A split in the circuits exists for ERISA benefits disputes
Chicago Daily Law Bulletin
February 1, 2010
by MARK D. DEBOFSKY
A recent ruling from the 1st Circuit illustrates a marked disparity between how different federal circuits adjudicate ERISA claims.
In Richards v. Hewlett-Packard Corp., 2010 U.S.App.LEXIS 1010 (1st Cir., Jan. 19), the plaintiff, Edward Richards, who worked for Digital Equipment Corporation from 1984 to 1991 as a software engineer, became disabled at age 39 due to chronic fatigue syndrome and fibromyalgia. Richards received disability insurance benefits from Prudential Insurance Company of America, the insurer for Digital (which was later acquired by Hewlett-Packard), until 2001, when benefits were terminated following a file review performed by Dr. Gwen Brachman, who reported that Richards was not physically impaired from performing the essential functions of a sedentary job.
Richards made three attempts to appeal Prudential's determination, yet additional file reviews performed for Prudential by Dr. Paul Howard and Dr. D. Dennis Payne concluded that Richards was capable of working. Richards then filed suit; and based on a magistrate judge's report and recommendation, judgment was entered in Prudential's favor despite the court's utilization of a de novo standard of adjudication. Richards appealed; and the reviewing court began its discussion upholding the district court's judgment by explaining that de novo consideration of ERISA claims requires the court "to independently weigh the facts and opinions in the administrative record to determine whether the claimant has met his burden of showing that he is disabled within the meaning of the policy. We grant no deference to the administrators' opinions or conclusions. Orndorf v. Paul Revere Life Ins. Co., 404 F.3d 510, 518 (1st Cir. 2005)." *16. The court added, "review is based on the administrative record and represents an ultimate conclusion as to a claimant's disability to be drawn from the facts." *17.
As to the merits, the appeals court rejected all of the plaintiff's arguments. First, the court dismissed the plaintiff's argument that no weight was given to the treating physician's opinion and reframed the argument as maintaining that the treating physician's opinion should have been given controlling weight; however, the Supreme Court has made it clear that no special deference need be given to a treating doctor's opinion. Black & Decker Disability Plan v. Nord, 538 U.S. 822, 831, 123 S. Ct. 1965, 155 L. Ed. 2d 1034 (2003).
The court also disposed of the plaintiff's argument that the insurer failed to give weight to the Social Security award. The court pointed out it was clear from the record that Prudential did consider the Social Security disability determination, but that there was ample justification for not giving it controlling weight, particularly since no attempt was made to compare the plan's criteria with Social Security's and because the administrative law judge's determination did not preclude all sedentary work. The court also noted that the Social Security determination was made in 1992, and there was no evidence the award was ever subsequently reviewed to determine whether Richards still qualified.
Finally, the court overruled the plaintiff's objection that the determination was made by non-examining doctors. The court found no obligation for Prudential to have had Richards examined. Hence, the court concluded that despite the length of time during which Richards was receiving benefits, Prudential had the legal right to review his ongoing entitlement to benefits, and Richards failed to meet his burden of proving his continued entitlement to benefits. Accordingly, the judgment was affirmed.
This case illustrates the profound split in the circuits as to the scope of how courts adjudicate ERISA benefit disputes under the de novo standard. The 1st Circuit's explanation of the scope of its review describes a review proceeding limited to a claim record. The 7th Circuit takes a much different position, however. In Krolnik v. Prudential Ins. Co. of America,570 F.3d 841 (7th Cir. 2009), the appeals court explained that the term "de novo review" is misleading - what Firestone [Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989)] requires is not "review" of any kind; it is an independent decision rather than "review" that Firestone contemplates. The Court repeatedly wrote that litigation under ERISA by plan participants seeking benefits should be conducted just like contract litigation, for the plan and any insurance policy are contracts. 489 U.S. at 112-13. In a contract suit the judge does not "review" either party's decision. Instead the court takes evidence (if there is a dispute about a material fact) and makes an independent decision about how the language of the contract applies to those facts.
570 F.3d at 843 (emphasis in original). Krolnik eschewed a record review proceeding and concluded that trials are necessary if the evidence is in conflict. Krolnik also has a different view of summary judgment in ERISA cases than the 1st Circuit. The 1st Circuit explained, "summary judgment is simply a vehicle for deciding the issue." Orndorf, 404 F.3d at 517. Accordingly, the non-moving party is not entitled to the usual inferences in its favor. Id. In contrast, Krolnik ruled a trial is essential if there is a conflict in the evidence, and that Krolnik must be entitled to offer medical evidence and cross-examine the physicians who rendered unfavorable opinions. 570 F.3d at 844 (citing Richardson v. Perales, 402 U.S. 389, 91 S. Ct. 1420, 28 L. Ed. 2d 842 (1971) (even when written medical reports are used as the principal evidence in a disability-benefits proceeding, the adverse party is entitled to cross-examine the physicians who prepared the reports).
Had Richards been given the opportunity to cross-examine Prudential's doctors, he would have had a fruitful basis for doing so since all three of the reviewing doctors have drawn judicial criticism raising ample doubt as to the doctors' objectivity and the reliability of their opinions. Brachman was singled out in Neumann v. Prudential Ins.Co. of America,367 F.Supp.2d 968, 991 (E.D.Va. 2005) "because she does not appear to believe that any patient with fibromyalgia can be totally disabled from sedentary work." (emphasis in original). The court was critical of her generalizations about fibromyalgia and found her opinion "not persuasive." Like Brachman, Dr. Paul Howard is also a frequently retained file reviewer for Prudential utilized to review fibromyalgia claims. In Lanoue v. Prudential Ins.Co. of America, 2009 U.S.Dist.LEXIS 91698 (D.Conn. Sept. 25, 2009), Howard's opinion was almost word for word the same as what he wrote in Richards. The court was critical of Howard for using generalizations such as an absence of abnormal range of motion when that is exactly what one would find with fibromyalgia patients. The court further complained that "Dr. Howard "convey[ed] conveys that pain of fibromyalgia is never sufficient to result in a qualifying disability" and concluded that he failed to weigh or consider all the relevant evidence. Consequently, the court rejected his opinion as lacking substantial evidence. Nor has Payne, another doctor frequently retained by insurers to support a denial of claims based on fibromyalgia, received a better reception in the courts. In Magee v. Metro.Life Ins.Co., 632 F.Supp.2d 308 (S.D.N.Y. 2009), the court found his conclusions "seriously flawed." And in Minton v. Deloitte & Touche USA LLP Plan, 631 F. Supp. 2d 1213(N.D.Cal.2009), the court rejected a report from Payne nearly identical to the report rendered in Richards, criticizing him for basing his opinion that a claimant diagnosed with fibromyalgia was not disabled "based on a lack of evidence that one would not expect to find in the first place." 631 F.Supp. at 1219. The court also deemed his report unreliable because it was based on "a belief that pain that is not supported by objective findings can never be so severe as to interfere with one's ability to function in the workplace." Id.
The 7th Circuit's citation in Krolnik of Richardson v. Perales in Krolnik is significant because the application of that ruling would have precluded the admissibility of the reports generated by Prudential's reviewing doctors without cross-examination. Perales permitted the admissibility of reports prepared only by doctors who had examined the claimant and were available for cross-examination. Obviously, the examination requirement is consistent with Rule 602 of the Federal Rules of Evidence which mandates personal knowledge as the keystone of testimonial admissibility. While Rule 702 arguably permits non-examining expert testimony, that Rule's restrictions on admissibility would have barred all three of Prudential's consultants based on the rulings critical of Brachman, Howard and Payne showing that they have consistently failed to meet Rule 702's requirements - "1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case." While it is impossible to predict the outcome had a trial taken place, the fact that Richards was acknowledged as disabled by Prudential for ten years, adjudicated as disabled by the Social Security Administration, and had the unwavering support of his treating physician, the file review he was given afforded him far weaker protection than the trial he would have received in the 7th Circuit.