Opinion ID: 803614
Heading Depth: 2
Heading Rank: 2

Heading: Interpretation of the Plan Under ERISA

Text: A. The District Court Properly Reviewed for Abuse of Discretion Day first challenges the district court’s ruling that Sedgwick’s interpretation of the Plan is reviewed for an abuse of discretion. Although Day concedes that the Plan conferred discretion on Sedgwick as claims administrator, he maintains that because Sedgwick was (1) biased or conflicted; (2) provided inconsistent reasoning for its denial; and (3) engaged in procedural misconduct, heightened or de novo review is required. We review this question de novo. See Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 962 (9th Cir. 2006) (en banc) (“We review de novo a district court’s choice and application of the standard of review to decisions by fiduciaries in ERISA cases” and “review for clear error the underlying findings of fact.”); see also Pannebecker v. Liberty Life Assurance Co. of Boston, 542 F.3d 1213, 1217 (9th Cir. 2008). Because the Plan conferred full discretion on Sedgwick, unless Day’s allegations of bias and misconduct are both true and warrant less deference, the district court correctly reviewed for an abuse of discretion. See Abatie, 458 F.3d at 967 (holding abuse of discretion review is required whenever an ERISA plan grants discretion to the plan administrator, but such review is informed by any conflict of interest appearing in the record). The district court did not err in finding no inherent or structural conflict of interest. The Plan is funded by AT&T and not Sedgwick, and administered by Sedgwick and not AT&T. See Abatie, 458 F.3d at 967 (a reviewing court must always consider the “inherent conflict that exists when a plan administrator both administers the plan and funds it”). Nor did the court err in rejecting Day’s allegations of actual conflict of interest. Just because Sedgwick consulted with AT&T in responding to Day’s concerns about his rolled over pension benefits being received by the IRA does not DAY v. AT&T DISABILITY INCOME PLAN 7851 show that AT&T had any influence over Sedgwick’s decision making process in this regard. Day’s remaining contentions are likewise without foundation. Although he is correct that we generally apply de novo review when an administrator engages in “wholesale and flagrant violations of the procedural requirement of ERISA,” id. at 971, and thus “fails to exercise discretion[,]” id. at 972, Day failed to present material or probative evidence in support of these bold assertions. At best he showed only that Sedgwick in its February 2009 and October 2009 letters elaborated on its initial reasons for rejecting his appeal, and that AT&T failed to provide him with copies of various documents that he was instead required to obtain from a separate AT&T office. Cf. id. at 972 (“[W]hen a plan administrator’s actions fall so far outside the strictures of ERISA that it cannot be said that the administrator exercised the discretion that ERISA and the ERISA plan grant, no deference is warranted.”). In sum, the district court correctly rejected Day’s allegations of misconduct by the claims administrator and properly reviewed for abuse of discretion. See Abatie, 458 F.3d at 967. B. Sedgwick Did Not Abuse Its Discretion in Interpreting the Plan Under the deferential abuse of discretion standard of review, “the plan administrator’s interpretation of the plan ‘will not be disturbed if reasonable.’ ” Conkright v. Frommert, 130 S. Ct. 1640, 1651 (2010) (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 111 (1989)). “ERISA plan administrators ‘abuse their discretion if they render decisions without any explanation, . . . construe provisions of the plan in a way that conflicts with the plain language of the plan’ ” or “rel[y] on clearly erroneous findings of fact.” Taft v. Equitable Life Assurance Soc’y, 9 F.3d 1469, 1472-73 (9th Cir. 1994) (quoting Eley v. Boeing Co., 945 F.2d 276, 279 (9th Cir. 1991)), abrogated on other grounds by Abatie, 458 7852 DAY v. AT&T DISABILITY INCOME PLAN F.3d at 973. Applying these criteria, we hold that Sedgwick did not abuse its discretion. Day’s chief arguments are that the Plan language prohibited the offset of the pension plan benefits against the LTD benefits, as applied by Sedgwick, and that Blankenship barred the offset. We disagree. [1] We begin with the relevant portions of the Plan and related documents that Sedgwick interpreted in reaching its offset determination.3 First, the Plan benefit formula mandated certain offsets to LTD benefits, as did the Summary Plan Description (SPD). The Plan’s offset provision (section 4.2) was set forth in a section entitled “Benefits from Other Sources” and stated: In addition to those listed in the applicable SPD, other benefits that reduce Benefits paid under the Plan include all benefits for which the Employee would be eligible if he applied for them, whether or not he actually receives them. (Emphasis added.) The SPD stated: The plan provides you with an LTD benefit . . . reduced by . . . pension benefits you may receive from any SBC company pension plan . . . . 3 Although Day argues that the district court erred by deferring to what he describes as Sedgwick’s interpretation of statutory terms, Sedgwick did not engage in statutory interpretation, nor does Day cite any authority in support of his contention that Sedgwick was required to look beyond the Plan to the ADEA’s definition of such terms as “receive” and “paid.” Moreover, even assuming Sedgwick was required to look to the ADEA, Day fails to explain why interpreting the statute would result in an understanding of “receive” or “paid” substantially different from that arrived at by Sedgwick in interpreting the Plan. DAY v. AT&T DISABILITY INCOME PLAN 7853 ... If you are eligible and apply for pension benefits (including a Disability Pension, if applicable), your pension benefit, to the extent paid to you, will be subtracted from your LTD payments. (If you elect a cashout, the equivalent monthly amount will be calculated and used as the factor for integration with LTD payments.) If you are eligible but elect to defer applying for any applicable pension benefit, your LTD payments will not be reduced by any pension benefits you are entitled to until such time as you apply for and are actually paid the pension benefit. Accordingly, the Plan and SPD provide that Day’s LTD benefits would be offset by any pension benefit: (i) for which he elected a cashout (“If you elect a cashout, the equivalent monthly amount will be calculated and used as the [offset] factor”); (ii) for which he was paid (“your pension benefit, to the extent paid to you, will be subtracted from your LTD payments”); or (iii) which he received (“[your] LTD benefit [will be] . . . reduced by benefits you may receive from . . . any SBC company pension plan”). [2] Sedgwick’s conclusion that Day received his pension benefits when he rolled them into an IRA was not an unreasonable interpretation. To “receive” means to “take into possession or control.” Blankenship, 486 F.3d at 624-25; see American Heritage Dictionary 1467 (5th ed.) (defining “receive” as “[t]o take or acquire (something given or offered)”). When a beneficiary rolls a pension into an IRA, he may not take possession of it, but he has control over the assets. For instance, he can choose the IRA and change it; and he can withdraw funds from it, albeit perhaps having to pay penalties for early withdrawal. It is therefore not unreasonable to say that he has received these benefits. Day contends this conclusion is in conflict with Blankenship. It is not, because our holding there is plainly distinguish7854 DAY v. AT&T DISABILITY INCOME PLAN able. We determined that a plan providing for an offset for pension benefits received by a beneficiary was ambiguous, because “receive” can mean either possession or control. See Blankenship, 486 F.3d at 624-25. Reviewing de novo and applying the doctrine of contra proferentem (“ambiguities are to be construed unfavorably to the drafter” Black’s Law Dictionary 377 (9th ed. 2009)), we construed the ambiguity against the Plan and held that “receive” referred to funds actually coming into the possession of a beneficiary. See Blankenship, 486 F.3d at 625. Therefore, funds rolled over to an IRA were not to be used to offset disability benefits. See id. at 627. [3] In rejecting Blankenship as controlling, Sedgwick correctly explained to Day that the case by its own terms does not apply here. As we acknowledged, contra proferentem applies when a plan does not grant a plan administrator discretion to interpret ambiguous plan terms; the doctrine does not apply when a plan “grants the administrator discretion to construe its terms.” Id. at 625.4 In the latter context, it is the administrator who resolves ambiguities in the plan’s language. See Winters v. Costco Wholesale Corp., 49 F.3d 550, 554 (9th Cir. 1995) (so holding). Because Sedgwick had discretion to interpret the Plan, the only question is whether Sedgwick’s interpretation of “receive” to include Day’s control of his IRA funds was unreasonable. See Conkright, 130 S. Ct. at 1651. It was not. The administrator therefore did not act unreasonably in concluding that Day had received pension benefits, and appropriately reduced his LTD benefits to account for the rollover.