability); and (2) attorneys’ fees should not have been awarded for legal fees expended during the internal administrative appeal or in the remand. With regard to the first issue, the Second Circuit Court of Appeals held that the district court should not have addressed Mr. Peterson’s eligibility for “any occupation” benefits because “Peterson’s occupation period had yet to expire,” and, therefore, “the issue was not even ripe for adjudication by the plan administrator, much less by the District Court.” Peterson v. Continental Cas. Co., 282 F.3d 112, 118 (2d Cir. 2002). With regard to attorneys’ fees, Continental achieved only partial success in its appeal. The Court of Appeals, following several other Circuit Courts of Appeal, determined that fees expended during the internal administrative appeal phase of a claim are not recoverable under ERISA. However, the court noted that this did not preclude all pre-litigation attorneys’ fees: “Of course, Peterson is entitled to collect a reasonable amount for fees and costs incurred in initiating suit in the District Court,” such as “time spent drafting the complaint.”
The Court of Appeals affirmed Judge McMahon’s award for attorneys’ fees incurred during the remand. It noted that this was an entirely new issue: “[W]e are not aware of any other court to adjudicate the precise issue of fees incurred during an administrative remand in the ERISA context.” Nonetheless,
[T]he text and legislative history [of ERISA] indicate that once a court of law has assumed jurisdiction over a suit, all costs incurred may be shifted by a court to one party. The fact that a court orders additional fact finding or proceedings to occur at the administrative level does not alter the fact that those proceedings are part of the “action” as defined by ERISA. Where the administrative proceedings are ordered by the district court and where that court retains jurisdiction over the action during the pendency of the administrative proceedings, we hold that ERISA authorizes the award of associated costs.
282 F.3d at 122.
The Peterson case reinforced several important and enduring legal points. Most importantly, an employee’s “own occupation” or “regular occupation” — for purposes of assessing a disability claim — should be determined based on the occupation in which the employee was regularly engaged prior to the onset of a disabling medical condition, and not on a temporary, make-work position assigned to the employee while his or her principal duties were re-assigned to another employee. Equally important, an employee may be deemed unable to perform the “substantial and material duties” of an occupation — even if able to perform some, or even a majority, of the occupation’s other duties — if the employee is incapable of performing a single duty or set of duties that disqualifies the employee from competitive employment in the occupation. Finally, attorneys’ fees in an ERISA lawsuit may be recoverable for attorney services provided immediately in anticipation of a lawsuit, i.e., evaluating a case and preparing a complaint, and for attorney services provided in a court-ordered remand.
Mark Scherzer Law :: Short- and Long-Term Disability Lawyers :: Attorney Chris Wieber:: Disability Benefits
New York Long-Term Disability Lawyers (including New York City, Long Island, Hudson Valley, Capital District,
Mohawk Valley, Southern Tier, Western New York, Finger Lakes, Central New York, and North Country)