Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_05-cv-02983/USCOURTS-azd-2_05-cv-02983-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1132 E.R.I.S.A.-Employee Benefits

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Mary D. Linich, 

Plaintiff, 

vs.

Broadspire Services, Inc.; Towers Perrin

Long-Term Disability Plan, 

Defendant. 

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No. CV 05-2983-PHX-MHM

ORDER

Defendants Broadspire Services, Inc. and Towers Perrin Long-Term Disability Plan

have filed a Motion for Partial Summary Judgment requesting a determination of the standard

of review in this ERISA action (Dkt. #14 & 15). Plaintiff has filed a Response (Dkt. #23 &

24), a Rule 56(f) Affidavit (Dkt. #25), and a Supplemental Citation of Authority in Support

of her Response (Dkt. #28). Defendants have filed a Reply (Dkt. #29) and a Response to

Plaintiff's Rule 56(f) Affidavit.

BACKGROUND

Plaintiff Mary Linich has sued Defendants Broadspire Services, Inc. ("Broadspire")

and Towers Perrin Long-Term Disability Plan (the "Plan"). Tower Perrin funds and

maintains the Plan for which Broadspire is the claim administrator. Plaintiff worked as an

administrative assistant for Towers Perrin before being diagnosed with fibromyalgia and

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Chronic Fatigue Syndrome, which prevented Plaintiff from being able to perform her

secretarial duties or any other occupation for which she is suited. Plaintiff applied for and

began receiving long-term disability benefits from Towers Perrin on June 1, 1999. To

remain eligible for long-term disability benefits under the Plan, Plaintiff must show that she

was unable to perform her job for the first 130 weeks that she is disabled. After 130 weeks,

Plaintiff is required to show that she is unable to perform any occupation for which she

reasonably could be suited based on her education, training, and experience. 

On June 1, 2004, the Plan terminated Plaintiff's long-term disability benefits asserting

that Plaintiff had not provided medical documentation to support her disability status. On

July 22, 2004, Plaintiff appealed Broadspire's decision, and on July 6, 2005, Broadspire

issued its final denial of Plaintiff's benefits. 

LEGAL STANDARD

Summary judgment is properly granted when no genuine and disputed issues of

material fact remain, and when, viewing the evidence most favorably to the non-moving

party, the movant is clearly entitled to prevail as a matter of law. Fed.R.Civ.P. 56; Celotex

Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Eisenberg

v. Ins. Co. of N. Am., 815 F.2d 1285, 1288-89 (9th Cir.1987).

Initially, the moving party bears the burden of showing that there is no material factual

dispute. Therefore, the court must regard as true the opposing party's evidence, if supported

by affidavits or other evidentiary material. Celotex, 477 U.S. at 324; Eisenberg, 815 F.2d

at 1289. The court must draw all reasonable inferences in favor of the party against whom

summary judgment is sought. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.

574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Intel Corp. v. Hartford Accident & Indem.

Co., 952 F.2d 1551, 1558 (9th Cir.1991).

The burden then shifts to the non-movant to establish the existence of material fact.

Celotex, 477 U.S. at 323, 106 S.Ct. 2548. The non-movant "must do more than simply show

that there is some metaphysical doubt as to the material facts" by "com[ing] forward with

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'specific facts showing that there is a genuine issue for trial.'" Matsushita, 475 U.S. at

586-87, 106 S.Ct. 1348 (quoting Fed.R.Civ.P. 56(e)). 

A dispute about a fact is "genuine" if the evidence is such that a reasonable jury could

return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The non-movant's bare assertions, standing

alone, are insufficient to create a material issue of fact and defeat a motion for summary

judgment. Id. at 247-48, 106 S.Ct. 2505.

DISCUSSION

A. APPLICABLE PLAN DOCUMENTS

The Court first considers what Plan policy governs the outcome of the case. Plaintiff

asserts that the Plan document itself is lacking because it covers six plans in thirteen pages

– some of which are only half a page of print – and it only mentions the long-term disability

("LTD") benefits plan once. Plaintiff acknowledges that new terms added to a SPD may be

incorporated into the Plan provided the new term meets all of the "statutory, regulatory, and

Plan requirements for modifying the Plan." White v. Jacobs Eng'g Group Long Term

Disability Benefit Plan, 896 F.2d 344 348 (9th Cir. 1989). Plaintiff claims, however, that

there is no evidence that the terms of the SPD were properly added to the Plan and that the

SPD does not satisfy the requirements of the regulations. 

Defendants contend that the SPD contains the Plan language applicable to the

determination of Plaintiff's benefits. Defendants cite Castillo v. Cigna Healthcare, 11 Fed.

Appx. 945, 2001 WL 638403 (9th Cir. June 7, 2001), for the proposition that the court may

consider the SPD in making the determination regarding a grant of discretionary authority.

The court in Castillo stated that the language in the SPD granted complete discretionary

authority to the plan administrator, which was found sufficient to unambiguously vest

discretion and shift the review of the plan administrator's determination to de novo.

The Ninth Circuit has looked to the SPD to find a grant of authority and discretion to

the plan administrator when making a determination as to benefit eligibility. See Bowers v.

IBM Life Ins. & Survivors Income Benefit Plan, 1997 WL 603891, at *1 (9th Cir. Sept. 30,

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1997); Castillo, 11 Fed. Appx. 945, 2001 WL 638403, at **3. A provision in the SPD can

establish the terms of the plan if the provision meets all the statutory, regulatory, and plan

requirements for modifying the plan. White v. Jacobs Eng'g Group, 896 F.2d at 348. "'Any

material modification in the terms of the plan' must be filed 'within 60 days after such

modification . . . is adopted or occurs.'" Id. Quoting 29 U.S.C. §§ 1022(a)(2), 1024(a)(1)(D).

An exception to the requirement of filing a modification exists if the modification is

"[i]ncorporated in a summary plan description or supplement filed with the Secretary of

Labor pursuant to § 2520.104a-3." Id. Quoting 29 C.F.R. § 2520.104a-4(b)(2)(i). Thus, if

the SPD contains 106 pages, which includes a more detailed explanation of the Plan, and the

modification was properly filed, the Court may consider the additional Plan terms as

presented in the SPD. Furthermore, there is no evidence to suggest that Defendants have not

properly complied with ERISA requirements. Therefore, the Court considers all Plan

documents in interpreting the terms of the Plan. 

Plaintiff continues on to argue that if the SPD is a controlling Plan document, the 1999

SPD Plan, in place when she first filed her claim, is the applicable Plan document – rather

than the July 2003 version of the SPD. See Music v. Western Conference of Teamsters

Pension, 712 F.2d 413 (9th Cir. 1983) (holding that benefits "vest immediately when that

participant becomes permanently disabled . . . it is the occurrence of the disabling injury

which ultimately and fundamentally establishes the participant's right to the disability

benefits."). Thus, Plaintiff asserts that the present uncertainty about whether the SPD meets

the statutory, regulatory, and Plan requirements makes it impossible to determine at this time

whether the Plan, the SPD, or a third-party contract governs the terms of the Plan under

which a determination of Plaintiff's benefits should be made.

In Music the court considered the

narrow issue of the benefit amount due under a disability pension plan when the plan

required a waiting period. Music, 712 F.2d 413. During the waiting period, a new collective

bargaining agreement with diminished benefits was instated and the court considered what

policy terms applied to the plaintiff's claim for disability pension benefits. Id. at 415. The

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court in Music found that when determining benefits due under a disability pension plan, the

applicable policy is the one in place when the participant's rights to the benefits vest, rather

than a subsequent revised policy. Id. at 420.

Plaintiff also cited Gibbs ex rel. Estate of Gibbs v. CIGNA Corp., 440 F.3d 571, 576

(2nd Cir. 2006) and Knudson v. City of Ellensburg, 832 F.2d 1142, 1143 (9th Cir. 1987) in

support of the argument that the 1999 SPD is the controlling document. However, Gibbs is

a non-precedential Second Circuit case that is distinguishable from the law in the Ninth

Circuit. Knudson is not an ERISA case, as it addresses disability benefits for a city police

officer. Government-employee benefit plans are not subject to ERISA regulation. Thus,

neither Gibbs nor Knudson are applicable here.

Defendants cite an Eastern District of California case which cites Grosz-Salomon v.

Paul Revere Life Ins. Co., 237 F.3d 1154, 1159 (9th Cir. 2001), for the proposition that when

making a determination as to the appropriate standard of review, a court must look at the

revised plan in effect at the time of the claim administrator made the benefit determination.

Defendants assert that the claim decision was made May 12, 2004. Therefore, Defendants

assert, the applicable Plan is the July 2003 SPD. 

The Ninth Circuit has distinguished benefits sought under ERISA pension plans from

benefits sought under ERISA LTD benefits plans. See Grosz-Salomon, 

In Grosz-Salomon the Ninth Circuit held that the revised provisions of the ERISA LTD

policy in existence at the time that disability insurer denied continuing benefits – rather than

ERISA plan as it existed when employee became disabled and originally filed her disability

claim – determined the standard of review of administrator's decision. Id. The court stated

that the fact that the plaintiff "became disabled and filed her disability claim while the first

policy was in effect was irrelevant; it does not entitle her to invoke that plan's provisions in

perpetuity." Id.

Here, as in Grosz-Salomon, the issue is which policy dictates the standard of review

of the denial of Plaintiff's LTD benefits. As in Grosz-Salomon, the plan in existence at the

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time the plan administrator denied Plaintiff's continued LTD benefits – the July 2003 SPD

– is the applicable policy under which to determine Plaintiff's claim for benefits. 

B. PLAN ADMINISTRATOR'S DECISION-MAKING ROLE

In actions to recover benefits due under an ERISA plan where the plan administrator

denied benefits, the court employs a de novo standard of review "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 Co. v. Bruch, 489 U.S. 101, 115,

109 S.Ct. 948 (1989). When an administrator has discretionary authority, federal courts

apply a more deferential abuse of discretion or arbitrary and capricious standard of review

to the administrator's decision. See, e.g., Sandy v. Reliance Standard Life Ins. Co., 222 F.3d

1202, 1204 (9th Cir. 2000). When the plan administrator exercises such discretion, the

default de novo review standard shifts to an abuse of discretion standard even if the

administrator has a conflict of interest. Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955,

965 (9th Cir. 2006) (citing Firestone, 489 U.S. at 115). To meet its burden of showing a grant

of discretion, the plan administrator must show that the plan "unambiguously" establishes it

discretionary authority. Kearney v. Standard Ins. Co., 175 F.3d 1084, 1089 (9th Cir. 1999)

(en banc); see, e.g., Abatie, 458 F.3d at 963-64 (holding that there are no "magic" words that

conjure up discretion on the part of the plan administrator, but the granting of the power to

interpret plan terms and to make final benefits determinations confers discretion on the plan

administrator). The plan administrator "carries the burden of showing that the grant of

discretion to the plan administrator is unambiguous. Thomas v. Oregon Fruit Prod. Co., 222

F.3d 991 (9th Cir. 2000). 

Defendants assert that the 2003 SPD grants to Broadspire as the Plan Administrator,

"the power and authority to construe the provisions of the plans and . . . sole discretion in

making determinations . . . including but not limited to, determinations of fact, eligibility for

benefits, and deciding any dispute that may arise regarding the rights of participants. . . ."

thereby warranting an "abuse of discretion" review standard. 

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Plaintiff argues that the Plan document itself does not delegate discretionary authority

to Broadspire but, rather, the Plan and the SPD name Towers Perrin as the Plan

Administrator and the responsible party for appointing a Plan Administration Committee

("Committee") to administer the Plan. Plaintiff acknowledges that the Plan permits the

Committee to delegate certain duties but asserts that the Plan prohibits the delegation of

fiduciary duties. Thus, Plaintiff asserts that Broadspire could not have been exercising

discretion when it terminated Plaintiff's long-term disability benefits. Therefore, Plaintiff

claims, the Court's review of Plaintiff's denial of benefits should be de novo. 

The SPD states that Committee, appointed by Towers Perrin as the administrator of

the Plan,

has the power and authority to construe the provisions of the plans and has sole

discretion in making determinations under the plans, including, but not limited

to, determinations of fact, eligibility for benefits, and deciding any dispute that

may arise regarding the rights of participants or their dependents under the

plans. All interpretations and decision of the Plan Administration Committee

are final and binding on all interested parties. 

SPD, at B-2. The language in the SPD does unambiguously grants decision-making

discretion to the Committee, thereby shifting the standard of review to abuse of discretion.

However, the Committee is appointed by the board and works on behalf of the Company.

Plan, at BROAD001551. 

Neither the Plan language nor the SPD unambiguously shifts discretionary authority

from the Committee to Broadspire as Defendants have asserted. In one instance the SPD

states that the Plan is administered by Kemper, Broadspire's predecessor. However,

"administered by" could mean that Broadspire is the plan administrator or merely that it is

the claims administrator. If it is the claims administrator, it would not have discretion to

make benefit determinations but, rather, would manage the claims for the Committee.

Nowhere else does the Plan or the SPD convey discretionary authority to Broadspire. 

Under ERISA, a named fiduciary may delegate its fiduciary responsibilities:

The instrument under which a plan is maintained may expressly provide for

procedures . . . (B) for named fiduciaries to designate persons other than

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named fiduciaries to carry out fiduciary responsibilities (other than trustee

responsibilities) under the plan.

ERISA, 29 U.S.C. § 1105(c)(1) (1988). However, the Court does not find that the Plan

unambiguously grants discretion to Broadspire as an unnamed fiduciary. Defendants'

assertion that the 2003 SPD grants power and authority to construe the Plan provisions is not

compelling because, in making their assertion, Defendants cite the language granting the

power and authority to the Committee, not to Broadspire. The Court recognizes that the Plan

documents do provide the option for the Committee to delegate authority. However, the

Court does not find language in the Plan documents specifically and unambiguously granting

authority directly to Broadspire nor to Broadspire as an unnamed fiduciary. Thus, the Court

must consider the conflict of interest between Towers Perrin and the Committee. 

C. CONFLICT OF INTEREST

The existence of a conflict of interest is relevant to how a court conducts abuse of

discretion review. Abatie, 458 F.3d at 965 citing Firestone, 489 U.S. at 115. The Supreme

Court in Firestone cautioned that "if a benefit plan gives discretion to an administrator or

fiduciary who is operating under a conflict of interest, that conflict must be weighed as a

'facto[r] in determining whether there is an abuse of discretion.'" Firestone, 489 U.S. at 115.

The Ninth Circuit's recent ruling in Abatie changes the guidelines under which a court

reviews a case where the plan administrator has discretion but operates under a conflict of

interest, as here. Under Abatie, conflict is presumed where the administrator is the funding

source and decisionmaker. Id. at 965. In other words, a plaintiff no longer needs to produce

evidence of a serious conflict. Id. Courts must "tailor the review," after weighing "all the

facts and circumstances," including the administrator's inherent conflict, that show whether

it abused its discretion. Id. at 968. In evaluating the conflict's effect on the benefits decision,

the Court may consider evidence outside the administrative record. Id. at 970. 

In light of the new guidelines set forth in Abatie, the Court finds that a Defendants'

request for a determination of the standard of review is premature. The Court is unable to

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make a determination at this time as to whether the Plan Administrator's conflict of interest

warrants de novo review.

D. RULE 56(f) REQUEST FOR ADDITIONAL DISCOVERY

The Ninth Circuit's recent ruling in Abatie also changes Plaintiff's right to seek

discovery regarding the Plan Administrator's conflict of interest. Prior to Abatie, when the

standard of review was for abuse of discretion, a district court may review only the evidence

that was presented to the plan administrator or fiduciary. Banuelos v. Construction Laborers'

Trust Funds for Southern California, 382 F.3d 897, 904 (9th Cir.2004), cert. denied, 545 U.S.

1127, 125 S.Ct. 2936 (2005).

Abatie holds that in determining whether the conflicted fiduciary abused its discretion,

the court may consider evidence outside the administrative record: 

The district court may, in its discretion, consider evidence outside the

administrative record to decide the nature, extent, and effect on the

decision-making process of any conflict of interest; the decision on the merits,

though, must rest on the administrative record once the conflict (if any) has

been established, by extrinsic evidence or otherwise. See Doe v. Travelers Ins.

Co., 167 F.3d 53, 57 (1st Cir. 1999) (holding that . . . [i]t is not clear that any

single answer covers all of the variations in ERISA cases; the 'record' may

depend on what has been decided, by whom, based on: what kind of

information, and also on the standard of review and the relief sought"). 

Abatie, 458 F.3d at 970. 

Again, in light of Abatie, the Court finds that Plaintiff has a valid claim for discovery

outside the administrative record regarding the conflict of interest involved in this case. 

Accordingly,

IT IS ORDERED that Defendants' Motion for Partial Summary Judgment (Dkt. #14)

is denied. 

IT IS FURTHER ORDERED that Plaintiff's request for discovery outside the

administrative record (Dkt. #25) is granted. The parties are given forty-five days from the

file-date of this Order to conduct discovery on the conflict of interest involved in this case.

IT IS FURTHER ORDERED that the parties shall file briefs with the Court not in

excess of five pages in length regarding the appropriate standard of review. Such briefs shall

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be filed no later than fifteen days after the conclusion of the forty-five day conflict of interest

discovery period. 

DATED this 15th day of March, 2007.

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