Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-99-05327/USCOURTS-caDC-99-05327-0/pdf.json

Parties Involved:
Federal National Mortgage Association
Appellee
Jane Fitts
Appellant
Unum Life Insurance Company of America
Appellee

Document Text:

<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 13, 2000 Decided January 12, 2001

No. 99-5327

Jane G. Fitts,

Appellant

v.

Federal National Mortgage Association and

Unum Life Insurance Company of America,

Appellees

Appeal from the United States District Court

for the District of Columbia

(No. 98cv00617)

John J. Witmeyer III argued the cause for appellant.

With him on the briefs was David E. Schreiber.

M. Carolyn Cox argued the cause for appellee Federal

National Mortgage Association. With her on the brief was

Craig Goldblatt.

USCA Case #99-5327 Document #568668 Filed: 01/12/2001 Page 1 of 10
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Frank C. Morris, Jr. argued the cause for appellee Unum

Life Insurance Company of America. With him on the brief

was Ann M. Courtney.

Before: Edwards, Chief Judge, Rogers and Garland,

Circuit Judges.

Opinion for the court filed Per Curiam.

Per Curiam: Jane G. Fitts sued her former employer and

the insurance company that administers claims under the

employer's long-term disability plan, alleging that they violated the Americans with Disabilities Act of 1990 (ADA) and the

Employee Retirement Income Security Act of 1974 (ERISA)

by terminating her disability benefits after 24 months. The

district court dismissed Fitts' ADA counts and granted summary judgment against her on the ERISA count. We affirm

the dismissal of the ADA counts on the ground that the longterm disability plan comes within the safe harbor provisions

of that statute. Because we conclude that the district court

applied the wrong standard of review to the ERISA count,

however, we reverse the grant of summary judgment and

remand the case for further proceedings.

I

Under its employee welfare benefit plan, the Federal National Mortgage Association ("Fannie Mae")1 offers its employees the opportunity to select from an array of benefits,

including a long-term disability insurance policy provided by

Unum Life Insurance Company of America. In the event

that an employee insured under the policy later becomes

totally disabled, the policy pays a percentage of the employee's income until the age of 65. The policy, however, places a

24-month cap on benefits for disabilities due to mental illness,

which it defines as "mental, emotional or nervous diseases or

disorders of any type."

__________

1 Fannie Mae is a federally-chartered, private corporation that

facilitates the secondary market in residential mortgages. Federal

National Mortgage Association Charter Act, 12 U.S.C. s 1716b.

USCA Case #99-5327 Document #568668 Filed: 01/12/2001 Page 2 of 10
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Jane Fitts, an attorney, was employed by Fannie Mae from

1982 to 1995 and paid the required premiums for the longterm disability policy. In 1995, Fitts became disabled by

bipolar disorder, an illness characterized by cycles of depressive and manic episodes. See Am. Psychiatric Ass'n, Diagnostic & Statistical Manual of Mental Disorders 395 (4th ed.

text rev. 2000). Fitts applied to Unum for benefits under the

policy, which Unum granted. Because Unum classified her

disorder as a mental illness, however, it limited her benefits

to 24 months. Fitts unsuccessfully protested Unum's decision, arguing that bipolar disorder is associated with changes

in the physical structure of the brain and often runs in

families, suggesting genetic causation. Unum asserts that it

invited Fitts to submit additional medical information supporting her claims, but that she responded only with "conclusory" letters from her treating psychiatrist and two other

psychiatrists. Fitts asserts that she signed a release permitting Unum to view her entire medical file, which contained

data supporting her claim. Unum refused to alter its classification of bipolar disorder as a mental illness and ceased

paying Fitts benefits after 24 months.

Fitts sued both Unum and Fannie Mae, contending that the

termination of her benefits after 24 months violated Titles I

and III of the ADA, 42 U.S.C. ss 12101-12213. Title I

prohibits a covered employer from discriminating "against a

qualified individual with a disability because of the disability

of such individual in regard to ... [the] terms, conditions and

privileges of employment." 42 U.S.C. s 12112(a). Title III

prohibits discrimination "on the basis of disability in the full

and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public

accommodation ...." 42 U.S.C. s 12182(a). Fitts also

claimed that the termination of her benefits violated ERISA,

29 U.S.C. ss 1001-1461, which entitles a participant or beneficiary of a covered plan "to recover benefits due to him under

the terms of his plan," 29 U.S.C. s 1132(a)(1)(B).2

__________

2 In addition, Fitts asserted claims under the District of Columbia

Human Rights Act (DCHRA), D.C. Code s 1-2501 et seq., and

USCA Case #99-5327 Document #568668 Filed: 01/12/2001 Page 3 of 10
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Pursuant to Federal Rule of Civil Procedure 12(b)(6), the

district court dismissed Fitts' claim under Title I of the ADA

because, as a totally disabled individual, she was not a

"qualified individual with a disability" eligible to sue under

Title I. Fitts v. Federal Nat'l Mortgage Ass'n, 44 F. Supp.

2d 317, 322-23 (D.D.C. 1999). The court also dismissed Fitts'

claim under Title III of the ADA, finding that the long-term

disability policy was not a good or service provided by a

public accommodation and hence that neither Fannie Mae nor

Unum was subject to suit under that Title. Id. at 324.

Finally, the court granted Unum's motion for summary judgment on Fitts' ERISA claim, ruling that Unum had not acted

in an arbitrary and capricious manner in classifying bipolar

disorder as a mental illness. Fitts v. Federal Nat'l Mortgage

Ass'n, 77 F. Supp. 2d 9, 24 (D.D.C. 1999). We review both

the dismissal of the ADA claims and the grant of summary

judgment on the ERISA claim de novo. See Systems Council

EM-3 v. AT&T Corp., 159 F.3d 1376, 1378 (D.C. Cir. 1998);

Heller v. Fortis Benefits Ins. Co., 142 F.3d 487, 492 (D.C. Cir.

1998).

II

In EEOC v. Aramark Corp., 208 F.3d 266 (D.C. Cir. 2000),

plaintiffs challenged an employee benefit plan that provided

24 months of long-term disability benefits for persons with

disabilities caused "to any extent" by mental conditions, but a

longer benefit period for those with physical disabilities. As

Fitts does here, the Aramark plaintiffs contended that the

__________

District of Columbia common law. The district court dismissed

those claims. Fitts did not appeal the dismissal of her common law

claims and has not argued the DCHRA issue in her briefs. Accordingly, neither is before us on this appeal. See Fed. R. App. P.

28(a)(9) (brief must "contain appellant's contentions and the reasons

for them"); see also Artis v. Greenspan, 158 F.3d 1301, 1302 n.1

(D.C. Cir. 1998) (issues listed but not briefed may be deemed

waived). The one sentence Fitts provides on the DCHRA issue in

her reply brief is insufficient, and we would not in any event

consider an argument raised for the first time in a reply brief. See

Herbert v. Nat'l Acad. of Sciences, 974 F.2d 192, 196 (D.C. Cir.

1992).

USCA Case #99-5327 Document #568668 Filed: 01/12/2001 Page 4 of 10
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

early termination of disability benefits violated Titles I and

III of the ADA. The district court dismissed the Aramark

plaintiffs' claims for the same reasons relied upon by the

district court here. On appeal, we declined to address the

district court's reasons, affirming instead on a different

ground--that the challenged plan was protected by the

ADA's safe harbor for bona fide employee benefit plans.

Aramark, 208 F.3d at 268. That provision, contained in ADA

s 501(c), states:

Subchapters I through III of this chapter and title IV of

this Act shall not be construed to prohibit or restrict--

(1) an insurer ... or any agent, or entity that

administers benefit plans, or similar organizations

from underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent

with State law; or

(2) a person or organization covered by this chapter

from establishing, sponsoring, observing or administering the terms of a bona fide benefit plan that are based

on underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent

with State law; or

(3) a person or organization covered by this chapter

from establishing, sponsoring, observing or administering the terms of a bona fide benefit plan that is not

subject to State laws that regulate insurance.

Paragraphs (1), (2), and (3) shall not be used as a

subterfuge to evade the purposes of subchapter[s] I and

III of this chapter.

42 U.S.C. s 12201(c).

The Aramark parties agreed that the benefit plan came

within the language of s 501(c)(3), because it was "bona fide

in that it exists and pays benefits," 208 F.3d at 269 (quoting

Public Employees Ret. Sys. of Ohio v. Betts, 492 U.S. 158, 166

(1989)), and because the preemption provisions of ERISA

rendered it "not subject to State laws that regulate insurance," id. (quoting 42 U.S.C. s 12201(c)(3)). Plaintiffs argued, however, that the plan failed to qualify for safe harbor

because it was a "subterfuge." Id. We disagreed, holding

that because Aramark's long-term disability benefit plan,

including the 24-month cap on mental disability benefits, had

been in place since 1982--long before the ADA's 1990 enactment--the 24-month benefit limit could not fall within

s 501(c)'s subterfuge exception to the safe harbor. Aramark,

208 F.3d at 269-70.

At Fitts' request, her appeal was held in abeyance pending

the decision in Aramark. The parties have fully briefed the

safe harbor issue, including the applicability of Aramark to

the instant case. We conclude that Aramark controls here

and requires that we affirm the dismissal of Fitts' ADA

claims.

USCA Case #99-5327 Document #568668 Filed: 01/12/2001 Page 5 of 10
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Like the plaintiffs in Aramark, Fitts does not dispute that

Fannie Mae's long-term disability plan, as implemented

through the Unum policy, comes within the language of

s 501(c)(3) as a bona fide benefit plan not subject to state law

because of ERISA preemption. Fitts does contend that the

plan is a "subterfuge," but in light of Aramark that argument

is unavailing: Fitts concedes that the 24-month cap on disability benefits for mental illness has been in place--without

modification--since at least 1985. Although Fitts argues that

the intentional retention of the cap since the 1990 passage of

the ADA renders the subterfuge provision applicable, adoption of such a theory would eviscerate the rule announced in

Aramark. Accordingly, we conclude that Fannie Mae falls

within the protection of the safe harbor provision of

s 501(c)(3).

Unum is likewise eligible for safe harbor protection, although as the insurer it is protected under s 501(c)(1) rather

than (c)(3). Subsection (c)(1) requires both that the longterm disability plan not be a subterfuge to evade the purposes

of the ADA and that it not be "inconsistent with State law."

The record contains an uncontested declaration that the

Unum policy was approved by the District of Columbia

Department of Insurance and Securities Regulation, J.A. at

30, and Fitts cites no District of Columbia case or statute

with which the plan is inconsistent. Accordingly, we affirm

USCA Case #99-5327 Document #568668 Filed: 01/12/2001 Page 6 of 10
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

the dismissal of appellant's ADA claims against both Fannie

Mae and Unum.

III

Under ERISA, a participant in or beneficiary of a covered

plan may sue "to recover benefits due to him under the terms

of his plan." 29 U.S.C. s 1132(a)(1)(B). Fitts contends that

Unum and Fannie Mae improperly classified her disability as

mental rather than physical, and hence improperly terminated her long-term disability benefits after only 24 months.

The district court concluded that the appropriate standard of

review for that classification was whether it was arbitrary and

capricious, determined that it was not, and granted summary

judgment for defendants.

In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101

(1989), the Supreme Court held that a denial of benefits

challenged under ERISA s 1132(a)(1)(B) is to be reviewed

under a de novo standard--not under the more deferential

arbitrary and capricious 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." 489 U.S. at 115. Firestone's employee benefit

plan provided severance benefits for employees "if released

because of a reduction in work force or if ... physically or

mentally unable to perform [the] job." Id. at 105-06. The

Court held that those provisions did not require that the

administrator's eligibility determinations be given deference.

Id. at 111-12.

Unum contends that, as the claims administrator of the

long-term disability policy, it has discretionary authority to

determine benefits eligibility because the policy requires the

insured to submit proof of disability. Such a requirement,

Unum asserts, necessarily gives the insurer discretion because it must evaluate the legitimacy of the proof submitted.

Unum Br. at 10. As Unum conceded at oral argument,

however, virtually all insurance policies require proof of eligibility before the dispensation of benefits--hardly a surprising

fact, since insurance companies are not in the business of

USCA Case #99-5327 Document #568668 Filed: 01/12/2001 Page 7 of 10
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

giving away money to anyone who requests it. Accordingly,

if we were to regard any plan that requires proof of eligibility

as conferring discretion, Firestone's exception would swallow

its rule and render the standard of review deferential in

almost every case. As Unum's argument would effectively

circumvent the Supreme Court's decision, we cannot accept

it.3

As a fallback, Unum points out that under Fannie Mae's

Flexible Benefits Plan, of which the long-term disability

insurance plan is a part, the company's Benefit Plans Committee is designated the Plan Administrator, s 2.01(e), and is

to "be afforded maximum deference allowed by law" in all of

its "decisions, interpretations [and] determinations," s 7.01.

The Plan further provides that the Committee "may" delegate its authority to "outside consultants or companies,"

including "those matters involving the exercise of discretion."

s 7.03 (emphasis added). Unum contends that "by purchasing and incorporating into its plan the terms of the long-term

disability policy, which itself grants Unum discretion, Fannie

Mae in fact did delegate discretionary authority to Unum."

Unum Br. at 9.

First, as we have noted above, the policy does not grant

Unum discretion; hence the purchase and incorporation of

__________

3 Most circuits that have considered the issue have concluded that

the mere requirement of proof of eligibility does not confer discretion upon an administrator. See Herzberger v. Standard Ins. Co,

205 F.3d 327, 332 (7th Cir. 2000) ("That the plan administrator will

not pay benefits until he receives satisfactory proof of entitlement

... states the obvious, echoing standard language in insurance

contracts not thought to confer any discretionary powers on the

insurer."); see also Feder v. Paul Revere Life Ins. Co., 228 F.3d

518, 524 (4th Cir. 2000); Kinstler v. First Reliance Standard Life

Ins. Co., 181 F.3d 243, 252 (2d Cir. 1999); Kearney v. Standard Ins.

Co., 175 F.3d 1084, 1089-90 (9th Cir. 1999) (en banc). Unum relies

heavily on the Sixth Circuit's decision in Perez v. Aetna Life Ins.

Co., 150 F.3d 550 (6th Cir. 1998). The policy at issue there,

however, did not simply require proof of eligibility but "satisfactory" proof. No such language appears in Unum's policy. Moreover,

Perez's view has been rejected by the above-cited circuits.

USCA Case #99-5327 Document #568668 Filed: 01/12/2001 Page 8 of 10
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

the policy into the benefits plan establishes nothing. Nor is

there any other indication that Fannie Mae (or, more precisely, the Committee) has delegated any discretionary authority

to Unum to determine eligibility.4 Finally, there is no "decision[ ], interpretation[ ] [or] determination[ ]" by Fannie Mae

itself at issue here. Fannie Mae has renounced its own

discretionary authority with respect to disability benefits

determinations. See Fannie Mae Br. at 11. At oral argument, the parties agreed that Fannie Mae exercised no

discretion with respect to the eligibility determination in this

case, and further agreed that there is no appeal to Fannie

Mae from Unum's disability benefit determinations. Thus,

neither Unum nor Fannie Mae exercised the discretion that

would justify the application of arbitrary and capricious review.

For the foregoing reasons, we conclude that Unum's classification of Fitts' illness as mental rather than physical must

be reviewed de novo. We do not, however, proceed with the

de novo review ourselves, because numerous factual disagreements persist. Fitts contends that if Unum's classification is

reviewed de novo, the record will demonstrate that her

disability is physical; Unum asserts the contrary. Fitts

contends that current medical research on bipolar disorder

supports her claim; Unum argues that there is no such

medical consensus. Unum asks us to rule on a motion to

exclude certain items of evidence proffered by the plaintiff;

Fitts argues that the evidence is admissible. Although the de

novo standard might theoretically permit this court to perform the necessary review, the intensely factual nature of the

record counsels that we return the case for the district court's

examination. In light of the change in the standard of

review, the parties will be free to supplement the existing

record by, inter alia, submitting current medical evidence

regarding bipolar disorder.

__________

4 Indeed, section 7.10(d) of the Plan provides that "notwithstanding any other provision of this section 7, claims with respect to the

benefits provided under an insurance contract ... shall be made

and reviewed under the terms of such contract." As discussed, the

terms of the long-term disability policy do not confer discretion on

Unum.

USCA Case #99-5327 Document #568668 Filed: 01/12/2001 Page 9 of 10
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

IV

We affirm the district court's dismissal of Fitts' claims

under the ADA on the ground that the long-term disability

plan is protected by the statute's safe harbor provision. We

reverse the court's grant of summary judgment on the

ERISA claim, however, and remand for de novo review of

Unum's classification of Fitts' disability as a mental illness.

USCA Case #99-5327 Document #568668 Filed: 01/12/2001 Page 10 of 10