2011 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

8-4-2011

Funk v. CIGNA Group Ins

Precedential or Non-Precedential: Precedential

Docket No. 10-3936

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 10-3936

_____________

ROBERT FUNK

v.

CIGNA GROUP INSURANCE; LUCENT 

TECHNOLOGIES, INC.; LUCENT TECHNOLIGIES INC., 

LONG TERM DISABILITY PLAN FOR MANAGEMENT 

EMPLOYEES,

CONNECTICUT GENERAL LIFE INSURANCE 

COMPANY, improperly pleaded as “CIGNA Group 

Insurance”; ALCATEL-LUCENT USA, INC., formerly 

known as Lucent Technologies, Inc.; THE LUCENT 

TECHNOLOGIES INC., LONG TERM DISABILITY PLAN 

FOR MANAGEMENT OR LBA EMPLOYEES, improperly 

pleaded as “Lucent Technologies, Inc. Long Term Disability

Plan for Management Employees,”

 Appellants.

_______________

On Appeal from the United States District Court

for the District of New Jersey

(D.C. No. 2-08-cv-05208)
2

District Judge: Hon. Faith S. Hochberg

_______________

Argued

June 21, 2011

Before: CHAGARES, JORDAN and GREENAWAY, JR., 

Circuit Judges.

(Filed: August 4, 2011)

_______________

Robert P. Lesko [ARGUED]

Karen Denise Peck

Wilson, Elser, Moskowitz, Edelman & Dicker

33 Washington Street, 17th Floor

Newark, NJ 07102

Jay P. Symonds

Wilson, Elser, Moskowitz, Edelman & Dicker

260 Franklin Street, 14th Floor

Boston, MA 02110

 Counsel for Appellants

Steven Gaechter [ARGUED]

McCarter & Gaechter

58 Main Street

Hackensack, NJ 07601

 Counsel for Appellee

_______________

OPINION OF THE COURT

_______________
3

JORDAN, Circuit Judge.

This case arises out of a decision by Connecticut 

General Life Insurance Company (“CIGNA”), as the thirdparty administrator of “The Lucent Technologies, Inc. Long 

Term Disability Plan for Management or LBA Employees”

(the “Plan”),1 to deny Alcatel-Lucent USA, Inc. (“Lucent”)

employee Robert Funk’s claim for long-term disability 

benefits under the Plan. Funk challenged that decision in the 

United States District Court for the District of New Jersey

pursuant to the Employee Retirement Income Security Act of 

1974 (“ERISA”). The District Court granted summary 

judgment for Funk on both his claim for long-term disability 

benefits and on CIGNA’s counterclaim under ERISA to 

recover overpaid benefits. 

CIGNA and the other appellants appeal from that 

decision and order.2

 For the following reasons, we will 

vacate the District Court’s order and remand with respect to 

CIGNA’s denial of benefits, and we will reverse the District 

Court’s order with respect to CIGNA’s counterclaim for 

overpaid benefits.

 1 In their briefs, the parties identify CIGNA Group 

Insurance as the Plan administrator. (See Appellants’ 

Opening Brief at 3; Appellee’s Answering Brief at 1.) The 

Plan itself, however, states that the “Administrator for the 

Plan is Connecticut General Life Insurance Company 

(CIGNA).” (App. 2 at 178.)

2 For ease of reference, we will refer to all of the 

appellants collectively as “CIGNA.” 
4

I. Background

A. The Parties And The ERISA Plan At Issue

Funk worked as a member of Lucent’s technical staff.

3

At all times relevant to this appeal, he was a participant in 

Lucent’s Plan, which was governed by ERISA and selffunded by Lucent through a trust. CIGNA administered the 

Plan. As Plan administrator, CIGNA had “full discretionary 

authority and power to ... determine eligibility for [Plan] 

benefits [and] to interpret and construe the terms and 

provisions of the [Plan].” (App. 2 at 585.)

Pursuant to the Plan, a participant could be eligible to 

receive long-term disability (“LTD”) benefits after he had 

received short-term disability benefits for 26 weeks. The 

Plan provided LTD benefits in two phases. Phase one began 

immediately after the 26-week short-term disability period 

and ran for one year. To receive LTD benefits for that oneyear period, the putatively disabled participant had to show 

that he was 

prevented by reason of such disability, other 

than accidental injury arising out of and in the 

course of employment of the Company, from 

engaging in his ... occupation or employment at 

the Company, for which the Eligible Employee 

is qualified, based on training, education or 

experience.

 3 Funk’s job involved testing computer software and 

hardware as part of product development. 
5

(App. 2 at 167.) However, for a Plan participant to receive 

LTD benefits beyond the one-year period, i.e., to move on to

phase two, CIGNA, “in [its] sole opinion [as] the [Plan] 

Administrator,” had to be persuaded that the participant was 

incapable of performing the requirements of any 

job for any employer for which the individual is 

qualified or may reasonably become qualified 

by training, education or experience, other than 

a job that pays less than 60 percent of the 

Eligible Employee’s Eligible Pay that would 

have been in effect on the day preceding the day 

that the Eligible Employee’s Short Term 

Disability Benefits ceased. 

(Id.) 

The Plan also provided that LTD benefits could be 

reduced by certain offsets, including Social Security disability 

benefits. Pursuant to the Plan, “[a]ny retroactive award of 

Social Security benefits which covers any portion of the 

period for which Plan benefits have been paid shall be 

considered as an offset of such Plan benefits and be payable 

to [CIGNA] by the recipient.” (App. 2 at 172.)

B. CIGNA’s Denial Of Funk’s Claim For Phase 

Two LTD Benefits

On December 7, 2004, Funk began a leave of absence 

due to depression and related disorders. In August 2005, after 

receiving short-term disability benefits for 26 weeks, Funk 
6

applied to CIGNA for LTD benefits.4

 In support of his 

application, Funk submitted a claim form and the treatment 

records from his mental healthcare providers, Dr. Pinchuck, 

his psychiatrist, and Mr. Libby, his psychotherapist.5 Funk’s 

submissions indicated that he had a history of alcohol abuse 

and had been experiencing stress from his financial situation 

and his relationship with his wife. Pinchuck’s and Libby’s 

treatment notes described Funk as suffering from, among 

other things, depression, anxiety, and paranoia. The notes 

indicated that Funk had difficulty concentrating, making 

decisions, and otherwise performing daily tasks. Both 

Pinchuck and Libby opined that Funk was unable at that time 

to return to work in his former position. 

CIGNA forwarded Funk’s treatment records to Dr. 

Mohsin Qayyum for independent review. Qayyum opined

that the information provided to him supported the conclusion 

that, “due to severe psychiatric symptoms[,]” Funk could not 

return to work. (App. 2 at 436.) Accordingly, Funk was 

awarded LTD benefits for a one-year period retroactive to 

June 28, 2005. 

 4 It is undisputed that Funk was an “Eligible 

Employee” under the Plan and that his eligible pay prior to 

the date of his disability was $78,100. 

5 Funk also listed Drs. Katz and Lederich as treating 

physicians, but they treated, respectively, chronic headaches 

and sleep difficulties, and neither provided information that 

the parties treat as significant to Funk’s claim that he was 

unable to work. 
7

In June 2005, Funk executed an agreement providing 

that his LTD benefits under the Plan were to be reduced by 

any Social Security benefits he ultimately received and that 

he would reimburse CIGNA “for any LTD overpayment ... 

that may occur as a result of” having received Social Security 

benefits. (App. 2 at 566.) In August 2005, he executed a 

similar agreement (together with the June 2005 agreement, 

the “Reimbursement Agreements”).

In January 2006, CIGNA notified Funk that it would 

again be reviewing his case to determine if he would remain 

eligible for benefits beyond the phase one period. The review 

required Funk to complete a disability questionnaire and to 

provide current treatment information from his mental 

healthcare providers. 

Funk submitted the questionnaire, listing bad tremors, 

lack of concentration, tiredness, short-term memory loss, 

aggression, depression, and paranoia as reasons why he could 

not return to work. Libby provided notes from therapy

sessions, including observations that Funk’s relationship with 

his wife had improved, that he was “communicating his 

feelings much clearer,” that he had “been able to use the skills 

learned in session to manage his depression – which is now 

under control,” and that he had “continue[d] to improve but 

need[ed] regular sessions [and] proper med[ication] to avoid 

regression.” (App. 2 at 426.) Libby also reported that Funk 

was still suffering from confusion, depression, helplessness,

and hopelessness and could not at that time return to work. 

Pinchuck did not provide updated treatment notes, stating that 

they were “sent before” and that “you can’t read my 

handwriting anyway.” (App. 2 at 374.) He instead provided

an updated evaluation of Funk, which indicated that Funk was 
8

not abusing substances and that he exhibited fair judgment 

and insight along with “grossly intact” cognition. (Id. at 375.) 

However, Pinchuck also indicated that Funk still suffered 

from depression and anxiety, scored a 40 on the Global 

Assessment of Functioning (“GAF”)6

, exhibited limited 

capacity to socialize and perform daily tasks, and was unable 

to return to work. 

CIGNA again enlisted Qayyum to independently 

review Funk’s claim. On August 15, 2006, after reviewing

Funk’s supplemental information, Qayyum issued a report 

concluding that, while the records showed Funk to be 

suffering from psychiatric symptoms, they did not show that 

those symptoms were severe or that he had “severe functional 

limitations in ... psychosocial domains.” (Id. at 367.) Given 

that, and considering Funk’s “fair insight and judgment,” 

“grossly intact” cognition, and within-normal-limits “thought 

process and content,” (id.) Qayyum opined that the “entirety 

... of [the] available information [did] not provide evidence 

 6 The GAF is a numeric rating used by mental health 

practitioners to measure the functional impairment of a 

patient on a 0-100 scale in accordance with the Diagnostic 

and Statistical Manual of Mental Disorders. See AM.

PSYCHIATRIC ASSOC., DIAGNOSTIC AND STATISTICAL 

MANUAL OF MENTAL DISORDERS 34 (4th ed., 2000). A score 

of 40 represents “[s]ome impairment in reality testing or 

communication (e.g., speech is at times illogical, obscure, or 

irrelevant) OR major impairment in several areas, such as 

work or school, family relations, judgment, thinking, or mood 

(e.g., depressed man avoids friends, neglects family, and is 

unable to work ...).” Id.
9

of psychiatric functional impairment to preclude” (id. at 368) 

Funk from working. 

On August 16, 2006, the day after issuing his report,

and after having made several unsuccessful attempts to 

contact Pinchuck for a peer-to-peer discussion about Funk, 

Qayyum finally spoke with Pinchuck. During that

conversation, which Qayyum later memorialized in notes, 

Pinchuck suggested that Funk might be able to work in a 

“menial job, such as mopping floors or working at a post 

office at night.” (Id. at 363.) Qayyum declined to speculate 

as to a suitable vocation but responded, echoing his report, 

that Funk was not “functionally impaired from working in a 

supportive, low stress, low cognitive demand environment,” 

as evidenced by, inter alia, his ability to use a computer and 

daily check his email. (Id.) 

Also during that conversation, Pinchuck revealed that 

he had referred Funk to a neuropsychologist, Dr. Robert 

Pancza, for an evaluation in March 2006. Pancza’s 

evaluation, the results of which Pinchuck later faxed to 

Qayyum, consisted of a battery of tests administered over two 

days. From that evaluation, Pancza observed:

[Funk] was pleasant and cooperative throughout 

th[e] examination. An appropriate amount of 

effort was applied to all tasks, without any signs 

of frustration. There was no noted tendency 

toward mental fatigue, distractibility, 

impulsivity, or lapses in concentration. All 

instructions were understood without difficulty. 

There were no indications that any affective 

factors, including anxiety or depression, were 
10

present at a level sufficient to diminish his 

functional level during the course of th[e] 

examination. Mood was noted to be normal and 

affect was well modulated throughout th[e] 

examination.

(Id. at 355.) The test results indicated that Funk enjoyed 

average to high function in most cognitive areas. 

Summarizing the evaluation, Pancza stated:

[T]here is a disparity between [Mr. Funk’s] selfreport of everyday cognitive functioning and the 

objective results of this examination. There is a 

growing body of research that has indicated that 

individuals who are depressed often 

significantly underestimate the quality of their 

cognitive functioning. Such appears to be the 

case for Mr. Funk. ... [I] ... reassured [Mr. 

Funk] about being capable of performing 

occupational activities based solely upon his 

current cognitive abilities. 

(Id. at 357.)

On August 22, 2006, CIGNA notified Funk via letter 

that he was no longer disabled as defined under the Plan and 

so would not receive further LTD benefits. Explaining its 

decision, CIGNA acknowledged Pinchuck’s opinion that 

Funk still suffered from depression, bi-polar disorder, 

anxiety, and paranoia and so was unable to work. However, 

it noted Pinchuck’s observations that, as of July 25, 2006, 

Funk was “alert and oriented” and exhibiting “good” 

behavior, that he had thought process and content “within 

normal limits,” had “fair” judgment and insight and “grossly 
11

intact” cognition, and had stopped drinking alcohol. (Id. at 

358-59.) Echoing Pinchuck’s opinion, CIGNA noted that 

Funk’s “ongoing severe depressive symptoms” made it 

difficult to get “a clear picture of [Funk’s] cognitive 

problems” but noted too that Panzca’s testing revealed “no 

gross cognitive defects.” (Id. at 359.) Finally, CIGNA noted 

that Funk was able daily to use a computer to check email. 

From the foregoing, CIGNA concluded that “there is no 

clinical evidence to support that [Funk] would be unable to 

work in a supportive, low stress, low cognitive demand 

environment.” (Id.) CIGNA closed the letter by informing

Funk of his right to administratively appeal the decision and 

to include additional information for CIGNA to consider.7

 

 Funk appealed to CIGNA for further review of his 

case. He contended that Qayyum’s report and notes, which 

CIGNA cited in denying benefits, were at odds with the 

medical documentation provided by Pinchuck and Libby. 

Funk also noted that CIGNA failed to perform any sort of 

vocational assessment to determine whether he could, in his 

mental condition, “reasonably become qualified by training, 

education or experience, and earn 60% of his pre-disability 

pay,” (id. at 316) which, Funk contended, not only made 

hollow CIGNA’s conclusion that he “[was] not functionally 

impaired from working in a supportive, low stress, low 

cognitive demand environment,” but also constituted 

noncompliance with the terms of the Plan, since “disability” 

 7 It appears that CIGNA, in denying benefits, had 

reviewed Qayyum’s summary of his conversation with 

Pinchuck, in which the Pancza evaluation was discussed, but 

had not reviewed the Pancza evaluation itself.
12

under the Plan could only be determined in light of a 

vocational assessment (id. at 315). 

Funk included as additional information in support of 

his appeal a letter from the Social Security Administration 

that indicated that his application for disability benefits was 

being reviewed and that, based on the submitted information, 

Funk appeared to “need help managing [his] money and 

meeting [his] daily needs.” (Id. at 317.) Funk subsequently 

supplied a medical questionnaire completed by Libby on 

February 11, 2007, indicating that Funk’s GAF score was 

45/50,

8 that his response to treatment over the last three years 

had been “fair to poor,” that his decision-making, stress 

tolerance, and performance were hindered by confusion, 

fatigue, dysphoric mood, and depression, that he had 

“marked” functional limitation in daily activities, social

functioning, and concentrating, and that “at present [his] 

depressive symptoms hinder sustained, gainful employment.” 

(Id. at 304, 306-07, 309.) Nevertheless, Libby also indicated 

in the questionnaire that, contrary to the Social Security 

Administration’s opinion, Funk “[could] ... manage benefits 

in his ... own best interest.” (Id. at 309.) 

 8 That GAF score represents “[s]erious symptoms 

(e.g., suicidal ideation, severe obsessional rituals, frequent 

shoplifting) OR any serious impairment in social, 

occupational or school functioning (e.g., no friends, unable to 

keep a job).” AM. PSYCHIATRIC ASSOC., DIAGNOSTIC AND 

STATISTICAL MANUAL OF MENTAL DISORDERS 34 (4th ed., 

2000).
13

In January 2007, while his appeal to CIGNA was 

pending, Funk was awarded Social Security disability 

benefits, retroactive to June 1, 2005. That retroactive Social 

Security award created a period in which Funk received both 

Social Security and LTD benefits, meaning that, under the 

Plan, he had been overpaid and was obligated to reimburse 

CIGNA the overpaid amount, which was $24,817. Funk paid 

CIGNA $18,500, but spent the remaining $6,317 on ordinary 

living expenses. Despite notice from CIGNA, Funk did not 

pay the balance owed.

Having received Funk’s additional submissions in 

support of his appeal, CIGNA forwarded all of the medical 

documentation that had previously been submitted with

Funk’s claim to Dr. Stuart Shipko for an independent review. 

After reviewing those records, Shipko concluded that Funk’s 

medical history did not support any restrictions or limitations 

on his working. Shipko opined that Pinchuck’s assessment 

“lack[ed] credibility,” citing two reasons. (Id. at 299.) First, 

Shipko believed that Pinchuck had, in his phone conversation 

with Qayyum, mischaracterized Pancza’s neuropsychological 

testing. In particular, Shipko was troubled that Pinchuck had 

said the test results did “not provide a clear assessment of 

[Funk’s] cognitive problems due to [Funk’s] ongoing severe 

depressive symptoms” and that follow-up testing was needed, 

despite Pancza having stated in his report that “emotional 

factors were not causing any cognitive impairment ... [or] 

interfering with effort or testing of cognition in any manner.” 

(Id. at 298.) Second, according to Shipko, Pinchuck had 

“indicate[d] that [Funk] ha[d] marginal cognitive abilities,” 

had “poor grooming and hygiene,” and was “still severely 

depressed,” though Pancza had stated in his report that Funk 

“was pleasant and cooperative throughout his examination,” 
14

“had a normal mood and affect,” and applied “an appropriate 

amount of effort ... [without a] tendency toward mental 

fatigue, distractibility, impulsivity or lapses in concentration.” 

(Id. at 298-99.) 

Shipko similarly criticized Libby’s opinion that Funk 

could not work, observing that it was at odds with Libby’s

own treatment notes, which, Shipko said, “indicate[d] that 

depression is under control and d[id] not indicate that [Funk] 

[was] reporting any problems with cognition or serious 

symptoms of depression.” (Id. at 299.) Shipko also noted 

that Libby conducted no formal cognition tests and that his 

report was inconsistent with Pancza’s evaluation. Shipko 

closed his review thusly: “Available information does not 

support an inability to work in any occupation for which he is 

suited.” (Id. at 300.)

CIGNA subsequently denied Funk’s appeal. Citing 

Shipko’s and Pancza’s evaluations, and giving no “deference 

to prior reviews,” CIGNA noted that Pinchuck’s and Libby’s 

opinions were at odds with their own treatment notes and 

Pancza’s evaluation. (Id. at 289.) CIGNA concluded that it 

had “not received medical information demonstrating a 

severity in [Funk’s] condition supporting restrictions 

preventing [him] from performing [his] own or any 

occupation.” (Id.) 

Funk again appealed within CIGNA, this time 

submitting a copy of Shipko’s report marked up with Libby’s 

handwritten comments. Libby noted errors he believed 

Shipko had made in chronicling Funk’s treatment and opined 

that Pancza’s evaluation was misleading because it was done 

in a controlled environment and that Funk’s then-current 
15

status did not support Shipko’s conclusion that Funk was able 

to work. 

On February 6, 2008, CIGNA issued a final decision 

denying Funk’s LTD claim. Noting in particular a lack of 

clinical evidence or documentation to support Libby’s 

opinion, CIGNA stated that it “had not been provided with 

the clinical evidence to support a physical or psychiatric 

functional loss which would preclude [Funk] from performing 

his regular occupation.” (Id. at 186.) 

C. Proceedings In The District Court 

On October 22, 2008, having exhausted his 

administrative appeals, Funk sued CIGNA pursuant to 29 

U.S.C. § 1132(a)(1)(B), seeking under ERISA to overturn 

CIGNA’s denial of LTD benefits. CIGNA countersued

pursuant to 29 U.S.C. § 1132(a)(3), seeking under ERISA to 

recover from Funk the remaining $6,317 of overpaid LTD 

benefits. The parties filed cross motions for summary 

judgment, and, on August 30, 2010, the District Court granted 

Funk’s motion and denied CIGNA’s. With respect to the 

denial of benefits, the Court held that CIGNA had acted 

arbitrarily and capriciously because, as an initial matter, it had 

failed to assess whether Funk was disabled as defined under 

the Plan; that is, it had failed to assess whether Funk could 

work in a job that would pay him 60% of his former wage (a 

“60% job”), given the restrictions identified in CIGNA’s 

initial denial (low stress environment, etc.). In the alternative, 

the Court held that CIGNA’s denial of benefits was not 

supported by substantial evidence as set forth in Metropolitan 

Life Insurance Co. v. Glenn, 554 U.S. 105 (2008), because 

CIGNA had (1) failed to reconcile its decision with the Social 
16

Security Administration’s award of disability benefits; (2) 

given greater weight to non-treating physicians’ opinions 

without explanation; (3) issued the initial denial without 

having reviewed Pancza’s report; (4) confused cognition with 

mental illness in determining Funk’s ability to be productive 

at work; and (5) exhibited a financial conflict of interest in 

administering the Plan. With respect to CIGNA’s 

counterclaim for recoupment of overpaid benefits, the Court 

held that an equitable lien over the Social Security funds, 

which is the relief CIGNA sought, was not possible here since 

those funds had been dissipated prior to suit and could not be 

traced.

CIGNA’s timely appeal to us followed. 

II. Standard of Review9

“Summary judgment is proper if there is no genuine 

issue of material fact and if, viewing the facts in the light 

most favorable to the non-moving party, the moving party is 

entitled to judgment as a matter of law.” Smathers v. MultiTool, Inc./Multi-Plastics, Inc. Emp. Health & Welfare Plan, 

298 F.3d 191, 194 (3d Cir. 2002). Applying that standard, we 

exercise plenary review of a district court’s grant of summary

judgment. Id. 

In determining whether benefits under a plan governed 

by 29 U.S.C. § 1132(a)(1)(B) were properly denied, we 

 9 The District Court had jurisdiction pursuant to 28 

U.S.C. § 1331 and 29 U.S.C. § 1132(e). We have jurisdiction 

pursuant to 28 U.S.C. § 1291.
17

review for abuse of discretion.10 Firestone Tire & Rubber 

Co. v. Bruch, 489 U.S. 101, 115 (1989); Glenn, 554 U.S. at 

115-17. Because “benefits determinations arise in many 

different contexts and circumstances, ... the factors to be 

considered [in reviewing a plan administrator’s exercise of 

discretion] will be varied and case-specific.” Estate of 

Schwing v. The Lilly Health Plan, 562 F.3d 522, 526 (3d Cir. 

2009) (internal quotation marks omitted). While a plan 

administrator’s potential conflict of interest may be among 

those case-specific factors, courts should not give that factor 

undue weight but should instead treat it as one of the several 

factors that may be relevant in the case. See id. (instructing 

that courts should “take account of several different 

considerations of which a conflict of interest is one, and reach 

a result by weighing all of those considerations” (internal 

quotation marks omitted)). A court may overturn a plan 

administrator’s determination “if it is without reason, 

unsupported by substantial evidence or erroneous as a matter 

of law.” Doroshow v. Hartford Life & Accident Ins. Co., 574 

F.3d 230, 234 (3d Cir. 2009). A decision is also subject to 

judicial correction when the plan administrator has failed to 

comply with the procedures required by the plan. Abnathya 

v. Hoffman-La Roche, Inc., 2 F.3d 40, 41 (3d Cir. 1993), 

abrogated in part on other grounds by Glenn, 554 U.S. at 

112. 

 10 “In the ERISA context, the arbitrary and capricious 

and abuse of discretion standards of review are essentially 

identical.” Miller v. Am. Airlines, Inc., 632 F.3d 837, 845 n.2 

(3d Cir. 2011).
18

III. Discussion

This appeal raises the question of whether CIGNA 

complied with its own Plan and relied on substantial evidence 

in denying LTD benefits to Funk. It also requires us to 

address whether CIGNA may assert an equitable lien on 

Funk’s Social Security benefits such that it may recoup an

overpayment of benefits. We discuss each of those issues in 

turn.

A. CIGNA’s Denial Of LTD Benefits

The District Court held that CIGNA abused its 

discretion in denying Funk phase two LTD benefits because 

CIGNA failed to comply with the Plan in determining 

“disability” and because its decision, which did not give 

proper consideration to the evidence and was infected by a 

conflict of interest, was not supported by substantial 

evidence. We disagree with the former conclusion and 

cannot accept the District Court’s analysis as to the latter.

1. Whether CIGNA Complied With the Plan 

The District Court concluded that, because CIGNA’s 

decision did not explicitly address salary or provide examples 

of suitable alternative 60% jobs, CIGNA failed to comply 

with the Plan provision requiring it to determine whether 

Funk was “incapable of performing the requirements of any 

job for any employer ... for which the individual is qualified 

or may reasonably become qualified ... , other than a job that 
19

pays less than 60 percent [of his former pay].”11

 11 The District Court’s opinion appears to focus on 

CIGNA’s initial decision rather than its final decision. For 

example, the District Court, in holding that CIGNA had failed 

to comply with the Plan, highlighted CIGNA’s failure to 

identify a 60% job that Funk could do, given his work 

limitations, even though the final decision indicates that Funk 

has no work limitations. Similarly, the District Court 

criticized CIGNA for basing its decision on Funk’s “intact 

computational skills” without explaining how those skills 

qualify him for a 60% job, even though the final decision 

made no mention of those skills. The Court’s emphasis was 

misplaced.

 (App. 2 at 

167.) CIGNA argues that it was not required to explicitly 

A plan administrator’s final, post-appeal decision 

should be the focus of review. See, e.g., 29 C.F.R. 

§ 2560.503-1(h) (requiring that claimants subject to adverse 

benefit determinations be provided with a “reasonable 

opportunity” to appeal that adverse decision); 29 C.F.R. 

§ 2560.503-1(h)(2)(i)-(ii) (requiring that claimant be provided 

appropriate notice and an opportunity to submit 

documentation and evidence supporting his or her claim); 29 

C.F.R. § 2560.503-1(h)(2)(iv) & (3)(ii) (requiring that the 

plan administrator’s review must “take[] into account all 

[additional information] ... without regard to whether such 

information was submitted or considered in the initial benefit 

determination,” “not afford deference to the initial adverse 

benefit determination,” and be “conducted by an appropriate 

named fiduciary of the plan who is neither the individual who 

made the adverse benefit determination that is the subject of 

the appeal, nor the subordinate of such individual”). To focus 

elsewhere would be inconsistent with ERISA’s exhaustion 
20

discuss salary and alternative 60% jobs because it had 

authority under the Plan to reasonably interpret Plan 

provisions, and it was reasonable to interpret the Plan as not 

requiring an analysis of alternative 60% jobs when it had 

determined that Funk could return to his former job. 

ERISA plans commonly grant authority to plan 

administrators to interpret the plan’s terms. Goldstein v. 

Johnson & Johnson, 251 F.3d 433, 441 (3d Cir. 2001). Even 

so, plan administrators do not have unfettered discretion in 

undertaking that task.

 

requirement. See LaRue v. DeWolff, Boberg & Assocs., Inc., 

552 U.S. 248, 258-259 (2008) (noting that claimants must 

“exhaust the administrative remedies mandated by ERISA 

§ 503, 29 U.S.C. § 1133, before filing suit under 

§ 502(a)(1)(B)”); Metropolitan Life Ins. Co. v. Price, 501 

F.3d 271, 280 (3d Cir. 2007) (similar). 

A court may of course consider a plan administrator’s 

pre-final decisions as evidence of the decision-making 

process that yielded the final decision, and it may be that 

questionable aspects of or inconsistencies among those prefinal decisions will prove significant in determining whether a 

plan administrator abused its discretion. See, e.g., Miller, 632 

F.3d at 855-56 (considering unexplained inconsistencies 

between a plan administrator’s initial and final disability 

determinations as a factor suggesting an abuse of discretion). 

In those instances, however, the pre-final decisions ought 

merely to inform a court’s review of the final decision. See 

generally id. 
21

If the terms are unambiguous, then any actions 

taken by the plan administrator inconsistent 

with the terms of the document are arbitrary. 

But actions reasonably consistent with 

unambiguous plan language are not arbitrary. If 

the reviewing court determines the terms of a

plan document are ambiguous, it must take the 

additional step and analyze whether the plan 

administrator’s interpretation of the document is

reasonable.

Bill Gray Enters., Inc. Emp. Health & Welfare Plan v. 

Gourley, 248 F.3d 206, 218 (3d Cir. 2001); see also McElroy 

v. SmithKline Beecham Health & Welfare Benefits Trust Plan

for U.S. Emps., 340 F.3d 139, 143 (3d Cir. 2003) (holding 

that plan administrator was authorized to interpret plan 

language that was “equivocal”).

Regardless of CIGNA’s characterization of what it did 

here, it does not appear that it interpreted ambiguous Plan 

terms. Indeed, the Plan’s requirements for determining phase 

two disability appear to be clear and thus unsuited to any 

further interpretation. The issue, then, is whether CIGNA 

acted “reasonably consistent with” those requirements. 

Gourley, 248 F.3d at 218. In our view, it did. The Plan 

required CIGNA to determine whether Funk was capable of 

working in any job that would pay him 60% of his former 

pay. CIGNA literally complied with that requirement when it 

determined that Funk could, without restrictions, “perform[] 

his regular occupation” (id. at 186), i.e., his former job at 

Lucent. It went without saying that his former job could be 

understood to pay 100% of his former wage. Moreover, 

because CIGNA’s determination that Funk was not disabled
22

did not turn on the existence of an alternative 60% job, it was 

unnecessary to discuss in its decision any alternative 60% 

jobs. CIGNA’s decision was therefore reasonably consistent 

with the Plan, and the District Court’s contrary holding was in 

error.

12

2. Whether Substantial Evidence Supported 

CIGNA’s Decision

In the alternative, the District Court concluded that 

CIGNA’s decision was not supported by substantial evidence 

because it did not give proper consideration to the evidence 

and was infected by a conflict of interest. Regarding the

latter point, the Court stated that CIGNA “exhibited a 

financial conflict of interest in the way that the plan for 

Lucent was administered.” (App. 1 at 11.) The Court 

reasoned that because CIGNA was a claim administrator 

operating in a competitive market, it labored under a conflict. 

Citing Glenn, the District Court said, “if a company is a claim 

administrator that offers itself to self-funded plans in a 

competitive market, then its incentive is to keep claims down 

to be more attractive to potential plans,” which incentivizes 

the claim administrator to “over-deny claims.” (Id. at 11-12

n.12.) 

That analysis, however, does not take full account of 

the Supreme Court’s instructions in Glenn. A party’s status 

 12 Even if we were to consider CIGNA as having 

engaged in Plan interpretation, rather than straightforward 

Plan execution, the same rationale supports the conclusion 

that CIGNA’s interpretation was reasonable.
23

as a third-party plan administrator does not automatically 

encumber it with a material conflict of interest. While the 

Supreme Court in Glenn did say that, “for ERISA purposes a 

conflict exists” when a third-party plan administrator operates 

in a competitive market for the delivery of such services,

13

the Court also acknowledged that the conflict may be of little 

or no practical significance. See 554 U.S. at 114-15

(explaining that, while a plan administrator may have a 

conflict of interest by virtue of its participation in a 

competitive market, a court “can nonetheless take account of 

the circumstances ... which ... diminish[] the significance or 

severity of the conflict in individual cases” (emphasis

original)). 

Here, as even Funk rightly and frankly acknowledged

at oral argument, there is nothing to suggest that CIGNA was 

laboring under a meaningful conflict of interest. Thus, the 

District Court should not have given the significant weight it 

appeared to give to a largely hypothetical conflict. Because 

we cannot be sure of the extent to which the District Court’s

weighing of that factor affected the Court’s holding, we will 

remand the case for a reevaluation of CIGNA’s claim 

 13 “For one thing,” the Glenn Court said, “the 

employer’s own conflict may extend to its selection of an 

insurance company to administer its plan. An employer 

choosing an administrator in effect buys insurance for others 

and consequently (when compared to the marketplace 

customer who buys for himself) may be more interested in an 

insurance company with low rates than in one with accurate 

claims processing.” Glenn, 554 U.S. at 114.
24

decision in light of the other factors cited by the District 

Court.

B. Recouping Overpayment

We now turn our attention to CIGNA’s counterclaim 

seeking recoupment of overpaid LTD benefits. Under 

ERISA, a fiduciary may bring a civil action “(A) to enjoin 

any act or practice which violates any provision of this 

subchapter or the terms of the plan, or (B) to obtain other 

appropriate equitable relief (i) to redress such violations or 

(ii) to enforce any provisions of this subchapter or the terms 

of the plan.” 29 U.S.C. § 1132(a)(3). However, a fiduciary 

may only seek relief under § 1132(a)(3) if the relief sought 

falls within “those categories of relief that were typically

available in equity,” Sereboff v. Mid Atlantic Med. Servs., 

Inc., 547 U.S. 356, 361 (2006) (internal quotation marks 

omitted) (emphasis original), and “the basis for its claims is 

equitable,” id. at 363. CIGNA here seeks equitable relief to 

enforce provisions of the Plan and the related Reimbursement 

Agreements. 

In Great-West Life & Annuity Ins. Co. v. Knudson, 534 

U.S. 204 (2002), an insurer that had paid medical bills for an

insured who had been injured in a car accident sought,

pursuant to a plan provision that reserved “a first lien upon 

any recovery ... that the beneficiary receives from [a] third 

party,” id. at 207 (internal quotation marks omitted),

reimbursement from the insured after she recovered in tort for 

her injuries, id. at 207-09. The Supreme Court rejected the 

insurer’s claim, explaining that the relief sought could not be 

categorized as equitable unless the insured possessed the

particular property to which the lien would attach at the time 
25

relief was sought. Because the settlement funds over which 

the insurer sought to impose a lien were in a trust, not in the 

insured’s possession, the insurer’s claim failed. Id. at 213-14. 

In those circumstances, the Court explained, the insurer was 

effectively seeking recovery from the insured’s general 

assets, which made the relief sought legal, not equitable, and 

thus impermissible under § 1132(a)(3). Id. at 214. 

 Subsequently, in Sereboff, the Supreme Court held an 

insurer’s claim for reimbursement was permissible under 

§ 1132(a)(3), despite quite similar facts. As in Knudson, the 

insurer in Sereboff sought to recoup medical expenses from 

an insured who had received a tort settlement. Sereboff, 547 

U.S. at 359. The insurer relied on a plan provision requiring 

the insured to “‘reimburse [the insurer]’ for [medical] benefits 

from ‘[a]ll recoveries from a third party (whether by lawsuit, 

settlement, or otherwise).” Id. In Sereboff, though, the funds 

upon which the insurer sought to impose a lien were in the 

insured’s investment accounts, and so were still in the

insured’s possession. Id. at 362-63. The Court identified that 

fact as a meaningful basis for distinguishing Knudson, 

explaining that the “impediment to characterizing the relief in 

Knudson as equitable [was] not present,” id. at 362, because 

the insurer in Sereboff was seeking “to recover a particular 

fund from the [insured],” id. at 363. 

The Court in Sereboff described the insurer’s claim as 

reflecting an equitable lien “by agreement” – that is, a lien 

arising out of an agreement to convey ownership of specific 

property to one party as soon as the counterparty gets title to 

the property. Id. at 363-65 (citing Barnes v. Alexander, 232 

U.S. 117, 121 (1914)). The insurance plan provision 

requiring reimbursement gave rise to such a lien. Id. When 
26

there is an equitable lien by agreement, the Court said, the 

lien “follow[s]” the contracted-for property “into the 

[counterparty’s] hands,” i.e., it attaches to the specified 

property “as soon as [the property] [is] identified.” Id. at 364. 

Consistent with that operation, the Court observed, “the fund 

over which [an equitable] lien [by agreement] is asserted need 

not be in existence when the contract containing the lien 

provision is executed.” Id. at 366. Moreover, the Court said, 

there is no “tracing requirement” for an equitable lien by 

agreement. Id. at 365. Property to which the lien attached 

may be converted into other property without affecting the 

efficacy of the lien. See id. (observing that the property at 

issue in Barnes had been converted into other property 

without disturbing the equitable lien by agreement).14 

In the present case, Funk argues that, because the 

funds upon which CIGNA sought to impose the lien – the 

Social Security award – were no longer in his possession, the 

District Court correctly followed Knudson and rejected 

 14 The Supreme Court’s description of equitable liens 

by agreement in Sereboff as laying claim to property not yet 

in possession and remaining valid even if the later acquiredproperty is converted strongly implies that, in that context and 

contrary to the Court’s discussion in Knudson, the defendant 

need not possess the property at the time relief is sought in 

order for the relief to be equitable – any post-agreement 

possession will suffice. See generally Sereboff, 547 U.S. at 

361-366 (recognizing that equitable liens by agreement 

operate where property is not yet in defendant’s possession 

and where property was in defendant’s possession and then 

converted).
27

CIGNA’s claim for an equitable lien. If, however, there was 

an equitable lien by agreement that attached to the Social 

Security award as soon as Funk received it, dissipation of the 

funds was immaterial. CIGNA asserts that it has an equitable 

lien by agreement, citing the Plan and the Reimbursement 

Agreements as agreements identifying specific funds (the 

Social Security award) and a particular share of those funds 

(the amount of overpayment) to which its lien attached. 

Considering the Plan and the Reimbursement 

Agreements, we believe that CIGNA has the better of those 

arguments. The Plan provides that a Social Security offset 

“shall be ... payable ... by the recipient.” (App. 2 at 172.) 

Likewise, the Reimbursement Agreements provide, 

respectively, for “reimburse[ment] ... for any LTD 

overpayment” (id. at 566 (June 22, 2005 agreement)) and

“reimburse[ment of] the full amount of any overpayment” (id.

at 531 (August 13, 2005 agreement)). The Supreme Court in 

Sereboff held that language specifying a right to 

reimbursement from “[a]ll recoveries from a third party 

(whether by lawsuit, settlement, or otherwise)” was sufficient 

to create an equitable lien by agreement. 547 U.S. at 359, 

369 (internal quotation marks omitted). Because the Plan 

and Reimbursement Agreements at issue here likewise 

specify the receipt of Social Security benefits as the particular 

fund from which reimbursement is to be made, they give rise 

to an equitable lien by agreement over those Social Security 

funds that are overpayments under the Plan.

15

 15 We acknowledge that the Plan and the 

Reimbursement Agreements, beyond providing that receipt of 

a Social Security award triggers the obligation to reimburse 

the amount of any overpayment, could have been clearer in 

 Thus, the relief 
28

CIGNA seeks is appropriate under § 1132(a)(3), and Funk 

must reimburse the $6,317 yet due and owing to CIGNA from 

the overpayment. 

IV. Conclusion

For the foregoing reasons, we will vacate the District 

Court’s order with respect to CIGNA’s denial of benefits, 

reverse the District Court’s order with respect to CIGNA’s 

counterclaim, and remand the case to the District Court for 

further proceedings consistent with this opinion.

 

specifying that reimbursement must come out of or from the 

Social Security award. However, in light of the language 

found sufficient in Sereboff, we have little trouble concluding 

that the language here was sufficiently specific regarding 

Social Security awards to create an equitable lien by 

agreement.