Opinion ID: 774230
Heading Depth: 1
Heading Rank: 4

Heading: definition of employee

Text: 45 Having concluded that the district court correctly decided to review the plan administrators' decision for abuse of discretion, we now consider the merits of that review. In reviewing the district court's order on a motion for summary judgment, we review de novo whether any genuine issue of material fact exists and whether the moving party is entitled to judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-52, 106 S. Ct. 2505, 2510-12 (1986). We draw all reasonable inferences in favor of the non-moving party. See id. Additionally, we review a district court's review of an ERISA plan administrator's decision de novo. See Canseco v. Construction Laborers Pension Trust, 93 F.3d 600, 605 (9th Cir. 1996); Snow, 87 F.3d at 331. 46 NWP contends that the district court erred in ruling that the Plan administrators abused their discretion by utilizing a W-2 definition of employee, rather than adopting a federal common law definition of the term. On ruling on NWP's motion for summary judgment, the district court characterized the issue as whether by construing the term `employee' as a W-2 employee, the [administrators] committed legal error, for [i]f the [administrators] committed legal error by employing an improper legal standard, then they abused their discretion. The court ruled that the term employee has a well-established common law meaning that the Supreme Court articulated in Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318, 323-24, 112 S. Ct. 1344, 1348 (1992). Therefore, its meaning is not ambiguous and the administrators did not have discretion to apply their own definition. Thus, the court ruled that by applying a W-2 definition, the administrators committed legal error, and accordingly abused their discretion. 47 Our determination of whether the district court's decision was correct turns on whether, as a matter of law, a term used, but not otherwise defined, by an ERISA pension plan that has an established federal common law meaning is unambiguous so that a plan administrator has no discretion to interpret its meaning. Neither the district court nor the plaintiffs cite to any cases supporting this position. Indeed, analogous case law suggests that merely because a term has a common law definition it is not unambiguous, so that an administrator is precluded from exercising discretion in its interpretation. 48 Thus, in Allen v. Western Conference of Teamsters Pension Trust Fund, 788 F.2d 648, 650 (9th Cir. 1986), we upheld the denial of benefits to a surviving spouse even though the plan administrator's definition of a plan term conflicted with its established definition. In Allen, following her husband's death, the plaintiff sought survivor benefits under his pension plan to which she would have been entitled had she been a surviving spouse under the terms of the plan. See id. at 649. The term surviving spouse was defined asthe person to whom the Vested Participant or Pensioner was married on the date of his death and throughout the one-year period ending on his death. Id. The plan administrator interpreted this definition to require that the surviving spouse actually have been married to the participant, construing marriage strictly to require a legal marriage relationship. See id. Unfortunately, although the plaintiff and the pensioner had a civil wedding ceremony and lived as husband and wife until the pensioner's death, because the decedent's prior marriage was not final at the time they were married, the marriage was void. See id. 49 The plaintiff argued, pursuant to California statutory law, that she was entitled to benefits as a putative spouse. See id. California law provides that where a marriage is void or voidable, but one or more of the spouses believed it to have been valid, a court may award the party the status of putative spouse. See id. This status has been held to entitle the spouse to: treat marital property as community property; receive workers' compensation benefits; take by intestacy; sue for wrongful death; and claim death benefits under a public employees' benefit plan. See id. Therefore, the plaintiff contended that she should be treated as a surviving spouse for the purposes of the pension plan. See id. The court rejected this argument, however, finding no authority for the proposition that putative and legal spouses must be treated the same for all purposes. See id. Because of this, and because the pension plan used the term married, the express terms of the plan governed. See id. at 650. The court therefore held that the denial of benefits was proper. See id. 50 While not directly on point here, Allen nevertheless is instructive as to our approach in analyzing an administrator's interpretation of a plan term in the face of a contrary legal definition. Allen demonstrates that the decision of the plan administrator to apply its own definition may be upheld although state law in effect defines the disputed term differently. 51 The Court of Appeals for the Sixth Circuit's opinion in Administrative Committee of the Sea Ray Employees' Stock Ownership & Profit Sharing Plan v. Robinson, 164 F.3d 981, 986 (6th Cir. 1999), cert. denied, 528 U.S. 1114, 120 S. Ct. 931 (2000), which held that a plan administrator had the discretion to interpret and construe an undefined term in the plan, also is instructive. There, the plaintiffs sought de novo review of the administrator's interpretation of the term partially terminated, as they argued that, as a matter of law, a court rather than the administrator should provide the determination of its meaning. See id. The court rejected this argument finding that because the plan granted discretion to the administrator, the discretion to interpret and construe the Plan logically extends to terms of the Plan, since any interpretation of a plan turns on the meaning of terms contained therein. Id. In doing so, it noted that [t]o limit an administrator's discretion to only those terms explicitly defined [by the plan] would undermine the administrator's discretionary power or require companies to write interminably long plans to account for every term. Id. 52 While the issues presented are not identical, we nevertheless find the Robinson analysis persuasive. Although arising in the context of the appropriate standard of review in considering the plan administrator's decision, the Robinson plaintiffs made a similar claim to that which the plaintiffs here put forth: that the court, rather than the plan administrators, should define an undefined plan term. But, as the Robinson court held, if the courts limited an administrator's discretion to the interpretation of defined terms, they would frustrate the discretionary power expressly conferred on the administrator by the plan. We should avoid such an inappropriate result here even though the plaintiffs urge us to require the Plan administrators to adopt a definition set forth by the Supreme Court rather than a definition we or the district court supplies. Regardless of which court's definition is used, if we required the Plans to use a judicially-crafted definition, we would be inappropriately depriving the administrators of their discretion to interpret the Plans. 53 We emphasize that there is nothing in the language of the Plans limiting the administrators' discretion to the interpretation of defined terms. To the contrary, the Plans expressly provide that their respective administrators have absolute or sole discretion to interpret the terms of the Plan and to determine eligibility for benefits under the Plan. Second, there is nothing in Darden from which we can conclude that the Supreme Court meant its definition ofemployee to apply to all ERISA plans where the term otherwise was undefined. The Court simply construed the term employee as it is used in ERISA for the purpose of determining who has standing to sue under section 1132(a). See Darden, 503 U.S. at 320-21, 112 S. Ct. at 1347. In doing so, the Court did not indicate that an administrator need apply this definition in interpreting individual ERISA plans. Indeed, as the Court of Appeals for the Seventh Circuit has recognized,[n]othing in ERISA . . . compels a plan to use the term `employee' in the same way it is used in the statute. Trombetta v. Cragin Fed. Bank for Sav. Employee Stock Ownership Plan, 102 F.3d 1435, 1440 (7th Cir. 1996) (internal quotation marks omitted). Instead, ERISA contemplates that there will be plans that do not cover all categories of employees, a strong indication that the terms do not have to be construed the same way. See Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 91, 103 S. Ct. 2890, 2896-97 (1983) (ERISA does not mandate that employers provide any particular benefits, and does not itself proscribe discrimination in the provision of employee benefits.). 54 Therefore, we find that the district court erroneously concluded that, in the absence of a definition in the Plans, the administrators were required, as a matter of law, to apply the federal common law definition of employee. Rather, plan administrators should be given the full benefit of the discretion afforded to them by their respective plans in interpreting plan terms, be they defined or undefined, with the reasonableness of those interpretations being evaluated against the relevant factual and legal backgrounds. 7 55 The relevant inquiry then becomes whether the definition applied by the administrators was arbitrary and capricious. The arbitrary and capricious standard of review requires the district court to give substantial deference to an administrator's decision. Indeed, an administrator's decisionis not arbitrary unless it is not grounded on any reasonable basis. Horan v. Kaiser Steel Ret. Plan, 947 F.2d 1412, 1417 (9th Cir. 1991) (internal quotation marks omitted). Accordingly, a court may overturn a decision only where it is so patently arbitrary and unreasonable as to lack foundation in factual basis and/or authority in governing case or statute law. Oster v. Barco of Cal. Employees' Ret. Plan, 869 F.2d 1215, 1219 (9th Cir. 1988) (internal quotation marks omitted); see Concrete Pipe & Prods. of Cal., Inc. v. Construction Laborers Pension Trust, 508 U.S. 602, 623, 113 S. Ct. 2264, 2279-80 (1993). 56 Here, in determining that the plaintiffs were not employees, the Plan administrators applied a W-2 definition. According to the administrators, the Plans were designed with only W-2 employees of NWP in mind, namely NWP physicians. Therefore, it was clearly reasonable to apply a W-2 definition because that application limited disbursements of benefits to persons whom the Plans were intended to benefit. Furthermore, the Plan administrators relied upon an Internal Revenue Service private letter ruling that stated that W-2 employees of entities within the Kaiser program other than NWP were not to be considered employees of NWP for tax purposes. Thus, it hardly could be argued seriously that adoption of a W-2 definition was unreasonable on the theory that there was no justifiable basis to exclude plaintiffs from the category of NWP W-2 employees. 57 We recently have held that a consistent pattern of interpretation is significant evidence that the plan administrator acted reasonably. See McDaniel v. Chevron Corp. , 203 F.3d 1099, 1113 (9th Cir. 2000); see also Hansen v. Western Greyhound Ret. Plan, 859 F.2d 779, 781 (9th Cir. 1988). Additionally, both Plan administrators informed the plaintiffs in writing that the W-2 definition consistently had been followed with respect to eligibility under the Plans. Finally, the Plan administrators considered the Darden factors in determining whether the plaintiffs were employees pursuant to the terms of the Plans, and concluded that they were not. 58 In light of the evidence presented to the district court, and reviewing its decision de novo, we conclude the district court erred in denying NWP's motion for summary judgment. The Plan administrators' decisions were not so patently arbitrary and unreasonable as to lack foundation in factual basis and/or authority in governing case or statute law. To the contrary, there was adequate support in the record from which the district court could, and should, have concluded that the Plan administrators did not abuse their discretion. We therefore reverse the district court's decision denying NWP's motion for summary judgment, and direct the district court to enter summary judgment in its favor. See Lawyers Title Ins. Corp. v. Honolulu Fed. Sav. & Loan Ass'n, 900 F.2d 159, 164 (9th Cir. 1990) (noting where record supports only one resolution of factual issue, or mixed question of law and fact, reviewing court can order lower court to enter judgment on issue); see also Martinez v. United States, 669 F.2d 568, 570 (9th Cir. 1981) (same). 59 In view of our foregoing conclusions, we need not address NWP's alternative argument that it has set forth an adequate basis from which it would be reasonable to conclude that the plaintiffs are not employees of NWP under the common law definition. We note, however, that there was sufficient evidence of record to establish that the Plan administrators assessed the plaintiffs' relationship with NWP in light of the appropriate Darden factors and concluded that the plaintiffs were not common law employees. But, inasmuch as we predicate our decision on our conclusion that the Plan administrators did not abuse their discretion in applying a W-2 definition of employee, we do not address this issue further.