N O T FO R PUB L ICAT IO N UNITED STATES C OUR T OF APPEALS FOR THE NINTH C IR C UIT
DOUGLAS B . POW ELL, Plaintiff - Appe lla nt, v. HAR TFORD LIFE AND AC C IDENT INSUR ANC E C OM PANY; THE C ADENC E DESIGN SYSTEM S, INC . LONG TER

M DISAB ILITY PLAN, De fe nda

nts - Appe lle e s. No. 13-16529 D.C . No. 3:12-c v-01705-TEH M EM O R ANDUM *

Appe a l from

the Unite d

Stat e s Distric t C ourt for the Northe rn Distric t of C a lifornia The lton E. He n de rson, Se nior Distric t Judge , Pre siding Argue d a nd Subm itte d Oc tobe r 23, 2015 San Fran c isc o , C a lifornia B e fore : WALLAC E, B LAC K ** , a nd C LIFTON, C irc uit Judge s. Pla intiff Dougla s B . Powe ll a ppe a ls the distric t c o urt’ s grant of sum m ary judgm e nt to de fe nda

nt The Ha rtford Life an d Ac c ide nt Insura nc e C om pa ny . 

# FIL ED N OV 13 2015 M OLLY C. DW Y ER, CLERK U
. S. CO URT O F APPEALS

* This disposition is not a ppropria te for public a t ion a

nd is not pre c e de nt e xc e pt a s provide d

by 9th C ir. R . 36-3. ** The Honora

ble Susa n H. B la c k, Se n ior C irc uit Judgefor the U.S. C ourt of Appe a ls for the Ele ve nth C i rc uit, sitting by de s igna tion.Powe ll c la im s tha t Ha rtford a buse d its disc re tion in c a l c ulat ing his M onthly R a te of B e ne fits unde r his e m

ploy e r’ s ER ISA Plan by

im prope rly pro rat ing his

“ M B O/Ke y

C ontributor B onus.” He argue s tha t the B onus, whic h

wa s a warde d for work tha t he c o m ple te d be twe e n Ja

nua ry 1, 1995 a nd June 30, 1995, should be pro ra te d ove r six m onths, thepe riod to whic h it re late s, a nd not ove r twe lve m onths, whic h is wha

t Ha rtford did. W e disa gre e and a ffirm the distric t c ourt. W he n a pla n c o nfe rs disc re tion on a

pla n a dm inistra

tor “ to de te rm ine
e ligibility for be n e fits or to c onstrue the te rm s of a pla n ,” re vie wis for a

buse of disc re tion. Abatie

v . Alta He alth &Life Ins. C o. , 458 F.3d 955, 963 (9th C ir. 2006) (e n ba nc ) (c iting Fire

stone Tireand Rubbe r C

o. v . Bruc h , 489 U.S. 101, 115 (1989)). He re the Plan gra nts Ha rtford suc h disc re tion. B ut whe n “ a be ne fit pla

n give s disc re tion to a

n a dm inistra

tor or fiduc ia

ry who is ope ra ting unde r a c onflic t of inte re st, tha

t c onflic t m

ust be we ighe d a s a

fa c t or in de te rm ining whe the r the re is a n a buse of disc re tion.” Me tro. Life Ins. C o . v . Gle nn , 554 U.S. 105, 111 (2008) (quota tion m arks a

nd c ita tion om itte d ). In this insta nc e , Ha rtford ope ra te d

unde r a c onflic t of inte re st be c a

use it both paid the Pla

n’ s be ne fits a

nd se rve d a s Pla

n a dm inistra

tor. Thus, our re vie w is for a buse of disc re tion with c onside ration of Hartford’ s c onflic t o f inte re s t a s a fa c tor.

2Powe ll c onte n d s tha t the pla i n la

n gua g e of the Pla

n re quire s pro rating the B onus ove r six m onths. B ut the Pla n’ s de finition of “ M onthly R a t e of B a sic Earnings,” de fine d a s “ the ra t e in e ffe c t on y our la st da y a s a n Ac tive Full-tim e Em ploy e e be fore be c om i ng Disa ble d” is a m biguous. Nothing in the

Pla n sta te s e xa c tly how to pro ra

t e a bonus to ge t a

prope r “ ra te in e ffe c t,” and the Pla n itse l f doe s not de fine tha

t te rm .

“ R a te in e ffe c t

on y o ur la st da

y ” ha s a pla in m e aning whe n

a pplie d to re gula

r pa y , whic h is e arne d inc re m e nta lly and at a known, fixe d ra te . As a

pplie d to bonuse s, howe ve r, the phra s e is a m biguous. Only

with the be ne fit of hindsight c an one disc e rn any

da ily “ ra te ” a pplic a ble to a bonus. ThePla

n una m biguously inc l ude s bonuse s in the c a lc u lation of M onthly R a te of B a sic Ea

rnings, but “

ra te in
e ffe c t on y our la st da

y ” fa i ls to a c c ount for the disc re tiona ry an d va ria ble nature of bonuse s a nd is the re fore am

biguous a s a

p plie d to bonuse s. Hartford sta

te s tha t it ha s a polic y

to pro ra te any bonuse s e arne d

in the y e ar pre c e ding a

disa b i lity ove r twe lve m onths, whic h is c onsiste nt with how the pla n de a ls with other varia

ble inc om e sourc e s , like c om m issions. Tha

t the Pla n spe c ifie s the u se of tha

t m e t hod for c om

m issione d

e m ploy e e s doe s not logic a lly m ake tha t m e thod unre a sona

ble or pre c l ude Ha

rtford from

a dopting it a s a

logic a l inte rpre tation of a

m biguous la

ngua ge with re ga

rd to non-c om

m issione d 3e m

ploy e e s. Ha

rtford followe d this polic y with re spe c t to the B onus, a

nd n othing in the re c ord sugge s ts tha

t Powe ll wa s single d out for unfa i r tre a tm e nt a c c o rding to
suc h an inte rna l polic y . Inde e d, with re g a rd to a nothe r bonus, the

“ Pa te nt Awa

rd,” whic h re late d to work ove r an inde finite pe riod of tim e , but a pe riod of tim e like ly longe r tha n a y e ar, Hartford pro rat e d it ove r twe lve m onths in de te rm ining Pla i ntiff’ s M onthly

R a te of B a sic Ea

rnings. Thus, the

inte rna l polic y

of Ha rtford
a c tua lly worke d to Powe ll’ s a dva

nta ge with re spe c t to the Pa te nt Awa rd. Although wec onside r Hartford’ s c onflic t of inte re st a s a fa c tor in de te rm i ning whe the r Hartford a buse d its disc re tion, its inte

rpre tation of “ ra te in
e ffe c t” wa s not “ (1) illogic a l , (2) im pla usible , or (3) without support in infe re nc e s that m a y be drawn from

the re c ord.” Salomaa v . Honda Long Te rm Disability Plan , 642 F.3d 666, 676 (9th C ir. 2011) (inte rna l quota tion m a rks om itte d). Hartford’ s uniform

a pplic ation of tha

t inte rpre tation did not c onstitute an a buse of disc re tion. Pla intiff a lso a

rgue s tha t the doc trine of c ontra

profe re n te m

should a pply he re . B ut whe n a

n ER ISA pla

n gra nts a n a dm inistra

tor disc re tion, c ontra profe re nte m is ina

pplic a ble
. Se e Day

v . AT& T Disability

Inc ome Plan , 698 F.3d 1091, 1098 (9th C ir. 2012). AFFIRM E D. 4Pow e l l v
. Hartford Life & Ac c ide nt Ins. C

o. , No. 13-16529 W ALLAC E , J., disse nting Hartford’ s bla

nke t a pplic a tion of a

one -siz e -fits-a ll rule tha

t a ll
c om pe nsation will be

ave ra ge d ove r twe lve m onths in c a lc ulating disa bility be ne fits c ontra dic ts the pla in la ngua ge of the pla

n Ha rtford a dm iniste rs. B e c a

use Hartford a dm iniste rs the pla n in a wa y tha t c ontra dic ts the pla

n’ s una m biguous te rm s, I disse nt from the m a jority ’ s holding tha

t Ha rtford did not a

b use its disc re tion in a

pply ing its one -siz e -fits-a ll rule to Powe ll’ s se m i-annua l M B O/Ke y C ontributor B onus. Le st the re be any

doubt a bout whe the r Powe ll’ s M B O /Ke y C ontributor B onus wa s e ithe r a se m i-annua l or a nnua l bonus, the

re c ord be fore us m ake s c le ar that it wa s a se m i-annua l bonus. In a

n inte rna l m e m orandum

c irc ulate d by

Powe ll’ s e m ploy e r, the c om

pa ny sta te d tha t the bonus “ c o ve rs the pe riod from Ja n ua ry 1, 1995 – June30, 1995.” Furthe r, both the subje c t line of the le tte r an d

its first
se nte nc e re fe r to the bonus a s the “ 1H 1995 Ke y C ontributor B onus.” “ 1 H,” re a d in
c onte xt, m e ant the first ha l f of the y e ar, sinc e the le tte r a lso re m inds bonus pla n pa rtic i pa nts tha t the y “ ne e d to c om

ple te [the ir] 2H ‘ 95 goa ls . . . be fore the e nd of July .” W ith it e sta

b lishe d tha t a ll pa rtie s to the M B O/Ke y

C ontributor B onus arra nge m e nt (inc luding Powe ll a nd his e m ploy e r) inte nde d tha

t the bonus be pa id
on a se m i-annua l ba sis, we turn to thepla n itse lf to se e how it de a ls with suc h



# FIL ED N OV 13 2015 M OLLY C. DW Y ER, CLERK U
. S. CO URT O F APPEALSbonuse s a

nd the n de te rm ine whe the r Hartford’ s inte rpre tation of thepla n provisions wa s re a sona

ble
. Day v . AT& T Disability

Inc ome Plan , 698 F.3d 1091, 1096 (9th C ir. 2012), quoting C onk right v . Fromme rt , 559 U.S. 506, 521 (2010) (“ Unde r the de fe re ntia l a

buse of disc re tion sta

nda rd of re v ie w, ‘ the pla

n a dm inistra

tor’ s inte rpre tation of thepla n will not be

disturbe d if re a sona

ble ’ ” ). W hile the a

buse of disc re tion sta

nda rd is highly

de fe re ntia l, we m

ust be c are ful to
avoid rubbe r-stam

ping Ha rtford’ s inte rpre t a tion. Taple y v . Loc als 302 &

612 , 728 F.3d 1134, 1140 (9th C ir. 2013), quoting C onk right , 559 U.S. a

t 521 (“ The C ourt’ s re vie w of the [pla

n a dm inistra

tor’ s] inte rpre tat ion is not without bite . . . ‘ a de fe re ntia l sta

nda rd of re vie w doe s not m e an tha t the pla n a dm inistra

tor will pre v a i l on the m e rits’ ” ). In de te rm i ning the pla in m e aning of pla n la ngua ge , “ we ‘ a

pply c ontra c t princ iple s de rive d from

sta te la w . . . guide d by

the polic ie s e xpre sse d in ER ISA
and othe r fe de ra l la

b or la ws.’ ” Dupre e v . Holman Prof. C o unse ling C

trs. , 572 F.3d 1094, 1097 (9th C ir. 2009), quoting Gilliam v . N e v ada Pow e r C

o. , 488 F.3d 1189, 1194 (9th C ir. 2007). W e m u st “ look to the

a gre e m e nt’ s la

ngua ge in c onte xt a

nd
c onstrue e a c h provision in a m anne r c onsiste nt with the whole suc h tha

t none is
re nde re d nuga

t ory .” Id. “ ‘ W e will not a

rtific ia lly c re a te am

biguity whe re none e xists.’ ” Id. , quoting Ev

ans v . Safe c o Ins. C

o. , 916 F.2d 1437, 1441 (9th C ir. 1990). 2Apply ing thoseprinc iple s he re , I c onc lude that Ha rtford unre a sona

bly inte rpre te d a

pla n provision re quiring it to pa y the “ ra te in e ffe c t on [the insure d’ s] la st da y ” to m e an it c o u ld dividea l l form s of c om pe n s a tion by

twe lve m onths. At the c rux of this c a se is the de finition of a te rm use d in the pla

n c a lle d “ M onthly R a te of B a sic Ea

rnings.” That te rm

is a ke y c og in figuring out how m uc h a n insure d is e ntitle d to. The pla n de fine s “ M o nthly

R a te of B a sic Ea

rnings” a s a

n insure d’ s “ re gula

r m onthly pa y , inc luding bonuse s.” The pla n a lso te l ls us a

t wha t point in tim

e of a n insure d’ s e m

ploy m e nt Ha rtford is to a sse ss the insure d’ s e arnings by

providing tha

t “ [i] f y ou be c om e Disa

ble d , y o ur M onthly

R a te of B a sic Earnings will be therate

in e ffe c t on y our last day

a s a n Ac tive Full-tim e Em ploy e e be fore be c om i ng Disa ble d.” (e m

pha sis a dde d). The dispute he re is not
ove r whe the r Powe ll is e ntitle d to ha ve his M B O/Ke y

C o ntributor B onus fa c tore d into his disa

b ility pa y m e nt; ne ithe r party

dispute s tha

t he is. The dispute he re is
ove r how to inte rpre t the phra se “ the ra te in e ffe c t on y our la st da y .” The pla

n doe s not de fine tha

t phra s e , so I turn to tra ditiona l m e thods of c ontra c t inte rpre tation to
a sc e rta i n its m e aning. One we l l-a c c e p te d dic tiona ry de finition of “

ra te ” is “ [t] he re lationship by whic h the am ount or num be r of one thing c orre sponds proportiona lly to the
am ount or num

be r of anothe r, ty

pic a lly sta

te d a s a pa rtic ula r num e ric a l a

m ount pe r 3unit.” O X F O R D E N G LI S H D I C T I O N A R Y O N LI N E , ra te , n.1 (Se p te m

be r 2015), http://www.oe d.c om

/vie w/Entry

/158412? rske y = ge v 7UJ& re sult= 2& isAdva nc e d= fa lse . Unde r that de finition, a “ ra te ” c onsists of a

t le a st two pa

rts: (1) a n am ount, a

nd (2) a unit of m e a sure m e nt. So, for e xam ple , if som e one a ske d y ou “ what is y our he art rate ,” an a

n s we r of “ 70” would be inc om p le te be c a u se the re is no unit of
m e a sure m e nt. Like w ise , with re spe c t to a rate of pa y one m ust de te rm ine both the
am ount of pa

y and the pe riod of tim e ove r whic h tha t a m ount wa s e arne d . Applie d he re , the first pa

rt of Powe ll’ s “ ra te ” wa s the am ount of his Ke y C ontributor B onus, whic h wa s $5,964.78. The se c ond pa

rt of Powe ll’ s “ ra te ” wa s the tim e pe riod ove r whic h tha

t a m ount wa s e arne d, whic h on the “ la st da y ” of Powe ll’ s e m ploy m e nt wa s se m i-annua lly

(a s the c o m

p any ’ s le tte r, disc usse d

a bove , e sta blishe s). Inte rpre ting the phra s e “ the ra te in e ffe c t on y our la st da y ” in this wa

y is buttre s se d by

c om p aring the la

ngua g e to othe r pla

n provisions. The

phra se a t issue he re a ppe ars in the pa

rt of the pla

n tha t is a pplic a ble only to non-c om

m issione d
e m ploy e e s (suc h a s Powe l l). The pla n c onta ins e ntire ly

se pa ra te provisions for
c om m issione d

e m ploy e e s. The pla

n provide s tha

t for c o m m issione d e m

ploy e e s,

“ y o ur M onthly

R a te of B a sic Ea

rnings will be

the av e ra ge of a

ny m onthly sa la ry or wa ge s, plus c om

m issions . . . . Ave

ra ge m o nthly

e a rnings will be ba se d on: (1) the 412 m onth pe riod e nding prior to the date y ou be c om e Tota lly Disa ble d, if y o u ha

ve worke d . . . for a

t le a st 12 m onths; or (2) the num b e r of c a le nda

r m onths y ou worke d prior to thedate y ou be c am e Tota lly Disa ble d , if y ou ha

ve worke d for . . . fe we r tha n 12 m onths.” So, in the provision governing c om m i ssione d e m

ploy e e s, the p la n e xpre ssly

spe c ifie s tha

t a n insure d’ s m onthly

e arnings will be ave ra ge d
ove r twe lve m onths. Tha

t is e xa c tly

what Ha rtford would like

to do in this c a se , but the p roble m

with Ha rtford’ s inte rpre tation is tha t the provision governing Powe l l doe s som e t

hing diffe re nt. B y

not using tha

t sa m e la n gua g e in the provision gove rning non-c om

m issione d e m

ploy e e s (suc h a s Powe ll), the im p lic a tion is tha

t non-c o m m issione d

e m ploy e e e arnings will not a u tom a tic a lly

be ave ra ge d

ove r twe lve m onths. C onside ring the re lationship be twe e n the pla n provisions gove

rning
c om m issione d

an d non-c om

m issione d e m

ploy e e s is e s se ntia l if we are to give both provisions the ir full e ffe c t. S e e AN T O N I

N S C A LI A & B R Y A N G A R N E R , R E A D I N G L A W 167 (2012) (“ A le ga l instrum e nt ty pic a lly c onta ins m any

inte rre late d pa

rts that m a ke up the whole . The e ntire ty of the doc um e nt thus provide s the c o nte xt for
e a c h of its pa

rts” ). Inde e d, we have e m ploy e d this ty

p e of ana ly sis in other c a se s involving e m

ploy e e be n e fit pla

n s. In Blak

e nship v . Libe rty

LifeAssuranc e C

o. of Boston , 486 F.3d 620, 625 (9th C ir. 2007), we c onstrue d the te rm “ re c e ive s” to 5m e an “ posse ssion through ac t ua l re c e ipt of funds.” Id. W e the n “ buttre sse d” our inte rpre tation by

e xam ining thestruc ture of the pla n's te rm s. Id. W e obse rve d tha t the p la n c ontra ste d be ne fits tha

t a n insure d “ re c e ive s” an d those for whic h a n insure d wa s “ e ligible .” Id. That distinc tion le d us to re a son tha t be c a use the pla

n re duc e d be ne fits “b a se d on e ligibility for c e rta i n ty

pe s of pa ym e nts, without
re quiring e vide nc e tha

t the individua l re c e i ve d the pa ym e nts or e ve n a

pplie d for the m , . . . whe re the [pla

n] re q uire s a de duc tion of be ne fits be c a use of funds

“ re c e ive d,” the te rm

is prope rly

re a d to m e an funds tha

t a c tua lly c om e into the posse s sion of theinsure d. Id. In e sse nc e , we c o n c lude d tha t “ re c e ive s” m

u st m e an tha

t the insure d ha s a c tua l posse ssion of funds sinc e the pla n e xpre ssly re duc e d

be ne fits ba se d on m e re e ligibility for othe r be ne fits. Applic a tion of theinte rpre tative princ iple s a pplie d in Blak e n ship the re fore supports interpre ting “ t he ra te in e ffe c t

on y o ur la st da

y ” to re quire pla

n provide rs to pa

y be ne fits ba se d

on the m e a sure m e nt of pa ym e nt a pplic a ble on the e m

ploy e e 's la st da

y of work. I unde rsta nd why Ha rtford use s a

bla nke t rule of dividing all form s of
c om pe nsation by

twe lve m o nths. The c om p any a dm iniste rs m any

insura nc e pla ns c ove ring m any

e m ploy e e s with diffe re nt c om pe nsation a

rra nge m e nts. De te rm ining
e a c h e m ploy e e ’ s “ ra te in e ffe c t on [the e m p loy e e ’ s] la st da

y ” is undoubte dly

m ore 6diffic u lt tha

n dividing all form s of c om pe nsation by

twe lve m onths. B ut Ha

rtford’ s de sire for e ffic ie n c y

c annot ove rc om e the ne e d to inte rpre t words in a c c orda nc e with the ir pla in m e aning. The pla n’ s c om m and tha t Ha rtford pa y an insure d ba se d on “ t he ra te in e ffe c t on [the insure d’ s] la st da y ,” c om bine d with thepla

n’ s distinc tions be t

we e n c o m m issione d a

nd non-c om

m issione d

e m ploy e e s, re nde rs Hartford’ s bla

nke t rule unre a sona

ble . Ac c ordingly , I would hold tha t Ha rtford
a buse d its disc re tion in interpre ting the pla n a nd I the re fore disse nt from the
m a jority disposition on tha

t ba sis.

7