Mcelroy v. Smithkline Beecham Health

• Decision Date: 06 August 2003
• Docket Number: No. 02-3421.,02-3421.
• Citation: 340 F.3d 139
• Parties: Paul F. MCELROY, Appellant v. SMITHKLINE BEECHAM HEALTH & WELFARE BENEFITS TRUST PLAN FOR U.S. EMPLOYEES; SmithKline Beecham; Unum Provident Corporation.
• Court: U.S. Court of Appeals — Third Circuit

340 F.3d 139

Paul F. MCELROY, Appellant v. SMITHKLINE BEECHAM HEALTH & WELFARE BENEFITS TRUST PLAN FOR U.S. EMPLOYEES; SmithKline Beecham; Unum Provident Corporation.

No. 02-3421.

United States Court of Appeals, Third Circuit.

Argued May 21, 2003.

Filed August 6, 2003.

Barbara J. Holland (Argued), Conshohocken, PA, Counsel for Appellant.

Brian T. Ortelere (Argued), Michael J. Eagles, Morgan, Lewis & Bockius, Philadelphia, PA, Counsel for Appellees.

BEFORE: SCIRICA, Chief Judge, SLOVITER, and NYGAARD, Circuit Judges.

OPINION OF THE COURT

NYGAARD, Circuit Judge.

In this disability benefits case, appellant Paul McElroy, who had been an employee of SmithKline Beecham, challenged the plan administrator's interpretation of the SmithKline Beecham Long Term Disability Plan. The plan administrator concluded that certain Railroad Retirement Board disability benefits ("RRB benefits") should be deducted from McElroy's long-term disability payments. The District Court granted summary judgment in favor of SmithKline, holding that the plan administrator's reading of the Plan — that the offset for "state disability benefits or similar government benefits" includes McElroy's RRB benefits — was reasonable. We agree with the District Court, and will therefore affirm.

I.

From 1965 until 1996, McElroy worked for Consolidated Rail Corporation as a computer system analyst. In 1996, McElroy left Conrail to work for SmithKline Beecham's Clinical Laboratories. The benefits package provided by SmithKline included basic long-term disability benefits. The Plan provided that the following disability payments received by the beneficiary would offset the SmithKline disability payment "dollar for dollar": (1) Primary Social Security benefits; (2) Worker's Compensation or Occupational Disease Law; (3) State disability benefits or similar government benefits; and (4) Benefits received from the SmithKline Beecham Pension Plan. At issue here is the phrase "State disability benefits or similar government benefits."

Because of a heart condition, McElroy became disabled in February 1997, at which time he filed a claim with SmithKline for long-term disability benefits. When SmithKline denied the claim, citing a preexisting condition, McElroy appealed SmithKline's denial and brought suit against SmithKline in 1999. The parties settled in July 2000, and McElroy was reinstated to the SmithKline Plan.

By this time, McElroy had begun receiving a disability annuity of $2,023.15 pursuant to the Railroad Retirement Act, as a result of his prior employment with Conrail. SmithKline notified McElroy that the plan administrator had concluded that these RRB benefits triggered an offset to reduce his disability payments.

McElroy appealed the plan administrator's decision, but the plan administrator denied the appeal, concluding that because the RRB benefit payments were a "similar government benefit" under the Plan, they should be deducted from the Plan payment. McElroy initiated this lawsuit in the United States District Court for the Eastern District of Pennsylvania. The District Court granted SmithKline's motion for summary judgment and denied McElroy's cross-motion for summary judgment.

II.

Before we can evaluate the propriety of the plan administrator's determination, we must decide whether the District Court properly applied the deferential "arbitrary and capricious" standard of review. The Supreme Court has instructed us to review the determination of a plan administrator 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).

Here, the SmithKline Plan clearly granted the plan administrator discretion to construe its terms:

SmithKline Beecham reserves the absolute right to interpret the provisions of the SB Pension Plan, Retirement Savings Plan and all welfare benefit plans, to make determinations of fact and eligibility for benefits, and to decide any dispute that may arise regarding the rights of employees, and their dependants or beneficiaries, under these plans. Any such determinations shall apply uniformly to all persons similarly situated and shall be binding and conclusive upon all interested persons.

App. at 109. Nevertheless, McElroy asserts that review of the decision should be de novo for other reasons.

First, McElroy contends that, because the plan administrator did not review SmithKline's claims processing documents or McElroy's claim file in making his determination, Moench v. Robertson compels us to find that his decision is not entitled to any deference. 62 F.3d 553, 567 (3d Cir.1995). According to Moench, if a plan administrator, "without knowledge of or inquiry into the relevant circumstances and merely as a result of his arbitrary decision or whim exercises or fails to exercise a power, the court will interpose." Id. at 568. In Moench, which involved a decision by a committee that administered an employee stock ownership plan, we found that there was "nothing in the record demonstrating that ... the [c]ommittee ... actually deliberated, discussed or interpreted the [employee stock option ownership] plan." Id. at 567.

In this case, however, the plan administrator did interpret the plain language of the Plan as to whether the meaning of the phrase "similar government benefits" in the Plan's offset provision included McElroy's RRB benefits. The plan administrator considered the plain language of the Plan, as well as a letter from counsel for the RRB, which characterized McElroy's RRB annuity as a "government disability benefit." App. at 145. In addition, in response to McElroy's use of an opinion from the Court of Common Pleas of Schuylkill County, Asief v. Commonwealth of Pennsylvania, No. S-331 (Schuylkill County Dec. 22, 1975), to argue that the RRB benefits were retirement benefits rather than disability benefits, the plan administrator distinguished Asief on several grounds. We conclude that here there are sufficient indicia that the plan administrator did actually deliberate and interpret the plan. Hence, Moench is inapplicable.¹

McElroy also argues that the plan administrator's decision does not warrant deference because he "failed to discharge his duties solely in the interest of plan participants and beneficiaries and for the exclusive purpose of providing benefits." Appellant's Br. at 26. But this contention overstates the plan administrator's responsibility. The plan administrator's duty to administer a plan for the sole benefit of its participants is qualified by his obligation to interpret a plan consistent with the documents and instruments governing the plan. 29 U.S.C. § 1104(a)(1)(D); O'Neil v. Retirement Plan for Salaried Employees of RKO Gen., Inc., 37 F.3d 55, 61 (2d Cir. 1994) (explaining that the plan administrator is not obligated to "resolve every issue of interpretation in favor of the plan beneficiaries").

III.

According to the plain language of the offset provision of the Plan, SmithKline is permitted to deduct from Plan benefits any payments that a beneficiary receives from:

— Primary Social Security benefits (your benefit only);

— Worker's Compensation or Occupational Disease Law (including any lump sum payments);

— State disability benefits or similar government benefits; or

— Benefits received from the SmithKline Beecham Pension Plan.

App. at 100. At issue here is the phrase "or similar government benefits." The plan administrator interpreted the phrase "similar government benefits" to include McElroy's RRB benefits. We must decide whether the plan administrator's interpretation of the Plan is reasonable. See Abnathya v. Hoffmann-LaRoche, Inc., 2 F.3d 40, 45 (3d Cir.1993) (stating that a decision of a plan administrator may only be overturned if it is "without reason, unsupported by the evidence or erroneous as a matter of law"). Because McElroy's RRB benefits, like state disability benefits, are disability benefits paid by a "government" agency, we conclude that the plan administrator's reading is not "without reason, unsupported by the evidence or erroneous as a matter of law." Id.²

McElroy argues that the plan administrator's reading of the Plan's offset provision conflicts with In re: Unisys Corp. Long Term Disability Plan ERISA Litigation, where we held that a plan must specify which benefits are to be considered in an offset provision. 97 F.3d 710 (3d Cir.1996). In Unisys, the defendant drafted a new long term disability plan which provided that benefits received by employees could be adjusted if the employees received pension benefits from other sources. After the original publication of the plan, the plan was revised to state that benefits were subject to reduction by amounts of any dependents' Social Security awards. The...