MacIejczak v. Procter & Gamble Co. ( 2007 )

Opinions of the United
2007 Decisions States Court of Appeals
for the Third Circuit
6-13-2007
Maciejczak v. Procter & Gamble Co
Precedential or Non-Precedential: Non-Precedential
Docket No. 06-2594
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________
No. 06-2594
_______________
JOHN W. MACIEJCZAK,
Appellant
v.
PROCTER & GAMBLE CO., PROCTER & GAMBLE DISABILITY
BENEFIT PLAN & BENEFIT PLANS TRUST, PROCTER & GAMBLE
DISABILITY BENEFIT PLAN CORPORATE REVIEWING BOARD,
PROCTER & GAMBLE PAPER PRODUCTS COMPANY
_______________
On Appeal From the United States District Court
for the Middle District of Pennsylvania
(No. 02-cv-01041)
District Judge: Honorable Thomas I. Vanaskie
Submitted Under Third Circuit LAR 34.1(a)
May 25, 2007
Before: CHAGARES, HARDIMAN, and TASHIMA,* Circuit Judges.
(Filed June 13, 2007)
*
Honorable A. Wallace Tashima, United States Court of Appeals for the Ninth
Circuit, sitting by designation.
__________________
OPINION OF THE COURT
__________________
CHAGARES, Circuit Judge.
Appellant John Maciejczak contends that the Procter & Gamble Company
(collectively with the other defendants, “P&G”) wrongly terminated long-term disability
benefits due to him under the terms of an employee welfare benefit plan. See Employee
Retirement Income Security Act of 1974 (“ERISA”) § 502(a)(1)(B), 29 U.S.C. §
1132(a)(1)(B). The District Court sustained P&G’s termination decision, and Maciejczak
appeals. We write only for the parties, and thus do not state the facts separately. Because
P&G’s termination of Maciejczak’s benefits was not arbitrary and capricious, we will
affirm.
I.
We begin with the standard of review. Where, as here, an ERISA benefit plan
“gives the administrator or fiduciary discretionary authority to determine eligibility for
benefits or to construe the terms of the plan,” we review the denial of benefits under the
arbitrary and capricious standard. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S.
101, 115 (1989); Vitale v. Latrobe Area Hosp., 420 F.3d 278, 281-82 (3d Cir. 2005).
Under this standard, the administrator’s decision “will be overturned only if it is ‘clearly
not supported by the evidence in the record or the administrator has failed to comply with
the procedures required by the plan.’” Orvosh v. Program of Group Ins. for Salaried
2
Employees of Volkswagen of Am., Inc., 222 F.3d 123, 129 (3d Cir. 2000) (quoting
Abnathya v. Hoffman-La Roche, Inc., 2 F.3d 40, 41 (3d Cir. 1993)).
Although this standard is deferential, we apply a more robust version of arbitrary
and capricious review when the plan administrator is operating under a conflict of
interest. See, e.g., Pinto v. Reliance Standard Life Ins. Co., 214 F.3d 377 (3d Cir. 2000).
In such a case, we employ a sliding-scale approach that “approximately calibrat[es] the
intensity of our review to the intensity of the conflict.” Id. at 393. Here, the District
Court determined that P&G was operating under “a minor conflict of interest.” Amended
Appendix (“App.”) 27. It thus applied a “slightly heightened version of the arbitrary and
capricious standard of review.” Id. That determination is a mixed question of law and
fact. See Kosiba v. Merck & Co., 384 F.3d 58, 64 (3d Cir. 2004). Accordingly, “our
review is plenary, though we review [the] district court’s underlying factual findings only
for clear error.” Id.Both parties disagree with the District Court’s “slightly heightened” standard of
review. P&G contends that “the standard should not have been heightened at all.” P&G
Brief 14. Maciejczak argues for “more than a slightly heightened standard.” Maciejczak
Brief 16. Maciejczak, however, does not articulate precisely how far down the scale our
review should slide. Presumably, he would be content with the “somewhat heightened”
review we applied in Smathers v. Multi-Tool, Inc., 298 F.3d 191, 199 (3d Cir. 2002), or
the “moderately heightened” standard of Kosiba, 384 F.3d at 68. He doubtless would
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raise no objection if we slid the standard all the way down to the “far end of the arbitrary
and capricious ‘range.’” See Pinto, 214 F.3d at 394.
In determining where on the arbitrary and capricious scale to situate our review,
we must examine the totality of the circumstances. See id. at 392. Among the relevant
factors are “the sophistication of the parties, the information accessible to the parties,” the
financial structure of the plan, and the presence of any procedural anomalies. See id.“Also relevant is the current status of the fiduciary, i.e., whether the decisionmaker is a
current employer, former employer, or insurer.” Kosiba, 384 F.3d at 64 (internal
quotation omitted). In addition, our cases have considered the cost of paying out benefits
relative to the total assets of the plan. See Pinto, 214 F.3d at 386.
Conflicts of interest are far more likely to arise when an insurance company, as
opposed to the employer, both funds and administers the plan. See Pinto, 214 F.3d at
387-88. Employer-funded plans present a decreased “risk of a conflict of interest . . .
because the employer has ‘incentives to avoid the loss of morale and higher wage
demands that could result from denials of benefits.’” Smathers, 298 F.3d at 197 (quoting
Nazay v. Miller, 949 F.2d 1323, 1335 (3d Cir. 1991)). Moreover, “the typical employer-
funded . . . plan is set up to be actuarially grounded, with the company making fixed
contributions to the . . . fund . . . .” Pinto, 214 F.3d at 388. In such circumstances, the
employer “‘incurs no direct expense as a result of the allowance of benefits, nor does it
benefit directly from the denial or discontinuation of benefits.’” Id. (quoting Abnathya, 2
4
F.3d at 45 n.5). Conversely, heightened scrutiny may be appropriate when the “plan is
‘unfunded,’ that is, when it pays benefits out of operating funds rather than from a
separate ERISA trust fund.” Vitale, 420 F.3d at 282.
Here, P&G pre-funds a Long-Term Disability Trust Fund, and the plan is
administered by a Board of Trustees consisting of P&G employees. The Trustees receive
no additional compensation for their service on the Board. Moreover, P&G’s
contributions to the plan are determined based on an estimate of the current year’s claim
liability and the plan’s investment return. Management determines the appropriate annual
contribution, if any, according to “anticipated claims and an actuarial determination of
unrevealed costs.” App. 288.
These features counsel against any heightening of the arbitrary and capricious
standard. Our cases “have noted that a situation in which the employer establishes a plan,
ensures its liquidity, and creates an internal benefits committee vested with the discretion
to interpret the plan’s terms and administer benefits does not typically constitute a conflict
of interest.” Stratton v. E.I. DuPont De Nemours & Co., 363 F.3d 250, 254-55 (3d Cir.
2004) (internal quotations and alterations omitted). That is exactly what P&G has done
here. Although, as the District Court noted, P&G’s contributions are not “fixed,” Pinto,
214 F.3d at 388, we are somewhat dubious about the District Court’s conclusion that this
fact warrants any ratcheting up of the standard of review. The record indicates that P&G
made no contributions to the fund in both 2001 and 2002. The mere fact that P&G will
5
have to make some contributions in the future, and that those payments are not fixed, is
scant evidence of any conflict of interest. The annual payment claimed by Maciejczak
was one-tenth of one percent of the amount of payments made by the Trust to
participants. That minimal impact on the fund makes it unlikely that the Trustees were
conflicted in Maciejczak’s case.
Maciejczak also argues that “procedural anomalies” in P&G’s claim processing
justify increased scrutiny. See Pinto, 214 F.3d at 394. In our view, none of the facts
pointed out by Maciejczak constitute “anomalies” that would warrant heightened scrutiny.
About the only factor that does weigh in Maciejczak’s favor is his status as a
former, as opposed to a current, employee. See Smathers, 298 F.3d at 198 (“Since
Smathers was no longer an employee when Multi-Tool made its decision to deny his
claims, the counterbalancing of its monetary self-interest by possible concerns about the
impact of its decision on morale and wage demands would thereby be lessened.”). As
P&G points out, though, our cases have never applied heightened scrutiny based on this
factor alone. Rather, our cases have applied heightened scrutiny to claims by former
employees only where some other structural conflict or procedural anomaly was present.
See Kosiba, 384 F.3d at 65; Smathers, 298 F.3d at 198. As a result, we doubt that this
factor alone justifies any movement away from traditional arbitrary and capricious
review.
But despite our reservations, we need not decide whether the District Court’s slight
6
heightening of the arbitrary and capricious standard was error. For our purposes, it is
sufficient to hold that no greater than a slight heightening was appropriate. We will
therefore assume arguendo that the District Court’s “slightly heightened” form of
arbitrary and capricious review applies.
II.
Applying that standard here, we agree with the District Court that the Trustees
acted within their discretion in terminating Maciejczak’s benefits. The Trustees accepted
Dr. Michael Wolk’s opinion that Maciejczak was not totally disabled, and rejected the
conflicting opinions of Maciejczak’s treating physician and chiropractor. Because “[a]
professional disagreement does not amount to an arbitrary refusal to credit” the plan
participant’s doctor, the Trustees’ decision was not arbitrary and capricious. See Stratton,
363 F.3d at 258; see also Black & Decker Disability Plan v. Nord, 538 U.S. 822 (2003).
Furthermore, the fact that P&G granted Maciejczak benefits in 1995 and terminated them
in 2001 does not render its decision arbitrary and capricious, even under a slightly
heightened version of that standard. The Long-Term Disability Plan specifically states
that participants must submit to subsequent examinations to reassess their eligibility.
Under the plan, then, the prior determination of eligibility does not foreclose the Trustees
from reassessing continued disability. As such, the Trustees’ decision to revisit and
reverse the earlier disability finding was not arbitrary and capricious. See Ellis v. Liberty
Life Assurance Co. of Boston, 394 F.3d 262, 273-74 (5th Cir. 2004) (ERISA plan
7
administrator may reverse initial grant of disability benefits in light of later-discovered
evidence that recipient was not disabled at the time of the initial grant of benefits).
III.
For these reasons, we will affirm the District Court’s judgment.
8