Evans v. Eaton Corporation Long Term Disability Plan, 514 F.3d 315 (4^th Cir. 2008) – decided January 8, 2008 – United States Court of Appeals for the Fourth Circuit – Robert E. Hoskins

I represented Evans. Evans is a tough one for me. On the one hand, I agree with the court’s analysis of the significance of the abuse of discretion standard with a self-funded plan. On the other, I disagree with the court’s factual conclusions based upon the record. So, although I agree with the legal analysis, I do not believe that the actual facts of the case “fit” with the legal analysis the court used. However, my opinion is, obviously, not the one that mattered.

In Evans, I represented the plaintiff who sought long term disability benefits from an ERISA governed long term disability plan. Evans’ employer, Eaton Corporation, sponsored, administered, and funded the plan. Most long term disability plans are insured, but the Eaton plan is not. The plan had procured many medical opinions that it decided warranted a denial of Evans’ claim. In the District Court, I argued that despite the “quantity” of medical opinions, they lacked “quality”. The District Court agreed and after analyzing the plan’s supporting medical opinions, found that each was lacking in some significant respect. The District Court ruled that Evans was entitled to the benefits she sought under ERISA. (To see a copy of the District Court’s decision in Evans, click here.) The defendant appealed to the United States Court of Appeals for the Fourth Circuit.

On appeal, the Fourth Circuit used the opportunity to stress a reviewing court’s role under the abuse of discretion standard in an ERISA case. The court held, in pertinent part:

“It is notoriously difficult to venture a general definition of the term “abuse of discretion,” and none is canonical; indeed the term has different meanings in different legal contexts. See 1 Steven Alan Childress & Martha S. Davis, Federal Standards of Review §§ 1.02, 4.21, at 1-12, 4-131, 4-132 (3d ed. 1999) (explaining that the term “fights simple definition” and has a “sliding contextual meaning” with “varying level[s] of deference”). In one sense, abuse of discretion is a term of exquisite balance. The word “abuse” recognizes that authority can be misused. The word “discretion” recognizes that the exercise of authority is often impossible without some leeway for judgment. But taken together, the two words convey an unmistakable message: that as a matter of priority as well as sequence, discretion is first, and review for abuse is only a posterior check on judgment which strays too far from the mark.

The language of “in-bounds” and “out-of-bounds” thus becomes all but irresistible in the abuse of discretion context, for the standard draws a line - - or rather, demarcates a region - - between the unsupportable and the merely mistaken, between the legal error, disorder of reason, severe lapse of judgment, and procedural failure that a reviewing court may always correct, and the simple disagreement that, on this standard, it may not. See Harry T. Edwards & Linda A. Elliott, Federal Standards of Review 68 (2007) (listing an “erroneous view of the law,” “patently arbitrary application of the controlling law,” “clearly erroneous assessment of the evidence,” judgment call outside “the range of choices permitted,” and error “in the weighing process by which [discretion is] exercised” as factors cabining the deference owed on abuse of discretion review (internal quotations omitted)). At its immovable core, the abuse of discretion standard requires a reviewing court to show enough deference to a primary decisionmaker’s judgment that the court does not reverse merely because it would have come to a different result in the first instance. See Henry J. Friendly, Indiscretion About Discretion, 31 Emory L.J. 747, 754 (1982) (“[T]he trial judge has discretion in those cases where his ruling will not be reversed simply because an appellate court disagrees.”). The “deference that is the hallmark of abuse-of-discretion review,” Gen. Elec. Co. v. Joiner, 522 U.S. 136, 143, 118 S. Ct. 512, 139 L.Ed.2d 508 (1997), is deference enough to appreciate reasonable disagreement.

The ERISA context permits a still more particularized conception of the abuse of discretion standard. First, in ERISA cases, the standard equates to reasonableness: We will not disturb an ERISA administrator’s discretionary decision if it is reasonable, and will reverse or remand if it is not. Firestone, 489 U.S. at 111; Booth, 201 F.3d at 342. Second, the abuse of discretion standard is less deferential to administrators than an arbitrary and capricious standard would be; to be unreasonable is not so extreme as to be irrational. See Firestone, 489 U.S. at 109-10; Booth, 201 F.3d at 341. Third, an administrator’s decision is reasonable “if it is the result of a deliberate, principled reasoning process and if it is supported by substantial evidence.” Bernstein v. CapitalCare, Inc., 70 F.3d 783, 788 (4^th Cir. 1995) (internal quotation omitted). Fourth, the decision must reflect careful attention to “the language of the plan,” as well as the requirements of ERISA itself. Booth, 201 F.3d at 342. One adds new assemblages of words to this legal landscape with caution, but it seems on the whole that we require ERISA administrators’ decisions to adhere both to the text of ERISA and the plan to which they have contracted; to rest on good evidence and sound reasoning; and to result from a fair and searching process.2

FOOTNOTES

2 In a valid reminder of Judge Friendly’s adage that “there is not just one standard of ‘abuse of discretion,’” Indiscretion About Discretion, 31 Emory L.J. at 783, Firestone remarks 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.” 489 U.S. at 115 (internal quotation omitted). Thus this circuit “lessen[s] the deference normally given under [an abuse of discretion] standard . . . to the extent necessary to counteract any influence unduly resulting” from an administrator’s conflict of interest - - but “in no case does the court deviate from the abuse of discretion standard.” Ellis v. Metro. Life Ins. Co., 126 F.3d 228, 233 (4^th Cir. 1997) The decision as to whether to lessen deference is not always a simple one, compare Colucci v. Agfa Corp., 3431 F.3d 170, 178-80 (4^th Cir. 2005), with Adams v. Louisiana-Pacific Corp., 177 Fed. Appx. 335, 343 n.3 (4^th Cir. 2006), and is not fully briefed in this case. But the particular variation on the standard would not alter the result here, and we proceed on the assumption that either various could apply.

Under no formulation, however, may a court, faced with discretionary language like that in the plan instrument in this case, forget its duty of deference and its secondary rather than primary role in determining a claimant’s right to benefits. The abuse of discretion standard in ERISA cases protects important values: the plan administrator’s greater experience and familiarity with plan terms and provisions; the enhanced prospects of achieving consistent application of those terms and provisions that results; the desire of those who establish ERISA plans to preserve at least some role in their administration; and the importance of ensuring that funds which are not unlimited go to those who, according to the terms of the plan, are truly deserving. Cf. Gilbertson v. Allied Signal, Inc., 328 F.3d 625, 632 (10^th Cir. 2003); Johannssen v. District No. 1-Pacific Coast Dist., 292 F.3d 159, 169 (4^th Cir. 2002); Commc’ns Workers of Am. v. AT&T, 309 U.S. App. D.C. 170, 40 F.3d 426, 432 (D.C. Cir. 1994). Thus, the language of discretion in an ERISA plan is a message to courts, counseling not judicial abdication, to be sure, but a healthy measure of judicial restraint.” Evans, 514 F.3d 315, *13-18.

I am not convinced that the District and Circuit Courts actuallyapplied different standards. The District Court purported to apply a pure abuse of discretion standard and I believe it did. I think the difference in the outcome lies simply in the factual findings of the two courts. Where Evans argued, and the District Court found, that plan’s opinions were deficient, the Fourth Circuit found Eaton’s medical opinions to be thorough and considered. The Fourth Circuit did take care to note when it comes to reviewing physicians’ medical opinions that “quantity” alone is insufficient to uphold a claim denial. Instead, there must be “quality”. Specifically, the court stated:

“And no fewer than nine physicians reviewed Evans’s file in the course of an initial benefits decision, two appeals, and a remand; all agreed that she did not meet the definition. The quantity is both impressive and, taken by itself, insufficient: As Evans argues, an ERISA administrator cannot prevail merely by multiplying deficient medical opinions, nor by arraying an abundance of low-quality opinions against a few high-quality ones.” Evans, 514 F.3d 315, *18-19

The court held that Evans had presented compelling evidence of her disability, but, unlike the District Court, found that the plan’s opinions were, also, compelling. Based upon that factual finding, the court held that under an abuse of discretion standard it must reverse the District Court’s ruling and uphold the plan’s decision. Several defense lawyers, in their blogs, trumpeted Evans to be a significant and far reaching defense victory. Having been involved in the case, I do not believe it is all that those bloggers make it to be. In fact, it can be read to be claimant friendly in many respects. Jude Wilkinson, obviously, and like he usually does, wrote the opinion with leeway to recognize many varying circumstances that might arise. As stated above, the court took care to note that a quantity of medical opinions relied upon is not, by itself, sufficient to uphold a plan decision. Instead, those opinions must be considered and have quality. Accordingly, no matter how many medical opinions a plan might have, if they are deficient then the claimant will prevail. Accordingly, Evans clearly stands for the proposition that a court is to evaluate the quality of the medical opinions relied upon by the plan and a plan cannot simply defer to quantity. Unfortunately, for Ms. Evans, the Fourth Circuit ruled that the Eaton plan’s opinions did have quality, but such will not be true in every case where a court conducts a thoughtful analysis and review.

Second, in Evans, the court specifically and unequivocally stated that the applicable standard of review in the Fourth Circuit is the abuse of discretion standard as opposed to the arbitrary and capricious standard. (See first opinion quote above.) That holding is significant because many circuits recognize the arbitrary and capricious standard as being the standard that is applicable with an ERISA claim under a deferential standard of review. So, despite the fact that, in the end, Ms. Evans’ lost, there is a "silver lining" for claimants in the court’s opinion. In my opinion, Judge Wilkinson did an excellent job with the opinion despite the fact that he ruled against my client. To view the Fourth Circuit’s opinion, click here. To view my decision of another published opinion from the Fourth Circuit regarding the same plan with very similar facts, Donovan v. Eaton Corporation Long Term Disability Plan, 462 F.3d 321 (4^th Cir. 2006), click here.

This case was featured on the front page of South Carolina Lawyers Weekly newspaper. I was quoted in the article. Click here to view the news story.