Blickenstaff v. R.R. Donnelley & Sons Co.

• Decision Date: 09 August 2004
• Docket Number: No. 03-2116.,03-2116.
• Citation: 378 F.3d 669
• Parties: Katherine BLICKENSTAFF, Plaintiff-Appellant, v. R.R. DONNELLEY & SONS CO. SHORT TERM DISABILITY PLAN, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

378 F.3d 669

Katherine BLICKENSTAFF, Plaintiff-Appellant, v. R.R. DONNELLEY & SONS CO. SHORT TERM DISABILITY PLAN, Defendant-Appellee.

No. 03-2116.

United States Court of Appeals, Seventh Circuit.

Argued May 18, 2004.

Decided August 9, 2004.

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Appeal from the United States District Court for the Southern District of Indiana, Sarah Evans Barker, J.

James E. Ayers, Wernle, Ristine & Ayers, Linden, IN, Gwyneth Ayers (argued), Boulder, CO, for Plaintiff-Appellant.

Donald A. Murday (argued), Chittenden, Murday & Novotny, Chicago, IL, for Defendant-Appellee.

Before FLAUM, Chief Judge, and KANNE and ROVNER, Circuit Judges.

KANNE, Circuit Judge.

Katherine Blickenstaff primarily appeals from the district court's determination that R.R. Donnelley & Sons Co. Short Term Disability Plan ("Plan") did not act arbitrarily and capriciously in terminating her short term disability benefits and then refusing to reinstate them on appeal. She also claims that the district court erred in limiting the evidence at trial and appeals the district court's decision to sanction her attorneys under Federal Rule of Civil Procedure 11. For the reasons we discuss below, we affirm the district court's treatment of trial evidence and its decision on the merits, but vacate, in part, the sanctions award.

I. History

A. Short Term Disability Claim Denial

R.R. Donnelley & Sons Co. employed Blickenstaff as a material handler. Beginning October 1, 1998, Blickenstaff was covered by the employee benefit plan at issue here, which provided benefits for short term disability. The short term disability portion of the Plan was self-funded by Donnelley, which served as the Plan administrator. A subsidiary of Hartford Life & Accident Insurance Co. served as the claims evaluator, and, under the terms of the Plan, "ha[d] full discretion and authority to determine benefits payable and to construe and interpret all terms and provisions of the Plan in connection with this determination."

Blickenstaff, under a prior benefits plan, received short term disability benefits from April 30, 1998 to June 1, 1998 because of lower back pain. She returned to work on June 1, 1998, with the following restrictions: no lifting more than ten pounds and no prolonged standing (more than two hours), bending, stooping, crawling, or climbing. Donnelley accommodated her restrictions and ultimately considered them, and her accommodated job, to be permanent.

Despite Donnelley's accommodation, Blickenstaff alleges that she continued to experience pain while working. She stopped work in October of 1998 and again applied for short term disability benefits. Under the Plan, she was entitled to receive short term disability benefits for twenty-six weeks if she met the definition of "total disability" throughout the benefits period:

Total Disability or Totally Disabled means that you are prevented by:

1) accidental bodily injury;

2) sickness;

3) Mental Illness;

4) Substance Abuse; or

5) Pregnancy,

from performing the essential duties of your occupation, or a reasonable alternative offered to you by the Employer, and as a result, you are earning less than 20% of your predisability Weekly Earnings. [Emphasis added].

The Plan initially approved the short term disability benefits, but terminated them in a letter dated March 18, 1999, nineteen weeks into the benefits period. It based its decision on new medical evidence, in the form of a functional capacity evaluation, which indicated Blickenstaff could perform her job as accommodated by Donnelley. Blickenstaff utilized the Plan's internal appeals process. When it refused to reinstate her benefits, she sued in state court, alleging violations of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001, et seq.¹ The case was properly removed to federal district court.

After denying, in part, the Plan's motion for summary judgment, see Blickenstaff v. R.R. Donnelley & Sons Co. Short-Term Disability Plan, 2001 WL 1719312, No. 00-C-983-B/S, 2001 U.S. Dist. LEXIS 22895 (S.D.Ind. Dec. 5, 2001), Judge Barker held a bench trial on March 18, 2002. The sole issue presented was whether the Plan's March 1999 termination of benefits was arbitrary and capricious. The court had previously found, in its summary judgment ruling, that the Plan did not act arbitrarily and capriciously in denying Blickenstaff second internal appeal following the initial decision to terminate her benefits.²

At trial, Blickenstaff argued, based on one word contained in the March 18, 1999 letter terminating her benefits, that the Plan utilized the wrong standard in evaluating her claim. The letter stated on page three that "[t]he Plan provides that Hartford would pay benefits if you were prevented by Disability from doing the essential duties of any occupation on a full time basis." [Emphasis added]. Blickenstaff rightly pointed out that the definition of disability appearing in the Plan documents defines "total disability" for short term disability purposes as being prevented from performing the essential duties of "your" occupation, not "any" occupation as appeared in the letter. Yet, the letter accurately quoted the definition of "total disability" on its first page, and goes on to state, in the sentences immediately following the one containing the phrase "any occupation:"

[Y]ou are capable of performing the essential duties of your occupation as a Material Handler as defined by your employer on January 25, 1999. Therefore, we find that the medical documentation in your file does not support your inability to perform your occupation and no [short term disability] benefits are available beyond March 14, 1999. [Emphasis added].

In its ruling, the district court did not directly address Blickenstaff's claim that the Plan used the wrong disability definition. Rather, it focused on Blickenstaff's other arguments that 1) the Plan used the wrong job description in evaluating her ability to perform her position; 2) the medical evidence did not support the conclusion that she could perform the job described in the incorrect job description; and 3) even if the Plan used the correct job description in evaluating her claim, the medical records still failed to support the finding that she could return to work.

Evidence presented at trial showed that, on November 19, 1998, Blickenstaff's supervisor filled out a physical demands analysis form that was allegedly supposed to describe the current physical demands of her job ("November job description"). The Plan requested the November job description as part of its decision-making process with regard to covering Blickenstaff's claim. The November job description stated that as part of her job as material handler, Blickenstaff was required to lift one-to-ten pounds constantly (with constantly defined as 67% to 100% of the workday); eleven-to-twenty pounds frequently (with frequently defined as 34% to 66% of the workday), and twenty-one-to-fifty pounds occasionally (with occasionally defined as 0-33% of the workday). The supervisor also recorded that only 10% of Blickenstaff's job included sedentary work, meaning lifting ten pounds maximum, and the other 90% of her job was light work, defined as lifting twenty pounds maximum. Blickenstaff correctly pointed out that the November job description did not comply with her permanent restrictions and argued at trial that to the extent the Plan believed the job as represented in the November job description was her job and the job to which she would return, it was wrong.

Blickenstaff next argued that the functional capacity evaluation, an exam performed by Independence Rehabilitation on February 16, 1999 at the Plan's request and upon which the Plan heavily relied in terminating her benefits ("February exam"), showed she could not perform her job as outlined in the November job description. Specifically, the February exam results showed she could only lift five-to-seven pounds constantly, seven-to-fifteen pounds frequently, and ten-to-twenty pounds occasionally. The November job description, Blickenstaff noted, stated that she needed to lift in excess of those amounts on a daily basis.

Blickenstaff also argued that even if the Plan utilized the correct job description — the accommodated job description in which she never lifted over ten pounds — the February exam still didn't support that she could return to work. Here, she pointed to the fact that the February exam reported she could only lift five-to-seven pounds constantly, not ten. The February exam noted, however, that based on the test results, Blickenstaff could work an eight-hour day in a light-duty position. Significantly, the February exam also stated that during the testing, "Ms. Blickenstaff exhibited symptom/disability exaggeration behavior" and that certain results "suggest[ed] very poor effort or voluntary submaximal effort which is not necessarily related to pain, impairment or disability."

Judge Barker did not find any of Blickenstaff's arguments persuasive. The judge first determined that the Plan made its decision based on the accommodated job description, not the November job description. Donnelley clarified, in a letter to Hartford dated January 25, 1999, that as of June 1, 1998, Blickenstaff worked in an accommodated job with the following restrictions: "refrain from standing more than 2 hours, lifting greater than 10 lbs., bending, stooping, climbing." The March 18, 1999 letter terminating Blickenstaff's benefits specifically cited the January letter and described Blickenstaff's job demands in terms of the restrictions listed therein.

The judge also confirmed that the accommodated job was the appropriate one for the Plan to use in its evaluation of Blickenstaff's claim because it was the position she held at the time she sought disability benefits. The judge observed that when Blickenstaff first appealed the determination terminating her benefits, she attached the...