United States District Court, Northern District of California
August 29, 2003
D. ANN MOELLER, PLAINTIFF,
PARKER HANNIFIN CORP., DEFENDANT
The opinion of the court was delivered by: Charles Breyer, District Judge
MEMORANDUM AND ORDER
This is an Employment Retirement Income Security Act (ERISA) lawsuit for long-term disability benefits. Now pending before the Court are the parties' cross-motions for summary judgment. After carefully considering the administrative record, and the pleadings filed by the parties, and having had the benefit of oral argument, defendant's motion for summary judgment is GRANTED and plaintiffs motion is DENIED. The Court concludes that an abuse of discretion standard of review applies and that defendant did not abuse its discretion in finding that plaintiff is not disabled from working in "any occupation" for which she is "reasonably fitted by education, training, or experience."
Plaintiff was employed by Parker Hannifin Corporation. Parker Hannifin sponsors a self-funded Group Insurance Plan, which includes long-term disability benefits. The Plan pays benefits for up to two years if the claimant is unable to perform the duties of her own [ Page 2]
occupation. After two years the Plan pays benefits only if the participant is "not able to do each of the material duties of any job for gain or profit for which [the participant is] reasonably fitted by education, training, or experience."
The Plan pays a third-party administrator ("TPA") to assist in claims administration. The TPA makes an initial claim decision. If benefits are denied, the claimant may appeal. The TPA reviews the appeal and any new information relating to the appeal, and then makes a recommendation to the Plan to approve or deny the appeal. An internal Parker Hannifin committee reviews the recommendation and decides whether to accept, reject, or modify the recommendation. Until January 1999, UnumProvident ("Unum") was the Plan's TPA. In January 2002, GatesMcDonald ("Gates") replaced Unum.
Plaintiff worked at Parker Hannifin as a cost accountant. She applied for and received long-term disability benefits beginning in January 1999 under the "own occupation" standard. Those benefits were scheduled to end in January 2001 unless she met the higher "any occupation" standard.
In November 2000, Unum had plaintiff submit to a Functional Capacity Evaluation ("FCE") to determine her ability to perform the demands of a financial analyst or any occupation. The physical therapist performing the evaluation found that plaintiff could not engage in "fingering," but that she had other functional abilities, such as being able to perform constant walking, occasional reach, handling, fingering, feeling, and standing as well as frequent sitting. The evaluator concluded that plaintiff could work at the sedentary level for eight hours a day, as long as certain restrictions are observed and plaintiff could frequently change her posture and take frequent breaks. The evaluator also suggested that plaintiff use her left hand where possible to avoid overusing her right arm.
Unum also asked plaintiff to provide updated medical reports. In January 2001 she submitted a report, on a form prepared by Unum, from her Orthopedic Surgeon, Dr. Barlas. Dr. Barlas reported that plaintiffs condition was unimproved and checked boxes that indicated she is disabled from her occupation and any other work. As to the question of when she will be able to return to work, he wrote that she is "permanently disabled." He also [ Page 3]
wrote that plaintiff is incapable of performing repetitive lifting, reaching, carrying, pushing, pulling, bending or squatting. In a question as to work capacity, he checked a box indicating that plaintiff is capable of sedentary work with a 10 pound lifting maximum. As to plaintiffs range of motion, he checked the box for "moderate impairment." The form also asked if plaintiff could be rehabilitated into her occupation or any other work. Dr. Barlas checked the "no" box for both of these questions.
Unum also had Genex, occupational consultants, conduct a Transferable Skills Analysis and Labor Market Survey to determine whether there were positions available in the San Francisco Bay Area that plaintiff could perform. Genex reviewed plaintiffs medical file, the FCE report, and plaintiffs education and work history, and identified four sedentary occupations that plaintiff could perform consistent with her physical limitations.
In May 2001, Unum advised plaintiff that she was not eligible for continued benefits under the "any occupation" standard. It based its decision on the results of the FCE and the Transferable Skills Analysis. It also noted: "Dr. Barlas indicated that you were capable of Sedentary work" and were incapable of performing "strenuous or repetitive lifting, reaching, carrying, pushing, pulling, bending, and squatting."
Plaintiff appealed Unum's decision. She claimed that the FCE and labor market survey failed to take into account that she is "unable to perform work related activities on a regular continuing basis in a competitive environment" and that it took her a month to recover from the activities she performed for the FCE. She submitted a narrative from Dr. Barlas and records from her rheumatologist, Dr. Jack Waxman. Dr. Barlas reported that plaintiff is restricted from continuous sitting for more than 15 minutes and keyboarding more than 15 minutes, and that she is precluded from lifting more than five pounds, prolonged walking and also precluded from reaching, lifting, pushing, pulling and torquing with either upper extremity, and that she is unable to do any work above shoulder level. Dr. Barlas also criticized the FCE, noting that it was done under artificial circumstances and "should not be extrapolated to assume that [plaintiff] would be able to perform these activities repeatedly and continuously over an eight-hour worked ay in a competitive work situation." He also [ Page 4]
opined that plaintiff could not perform any of the jobs identified by Genex.
While plaintiffs appeal was pending, Gates succeeded Unum as the Plan's TPA. Gates retained Dr. Bodor, a Diagnostic and Rehabilitation specialist, to review plaintiffs medical file. Based on his review, Dr. Bodor concluded that plaintiff does not meet the "any occupation" standard of disability. He found that the restrictions Dr. Barlas noted in his September 2001 report would not preclude plaintiff from performing the occupations identified by the labor market survey. He also noted that "[i]t could be argued on the patient's behalf that her multiple pains are sufficiently draining of energy and disabling that she simply does not have the energy to work, and that her flare ups are sufficiently disabling that during these times she would even be unable to do sedentary work." He explained that it would be hard for him to determine the extent of plaintiff s pain even if he met plaintiff. He suggested that "[v]ideo surveillance might help in providing objective evidence of whether the patient is indeed suffering as much as she states she is, and is similarly disabled. If video surveillance did not show much evidence of disability at home and in the community, it would further corroborate my opinion that she does not file the `any occupation' definition of disability.'"
Gates subsequently engaged a company to perform surveillance of plaintiff. On the first day of surveillance plaintiff did not leave her house, although it was confirmed that she was at home. On the third day neighbors confirmed that plaintiff was away on vacation. On the second day, plaintiff left her home, drove to an ATM machine, and then met a woman and child for lunch at a restaurant. Plaintiff subsequently went to a "Mail Boxes, Etc." store and emerged carrying a box in both her hands and arms. She bent over to place the box in her car. She was later observed returning home and carrying a shopping bag with her right hand into her house.
Gates recommended that the Plan deny plaintiff's appeal. Defendant concurred. On April 18, 2002, Gates notified plaintiff of the benefits decision: "Based on an internal review and an outside physician review of your medical information including a Transferable Skills Analysis, we are upholding the denial of Long Term Disability benefits after January 25, [ Page 5]
2001. The review results concluded that while you do have some restrictions, they do not preclude you from doing any occupation as defined by the Parker Hannifin Corporation Long Term Disability plan." Plaintiff subsequently filed this ERIS A lawsuit challenging the denial of benefits.
STANDARD OF REVIEW
Defendant contends that the Court must review its disability determination under an abuse of discretion standard while plaintiff argues that defendant has a conflict of interest that warrants less deferential review by a district court.
When an ERISA plan provides the plan administrator or fiduciary with discretionary authority to determine benefit eligibility, a district court reviews the decision to grant or deny benefits for an abuse of discretion. See Firestone Tire & Rubber Co. v. Bruch. 489 U.S. 101, 115 (1989); Bendixen v. Standard Ins. Co., 185 F.3d 939, 942 (9th Cir. 1999). The "default is that the administrator has no discretion, and the administrator has to show that the plan gives it discretionary authority in order to get any judicial deference to its decision." Kearney v. Standard Ins. Co., 175 F.3d 1084, 1089 (9th Cir. 1999) (en bane).
The ERISA plan at issue here unambiguously provides defendant with discretion to determine whether a claimant is disabled from "any occupation" for which she is qualified. The plan provides:
Parker Hannifin Corporation shall exercise all
discretionary authority and control with respect to
management of this plan, which is not specifically
granted to the Plan Supervisor, NGS American, Inc., or
The Plan Administrator shall have any and all powers
of authority which shall be proper to enable him to
carry out his duties under this plan, including . . .
full discretionary authority to make regulations with
respect to this plan not inconsistent with this plan
or ERISA and to determine, consistently therewith, all
questions that may arise as to the status and rights
of participants and beneficiaries and any and all
The Plan Administrator shall have full discretionary
authority to interpret all provisions of the Plan,
including resolving an inconsistency or ambiguity or
correcting an error or omission.
2001 Summary of Coverages at pp. 23-4, 23-5. [ Page 6]
Plaintiff does not contend that the Plan does not confer discretionary authority upon defendant; instead, she argues that because the Plan is self-funded, that is, Parker Hannifin, rather than a third-party insurance company, funds the Plan, defendant has a conflict of interest warranting de novo review.
The Ninth Circuit has held that the abuse of discretion standard of review can be "heightened" by a plan administrator's conflict of interest. See Atwood v. Newmont Gold Co, 45 F.3d 1317, 13 22 (9th Cir. 1995). Defendant has an apparent conflict of interest in this case because the long-term disability policy is both funded and administered by defendant. See Bendixen, 185 F.3d at 943; Lang v. Long-Term Disability Plan of Sponsor Applied Remote Tech., Inc., 125 F.3d 794, 797 (9th Cir. 1997). "Nevertheless, the presence of a conflict does not automatically remove the deference [courts] ordinarily accord to ERISA administrators who are authorized by the plan to interpret a plan's provisions." Lang, 125 F.3d at 797. "[O]nly a `serious' conflict would heighten scrutiny." Bendixen. 185 F.3d at 943.
In Bendixen. the court explained that
In order to establish a serious conflict, the
beneficiary has the burden to come forward with
"material, probative evidence, beyond the mere fact of
the apparent conflict, tending to show that the
fiduciary's self-interest caused a breach of the
administrator's fiduciary obligations to the
beneficiary." If the beneficiary cannot satisfy this
burden, the district court should apply the
traditional abuse of discretion review. If the
beneficiary does satisfy the burden, the plan then
bears the burden to show the conflict of interest did
not affect the decision to deny benefits.
Id. The Ninth Circuit has found "material, probative evidence" of a serious conflict of interest to consist of "inconsistencies in the plan administrator's reasons," Lang. 125 F.3d at 799; Tremain v. Bell Indus., Inc., 196 F.3d 970
, 976 (9th Cir. 1999), and a failure to provide the claimant with a full and fair review and the failure to follow plan procedures. See Friedrich v. Intel. 181 F.3d 1105
, 1110 (9th Cir. 1999).
Plaintiff does not argue that defendant gave her inconsistent reasons for the denial of benefits, or that the Plan did not follow its procedures. Instead, she identifies a number of instances in which she claims defendant violated its fiduciary duty and therefore had a [ Page 7]
"serious" conflict of interest. See Lang. 125 F.3d at 798.
First, plaintiff contends that defendant denied benefits on the basis of Dr. Bodor's "outside physician" review yet Dr. Bodor did not in fact opine that plaintiff was not disabled; plaintiff contends Dr. Bodor concluded that she might be disabled if her pain and resulting fatigue prevent her from working. A fair reading of Dr. Bodor's report, however, suggests that he did conclude that plaintiff could engage in "any occupation" for which she is qualified. He stated that the restrictions outlined by Dr. Barlas do not preclude plaintiff "from doing any occupation as defined in the 2/12/02 letter from Kristie Firella, R.N." He also suggested that video surveillance, if it did not show much evidence of disability, "would further corroborate my opinion that [plaintiff] does not fit the `any occupation' definition of disability." (Emphasis added). Thus, it was reasonable for defendant to interpret Dr. Bodor's report as concluding that plaintiff is not disabled within the meaning of the Plan.
Next, plaintiff argues that the video surveillance was inadequate to determine whether plaintiffs pain was so severe as to preclude her from working in any occupation. The fact that the surveillance may not have conclusively demonstrated that plaintiff was or was not disabled, however, does not mean defendant somehow breached its fiduciary duty. Defendant did not cite the results of the surveillance as a reason for denying plaintiff benefits.
Third, plaintiff claims defendant improperly relied on the opinions of physicians who never examined plaintiff and therefore acted like an adversary rather than a fiduciary. Defendant, however, relied in part on the FCE performed by the physical therapist. Defendant also accepted the restrictions identified by plaintiffs treating physician. Its non-examining physician simply disagreed with plaintiff's treating physician as to what work, if any, plaintiff could perform based on those same restrictions. Plaintiff does not cite any case that suggests that a plan breaches its fiduciary duty when it does not accept a treating physician's conclusion as to what jobs a claimant can perform.
In her opposition to defendant's motion for summary judgment, plaintiff also accuses defendant of misconstruing the reports of Dr. Barlas and Dr. Waxman, and that this [ Page 8]
deliberate misinterpretation is further evidence of a predisposition to deny benefits. In its initial letter denying benefits, Unum noted that one ground for its decision was that Dr. Barlas found that plaintiff could perform sedentary work. The Court agrees with plaintiff that Dr. Barlas' report cannot reasonably be read as suggesting that Dr. Barlas believes plaintiff can perform full-time sedentary work. On the form report (prepared by Unum), Dr. Barlas repeatedly notes that plaintiff cannot perform "any" work and he even specifically notes that she is "permanently" disabled. The question as to "work capacity," in which Dr. Barlas checked the box for "sedentary work," did not have a box for "no work;" Dr. Barlas simply checked the box that offered the least work capacity.
Nonetheless, the Court does not find that Unum's unreasonable interpretation (in part) of Dr. Barlas' report is material, probative evidence of a "serious" conflict of interest. The alleged fact that Dr. Barlas had found plaintiff could perform sedentary work was just one ground for the initial denial of benefits and defendant did not rely on that ground in ultimately denying her appeal. Instead, it invited plaintiff to have Dr. Barlas submit a narrative explaining his opinion and it had an outside physician review her file.
Plaintiff also suggests that because defendant argues in its briefs that Dr. Waxman implied that plaintiff could work (by noting that she should use gloves when working), defendant was predisposed to deny benefits. Plaintiff correctly notes that Dr. Waxman's notes indicate that he never considered whether plaintiffs ailments precluded her from working. Defendant's Dr. Waxman argument, however, is a litigation argument; the administrative record does not suggest that defendant relied on Dr. Waxman's glove comment in concluding that plaintiff was not disabled within the meaning of the Plan.
In sum, the Court finds that plaintiff has not met its burden of producing material, probative evidence that defendant had a "serious" conflict of interest. This finding is supported by the fact that it is undisputed that neither Unum, Gates nor Dr. Bodor had a financial incentive to recommend denial of benefits. Moreover, in 2002, the year defendant finally denied plaintiffs claim for benefits, defendant acted on 256 claims for long-term disability benefits. Out of the 135 claims for benefits under the "own occupation" standard, [ Page 9]
the Plan denied only 9 claims. Out of the 121 claims under the "any occupation" standard, the Plan denied only 3 claims, one of which was plaintiffs claim. These statistics are not consistent with a plan operating under a "serious" conflict of interest. The Court will therefore review defendant's benefits decision for an abuse of discretion.
SUMMARY JUDGMENT STANDARD
"Where the decision to grant or deny benefits is reviewed for abuse of discretion, a motion for summary judgment is merely the conduit to bring the legal question before the district court and the usual tests of summary judgment, such as whether a genuine dispute of material fact exists, do not apply." Bendixen, 185 F.3d at 942. The Court reviews the administrative record to determine whether the defendant's decision was an abuse of discretion.
A plan administrator abuses its discretion in denying benefits when it renders a decision without explanation, construes provisions of the plan in a way that conflicts with the plain language of the plan, or relies on clearly erroneous findings of fact. See Bendixen. 185 F.3d at 944. The Supreme Court recently noted that plan administrators also "may not arbitrarily refuse to credit a claimant's reliable evidence, including the opinions of treating physicians." The Black & Decker Disability Plan v. Nord, 123 S.Ct. 1965, 1972 (2003).
Plaintiff argues, in effect, that defendant arbitrarily refused to credit Dr. Barlas' opinion that plaintiff could not work in any occupation. She contends that defendant could not base its decision on Dr. Bodor's opinion because Dr. Bodor did not opine that plaintiff could work, but instead suggested that surveillance was needed to determine if she could work on a full time basis. She also argues that defendant could not rest its decision on the labor market survey because the survey erroneously assumed that plaintiffs treating physician had suggested that plaintiff could perform full time sedentary work. Finally, she claims that defendant could not reasonably rely on the FCE.
The Supreme Court has rejected the proposition that plan administrators must "accord special weight to the opinions of a claimant's physician; nor may courts impose on plan [ Page 10]
administrators a discrete burden of explanation when they credit reliable evidence that conflicts with a treating physician's evaluation." Nord, 123 S.Ct. at 1965. In this case defendant credited reliable evidence, namely, the FCE, labor market survey, and Dr. Bodor's opinion, over that of Dr. Barlas. Defendant was not required to accept Dr. Barlas' criticism of the FCE as being performed under "artificial conditions." All FCEs, indeed nearly all medical examinations, are performed under artificial conditions. Defendant did not abuse its discretion in crediting the conclusion of Dr. Bodor and the FCE evaluator that plaintiff could perform certain sedentary work.
Nor did defendant abuse its discretion in crediting the results of the labor market survey. The fact that Genex may have been under the mistaken impression that plaintiffs treating physician had indicated that plaintiff could perform full-time sedentary work is irrelevant. Defendant assumed, based on the FCE and Dr. Bodor's opinion, that plaintiff could engage in such work. The question is whether there was substantial evidence in the record to support that assumption. The results of the FCE and Dr. Bodor's review constitute such evidence.
Finally, as is explained above, defendant reasonably interpreted Dr. Bodor's report as opining that — based on the limitations identified by Dr. Barlas — plaintiff could perform "any occupation." The Court does not read Dr. Bodor's opinion as finding that plaintiff could perform only one specific job, the job described in the report; rather, Dr. Bodor was giving an example of a job that he believed plaintiff could perform consistent with the limitations found by Dr. Barlas.
In sum, defendant's finding that plaintiff could perform "any occupation" was not an abuse of discretion. While there was certainly evidence in the record from which defendant could have come to the opposite conclusion, the fact that there is contradictory evidence in the record does not mean that defendant acted arbitrarily or capriciously. See Bendixen, 185 F.3d at 944. [ Page 11]
For the foregoing reasons, defendant's motion for summary judgment is GRANTED and plaintiff's motion for summary judgment is DENIED.
IT IS SO ORDERED. [ Page 12]
The Court having granted defendant's motion for summary judgment and having denied plaintiffs cross-motion for summary judgment by Memorandum and Order dated August 29, 2003, it is hereby ordered that judgment be entered in favor of defendant and against plaintiff.
IT IS SO ORDERED. [ Page 1]
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