Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca4-07-01580/USCOURTS-ca4-07-01580-0/pdf.json

Parties Involved:
Prudential Insurance Company of America
Appellee
Patricia Woods
Appellant

Document Text:

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

PATRICIA WOODS, 

Plaintiff-Appellant,

v.  No. 07-1580

PRUDENTIAL INSURANCE COMPANY OF

AMERICA,

Defendant-Appellee. 

Appeal from the United States District Court

for the Eastern District of Virginia, at Newport News.

Jerome B. Friedman, District Judge.

(4:06-cv-00148-JBF)

Argued: May 15, 2008

Decided: June 11, 2008

Before SHEDD, Circuit Judge, HAMILTON, Senior Circuit Judge,

and Terry L. WOOTEN, United States District Judge for the

District of South Carolina, sitting by designation.

Vacated and remanded by published opinion. Judge Shedd wrote the

opinion, in which Senior Judge Hamilton and Judge Wooten joined.

COUNSEL

ARGUED: Gregory Edward Camden, MONTAGNA, KLEIN, CAMDEN, LLP, Norfolk, Virginia, for Appellant. Walter Laurence Williams, WILSON, ELSER, MOSKOWITZ, EDELMAN & DICKER,

LLP, McLean, Virginia, for Appellee. ON BRIEF: Dana L. Plunkett,

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WILSON, ELSER, MOSKOWITZ, EDELMAN & DICKER, LLP,

McLean, Virginia, for Appellee. 

OPINION

SHEDD, Circuit Judge: 

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), establishes the principle that courts review de novo an ERISA1

 benefits

determination unless the plan confers discretionary authority on its

administrator. In this case we again confront the question of exactly

what language is sufficient under Firestone to confer discretion on a

plan administrator — and thus trigger an abuse-of-discretion review

in the courts — over benefits determinations. In answering this question, we conclude that the plan currently before us does not clearly

vest discretionary authority in its administrator and that the district

court erred in engaging in an abuse-of-discretion review. Accordingly, we vacate the district court’s judgment and remand for further

proceedings using a de novo standard of review.

I

Patricia Woods was employed by Wendy’s International, Inc. as a

co-manager. During the time of her employment, she was insured

under a long-term disability plan (the "Plan") issued and administered

by Prudential Insurance Company of America ("Prudential"). After

Woods was injured in an automobile accident, she filed a claim for

benefits under the Plan. Prudential approved Woods’ claim and paid

her benefits for an initial twelve-month period ending in January

2005. Subsequently, Prudential reevaluated Woods’ claim and denied

further benefits beyond January 2005. Woods then pursued administrative appeals with Prudential, which eventually culminated in Prudential’s final denial of benefits in September 2006. 

Consequently, Woods brought this action under ERISA. Both parties moved for summary judgment, which the district court granted in

1Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq.

2 WOODS v. PRUDENTIAL INSURANCE CO.

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Prudential’s favor. In so doing, the court concluded that (1) the Plan

vests discretion in Prudential to make benefits determinations and (2)

under a modified abuse-of-discretion standard Prudential’s decision

must be upheld.2 Woods now appeals, asserting that a de novo standard of review applies to Prudential’s benefits determination and

requesting that we remand to the district court for reconsideration

under that standard.

II

A.

"In reviewing the denial of benefits under an ERISA plan, a court’s

first task is to consider de novo whether the relevant plan documents

confer discretionary authority on the plan administrator to make a

benefits-eligibility determination." Blackshear v. Reliance Std. Life

Ins. Co., 509 F.3d 634, 638 (4th Cir. 2007). In undertaking this

inquiry, we begin with the broad principle set out in Firestone. There,

the Court held that "a denial of benefits . . . 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, 489 U.S. at 115

(emphasis added). If such discretionary authority is conferred, the

courts’ review is for abuse of discretion. Id. Thus, Firestone established that the default standard of review is de novo, and that an

abuse-of-discretion review is appropriate only when discretion is

vested in the plan administrator. See, e.g., Bynum v. Cigna Healthcare

of North Carolina, Inc., 287 F.3d 305, 311 (4th Cir. 2002). 

In applying Firestone, we have held that an ERISA plan can confer

discretion on its administrator in two ways: (1) by language which

"expressly creates discretionary authority," and (2) by terms which

"create discretion by implication." Feder v. Paul Revere Life Ins. Co.,

228 F.3d 518, 522-23 (4th Cir. 2000). However, regardless of whether

discretion is created expressly or implicitly, we have consistently

2The district court employed a modified abuse-of-discretion standard

because Prudential is both the administrator and the insurer of the Plan.

See, e.g., Doe v. Group Hospitalization & Med. Sers., 3 F.3d 80, 87 (4th

Cir. 1993). 

WOODS v. PRUDENTIAL INSURANCE CO. 3

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required that the plan manifest a clear intent to confer such discretion.

See, e.g., id. at 523; Gallagher v. Reliance Std. Life Ins. Co., 305 F.3d

264, 268 (4th Cir. 2002). Moreover, we have made it plain that "[i]f

a plan does not clearly grant discretion, the standard of review is de

novo." Id. at 270 n.6. Finally, in the context of determining whether

a plan sufficiently confers discretion, we have held that "[a]ny

ambiguity in an ERISA plan is construed against the drafter of the

plan . . . and in accordance with the reasonable expectations of the

insured." Id. (internal quotations omitted).

B.

With these principles in mind, we must determine whether the Plan

confers discretionary authority over benefit determinations on Prudential. While both parties agree that the Plan does not do so

expressly, Prudential contends that such authority should be implied

because the Plan specifies that a claimant is eligible for benefits

"when Prudential determines" that eligibility exists and that disabilities are "determined by Prudential."3

 We find Prudential’s argument

unpersuasive.

Although the Plan’s language vests authority in Prudential, it does

not create any discretionary authority, as required by Firestone. As

we indicated in Gallagher, discretionary authority is not conferred

"by the mere fact that a plan requires a determination of eligibility or

entitlement by the administrator." 305 F.3d at 269 (internal quotations

3The Summary Plan Description ("SPD") contains the following language: 

The Prudential Insurance Company of America as Claims

Administrator has the sole discretion to interpret the terms of the

Group Contract, to make factual findings, and to determine eligibility for benefits. The decision of the Claims Administrator

shall not be overturned unless arbitrary and capricious. 

J.A. 584 (emphasis added). Both Prudential and Woods acknowledge

that this language is not relevant to our inquiry because it is not contained in the Plan itself. Nonetheless, its inclusion in the SPD demonstrates that Prudential knows how to draft language expressly reserving

discretionary authority. 

4 WOODS v. PRUDENTIAL INSURANCE CO.

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omitted).4

 In other words, almost all ERISA plans designate an

administrator who, in order to carry out its duties under the plan, must

determine whether a participant is eligible for benefits. Yet this

authority to make determinations does not carry with it the requisite

discretion under Firestone unless the plan so provides. Firestone itself

is based on this distinction. That decision, grounded in common law

trust principles, drew a contrast between trustees who had no discretion but who, of course, had authority to manage a trust, and trustees

who had been granted discretion, in addition to their authority. See,

e.g., Firestone, 489 U.S. at 111 ("where discretion is conferred upon

the trustee," abuse-of-discretion review is appropriate); id. (abuse-ofdiscretion review is appropriate when "discretion [is] vested in [trustees] by the instrument under which they act"); see also Haley v. Paul

Revere Life Ins. Co., 77 F.3d 84, 88 (4th Cir. 1996) (noting difference

between authority/duty to pay benefits and grant of discretion over

benefit determinations). This distinction is important because ERISA

plans are to be construed "in accordance with the reasonable expectations of the insured" when ambiguous, Gallagher, 305 F.3d at 269,

and are to "enable plan beneficiaries to learn their rights and obligations at any time" by "reliance on the face of written plan documents,"

Blackshear, 509 F.3d at 643 (internal citations and alteration omitted).

A plan which simply conveys authority to an administrator creates the

expectation only that such authority will be exercised, not that the

administrator will enjoy wide discretion in wielding its authority as

well as freedom from searching judicial scrutiny. 

In reaching this conclusion, we find ourselves in substantial accord

with the Seventh Circuit’s decision in Herzberger v. Standard Ins.

Co., 205 F.3d 327, 332 (7th Cir. 2000):

We hold that the mere fact that a plan requires a determination of eligibility or entitlement by the administrator . . .

4Prudential relies heavily on our statement in Feder that "if the terms

of a plan indicate a clear intention to delegate final authority to determine

eligibility to the plan administrator, then [we] will recognize discretionary authority by implication." 228 F.3d at 523. However, as we made

clear in Gallagher, we cannot infer a final authority to determine eligibility from the mere requirement that a determination be made by the

administrator. 

WOODS v. PRUDENTIAL INSURANCE CO. 5

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does not give the employee adequate notice that the plan

administrator is to make a judgment largely insulated from

judicial review by reason of being discretionary. Obviously

a plan will not — could not, consistent with its fiduciary

obligation to the other participants — pay benefits without

first making a determination that the applicant was entitled

to them. The statement of this truism in the plan document

implies nothing one way or the other about the scope of

judicial review of his determination, any more than our

statement that a district court "determined" this or that telegraphs the scope of our judicial review of that determination.

In Gallagher, we implicitly accepted this reasoning, see 305 F.3d at

269-70, and we expressly do so now. 

This approach makes clear that the Plan’s language merely designates who must make benefit determinations and the timing of those

determinations. Nothing in the phrases "when Prudential determines"

or "determined by Prudential" implies the conferral of discretion, as

opposed to mere authority, on Prudential. A contrary conclusion —

that the bare assignment of authority to Prudential creates Firestonetype discretion — would lead to an abuse-of-discretion (rather than

a de novo) review whenever an administrator is vested with authority

to make eligibility determinations. Thus, because an administrator

always possesses such authority (the responsibility to make eligibility

determinations being inherent in the office of administrator), Prudential’s argument would lead to an abuse-of-discretion review in nearly

every ERISA benefits case, thereby jettisoning Firestone’s distinction

between authority and discretionary authority.

III

Accordingly, Prudential’s denial of Woods’ claim must be

reviewed de novo. We vacate the judgment entered below and remand

for further proceedings consistent with this opinion.

VACATED AND REMANDED

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