## Facts

- Donald E. Conley, a Pitney Bowes employee and plan participant, received long-term disability benefits after an automobile accident.
- Pitney Bowes later notified Conley that his long-term disability benefits would be terminated.
- The plan contained (1) an exhaustion provision requiring participants to pursue internal appeals before filing suit and (2) a notice provision requiring any denial letter to include an explanation of the claim appeal procedure.
- The denial letter sent to Conley did not describe the appeal procedures and did not inform him of the exhaustion requirement.
- Conley did not pursue internal plan appeals and instead sued in Missouri state court challenging the benefits termination.
- Defendants removed the case to federal court on the ground that the claim arose under ERISA.
- The district court granted summary judgment for defendants based on failure to exhaust, reasoning that Conley had a summary plan booklet describing appeal procedures and therefore “must have known” of the administrative remedies.

## Issues

1. Whether an ERISA plan may assert a contractual exhaustion requirement as a defense when the plan’s denial letter failed to provide the contractually required notice of appeal procedures.
2. Whether a participant’s possession of plan materials describing appeal procedures cures the plan’s failure to include appeal instructions in the denial notice.

## Decision

- The Eighth Circuit reversed the district court’s grant of summary judgment and remanded.
- The court held Conley was not required to exhaust plan remedies because the plan failed to perform its own contractual duty to provide appeal-procedure notice in the denial letter.
- The court rejected the district court’s reliance on Conley’s possession of a plan booklet as a substitute for the denial letter notice required by the plan.
- A dissent would have affirmed, emphasizing that Conley and his counsel had access to the appeal procedure through the plan booklet.

## Legal Principles

- ERISA does not itself impose a universal exhaustion requirement; in the Eighth Circuit, exhaustion is required only when the plan’s terms create that obligation.
- When a plan’s exhaustion promise and notice-of-denial promise are reciprocal terms, ordinary contract principles apply to their enforcement.
- In a bilateral contract with sequential performances, the earlier performance may operate as a constructive condition precedent to the other party’s later duty.
- Where the plan requires that denial letters include appeal instructions, providing that notice is a condition to the plan’s ability to invoke exhaustion as a bar to suit.

## Conclusion

Because the plan required denial notices to explain the appeal process and the denial letter omitted that information, the plan could not rely on its exhaustion provision to defeat Conley’s ERISA benefits suit; summary judgment was reversed and the case was remanded.


Conley v. Pitney Bowes, 34 F.3d 714 (8th Cir. 1994)