Court Opinion

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Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

9-13-2004

Kosiba v. Merck Co Inc
Precedential or Non-Precedential: Precedential

Docket No. 02-2668

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Recommended Citation
"Kosiba v. Merck Co Inc" (2004). 2004 Decisions. Paper 282.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/282

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                                              CHARLES F. SZYMANSKI (Argued)
                    PRECEDENTIAL              Markowitz & Richman
                                              121 South Broad Street
 THE UNITED STATES COURT OF                   Suite 1100
APPEALS FOR THE THIRD CIRCUIT                 Philadelphia, PA 19107

           _______________                    Attorney for Appellant

             NO. 02-2668                      PETER J. HECK (Argued)
                                              Del Mauro, DiGiaimo, Knepper & Heck
 MICHAELEEN KOSIBA; CELESLIE                  8 Headquarters Plaza
        EPPS-MALLOY                           North Tower
                                              Morristown, NJ 07960
                   v.
                                              Attorney for Appellee
 MERCK & COMPANY; UNUM LIFE
          INSURANCE                                  ______________________
COMPANY OF AMERICA; MERCK &
       CO., LONG TERM                                       OPINION
  DISABILITY PLAN FOR UNION                          ______________________
          EMPLOYEES

         Celeslie Epps-M alloy,               BECKER, Circuit Judge.
                                                 Plaintiff Celeslie Epps-Malloy is a
               Appellant
                                              former employee of defendant Merck &
                                              Co. (“Merck”), who participated in
         __________________
                                              Merck’s ERISA-based Long Term
                                              Disability Plan for Union Employees (the
   On Appeal From The United States
                                              “Plan”). 1 At times relevant, Merck, as
 District Court For The District Of New
                                              overall plan administrator, had delegated
                  Jersey
                                              responsibility for claims administration to
          (D.C. No. 98-cv-03571)
                                              defendant U N UM Life Insurance
District Judge: Honorable Mary Little
               Cooper
           Argued June 28, 2004
    Before: AMBRO, BECKER, and
      GREENBERG, Circuit Judge                  1
                                                 Michaleen Kosiba, the other named
                                              plaintiff in this case, settled her case
                                              against the defendants in the District
      (Filed September 13, 2004 )
                                              Court, and is not participating on appeal.

                                          1
Company of America (“UNUM”). 2                          ERISA plan fiduciaries’ discretionary
Following an at-work injury and a                       decisions regarding benefits. Turning to
diagnosis of sarcoidosis and fibromyalgia,              the merits of Epps-Malloy’s claim, the
Epps-Malloy applied for and received                    District Court found, principally because
long-term disability (LTD) benefits from                of Dr. Dev’s report, that the defendants’
the defendants in 1993. During a periodic               denial of benefits was not arbitrary and
review conducted in 1996, the defendants                capricious.
terminated Epps-Malloy’s benefits, finding
                                                            On appeal, we concentrate on the
that she was no longer totally disabled
                                                        District Court’s first conclusion. We agree
under the terms of the Plan. During the
                                                        with the District Court that the record in
course of the Plan’s administrative appeals
                                                        this case does not support finding a
process, Merck requested that Epps-
                                                        financial conflict of interest (which, under
Malloy undergo an independent medical
                                                        Pinto’s “sliding scale” approach, would
e x a m i n a ti o n , a n d d e s i g n a te d a
                                                        warrant a standard of judicial review less
pulmonologist, Dr. Gautam Dev, to
                                                        deferential than arbitrary and capricious
evalu ate her.            Dr. Dev’s report
                                                        review), and that delegation by Merck to
contradicted Epps-M alloy’s treating
                                                        UNUM of claims administration would
physicians’ diagnoses, and on this basis
                                                        ordinarily preclude heightened review.
the defendants upheld their denial of
                                                        However, there is evidence of procedural
continued benefits. Epps-M alloy then
                                                        bias in Merck’s intervention in the appeals
filed this suit under 29 U.S.C. §
                                                        process to request an independent medical
1132(a)(1)(B), seeking benefits allegedly
                                                        exam. This is especially problematic
due her under the terms of the Plan.
                                                        because the record before the defendants
    Epps-M alloy’s c la im       surviv ed              prior to Dr. Dev’s examination provided
summary judgment, and the District Court                reasonably sound as well as unequivocal
held a Fed. R. Civ. P. 52(a) bench trial on             support for Epps-Malloy’s claim for
a stipulated documentary record. The                    benefits; the choice to request a third
Court concluded that under Pinto v.                     medical opinion therefore strongly
Reliance Standard Life Insurance Co., 214               suggests a desire to generate evidence to
F.3d 377 (3d Cir. 2000), and its progeny,               counter Epp s-M alloy’s physicians’
the structural arrangement among Merck,                 diagnoses. Because Merck’s intervention,
the Plan, and UNUM did not warrant a                    notwithstanding its delegation of claims
departure from the traditional “arbitrary               administration to a large and experienced
and capricious” standard of review over                 carrier, undermines the defendants’ claim
                                                        to the deference normally accorded an
                                                        ERISA plan fiduciary with discretionary
  2
   We shall refer to Merck, the Plan, and               authority, we conclude that the District
UNUM collectively as “the defendants”                   Court should have applied a moderately
except where it is necessary to                         heightened arbitrary and capricious
distinguish them.

                                                    2
standard of review. Additionally, with             granted short-term disability benefits by
respect to the merits, the District Court          the defendants in October 1992. In
fa il e d to ad dr es s E pp s-M all oy’ s         October 1993, she was approved for LTD
fibromyalgia diagnosis, an omission which          benefits, but was reminded that periodic
itself alone would require a new trial. For        requests for medical information would be
these reasons, we will reverse the                 made in the future to ensure continued
judgment of the District Court and remand          eligibility (i.e., to determine that she
for a new trial.                                   continued to be completely disabled under
                                                   the Plan). Around the same time, Epps-
                                                   Malloy applied for Social Security
 I. Factual Background and Procedural              disability benefits.       In 1994, an
History                                            administrative law judge overruled the
                                                   Social Security Administration’s (SSA)
    Although the District Court, which
                                                   initial determination denying her Social
rendered its opinion following a Fed. R.
                                                   Security benefits, and awarded her Social
Civ. P. 52(a) bench trial on a stipulated
                                                   Security long-term disability benefits,
documentary record, gave a lengthy
                                                   finding her permanently disabled.
account of the parties’ factual contentions,
it by and large did not make findings of              Epps-M alloy’s benefits were provided
fact as required by Rule 52(a). As such,           under the terms of the Merck & Co. Long
what follows is not so much the District
Court’s factual findings as it is our own
summary of the record before us.                   stiffness of muscles and associated
   A. Epps-Malloy’s Medical History                connective tissue structures.”
                                                   Merriam-Webster Medical Dictionary
    Epps-Malloy was employed by Merck              (2002), at http://www.dictionary.com.
as a cook and food-service attendant. She          The cause is unknown. Sarcoidosis is “a
suffered an injury at work in 1991, and            disease of unknown origin marked by
was diagnosed with fibromyalgia, chronic           formation of granulomatous lesions that
pain syndrome, and sarcoidosis.3 She was           appear especially in the liver, lungs, skin,
                                                   and lymph nodes.” American Heritage
                                                   Stedman’s Medical Dictionary (2002), at
  3
   It is unclear from the record whether           http://www.dictionary.com. A
there was any causal relationship                  granuloma, in turn, is a “[c]hronic
between the injury—a stack of food                 inflammatory lesion characterised by
service trays falling on Epps-                     large numbers of cells of various types
Malloy—and the ailments that form the              (macrophages, lymphocytes, fibroblasts,
basis of her claim. Fibromyalgia (also             giant cells), some degrading and some
referred to as fibromyositis) is “any of a         repairing the tissues.” On-line Medical
group of nonarticular rheumatic disorders          Dictionary, at http://cancerweb.ncl.ac.uk/
characterized by pain, tenderness, and             omd/index.html.

                                               3
Term Disability Plan fo r Un ion                               In May 1996, as part of a periodic
Employees, an ERISA plan. By the Plan’s                    review of Epps-Malloy’s benefits, UNUM
terms, “[Merck] shall pay the cost of the                  requested information from her treating
benefits provided under the Plan,” though                  physicians, Dr. Panullo and Dr. David
the Plan gives discretion to the                           Williams. Dr. Panullo was Epps-Malloy’s
M a n a g e m e n t P e n s i o n I n v e s t m e nt       gynecologist. Epps-M alloy’s disability is
Committee to choose “any funding                           not related to any gynecological condition,
method, or combination of funding                          s o D r . P a n u l l o ’ s re p o r t s a re
methods which are permissible under                        irrelevant—though they seem to have been
ERISA.” The District Court found that no                   misunderstood by UNUM, at some points,
evidence was introduced on how Merck                       to indicate that Epps-M alloy was entirely
actually funded the plan, and the parties do               able to work, when they in fact say only
not dispute this on appeal. The Plan                       that no gynecological problems prevented
allocates fiduciary responsibility among a                 Epps-Malloy from working. We therefore
committee of Merck’s Board of Directors                    say no more about Dr. Panullo.
( w h i c h h a s c e r ta i n po w e r s o f
                                                               Dr. Williams’s notes from January 16,
appointment); the Merck Management
                                                           1996, refer to Epps-Malloy’s sarcoidosis
Pension Investment Committee (which is
                                                           and her fibromyalgia. According to his
responsible for the investment and
                                                           notes, the sarcoidosis had been diagnosed
management of Plan funds); and Merck
                                                           by a 1989 bronchoscopy; the record does
itself, which is the plan administrator. As
                                                           not disclose when the initial fibromyalgia
plan administrator, Merck has the power to
                                                           diagnosis was made. Dr. Williams’s June
appoint a claims administrator, who “shall
                                                           14, 1996, notes state that “[s]arcoidosis is
determine claims for benefits by
                                                           her diagnosis as well as fibromyalgia,” and
Participants under the Plan.” At the time
                                                           he indicated that she was being medicated
Epps-M alloy’s LTD benefits were first
                                                           for fibromyalgia. In response to an
granted, Thomas L. Jacob & Associates
                                                           UNUM questionnaire dated October 28,
(“TLJ”) was Merck’s appointed claims
                                                           1996, Dr. Williams stated that Epps-
administrator; later, appellee UNUM was
                                                           Malloy was “disabled to light activity
the claims administrator. Notwithstanding
                                                           because of shortness of breath” and that
this appointment, the Plan confers on
                                                           his prognosis for her to return to gainful
Merck (as plan administrator) the powers
                                                           employment on a part-time basis or full-
“to construe the Plan”; “to decide all
                                                           time basis was “never.”
questions of eligibility”; and “to request
and receive from all Participants such                        UNUM informed Epps-Malloy on
information [as is] necessary for the proper               December 31, 1996 that it was terminating
administration of the Plan.”                               her benefits. The letter explained that a
                                                           review of medical documentation,
 B. Termination of Epps-Malloy’s LTD
                                                           including information from Drs. Panullo
Benefits
                                                           and Williams, led UNUM to conclude that

                                                       4
    she no longer met the definition of being
    “unable to perform any and every duty” of
    her occupation, as required by the Plan.            non-productive and worse upon laying
    The letter also stated that “there is no            down. The patient also has post-nasal
    evidence to support that you are medically          drip and chronic sinus problems. Her
    incapable to perform the duties of your             exercise tolerance is minimal, and she is
    occupation.” The letter further informed            barely able to achieve her day-to-day
    Epps-Malloy that she would have to come             activities. The patient was treated in the
    forward with objective medical evidence             past with steroids; however, could not
    of her disability.                                  tolerate them because of what appears to
        Epps-Malloy administratively appealed           be psychosis and marked degree of
    this decision. She provided additional              weight gain. She has a history of
    information to UNUM, including the name             smoking one pack per day for six years.
    of her new treating physician, Dr. Fred
    McQueen. Dr. McQueen repeated the                      [Physical exam reveals nothing
    fibromyalgia diagnosis, stated “[s]he                  amiss; pulmonary function was
    cannot return to gainful employment,” and              normal; blood gases were near
    that he did “not feel it in her best interest          normal]
    to be under any stress due to triggering her               My impression of Mrs. Epps-
    sarcoid remission.”         Dr. McQueen                Malloy is that her
    concluded: “Permanently & totally                      symptomatology is not
    disabled. Suffers with severe anxiety. She             commensurate with her clinical
    cannot cope with stress.”                              presentation. Considering the
        Upon receiving Dr. McQueen’s report,               normal pulmonary function test
    UNUM wrote to Epps-Malloy stating that                 and near normal arterial blood
    “Merck & Company has requested an                      gas, I have a difficult time
    Independent Medical Exam.”           The               ascribing sarcoidosis as a cause of
    defendants designated Dr. Dev to perform               her symptomatology. She appears
    the examination. We rescribe Dr. Dev’s                 to be somewhat emotional and I
    report       in    the     margin;4                    cannot reliably exclude
                                                           malingering behavior. On the
                                                           contrary, the endobronchial
4
    I saw Celeslie Epps-M alloy on 5/8/97.                 sarcoid may be leading to a
    The patient is a 47 year old female with a             persistent cough and dyspnea.
    history of sarcoidosis reportedly                      Chronic sinusitis can also
    diagnosed by a transbronchial biopsy in                exacerbate a respiratory condition
    1987. The patient currently presents for               and lead to some degree of
    medical evaluation for her complaints of               shortness of breath. The patient’s
    shortness of breath on minimal exertion                impaired cardiac status is also a
    and also complains of cough, which is                  possibility and an exercise stress

                                                    5
in sum, Dr. Dev concluded that a diagnosis          F.3d 377 (3d Cir. 2000), and its progeny,
of sarcoidosis was “incompatible with her           the District Court first concluded that an
clinical presentation”—i.e., that he                “arbitrary and capricious” standard of
disagreed with the sarcoidosis diagnosis.           review applied to its judicial review of the
He did not opine on her fibromyalgia                defendants’ denial of benefits. The Court
diagnosis. Based on Dr. Dev’s report,               then concluded that their denial of benefits
UNUM upheld its decision denying                    was not arbitrary and capricious. It
benefits.                                           therefore entered judgment for the
                                                    defendants.
C. Proceedings Before the District Court
    Epps-Malloy filed this suit, seeking
benefits allegedly due her under the terms            II. Our Standard of Review Over the
of the Plan under 29 U.S .C. §                      District Court’s Decision
1132(a)(1)(B), and other relief. Merck
                                                        In the post-Pinto era, we appear to
counterclaimed to recoup, under the terms
                                                    have had only one case in the same
of the Plan, the Social Security disability
                                                    procedural posture as this one, i.e., an
benefits Epps-M alloy had received. The
                                                    appeal from a bench trial. In Goldstein v.
counterclaim was settled, and the District
                                                    Johnson & Johnson, 251 F.3d 433, 441 (3d
Court denied summary judgment on Epps-
                                                    Cir. 2001), we stated (without further
Malloy’s § 1132(a)(1)(B) claim. The case
                                                    elaboration or citation) that in such an
therefore proceeded to a trial on the merits,
                                                    appeal “[w]e have plenary review over a
which was conducted as a Fed. R. Civ. P.
                                                    district court’s conclusions of law, and we
52(a) bench trial on a stipulated
                                                    review its factual conclusions for clear
documentary record. Canvassing Pinto v.
                                                    error.” This is, of course, the usual
Reliance Standard Life Insurance Co., 214
                                                    standard of review on appeal from a bench
                                                    trial. See In re Unisys Savings Plan Litig.,
       test might be able to help                   173 F.3d 145, 149 (3d Cir. 1999).
       answer some of the                           Determining the proper standard of
       unanswered questions.                        judicial review under Pinto is a question of
                                                    applying law to fact; accordingly, our
       I feel, based on her pulmonary               review is plenary, though we review a
   function tests and arterial blood                district court’s underlying factual findings
   gas information, that her present                only for clear error. Because we conclude
   diagnosis is incompatible with her               the District Court applied too deferential a
   clinical presentation.                           standard of judicial review, we do not
Dr. Dev’s description of when and how               reach the merits of Epps-Malloy’s claim.
Epps-Malloy’s sarcoidosis was first
diagnosed conflicts with that of Dr.
Williams; it is not clear whether this               III. Standard of Judicial Review over
inconsistency is significant.                       Unum’s Determination of Epps-Malloy’s

                                                6
Claim                                                         relevant is “the current status of the
                                                              fidu ciary,” id., i.e., whethe r the
    Our principal task is to determine
                                                              decisionmaker is a current employer,
whether the District Court applied the
                                                              former employer, or insurer. Our cases
appropriate standard of judicial review to
                                                              have addressed various combinations of
the defendants’ decision to deny LTD
                                                              these factors.      In Pinto itself, we
benefits to Epps-Malloy. We begin with a
                                                              concluded that “heightened arbitrary and
discussion of Pinto and our cases
                                                              capricious review,” id. at 393, or review
following it, and then turn to the proper
                                                              “on the far end of the arbitrary and
standard of judicial review in this case.
                                                              capricious ‘range,’” id. at 394, was
          A. Pinto and Its Progeny                            appropriate because Pinto’s insurer both
                                                              made benefits determinations and funded
     We held in Pinto that, in reviewing an
                                                              the benefits, and because of various
ERISA plan fiduciary’s discretionary
                                                              procedural anomalies that tended to
determination regarding benefits, a court
                                                              suggest that “whenever it was at a
must take into account the existence of the
                                                              crossroads, [the insurer defendant] chose
structural conflict of interest present when
                                                              the decision disfavorable to Pinto.” Id.
a financially interested entity also makes
benefit determinations. Specifically, we                          Turning to Pinto’s progeny, we first
adopted a “sliding scale” approach, in                        note that in some cases the parties stipulate
which district courts must “consider the                      to the applicable standard of judicial
nature and degree of apparent conflicts                       review, or at least do not contest the
with a view to shaping their arbitrary and                    District Court’s choice of a standard of
capricious review of the benefits                             review. See, e.g., McLeod v. Hartford Life
d e t e r m in a t i o n s o f d i s c re t i o n a r y       & Accident Ins. Co., 372 F.3d 618, 623-24
decisionmakers.” Pinto, 214 F.3d at 393.                      & nn.3-4 (3d Cir. 2004); Orvosh v.
This “sliding scale” method “intensif[ies]                    Program of Group Ins. for Salaried
the degree of scrutiny to match the degree                    Employees of Volkswagen of Am., Inc.,
of the conflict.” Id. at 379.                                 222 F.3d 123, 129 (3d Cir. 2000). Other
                                                              cases, though they cite Pinto, are factually
    Pinto offered a nonexclusive list of
                                                              too far removed from the facts of this case
factors to consider in assessing whether a
                                                              to provide meaningful guidance. See, e.g.,
structural conflict of interest warranting
                                                              Goldstein, 251 F.3d 433 (unfunded
heightened review exists. The sliding-
                                                              executive deferred compensation, or “top
scale approach “allows each case to be
                                                              hat,” plan).
examined on its facts.” Id. at 392. Among
the factors we identified were “the                                While Pinto addressed the case of an
sophistication of the parties, the                            i n s u r er b o t h m aking bene fit s
information accessible to the parties, and                    determinations and paying claims, it did
the exact financial arrangement between                       not definitively decide whether any form
the insurer and the company.” Id. Also                        of heightened review applies to employers

                                                          7
both making benefits determinations and            and capricious standard.” Id. at 199. Most
paying claims. When an employer pays               recently, we approved a district court’s
claims out of its general operating                holding that the unfunded and self-
funds—the situation most likely to                 administered benefit plan in Stratton v. E.I.
introduce a structural conflict because the        DuPont de Nemours & Co., 363 F.3d 250,
employer feels an immediate “sting” from           255 (3d Cir. 2004), warranted only a
paying a claim—the plan is referred to as          “slightly heightened form of arbitrary and
“unfunded” or sometimes “self-funded.”             capricious review.”
This is in contrast to “the typical
                                                        As we noted in Pinto itself, the
employer-funded pension plan” which “is
                                                   financial and administrative relationship
set up to be actuarially grounded, with the
                                                   between the employer and the benefit plan
company making fixed contributions to the
                                                   is not the only relevant consideration. For
pension fund.” Pinto, 214 F.3d at 388.
                                                   example, in Stratton, we observed that
    We confronted (but were ultimately             while an employer administering an
able to avoid) ruling on the issue of              unfunded plan may have a financial
whether heightened review applies to               incentive to deny the claims of its
employers making benefits determinations           employees, it thereby risks “the loss of
and paying claims in Skretvedt v. E.I.             morale and higher wage demands that
DuPont de Nemours & Co., 268 F.3d 167              could result from denials of benefits.” 363
(3d Cir. 2001). That case concerned                F.3d at 254 (quoting Nazay v. Miller, 949
(among other things) an employer-                  F.2d 1323, 1335 (3d Cir. 1991)); see also
administered unfunded benefit plan, and            Smathers, 298 F.3d at 198; Pinto, 214 F.3d
noted that “a heightened standard of               at 389. We have recognized the inverse as
review might be applicable to the                  well: When a former employee seeks
[employer-controlled] Board’s denial of            b e n e f it s , t h i s c o n f l ic t-mitiga tin g
Skretvedt’s claim for the unfunded . . .           consideration is not present.                   See
benefits, because of the potential conflict        Smathers, 298 F.3d at 198 (“Since
under Pinto.” Id. at 175. We reached this          Smathers was no longer an employee when
question less than a year later, in Smathers       Multi-Tool made its decision to deny his
v. Multi-Tool, Inc./Multi-Plastics, Inc.           claims, the counterbalancing of its
Employee Health & Welfare Plan, 298                monetary self-interest by possible concerns
F.3d 191 (3d Cir. 2002). In Smathers, we           about the impact of its decision on morale
concluded that an employer’s unfunded              and wage demands would thereby be
and self-adminstered benefits plan                 lessened.”).
presented a conflict that, though “not
                                                      Indeed, we made the general point
extraordinary,” did warrant “somewhat
                                                   about the short-circuiting of incentives by
heightened” scrutiny, requiring “a more
                                                   imperfect information flow in Pinto itself:
penetrating review of [the] administrator’s
decisionmaking process than would                      [M]any claims for benefits are
normally be conducted under the arbitrary              made after individuals have left

                                               8
       active employment and are                    her insurer’s financial conflict of interest.
       seeking pension or disability                See Pinto, 214 F.3d at 393 (“[L]ooking at
       benefits. Details about the                  the final decision, we see a selectivity that
       handling of those claims,                    appears self-serving in the administrator’s
       w h e t h e r r e s p o n s ib l e o r       use of [one doctor’s] expertise.”); id.
       irresponsible, are unlikely to               (“[i]nconsistent treatment of the same
       seep into the collec tive                    facts”); id. at 394 (suggesting that
       knowledge of still-ac tive                   “whenever it was at a crossroads, Reliance
       employees. If Pinto’s claim is               Standard chose the decision disfavorable
       denied, few at Rhone-Poulenc                 to Pinto”). Though no case since Pinto
       will learn of it, and Reliance               appears to have turned on evidence of
       Standard will have little motive             procedural bias or unfairness, the
       to heed the economic advice of               corresponding negative pregnant appears
       the Seventh Circuit that “it is a            in several of our cases. See Skretvedt, 268
       poor business decision to resist             F.3d at 175-76 (considering but rejecting
       paying meritorious claims for                allegations of decisionmaker bias in the
       benefits.”                                   benefits review system); Goldstein, 251
                                                    F.3d at 435-36 (noting that heightened
214 F.3d at 388 (quoting Mers v. Mariott
                                                    review would be required when “the
Int’l G roup Accidental Death &
                                                    beneficiary has put forth specific evidence
Dismemberment Plan, 144 F.3d 1014,
                                                    of bias or bad faith in his or her particular
1020 (7th Cir. 1998)); see also id. at 392
                                                    case”); Bill Gray Enters., Inc. Employee
(noting the relevance of the current
                                                    Health & Welfare Plan v. Gourley, 248
relationship between the fiduciary and
                                                    F.3d 206, 216 (3d Cir. 2001) (“[U]nless
beneficiary). In short, our precedents
                                                    specific evidence of bias or bad-faith has
recognize that the situation of an
                                                    been submitted, plans . . . are reviewed
individual claiming benefits from her
                                                    under the traditional arbitrary and
former employer may, for Pinto purposes,
                                                    capricious standard.”); id. at 216 n.8
be more akin to that of an insured claiming
                                                    (“Gourley has failed to allege bias on the
benefits from an insurance company than
                                                    part of the plan administrator . . . .”).
that of an employee claiming benefits from
her current employer.                                B. The Appropriate Standard of Review
                                                    in This Case
    Our precedents establish at least one
more cause for heightened review:                       We begin with the financial and
demonstrated procedural irregularity, bias,         administrative arrangement between
or unfairness in the review of the                  Merck and the Plan. The District Court
claimant’s application for benefits. The            found that Epps-M alloy had offered no
Pinto panel’s decision to apply heightened          evidence on the mechanism by which
review turned almost as much on the                 Merck funds the Plan beyond the bare
procedures afforded to Pinto as it did on           statement in the Plan itself that “[M erck]

                                                9
shall pay the cost of the benefits provided         conclusion above that Epps-M alloy’s
under the Plan.” By the Plan’s terms,               status as a former employee might well
Merck is the plan administrator, and even           trigger some heightened level of review if,
t h o u g h it has delegated claim s                for example, Merck pays Plan benefits out
administrative authority to UNUM , it               of its general operating funds.
exercises ultimate administrative authority
                                                        Ep ps -M all oy’ s   argument        f or
as evidenced by its request that Epps-
                                                    heightened review draws more support
Malloy be examined by Dr. Dev. But
                                                    from our discussion in Pinto of procedural
since Epps-Malloy has not excluded the
                                                    bias.      As described above, Merck
possibility that Merck pays for the benefits
                                                    intervened in Epps-Malloy’s appeal
it administers through fixed contributions
                                                    process, requesting that she submit to an
to an actuarially grounded fund, thereby
                                                    “Independent Medical Exam,” ultimately
leaving Merck with no immediate financial
                                                    conducted by Dr. Dev. Merck surely has
conflict of interest, we do not impose a
                                                    the authority under the plan to require such
heightened standard of review on this
                                                    an exam—the Plan empowers Merck as
ground.5 We reiterate, however, our
                                                    Administrator “to request and receive from
                                                    all Participants such information [as is]
  5
    The District Court may, of course,              necessary for the proper administration of
allow the parties on remand to                      the Plan.” But the circumstances under
supplement the record to introduce                  which Merck made this request necessarily
evidence of the Plan’s actual funding               raise an inference of bias: At the time of
mechanism. While we have held that, in              the request, every piece of evidence in
general, the record for arbitrary-and-              Epps-M alloy’s record—the opinions of
capricious review of ERISA benefits                 two doctors ( D rs. Williams and
denial is the record made before the plan           McQueen), a consistent medical history,
administrator, and cannot be                        and an SSA determination that she was
supplemented during litigation, see                 totally disabled— supported her contention
Mitchell v. Eastman Kodak Co., 113 F.3d             that she was disabled.6 The District
433, 440 (3d Cir. 1997), when a court is
deciding what standard of review to
employ—arbitrary-and-capricious                     deciding on a level of review); Skretvedt,
review, or some higher standard under               268 F.3d at 174-75 (same). We leave
Pinto—it may consider evidence of of                this decision to the sound discretion of
potential biases and conflicts of interest          the District Court.
that is not found in the administrator’s
                                                      6
record. The Plan’s funding mechanism                    We express no view on the relevance
might well be evidence of this sort. See,           vel non in the ERISA benefits context of
e.g., Stratton, 363 F.3d at 254-55                  an SSA finding of total disability. It is
(considering an ERISA plan’s funding                enough for our purposes here to note that
and decisionmaking mechanisms in                    the SSA ruling gives at least some

                                               10
Court’s discussion is consistent with this         faith belief that Epps-Malloy’s application
view: It recognized that Epps-Malloy’s             was a close call, and that it could resolve
physician’s reports uniformly supported            perceived ambiguities with a third
her contentions (though they were, in some         physician’s opinion. Independent medical
aspects, incomplete), and that the                 examinations are not uncommon in the
defendants’ denial of benefits was                 claims administration world, and this is
grounded on Dr. Dev’s report, augmented            responsible plan administration that we
by medical opinions offered by one Nurse           would not wish to deter. At this stage,
Girardo based on a review of Epps-                 however, we are considering only how
Malloy’s file.                                     searching a review of the defendants’
                                                   benefits determination to undertake. Epps-
    It is in this light that we must view
                                                   Malloy’s suit will rise or fall with the
Merck’s request for an independent
                                                   merits of her underlying claim (including
medical examination. We have a claimant
                                                   Dr. Dev’s opinion), modulated by the
seeking continued LTD benefits whose
                                                   deference owed to the defendants’
treating physicians offer unequivocal
                                                   decision. For a responsible fiduciary, we
support for her claims, and a plan
                                                   trust that the incentive to collect enough
administrator that has delegated claims
                                                   information to make a responsible claims
administration to a large insurance
                                                   determination will outweigh the incentive
company intervening—not at the initial
                                                   to avoid requesting more information in
determination stage, but at the appeal
                                                   the hopes of maintaining the most
stage— with a request for an additional
                                                   deferential standard of review. And we
medical examination to be performed by a
                                                   trust that courts will not penalize plan
physician of its own choosing. This
                                                   administrators for seeking independent
situation arguably has a quality to it that
                                                   medical examinations at appropriate stages
undermines the administrator’s claim to
                                                   of the claims determination process.
the deference normally owed to plan
fiduciaries. Given how favorable the                   We conclude that the procedural bias
record was to Epps-Malloy prior to Dr.             we have described in Epps-Malloy’s
Dev’s examination, the most natural                appeals process warrants a moderately
inference is that by intervening and               heightened arbitrary and capricious
ordering the retention of Dr. Dev, thus            standard of review.            Naturally, a
seeking evidence to counter Epps-Malloy’s          significantly heightened arbitrary and
physicians’ evaluation, Merck was not              capricious standard of review would be
being a disinterested fiduciary.                   warranted if Merck also acted under a
                                                   financial conflict of interest, but, as noted
   That said, we acknowledge the
                                                   above, the record before us does not
possibility that Merck acted with a good
                                                   demonstrate such a conflict. Because the
                                                   District Court applied an unmodified
support for Epps-Malloy’s claim for                arbitrary and capricious standard of review
ERISA benefits.                                    to the defendants’ actions, we will set

                                              11
aside the judgment and remand for a new              a rheumatologist.
trial on the merits under an appropriate
                                                         It would be premature to hold that,
standard of judicial review. Because the
                                                     given the record on Epps-M alloy’s alleged
question whether the de fend ants’
                                                     fibromyalgia, the defendants’ denial of
determination can stand is essentially an
                                                     benefits to her was impermissible as a
ultimate issue of fact, it is appropriate for
                                                     matter of law. Doctor Dev did, in fact,
the District Court to undertake that inquiry
                                                     apparently perform a musculo-skeletal
in the first instance. See Fed. R. Civ. P.
                                                     examination, finding “unremarkable”
52(a); cf. Pullman-Standard v. Swint, 456
                                                     results; this may be evidence that Epps-
U.S. 273, 287 (1982) (holding that clearly
                                                     Malloy was not disabled by fibromyalgia.
erroneous review applies to ultimate issues
                                                     But it is plain that the District Court did
of fact as well as subsidiary findings of
                                                     not adequately address the defendants’
fact).
                                                     treatment of Epps-M alloy’s fibromyalgia
                                                     diagnosis. On remand, the District Court
                                                     should separately consider the defendants’
 IV. The District Court’s Conclusion on
                                                     determinations regarding the two distinct
the Merits
                                                     infirmities from which Epps-Malloy
    Even if we were not setting aside the            allegedly suffers.
District Court’s conclusion on the merits
                                                         That Court’s review of these
because of the standard of review it
                                                     determinations should be based on the
applied, we would be constrained to do so
                                                     record available to the plan administrator
because it did not adequately address the
                                                     in making its own decision; if there is not
defendants’ denial of LTD benefits to
                                                     sufficient evidence in the defendants’
Epps-Malloy in light of her diagnosis of
                                                     record to support their decision as to the
fibromyalgia. While one diagnosis in
                                                     fibromyalgia claim, then it must be
Epps-M alloy’s records is sarcoidosis, she
                                                     reversed. See Mitchell v. Eastman Kodak
was also diagnosed with fibromyalgia.
                                                     Co., 113 F.3d 433 (3d Cir. 1997); cf.
Not only did her doctors ascribe aspects of
                                                     Sandoval v. Aetna Life & Cas. Ins. Co.,
her disability to fibromyalgia, the ALJ
                                                     967 F.2d 377, 381 (10th Cir. 1992) (“In
appears to have granted SSA benefits to
                                                     effect, a curtain falls when the fiduciary
Epps-Malloy principally on the basis of
                                                     completes its review, and for purposes of
her fibromyalgia. As noted above, Dr.
                                                     determining if substantial evidence
Dev’s report is the defendants’ best
                                                     supported the decision, the district court
counter to Epps-Malloy’s physicians’
                                                     must evaluate the record as it was at the
diagnoses, but, as the District Court itself
                                                     time of the decision.”). While the District
found, “[Dr. Dev] did not address the
                                                     Court may take further evidence to aid in
previous diagnosis of fibromyalgia or any
                                                     its understanding of the medical issues
other condition.” This is hardly surprising,
                                                     involved, it must base its ultimate
as Dr. Dev is a pulmonologist, and
                                                     determination on the record before the
fibromyalgia is most commonly treated by

                                                12
plan administrator, not its own judgment
of whether Epps-Malloy was disabled. We
leave it to the District Court to determine
whether the defendants’ treatment of Epps-
Malloy’s fibromyalgia claims met the
moderately heightened arbitrary and
capricious standard that we have
identified.

             V. Conclusion
    Because the original bench trial
proceeded on too deferential a standard of
review, we will reverse the judgment of
the District Court and remand for a new
trial on the merits.

                                              13