McDonough v. Aetna Life Insurance Company , 783 F.3d 374 ( 2015 )

United States Court of Appeals
For the First Circuit
No. 14-1293
JOSEPH McDONOUGH,
Plaintiff, Appellant,
v.
AETNA LIFE INSURANCE COMPANY,
Defendant, Appellee.
BIOGEN INC. and BIOGEN INC. GROUP LONG TERM DISABILITY PLAN,
Defendants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Douglas P. Woodlock, U.S. District Judge]
Before
Barron, Selya and Stahl,
Circuit Judges.
Mala M. Rafik, with whom Socorra A. Glennon and Sean K.
Collins were on brief, for appellant.
Stephen D. Rosenberg, with whom Caroline M. Fiore and The
Wagner Law Group were on brief, for appellee.
April 15, 2015
SELYA, Circuit Judge. This case, brought under the
Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.
§§ 1001-1461, presents two issues. The first concerns the
operation of an "own occupation" test within the definition of
disability contained in a long-term disability (LTD) plan. The
second concerns the operation of ERISA's penalty provision for late
disclosure or non-disclosure of relevant plan documents. See 29
U.S.C. § 1132(c)(1)(B). After careful consideration, we vacate the
district court's entry of summary judgment with respect to the
termination of disability benefits and remand that issue for
further consideration by the claims administrator. At the same
time, we affirm the district court's imposition of a $5,000 penalty
for the belated production of a plan document.
I. BACKGROUND
Plaintiff-appellant Joseph McDonough worked in the
information technology division of Biogen Idec, Inc., now known as
Biogen Inc. (Biogen). In March of 2007, he assumed the position of
Senior Analyst III, Systems Administration. This was a high-
pressure job, with responsibility for providing support for the
server infrastructure at Biogen locations around the world (24
hours a day, 365 days a year).
In November of the following year, the appellant suffered
the sudden onset of right-side numbness, dizziness, and blurred
vision. He was hospitalized and provisionally diagnosed with a
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stroke. Although this diagnosis could not be confirmed, some of
his symptoms persisted and he did not return to work.
The appellant was eligible for disability benefits
through a Biogen employee welfare benefit plan underwritten by
defendant-appellee Aetna Life Insurance Company (Aetna). Biogen
serves as the plan administrator and Aetna serves as the claims
administrator. Withal, Aetna has plenary discretion to determine
"whether and to what extent employees and beneficiaries are
entitled to benefits."
A plan participant is disabled within the meaning of the
plan on any day that the participant is "not able to perform the
material duties of [his] own occupation solely because of: disease
or injury; and [his] work earnings are 80% or less of [his]
adjusted predisability earnings." A participant's material duties
are those "normally required for the performance of [the
participant's] own occupation," so long as they "cannot be
reasonably[] omitted or modified." The plan defines a
participant's "own occupation" as the occupation "routinely
perform[ed]" by the participant at the time the disability began as
that occupation is "normally performed in the national economy,"
rather than how it is performed for the employer.
The appellant successfully applied for LTD benefits under
the plan, commencing May 23, 2009. From that point forward, he and
his health-care providers kept Aetna informed of his treatment and
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prognosis. Despite extensive therapy, the appellant continued to
experience physical symptoms including sudden right-side weakness
and loss of balance. He also suffered from anxiety, panic attacks,
and the like. With this in mind, the appellant's primary care
physician (PCP) referred him for mental health care in June 2009.
Some of his health-care providers suggested that his physical
symptoms might be a reaction to stress associated with the
demanding nature of his job.
In September of 2009, the appellant's PCP reported that
the appellant was continuing to experience right-side weakness but
had a "sedentary level of functionality" and "could work 5 days a
week and 8 hours per day." Based on this report, Aetna began to
evaluate the appellant's continued eligibility for benefits. Soon
thereafter, two of the appellant's mental health providers jointly
reported that he suffered debilitating panic attacks four to five
times per week and projected that — due to a combination of these
attacks, sleeplessness, and anxiety — the appellant would be unable
to work for a year.
On October 29, 2009, Aetna informed the appellant by
letter that his LTD benefits would be terminated as of October 31,
2009. In Aetna's judgment, the appellant no longer met the plan's
definition of disability. This judgment was premised in large part
on his PCP's conclusion that he could perform sedentary work 40
hours per week. Aetna wrote off the contradictory report of the
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appellant's mental health providers, concluding that it "lacked
examination findings [sufficient] to support a functional
impairment from a clinical standpoint."
The appellant challenged the benefits-termination
decision through Aetna's internal appeals procedure. In support,
he submitted medical records from physicians, mental health
providers, and physical therapists, highlighting the symptomatology
that (in his view) precluded him from satisfying the physical and
cognitive requirements of his job. These symptoms included right-
side numbness and weakness, which he said significantly impeded his
fine-motor skills for typing and writing. They also included
anxiety, sleeplessness, and frequent panic attacks, which he said
would impair his ability to cope with the stressful and time-
intensive nature of his position. Finally, he submitted a report
by a vocational consultant who reviewed his medical records to
assess his work capacity.
At this juncture, Aetna engaged four doctors, two
specializing in occupational medicine and two specializing in
psychology, to review the appellant's medical records and other
documents submitted in support of his appeal. Aetna has conceded
that all four of these doctors should be treated as Aetna employees
rather than independent medical reviewers. In written reports,
each of the four purposed to evaluate the medical evidence in
detail. All of them concluded that the appellant was no longer
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disabled, stating variously that the record "[f]ails to support
functional impairment," that the appellant's "functional deficits
would not preclude him from working in his own sedentary level
occupation," that "from a psychological/psychiatric perspective,
the claimant is not impaired from working. . . . in his own job or
any job," and that the medical evidence "does not support a
functional impairment, from a psychological perspective." These
reports uniformly listed among the documents reviewed, in what
seems to be a boilerplate formulation, a job description, job
analysis worksheet, and occupation description — yet none of the
reviewers discussed either the demands of the appellant's position
as it is normally performed in the national economy or how his
symptoms would affect his ability to meet those demands.
In November of 2010, Aetna denied the internal appeal.
In doing so, Aetna determined that "[f]rom an [o]ccupational
[m]edicine perspective," the appellant did not suffer from the
sequelae of a stroke; and that while he had some functional
impairment, his functional deficits "would not preclude him from
working in his own sedentary level occupation." Aetna
acknowledged, "[f]rom a psychology perspective," the reports of
panic attacks and anxiety, as well as the reported likelihood that
these symptoms would cause the appellant to miss more than four
work days per month. It concluded, however, that the medical
records did not warrant a finding that any of the appellant's
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mental health problems were of "a severity likely to have impaired
his occupational functioning." Aetna's denial letter did not
discuss, directly or indirectly, the requirements of the
appellant's position as it is normally performed in the national
economy.
Dismayed by this decision, the appellant decamped to the
federal district court, invoked ERISA, and sued for wrongful
termination of benefits. See 29 U.S.C. § 1132(a)(1)(B). Although
his suit named multiple defendants, the parties later agreed that
Aetna was the only proper defendant with respect to the benefits-
termination claim.
Early on, the appellant made written requests of both
Aetna and Biogen, pursuant to 29 U.S.C. § 1024(b)(4), for "a
complete copy of [his] plan, summary plan description, policy, and
any and all attachments and amendments relating to his [LTD] Plan."
Aetna responded by providing documents entitled "Your Group Plan"
and "Summary of Coverage." But as the deadline neared for filing
summary judgment motions, Aetna disclosed for the first time the
policy agreement between Aetna and Biogen. Unlike the previously
disclosed plan documents, the policy agreement contained language
granting Aetna complete discretion over all benefits-eligibility
decisions. This language was important: it had the effect of
altering the standard of judicial review. See McDonough v. Aetna
Life Ins. Co., No. 11-11167, 2014 WL 690319, at *12 (D. Mass. Feb.
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19, 2014). The appellant promptly amended his complaint to add a
request for penalties for failure to produce all relevant plan
documents within the statutorily prescribed time. See 29 U.S.C.
§ 1132(a)(1)(A), (c)(1)(B).
In due season, the parties cross-moved for summary
judgment. The district court granted summary judgment for Aetna on
the benefits-termination claim. See McDonough, 2014 WL 690319, at
*19. With respect to the appellant's other claim, the court
determined that a relevant document had been disclosed belatedly
and assessed a $5,000 penalty against Aetna.1 See id.II. ANALYSIS
The appellant advances two claims of error. The first
relates to the district court's finding that Aetna's benefits-
termination decision is supportable. The second relates to what
the appellant regards as the skimpiness of the penalty assessed.
We address these claims of error sequentially.
A. Termination of Benefits.
In ERISA cases, an inquiring court must peruse the plan
documents in order to determine the standard of judicial review
applicable to a claims administrator's denial of benefits. See
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). A
challenge to a denial of benefits is to be reviewed de novo "unless
1
The parties agreed that any penalty imposed should be
charged exclusively to Aetna (and not to Biogen). See McDonough,
2014 WL 690319, at *19.
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the benefit plan gives the administrator or fiduciary discretionary
authority to determine eligibility for benefits or to construe the
terms of the plan." Id. But where the plan documents grant the
claims administrator full discretionary authority, the decision is
reviewed for abuse of discretion. See id. at 111; Colby v. Union
Sec. Ins. Co. & Mgmt. Co. for Merrimack Anesthesia Assocs. LTD
Plan, 705 F.3d 58, 61 (1st Cir. 2013). Because both trial and
appellate courts are tasked to inspect the claims administrator's
actions through the same lens, our review of the district court's
approval or rejection of a benefits-termination decision is de
novo. See Colby, 705 F.3d at 61 n.2.
In this case, the parties agree that, given the sweeping
phraseology of the belatedly produced policy agreement, abuse of
discretion review applies. A court that undertakes abuse of
discretion review in an ERISA case must determine whether the
claims administrator's decision is arbitrary and capricious or,
looked at from another angle, whether that decision is reasonable
and supported by substantial evidence on the record as a whole.
See id. at 61. Although this is a deferential metric, it is not
without some bite. See id. at 62 (noting that "there is a sharp
distinction between deferential review and no review at all"); see
also Conkright v. Frommert, 559 U.S. 506, 521 (2010). Here,
moreover, abuse of discretion review has a special gloss. Aetna is
the entity that both resolves benefits claims and pays meritorious
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claims. As such, Aetna suffers from a structural conflict of
interest. While the existence of such a structural conflict does
not alter the standard of review, it is a factor that a court may
draw upon to temper the deference afforded to the claims
administrator's decision. See Colby, 705 F.3d at 62.
Moving from the general to the specific, the appellant
contends that Aetna's termination of his LTD benefits constituted
an abuse of discretion; that is, that the benefits-termination
decision was arbitrary, capricious, and not supported by the
record. Specifically, the appellant contends that Aetna failed to
evaluate his documented functional limitations in light of the
duties of his own occupation as it is normally performed in the
national economy. He adds that Aetna conflated the "own
occupation" standard with that of "any sedentary occupation,"
thereby giving short shrift to the cognitive demands of the
appellant's own occupation. And, finally, he submits that the
claims administrator mis-weighed the medical and vocational
evidence.
The record contains a plethora of reports from a wide
variety of physicians and mental health professionals.2 These
reports take different slants and, read in the ensemble, they do
2
For a comprehensive and in-depth catalogue of the copious
medical and vocational reports relating to the appellant's case, we
refer the reader to the district court's meticulous opinion. See
McDonough, 2014 WL 690319, at *2-9.
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not at first blush paint a clear picture of either the extent or
duration of the appellant's disability. As we explain below,
however, there is a threshold issue here — and this appeal does not
turn on what the medical evidence shows.
We begin with bedrock: an ERISA benefits determination
must be a reasoned determination, and "[a] benefits determination
cannot be 'reasoned' when the [claims] administrator sidesteps the
central inquiry." Id. at 67. By the plain language of the plan at
issue here, the key inquiry is whether the claimant is "able to
perform the material duties of [his] own occupation" as "normally
performed in the national economy." Thus, a reasoned determination
of the existence of disability vel non requires, inter alia, a
review of the material duties of the claimant's particular position
and an assessment of how those duties align with the position as it
is normally performed in the national economy. See Elliott v.
Metro. Life Ins. Co., 473 F.3d 613, 618-19 (6th Cir. 2006). Only
then can a claims administrator distill the medical and vocational
evidence, apply it to the occupational profile, and make a reasoned
determination of whether or not the claimant is disabled.
Viewed against this backdrop, Aetna's decision to
terminate the appellant's LTD benefits was not a reasoned
determination. None of the four internal reviewers upon whom Aetna
relied compared the appellant's symptoms or impairments to any
description of the physical and cognitive demands of his own
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occupation as that term is defined in the plan documents. Nor does
the administrative record support an inference that Aetna itself
made any such comparison. While the record is rife with accounts
of the appellant's medical and psychological symptoms, Aetna never
took the obligatory step of assessing whether and to what extent
(if at all) the appellant's impairments compromised his ability to
carry out the material duties of his own occupation as normally
performed in the national economy.
To be sure, some of the internal reviews as well as
Aetna's letter denying the internal appeal made passing references
to the appellant's "own occupation" or "own sedentary level
occupation." But these references were unaccompanied by any
attempt to articulate the material duties of the appellant's own
occupation as that occupation is normally performed in the national
economy. Both the reviewers' reports and the denial letter are
silent as to the dimensions of the own occupation benchmark.3 On
this opaque record, there is simply no way to tell whether the
reviewers were applying a correct conception of the appellant's own
3
Moreover, at least one of the reviewers drew in large part
from the Social Security Administration's standards for complete
disability — and never gave so much as lip service to the own
occupation benchmark. Another referred to only the appellant's
"own sedentary level occupation," which strongly suggests a focus
on certain physical demands to the exclusion of others (such as
fine motor skills) and disregards the cognitive demands of the
appellant's own occupation.
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occupation (as defined in the plan documents) or some other
conception.
Although the administrative record as a whole lends
support to the conclusion that neither Aetna nor its reviewers were
drawing on a settled articulation of the material duties of the
appellant's own occupation as normally performed in the national
economy, there is one small fragment that may point in a contrary
direction. In the past, the United States Department of Labor
published a standard work called the Dictionary of Occupational
Titles (DOT), and a claims administrator may properly consider a
position description drawn from the DOT in assessing a claim of
disability as long as it involves duties comparable to those of the
claimant's own job. See Tsoulas v. Liberty Life Assur. Co. of
Bos., 454 F.3d 69, 78 (1st Cir. 2006). We have found, buried in
the amplitudinous record, an internal assessment by an Aetna
employee purporting to correlate the appellant's job description
with a position description contained in the DOT.4
In the final analysis, this internal assessment is little
more than a waif in the wilderness: it is not mentioned by Aetna in
its brief, and neither the denial letter itself nor the reviewers'
reports ever discussed it. In any event, the record is utterly
devoid of any explanation of the Aetna employee's rationale for
4
The complete job description used to conduct this assessment
appears nowhere in the administrative record.
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selecting that particular position from the DOT's compendium of
available job classifications.5
Let us be perfectly clear: under an own occupation
standard, medical evidence is only part of the equation. See
Elliott, 473 F.3d at 618, 623. To assess a claimant's ability to
perform his own occupation, a decisionmaker must be aware of, and
apply, the requirements of the occupation. See id. at 618. Here,
those requirements are measured by how the occupation is normally
performed in the national economy — but the claims administrator
and the various reviewers seem to have ignored that fact. Because
they failed to take such requirements into account, the
determination of disability under the plan cannot be said to be
reasoned. See id. (concluding that benefits-termination decision
was arbitrary and capricious because the administrator "did not
rely on an application of the relevant evidence to the occupational
standard"); see also Miller v. Am. Airlines, Inc., 632 F.3d 837,
855 (3d Cir. 2011) (concluding in the context of a somewhat
different "own occupation" definition that "it is essential that
any rational decision to terminate disability benefits
5
For his part, the appellant submitted a vocational
assessment in support of his administrative appeal, which
identified a different DOT position as most closely analogous to
his job. Aetna never acknowledged this facet of the report, nor
did it provide a reasoned basis for rejecting the recommended DOT
classification.
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. . . consider whether the claimant can actually perform the
specific job requirements of a position").
It is especially fitting, we think, that Aetna be held to
account for this gap in the record. The appellant's claim of
continuing disability is tied to the cognitive demands of a high-
pressure environment where he was on call 24 hours a day, 365 days
a year and responsible for managing systems and employees. That
claim is also tied to physical demands specific to this kind of
position, such as frequent right-hand use for computing, typing,
and writing. On this record, however, no reasonable claims
administrator could tell to what extent these matters were or were
not integral to the appellant's occupation as that occupation is
normally performed in the national economy. Such a claims
administrator could only guess — and a determination based on
guesswork is the antithesis of a reasoned determination.
There is another reason to hold Aetna strictly to account
here. The own occupation standard limned in the plan was not
handed down from Mount Olympus. Rather, it was prescribed by Aetna
— and having set up the benchmark, Aetna should not be heard to
complain when a court holds it to its own prescription.
To say more would be to paint the lily. We hold that
Aetna's failure to articulate the contours of the own occupation
standard, apply that standard in a meaningful way, and reason from
that standard to an appropriate conclusion regarding the
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appellant's putative disability renders its benefits-termination
decision arbitrary and capricious. See Miller, 632 F.3d at 855;
Elliott, 473 F.3d at 618-19. This holding will necessitate further
administrative proceedings. After all, this is a close case. As
the district court aptly observed, the medical evidence is both
voluminous and conflicting. See McDonough, 2014 WL 690319, at *2.
We therefore vacate the entry of summary judgment on the benefits-
termination claim and remand to the district court with
instructions to remit the matter to Aetna for further review in
light of our opinion.6 See Maher v. Mass. Gen. Hosp. LTD Plan, 665
F.3d 289, 295 (1st Cir. 2011); Buffonge v. Prudential Ins. Co. of
Am., 426 F.3d 20, 31-32 (1st Cir. 2005). We take no view as to the
outcome of further proceedings.
B. Amount of Penalty.
This brings us to the appellant's plaint that the
district court levied too paltry a penalty for Aetna's tardy
disclosure of the policy agreement. Lamenting that Aetna's
disclosure was 1,157 days late, the appellant suggests that a
penalty amounting to roughly $4 per day is inadequate to serve the
deterrent purpose of the penalty statute. Our review of a district
court's imposition of penalties under ERISA is for abuse of
6
Were this an instance of a claimant who had been denied
benefits to which he clearly was entitled, no remand would be
required. See Buffonge v. Prudential Ins. Co. of Am., 426 F.3d 20,
31 (1st Cir. 2005). But this case is not of that genre.
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discretion. See Sullivan v. Raytheon Co., 262 F.3d 41, 52 (1st
Cir. 2001); Rodriguez-Abreu v. Chase Manhattan Bank, 986 F.2d 580,
588 (1st Cir. 1993).
The controlling statute is 29 U.S.C. § 1132(c)(1)(B),
which provides that when an administrator "fails or refuses to
comply" with a proper request for plan documents inside 30 days,
the court in its discretion may impose a monetary penalty "of up to
$100 a day." By a regulation promulgated prior to the events at
issue here, the maximum daily penalty was increased to $110 per
day. See 29 C.F.R. § 2575.502c-1.
Here, the appellant demanded the plan documents on
November 5, 2009. While he received much of the pertinent
information promptly, he did not receive the policy agreement until
February 4, 2013. The court below determined that Aetna violated
the statute by failing to turn over the policy agreement in a
timeous manner and imposed a $5,000 penalty. See McDonough, 2014
WL 690319, at *19.
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On appeal, Aetna does not gainsay that its late
disclosure of the policy agreement violated ERISA.7 The battle is
over the penalty amount.
The district court imposed the challenged penalty in
order to "capture Aetna's attention to its statutory obligations."
Id. Although the statute and regulations identify a maximum
penalty rate for calculating penalties — $110 per day — a deviation
from this rate is not (as the appellant implies) a per se abuse of
discretion. The statutory/regulatory maximum is a ceiling on the
amount of any daily penalty that may be imposed. There is no need
for a district court to use a daily rate at all and — as long as
the aggregate penalty does not offend the ceiling (days of delay
times daily rate) — the amount of the penalty has been left by
Congress to the sound discretion of the district court.
All failures to make timely disclosures are not created
equal, and we think it fair to infer that Congress intended
district courts to consider the totality of the circumstances in
fixing a penalty amount. See Kwan v. Andalex Grp. LLC, 737 F.3d
7We recently held that an insurer not specifically designated
as the "plan administrator" in the plan documents may not be
treated as "the administrator" within the meaning of ERISA's
penalty provision. See Tetreault v. Reliance Std. Life Ins. Co.,
769 F.3d 49, 59-60 (1st Cir. 2014) (construing 29 U.S.C.
§ 1132(c)(1)). Here, however, Aetna represented to the district
court (pre-Tetreault) that it, not Biogen, should bear the brunt of
any penalty. That representation was accepted by both the
appellant and the district court, see supra note 1, and Aetna is
bound by it.
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834, 848 (2d Cir. 2013); Romero v. SmithKline Beecham, 309 F.3d
113, 120 (3d Cir. 2002); see also Sullivan, 262 F.3d at 52. These
circumstances ordinarily will include, at a bare minimum, whether
the belated disclosure was in bad faith; whether it caused harm to
the opposing party; and if so, the nature and extent of that harm.
See, e.g., Kwan, 737 F.3d at 848; Sullivan, 262 F.3d at 52.
The court below concluded that Aetna's late disclosure
was due to "inattentiveness," not bad faith. McDonough, 2014 WL
690319, at *19. The court made no express finding of prejudice,
and none is apparent: although the late disclosure implicated the
standard of review, the policy agreement was received by the
appellant before briefing on summary judgment began.
We need not tarry. A district court is charged with the
management of the cases on its docket. Over time, that court
develops an understanding of the nuances of a case — an intimate
understanding that an appellate court cannot hope to replicate.
Given the district court's superior coign of vantage, its hands-on
judgment as to the need for a penalty and the quantification of
that penalty (if one is needed) is entitled to considerable
respect. See United States v. Smithfield Foods, Inc., 191 F.3d
516, 526-27, 529 (4th Cir. 1999); United States v. Ekco Housewares,
Inc., 62 F.3d 806, 814, 816 (6th Cir. 1995).
This is such a case. In the past, we have affirmed
decisions declining to impose any monetary penalty for late
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disclosures of plan documents absent a showing of either bad faith
or prejudice. See, e.g., Kerkhof v. MCI WorldCom, Inc., 282 F.3d
44, 55-56 (1st Cir. 2002); Sullivan, 262 F.3d at 52; Rodriguez-
Abreu, 986 F.2d at 588-89. Especially when considered in light of
those decisions, the $5,000 penalty imposed by the court below
falls comfortably within the wide encincture of its discretion.
III. CONCLUSION
We need go no further. For the reasons elucidated above,
the judgment with respect to the benefits-termination claim is
vacated and that claim is remanded to the district court with
instructions to remit it to the claims administrator for further
proceedings. The award of a statutory penalty in the amount of
$5,000 is affirmed. The parties shall bear their own costs.
So Ordered.
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