Washington had moved to Phoenix, where he’d played once in a college game, against Arizona State University; his mother was in a nearby nursing home. He joined the local Black Republican group and was a volunteer minister in a local Baptist church.
Finally, in 1998, the NFL plan offered Washington $400,000 to settle his longstanding disability dispute, and he accepted it, taking advice from a former player turned attorney, who was unfamiliar with ERISA law and didn’t know that the NFL had just lost a critical Court of Appeals case in the Eighth Circuit in Minneapolis. A judge had ruled in favor of an ex-player who, like Washington, was denied football disability benefits because he had more than a single injury. “To require that a disability result from a single, identifiable football injury when the relevant plan language speaks of ‘a football injury while an active player’ is to place undue and inappropriate emphasis on the word ‘a.’ ” The judge concluded that the NFL’s decision to deny benefits was “arbitrary and capricious.”
When Washington later learned of the earlier case, he felt like he’d been duped into taking the settlement, and sued the league, asking a court to set aside his settlement on the ground that the NFL had breached a fiduciary duty by not telling him of the other decision five years earlier.
A STRONG DEFENSE
Washington was up against a tough team. To tackle players who file disability claims, the NFL has long relied on Groom Law Group, a Washington, D.C., law firm whose ranks include former officials from the Labor Department, the Treasury, and other agencies.
Groom’s star player in these football disputes is Douglas Ell, who has handled—and won—most of the NFL’s disability suits since 1994. Like other lawyers who defend plans, he said the trustees are only doing what the plan required to protect resources for everyone. “A lot of people say, ‘The evil NFL denies disability benefits,’ but that’s not the issue,” said Ell. “It’s whether the person met the terms of the plan.” There’s a reason the law gives the trustees the power to overrule the league’s own doctors. Without the legal protections ERISA provides employers, he said, they’d have to lower the benefits they pay, because they’d be paying ineligible claims. “The people running the plans shouldn’t be secondguessed by judges. We want to pay the player, not the lawyers.”
With Ell heading the NFL’s defense, the league has enjoyed an impressive winning streak in the courtroom. Of more than twenty lawsuits filed by retired players in the decade before Washington filed his suit, all but four were initially decided in favor of the NFL plan, and of those four, two were reversed on appeal.
Taking on the NFL, Washington faced a well-funded foe, as do most employees or retirees who challenge a pension decision: ERISA allows plan administrators to use pension assets to pay for fees associated with running the plans; these include fees to record keepers, investment managers, consultants, and… lawyers. Thus, the defense pockets are very deep. The NFL paid Groom Law Group $2.9 million from its pension assets in 2008, and roughly $25 million over the prior decade, though not all of that was for defense work. Former players, who may have little or no income other than Social Security disability benefits, usually crash into a wall when they try to find an attorney to represent them.
Like most people who initially flail about looking for legal help with their pensions, the players contact lawyers they pull from the Yellow Pages or Internet ads, oftentimes personal injury lawyers unfamiliar with the boggling quirks of the federal law—as evidenced by the fact that they often file the claims in state court, where they have a brief life.
Most people can’t afford hourly fees for an attorney, so they seek out lawyers who take cases on a contingency-fee basis. But few attorneys represent employees and retirees in ERISA cases because the most a plaintiff can recover is the benefit, not other damages that can finance the case. Yet another quirk of ERISA: The attorneys, if successful, are awarded fees only at the court’s discretion. Plaintiffs face a financial risk as well: If they lose, they could be required to pay the other side’s costs. Delvin Williams, a former 49ers and Miami Dolphins running back, successfully sued the NFL for seven years’ worth of back benefits, but the NFL appealed, and the Ninth Circuit not only reversed his victory but also ordered him to reimburse the NFL plan $75,000 for legal fees. The league’s plan deducts $625 a month from his disability checks. His debt will be paid off in 2012.
Washington had been fortunate enough to find an attorney willing to take his case on a contingency basis, and initially, it seemed as though he would prevail. In March 2005, a federal judge in Phoenix ruled that the NFL plan had breached a duty to Washington by not disclosing relevant facts. The judge ordered the NFL plan to reconsider Washington’s claim for football-related disability payments.
The league stalled, at one point saying they were suspending processing his claim until Washington sent twenty years’ worth of income tax returns. The league then appealed, and in 2007 the U.S. Ninth Circuit Court of Appeals reversed the lower court’s ruling and handed a victory to the NFL. Victor Washington’s long game in the courts was finally over.
Washington refused to believe it. He continued to mail copies of his records and appeals to lawmakers, the media, and anyone he thought would listen. He died of heart and renal failure in a Pennsylvania hospice on New Year’s Eve 2008. He was sixty-two. Elapsed time: twenty-eight years.
PENSION PARTISAN
Another quirk in ERISA ensures that most employees and retirees who dispute a benefits decision are knocked off the field before the game even starts. Before they can take a case to court, they must follow a lengthy claims-and-appeals procedure that can take months or years, trying to obtain critical documents and attempting to meet tricky deadlines.
And they must deal with the benefits clerks. Anyone who has waited on hold to talk to a benefits plan administrator at a call center in Bangalore knows what a Kafkaesque process this can be.
If anyone was up for the challenge, it was Fred Loewy. He had worked in a lab at Motorola Inc. near Phoenix, Arizona, for more than thirty-five years, analyzing systems failures in guided missiles and nuclear power plants. As a teenager in France, he had joined the partisans and fought the Nazis. So Loewy was not daunted by complex calculations or uneven battles.
But he had never tried to fight a benefits administrator. His battle began the day after he retired in 1998. Loewy (pronounced Low-ey) noticed that his pension had been calculated incorrectly. It wasn’t a big deal—under $100 a month, reducing his pension to $1,100.
Loewy wrote a polite letter to the pension administrator, asking the staff to review their math and recalculate his pension. Instead of an answer, the next month the administrator sent him a check for $111, with no explanation. Loewy wrote again. A month later he received a check for $222, again with no explanation. This was just the beginning of a long, unhappy relationship. But before Loewy could pursue the matter further, his wife died unexpectedly, and he put aside his pension dispute while he dealt with family matters and medical claims.
He resumed his pension pursuit in December 2001, when he mailed a certified letter to the pension administrator asking it to explain how it was calculating his pension and to send copies of the pension documents they used, which are rights under ERISA.
After a month went by with no response, Loewy phoned the administrative offices and was told his letter hadn’t arrived. He sent a certified letter a second time, and again got no answer. In February 2002, he called again, and was again told that his letter hadn’t arrived. In March, not having heard back, he sent his letter a fourth time, and, in April, a fifth time. Finally, an administrator wrote back saying they had received his letter. In May, the administrator sent Loewy a copy of the pension-plan rules from 1998, the year Loewy retired, but didn’t include an explanation of how it calculated his pension.
Loewy already had a copy of the pension rules booklet from 1998. What he really wanted was an explanation of how his benefit was being calculated. So in June he wrote to Motorola’s App
eals Center, complaining that his requests for a review of his pension calculation had been “consistently ignored.” They ignored him.
After five more months of phone calls and letters, Motorola mailed Loewy a copy of the 1998 plan rules, which it had already sent in June. Loewy persisted. In January 2003, he began addressing his monthly letters to Noemi Lopez, an administrator in the Scottsdale office with whom he had been corresponding. His letter was returned, unclaimed, after three delivery attempts.
In March, after another round of unanswered letters and phone calls, Loewy reached Lopez on the phone. She said she hadn’t received his letter. He re-sent it. At the end of March, when he called again, Lopez said she had received his letter, and would write back regarding his pension calculation. She didn’t.
A month later, at the end of April, Lopez called Loewy and said she’d received an actuary’s report regarding his benefits calculation and would write him within three or four days. She never wrote back.
Plan participants have a legal right to review pension documents at the company’s offices, a point noted in a booklet Motorola had distributed to employees. Inspired by this, the diminutive Loewy, clad in a three-piece, drove twenty miles from his Glendale home to Motorola’s offices in Scottsdale and asked to see the pension documents and speak to Lopez. The receptionist told him he couldn’t see any documents, and that Lopez was leaving the building for a meeting.
Loewy’s efforts were not completely in vain. The company finally responded. Shortly after his visit to the Scottsdale office, he got a letter from Frederic Singerman, a lawyer at Seyfarth Shaw, a large law firm in Washington, D.C., which represented Motorola, saying it was too late for Loewy to file a claim. Loewy had never seen a reference to a statute of limitations, so he wrote back, asking the lawyer to provide more details about the time frame for filing an appeal.
Two weeks later, Singerman replied, stating that the appeal period had expired in 1998 after Loewy first contacted the company. He added that Loewy was free to sue, but that it was too late. “Legal action on your part is no longer timely.”
The letter added that Lopez would send the plan documents for 1995 to 1998, but that Loewy’s continued efforts would be in vain. “If you are aware of other documents relevant to your claim, you will need to specify them. However, we cannot permit you to use the Plan’s offices to browse Plan records without limit in hopes of finding something ‘useful,’ and we are not aware of additional documentation that would serve to perfect your claim.”
The letter stated that Lopez “has been very cooperative and patient in explaining how your benefits were calculated and why the calculation amount was correct.” That month, Lopez was promoted to project manager and second vice president at Hewitt Associates, an outside administrator based in Lincolnshire, Illinois, to whom Motorola had outsourced the pension administration earlier in the year.
By this point, most retirees would have given up. But Loewy was tougher than he looked. His father, Elias, had run a radio shop in Alsace, France, until 1940, when his family was interned. An old business partner of his father’s, who was in charge of the local police, helped them obtain false identity papers, and the family fled to the mountains in the south, near Montpelier. A teacher whose fiancé had been killed in the First World War taught them how to pass as Catholics. Fred, then sixteen, used his chemistry skills to make shoe polish and soap, which he traded for tobacco that he swapped for food. He also helped his father harvest chestnuts and fix radios and sewing machines. In May 1943, Fred and his older brother, Max, joined an underground partisan group, Saint-Germain-de-Calberte. Fred repaired the ragtag weapons the unit cobbled together and fought in numerous skirmishes against the Germans. In August 1944, Max was killed.
After the war, Fred, his sister, and his parents resettled in the United States. Elias’s health was shattered, so they looked for someplace warm. They knew little about Phoenix, but they’d heard it needed a radio repair shop. Loewy worked in the family business until 1962, when he got a job at Motorola. He enjoyed his job as senior staff reliability engineer so much that he delayed retiring until he was almost seventy-three.
LEGAL AID
Although Motorola’s lawyer said it was futile to sue, Loewy hired a lawyer anyway. He found a good ally. There are relatively few experts on pension law who represent plaintiffs; most represent employers. One of those who did happened to practice in Phoenix. Susan Martin is not only willing to take on boggling, protracted cases against deep-pocketed adversaries, but she has a soft spot for long-shot cases involving little guys being shoved around by large Washington law firms. And she’d never had a client as organized as Loewy, who showed up with every document, letter, records of phone calls, post office receipts, and Post-it notes going back to 1998, organized chronologically.
Martin is a tenacious fighter in her own right. And having raised three teenagers, she has little patience for companies that flout the rules. Martin ascertained that the pertinent pension plan rules were contained in a 1978 pension document and asked Motorola to produce it. No response. She requested it again. No response. Martin filed a motion to compel the company to produce the document. Motorola finally complied—a year after she’d requested it. An actuary who then reviewed the pension rules determined that Motorola had failed to pay Loewy the correct amount for eight years. It owed him a total of $181,500.
Motorola didn’t agree with that conclusion. So Loewy, having “exhausted all his administrative remedies,” as they say in ERISA, was finally free to sue. The complaint, filed in federal court in Phoenix, was a class action because, as it turned out, Motorola had miscalculated the benefits of roughly five hundred other retirees who, like Loewy, had worked past age sixty-five.
In court, Motorola maintained that it had calculated Loewy’s pension correctly. Its reasoning: Just because the method it used wasn’t in the rule book, the plan didn’t actually have language forbidding the method, and thus it was allowed.
It also said it had cooperated exhaustively with Loewy, and that its benefits administrator, Hewitt, had spent 196 hours responding to Loewy’s lawyer’s document requests. In a sworn affidavit, Lopez said she had “repeatedly explained the benefits calculation and gave him plan documents.”
As his claim wended through the court, Loewy spent his time organizing and translating his records from the war years, including a eulogy that a Protestant clergyman gave in 1944 at his brother’s funeral: “Max found death in this uneven battle,” the cleric said. He fell against an adversary that had outclassed him “in number and strength of weapons.”
Sifting through old photographs of his days with the partisans, he came to a picture of Max in his school uniform before the war, and he shook his head. “I’m eighty. My days are numbered. I only hope to live long enough to see this suit completed.”
He got his wish. The judge didn’t buy Motorola’s arguments, and the company agreed to settle. If Motorola had recalculated Loewy’s pension in the first place, when he had asked for it, it would have been out a total of about $9,300. Having picked a fight with the wrong guy, Motorola now had to pay more than $11 million to more than one thousand retirees. The payments went out in 2006. Loewy died a few months later.
Chapter 12
EPITAPH
The Games Continue
JUST DAYS AFTER the massive health care overhaul became law on March 23, 2010, large companies announced that health care reform was already costing them billions of dollars. Caterpillar was the first, announcing a $240 million hit, followed by Deere & Co., ($220 million), Verizon ($970 million), and AT&T, with the largest charge of all, $1 billion.
These statements were red meat to Fox News, where pundits concluded that this was evidence that “Obamacare” was already on its way to bankrupting the country. Former Arkansas governor Mike Huckabee, speaking on Fox Business Happy Hour, was troubled by the impact on Americans as a whole. “Whether it’s your phone bill or the cost of a tractor, the only way the companies can survive i
s they’re going to have to up their cost, cut their benefits, lay off employees.”
Administration officials went on the defensive, frantically trying to explain that the “charges” were merely accounting effects having to do with the retiree health coverage, not employee health coverage, and had something to do with Medicare subsidies. But they might as well have been speaking Sanskrit to the nimble-fingered reporters rushing to get the Really Big Numbers online and into print. In the initial press frenzy, no one reported that none of the companies taking these massive charges was on the hook for a cent. The $1 billion charge that AT&T was taking? It represented the loss of a deduction for something that was costing the company nothing in the first place.
This mini-drama was just the latest example of employers crying wolf about the cost of retirement benefits, or, in this case, employer-subsidized prescription drug coverage. But it illustrates how employers continue to use the public’s ignorance of accounting and the way retiree benefits work to bamboozle analysts, employees, retirees, unions, Congress, and the courts.
This Medicare charade was just the latest inning of a game that started in late 2003, when Congress was poised to add prescription drugs to the things Medicare covered. Large employers recognized an opportunity: Many were providing prescription drug coverage to retirees as part of their retiree health benefits. Their basic message to lawmakers was “Why should we continue to provide prescription drug coverage if Medicare is going to start covering it?”
Employers threatened to dump millions of retirees onto the government program unless the government sweetened the deal for them. The companies were bluffing. For one thing, they had already largely dropped prescription drug coverage for salaried retirees or had shifted much of the cost to them. And they couldn’t unilaterally cancel coverage for union retirees covered by collectively bargained contracts. But lawmakers didn’t know employers were making an empty threat. In any case, providing a subsidy to employers was a safe political move: They would appear to be helping retirees, being pro-business, and saving taxpayers money.
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