NOT RECOMMENDED F OR F ULL-TEXT PUBLICATION F ile Nam e: 11a0679n.06 Nos. 10-1006/10-1190 UNITED STAT ES COURT OF AP P EALS F OR THE S IXTH CIRCUIT

TI MOTHY O’ CAL L AGHAN , Plaintiff-Appellee Cross-Appellant,

v. SPX C ORPORATI ON, Def endant- Appellant Cross-Appe llee. ) ) ) ) ) ) ) ) ) ) ON AP P E AL FROM THE UNI TED STATES DI STRI CT COU R T FOR THE EASTERN DI STRI CT OF MI CHI GAN

BEF ORE: ROGERS and KETHL EDGE, Circuit Judges; and RUSSEL L , Chief District J udg e. * ROGERS, Circuit J udg e. Timothy O’Callag han, a pa

rticipant in SPX Corpora

tion’s long

term disability plan, sued his former employ e r a f te r th e company discontinued his disability benef its. The district cour

t entere d judgme nt on the admini strative record for O’Callag han, finding t hat the plan administrator’s decision was arbitra ry and capr icious. Be cause there is insufficient indication that the plan administrator adequat ely considere d O’Callag han’s objective evidenc e of disability , judgm en t on the administrative rec ord was proper . Howeve r, O’Callag han is not entitled to attorney ’s fe es.

The Honora

ble Thomas B. Russell, United States Chief District J udg e for th e W est ern * District of Ke ntucky , sitti ng by desig nation.Nos. 10-1006/10-1190

O’Callaghan v. SPX Corp.

SPX maintains a long- term disability plan pursuant to the Employ ee Re t i re m en t I ncome Security Act of 1974 (ERI SA). S ee 2 9 U. S.C. § 1001 et seq . The plan define s “disability ” as follows: You ar e conside red disable d under this Plan if, due to a non-work rela ted illness or acc idental injury , y ou are rec eiving appropr iate car e fr o m a p h y sician on a reg ular basis and for the first 24 months from th e o n s et of the disability , y ou are not able to ear

n 70% o f y o u r pre- disability ear nings from y our reg ular occupation in the local economy ; or bey ond 24 months, y ou are not able to ear n 70% of y our pre- disability ear nings at any occupa

tion for which y ou are rea sonably qualified in the local e conomy . R. 8 at 5. The plan limit s disability benef its to 18 months for “neur omusculoskeletal or soft tissue disorder, unless there is some objective medical evidenc e of cer tain conditions.” R. 8 at 8. The plan is org anized as a Vol u n t ar y Employ ees’ Be nefic iary Association (VEB A), a form of trust that is funded entirely by employ ee contributions. SPX self-insure s the trust in the eve n t o f a defic it in employ ee c ontributions. O’Callag han worke d as a sales manag er for SPX until J anuar y 2002. He had a history of lower back pain and had previously been diag nosed with a deg ener ative disc disease. After sever al spinal surg erie s failed to relieve the pain, O’Callag han in J uly 2002 applied for and beg an rec eiving long- term disability benef it s under the company ’s ERI SA plan. As a condition for rec eiving pay ments, SPX requi r e d O ’ Ca ll a g h a n to apply for Social Security Disability I ncome (SSDI ) benef its, which he w as aw arde d in Febr uary 2004.

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O’Callaghan v. SPX Corp. Shortly there afte r, O’Callag h an u n d erwent another spinal surg ery in October 2004. The results of this surg ery wer e promising, and O’Callag han’s condition beg an to improve over the next y ear . By October 2005, O’Callag han’s trea ting phy sician, Dr. Br adley Ahlg ren, noted t h at O’Callag han wa s off a ll pain medication and wa s pleased w ith the outcome of his surg ery . The p l an ad m inistrator revie wed O’Callag han’s claim in late 2006 and require d him to submit to an independe nt medical examination. An elec tromy og raphic (EMG) exam administered in F ebrua ry 2007 did not reve al any objective neurolog ical defic its, sug g esting that O’Callag han’s condition had improved since his October 2004 surg ery . The plan administrator also ref err ed O’Callag han to Dr. Ba la Prasad for a phy sical examination. Dr. Prasad deter mined that O’Callag han

was subject to light (but perma nent) functional restric tions due to his re s i d u al back pain, but conclude d that O’Callag han reta ined the functional capa city to retur n t o work. Ba sed on these finding s and the absenc e of “objec tive medical evidenc e” of disability , the plan administrator denied continuation of long -term c overa g e in 2007. O ’ Ca ll a g h a

n th e n appea led administratively

. I n his first-leve l appea l, O’ Ca ll a g h a n s u b mi tt e d Dr. Ahlg ren’ s old trea tment notes from October 2005, which did littl e to rebut Dr. Prasad’ s finding s. Dr. Ahlg ren’ s notes indicated that O’Callag han had experience d “sig nificant improvement” and was doing “much better than he had been doing preope rative l y . ” R. 8 at 352. The plan administrator d enied O’Callag han’s first-leve l appea l in J anuar y 2008, noting the absenc e of objective medical finding s to support O’Callag han’s clai m th a t h e was disabled, and citing Dr. Ahlg ren’ s statement that O’Callag han wa s doing be tter.

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O’Callaghan v. SPX Corp.

I n rea lity , it appea

rs that O’Callag han had taken a turn for the worse afte r October 2005. His second- level appea l was acc ompanied by the repor t of a reha

bilitation speci alist, Dr. J ames Stathakios, who phy sically examined O’Callag han in Fe bruar y 2008 and administered an MRI scan and another EMG exam. The results of these tests indicated that O’Callag han had been experiencing postoperative problems since his October 2004 surg ery . The clinical tests came back as “abnor mal” and showed postoperative chang es i ncluding “disc b u lging ” and “ner ve root irritation.” Fr om his phy sical examination, Dr. Stathakios conclude d that O’Callag han had a decr ease d rang e of motion in his s p i n e, an d decr ease d ref lexes and sensation in his lower left leg

. I n addition to the new medical evidenc e, O’Callag han submitt ed the repor t of a vocational consul ta

n t, which sug g ested that O’Callag han’s “diffic ulty with conce ntration” and “nee d to lie down or re c li n e f r e q u e n tly throug hout the day ” would “p re cl u d e all work activity ” and “would not be acc eptable to any employ er.” O’Callag han also cited his 2004 S o cial Security awa rd—which had not been discontinued—as evidenc e of his disability

. The plan administrator ref err ed the new medical evidenc e to another medical examiner, Dr. Phili p Marion, for a file r eview. D r. Mar ion was g iven copies of Dr. S tathakios’s t rea tment notes and the subsequent MRI and EMG results, as well as Dr. Prasad’ s repor t and the initial EMG results. I n a two-pag e opinion, Dr. Marion concl uded that O’Callag han was not disabled and that he was “func tionally capa

ble of perf

orming sedenta

ry capa city occupa

tional activities.” R. 8 at 449. SPX denied O’Callag han’s second- level appea l in Aug ust 2008, noting that its dec i s i o n was based on information from O’Callag han’s tr e a ti n g p h y s ic ia

n s a nd the results of Dr. Prasad’ s examination. The

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O’Callaghan v. SPX Corp.

final benef

its denial letter conclude d that “[t] he objective clinical finding s did not support Mr. O’Callag han’s c laim to be disabled fr om any occupa tion.” R. 8 at 367 (emphasis in orig inal). O’Callag han filed thi s suit in state court in November 2008. After SPX remove d the case
to the fede ral district court below, the parties filed cross motions for judgme nt on the administrative

rec ord. The district court g rante d O’Callag han’s motion, finding that the plan administrator’s decision was arbitra ry and capr icious, and g ave three rea sons for its decision. First, the court conclude d that the plan administrator was acting under a confl i ct of interest beca use SPX reta ins potential liability under the plan and would be r equire d to fund the plan in the e vent of a defic it in employ ee contributions. Second, the district court found that SPX had failed to addre ss the favor able evidenc e O’ C al l ag han prese nted during his second- level appea l. The court rea soned that “Dr

. Prasad’ s limit ed revie w did not include the objective tests and the narr ative statements that O’Callag han subm itted d u ri n g the appeals proce ss,” and that “Dr

. Marion did not explain why he disag ree d with Dr. Stath ak i o s ’ i n t erpr etation of the objective medical tests and did not even acknow ledg e that t h er e was a disag ree ment.” R. 15 at 8. Third, the district court cited the plan administrator’s failure to explain why it took a position differ ent from that of the Social Security Administration reg arding O’Callag han’s disability

. The district court declined to awa rd O’Callag han attorney ’s fee s, rea soning that SPX had not acte d in bad faith and its position was not frivolous. O’Callaghan v. SPX Corp. , No. 2:09-cv-10196, 2010 WL 259052, at *1 (E.D. Mich. J an. 20, 2010). Howeve r, the court g rante d O’Cal l agh an ’s

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O’Callaghan v. SPX Corp.

reque st for pre

judgme nt interest. Id. at *2. SPX appea ls the denial of i ts motion for judg ment on the administrative re cord, a nd O’Callag han cr oss-appe als the denia l of attorney ’s fe es. The plan administrator’s decision to deny continuation of long- term disability benef its was arbitra ry and capr icious beca

use it was not the result of a “deliber ate, principled rea soning proce ss” and was not “supported by substantial evidenc e.” See Glenn v. MetLife , 461 F.3d 660, 666 (6th Cir. 2006). There is no indication that either the plan administrator or its independe nt medical examiner, Dr. Marion, adequately consid e red the subsequent evidenc e of disability submitt ed in O’Callag han’s second- level administrative a ppeal. Where, as here , an ERI SA p l an gra nts the plan administrator discretionar y authority to deter mine benef

it elig ibil it

y , b e n e f it d e n ia ls a

r e r e v ie w e d u

n d e r a d e f ere ntial arbitra

ry -and- capr icious standard. See Firestone Tire & Rubber Co. v. Bruch , 489 U.S. 101, 115 (1989). Def ere ntial though the standard may be, howeve r, it is more than a “mer e formality ” or “rubbe r stamp.” See Glenn , 461 F.3d at 666 (interna l quotation marks omitted). The plan administrator’s decision must be the result of a “deliber ate, principled rea soning proce ss” and must be “supported by substantial evidenc e.” Id. (interna l quotation marks omitted). I n deter mining whether the plan administrator’s decision passes muster under this standard, “we are require d to revie w ‘the quali ty and quantity of the medical evidenc e and the opinions on both sides of the issues.’” Id. (quoting McD onald v. W estern-Southe rn L i f e In s . Co. , 347 F.3d 161, 168 (6th Cir. 2003)). Application of this standard leads t o t h e conclusion that SPX’s decision to discontinue O’ Callag han’s long- term disability benef its was arbitra ry and ca pricious.

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O’Callaghan v. SPX Corp. First, th ere is no indication from the rec ord that either the plan administrator or its independe nt medical examiner, Dr. Marion, adequately considere d O’Callag han’s objecti v e me d ic a l

ev i d en ce s ubmitted afte r the initial denial of benef its. “[T] he failure to consider evidenc e that i s offe red afte r an initial denial of benef its rende rs a final denial of benef its arbitra ry and capr icious.” Glenn , 461 F.3d at 672. Her e, the new evidenc e includes (1) rec ent MRI and EMG results
contra dicting the results of tests pe rfor med by the plan administrator’s first medical examiner, Dr. Prasad; (2) a statement from O’Callag han’s second tre ating phy sician, Dr. Stathakios, inter preting these results and opining that O’Callag han is perma nently disabled; and (3) the repor t of a vocational consultant sug g esting that O’Callag han’s f unctional limitations would prec lude all work activity

. SPX’s final benef

its de nial letter, informing O’Callag han of the results of his second- level appea l, makes no mention of the new medical evidenc e, and there is no indication that the plan administrator otherwise c onsidered it. I nstead, the administrative rec ord ref lects that Dr. Mario n i s the only person who ever revie wed O’ Callag han’s objec tive evidenc e of disability

. But Dr . Marion’s two- pag e re port g ives

no indication that he adequatel y co nsidered this evidenc e. Although Dr. Marion noted the MRI repor t “demonstra

ting the patient’s postsurg ical deg ener ative lu m b ar spine chang es,” he did not expla i n wh y h e discounted this evidenc e in favor of the results of Dr. Prasad’ s examination, underta ken more than a y ear ear lier. Simi larly , althoug h Dr. Marion’s repor t mentions the statement from Dr. Stathakios, the repor t do es not explain why Dr. Marion discounted the opinion of O’Callag han’s trea ting phy sician. Gene rally s peaking , a plan administrator “may not reje ct

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O’Callaghan v. SPX Corp. summarily the opinions of a trea ting phy sician, but must instead g ive rea so n s for adopting an alterna tive opinion.” Elliott v. Metropolitan Life Ins. Co. , 473 F.3d 613, 620 (6th Cir. 2006). Her e, the plan administrator g ave controlli n g we i g ht to Dr. Marion’s opinion—a non-treating, nonexamining source —without a ny explanation and, as in Elliott , “for no appar ent rea son.” We ha ve held that benef

it denials based on simil arly perf unctory file revie ws are arbitra ry and capr icious. See Kalish v. Liberty Mutual , 419 F.3d 501, 509-11 (6th Cir. 2005); Calvert v. Firstar Finance, Inc ., 409 F.3d 286, 295- 97 (6th Cir. 2005). Contrary to SPX’s arg ument, the district court did not misapply the arbitra ry -and- capr icious standard in r eac hing this conc lusion. The court proper ly revie wed “the quantity and the quality of the medical evidenc e and the opinions on both sides of the issue,” the require ment stated in Glenn , 461 F.3d at 666, and conclude d that the final benef its denial was n o t s u p p o rt ed by substantial evidenc e beca

use the plan administrator failed to consider evidenc e submitt ed afte r the initial denial of benef its. SPX protests that the court should have defe rre d to the plan administrator’s finding that the opinion of Dr. Marion was more cre dible than the opinions of O’Callag han’s trea ting phy sicians. But in light of the rec ord as supplemented afte r the first-leve l appea l, Dr. Marion’s two-pag e repor t is hardly “substantial evidenc e” on which to base a final denial of benef its. And without some explanation for why one side was cre dited over the other, there is no ind i ca tion that the plan administrator’s finding was the r esult of a “ delibera te, principled r easoning proce ss.” Second, the plan administrator failed to mentio n the Social Security Administration’s
contra ry conclusion. The Administration found that O’Callag han was perma nently disabled despite

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O’Callaghan v. SPX Corp.

the fac t that its definition of “per mane n t l y disabled” is more stringe nt than the definition of “disability ” under the S PX plan. SSDI benef its are awa

rded only if the per son’s impairment is so

sever e that he or she “ca

nnot .

. . eng ag e in a

ny other kind of substantial g ainful work which exis ts in the national economy .” 42 U.S.C. § 4 2 3 (d )( 2 )(A). I n contra st, a person may be considere d “disabled” under the SPX plan if he or she is “not able to ear n 70% of [hi s/her] pre- disability

ear nings a t any

occupation for which [s/ he] is rea sonably qualified in the local e conomy .” R. 8 at 5. Despite the appar ent anomaly of considering O’Callag han disabled for Social Security purposes but not for purposes of SPX’s plan, the final benef its denial letter completely ignor es O’Callag han’s SSDI awa rd. This is espec ially troubling g iven that SPX require d O’Callag han to apply for Social Security benef its and indee d p ro fi ted from his rec eipt of those pay ments, beca

use the plan’s long- term disability pay

ments wer e offse t to the extent of O’Callag han’s SSDI awa rd. See Benne tt v. Kemper National Servic es, Inc. , 514 F.3d 547, 554 (6th Cir. 2008). SPX counter s that there was g ood rea son to discount the SSDI awa

rd beca use it was “stale.” See Cox v. Standard Life Ins. Co. , 585 F.3d 295, 303 (6th Cir. 2009). O’Callag han was awa rded SSDI benef

its in Fe bruar

y 2004, sever al m o nths befor e his October 2004 surg ery , which at least temporar ily improved his condition, and the Social Security Administration did not revie w its awa rd for another three y ear s. Thus, at the time the plan administrator revie wed O’Callag han’s claim in late 2006, the SSDI awa rd may not have acc urate ly ref lected O ’Callag han’s f

unctional ca

pacity

.

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O’Callaghan v. SPX Corp.

I t is true that the Social Secur ity awa rd would be more rele vant, and the f ailure to mention it even more troubling, if the plan administrator had conducte d its revie w in late 2004, shortly afte r the S SDI awa

rd and befor e O’Callag han underwent surge ry . Ne verthe less, the failure t o mention and rebut the SSDI awa

rd, like the failure to adequately consider O’Callag han’s objective medical

ev i d en ce , is a fac tor that weig hs in favor of finding that the plan administrator’s decision was arbitra ry and ca pricious. See B ennett , 514 F.3d a t 553-54. We do not, howeve r, rely on the t hird basis for the district court’s ruling —the presence of

a conflict of interest. Whether SPX was acting under a conflict of interest is questionable. SPX does
not have an “immediate financ ial interest,” like that in Metropolitan Life Ins. Co. v. Glenn , 554 U.S. 105, 112 (2008), in the pay ment of benef

its beca use it does not pay benef

its from its g ener al assets and does not fund the trust from which benef its are paid. I nst ea d , S P X’ s ERI SA plan is funded entirely by employ ee contributions. There is no evidenc e that SPX has ever had to make a stop-loss contribution to the plan. I ndeed, there is no evidenc e that any conflict of interest actua lly influence d the plan administrator’s decision at all. Thus, even if there was a structura l conflict of interest (and we ha ve our doubts about this), its eff ect on the pla

n administrator’s de cision was neg ligible. Wit h respe ct to O’Callag han’s cross appea l, the district court did not abuse its discretion in deny ing O’Callag han’s motion for attorney ’s fee s. Under ERI SA, a “cou rt i n i t s discretion may allow a re asonable attorney ' s fee and costs of a ction to either pa rty .” 29 U.S.C. § 1132(g )(1)

. We revie w a district cour

t’s decision to deny

attorney ’s fe es for

abuse of discretion.

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O’Callaghan v. SPX Corp.

The d i s t ri ct court considere d the following fac tors in deny ing O’Callag han’s motion for attorney ’s fe es: (1) the deg ree of the opposing p ar ty ’s culpability or bad faith; (2) the opposing party ’s ability to satisfy an awa rd of attorney ’s fee s; (3 ) the deter rent eff ect of an awa rd on other persons under simil ar circ umstances; (4) whether the party reque sting fe es s o u gh t to confe r a common benef it on all participa

nts and benef

iciarie s of an ERI SA plan or resolve sign i fi cant leg al questions reg arding ERI SA; and (5) the rela tive merits of the pa

rties’ positions. O’Callaghan , 2010 WL 259052, *1 (quoting Shelby Cnty. Health Care Corp. v. S. Council of Indus. W orkers Health and W

elfare Trust Fund , 203 F.3d 926, 936 (6th Cir. 2000)). The parties ag ree that this was the cor

rec t standard to apply

. The district court made finding s on eac h of these fac tors. The court found that SPX had not “ac ted with a high deg ree of culpability or bad faith”; that its ability to satisfy an awa rd of attorney ’s fee s was uncontested; that awa rding attorney ’s fee s would not have a deter rent eff ect beca use there

was nothing in the rec ord to indicate delibera te misconduct; that O’Callag han had not sou g ht to confe r a common benef

it on all participa

nts an d benef

iciarie s of the ERI SA plan or to resolve signific ant leg al questions reg arding ERI SA; and that both parties’ positions had merit. Id. at *1-*2. All of these f

actor s—except for the a

bility to pay —weig h ag ainst an aw ard of attorney ’s fe es. O’Callag han provides no g ood rea son to second- g uess these fac tual finding s. O’Callag han arg ues that he “ conclusively established” the first, second, a nd fifth fa ctors—SPX’s culpability or bad faith, ability to pay , and the merits of the parties’ positions, respe ctively

. But the district court

car efully considere d whether the plan administrator acte d in bad fa i th, despite finding that its decision was arbitra

ry and capr icious. O’Callaghan , 2010 WL 259053, at *1. Although the district - 11 -Nos. 10-1006/10-1190

O’Callaghan v. SPX Corp.

court proper ly decide d that the plan administrator’s decision was arbitra ry and capr icious, and even i f t h i s court might take a differ ent view of whether the plan administrator acte d in bad faith, the district court’s c ontrary

conclusion wa s not an abuse of discretion. See id. The same rea sonin g ap plies to O’Callag han’s arg ument that the merits of the parties’ positions favor ed his reque st for attorney ’s fees. I n disposing of the fifth fac tor, the d i s t ri ct co urt found that “[b] oth parties proff ere d positions that had merit. Although defe ndant’s position was not

s u ff i ci en tly persua sive on the m erits of this case , it cer tainly was not frivolous.” Id. Ag ain, eve n though the district court’s judgme nt on the administrative rec ord was proper , it was a close call for O’Callag han under the arbitra ry and capr icious standard. The district court’s finding that this fac tor also weig hed ag ainst an aw ard of attorney ’s fe es wa s not an abuse of discretion. The Supreme Court’s subsequent decision in Hardt v. Reliance Standard Life Ins. Co. , 130 S. Ct. 2149, 2156 (2010), does not c hang e matters. Hardt clar ified that a fee claimant need not be

a “pre vailing party ” to be elig ible for attorney ’s fee s under ERI SA’s fee -shifting statute. Eligibility for attorney ’s fee s require s mere ly that the claimant have achie ved “some deg ree of succe ss on the

m er i t s . ” Id. at 2158. But Hardt does not chang e the district court’s five-f actor analy sis. Hardt

mere ly rela x es the threshold for elig ibilit y for at t orney ’s fee s—from “pre vailing party ” to “some deg ree of succe ss on the merits.” Id. at 2156. Even under this more rela x ed threshold for elig ibilit y , O’Callag han must still demonstrate his entitlement to attorney ’s fee s under 29 U.S.C. § 1132(g )(2)

. The district cour

t’s conclusion that he ha s not done so was not an a buse of discr etion. The judg ment of the district cour t is affirmed.

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