:: Fourth Circuit Hands Down Post-Glenn Opinion On Standard Of Review

he principles announced in Glenn alter some of our court’s earlier approaches to reviewing discretionary determinations made by ERISA administrators allegedly operating under a conflict of interest. For example, before Glenn, when we found a conflict of interest, we applied a “modified” abuse-of-discretion standard that reduced deference to the administrator to the degree necessary to neutralize any untoward influence resulting from the conflict of interest. See, e.g., Stanford, 514 F.3d at 357. And before Glenn we defined a conflict of interest more narrowly. See Colucci, 431 F.3d at 179-80.

Champion v. Black & Decker, 2008 U.S. App. LEXIS 25741 (4th Cir. S.C. Dec. 19, 2008)

The Fourth Circuit Court of Appeals has reassess its views on conflicts of interests in view of MetLife v. Glenn.  The Court had formerly held that an employer that self funded a benefit plan was not per se conflicted.

The old view, from Colucci v. Agfa Corp. Severance Pay Plan, 431 F.3d 170 (4th Cir. S.C. 2005):

But the simple and commonplace fact that a plan’s administrator is also its funder is not enough to support a finding of [**21]  a conflict of interest that would cause an adjustment to our deference. See De Nobel, 885 F.2d at 1191. The circumstances under which we have suggested a conflict of interest might arise are when a plan is managed by its insurer, whose revenue comes from fixed premiums paid by the plan’s sponsor.

The new view, articulated in Champion:

As it now stands after Glenn, a conflict of interest is readily determinable by the dual role of an administrator or other fiduciary . . .

And the “sliding scale” approach to evaluating the effect of a conflict is abandoned, such that:

. . . courts are to apply simply the abuse-of-discretion standard for reviewing discretionary determinations by that administrator,  even if the administrator operated under a conflict of interest. Under that familiar standard, a discretionary determination will be upheld if reasonable. See Guthrie v. Nat’l Rural Elec. Coop. Assoc. Long-Term Disability Plan, 509 F.3d 644, 650 (4th Cir. 2007). And any conflict of interest is considered as one factor, among many, in determining the reasonableness of the discretionary determination.

The Court’s prior decision in Booth v. Wal-Mart Stores, Inc. Assocs. Health & Welfare Plan, 201 F.3d 335 (4th Cir. 2000), identified eight nonexclusive factors that a court may consider, including a conflict of interest, and the Court noted that case in proceeding with its review.  The factors are:

(1) the language of the plan; (2) the purposes and goals of the plan; (3) the adequacy of the materials considered to make the decision and the degree to which they support it; (4) whether the fiduciary’s interpretation was consistent with other provisions in the plan and with earlier interpretations of the plan; (5) whether the decisionmaking process was reasoned and principled; (6) whether the decision was consistent with the procedural and substantive requirements of ERISA; (7) any external standard relevant to the exercise of discretion; and (8) the fiduciary’s motives and any conflict of interest  it may have.

Note: The Court held for the defendant in the case.  While Glenn confers greater discretion on the court in terms of a factor analysis, it does not mandate that a conflict be elevated to the status of a determinative factor.  This case is a good example of that.

Countermeasures – The facts involved application of a mental disability exclusion.  As the following excerpt demonstrates, the factor analysis can actually cut both ways, and in this case, the Court found evidence of even-handedness in certain actions of the plan:

When we heed Glenn’s instruction on considering the conflict factor, we can find no evidence raising a concern that would increase the weight of the conflict. See 128 S. Ct. at 2351. Indeed, when the Plan overruled the initial denial of short-term disability benefits by CIGNA, the third-party administrator, it manifested an approach demonstrating an unbiased interest that favored Champion, making the conflict factor “less important (perhaps to the vanishing point).” Id. In the same vein, the Plan also voluntarily granted Champion a second appeal after she hired a lawyer, allowing her to present further matters. This second appeal, which was not required by the Plan language, increased the likelihood of an accurate final decision, thereby also reducing the conflict factor “to the vanishing point.” Id. Champion provides no contrary evidence tending to show that  the Plan’s dual role “affected the benefits decision.” Id.

Thus, the evidence does not support giving such weight to the conflict that it “act[s] as a tiebreaker when the other factors are closely balanced.” Glenn, 128 S. Ct. at 2351. Indeed, the factors are not closely balanced here, and the conflict factor in particular approaches “the vanishing point.” Id. The Plan provided a well-reasoned justification for its decision denying further benefits, based on the record and the Plan language. Utilizing the combination-of-factors method employed by Booth and endorsed in Glenn, we conclude that the Plan did not abuse its discretion in terminating Champion’s disability benefits after 30 months