Friedrich v. Intel Corp.
| Decision Date | 08 December 1998 |
| Docket Number | No. 97-16623,N,97-16623 |
| Citation | 181 F.3d 1105 |
| Parties | (9th Cir. 1999) JOSEPH H. FRIEDRICH, Plaintiff-Appellee, v. INTEL CORPORATION; INTEL CORPORATION LONG TERM DISABILITY BENEFIT PLAN, Defendants-Appellants. JOSEPH H. FRIEDRICH, Plaintiff-Appellee, v. INTEL CORPORATION; INTEL CORPORATION LONG TERM DISABILITY BENEFIT PLAN, Defendants-Appellants. o. 97-17183 Argued and Submitted: |
| Court | U.S. Court of Appeals — Ninth Circuit |
[Copyrighted Material Omitted] George M. Kraw (Argued), Sarah Kenyon Kraw, Jeanine DeBacker of Kraw & Kraw, San Jose, California, for the defendants-appellants.
Andrea M. Miller (Argued), Nageley & Meredith, Sacramento, California, for the plaintiff-appellee.
Appeals from the United States District Court for the Eastern District of California. Sacramento Garland E. Burrell, District Judge, Presiding. D.C. No. CV 94-01613-GEB.
Before: Myron H. Bright,* Betty B. Fletcher, and David R. Thompson, Circuit Judges.
Intel Corporation and Intel Corporation Long Term Disability Benefit Plan (collectively "Intel") appeal the district court's judgment in favor of plaintiff-appellee Joseph Friedrich, following a bench trial. The district court concluded that Intel failed to comply with the Employee Retirement Income Security Act of 1974 ("ERISA") when it denied Friedrich's claim for long term disability benefits. Intel argues that the district court erred in reviewing Friedrich's claim de novo and awarding Friedrich benefits and attorneys' fees. We affirm the district court in all respects.
Intel maintains a short-term and long-term disability plan. The short-term plan, funded by employee contributions, provides up to fifty-two weeks of benefits for disabilities caused by any physical or mental illness, injury, or condition. Intel funds the long-term disability plan ("LTD Plan") directly from its general corporate assets and serves as the named fiduciary and administrator of the plan. The LTD Plan gives Intel discretion to determine benefit eligibility and to construe plan terms. Maureen Shiells administered Intel's LTD Plan in its risk management department which also manages Intel's corporate liabilities. Employees may appeal adverse decisions to a Disability Appeals Board.
Section 2.05 of the LTD Plan defines "Disability " as follows:
"Disability" shall mean any illness or injury that is recognized by the American Medical Association, substantiated by objective medical findings and which renders a Participant incapable of performing work. During the first eighteen (18) months of Disability, a Participant must be unable to perform the work of his or her regular occupation or any reasonably related occupation. After eighteen (18) months of Disability, a Participant must be unable to perform the work of any occupation for which he or she is or becomes reasonably qualified for by training, education or experience.
LTD Plan 2.14 defines "Objective Medical Findings" as:
a measurable abnormality which is evidenced by one or more standard medical diagnostic procedures including laboratory tests, physical examination findings, X-rays, MRI's, EEG's, ECG's, "Catscans" or similar tests. Objective medical findings do not include physicians' opinions or other third party opinions based solely on the acceptance of subjective complaints.
The LTD Plan excludes from coverage any disability that "arises out of, relates to, is caused by or results from . . . mental, emotional or psychiatric illness or disorder of any type . . ." LTD Plan 4.03.
Joseph Friedrich worked for Intel as a managing engineer from 1971 until he became disabled, resulting in his termination by Intel on October 5, 1993. After suffering flu-like symptoms, which included fatigue, headache, sore throat, general shakiness, and cognitive difficulties, Friedrich consulted with his primary care physician, Dr. Roy Greenberg. Dr. Greenberg referred Friedrich to Dr. Charles Schaffer, the psychiatrist with whom Friedrich had maintained a doctor-patient relationship since 1986. In June 1992, Dr. Schaffer referred Friedrich to Dr. Monice Kwok, an internist. After examination and laboratory tests, Dr. Kwok advised Dr. Schaffer that Friedrich should be treated for Chronic Fatigue Syndrome ("CFS").1 Friedrich returned to Dr. Greenberg for treatment of CFS and discontinued treatment with Dr. Schaffer. A specialist, Dr. Jay Goldstein concurred in the diagnosis of CFS after performing a SPECT scan. After returning to a previous primary care physician, Friedrich began treatment with a specialist, Dr. Jeffrey Anderson, who identified CFS and chemical/pesticide toxicity to be responsible for Friedrich's disability.
In May 1992, Dr. Schaffer provided a diagnosis of "Major Depression" on Friedrich's application for short-term disability benefits from Intel.2 Dr. Schaffer stated that he considered "major depression" to be the most appropriate diagnosis at the time. In August 1992, Friedrich submitted a new diagnosis of CFS to Intel.
On February 19, 1993, Intel notified Friedrich that it found Friedrich ineligible for LTD benefits and that his short-term benefits would end on May 13, 1993. Intel had requested medical records and progress reports from Dr. Greenberg and Dr. Schaffer. Based on Friedrich's records, Shiells denied Friedrich's claim for LTD benefits on two independent grounds: Friedrich lacked objective medical evidence that substantiated a disability, and his symptoms stemmed from psychiatric disorders.
Shiells rejected Friedrich's LTD claim out of hand without notifying Friedrich of the right to present medical evidence and the criteria utilized by Intel in LTD benefits determinations. In March 1993, Friedrich submitted an appeal from the denial of benefits and included a report from Dr. Anderson containing a new diagnosis that Friedrich suffered from CFS and chemical/pesticide toxicity. Intel scheduled five medical examinations by physicians it selected. Intel received reports from these physicians stating in pertinent part that Friedrich exhibited psychiatric health problems but not a physical health problem. In addition, an Intel physician claimed that CFS is not a "true physical disease." According to Intel's denial of Friedrich's appeal, the five medical examiners failed to identify any objective medical findings to substantiate a "disability" as defined by the LTD Plan. Before denial of the appeal, Intel failed to notify Friedrich that it had received medical reports that could be made available for review and comment by Friedrich.
Friedrich requested reconsideration of his claim, and submitted additional documentation, including EEG examination results and a neuropsychological exam by an expert in testing for cognitive effects of CFS. Intel responded that the LTD Plan did not provide for reconsideration of the Intel Disability Appeals Committee decision. Friedrich submitted another request for reconsideration two weeks later based upon a Social Security Disability finding of disability.3 After Intel refused to reconsider the claim, Friedrich filed this lawsuit in October 1994.
The district court initially dismissed Friedrich's claim for breach of fiduciary duty on December 14, 1994. On October 5, 1995, the district court denied cross-motions for summary judgment and ruled that the 1991 LTD Plan controlled and that the LTD Plan grants the administrator discretionary authority to determine eligibility for benefits and to construe the terms of the LTD Plan. After a bench trial, on July 9, 1997, the district judge entered judgment in favor of Friedrich. On October 16, 1997, the district court awarded Friedrich attorneys' fees.4 Intel timely appeals the final judgment. The district court exercised jurisdiction pursuant to 28 U.S.C. 1331 (1993) (federal question) and we have appellate jurisdiction pursuant to 28 U.S.C. 1291 (1993) to review the final judgment.
This court reviews de novo the district court's choice of the standard of review applicable to decisions by fiduciaries. Snow v. Standard Ins. Co., 87 F.3d 327, 331 (9th Cir. 1996). This court reviews underlying findings of fact for clear error. Id.
When an ERISA plan administrator is given discretion to determine benefits eligibility, courts must review the decision denying benefits under the deferential abuse of discretion standard. Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 115, 103 L. Ed. 2d 80, 109 S. Ct. 948 (1989). Because Intel serves as the plan administrator and funds the plan from its own general assets, Intel acts as a fiduciary in apparent conflict with its beneficiaries, including Friedrich. See Atwood v. Newmont Gold Co., 45 F.3d 1317, 1322 (9th Cir. 1995). We follow a two-part test to determine whether to invoke heightened scrutiny of a benefits decision made by fiduciaries with apparent conflicts. Id. at 1323. First, the beneficiary needs to shoulder the burden of providing "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." Id. If the beneficiary comes forward with such evidence, "the plan bears the burden of producing evidence to show that the conflict of interest did not affect the decision to deny benefits." Id. If the plan does not meet its burden, courts review the decision to deny benefits de novo. Id.
Intel argues that the district court erred by reviewing Intel's decision de novo rather than for an abuse of discretion. The district court concluded that "Friedrich presented material probative evidence beyond the mere fact of the apparent conflict tending to show that Intel's self-interest caused a breach of its fiduciary obligations to him." The district court further determined that Intel failed to produce sufficient evidence to demonstrate the conflict of interest did not...
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