Schwing v. Lilly Health Plan ( 2009 )

Opinions of the United
2009 Decisions States Court of Appeals
for the Third Circuit
4-14-2009
Schwing v. Lilly Health Plan
Precedential or Non-Precedential: Precedential
Docket No. 06-4671
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Recommended Citation
"Schwing v. Lilly Health Plan" (2009). 2009 Decisions. Paper 1445.
http://digitalcommons.law.villanova.edu/thirdcircuit_2009/1445
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 06-4671
ESTATE OF KEVIN SCHWING
v.
THE LILLY HEALTH PLAN; THE ELI LILLY
AND COMPANY LIFE INSURANCE AND
DEATH BENEFIT PLAN; THE ELI LILLY AND
COMPANY HEALTH CARE FLEXIBLE SPENDING PLAN;
THE ELI LILLY AND COMPANY DEPENDENT DAY CARE
FLEXIBLE SPENDING PLAN; THE LILLY SEVERANCE
PAY PLAN; THE ELI LILLY AND COMPANY HOLIDAY
AND VACATION PLAN; THE LILLY DENTAL PLUS
PLAN; PCS PHARMACY BENEFITS MANAGEMENT
SERVICE PROGRAM; THE LILLY EMPLOYEE SAVINGS
PLAN; THE LILLY RETIREMENT PLAN; ELI LILLY AND
COMPANY, INDIVIDUALLY AND AS PLAN SPONSOR,
FIDUCIARY AND ADMINISTRATOR OF THE LILLY
RETIREMENT PLAN, AND THE LILLY SEVERANCE PAY
PLAN, AND THE ELI LILLY AND COMPANY HOLIDAY
AND VACATION PLAN, AND THE LILLY HEALTH PLAN,
AND THE LILLY DENTAL PLUS PLAN, AND PCS
PHARMACY BENEFITS MANAGEMENT SERVICE
PROGRAM; THE EMPLOYEE BENEFITS COMMITTEE,
AS ADMINISTRATOR AND NAMED FIDUCIARY OF THE
LILLY RETIREMENT PLAN, AND THE LILLY
SEVERANCE PAY PLAN, AND THE ELI LILLY AND
COMPANY HOLIDAY AND VACATION PLAN, AND THE
LILLY HEALTH PLAN, AND THE LILLY DENTAL PLUS
PLAN, AND PCS PHARMACY BENEFITS MANAGEMENT
SERVICE PROGRAM; LILLY GLOBAL SHARES STOCK
OPTION PLAN,
Appellants
(AMENDED AS PER THE CLERK'S 6/19/08 ORDER)
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
(D.C. Civil No. 03-cv-04848)
District Judge: The Honorable James Knoll Gardner
Argued: March 5, 2009
Before: BARRY, GREENBERG, Circuit Judges, and
ACKERMAN,* District Judge
(Opinion Filed: April 14, 2009)
Ellen E. Boshkoff, Esq. (Argued)
Baker & Daniels
300 North Meridian Street
Suite 2700
Indianapolis, IN 46204-0000
Counsel for Appellants
Michael S. Misher, Esq. (Argued)
Zarwin, Baum, DeVito, Kaplan, Schaer & Toddy
1515 Market Street
Suite 1200
Philadelphia, PA 19102-0000
Counsel for Appellee
*
Honorable Harold A. Ackerman, Senior United States
District Judge for the District of New Jersey, sitting by designation.
2
OPINION OF THE COURT
BARRY, Circuit Judge
The Lilly Health Plan appeals the order of the District Court
entering judgment on behalf of a claimant who sought severance
benefits pursuant to an ERISA-governed plan. Applying the
recent decision of the Supreme Court in Metropolitan Life
Insurance Co. v. Glenn, 128 S. Ct. 2343 (2008), we conclude that
the plan administrator’s decision to deny benefits was not an abuse
of discretion. We will, therefore, reverse the order of the District
Court.
I.
Kevin Schwing, an employee of Eli Lilly and Company
(“Lilly”), was terminated from his sales position on August 22,
2001 for falsifying call data. Schwing sought payment of
severance benefits pursuant to the Lilly Severance Plan 1 , but his
claim for benefits was denied by Lilly’s Employee Benefits
Committee (“EBC”), the plan administrator. The EBC determined
that Schwing was ineligible for severance benefits because he was
terminated for misconduct, misconduct to which both Schwing’s
supervisor and a representative from Lilly’s human resources
department stated to the EBC that Schwing had admitted. Schwing
challenged the EBC’s determination, denying that he had admitted
any wrongdoing and arguing that he had been terminated not for
the alleged misconduct, but either as a result of mistakes or in
retaliation for a grievance he filed in 1997. The EBC considered
Schwing’s arguments, and again denied his claim.
1
The Lilly Severance Plan is an ERISA-governed, self-
funded plan that grants the plan administrator full discretion to
interpret the terms of the plan and to decide any and all matters
arising from the plan.
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Following a bench trial, the District Court entered judgment
for Schwing, finding that the EBC’s decision was tainted by a
conflict of interest and that the EBC failed to adequately
investigate Schwing’s claim. Lilly now appeals.
Our review of the District Court’s legal conclusions is
plenary, and we apply the same standard of review that the Court
should have applied. Smathers v. Multi-Tool, Inc./Multi-Plastics,
Inc., Employee Health and Welfare Plan, 298 F.3d 191, 194 (3d
Cir. 2002). Because determining the correct standard of review is
a question of law, our review is plenary. We review the Court’s
findings of fact for clear error. Kosiba v. Merck & Co., 384 F.3d
58, 64 (3d Cir. 2004). The District Court had jurisdiction pursuant
to 29 U.S.C. § 1132(e)(1), and we have jurisdiction pursuant to 28
U.S.C. § 1291.
II.
In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101
(1989), the Supreme Court held that, when evaluating challenges
to denials of benefits in actions brought under 29 U.S.C. §
1132(a)(1)(B), district courts are to review the plan
administrator’s decision under a de novo standard of review,
unless the plan grants discretionary authority to the administrator
or fiduciary to determine eligibility for benefits or interpret the
terms of the plan. The Court recognized 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.”
Firestone, 489 U.S. at 115 (internal quotation omitted).
Prior to the Supreme Court’s recent decision in Glenn, we
interpreted this language in Firestone to mean that courts should
consider conflicts of interest affecting plan administration when
formulating the standard of review. See Pinto v. Reliance
Standard Life Ins. Co., 214 F.3d 377, 392 (3d Cir. 2000).
Accordingly, we adjusted the standard of review using a “sliding
scale” in which the level of deference we accorded to a plan
administrator would change depending on the conflict or conflicts
of interest affecting plan administration. Id.
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In Glenn, the Supreme Court interpreted the relevant
language in Firestone in a different way, holding that courts should
continue to apply a deferential abuse-of-discretion standard of
review in cases where a conflict of interest is present, but that
courts should take the conflict into account not in formulating the
standard of review, but in determining whether the administrator or
fiduciary abused its discretion:
We do not believe that Firestone’s statement implies
a change in the standard of review, say, from
deferential to de novo review. Trust law continues
to apply a deferential standard of review to the
discretionary decisionmaking of a conflicted trustee,
while at the same time requiring the reviewing judge
to take account of the conflict when determining
whether the trustee, substantively or procedurally,
has abused his discretion. We see no reason to
forsake Firestone’s reliance upon trust law in this
respect.
Glenn, 128 S. Ct. at 2350 (emphasis in original) (internal citations
omitted). The Court held that it was not “necessary or desirable”
for courts to create special procedural, evidentiary, or burden-of-
proof rules to account for conflicts of interest, and that “conflicts
are but one factor among many that a reviewing judge must take
into account.” Id. at 2351.
Accordingly, we find that, in light of Glenn, our “sliding
scale” approach is no longer valid. Instead, courts reviewing the
decisions of ERISA plan administrators or fiduciaries in civil
enforcement actions brought pursuant to 29 U.S.C. § 1132(a)(1)(B)
should apply a deferential abuse of discretion standard of review
across the board and consider any conflict of interest as one of
several factors in considering whether the administrator or the
fiduciary abused its discretion. Glenn, 128 S. Ct. at 2350; see
Champion v. Black & Decker (U.S.) Inc., 550 F.3d 353, 359 (4th
Cir. 2008) (abandoning sliding scale approach, after Glenn); Burke
v. Pitney Bowes Inc. Long-Term Disability Plan, 544 F.3d 1016,
1025 (9th Cir. 2008) (same); Doyle v. Liberty Life Assur. Co. of
Boston, 542 F.3d 1352, 1357 (11th Cir. 2008) (same); Wakkinen v.
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UNUM Life Ins. Co. of Am., 531 F.3d 575, 581 (8th Cir. 2008)
(same); see also Michaels v. The Equitable Life Assur. Soc. of U.S.
Employees, Managers, and Agents Long Term Disability Plan,
2009 WL 19344 (3d Cir. Jan. 5, 2009) (predicting the result we
now reach: that, after Glenn, we will no longer apply the sliding-
scale approach). But see Weber v. GE Group Life Assur. Co., 541
F.3d 1002, 1010-11 (10th Cir. 2008) (holding that the sliding scale
approach mirrors Glenn’s approach).
As Glenn recognized, benefits determinations arise in many
different contexts and circumstances, and, therefore, the factors to
be considered will be varied and case-specific. Glenn, 128 S. Ct. at
2351. In Glenn, factors included procedural concerns about the
administrator’s decision making process and structural concerns
about the conflict of interest inherent in the way the ERISA-
governed plan was funded; in another case, the facts may present
an entirely different set of considerations. Id. at 2351-52. After
Glenn, however, it is clear that courts should “take account of
several different considerations of which a conflict of interest is
one,” and reach a result by weighing all of those considerations.
Id. at 2351.
III.
Here, and in broad summary, the District Court applied a
heightened standard of review based on its finding of a conflict of
interest involving the EBC’s attorney, who was also an attorney for
Lilly. The Court concluded that the conflict of interest tainted the
deliberations to such a degree as to render the EBC’s decision
arbitrary and capricious. In the alternative, the Court concluded
that, even ignoring the conflict of interest, the EBC’s decision was
arbitrary and capricious largely because the EBC failed to
undertake a full investigation of Schwing’s claim.
We disagree with the District Court and find that the EBC
did not abuse its discretion2 when it denied Schwing’s claim for
2
Our prior caselaw referenced an “arbitrary and capricious”
standard of review, while Glenn describes the standard as “abuse
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severance benefits, even considering, as factors, the attorney’s
conflict of interest and the conflict of interest inherent in the fact
that Lilly funds and administers the plan. The attorney’s role vis-
a-vis the EBC was advisory only and her conduct, although
criticized by the Court, was altogether appropriate. We note that
ERISA fiduciaries are not required to engage independent counsel
to aid in their interpretation and administration of an ERISA plan,
Ashenbaugh v. Crucible Inc., 1975 Salaried Retirement Plan, 854
F.2d 1516, 1531-32 (3d Cir. 1988), and we note our disagreement
with the Court’s conclusion, based on certain cases interpreting the
attorney-client privilege, see, e.g., Washington-Baltimore
Newspaper Guild v. Washington Star Co., 543 F. Supp. 906 (D.D.C.
1982), that an attorney for an ERISA fiduciary owes a fiduciary-
like duty of neutrality to each ERISA claimant. Even if we
considered the purported conflict of interest here to be serious, the
decision to deny Schwing’s claim for severance benefits was not so
close that this factor would act as “tiebreaker” tipping the scales in
favor of finding that the EBC abused its discretion. See Glenn, 128
S. Ct. at 2351; Wakkinen v. UNUM Life Ins. Co. of Am., 531 F.3d
575, 582 (8th Cir. 2008). To the contrary, there was an abundance
of evidence of Schwing’s misconduct to support the denial of his
claim and a lack of evidence to support his theory of pretext.
We also conclude, as a matter of law, that the EBC
conducted an appropriate investigation of the claim. There is no
requirement that an ERISA administrator faced with an issue of
who is to be believed must conduct an independent investigation
into the veracity of each account. Pinto, 214 F.3d at 394 n.8; see
also Cord v. Reliance Standard Life Ins. Co., 362 F. Supp. 2d 480,
486 (D. Del. 2005). The administrative record before the District
Court was more than adequate to support the EBC’s denial of
Schwing’s claim, and we cannot conclude that the EBC’s decision
was “without reason, unsupported by substantial evidence or
of discretion.” We have recognized that, at least in the ERISA
context, these standards of review are practically identical.
Abnathya v. Hoffman-La Roche, Inc., 2 F.3d 40, 45 n.4 (3d Cir.
1993)
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erroneous as a matter of law.” Abnathya, 2 F.3d at 45 (internal
quotation omitted).
IV.
For the reasons stated above, we will reverse the judgment
of the District Court.
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