Opinion ID: 77924
Heading Depth: 2
Heading Rank: 2

Heading: ERISA's Heightened Standard of Review

Text: Doyle's second and primary argument is that the district court erred in applying a modified, rather than heightened, standard of review. We agree. Our cases hold that the heightened standard applies to an administrator's benefits-denial decision based on factual determinations, as well as decisions based on plan interpretations. In Torres v. Pittston Co., 346 F.3d 1324 (11th Cir.2003), a factual determination case, we stated unequivocally: [W]e are bound by precedent to apply the heightened arbitrary-and-capricious standard both to factual determinations and interpretations of the plan document by an ERISA fiduciary operating with discretionary authority but operating under a conflict of interest. . . . . . . . [W]e conclude that the heightened arbitrary and capricious standard of review for decisions by a conflicted ERISA fiduciary applies equally to determinations of fact as to determinations of plan interpretation. Id. at 1329-32 (emphasis added). We declined to differentiate between denials based on plan interpretations and denials based on factual determinations, saying that the need to protect against the fiduciary's self-interest applies with equal force to plan determinations and findings of fact made by a conflicted fiduciary in the course of its benefits decision. Id. at 1332; see also Yochum v. Barnett Banks, Inc. Severance Pay Plan, 234 F.3d 541, 544 (11th Cir.2000) (applying heightened standard to conflicted administrator's factual determinations regarding comparable employment under severance pay plan). Nevertheless, the district court considered the burden-shifting question open in light of the following statement in Williams: In both Shaw and Levinson, two factual-determination cases, we did not say whether Brown 's `heightened arbitrary and capricious,' burden-shifting approach should be applied to factual determination cases like this. 373 F.3d at 1138-39 (emphasis added). [2] Despite this statement, the Williams court said that the district court should have applied the heightened, rather than the `regular' arbitrary and capricious standard, id. at 1137, even after acknowledging that the case involved a plan administrator's factual determinations, id. at 1134 n. 3. The Williams court recognized that, as in Shaw and Levinson, it did not have to decide whether the burden-shifting approach under the heightened standard applied because it concluded that the administrator's decision was de novo right. Id. at 1139 (Because no grounds exist to disturb [the administrator's] determination under the de novo review standard, we need not review it under the more deferential (`mere' or `heightened' arbitrary and capricious) standard. . . .). Thus, the Williams court's comment about the burden-shifting approach being an open question was dictum. Finally, in recapitulating the 6-step analysis for reviewing an administrator's benefits decision originally developed in HCA, the Williams court explicitly said that the analysis applied to  all ERISA-plan benefit denials, including denials based on factual determinations. Id. at 1137 & n. 6. We conclude that the district court erred in not reviewing Liberty Life's factual determinations under the heightened arbitrary and capricious standard developed in Brown and applied in Torres. The practical effect of this error was to relieve Liberty Life of its burden of proving that its decision to deny Doyle LTD benefits was not tainted by a conflict of interest. Instead, the district court, upon consideration of the evidence, concluded that Liberty Life was due summary judgment because its decision was not affected by the conflict. Of course, the district court's error in applying the incorrect standard warrants reversal only if the record does not support summary judgment in favor of Liberty Life, in which case the error would be harmless. Lucas v. W.W. Grainger, Inc., 257 F.3d 1249, 1256 (11th Cir.2001) (noting that we may affirm [the] judgment `on any ground that finds support in the record' (quoting Jaffke v. Dunham, 352 U.S. 280, 281, 77 S.Ct. 307, 308, 1 L.Ed.2d 314 (1957))). We conclude, however, that summary judgment was improper. In order to succeed on its summary judgment motion, Liberty Life, as the moving party, bore the burden of establishing that there existed no genuine issue of material fact and that it was entitled to judgment as a matter of law. Livernois v. Med. Disposables, Inc., 837 F.2d 1018, 1022 (11th Cir.1988). On the issue of whether its decision was tainted by a conflict of interestthe pivotal issue upon which the district court based its grant of summary judgmentLiberty Life advanced only two arguments in its summary judgment brief. First, Liberty Life argued that its approval of STD benefits demonstrates that Liberty Life's decision making processes were not biased. (R.1-11 at 16 n. 1.) Second, Liberty Life argued that its decision to employ an independent physician to review Doyle's benefits-denial appeal demonstrate[s] that its decision-making process was free from bias. (R.1-11 at 19 n. 2.) In her opposition to Liberty Life's motion for summary judgment, however, Doyle offered alternative explanations for Liberty Life's actions. Doyle argued that Liberty Life's approval of 90 days of STD benefitswhich it characterized as charitable could be viewed as an arbitrary decision to terminate benefits on the 91st day without any explanation as to how Ms. Doyle's condition had changed on the 90th day. (R.2-14 at 9.) Further, Doyle explained that Liberty Life's retention of an independent physician to review her benefits-denial appeal did not demonstrate its lack of bias because Liberty Life was required by federal regulations to obtain a report from an unrelated physician consultant as part of [her] appeal under 29 C.F.R. § 2560.503-1(h)(3)(iii) & (v) and 29 C.F.R. § 2560.503-1(h)(4). (R.2-14 at 9.) It was on this evidence that the district court concluded that there does not appear to be any evidence that Liberty in any way manipulated or improperly influenced Doyle's LTD benefits process in order to achieve a financially beneficial result. (R.2-18 at 13.) We conclude that the court erred in so finding. Under our burden-shifting standard, Liberty Life bore the burden of proving that undisputed facts supported a decision that it was not influenced by a conflict, a burden that it failed to carry on the facts it advanced. Therefore, we reverse the grant of Liberty Life's motion for summary judgment. While we reach the result we understand our precedent to require, we think it appropriate to note that we agree with the district court's observations in this case that our heightened standard is flawed, and that applying a burden shifting analysis to a claims administrator's factual determinations poses unique difficulties. (R.2-18 at 12.) We think our heightened standard is flawed in at least three ways. First, our heightened standard is inconsistent with the Supreme Court's announcement in Bruch of two standards under which an administrator's decision should be reviewed, de novo and abuse of discretion. The agreement among the circuits that the decision of a conflicted ERISA administrator exercising discretion should be reviewed under a less deferential standard than the decision of an administrator not operating under a conflict is premised on the Court's dictum in Bruch that if a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a `factor in determining whether there is an abuse of discretion.' 489 U.S. at 115, 109 S.Ct. at 957 (quoting Restatement (Second) of Trusts § 187 cmt. d (1959)). As this statement clearly says, the existence of a conflict should be treated only as a factor in determining whether the administrator abused its discretion; the existence of a conflict does not require an altogether new standard. Our use of a third standard the heightened standardis not required by, and more importantly is contrary to, the Supreme Court's treatment of a conflict of interest in Bruch. See Chambers v. Family Health Plan Corp., 100 F.3d 818, 826 (10th Cir.1996) (rejecting Brown 's heightened standard as inconsistent with . . . the Supreme Court's dictum in [ Bruch ].). The second flaw in our heightened standard is its burden-shifting feature, under which the administrator bears the burden of proving that its decision was not influenced by a conflict. As the Second Circuit noted, our burden-shifting standard is contrary to the traditional burden of proof in a civil case. Whitney v. Empire Blue Cross & Blue Shield, 106 F.3d 475, 477 (2d Cir.1997) (quoting Sullivan v. LTV Aerospace & Def. Co., 82 F.3d 1251, 1259 (2d Cir.1996)) (internal quotation marks omitted). The traditional burden of proof requires the plaintiff to prove that the decision was tainted by self-interest, whereas our standard requires the defendant to prove that its decision was not tainted. We stand alone in our application of a standard that shifts to the administrator the burden of proving that its decision was not influenced by a conflict. Other circuits apply one of two different approaches, neither of which shifts the burden of proof to the administrator. The First and Second Circuits, for example, have adopted a reduced deference approach, under which a court will reduce the deference afforded under arbitrary and capricious review after the claimant shows that the administrator's decision was tainted by a conflict of interest. [3] Conversely, the Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, and Tenth Circuits apply a sliding scale approach, under which the district court decrease[s] the level of deference given to the conflicted administrator's decision in proportion to the seriousness of the conflict, Chambers, 100 F.3d at 825, and then only after the claimant shows the existence of a conflict, Rud v. Liberty Life Assurance Co. of Boston, 438 F.3d 772, 777 (7th Cir.2006). [4] Finally, the third flaw in our heightened standard is the remarkably difficult burden it imposes upon the administrator in proving that its decision was not tainted by a conflict. Perhaps recognizing that proving the positive is easier than proving the negative, this court said in Brown, a plan interpretation case, that an administrator can carry this burden by showing that its decision benefitted the class of all participants and beneficiaries. 898 F.2d at 1567. But, in a factual determination case, it is virtually impossible for an administrator to prove that its factual findings somehow benefit the class of all participants and beneficiaries. Each claim is unique and requires individual assessment of the facts supporting the claim, so that a benefits decision with respect to one beneficiary carries no precedential value with respect to other beneficiaries. So, unable to prove that its decision benefits other beneficiaries, the administrator is relegated to the unenviable task of proving the negative, a task which is complicated by the fact that the decision-maker must prove that it was not even unconsciously influenced by the conflict. See, e.g., id. at 1565 (A conflicted fiduciary may favor, consciously or unconsciously, its interests over the interests of the plan beneficiaries.). This is an unworkable standard. The district court recognized this flaw when it said that under our standard a fiduciary operating under a conflict of interest is actually subject to greater scrutiny than under de novo review. . . . (R.2-18 at 11.) Our standard is tantamount to invoking a presumption that the administrator has acted wrongly in its self-interest. This is why courts and commentators have labeled our heightened standard the presumptively void standard. See Vega v. Nat'l Life Ins. Servs., Inc., 188 F.3d 287, 297 (5th Cir.1999) (en banc) (citing Brown as an example of the presumptively void approach); Woo v. Deluxe Corp., 144 F.3d 1157, 1161 (8th Cir.1998) (discussing Brown 's presumptively void standard); Chambers, 100 F.3d at 826 (Tenth Circuit rejecting Brown 's presumptively void standard); Kathryn J. Kennedy, Judicial Standard of Review in ERISA Benefit Claim Cases, 50 Am. U.L.Rev. 1083, 1158-60 (2001) (discussing Brown 's adoption of the presumptively void standard). The benefits decision of an administrator operating under a conflict of interest should be subjected to more exacting review in both factual determination and plan interpretation cases. As we have previously noted, in both cases the same self-interest operates such that a `conflicted fiduciary may favor, consciously or unconsciously, its interests over the interests of the plan beneficiaries.' Torres, 346 F.3d at 1330 (quoting Brown, 898 F.2d at 1565). But, our heightened standard effectively makes the administrator's conflict of interest the dispositive factor, rather than merely a factor, in determining whether its decision was arbitrary and capricious. We should adopt the approach used by the Bruch Court and, without shifting the burden of proof, instruct the district courts to take into account the existence of a conflict of interest when determining whether an administrator's decision to deny benefits was arbitrary and capricious. We urge our court to review en banc this troublesome heightened standard and consider adopting a more workable standard to apply in factual determination cases. [5] This case illustrates the flaws in our standard. The district court found no evidence of any influence of conflict, but Doyle arguescorrectly we thinkthat the court has relieved Liberty Life of the burden it bears under our heightened standard. We have trouble imagining what evidence Liberty Life could offer to satisfy that standard.