Landree v The Prudential Insurance Company of America, No. 3:2010cv05353 - Document 29 (W.D. Wash. 2011)
Court Description: ORDER granting in part and denying in part 25 Prudential's Motion for Reconsideration, as more fully set forth in the Order, signed by Judge Ronald B. Leighton.(DN)
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Landree v The Prudential Insurance Company of America Doc. 29 HONORABLE RONALD B. LEIGHTON 1 2 3 4 5 6 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT TACOMA 7 8 9 Plaintiff, 10 11 12 13 14 15 CASE NO. 3:10-CV-05353-RBL JOHN S. LANDREE, ORDER ON DEFENDANTS’ MOTION FOR RECONSIDERATION v. THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a foreign corporation; and SIMPSON HEALTH AND WELFARE PLAN, an employee welfare and benefit plan, Defendants. 16 I. INTRODUCTION 17 18 This matter comes before the Court upon Prudential’s Motion for Reconsideration. (Dkt. 19 #25.) On June 13, 2011, the Court denied Prudential’s Motion for Summary Judgment. (Dkt. 20 #24.) To reach its decision, the Court conducted a de novo review of Prudential’s decision to deny 21 Landree’s claim for benefits because the Court found WAC 284-96-012 (the Regulation) 22 invalidated the discretionary language in the Plan. Under this de novo standard of review, there 23 24 were genuine issues of material fact precluding summary judgment. Prudential contends this 25 ruling was clear error because (1) the Regulation cannot retroactively change the terms of the 26 Plan and (2) the Regulation is completely preempted by ERISA. Prudential contends its decision 27 28 ORDER - 1 Dockets.Justia.com 1 2 to deny benefits should be reviewed under the abuse of discretion standard of review, and that under this standard of review, the Motion for Summary Judgment should be granted. Landree responds that the Court was correct to apply the de novo standard of review to 3 4 Prudential’s decision. Landree argues the Washington State insurance commissioner has the 5 authority to apply the Regulation retroactively because the regulation clarifies existing law and 6 7 does not affect substantive rights. Landree argues that, if the court applies the abuse of discretion 8 standard, the Motion for Reconsideration should be denied because a reasonable trier of fact 9 could be left with a firm conviction that a mistake was made. 10 The Court’s ruling is set forth below. 11 II. FACTS 12 13 A. The Plan 14 The Plan purports to give Prudential“ sole discretion to interpret the terms of the the 15 Group contract, to make factual findings, and to determine eligibility for benefits. (0345-46.)1 ” 16 In relevant part, the LTD coverage section of the Plan reads as follows: 17 How Does Prudential Define Disability? You are disabled when Prudential determines that: - you are unable to perform the material and substantial duties of your regular occupation due to your sickness or injury . . . Material and substantial duties means duties that are: - normally required for the performance of your regular occupation; and - cannot be reasonably omitted or modified . . . Regular occupation means the occupation you are routinely performing when your disability begins. Prudential will look at your occupation as it is normally performed instead of how the work tasks are performed for a specific employer or at a specific location. (0323, emphases in original.) 18 19 20 21 22 23 24 25 26 27 28 1 Numbered citations refer to either the Administrative Record (0001-0295) or Plan documents (0296-0353). [Dkt. #s 18 & 19, respectively.] ORDER - 2 1 2 B. Prudential Denies Landree’s Initial Claim for Long Term Disability 1. Landree Applies for Long Term Disability 3 On January 9, 2007, Landree saw his primary care physician, Dr. William Brand. Brand 4 5 noted Landree was experiencing “right anterior pleuritic chest pain and had “fatty infiltration of the ” 6 liver. (0169.) Brand concluded Landree’s systems were “otherwise negative and that his type two ” ” 7 diabetes mellitus and hypertension were controlled. Brand listed ten conditions Landree suffered 8 from, including hypercholestolemia and “chronic low pain. ” 9 On January 20, Landree experienced two spells of dizziness at work and a coworker 10 11 drove him home. (0167.) His wife wanted him to go the emergency room but he did not. 12 On January 26, Landree met with Dr. Theodore Lau, a Cardiac Health Specialist. Dr. Lau 13 noted Landree had normal left ventricular systolic function, left ventricular diastolic dysfunction, 14 mildly elevated systolic pulmonary artery pressure, and that there were“no significant changes ” 15 from an earlier study taken on March 10, 2006. (0174.) Dr. Lau administered an exercise test 16 17 and concluded the“raw data was unremarkable. (0175.) ” 18 From February to April of 2007, Landree attended counseling sessions with Lem 19 Stepherson, Ph.D. According to a one-sentence note from Stepherson, this counseling addressed 20 Landree’s anxiety related to the death of a co-worker, a heavy workload, and multiple health 21 22 23 24 25 related conditions. (0134.) On February 12, Landree saw Dr. John Rowlands for a pulmonary consultation. Rowlands concluded the test results were mostly negative. (0173.) Landree stopped working on February 22, 2007, and saw Dr. Brand on February 26. 26 Brand wrote Landree was undergoing a disability evaluation and that he“ feels anxiety and stress 27 28 to the point where he feels he cannot return to work pending his disability evaluation. (0164.) ” ORDER - 3 On March 19, Landree saw Dr. Paul Darby, an occupational health specialist at the 1 2 Franciscan Occupational Health Clinic in Tacoma. Darby opined Landree’s“medical problems 3 have been mounting lately and the shift work is throwing his diabetes out of control. (0094.) ” 4 Darby made the following diagnoses: (1) Type 2 Diabetes mellitus (2) Recurrent near-syncope 5 (3) Coronary artery disease (4) Hypertension (5) Paroxysmal atrial tachycardia (6) Dyslipidemia 6 7 (7) Diverticulosis (8) Gastroesophagul reflux disease (9) Chronic back pain. Darby opined, “I 8 have received all of his medical records and reviewed those . . . Patient is not medically fit for 9 the essential job functions. He is restricted from shift work, working alone or remote from 10 observation, work at unprotected heights, working with dangerous equipment, or wearing any 11 respirator. (Id.) ” 12 2. Prudential Evaluates and Denies Landree’s Initial Claim 13 On June 12, 2007, Prudential received Landree’s claim for LTD. On that date, Dusti 14 15 LaFlamme, a Claim Manager for Prudential, wrote the following on an internal note: “No 16 eligibility issues. EE is [redacted] yr old shift coordinator TD since 2/23/07 due to type 2 17 diabetes mellitus, CAD, PAT and chronic back pain. EE reports dizzy spells and heart problems. ” 18 (0197.) 19 On June 14, Michael Chretien, a Vocational Rehabilitation Counselor at Prudential, 20 created a short report for Prudential to understand how Landree’s job is normally done. Chretien 21 based his report on reference manuals. Chretien briefly described the job duties of a“Pulp Plant 22 Supervisor but did not classify the work as light, medium, or heavy. (0198.) ” 23 On July 25, LaFlamme and Landree had a telephone conversation. Landree explained his 24 medical conditions and indicated his job requirements included shift work, being HAZMAT 25 certified, using ladders and bending. (0216.) On July 26, LaFlamme met with Team Leader 26 Linda Conley. At this meeting, Prudential classified Landree’s occupation as“light. (0200.) ” 27 28 On August 6, 2007, Prudential decided to deny Landree’s claim. On that day, Sandra Chapkovich, RN, did a“clinical review of records from Dr. Brand, Dr. Darby, Dr. Lau, and Dr. ” ORDER - 4 1 Rowlands. The review consists of abbreviations and medical data not entirely understood by the 2 Court. It appears Chapkovich looked at Landree’s diagnoses and medical data and came to the 3 conclusion Landree had no restrictions or limitations. (0201.) She closed the review by opining 4 Landree“may have made a life choice to retire. (Id.) On the same day, Dr. Joyce Bachman ” 5 affirmed Chapkovich’s review in a brief note. Bachman opined, “[t]here is no contraindication for 6 the claimant in doing shift work which he has been doing without incident. (0204.) ” 7 On August 13, 2007, Prudential denied Landree’s claim in a letter written by LaFlamme. 8 LaFlamme emphasized negative test results, lack of chest pain, and controlled hypertension and 9 diabetes. The letter concluded,“[W]e find you are reasonably capable of performing an 10 11 12 occupation requiring light work capacity duties. (0287-89.) ” C. Prudential Denies Landree’s First Appeal 1. Doctor Visits Before the First Appeal 13 On July 24, 2007, Landree saw a back specialist, Dr. Carlos Moravek. Moravek noted 14 15 Landree’s pain intensity measured two out of ten, his range of motion was reduced, and he was 16 nontender to most touches. (0052.) Moravek recommended an MRI. 17 18 On September 24, Landree saw Dr. Rowlands again. Rowlands noted that Landree’s pleuritic chest pain had resolved and that his daytime sleepiness and sense of well-being had 19 improved as a result of his retirement. (0059.) 20 21 22 23 2. The Dispute Over Landree’s “Regular Occupation” On August 14, LaFlamme informed Landree over the phone that Prudential had denied his claim. During this conversation, Landree took issue with Prudential describing his work 24 duties as light. (0217.) 25 26 On September 7, Marc Swan, a Vocational Specialist at Prudential, sent a message to 27 LaFlamme. He opined Landree’s job description“ appears closer to the medium range, and the ” 28 twelve hour shifts and passing the respiratory physical were“issues of concern. (0220-21.) ” ORDER - 5 1 Apparently these issues were not of that much concern. On September 10, Conley, 2 LaFlamme, and Swan held a meeting to discuss Landree’s claim. An internal note reads,“Based on 3 review of new information, our prior decision does not change . . . Regardless of whether the 4 occ[upation] is light or medium, EE is not precluded from performing his occupation. (0207.) ” 5 Sometime before September 28, Landree obtained legal assistance from attorney Teri 6 7 8 9 10 Rideout. Rideout commissioned Shervey & Associates to do an occupation analysis of Landree’s position. This analysis concluded the position exceeded light work capacity duties. (0131.) On October 25, Dr. Brand wrote a letter to Rideout after he reviewed the Shervey occupation analysis. Brand opined Landree“has multiple medical problems which could be 11 adversely affected by working irregular shift hours, stress on the job, and variation in 12 13 temperature and environment. (0060.) Brand thought Landree’s coronary artery disease, diabetes, ” 14 and blood pressure would be “negatively affected if he continued working at Simpson. Brand also ” 15 wrote, “I do not believe Mr. Landree should ever be placed in a situation where he would have to 16 wear SCBA breathing apparatus in a stressful rescue situation. (Id.) ” 17 18 On December 7, Rideout wrote a letter to Prudential. (0120.) Rideout emphasized that an 19 MRI from 7/26/07 revealed spinal damage and reemphasized the recommendations of Dr. Darby 20 and Dr. Brand. The letter enclosed the Shervey occupation analysis and MRI results. 21 Prudential responded to this letter with an appropriate step. On December 18, Angela 22 Holland, an Appeals Specialist, ordered a Labor Market Survey to investigate whether 12 hour 23 24 25 irregular shifts, respirator use, and Hazmat suits were a normal part of Landree’s regular occupation. (0208.) 26 27 28 ORDER - 6 3. Dr. Syrjamaki’s Review and Denial of Landree’s First Appeal 1 On December 19, Prudential decided to bolster its decision with an external review. On 2 3 4 that day, Holland wrote to a Southfield, Michigan company called Qualified Medical Examiners. She requested a specialist in occupational medicine conduct an “expedited handling of an ” 5 independent file review. (0284-85.) A specialist in internal medicine, Dr. Charles Syrjamaki, 6 7 handled this request. Syrjamaki dutifully conducted a file review for Prudential on December 27, 2007.2 8 9 10 Syrjamaki reviewed medical records from Doctors Brand, Darby, Lau, and Rowlands as well as the one page note from the psychologist Lem Stepherson. Syrjamaki also reviewed the Shervey 11 occupation analysis and letters from Landree and Rideout. Syrjamaki talked with Dr. Brand on 12 13 the telephone and concluded from that conversation and other records that“the precipitating event 14 for Mr. Landry [sic] going off work . . . was some anxiety and stress, which was situational at the 15 time. (0050.) ” 16 Syrjamaki opined that none of Landree’s individual conditions prevented him from 17 18 working: In reviewing the medical records, Mr. Landree does not appear to be disabled from his job as a shift coordinator for Simpson Tacoma Kraft Company. Although he is 59 years of age and was moderately overweight, his job did not have significant physical demands that he could not do. It also appeared that although he did have significant medical disorders, these were stable and under good control. His diabetes mellitus appeared to be under good control by diet and oral medications. He had one episode of dizziness and near syncope but had a negative evaluation for this and had no recurrence. He did not have any significant coronary artery disease. His hypertension was under good control, and his degenerative arthritis and degenerative disk disease was no more than one would expect for a man his age. He had done the same job for 33 years, and although he was a shift coordinator, this was not a new job for him, and the notion that he was too ill to do shift work was not borne out by the medical records. (0050-51.) 19 20 21 22 23 24 25 26 27 28 2 The Court notes that the review was completed the same day Syrjamaki received the request. (0044.) ORDER - 7 1 Prudential paid Syrjamaki $1,625 for the 6.5 hours of work necessary for the file review. 2 (0114.) Based on this review, Holland thought it unnecessary to wait for the results of the Labor 3 Market Survey she ordered on December 18. (0209.) Holland upheld the decision to disallow 4 benefits. 5 On January 9, 2008, Holland informed Rideout of the appeal decision in a letter. Holland 6 7 emphasized that Landree left work due to “situational anxiety. (0282.) The letter quotes ” 8 extensively from Syrjamaki’s review and concluded“the medical evidence does not support any 9 restrictions or limitation. (Id.) ” 10 D. Prudential Denies Landree’s Second and Final Appeal 11 On January 23, 2008, Linda Geis, Director at Vocational Directions LLC, completed the 12 13 Labor Market Survey for Prudential that Holland had ordered on December 18. Of four Pulp 14 Plants that had a Supervisor position, two reported using hazmat suits and irregular shift patterns 15 like those used at Simpson. (0108-11.) Holland did not think this had any impact on her decision 16 to deny the first appeal. (0210.) 17 18 On March 11, Jim Burg, a Simpson Human Resources Manager, sent a letter and 19 description of Landree’s position to Rideout. Burg emphasized the physical demands of the job 20 and the fact that it was stressful. He explained the importance of Landree being on the 21 Emergency Response Team, and that in 2007 a Simpson doctor would not approve Landree for 22 continued employment because he could not pass the required physical. Burg opined that in his 23 24 25 26 27 43 years of Human Resources Management he could not recall an employee being more eligible for LTD benefits. (0069.) On April 25, Dr. Brand sent a letter to Rideout. Brand wrote“stress and anxiety were a ” “ contributing factor to Landree’s difficulty at work, but went on to emphasize his other diagnoses. ” 28 ORDER - 8 1 2 (0041.) Brand believed it would be “unconscionable for Landree to go back to work because of ” the high probability of a heart attack. Rideout forwarded this information to Prudential along with a letter arguing Dr. 3 4 Syrjamaki was ignoring recommendations of other doctors and Simpson. (0065.) In response, 5 Holland decided the best course of action would be to have Dr. Syrjamaki conduct another 6 7 review in light of the newly received opinions of Dr. Brand and Jim Burg. (0211.) On June 17, Syrjamaki completed his second review, this time considering the letters 8 9 10 from Brand and Burg, as well as the Labor Market Survey. Syrjamaki believed it was “ unclear why Dr. Darby would not pass Mr. Landree on the physical examination, as it appeared that the 11 coronary artery disease was minimal and insignificant, that the Type 2 diabetes mellitus was 12 13 under good control, the cardiac arrhythmia (paroxysmal atrial tachycardia) was controlled, 14 hypertension was controlled, and his pulmonary function tests were normal. (0023.) Syrjamaki ” 15 opined that long-term risk factors do not provide a reason for why an individual cannot do a job. 16 Syrjamaki did not mention the requirement of wearing a SCBA device or the work classification. 17 18 Prudential paid Syrjamaki $875 for the 3.5 hours needed to complete this second review. (0005.) 19 On July 10, 2008, Marc Swan, the Vocational Specialist at Prudential opined that 20 Landree’s position“would best be described as a heavy strength demand occ[upation]. (0213.) The ” 21 same day, Prudential sent Rideout a letter informing her that Landree’s second appeal had been 22 denied. (0270-74.) The letter quotes extensively from Dr. Syrjamaki’s second review. The letter 23 24 concedes Landree’s job falls into the “ heavy to very heavy category, but concludes that“ absence ” in 25 of any medically supported restrictions or limitations, we still conclude that Mr. Landree has the 26 functional capacity to perform the material and substantial duties of his regular occupation. “ 27 (0272.) 28 ORDER - 9 His administrative remedies exhausted, Landree filed a Complaint on May 20, 2010 1 2 seeking LTD benefits, removal of Prudential as Plan fiduciary, and attorney’s fees. Prudential 3 filed its Motion for Summary Judgment on February 4, 2011. In his Response to the Motion, 4 5 Landree argued the Regulation invalidated the discretionary language in the plan, and accordingly, the standard of review should be de novo. Prudential did not file a reply.3 The Court 6 7 conducted a de novo review and ruled there were genuine issues of material fact precluding 8 summary judgment. Prudential now contends this ruling was clear error because (1) the 9 Regulation cannot retroactively change the terms of the Plan and (2) the Regulation is 10 completely preempted by ERISA. The Court will not reach either of these broad contentions 11 because it is clear the Regulation cannot apply retroactively to Prudential’s decision to deny 12 13 Landree benefits, whether or not it could change the terms of the actual Plan. The Court will 14 explain its retroactivity ruling and then turn to the underlying Motion for Summary Judgment 15 under the abuse of discretion standard. 16 III. DISCUSSION 17 A. The Motion for Reconsideration is GRANTED as to the Court’s retroactive application of the Regulation because Prudential had a vested right to a deferential review and Prudential denied benefits before the Regulation was issued. 18 19 20 The Regulation took effect on September 5, 2009. For the Regulation to nullify the 21 discretionary language in the Plan and change the standard to de novo, the Regulation must apply 22 retroactively to July 10, 2008, the date Prudential issued its final denial of Landree’s claim for 23 24 25 LTD benefits. Landree argues Washington law controls the retroactivity issue, and that under Washington law, the Regulation applies retroactively because it clarifies existing law. Prudential 26 27 28 3 Prudential’s excuse for this is that the Scheduling Order (Dkt. #15) did not provide for reply briefs. The Court is not sure what to make of this excuse because the Scheduling Order did not provide for a Summary Judgment Motion in the first place. In any event, considerable time could have been saved had Prudential asked for leave to address whether the Regulation could apply retroactively to its decision to deny benefits. ORDER - 10 1 2 3 4 argues the Regulation was a substantive change to the law, and that it had a“vested right to a ” deferential review before the Regulation was issued. Generally, prospective application of new administrative regulations is presumed. Champagne v. Thurston County, 163 Wn.2d 69, 80 (2008) (en banc). A regulation or statute 5 cannot be applied retroactively “where the effect would be to interfere with vested rights. Lawson ” 6 7 v. State, 107 Wn.2d 444, 454-55 (1986) ( “Thus, for example, a statute may not be applied 8 retroactively where the result would be to impair the obligation of contract. ). However, courts ” 9 may apply an amendment retroactively if the amendment serves to clarify the purpose of the 10 existing rule. Champagne, at 80. 11 In Saffon v. Wells Fargo & Co. Long Term Disability Plan, the Ninth Circuit held that the 12 13 California state insurance commissioner could not retroactively nullify an ERISA plan’s grant of 14 discretionary authority by revoking a certificate of insurance. 522 F.3d 863 (2008). That Court 15 stated, “Assuming that the Commissioner may prohibit insurance companies from using this 16 discretionary clause in future insurance contracts, he cannot rewrite existing contracts so as to 17 18 19 20 21 change the rights and duties thereunder. Id. at 867. ” 1. Prudential had a vested right to a deferential review. Landree argues the Regulation authorizes reviewing courts to re-write existing contracts. Prudential argues it had a vested right to a deferential review and is legally exempt from a de 22 novo review. “[A] vested right, entitled to protection from legislation, must be something more 23 24 than a mere expectation based upon an anticipated continuance of the existing law; it must have 25 become a title, legal or equitable, to the present or future enjoyment of property, a demand, or a 26 legal exemption from a demand by another. In Re Marriage of MacDonald, 104 Wash.2d 745, ” 27 750 (1985). 28 ORDER - 11 1 The Regulation does not apply retroactively to Prudential’s decision to deny benefits 2 because Prudential had a vested right to a deferential review of decisions it made before the 3 Regulation. Prudential and Simpson bargained for rights, duties, and obligations embodied in the 4 Plan, and Prudential acted pursuant to the Plan when it denied Landree’s claim for benefits. 5 Prudential relied on more than a mere expectation of existing law when it decided to deny LTD 6 7 benefits because Prudential and Landree were bound by the written terms of the Plan. Were it 8 applied retroactively to the time the decision was made, the Regulation would impermissibly re- 9 write those terms. The Regulation cannot have retroactive effect on this Court’s review of 10 Prudential’s decision to deny benefits because if the Regulation were applied retroactively in that 11 way, it would interfere with vested rights. 12 13 2. Prudential denied benefits before the Regulation was issued. 14 Landree seeks to distinguish Saffon on state law grounds, arguing that RCW 48.18.510, 15 unlike the California insurance code, requires that non-complying insurance policies be read as 16 though they were in compliance with the Washington insurance code. Landree argues that “Unlike 17 18 19 20 21 California, Washington law promotes uniformity by “re-writing existing policies so that they ” comply with Washington law. (Dkt. #27 at 5.) ” Landree forgets the narrow scope of this Court’s review. The Court can only review Prudential’s decision to deny benefits at the time the decision was made. At that time, the 22 discretionary language in the Plan complied with Washington law. See e.g., Bartholomew v. 23 24 Unum Life Ins. Cor. Of Am., 588 F.Supp.2d 1262 (W.D. Wash. 2008) (parties agreed that 25 discretionary language in Plan was valid). The Court expresses no opinion on whether the 26 Regulation would apply retroactively to an administrator’s decision made after the Regulation 27 was issued because that is not the situation presented here. The Court only rules that the 28 ORDER - 12 1 2 3 4 Regulation cannot affect the review of Prudential’s decision because Prudential made that decision before the Regulation was issued. Landree also argues that the Regulation applies retroactively to Prudential’s decision because the Regulation clarifies existing law. At first blush, Landree appears correct because the 5 Notice for proposed rule making accompanying the Regulation stated“These new rules inform 6 7 and clarify . . . that the Washington insurance code prohibits the use of discretionary clauses. ” 8 Wn. State Register 09-16-128. However, the proposed rulemaking goes on to say that“ current if 9 contracts or policies contain discretionary clauses, [administrators] are required to administer 10 them as though they did not contain discretionary clauses. Id. (emphases added) This notice of ” 11 proposed rulemaking does not stand for the proposition that a court reviewing an administrator’s 12 13 14 15 decision made before the Regulation must review that decision de novo. The Regulation does not apply retroactively to Prudential’s decision to deny benefits because Prudential had a vested right in a deferential review and Prudential made the decision 16 before the Regulation was issued. Thus, the Regulation cannot invalidate the discretionary 17 18 language in the plan in such a way that it affects the Court’s review of Prudential’s decision. 19 Abuse of discretion is the correct standard of review. A denial of benefits is to be 20 reviewed under a de novo standard unless the benefit plan gives the administrator discretionary 21 authority. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). Abuse of discretion 22 is the standard when the plan grants the administrator discretionary authority. Id. Here, the Plan 23 24 25 grants Prudential discretionary authority, and the Regulation has no retroactive effect on the Plan, so abuse of discretion is the standard of review. 26 27 28 ORDER - 13 B. The Motion for Reconsideration is DENIED as to the Court’s denial of the Motion for Summary Judgment because a reasonable person could be left with a firm conviction that it was a mistake to deny Landree’s claim. 1 2 Landree argues the Motion for Reconsideration should be denied because a reasonable 3 4 person could be left with a firm conviction that it was a mistake to deny Landree’s claim. 5 Prudential argues that the facts demonstrate they “ acted reasonably and“the fact that this Court ” 6 7 previously found that the merits were too close to make a call under the de novo standard of 8 review, compels the conclusion that Prudential is entitled to judgment under the abuse of ” 9 discretion standard. 4 10 1. Abuse of discretion standard 11 Prudential oversimplifies the abuse of discretion standard.“Applying a deferential 12 13 standard of review does not mean that the plan administrator will prevail on the merits. Conkright ” 14 v. Frommert, 130 S.Ct. 1640, 1651 (2010). In ERISA cases, when the plan administrator has a 15 conflict of interest, the level of protection provided by the abuse of discretion standard to 16 administrators will depend on the facts of each particular case. See Saffon at 867-68 ( “While we 17 18 19 nominally review for abuse of discretion, the degree of deference we accord a claims administrator’s decision can vary significantly. ) ” Beginning with Abatie v. Alta Health in 2006, both the Ninth Circuit and Supreme Court 20 21 have whittled away the deference given to administrators possessing a conflict of interest while 22 still referring to the standard as abuse of discretion. In Abatie, the Court said that the “ conflict [of 23 24 interest] must be weighted as a factor in determining wither there is an abuse of discretion. 458 ” 25 F.3d 955, 965 (9th Cir. 2006). In Saffon, the Court elaborated on Abatie, stating that different 26 levels of skepticism will be applied to an administrator’s decision depending on various factors 27 28 4 The Court would not describe its decision to deny Prudential’s Motion for Summary Judgment under the de novo standard as a close call. That decision would have been closer had cross-motions been before the Court. ORDER - 14 1 such as inconsistent reasons for denial or evidence of malice. 522 F.3d 863 at 868 (9th Cir. 2 2008). The Supreme Court’s decision in Metropolitan Life Ins. Co. v. Glenn essentially affirmed 3 Abatie but emphasized that weighing the conflict of interest does not turn abuse of discretion into 4 de novo review. 554 U.S. 106 (2008). In Conkright, the Supreme Court added that a “single 5 honest mistake in plan interpretation does not deprive the plan of the abuse of discretion ” 6 7 8 9 10 standard. 130 S.Ct 1640, 1644 (2010). “ Weighing the conflict of interest is important because ERISA administrators have an ” incentive to abuse their discretion, but this weighing is difficult in practice because courts lack the information they need to gauge whether the administrators are abusing that discretion. See 11 Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 675. (9th Cir. 2011). Unlike 12 13 insurance companies operating outside of ERISA, insurance companies handling ERISA plans 14 may have an incentive to abuse their discretion because the statute shields them from bad faith 15 claims. Id. District courts may have difficulty figuring out whether discretion is being abused 16 because they must rely on the administrative record, which usually includes no evidence on how 17 18 the administrator handled similar claims or what sort of internal directives were given to claims 19 managers. Id. This is why, in reviewing a plan administrator’s decision, the court“is making 20 something akin to a credibility determination about the insurance company's or plan 21 administrator's reason for denying coverage under a particular plan and a particular set of 22 medical and other records. Abatie at 969. ” 23 24 In Salomaa, the Ninth Circuit synthesized post-Abatie cases into a workable rule. The 25 Salomaa court began by explicitly overruling the“any reasonable basis test relied on by ” 26 Prudential in their original Motion for Summary Judgment. 642 F.3d 666, 673-74. Today, in 27 ERISA cases where an administrator possesses a conflict of interest, the test for abuse of 28 ORDER - 15 1 discretion today is whether the court is“left with a definite and firm conviction that a mistake has 2 been committed. Id. at 676. An administrator abuses their discretion if their decision was “(1) ” 3 illogical, (2) implausible, or (3) without support in inferences that may be drawn from the facts 4 in the record, and a“higher degree of skepticism is appropriate where the administrator has a ” 5 conflict of interest. Id. ” 6 7 In Salomaa, the Ninth Circuit reversed the district court’s decision in favor of the 8 administrator after a trial on the administrative record. Here, the Court is faced with a Motion for 9 Summary Judgment brought by Prudential. Summary judgment is appropriate when, viewing the 10 facts in the light most favorable to the nonmoving party, there is no genuine issue of material fact 11 which would preclude summary judgment as a matter of law. The Motion “should be granted 12 13 where the nonmoving party fails to offer evidence from which a reasonable [fact finder] could 14 return a [decision] in its favor.” Triton Energy Corp. v. Square D Co., 68 F.3d 1216, 1220 (9th 15 Cir. 1995). Here, the standard the Court applies is whether there is evidence in the administrative 16 record from which a reasonable fact finder could be left with a definite and firm conviction that 17 18 Prudential committed a mistake in denying Landree’s claim for benefits. 19 2. Prudential has a conflict of interest. 20 When the same entity funds a plan and also evaluates claims, a structural conflict of 21 interest exists. Glenn, 554 U.S. 105, 112. Here, Prudential funds the Plan and also evaluates 22 claims, so it operates under a conflict of interest. Therefore, the Abatie line of cases control the 23 24 outcome of this case, and heightened skepticism of Prudential’s decision is warranted. 25 26 27 28 ORDER - 16 1 3. A reasonable person could be left with a definite and firm conviction that it was a mistake to deny Landree’s claim. 2 Landree argues the Motion should be denied because Prudential shifted its reasons for 3 4 denial, ignored a Social Security award, did not consider important aspects of Landree’s job, and 5 Dr. Syrjamaki’s medical conclusions were not credible. Prudential argues the record shows 6 Landree’s physical ailments did not amount to a disability, Landree’s situational anxiety led to his 7 retirement, and Dr. Syrjamaki is more credible than Landree’s doctors because Dr. Syrjamaki had 8 access to all of Landree’s records. 9 10 There is no checklist for district courts to apply in ERISA abuse-of-discretion cases, but 11 the Salomaa court’s application of the rule provides guidance on the types of things district courts 12 may consider when weighing conflicts of interest: 13 19 “ this case, the plan abused its discretion. Its decision was illogical, implausible, In and without support in inferences that could reasonably be drawn from facts in the record, because: (1) every doctor who personally examined Salomaa concluded that he was disabled; (2) the plan administrator demanded objective tests to establish the existence of a condition for which there are no objective tests; (3) the administrator failed to consider the Social Security disability award; (4) the reasons for denial shifted as they were refuted, were largely unsupported by the medical file, and only the denial stayed constant; and (5) the plan administrator failed to engage in the required “meaningful dialogue with Salomaa. ” ” 642 F.3d at 676. 20 Here, a reasonable fact finder could be left with a definite and firm conviction that a 14 15 16 17 18 21 mistake was made. A fact finder could reasonably conclude that Prudential’s decision was 22 illogical, implausible and without support in inferences that could reasonably be drawn from 23 24 facts in the record, because: (1) Prudential shifted their reasons for denial; (2) Prudential’s 25 conclusion that Landree had no restrictions or limitations was not supported by the record; (3) 26 Prudential’s conclusion that Landree left work due to “situational stress was not supported by the ” 27 28 ORDER - 17 1 record; (4) Prudential did not conduct an in-person examination of Landree, and (5) Dr. Brand 2 and Dr. Darby, who did conduct in-person examinations of Landree, concluded he was disabled. 3 Prudential shifted their reasons for denial. Prudential first told Landree he had no 4 restrictions from light work and later told him he had no restrictions at all. In their original denial 5 letter, Prudential said,“In Conclusion, we find you are reasonably capable of performing an 6 7 occupation requiring light work capacity duties. Our vocational consultant confirmed the regular 8 duties of your occupation are considered light work capacity. (0288) Prudential did not bother to ” 9 wait for the results of their Labor Market survey before denying Landree’s first appeal (0209) and 10 told Landree he had “no restrictions or limitations in the denials of his first and second appeals. ” 11 (0281, 0272.) Prudential’s credibility is somewhat suspect because their“reasons for denial shifted 12 13 as they were refuted. See Salomaa at 676. ” 14 Prudential’s ultimate conclusion that Landree had no restrictions or limitations was not 15 supported by facts in the administrative record. The record shows Landree failed a physical in 16 2007, the Social Security Administration found him totally disabled, and Doctors Darby and 17 18 Brand thought it would be dangerous for Landree to continue working. Dr. Syrjamaki disagreed 19 but never explained exactly why someone with all of Landree’s diagnoses was capable of doing 20 heavy shift work. Dr. Syrjamaki thought Landree would “be able to fulfill the requirements of a 21 Shift Coordinator but did not seem to know what a shift coordinator did. Dr. Syrjamaki deftly ” 22 addressed the lack of danger regarding each individual condition but provided no opinion as to 23 24 their combined effect upon Landree. (0023.) Prudential’s conclusion that Landree had no 25 restrictions or limitations is unsupported by facts in the record because Prudential ignored the 26 actual requirements of Landree’s occupation and the combined effect of Landree’s multiple 27 diagnoses. 28 ORDER - 18 1 Prudential’s theory that Landree left work due to situational stress was not supported by 2 the record. There are pages of records documenting Landree’s physical medical conditions but 3 Prudential seized on a one-sentence note from psychologist Stepherson and an off-hand comment 4 Landree made to Dr. Brand in an effort to persuade the Court that Landree made a life choice to 5 retire. Dr. Syrjamaki apparently based the situational stress theory on a telephone conversation 6 7 he had with Dr. Brand, but Dr. Brand emphasized that stress was only one contributing factor to 8 Landree’s disability. The Court understands that Prudential receives questionable claims for 9 disability benefits regularly, but here, when viewed as a whole, the administrative record does 10 not support a finding that Landree retired because of situational stress. 11 Prudential’s credibility is substantially undermined because it chose to pay $2,500 for an 12 13 expedited paper review rather than conduct an in-person examination of Landree that the Plan 14 explicitly authorized. An in-person evaluator could have been given access to the same records 15 Dr. Syrjamaki had and come to a conclusion based on both those records and an in-person 16 examination. The Court has yet to hear an explanation for the external paper review that makes 17 18 any sense. There is at least a genuine question of fact as to whether Dr. Syrjamaki was an 19 objective reviewer or a heavy hitter brought in by Prudential to give the Company the answer it 20 wanted to hear. 21 Dr. Brand and Dr. Darby, both of whom had an understanding of Landree’s job 22 requirements, thought he was disabled. It is true that test results from Dr. Lau and Dr. Rowlands 23 24 were mostly negative, but these Doctors were specialists and the record does not indicate they 25 knew anything about Landree’s job requirements or were asked to make a disability 26 determination. The record definitively shows Sandra Chapkovich did not know anything about 27 Landree’s job requirements and, on the whole, the record indicates Dr. Syrjamaki gave these 28 ORDER - 19 1 requirements little attention in his analysis. The only doctors who personally saw Landree and 2 knew something about his job requirements, concluded he was disabled. The conclusions of 3 Brand and Darby weigh heavily against those of Dr. Syrjamaki and Sandra Chapkovich. 4 Even if deference is given to Prudential’s decision, a fact-finder could still be left with a 5 firm conviction that the decision was a mistake due to Prudential’s conflict of interest. 6 IV. CONCLUSION 7 8 The Court was wrong to apply the de novo standard in its original order denying 9 Prudential’s Motion for Summary judgment because the Regulation cannot apply retroactively to 10 Prudential’s decision to deny benefits. The Motion for Reconsideration is GRANTED insofar as 11 the Court applied the Regulation retroactively and based its order on a de novo review. Abuse of 12 13 discretion, as explained in Salomaa, is the standard of review in this case. 14 The Motion for Reconsideration is DENIED as to the underlying Motion for Summary 15 judgment because a reasonable trier of fact could be left with a firm conviction that Prudential 16 made a mistake in denying benefits to Landree. Based on the Court’s review of the administrative 17 18 record, Prudential’s conflict of interest appears to have had an effect on their decision to deny 19 benefits, although at this time the court cannot say what the extent of this effect was or what the 20 ultimate outcome should be. 21 This is a fact intensive dispute with an ever-evolving judicial standard. A one-day trial on 22 the merits will insure the Court reaches a ruling that is based on a full understanding of facts and 23 24 an accurate application of law. The parties should schedule a one-day bench trial based solely on 25 the administrative record. The parties should focus their factual presentations on the physical 26 requirements of Landree’s occupation, the extent of his alleged disabilities in 2007, and the 27 credibility of medical experts involved in this dispute. The parties should focus their legal 28 ORDER - 20 1 2 arguments on whether or not the Court has correctly identified controlling authority on the abuse of discretion standard. 3 IT IS SO ORDERED. 4 Dated this 4th day of August, 2011. 5 6 7 8 A RONALD B. LEIGHTON UNITED STATES DISTRICT JUDGE 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ORDER - 21
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