Fleisher v. Standard Ins. Co.

• Decision Date: 17 May 2012
• Docket Number: No. 11–2490.,11–2490.
• Citation: 53 Employee Benefits Cas. 1225,679 F.3d 116
• Parties: Robert FLEISHER, D.M.D., Appellant v. STANDARD INSURANCE COMPANY.
• Court: U.S. Court of Appeals — Third Circuit

679 F.3d 116

53 Employee Benefits Cas. 1225

Robert FLEISHER, D.M.D., Appellant

v.STANDARD INSURANCE COMPANY.

No. 11–2490.

United States Court of Appeals,Third Circuit.

Argued Feb. 6, 2012.

Filed: May 17, 2012.

Clifford D. Swift, III, Esq. (Argued), Mark F. Seltzer & Associates, Philadelphia, PA, for Appellant.

Brooks R. Magratten, Esq. (Argued), Pierce Atwood, Providence, RI, Byrne J. Decker, Esq., Portland, ME, for Appellee.

Before: SLOVITER, VANASKIE and GARTH, Circuit Judges.

OPINION OF THE COURT

VANASKIE, Circuit Judge.

Robert Fleisher, D.M.D., filed suit against the Standard Insurance Company (“Standard”), alleging, inter alia, a violation of § 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1132(a)(1)(B). The suit arises out of Standard's decision to reduce Fleisher's monthly long-term disability (“LTD”) benefits by the amount of the monthly benefits he receives under a separate LTD insurance policy issued to him by the North American Company for Life and Health Insurance (“North American”). Fleisher disputes Standard's decision that the North American Policy constitutes “group insurance coverage,” and that the monthly payment he receives under that Policy is therefore “Deductible Income” under the Standard Policy. The District Court, applying the deferential abuse of discretion standard of review, granted Standard's motion to dismiss. Specifically, it found that Standard's determination to offset the North American monthly benefit of $1,500 from Standard's monthly obligation of $10,000 is supported by substantial evidence and not unreasonable. Fleisher now appeals this decision. For the reasons stated herein, we will affirm the decision of the District Court.

I.

During the course of his career as a dentist, Fleisher obtained LTD insurance coverage under two separate policies. In July 1979, Fleisher obtained coverage under a policy issued by North American (“North American Policy”) to the American Association of Endodontics (“AAE”), of which Fleisher is a member. The North American Policy provides for LTD benefits of $1,500 per month.

In August 2002, Fleisher became eligible for LTD insurance coverage under a group policy issued by Standard (“Standard Policy”) to his employer, Endodontics, Ltd., P.C. (“Endodontics”). The LTD coverage offered by Fleisher's employer is an employee benefit governed by ERISA. See Shaw v. Delta Air Lines, 463 U.S. 85, 91 n. 5, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983) (“An ‘employee welfare benefit plan’ [governed by ERISA] includes any program that provides benefits for contingencies such as illness, accident, disability, death, or unemployment.”). The Standard Policy provides for monthly LTD benefits equal to a percentage of the plan participant's pre-disability earnings, which in Fleisher's case was a maximum of “$10,000 before reduction by Deductible Income.” (A.61.) The Policy defines “Deductible Income” to include “[a]ny amount you [a plan participant] receive or are eligible to receive because of your disability under another group insurance coverage.” (A.72) (emphasis added). The Standard Policy excludes from “Deductible Income” benefits paid under “any individual disability insurance policy.” (A.72.) The Policy does not define either “another group insurance coverage” or “individual disability insurance policy.”

In January 2008, Fleisher became disabled and claimed LTD benefits under both the Standard and the North American policies. Shortly after Fleisher began collecting under both policies, Standard reduced his monthly benefits from $10,000 to $8,500 based on its determination that the North American Policy constitutes “another group insurance coverage,” and that the $1,500 in benefits he receives under it is therefore “Deductible Income.” Fleisher filed an administrative appeal of Standard's decision, arguing that the North American Policy qualifies as an individual disability insurance policy, and therefore is not subject to deduction. By letter dated July 11, 2008, Standard rejected Fleisher's appeal and continued making the deduction.

On May 26, 2010 Fleisher filed a Complaint in the United States District Court for the District of New Jersey, asserting individual and class claims for wrongful denial of benefits under ERISA, along with various state law claims. After Standard moved to dismiss the Complaint, Fleisher filed an Amended Complaint on September 8, 2010. After Standard moved to dismiss the Amended Complaint, Fleisher filed a Second Amended Complaint (“SAC”) on October 1, 2010.¹ The SAC asserts three ERISA claims: breaches of fiduciary duty (Count I) and contract (Count III), both pursuant to § 502(a)(3), 29 U.S.C. § 1132(a)(3), and breach of contract pursuant to § 502(a)(1)(B) (Count II). The SAC seeks restitution for the deductions previously taken as well as injunctive relief to govern future deduction decisions.

Standard moved to dismiss the SAC pursuant to Fed.R.Civ.P. 12(b)(6). On May 2, 2011, the District Court granted Standard's motion. The District Court initially concluded that the benefits offset determination was governed by “the deferential abuse of discretion standard.” (A.14.) Applying that narrow standard of review, the Court held that Fleisher could not show that Standard's decision reflected an unreasonable interpretation or application of the Standard Policy. The District Court recognized that there was a conflict of interest arising from the fact that Standard both paid benefits and made the offset decision, and that such a conflict had to be considered in deciding whether Standard had abused its discretion. It concluded, however, that Standard's interpretation of pertinent policy provisions was not so close as to make the conflict of interest a determinative factor. The Court also dismissed Fleisher's § 502(a)(3) claims for breaches of fiduciary duty and contract, concluding that Standard's conduct was not improper.

II.

We have jurisdiction over this appeal pursuant to 28 U.S.C. § 1291. We exercise plenary review over a district court's grant of a motion to dismiss pursuant to Rule 12(b)(6). Gelman v. State Farm Mut. Auto. Ins. Co., 583 F.3d 187, 190 (3d Cir.2009). Accordingly, we must “ ‘accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.’ ” Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir.2009) (quoting Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir.2008)). To survive a motion to dismiss, a complaint must contain sufficient factual allegations, taken as true, to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (holding that the plausibility pleading standard articulated in Twombly applies to all civil actions).

III.

Fleisher's coverage under the Standard Policy, an employee welfare benefit plan, is governed by ERISA, 29 U.S.C. §§ 1001, et seq.Section 502(a)(1)(B) of ERISA creates a civil cause of action for a plan participant “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.” To assert a claim under this provision, a plan participant must demonstrate that “he or she ... ha[s] a right to benefits that is legally enforceable against the plan,” and that the plan administrator improperly denied those benefits. Hooven v. Exxon Mobil Corp., 465 F.3d 566, 574 (3d Cir.2006). The SAC alleges that Standard “breached its obligations under ERISA to Dr. Fleisher ... by taking a deduction to which it was not entitled and thus unreasonably failing to pay those benefits in full.” (A.140–41.)

In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), the Supreme Court held:

[A] denial of benefits challenged under [§ 502(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.

When a plan grants its administrator such discretionary authority, “[t]rust principles make a deferential standard of review appropriate,” id. at 111, 109 S.Ct. 948, and “we review a denial of benefits under an ‘arbitrary and capricious' standard.”

Orvosh v. Program of Group Ins. for Salaried Emps. of Volkswagen of Am., Inc., 222 F.3d 123, 129 (3d Cir.2000).² Likewise, when an administrator acts pursuant to her authority “to construe the terms of the plan,” Gritzer v. CBS, Inc., 275 F.3d 291, 295 (3d Cir.2002) or “to act as a finder of facts,” Mitchell v. Eastman Kodak Co., 113 F.3d 433, 438 (3d Cir.1997), abrogated on other grounds as recognized by Miller v. Am. Airlines, Inc., 632 F.3d 837, 847 (3d Cir.2011), we also apply the arbitrary and capricious standard when reviewing those interpretations and factual findings.

“An administrator's decision is arbitrary and capricious ‘if it is without reason, unsupported by substantial evidence or erroneous as a matter of law.’ ” Miller, 632 F.3d at 845 (quoting Abnathya v. Hoffmann–La Roche, Inc., 2 F.3d 40, 45 (3d Cir.1993)) (internal quotation marks omitted). An administrator's interpretation is not arbitrary if it is “reasonably consistent with unambiguous plan language.” Bill Gray Enters. v. Gourley, 248 F.3d 206, 218 (3d Cir.2001). When a plan's language is ambiguous and the administrator is authorized to interpret it, courts “must defer to this interpretation unless it is arbitrary or capricious.” McElroy v. SmithKline Beecham Health & Welfare Benefits Trust Plan, 340 F.3d 139, 143 (3d Cir.2003). “The determination of whether a term is ambiguous is a question of law. A term is ambiguous...