The district court used the framework that we established in Williams v. BellSouth Telecommunications, Inc., 373 F.3d 1132, 1137-38 (11th Cir. 2004), which provides a six-step process “for use in judicially reviewing virtually all ERISA-plan benefit denials”:
(1) Apply the de novo standard to determine whether the claim administrator’s benefits-denial decision is “wrong” (i.e., the court disagrees with the administrator’s decision); if it is not, then end the inquiry and affirm the decision.
(2) If the administrator’s decision in fact is “de novo wrong,” then determine whether he was vested with discretion in reviewing claims; if not, end judicial inquiry and reverse the decision.
(3) If the administrator’s decision is “de novo wrong” and he was vested with discretion in reviewing claims, then determine whether “reasonable” grounds supported it (hence, review his decision under the more deferential arbitrary and capricious standard).
(4) If no reasonable grounds exist, then end the inquiry and reverse the administrator’s decision; if reasonable grounds do exist, then determine if he operated under a conflict of interest.
(5) If there is no conflict, then end the inquiry and affirm the decision.
(6) If there is a conflict of interest, then apply heightened arbitrary and capricious review to the decision to affirm or deny it.
Id. (footnotes omitted).
Recently, in Metropolitan Life Insurance Co. v. Glenn, the Supreme Court cast doubt on the sixth step of this procedure. 128 S. Ct. 2343, 2350-51 (2008).
Frankie White v. Coca-Cola Co., 2008 U.S. App. LEXIS 19283 (11th Cir. Ga. Sept. 10, 2008) (unpublished)
This recent unpublished 11th Circuit opinion presents interesting comment, post-Glenn, on the appropriate standard of review in a benefits denial case. At issue was the plan administrator’s reduction of benefits under a long-term-disability plan based on a participant’s receipt of Social Security disability benefits.
The case involves discussion of the 11th Circuit’s view on when a conflict arises and Glenn’s effect on the 6-step process excerpted above.
First, the court addresses the question of whether the plan administrator operated under a conflict of interest. The facts in this case differed from many of the welfare benefit cases where the issue has arisen in that Coca-Cola provides the LTD benefits through a trust.
The Court held that the funding of benefits through a trust averted a conflict of interest, stating:
The committee does not operate under a conflict of interest. “Our circuit law is clear that no conflict of interest exists where benefits are paid from a trust that is funded through periodic contributions so that the provider incurs no immediate expense as a result of paying benefits.” Id. at 856; see also Buckley v. Metro. Life, 115 F.3d 936, 939-40 (11th Cir. 1997). Under the plan, a participant’s benefits are paid by the third-party administrator, which is refunded by the trust. Coca-Cola makes periodic, nonreversionary payments to the trust.
This observation is noteworthy in the retirement plan context as well since these plans are funded through a trust.
Second, though not necessary to the decision, the Court expresses the correct view that “heightened” standard of review does not comport with Glenn. The Court observes:
The Court concluded “that a conflict should ‘be weighed as a factor in determining whether there is an abuse of discretion.’” Id. (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S. Ct. 948, 957 (1989) (internal quotation marks omitted)). The Court explained that the consideration of a conflict as a factor did not require “a change in the standard of review” and criticized “special burden-of-proof rules, or other special procedural or evidentiary rules, focused narrowly upon the evaluator/payor conflict” that circuit courts had developed. Id. at 2351. The Court stated that “[b]enefits decisions” are too numerous in nature “to come up with a one-size-fits-all procedural system that is likely to promote fair and accurate review. Indeed, special procedural rules would create further complexity, adding time and expense to a process that may already be too costly for many of those who seek redress.” Id. Although Glenn affects the sixth step of Williams, Glenn does not alter our analysis unless Coca-Cola operated under a conflict of interest.
The court avoided the need to work out the compliance of the 11th Circuit test with the Glenn analysis.
Note: The case includes a discussion of when reference to extrinsic evidence may be necessary:
As we explained earlier, the proviso clause conflicts with several provisions of the plan, which creates an ambiguity. After the committee identified this ambiguity, it was permitted to consider extrinsic evidence to resolve it. Thiokol, 231 F.3d at 844; see also Stewart, 980 F.2d at 702.
The committee reasonably interpreted the proviso clause to make it consistent with the summary plan description, the past practices of Coca-Cola, and the other provisions of the plan. The summary plan description clearly explains the reduction of benefits if a participant receives benefits from other sources and provides an arithmetical example of the offset. The committee determined that it had been the established practice of Coca-Cola to permit an offset below 60 percent of a participant’s average compensation. See Thiokol, 231 F.3d at 844 (fiduciary properly considered how a disputed plan provision had been interpreted in the past to resolve an ambiguity); Carriers Container Council, Inc. v. Mobile S.S. Ass’n Inc.-Int’l Longshoreman’s Ass’n, 896 F.2d 1330, 1339 (11th Cir. 1990). The committee retained and followed the advice of outside counsel regarding both the offset and recoupment provisions. “There is no requirement that an administrator . . . seek independent counsel in interpreting and administering an ERISA plan,” but seeking counsel establishes the “evenhandedness of [the] decision-making process” because it contributes to “informed and knowledgeable decisions . . . in interpreting the Plan.” Thiokol, 231 F.3d at 835.
Rejection of Contra Proferenum Doctrine – The Court rejected the argument that the court should construe the plan document against the plan administrator, observing:
We have rejected contra proferentem in ERISA appeals, except during the first step of the Williams analysis, because “[t]he ‘reasonable interpretation’ factor and the arbitrary and capricious standard of review would have little meaning if ambiguous language in an ERISA plan were construed against the [plan administrator].” Cagle, 112 F.3d at 1519.
Rejection of Subrogation Analogy – The Court dispatched an analogy offered from Smith v. Life Insurance Co. of North America, 466 F. Supp. 2d 1275 (N.D. Ga. 2006) as inapplicable, stating:
Fourth, [the plaintiffs] cite Smith v. Life Insurance Co. of North America, 466 F. Supp. 2d 1275 (N.D. Ga. 2006), for the proposition that ERISA precludes the enforcement of the recoupment provision, but that decision is inapposite. In Smith, the district court concluded, “Despite the [subrogation] language of the Plan, the federal common law make whole doctrine precludes [a plan administrator] from off-setting its monthly disability benefits” to account for a participant’s tort recovery unless the participant has been “made whole.” Id. at 1286.
This appeal does not involve a tort recovery or the make whole doctrine.