Saffon v. Wells Fargo & Co. Long Term Disability

• Decision Date: 09 January 2008
• Docket Number: No. 05-56824.,05-56824.
• Citation: 522 F.3d 863
• Court: U.S. Court of Appeals — Ninth Circuit
• Parties: Graciela SAFFON, Plaintiff-Appellant, v. WELLS FARGO & COMPANY LONG TERM DISABILITY PLAN, an ERISA plan, Defendant-Appellee.

522 F.3d 863

Graciela SAFFON, Plaintiff-Appellant, v. WELLS FARGO & COMPANY LONG TERM DISABILITY PLAN, an ERISA plan, Defendant-Appellee.

No. 05-56824.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted August 10, 2007.

Filed January 9, 2008.

Amended April 16, 2008.

Cassie Springer-Sullivan and Charles J. Fleishman, Beverly Hills, CA, for the plaintiff-appellant.

Yuliya I. LaRoe and Eric R. McDonough, Seyfarth Shaw LLP, Los Angeles, CA, for the defendant-appellee.

Appeal from the United States District Court for the Central District of California; George P. Schiavelli, District Judge, Presiding. D.C. No. CV-04-01237-GPS.

Before ALEX KOZINSKI, Chief Judge, JOHNNIE B. RAWLINSON, Circuit Judge and MIRIAM GOLDMAN CEDARBAUM,^* Senior District Judge.

ORDER

The opinion filed January 9, 2008, appearing at 511 F.3d 1206 (9th Cir.2008), is ordered amended as follows:

Page 1215, Column 2,

Line 38 After insert a footnote stating: petition for rehearing, Wells Fargo claims that our precedents forbid the district court from hearing additional evidence. E.g., McKenzie v. General Telephone Co. of Cal., 41 F.3d 1310, 1316 (9th Cir.1994) (error for district court to hear additional evidence of disability not presented to plan administrator); Taft v. Equitable Life Assur. Soc'y, 9 F.3d 1469, 1472 (9th Cir.1993) (same). But Abatie held that district courts may take additional evidence whenever "[procedural] irregularities have prevented full development of the administrative record," Abatie, 458 F.3d at 973, and to the extent that our earlier cases conflict with Abatie, a later en banc decision, those cases are no longer good law. Here, MetLife failed to have a meaningful dialogue with Saffon, and that procedural irregularity prevented full development of the administrative record because it prevented Saffon from obtaining the Functional Capacity Evaluation that MetLife now claims to need. Therefore, the district court may take additional evidence. Id. >

Page 1217, Column 1,

Line 6 After insert a footnote stating: Wells Fargo's petition for rehearing claims that only plan administrators have authority to determine whether Saffon is disabled; the district court may not do so. See, e.g., Saffle v. Sierra Pac. Power Co. Bargaining Unit Long Term Disability Income Plan, 85 F.3d 455, 461 (9th Cir.1996) (remanding to plan administrator, rather than district court, to determine whether claimant was disabled); Patterson v. Hughes Aircraft Co., 11 F.3d 948, 951 (9th Cir.1993) (same). But we have held that, where procedural irregularities have prevented full development of the administrative record, the district court may hear additional evidence. See Abatie, 458 F.3d at 973. There would be no point in taking additional evidence in the district court if the court were not authorized to decide the issue. See id. at 974 (remanding to the district court rather than the plan administrator). >

The petition for rehearing and rehearing en banc is denied. See Fed. R.App. P. 35; Fed. R.App. P. 40. No further petitions may be filed.

OPINION

KOZINSKI, Chief Judge:

We consider whether an ERISA plan administrator properly terminated benefits because of its beneficiary's failure to produce evidence of her disability.

Facts

Graciela Saffon has long suffered from degeneration of her cervical spine, a condition confirmed by repeated MRI scans and X-rays. After a car crash aggravated her condition in December 2001, Saffon quit her desk job at Wells Fargo Bank and applied for disability benefits from defendant, the Wells Fargo & Co. Long Term Disability Plan. The Metropolitan Life Insurance Company (MetLife), which served both as the Plan's insurer and as its claims administrator, promptly began to pay her short-term disability benefits. Saffon eventually applied for long-term disability benefits, which MetLife granted. After paying long-term benefits for a year, MetLife informed Saffon that she "no longer m[et] the definition of disability" and terminated her long-term benefits. Saffon then unsuccessfully availed herself of MetLife's administrative appeals process.

Saffon sued the Plan under 29 U.S.C. § 1132(a), seeking payment of withheld benefits, attorney's fees and a declaration that she is disabled. After a bench trial on the administrative record, the district court concluded that the Plan hadn't abused its discretion and denied Saffon any relief.

Standard of Review

1. We review benefits denials de novo "unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits;" if the plan does grant such discretionary authority, we review the administrator's decision for abuse of discretion. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989).

Here, the Plan's Summary Plan Description states:

In carrying out their respective responsibilities under the Plan, the Plan administrator and other Plan fiduciaries shall have discretionary authority to interpret the terms of the Plan and to determine eligibility for and entitlement to Plan benefits in accordance with the terms of the Plan.

Saffon argues that we must review MetLife's decision de novo because it is unclear whether the Summary Plan Description's discretionary clause refers to MetLife. Kearney v. Standard Ins. Co., 175 F.3d 1084, 1090 (9th Cir.1999) (en banc) (we defer only if the grant of discretionary authority is "unambiguous[ ]"). Saffon sees an ambiguity in the fact that the Summary Plan Description doesn't refer to MetLife by name; instead, it grants discretionary authority to "the Plan administrator [Wells Fargo] and other Plan fiduciaries." But it's perfectly clear that MetLife is included in this grant of discretionary authority because it is one of the "other Plan fiduciaries" mentioned there.

A "fiduciary" is an entity with "any discretionary authority" in the "administration of" an ERISA plan. 29 U.S.C. § 1002(21)(A). See Aetna Health Inc. v. Davila, 542 U.S. 200, 220, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004) ("When administering employee benefit plans, HMOs must make discretionary decisions regarding eligibility for plan benefits, and, in this regard, must be treated as plan fiduciaries."). MetLife's Certificate of Insurance provides that "MetLife in its discretion has authority to interpret the terms, conditions, and provisions of the entire contract." The Summary Plan Description explains that the Plan "is ... administered by [MetLife]." "To qualify for LTD benefits," beneficiaries must "[r]eceive approval for LTD benefits by MetLife." Those "benefits will begin" one month after "MetLife determines you are disabled," and will end on "[t]he date MetLife determines that you are no longer disabled."

These provisions leave no doubt that MetLife is an entity with discretionary authority to administer the Plan. MetLife is therefore one of the "other Plan fiduciaries" to which the Summary Plan Description grants "discretionary authority to ... determine eligibility for ... Plan benefits." While the path to this conclusion is somewhat tortuous, it is also perfectly clear. See Wilson Arlington Co. v. Prudential Ins. Co. of Am., 912 F.2d 366, 371 (9th Cir.1990) (complexity is not the same thing as ambiguity). The Plan unambiguously confers discretionary authority on MetLife to administer benefits claims.

2. Saffon also argues that we must disregard the discretionary authority granted to MetLife because the California Insurance Commissioner has revoked the Certificate of Insurance in Saffon's policy, and "any related Summary Plan Descriptions."¹ At least 6 other states have done the same; the National Association of Insurance Commissioners encourages the remaining 43 to follow suit. See Henry Quillen, State Prohibition of Discretionary Clauses in ERISA-Covered Benefit Plans, J. Pension Planning & Compliance, Summer 2006, at 67.

This nationwide vote of no confidence seems to have been precipitated by the cupidity of one particular insurer, Unum-Provident Corp., which boosted its profits by repeatedly denying benefits claims it knew to be valid. Unum-Provident's internal memos revealed that the company's senior officers relied on ERISA's deferential standard of review to avoid detection and liability. See John H. Langbein, Trust Law As Regulatory Law: The UNUM/Provident Scandal and Judicial Review of Benefit Denials Under ERISA, 101 Nw. U.L.Rev. 1315, 1317-21 (2007) (describing Unum-Provident's behavior). It is an open question whether the states' efforts are preempted by ERISA, 29 U.S.C. § 1144(a), or (as is more likely) they are saved from preemption because they "regulate[ ] insurance," id. § 1144(b)(2)(A). See Quillen, supra, at (arguing against preemption). The parties haven't briefed the preemption question in depth, and we do not consider it.

Even if federal law permitted states to nullify an ERISA plan's grant of discretionary authority, California law doesn't authorize the Commissioner to do so retroactively. Cal. Ins.Code § 10291.5(f). Assuming that the Commissioner may prohibit insurance companies from using this discretionary clause in future insurance contracts, he cannot rewrite existing contracts so as to change the rights and duties thereunder. Cf. Peterson v. Am. Life & Health Ins. Co., 48 F.3d 404, 410 (9th Cir.1995) ("[A]n otherwise valid [insurance] policy is a binding contract and governs the obligations of the parties until the Commissioner revokes his approval.").

3. That the Plan grants MetLife discretionary authority is only the first step in determining the standard by which we review its denial of benefits. While we nominally review for abuse of discretion, the degree of deference we accord to a claims administrator's decision can vary significantly. In Bruch, the Supreme Court instructed us to "weigh[ ]" a fiduciary's "conflict of interest" as "a `facto[r] in determining whether there is an abuse of discretion.'" 489 U.S. at 115...