Jebian v. Hewlett-Packard Co. Employee

• Decision Date: 19 November 2002
• Docket Number: No. 00-56988.,00-56988.
• Citation: 349 F.3d 1098
• Parties: Donald JEBIAN, Plaintiff-Appellant, v. HEWLETT-PACKARD COMPANY EMPLOYEE BENEFITS ORGANIZATION INCOME PROTECTION PLAN; Erisa Plan, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

349 F.3d 1098

Donald JEBIAN, Plaintiff-Appellant, v. HEWLETT-PACKARD COMPANY EMPLOYEE BENEFITS ORGANIZATION INCOME PROTECTION PLAN; Erisa Plan, Defendants-Appellees.

No. 00-56988.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted December 3, 2001.

Filed November 19, 2002.

Opinion Withdrawn November 25, 2003.

Opinion Filed November, 25, 2003.

COPYRIGHT MATERIAL OMITTED

Charles J. Fleishman, Beverly Hills, CA, for the appellant.

Joseph P. Busch, III, Gibson, Dunn & Crutcher, Los Angeles, CA, for the appellee.

Appeal from the United States District Court for the Central District of California; Ronald S.W. Lew, District Judge, Presiding. D.C. No. CV-99-09548-RSWL.

Before: HARRY PREGERSON, A. WALLACE TASHIMA and MARSHA S. BERZON, Circuit Judges.

Opinion by Judge BERZON; Dissent by Judge TASHIMA.

ORDER

The opinion and dissenting opinion, filed November 19, 2002, published at 310 F.3d 1173, are withdrawn and replaced by the opinion and dissenting opinion filed concurrently with this order. Judge Pregerson and Judge Berzon have voted to deny Appellees' Petition for Rehearing and to reject Appellees' Petition for Rehearing En Banc. Judge Tashima has voted to grant the petitions. The full court has been advised of the petition for rehearing en banc and no judge has requested a vote on whether to rehear the matter en banc. See Fed.R.App.P. 35.

The petition for rehearing is DENIED. The petition for rehearing en banc is REJECTED.

OPINION

BERZON, Circuit Judge.

On November 19, 2002, we issued an opinion reversing the district court and remanding for further consideration. Jebian v. Hewlett-Packard Co., 310 F.3d 1173 (2002). We stayed our mandate pending the Supreme Court's ruling in Black & Decker Disability Plan v. Nord, ___ U.S. ___, 123 S.Ct. 1965, 1969, 155 L.Ed.2d 1034 (2003). We now issue a substituted opinion, reaffirming our earlier treatment of the appropriate standard of review in ERISA cases where benefits are "deemed denied" through the passage of time but withdrawing our instruction that the district court consider appellant's claims in the light of a "treating physician rule."

BACKGROUND

Donald Jebian, now sixty-three, worked as a software engineer for Hewlett Packard continuously from 1983 to May 1995. In 1990 he began to suffer from a series of orthopedic impairments that caused him pain and made it difficult for him to move normally.

Jebian first developed bilateral shoulder pain. It turned out that he had a massive rotator cuff defect in his right shoulder, which was not diagnosed until 1995. In 1992, Jebian also began to experience back pain. Doctors determined that the cause was lumbar spinal stenosis.¹ His doctors agree that his stenosis is congenital rather than the result of injury. Later, Jebian was diagnosed with lumbar degenerative disc disease, which exacerbated his back pain.

Jebian stopped work in May 1994 because of intractable back pain. He had a lumbar discectomy in June 1995, the first of several surgeries. Because his back pain persisted after the surgery, he had a second surgery on his back in the fall of 1995. Dr. Stark, who examined Jebian at Hewlett Packard's request with regard to a worker's compensation claim in October 1995, predicted that Jebian would need yet another surgery on his back. Jebian also underwent two surgeries on his shoulders in 1996, one on each.

Jebian was a participant in an employee benefit plan ("the Plan") covered by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq. The Plan, self-funded by Hewlett Packard and administered by an independent claims administrator, Voluntary Plan Administrator ("VPA"), offers both short-term and long-term disability leave. Short-term disability benefits last up to thirty-nine weeks. An applicant for short term disability benefits must show that "following the onset of the injury or sickness, the Member is continuously unable to perform each and every duty of his or her Occupation."

After thirty-nine weeks, an employee still unable to work must apply separately for long-term disability benefits. Long-term benefits are granted under the Plan if "the Member is continuously unable to perform any occupation for which he or she is or may become qualified by reason of his or her education, training or experience" (emphasis added). The Plan stipulates that disability determinations for either long- or short-term benefits are to be "made by the Claims Administrator on the basis of objective medical evidence."

After first leaving work in May 1995 Jebian applied for and received short-term disability benefits. He applied for long-term benefits after the requisite thirty-nine weeks of short-term benefits. VPA initially denied the application, but on appeal reversed its decision. By the time of that reversal, Jebian had returned to work, so long-term benefits were granted retroactively only for the six-week period before Jebian returned to work.

Jebian shortly left work once again due to the same medical conditions. He tried to return to work in May 1997, but within a matter of weeks left work for a third time, this time not to return.

VPA found Jebian eligible for short-term disability benefits when he left work in June 1997. In February 1998, with the thirty-ninth week of his short-term benefits approaching, Jebian again applied for long-term benefits. VPA denied Jebian's application for long-term disability benefits on August 3, 1998.

VPA's letter of denial based its decision on two reports that it had commissioned concerning Jebian's condition: a "Work Capacities Assessment" conducted by physical therapists employed by Health-South, a company that conducts such physical assessments for insurers and employers, and an "Employability Assessment Report" conducted by a vocational consultant employed by Rehab West, a company that provides vocational assessments.

VPA's denial letter relied largely on HealthSouth's representation that Jebian could tolerate "sitting, walking, trunk bending, overhead reaching, squatting," and other functions, though the Health-South report had noted that Jebian had substantive limitations in his ability to carry out these functions. The letter also cited and adopted Rehab West's conclusion that Jebian was professionally and physically qualified to perform four occupations — user support analyst, data processing auditor, sales representative for computers and electronic data processing systems, and technical training instructor. The 1998 Rehab West report was identical to one that had formed the basis for the decision to deny Jebian long-term disability benefits two years earlier (a decision that, as noted, was retracted by VPA on appeal). Rehab West did not conduct its own medical exam of Jebian. Rather, the Rehab West report concluded, in one sentence, that "[i]t also appears that these occupations are within his physical capabilities as per the medical reports provided." It is not clear from the record which medical documents were provided to Rehab West. Precisely the same sentence regarding medical reports had appeared in the 1996 Rehab West report, although Jebian's medical circumstances had changed greatly by 1998.² Further, the Rehab West report does not indicate that any of the jobs it suggests could be done by a person who can sit or stand for only limited time periods.³

In November 1998, Jebian appealed the denial of benefits. He argued that crucial records were not considered, that some medical records were misread, and that the alternative employment recommendations were based on erroneous readings of the medical information. Enclosed with his appeal was a letter from Dr. James Landes. Dr. Landes, who had examined Jebian in September 1998, reviewed medical records, the Health-South and Rehab West reports, and the denial letter; emphasized that Jebian is incapable of prolonged sitting or standing; and pointed out that the four jobs recommended by Rehab West all involve one or the other. Dr. Landes urged VPA to reconsider its decision.

Under the Plan's language, Jebian's "claim shall be deemed to have been denied on review" if VPA neither responds within sixty days nor informs the claimant that it could take up to sixty days longer to respond. On March 15, 1999, 119 days after receiving Jebian's appeal, VPA wrote to Jebian, responding to his objections but leaving the appeal pending to consider further medical documentation. VPA wrote to Jebian again in June 1999, stating that it was still awaiting some medical records and that the appeal therefore remained pending.

On September 29, 1999, Jebian filed his complaint in district court. Only after that, on November 5, 1999, did VPA send Jebian a letter finally denying his claim for long-term disability benefits.

The district court reviewed VPA's decision for abuse of discretion and granted summary judgment to the Plan. We reverse. We conclude that the proper standard of review of VPA's decision in this case is de novo, and remand for reconsideration of Jebian's claim accordingly.

DISCUSSION

I

A challenge to an ERISA plan's denial of benefits is reviewed de novo "unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). If a plan does grant such discretion, a reviewing court applies an "abuse of discretion" or — what amounts to the same thing — an "arbitrary and capricious" standard. See Taft v. Equitable Life Assurance Soc'y, 9 F.3d 1469, 1471 n. 2 (9th Cir.1994).

The plan before us explicitly grants discretion to decide appeals from denials of claims for benefits to the plan administrator. The pertinent language reads: "The Claims Administrator shall have the discretionary authority to construe the language of the plan and make the decision on review on behalf of the Organization."

The...