Court Opinion

ID: 9402763
Source: CourtListenerOpinion
Date Created: 2023-06-16 19:00:44.077117+00
Date Added: 2024-06-11T17:20:02.490012
License: Public Domain

NOT RECOMMENDED FOR PUBLICATION
                                File Name: 23a0283n.06

                                           No. 22-3774

                          UNITED STATES COURT OF APPEALS
                              FOR THE SIXTH CIRCUIT
                                                                                       FILED
                                    )                                            Jun 16, 2023
 KAREN O’KELLY, fka Karen Langenfeld,
                                    )                                        DEBORAH S. HUNT, Clerk
                                    )
         Plaintiff-Appellant,
                                    )
                                                              ON APPEAL FROM THE UNITED
                                    )
 v.                                                           STATES DISTRICT COURT FOR
                                    )
                                                              THE NORTHERN DISTRICT OF
 FEDERAL RESERVE BANK OF CLEVELAND, )                         OHIO
                                    )
 et al.,                                                                        OPINION
                                    )
         Defendants-Appellees.      )

Before: BOGGS, WHITE, and BUSH, Circuit Judges.

       BOGGS, Circuit Judge. Karen O’Kelly stopped working at the Federal Reserve Bank of

Cleveland (“Bank”) and filed for long-term disability benefits, citing symptoms related to mold

exposure. The Bank’s third-party claims administrator, Matrix Absence Management, Inc.

(“Matrix”), initially approved O’Kelly’s claim but later terminated her benefits after finding that

she no longer qualified as “totally disabled” under the terms of the plan. O’Kelly now challenges

Matrix’s denial. Because the Bank delegated authority under the plan to Matrix to decide benefits

claims in its sole discretion, we review Matrix’s decision only for arbitrariness under New York

law. Matrix’s decision was procedurally sound and supported by substantial evidence, including

the professional opinions of seven physicians who reviewed O’Kelly’s medical records. We affirm

the district court’s grant of summary judgment to the Bank.
No. 22-3774, O’Kelly v. Fed. Rsrv. Bank of Cleveland

                                                   I

        A. Administrative History
        While working at the Federal Reserve Bank of Cleveland, Karen O’Kelly enrolled in the

long-term disability-income plan for Federal Reserve employees. Under the plan, participants can

receive long-term disability benefits if they are deemed “totally disabled.” The plan provides two

definitions of total disability, based on how long the participant claims to have been disabled.

During the first eighteen months of the participant’s disability, the participant is totally disabled if

her disability keeps her from working on a regular and full-time basis at her own job or at another

job in her same occupation. After eighteen months, the participant is totally disabled if her

disability keeps her from working in any occupation.

        To administer benefits under the plan, the plan administrator appoints a medical board—

which may be a third-party administrator—to determine whether those who have filed claims are

totally disabled. The medical board has sole discretion to make these determinations. The Bank

appointed a third party, Matrix, as the plan’s medical board. Matrix adjudicated O’Kelly’s claim.

        After first complaining of exposure to mold in August 2015, O’Kelly stopped working for

the Bank on August 31, 2016. When she exhausted her short-term disability benefits, O’Kelly filed

for long-term disability benefits. O’Kelly also applied for social-security disability benefits, for

which she submitted to a psychological exam in February 2017. The Social Security

Administration (SSA) deemed O’Kelly disabled due to “psychologically based symptoms” and

approved her claim.

        After receiving the SSA’s report, Matrix agreed that O’Kelly could not work at her own

job and approved her claim for the plan’s initial eighteen-month period, which ended on March 1,

2018. Matrix found that, although O’Kelly’s medical records did not support her claim that she

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No. 22-3774, O’Kelly v. Fed. Rsrv. Bank of Cleveland

was impaired due to mold toxicity, heavy-metal exposure, or chronic-inflammatory-response

syndrome, they did support O’Kelly’s claims of impairment due to depression and anxiety.

However, Matrix told O’Kelly that it would review her claim as she moved into the plan’s second

period, which would require a finding that O’Kelly could not work in any occupation.

       In January 2018, roughly three months before the initial eighteen-month period was set to

elapse, Matrix reviewed O’Kelly’s updated medical records and found that O’Kelly was not totally

disabled, even under the initial-period definition, because her disability did not keep her from

working in her own job or in another job in that occupation. Matrix terminated her disability

benefits immediately.

       O’Kelly appealed, attaching additional information. Matrix agreed to review its

termination decision, and scheduled O’Kelly for a medical exam. A psychologist evaluated

O’Kelly and found no evidence of neurocognitive impairment. As to O’Kelly’s alleged anxiety

and depression, the psychologist noted that her failing scores on a symptom-validity test suggested

that she was “likely feigning.” Matrix also sent O’Kelly’s records to two physicians, who found

no support for O’Kelly’s impairment from any physical or mental conditions. Matrix’s medical

director reviewed O’Kelly’s file and reached the same conclusion. Matrix also reviewed the SSA’s

award of disability benefits, which Matrix noted was based on records only up to March 2017. In

October 2018, Matrix affirmed its denial of O’Kelly’s benefits, noting that it had considered the

medical exam, peer reviews, the director’s review, and the SSA award.

       O’Kelly appealed again, attaching more information. Matrix sent O’Kelly’s claim to two

new doctors—an internist and a psychiatrist—for further peer review. Both doctors found no

functional impairment. However, during the psychiatrist’s review, one of O’Kelly’s doctors

recommended that her records be reviewed by a pain-medicine specialist or by a neurologist.

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No. 22-3774, O’Kelly v. Fed. Rsrv. Bank of Cleveland

Matrix had both types of doctor review O’Kelly’s records. The neurologist found no support for

impairment, but the pain-medicine specialist suggested that O’Kelly had some functional

limitations, such as a limited ability to lift and no ability to crawl or balance. Matrix sought more

input as to whether O’Kelly could perform her own occupation within those limitations identified

by the specialist. Two vocational-rehabilitation consultants reviewed O’Kelly’s records and

concluded that she could work in her job. The consultants also identified four other occupations

within 50 miles of O’Kelly’s residence that matched her skill set and physical limitations. Matrix

denied O’Kelly’s second appeal in May 2019 and declared its decision final. Summarizing all of

this medical evidence, Matrix concluded that no disability kept O’Kelly from working in her job

or in another occupation.

       B. Procedural History
       O’Kelly sued the Bank in the Northern District of Ohio, seeking review of the Bank’s denial

of disability benefits. The parties agreed at the outset that, although the Employee Retirement

Income Security Act of 1974 (“ERISA”) might not govern the plan at issue, their case would be

handled “in the same manner as that followed for Plan benefit claims under” ERISA. The district

court assigned the case to the administrative track, which does not permit discovery. Instead, both

parties moved for summary judgment based on the administrative record.

       The district court granted summary judgment to the Bank. Assuming that the Bank’s plan

is a governmental plan that ERISA does not cover, the district court agreed with the Bank that,

under New York law, it would review only whether Matrix’s denial of benefits was arbitrary or

capricious. The court declined to make its own determination of whether O’Kelly was disabled

under the plan’s definition and focused instead on Matrix’s decision-making process.

                                                -4-
No. 22-3774, O’Kelly v. Fed. Rsrv. Bank of Cleveland

       The district court upheld Matrix’s denial of O’Kelly’s benefits. The court held that Matrix’s

decision was not arbitrary because evidence in the administrative record supported it. The court

addressed O’Kelly’s claims that Matrix had failed to consider or improperly weighed various

pieces of evidence, including her psychological exam in February 2017, the medical opinions of

her physicians, the psychologist’s suggestion that O’Kelly could be faking her symptoms, and her

favorable SSA award of disability insurance. Weighing conflicting evidence and crediting one

medical opinion over another, the district court noted, does not constitute arbitrary action. The

court also found the decision untainted by any bias or conflict of interest. The court noted that

O’Kelly had not provided any evidence suggesting that Matrix’s review process was biased in

favor of the Bank. O’Kelly timely appealed.

                                                 II

       A. Standard of Review

       This case’s procedural posture requires us to identify two standards of review: one for

Matrix’s decision and another for the district court’s. Autran v. Procter & Gamble Health & Long-

Term Disability Benefit Plan, 27 F.4th 405, 411 (6th Cir. 2022).

       Under ERISA, for employee-benefit plans that give discretionary power to administrators

to interpret plan terms and determine eligibility for benefits, we review an administrator’s denial

of benefits under the arbitrary-and-capricious standard. Ibid. (citing Frazier v. Life Ins. Co. of N.

Am., 725 F.3d 560, 566 (6th Cir. 2013)). However, this is not an ERISA case. ERISA does not

apply to “governmental plan[s],” 29 U.S.C. § 1003(b)(1), which include employee plans

established or maintained by the U.S. government or by its “agency or instrumentality,” id. §

                                                -5-
No. 22-3774, O’Kelly v. Fed. Rsrv. Bank of Cleveland

1002(32).1 The district court assumed, and the parties agreed, that the Bank is such an

instrumentality and its plan a governmental one to which ERISA does not apply. See Starr Int’l

Co. v. Fed. Rsrv. Bank of N.Y., 742 F.3d 37, 40 (2d Cir. 2014) (explaining that federal reserve banks

are federal instrumentalities); 12 U.S.C. § 391 (designating federal reserve banks as “fiscal agents

of the United States”). We assume the same.

        Since ERISA does not apply, contract-law principles determine our standard of review for

Matrix’s decision. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 112–13 (1989). Here,

the plan contains a New York choice-of-law provision. Therefore, we apply New York law in

reviewing O’Kelly’s claims.

        Under New York law, we enforce written agreements that are “complete, clear and

unambiguous on [their] face” according to the plain meaning of their terms. Greenfield v. Philles Recs.,

Inc., 780 N.E.2d 166, 170 (N.Y. 2002). When a plan vests sole authority in the designated

decisionmaker, an employer’s decision to deny “non-ERISA benefits may be set aside only where it is

made in bad faith, was arbitrary or was the result of fraud.” Welland v. Citigroup, Inc., No. 00-Civ-

738, 2003 WL 22973574, at *11 (S.D.N.Y. Dec. 17, 2003), aff’d, 116 F. App’x 321 (2d Cir. 2004).

If a reasonable basis supports the decision, we may not “substitute [our] judgment for that of [the

employer] on the disputed factual issues.” Ibid. (second alteration in original) (quoting Gehrhardt

v. Gen. Motors Corp., 581 F.3d 7, 12 (2d Cir. 1978)).

        O’Kelly argues that Welland does not apply because it concerned stock options, not

disability benefits. This distinction is unpersuasive. In Welland, the employer offered its

employees stock options that were forfeited upon the employee’s termination for any reason other

1
  ERISA, then, cannot provide the statutory hook for federal subject-matter jurisdiction. Halttunen
v. City of Livonia, 664 F. App’x 510, 513 (6th Cir. 2016). Instead, the district court exercised
jurisdiction under the Federal Reserve Act, 12 U.S.C. § 632.

                                                 -6-
No. 22-3774, O’Kelly v. Fed. Rsrv. Bank of Cleveland

than retirement. Id. at *10. To determine when employees forfeited their stock options under the

plan, the employer delegated authority to a committee that “functioned as the plan administrator

and was vested with the sole authority to interpret” the terms of the benefits plan. Id. at *11. In

affirming the district court’s standard of review, the Second Circuit found this delegation of

authority especially relevant. Welland, 116 F. App’x at 322.2 Here, the Bank’s plan similarly

delegated authority to Matrix to make all disability determinations in its sole discretion, making

arbitrary-and-capricious review of Matrix’s denial the appropriate standard.

       O’Kelly also refers us to Dunham v. Unum Grp., No. 2:13-cv-0794, 2015 WL 6798578

(S.D. Ohio Nov. 6, 2015), suggesting that we should review Matrix’s decision de novo. There, the

court reviewed de novo a breach-of-contract claim under a non-ERISA disability-benefits plan that

defined disability and denied benefits because the claimant did not meet that definition. Id. at *3–

4. We find this case unhelpful. First, the Dunham court applied Ohio law, not New York law. Id.

at *3. Second, the plan did not delegate authority to a third-party administrator to make disability

determinations in its sole discretion. Since O’Kelly’s plan expressly included such a delegation,

New York law requires us to enforce it. See Greenfield, 780 N.E.2d at 170. Therefore, whether the

Bank breached its contract with O’Kelly turns not on whether O’Kelly is actually disabled, but on

whether Matrix’s denial was a valid exercise of its delegated decision-making authority—that is,

on whether its decision was “made in bad faith, was arbitrary or was the result of fraud.” Welland,

2003 WL 22973574, at *11.

2
 We note that the Second Circuit described the district court’s review as review “under an arbitrary
and capricious standard.” Welland, 116 F. App’x at 322, which explains why we and the district
court also cite non–New York cases that employ this standard.

                                               -7-
No. 22-3774, O’Kelly v. Fed. Rsrv. Bank of Cleveland

        As for our review of the district court, we review its legal holding that Matrix did not act

arbitrarily de novo and its factual findings for clear error. Fenwick v. Hartford Life & Accident Ins.

Co., 841 F. App’x 847, 852 (6th Cir. 2021).

        B. Threshold Challenges

        O’Kelly raises several challenges to the district court’s decision that we address before

reviewing whether Matrix’s decision was arbitrary. In particular, O’Kelly argues that the district

court applied the wrong standard of review to Matrix’s decision, and considered medical

documents in the administrative record that were not authenticated and therefore inadmissible as

evidence.

        First, we conclude from our discussion above that the district court applied the proper

standard of review under New York law. Second, we note that the district court properly based its

grant of summary judgment on the administrative record. O’Kelly forfeited her authentication

argument below by raising it for the first time in her summary-judgment reply brief. See Bennett

v. Bascom, 788 F. App’x 318, 323 (6th Cir. 2019) (citing Scottsdale Ins. Co. v. Flowers, 513 F.3d

546, 553 (6th Cir. 2008)). Even if we did not deem O’Kelly’s argument waived, we would agree

with the district court that it does not “constitute a proper objection on summary judgment.” The

Federal Rules of Civil Procedure have no bearing on which medical documents Matrix may

consider in evaluating O’Kelly’s claim. Cf. Wilkins v. Baptist Healthcare Sys., Inc., 150 F.3d 609,

619 (6th Cir. 1998) (Gilman, J., concurring) (stating, as the opinion of the court, that Rule 56’s

summary-judgment procedures are “inapposite” to ERISA actions). O’Kelly’s point that her case

is a non-ERISA matter does not render Rule 56 any more appropriate because the district court

still was required to review the full administrative record that Matrix used in its review in order to

rule on arbitrariness.

                                                -8-
No. 22-3774, O’Kelly v. Fed. Rsrv. Bank of Cleveland

        We also decline, as the district court did, to consider O’Kelly’s argument that she met the

plan’s definition of being totally disabled. Our decision to review Matrix’s denial for arbitrariness

renders moot O’Kelly’s breach-of-contract argument on the merits of her disability claim. Our role

on review is not to find for ourselves whether O’Kelly was totally disabled under the plan, but to

check if a reasonable basis supported Matrix’s finding.

        C. The Bank’s Decision

        Arriving at O’Kelly’s central challenge, we find no bad faith, arbitrariness, or fraud in

Matrix’s denial of benefits. The decision to deny plan benefits is not arbitrary if it is “the result of

a deliberate, principled reasoning process and . . . supported by substantial evidence.” Autran, 27

F.4th at 411 (omission in original) (quoting Davis v. Hartford Life & Accident Ins. Co., 980 F.3d

541, 547 (6th Cir. 2020)). Substantively, plan administrators can reach only those decisions for

which a rational person could conclude that adequate evidence exists. Id. at 412. When the record

contains enough support for a rational decision in either direction, how the administrator weighs

conflicting evidence is not arbitrary. Ibid. Procedurally, plan administrators must reach their

decisions through “reasoned decisionmaking.” Ibid. If a participant’s disability is contested, the

administrator must weigh the full administrative record. Id. at 415.

        Matrix’s decision in O’Kelly’s case passes substantive and procedural muster. The record

contained more than adequate evidence for Matrix to conclude that O’Kelly was not disabled. See

id. at 413. O’Kelly’s primary-care physician and seven other physicians all reviewed O’Kelly’s

medical records and found no evidence that she suffered from any neurological impairment. After

the SSA’s disability finding, another physician found no evidence of a disabling psychiatric

condition. And to the extent that O’Kelly does suffer some impairment, two vocational reviews

found that O’Kelly could perform her own or another occupation.

                                                 -9-
No. 22-3774, O’Kelly v. Fed. Rsrv. Bank of Cleveland

       Matrix also considered the full administrative record in deciding O’Kelly’s claim. In its 33-

page final denial letter, Matrix addressed all relevant evidence, including the conflicting disability

opinions. Matrix also confronted the SSA’s contrary disability finding, explaining that the initial

SSA award was based on clinical records from the time of the SSA decision and that its denial

rested on “updated clinical information” received since the SSA’s decision and on “current

findings” from four physicians. In sum, Matrix had enough evidence to conclude that O’Kelly was

not totally disabled, and it followed a rational process in reaching that conclusion. See ibid.

       O’Kelly responds with instances of alleged arbitrariness at each of Matrix’s three reviews.

She argues that Matrix’s decision was arbitrary because (1) Matrix’s initial termination of benefits

“relied on an unnamed non-examining nurse practitioner” who found that O’Kelly’s condition had

improved, and (2) Matrix did not address the opposing medical opinions of several physicians,

submitted with O’Kelly’s first and second appeals.

               1. Initial Termination

       O’Kelly argues that Matrix’s initial decision to terminate her disability benefits was

arbitrary because it relied in part on the opinion of an unnamed nurse who focused on the fact that

O’Kelly was “smiling and appear[ed] improved” at a medical appointment. This opinion, O’Kelly

argues, amounted to a selective review of the record.

       O’Kelly’s focus on the nurse is misplaced because it challenges only Matrix’s initial

termination of benefits, not its final denial. Under the terms of the plan, Matrix’s denial of

O’Kelly’s benefits was not final until she exhausted the internal appeals process, after which

Matrix reached a final decision based on its review of all the evidence in the record. Only Matrix’s

final decision is before us. In that decision, it is clear that Matrix addressed all of the relevant

information.

                                                - 10 -
No. 22-3774, O’Kelly v. Fed. Rsrv. Bank of Cleveland

       Even if we reviewed Matrix’s initial termination, we would not find it arbitrary. As the

district court noted, Matrix had reviewed and summarized medical records from four of O’Kelly’s

doctors. Both Matrix and the nurse based their conclusions on this evidence. And although Matrix’s

initial termination letter did not mention the SSA’s disability finding, Matrix relied on that same

finding when it first approved O’Kelly’s disability benefits. O’Kelly’s claim of selective review

mischaracterizes the review that actually took place.

               2. First Appeal

       O’Kelly next argues that Matrix acted arbitrarily by failing to address a clinical counselor’s

opinion, submitted with O’Kelly’s first appeal, that suggested that O’Kelly suffered from

depression, anxiety, and post-traumatic stress disorder. However, Matrix noted in its final letter

that the counselor’s opinion was inconclusive and never actually diagnosed O’Kelly with any

disorder. It was not arbitrary for Matrix to assign little weight to a medical opinion with little

significance. In any event, Matrix’s reviewing physicians addressed the opinion. Two peer

reviewers noted that the opinion lacked any specific diagnosis or definitive finding of impairment.

Another noted that the opinion was based only on a “symptom survey” ordered by O’Kelly’s own

attorney. O’Kelly faults one of the peer reviewers for not personally contacting the author of the

opinion, but she offers no support for the notion that Matrix’s reviewing physicians must contact

each of O’Kelly’s care providers. Matrix’s review of the medical record was adequate, and that

review balanced the counselor’s opinion against the weight of other relevant evidence.

               3. Second Appeal

       Finally, O’Kelly contends that Matrix acted arbitrarily when it failed to respond to two

medical opinions that O’Kelly submitted with her second appeal. Although Matrix consulted four

physicians in reviewing O’Kelly’s second appeal, O’Kelly claims that none refuted the conclusions

                                               - 11 -
No. 22-3774, O’Kelly v. Fed. Rsrv. Bank of Cleveland

of her physicians, which countered Matrix’s findings up to that point. Even if we accepted

O’Kelly’s premise that Matrix needed to rebut each contrary opinion in the medical record, we

would conclude that Matrix met that burden. See Balmert v. Reliance Standard Life Ins. Co., 601

F.3d 497, 504 (6th Cir. 2010) (“Reliance on other physicians is reasonable so long as the

administrator does not totally ignore the treating physician’s opinions.”). Matrix sent O’Kelly’s

medical records to four physicians, who reviewed these opinions in light of the medical evidence

from O’Kelly’s other doctors. One reviewer even spoke with the author of one of O’Kelly’s

proffered opinions and addressed that diagnosis in his report. The other opinion, as the district

court noted, conflicted with those of three of O’Kelly’s doctors. Contrary to what O’Kelly claims,

Matrix explained its disagreement with the two opinions through its peer reviewers. In denying

O’Kelly her disability benefits, Matrix did not ignore any part of the medical record.

                                        CONCLUSION

       For the reasons above, the judgment of the district court is AFFIRMED.

                                              - 12 -