Opinion ID: 63326
Heading Depth: 3
Heading Rank: 2

Heading: GEGLAC’s discretion

Text: We structure our review around GEGLAC’s objections that the district court (1) improperly applied the rule of contra proferentem to construe the Plan terms against GEGLAC and (2) gave GEGLAC’s interpretation of the Plan insufficient deference under the abuse of discretion analysis.
The district court found the Plan language ambiguous and applied the doctrine of contra proferentem, i.e., interpreting a contract against the drafter.1 Under this Circuit’s “unique two-step approach to apply[ing] the abuse of discretion standard, [] contra proferentem may properly be used under the first step.” Rhorer v. Raytheon Engineers and Constructors, Inc., 181 F.3d 634, 642 (5th Cir. 1999). GEGLAC correctly notes that the rule of contra proferentem is inapplicable under the second step of our analysis, because GEGLAC’s discretion to interpret the Plan necessarily includes the power to resolve any ambiguities therein. High, 459 F.3d at 579. Here, the district court was confronted with two reasonable interpretations of the Plan and applied contra proferentem to resolve the ambiguity, construing the language against GEGLAC. His application of the rule was confined to 1 The rule of contra proferentem is a rule of last resort under which ambiguities in contract language are resolved against the drafter. High, 459 F.3d at 578-79; see 11 SAMUEL WILLISTON & RICHARD A. LORD, A TREATISE ON THE LAW OF CONTRACTS § 32:12 (4th ed. 2000). 5 No. 07-10739 determining whether GEGLAC’s interpretation of the Plan was “legally correct,” the first step in the analysis. This was a proper use of contra proferentem under our ERISA precedent.
Dunn argued and the district court agreed that GEGLAC was operating under a conflict of interest because it was both the insurer and the administrator of the Plan. Courts must account for any conflict when reviewing an administrator’s benefits decision. The Supreme Court has noted that when “a benefit plan gives discretion to an administrator . . . who is operating under a conflict of interest, that conflict must be weighed as a facto[r] in determining whether there is an abuse of discretion.” Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989) (quotation marks omitted). When a conflict of interest is identified, this court applies a “sliding scale” to assess the potential impact of the conflict. Lain v. UNUM Life Ins. Co. of America, 279 F.3d 337, 343 (5th Cir. 2002). “The greater the evidence of conflict on the part of the administrator, the less deferential our abuse of discretion standard will be.” Id. “When a minimal basis for a conflict is established, we review the decision with only a modicum less deference than we otherwise would.” Id. (emphasis in original; quotation marks omitted). According to the district court, GEGLAC’s dual role created a conflict “near that end of the sliding scale continuum approaching an absolute conflict of interest and compels a finding that its interpretation of this contract term is entitled to minimal deference.” The district court supported its decision with the following language from an Eleventh Circuit opinion: [W]hen a plan beneficiary demonstrates a substantial conflict of interest on the part of the fiduciary responsible for benefits determinations, the burden shifts to the fiduciary to prove that its interpretation of plan provisions committed to its discretion was not tainted by self-interest. That is, a wrong but apparently reasonable 6 No. 07-10739 interpretation is arbitrary and capricious if it advances the conflicting interest of the fiduciary at the expense of the affected beneficiary or beneficiaries unless the fiduciary justifies the interpretation on the ground of its benefit to the class of all participants and beneficiaries. Brown v. Blue Cross & Blue Shield of Alabama, Inc., 898 F.2d 1556, 1566-67 (11th Cir. 1990) (emphasis added). GEGLAC does not dispute that its dual role as insurer and administrator creates a conflict of interest under this court’s precedent, see Plyant, 497 F.3d at 539, but argues that the district court improperly weighed that conflict under this court’s “sliding scale.” As an initial matter, the Brown test from another Circuit is at odds with this court’s settled treatment of administrator conflicts under ERISA. In fact, we have expressly rejected Brown’s “presumptively void” standard. Vega v. National Life Ins. Servs., 188 F.3d 287, 296-98 (5th Cir. 1999) (en banc). Under our precedent, the burden remains on the claimant to muster any evidence of a conflict that would undermine the administrator’s benefits decision; it does not shift to the administrator to prove that its decision was not self-interested. See id. at 298-99. GEGLAC’s dual role as administrator and insurer is merely one factor in the overall abuse of discretion analysis. Metropolitan Life Ins. Co. v. Glenn, 128 S. Ct. 2343, 2348-49 (2008).2 Further, Dunn has not demonstrated that GEGLAC’s decision was tainted by a “substantial” conflict of interest. GEGLAC’s dual role as administrator and 2 In Glenn, the Supreme Court confirmed that “the fact that a plan administrator both evaluates claims for benefits and pays benefits claims” creates a conflict of interest that must be weighed as a factor in determining whether there was an abuse of discretion. 128 S. Ct. at 2348-49 (citing Firestone, 489 U.S. at 115). In addressing how such a conflict must be accounted for under an abuse of discretion review, the Court eschewed “special burden-of-proof rules, or other special procedural or evidentiary rules, focused narrowly upon the evaluator/payor conflict.” Id. at 2351. The Court’s treatment of the evaluator/payor conflict as merely one factor in the overall abuse of discretion analysis is more closely aligned with this court’s “sliding scale” approach than the Eleventh Circuit’s “presumptively void” standard. Compare id. at 2350-52 with Vega, 188 F.3d at 298-99. 7 No. 07-10739 insurer creates only a minimal conflict, not a substantial one. Corry, 499 F.3d at 398. Dunn has offered no other evidence of a conflict of interest. In such a case, where the claimant has identified GEGLAC’s dual role as administrator and insurer but has pointed to no further evidence of a conflict, we review GEGLAC’s decision with “only a modicum less deference” than would otherwise be afforded under the abuse of discretion standard. Id.; Plyant, 497 F.3d at 539. Quite contrary to the standard announced in Brown, under these circumstances we will defer to GEGLAC’s interpretation of the Plan, even if that interpretation is “wrong” (in the sense that it is legally incorrect), so long as GEGLAC’s interpretation “fall[s] somewhere on a continuum of reasonableness . . . .” Corry, 499 F.3d at 398. In summary, two equally rational interpretations of the Plan language are involved in this dispute. Under the Plan, “‘Basic Monthly Earnings’ means your gross monthly compensation from your employer including the gross monthly rate of commissions and Bonus pay during the calendar year(s) prior to your Period of Disability . . . .” The term “commissions” is not qualified in any way (e.g., “commissions paid” or “commissions earned”). Dunn’s interpretation of BME to include all commissions earned during the year prior to his stroke is certainly reasonable; but, GEGLAC’s interpretation of BME to include only those commissions actually paid is also reasonable.3 In this classic example of 3 We interpret ERISA plan language “in an ordinary and popular sense as would a person of average intelligence and experience, such that the language is given its generally accepted meaning if there is one.” Keszenheimer v. Reliance Standard Life Ins. Co., 402 F.3d 504, 507 (5th Cir. 2005). The term “commission” is defined as “[a] fee paid to an agent or employee for a particular transaction . . . [,]” BLACK’S LAW DICTIONARY 286 (8th ed. 2004) (emphasis added), or “a fee paid to an agent or employee for transacting a piece of business or performing a service . . . [,]” WEBSTER’S THIRD NEW INT’L DICTIONARY OF THE ENGLISH LANGUAGE UNABRIDGED 457 (1993) (emphasis added). The definition of “paid” is “receiving pay; marked by the reception of pay . . . .” WEBSTER’S, supra, at 1620 (emphasis added). These definitions suggest that “commissions” are commonly understood to be payments that are actually received by an employee. 8 No. 07-10739 ambiguous plan language, GEGLAC was permitted to apply an interpretation of the Plan that was reasonable and not arrived at in an arbitrary and capricious manner. We find reasonableness and no caprice. Therefore, we REVERSE the judgment in favor of Dunn, RENDER judgment for GEGLAC, and REMAND for entry of judgment. REVERSED, RENDERED, and REMANDED. 9