* District Judge of the Southern District of Texas, sitting by designation. United States Court of Appeals,

Fifth Circuit.

No. 91–4255.

KENNETH E. WILDBUR, Sr., et al., Plaintiffs–Appellants,

v.

ARCO CHEMICAL CO., et al., Defendants–Appellees.

Oct. 12, 1992.

Appeal from the United States District Court for the Western District of Louisiana.

Before KING and WIENER, Circuit Judges, and LAKE * *, District Judge.

SIM LAKE, District Judge:

Pint iffs appeal from a summary judgment denying them benefits under their employer's ERISA

plans because the district court concluded that plaint iffs were never terminated from e mployment.

Plaint iffs argue that although the district court properly applied a de novo standard in reviewing the

eligibilit y deter minat ions of the plans' administrator, the court reached the wrong result because it

limit ed its consideration to facts and arguments in the administrative record. Plaintiffs also argue that

the court erred in denying them discovery against the attorney s who advised the plans. Defendants

reply that the court reached the rig ht result and correctly limited its review to the administrative

record, but argue alternatively t hat because the court erred in applying a d e novo standard, its

judgment may also be affirmed under the abuse of discretion standard the court should have applied.

For the reasons explained below, we VACATE the judgment of the district court and REMAND the

case for further consideration.

I. FACTS

Until December 19, 1986, Atlantic Richfield Co m pany ("ARCO") employed Kenneth Wildbur

and the other plaint iffs at one of its subsidiaries, ChemLink Petroleum, Inc. Plaintiffs participated in

the Atlantic Richfield Retirement Plan ("ARRP"), which is a defined benefit plan under the Employee1 The ARRP does not contain similar language defining termination from employment.

Plaintiffs argue that a conflict exists between criteria for eligibility in ¶ 4.1(b) of the STAP and the

criteria in Schedule M and that the Schedule M criteria controls. Defendants argue that ¶ 4.1(b) Ret irement Income Security Act of 1974, 88 Stat. 829, as amended, 29 U.S.C. §§ 1001, et seq.

("ERISA"). Plaintiffs also participated in ARCO's Special Termination Allowance Plan ("STAP").

The STAP is an ER ISA employee welfare benefit plan that pays severance benefits to eligible

employees. ARCO sponsors and administers both plans.

Between 1984 and 1987 ARCO consolidated and reorganized its operations by selling assets

and divisions. In May of 1986 ARCO amended the ARRP to add section 35, which provided for

special enhanced retirement benefits. A plan member was eligible for these benefits if the member

was notified by ARCO between May 6, 1986, an d January 31, 1987, that "he or she will be

terminated from employment due to the continuing consolidation of [ARCO], with a termination date

on or before December 31, 1989, as determined by [ARCO]." If an ARRP member was eligible for

special enhanced retirement benefits under section 35, the member's retirement b enefits were

enhanced by adding five years to the employee's period of service for ca lculating benefit vesting,

eligibilit y and accrual; by adding five years to the employee's actual age for benefit calculations; and

by increasing the employee's average final base pay for benefit calculations.

When ARCO added section 35 to the ARRP it also amended the STAP. Amendment No. 12

to the STAP added Schedule M "Special Benefit Provisions" to provide special severance benefits

to employees who were informed between May 6, 1986, and January 31, 1987, of their termination

because of ARCO's consolidation and who "terminate employment" on or before December 31, 1989.

Schedule M incorporated all of the "rights and benefits" of the STAP, but provided that if a conflict

arose between the STAP and Schedule M, Schedule M would control. Paragraph 4.1(b) of the STAP

stated that a "termination of employment will not be deemed to have occurred if the Employee

co nt inues in the employment of a Company that purchases a Subsidiary or Affiliate, or asset s o f

[ARCO]." 1 An eligible employee could elect to receive either enhanced retirement benefits underapplies because it does not conflict with Schedule M, and because, even if there is a conflict,

plaintiffs are also ineligible under Schedule M.

2 At some stages of the administrative process a separate STAP committee considered and

denied plaintiffs' STAP claims. For simplicity we will refer to both plans' administrators as the

ARRP committee. section 35 of the ARRP or the special severance benefits provided by Schedule M of the STAP, but

not both.

On December 19, 1986, ARCO sold ChemLink and other assets to PONY Industries. The

As set Purchase Agreement stated that PONY will "use reasonable efforts to utilize employees of

[ARCO] in the operati on of the Purchased Assets after closing. [PONY] will, not later than five days

befo re t he Clo sing Date, specify to [ARCO] the names of employees of the Units whom PONY

propose[s] to employ and those whom PONY do[es] not propose to employ after the Closing." The

plaint iffs a re salaried ChemLink workers whom PONY continued to employ after it purchased

ChemLink from ARCO.

After the plaint iffs became PONY employees they requested enhanced retirement benefits

under section 35 of the ARRP and special severance benefits under Schedule M of the STAP. Both

requests were denied by the plans' administrator, the AR R P committee, which concluded that the

plaintiffs had not been terminated from employment. 2

Plaint iffs brought this suit in Loui siana state court in September of 1988 against ARCO,

ChemLink, ARRP and the ARRP Trustees to recover benefits under the plans. Defendants removed

the case because the plaint iffs' claims were governed by ERISA, and plaint iffs agree that this action

is brought under § 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B).

Commencement of this litigation did no t abat e plaintiffs' efforts to obtain relief via the

administrative review procedures provided by the plans. Over the next two years the parties litigated3 Defendants' Exhibits J–21 and J–22.

in both forums, and both sides sought to use events in o ne forum to enhance their position in the

other. One result of this dual track litigation was that the district court was in the unenviable position

of continually being asked to review an administrative record that was in a state of flux. After ARCO

filed its first motion for summary judgment in March of 1989, plaint iffs raised facts in opposition that

they had not presented to the ARRP committee. The parties agreed temporarily to stay the litigation

so that plaint iffs could obtain and present new evidence to the ARRP and STAP committees, and the

district court granted several stays to allow the committees to reconsider the plaint iffs' claims in light

of this evidence.

During the second phase of administrative review plaintiffs presented evidence intended to

show that when ARCO sold other divisions it had considered employees who continued working in

the sold divisions as terminated from employment and eligible for bene fit s under section 35 of the

ARRP. Plaintiffs cited ARCO's sale of its Philadelphia refinery to Transworld Oil, Ltd. and its sale

of oil and gas assets to Ho ndo Oil Co . as examples of ARCO's payment of enhanced retirement

benefits under section 35 to former ARCO employees who continued working for those operations

after ARCO sold them. Plaintiffs also identified ARCO employees who co nt inued working for

ChemLink as PONY employees, but were nevertheless considered terminated and eligible to receive

section 35 benefits. Plaintiffs argued that this evidence showed that ARCO did not uniformly

interpret section 35, but instead administered the plan to prom ote its own business purposes. After

reviewing the newly presented evidence, the plaint iffs' ARRP and STAP claims were again denied on

November 3, 1989. 3

After the second phase of administrative revie w, the parti es agai n agreed to resort to the

administrative process to allow the review committee to consider claims of newly joined plaint iffs.

In February of 1990 the new plaint iffs' claims for benefits under section 35 of the ARRP and Schedule

M of the STAP were denied.4 R.Vol. 6, p. 676.

5 Neither the district court's initial letter of affirmance (R.Vol. 7, p. 815) nor its later orders

(R.Vol. 7, pp. 855, 856) addressed the standard to be used in reviewing the administrators'

decisions, although in its second order the district court adopted the magistrate judge's finding

(based on her conclusion that an arbitrary and capricious standard applied) that plaintiffs were

entitled to discovery on "the uniformity of construction of the ARRP/STAP, the fairness and

reasonableness of the reading of the ARRP/STAP, and the anticipated costs of a favorable verdict

to the ARRP/STAP."

6 R.Vol. 10, p. 1313. After the three phases of administrative review were completed, plaint iffs' counsel sought to

depose all of the ARRP committee members and ARCO's lawy ers. ARCO moved to quash the

depositions on grounds of relevance, the attorney work product doctr i ne, and the attorney-client

privilege. The magistrate judge concluded that the discovery could yield evidence of ARCO's

uniformity of construction of the plans, the fairness and reasonableness of the administrator's reading

of the plans and the anticipated costs of a verdict favorable to the plans, all o f which would be

relevant under the arbitrary and capricious standard that the magistrate judge concluded would guide

the court's review of the merits. 4 The magistrate judge allowed plaintiffs to depose the committee

members about all phases of the administrative review process and to depose Richard Anderson, an

ARCO attorney, about the administration of the plans before September of 1988, when the lawsuit

was filed, but quashed the deposition of ARCO's trial counsel, Howard Shapiro. The district court

affirmed the magistrate judge's rulings. 5

In December of 1990 the par t ies again filed cross-motions for summary judgment. On

February 27, 1991, the district court entered a Memorandum Ruling granting defendants' motion for

summary judgment, 765 F.Supp. 891, 6 and the following month the court entered a final judgment

for defendants after denying Plaint iffs' Moti on to Set Aside Ruling and Remand and Plaint iffs' Moti on

to Reconsider.

The district court concluded that its review of the plan administrator's benefit determinations

should be conducted under a de novo standard, but observed alternatively that it would have reached7 Both the magistrate judge and the district court referred to an "arbitrary and capricious"

standard of review in describing the more deferential standard that may apply instead of a de novo

standard if the plan satisfies the criteria articulated in Firestone Tire & Rubber Co. v. Bruch, 489

U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). Although our pre- Firestone decisions generally

employed an "arbitrary and capricious" vernacular, e.g., Denton v. First National Bank of Waco,

765 F.2d 1295, 1304 (5th Cir.1985), after Firestone we have usually described this more

deferential alternative to de novo review as review under an "abuse of discretion" standard. See

Jordan v. Cameron Iron Works, Inc., 900 F.2d 53, 56 n. 1 (5th Cir.), cert. denied, ––– U.S. ––––,

111 S.Ct. 344, 112 L.Ed.2d 308 (1990). Nevertheless, both this court and district courts in this

circuit have continued to use both terms to describe the same deferential standard of review. E.g.,

Penn v. How e–Baker Engineers, Inc., 898 F.2d 1096, 1100 (5th Cir.1990). Although we employ

in this opinion what we describe as the abuse of discretion standard, we detect only a semantic,

not a substantive, difference in this label and the "arbitrary and capricious" label used in this case

by the magistrate judge and district court.

8 Memorandum Ruling, 765 F.Supp. at 895. the same result under a more deferential, arbitrary and capricious standard of review. 7 With respect

to plaint iffs' claim for special severance benefits under Schedule M, the court concluded that ¶ 4.1(b)

of STAP was not inconsistent with nor superseded by Schedule M, and that under ¶ 4.1(b) employees

such as plaintiffs who continued in the employment of a company that purchased a subsidiary o f

ARCO were not entitled to Schedule M benefits. The court also concluded, as a matter of law, that

the section 35 language "terminated from emp lo yment , due to continuing consolidation of the

company" meant termination from all employment, not merely from ARCO employment. The court

held that a change of employers with a continuat io n o f employment was not a termination from

employment and therefore t h at plaint iffs were not entitled to special severance benefits under

Schedule M of the STAP or enhanced retirement benefits under section 35 of the ARRP.

The central issue presented by this appeal involves the district court's conclusion, based on

its reading of Perry v. Simplicity Engineering Div. of Lukens General Industries, Inc., 900 F.2d 963,

966 (6th Cir.1990), that it should not consider evidenc e not presented to the plans' administrator.

Although the district court acknowledged that the Eleventh Circuit reached the opposite conclusion

in Moon v. American Home Assurance Co., 888 F.2d 86, 89 (11th Cir.1989), the court held that "[i]n

reviewing the ARRP committee's decision, we conclude that we consider only the evidence contained

in the administrative record." 89 Memorandum Ruling, 765 F.Supp. at 895.

10 Because § 6.6 of the STAP contains language that is the same as § 15.11 of the ARRP in all

material respects, for the sake of brevity our discussion will only refer to § 15.11 of the ARRP.

Our analysis applies to both plans. To determine whether the district court erred in no t co nsidering evidence beyond the

administrative record we must identify the appropriate standard of review, determine whether the

excluded evidence was relevant under that st andard, and, if so, decide whether the district court's

failure to consider this evidence requires that its judgment be reversed.

II. THE STANDARD OF REVIEW

Because the district court concluded that the only express discretionary authority conferred

on the plans' administrator was the authority to grant a review of an application for benefits that had

previously been denied, the court held that the administrator's determinations must be reviewed de

novo, rather than under the abuse of discretion standard. 9 ARCO argues that the district court should

h ave applied an abuse of discretion standard because the plan language gives to the administrator

discretionary authority to determine eligibility for benefits.

Section 15.11 of the ARRP contains a detailed procedure for claiming benefits. If a claim is

init ially denied, a claimant may seek review of the denial by the plan administrator. Section 15.11

states that if a claimant seeks such review, as plaintiffs did in this case,

[t]he Administrator sh all make a full and fair review of each application and any written

materials submitted by the applicant or the company in connection therewith and may require

the company or applicant to submit within thirty days of written notice by the administrator

therefor, such additional facts, documents, or other evidence as the Administrator, in its sole

discretion, deems necessary or advisable in making such a review. On the basis of its review,

the Administrator shall make an independent determination of the app licant 's eligibility for

benefits under the Plan. The decision of the Administrator on any application shall be final

and conclusive upon all persons if supported by substantial evidence in the record. 10

A denial of benefits challenged under § 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B),

is reviewed under a de novo standard unless the plan gives the administrator "discretionary authority11 The administrator is a committee.

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, 956, 103 L.Ed.2d 80 (1989). If the administrator

has disc ret io nary authority, a reviewing court applies an abuse of discretion standard. I d.

Discretionary authority cannot be implied; an administrator has no discretion to determine eligibility

or interpret the plan unless the plan language expressly confers such authority on the administrator.

Cathey v. Dow Chemical Co. Medical Care Program, 907 F.2d 554, 558 (5th Cir.1990 ), cert.

denied, ––– U.S. ––––, 111 S.Ct. 964, 112 L.Ed.2d 1051 (1991).

In their briefing on this issue the parties quote from p lan language cited by this and other

co urt s in an ever-expanding number of decisions and argue that the language of § 15.11 is either

similar enough to, or too dissimilar from, those plans to achieve the result advocated in this case. As

our prior decisions reflect, however, we have not imposed a linguistic template; we read a plan as

a whole to determine if, in our judgment, it satisfies the Firestone cri teria. Al though our pri or

decisions are il lust rat ive of our analysis of particular plan language, they do not diminish our

obligation to critically evaluate the language of § 15.11 under the lens of Firestone.

We conclud e t hat although § 15.11 does not expressly give the administrator authority to

construe plan terms, it does expressly give the administrator discretionary author i ty to determine

eligibilit y for benefits. Section 15.11 says that after reviewing the evidence it 1 1 believes necessary,

the administrator "shall make an independent determination of the applicant's eligibility for benefits

under the Plan" a nd t hat decisio n "shall be final and conclusive upon all persons if supported by

substantial evidence in the record." This language satisfies one of the alternative Firestone criteria

for review under an abu se of discret ion standard because it expresses, i.e., puts into words, the

authority of the administrator to determine eligibilit y. That authority is "independent," i.e., it cannot12 In one of our early ERISA decisions, Dennard v. Richards Group, Inc., 681 F.2d 306, 314

(5th Cir.1982), we cited with approval a definition of an "arbitrary and capricious" standard as

one that required a reviewing court to determine if the decision of the plan fiduciary is "supported

by substantial evidence" and is based on correct interpretations of law. Although we have no

desire to wade into the largely semantic disagreement among other circuits about how to label this

deferential standard of review, we are nonetheless confident that if a decision is supported by

substantial evidence and is not erroneous as a matter of law, it is not arbitrary and capricious. See

Sandoval v. Aetna Life & Casualty Ins. Co., 967 F.2d 377 and n. 4 (10th Cir.1992). be made by anyone else, and it is "final and conclusive," if supported by substantial evidence. 12

We reject plaint iffs' argument that a de novo standard must apply because of the absence of

the word "discretion" in the sentence of § 15.11 that states that the administrator has the power to

make an "independent determination of an applicant's eligibility for benefits...." We agree with the

District of Columbia Circuit that "[t]he Court in Firestone surely did not suggest that "discretionary

authority' hinges on incantation of the word "discretion' or any other "magic word.' Rather, the

Supreme Court directed lower courts to focus on the breadth of the administrators' power—their

"authority to determine eligibilit y for benefits or to construe the terms of the plan' ..." Block v. Pitney

Bowes Inc., 952 F.2d 1450, 1453 (D.C.Cir.1992). A ccord, De Nobel v. Vitro Corp., 885 F.2d 1180,

1187 (4th Cir.1989) ("There are obviously no magic words required to trigger the application of one

o r ano t her standard of judicial review ..."). Although the expression of the ARCO plan

administrator's discretionary authority to determine eligibilit y may not be as obvious as in some of the

cases where we have found similar discretion, we are sat isfied that, taken as a whole, § 15.11

expresses the di scret io n of the plan administrator to determine eligibility. Our analysis of § 15.11

necessarily leads us to conclude that the district court erred in applying a de novo standard of review.

III. WHAT EVIDENCE IS RELEVANT TO REVIEW UNDER AN ABUSE OF DISCRETION

STANDARD?

Application of the abuse of discretion standard may involve a two-step process. First, a court

must determine the legally correct interpretation of the plan. If the administrator did not give the plan

the legally correct interpretation, the court must then determine whether the administrator's decision

was an abuse of discretion. E.g., Jordan v. Cameron Iron Works, Inc., 900 F.2d 53, 56 (5th Cir.),13 The genesis of this two-step, multiple-part analysis appears to be Dennard v. Richards

Group, Inc., 681 F.2d 306, 314 (5th Cir.1982). cert. denied,

––– U.S.

––––, 111 S.Ct. 344, 112 L.Ed.2d 308 (1990). 13 In answering the first

question, i.e., whether the administrator's interpretation of the plan was legally correct, a court must

consider:

(1) whether the administrator has given the plan a uniform construction,

(2) whether the interpretation is consistent with a fair reading of the plan, and

(3) any unanticipated costs resulting from different interpretations of the plan.

Jordan, 900 F.2d at 56.

If a court concludes that the administrator's interpretation is incorrect, the court must then

determine whether the administ rat or abused his discretion. Three factors are important in this

analysis:

(1) the internal consistency of the plan under the administrator's interpretation,

(2) any relevant regulations formulated by the appropriate administrative agencies, and

(3) the factual background of the determination and any inferences of lack of good faith.

Batchelor v. International Brotherhood of Electrical Workers Local 861 Pension & Retirement

Fund, 877 F.2d 441, 445–48 (5th Cir.1989). Although the fact that an administrator's interpretation

is not the correct one does not in itself establish that the administrator abused his discretion, "[w]hen

[his] interpretation of a plan is in direct conflict with express language in a plan, this action is a very

strong indication

o f arbit rary and capricious behavior." I d. at 445, quoting Dennard v. Richards

Group, Inc., 681 F.2d 306, 314 (5th Cir.1982).

Our well-est ablished criteria for evaluating a benefit determination under an abuse of

discretion standard makes it obvious that so me evidence other than that contained in the14 Although the other elements—internal consistency and applicable regulations—would

generally appear to be less susceptible to extra-record evidence, we express no opinion whether

evidence apart from the administrative record could also be relevant to these elements. administrative record may be relevant at both steps of this process of judicial review. Determining

whether the administrator has given a uniform construction to a plan may require a court to evaluate

evidence of benefit determinations other than the one under scrutiny. Likewise, to determine whether

an interpretation results in unanticipated costs a cou rt may be required to review what costs were

anticipated and what costs may flow from the challenged interpretation. We can readily envision

scenarios where much of this information would not be in the administrative record.

If a reviewing court concludes that the administrator's interpretation of the plan was incorrect

and proceeds to the second step of our abuse of discretion analysis, three additional factors become

relevant. One of these (which really involves two separate questions), the factual background of the

determination and any inferences of a lack of good faith, may, at least on the question of good faith,

require the court to review evidence that was not presented to the administrator. 14 This is especially

true because we have instructed district courts to evaluate inferences of lack of good faith on a sliding

scale.

We note that "the arbitrary and capricious standard may be a range, not a point.

There may be in effect a sliding scale of judicial review of trustees' decisions ...—more

penetrating the greater is the suspicion of partiality, less penetrating the smaller that suspicion

is ...'.

Lowry v. Bankers Life & Casualty Retirement Plan, 871 F.2d 522, 525 n. 6 (5th Cir.), cert. denied,

493 U.S. 852, 110 S.Ct. 152, 107 L.Ed.2d 111 (1989). Consistent with this analysis, the Eleventh

Circuit has observed that "a wrong but apparently reasonable interpretation is arbitrary and capricious

if it advances the conflicting int erest o f t he fiduciary at the expense of the affected beneficiary or

beneficiaries unless the fiduciary justifies the interpretation on the ground of its benefit to the class

of all participants and beneficiaries." B rown v. Blue Cross & Blue Shield of Alabama, Inc., 898 F.2d

1556, 1566–67 (1 1th Cir.1990), c ert. denied,

––– U.S.

––––, 111 S.Ct. 712, 112 L.Ed.2d 70115 In Batchelor we evaluated the testimony of a pension fund actuary and evidence of the

pension plan's total assets before concluding that the plan would not face substantial unanticipated

costs if the plaintiff were to prevail, 877 F.2d at 445. In Jordan we lamented the failure of either

party to present the district court evidence of the administrator's actions in handling claims similar

to the plaintiff's and evidence concerning unanticipated costs. 900 F.2d at 56. In Penn v.

How e–Baker Engineers, Inc., 898 F.2d 1096, 1101 (5th Cir.1990), we affirmed the judgment of

the district court after a bench trial because we concluded that the trial testimony and exhibits of

the plaintiff and two of the defendant's employees provided an adequate basis for the district court

to conclude that the plan administrator's denial of pension benefits was not arbitrary or capricious.

In Kennedy v. Electricians Pension Plan, IBEW # 995, 954 F.2d 1116, 1123–24 (5th Cir.1992),

both the district court and this court evaluated evidence offered at trial by the plan administrator

of the substantial costs that would result from a decision favorable to the plaintiff. We also noted

"the scant evidence" presented by both parties before the district court on the factual background

and good faith of the plan fiduciary. 954 F.2d at 1124–25. In one of our few decisions reviewing

a district court's de novo review of a benefit determination, Schultz v. Metropolitan Life Ins. Co.,

872 F.2d 676, 679–80 (5th Cir.1989), we implicitly approved the district court's use of affidavit

evidence offered to show inconsistent treatment of other similar claims by the plan administrator. (1991).

Perhaps because the focus of our p rior decisions was to define and apply the appropriate

standard of review, we do not appear to have explicitly stated that evidence beyond the administrative

record may be considered by a reviewing court. Although our abuse of discretion analysis and the

manner in which we have applied it submits to no other reasonable interpretation, 15 we now make

manifest that a district court is not confined t o the administrative record in determining whether,

under our analytical

framework, a plan administrator abused his discretion in making a benefit

determinati o n. This is not to say that a litigant dissatisfied with an administrator's benefit

determination is free to disregard t he evidence before the administrator and relitigate in court the

historical facts surrounding a claim. We have long held that in conducting review under an abuse of

discretion standard , a district court should evaluate the administrator's fact findings regarding the

eligibilit y of a claimant based on t he evidence before the administrator, assuming that both parties

were given an opportuni ty to present facts to the administrator. S ee Denton v. First National Bank

of Waco, 765 F.2d 1295, 1304 (5th Cir.1985); L owry v. Bankers Life & Casualty Retirement Plan,

865 F.2d 692, 694 (5th Cir.), reh'g denied, 871 F.2d 522, cert. denied, 493 U.S. 852, 110 S.Ct. 152,

107 L.Ed.2d 111 (1989). Yet, in these and other opinions, we have also explained how other

evidence, not dealing with the historical facts underlying t he benefit determination, and therefore16 Memorandum Ruling, 765 F.Supp. at 895–896.

usually not in the administrative record, was relevant under our abuse of discretion analysis.

Defendants argue that allowing a district court to consider evidence not in the administrative

record would undermine the utility and integrity of the administrative process. Without focusing on

particular types of evidence or the reasons they could be relevant to judicial review, the district court

adopted this argument, reasoning that if district courts were to consider evidence not presented to

the administrator, they would become "su bst itute plan administrators" and in so doing, would

frustrate ERISA's goal of prompt resolution of claims by plan fiduciaries. 16

The district court found support for its ruling in the Sixth Circuit's decision in P erry v.

Simp licity Engineering Div. of Lukens General Industries, Inc., 900 F.2d 963 (6th Cir.1990). In

Perry the district court granted summary judgment for the plan administrator after concluding that

under an arbitrary and capricious standard the administrative record supported the decision to deny

Perry benefits because he was not totally disabled while covered by his employer's disabilit y plan. The

court refused to reconsider its decision in light of evidence from a vocational expert that Perry had

become disabled while he was covered by his employer's plan. The Sixth Circuit held that the district

court should have used a de novo standard of review but affirmed the summary judgment after

concluding that no other result was possible even if a de novo standard had been used. Id. at 967.

To reach this result the Sixth Circuit had to decide what weight to give to the evidence

offered by plaint iff that was not in the administrative record. The court acknowledged that d e novo

review could reasonably mean either review based only on the administrative record, or review based

on the record an d any additional evidence received by the reviewing court. I d. at 966. After

observing that the Supreme Court in Firestone had not stated which type of de novo review it had

in mind, the Sixth Circuit held the first type to be more appropriate for two reasons. First, its prior

precedent limit

ed courts to revi e w of the administrative record alone when using an arbitrary and17 In Oldenburger v. Central States Pension Fund, 934 F.2d 171, 174 (8th Cir.1991), the

Eighth Circuit stated that judicial review under an arbitrary and capricious standard was limited to

the evidence before the plan administrator. Like Perry and Sandoval, the case turned on an issue

of historical fact—whether the plan member was an employee at his normal retirement date.

Because the Eighth Circuit's opinion does not indicate that plaintiff sought to introduce evidence

before the district court that was not considered by the plan administrator, its statement regarding

what evidence the court could consider appears to be dicta. capricious standard. Second, it concluded that permitt ing courts to consider evidence not in the

administ rat ive record would impair ERISA's goal of achieving prompt and inexpensive benefit

determinations by plan administrators. Id. at 966–67.

In S andoval v. Aetna Life & Casualty Ins. Co., 967 F.2d 377 (10th Cir.1992), the Perry

rationale was found persuasive in the context of a review of a benefit determination under an arbitrary

and capricious standard. Sandoval's long-term disability benefits under his emplo yer's plan were

terminated after the plan administrator determined that he was no longer totally disabled, and the plan

review committee upheld this decision. Although Sandoval was represented by counsel before the

administrative review committee, neither he nor his counsel informed the committee that he continued

to be disabled not only because of his prior physical impairments, but also because he was suffering

from psychological impairment. Before the district court, however, Sandoval presented evidence of

psychological impairment, and the court found that he was in fact psychologically disabled. The court

nevertheless aff

irmed the decision to terminate Sandoval's benefits because he had never offered

evidence or argued psychological impairment during the administrative review process, and based on

the record before it, the administrator's decision to terminate Sandoval's disability benefits was not

arbitrary and capricious.

The Tenth Circuit affirmed. Citing P erry, the court concluded that "[i]n determining whether

the plan administrator's decision was ar bit rary and capricious, the district court generally may

consider only the arguments and evidence before the administrator at the time it made that decision."

967 F.2d at 380. Like the Sixth Circuit, the Tenth Circuit concluded that a contrary rule would result

in increased expense and delay of benefit determinations by plan administrators. 1718 The court's opinion does not say what additional evidence the district court considered.

Perry and Sandoval do not reflect a consensus among the circuits on this issue; the Eleventh

and Third Circuits have held that a district court may consider evidence that was not before the plan

administrator. In M

oon v. American Home Assurance Co., 888 F.2d 86 (11th Cir.1989), the district

court granted summary judgment to the plaintiffs for accidental death benefits under a group travel

accident insurance policy issued by the defendant. Without deciding whether the district court should

have applied ERISA instead of state insurance law, the Eleventh Circuit concluded that the judgment

could be affirmed under an ERISA de novo standard because that standard was essentially the same

as the state law standard of review used by the d istrict court. Of i m portance to thi s case was the

Elevent h Circuit's conclusion that limiting a trial court conducting d e novo review to the f acts

available to the administrator at the time of the decision was "contrary to the concept of a de novo

review." Id. at 89. 18

T he Third Circuit reached the same conclusion in Luby v. Teamsters Healt h, Welfare &

Pension Trust Funds, 944 F.2d 1176, 1184–85 (3d Cir.1991). The district court, in order to

determine whether a deceased plan member had signed beneficiary cards, examined evidence of his

signature on other documents that were not before the plan administrator. In affirming the district

court the Third Circuit held t hat although limiting the district court to review of the evidence

considered by the plan administrator was appropriate where a deferential standard of review applied,

such a limitation made no sense when the administrator's decision was reviewed de novo, especially

where, as in the case before it, there was no administrative record to review on the crucial issue of

who executed the benefit cards. Id. at 1184–85.

We find both illuminat ing and prescient the Second C ircuit 's discussion of the apparent

conflict between these two lines of cases.

We believe that it is unnecessary to resolve the conflict between Moon and Perry todetermine whether the district court properly admitted the expert testimony at issue in this

case, although we note that in earlier decisions we appear to have accepted without discussion

a dist rict court's consideration on de novo review of evidence not presented to the plan

administrator. See, e.g., Heidgerd v. Olin Corp., 906 F.2d 903 (2d Cir.1990). Even if we

accepted the Sixth Circuit's view that a co urt's de novo review of the denial of ERISA

benefits should be limited to the information presented to the administrator who denied the

claim—an issue we do not decide—we believe that evidence regarding the proper

interpretation of the terms of the plan, like the expert testimony here, would be treated

differently from

evidence intended to establish a particular historical fact regarding the

claimant, like the evidence of the date of total disability at issue in Perry. Consideration of

evidence relevant to plan interpretation on de novo review does not implicate the Sixth

Circuit's concern that courts would become "substitute plan administrators," particularly since

de novo review under the Firestone standard presupposes that the administrator's role does

not include discretion to interpret the terms of the pla n. Indeed, at l east one ci rcui t has

suggested, without deciding, that it may be appropriate under Firestone to apply different

standards of review to claim denials based on factual determinations and claim denials based

on interpretation of the terms of the plan.

Masella v. Blue Cross & Blue Shield of Connectic ut, Inc., 936 F.2d 98, 104 (2d Cir.1991). We

recently held that it is appropriate under Firestone to apply different standards of review to claim

denials based on factual determinations and denials based on interpret at io ns of plan language. In

Pierre v. Connecticut General Life Ins. Co., 932 F.2d 1552 (5th Cir.), cert. denied,

––– U.S.

––––,

112 S.Ct. 453, 116 L.Ed.2d 470 (1991), the district court reviewed a plan administrator's denial of

accidental death benefits to a widow under her husband's ERISA plan. Applying a d e novo standard

of review, the court held that hearsay evidence considered by the administrator was untrustworthy

and in the absence of that evidence there was an insufficient evidentiary basis to support the

administrator's denial of benefits.

On appeal in Pierre we began our analysis by observing that benefit determinations made by

a plan administrator may be divided into two general categories.

"First, he must determine the facts underlying the claim for benefits. Second, he must then

determine whether those facts constitute a claim to be honored under the terms of the plan.

[ Firestone ] addressed the proper standard of review that is t o be given to the pl an administrator's second determination. [It] did not speak to the first."

Pierre, 932 F.2d at 1557 (citations omitted). We then held that it was entirely consistent with the

principles of trust law that undergirded the Supreme Court's analysis in Firestone to apply different

standards of review to these categories of decisions. After a thorough analysis of both ERISA and19 See Davidson v. Prudential Ins. Co. of America, 953 F.2d 1093, 1095 (8th Cir.1992)

(district court reviewing denial of disability benefits under de novo standard did not abuse its

discretion in refusing to consider additional evidence of disability where employee failed to

present it to plan administrator). We do not, however, read Pierre or our other decisions as

limiting judicial review of all fact determinations made by a plan administrator to the

administrative record. For example, in this case the ARCO plan administrator found that it had

consistently interpreted the eligibility requirement in § 35.2. We have consistently stated that

courts may consider evidence outside the administrative record of other benefit determinations in

deciding whether the administrator has uniformly interpreted plan language, and we see no reason

the role of a court in undertaking this analysis should be truncated merely because a plan

administrator may have considered some of the same evidence. trust laws, we concluded that a reviewing court should evaluate fact determinations "that reflect a

reasonable and impartial judgment" of a plan administrator under an abuse of discretion standard

whether or not the plan gave the administrator express discr etion under the F irestone analysis to

determine eligibility or construe plan terms. 932 F.2d at 1562. Applying this standard to the facts

in Pierre we held that there was sufficient evidence apart from the untrustworthy hearsay to support

the administrator's decision, especially since the plaint iffs had been requested by the administrator to

submit any evidence that Pierre's death was accidental, but had declined to do so.

The ARCO defendants argue that Pierre supports the decision of the district court to limit

review to the evidence before the ARRP and STAP administrator. The problem with this argument

is that the basis for the district c o urt 's decision was not its approval of the administrator's fact

findings, but its conclusion that the administrator corr ectly interpreted the eligibility criteria of the

ARRP and the STAP. Firestone still dictates the standard for reviewing this type of determination

by a plan administrator. Therefore, in this case the abuse of discretion standard applies, not because

the eligibilit

y determinations turned on the administrator's findings of historical facts about plaint iffs'

claims, but because we have concluded that the administrator had discretion under § 15.11 to make

eligibility determinations.

Although it can be argued that our decisions in Denton, Lowry, and Pierre would support a

decision by a district court conducting an abuse of discretion review to limit its review of the

historical facts underlying a claim to those presented to the plan administrator, 19 that is not what the20 Plaintiffs' Brief at 12.

district court did in this case. Instead, the court concluded, as a matter of law, that the administrator's

interpretations of the plans' eligibilit y criteria were correct. In other words, using the nomenclature

of our two-step abuse-of-discretion analysis, the district court held that the admin istrator's

interpretations of the plans' eligibilit y criteria was consistent with a fair reading of the pla ns. Thi s

distinction makes Perry and Sandoval inapposite since they both involved district court review of a

plan administrator's determination of questions of historical fact. Like the Second Circuit in M asella,

we believe that evidence beyond the administrative record showing inconsistent plan interpretation

by the administrator, as well as evidence relevan t to the other el em ents of our abuse of di

screti on

analysis, does not "implicate the Sixth Circuit's concern [and the concern of the district court in this

case] that courts would become "substitute plan administrators....' " 936 F.2d at 104. We therefore

conclude that evidence that is relevant in determining whether under our two-step framework, an

administrator's interpretation of a plan was legally correct, and if not, whether the administrator

abused his discretion, may be considered by a district court even if this evidence was not part of the

administrative record.

IV. DID THE DISTRICT COURT ERR IN FAILING TO CONSIDER RELEVANT

EVIDENCE?

In their br iefs plaint iffs present a number of factual and legal arguments why the district

court's refusal to consider what plaint iffs characterize as their "best evidence and arguments" 20 led

the district court to err in holding that plaint iffs were not entitled to the benefits they sought. Ideally,

to determine whether the district court erred we would identify the evidence that the court did not

consider and then determine whether it was relevant under our abuse-of-discretion analysis. If so,

we would then decide whether the district co urt 's failure to consider this evidence was reversible

error.

In thi s case the record we have been presented prevents us from engaging in this type of21 Memorandum Ruling, 765 F.Supp. at 896.

22 Memorandum Ruling, 765 F.Supp. at 895.

23 Memorandum Ruling, 765 F.Supp. at 896. analysis. For example, plaintiffs argue that the district court erred in failing to consider other ARCO

i nterpretations of the word "terminated" as used in § 35.2 of the ARRP. The evidence cited by

plaintiffs includes evidence from the second phase of the administrative process dealing with

interpretations given by the plan administrator to § 35.2 and similarly wo rded provisions of the

AR RP, and o ther evidence not presented at the second hearing. We cannot tell from the record,

however, whether the district court considered either of these types of evidence . The court was

obviously aware of some of this evidence, but whether that knowledge affected the court's decision

is not clear. At certain places in the court's Memorandum Ruling it appears that the court may have

been influenced by some of this evidence. For example, in footnote 3 to conclusion of law 6 the court

stated that it "has had extreme difficult y in deciding this case given the close question of plan

language interpretation. This task has not been made any easier by the obvious efforts of Atlantic

Richfiel d t o ignore the language and meaning of Section 35 to provide for Section 35 benefits to

certain select employees in their personnel and legal departments." 21

Yet, counterbalanced against this type of equivocal reference to evidence or arguments that

the court did not ident ify, is the court's explicit statement in conclusion of law 3 that "[i]n reviewing

the ARRP committee's decision, we conclude that we consider only the evide nce cont ained in the

administrative record." 22 In a similar vein, in conclusion of law 6 the court stated:

Section 35 of the Atlantic Richfield Ret irement Plan has not been historically

interpreted consistent with the wording of subsection 4.1(b) of the Atlantic Richfield Special

Termination Allowance Plan. Irrespective of the lack of interpretive history of Section 35,

this Court finds, as a matter of law, that the language "terminated from employment, due to

the continuing consolidation of the company' refers to the termination from all employment

and not merely that the employee was no longer being compensated by At lant ic Richfield.

(emphasis ours) 23

We cannot tell from these statements whether the district court was aware of evidence of contrary24 In their briefs the parties expend considerable effort in arguing, from the plaintiffs' standpoint,

that the district court failed to consider other relevant evidence, and from the defendants'

standpoint, that the court may have considered that evidence, but did not mention it, or,

alternatively, that the evidence was not relevant anyway. Because we vacate the judgment and

remand for further consideration by the district court, we do not attempt to respond to those

arguments, even assuming that it would be possible to do so on this record.

25 Memorandum Ruling, 765 F.Supp. at 895.

26 R.Vol. 10, pp. 1324, 1325.

27 R.Vol. 10, p. 1333. interpretations of § 35.2 but consciously chose no t to let this evidence affect its decisionmaking

process, or whether the court evaluated it but concluded that it did not overcome the court's

conclusion as to the meaning of the plans' eligibility criteria. 24

We are also in doubt as to what the district court meant by its statement that it considered

"only evidence contained in the administrative record." 25 Plaintiffs argue that the court declined not

o nly to consider facts and arguments raised in the cross-motions for summary judgment that were

never presented to the plan administrator, but that the court also declined to consi der "rem anded

facts," that is, facts and arguments first presented to the plan administrator on remand. Plaintiffs

attempt to buttress this argument by referring us to a copy of t heir Post Heari ng Mem orandum

responding to questions raised by the court during oral argument. The Post Hearing Memorandum,

which together with an accompanying letter to the district judge 2 6 were docketed with t he court's

Memorandum Ruling, contains numerous underscorings and marginal comments ind icating that

someone carefully read and evaluated it. Among these comments is the note that the reader would

"not consider" certain evidence urged by plaint iffs' cou nsel. 27 Directly opposite this notation is

plaint iffs' argument that the court should consider the affidavit of Kenneth Terrell, a former regional

manager for ChemLink, as evidence that ARCO had previously told ChemLink employees that they

would receive enhanced retirement benefits provided by § 35, and that other ChemLink employees

did receive enhanced benefits even though they continued working for ChemLink after PONY bought

it. This affidavit (Exhibit B to Plaintiffs' Opposition to Defendants' Motion for Summary Judgment)was executed on April 14, 1989, and was submitted to the ARRP committee as part of the second

remand. The "not consider" notation is even more puzzling because the court referred to unspecified

evidence of this type in footnote 3 of its Memorandum Ruling.

Although we recognize that under Fed.R.Civ.P. 52(a) "[f]indings of fact and conclusions of

law are unnecessary on decisions on motions under Rule 12 or 56 ...," we are als o mindful of our

requirement that a district court explain its reasons for granting a motion for summary judgment in

sufficient detail for u s to determine whether the court correctly applied the appropriate legal test.

E.g., Myers v. Gulf Oil Corp., 731 F.2d 281, 283–84 (5th Cir.1984). Our decision should not be

understood as br o adening in any way our prior precedent regarding the sufficiency required of a

district court's explanation of its reasons for granting a motion for summary judgment. We do not

accept plaint iffs' argument that the district court's failure to expressly list or refer to each factual and

legal argument raised by plaintiffs means that the court did not consider these facts and arguments.

Nor are we intimating that all six of the elements that may affect a district court's abuse-of-discretion

analysis are present in every case, or that if all of them are potentially relevant in a particular case, that

a district court must refer to them in deciding a case. We are mindful that in many cases the parties

may not raise all of these elements, and that elements that are raised may not be supported by

sufficient summary judgment evidence to create a genuine issue of material fact.

But in the context of this case, where we are to draw all legitimate factual inferences in favor

of the nonmovant, where the district court acknowledged that in deciding a "close question of plan

language interpretation" it would not consider e vidence not presented to the plan administrator,

where we have extreme difficult y determining what evidence and arguments the court did consider,

and where the evidence that the court arguably did not c o nsider may be relevant under the proper

analyt ical framework for evaluating the administrator's denial of benefits, we conclude that it is

necessary to vacate the judgment and reman d fo r a fuller analysis of the evidence under the28 We are mindful of the district court's statement that it would reach the same result under an

arbitrary and capricious review, but as we have attempted to explain above, the court's

Memorandum Ruling does not apply the analytical framework necessary for us to evaluate the

court's decision under that type of review, i.e., abuse of discretion review. When faced with a

similar problem in Dennard v. Richards Group, Inc., 681 F.2d 306, 314 (5th Cir.1982), we

employed the same approach we reluctantly apply here. appropriate standard of review. 28 We intimate no opinion as to the co rrect ness of the ultimate

decision of the district court affirming the administrator's decisions. The district court may well have

reached the right decision. On the record before us, however, we are unable to perform our

coordinate role of reviewing the decision of the distr ict co urt because we cannot tell whether the

court properly evaluated all of the potentially relevant evidence.

V. PLAINTIFFS' RIGHT TO DEPOSE THE PLANS' ATTORNEYS

After the ARRP committee completed the last phase of its review of plaint iff s' claims, the

plaint iffs sought to depose all of the ARRP and STAP committee members and ARCO's in-house and

trial counsel. ARCO moved to quash t he depositions on grounds of relevance, the attorney work

product doctrine, and the attorney-client privilege. The magistrate judge allowed plaintiffs to depose

the ARRP and STAP committee members about all phases of the administrative process and allowed

plaint iffs to depose Richard Anderson, ARCO's in-house counsel, about events before plaint iffs filed

this action. The magistrate judge quashed the deposition of ARCO's trial counsel, Howard Shapiro,

after concluding that his communications with the plan administrator were protected by the

attorney-client privilege.

Plaint iffs argue that they should have been allowed to depose both counsel on all advice they

gave the plans, including advice given during the two remands after this suit was filed, because the

attorney-client privilege cannot be asserted by an ERISA plan fiduciary against plan beneficiaries such

as plaint iffs. An ERISA plan is a separate legal entity from its sponsor, 29 U.S.C. § 1132(d), and a

plan's administrator owes a fiduciary duty to the plan's beneficiaries, not its sponsor. S ee 29 U.S.C.

§§ 1002(21), 1103(a) and (c)(1), and 1104(a)(1). When an attorney advises a plan administrator or29 R.Vol. 6, p. 660.

30 Ruling at p. 7.

31 Ruling at p. 8. other fiduciary concerning pla n administ ration, the attorney's clients are the plan beneficiaries for

whom the fiduciary acts, not the plan administrator. W ashington–Baltimore Newspaper Guild, Local

35 v. Wa shington Star Co., 543 F.Supp. 906, 909 (D.D.C.1982). Therefore, an ERISA fiduciary

cannot assert the attorney-client privilege against a plan beneficiary about legal advice dealing with

plan administration. Id.

The magist rat e judge found that there had never been a mutuality of interest that would

create a fiduciary relationship between ARCO's trial counsel, Shapiro, and t he plan beneficiaries

because all of Shapiro's communications with the plan administrator were made for the purpose of

defending the pending lawsuit and did not deal with plan administration. This finding is supported

by Defendants' Response to Plaint iffs' Supplemental Discovery Memorandum, 29 and plaint iffs do not

dispute it in their briefs before this court. We therefore AFFIRM the magistrate judge's ruling that

Shapiro was not subject to discovery about his communications with plan administrator.

The magistrate judge allowed plaint iffs to depose ARCO's in-house counsel, Anderson, about

communications with the plan administrator before the lawsuit was fi led because she found that

Anderson "did previously perform in a fiduciary capacity toward the plaint iffs when he acted as legal

counsel to the administrator of the ARRP/STAP during times prior to the institution of this suit." 30

The magistrate judge found, however, that after suit was filed "the mutuality of interests between the

plaint iffs and Mr. Anderson, which is a prerequisite to the existence of the fiduciary exception to the

attorney/client privilege, ceased to exist

... as the interest s o f the administrator, the remaining

beneficiaries, and the plan itself, and the interests of the plan-beneficiaries diverged at that point." 31

The magistrate judge therefore held that discovery into Anderson's communications with the pl an

administrator after the suit was filed was "protected by the attorney-client privilege and/or the work32 Id.

product doctri ne." 32

Plaintif fs argue t hat regardless of the lawsuit, the plan administrator was still passing on

plaint iffs' claims, and the administrator's lawyer, Anderson, was still rendering advice to the

ad minist rat o r about these claims. According to plaintiffs, this advice, which dealt with plan

administration, was no less discoverable just because a lawsuit had been filed. Plaintiffs were still plan

beneficiaries and Anderson, as an attorney for the plan, still bore a fiduciary relationship toward them.

Neither the magistrate judge in her ruling nor defendants in their brief cite any authority approving

an exception to the rule that the attorney-client privilege is not implicated when plan members seek

to discover communications between a plan's administrator and its lawyer merely because the interests

of the plan administrator is not then coincidental to the interests of all plan beneficiaries.

We express no opinion on the scope of the attorney-client privilege, however, because even

if plaint iffs were correct on this argument, we would still affirm the magistrate judge's decision. In

addition to the attorney-client privilege, the magistrate judge found that discovery into Anderson's

communications with plan administrator after plaint iffs' suit was filed was protected by the attorney

work product doctrine. Plaintiffs have not challenged that ruling. Because the attorney work product

doctrine fosters interests different from the attorney-client privilege, it may be successfully invoked

against a pe nsio n plan beneficiary even though the attorney-client privilege is unavailable. H elt v.

Metropolitan District Comm'n, 113 F.R.D. 7, 12 (D.Conn.1986) ("The plaintiff does "not stand in

the same position with respect to the attorney, for whom the work-product rule is designed to benefit,

as [he do es t o his] o wn trustees.' "). By failing to address this issue in their briefs, plaintiffs have

abandoned it. S ee, e.g., United States v. Lindell, 881 F.2d 1313, 1325 (5th Cir.1989), cert. denied,

493 U.S. 1087, 110 S.Ct. 1152, 107 L.Ed.2d 1056 (1990). We therefore decline to disturb the

magistrate judge's conclusion that discovery against Anderson was protected by the work product

doctrine.VI. CONCLUSION

For the foregoing reasons, we VACATE the judgment of the district court and REMAND

this action for further consideration by the district court.