This article has been published in “The Advocate”, a monthly publication of the Arizona Association for Justice/Arizona Trial Lawyers Association, July-August 2015 issue, @2015 by Steven J. Bruzonsky, Esq.
ERISA Liens: The Ninth Circuit Pritchard Case, Part 1
In Oldoerp v. Wells Fargo & Company LongTerm Disability Plan, No. 11-16369 (9th Cir. 11-21-2012), the Ninth Circuit held that the district court erred in reviewing MetLife’s denial of long-terms disability benefits only for abuse of discretion, per the Summary Plan Description (SPD). The Ninth Circuit reversed and remanded the case back to the district court, to review this denial de novo. Apparently the court considered the Certificate of Insurance, which failed to set forth any standard of review for denial of long-term disability benefits, as part of the official governing Plan Document. However, this case is a nonpublished Memorandum decision, which per court rules is not citable as legal authority.
However, the Ninth Circuit, in Prichard v. Metro. Life Ins. Co., Docket 12-17355 (9th Cir. 4-21-2015), is a published decision with the same essential facts and holding. In Pritchard, the Ninth Circuit gives us clear instruction on how to apply dicta in the previous U.S. Supreme Court decisions of CIGNA Corp. v. Amara, 131 S. Ct. 1866, 563 U.S. ___ (2011) and U.S. Airways v. McCutchen, 133 S.Ct. 1537, 569 U.S. ___, 133 S.Ct. 1537 (2013) regarding the Summary Plan Description (SPD) and official governing Plan Document in ERISA lien cases. In this regard, please my previous “Liens Corner” articles July – August 2011 regarding the Amara case, and July – August 2013 regarding the McCutchen case.
In my opinion, this Ninth Circuit decision in Pritchard essentially holds that:
1. The ERISA Plan may in writing incorporate by reference other documents, such as the long-term disability insurance certificate in the Pritchard case, as part of the official governing Plan Document. If this is done, then such documents are part of the official governing Plan Document which is a binding contract between the ERISA Plan and its Plan participants.
2. If the ERISA Plan has not in writing incorporated by reference the SPD as part of the official governing Plan Document, then the SPD is merely an informational summary with no contractual effect.
3. As Pritchard does not involve any SPD being incorporated by reference into the official governing Plan Document, this still leaves open the argument that the SPD(s) cannot be incorporated by reference as part of the official governing Plan Document, because ERISA expressly defines the SPD(s) and “written instrument”/official governing Plan Document as separate documents.
4. The Plan Administrator’s or other Plan official’s statement that the SPD is part of or functions as the official governing Plan Document is of no legal effect when there is language in the SPD to the contrary, such as the SPD stating that “official plan documents . . . remain the final authority” and “shall govern” in the event the SPD’s terms conflict with those of official Plan Documents.
5. An ERISA Plan may purchase long-term disability or other insurance, and if the Insurance Certificate states therein that it is or is part of the official governing Plan Document(s), then it qualifies legally as an official governing Plan Document.
In this case: MetLife (administering IBM’s long-term disability plan) terminated Pritchard’s long-term disability benefits because insufficient medical evidence supported the existence of a “continuing disability” as defined by the Plan. After a series of unsuccessful appeals to Metlife, Pritchard brought this action in district court under 29 U.S.C. § 1132(a)(1)(B). The parties submitted cross motions for summary judgment. The district court observed that the choice of which standard of review to apply "[d]epend[s] on the language of the ERISA plan at issue," because a court must review a denial of benefits de novo "unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). The district court concluded that it should review MetLife's denial of benefits for an abuse of discretion because it found that the Summary Plan Description (SPD) was the governing plan document and unambiguously granted MetLife discretionary authority to determine benefit eligibility. The district court then reviewed and affirmed MetLife's decision, concluding that MetLife did not abuse its discretion in denying Prichard additional benefits.
The Ninth Circuit vacated the district court’s judgment, holding that the district court erred in reviewing the denial of benefits for an abuse of discretion, rather than de novo. Although the SPD conferred discretionary authority upon the plan administrator, the SPD disclaimed that it was part of the official governing Plan Document, as the SPD stated that "official plan documents . . . remain the final authority" and "shall govern" in the event the SPD's terms conflict with those of official Plan documents. The only official governing Plan Document was the long-term disability insurance certificate, which failed to confer discretionary authority upon the Plan Administrator.
Some quotes from this Ninth Circuit opinion follow:
”In support of its argument for an abuse of discretion standard, MetLife pointed to language in its Summary Plan Description (SPD) that stated, "Plan fiduciaries shall have discretionary authority to interpret the terms of the [Long-Term Disability] Plan and to determine eligibility for and entitlement to [Long-Term Disability] Plan benefits." Prichard countered by citing the Supreme Court's decision in CIGNA Corp. v. Amara, 131 S. Ct. 1866, 1877 (2011), which held that "the terms of statutorily required plan summaries . . . may [not] be enforced . . . as the terms of the plan itself." Prichard argued that the district court was required to review MetLife's decision de novo because Amara precluded MetLife from asserting the SPD's terms as those of the Plan, and no other Plan document in the administrative record conferred discretionary authority upon MetLife. - - -
Here, it is undisputed that the only document in the record that confers discretionary authority upon MetLife is the SPD. Prichard argues that after Amara, a grant of discretion located only within an SPD (as opposed to a formal plan document) is insufficient to warrant discretionary review. However, MetLife argues that Prichard misapprehends the scope of the Plan. According to MetLife, the SPD is the Plan (i.e., it is the only formal Plan document), and therefore the SPD's terms warrant discretionary review.”
The next issue’s “Liens Corner” article will include more “juicy” quotes from this Ninth Circuit Pritchard decision discussing ERISA official governing Plan Documents, Summary Plan Descriptions, and that certain plan documents, such as insurance certificates (but not necessarily SPDs) may be incorporated by reference into the official governing Plan Documents.