Opinion ID: 777864
Heading Depth: 3
Heading Rank: 1

Heading: standard of review

Text: 21 The Plan denies the validity of the 1992 Amendment on the ground that the DEC was not authorized under the Plan Document to amend its terms. It would thus have us affirm Hart's decision denying the Plaintiffs any past service credits. Before we can reach that question, however, we must tackle the thorny question of the appropriate standard of review for the district court and ourselves. 22 The district court treated the validity of the 1992 Amendment as a legal issue for plenary or de novo review. The Plan argues that this was error because Hart's decision not to recognize the 1992 Amendment was within the scope of discretionary powers conferred on her by the Plan Document. It claims that Hart, in rejecting the amendment, was essentially interpreting the terms Employer and Contract Holder as they applied to those sections of the Plan Document which set out who may amend the Plan. Under this framing of the issue, Hart's instruction to John Hancock to disregard the 1992 Amendment was allegedly based on her finding that neither of these terms applied to the DEC and that it consequently had no power to unilaterally amend the Plan. Because the Plan frames Hart's actions as based on her power of interpretation, it argues that the district court was limited to reviewing her actions for abuse of discretion under Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). 23 In the paradigmatic action under 29 U.S.C. § 1132(a)(1)(B), review of a plan administrator's benefits determination is governed by the framework established in Firestone. In that seminal case, the Supreme Court noted that although it is a comprehensive and reticulated statute, ERISA does not set out the appropriate standard of review. Id., 489 U.S. at 108-09, 109 S.Ct. 948 (internal quotations omitted). The Supreme Court therefore filled in the gap using trust principles to establish the general rule that benefits determinations based on plan interpretations are to be reviewed de novo as courts construe the terms of trust agreements without deference to either party's interpretation. 489 U.S. at 112, 109 S.Ct. 948. However, a deferential abuse of discretion review is used when the benefit plan gives the administrator discretionary authority to determine eligibility for benefits or to construe the terms of the plan because a trustee may be given discretionary power to construe ambiguous terms of a trust. Id. at 111, 115, 109 S.Ct. 948. 24 Thus, a reviewing court must initially decide de novo whether the plan's language grants the administrator discretion and whether the administrator acted within the scope of that discretion. Feder v. The Paul Revere Life Ins. Co., 228 F.3d 518, 522 (4th Cir.2000); Haley v. The Paul Revere Life Ins. Co., 77 F.3d 84, 89 (4th Cir.1996). If the reviewing court determines that the language of the plan does grant discretion in a particular area, it reviews decisions taken under that grant for abuse thereof. Id. In all other cases review is de novo. 25 While there is no dispute that Hart was given broad authority in the Plan Document to interpret the Plan and decide matters of administration under it, we do not believe that trust principles or the rule in Firestone extend so far as to require judicial deference in this case. Hart's actions exceeded the scope of her discretionary authority. For one thing, we are highly skeptical as a factual matter that the process that she engaged in was one of plan interpretation. There is little or no evidence that Hart made any undertaking to interpret the terms of the Plan Document at all. The record shows that Hart did not scrutinize or even pay much attention to the use and meaning of the terms Employer and Contract Holder in the Plan Document. Rather, Hart testified that it was her belief prior to the internal strife at the union that MEBA/NMU did have authority under the terms of the Plan Document to make unilateral amendments. In deciding to ignore the 1992 Amendment, Hart seems simply to have concluded — based on the advise of counsel for the insurgent faction at PCD as well as this Circuit's 1991 opinion concerned with a separate benefit plan for union members — that MEBA/NMU no longer represented the union and could not therefore control the Plan. Although PCD now argues that this conclusion depends in part on finding PCD to be the Contract Holder (an undefined term in the Plan Document), it ultimately hinges on a determination as to whether MEBA/NMU was the legal successor to PCD as the plan sponsor and whether the merger was somehow legally avoided prior to passing the 1992 Amendment. 3 Such legal questions are appropriate terrain for the courts, not plan administrators, and when eligibility determinations turn on questions of law we have not hesitated to apply a de novo standard of review. See Gauer v. Connors, 953 F.2d 97, 99 (4th Cir.1991). 26 Moreover, even if we did accept that Hart was nominally engaged in interpreting the terms of the pension plan, we would still not accept the Plan's claim for deferential review in this context. This Circuit has stated that the deferential standard reflects our recognition of the greater institutional competence plan administrators possess relative to our own within their area of expertise. See Berry v. Ciba-Geigy Corp., 761 F.2d 1003, 1006 (4th Cir.1985); Richards v. United Mine Workers of America Health and Retirement Funds, 851 F.2d 122, 123 (4th Cir.1988); Quesinberry v. Life Ins. Co. of North America, 987 F.2d 1017, 1022 (4th Cir.1993) (en banc). The standard exists to ensure that administrative responsibility rests with those whose experience is daily and continual, not with judges whose exposure is episodic and occasional. Berry, 761 F.2d at 1006. A plan administrator's area of competence is in the application of plan terms to the factual circumstances of particular claims and the day to day administration of the plan. It is not in the determination of which contending slates of leaders representing different entities is entitled to speak as legal successor to the status of Contract Holder. 27 The Supreme Court's guidance in Firestone does not require a contrary result. In that case, the Court was writing against the background of a widespread practice in federal courts of applying the arbitrary and capricious standard to benefits decisions regardless of whether the plan specifically conferred discretion to interpret the plan to its administrator(s) or not. As Firestone recognized, that practice developed in part in response to the Congressional purpose in passing ERISA to promote internal resolution of claims and encourage informal and non-adversarial proceedings. See Firestone, 489 U.S. at 114-115, 109 S.Ct. 948; see also Berry, 761 F.2d at 1007; Grossmuller v. International Union, UAW Local 813, 715 F.2d 853, 857 (3d Cir.1983). While recognizing this policy, Firestone, 489 U.S. at 115, 109 S.Ct. 948, the Supreme Court nevertheless found it outweighed by other considerations, namely: 1) the Congressional intent that the courts be guided by trust law principles in developing federal common law under ERISA, 2) the principle that the duties and powers of a trustee may be determined by a court's plenary review of a trust document, and 3) the duty to impose a standard that would at least preserve the pre-existing level of employee protection in light of Congress' purpose to promote the interests of employees and their beneficiaries in benefits plans. See Firestone, 489 U.S. at 110-12, 109 S.Ct. 948. However, because the Court found that it was to be guided by trust law, it also held that deference is to be given when it is required in accordance with the trust principle that a trustee may be given discretion to interpret terms of the trust. Id. at 111, 109 S.Ct. 948. 28 None of these policies provides justification for granting deference here. Employee protection is furthered by more, rather than less scrutiny of conflicts in which both sides have mixed and partisan motives. The Congressional policy favoring internal resolution of benefits claims can not reasonably be interpreted to require us to give deference to the plan administrator as one of the parties in a conflict in which it is essentially a direct participant. As for principles of trust law, the rule that a court will respect the discretion conferred on a plan administrator as trustee can not apply when the issue is whether the plan administrator can frustrate the authority of the entity claiming the power to control the terms of that very discretion. 4 In such a case, the discretionary powers given to a trustee run up against the duty to obey powers of control reserved by the trust settlor. See Restatement (Second) of Trusts §§ 185, 330 (1959) (describing a trustee's duty with respect to a person reserving the power of control or revocation). While a plan administrator can, and indeed may be obligated to resist a benefits award that she believes to be the product of an illegitimate attempt to amend the plan, the proper resolution of such a conflict must remain with the courts sitting in their plenary capacity, and the parties' recourse is to apply to the courts for instructions. See Firestone, 489 U.S. at 112, 109 S.Ct. 948; Restatement (Second) of Trusts § 185 comment e (1959). 29 Other authorities cited by the Plan, Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 82, 115 S.Ct. 1223, 131 L.Ed.2d 94 (1995), and Hutchins v. Champion Int'l Corp., 110 F.3d 1341 (8th Cir.1997), are similarly unavailing to its position. In Curtiss-Wright the Supreme Court recognized the importance of requiring pension plans to have written procedures for amending plan provisions and identifying the persons with authority to make such amendments. 514 U.S. at 82, 115 S.Ct. 1223. In this regard the Court recognized that having an amendment procedure enables plan administrators ... to have a mechanism for sorting out, from among the occasional corporate communications that pass through their offices and that conflict with existing plan terms, the bona fide amendments from those that are not. Id. The Court further recognized that plan administrators may have a statutory responsibility to do this sorting out. Id. However, as the district court correctly noted, this falls far short of conferring a blanket authority to ignore amendments which are at least ostensibly made in conformance with the procedure provided for in the Plan Document and protecting that authority behind a shield of judicial deference. Curtiss-Wright speaks to a plan administrator's duty to run the plan in accordance with its documents (including amendment procedures) not to the scope of a grant of discretion. 30 Hutchins dealt with the authority of a plan administrator to amend a disability plan in order to exclude benefit payments to incarcerated criminals. 110 F.3d at 1343. The relevant plan provision reserved the right of plan amendment to the employer's board of directors, but added that any amendment which is not a substantive amendment shall be made on behalf of [the employer] by the [plan administrator]. Id. The Eighth Circuit granted deference to the plan administrator's determination that his amendment was not a substantive one, finding his interpretation of the word substantive reasonable. Id. at 1344-45. Hutchins is distinguishable because the plan administrator in that case was merely interpreting the scope of its own powers, not attempting to limit those reserved for the employer. It thus does not involve the conflict of powers in a trust that compels us in this case to adjudicate the issue without granting deference to one of the sides. 31 Finally, even apart from the general question of the applicability of the rule in Firestone to this context, we would still apply de novo review in this case due to the plan administrator's palpable conflict of interest. Though Firestone directs abuse of discretion review of plan interpretations made under expressly granted discretionary power, it also cautioned that where a conflict of interest is manifest, such a conflict should be factored into the judicial review process. 489 U.S. at 115, 109 S.Ct. 948; see also Booth v. Wal-Mart Stores Inc., 201 F.3d 335, 341 (4th Cir.2000); Doe v. Group Hospitalization & Medical, 3 F.3d 80, 86-87 (4th Cir.1993). In this case, Hart had a clear conflict of interest because she considered herself to be responsible to the management of PCD, which has demonstrated through the course of this litigation that it considers this issue as an extension of its bitter campaign against MEBA/NMU. Moreover, Hart imported PCD's conflict into her determination by relying entirely on the opinion from PCD and its counsel that MEBA/NMU was not authorized to amend the Plan. Thus, we would in any event reduce the degree of deference to the extent necessary to neutralize the untoward influence of PCD on her decision. Doe, 3 F.3d at 87. Given the source of that decision, our review, once again, is de novo.