Barbara Barham v. Reliance Standard ( 2006 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 05-2485
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Barbara Barham, *
*
Appellant, *
*
v. *
* Appeal from the United States
Reliance Standard Life * District Court for the
Insurance Company, * Eastern District of Arkansas.
*
Appellee, *
*
Arquest, Inc., *
*
Defendant. *
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Submitted: December 12, 2005
Filed: March 21, 2006
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Before BYE, BEAM, and GRUENDER, Circuit Judges.
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BYE, Circuit Judge.
Barbara Barham filed this action in district court challenging Reliance Standard
Life Insurance Company's (Reliance's) denial of her claim for long-term disability
benefits under a plan governed by the Employment Retirement Income Security Act
of 1974 (ERISA), 29 U.S.C. §§ 1001-1461. Applying an abuse-of-discretion
standard, the district court concluded the denial was supported by substantial
evidence. Because the policy included in the administrative record did not grant
Reliance discretion to determine eligibility for benefits, the district court should have
used a de novo standard. We therefore reverse and remand with instructions to the
district court to apply de novo review.
I
Barbara Barham worked for Arquest, Inc., as a machine operator in a disposable
diaper factory. She had a long history of back problems dating back to 1968,
including back surgery in 1973, stemming in large part from congenital spina bifida
and mild scoliosis. On August 31, 1999, she began treating with Dr. R. Lee Archer,
a neurologist, who concluded she was "permanently and completely disabled because
of her low back problems." App. at 668.
Barham was covered under an employer-sponsored long-term disability policy
issued by Reliance. Under the policy, she was entitled to disability benefits for
twenty-four months if she could not perform her own job. After the first twenty-four
months, she was entitled to additional disability benefits if she could not perform any
job. Barham applied for and received disability benefits from Reliance for the first
twenty-four months. Reliance also advised Barham to apply for Social Security
disability benefits, presumably because Reliance was contractually entitled to an offset
for any social security benefits Barham received. Barham did, in fact, receive Social
Security disability benefits. On September 7, 2000, Reliance notified Barham it had
received a copy of the Social Security Award certificate and told Barham she owed
Reliance $5280 for the amount Reliance had overpaid her.
On July 16, 2001, Reliance notified Barham it would review her claim to
determine whether she was eligible for disability benefits beyond the initial twenty-
four month period. Barham completed disability review questionnaires for Reliance
on July 20, 2001, and March 25, 2002. On September 24, 2002, at Reliance's request,
Barham also participated in a one-day Functional Capacity Evaluation (FCE)
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performed by a registered nurse. According to the nurse who completed the FCE,
Barham was capable of performing sedentary level work. On June 30, 2003, Dr.
Archer responded to the FCE findings and opined Barham was not capable of
performing even sedentary level work because she was restricted by pain due to her
spina bifida.
After initially terminating Barham's claim for long-term benefits, Reliance
asked Dr. William Hauptman, a gastroenterologist, to conduct a paper review of
Barham's file. According to the gastroenterologist, Barham was not impaired from
performing sedentary work. This assessment appeared preliminary, however, as Dr.
Hauptman concluded "it will be important for further evaluation to obtain medical
records from all health care providers including primary physicians and any mental
health care providers." App. at 473. Nonetheless, in a letter dated July 23, 2003,
Reliance upheld its earlier decision to terminate Barham's long-term disability benefits
based on the FCE's determination she was capable of performing sedentary level work
and the paper review conducted by Dr. Hauptman.
In September 2003, Barham brought suit against Reliance in federal district
court challenging the benefits denial. In December 2003, the district court entered an
ERISA Scheduling Order requiring the parties to submit a copy of the administrative
record and to file briefs addressing the appropriate standard of review. The court
indicated it would then decide the case based upon the administrative record and the
parties' briefs.
On February 4, 2004, Thomas Hardy, a Reliance employee "authorized to make
this Declaration of behalf of the company," filed an affidavit with the district court
attaching a "complete and accurate copy of the claim file" and "declar[ing] under
penalty of perjury that the foregoing is true and correct." App. at 123-24. Included
within the administrative record was a copy of the group policy under which Barham
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made her claim for benefits. Notably, the policy did not grant Reliance discretion to
interpret the plan or determine eligibility for benefits.
On April 28, 2004, Reliance's counsel filed its brief on the standard of review
pursuant to the district court's ERISA Scheduling Order. Reliance argued the
appropriate standard of review was abuse of discretion because the policy granted
Reliance discretion to interpret the plan and determine eligibility for benefits. As
support, Reliance's counsel cited to "policy at page 6.0, a copy of which is attached
as Exhibit 'A.'" App. at 49. Exhibit "A" was attached to the brief without an affidavit
verifying its authenticity or accuracy. Unlike the policy included with the Hardy
affidavit, the policy attached as Exhibit "A" included the following provisions:
Reliance Standard Life Insurance Company shall serve as the claims
review fiduciary with respect to the insurance policy and the Plan. The
claims review fiduciary has the discretionary authority to interpret the
Plan and the insurance policy and to determine eligibility for benefits.
Decisions by the claims review fiduciary shall be complete, final and
binding on all parties.
Appellee's App. at 12.
Based upon Exhibit "A" and the representations made in Reliance's counsel's
brief, the district court concluded the plan gave Reliance discretionary authority to
determine eligibility for benefits and consequently reviewed the decision to deny
benefits under an abuse-of-discretion standard. Under the abuse-of-discretion
standard, the district court concluded Reliance's denial was supported by substantial
evidence.
Barham filed a timely appeal with this court contending, in part, the district
court applied the wrong standard of review. In support of that argument, Barham
primarily argued serious procedural irregularities occurred during the administrative
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proceedings which should have triggered a less deferential standard of review. For
the first time in her reply brief, however, Barham supplemented her standard-of-
review argument by noting the policy contained in the administrative record did not
contain any language granting Reliance discretionary authority to interpret the policy
or make eligibility determinations.
II
We have plenary review over the district court's determination of the
appropriate standard of review to apply to an ERISA plan's denial of benefits. See
Tillery v. Hoffman Enclosures, Inc., 280 F.3d 1192, 1196 (8th Cir. 2002) (applying
de novo review).
"[A] denial of benefits . . . should be reviewed under a de novo standard unless
the benefit plan grants the administrator or fiduciary discretionary authority to
determine eligibility for benefits or to construe the terms of the plan." Id. at 1196-97
(citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)). Here, the
policy contained in the administrative record did not grant the administrator or
fiduciary discretionary authority to determine eligibility for benefits or to construe the
terms of the plan. Thus, a de novo standard should apply.
The district court applied an abuse-of-discretion standard because Reliance's
counsel represented the policy gave Reliance discretion to determine eligibility for
benefits. The policy which purportedly granted this authority was not the same as the
policy verified by Reliance as the complete and correct copy and included within the
administrative record, however, but an unverified copy attached to Reliance's brief
without any supporting affidavit.
Reliance contends Barham waived the right to rely upon the administrative
record because she waited until her reply brief to note the discrepancy between the
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two policies. As a general rule, we will not consider arguments raised for the first
time in a reply brief. Akeyo v. O'Hanlon, 75 F.3d 370, 374 n.2 (8th Cir. 1996). We
are not precluded from doing so, however, particularly where, as here, the argument
raised in the reply brief supplements an argument raised in a party's initial brief. See
United States v. Head, 340 F.3d 628, 630 n.4 (8th Cir. 2003); see also Parmenter v.
Fed. Deposit Ins. Corp., 925 F.2d 1088, 1093-94 (8th Cir. 1991) (considering an
argument raised for the first time in a reply brief where "the interests of justice"
required a remand to the district court to address the question raised); Stafford v. Ford
Motor Co., 790 F.2d 702, 706 (8th Cir. 1986) ("The matter of what questions may be
taken up and resolved for the first time on appeal is one left primarily to the discretion
of the courts of appeal, to be exercised on the facts of the individual cases.") (quoting
Singleton v. Wulff, 428 U.S. 106, 121 (1976)).
While we do not condone the untimely manner in which Barham noted the
discrepancy between the policy presented to the district court and the policy within
the administrative record, neither do we wish to condone the unorthodox manner in
which Reliance's counsel presented the district court with Exhibit "A" – a policy that
differed in a very material respect from the one within the administrative record.
Under these circumstances, even if Exhibit "A" had been submitted with a supporting
affidavit, it would have been inappropriate for the district court to consider it unless
Reliance also gave a satisfactory explanation for its contradiction with the Hardy
affidavit. See Camfield Tires, Inc. v. Michelin Tire Corp., 719 F.2d 1361, 1364-65
(8th Cir. 1983) (indicating district courts should not consider inherently contradictory
affidavits submitted by the same party in summary judgment proceedings unless the
party explains the inconsistency).1
1
We agree with the dissent a plan need not be in the administrative record to be
considered by the district court. See Farley v. Ark. Blue Cross & Blue Shield, 147
F.3d 774, 776 n.4 (8th Cir. 1998) ("We note, however, that conducting limited
discovery for the purpose of determining the appropriate standard of review does not
run afoul of the general prohibition on admitting evidence outside the administrative
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There is no evidence in the district court or appellate record contradicting or
explaining the Hardy affidavit, which verified the authenticity and accuracy of the
policy contained within the administrative record. Reliance had ample time to
develop an accurate record in the district court and failed to do so. Cf. Von Kahl v.
United States, 242 F.3d 783, 788 (8th Cir. 2001) (declining to allow a party to
supplement the record where there was ample time to develop an accurate record and
any gaps in the record were likely due to a lack of diligence). Under these
circumstances, we believe it is appropriate to remand this case with instructions for
the district court to review the benefits denial de novo, see McKeehan v. Cigna Life
Ins. Co., 344 F.3d 789, 793 (8th Cir. 2003) (concluding de novo review should be
conducted in the first instance by the district court where record includes conflicting
medical opinions and evidence), as de novo review is consistent with the only policy
verified as accurate in the administrative record or the district court.
III
We reverse and remand with instructions for the district court to apply a de
novo standard of review to Reliance's denial of Barbara Barham's claim for long-term
disability benefits.
BEAM, Circuit Judge, dissenting.
While I agree this case must be remanded to the district court, I disagree with
this court determining the standard of review for the district court to apply. The
record for the purpose of determining benefits."). In this case, however, a plan
verified as authentic and accurate by Reliance was included in the administrative
record, and the conflicting plan was never appropriately put before the district court.
Thus, while we agree the district court should be able to review evidence outside the
administrative record to determine which plan applies, we do not believe that rule
applies or governs in this case.
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central issue seized upon by the court is which version of the benefit plan governs:
Plan A, from the administrative record, which would necessitate a de novo review, or
Plan B, which contains language granting Reliance discretion and would permit an
abuse-of-discretion review. Plan B, which the district court used, was not in the
administrative record. However, whether Plan B was in the administrative record
should not be dispositive of the standard of review. The correct inquiry is which plan
was in effect at the time of Barham's claim. After all, the quest of this court should
be a search for the truth, not a search for error.
The court assumes that the administrative record must contain the benefit plan.
I agree that both sides should make an accurate and complete record before coming
to federal court. Vega v. Nat'l Life Ins. Servs., Inc., 188 F.3d 287, 302 n.13 (5th Cir.
1999). When courts review a denial of benefits under an abuse-of-discretion standard,
only the evidence in the administrative record is considered. Sahulka v. Lucent
Techs., Inc., 206 F.3d 763, 769 (8th Cir. 2000). Even under a de novo review, the
introduction of documentation not in the administrative record is discouraged unless
good cause is shown. Ferrari v. Teachers Ins. and Annuity Ass'n, 278 F.3d 801, 807
(8th Cir. 2002). However, the vast majority of case law addresses only whether a plan
participant can add documentation to the record which was not before the
administrator. See, e.g., id. (discussing decision not to expand record to include
financial documentation offered by plan participant).
The issue of whether a plan must be present in the administrative record has not
been squarely addressed by this court. I agree with the Sixth Circuit, which has
addressed this issue and determined that the plan need not be present in the
administrative record to be considered by the district court. Bass v. TRW Employee
Welfare Benefits Trust, 86 F. App'x 848, 851 (6th Cir. 2004) (unpublished). The
reasons for limiting the record before the district court are to provide for expeditious
review and to prevent the district courts from becoming plan administrators. Brown
v. Seitz Foods, Inc., Disability Ben. Plan, 140 F.3d 1198, 1200 (8th Cir. 1998).
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Refusing to admit a benefit plan would not advance either of these goals. So, in my
view, the district court should be able to review evidence outside the administrative
record to determine which plan applies.
The benefit plan which Reliance contends is the correct one was not in the
administrative record and was adopted by the district court from Reliance's brief.
Because this is simply an evidentiary dispute, we should remand to the district court
to determine which plan and which standard of review to apply to Barham's claim.
Accordingly, I respectfully dissent.
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