Opinion
No. C01-0177
October 11, 2002
ORDER
This matter comes before the court pursuant to trial on a stipulated record. The parties have consented to the exercise of jurisdiction by a United States Magistrate Judge pursuant to 28 U.S.C. § 636(c). Plaintiff brings this ERISA action to recover benefits under a disability pension program. For the reasons set forth below, the court finds in favor of the defendant.
Factual Background
The plaintiff, Rick Klaver, was employed by the defendant, Cargill, Inc., for over thirty years as a grinderman. On December 15, 1998, the plaintiff fell down some stairs at a job site in Iowa Falls. He briefly lost consciousness and was taken to the emergency room. Following his fall, the plaintiff began experiencing several physical and mental problems including problems with his knees and his back, and he was prescribed an anti-depressant medication, Paxil. From December 15, 1998 through June 14, 1999, the plaintiff was seeing a chiropractor and a psychiatrist. The plaintiff's mental problems began to increase in severity in January of 1999 through June of 1999 causing him to become increasingly moody, irritable and depressed at work.
On June 8, 1999, the plaintiff was involved in an incident at Cargill which eventually led to his termination. The plaintiff allegedly threatened to shoot his supervisors with an M-16 rifle. Because this behavior was in violation of Cargill's violence in the workplace policies, he was terminated a few days later. On June 10, 1999, the plaintiff applied for treatment of his mental condition. He claims that he informed the plant supervisor, Greg Lofstedt, that he was seeking treatment for depression and that he also planned on applying for a disability pension under the Cargill Plan. The plaintiff further claims Mr. Lofstedt allegedly told him that it was too late to apply for the benefits.
On June 14, 1999, the plaintiff was terminated by Cargill. He was 52 years old at the time. The plaintiff claims that he again indicated to Mr. Lofstedt that he wished to apply for disability benefits and Mr. Lofstedt told him that he could not receive such benefits and he would have to take his case to arbitration under Cargill's grievance policy. Later that same day, the plaintiff saw Dr. Ronald Larsen, who diagnosed him with major depression and confined the plaintiff to observation in a locked psychiatric unit. The only other evidence in the record of any previous psychiatric treatment for the plaintiff was the prescription of Paxil in December of 1998.
The plaintiff subsequently filed a grievance pursuant to a collective bargaining agreement challenging his termination and seeking reinstatement to his position. His grievance was heard on July 14, 2000 at which time the plaintiff denied making any threatening statements about shooting Cargill's managers with an M-16 rifle. The neutral arbitrator found that the plaintiff did threaten to shoot Cargill managers and denied his grievance.
The plaintiff filed a written application for disability retirement benefits on April 30, 2001, nine months after the denial of his grievance and over twenty-two months after he was terminated from Cargill. He applied for a disability pension under the Incorporated and Associated Companies Pension Plan for Union Represented Hourly Wage Employees (the Plan). The Plan is an employee benefit plan governed by the Employee Retirement Income Securities Act (ERISA). Cargill acts as both the employer and as the administrator of the Plan.
Cargill rejected the plaintiff's application on the ground that he was no longer an active employee. However, Cargill did give the plaintiff the option to begin drawing his vested pension benefits at age 55. The plaintiff subsequently submitted a request for review of Cargill's denial of disability retirement benefits stating that nothing in the Plan indicated that a disability retirement application must be filed while a person was still on the Cargill payroll. Following that request, Cargill submitted the plaintiff's medical records to Dr. Richard C. Cohan. After reviewing the records, Dr. Cohan concluded that the plaintiff was not permanently disabled as of the date he was discharged from employment. Cargill again denied benefits on the grounds that: (1) the plaintiff was not an active employee, and therefore was not a "participant" in the Plan at the time he submitted his application for a disability pension; and (2) he had not established that he was disabled within the meaning of the Plan as of his last date of employment. Based on Cargill's decision, the plaintiff filed the present suit pursuant to § 503(a)(1)(B) of ERISA seeking this court's review of Cargill's denial of his request for a disability pension.
Standard of Review
As a threshold matter, the court must determine the proper standard of review to apply in this case. "ERISA provides a plan beneficiary with the right to judicial review of a benefits determination." Woo v. Deluxe Corp., 144 F.3d 1157, 1160 (8th Cir. 1998). When reviewing a plan administrator's decision to deny benefits, "a reviewing court should apply a de novo standard of review unless the plan gives the `administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.'" Donaho v. FMC Corp., 74 F.3d 894, 898 (8th Cir. 1996) (quoting Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)). "When an ERISA plan fiduciary . . . has authority to determine eligibility for an ERISA benefit plan or to interpret plan terms, the fiduciary's refusal to pay benefits under the plan is reviewed for an abuse of discretion." Fink v. Union Cent. Life Ins. Co., 94 F.3d 489, 491 (8th Cir. 1996) (citingBruch, 489 U.S. at 115).
It is undisputed in this case that the Cargill Plan administrator was explicitly provided with the discretionary authority to determine eligibility for benefits and to construe and interpret the Plan. Under § 38 entitled "Plan Administrator," the Plan states:
If there shall arise any misunderstanding or ambiguity concerning the meaning of any of the provisions of the Plan, the Plan Administrator shall have the sole right to construe such provisions, and, if consistent with the Plan the Fiduciary's decision shall be final. The Plan Administrator may establish such rules and regulations supplementing the Plan as it considers desirable.
Because the Plan vests discretionary authority in the administrator, a court would typically review the administrator's decision for abuse of discretion. Under this deferential abuse of discretion standard, "an administrator's decision to deny benefits will stand if reasonable."Farley v. Ark. Blue Cross Blue Shield, 147 F.3d 774, 777 (8th Cir. 1998). The decision by the Plan administrator to deny benefits to the plaintiff will be upheld unless it is found to be arbitrary and capricious. Lickteig v. Bus. Men's Assurance Co. of America, 61 F.3d 579, 583 (8th Cir. 1995). The decision will be deemed arbitrary and capricious only if it was "`extraordinarily imprudent or extremely unreasonable.'"Lutheran Med. Ctr. v. Contractors Health Welfare Plan, 25 F.3d 616, 620 (8th Cir. 1994) (citing Cox v. Mid-American Dairymen, Inc., 965 F.2d 569, 572 (8th Cir. 1992)). "This deferential standard reflects our general hesitancy to interfere with the administration of a benefits plan." Layes v. Mead Corp., 132 F.3d 1246, 1250 (8th Cir. 1998).
The plaintiff in this case argues that a less deferential standard of review should be used in certain situations such as this one. Courts "ordinarily review the administrator's decision for abuse of discretion," but the Eighth Circuit has stated that may not always be the case. Heaser v. Toro Co., 247 F.3d 826, 833 (8th Cir. 2001). A plaintiff may obtain a less deferential review by presenting "material, probative evidence demonstrating that (1) a palpable conflict of interest or a serious procedural irregularity existed, which (2) caused a serious breach of the plan administrator's fiduciary duty to [him]." Woo, 144 F.3d at 1160. In other words, a court must decide whether the plaintiff has presented such "evidence that gives rise to `serious doubts as to whether the result reached was the product of an arbitrary decision or the plan administrator's whim. . . .'" Layes, 132 F.3d at 1250 (citing Buttram v. Central States S.E. S.W. Areas Health Welfare Fund, 76 F.3d 896, 899-900 (8th Cir. 1996)).
The plaintiff argues that the less deferential standard is appropriate here due to a conflict of interest because Cargill acts as both the employer and the Plan administrator. The plaintiff therefore contends that Cargill had a financial interest in denying his claim. Also, the plaintiff points to the fact that Cargill relied on the opinion of a non-examining physician to support its contention that the plaintiff was not disabled when Cargill should have consulted a mental health expert. The plaintiff concludes that this is a procedural irregularity that has some connection to the substantive decision reached. The plaintiff, therefore, argues that the court should apply a sliding-scale standard of review where "the evidence supporting the plan administrator's decision must increase in proportion to the seriousness of the conflict or procedural irregularity." Woo, 144 F.3d at 1162.
Cargill, on the other hand, argues that it does not have a conflict of interest simply because it is the employer and the Plan administrator. It also points out the fact that it is disability retirement benefits under a pension plan that are in issue here, not a disability insurance plan such as the one in Woo on which the plaintiff relies, and the Eighth Circuit has never applied Woo to a pension plan. See id. Cargill further points out that the Plan in issue in this case is a funded, defined benefit, non-contributory pension plan covering the employees of Cargill and its associated companies. Contributions by Cargill are put into a trust and the funds in that trust are only used for payment of benefits under the Plan, so therefore, whether a participant obtains a disability pension has no direct financial effect on Cargill. Finally, Cargill points out that the disability retirement provisions of the Plan do not affect a participant's vested retirement benefits. Regarding the plaintiff's claim of procedural irregularity, Cargill contends that Dr. Cohan was an independent physician not employed at Cargill so it was not improper to rely on his medical opinion that the plaintiff was not disabled.
The court finds that abuse of discretion is the correct standard of review to apply. The plaintiff has not demonstrated that the less deferential standard is appropriate in this case. The plaintiff has not established a palpable conflict of interest, nor has he demonstrated a procedural error that would invoke the less deferential standard. Therefore, the standard of review should not be modified.
The Plaintiff Was No Longer an Active Employee
Cargill's first basis for denying the plaintiff's application for disability retirement benefits was that he did not apply for the benefits while he was an active employee, rather, he applied twenty-two months after he was terminated. The plaintiff argues that he took two steps that entitle him to benefits: (1) he applied for services through Cargill's health carrier on June 10, 1999 for mental health treatment; and (2) he told Mr. Lofstedt on June 10, 1999 that he wished to apply for disability benefits through the Plan.
Section 11.1 of the Plan states:
A Participant shall be eligible to receive a Disability Retirement Benefit on or after having attained age forty-five (45) and having completed fifteen (15) or more years Continuous Service and having the Company determine upon application by such Participant that he is totally and permanently disabled . . .
Section 1.8 of the plan defines "Participant":
For purposes of the Plan a Participant shall include any active employee . . . who is eligible to and becomes a Participant in this Plan . . .; the Plan comprehends that any person who is no longer an active employee but who has attained pension eligibility under the provisions to any Prior Plan as it existed at the time of such persons termination of employment shall continue to participate to the extent and the amount of the provisions of any Prior Plan under which he retired.
The plaintiff argues that he was an active employee on June 10, 1999, the applicable date according to him, because he remained on the payroll and there is no other definition of "active employee" anywhere in the Plan. Further, he contends that he became a participant because he met the requirements of § 11.1, specifically, he has attained 45 years of age and worked at Cargill for over fifteen continuous years. The plaintiff also contends that § 1.8 does not specify that a person must be an active employee at the time they apply for benefits. Therefore, he argues he need only be active at the time the determination is made of whether or not he is a participant. In sum, the plaintiff argues that he has established that he applied for a disability pension while still an employee of Cargill.
Cargill, however, construed the Plan as requiring an applicant for disability retirement benefits to be a participant at the time of his application, not at the time of disability. The plaintiff argues that this interpretation that the person be an active employee at the time of the application is not consistent with the terms of the Plan. Cargill states that the Plan defined a participant as either an active employee or one eligible under a Prior Plan, for example reaching the age of 65 and collecting vested retirement benefits, and the plaintiff was neither of these. Further, Cargill points out that if there was some confusion regarding this issue, it is up to the Plan administrator to interpret the provisions of the Plan and the interpretation here was reasonable. Finally, Cargill states that the plaintiff could have received his deferred vested pension but he declined to apply and instead continued his quest for a disability pension.
"When determining whether an administrator's interpretation of a plan is reasonable, [courts] apply a five-factor test." Farley, 147 F.3d at 777 n. 6 (citing Finley v. Special Agents Mut. Benefit Ass'n, Inc., 957 F.2d 617, 621 (8th Cir. 1992)). The Eighth Circuit in Finley laid out five factors for courts to consider in determining whether the plan administrator's interpretation of terms of the Plan was reasonable: (1) whether the plan administrator's interpretation is consistent with the goals of the Plan; (2) whether the plan administrator's interpretation renders any language in the Plan meaningless or internally inconsistent; (3) whether the plain administrator's interpretation conflicts with the substantive or procedural requirements of the ERISA statute; (4) whether the plan administrator has interpreted the words at issue consistently; and (5) whether the plan administrator's interpretation is contrary to the clear language of the plan. Finley, 957 F.2d at 621-22. The court went on to hold in Solger:
[W]e will reverse the plan administrator's interpretation of the plan only if it is unreasonable. We will sustain the administrator's interpretation if it is reasonable, even if it is not the only reasonable interpretation of the plan, and even if we would have chosen a different interpretation had the initial decision been ours to make.Solger v. Wal-Mart Stores, Inc., 144 F.3d 567, 568 (8th Cir. 1998).
The court finds that the Cargill Plan administrator's interpretation of the terms of the Plan was reasonable, and not arbitrary and capricious. The term "active employee" was not defined anywhere in the Plan and it was therefore left up to the Plan administrator to interpret the meaning of that term pursuant to § 38 of the Plan. It was certainly reasonable for the administrator to conclude that the applicant's status of "active employee" is to be determined at the time of the application, not at the time of the disability. Similarly, it was reasonable for the administrator to interpret the terms of the Plan so as to require the application for disability retirement benefits be in writing. The plaintiff filed his written application for benefits almost two years after being terminated and therefore, under Cargill's reasonable interpretation of the terms of the Plan, he was no longer eligible to apply for disability retirement benefits.
Determination of the Plaintiff's Disability
Finally, in addition to his contention that he was in fact eligible to apply for a disability pension, the plaintiff asserts that he has established that he is permanently and totally disabled and is therefore entitled to disability retirement benefits under the Plan. He points out that the Plan requires an employee to demonstrate disability on the basis of competent medical testimony, which the plaintiff alleges he has done. Cargill argues that even if the plaintiff were eligible to apply for a disability pension, he has not established that he was in fact disabled. Specifically, Cargill points to the fact that the only evidence of the plaintiff's alleged permanent disability came after termination of his employment. Further, several of the plaintiff's doctors made statements that he could return to work following his treatment and the plaintiff himself made statements expressing his desire to return to work.
The plaintiff submitted to Cargill the reports of several physicians describing both his physical and mental impairments. The reports indicate that his physical problems included back injury, problems with his knees, obesity, chronic headaches, sleep apnea and foot pain. Dr. Larsen diagnosed the plaintiff with major depression. Cargill submitted all of the plaintiff's medical reports to Dr. Cohan to get an independent assessment of the plaintiff's medical condition. Dr. Cohan concluded that the plaintiff was not permanently and totally disabled. Based on this assessment and the other information known to it, Cargill found that, even if the plaintiff was eligible to apply for a disability pension, he failed to establish that he was permanently and totally disabled within the meaning of the Plan. Section 11.1 of the Plan states:
A determination that a Participant is totally and permanently disabled shall be made by the Company on the basis of competent medical testimony satisfactory to the Company that such person is unable to engage in any gainful occupation for which the employee is reasonably educated, trained or experienced by reason of medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration, and that such condition has existed for six (6) months or more.
When a court is asked to review the reasonableness of a Plan administrator's evaluation of the facts to determine application of the Plan, the court must "focus on whether the decision is supported by substantial evidence." Farley, 147 F.3d at 777 (citing Donaho, 74 F.3d at 898-900). Substantial evidence is "`more than a scintilla but less than a preponderance.'" Woo, 144 F.3d at 1162 (quoting Donaho, 74 F.3d at 900 n. 10). Courts are only to consider the evidence that was before the Plan administrator when the claim was denied. Brown v. Seitz Foods, Inc., Disability Benefit Plan, 140 F.3d 1198, 1200 (8th Cir. 1998). Further, courts are not to "substitute [their] own weighing of the evidence for that of the administrator." Farley, 147 F.3d at 777 (citing Cash v. Wal-Mart Group Health Plan, 107 F.3d 637, 641 (8th Cir. 1997)). "The unreasonableness of a plan administrator's decision can be determined by both the quantity and quality of the evidence supporting it." Donaho, 74 F.3d at 900.
The Cargill Plan administrator's determination that even if the plaintiff was eligible to apply for a disability pension, he did not establish that he was disabled, is supported by substantial evidence. While it is true that the plaintiff has been diagnosed with major depression, he has provided no medical records regarding his mental condition before his termination from Cargill, aside from the records regarding his prescription for Paxil. There were also statements from doctors who said the plaintiff could eventually return to work with no mention of a permanent disability. Further, Cargill supplied all of the plaintiff's records to Dr. Cohan to obtain an independent medical assessment. Dr. Cohan found the plaintiff not disabled. Therefore, even if Cargill found that the plaintiff was eligible to apply for a disability pension, its finding that he was not disabled is a reasonable determination and is supported by substantial evidence. There is no evidence that the defendant abused its discretion by not complying with ERISA procedures nor was its decision to deny benefits extremely unreasonable. Cargill was acting within the scope if its authority when it denied disability retirement benefits to the plaintiff.
Based upon the foregoing,
IT IS ORDERED that the court finds in favor of defendant and against plaintiff. This action is dismissed. The Clerk of Court shall enter judgment for the defendant.