Snow v. Standard Ins. Co.

• Decision Date: 21 June 1996
• Docket Number: No. 95-55515,95-55515
• Citation: 87 F.3d 327
• Parties: 20 Employee Benefits Cas. 1375, 96 Cal. Daily Op. Serv. 4487, 96 Daily Journal D.A.R. 7305, Pens. Plan Guide P 23921C Gloria SNOW, Plaintiff-Appellee, v. STANDARD INSURANCE COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 327

87 F.3d 327

20 Employee Benefits Cas. 1375, 96 Cal. Daily

Op. Serv. 4487,

96 Daily Journal D.A.R. 7305,

Pens. Plan Guide P 23921C

Gloria SNOW, Plaintiff-Appellee, v. STANDARD INSURANCE COMPANY, Defendant-Appellant.

No. 95-55515.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 5, 1996.

Decided June 21, 1996.

David L. Bacon, Adams, Duque & Hazeltine and David A. Lingenbrink, Galton & Helm, Los Angeles, California, for defendant-appellant.

Stuart Sandhaus, Laguna Niguel, California, and Gerard Engelskirchen, Santa Cruz, California, for plaintiff-appellee.

Daniel Feinberg, Sigman, Lewis & Feinberg, Oakland, California, for amicus curiae.

Appeal from the United States District Court for the Central District of California, Edward Rafeedie, District Judge, Presiding. D.C. No. CV-94-01609-ER-BRx.

Before: FARRIS, FERNANDEZ, and THOMAS, Circuit Judges.

FERNANDEZ, Circuit Judge:

Gloria Snow was an employee of Harlyn Products, Inc., which maintained a long-term disability plan. The Plan was issued by Standard Insurance Company, and that company also served as the Plan's claims review administrator. Snow claimed that she was disabled due to Chronic Fatigue Immune Dysfunction Syndrome (CFS), but her claim was denied. She then commenced this action pursuant to the Employment Retirement Income Security Act, 29 U.S.C. § 1132. The district court determined that it should review Standard's decision for abuse of discretion, and that there was evidence to support Standard's determination. However, the court was of the opinion that additional evidence should be obtained. Thus, it returned the matter to Standard for the purpose of further evidence development and awarded fees and costs to Snow. Standard appealed, and we reverse and remand.

BACKGROUND

Harlyn Products, Inc., hired Snow in April of 1976, and by 1982 it had promoted her to the position of Director of Human Resources. In 1987, Snow began to suffer various symptoms, including fatigue, headaches, panic attacks, and concentration or memory problems. However, she continued to work at Harlyn until January 3, 1992. During the intervening years, Snow saw a number of physicians. Some of them determined that Snow had CFS or that it was highly probable that she did. One physician diagnosed Snow as having a panic disorder; others ruled out certain other maladies.

Snow filed her long-term disability claim in July of 1992 and alleged that she was disabled because of CFS. Her claim was temporarily approved on the sole basis that she may have been suffering from a disabling mental condition, but with the qualification that an additional investigation would be undertaken.

Standard's benefits analyst referred Snow's claim to Dr. David Franck, one of Standard's medical directors. Dr. Franck opined that Snow did not meet the criteria which the Center for Disease Control had developed for the purpose of diagnosing CFS. He recommended that Snow be assessed by a psychiatrist in order to determine whether a mental condition was impairing Snow's functional capacity. After the psychiatrist met with and tested Snow, he opined that Snow was suffering from a mental disorder, but that she could work full time and was not disabled due to CFS or any other disease. Standard then denied Snow's claim.

After Standard received a letter from Snow's attorney, it conducted a second review of her claim. One of Snow's attending physicians, Dr. De Remer, sent a letter to Standard in which she concluded that Snow was disabled from CFS and did qualify for long-term disability benefits. She later sent additional documentation explaining the basis of her diagnosis after Standard asked her for further information. However, Dr. De Remer also stated that Snow was not disabled by fatigue or pain. Another of Snow's attending physicians, Dr. Goldstein, also sent his notes and a CFS checklist to Standard. Standard asked a consulting physician, Dr. Fancher, to render an opinion. Dr. Fancher has an active practice and provides consulting services to Standard 8 to 12 hours per week. He is familiar with CFS and often determines that a claimant is afflicted with that syndrome. However, he is dubious that there are real experts in the area because of the very unique nature of the disease and its diagnosis.

He was of the opinion that Snow was not afflicted with CFS.

Standard then denied Snow's claim on the ground that she did not meet the criteria for CFS as established by the Center for Disease Control. This litigation followed.

JURISDICTION

The district court had jurisdiction over this ERISA matter pursuant to 29 U.S.C. § 1132(e)(1) and 28 U.S.C. § 1331. We have jurisdiction pursuant to 28 U.S.C. § 1291.

STANDARDS OF REVIEW

In an ERISA case, there are two levels at which the standard of review must be considered. The first level involves the standard for the district court's and our review of plan administrators' determinations. The second involves the standard for our review of the district court's determinations.

We will first consider the first level. A determination that denies benefits under an ERISA plan is reviewed de novo "unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956-57, 103 L.Ed.2d 80 (1989). When discretion is conferred, the exercise of that discretion is reviewed under the arbitrary or capricious standard, or for abuse of discretion, which comes to the same thing. See Atwood v. Newmont Gold Co., Inc., 45 F.3d 1317, 1321 & n. 1 (9th Cir.1995); McKenzie v. General Tel. Co., 41 F.3d 1310, 1314 (9th Cir.1994), cert. denied, --- U.S. ----, 115 S.Ct. 1697, 131 L.Ed.2d 560 (1995); Taft v. Equitable Life Assurance Soc'y, 9 F.3d 1469, 1471 (9th Cir.1993).

We have not been stingy in our determinations that discretion is conferred upon plan administrators. That is sensible because a proper and efficient functioning of an ERISA plan does often depend upon the use of discretion by the plan fiduciaries. As we have pointed out, a plan does confer discretion when it "includes even one important discretionary element, and the power to apply that element is unambiguously retained by its administrator." Bogue v. Ampex Corp., 976 F.2d 1319, 1325 (9th Cir.1992), cert. denied, 507 U.S. 1031, 113 S.Ct. 1847, 123 L.Ed.2d 471 (1993). In Bogue that element was found in language in an employment severance plan which provided that the administrator would make determinations about similar employment positions within the company. Id. at 1324. In other words, if the plan administrator has the authority to determine eligibility for benefits, that inherently confers discretion upon him. See Patterson v. Hughes Aircraft Co., 11 F.3d 948, 949-50 (9th Cir.1993) (per curiam); Eley v. Boeing Co., 945 F.2d 276, 278 (9th Cir.1991); Madden v. ITT Long Term Disability Plan for Salaried Employees, 914 F.2d 1279, 1284-85 (9th Cir.1990), cert. denied, 498 U.S. 1087, 111 S.Ct. 964, 112 L.Ed.2d 1051 (1991).

The plan before us provides that there will be no benefit payment unless Standard is presented with what it considers to be satisfactory written proof of the claimed loss. We see no relevant difference between that and plans which declare that the plan administrator will determine eligibility. It is apparent that both require the administrator to decide whether the person has become eligible as a result of presentation of satisfactory proof to that effect. See Donato v. Metropolitan Life Ins. Co., 19 F.3d 375, 378-80 (7th Cir.1994); Miller v. Metropolitan Life Ins. Co., 925 F.2d 979, 983-84 (6th Cir.1991); Bali v. Blue Cross & Blue Shield Ass'n, 873 F.2d 1043, 1047 (7th Cir.1989). Therefore, the district court correctly determined that review of Standard's decision must be for an abuse of discretion. ¹

That, however, does not quite end the inquiry because, as the Supreme Court has pointed out, if the plan administrator is operating under a conflict of interest, "that conflict must be weighed as a 'facto[r] in determining whether there is an abuse of discretion.' " Firestone, 489 U.S. at 115, 109 S.Ct. at 957. In this case, there was a formal conflict because Standard was both the insurance company and the Plan administrator. If that formal conflict led to a true conflict, the standard of review would not exactly change, but scrutiny of Standard's decision would become more searching. See Winters v. Costco Wholesale Corp., 49 F.3d 550, 552 (9th Cir.), cert. denied, --- U.S. ----, 116 S.Ct. 276, 133 L.Ed.2d 197 (1995); Atwood, 45 F.3d at 1322.

In Atwood, we explained what that meant when we stated:

The "less deferential" standard under which we review apparently conflicted fiduciaries has two steps. First, we must determine whether the affected beneficiary has provided material, probative evidence, beyond the mere fact of the apparent conflict, tending to show that the fiduciary's self interest caused a breach of the administrator's fiduciary obligations to the beneficiary. If not, we apply our traditional abuse of discretion review. On the other hand, if the beneficiary has made the required showing, the principles of trust law require us to act very skeptically in deferring to the discretion of an administrator who appears to have committed a breach of fiduciary duty.

Id. at 1323.

When it decided this case, the district court did not have the benefit of Atwood. It opined that because of the apparent conflict it should use a sliding scale and apply a somewhat heightened standard of review. However, it also found that there was no evidence of bad faith or improper motivation. Standard did not reject all CFS claims; indeed, it approved about 75 percent of them. As the district court said, "There is no real evidence, other than an unfavorable result for the plaintiff, that the conflict actually impaired [Stand...