Hunter v. Federal Express Corp.

Opinions of the United
2006 Decisions States Court of Appeals
for the Third Circuit
2-22-2006
Hunter v. Fed Express Corp
Precedential or Non-Precedential: Non-Precedential
Docket No. 04-3563
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NOT PRECEDENTIAL
IN THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Case No: 04-3563
FLORENCE HUNTER
v.
FEDERAL EXPRESS CORPORATION,
Appellant
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
District Court No.: 03-CV-06711
District Judge: The Honorable Stewart Dalzell
Argued January 26, 2006
Before: RENDELL and SMITH, Circuit Judges,
and IRENAS, District Judge *
(Filed: February 22, 2006 )
Colby S. Morgan, Jr. (argued)
John M. Oehmler
Federal Express Corporation
3620 Hacks Cross Road
Building B, 3rd Floor
Memphis, TN 38125
Christopher J. Moran
Dara P. Newman
*
The Honorable Joseph E. Irenas, Senior District Judge for the District of New Jersey,
sitting by designation.
Simon Moran
1600 Market Street
Suite 2020
Philadelphia, PA 19103
Counsel for Appellant
Gregory J. Boles (argued)
Fenner & Boles
1515 Market Street
Suite 1510
Philadelphia, PA 19102
Counsel for Appellee
OPINION
SMITH, Circuit Judge.
Federal Express Corporation (“FedEx”) appeals from an order of the United States
District Court for the Eastern District of Pennsylvania granting summary judgment in
favor of Florence Hunter on her claim under the Employee Retirement Income Security
Act (“ERISA”), 29 U.S.C. § 1132, for restoration of her long term disability (“LTD”)
benefits. The District Court had jurisdiction under 28 U.S.C. § 1331. We exercise
appellate jurisdiction pursuant to 28 U.S.C. § 1291. For the reasons set forth below, we
will reverse the judgment of the District Court.
I.
In 1994, Hunter was a manager of station operations for FedEx and a participant in
FedEx’s LTD Plan. In July of that year, Hunter stopped working because of
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complications with her pregnancy and she began receiving short term disability benefits.
In October, during childbirth, she suffered a left occipital hemorrhage infarct and another
intracranial hemorrhage in the same location two weeks later. Short term disability
benefits continued until January 26, 1995. LTD benefits for an “occupational disability”
commenced the following day.1 On December 11, 1996, Hunter’s application for Social
Security disability benefits was approved. LTD benefits based on a total disability
commenced on January 27, 1997.2
FedEx’s LTD plan provided that FedEx was the administrator of the Plan. The
initial review and processing of disability claims, however, was performed pursuant to a
contract by Kemper Insurance. Once benefits were awarded, an employee was obligated
to provide “[a]dditional updated substantiation” or risked the suspension of benefits.
Consistent with the above, Kemper occasionally contacted Hunter’s primary care
physician, Dr. Perlson, regarding her medical status. In August of 1998, in response to an
1
LTD benefits were payable for either an occupational disability or a total disability.
An occupational disability meant an inability “because of a medically-determinable
physical impairment or mental impairment . . . to perform the duties of his regular
occupation.”
2
A total disability was defined by the LTD Plan as an “inability . . . because of a
medically-determinable physical impairment . . . to engage in any substantially gainful
activity for which he is reasonably qualified (or could reasonably become qualified) on
the basis of his education, training or experience.” The term “substantially gainful
activity” was not defined by the Plan. The employee benefits handbook, however,
provided that “[t]otal disability means you cannot, for physical reasons only, do any work
on either a part-time or full-time basis for which you have training, education, or
experience or for which you can obtain the education or training.”
3
inquiry from Kemper, Dr. Perlson indicated that Hunter was “blind - dyslexic” and he
opined that she was not able to work with restrictions. In a form entitled “Evaluation of
Physical Abilities,” Dr. Perlson noted that Hunter could not drive for more than three
hours or lift more than twenty pounds. Her visual clarity and color were unimpaired, but
her visual depth perception was limited.
Periodic updates were obtained thereafter. On September 18, 2002, Hunter spoke
with a claims representative and confirmed that she was independent regarding her
activities of daily living and that she was able to drive short distances. Hunter advised
that Dr. Perlson was her only treating physician.
On September 19, 2002, Dr. Perlson completed a LTD Physician Report submitted
by Kemper. He documented that Hunter had hypertension and dsylexia secondary to the
occipital infarction she sustained in 1994. In response to an inquiry as to Hunter’s ability
to work full duty, Dr. Perlson checked the “no” box. Although the box regarding
Hunter’s ability to work part-time was not completed, Dr. Perlson opined that Hunter’s
only work restriction was that she was not permitted “to read - anything.” A computer
log entry dated September 27, 2002 indicated that Dr. Perlson advised a Kemper
representative that Hunter’s cognitive function was “good” and that she “probably can
work for a minimum of 25 hrs /week any job as long as there is no reading involved.”
In October of 2002, Kemper submitted the documentation it had from Dr. Perlson
to Dr. Cohan, a neurologist, for the purpose of conducting a peer review. Dr. Cohan
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found no objective evidence to support the work restriction outlined by Dr. Perlson, but
noted that a neuro-ophthalmologic report would be useful.
Kemper followed this suggestion and arranged for an independent medical
examination on November 19, 2002 by Dr. Liu, who was associated with the University
of Pennsylvania’s Department of Neurology and Ophthalmology. Dr. Liu noted that he
was provided limited medical records, no diagnostic studies or reports, and that he was
relying on Hunter’s history and his examination. Dr. Liu documented that “[o]ver the
years she states she has had some recovery, but she states that she can read for two or
three minutes at best and then she can no longer read. She states she can read selectively,
but cannot read whole passages or memos.”
Dr. Liu’s physical examination of Hunter revealed that her vision as corrected was
“20/20 with the right eye and 20/25 with the left. At near she saw 20/50+2 with the right
eye pinholing to 20/30 and with the left she was 20/40+3. She saw 12 of 12 color plates
with both eyes. Fields were full to confrontation techniques. Formal fields were not done
today.” A dilated funduscopic examination was normal. Dr. Liu also performed a
“detailed language examination. She can read, write, name, repeat, comprehend, and her
speech is fluent. Therefore, we found no aphasia.” Id. His report also indicated that
Hunter did not exhibit any motor or sensory deficits.
Before stating his opinion, Dr. Liu repeated the limitations of his report. He
opined that he “found that she was able to read and had no visual field deficits or acuity
5
deficits related to what reportedly occurred in 1994. I have no objective evidence for
visual reading problems at this time and I have only her subjective complaints.” He
further stated that “[f]rom what I was able to see on my examination today, I do not see
her having any problems working at a regular job.”
Dr. Liu’s report was provided to Dr. Cohan. In a supplemental report dated
December 3, 2002, Dr. Cohan adhered to his initial opinion that the data failed to support
a functional impairment that would render Hunter unable to engage in any compensable
employment for 25 hours. On December 6, 2002, Kemper notified Hunter in a letter that
it had reviewed her LTD benefits claim and “determined that no benefits are payable to
you for this claim beyond 11/30/02.” Kemper explained that it had reviewed Dr.
Perlson’s documentation and his work restriction precluding reading, together with Dr.
Liu’s report that Hunter had “essentially normal findings,” and that there was “no
significant objective evidence for visual reading problems.” The notice advised that she
had the right to appeal and that she should submit medical documentation to support her
claim of a total disability.
Hunter obtained counsel and appealed the termination of benefits to FedEx’s
Benefits Review Committee (“BRC”). Shortly thereafter, on December 28, 2002, Hunter
was examined by Paul Suscavage, OD. He opined that she “managed Snellen chart OK”
and had “good central vision with current use of spectacles.” The results of a visual field
analyzer demonstrated “marked field loss,” greater in the right eye than the left eye, and
6
“stereo vision reduced to 25%.” An MRI of the brain performed on December 31, 2002
showed an “area of chronic hemorrhagic infarction . . . in the left occipital lobe. Multiple
small round foci of high signal intensity were noted in the subcortical white matter.”
There was no evidence of any acute or subacute condition.
Hunter was also examined by Dr. Klazmer, a neurologist, and Psychologist Joseph
Tracy, Ph.D. Dr. Tracy concluded that Hunter had several neuropsychological deficits,
the “most significant deficits are in visual perceptual and visuospatial reasoning
consistent with her occipital stroke.” Deficits were also noted with regard to executive
function and some psychomotor skills. Dr. Tracy also noted that Hunter displayed “a
clinically significant level of depression.” He stated that he “consider[ed] Ms. Hunter
disabled” and opined that he did not believe that Hunter was “capable of working at her
previous levels which apparently involve managerial work handling customer complaints
at Federal Express. Speeded and detailed computer work with a high reliance on
visuoperceptual and visuospatial skills would be too difficult for her.”
Dr. Tracy’s report and the MRI were both provided to Dr. Klazmer. In a letter
dated January 23, 2003, Dr. Klazmer documented that neurologic examination “showed
evidence of subjective right superior quadrant visual field loss in both eyes.” He
indicated that the MRI showed “an area of abnormal signal in the left occipital lobe
consistent with a chronic infarction” and subcortical white matter hyperintensities. With
regard to Dr. Tracy’s report, Dr. Klazmer related that he had spoken to Dr. Tracy, who
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conveyed that Hunter
shows visual processing impairment along with subtle difficulties using her
right hand, memory problems and findings suggestive of depression. He
feels the neuropsychological impairments noticed on her recent testing are
in par and essentially unchanged from her initial neuropsychological
evaluation that was performed on July 1, 1996 by Dr. Roderick Hafer.
Dr. Klazmer opined that
Florence Hunter, in summary, is status post a left occipital hemorrhage,
probably from eclampsia with residual cognitive impairment that has not
improved. In my opinion, this precludes her from returning to work in her
former capacity and will impair her ability to obtain any type of
commensurable employment for which she was reasonably qualified.
Kemper had peer reviews conducted after Hunter filed her appeal by Dr.
Superfine, an internist, Dr. Goldberg, a neurologist, Dr. Epstein, an ophthalmologist, and
Dr. Carpenter, a psychologist. Neither Optometrist Suscavage’s report nor the MRI
report were provided to Kemper until May of 2003. As a result, the peer review
physicians did not have the opportunity to review that evidence. But they did review the
reports of Dr. Liu, Dr. Klazmer, and Dr. Tracy. The peer review physicians generally
opined that the data submitted failed to substantiate a functional impairment precluding
Hunter from working either part or full-time.
After Optometrist Suscavage’s records and the MRI were submitted to Kemper, it
provided the documents to Dr. Goldberg to supplement his peer review report. Dr.
Goldberg did not alter his conclusion. He acknowledged the new evidence that Hunter
had a visual field defect from 1995, but pointed out that Dr. Liu had conducted a
8
thorough eye examination and concluded that there was nothing to support visual field
defects.
Dr. Epstein also submitted a supplemental peer review report after reviewing this
additional evidence. He opined that “[f]rom an ophthalmologic standpoint, I feel that
there is no objective evidence to substantiate disability, however, the visual field
abnormality has not been addressed.”
After consideration of all of this medical documentation, the BRC denied
Hunter’s appeal. The BRC cited the Plan’s definition of total disability and the Plan’s
provision which allows an award of benefits only when the “Administrator has received .
. . information sufficient . . . to determine in its sole and exclusive discretion that a
Disability exists.” The BRC explained that it upheld the denial based “on all the
information submitted, including Kemper’s peer physician reviews.” The BRC
emphasized that it had to assess whether Hunter was disabled as to “all occupations
beginning on 12/01/02.” The BRC expressed its regret that the decision was unfavorable,
but it reiterated that the Plan is “specific regarding the requirement of significant
objective findings that a functional impairment exists that would preclude a covered
employee from engaging in any substantially gainful activity, part-time or full-time . . .
and this requirement was not met in this case.”
This ERISA action followed. Cross-motions for summary judgment were filed
after discovery closed. The District Court applied a heightened standard of review,
9
concluded the BRC’s decision was arbitrary and capricious, and granted summary
judgment in favor of Hunter. FedEx filed a timely appeal.
II.
Because we are reviewing a grant of summary judgment, our review is plenary.
Smathers v. Multi-Tool Inc, 298 F.3d 191, 194 (3d Cir. 2002). In addition, because this is
an ERISA claim, we must determine the level of scrutiny appropriately employed in
reviewing FedEx’s decision to terminate Hunter’s LTD benefits. FedEx contends that the
District Court erred in applying the heightened arbitrary and capricious standard of
review. We agree.
In Firestone Tire & Rubber Company v. Bruch, 489 U.S. 101, 115 (1989), the
Supreme Court instructed that the deferential arbitrary and capricious standard of review
applies if an ERISA plan gives the administrator discretionary authority to determine the
eligibility for benefits or to construe the terms of the plan. Id. The Bruch Court
observed 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 factor in
determining whether there is an abuse of discretion.” Id.
In Pinto v. Reliance Standard Life Insurance Company, 214 F.3d 377 (3d Cir.
2000), we held that an insurer who both funded and administered an ERISA plan had a
conflict of interest that “warrant[ed] a heightened form of the arbitrary and capricious
standard of review.” Id. at 378. Pinto distinguished between insurance companies that
10
both fund and administer a plan, and employers that both fund and administer a plan,
recognizing that the heightened standard need not be applied to an employer who both
funds and administers a plan unless the employee demonstrates that the employer’s
exercise of discretion may have been tainted. Pinto, 214 F.3d at 387-388.
In Pinto’s wake, we have not been hesitant to apply a heightened standard of
review to an employer who both funds and administers its ERISA plan where the
evidence demonstrates a reason to question the employer’s impartiality. For example, in
Smathers v. Multi-Tool, Inc., 298 F.3d 191, 198 (3d Cir. 2002), we concluded that the
heightened arbitrary and capricious standard should have been applied because the
employer would sustain direct financial harm if the claim was paid. In Kosiba v. Merck &
Company, 384 F.3d 58 (3d Cir. 2004), we recognized that a financial conflict of interest
was not the only cause for heightened review. We explained that our precedents also
established that such review may be warranted if there is a “demonstrated procedural
irregularity, bias or unfairness in the review of the claimant’s application for benefits.”
Id. at 66. There, the evidence unequivocally demonstrated that the employee had total
disability, yet the employer intervened in the appeal by seeking an independent medical
examination, even though its insurance administrator had not. We concluded that this
procedural irregularity warranted more stringent scrutiny than the deferential arbitrary and
capricious standard of review. Id. at 68. In the absence of a financial conflict or a
procedural irregularity, however, we have found that it was error to employ the
11
heightened standard of review to an employer’s decision. Vitale v. Latrobe Area Hosp.,
420 F.3d 278, 283 (3d Cir. 2005).
Thus, we must determine whether the District Court’s application of the
heightened standard of review was warranted in light of the fact that FedEx is an
employer and not an insurance company. We conclude after careful review of the record
that FedEx, even though it both funds and administers its Plan, did not have a financial
conflict of interest inasmuch as it qualified as the “typical employer” described in Pinto.
214 F.3d at 388. Its contributions to the Plan were actuarially grounded and irrevocably
made to the Trust Fund. The assets of the Trust were used exclusively for the payment of
benefits under the Plan and administrative costs. In the event the Trust was unable to pay
benefits due under the Plan, FedEx was under no obligation to make up the shortfall.
Pinto, 214 F.3d 388. Moreover, FedEx had contracted with Kemper to initially process
its claims. Kosiba, 384 F.3d at 61. Indeed, Hunter did not contend that a financial
conflict of interest existed.
Instead, Hunter asserted that heightened review was warranted because of
procedural anomalies. We find no basis for concluding that there was a procedural
irregularity, as in Kosiba, which would justify application of the heightened arbitrary and
capricious standard of review. As the District Court pointed out in its memorandum,
Hunter did not “allege that FedEx failed to comply with Plan procedures.”
Accordingly, in the absence of a financial conflict of interest or a procedural
12
irregularity, FedEx’s decision to terminate Hunter’s LTD benefits should have been
reviewed under the deferential arbitrary and capricious standard. For that reason, we
conclude that the District Court erred by applying the heightened arbitrary and capricious
standard of review.
III.
Ordinarily, we would remand to allow the District Court to apply the correct
standard of review. Remand is unnecessary, however, because the District Court
concluded that the BRC’s decision was “so flawed that it could not stand even if we had
applied the highly deferential ‘arbitrary and capricious’ standard.”
“Under the arbitrary and capricious (or abuse of discretion) standard of review, the
district court may overturn a decision of the Plan administrator only if it is ‘without
reason, unsupported by substantial evidence or erroneous as a matter of law.’” Abnathya
v. Hoffman-La Roche, Inc., 2 F.3d 40, 45 (3d Cir. 1993) (quoting Adamo v. Anchor
Hocking Corp., 720 F. Supp. 491, 500 (W.D. Pa. 1989)). “This scope of review is narrow,
and ‘the court is not free to substitute its own judgment for that of the defendants in
determining eligibility for plan benefits.’” Abnathya, 2 F.3d at 45 (quoting Lucash v.
Strick Corp., 602 F. Supp. 430, 434 (E.D. Pa. 1984)).
We conclude that the District Court also erred in applying, in the alternative, the
deferential arbitrary and capricious standard of review. The BRC terminated Hunter’s
LTD benefits because the objective evidence she submitted did not demonstrate that she
13
had a physical impairment that precluded her from engaging in any substantially gainful
activity on either a part-time or full-time basis. The District Court concluded that the
BRC’s determination was not supported by substantial evidence because Hunter had
submitted objective evidence, namely Dr. Suscavage’s 2002 progress notes, the 2002
MRI test result, and Dr. Tracy’s report. Yet neither Dr. Suscavage’s notes, including the
visual field test result, nor the MRI, explained how their findings affected Hunter’s
current ability to function and engage in substantial gainful activity. Although Dr.
Tracy’s report explained that Hunter was limited in her ability to function, he opined that
she was unable to perform her previous managerial position with FedEx. Hunter’s
inability to perform her previous work with FedEx, however, did not establish that she
had a total disability as defined by the Plan.
In addition, the District Court further explained that the BRC’s decision was
deficient because it relied on the opinions of its peer review physicians, who accorded
more weight to Dr. Liu’s report than to the MRI test result and Dr. Suscavage’s visual
field test. Although the District Court may have concluded that the visual field test result
should trump the opinion of Dr. Liu, a reviewing court may not substitute its judgment
for that of the BRC. Abnathya, 2 F.3d at 45. Rather, it must determine if the BRC’s
decision was without reason or unsupported by substantial evidence. In our view, it was
not unreasonable for the BRC to accord more weight to the opinion of a medical doctor,
who specializes in neurology and ophthalmology at a major university hospital and who
14
based his opinion on his physical examination of the patient, than to a test result obtained
by an optometrist that is unaccompanied by any explanation regarding how the test’s
findings limit that patient’s ability to function.
Nor do we find the decision to terminate benefits suspect because it occurred
several years after benefits had been awarded. It is not uncommon for benefit plans to
periodically review a beneficiary’s status. Here, the initial steps to investigate Hunter’s
continued eligibility occurred only after Dr. Perlson opined that she could work on a less
than full time basis as long as she was not required to read.
In sum, the District Court did engage in a thorough review of the medical
evidence. Application of the deferential standard of review, however, establishes that the
BRC’s decision to terminate Hunter’s LTD benefits was not arbitrary and capricious. We
will reverse the judgment of the District Court. We will remand to the District Court with
the direction that it vacate the judgment in favor of Hunter and enter judgment in favor of
FedEx.
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