Lang v. Long-Term Disability Plan of Sponsor Applied Remote Technology, Inc., LONG-TERM

• Decision Date: 11 September 1997
• Docket Number: No. 96-56080,LONG-TERM,96-56080
• Citation: 125 F.3d 794
• Parties: 21 Employee Benefits Cas. 1867, 97 Cal. Daily Op. Serv. 7320, 97 Daily Journal D.A.R. 11,807 Judith LANG, aka Judith Clark-Lang, Plaintiff-Appellant, v.DISABILITY PLAN OF SPONSOR APPLIED REMOTE TECHNOLOGY, INC.; Applied Remote Technology, Inc., a California Corporation as Sponsor & Fiduciary of the Long-Term Disability Plan; Standard Insurance Company, A Mutual Life Insurance Company, as Administrator & Fiduciary of the Long-Term Disability Plan, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 794

125 F.3d 794

21 Employee Benefits Cas. 1867, 97 Cal. Daily

Op. Serv. 7320,

97 Daily Journal D.A.R. 11,807

Judith LANG, aka Judith Clark-Lang, Plaintiff-Appellant, v. LONG-TERM DISABILITY PLAN OF SPONSOR APPLIED REMOTE TECHNOLOGY, INC.; Applied Remote Technology, Inc., a California Corporation as Sponsor & Fiduciary of the Long-Term Disability Plan; Standard Insurance Company, A Mutual Life Insurance Company, as Administrator & Fiduciary of the Long-Term Disability Plan, Defendants-Appellees.

No. 96-56080.

United States Court of Appeals Ninth Circuit.

Argued and Submitted March 4, 1997.

Decided Sept. 11, 1997.

Jeffrey I. Ehrlich, Washington, D.C., for plaintiff-appellant.

Howard Bennett Hellen, San Diego, California, for plaintiff-appellant.

Michael A. Conley, Pillsbury Madison & Sutro, LLP, San Francisco, California, for defendants-appellees.

Appeal from the United States District Court for the Southern District of California Before: SCHROEDER, FERGUSON, and LEAVY, Circuit Judges.

Marilyn L. Huff, District Judge, Presiding. D.C. No. CV-95-00351-MLH.

SCHROEDER, Circuit Judge:

Judith Lang, a former contracts manager for Applied Remote Technology, Inc., appeals the district court's grant of summary judgment in favor of defendants-appellees on her claim for long-term disability benefits. The appellees are Applied Remote Technology, the sponsor of the welfare benefit plan (the "Plan") under which Lang claimed the benefits, and Standard Insurance Company, the issuer and administrator of the Plan. In her suit, under Section 502(a)(1)(B) of the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132(a)(1)(B), Lang claims that Standard wrongfully terminated her benefits. Standard contends that its decision to limit Lang's benefits to two years was proper because her disability was "caused or contributed to" by a "mental disorder," for which the Plan provided a two-year limit. Lang disagrees that her disability was due to a "mental disorder." She argues that the Plan is ambiguous as to what constitutes a "mental disorder" and that Standard's determination was tainted by self-interest. We conclude that Standard's conflict of interest, arising out of its dual role as the administrator and funding source for the Plan, affected its decision in Lang's case. For that reason, Standard's interpretation of the Plan and its ultimate determination must be reviewed without deference. We hold the benefits were improperly terminated.

BACKGROUND

Lang first applied for benefits in December of 1992. She indicated that her inability to work was triggered by stress arising from her job. The symptoms she described were "uncontrollable crying," "throwing up before work," and "inability to concentrate." Lang listed a psychiatrist, Dr. Venn-Watson, as her treating physician. Dr. Venn-Watson had diagnosed Lang as having depressive neurosis and was treating Lang for "insomnia" and "frequent crying spells." Upon receipt of Lang's application for benefits, Standard informed Lang that it intended to apply the "mental disorder" limitation to her claim. Under the Plan, Standard was authorized to terminate the payment of long-term disability benefits after two years if the beneficiary's disability was "caused or contributed to" by a "mental disorder." "Mental disorder" was defined in the Plan as a "mental, emotional, behavioral, or stress-related disorder." The Plan, however, was silent as to whether the administrator should look to causes or symptoms when determining whether the claimant had a "mental disorder" for purposes of applying the limitation. The Plan granted discretion to Standard to construe the terms of the Plan.

While Lang was receiving benefits during the two-year period, her family care physician, Dr. Wasserman, diagnosed her with fibromyalgia. Fibromyalgia is a type of muscular or soft-tissue rheumatism that affects principally muscles and their attachment to bones, but which is also commonly accompanied by fatigue, sleep disturbances, lack of concentration, changes in mood or thinking, anxiety and depression. See Fibromyalgia, Arthritis Foundation Pamphlet at 1, 5 (1992). The depression and anxiety associated with fibromyalgia are believed to be symptoms of this muscular disease, rather than causes of it. Researchers suggest that there is a possible "biologic link" between fibromyalgia and some forms of depression and chronic anxiety. Id. at 5. In addition, the Pamphlet reports that while "[t]he single exact cause of fibromyalgia is unknown[,] ... a number of stresses ... may precipitate the generalized pain, fatigue, sleep, and mood problems that characterize fibromyalgia." Id. at 7. It is often difficult to diagnose fibromyalgia, and "[o]ften people with fibromyalgia have undergone many tests and have seen many different specialists while in search of an answer." Id. at 10. Lang was experiencing all of the symptoms associated with fibromyalgia at all relevant times.

Armed with her new fibromyalgia diagnosis, Lang requested that Standard reassess its initial determination to apply the mental disorder limitation to her claim. In response, Standard sent Lang's medical records Standard's Quality Assurance Unit reviewed this initial denial, and affirmed it in a letter dated February 24, 1995, although on different grounds. This time, Standard stated that it was no longer disputing that Lang had fibromyalgia, and wrote that it was aware of the various symptoms and "diagnostic criteria established for this condition as set forth by the American College of Rheumatology." However, the Quality Assurance Unit still denied Lang's claim, but on the ground that Lang had failed to establish that her fibromyalgia, "separate from psychological factors, [was] disabling in and of itself." Standard also stated, for the first time, that it "consider[ed] symptoms, not cause" when deciding whether to apply the "mental disorder" limitation. Standard, in effect, took the position that even if Lang's depression was a symptom of her physical disorder, fibromyalgia, the limitation would still apply.

to Dr. Fraback, a rheumatologist often used by Standard to evaluate long-term disability claims. He did not examine Lang, but opined, in a short memorandum, that Lang's disability was primarily due to her depression, and that Lang's fibromyalgia diagnosis was not clear because Lang's doctor had failed to identify the requisite number of trigger points. On the basis of that report, Standard refused to remove the mental disorder limitation. Standard explained to Lang in a letter dated January 9, 1995, that its decision was based on the fact that it had found no objective medical evidence to support Lang's claim that she had fibromyalgia, and that it still believed that Lang's disability was "caused or contributed to" by depression.

DISCUSSION

1. Standards of Review

We review the district court's grant of summary judgment de novo. Mongeluzo v. Baxter Travenol Long Term Disability Ben. Plan, 46 F.3d 938 (9th Cir.1995). We also review de novo the district court's choice and application of the standard of review applicable to decisions by fiduciaries in the ERISA context. Taft v. Equitable Life Assurance Soc'y, 9 F.3d 1469, 1471 (9th Cir.1993).

When an ERISA plan vests its administrator with discretion to determine eligibility for benefits and to construe the terms of the plan, as the Plan does in this case, the district court ordinarily reviews the administrator's determination for abuse of discretion. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956-57, 103 L.Ed.2d 80 (1989); Taft, 9 F.3d at 1471.

The degree of judicial deference associated with this standard of review may, however, be affected by factors such as conflict of interest. See Firestone, 489 U.S. at 115, 109 S.Ct. at 956-57 (courts must weigh conflict as a "factor" in determining whether abuse of discretion has occurred); Brown v. Blue Cross & Blue Shield of Alabama, Inc., 898 F.2d 1556, 1564 (11th Cir.1990) (the abuse of discretion standard "must be contextually tailored[,]" so that the degree of deference accorded to the plan fiduciary depends "upon the dynamics of the decisionmaking process[ ]") (quotations omitted).

The Plan in this case is actually an insurance policy issued and administered by Standard. Given Standard's dual role as both the funding source and the administrator of the Plan, we are faced with an inherent conflict of interest situation, and must take this factor into account. Brown, 898 F.2d at 1561 ("Because an insurance company pays out to beneficiaries from its own assets rather than the assets of a trust, its fiduciary role lies in perpetual conflict with its profit-making role as a business.")

Nevertheless, the presence of conflict does not automatically remove the deference we ordinarily accord to ERISA administrators who are authorized by the plan to interpret a plan's provisions. We considered this issue in Atwood v. Newmont Gold Co., Inc., 45 F.3d 1317, 1322 (9th Cir.1995). We there observed that our circuit's approach is similar to the Eleventh Circuit's, where the leading decision is Brown, supra. Judge Johnson's opinion for the Eleventh Circuit in Brown contains an extensive and sensitive discussion of the reasons for replacing traditional deference with a different analysis when dealing with ERISA plans where there exists an inherent conflict of interest. Brown explained that plans such as this one, funded by insurers and also administered by them, are not true trusts. The administrator's decisions in these cases are hence not as easily justified as the decisions of a fiduciary in the case of a true trust. See Brown, 898 F.2d at 1567.

Looking to Brown for guidance, we held in Atwood that "our traditional abuse of discretion review [is not altered] in the absence of facts indicating that [the] conflicting interest caused a serious breach of the plan administrator's fiduciary duty to ... the...