Court Opinion

ID: 42452
Source: CourtListenerOpinion
Date Created: 2010-04-25 21:20:42+00
Date Added: 2024-06-11T14:56:54.921454
License: Public Domain

[DO NOT PUBLISH]

              IN THE UNITED STATES COURT OF APPEALS

                      FOR THE ELEVENTH CIRCUIT
                                                                   FILED
                        ________________________         U.S. COURT OF APPEALS
                                                           ELEVENTH CIRCUIT
                                                             September 16, 2005
                              No. 04-14852                  THOMAS K. KAHN
                        ________________________                  CLERK

                 D. C. Docket No. 03-00291 CV-J-99-MMH

JOHN S. MORDECAI,

                                                Plaintiff-Appellant,

                                    versus

STANDARD INSURANCE COMPANY,
a foreign corporation,

                                                Defendant-Appellee.

                        ________________________

                 Appeal from the United States District Court
                     for the Middle District of Florida
                      _________________________
                           (September 16, 2005)

Before TJOFLAT, PRYOR and ALARCÓN*, Circuit Judges.

ALARCÓN, Circuit Judge:

     John Mordecai appeals from the district court’s order denying Mr.
Mordecai’s motion for summary judgment and granting Standard Insurance

Company’s (“Standard”) cross-motion for summary judgment. Mr. Mordecai

contends that the district court erred in granting Standard’s motion because he

offered a reasonable alternative interpretation that rivaled Standard’s interpretation

of the “Deductible Income” provision of his employer’s group long term disability

insurance policy (“Policy”).

      We affirm because we conclude that Standard’s interpretation of the

language of the Policy was reasonable and Mr. Mordecai did not offer a

reasonable alternative interpretation of the Policy.

                                          I

      Mr. Mordecai was a plaintiff’s personal injury lawyer at the law firm of

Harris, Guidi, Rosner & Mordecai. He was insured under the firm’s Policy, which

benefits were administered and paid for by Standard. After suffering from

depression and anxiety for several years, Mr. Mordecai applied for and was

granted long term disability (“LTD”) benefits by Standard.

      Standard determined that Mr. Mordecai’s monthly benefit was the $10,000

maximum payable under the Policy. The Policy allows Standard to reduce Mr.

Mordecai’s benefit amount by any deductible income (“Deductible Income”) he

receives. The Policy defines Deductible Income as “[a]ny earnings or

                                          2
compensation included in Predisability Earnings which you receive or are eligible

to receive while LTD Benefits are payable.” Standard did not include in its

calculation of predisability earnings any income that Mr. Mordecai might receive

after disability, i.e., contingent fee recoveries for work performed prior to his

disability but not received until after he became disabled.

      Based on the Deductible Income provision, Standard reduced Mr.

Mordecai’s $10,000 benefit by the post-disability income he received for work he

performed on cases before becoming disabled. Because Mr. Mordecai’s post-

disability income was more than his LTD benefit of $10,000, Standard determined

that he was entitled to the minimum benefit of $1,000.

      Thereafter, Mr. Mordecai filed this action against Standard in state court

alleging that Standard breached the Policy by including his post-disability income

as Deductible Income. Standard removed this action to the district court on the

basis of federal question jurisdiction and the preemption of Mr. Mordecai’s state

law claims by the Employment Retirement Income Security Act, 29 U.S.C. §1001,

et seq. (“ERISA”).

      Mr. Mordecai filed a motion for summary judgment in which he argued that

his post-disability income was not Deductible Income under the Policy. Standard

opposed the motion and filed a cross-motion for summary judgment. The district

                                           3
court granted Standard’s motion for summary judgment and denied Mr.

Mordecai’s motion holding “[b]ecause Defendant, in computing Plaintiff’s

Predisability Income, considered as income the contingency fees and bonuses paid

by the Firm and received by the Plaintiff predisability, the decision to look to these

same sources of income in computing Plaintiff’s Deductible Income was proper.”

Mr. Mordecai has filed a timely appeal from the district court’s orders.

                                          II

      Mr. Mordecai contends that the district court erred in granting Standard’s

motion for summary judgment because Standard’s interpretation of the

“Deductible Income” provision of the Policy, pursuant to which Standard reduced

Mr. Mordecai’s LTD Benefit, was “wrong.” We review an appeal from a grant of

summary judgment under the plenary standard of review. Brown v. Blue Cross

and Blue Shield of Alabama, Inc., 898 F.2d 1556, 1559 (11th Cir. 1990).

Generally, we review a claims administrator’s denial of ERISA benefits under a de

novo standard. Florence Nightingale Nursing Service, Inc. v. Blue Cross/Blue

Shield of Alabama, 41 F.3d 1476, 1481 (11th Cir. 1995). However, because the

plan documents at issue explicitly granted Standard discretion to determine

eligibility or construe terms of the Policy, and Standard served as the decision-

making fiduciary for benefits that were paid out of its own assets, we review its

                                          4
decision to deny benefits under a “heightened,” or less deferential, arbitrary and

capricious standard of review. HCA Health Services of Georgia, Inc. v. Employers

Health Insurance Co., 240 F.3d 982, 992 (11th Cir. 2001); Torres v. Pittston Co.,

346 F.3d 1324, 1334 (11th Cir. 2003).

      Under the heightened arbitrary and capricious standard of review, our

threshold procedure is a de novo review of the administrative record to determine

the legally correct interpretation of the disputed provision. Brown, 898 F.2d at

1566 & n.12. That is, we must determine whether Standard’s interpretation of the

Policy was “wrong.” Id. To that end, we must consider whether Mr. Mordecai has

proposed a reasonable alternative interpretation of the Policy, one that can rival

Standard’s interpretation. Brown, 898 F.2d at 1570. If Mr. Mordecai establishes a

reasonable interpretation, then under contra preferentem, we accept his

interpretation as the correct interpretation. Florence Nightingale Nursing Service,

Inc. 41 F.3d at 1481.

      If we determine that Mr. Mordecai’s interpretation is reasonable, however,

he does not automatically prevail. Under the arbitrary and capricious standard of

review, we then evaluate whether Standard was arbitrary and capricious in

adopting an alternative interpretation of the Policy in a manner that was tainted by

self-interest. Brown, 898 F.2d at 1570.

                                          5
                                         III

      Turning to the first step of our analysis, we must consider whether

Standard’s interpretation of the disputed Policy provision was “wrong.” Brown,

898 F.2d at 1566 & n.12. The Policy defines Deductible Income, in part, as “[a]ny

earnings or compensation included in Predisability Earnings which you receive or

are eligible to receive while LTD Benefits are payable.” (ER 2, Exh. A, p. 8.) The

Policy expressly states that the “earnings in effect” on which Predisability

Earnings are based, include commissions and bonuses. (ER 2, Exh. A, p. 7.)

      The record shows that Mr. Mordecai advised Standard that the pay he

received after he became disabled “was for my work on cases that were completed

before [he became disabled] or for work performed on cases that were resolved

afterward.” (R 1-22, Exh. B.) Standard contends that because Mr. Mordecai’s

“commissions and bonuses” were the type of income included in calculating Mr.

Mordecai’s Predisability Earnings, “it was proper to treat [contingent] fee recovery

income as Deductible Income under the provision incorporating ‘any earnings or

compensation included in Predisability Earnings’ as it was received ‘when

disability benefits were payable.’” (Red Br. at 25.) Standard argues that its

“interpretation of the Deductible Income provision is reasonable because it relies

upon the express terms of the plan and provides a logical result in view of the

                                          6
purpose of the Policy of guaranteeing a basic level of income.” (Red Br. at 26.)

We agree.

      The commissions Mr. Mordecai received post-disability were the type of

“earnings in effect” upon which his Predisability Earnings were based. Standard’s

interpretation that they were included in Predisability Earnings, and therefore

constituted Deductible Income because Mr. Mordecai received them “while LTD

Benefits are payable,” is reasonable. The fact that Standard “did not and would

not include in its calculation of Predisability Earnings amounts that Mordecai

‘might’ receive after disability, i.e., [contingency] fee recoveries that were earned

but not yet received” (Red Br. at 9) is consistent with the plain language of the

Policy. As Standard explained, the Policy expressly limited Predisability Earnings

to Mr. Mordecai’s commissions and bonuses received in the 12 and 36 months

preceding his disability. Speculative “commissions and bonuses” were not

included in Standard’s calculation of Predisability Earnings.

      Because compensation for legal work performed under a contingency fee

agreement is dependent on a disposition that favors a client, whether any fee will

be paid is speculative. It could not properly be included in calculating Mr.

Mordecai’s Predisability Earnings. To the extent Mr. Mordecai received

contingency fees post-disability, they constituted Deductible Income.

                                          7
      While we agree with Standard’s interpretation of the Policy, we must

consider whether Mr. Mordecai has “proposed a sound interpretation of the plan,

on that can rival [Standard’s] interpretation.” Brown, 898 F.2d at 1570. Mr.

Mordecai contends that Deductible Income is limited to the dollars that were

actually included in Standard’s calculation of his LTD Benefit. We disagree.

      If Deductible Income were limited to the actual dollars included in the

calculation of Mr. Mordecai’s LTD Benefit based on the income Mr. Mordecai

received predisability, the provision of the Policy that includes earnings received

“while LTD Benefits are payable” as Deductible Income would be rendered

meaningless. Mr. Mordecai’s interpretation would require Standard to have

included, in calculating Mr. Mordecai’s LTD Benefit, speculative income Mr.

Mordecai might receive post-disability in order for it to constitute Deductible

Income. Because the Policy expressly states that the calculation of Predisability

Earnings is based on commissions and bonuses Mr. Mordecai received before

disability, Mr. Mordecai’s interpretation of the Deductible Income provision runs

contrary to the express terms of the Policy.

      Further, Mr. Mordecai’s interpretation would result in a windfall to him

because he would be entitled to receive a full, unreduced LTD Benefit, as well as

any income he received post-disability for work performed on a contingent fee

                                          8
agreement before he became disabled, even though Standard would not have been

allowed to consider that amount in calculating what Mr. Mordecai earned before

disability because the possibility in receiving any payment was speculative.

      Accordingly, we hold that Mr. Mordecai did not offer a reasonable

alternative interpretation of the Policy to rival Standard’s interpretation. As a

result, Standard’s correct interpretation controls. Thus, the court need not reach

the second step of the Brown analysis concerning whether Standard acted

arbitrarily and capriciously in interpreting the Policy in a manner that was tainted

by self-interest. See Brown, 898 F.2d at 1568, 1570 (holding that if the court

determines that the claimant has proposed a sound interpretation of the plan, it

thereafter evaluates whether the fiduciary was arbitrary and capricious in adopting

a different interpretation that was tainted by self-interest).

      AFFIRMED.

                                           9