Madden v. ITT Long Term Disability Plan for Salaried Employees, 89-55505

• Decision Date: 17 September 1990
• Docket Number: No. 89-55505,89-55505
• Citation: 914 F.2d 1279
• Parties: 13 Employee Benefits Ca 1564 Ervin B. MADDEN, Plaintiff-Appellant, v. ITT LONG TERM DISABILITY PLAN FOR SALARIED EMPLOYEES; Federal Electric Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1279

914 F.2d 1279

13 Employee Benefits Ca 1564

Ervin B. MADDEN, Plaintiff-Appellant, v. ITT LONG TERM DISABILITY PLAN FOR SALARIED EMPLOYEES;

Federal Electric Corporation, Defendants-Appellees.

No. 89-55505.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 6, 1990.

Decided Sept. 17, 1990.

Steven Roseman, Long Beach, Cal., for plaintiff-appellant.

John L. Viola, Adams, Duque & Hazeltine, Los Angeles, Cal., for defendants-appellees.

Appeal from the United States District Court for the Central District of California.

Before ALARCON, BRUNETTI and O'SCANNLAIN, Circuit Judges.

BRUNETTI, Circuit Judge:

Ervin Madden ("Madden") filed suit against his employer, Federal Electric Corp. ("Federal"), and its long-term disability plan, ITT Long Term Disability Plan for Salaried Employees ("the Plan"), pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. Sec. 1132(a)(1)(B), to recover benefits allegedly due him under the terms of the Plan, arising out of the termination of Madden's long-term Plan disability benefits by Metropolitan Life Insurance Co. ("Metropolitan"), ITT's delegate, and seeking contractual damages, injunctive relief, and attorney's fees.

A. Factual and Procedural Background

Madden was employed by Federal for nine years as a management employee. He has extensive education and experience in communications and electronics, including supervisory positions. On February 13, 1983 Madden suffered a spinal injury that resulted in his inability to return to work at Federal. Because of this injury, Madden applied for long-term disability benefits from the Plan.

The Plan provides two standards of disability qualifications:

1. During the first year in which you receive LTD [Long Term Disability] benefits you are considered totally disabled if you are unable to perform the regular duties of your ITT job and are not employed elsewhere.

2. After the first year, total disability means you are unable to engage in any occupation for which you are qualified, based on your training, education, or experience.

(emphasis in original).

From the period September 1983 through August 1985, Madden's own chosen physician, Dr. Edward A. Smith, a board certified neurosurgeon, periodically informed The Equitable Life Assurance Society of the United States ("Equitable"), to whom ITT had delegated its authority to administer the Plan, that Madden was disabled under both definitions of total disability. Accordingly, Madden received Plan benefits for that period.

In August 1985 Dr. Smith informed Equitable that although Madden was still totally disabled from his regular work, he was not totally disabled from any other occupation. In November 1985 Dr. Smith again indicated that Madden was not totally disabled from work, other than his own former job at Federal. Dr. Smith believed that Madden should be able to do "semi-sedentary work," if the job allowed him to stand up after every thirty minutes of sitting and did not require lifting objects in excess of ten pounds. ¹ However, Madden continued to receive Plan benefits.

Meanwhile, in October 1985 the Social Security Administration, reversing its earlier position, found that Madden had satisfied its requirements for receiving social security disability benefits commencing February 14, 1983 and awarded him retroactive benefits. On March 20, 1986 Madden phoned Metropolitan, who had replaced Equitable as ITT's delegate on January 1, 1986, and reported this retroactive benefit award.

In April 1986 Metropolitan reviewed Madden's file and determined, based on Dr. Smith's previous medical findings, the only current medical information on file, and Madden's training, education, and experience, that Madden was no longer totally disabled as defined by the Plan. Metropolitan thus informed him of the termination of his Plan benefits effective June 1, 1986. Metropolitan also explained the review procedure for such denials of benefit claims: "When requesting a review, please state the reason you believe the claim was improperly denied, and submit any data, questions or comments you deem appropriate."

Madden requested that Metropolitan review its decision to terminate his benefits, alleging that Dr. Smith had not conveyed all relevant information; Metropolitan initiated such a review. Pursuant to this review, in August 1986 Dr. Smith contacted Metropolitan, again indicating that based upon his March 1986 examination, while Madden was limited to "semi-sedentary" work, he was not disabled for any occupation. ² Specifically, while he was limited in his abilities to bend, lift, and stoop, he suffered no limitations regarding activities such as operating electrical equipment, concentrating visual attention, grasping, handling, and finger dexterity. Based on Dr. Smith's medical findings Metropolitan affirmed its decision to terminate Madden's Plan benefits, again requesting that Madden provide any medical information that would support his benefit claim.

Madden responded by filing a complaint with the Office of the Washington State Insurance Commissioner. In response to this complaint, in January 1987 Metropolitan conducted a second review, reaffirming its decision to terminate Madden's Plan benefits, based upon Dr. Smith's medical findings and Madden's training, education, and experience.

In February 1987 Madden requested yet another review, at which time Metropolitan had an independent outside agency, Crawford Risk Management Services ("Crawford"), perform a vocational assessment. Crawford reviewed Dr. Smith's medical findings, Madden's age, and his education, training, and experience. Crawford determined that Madden retained functional capacity to perform work within his capabilities, listing five job titles he should be capable of performing. Based on Dr. Smith's medical findings and Crawford's assessment, Metropolitan again reaffirmed its decision to terminate Madden's Plan benefits. At no time during these three reviews did Madden submit any additional medical evidence supporting his benefit claim. ³

In April 1988 Madden filed suit against the Plan and Federal pursuant to ERISA, 29 U.S.C. Sec. 1132(a)(1)(B), ⁴ to recover benefits allegedly due him under the terms of the Plan, seeking contractual damages, injunctive relief, and attorney's fees. The district court granted defendants' motion for summary judgment, ruling that Metropolitan's decision to terminate Madden's Plan benefits was reviewable under the "arbitrary and capricious" standard of review. The court found that Metropolitan's decision was not arbitrary and capricious, was supported by substantial evidence, was not made in bad faith, and was not erroneous as a matter of law, and that even if the decision were subject to de novo review, Metropolitan did not violate its fiduciary duty. The court also ruled that the Plan was entitled to the retroactive social security benefits Madden received for the period he also received Plan benefits. Lastly, the court ruled that Federal was not a proper party, because ERISA only permits suits for recovery of benefits against the employee benefit plan itself, not the employer. The court denied Madden's cross-motion for summary judgment, which sought ERISA disability benefits on the theory that he was eligible because he received a social security award.

Madden appeals, contending that (1) Metropolitan's decision to terminate his Plan benefits should be reviewed under the de novo standard of review; (2) Metropolitan acted improperly in terminating his Plan benefits; (3) there are disputed issues of material facts; (4) he is entitled to summary judgment because he succeeded in his social security disability claim; (5) the Plan is not entitled to any of his retroactive social security benefits award; and (6) Federal is a proper party. Madden also requests attorney's fees on the appeal. We affirm.

B. Standard of Review

We review a grant of summary judgment de novo. Kruso v. International Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir.1989), cert. denied, --- U.S. ----, 110 S.Ct. 3217, 110 L.Ed.2d 664 (1990). We must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Tzung v. State Farm Fire and Casualty Co., 873 F.2d 1338, 1339-40 (9th Cir.1989).

Madden contends that Metropolitan's decision to terminate his Plan benefits should be reviewed under the de novo standard of review. Madden contends that even though ITT's decisions under the Plan are entitled to the "arbitrary and capricious" standard of review because ITT is the Plan's named fiduciary, Metropolitan's decision to terminate his Plan benefits is not, because Metropolitan is merely ITT's delegate and not an ERISA fiduciary.

Under ERISA "[e]very employee benefit plan shall be established and maintained pursuant to a written instrument. Such instrument shall provide for one or more named fiduciaries who jointly or severally shall have authority to control and manage the operation and administration of the plan." ERISA, 29 U.S.C. Sec. 1102(a)(1) (1988).

In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 953-57, 103 L.Ed.2d 80 (1989), the Supreme Court closely analogized the law under ERISA to trust law and ruled on the applicable judicial standard of review of ERISA claims: "[A] denial of benefits challenged under Sec. 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Id. 109 S.Ct. at 956. Where such authority is given, under trust principles a "deferential standard of review" is appropriate. Id. 109 S.Ct. at 954.

Under ERISA, a named fiduciary may delegate its fiduciary responsibilities:

The instrument under which a plan is...