Court Opinion

ID: 9495555
Source: CourtListenerOpinion
Date Created: 2023-08-05 16:05:31.093527+00
Date Added: 2024-06-11T17:57:04.876600
License: Public Domain

TASHIMA, Circuit Judge,
dissenting:
I dissent because the majority forfeits an independent ERISA administrator’s plan — -given authority to exercise its discretion when ruling on a plan member’s claim, simply because the administrator was late in ruling on a claim for benefits and, in doing so, creates an inter-circuit conflict. The majority acknowledges that the plan “explicitly grants discretion to decide appeals from denials of claims for benefits to the plan administrator.” Maj. op. at 1177. Further, the record reveals that the independent plan administrator, Voluntary Plan Administrator (“VPA”), did exercise its discretion in denying Jebian’s appeal. To apply the non-deferential, de novo standard of review solely because of a procedural irregularity is an extreme measure warranted neither by the facts of this case nor by the cases on which the majority relies. As I explain below, all of those cases involved circumstances very different from those presented here. On the contrary, the majority’s conclusion conflicts with the decisions of the only circuit to have dealt with the precise issue we face, as well as with the reasoning of our own precedent regarding the effect of procedural violations.
Jebian’s letter appealing the denial of benefits is dated November 11, 1998, and was received by VPA on November 16, 1998. VPA responded on March 15, 1999, with a letter denying some of Jebian’s claims and asking for further information regarding two of his claims. The letter explained in detail the reasons for VPA’s decision. This letter was sent after the 60-day period required by 29 C.F.R. § 2560.503-1(h)(4)(i), but before the 120-day limit. On June 11,1999, VPA wrote to Jebian to inform him that it had received some, but not all, of the medical records it had requested, and that the medical offices stated that Jebian had not returned the medical authorization forms they needed in order to release the rest of the records. VPA indicated that it would assume the claims were pending until it received the records. Jebian responded by filing this action on September 20, 1999. On November 5,1999, VPA sent Jebian a letter again explaining the reasons for the denial of benefits and giving further explanations based on the records it had received.
The cases cited by the majority do not support its conclusion to strip the plan administrator of its discretion. For example, in Rodriguez-Abreu v. Chase Manhattan Bank, 986 F.2d 580 (1st Cir.1993), the decision regarding benefits was made by someone who was not authorized by the *1184plan to make that decision. Likewise, in Sanford v. Harvard Indus., Inc., 262 F.3d 590 (6th Cir.2001), the court affirmed the district court’s determination that it was not the authorized party that made the benefits determination, but “the company at a meeting prompted by a union grievance held under the auspices of the [collective bargaining agreement].” Id. at 596-97. Thus, in both Rodriguez-Abreu and Sanford, unlike this case, the decision regarding benefits was made by someone who was not given discretionary authority by the plan. The First and Sixth Circuits therefore properly upheld the district courts’ use of the de novo standard of review rather than the abuse of discretion standard. Id.; Rodriguez-Abreu, 986 F.2d at 584. Finally, in Sharkey v. Ultramar Energy Ltd., 70 F.3d 226, 229-30 (2d Cir.1995), the court stated that the denial of benefits is reviewed de novo if an unauthorized party makes the determination, but found that there was insufficient evidence of who actually made the determination in order to uphold the grant of summary judgment. It therefore reversed the grant of summary judgment and remanded. Id. at 230.
Unlike Rodriguez-Abreu, Sanford, and Sharkey, the instant case does not involve an unauthorized party making the benefits determination. VPA, as the majority concedes, is the party granted the discretionary authority by the plan to decide claim appeals. In cases in which the party that is given discretionary authority by the plan did not actually exercise its discretion, such as those cited by the majority, it makes sense to apply the de novo standard of review. Here, however, the discretion was exercised by the party in whom it was vested by the plan, VPA, albeit in an untimely manner.1
The Eighth Circuit addressed the precise question we face in a case with facts similar to those presented here, McGarrah v. Hartford Life Ins. Co., 234 F.3d 1026 (8th Cir.2000). In McGarrah, the Eighth Circuit rejected the claimant’s argument that the insurance company’s failure to respond to his appeal from an adverse decision entitled the claimant to a less deferential standard of review. Id. at 1030-31. The insurance company in McGarrah completely failed to respond to the claimant’s appeal. The court acknowledged that the company’s failure to respond was “a serious procedural irregularity.” Id. at 1031 (citing 29 C.F.R. § 2560.503 — 1(h)(3)). It relied, however, on its decision in Buttram v. Cent. States, S.E. & S.W. Areas Health & Welfare Fund, 76 F.3d 896 (8th Cir.1996), in which it stated that procedural irregularities “must have some connection to the substantive decision reached; i.e., they must cause the actual decision to be a breach of the plan trustee’s fiduciary obligations.” Id. at 901. Reasoning that the insurance company had made a thorough investigation and adequately explained the basis for its decision, the court in McGarrah concluded that the claimant failed to meet his burden of presenting evidence that the irregularity raised serious doubts about the integrity of the decision making process. McGarrah, 234 F.3d at 1031. The court therefore held that the district court properly applied the deferential abuse of discretion standard.2 Id.; see also Tillery *1185v. Hoffman Enclosures, Inc., 280 F.3d 1192, 1198-99 (8th Cir.2002) (upholding the district court’s decision to review the decision for an abuse of discretion where the administrator’s “failure to provide [the beneficiaries] with timely notice of the denial and of their appeal rights” resulted in a procedural irregularity, but the irregularity did not “so undermine the decision of the plan administrator as to render it suspect”); Clapp v. Citibank, N.A. Disability Plan (501), 262 F.3d 820, 827-28 (8th Cir.2001) (stating that a “sliding-scale” standard of review is appropriate only if the claimant presents material, probative evidence demonstrating a palpable conflict of interest or serious procedural irregularity that caused a serious breach of fiduciary duty, and concluding that a less deferential standard of review was not warranted).
Here, VPA’s response detailed the reasons for the denial of Jebian’s appeal. There is no evidence in the record, that VPA relinquished the discretion granted it in the plan or that the untimeliness of its response raised doubts about the integrity of the decision-making process.3
“Ordinarily, a claimant who suffers because of a fiduciary’s failure to comply with ERISA’s procedural requirements is entitled to no substantive remedy.” Blau v. Del Monte Corp., 748 F.2d 1348, 1353 (9th Cir.1985) (citation omitted); see also Kent v. United of Omaha Life Ins. Co., 96 F.3d 803, 807 (6th Cir.1996) (“Generally, the courts have recognized in E.R.I.S.A. cases that procedural violations entail substantive remedies only when some useful purpose would be served.”). As the majority observes, the question of whether procedural violations influence the standard of review was left open in Blau.4, In Blau, “there was no summary plan description, no claims procedure, and no provision to inform participants in writing of anything;” in short, the employer “failed to comply with virtually every applicable mandate of ERISA.” 748 F.2d at 1353. We reasoned that the egregious procedural violations “work[ed] a substantive harm” by “altering] the substantive relationship between employer and employee that dis*1186closure, reporting and fiduciary duties sought to balance somewhat more equally.” Id. at 1354. “Thus, in reviewing an administrator’s decision, a court must consider continuing procedural violations in determining whether the decision to deny benefits in a particular case was arbitrary and capricious.” Id.
While Blau left the question open, we have since required claimants to show that a violation of ERISA’s procedural requirements “ ‘caused a substantive violation or themselves worked a substantive harm.’” Parker v. BankAmerica Corp., 50 F.3d 757, 769 (9th Cir.1995) (quoting Bogue v. Ampex Corp., 976 F.2d 1319, 1326 n. 33 (9th Cir.1992)); McKenzie v. Gen. Tel. Co., 41 F.3d 1310, 1314-16 (9th Cir.1994) (reasoning that the insurance company’s procedural violation did not prejudice the claimant’s “opportunity to obtain a full and fair review of his claim,” and consequently affirming the district court’s holding that the violation did not cause the claimant substantive harm); Bogue, 976 F.2d at 1326 (concluding that the claimant “ha[d] not met his requirement of showing that any procedural defects caused him substantive harm or involved a substantive violation of ERISA”). Thus, even though Blau and its progeny deal with whether the claimant was entitled to a substantive remedy, rather than whether a less deferential standard of review should apply, the question we faced in Blau is the same as that we face here — that is, what should be the consequence of a procedural violation?
Similar to Blau, our sister circuits have adopted a rule of substantial compliance in determining whether violations of 29 C.F.R. § 2560.503-1’s claims procedures warrant relief; that is, a decision regarding benefits will not be upset for procedural violations if the company has substantially complied with procedural requirements such that the claimant has “all the necessary information at a time when the participant still has a meaningful opportunity for appeal and for full and fair review.” Schleibaum v. Kmart Corp., 153 F.3d 496, 499 (7th Cir.1998) (citations omitted); see, e.g., Perrino v. S. Bell Tel. & Tel. Co., 209 F.3d 1309, 1318 (11th Cir.2000) (stating that claimants should not be able to avoid the exhaustion requirement if technical deficiencies in a claims procedure do not hinder effective administrative review of their claims); Terry v. Bayer Corp., 145 F.3d 28, 39 (1st Cir.1998) (rejecting a claim for relief from an adverse decision regarding benefits where no prejudice resulted from inadequate notice of the denial, stating that “ERISA’s notice requirements are not meant to create a system of strict liability for formal notice failures”); Heller v. Fortis Benefits Ins. Co., 142 F.3d 487, 492-93 (D.C.Cir.1998) (reasoning that, “although the initial letter from [the insurance company] informing[the claimant] of the denial of her disability benefits did not conform to the requirements of the regulations,” the communication between the company, the claimant, and her lawyer insured that she understood the reasons for the denial of benefits and her right to appeal the decision); Kent, 96 F.3d at 807-08 (adopting the rule that a decision will be upheld even if procedures have been violated, if the claimant is “notified of the reasons for the denial of the claim and [has] a fair opportunity for review”); Hines v. Mass. Mut. Life Ins. Co., 43 F.3d 207, 211 (5th Cir.1995) (stating that the “[fjailure to fulfill procedural requirements generally does not give rise to a substantive damage remedy,” except “when the violations are continuous and amount to substantive harm,” and citing Blau); Sheppard & Enoch Pratt Hosp., Inc. v. Travelers Ins. Co., 32 F.3d 120, 127 (4th Cir.1994) (finding no prejudice in a plan administrator’s violations of 29 *1187C.F.R. § 2560.503-1’s requirements of a timely and specific response, stating that the notice substantially complied with the regulation); Donato v. Metro. Life Ins. Co., 19 F.3d 375, 382-83 (7th Cir.1994) (stating that substantial compliance with the regulations is sufficient, and concluding that the claimant had received information sufficient to permit effective review).
Thus, although Blau left open the issue of the applicable standard of review when ERISA’s procedural requirements have been violated, it also set forth the principle that the claimant must show some type of prejudice or harm that results from a procedural violation of ERISA. We have relied on that principle, in affirming benefits decisions, see, e.g., Parker, 50 F.3d at 769; McKenzie, 41 F.3d at 1315-16, and other circuits have engaged in a similar analysis in determining the effect of procedural violations of ERISA, as the cases cited above demonstrate.
Our line of cases following Blau firmly establishes the law of the circuit that a showing of prejudice from a procedural violation of ERISA, i.e., that the violation caused the claimant substantive harm, is required before relief can be granted based on such a violation. Parker, 50 F.3d at 769; McKenzie, 41 F.3d at 1314-16; Bogue, 976 F.2d at 1326 & n. 33. The majority’s decision today literally disregards circuit precedent that is clearly relevant to the instant case without so much as even mentioning those cases.5
Besides being bad law, the majority’s position is also bad policy. The district court rejected Jebian’s argument for de novo review, noting that Jebian had “shirkfed] his responsibility under the Plan” to provide VPA with the medical records YPA requested in order to render its decision. In cases such as this one, where the delay is caused by the claimant’s failure to furnish the plan administrator with the needed medical records, the majority’s decision will force plan administrators' to deny such claims within the permitted period, rather than to risk awaiting receipt of the required medical records so that a more reasoned decision, one based on a review of the full medical records, can be made.
There is no indication in the record that Jebian argued below, nor does he argue on appeal, that “the untimely notice so infected the decision making process as to render the decision to deny suspect.” Tillery, 280 F.3d at 1199. Thus, nothing in the record, and certainly not the case law, supports applying a de novo standard of review in this case. For these reasons, I respectfully dissent.
As the majority indicates, Regula v. Delta Family-Care Disability Survivorship Plan, 266 F.3d 1130 (9th Cir.2001), was decided after the district court’s decision was rendered. That case imported the “treating physician rule” from the Social Security context to ERISA benefit decisions. While I agree with the majority that this issue should now be considered on remand, I disagree that it is the district court, rather than the plan administrator, that should consider the Regula issue in the first instance. The district court’s review of ERISA benefit determinations is limited to the record made before the plan administrator. Kearney v. Standard Ins. Co., 175 F.3d 1084, 1090 (9th Cir.1999) (en banc). We have also held, in a closely analogous context, that “remand [to the plan administrator] is the correct course to follow when an ERISA plan administrator, with discretion to apply a plan, has miscon*1188strued the Plan and applied a wrong standard to a benefits determination.” Saffle v. Sierra Pac. Power Co. Bargaining Unit Long Term Disability Income Plan, 85 F.3d 455, 461 (9th Cir.1996). For these reasons, I would remand the matter to the plan administrator for it to exercise its discretion in the first instance, taking into account the newly-imposed treating physician rule of Regula.
Thus, I would remand to the district court for it to determine whether the procedural violation “worked a substantive harm” against Jebian.6 Parker, 50 F.3d at 769 (internal quotation marks omitted). If the district court concludes that it did not, it should remand the matter to the plan administrator for its reevaluation of Jebi-an’s claim in light of Regula.

. The majority's emphasis on the fact that it was the plan itself that deemed the claim denied, not just the regulations, is irrelevant because the plan merely mirrored the language in the regulation in force at the time, 29 C.F.R. § 2560.503-1 (h) (1999). Section 2560.503-1 was amended in 2000, removing the language stating that a claim is deemed denied on review if the claimant does not receive written notice within sixty or 120 days. See 65 Fed.Reg. 70246, 70265, 70268-69 (Nov. 21, 2000).

. The majority dismisses McGarrah on the basis that “[tjhere is nothing in McGarrah ... indicating that the plan in question contained *1185the 'deemed ... denied' language at issue here.” Maj. op. at 1179 n. 7. The same regulations as were in force in the instant case, containing the "deemed denied” language, were in force at the time of the appeal of benefits in McGarrah. Thus, the appeal in McGarrah presumably was also deemed denied, at least by operation of the regulations, if not also by the plan itself, a question not addressed by McGarrah. Whether it is the regulation or the plan, or both, as in the instant case, that deems the claim denied, is irrelevant. The question is whether the import of the "deemed denied” language is that discretion is completely removed from the administrator, as the majority concludes, or whether the untimeliness is merely a procedural violation. Where, as here, the administrator has exercised its discretion, and the claimant has presented no evidence that the timing of the decision prejudiced him in any way, it does not make sense to strip the administrator of its authority, regardless of whether the "deemed denied” language is contained in the plan or the regulations.

. Both McGarrah and the instant case are distinguishable from Gritzer v. CBS, Inc., 275 F.3d 291 (3d Cir.2002), cited by the majority, at 1179 n. 7, because, in Gñtzer, the plan administrator “never made any effort to analyze” the appellants' initial claim for benefits, "much less to advise them of what that analysis disclosed,” until after the litigation was filed. Id. at 295.

. As the majority notes, Blau was decided before Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), when the default standard of review of administrator's decisions under ERISA was the deferential "arbitrary" or "capricious” standard. Blau, 748 F.2d at 1353. In the instant case, however, the default standard of review would be the abuse of discretion standard as well, because of the explicit grant of discretionary authority contained in the plan.

. Moreover, no other circuit has treated a procedural violation simpliciter as triggering de novo review.

. As indicated above, under Kearney, the district court's review is limited to the record that was before the plan administrator. On remand, however, "[t]he district judge will be asking a different question as he reads the evidence, not whether there is a genuine issue of material fact” regarding the denial of benefits, Kearney, 175 F.3d at 1095, but whether the procedural violation ”prejudice[d] [Jebi-an's] opportunity to obtain a full and fair review of his claim,” McKenzie, 41 F.3d at 1316.