Regula v. Delta Family Care Disability Survivorship Plan, PLAINTIFF-APPELLANT

• Decision Date: 24 September 2001
• Docket Number: FAMILY-CARE,DEFENDANT-APPELLEE,No. 98-55853,PLAINTIFF-APPELLANT,98-55853
• Citation: 266 F.3d 1130
• Parties: (9th Cir. 2001) FRANK REGULA,, v. DELTADISABILITY SURVIVORSHIP PLAN,
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1130

266 F.3d 1130 (9th Cir. 2001)

FRANK REGULA, PLAINTIFF-APPELLANT, v. DELTA FAMILY-CARE DISABILITY SURVIVORSHIP PLAN, DEFENDANT-APPELLEE.

No. 98-55853

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted October 6, 1999

Filed September 24, 2001

[Copyrighted Material Omitted] Lawrence D. Rohlfing, Santa Fe Springs, California, for the plaintiff-appellant.

Hunter B. Hughes, Atlanta, Georgia, for the defendant-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-96-07304-RSWL Before: Betty B. Fletcher, Dorothy W. Nelson, and Melvin Brunetti, Circuit Judges.

Opinion by Judge B. Fletcher; Dissent by Judge Brunetti

BETTY B. FLETCHER, Circuit Judge:

Frank Regula appeals the district court's denial of his motion for summary judgment on his claim that the Delta Family-Care Disability Survivorship Plan ("Delta Plan" or "Plan") abused its discretion in terminating his disability benefits. Specifically, Regula contends that the Delta Plan should have accorded deference to the opinions of his treating physicians and considered vocational evidence in making its benefits determination. Regula also sought summary judgment on the ground that the Delta Plan failed to provide him with a full and fair review of his disability claim. The district court denied Regula's summary judgment motion in its entirety and entered judgment in the Plan's favor pursuant to a stipulation signed by the parties. We vacate the judgment of the district court and remand for a determination as to whether the Delta Plan may have been acting under a conflict of interest, and thus whether the court should have applied a less deferential standard of review to the Plan's decision to discontinue Regula's benefits.

I.

The Delta Plan is a non-contributory employee welfare benefit plan governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended. The Plan provides short-and long-term disability benefits to non-pilot Delta employees.

Under the Plan, a participating employee is eligible for short-term disability benefits "when he is disabled as a result of a demonstrable injury or disease (including mental or nervous disorders) . . . which prevents the Employee from engaging in his customary occupation." An eligible employee can qualify for short-term disability benefits for up to eighteen months with the approval of the Plan's Administrative Committee. Once the short-term disability benefits expire, a participating employee is eligible for long-term disability benefits if "he is disabled at that time as a result of demonstrable injury or disease (including mental or nervous disorders) which will continuously and totally prevent him from engaging in any occupation whatsoever for compensation or profit, including part-time work." An employee is eligible for longterm benefits "so long as he remains disabled. " In addition, an employee must be "under the care of a physician or surgeon for the injury or disease" to remain eligible for such benefits. The Administrative Committee determines whether a participant is "disabled" and is therefore eligible for benefits.

The Administrative Committee also serves as the"named fiduciary" of the Plan and has "authority to control and manage the operation and administration of the plan. " As part of its function, the Administrative Committee is given"the exclusive power to interpret [the Plan]" and "its interpretation and decisions [are] final and conclusive." Furthermore, the Committee is charged with "decid[ing] all questions concerning the Plan."

The Plan has a two-tiered review procedure governing appeals from a claims denial. The Plan's Administrative Subcommittee provides the first level of review. If the claimant is not satisfied with the outcome of the Subcommittee's decision, the claimant may then appeal to the full Administrative Committee. During either level of the review process, the claimant or his representative is entitled to review "pertinent documents relating to the denial and may submit written comments."

Frank Regula began his employment with Western Airlines ("Western") in 1971 and functioned normally in his job until sustaining "a severe injury to the neck, right shoulder and arm during the course of his employment" as a clerk in October 1985. Nearly two years later, Regula filed a claim for shortterm disability benefits, claiming that he had sustained a "cervical disc injury." The Delta Plan granted Regula's request and awarded him short-term disability benefits through October 30, 1987.

The Plan then awarded Regula long-term disability benefits beginning in November 1987 and approved the continuation of these benefits on thirteen separate occasions. The Plan reviewed Regula's disability award every three months, and notified him each time that he would be required to submit an updated physician's report to prove his continued eligibility for benefits. Throughout this period, Regula continued to demonstrate his eligibility by submitting updated reports from his treating physicians. On July 25, 1995, however, the Plan terminated Regula's long-term disability benefits because it determined that he was capable of working, rendering him ineligible for benefits under the definition of"Long Term Disability" in section 4.03 of the Plan.

Regula submitted two contemporaneous reports by his treating physicians in support of his claim for continued disability benefits.¹ In the first report, Dr. Sandra Smith, a psychologist, opined that it was "very probable" that Regula was still disabled in the summer of 1994. In response to an inquiry from the Plan about the possibility of vocational rehabilitation, Dr. Smith further clarified her diagnosis by declaring that Regula's "combined physical and emotional symptom complex" prevented him from enrolling in a vocational rehabilitation program. As a psychologist, Dr. Smith stated that her diagnosis was limited to Regula's psychological condition and that she would "defer . . . to an appropriate medical specialist concerning Regula's physical symptoms."

Regula's second report, prepared by Dr. Dean H. Cummings, provided a diagnosis of Regula's continuing physical symptoms. In that report, Dr. Cummings concluded that Regula was still "permanently disabled" in December 1994 due to the "undesirable effects of multiple surgeries." Specifically, Dr. Cummings cited Regula's "[i]nability to sustain repeated or prolonged standing, sitting, pulling, pushing, bending, stooping, lifting to waist level, lifting over [his] head, walking, exerting or sitting for 10 minutes or more" as disabling factors.

In response to Regula's two reports, the Delta Plan arranged for Regula to be examined by Dr. Rajeswari Kumar, a specialist in physical and rehabilitative medicine. Dr. Kumar diagnosed Regula with chronic pain syndrome, post-traumatic pain in the cervical and lumbar regions, status post-anterior diskectomy at C5-6 and C6-7, and status post-decompression of superficial radial nerve, right upper extremity. Nevertheless, Dr. Kumar concluded that Regula was "definitely capable of gainful employment performing some type of work." Dr. Kumar also noted that Regula could perform several specific activities including, most notably, standing and walking for four to six hours per day. These considerations led Dr. Kumar to conclude that Regula was not disabled.

In addition, the Plan arranged for a psychiatrist, Dr. James O'Brien, to assess Regula's psychological condition. After examining him, Dr. O'Brien concluded that Regula was"consciously exaggerating his psychological and orthopedic difficulties." In response to the report prepared by Regula's psychologist, Dr. Smith, Dr. O'Brien specifically attacked Dr. Smith's diagnosis as biased because she expressed opinions about Regula's physical condition that were outside of her field of expertise. Consistent with Dr. Kumar's report, Dr. O'Brien also concluded that "Mr. Regula can return to work immediately and that there is no type of work within his job description that he would not be able to do." Thus, both of the Delta Plan's examiners concluded that Regula was not disabled.

Based on these reports, the Plan terminated Regula's longterm disability benefits in a letter dated July 25, 1995. The letter also notified Regula that the Plan would reconsider its decision, but that he must submit "objective evidence that [he is] continuously and totally disabled from engaging in any occupation or work for compensation or profit" in order to perfect his claim.

Regula then appealed the denial of his long-term disability benefits to the Administrative Subcommittee. The Plan sent Regula's attorney, Lawrence Rohlfing, a letter informing him about a claimant's right "to review pertinent documents related to [his] appeal and submit other comments, issues or evidence in further support of the appeal to the Subcommittee." In response, Rohlfing submitted additional superannuated reports from Drs. Shapero and Smith, along with a fourpage letter setting forth Regula's legal and factual case for continued eligibility. Nevertheless, the Administrative Subcommittee rejected Regula's appeal. The Plan communicated its rejection through a letter citing specific parts of the Plan's examining physicians' reports that supported the Subcommittee's decision.

After the rejection of his appeal on the first level of review, Regula appealed to the full Administrative Committee. The Secretary of the Administrative Committee wrote a letter to Rohlfing delineating the types of evidence that could be submitted to perfect Regula's claim. This letter was received only six days prior to the scheduled date of the hearing. Recognizing that the letter did not grant Regula a sufficient amount of time to collect and submit additional evidence, the Plan offered him an extension of time. Regula refused the Plan's offer....