In McGahey v. Harvard University Flexible Benefits Plan, 2009 U.S.Dist. LEXIS 115364 (D.Mass. Dec. 11, 2009), the court wrestled with how to apply a deferential standard of review in evaluating a claim for disability benefits. The plaintiff, Rosemary McGahey, who had worked as the director of residential dining at Harvard University, injured her right knee when she slipped on ice while at work in February 2004.
After being out of work for several weeks, she was finally able to return; however, she had another fall in a dining hall in August 2004, which reinjured her knee, and also injured her hip and back, leaving her in excruciating pain. McGahey also suffered from anxiety and depression. Consequently, she applied both for workers’ compensation benefits and disability benefits through Harvard’s long-term disability plan. The disability plan initially approved benefits based on McGahey’s inability to perform her regular occupational duties; however, after the initial 24-month period of disability concluded, McGahey was denied ongoing benefits because the definition of disability transitioned to a requirement that she be unable to perform the duties of any occupation. Meanwhile, McGahey received both workers’ compensation benefits, as well as an award of Social Security disability benefits following a hearing before an administrative law judge.
When Harvard terminated the long-term disability benefit payments, McGahey appealed, and Harvard responded by having her undergo both a psychological and an orthopedic evaluation. The psychologist diagnosed “major depressive disorder, in partial remission,” but nonetheless deemed McGahey capable of employment. The orthopedic surgeon also concluded there was a “significant non-organic (psychological) component to the overall impairment” and deemed McGahey capable of engaging in full-time “modified sedentary job categories.”
Yet another examination by a second orthopedic surgeon concurred that while McGahey could not return to her prior job, she could perform other light-duty work. A follow-up vocational assessment identified seven jobs in the local economy consistent with the evaluation findings and McGahey’s skills and physical limitations. Consequently, the benefit denial was upheld, resulting in McGahey filing suit seeking restoration of her benefits.
Because the long-term disability benefits were provided to McGahey as an employee benefit, her claim was governed by ERISA, 29 U.S.C. § 1001 et seq. Presented to the court were cross-motions for summary judgment. Despite the invocation of Rule 56 of the Federal Rules of Civil Procedure, the court noted:
Summary judgment is, however, a misnomer as a “trial is usually not an option: in a very real sense, the district court sits more as an appellate tribunal than as a trial court. It does not take evidence, but, rather, evaluates the reasonableness of an administrative determination in light of the record compiled before the plan fiduciary.” Leahy v. Raytheon Co., 315 F.3d 11, 17-18 (1st Cir. 2002). Because of the quasi-appellate nature of the proceeding, “the non-moving party is not entitled to the usual inferences in its favor.” Orndorf v. Paul Revere Life Ins. Co., 404 F.3d 510, 517 (1st Cir. 2005). *20-*21.
The court further determined that language in the benefit plan triggered a deferential standard of review, the scope of which was explained by the court:
Under the arbitrary and capricious standard, a decision of a plan administrator will be upheld even where contrary evidence might suggest a different result, so long as the decision “is plausible in light of the record as a whole, … or, put another way, whether the decision is supported by substantial evidence in the record.” Leahy, 315 F.3d at 17. “Substantial evidence … means evidence reasonably sufficient to support a conclusion. Sufficiency, of course, does not disappear merely by reason of contradictory evidence. … [The] question [is] not which side [the court] believe[s] is right, but whether [the administrator] had substantial evidentiary grounds for a reasonable decision in its favor.” Doyle v. Paul Revere Life Ins. Co., 144 F.3d 181, 184 (1st Cir. 1998). *21-*22.
In other words, the court does not weigh the evidence, nor does the existence of contrary evidence render the decision arbitrary and capricious.
However, the court added that a conflict of interest is triggered when the plan administrator both funds the payment of benefits and decides the claim according to Metro. Life Ins. Co. v. Glenn, 128 S. Ct. 2343, 2348 (2008). Where the conflict is shown to have affected the claim decision, it is given greater weight; and the court found four factors required further examination: the disregard of the Social Security finding, the plan’s refusal to consider the workers’ compensation award, the “glossing over” of the opinions of the treating doctors, and questions about the impartiality of the doctors who examined McGahey.
As to the impact of the Social Security claim, the court cited Glenn’s finding of “procedural unreasonableness” when a disability plan requires an employee to seek SSDI benefits, but then minimizes the award of such benefits, since the “seemingly inconsistent positions were both financially advantageous” to the plan administrator. 128 S. Ct. at 2352. Although Harvard asserted that Social Security applies different standards for adjudication of benefits, the court agreed with the plaintiff that the standards used both by the plan and Social Security were substantially similar. Likewise, the court determined Harvard failed to give consideration to the workers’ compensation award.
Turning to the questioned impartiality of the examining doctors’ findings, the court pointed out that it had allowed discovery into plaintiff’s allegations that the doctors selected to perform the examinations were biased. The court allowed McGahey to find out the total number of examinations performed by the examining doctors and the statistics as to the number of times they found the claimants impaired. One physician was found to have recommended denial in each of the 22 cases he considered on behalf of the plan; another physician recommended denial in 80 percent of the claims he was referred (25 out of 31). The court then recounted that fourteen medical professionals had examined McGahey or were consulted in her case, and the only three who found she was malingering were the doctors hired by Harvard. That factor, plus the plan’s disregard of the Social Security and workers’ compensation awards, convinced the court that the denial of benefits was arbitrary and capricious. The court then set forth the heart of its conclusion:
It is true that the arbitrary and capricious standard is highly – one might even say reverentially – deferential to plan administrators. It is also true that plaintiffs seldom if ever prevail when the standard is applied. But seldom if ever cannot mean never at all, or the promise made to claimants that federal courts will review their benefits decisions for abuses of discretion would be a cruel and illusory exercise. *33.
The court therefore granted judgment in McGahey’s favor, along with an award of attorneys’ fees and costs.
The court’s view of the meaning of the arbitrary and capricious standard of review is consistent with several key citations included in the Glenn ruling: Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415-417 (1971) and Universal Camera Corp. v.NLRB, 340 U.S. 474, 490, 71 S. Ct. 456, 95 L. Ed. 456 (1951) establish a heightened duty to probe the record under review. According to Overton Park, despite a “presumption of regularity” to which an underlying “administrative” decision is entitled, the court should nonetheless conduct a “substantial inquiry” and a “thorough, probing, in-depth review.” 401 U.S. at 415. The citation to Universal Camera is also significant. Universal Camera expressly rejected the notion that deferential review begins and ends with a search for evidence supporting the reasonableness of the decision under consideration. 340 U.S. at 488. Rather, a reviewing court must satisfy itself that the determination under review was based on “adequate proof” in the record. Id. Further, a reviewing court must consider the totality of the evidence, and fully take into account any evidence in the record that is inconsistent with the determination. Id.
Finally, the Court directed lower courts to “assume more responsibility for the reasonableness and fairness” of claim determinations, and that courts are “not to abdicate the conventional judicial function.” 340 U.S. at 490.
Professor John Langbein of Yale University Law School, a highly influential ERISA scholar who was also cited by the Supreme Court in Glenn, wrote, “the proper role of the federal courts is to decide these cases fairly, and not slough them off on biased decision makers.” J.H. Langbein, “Trust Law as Regulatory Law: The Unum/Provident Scandal and Judicial Review of Benefit Denials Under ERISA,” 101 Northwestern U. L.Rev. 1315, 1334 (2007). This ruling exemplifies these principles by illuminating the bias of physician opinions that appear persuasive on their face and giving substance to Congress’ intent that ERISA be a vehicle for enforcing claimants’ rights to promised benefits.
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I have been an adjunct professor at The John Marshall Law School for the past 10 years, teaching employee benefits litigation. The program I teach in the Center for Tax Law & Employee Benefits, offers the only LLM and MS degree in Employee Benefits Law in the United States. The LLM degree program attracts newly admitted attorneys or seasoned attorneys who wish to learn more about employee benefits law, whereas the MS degree program is directed to human resource executives, actuaries, accountants, investment advisors and other employee benefits professionals who wish to become conversant with employee benefits law.
In an effort to allow LLM and MS candidates to jump start their degree program, the Center will begin offering many of the required courses online, via e-classes. The Web site that describes the courses and faculty is available at www.eclass.jmls.edu and is also available from the school’s main Web page.
The online courses are taught by the same instructors who teach the in-class courses. Thus, they will be just as comprehensive and extraordinary as the in-class instruction. The professors are able to provide insights and perspectives on the real-world practice of employee benefits law. Their instructional style is designed to engage every student in dialogue and discussion.
Classes begin the week of Jan. 18, 2010.
This article was initially published in the Chicago Daily Law Bulletin.