Cox v. Mid-America Dairymen, Inc., MID-AMERICA

• Decision Date: 11 June 1992
• Docket Number: No. 91-1066,MID-AMERICA,91-1066
• Citation: 965 F.2d 569
• Parties: Howard E. COX, Appellee, v.DAIRYMEN, INC., A Kansas Corporation, Appellant, Mid-America Dairymen, Inc. Retirement Plan; Northern Trust Company.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 569

965 F.2d 569

Howard E. COX, Appellee, v. MID-AMERICA DAIRYMEN, INC., A Kansas Corporation, Appellant Mid-America Dairymen, Inc. Retirement Plan; Northern Trust Company.

No. 91-1066.

United States Court of Appeals Eighth Circuit.

Submitted Sept. 10, 1991.

Decided May 11, 1992.

Rehearing Denied June 11, 1992.

Wayne H. Hoecker, Kansas City, Mo., argued, for appellant.

Gary T. Nelms, Springfield, Mo., argued, for appellee.

Before JOHN R. GIBSON, BOWMAN and LOKEN, Circuit Judges.

LOKEN, Circuit Judge.

This is an employee's action under ERISA, 29 U.S.C. §§ 1001 et seq., to review the denial of disability benefits under his employer's retirement plan. The district court entered summary judgment awarding benefits to Howard E. Cox, concluding that the Plan's trustees had abused their discretion in finding him not disabled. The employer, Mid-America Dairymen, Inc., has appealed. We conclude that the trustees did not adequately explain their discretionary decision to deny Cox benefits; thus, a reviewing court cannot determine whether that discretion was abused. Accordingly, we remand with directions to remand these proceedings for further consideration by the trustees.

I. Factual and Procedural Background

In December 1985, Cox had a heart attack that resulted in angioplasty surgery. He returned to his job as a full-time maintenance worker at Mid-America's milk plant on January 30, 1986, and continued to work until June 18, 1987, when he was laid off because of a plant closing. He initially requested recall and transfer to another plant. However, on July 28, 1987, he gave up his recall rights and terminated his employ in order to receive a pay-out from Mid-America's pension plan.

In February 1988, Cox applied to a different employer for a job that required heavy labor. Responding to an inquiry from another physician, Cox' cardiologist, Dr. John Best, wrote:

Howard Cox is now approximately two years status post angioplasty.... Since that time he has done relatively well without any episodes of chest pain or arrhythmias.

At this time I feel Mr. Cox can probably return to normal activity but again, still should avoid extremes of heat and cold and extremes of isometric exertion.

Cox was not hired for that position.

In March 1988, Cox applied for Social Security disability benefits, alleging a disability onset date of June 2, 1987. In May 1988, he had a medical re-evaluation at Dr. Best's clinic, which reported "recurrent angina, post angioplasty." In September 1988, just prior to Cox' Social Security hearing, Dr. Best wrote:

Mr. Cox has had a continuing deterioration of his health with recurrent Class III-IV angina pectoris....

I feel it is imperative that Mr. Cox be considered for repeat angiography in order that he can return to gainful employment. At this time he is totally and completely disabled.

On October 18, 1988, the Social Security Administrative Law Judge ruled that Cox had been disabled for purposes of the Social Security Act since June 2, 1987; the ALJ's opinion did not discuss why he selected the disability onset date alleged by Cox, as opposed to a later date.

In December 1988, Cox applied for disability benefits under Mid-America's Retirement Plan. He alleged that he became disabled on May 1, 1987, and submitted a statement by Dr. Best as the attending physician that:

[Cox] had a myocardial infarction in December of 1985. Since then he has intermittent chest pain.... [Cox] is disabled totally from his usual & standard occupation since May of 1987.

On December 27, 1988, Mid-America's Retirement Committee (the Plan trustees) denied Cox' application, explaining that "our records indicate you were continuously working until you were laid off on June 18, 1987 and that you were willing to transfer to another facility if work was available." As permitted by the Plan, Cox then appealed to the Retirement Committee and submitted a February 20, 1989 letter from Dr. Best to Cox' attorney stating:

It is my opinion that as a result of Mr. Cox' three vessel coronary disease, he was disabled from the time of his infarct [December 1985] from his usual and standard duties as a maintenance worker at his Mid-America Dairy Plant.

The Retirement Committee submitted Cox' file to a "Physician Advisor who is board certified in cardiology," ¹ asking for a determination of Cox' disability status as of the date of his voluntary termination, July 28, 1987. This consultant reported:

The clinical history documents coronary artery disease ... for which treatment had been attempted without complete success. Although the patient undoubtedly suffered acute myocardial infarction in 1985, best evidence suggests that following the infarction and treatment of it he recovered ... and did not initially have angina. The first report of recurrent angina was in May, 1988, and at that time a treadmill exercise test did not confirm evidence of myocardial ischemia. As far as I can tell, there was no evidence of disability in July of 1987.

The Retirement Committee denied Cox' appeal, explaining in the minutes of its June 30, 1989, meeting "that there was not sufficient evidence to establish that Mr. Cox was disabled prior to the time his employment with Mid-Am terminated."

Cox then commenced this action "to recover benefits due to him under the terms of his plan," 29 U.S.C. § 1132(a)(1)(B). Mid-America conceded that Cox was disabled when he commenced this action, but defended the Retirement Committee's decision that he was not "totally and permanently disabled"--the key phrase in the Retirement Plan--when he left Mid-America's employ. The district court granted summary judgment in favor of Cox, concluding that the Retirement Committee had abused its discretion by:

rely[ing] chiefly on the opinion of a medical doctor who did not examine the plaintiff, and ... totally disregard[ing] credible contradictory evidence from the plaintiff's own treating physician, as well as the extensive examination of plaintiff done by the [Social Security] ALJ.

This appeal followed.

II. The Standard of Review

ERISA expressly provides for judicial review of benefit denial decisions, but does not specify the appropriate standard of review. In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956, 103 L.Ed.2d 80 (1989), borrowing from traditional trust law principles, the Supreme Court stated that a deferential standard of review is appropriate under § 1132(a)(1)(B) if "the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." In this case, § 6.03 of Mid-America's Retirement Plan provides:

In case of any factual dispute hereunder, the Retirement Committee shall resolve such dispute giving due weight to all evidence available to it. The Retirement Committee shall interpret the Plan and shall determine all questions arising in the administration, interpretation and application of the Plan.

We agree with the district court that this Plan language requires that a deferential abuse of discretion standard be applied both to the Retirement Committee's interpretations of the Plan and to its fact-based disability determinations. ²

Although Bruch involved a trustee decision that was reviewed de novo, the Supreme Court provided considerable guidance in applying a deferential standard, first, by clarifying that traditional trust law principles are the relevant frame of reference, and second, by specifically citing the Restatement (Second) of Trusts § 187, Comment d, in briefly discussing how the deferential standard may be affected when the trustee is acting under a conflict of interest. 489 U.S. at 115, 109 S.Ct. at 956. Section 187 of the Restatement provides that discretion conferred upon a trustee "is not subject to control by the court, except to prevent an abuse by the trustee of his discretion." ³ Comment d then elaborates on this standard:

d. Factors in determining whether there is an abuse of discretion. In determining the question whether the trustee is guilty of an abuse of discretion in exercising or failing to exercise a power, the following circumstances may be relevant: (1) the extent of the discretion conferred upon the trustee by the terms of the trust; (2) the purposes of the trust; (3) the nature of the power; (4) the existence or non-existence, the definiteness or indefiniteness, of an external standard by which the reasonableness of the trustee's conduct can be judged; (5) the motives of the trustee in exercising or refraining from exercising the power; (6) the existence or nonexistence of an interest in the trustee conflicting with that of the beneficiaries.

This is essentially the deferential standard that we recently articulated in Finley v. Special Agents Mutual Benefit Ass'n, Inc., 957 F.2d 617, 621 (8th Cir.1992).

Cox relies upon Simmons v. Diamond Shamrock Corp., 844 F.2d 517, 522-23 (8th Cir.1988), in urging a stricter "reasonableness" standard of review. However, we conclude that such a standard would be inconsistent with the Supreme Court's later decision in Bruch. Trust law plainly does not permit a reviewing court to reject a discretionary trustee decision with which the court simply disagrees:

It is not necessarily an "abuse of discretion" to make decisions under a discretionary power which the court believes that an ordinarily prudent trustee would not have made, or to fail to use the power as the court would have used it if the discretion had been granted to the court.... However, if the action of the trustee is extraordinarily imprudent or extremely unreasonable, the court is likely to find that there has been an abuse of discretion.

George G. Bogert & George T. Bogert, The Law of Trusts and Trustees § 560, at 201-04 (rev.2d ed. 1980), cited in Bruch, 489 U.S. at 111, 109 S.Ct. at 954. Thus, Bruch does not permit the rejection of "unreasonable" trustee decisions, except to the limited extent a...