United States Court of Appeals

For the First Circuit

Nos. 10-1423; 10-1494

D&H THERAPY ASSOCIATES, LLC; ROBIN DOLAN,

Plaintiffs, Appellees/Cross-Appellants,

v.

BOSTON MUTUAL LIFE INSURANCE COMPANY,

Defendant, Appellant/Cross-Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND

[Hon. William E. Smith, U.S. District Judge]

Before

Lynch, Chief Judge,

Torruella and Stahl, Circuit Judges.

Brooks R. Magratten, with whom Michael J. Daly and Pierce

Atwood LLP were on brief, for appellant/cross-appellee.

Charles S. Beal, with whom Jonathan E. Pincince and Beal Law,

LLC were on brief, for appellees/cross-appellants.

April 20, 2011
-2-

LYNCH, Chief Judge. Both parties appeal from grants of

summary judgment in this dispute concerning the benefit eligibility

language of a long-term disability benefit plan regulated by the

Employee Retirement Income Security Act (ERISA). Plaintiffs D&H

Therapy Associates, LLC (D&H), and Robin Dolan appeal from a grant

of summary judgment against their claims that Dolan was eligible

for and entitled to benefits under the plan or, in the alternative,

damages for fraud in the inducement. Defendant Boston Mutual Life

Insurance Company (Boston Mutual), in turn, appeals from entry of

summary judgment against its counterclaim that it is entitled to

reimbursement for payments already made to Dolan, which it says

were mistaken.

D&H obtained an ERISA plan from Boston Mutual in 2000.

Under the plan, employees who suffer specified reductions in

monthly earnings due to long-term disability are eligible for

benefits. Dolan is both a part-owner and an employee of D&H. In

2001, she became physically unable to continue some of her tasks as

an employee, which prompted a reduction in her monthly W-2

earnings. In 2002, she began receiving benefits under the plan.

After a 2006 audit, however, Boston Mutual terminated the benefits

and demanded Dolan return past payments. It told Dolan that she

had failed to account for her non-salary income, including earnings

from her ownership stake in D&H. With those ownership earnings

included, Boston Mutual stated, Dolan's monthly earnings had been
-3-

higher than her pre-disability monthly earnings since 2002, and so

she was not and had never been eligible for payments.

After Dolan filed unsuccessful administrative appeals

with Boston Mutual's third-party claims administrator, she and D&H

initiated this litigation against Boston Mutual. Except as needed

we refer to both plaintiffs as Dolan. Dolan challenges her benefit

termination on two grounds. First, she argues that the plan

defines "earnings" as W-2 income such that non-salary income is not

relevant to eligibility determinations. Second, she argues that

Boston Mutual should be estopped from construing the plan otherwise

because it represented to D&H at the time of purchase that the plan

defined "earnings" as W-2 income. In the alternative, Dolan claims

that Boston Mutual's representations fraudulently induced D&H to

forego renewing its preexisting insurance policy. Boston Mutual

counterclaims that under the plan it is entitled to reimbursement

of the $163,661.57 it paid to Dolan.

The district court granted summary judgment to each party

on the claims brought by the other. As to Dolan's claims, it held

that Boston Mutual's construction of the plan's language was within

its discretion as the plan administrator and that Dolan's

fraudulent inducement claim was preempted by ERISA. As to Boston

Mutual's counterclaim, it held that the reimbursement sought did

not qualify as appropriate equitable relief under ERISA.
D&H has been a limited liability company since 2004, when 1

it transferred its status from a partnership. A predecessor

entity, Professional Rehabilitation Network (PRN), purchased the

two long-term disability insurance policies described in this

dispute. For ease of exposition, we refer to the present limited

liability company and its predecessor entities collectively as D&H.

-4-

We hold that Boston Mutual abused its discretion when it

determined that Dolan has never been eligible for benefits under

the plan. This holding requires entry of judgment for Dolan on

both her wrongful denial of benefits claim and on Boston Mutual's

counterclaim for recoupment of past payments. Accordingly, we

reverse the district court's entry of judgment for Boston Mutual on

Dolan's denial of benefits claim and affirm for Dolan on Boston

Mutual's counterclaim. We need not reach Dolan's equitable

estoppel argument or her fraud in the inducement claim.

I.

Dolan and her partner Kim Havunen each hold a half

ownership stake in D&H, a firm that provides physical,

occupational, and speech therapy services at several clinics in

Rhode Island. At all times relevant to this suit, Dolan and 1

Havunen were also employees of the firm. Dolan served as the

director of clinical services and as a physical therapist, while

Havunen served as the director of business operations. Like other

employees of the firm, Dolan and Havunen drew salary based on the

number of hours they worked. Their salaries were not influenced,

at least directly, by their ownership stakes in D&H.
-5-

A. D&H's Acquisition of the Boston Mutual Plan

In 1997, D&H obtained a long-term disability insurance

policy from Guarantee Life Insurance Company (Guarantee Life). D&H

obtained the policy with the help of an insurance agent, Benefit

Services, Inc. (Benefit Services). Havunen led the efforts to

obtain this policy. She testified that she explained to a Benefit

Services representative that D&H wanted a policy that would protect

W-2 earnings such that the principals of the firm would be

insulated against loss of the salary form of their income. Havunen

understood the Guarantee Life policy to reflect this request.

According to Havunen, the policy defined protected earnings for

principals as W-2 earnings.

In 2000, the Guarantee Life policy was expiring. As D&H

considered whether to renew the policy, the same Benefit Services

representative who had assisted D&H with the Guarantee Life policy

contacted Havunen. The representative, Maureen Baker, informed

Havunen that she had received a quote from a different insurance

provider at a better rate. Havunen testified that she told Baker

that D&H would only consider switching to the new policy if the

policy protected W-2 earnings in the same manner as she understood

the Guarantee Life policy did. Havunen testified further that when

Baker identified the quote in question as belonging to Boston

Mutual, Havunen reiterated this requirement. 
-6-

To ensure that the Boston Mutual policy would meet these

specifications, Havunen testified, she and Baker met with a Boston

Mutual agent, Thomas Liszanckie. Havunen testified that Liszanckie

assured her that the Boston Mutual policy would contain the same

definitions of "earnings" and "income" as the Guarantee Life

policy. She testified as well that Liszanckie brought a written

"Group Insurance Proposal," which he said contained the requested

protection for W-2 income. Havunen testified that Liszanckie

identified the last page of the proposal as ensuring this

protection. That page includes the following statement:

"Definition of Earnings: Basic Annual Earnings shall mean the

Insured Person's earnings for the prior calendar year as reported

by the Group Policyholder on form W-2."

Havunen testified that, based on Liszanckie's statements

and the proposal's definition of earnings, D&H did not renew the

Guarantee Life policy and instead purchased the Boston Mutual

policy. When Havunen received the final language of the policy,

she expressed some concern to Baker about the policy's terms

relating to "any other income from employment," which might be

construed to include income other than W-2 income. Baker, Havunen

testified, assured her that this language only referred to other

income that may be included in W-2 earnings, like bonuses and

commissions. Havunen did not contest the final policy language.
Baker testified that the policy laid out different 2

benefit schedules for principals and all other employees. She

acknowledged that a portion of the policy defined earnings as W-2

earnings, but speculated that this portion only applied to nonprincipal employees and that a portion of the policy not present in

the record gave a separate definition of earnings that applied to

principals.

-7-

She testified that D&H would not have signed on to the policy if

not for Liszanckie and Baker's representations.

Boston Mutual disputes Havunen's testimony concerning her

conversations with Baker, the content of the Guarantee Life policy,

and her interactions with Liszanckie. Baker testified that, in her

discussions with Havunen about both the Guarantee Life policy and

the Boston Mutual policy, Havunen told her that she wanted to

protect the K-1 income of D&H's principals, not their W-2 income.

Baker also speculated that a portion of the Guarantee Life policy

not present in the record defined earnings for principals

differently from that of other employees and included non-salary

income. Liszanckie testified that while he occasionally dropped 2

off insurance forms to customers before they signed an insurance

policy, he rarely met with the customers and he could not recall

whether he met with Havunen and Baker.

B. The Terms of the Boston Mutual Plan

Having reviewed these disputed facts concerning D&H's

decision to obtain the Boston Mutual policy, we turn to the plan

language that governs that policy. There is no dispute that the

policy, unlike the Guarantee Life policy, is governed by ERISA. We
-8-

divide discussion of the plan's contents between provisions

concerning benefit eligibility, provisions concerning benefit

calculation, and provisions concerning overpayment of claims.

As to benefit eligibility, principals and all other

employees are eligible for benefits if they suffer a specified loss

in earnings due to disability. This applies when these individuals

"are not able to perform some or all of the material and

substantial duties of [their] regular occupation" and "have at

least a 20% loss in [their] pre-disability earnings." This

litigation does not concern what rises to an inability to perform

occupational duties.

It concerns, instead, what it means to have a 20% loss in

pre-disability earnings as defined by the plan. For both

principals and all other employees, the plan gives these

definitions concerning earnings: "Pre-disability earnings means

your monthly rate of earnings from the employer in effect just

prior to the date disability begins. Basic annual Earnings shall

mean the Insured Person's earnings for the prior calendar year as

reported by the Group Policyholder on form W-2, excluding

commissions." If an individual has earnings for less than a

calendar year, the plan provides that "Basic Annual Earnings shall

be determined by averaging the monthly earnings for each month

worked and annualizing the result."
-9-

The plan lists a series of circumstances that justify

benefit termination. These include when an individual is "no

longer disabled," has "reached the end of the maximum payment

duration," or has "current earnings [that] exceed 80% of [his or

her] pre-disability earnings." Benefits will also be terminated

when an individual is "able to increase [his or her] current

earnings by increasing the number of hours [he or she] work[s] or

the number of duties [he or she] perform[s] in [his or her] regular

occupation but . . . do[es] not do so." The plan emphasizes, in

bolded all-capital letters, that if an individual is "disabled and

working, earning more than 80% of [his or her] pre-disability

earnings, no payment will be made."

As to benefit calculation, the plan specifies that the

maximum monthly payment is $6,000 and the minimum monthly payment

is $100 or 10%, presumably of monthly pre-disability earnings. It

includes two formulas for benefit calculation. The first applies

to individuals "earning less than 20% of [their] pre-disability

earnings," whether they are currently working or not. The second

applies to individuals working and "earning between 20% and 80% of

[their] pre-disability earnings." The plan makes no express

provision for how to calculate benefit payments for individuals who

are not working but are nonetheless earning between 20% and 80% of

their pre-disability earnings.
-10-

The specifics of the two formulas are as follows. Under

the first, monthly payments are figured by taking the lesser of (a)

$6,000 and (b) 60% of "pre-disability earnings," and then

subtracting "any other income amounts except any income [the

individual] earn[s] or receive[s] from any form of employment."

Under the second, benefits are initially the lesser of (a) $6,000,

(b) 100% of "pre-disability earnings" minus "any other income

amounts including current income [the individual] earn[s] or

receive[s] from any form of employment," and (c) 60% of "predisability earnings." After 24 months, additional payments under

this formula are determined by taking the lesser of (a) $6,000, and

(b) 60% of "pre-disability income," and then subtracting 50% of

"any income [the individual] earn[s] or receive[s] from any form of

employment" and 100% of "any other income amounts."

The policy defines "other income amounts" in six

categories. All the categories except for one pertain to benefits

and awards an individual either receives or is eligible to receive

under specified laws or employer insurance plans. The remaining

category, particularly important for our purposes, states that

"other income amounts" includes "any income you earn or receive

from any form of employment."

As to overpayment, the plan provides, "We have the right

to recover overpayments due to fraud; an error we make in

processing your claim; [or] your receipt of other income amounts."
-11-

It also states, "If we determine that we overpaid your claim, then

we require you repay us in full. We will determine the method by

which you will repay us."

C. The Dispute Under the Boston Mutual Plan

In February 2001, shortly after D&H obtained the Boston

Mutual policy, Dolan underwent orthopedic surgery. When she

returned to work in August 2001, she worked fewer hours and

received less salary. In January 2002, Boston Mutual approved

Dolan's claim under the policy and began dispensing benefits.

These benefits continued until 2006, when Boston Mutual's thirdparty claims administrator, Disability Reinsurance Management

Services (DRMS), conducted an audit. 

Based on the audit, DRMS concluded that Dolan's benefit

payments had not properly taken account of business profits she

received as a principal of D&H and another entity, Associated

Professional Management, Inc. With those profits included, DRMS

calculated Dolan's pre-disability monthly earnings to be $5,833.33

and her post-disability monthly earnings in 2002 to be $7,670.67.

In an August 2006 letter, Boston Mutual informed Dolan of the audit

and asserted its right under the policy to recover overpayments due

to "fraud or error." Dolan, through her attorney, contested this

finding. She argued that this business income fell outside the

definition of "earnings" relevant for determining eligibility under

the policy. 
-12-

Notwithstanding Dolan's objections, by an October 2006

letter Boston Mutual discontinued her benefits and reasserted its

demand that she repay past benefits. The letter stated that the

benefits Dolan had received since January 2002 had resulted in an

overpayment of $145,958.32. Dolan twice appealed the termination

determination, and in each case DRMS denied the appeal. In her

appeals, Dolan argued that she had disclosed her ownership

interests at all relevant times and that the intention of D&H and

its principals in purchasing the policy had been to protect W-2

earnings. She did not submit evidence that Boston Mutual had

represented to D&H that the policy would protect W-2 earnings in

this fashion. After DRMS denied these appeals, Dolan filed this

lawsuit.

In the district court, Dolan challenged her benefit

termination under ERISA's civil enforcement provision, 29 U.S.C.

§ 1132. She argued that (1) the plain language of the plan renders

non-salary income irrelevant for benefit eligibility, and (2)

Boston Mutual should be equitably estopped from asserting otherwise

given Liszanckie's representations to Havunen. In the alternative,

Dolan argued that D&H was fraudulently induced to purchase the

Boston Mutual plan and sought damages in tort under state law. As

a remedy for fraudulent inducement, Dolan argued that she was

entitled to the benefits she would have received under the

Guarantee Life policy had D&H renewed it. Dolan also asserted
The counterclaim originally sought $145,958.32 in 3

overpaid benefits. Boston Mutual subsequently recalculated the

amount of the overpayment.

These affidavits include Havunen's testimony concerning 4

the circumstances surrounding D&H's decision to purchase the Boston

Mutual policy, as well as some of Liszanckie's testimony. They

also include Dolan's testimony concerning her disabling condition

and interactions with Boston Mutual.

-13-

state law contract claims, but later conceded that these claims are

preempted by ERISA.

Boston Mutual counterclaimed, demanding reimbursement

under the plan for $163,661.57 in overpaid benefits. The parties 3

cross-moved for summary judgment on Dolan's claims and Boston

Mutual's counterclaim.

Three arguments Boston Mutual made before the district

court are relevant on appeal. First, it argued that its

determination that Dolan had not been eligible for benefits was

reasonable and within the discretion afforded to certain plan

administrators under ERISA. Second, it argued that the district

court could not consider four affidavits Dolan submitted concerning

purported misrepresentations because they had not been part of the

administrative record. Third, it argued that ERISA preempts 4

Dolan's state claim for fraud in the inducement.

Initially, the district court granted Boston Mutual's

motion for summary judgment on Dolan's claims but denied both

parties' motions for summary judgment on Boston Mutual's

counterclaim. Boston Mutual moved for reconsideration of the
-14-

denial of summary judgment as to its counterclaim in light of a

Supreme Court decision, Sereboff v. Mid Atlantic Medical Services,

Inc., 547 U.S. 356 (2006), on permissible relief under ERISA that

the district court had not considered. Dolan moved for

reconsideration of her claims in light of a recent decision of this

court, Denmark v. Liberty Life Assurance Co. of Boston, 566 F.3d 1

(1st Cir. 2009), concerning conflicts of interest in certain

discretionary decisions by ERISA plan administrators.

The district court reaffirmed its grant of summary

judgment for Boston Mutual on Dolan's claims. On reconsideration,

however, it granted Dolan's motion for summary judgment on Boston

Mutual's counterclaim. In the two decisions, the district court

held (1) Boston Mutual's eligibility determination was reasonable

and thus entitled to deference under ERISA, (2) ERISA preempts

Dolan's claim for fraud in the inducement under 29 U.S.C.

§ 1144(a), and (3) Boston Mutual's claim for reimbursement for

overpaid benefits is not "appropriate equitable relief" under 29

U.S.C. § 1132(a)(3). The district court did not expressly address

Dolan's equitable estoppel argument. It also did not address

Boston Mutual's motion to strike the four contested affidavits, as

the motion was deemed moot in light of the court's grant of summary

judgment for Boston Mutual.

In the present cross-appeals, Dolan appeals the district

court's grant of summary judgment for Boston Mutual on her claims
We have noted that "[f]or purposes of reviewing benefit 5

determinations by an ERISA plan administrator, the arbitrary and

capricious standard is functionally equivalent to the abuse of

-15-

and Boston Mutual appeals the district court's grant of summary

judgment for Dolan on its counterclaim.

II.

We review the district court's grants of summary judgment

de novo. Sch. Union No. 37 v. United Nat'l Ins. Co., 617 F.3d 554,

558-59 (1st Cir. 2010). In the typical case, we will reverse a

grant of summary judgment only if, making all factual inferences in

favor of the non-moving party, a rational factfinder could resolve

the legal issue for either side. Cusson v. Liberty Life Assurance

Co. of Boston, 592 F.3d 215, 223-24 (1st Cir. 2010). The presence

of cross-motions does not alter this general standard. When there

are cross-motions for summary judgment, the court must consider

each motion separately, drawing all inferences in favor of each

non-moving party in turn. Merchants Ins. Co. of N.H., Inc. v. U.S.

Fid. & Guar. Co., 143 F.3d 5, 7 (1st Cir. 1998). 

Cases that concern benefit determinations under an ERISA

plan, however, are not typical cases when it comes to summary

judgment. When an ERISA plan gives an administrator discretionary

authority to determine eligibility for benefits or construe the

plan's terms, the district court must uphold the administrator's

decision unless it is "arbitrary, capricious, or an abuse of

discretion." Cusson, 592 F.3d at 224 (quoting Gannon v. Metro. 5
discretion standard." Wright v. R.R. Donnelley & Sons Grp.

Benefits Plan, 402 F.3d 67, 74 n.3 (1st Cir. 2005). We describe

the relevant standard of review for these benefit determinations as

"abuse of discretion" review.

-16-

Life Ins. Co., 360 F.3d 211, 213 (1st Cir. 2004)) (internal

quotation marks omitted). In such cases, "summary judgment is

simply a vehicle for deciding the issue" and "the non-moving party

is not entitled to the usual inferences in its favor." Id.

(quoting Orndorf v. Paul Revere Life Ins. Co., 404 F.3d 510, 517

(1st Cir. 2005)) (internal quotation marks omitted).

The parties agree that the plan at issue here affords

Boston Mutual authority to determine benefit eligibility and

construe its terms. Accordingly, the district court reviewed

Boston Mutual's benefit determinations for abuse of discretion.

Our de novo review of the district court's grants of summary

judgment as they relate to benefit determinations must look to

whether the district court erred in finding that Boston Mutual's

determinations were within its discretion. Our de novo review of

the district court's grants of summary judgment as they relate to

other issues must employ the non-deferential review typically

employed on summary judgment. See Orndorf, 404 F.3d at 517. 

III.

We address in concert the two benefit determinations

relevant to this appeal, as both rest on the same stated rationale.

Boston Mutual terminated Dolan's benefits because it deemed Dolan
Specifically, Boston Mutual argues that S corporation 6

"pass through" income paid to working shareholders falls within the

definition of "earnings" when the term is used in isolation or in

conjunction with the term "current." It argues that this view is

consistent with case law concerning the earnings subject to federal

-17-

ineligible for benefits under the plan, and it demanded recoupment

of past payments made to Dolan because it deemed that Dolan had

never been eligible for benefits under the plan. It has been

Boston Mutual's position that Dolan has never been eligible for

benefits because her post-disability earnings have always exceeded

her pre-disability earnings as defined by the plan. There are no

disputed facts concerning Dolan's income. The parties only dispute

how to interpret the plan's terms and thereby determine Dolan's

eligibility for benefits in light of her income.

This interpretive dispute centers on four constructions

present in the plan: "earnings," "basic annual earnings," "predisability earnings," and "current earnings." Dolan argues that

the plan's definition of "basic annual earnings" defines "earnings"

as W-2 income and that a reasonable reading of the plan demands a

consistent application of this definition, irrespective of the

temporal periods "pre-disability" and "current." It has been

Boston Mutual's position that when the term "earnings" precedes the

terms "pre-disability" or "basic annual" it refers to monthly W-2

income, but when the term "earnings" is used alone or combined with

the term "current" it refers to all income that derives from

employment, including ownership income.6
employment taxes. See Nu-Look Design, Inc. v. C.I.R., 356 F.3d

290, 291 (3d Cir. 2004); Joseph Radtke, S.C. v. United States, 895

F.2d 1196, 1197 (7th Cir. 1990); Spicer Accounting, Inc. v. United

States, 918 F.2d 90, 93 (9th Cir. 1990). Boston Mutual has not

argued that any other type of non-salary income deriving from

employment falls into these two definitions of "earnings."

-18-

A. Existing Circuit Law

In this circuit, we have held that an ERISA benefit

determination is within the discretion of the plan administrator so

long as it is "reasoned and supported by substantial evidence."

Wright v. R.R. Donnelly & Sons Grp. Benefits Plan, 402 F.3d 67, 74

(1st Cir. 2005) (quoting Gannon, 360 F.3d at 213). We have

emphasized that our review of whether a plan administrator abused

its discretion does not require that we determine either the "best

reading" of the ERISA plan or how we would read the plan de novo.

Stamp v. Metro. Life Ins. Co., 531 F.3d 84, 94 (1st Cir. 2008)

(quoting Lennon v. Metro. Life Ins. Co., 504 F.3d 617, 624 (6th

Cir. 2007)) (internal quotation marks omitted). We have also noted

that the doctrine of contra proferentem does not apply to review of

an ERISA plan construction advanced by an administrator given

authority to construe the plan. Id. at 93 (citing Morton v. Smith,

91 F.3d 867, 871 n.1 (7th Cir. 1996)).

Challenges to benefit determinations in this circuit have

typically involved the application of contested facts to

uncontested plan terms. In Leahy v. Raytheon Co., 315 F.3d 11 (1st

Cir. 2002), for example, we noted that the relevant plan terms were
-19-

"clear and unambiguous" but that, "[a]s in many such instances,"

the "devil is in the details" of applying the facts to those terms.

Id. at 18. Most often, plaintiffs have challenged the sufficiency

of the evidence underlying an ERISA plan administrator's factual

conclusions. See, e.g., Cusson, 592 F.3d at 229-30; Orndorf, 404

F.3d at 518. They have also challenged benefit determinations on

the grounds that the ERISA plan administrator improperly credited

certain evidence. See, e.g., Medina v. Metro. Life Ins. Co., 588

F.3d 41, 45-47 (1st Cir. 2009); Buffonge v. Prudential Ins. Co. of

Am., 426 F.3d 20, 30 (1st Cir. 2005).

We are aware of only two cases decided in this circuit

concerning purely interpretive questions like the one raised in

this appeal. Understandably, neither of these cases articulate

general guidelines as to when a plan administrator's construction

is sufficiently lacking in reason that it rises to the level of an

abuse of discretion. In the more recent case, Coffin v. Bowater

Inc., 501 F.3d 80 (1st Cir. 2007), we upheld a plan administrator's

construction because we found its construction "significantly more

persuasive" than that offered by the plaintiffs. Id. at 96. In so

holding, the court did not need to reach the more difficult

question of when a plan administrator's construction will be

sufficiently reasonable to warrant deference even though it is only

as persuasive or less persuasive than the interpretation offered by

the plaintiffs.
-20-

In an earlier case, Kolling v. American Power Conversion

Corp., 347 F.3d 11 (1st Cir. 2003), we held it within a plan

administrator's discretion to "reasonably" construe the term

"employee," which was circularly defined by the plan as "Employee

of the Employer." Id. at 14. (citing Trombetta v. Cragin Fed. Bank

for Sav. Emp. Stock Ownership Plan, 102 F.3d 1435, 1439-40 (7th

Cir. 1996)). We held that the plan administrator had "permissibly

looked" to the insurance company's "intention in defining the

Plan's scope" and that the evidence supported its determination

regarding that intention. Id. We also held that the insurance

company had consistently applied its definition of "employee" in

the past. Id. We did not address when these indicators or others

might require a holding that a plan construction was unreasonable.

The Supreme Court has not spoken directly to how courts

should assess whether an administrator's construction of a plan

term is so unreasonable as to constitute an abuse of discretion.

In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), the

Court noted that "ERISA abounds with the language and terminology

of trust law," id. at 110, and that given this, it had held that

courts must develop a "federal common law of rights and obligations

under ERISA-regulated plans," id. (quoting Pilot Life Ins. Co. v.

Dedeaux, 481 U.S. 41, 56 (1987)) (internal quotation marks

omitted). The Court held that "[t]rust principles make a

deferential standard of review appropriate when a trustee exercises
-21-

discretionary powers," and that when a trustee is given such power

"to construe disputed or doubtful terms . . . the trustee's

interpretation will not be disturbed if reasonable." Id. at 111.

The Court has not given precise content to this standard.

It has held that courts must consider conflicts of interest that

may arise when an administrator, like Boston Mutual, "both

determines whether an employee is eligible for benefits and pays

benefits out of its own pocket." Metro. Life Ins. Co. v. Glenn,

554 U.S. 105, 108 (2008); see also Conkright v. Frommert, 130 S.

Ct. 1640, 1647 (2010). In Glenn, the Court noted that courts "will

often take account of several different considerations of which a

conflict of interest is one." Glenn, 554 U.S. at 117. It did not

identify other relevant factors, however, and "warned against

creating formulas that will 'falsif[y] the actual process of

judging' or serve as 'instrument[s] of futile casuistry.'" Id. at

119 (quoting Universal Camera Corp. v. Nat'l Labor Relations Bd.,

340 U.S. 474, 489 (1951)) (alterations in original).

B. Law Beyond This Circuit

In the absence of clear guidance from either this court

or the Supreme Court, we look to the law of other circuits. The

circuit courts have articulated the abuse of discretion standard

afforded to ERISA plan administrators under Bruch in various ways.

Jayne E. Zanglein & Susan J. Stabile, ERISA Litigation 550 (3d ed.

2008). We do not delve into how the circuits have formulated this
-22-

standard for all cases in which an ERISA plan administrator has

power to make benefit determinations. Rather, we limit our

attention to the question of when an ERISA plan administrator,

acting pursuant to a grant of power to construe the plan's terms,

construes the plan in a manner that is unreasonable and thus abuses

its discretion.

At the outset, we note that "[i]t is notoriously

difficult to venture a general definition of the term 'abuse of

discretion,' and none is canonical; indeed, the term has different

meanings in different legal contexts." Evans v. Eaton Corp. Long

Term Disability Plan, 514 F.3d 315, 321-22 (4th Cir. 2008). As

Judge Wilkinson wrote in Evans, the standard "draws a line--or

rather demarcates a region--between the unsupportable and the

merely mistaken, between the legal error, disorder of reason,

severe lapse of judgment, and procedural failure that a reviewing

court may always correct, and the simple disagreement that, on this

standard, it may not." Id. at 322 (citing Harry T. Edwards & Linda

Elliott, Federal Standards of Review 68 (2007)). It goes without

saying that terms like "reasonable," which underlie the standard

here, are similarly difficult to define precisely.

It also bears emphasis that this standard of review,

which concerns a fiduciary element of the role of an ERISA plan

administrator, must reflect the relevant principles of trust law,

rather than the law of contracts. Matthews v. Sears Pension Plan,
-23-

144 F.3d 461, 465 (7th Cir. 1998); see also Bruch, 489 U.S. at 111.

As the Supreme Court has held, trust law "can ask judges to

determine lawfulness by taking account of several different, often

case-specific, factors, reaching a result by weighing all

together." Glenn, 554 U.S. at 117. In this context, our analysis

must weigh the values advanced by ERISA in empowering plan

administrators as fiduciaries, cf. Evans, 514 F.3d at 323, with the

dangers policed by the statute arising from breach of fiduciary

duty, cf. Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 141

n.8 (1985).

In their review of ERISA plan constructions like the one

presented in this case, courts beyond this circuit have looked to

the language and purpose of the plan. In some circuits, the

analysis has been conducted with reference to the consistency of an

administrator's construction with the "plain meaning" of the plan.

See Boyd v. Bert Bell/Pete Rozelle NFL Players Ret. Plan, 410 F.3d

1173, 1178 (9th Cir. 2005); Wagener v. SBC Pension Benefit Plan--

Non Bargained Program, 407 F.3d 395, 404 (D.C. Cir. 2005); Pagan v.

NYNEX Pension Plan, 52 F.3d 438, 443 (2d Cir. 1995); Fuller v. CBT

Corp., 905 F.2d 1055, 1060 (7th Cir. 1990). These circuits have

not defined how courts should determine whether an interpretation

does not accord with an ERISA plan's plain meaning.

At least four circuits have advanced more specific

standards. The Fifth Circuit has split the inquiry into two steps,
-24-

each of which contains three guiding factors, while the Third,

Fourth, and Eighth circuits have listed a general set of

guidelines.

The Fifth Circuit first asks whether an administrator's

interpretation is "legally correct." Chacko v. Sabre, Inc., 473

F.3d 604, 611 (5th Cir. 2006). In so doing, it considers "(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." Id. If the

interpretation is "legally correct," it must stand; if it is not,

the court considers three factors to determine if it is an abuse of

discretion: "(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." Gosselink v. Am. Tel. & Tel., Inc., 272 F.3d 722

(5th Cir. 2001).

The Third, Fourth, and Eighth circuits each employs a

multi-factor test to determine whether a plan construction

constitutes an abuse of discretion. The Third and Eighth circuits

each considers the following five factors:

(1) whether the administrator's language is

contrary to the clear language of the plan;

(2) whether the interpretation conflicts with

the substantive or procedural requirements of
-25-

ERISA; (3) whether the interpretation renders

any language of the plan meaningless or

internally inconsistent; (4) whether the

interpretation is consistent with the goals of

the plan; and (5) whether the administrator

has consistently followed the interpretation.

Manning v. Am. Republic Ins. Co., 604 F.3d 1030, 1041-42 (8th Cir.

2010); see also Howley v. Mellon Fin. Corp., 625 F.3d 788, 795 (3d

Cir. 2010). The Fourth Circuit's "non-exhaustive" list of factors

includes these five factors as well as "whether the decisionmaking

process was reasoned and principled," "any external standard

relevant to the exercise of discretion," and "the fiduciary's

motives and any conflict of interest it may have." Carden v. Aetna

Life Ins. Co., 559 F.3d 256, 261 (4th Cir. 2009).

C. Boston Mutual's Construction of the Plan

Although these standards are instructive, we do not adopt

them or any specific guiding factors. With all due deference to

Boston Mutual's role as a fiduciary, it is clear that its

construction of the ERISA plan at issue stretches beyond the bounds

of reasonableness. This is so for a number of reasons, which are

specific to the particular case at hand.

As an initial matter, Boston Mutual's construction of the

term "earnings" cannot be applied consistently within its own

account of the plan's meaning. It has been Boston Mutual's

position that the term "earnings" refers to W-2 income when it is

used in conjunction with the terms "pre-disability" or "basic

annual." It has also been Boston Mutual's position that the term
-26-

"earnings" refers to all income deriving from employment when it is

used alone or with the term "current." Yet the plan's express

definitions of "pre-disability earnings" and "basic annual

earnings" cannot support both of these positions at once.

The plan expressly defines "pre-disability earnings" as

well as "Basic annual Earnings" with reference to the unaccompanied

term "earnings." The plan defines "pre-disability earnings" as

"your monthly rate of earnings from the employer in effect just

prior to the date disability begins." (Emphasis added.) It

defines "Basic annual Earnings," in turn, as "the Insured Person's

earnings for the prior calendar year as reported by the Group

Policyholder on form W-2, excluding commissions. If the person has

earnings for less than a calendar year, Basic Annual Earnings shall

be determined by averaging the monthly earnings for each month

worked and annualizing the result." (Emphasis added.)

If Boston Mutual's definition of the unaccompanied term

"earnings" were applied to that unaccompanied term as used within

the plan's stated definitions of "pre-disability earnings" and

"basic annual earnings," the term "earnings" would have to refer to

both W-2 income and non-salary income when used in conjunction with

the terms "pre-disability" and "basic annual." If, on the other

hand, one accepts Boston Mutual's definition of "earnings" as used

in conjunction with "pre-disability" and "basic annual," then the

definition of the unaccompanied term "earnings" as used within the
-27-

plan's definitions of "pre-disability earnings" and "basic annual

earnings" would have to refer only to salary income.

Boston Mutual attempts to counter this contradiction by

invoking the broader structure of the plan. It argues that "the

clear import" of the plan "is to reduce and potentially eliminate

benefit payments once the claimant earns enough money from other

sources of income." In support of this claim, Boston Mutual points

in particular to the plan's provision that benefits may be limited

by a participant's receipt of "other income amounts," a term the

plan defines, inter alia, as "[a]ny income you earn or receive from

any form of employment." Boston Mutual argues that its various

constructions of the term "earnings," notwithstanding the

definitions at the beginning of the plan, are consistent with the

plan's effort to take account of income from employment.

Specifically, Boston Mutual relies on language concerning

benefit termination. The plan states that if an employee covered

by the plan is "disabled and working, earning more than 80% of [his

or her] pre-disability earnings, no payment will be made," and

payments will stop "the date [the covered employee's] current

earnings exceed 80% of [his or her] pre-disability earnings."

(Emphasis added.) Boston Mutual argues that these provisions only

allow payment of benefits when the sum of a covered employee's W-2

income and non-salary income from employment is at least 20% less

than that individual's pre-disability W-2 income. The benefit
The plan identifies a "minimum payment" amount, which 7

might be read to ensure a baseline payment for individuals that

meet benefit eligibility requirements but would receive a payment

of zero under the benefit calculation formula. Neither party has

invoked this provision, however, and we need not address it

further.

-28-

formula, which sets payment amounts for those "earning" at least

20% less than their "pre-disability earnings," mirrors this

requirement under Boston Mutual's construction.

This argument elides clear divisions within the plan's

structure that distinguish between questions of benefit calculation

and questions of benefit eligibility. The plan employs the term

"earnings," in combination with various other terms, in its

provisions governing whether a payment can be made. In addition to

the provisions upon which Boston Mutual relies, the plan limits

eligibility for benefits in its definition of disability to

individuals who have "at least a 20% loss in [their] pre-disability

earnings." The plan employs the term "income," by contrast, in its

provisions governing the size of payments due to qualified

individuals. These provisions might plausibly reduce the size of

a benefit payment to zero, but they are distinct from provisions 7

concerning who is qualified to receive a payment.

Not only do "earnings" and "income" occupy different

domains of the plan; Boston Mutual has also construed these terms

quite differently. Depending on the context, Boston Mutual

construes "earnings" to mean either W-2 income or both W-2 income
Boston Mutual cites a series of dictionary definitions 8

for the proposition that its definition of "earnings" when the term

is either unaccompanied or accompanied by the term "current" falls

within ordinary usage. Although some of the dictionary definitions

refer to "earnings" as all income deriving from labor and capital,

Boston Mutual does not assert that its definition of "earnings"

stretches this broadly.

The most logical textual source for this construction of 9

the term "earnings" when used with the term "pre-disability" is the

definition of "Basic annual Earnings." The plan defines "pre-

-29-

and non-salary income deriving from employment. As expressly 8

defined within the plan, "other income amounts" extend beyond both

of these definitions of earnings. In its definition of "other

income amounts," the plan includes "any income you earn or receive

from any form of employment." It also includes a variety of

benefits and awards received under employment plans and government

programs. For example, the plan lists Social Security benefits due

to disability or retirement, benefits received under workers'

compensation, and sick leave benefits.

Boston Mutual's interpretation also renders meaningless

the only provision in the plan that appears to define "earnings" in

a substantive way. The plan defines "Basic annual Earnings" with

reference to W-2 earnings; elsewhere, the plan is silent as to what

counts as earnings. The plan's express definition of "predisability earnings" does not mention W-2 earnings, and Boston

Mutual has not explicitly explained why it has construed the term

"earnings" to mean W-2 income when it is used with the term "predisability." Under Boston Mutual's construction of the plan, the 9
disability earnings" with reference to the insured's "monthly rate

of earnings," however, not "basic annual earnings." Thus, this

construction would suggest that "Basic annual Earnings" defines

"earnings" generally, which is not Boston Mutual's position.

-30-

definition of "Basic annual Earnings" is only relevant to that

particular phrase. Yet the phrase does not appear once in the plan

outside the provisions that define it.

Boston Mutual makes a further structural argument that

its construction avoids a difficulty that would arise if the plan

were construed to define "earnings" as W-2 income. It argues that

if earnings were construed in that manner, principals like Dolan

could inflate their benefit payments by reclassifying their W-2

income as non-salary income. The plan expressly avoids this

purported difficulty, however. It provides that an individual will

no longer receive benefits if he or she is "able to increase [his

or her] current earnings by increasing the number of hours [he or

she] work[s] or the number of duties [he or she] perform[s] in [his

or her] regular occupation but . . . does not do so." This

provision would allow Boston Mutual to terminate the benefits of

individuals who attempted to increase their benefits in this

fashion.

It is also instructive that Boston Mutual, though

indisputably in possession of all of Dolan's tax forms at all times

relevant to this suit, did not advance its present construction of

the plan until more than four years after it began paying Dolan
We do not reach Boston Mutual's argument that we may not 10

consider the contents of the four contested affidavits, which

contain additional factual claims concerning the consistency of

Boston Mutual's construction of the plan. The contents of these

affidavits are not necessary to our holding.

We have considered the arguments as to whether Boston 11

Mutual has taken adequate measures to "insulate [its]

decisionmaking process against the potentially pernicious effects

of structural conflicts" of interest, Denmark v. Liberty Life

Assurance Co. of Boston, 566 F.3d 1, 9 (1st Cir. 2009), and they do

not alter our conclusion.

-31-

benefits. Boston Mutual does not dispute that Dolan's tax forms

made clear that she was a principal of D&H and Associated

Professional Management, Inc., and received income in these

capacities. When Dolan filed her initial claim for benefits,

Boston Mutual apparently did not consider this other income stream

to preclude eligibility.10

If Boston Mutual wanted to offer a plan that determined

benefit eligibility by comparing pre-disability W-2 income with

post-disability income deriving from employment, it could have

drafted a plan that made this clear. Boston Mutual may not

transform an existing plan to achieve this end by construing it in

a fashion contrary to its terms. In light of the foregoing, we

hold that Boston Mutual's construction of the plan was unreasonable

and, therefore, that its determination that Dolan has never been

eligible for benefits constituted an abuse of discretion.11
-32-

IV.

Our holding that Boston Mutual abused its discretion in

determining that Dolan has never been eligible for benefits

requires an entry of judgment for Dolan on both her wrongful denial

of benefits claim and Boston Mutual's counterclaim for recoupment

of past payments. We affirm the entry of judgment for Dolan on

Boston Mutual's counterclaim on the different ground that Boston

Mutual's determination that it overpaid benefits was an abuse of

discretion. We reverse the district court's entry of judgment for

Boston Mutual on Dolan's wrongful denial of benefits claim and

remand to the district court with instructions to enter judgment

for Dolan, subject to the provisos in this opinion.

So ordered.