Force v. Ameritech Corp Inc ( 2007 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 07a0726n.06
Filed: October 9, 2007
No. 06-2422
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
ARNITA FORCE, )
) ON APPEAL FROM THE
Plaintiff-Appellee, ) UNITED STATES DISTRICT
) COURT FOR THE EASTERN
v. ) DISTRICT OF MICHIGAN
)
AMERITECH CORPORATION, INC., ) OPINION
)
Defendant-Appellant. )
)
BEFORE: COLE, COOK, Circuit Judges; and FROST, District Judge.*
R. GUY COLE, JR., Circuit Judge. Plaintiff-Appellee Arnita Force brought this suit
against Defendant-Appellant Ameritech Corporation, Inc. (“Ameritech”), alleging wrongful
termination of her long-term disability (“LTD”) benefits under the Employee Retirement Income
Security Act of 1974 (“ERISA”), 29 U.S.C. § 1132(a)(1)(B). The district court concluded that
Ameritech’s decision to terminate Force’s LTD benefits was arbitrary and capricious. For the
reasons that follow, we AFFIRM the judgment of the district court.
I.
A. Factual Background
*
The Honorable Gregory L. Frost, United States District Judge for the Southern District
of Ohio, sitting by designation.
No. 062422
Force v. Ameritech
Arnita Force was employed by Ameritech from September 1978 to July 1994. As a result
of a car accident that occurred on July 4, 1994, Dr. Howard Schwartz diagnosed Force with
cephalalgia (i.e., headaches or head pain), cervical strain, and right shoulder strain. X-rays
conducted after the accident indicated “osteophytic spurring of C5[-]C6 with a fracture of the
osteophyte inferior plate[, and d]iminished disc space at C4-C5.” (JA 217.) Dr. Schwartz indicated
on Disability Certificates dated August 5, 1994 and September 9, 1994 that Force was precluded
from “bending, lifting, twisting, and prolonged standing,” and that she was “disabled.” (JA 218-24.)
Due to these injuries, Force applied for and received short-term disability benefits for fifty-two
weeks, from August 1994 to August 1995. Following the expiration of her short-term disability
benefits, Force applied for and received LTD benefits from August 1995 through May 1998.
On June 21, 1995, Dr. Schwartz completed an “Attending Physician’s Statement of
Functional Capacity,” which noted that Force was severely limited in her ability to walk, stand, and
sit, and characterized Force as “totally disabled for [her] occupation.” (JA 252-53.) In a September
11, 1996 letter, Dr. Schwartz stated that
[Force’s] primary diagnosis is chronic pain syndrome, low grade cervical and lumbar
radiculopathy, and tendinitis of the right wrist. She should avoid any and all
activities that would cause reaching, pushing, repetitive movements, climbing,
bending, stooping, or operating any equipment or machinery that would endanger her
or coworkers. She should also avoid any prolonged sitting (not more than 30
minutes), or standing (not more than 10 minutes), because of her chronic pain. It is
advisable and necessary that she have bed rest several times during the course of the
day.
I believe that she should not do any lifting of any sort of weight, and this should be
avoided completely.
(JA 239.) Dr. Schwartz also advised that “[u]nless and until [Force’s] condition significantly
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improves, she will remain totally disabled from any employment.” (Id.)
On September 13, 1996, two days after Dr. Schwartz’s letter, MetLife, a third-party
administrator for the Ameritech Disability Service Center, informed Force that she might be eligible
for Social Security disability benefits and encouraged her to apply. The letter also stated that
MetLife had forwarded Force’s information to Kennedy & Associates, a law firm specializing in
obtaining such benefits. Subsequently, Force applied for and received Social Security disability
benefits retroactive to July 1994. On June 18, 1997, Force repaid Ameritech $26,396.67, because
LTD benefits are offset by any Social Security disability benefits the employee receives.
Time did not alleviate Force’s health problems. Roughly three years after the car accident,
on January 25, 1997, a CT scan revealed spinal stenosis at C5-C6, a mild diffuse bulge at C2-C3,
narrowing of the left L4-L5 neural foramen, and “evidence of a congenital anomaly involving L5
vertebra and the upper sacrum [associated] with a rotary scoliosis.” (JA 261-62.)
Dr. Schwartz referred Force to Dr. Armando Ortiz, a specialist in neurological surgery, who
examined Force on March 11, 1997. Dr. Ortiz found that Force had “slight limitation of movements
of the cervical spine in all directions because of discomfort” but otherwise concluded that she had
“no other focal localized neurological findings.” (JA 256.) Dr. Ortiz also noted that
[t]he motor, sensory and coordination of the upper extremities is intact. Although
she states that there might be a little difference in the perception of sensation to
pinprick on the right, compared to the left, I find no definite pattern for this
involvement. The same happened in the area of the C2 dermatome, where she may
have some hypesthesia in the C2 on the right.
(JA 257.) Ultimately, Dr. Ortiz concluded that “[Force] has evidence of cervical spondylosis.” (Id.)
Dr. Ortiz questioned “whether the spondylosis [was] . . . due to the trauma [of the car accident] . .
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. ,” but opined, “I am inclined to believe that there was a pre-existing condition which was definitely
aggravated by the accident, and is causing now the subjective complaints that the patient has.” (Id.)
On December 22, 1997, Force underwent a Functional Capacity Evaluation (FCE) at
Ameritech’s request. The FCE report, dated January 12, 1998, was written by Scott McKay, a non-
physician occupational therapist. The report explained that “[t]he evaluation was performed to
assess the client’s physical abilities and limitations related to her present level of functioning.” (JA
133.) Under the heading “Physical Demand Level,” the report stated that Force “demonstrated the
physical ability to work at the SEDENTARY Physical Demand Level for the 6 hours of the
evaluation” and explained that sedentary “is defined by the Dictionary of Occupational Titles . . . as
lifting 10 [pounds] infrequently.” (JA 134.) Under the heading “Digital Tenderness Mapping,” the
report stated that Force’s “result[s] appear to correlate with true medical impairment and disability.”
(JA 134-35.) The report concluded that “Force exhibited minimal symptom/disability exaggeration
behavior by our criteria . . . ,” and it then stated that “during the evaluation Ms. Force’s comments
in regard to her limited abilities could be [construed] as symptoms exaggeration, as her comments
were consistently underestimating her abilities.” (JA 135.) Ultimately, the report concluded that
“Ms. Force presents significant impairments which may adversely affect return to work,” classified
her “functional abilities” as consistent with a work demand of “sedentary-light,” and recommended
that “Force may benefit from a Work Conditioning program emphasizing strength, fitness,
stabilization principles and body mechanics.” (JA 135-36.)
On March 9, 1998, Kathleen Roche, a non-physician “Return-To-Work Specialist,” sent
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Connie Neier, an LTD specialist with Ameritech, a transferable skills analysis for Force, addressing
“Force’s ability to work in a Sedentary position.” (JA 125.) The letter stated that “[t]he analysis is
based on review of chart notes and medical records, which include her restrictions and limitations;
the [claimant’s] education and vocational history; and review of vocational reference materials.”
(Id.) Based on Dr. Ortiz’s letter and the FCE report, Roche concluded that Force “has the physical
capacity to perform sedentary work” and “would be able to perform her [previous] job duties as a
Manager, Publishing Graphic Center.” (JA 126.) Roche also listed ten additional jobs that Force
could perform, since all were classified as sedentary work.
On March 24, 1998, Neier, in a written letter, informed Force that Ameritech was terminating
her LTD benefits because she was no longer “eligible . . . under the Ameritech Long Term Disability
Plan.” (JA 111-12.) Force then requested an administrative appeal. Upon reassessing Force’s LTD
claim, the Employees’ Benefit Committee at Ameritech upheld the denial of benefits on October 21,
1998.
B. Procedural History
Force then instituted the present lawsuit in federal district court on April 15, 2003 under
Section 502 of ERISA, 29 U.S.C. § 1132(a)(1)(B). Shortly thereafter, the case was stayed upon
agreement of the parties to allow Ameritech to reevaluate Force’s claim. Pursuant to the parties’
stipulation, Ameritech enlisted the SBC Medical Absence and Accommodations Research Team
Quality Review Unit (the “Unit”) to reconsider Force’s appeal and conduct an independent
assessment. The Unit in turn referred Force’s entire disability claim file to Dr. Vernon Mark, a
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Force v. Ameritech
board-certified specialist in neurosurgery, for independent review. Through a letter dated September
27, 2004, Dr. Mark informed the Unit that, based on his review of prognosis notes from Force’s
previous medical consultations, the FCE report from December 1997, and the Transferable Skills
Analysis from March 1998, Force “was not disabled from her regular job on the basis of objective
findings.” (Supp. JA 380.) Although Dr. Mark found “some limitation on [Force’s] range of neck
movement, a slightly decreased biceps jerk and some degree of central stenosis at C5/C6,” in his
estimation, these conditions did not “impair. . . her ability to perform her own occupation or any
sedentary job duty.” (Id.) Overall, Dr. Mark concluded that Force had an “essentially normal
neurological evaluation.” (Supp. JA 381.)
On the basis of Dr. Mark’s evaluation, the Unit determined that Force’s medical condition
was not so severe as to prevent her from performing her primarily sedentary duties at Ameritech and
recommended that the denial of Force’s LTD benefits be affirmed. Accordingly, Ameritech sent a
final letter to Force, dated November 8, 2004, upholding its termination decision.
Following this final denial later, Force re-instituted her case in federal district court. Force
again alleged that Ameritech wrongfully terminated her LTD benefits under Section 502 of ERISA,
29 U.S.C. § 1132(a)(1)(B). The case was assigned to a magistrate judge who issued a Report and
Recommendation on September 5, 2006. In his report, the magistrate judge recommended that
Force’s motion should be granted on the basis of (1) a conflict of interest between Ameritech’s role
in both determining benefits eligibility and paying those benefits; (2) Ameritech’s disregard of the
Social Security Administration’s determination that Force was disabled; and (3) existing medical
evidence. On September 19, 2006, the district court adopted the magistrate judge’s recommendation
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and thereby determined that Ameritech had wrongfully denied Force’s claim for LTD benefits.
Ameritech timely appealed to this Court.
II. STANDARD OF REVIEW
When an ERISA plan administrator “has no discretion to determine benefits eligibility,” this
Court engages in a de novo review of the benefits eligibility decision. Calvert v. Firstar Fin., Inc.,
409 F.3d 286, 291 (6th Cir. 2005). If, however, the plan administrator or fiduciary has discretionary
authority to determine benefits eligibility or to construe the terms of the plan, then this Court
employs “the highly deferential arbitrary and capricious standard of review.” McDonald v. W.-S. Life
Ins. Co., 347 F.3d 161, 168 (6th Cir. 2003) (quoting Yeager v. Reliance Standard Life Ins. Co., 88
F.3d 376, 380 (6th Cir. 1996)); see also Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115
(1989). Under the arbitrary-and-capricious standard of review, the administrator’s decision is upheld
if it is “rational in light of the plan’s provisions” and “when it is possible to offer a reasoned
explanation, based on the evidence, for a particular outcome . . . .” McDonald, 347 F.3d at 169
(quoting Williams v. Int’l Paper Co., 227 F.3d 706, 712 (6th Cir. 2000) (internal quotation marks
omitted)).
It is well established that the arbitrary-and-capricious standard “is the least demanding form
of judicial review of administrative action.” Williams, 227 F.3d at 712. Nevertheless, this Court
explained in McDonald that “[d]eferential review is not no review, and deference need not be
abject.” 347 F.3d at 172 (quoting Hess v. Hartford Life & Accident Ins. Co., 274 F.3d 456, 461 (7th
Cir. 2001), and Gallo v. Amoco Corp., 102 F.3d 918, 922 (7th Cir. 1996) (internal quotation marks
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omitted)).
Here, the district court correctly reviewed Ameritech’s denial of LTD benefits under an
arbitrary-and-capricious standard of review because Ameritech’s Long-Term Disability Plan grants
Ameritech, through the Employee Benefits Committee, the right to grant or deny claims for benefits
under the Plan. Thus, Ameritech, although not the direct plan administrator, is nonetheless a
fiduciary** with discretionary authority to determine benefits eligibility.
III. DISCUSSION
1. Conflict of Interest
The district court properly concluded that Ameritech’s denial of LTD benefits to Force was
arbitrary and capricious, based in part on an apparent conflict of interest. In Glenn v. Metropolitan
Life Insurance Co., 461 F.3d 660, 666 (6th Cir. 2006), this Court explained that where the employer
“is authorized both to decide whether an employee is eligible for benefits and to pay those benefits[,]
[t]his dual function creates an apparent conflict of interest.” The Supreme Court elaborated in
Firestone Tire & Rubber Co., 489 U.S. at 115, that “if a benefit plan gives discretion to an
administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed
as a ‘facto[r] in determining whether there is an abuse of discretion.’ ” Id. (quoting Restatement
**
Under 29 U.S.C. § 1002, Ameritech is a fiduciary because it exercises “discretionary
authority or discretionary control respecting management of [the ERISA LTD] plan or exercises
any authority or control respecting management or disposition of [the Plan’s] assets. Under the
Plan, the Employee Benefits Committee, selected by Ameritech, “determines conclusively for all
parties all questions arising in the administration of the Plan” and further has “the right to grant
and deny initial claims for benefits under the Plan . . . .” (JA 343.)
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(Second) of Trusts § 187 cmt. d (1959)).
The district court here did just that. The magistrate judge considered Ameritech’s conflict
of interest as a factor in determining whether Ameritech’s decision to deny Force LTD benefits was
arbitrary and capricious. Specifically, the magistrate judge noted that “Ameritech is the plan funder
[sic], and has, through its Benefits Committee, the authority to grant or deny LTD benefits. In other
words, Ameritech is authorized to decide eligibility for benefits and to pay those benefits creating
an apparent conflict of interest.” (JA 19.)
Because Ameritech has the authority to determine eligibility for benefits and to pay out those
benefits, the district court did not err in concluding that Ameritech was operating under a potential
conflict of interest—a factor that is relevant to whether Ameritech’s denial of LTD benefits was
arbitrary and capricious. Calvert, 409 F.3d at 292 (explaining that the defendant’s possible conflict
of interest is a relevant factor in determining whether its benefits eligibility decision was arbitrary
and capricious). Although MetLife, an independent third party, plays a role in administering LTD
benefits, Ameritech’s LTD Plan neither mentions MetLife nor makes clear MetLife’s specific
functions. In fact, the Plan itself states that Michigan Bell Telephone Company (“Michigan Bell”)
is the plan administrator. Michigan Bell is a wholly-owned subsidiary of Ameritech, and therefore
is not an independent third-party administrator. Further, the “Plan Administration” section states
that “[t]he Employees’ Benefit Committee which is appointed by the Company, has the right to grant
and deny initial claims for benefits under the Plan and to review on appeal claims it has denied.”
(JA 343.) Thus, under the Plan, a committee selected by Ameritech has the power to determine
benefits eligibility and to interpret the terms of the Plan.
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2. Medical Evidence
The district court also properly concluded that, based on the medical evidence, Ameritech’s
termination of Force’s LTD benefits was arbitrary and capricious. Ameritech argues that the district
court erred by relying exclusively on Ameritech’s denial letters of March 1998 and October 1998
in reaching this conclusion, because the November 2004 letter superseded these previous letters. To
the extent that the district court based its findings on the two 1998 letters, however, we find this error
harmless, because the 2004 denial letter suffers from similar deficiencies to those contained in the
prior letters.
Specifically, the records Ameritech relied on to deny Force LTD benefits have several
inconsistencies. Along with the January 1998 and March 1998 denial letters, the 2004 denial letter,
which incorporated the findings of Dr. Mark, focused primarily on the FCE report from January
1998. In his report to Ameritech, Dr. Mark noted that “[t]he summary of the [FCE] reported that Ms.
Force’s functional abilities were consistent with sedentary work demands.” (Supp. JA 381.) The
FCE report, however, was prepared by a non-physician and was based on a single evaluation of
Force.
Furthermore, the FCE report is internally inconsistent:
Although the report concludes that [Force] is capable of at least sedentary employment, it
also notes that she has ‘significant impairments which may adversely affect return to work,’
and states that digital tenderness mapping (DTM) results ‘appear to be associated with a
specific low back pain syndrome. This result appears to correlate with true medical
impairment and disability. (JA 23 (internal citations omitted).)
Additionally, although the basis of the 2004 denial letter was Dr. Mark’s independent review,
Dr. Mark did not personally examine Force. Rather, he issued his findings based solely on the
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contents of Force’s medical file. The facts surrounding the 2004 denial letter are therefore nearly
indistinguishable from those in Calvert, where this Court concluded that the denial of LTD benefits
was arbitrary and capricious. 409 F.3d at 295-97. In Calvert, despite the evidence showing that
Calvert was disabled, her employer denied her benefits by basing its decision on the opinion of a
doctor, who reviewed Calvert’s medical file but did not personally examine her. Id. at 296. This
Court detected several flaws in the doctor’s report because he “did not describe the data he relied on
in reaching his conclusion” and “his conclusion suggested that he might have disregarded certain
tests and examination results.” Id. at 296-97.
In this case, Dr. Mark’s report suffers from similar deficiencies. Dr. Mark did not provide
a sufficient description of the data leading to his conclusion. Rather than pointing to specific
medical examinations supporting his findings, he instead summarily stated that he determined
Force’s lack of disability “based on the information available for review and from a neurosurgical
perspective.” (Supp. JA 380.) The only clinical findings Dr. Mark referenced in any detail were
“some limitation on [Force’s] range of neck movement, a slightly decreased biceps jerk and some
degree of central stenosis on C5/C6 on MRI.” (Id.) Dr. Mark’s letter does not make clear, however,
whether he considered the results of the CT scan on January 25, 1997, Dr. Schwartz’s findings of
chronic pain syndrome and tendinitis of the right wrist, and Dr. Ortiz’s finding of “some hypesthesia
in the C2 on the right.” (JA 257.) The vagueness of this description leads this Court to conclude that,
as in Calvert, Dr. Mark may have disregarded, or at least discounted, certain tests and examination
results.
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3. The Social Security Administration’s Benefits Determination
Lastly, the district court was correct in factoring into its arbitrary-and-capricious calculus
Ameritech’s failure to consider the SSA’s finding that Force was disabled and therefore entitled to
disability benefits. To qualify for Social Security benefits a person must be disabled, which is
defined as an “inability to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than 12 months.” 42 U.S.C. §
423(d)(2)(A). Under Ameritech’s LTD Plan, a person is disabled if
a sickness or injury . . . prevents the employee from performing the duties of his/her
occupation or employment. “Disability” after the one year period immediately
following the Waiting Period shall mean that the employee is prevented by reason
of such sickness or injury from engaging in any occupation or employment for which
the employee is qualified, or may reasonably become qualified, based on training,
education or experience. An employee shall continue to be considered disabled if
deemed incapable of performing the requirements of a job as a Salaried Employee
other than one whose rate of pay is less than 50% of the employee’s Base Pay at the
time the disability commenced.
(JA 111 (emphasis added).)
Despite the definitional overlap between eligibility for Social Security benefits and eligibility
for LTD benefits, Ameritech’s 2004 decision to deny Force LTD benefits made no reference to the
SSA’s benefits determination. As this Court stated in Calvert, “the SSA determination, though
certainly not binding, is far from meaningless.” 409 F.3d at 294. In that case, the Court was
persuaded that the SSA’s determination of Calvert’s eligibility for benefits was relevant because
such a determination, “at a minimum, provides support for the conclusion that an administrative
agency charged with examining Calvert’s medical records found, as it expressly said it did, objective
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support . . .” for a conclusion that Calvert was disabled. Id.; accord Glenn, 461 F.3d at 667 (“The
courts have recognized that a disability determination by the [SSA] is relevant in an action to
determine the arbitrariness of a decision to terminate benefits under an ERISA plan.”). Likewise,
in this case, we are persuaded that the SSA’s grant of benefits to Force constitutes objective support
of her disability and that Ameritech’s refusal to at least consider this determination is arbitrary and
capricious.
IV. CONCLUSION
For the preceding reasons, we AFFIRM the judgment of the district court.
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