493 F.3d 533 (5th Cir. 2007), 05-21068, Wade v. Hewlett-Packard Development Co. LP Short Term Disability Plan

Docket Nº:05-21068.
Citation:493 F.3d 533
Case Date:July 20, 2007
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 533

493 F.3d 533 (5th Cir. 2007)

Alfred WADE, Plaintiff-Appellant,



No. 05-21068.

United States Court of Appeals, Fifth Circuit.

July 20, 2007

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[Copyrighted Material Omitted]

Page 535

Blair B. Brininger (argued), Houston, TX, for Wade.

Linda Ottinger Headley (argued), Danielle Kujawa Herring, Littler Memdelson, Houston, TX, for Defendant-Appellee.

Appeal from the United States District Court for the Southern District of Texas Houston Division USDC No. 4:04-cv-3532

Before JOLLY, HIGGINBOTHAM, and DENNIS, Circuit Judges.

DENNIS, Circuit Judge:

Alfred Wade appeals a summary judgment in favor of the defendant-appellee, administrator of his employer's Short-Term Disability Plan, on his claim for benefits under the Plan. We affirm.


Claimant-appellant Alfred Wade began his employment with Compaq Computer Corporation ("Compaq") in 1988 as a Line Operator; at the time he left his employment, he was employed as an internal consultant in sales and services at one of Compaq's retail stores. On August 24, 2000, Wade consulted a psychiatrist, Dr. Mary Ann Ty, who diagnosed Wade with major depression and attention deficit-hyperactivity disorder. Dr. Ty based her diagnosis on Wade's symptoms including: feelings of being "out of control" and "overwhelmed, " hypersomnia, decrease in energy, difficulty with concentration and attention, disorganization, and inability to complete tasks. However, she found that Wade's ability to make decisions regarding daily living, relationships, and life was rated as "good." She advised him not to go to work.

Upon this diagnosis, Wade, on August 24, 2000, filed a claim for short-term disability benefits. The Plan defined "disability" as:

. . . a medical condition (or having such a condition, as the case may be) determined by the Plan Administrator to be one which is continuous and prevents the Employee from performing each of the material duties of his or her regular occupation. The Employee (1) must also be under the regular care of Physician appropriate to the medical condition and (2) cannot be working at any job for wage or profit in order to be Disabled or considered to have a Disability, except when such a job is for his Employer or within the terms of Rehabilitative Employment pursuant to Section 3.9.

Compaq, his employer, was the Plan Administrator and retained final authority over benefits decisions; however, it outsourced preliminary short-term disability benefits review to ValueOptions, a disability care management service company. Upon receiving Wade's claim, ValueOptions opened a disability case file for him on or around August 29, 2000.

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The Plan's benefits review process consisted of three levels. ValueOptions conducted the first two levels, while Compaq conducted the third and final level. At the first level, ValueOptions solicited a neurophysiologist, Dr. Barbara Uzzell, to conduct a psychiatric and functional assessment of Wade on September 25, 2000.1 Based upon this assessment, she diagnosed him with Dysthymic Disorder and Avoidant Personality Disorder. Her assessment of ten categories revealed Wade's moderate impairment in three of the categories, whereas there was mild to no impairment in the other seven. She recommended that Wade continue treatment with Dr. Ty and referred him to Suzi Phelps, a psychologist and therapist. However, because Dr. Uzzell found that Wade's condition did not constitute a disability, she recommended denying benefits. A ValueOptions psychiatrist, Dr. Frank Webster, reviewed Wade's file, agreed with Dr. Uzzell that Wade was not disabled, and upheld Dr. Uzzell's recommendation. On September 26, 2000, ValueOptions contacted Wade via telephone and communicated its decision to deny benefits; it did not share Dr. Uzzell's report with him or send him a denial letter. In this conversation, Wade immediately advised ValueOptions of his desire to appeal and to submit information from his treating physician.

At the second level of the claims process, the ValueOptions Appeals Committee (on which Dr. Webster was a member) reviewed Wade's claim and the initial denial of benefits. They invited Wade's treating physicians to submit a letter and a copy of treatment notes for consideration; on October 4, 2000, Dr. Ty and Dr. Phelps submitted information to the Committee. Nevertheless, the ValueOptions Appeals Committee, on October 6, 2000, affirmed the denial of short-term disability benefits. As it explained in a letter to Wade, "the clinical information provided does not meet ValueOptions' short-term Disability criteria." Additionally, the letter explained to Wade that he had the right to appeal to Compaq and provided an address and phone number. The letter did not, however, reference the Plan criteria, explain why his information failed to meet the criteria, advise him of the appeal time-line, or detail the information Wade should submit to perfect his appeal.

Wade's attorney wrote to Compaq on December 5, 2000, requesting various Plan documentation and requesting an appeal. Compaq responded, inviting Wade's attorney to provide any additional information for Compaq to assess in its review of Wade's claim. At this third and final level, the Compaq Welfare Benefits Administrative Committee ("WBAC"), comprised only of Elaine Boddome (a Compaq employee), reviewed Wade's claim in May 2001.2 Kathy Collier, a Compaq benefits representative responsible for preparing Wade's file to present to WBAC, noticed several errors in ValueOptions' processing of Wade's

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claim. Therefore, she requested that ValueOptions re-review Wade's case and provide WBAC with additional information. Additionally, WBAC enlisted another psychiatrist, Dr. Conway McDanald, to conduct an additional review of all of the documentation in Wade's file. Subsequently, on August 24, 2001, WBAC issued a final denial of short-term disability benefits via a letter to Wade. This letter explained that short-term disability benefits were being denied, because the documentation did not substantiate a claim for short-term disability.

Wade sued in the United States District Court for the Southern District of Texas under 29 U.S.C. § 1132(a)(1)(B).3] Upon assessing the parties' cross-motions for summary judgment, the district court denied Wade's motion, granted defendant's motion. The court also summarily and sua sponte awarded costs in favor of the defendant.

Wade timely appealed, wherein he argues that the district court erred by: (1) applying the abuse of discretion standard of review to Wade's case, despite an asserted conflict of interest; (2) disregarding the impact of significant procedural errors, which allegedly should have reduced the district court's level of deference to the Plan Administrator; (3) refusing to conclude that the Plan Administrator abused its discretion; and (4) awarding costs to the defendant.


We review a district court's grant of summary judgment in ERISA cases de novo, applying the same standard as the district court. Baker v. Metropolitan Life Ins., 364 F.3d 624, 627 (5th Cir. 2004) (citing Performance Autoplex II Ltd. v. Mid-Continent Casualty Co., 322 F.3d 847, 853 (5th Cir. 2003)). A grant of summary judgment is proper if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Id. (citing Performance Autoplex, 322 F.3d at 853; Fed.R.Civ.P. 56(c)). In evaluating the existence of a genuine issue of material fact, we review the evidence and inferences drawn from that evidence in the light most favorable to the non-moving party. Id. at 627-28 (citing Daniels v. City of Arlington, Tex., 246 F.3d 500, 502 (5th Cir. 2001)).


Wade argues on appeal that the district court erred when it applied the abuse of discretion standard of review, asserting that it should have given less deference to the Plan Administrator, given the conflict of interest, i.e., that Compaq was both the insurer and administrator of the plan. Whether the district court applied the correct standard of review is a question of law that we review de novo. MacLachlan v. ExxonMobil Corp., 350 F.3d 472, 478 (5th Cir. 2003) (citing Chevron Chem. Co. v. Oil, Chem. & Atomic Workers Local Union 4-447, 47 F.3d 139, 142 (5th Cir. 1995)).

A plan administrator completes two tasks in making a benefit determination: (1) determining the facts underlying the benefit claim; and (2) construing the terms of the plan. The administrator's factual determinations are reviewed for abuse of discretion. Chacko v. Sabre, Inc., 473 F.3d 604, 609-10 (5th Cir. 2006). By contrast, the administrator's construction of plan terms is typically reviewed de novo. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). But where, as here, 4 a plan

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expressly confers discretion on the plan administrator to construe the plan's terms, the administrator's construction is reviewed for abuse of discretion. Chacko, 473 F.3d at 610 (citing Firestone, 489 U.S. at 115, 109 S.Ct. 948; Gosselink v. AT&T, Inc. 272 F.3d 722, 726 (5th Cir.2001); Vega v. Nat'l Life Ins. Servs., Inc., 188 F.3d 287, 295 (5th Cir.1999) (en banc)).

Where an administrator's decision is "tainted by a conflict of interest, " courts implement a sliding scale standard of review. MacLachlan, 350 F.3d at 478. The standard of review does not change, i.e., it remains abuse of discretion; the existence of a conflict of interest is simply a factor to be considered in determining whether the administrator abused its discretion. Vega, 188 F.3d at 296-97. Less deference is given to the Administrator, in proportion to the evidence of conflict. Id. Where "a minimal basis for a conflict is established, the decision is reviewed with 'only a modicum less deference than we otherwise would.' " Lain v. UNUM Life. Ins....

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