The opinion of the court was delivered by: DANA SABRAW, District Judge
PLAINTIFF'S NOTICE OF NEW DECISION
Plaintiff RENEE C. PEREZ hereby submits this notice of a new
decision by the Seventh Circuit Court of Appeals in Diaz v.
Prudential Ins. Co. Of America, Case no. 04-2342, 2005 U.S. App
LEXIS ___, ___ F3d. ___ (7th Cir. September 20, 2005). A
copy of the decision is attached hereto for the Court's
convenience, pending it's availability through LEXIS or Westlaw.
Plaintiff will provide that citation as soon as it becomes
Diaz is of course the case on which Defendants have argued in
support of an alleged reservation of discretion. It is also one
of the cases Defendants did not apprise the Court was on appeal.
The Seventh Circuit has just rendered it's decision, reversing
the district court and concluding the plan's language was not a
sufficiently unambiguous grant of discretion to warrant anything
but de novo review (Id. at p. 2), and that it therefore required
the Seventh Circuit's safe harbor language identified in
Herzberger which it also did not have to avoid plenary review. In essence, it also
disapproved of and overturned Donato and Bali to the extent they
were inconsistent with the new decision. Id. at p. 9. While the
cases and law of the Ninth Circuit remain binding, rather than
that of the Seventh Circuit, Plaintiff is submitting this new
decision issued today because the Defendants have so fervently
argued it and Donato, which cases Plaintiff has addressed in
her opposition, and because both have been overturned to the
extent they are inconsistent with the new decision. In the United States Court of Appeals For the Seventh Circuit
PRUDENTIAL INSURANCE COMPANY OF AMERICA,
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 03 C 2702 Charles R. Norgle, Sr., Judge.
ARGUED JANUARY 3, 2005 DECIDED SEPTEMBER 20, 2005
Before BAUER, EASTERBROOK, and WOOD, Circuit Judges.
WOOD, Circuit Judge. This case involves Hugo Diaz's pursuit
of long-term benefits under his company's group insurance
disability plan. Prudential Insurance Company of America, the
plan's underwriter, denied Diaz's application, both initially and
through several rounds of appeal. Diaz turned to the courts, but
the district court concluded that the plan gave the administrator
discretionary authority to determine participant eligibility. It
therefore reviewed Prudential's decision under the deferential
"arbitrary and capricious" standard and concluded that Prudential
was entitled to summary judgment. We conclude that deferential
review was not appropriate given the language of this plan and thus remand for further proceedings.
Diaz began working in 1998 as a computer programmer analyst at
Bank One in Chicago. As a Bank One employee, he participated in a
group disability insurance plan underwritten by Prudential. The
plan included a long-term disability component (LTD Plan) that
provided benefits to a participant who was unable to perform the
essential functions of his or her regular occupation as a result
of an injury or illness.
In 2000, Diaz began experiencing persistent lower back pain and
was diagnosed with degenerative disc disease and radiculopathy.
For about two years, he underwent a series of non-operative
medical treatments that included lumbar epidural steroid
injections, physical therapy, and pain medication. Because his
condition was not improving and he was in considerable pain, he
stopped working on January 31, 2002. On February 4, on the
recommendation of his physician, Diaz underwent a lumbar fusion
procedure with hardware implantation to correct an annular tear
at the lumbosacral joint, or L5-S1. Although post-operative
examinations showed that the hardware alignment was satisfactory
and there were no neurological deficits in his lower extremities,
Diaz continued to report varying levels of pain in his back and
legs. At times, Diaz reported that he felt hardware movement in
his back, but each time he had this checked out, X-rays revealed
that no movement had occurred and that the fusion was
consolidating satisfactorily. After months of ineffective
physical therapy and pain medication, he decided that he could
not return to work.
Diaz submitted a claim for benefits under the LTD Plan on July
22, 2002, alleging that the back pain had rendered him disabled
as of February 4, 2002. He supported his application with several doctors' notes expressing the opinion
that Diaz's condition prevented him from sitting for more than
fifteen to twenty minutes. Prudential denied the claim on August
27, for the stated reason that Diaz's reported inability to
perform his job (which it considered a sedentary one) was not
consistent with the medical evidence. Diaz sought reconsideration
of the rejection on October 22 and submitted additional medical
evidence in support of his claim, but Prudential upheld its
negative decision on January 22, 2003. Diaz then filed a second
appeal on February 4. This time, Prudential submitted Diaz's
medical documentation to its medical consultant, Dr. Gale Brown,
for review. Although Dr. Brown did not personally examine Diaz,
he opined based on Diaz's medical records that the clinical and
diagnostic evidence relating to Diaz's lumbar spine condition did
not support Diaz's reports of persistent pain. He concluded that
Diaz's condition did not prevent him from performing his job on a
full-time basis. Dr. Brown noted, however, that there were
non-physical factors that were having an adverse impact on Diaz's
ability to engage in gainful employment, including his anxiety
over losing his job, depression, and opioid dependency, but Diaz
was not seeking benefits on any of those bases. On April 16,
2003, Prudential again upheld its decision denying Diaz benefits.
Diaz filed this action in district court on April 22, 2003,
under § 502(a)(1)(B) of the Employee Retirement Income Security
Act of 1974 (ERISA), 29 U.S.C. § 1132(a)(1)(B), seeking an award
of benefits under the LTD Plan. On May 12, 2004, the district
court granted summary judgment in favor of Prudential, finding
that Prudential's denial of benefits was not arbitrary or
capricious. On appeal, Diaz contends that the court should have
reviewed Prudential's decision de novo. In the alternative, he
asserts that Prudential's decision is unsupportable even under
the deferential standard of review and urges this court to award
The Supreme Court has held that "a denial of benefits
challenged under § 1132(a)(1)(B) is to be reviewed under a de
novo standard 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 v. Bruch, 489 U.S. 101, 115 (1989). Under Bruch,
plenary review is the default standard. We have held that plenary
review is required when the plan documents contain no indication
of the scope of judicial review, because "it is a natural and
modest extension of Bruch, or perhaps merely a spelling out of
an implication of it, to construe uncertain language concerning
the scope of judicial review as favoring plenary review as well."
Herzberger v. Standard Ins. Co., 205 F.3d 327, 330 (7th Cir.
2000). If a plan "is going to reserve a broad, unchanneled
discretion to deny claims, [plan participants] should be told
this, and told clearly." Id. at 333. To decide whether a plan
confers discretion on the administrator, as Bruch and
Herzberger use the term, we review the language of the plan de
novo as we would review the language of any contract. Ramsey v.
Hercules Inc., 77 F.3d 199, 205 (7th Cir. 1996).
Herzberger holds that the critical question is notice:
participants must be able to tell from the plan's language
whether the plan is one that reserves ...