Neil Sorger v. Novartis Corp. Db&d Plan ( 2021 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS AUG 25 2021
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
NEIL SORGER, No. 20-15224
Plaintiff-Appellant, D.C. No. 3:19-cv-00105-JSC
v.
MEMORANDUM*
NOVARTIS CORPORATION DEATH
BENEFIT & DISABILITY PLAN,
METROPOLITAN LIFE INSURANCE
COMPANY,
Defendants-Appellees.
Appeal from the United States District Court
For the Northern District of California
Jacqueline Scott Corley, Magistrate Judge, Presiding
Argued and Submitted May 14, 2021
San Francisco, California
Before: NGUYEN and COLLINS, Circuit Judges, and BURGESS,* Chief
District Judge.
Neil Sorger appeals from the district court’s order concluding that Novartis
Corporation Death Benefit and Disability Plan (the “Plan”) and Metropolitan Life
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.

The Honorable Timothy M. Burgess, Chief United States District
Judge for the District of Alaska, sitting by designation.
Insurance Company (“MetLife,” and together, “Appellees”) did not abuse their
discretion in terminating Sorger’s supplemental long term disability (“LTD”)
benefits pursuant to the Plan’s pre-existing condition clause in the Summary Plan
Description.1 We have jurisdiction pursuant to 28 U.S.C. § 1291. We affirm.
The Plan is a self-funded plan governed by ERISA that provides the LTD
benefits coverage at issue. Plan participants are entitled to basic LTD benefits
equal to 50% of the participant’s total pay, and participants may purchase
supplemental LTD coverage to be eligible to receive an additional 17% of total
pay. The funds for supplemental LTD benefits are held in a Voluntary Employee
Benefit Association (“VEBA”) Trust. Novartis is reimbursed from the VEBA
Trust for supplemental LTD benefits paid out under the Plan. MetLife serves as
Claims Administrator and Plan Administrator, meaning, it determines whether a
1
The Summary Plan Description provides that “[i]f you have a pre-existing
condition and elect supplemental LTD coverage, your supplemental LTD coverage
for that pre-existing condition will not take effect for 12 months after the effective
date of your supplemental LTD coverage.” The Plan defines a “pre-existing
condition” as:
an injury, sickness, or pregnancy for which you, in the three months before your
supplemental LTD coverage took effect:
• received medical treatment, consultation, care, or services,
• took prescription medications or had medications prescribed, or
• had symptoms or conditions which would cause a reasonably prudent
person to seek diagnosis, care, or treatment.
2
Plan participant is eligible to receive benefits under the Plan. Because the parties
are otherwise familiar with the factual and procedural history of the case, we need
not further recount it here.
I.
First, Sorger argues that the district court erred by reviewing the
supplemental LTD benefits decision under an abuse of discretion standard rather
than de novo. “We review de novo a district court’s choice and application of the
standard of review to decisions by fiduciaries in ERISA cases. We review for clear
error the underlying findings of fact.” Abatie v. Alta Health & Life Ins. Co., 458
F.3d 955, 962 (9th Cir. 2006) (en banc) (citation omitted). “Whether a plan is an
ERISA plan is a finding of fact.” Steen v. John Hancock Mut. Life Ins. Co., 106
F.3d 904, 913 (9th Cir. 1997). Once it is determined that a plan is governed by
ERISA, we review the denial of benefits “under a de novo standard unless the
benefit plan gives the administrator discretionary authority to determine eligibility
for benefits or to construe the terms of the plan.” Montour v. Hartford Life &
Accident Ins. Co., 588 F.3d 623, 629 (9th Cir. 2009) (simplified) (quoting Burke v.
Pitney Bowes Inc. Long-Term Disability Plan, 544 F.3d 1016, 1023 (9th Cir.
2008)). “Where . . . the plan ‘does grant such discretionary authority, we review
the administrator’s decision for abuse of discretion.’” Id. (quoting Saffon v. Wells
Fargo & Co. Long Term Disability Plan, 522 F.3d 863, 866 (9th Cir. 2008)). “The
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manner in which a reviewing court applies the abuse of discretion standard,
however, depends on whether the administrator has a conflicting interest.” Id. If
“the same entity that funds an ERISA benefits plan also evaluates claims,” then
“the plan administrator faces a structural conflict of interest” because “benefits are
paid out of the administrator’s own pocket.” Id. at 630.
The district court did not commit clear error when it found that the Plan
sponsored by Novartis was the only ERISA plan at issue in this case. The district
court found that Sorger presented no evidence that the VEBA Trust was used as
anything other than a funding mechanism for the Plan’s supplemental LTD
benefits or that the VEBA Trust is a separate ERISA Plan. The district court also
found that the predecessor to the VEBA Trust was implemented to pay for certain
employee benefits on a tax-advantaged basis; however, by the time Sorger joined
the Plan, the VEBA Trust was only used as a funding mechanism for supplemental
LTD benefits. Sorger did not present any argument on appeal that would disturb
the district court’s finding.
Having concluded that there is only one ERISA plan at issue, we further
conclude that the district court properly determined that MetLife’s decision should
be reviewed under an abuse of discretion standard. We must evaluate de novo
whether the Plan “unambiguously gives the plan administrator discretion to
determine eligibility or construe the plan’s terms.” Burke, 544 F.3d at 1023–24.
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Here, the district court correctly concluded that there is no structural conflict of
interest and that the Plan unambiguously gives MetLife discretion to determine
eligibility and construe the Plan’s terms. The Plan contains an unambiguous
provision giving the Plan Administrator the “express discretionary authorit[y]” to,
in pertinent part: (1) “construe and interpret the terms of the Plan, and to resolve all
ambiguities, inconsistencies or omissions therein”; and (2) “decide all questions of
eligibility and determine the amount, manner and time of payment of any
benefits.”
The Summary Plan Description states that MetLife is the Claims
Administrator for the LTD benefits under the Plan and that it “is responsible for
processing and deciding all claims for benefits . . . as well as all appeals of denied
claims.” There is no conflict of interest because Novartis, through the VEBA
Trust, funds the supplemental LTD benefits, while MetLife has total discretion to
determine who receives the benefits. Sorger does not dispute that the Plan
delegates authority to MetLife. Instead, Sorger predicates his argument against the
application of an abuse of discretion standard on there being two ERISA plans,
which he did not establish.
Since the district court did not clearly err by finding only one ERISA plan at
issue, and there is no conflict of interest vis-à-vis MetLife, the district court
properly reviewed MetLife’s decision under an abuse of discretion standard.
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II.
Second, the district court did not abuse its discretion in concluding that the
pre-existing condition clause in the Summary Plan Description was valid. Under
abuse of discretion review, we must consider whether the decision was “(1)
illogical, (2) implausible, or (3) without support in inferences that may be drawn
from the facts in the record.” Salomaa v. Honda Long Term Disability Plan, 642
F.3d 666, 676 (9th Cir. 2011) (quoting United States v. Hinkson, 585 F.3d 1247,
1262 (9th Cir. 2009) (en banc)). “[A]n administrator’s denial of benefits must be
upheld ‘if it is based upon a reasonable interpretation of the plan’s terms and if it
was made in good faith.’” Moyle v. Liberty Mut. Ret. Benefit Plan, 823 F.3d 948,
957–58 (9th Cir. 2016) (quoting McDaniel v. Chevron Corp., 203 F.3d 1099, 1113
(9th Cir. 2000)). Sorger argues that the pre-existing condition clause in the
Summary Plan Description is invalid because the Plan says that MetLife will
establish the pre-existing condition limitations, but MetLife did not create the
relevant limitation here. Contrary to Sorger’s argument, by the plain language of
the Plan and Task Orders, MetLife was not limited to only enforcing conditions it
created.2 By its terms, the Plan expressly incorporates, in its entirety, the Summary
2
The Task Orders govern, in part, MetLife’s scope of duties under the Plan. For
example, the Task Order No. 2 states “[Novartis] and MetLife acknowledge that
MetLife assumes the responsibility and discretionary authority for approving or
denying Plan Benefits in whole or part.”
6
Plan Description prepared by Novartis. Moreover, Task Order No. 2, which is an
agreement between Novartis and MetLife, expressly incorporates the Summary
Plan Description prepared by Novartis. Given MetLife’s “express discretionary
authorit[y]” to, in pertinent part, “construe and interpret the terms of the Plan,”
MetLife has discretion to construe and enforce the Summary Plan Description. To
the extent Sorger argues that the Plan impermissibly delegates authority to
MetLife, that argument fails because Novartis sets the terms of the Summary Plan
Description, which MetLife agreed to accept under the Task Order. The terms of
the Plan give MetLife “express discretionary authorit[y]” to “delegate authority
with regard to its responsibilities.” This includes the Plan’s reference to “pre-
existing condition limitations as established from time to time by the Claims
Administrator.”
III.
Third, the district court properly found the pre-existing condition clause to
apply by its terms. MetLife did not abuse its discretion by (1) interpreting part of
the pre-existing condition clause as requiring twelve consecutive months as an
active employee; (2) applying the pre-existing condition clause even though Sorger
assertedly was not diagnosed with or specifically treated for his pre-existing
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condition during the look-back period3; and (3) determining that the pre-existing
condition clause did not expire on January 1, 2014.
In construing an ERISA plan, courts must “apply contract principles derived
from state law . . . guided by the policies expressed in ERISA and other federal
labor laws.” Gilliam v. Nev. Power Co., 488 F.3d 1189, 1194 (9th Cir. 2007)
(alteration in original) (quoting Richardson v. Pension Plan of Bethlehem Steel
Corp., 112 F.3d 982, 985 (9th Cir. 1997)). Thus, the “terms in an ERISA plan
should be interpreted ‘in an ordinary and popular sense as would a [person] of
average intelligence and experience.’” Id. (alteration in original) (quoting
Richardson, 112 F.3d at 985). MetLife’s interpretation will be upheld “so long as
[it] does not construe the language of the plan unreasonably or render its decision
without explanation.” Montour, 588 F.3d at 630.
Sorger’s argument that MetLife abused its discretion by not considering
Sorger to be an “active employee” under the Plan was properly rejected by the
district court. The Plan states that “[i]f you should become disabled because of a
pre-existing condition, no supplemental LTD benefits are payable under this plan
for that disability unless . . . you have been an active employee under this plan for
[twelve] consecutive months.” The district court reasoned that the pre-existing
3
Sorger elected the supplemental LTD benefits coverage effective January 1,
2013. The relevant three-month look-back period is October 1, 2012, to December
31, 2012.
8
condition limitation specifically qualifies “employee” with “active,” which shows
that Novartis intended Plan participants to actively work for at least twelve
consecutive months before receiving supplemental LTD benefits for a pre-existing
condition. Sorger’s argument that MetLife abused its discretion by not counting
the time Sorger was receiving disability benefits under the Plan stretches the plain
language of the Plan and is unpersuasive.
Sorger also argues that the pre-existing condition clause does not apply even
if we adopt the district court’s interpretation. Sorger cites McLeod v. Hartford Life
& Accident Insurance Co., 372 F.3d 618, 625 (3d Cir. 2004), for the proposition
that Sorger was not treated specifically for the condition which MetLife
determined was pre-existing and that MetLife improperly terminated his
supplemental LTD benefits as a result. McLeod is distinguishable because the
McLeod court applied a heightened standard of review to the benefits
determination, and “no one even suspected” that the appellant’s symptom was
connected to the appellant’s pre-existing condition. Id. at 624. Here, the district
court properly applied the more deferential abuse of discretion standard, and the
record shows that Sorger “received medical treatment, consultation, care, or
services” for his pre-existing condition. In light of Family Nurse Practitioner
(“FNP”) Nancy Bryant’s notes from Sorger’s November 2, 2012 office visit, it
cannot be reasonably argued that “no one even suspected” Sorger suffered from the
9
condition with which he was ultimately diagnosed.
Finally, Sorger’s argument that the pre-existing condition clause does not
apply to any disability after January 1, 2014, is similarly unavailing. The Plan
states that Sorger’s “supplemental LTD coverage for [a] pre-existing condition will
not take effect for [twelve] months after the effective date of [his] supplemental
LTD coverage.” The district court properly concluded that this language addresses
the effective date of the supplemental coverage, meaning, Sorger would be able to
seek supplemental LTD benefits coverage for his pre-existing condition beginning
January 1, 2014. It does not, however, negate the pre-existing condition clause
altogether or otherwise negate terms of the Plan which may prevent Sorger from
obtaining supplemental LTD coverage for a pre-existing condition.
IV.
Fourth, MetLife did not abuse its discretion in denying coverage for Sorger’s
pre-existing condition. We hold that MetLife had support for its decision based on
Sorger’s visit to FNP Bryant in November 2012 and the report of Independent
Physician Consultant Dr. Warren Taff, who reviewed Sorger’s extensive medical
records and concluded that Sorger’s condition “was most likely underlying and did
exist prior to a definitive diagnosis being reached.” Dr. Taff further concluded that
Sorger “received ‘consultation or care for symptoms’” associated with his pre-
existing condition when he visited FNP Bryant in November 2012. While the pre-
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existing condition clause would also apply if Sorger “took prescription medications
or had medications prescribed” for his pre-existing condition during the look-back
period, the record indicates that Sorger may have been prescribed certain
medications to specifically treat other conditions not at issue here. Even if we
were to agree with Sorger on this point, we would still conclude that MetLife did
not abuse its discretion in concluding that Sorger “received medical treatment,
consultation, care, or services” for his pre-existing condition during the look-back
period. Accordingly, MetLife’s decision was not illogical, implausible, or without
support in the factual record.
AFFIRMED.
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