Exchanging correspondence with a plan administrator requesting reconsideration of a denial may preserve the right to sue by extending contractual time limitations and demonstrating that the pursuit of administrative remedies would be futile.  The United States District Court Southern District of California determined that the date of an initial claim denial did not trigger a pension plan’s two-year time limitations clause, since the language within the clause indicated that resolution of the claim, rather than awareness of the claim, is the triggering event.  Watkins v. Citigroup Retirement Systems, No. 15-CV-731 DMS (NLS), 2015 WL 9581838 (S.D. Cal. Dec. 30, 2015). The Court also declined to dismiss the plaintiff’s complaint for failing to exhaust administrative remedies due to the defendant’s persistent restatement of its position in response to Plaintiff’s repeated requests for reconsideration. Id.

In Withrow v. Halsey, 655 F.3d 1022 (2011), the Ninth Circuit recognized that a four year statute of limitations applies for contract disputes to ERISA benefits claims arising in California.  However, the Supreme Court’s decision in Heimeshoff v. Hartford Life & Accident Insurance Co., 134 S. Ct. 604 (2013), provides that an ERISA plan may be contractually limited to a shorter timeframe to file suit, as long as that limitation is reasonable.  While it is uncertain exactly when a shorter timeframe will be considered reasonable, the terms limiting the timeframe should provide some indication as to when that timeframe will begin.

In Watkins, the Plaintiff, a participant in Citigroup’s pension benefits plan (the “Plan”), dissolved his marriage.  As part of the marriage dissolution, it was ordered that Plaintiff’s former wife be granted a half interest in the Plan as a straight life annuity.  After the death of his former wife, Plaintiff requested that Citigroup reallocate the pension funds to his account.  Citigroup provided an initial denial of Plaintiff’s claim on April 11, 2012, stating that the marriage dissolution order did not allow payments to return to Plaintiff upon the death of his former wife. Plaintiff and Citigroup continued to exchange correspondence and debate the denial for almost nineteen months until December 18, 2013, when Citigroup sent a letter to Plaintiff expressly advising Plaintiff of its denial and indicating that Plaintiff could pursue his claim through formal claims and appeals procedures with Citigroup.

Instead of pursuing the formal claims and appeals procedures with Citigroup, Plaintiff initiated a lawsuit by filing a complaint with the Court on April 3, 2015.  Citigroup responded to Plaintiff’s complaint by filing a motion to dismiss, arguing that Plaintiff’s complaint was time barred under the Plan’s two-year contractual limitation, as it was filed nearly three years after he received the initial denial of his claim on April 11, 2012. The relevant portion of the Plan stated:

“A claimant must file any lawsuit…within two years from the date on which the claimant was aware, or should have been aware, of the claim at issue in the proceeding.  The two-year limitation shall be increased by any time a claim or appeal on the issue is under consideration by the appropriate fiduciary.”

The court denied Citigroup’s motion to dismiss stating that the two-year provision indicated that resolution of the claim, as opposed to awareness of the claim, is the triggering event.  The claim was no longer under consideration, at least informally, as of December 18, 2013 when Plaintiff was expressly advised his claim was denied and he could pursue his claim through the formal appeals and claims procedures.  The Court did not allow Citigroup to ignore the language in the Plan indicating that the two-year limitation shall be increased while the issue is under consideration by the appropriate fiduciary, regardless of whether the consideration is informal.

A recognized exception to the requirement that plaintiffs must avail themselves of a plan’s internal appeal procedures prior to filing suit is when a resort to such administrative procedures is shown to be futile. Vaught v. Scottsdale Healthcare Corp. Health Plan, 546 F.3d 620 (2008). The Court refused to dismiss Plaintiff’s complaint for failing to exhaust administrative remedies.   It held that requiring Plaintiff to pursue formal remedies with Citigroup would have been futile due to Citigroup’s continued re-statement of its position in response to Plaintiff’s persistent requests for reconsideration.

The decision in Watkins demonstrates that the terms of a time limitations clause should be carefully analyzed to determine exactly what event could trigger the running of a contractual limitations period.  A plaintiff’s actual knowledge of an initial denial will not overcome continued debate and correspondence indicative of continued informal consideration by a fiduciary when such consideration increases the time to file a claim. This decision is also important in demonstrating how persistent communication with a plan fiduciary can show that resort to administrative remedies would be futile and can work to avoid dismissal of a lawsuit for failure to exhaust available administrative remedies.