Opinion
No. CV-04-1553-PHX-NVW.
August 24, 2006
ORDER
The court has before it Plaintiff's Motion for Summary Judgment, Doc. # 57, and accompanying Statement of Facts, Doc. # 58; Defendants' Cross-Motion for Summary Judgment and Response to Plaintiff's Motion, Doc. # 60, and accompanying Statement of Facts, Doc. # 61, and Response to Plaintiff's Statement of Facts, Doc. # 62; Plaintiff's Response, Doc. # 68; and Defendants' Reply, Doc. # 70.
On November 10, 2003, Motorola denied Lawrence's appeal, concluding that Lawrence's objective medical evidence failed to establish that he continued to be disabled under the Plan's definition of long-term disability. Subsequently, Lawrence brought this action, challenging Motorola's disability determination, pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"). 29 U.S.C. § 1132(a)(1)(B). On May 16, 2006, the court held that abuse of discretion is the proper standard by which to review Motorola's disability determination, holding that the Plan granted Motorola discretion and that Lawrence failed to submit evidence establishing that de novo review was appropriate. Doc. # 54. On August 15, 2006, in Abatie v. Alta Health Life Insurance Company, 2006 U.S. App. Lexis 20829, 2006 WL 2347660, ___ F.3d ___ (9th Cir. Aug. 15, 2006) (en banc), the Ninth Circuit held that, under abuse of discretion review, evidence of a conflict of interest and procedural irregularities are to be considered by the district court.
The court addresses whether Motorola abused its discretion in concluding that Lawrence was no longer disabled pursuant to the Plan.
I. Statement of Facts
In April 2000, Lawrence stopped working and applied for disability benefits. PSOF at ¶ 6. Lawrence alleged that he was suffering from a combination of abdominal pain, leg pain, neck pain, headaches, recurring neuromas, degenerative disc disease, hernia repairs with mesh wiring, multiple inguinal herniorrhaphies, painful staples, degenerative disc disease of the knees, depression, and medication side effects. PSOF at ¶ 11.
Motorola is the designated administrator and fiduciary of the Plan. DSOF at ¶ 4. Section 10.1 of the Plan expressly provides that Motorola delegates its administrative authority to an Administrative Committee. DSOF at ¶ 5. Section 10.2(e) of the Plan provides that Motorola's Administrative Committee shall have express authority "to construe and interpret the Plan, decide all questions of fact and questions of eligibility and determine the amount, manner, and time of payment of any benefits hereunder. The Committee shall have discretionary authority to grant or deny benefits under the Plan. Benefits under the Plan will be paid only if the Committee decides in its discretion that the applicant is entitled to them." DSOF at ¶ 10.
The Plan defines short-term disability as "the continuous inability of the Participant to perform the essential duties pertaining to his/her usual and customary occupation as indicated on his or her job position description in substantially the same manner as immediately prior to incurring a medically determinable physical or mental impairment." DSOF at ¶ 12. A participant is entitled to short-term benefits for 180 days. DSOF at ¶ 11. Following the 180 days of short-term disability, a participant is entitled to receive long-term disability benefits if "the ongoing, continuous inability of the Participant to engage in any Substantial and Gainful Employment by reason of meeting a medically determinable physical or mental impairment that can be expected to be of a long-continued and indefinite duration." DSOF at ¶ 14. The Plan's definition of disability also provides that "[t]he Plan Administrator, in its sole and complete discretion, may require objective evidence of a Participant's disability." DSOF at ¶ 12.
Lawrence received short-term benefits from April 2000 to October 2000 and received long-term benefits from October 20, 2000, through January 14, 2003. PSOF at ¶ 28. On January 13, 2003, Motorola terminated Lawrence's disability benefits because (1) Lawrence failed to provide objective medical evidence establishing a disability and (2) Lawrence missed two schedule IMEs. DSOF at ¶ 25. On November 10, 2003, Motorola upheld its initial denial because of a purported lack of objective medical evidence establishing Lawrence's disability. DSOF at ¶ 29.
Although there were short periods in between October 2000 and January 2003 during which Lawrence did not receive disability benefits, for the purposes of this Motion the court presumes that Lawrence received long-term disability benefits for this period of time.
In upholding its initial denial, Motorola relied on the medical opinions of three physicians. First, Dr. Mitchell Nudelman reviewed Lawrence's record and concluded on August 11, 2003, that there was insufficient clinical documentation to support Lawrence's disability claim. DSOF at ¶ 27. Second, on September 21, 2003, Dr. Gary Prince performed a psychiatric IME and concluded that Lawrence was not impaired by a psychiatric condition, stating that Lawrence's "level of psychiatric dysfunction does not qualify for a diagnosis of major mental illness." DSOF at ¶ 29. However, Dr. Prince also stated that Lawrence's "chronic pain and the limitations it places on him seem to be genuinely disabling factors." DSOF at ¶ 29. Third, on October 28, 2003, Dr. Robert Dunn, a neurologist, performed an IME to evaluate whether Lawrence was physically disabled. Dr. Dunn stated that Lawrence did not have objective medical findings to support his claim of disability. DSOF at ¶ 31. Addressing the reasonableness of Lawrence's doctor's limitations on Lawrence's ability to work, Dr. Dunn stated:
I do not see restrictions or limitations placed upon the claimant's work activities by the attending physician, which are consistent with his neurologic objective findings. He did not have reflex changes, he did not have loss of strength, and he did not have atrophy. Granted, migraine history can be a problem with his occupation and his chronic pain syndrome with his requirements of multiple narcotics, this may well be a problem with his type of occupation. However, I think he could return to his usual occupation if non-narcotic treatment could be utilized.
DSOF at ¶ 31. Dr. Dunn also stated that Lawrence "needs to be under treatment with a pain management doctor," and stated that he would encourage "the use of medication other than narcotics for his chronic pain syndrome if at all possible." Tr. at 77-78.
Four of Lawrence's treating physicians — Dr. Gerald Wolfley, Dr. Herbert Goodman, Dr. James Gough, and Dr. Combs — opined that Lawrence was unable to work. PSOF at ¶¶ 13-17.
Lawrence requested a copy of his administrative record on five occasions. PSOF at ¶¶ 34-37. He did not receive a complete copy of the administrative record, containing all "relevant" documents, until December 10, 2004, which Motorola does not dispute. Defendants' Response to Plaintiff's Statement of Facts ("DRPSOF") at ¶ 39.
II. Standard of Review
A. Abuse of Discretion
In Abatie, 2006 U.S. App. 20829 at *26-27, ___ F.3d at ___, the Ninth Circuit overruled Atwood v. Newmont Gold Co., 45 F.3d 1317 (9th Cir. 1995), and clarified the standard by which a district court reviews a plan administrator's decision when that plan confers discretion on the administrator and there is a structural conflict of interest. The court described the standard as "abuse of discretion review, tempered by skepticism commensurate with the plan administrators's conflict of interest." Id. at *2-3. Accordingly, a district court now evaluates all of "the facts and circumstances" to "decide in each case how much or how little to credit the plan administrator's reason for denying coverage." Id. at *29. "An egregious conflict may weigh more heavily (that is, may cause the court to find an abuse of discretion more readily) than a minor, technical conflict might." Id. Moreover, "[a] straightforward abuse of discretion analysis allows a court to tailor its review to all the circumstances before it." Id. (citations omitted). The result of this new case-by-case approach is that "plaintiffs will have the benefit of an abuse of discretion review that always considers the inherent conflict when a plan administrator is also the fiduciary, even in the absence of `smoking gun' evidence of conflict." Id. at 31-32. In addition, "[a] procedural irregularity, like a conflict of interest, is a matter to be weighed in deciding whether an administrator's decision was an abuse of discretion." Id. at *42 (citations omitted).
B. Procedure
Abatie similarly does not prescribe the procedure a district court should follow when exercising abuse of discretion review. In Abatie the district court erred in not resolving certain questions of fact extraneous to discretionary judgments made by the plan administrator. Id. at *45-46. However, in this case the only ultimate question before the court is whether Motorola abused its discretion in finding Lawrence not disabled. For that inquiry this court is limited to the administrative record. Id. at *36 ("Today, we continue to recognize that, in general, a district court may review only the administrative record when considering whether the plan administrator abused its discretion, but may admit additional evidence on de novo review.").
The court has already addressed whether Lawrence acted under a conflict of interest. Conclusions from that earlier decision will be incorporated here.
By order of May 16, 2006, Doc. # 54, this court set a hearing on August 18, 2006, "on the merits of the case" to conduct the abuse of discretion review of the denial of benefits. This court called for written briefing supported for separate statements of fact with record references as in the manner of presenting motions for summary judgment under the local rules of this court. This was for the convenience of the court in accessing the portions of the record that the parties thought important, but this court did not contemplate that the briefing thus called for would be on motion for summary judgment or that this court would examine the record to identify disputed questions of material fact for later trial. Rather, the court understood its task as the ultimate one of judging whether Motorola abused its discretion in denying Lawrence disability benefits.
LRCiv 56(c)(2) provides, "Any party seeking summary judgment shall set forth, separately from the memorandum of law, the specific facts relied upon in the memorandum in support of the motion. The facts shall be stated in concise, numbered paragraphs. As to each fact, the statement shall refer to the specific portion of the record where the fact may be found. Any party opposing summary judgment shall file a statement in the form prescribed by this Rule, specifying those paragraphs in the moving party's statement of facts which are disputed, and also setting forth those facts which establish a genuine issue of material fact or otherwise preclude summary judgment in favor of the moving party."
Counsel for both parties confirmed at the August 18, 2006 hearing that this was their understanding as well. Therefore, though the parties' briefs are styled as on motion for summary judgment, neither counsel nor the court so understand this inquiry. In this order this court makes its ultimate determination of whether Motorola abused its discretion.
III. Analysis
Lawrence argues that Motorola abused its discretion by (1) importing an objective medical evidence requirement into the Plan, (2) disregarding Lawrence's doctor's opinions and misinterpreting the opinions of the consulting doctors, (3) failing to consider the combination of Lawrence's impairments, and (4) discontinuing Lawrence's disability without any evidence suggesting that Lawrence's condition had improved. Motorola argues that it had a reasonable basis supporting its decision to terminate Lawrence's disability benefits.
In determining whether Motorola abused its decision, the court will also consider Motorola's structural conflict of interest and Motorola's failure to turn over Lawrence's administrative record, which is a violation of ERISA's procedural regulations.
A. Objective Medical Evidence Requirement
"An ERISA plan administrator abuses its discretion if it construes provisions of the plan in a way that conflicts with the plain meaning of the plan." Saffle v. Sierra Pac. Power Co. Bargaining Unit Long Term Disability Income Plan, 85 F.3d 455, 458 (9th Cir. 1996) (citations and internal quotation marks omitted). Lawrence argues that Motorola improperly imported an objective medical evidence requirement into the Plan, which was not supported by the Plan's plain language.
In support of his argument, Lawrence cites three circuit opinions: Canseco v. Southern California Construction Laborers Trust, 93 F.3d 600, 609 (9th Cir. 1996) (holding that "[i]n construing the CLPT plan to prohibit the retroactive payment of benefits for which the retirees are indisputably eligible, the Trustees offered an interpretation of the CLPT plan that clearly conflicted with its plain language"), Saffle, 85 F.3d at 460 (9th Cir. 1996) (holding that "the Committee arbitrarily construed the Plan to include performing a substantial portion of `work available for which she is qualified' with accommodations that could have been made"); and Mitchell v. Eastman Kodak Co., 113 F.3d 433 (3d Cir. 1997). None of these cases is directly on point because none involves a plan providing that an administrator may, at its discretion, require objective medical evidence.
The inquiry, however, under Saffle is whether the Plan administrator, by requiring Lawrence to submit objective medical evidence establishing his disability, interpreted the Plan in a manner inconsistent with its plain language. In addition, under ERISA federal common law, the doctrine of reasonable expectations applies and requires that an exclusion be "clear, plain, and conspicuous enough to negate [a] layman['s] objectively reasonable expectations of coverage." Saltarelli v. Bob Barker Group Med. Trust, 35 F.3d 382, 387 (9th Cir. 1994). See also Duncan v. Continental Cas. Co., 1997 U.S. Dist. LEXIS 1582, at *14-15 (N.D. Cal. 1997) (relying on Saltarelli to conclude that an administrator abused its discretion by requiring objective medical evidence when the plan did not support such an exclusion); May v. Metro Life Ins. Co., 2004 U.S. Dist. LEXIS 18486, at *26 (N.D. Cal. 2004) (stating that the plan administrator abused its discretion by requiring objective medical evidence when the plan did not support such a requirement).
On the one hand, it can be argued that the Plan, by providing such broad language, provided Lawrence with notice of this possible requirement. On the other hand, it can be argued that the impact of this provision is implicitly to exclude from disability coverage those conditions that cannot be substantiated by objective medical evidence. Here, while the Plan contains specific exclusions from long-term disability benefit coverage, none is based on chronic pain or pain that cannot be substantiated by objective medical evidence. See, e.g., Belcher v. Verizon Wireless Short Term Disability Plan, 2006 U.S. Dist. LEXIS 48861, at *16 (D.S.C. 2006) (stating that the defendant did not abuse its discretion in denying Belcher's disability claim because MetLife's Plan specifically excluded disabilities that could not be established with objective medical evidence). In addition, the Plan does not define "objective evidence."
Based on these facts, the Plan did not provide Lawrence with clear and conspicuous notice that he would receive disability benefits only if his objective medical evidence established his disability. Indeed, at oral argument counsel for Motorola conceded that the "objective medical evidence" clause does not authorize creation of additional coverage exclusions in general or an exclusion of pain disability in particular. Thus, the Plan administrator's decision to rely on a lack of objective medical evidence for a quantification of admittedly real pain — something that medical science has not yet reduced to objective quantification — is a fact to be considered in determining whether Motorola abused its discretion in denying Lawrence's claim.
B. Physician' Opinions
Lawrence argues that the Plan administrator abused its discretion (1) by relying on its examining doctors' opinions rather than the opinions of Lawrence's treating physicians, and (2) by relying on Dr. Dunn's medical opinion, in which Dr. Dunn found that Lawrence was not disabled if he could use non-narcotic medication. These arguments are addressed in turn.
First, there is no treating physician rule in ERISA cases; however, an administrator may not arbitrarily refuse to credit a claimant's reliable evidence, including a treating physician's opinion. Black Decker Disability Plan v. Nord, 538 U.S. 822, 834 (2003). In this case, the Plan administrator relied on the medical opinions of three doctors, including two doctors who physically examined Lawrence. Thus, the fact that Motorola relied on its own examining doctors rather than Lawrence's treating physicians does not in and of itself establish an abuse of discretion.
Second, Motorola abused its discretion in relying on Dr. Dunn's medical opinion to conclude that Lawrence was not disabled. In its November 10, 2003 decision upholding the termination of Lawrence's long-term disability benefits, Motorola relied on the opinions of (1) Dr. Nudelman, who performed a peer review of Lawrence's file, (2) Dr. Prince, who physically examined Lawrence to determine whether he had a mental disability, and (3) Dr. Dunn, who examined Lawrence to determine whether he had a physical disability. The letter upholding denial provided:
In order to perform a fair and full review within the appeal process, an (IME) for determination of physical abilities and inabilities was necessary. Dr. Dunn has determined that there are no objective medical findings to support the inability to perform the physical demands of your occupation. This is based on the lack of clinical findings in the neurological examination. Additionally, he noted that he does not see restrictions and limitations placed upon your work activities by the attending physician, which are consistent with your neurologic objective findings. There are no reflex changes, no loss of strength and no atrophy. Granted, migraine history can be a problem [in] your occupation and chronic pain syndrome given your requirement of multiple narcotics, this may well be a problem with this type of occupation. However, Dr. Dunn notes that you could return to your usual occupation if non-narcotic treatment could be utilized. Therefore, Long Term Disability benefits will remain denied from January 14, 2003 forward due to the lack of clinical findings to substantiate total disability from any occupation.
Doc. # 61, Exhibit C (emphasis added).
From this letter, it is clear Motorola relied on Dr. Dunn's opinion in determining that Lawrence was not disabled. Doc. # 61, Exhibit C ("In order to perform a full and fair review within the appeal process, an (IME) for determination of physical abilities and inabilities was necessary."). It is also clear that Motorola relied on Dr. Dunn's conclusion that Lawrence could perform his usual occupation if he could utilize non-narcotic treatment.
This statement raises the question whether a plan administrator abuses its discretion by denying disability benefits based upon a doctor's opinion that the claimant could perform his occupation if he does not take narcotics for his pain, when the record indicates that the claimant does, indeed, require narcotic pain medication. For the following reasons, it is clear that Motorola's decision to rely on Dr. Dunn's medical opinion was an abuse of its discretion.
Neither Motorola in its denial letter nor Dr. Dunn in his medical report provides any explanation for why Lawrence could utilize non-narcotic treatment. See Doc. # 61, Exhibit C and Tr. at 71-78. Moreover, Dr. Dunn determined that Lawrence was not exaggerating his symptoms or malingering. Pursuant to ERISA, in reaching its disability determination, Motorola was required to provide a reasoned explanation for why Lawrence was not disabled. Assuming without explanation that Lawrence could utilize non-narcotic treatment, when Lawrence's treating physicians consistently prescribed narcotic pain medication, was not a reasoned explanation.
Multiple courts have held that an administrator abuses its discretion when it fails to consider the effect of the claimant's medication. In Adams v. Prudential Ins. Co. of Am., 280 F. Supp. 2d 731, 740-41 (N.D. Ohio 2003), the court held that the plan administrator abused its discretion by failing to consider Adams's narcotic regimen, which included Oxycontin, Demerol, Zoloft, Cardizen. and Neurotonin. See also Dirberger v. Unum Life Ins. Co. of Am., 246 F. Supp. 2d 927, 935 (W.D. Tenn. 2002) (concluding that the administrator erred in failing to consider Plaintiff's medications); Nickola v. CNA Group Life Assurance, Co., 2005 U.S. Dist. LEXIS 16219, at *21 (E.D. Ill. 2005) ("Defendant's decision to cease paying Plaintiff's LTD benefits is subject to reversal because of Defendant's lack of meaningful analysis of whether Plaintiff's daily use of substantial amounts of prescription narcotic pain medication rendered him incapable of obtaining and keeping gainful employment."). While these cases do not address the precise issue in this case — a plan administrator's unreasoned assumption that a plan participant can utilize non-narcotic treatment — they suggest that the Plan administrator's approach in this case was flawed.
In addition, Motorola had clear notice that Lawrence was impaired by his medications. See Letter Appealing Lawrence's Initial Denial ("In addition, claimant suffers from medication side effects."). Moreover, Dr. Dunn listed Lawrence's medications — Oxycontin (a narcotic, taken daily), Atonal (for prostate hypertrophy), Lodine, Dexedrine, Midrin, Ambien, Klonopin, Famvir (for hyperlipidemia), migraine medications, and other sleep medications — in the report he submitted to Motorola. Tr. at 74. Yet Dr. Dunn did not comment at all on the impact of these medications and did not explain how Lawrence could function with non-narcotic treatment.
Motorola offers three arguments for why the Plan administrator did not err in relying on Dr. Dunn's opinion. First, Motorola argues that Dr. Dunn made this statement in conjunction with Lawrence's ability to perform his own occupation, when the operative definition of disability was the "any occupation" standard. It is unclear why this distinction matters. The issue is whether a plan administrator can make a disability determination based on the wholly-unsupported assumption that the claimant is able to stop taking narcotic medication. Moreover, Motorola relied on Dr. Dunn's disability determination to conclude that Lawrence was not disabled under the "any occupation" standard.
Second, Motorola argues that although Dr. Dunn referenced non-narcotic treatment, he ultimately concluded that Lawrence did not have any restrictions — a conclusion he could not have reached if he believed that Lawrence could not function without narcotics. Dr. Dunn's statements cannot be reconciled in this manner. Dr. Dunn first stated that he believed Lawrence "could return to his usual occupation if non-narcotic treatment could be utilized." Tr. at 77. Dr. Dunn then stated: "I do not see any restrictions or limitations on his work capacity at this time, on the basis of the objective findings of the neurological examination." In other words, Dr. Dunn's later statement was limited to whether objective findings from his neurological examination identified a disability.
Third, Motorola argues that Lawrence has failed to identify any evidence in the claim file establishing that Lawrence cannot function without narcotics. This argument is misplaced, for the record conclusively establishes that Lawrence's treating physicians judge these medications to be medically necessary. It was Motorola that comes up short in failing to rebut that with any evidence, explanation, or factual support.
C. Combination of the Impairments
Lawrence argues that Motorola failed to consider the combined effect of his physical and psychological ailments. He claims that these ailments, when viewed together, establish his disability. As stated above, the Plan administrator relied on Dr. Nudelman's, Dr. Prince's, and Dr. Dunn's medical opinions to conclude that Lawrence was not disabled under the Plan.
The Plan limits to twenty-four months long-term disability benefits based primarily on a mental condition. However, Lawrence is not arguing that his disability is caused primarily by a mental condition but rather that his physical impairments result in some mental distress, which, when viewed with his physical impairments, establish his disability.
Dr. Nudelman reviewed Lawrence's medical file and stated that "it is my opinion within reasonable certainty at this time, that there is not sufficient objective clinical documentation so as to support the claimant's assertion that he is unable to perform the material and substantial duties of ANY occupation, including even sedentary work, on the basis of his various medical conditions." Tr. at 153. Dr. Nudelman relied on the "University Based Assistant Professor Board Certified in Anesthesiology Specializing in Pain Management" to reach this conclusion. Tr. at 153. The consulting professor discussed Lawrence's psychiatric conditions but did not appear to consider them in his conclusion that objective medical evidence did not support a physical disability precluding Lawrence from performing any occupation.
Following Dr. Nudelman's evaluation of Lawrence's record, Dr. Prince examined Lawrence for a mental disability. Dr. Prince classified Lawrence as having dysthemia, adjustment disorder, and ADHD, but he concluded that "the level of psychiatric dysfunction does not qualify for a diagnosis of major mental illness." Tr. at 122. Dr. Prince concluded that Lawrence "is not impaired by any psychiatric illness. His chronic pain and the limitations it places on him seem to be genuinely disabling factors. Unless some of this can be diminished it would seem that the restrictions placed on his work capacity will be permanent." Tr. at 123.
Based on Dr. Prince's suggestion that Lawrence was disabled from chronic pain, Mutual of Omaha asked Dr. Dunn to examine Lawrence for a physical disability. Dr. Dunn concluded that Lawrence "does not show objective medical findings to support that he is unable to perform the physical demands of his occupation. This is based on the lack of objective findings in the neurological examination, and not on evaluation of his psychiatric complaints." Tr. at 77.
In its denial letter, Motorola referenced these doctors' opinions but did not state that, as the Plan administrator, it was considering all of the evidence — both physical and mental — in determining whether Lawrence was disabled. Rather, the language from the denial letter provides: "the level of psychiatric dysfunction does not qualify for a diagnosis of major mental illness." Doc. # 61, Exhibit C. In addition, the Plan administrator concluded that Lawrence was not physically disabled from performing his job, based on Dr. Dunn's review.
An administrator abuses its discretion by failing to consider the combination of the claimant's impairments. Nickola, 2005 U.S. Dist. LEXIS 16219, at *30 ("Precedent teaches that an administrator making a disability determination must make a reasoned assessment of whether the total combination of a claimant's impairments justify a disability finding, even if no single impairment standing alone would warrant the conclusion."); Austin v. Cont'l Cas. Co., 216 F. Supp. 2d 550, 558-59 (W.D.N.C. 2002) (stating that administrator erred by failing to consider all of the claimant's ailments in combination); Dirnberger, 246 F. Supp. 2d at 935 ("Finding that Plaintiff was disabled totally due to his depression and finding that Plaintiff's depression contributed to his disability as a part of a whole are two distinct approaches. The Court concludes that Unum erred in failing to consider Plaintiff's depression and his medications as part of the whole.").
These cases establish that a plan administrator errs by failing to consider the combination of impairments, including physical and mental impairments. As the Dirnberger court held, a plan administrator should consider in its disability determination a plan participant's mental impairments even if those impairments do not disable the participant pursuant to the plan's mental disability provision. Here, Dr. Prince determined that Lawrence suffers from dysthemia (chronic depression), adjustment disorder, and ADHD, but concluded that these mental conditions do not disable him pursuant to the Plan. The Plan administrator, in rendering its decision, should have considered whether Lawrence's physical impairments, combined with his mental impairments flowing from his physical conditions, were disabling. It was error not to do so, and this is a fact to be considered in determining whether Motorola abused its discretion in denying Lawrence's claim.
This conclusion in no way suggests that Lawrence is mentally disabled under the Plan. Before the administrator terminated his disability benefits, Lawrence had been receiving long-term benefits because of his physical impairments. In evaluating whether Lawrence was disabled, primarily because of his physical impairments, the Plan administrator should have also considered his consequent mental conditions.
D. Medical Improvement
Lawrence argues that Motorola abused its discretion by terminating his benefits without evidence of medical improvement. While the Ninth Circuit has not addressed the issue whether a plan administrator should produce evidence of medical improvement when it discontinues disability benefits, see Sotak v. Highmark Life Ins. Co., No. CV-04-1062, 2006 U.S. Dist. LEXIS 14521, at *11 (D. Ariz. 2006), it is not the case that every time a plan administrator discontinues disability benefits, it must produce evidence of medical improvement. Here, Lawrence underwent surgical procedures during his disability period and his doctors remained optimistic that he would be able at some point to return to work. Tr. at 352. Lawrence does not have a condition which will not improve, such as a chronic heart condition. Rather, Lawrence suffers from a number of different impairments that produce disabling pain. In such a case, the fact that Motorola did not cite medical evidence demonstrating an improvement does not suggest an abuse of discretion.
E. Abuse of Discretion
Abatie requires that a district court consider all of the facts to determine whether the Plan administrator abused its discretion. For the following reasons, Motorola abused its discretion in denying Lawrence's disability claim.
First, as stated above, Motorola is acting under a structural conflict of interest because it acts as both the plan administrator and the funding source for benefits.
Second, Motorola failed to provide Lawrence with "all documents, records, and other information relevant to the claimant's claim for benefits." 29 CFR 2560.503-1(h)(2)(iii). This procedural irregularity affected Lawrence's ability to receive a full and fair hearing and is relevant in determining whether a plan administrator abused its discretion. Abatie, 2006 U.S. App. at *42
Third, Motorola required that Lawrence establish his disability with only objective medical evidence, relying on a single sentence in the Plan providing that the administrator may, in its discretion, require objective evidence. Motorola neither defined "objective evidence" nor created an exclusion for disabilities based on chronic pain. Lawrence did not have clear and conspicuous notice of this requirement. Moreover, Motorola ignored Lawrence's subjective pain evidence without any finding of malingering and in the face of its own consultant's conclusion of no malingering.
Fourth, and most crucial to this decision, Motorola's disability determination was based on the assumption that Lawrence could utilize non-narcotic treatment. Yet neither Motorola nor Dr. Dunn, upon whose opinion Motorola relied to reach its conclusion, provided any factual support or reasoned explanation for this key assumption.
Fifth, Motorola failed to consider both Lawrence's physical and mental impairments in making its disability determination.
These facts establish that Motorola abused its discretion in denying Lawrence's disability claim.
F. Remand or Award of Benefits
Upon determining that Motorola abused its discretion, the question of the appropriate remedy arises — either to remand the case to the Plan administrator or to reinstate benefits. Abatie is silent on this issue; therefore, the court will apply pre- Abatie authority to determine the proper remedy.
Saffle, 85 F.3d at 460-61, instructs a court to remand a claim determination to the plan administrator when the administrator applies the wrong standard to a disability claim. See id. at 460 ("Here, the Committee abused its discretion by erroneously factoring `accommodation' into the criteria for total disability for purposes of occupational disability benefits."). Meanwhile, in Grosz-Salomon v. Paul Revere Life Insurance Co., 237 F.3d 1154 (9th Cir. 2001), the court stated that "retroactive reinstatement of benefits is appropriate in ERISA cases where, as here, but for the insurer's arbitrary and capricious conduct, the insured would have continued to receive the benefits or where there was no evidence in the record to support a termination or denial of benefits. In other words, a plan administrator will not get a second bite at the apple when its first decision was simply contrary to the facts." Id. at 1163 (citations and internal quotation marks omitted). The Grosz-Salomon court limited Saffle as standing "for the proposition that `remand for reevaluation of the merits of a claim is the correct course to follow when an ERISA plan administrator, with discretion to apply a plan, has misconstrued the Plan and applied a wrong standard to a benefits determination.'" Id. (quoting Saffle, 85 F.3d at 461).
Although the Ninth Circuit held that the district court erred in applying an abuse of discretion standard, it did not remand. Id. Instead, it reviewed on the merits the district court's decision to award benefits. Id. at 1162-63.
District courts within this circuit have similarly awarded benefits when the plan administrator did not apply the wrong standard. See, e.g., DeLeon v. Bristol-Myers Squibb Co. Long Term Disability Plan, 203 F. Supp. 2d 1181, (D. Or. 2002) (finding Saffle inapposite and awarding benefits when the questions before the court were limited to evidentiary issues and whether the defendant abused its discretion in terminating DeLeon's long-term disability benefits); Rigg v. Cont'l Cas. Co., 2004 U.S. Dist. LEXIS 8009, at *20 (N.D. Cal. 2004) (awarding benefits under abuse of discretion review because "[t]he undisputed facts in the Administrative Record show that Rigg suffered from fatigue and weakness associated with her medical condition to the extent that she could work no more than 30 hours a week and required frequent rest periods throughout th day"); Rosenthal v. Long-Term Disability Plan of Epstein, Becker Green, P.C., 1999 U.S. Dist. LEXIS 21443, at *42-43 (C.D. Cal. 1999) (awarding benefits under both abuse of discretion and de novo review, and stating that " Saffle does not require a remand where no additional factual determinations need to be made and only one conclusion can be reached").
While Motorola improperly relied on a lack of objective medical evidence, the primary reason why Motorola abused its discretion was because it relied on Dr. Dunn's opinion that Lawrence could return to his engineering job if he could utilize non-narcotic treatment. Neither Motorola nor Dr. Dunn provided any explanation for why Lawrence would be able to follow this treatment. Without Dr. Dunn's medical opinion, upon which Motorola relied, the undisputed facts establish that Lawrence is disabled. A remand in this case is inappropriate.
IV. Failure to Turn Over Documents
Lawrence seeks a penalty of $100 per day for 635 days, amounting to $63,500, because Motorola failed to turn over Lawrence's administrative record within thirty days of Lawrence's request. The relevant statute, 29 U.S.C. § 1132 (c)(1), provides:
Any administrator . . . who fails or refuses to comply with a request for any information which such administrator is required by this title to furnish to a participant or beneficiary (unless such failure or refusal results from matters reasonably beyond the control of the administrator) by mailing the material requested to the last known address of the requesting participant or beneficiary within 30 days after such request may in the court's discretion be personally liable to such participant or beneficiary in the amount of up to $100 a day from the date of such failure or refusal, and the court may in its discretion order such other relief as it deems proper.
The maximum penalty has been increased to $110 per day. 29 C.F.R. § 2575.502c-1. The purpose of the disclosure provisions of 29 U.S.C. § 1132 is to ensure that "the individual knows exactly where he stands with respect to the plan[.]" Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 118 (1989) (citations and internal quotation marks omitted).
Lawrence first requested his administrative record on March 13, 2003, following Motorola's initial denial of his disability claim. PSOF at ¶ 34. Lawrence sent follow-up letters on July 11, 2003, December 17, 2003, July 28, 2004, and August 23, 2004, requesting that Motorola comply with his request for the administrative record and produce all documents "relevant" to Motorola's decision. PSOF at ¶¶ 36-37. Motorola does not dispute that it did not turn over a complete administrative record until December 10, 2004. Defendants' Response to Plaintiff's Statement of Facts ("DRPSOF") at ¶ 39. Rather, Motorola argues that it should not be penalized because (1) although Motorola did not turn over a complete record, Doc. # 60 at 15:15-16 ("Defendants concede that their production of documents was not as complete as it could have been. . . ."), Motorola did turn over to Lawrence a number of key documents, (2) the facts of this case suggest that Lawrence should receive only a minimal penalty or no penalty at all, and (3) Lawrence cannot show prejudice that resulted from receiving an incomplete record. Motorola also argues that it should not be penalized for the period between its final denial and its document production on December 10, 2004.
A showing of prejudice is not necessary to prevail in a 29 U.S.C. § 1132 (c)(1) claim. See Shapiro v. Cont'l Cas. Co., 415 F. Supp. 2d 1060, 1070 (C.D. Cal. 2006). However, prejudice may be can be considered in determining whether to impose a penalty and the amount of any penalty. Kerr v. Charles F. Vatterott Co., 184 F.3d 938, 948 (8th Cir. 1999). Motorola also cites Palmer v. Univ. Med. Group, 994 F. Supp. 1221, 1241 (D. Or. 1998), for the proposition that the per-day penalty should not extend beyond Motorola's denial of Lawrence's appeal. However, the Palmer court relied upon the fact that the claimant did not request the administrative record until after University Medical Group had denied her appeal. Id. Such facts are not present here, as Lawrence requested his record well before the administrative appeal process concluded. Moreover, it is not clear that a claimant's request for the administrative record after the final decision is not covered by 29 U.S.C. § 1132(c)(1)(B).
The facts of this case warrant a penalty, but not in the amount that Lawrence seeks. Although Lawrence requested his complete administrative record five times, Motorola did comply to an extent by furnishing some of the requested documents at different points. In addition, it appears that Motorola's failure to produce Lawrence's administrative record stemmed from negligence and not bad faith. Nevertheless, until December 10, 2004, Lawrence was unaware of the relevant documents upon which Motorola relied in reaching its decision. Thus, in the court's discretion, a penalty of $5,000 is appropriate.
IT IS THEREFORE ORDERED that Plaintiff's misnamed Motion for Summary Judgment, Doc. # 57, is granted for reinstatement of disability benefits and those benefits are reinstated as of January 14, 2003.
IT IS FURTHER ORDERED that Defendants' misnamed Cross-Motion for Summary Judgment, Doc. # 60, is denied.
IT IS FURTHER ORDERED that Defendants are penalized pursuant to 29 U.S.C. § 1132 (c)(1) in an amount of $5,000.
IT IS FURTHER ORDERED that by August 30, 2006, the parties submit a stipulated form of judgment, or separate forms if they cannot agree, quantifying the amount of damages to the time of entry of judgment, with calculation of prejudgment interest, and providing for such post-judgment relief as is proper.