Nichols v. Prudential Insurance Co. of America

Argued: December 17, 2004 Cecilia Nichols appeals from the February 27, 2004 decision and order of the United States District Court for the Southern District of New York (Victor Marrero, J.) dismissing without prejudice her claims of wrongful termination of disability benefits under the Employee Retirement Income Security Act of 1974, as amended and codified at 29 U.S.C. §§ 1001--1461 and scattered sections of 26 U.S.C. (""ERISA""). The district court held that while defendantappellee The Prudential Insurance Company of America (""Prudential"") did violate the deadlines for completing review of a denial of benefits set forth in 29 C.F.R. § 2560.503-1(h),1 promulgated pursuant to ERISA, it made good faith efforts to complete this review that placed it in substantial compliance with the regulation. The district court therefore dismissed Nichols's claims for failure to exhaust administrative remedies, but ordered that Prudential complete its review and render a decision within thirty days of the date that Nichols complies with Prudential's requests for additional information and for an independent medical examination. On appeal, Nichols argues that the ""substantial compliance"" doctrine is inconsistent with the regulation, that Prudential did not technically or substantially comply with the regulation, and that in the absence of a decision by Prudential, the district court should have reviewed the denial of benefits de novo. Prudential argues that the district court's order was an interlocutory remand order over which this Court does not have appellate jurisdiction, that the ""substantial compliance"" doctrine is proper and consistent with the tolling scheme implemented by the current version of the regulation, and that any district court review of the denial of benefits should be under an arbitrary and capricious standard. We hold that the district court's dismissal without prejudice is a final decision over which this Court has appellate jurisdiction. We further hold that the plain language of 29 C.F.R. § 2560.503-1(h) precludes the judicial creation of a ""substantial compliance"" doctrine. We finally hold that the lack of discretion vested in the plan administrator, or alternatively, failure to exercise any such discretion, requires de novo review of the denial of benefits. We therefore vacate the district court's order and remand to the district court for de novo review of the merits of Nichols's claim. BACKGROUND