Gayle v. United Parcel Service, Incorporated; Flexible Benefits Plan-United Parcel Service Long Term Disability Plan, 401 F.3d 222 (4th Cir. 2005) – decided March 9, 2005 – United States Court of Appeals for the Fourth Circuit – Robert E. Hoskins

I represented Gayle. Gayle is an unfortunate case on many levels, but I cannot say that I disagree with its specific holding. Gayle had an ERISA long term disability claim through a self-funded plan sponsored and funded by her former employer, United Parcel Service. Gayle filed a claim which was denied. The denial letter advised, as required by federal regulation, that Gayle had a right to appeal the decision within 180 days. Gayle sought the services of a law firm. Gayle retained the firm well within the 180 day window to appeal the initial claim denial. Unfortunately, her file ended up on the wrong desk where it sat for many months. Approximately a month after the 180 day window to appeal had closed, the law firm rediscovered Gayle’s file and forwarded it to me to handle as an ERISA claim. I appealed the claim denial only to receive notice from UPS that it was too late to appeal as the 180 day window had closed. I filed suit asking the federal court to declare that since Gayle was not personally at fault for the late appeal that she should be relieved of the consequences of the tardy appeal and be allowed to pursue her claim. I asked the court to make its holding by applying what is known as the doctrine of “equitable tolling”. That doctrine holds that where a deadline is missed and the circumstances are such that it would be inequitable to hold the party missing the deadline to the consequences of that mistake that equity will step in. I argued that the fault lie with the law firm that failed to timely appeal Gayle’s claim. Gayle had done everything that one could reasonably expect in hiring a lawyer well within the deadline to make a timely appeal.

The district court ruled against Gayle and held that with a denied ERISA benefit claim full exhaustion of administrative remedies is mandatory and that in order to exhaust administrative remedies Gayle would had to have appealed her claim in a timely manner which she did not. (Click here to see the district court opinion)

Both sides knew from the outset that the Gayle case would not finally be decided in the district court, but would ultimately be decided before the United States Court of Appeals for the Fourth Circuit. Whichever side lost in the district court was clearly going to appeal. So, when Gayle lost in the district court, we did, indeed, appeal to the Fourth Circuit. The parties presented their arguments to the court and, in an opinion authored by the Honorable J. Harvie Wilkinson, III, the Fourth Circuit affirmed the district court by way of a published opinion. Judge Wilkinson took the opportunity to address some “old” and “new” issues in the Fourth Circuit. First, the court recognized the long established principle that all administrative remedies available under a particular plan must be exhausted before a party has a right to file a lawsuit in federal court (with some exceptions). The court held:

“The statutory requirement that plans have a review process, see 29 U.S.C. § 1133, along with the well-established principle that plans can craft their governing principles as they think best, see Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 78, 131 L.Ed.2d 94, 115 S. Ct. 1223 (1995), further persuades us that Gayle’s argument lacks merit. Plan sponsors, not federal courts, are empowered by ERISA “to adopt, modify, or terminate welfare plans”. Id. Recognizing this, Gayle presses the language of the SPD itself to argue that it permits stand-alone second appeals. The SPD states that “each level of appeal will be independent from the previous level (i.e., the same person(s) . . . involved in a prior level of appeal will not be involved in the appeal).” It also promises that “on each level of appeal, the claims reviewer will review relevant information that you submit even if it is new information.” Taken together, Gayle asserts that this language means that the two levels of appeal are sealed off from each other, and that there “independence” precludes any consequences of missing an initial deadline upon subsequent appealability.

 

But this view misapprehends the import and the clarity of the SPD. While it permits new evidence at each level of appeal, this permissive rule simply advances “the strong federal policy encouraging private resolution of ERISA-related disputes.” Powell v. AT&T Communs., 938 F.2d 823, 825 (7th Cir. 1991). Accord Makar, 872 F.2d at 82-83. It makes such informal resolution possible for many Plan participants - - who may not wish to hire counsel for an internal appeal - - by allowing them to improve their arguments unconstrained by unforgiving rules of evidence and waiver. The “independence” Gayle repeatedly invokes does not mean that the appeal process is disjointed or is not unitary. It simply gives claimants assurance that individuals deciding the first level appeal will not also be decision makers for the second level appeal. This is hardly revolutionary; it mirrors the commonplace that lower court judges will not hear appeals of their own rulings.”

The Fourth Circuit had never before addressed the doctrine of equitable tolling in the context of an ERISA case. But, the court was clear that it would not apply equitable tolling to relieve a party of a mistake of his or her attorney. The court stated:

“. . ., even though the attorney’s mistake in construing a statute of limitations provision “appears to have been innocent,” id. at 330, it nonetheless was not an “extraordinary circumstance” justifying equitable tolling. We think that attorney negligence - - including allowing a client’s case to fall through the cracks - - is even less an extraordinary circumstance. Equity will not disadvantage one party, who is entitled to rely on the mandated appeals procedures, in order to mitigate the negligence of the other party’s freely-chosen attorney. See, e.g., Link, 370 U.S. at 634 n.10 (“Keeping this suit alive merely because plaintiff should not be penalized for the omissions of his own attorney would be visiting the sins of plaintiff’s lawyer upon the defendant.”) (emphasis in original). While the defendant thus remains free to reconsider a claim forfeited through attorney error, no court may compel it to do so. We therefore hold that attorney negligence does not justify equitable tolling.” Gayle, 401 F.3d 222, 227.

However, Judge Wilkinson, in writing the opinion, had the wisdom to recognize that the doctrine of equitable tolling might arise in other circumstances. Accordingly, although he did not grant Gayle the relief she sought based upon her facts, he did recognize that the doctrine may be applicable in other circumstances. Specifically, the court wrote:

“If available, however, equitable tolling would restore a claimant’s right to review even though she otherwise would be time-barred. But “federal courts have typically extended equitable relief only sparingly.” Irwin v. Dep’t of Veterans Affairs, 498 U.S. 89, 96, 112 L.Ed.2d 435, 111 S. Ct. 453 (1990). The rarity of our resort to equity does not spring from miserliness. Rather, equitable tolling “must be guarded and infrequent, lest circumstances of individualized hardship supplant the rules of clearly drafted statutes.” Harris v. Hutchinson, 209 F.3d 325, 330 (4th Cir. 2000).

 

Equitable tolling, while rare, does allow for exceptions to the strict enforcement of deadlines. Such exceptions are narrow, and none is available here. Equitable tolling has been permitted “where the claimant has actively pursued his judicial remedies by filing a defective pleading during” the limitations period. Irwin, 498 U.S. at 96. In this case, however, Gayle made no appeal to the Plan, defective or otherwise, within the authorized period. Equitable tolling has also been appropriate “where the complainant has been induced or tricked by his adversary’s misconduct into allowing the filing deadline to pass.” Id. But the Plan sent Gayle a detailed denial letter. She does not dispute receiving it, or that - - far from tricking her into inaction - - it was anything short of clear on the simple procedures she should follow should she disagree with the denial of benefits.” Gayle, 401 F.3d 222, 226.

In Gayle, the Fourth Circuit basically aligned itself with the majority of other circuit courts in recognizing (1) that all available levels of review must be exhausted before filing suit on an ERISA claim and (2) the doctrine of equitable tolling might be invoked in appropriate circumstances, but that attorney negligence is not one. No circuit court in the country, as of the date Gayle was argued, had applied the doctrine to relieve a party of an attorney’s negligence such as occurred in Gayle’s case, and it is not surprising that the Fourth Circuit would not either. However, the Fourth Circuit did recognize the possibility of applying the doctrine of equitable tolling to relieve a late appeal in appropriate circumstances for the first time. (Click here to view the Gayle Fourth Circuit decision.) As of March 2008, Gayle had been cited over 30 times including by the United States Court of Appeals for the Fifth and Tenth Circuits.

This case was featured featured on the front page of South Carolina Lawyers Weekly newspaper. I was quoted in the article.