Rex T. KEARNEY, Jr., Plaintiff-Appellant, v. STANDARD INSURANCE COMPANY, Defendant-Appellee

FERNANDEZ, Circuit Judge,

with whom O’SCANNLAIN, and T.G. NELSON, Circuit Judges, join, dissenting.

While I see no particular point in disputing the majority’s determination that this case must be remanded to the district court, 1 I do not concur with its rationale, reasoning or result. Hence I dissent because, as I see it, the keystone of the approach favored of the majority is undue caution about treating administrator authority under an ERISA plan different from insurance company authority in the non-ERISA insurance world. However, because that keystone is defective, the whole arch of the opinion must collapse. There are two major fractures in that most important voussoir.

The first fracture exists because there is no need for such great caution. This case does not involve a mere contract; it involves an ERISA plan. The difference is exceedingly important and imposes both benefits and burdens upon any entity which is acting as an administrator of a plan. For Standard, and for all other similarly situated companies, the fiduciary nature of the duties can be a double-edged sword to say the least.

In an ordinary contract case, for example, one party is not a fiduciary for the other. Even insurance is simply a special kind of contract between two consenting parties. See, e.g., Hassard, Bonnington, Roger & Huber v. Home Ins. Co., 740 F.Supp. 789, 791-92 (S.D.Cal.1990); Lunsford v. American Guarantee & Liab. Ins. Co., 775 F.Supp. 1574, 1583 (N.D.Cal.1991); Love v. Fire Ins. Exch., 221 Cal.App.3d 1136, 1147-50 , 271 Cal.Rptr. 246, 252-54 (1990); Henry v. Associated Indem. Corp., 217 Cal.App.3d 1405, 1418-19 , 266 Cal. Rptr. 578, 586 (1990). That fact means that parties can be expected to, and do, deal with each other at arms length to some extent. Special doctrines do hedge, or erode, the full impact of the somewhat theoretical assumption of a true negotiation between large insurance companies and ordinary consumers. Thus, the covenant of good faith and fair dealing is implied, as it is in all contracts, but it is heightened in the insurance context and a violation of it can lead to tort liability. See e.g., Love, 221 Cal.App.3d at 1147-48 , 271 Cal.Rptr. at 252-53 . Nonetheless, an insurance company, like anyone else, can pursue its own interests, as long as it does not violate the terms of its contract (including the covenant of good faith). As a result, we might well feel great trepidation about finding that a contracting party has discretion, and might be quite chary about bestowing a discretionary interpretation upon the words of an insurance, or other normal, contract.

When it comes to ERISA, however, we cannot simply apply the same premises, even when an insurance company is involved. The whole arrangement is quite different when a company undertakes to act as a plan administrator. It, then, is not a mere contracting party; it is a fiduciary. See 29 U.S.C. §§ 1002 (16)(A), 1002(21)(A). In effect, the entity creating the plan is a trustor, the administering company is a trustee, and the claimant is a beneficiary of that trust. Therefore, even though it does insure a benefit, an insurance company must act as a fiduciary must act. That actually imposes a higher duty upon it than it would undertake were it in a mere contractual relationship. It cannot simply act as a self-interested party that need only avoid violating the legal floor created by the covenant of good faith and fair dealing. It must reach much higher; it must act with the very punctilio of fair *1102 ness. See 29 U.S.C. § 1104 (a)(1) (“[A] fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries.... ” ); NLRB v. Amax Coal Co., 453 U.S. 322, 329 , 101 S.Ct. 2789, 2794 , 69 L.Ed.2d 672 (1981) (“[A] trustee bears an unwavering duty of complete loyalty to the beneficiary of the trust, to the exclusion of the interests of all other parties.”); Blau v. Del Monte Corp., 748 F.2d 1348, 1353 (9th Cir.1984) (“The administrator of an employee welfare benefit plan ... has no discretion ... to flout the ... fiduciary obligations imposed by ERISA, or to deny benefits in contravention of the plan’s plain terms.”); Restatement (Second) of Trusts § 170(1)(1959) (“The trustee is under a duty to the beneficiary to administer the trust solely in the interest of the beneficiary.”); Restatement (Second) of Trusts § 183 (1959) (“When there are two or more beneficiaries of a trust, the trustee is under a duty to deal impartially with them.”); cf. Howard v. Shay, 100 F.3d 1484, 1488 (9th Cir.1996) (The administrator’s “duties are the ‘highest known to the law.’ ”).

At the same time, it is not at all unusual to confer discretion upon a trustee; it is rather normal so to do. Thus, while it might seem a bit jarring to interpret ordinary contract language in a way that confers discretion, where one party must depend on the mere good faith of the other, it is not at all surprising to find discretionary language in an ERISA plan, where the beneficiary can insist on fiduciary behavior. In the former case, the conferral of discretion may seem downright scary; in the latter, the principles of trust law act as an anodyne for undue fears. It is true that when there is discretion courts will only review the administrator’s actions for an abuse of that discretion. See Restatement (Second) of Trusts § 187 (1959). However, the high principles and standards of trust law do protect the beneficiary. No fiduciary, not even an insurance company, can draw much comfort from the fact that discretion is conferred upon it, if it acts in a lax, conflicted, arbitrary, capricious, or abusive manner toward the beneficiary. 2 Nevertheless, trust law principles do not cut in only one direction. The beneficiary is left to the mercy of the trustee, as long as the trustee does.not violate the duties imposed upon him. That uncovers the second fracture in a timorous approach — the treatment of ERISA as if it were a one-way statute.

ERISA was intended to protect beneficiaries, but that is not all it was intended to do. There might not be a beneficiary to protect, if employers and plan administra,-tors were faced with constant litigation and expense when they set up their plans. Myriads of state laws, proliferating concepts of state tort liability (insurance bad faith cases for example), and litigious delays, could all conspire to make the very setting up of ERISA plans decidedly unattractive to many employers. Transaction costs, like litigation and constant judicial “refinements” over the course of hundreds of disputes, will not always enhance the efficient delivery of benefits. Thus, as we have said, “ERISA was enacted to promote and protect employer interests as well as employee interests.” Aloha Airlines, Inc. v. Ahue, 12 F.3d 1498, 1503 (9th Cir.1993). Moreover, ERISA does “set forth a comprehensive civil enforcement scheme that represents a careful balancing *1103 of the need for prompt and fair claims settlement procedures against the public interest in encouraging the formation of employee benefit plans.” Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54 , 107 S.Ct. 1549, 1556 , 95 L.Ed.2d 39 (1987).

Once all of this is realized, we may take heart, become more robust, and discover that we need not strain ourselves to assure that federal courts will give a meticulous de novo review to as many ERISA decisions as possible, either because we think of insured ERISA plans as being much like ordinary contracts or because we believe that ERISA was single-mindedly directed to the maximization of each employee’s recovery from available plans. That explains why, as we pointed out in Snow v. Standard Ins. Co., 87 F.3d 327, 330 (9th Cir.1996), “[w]e have not been stingy in our determinations that discretion is conferred upon plan administrators.”

Of course, timidity aside, the first step in our analysis must still be to determine whether “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 , 109 S.Ct. 948, 956-57 , 103 L.Ed.2d 80 (1989). If it does not, review is de novo. If it does, we should, instead, review the decision for abuse of discretion. See Snow, 87 F.3d at 330 ; Atwood, 45 F.3d at 1321 & n. 1; McKenzie v. General Tel. Co., 41 F.3d 1310, 1314 (9th Cir.1994); Taft v. Equitable Life Assurance Soc’y, 9 F.3d 1469 , 1471 & n. 2 (9th Cir.1994). We outlined the general principles which should be applied to that determination in Snow, 87 F.3d at 330 , and, as I see it, there is no reason to deviate from that outline at this time. We said:

[A] proper and efficient functioning of an ERISA plan does often depend upon the use of discretion by the plan fiduciaries. As we have pointed out, a plan does confer discretion when it “includes even one important discretionary element, and the power to apply that element is unambiguously retained by its administrator.” Bogue v. Ampex Corp., 976 F.2d 1319, 1325 (9th Cir.1992), cert. denied, 507 U.S. 1031 , 113 S.Ct. 1847 , 123 L.Ed.2d 471 (1993). In Bogue that element was found in language in an employment severance plan which provided that the administrator would make determinations about similar employment positions within the company. Id. at 1324 . In other words, if the plan administrator has the authority to determine eligibility for benefits, that inherently confers discretion upon him. See Patterson v. Hughes Aircraft, Co., 11 F.3d 948, 949-50 (9th Cir.1993) (per curiam); Eley v. Boeing Co., 945 F.2d 276, 278 (9th Cir.1991); Madden v. ITT Long Term Disability Plan for Salaried Employees, 914 F.2d 1279, 1284-85 (9th Cir.1990), ce rt. denied, 498 U.S. 1087 , 111 S.Ct. 964 , 112 L.Ed.2d 1051 (1991).

Id.

The plan in this case required that the beneficiary supply “satisfactory written proof’ to Standard. In my opinion, that does not require a construction different from the one we reached in Snow , where we said:

The plan before us provides that there will be no benefit payment unless Standard is presented with what it considers to be satisfactory written proof of the claimed loss. We see no relevant difference between that and plans which declare that the plan administrator will determine eligibility. It is apparent that both require the administrator to decide whether the person has become eligible as a result of presentation of satisfactory proof to that effect. See Donato v. Metropolitan Life Ins. Co., 19 F.3d 375, 378-80 (7th Cir.1994); Miller v. Metropolitan Life Ins. Co., 925 F.2d 979, 983-84 (6th Cir.1991); Bali v. Blue Cross & Blue Shield Ass’n, 873 F.2d 1043, 1047 (7th Cir.1989). Therefore, the district court correctly determined that review of Standard’s decision must be for an abuse of discretion.

*1104 Id. (footnote reference omitted). I recognize that saying “proof which is satisfactory” can be distinguished from saying “proof which is satisfactory to us.” However, aside from nice scholastic debates, it is a distinction without a difference, unless, based upon some of the ephemeral concerns upon which I have already expatiated, we desire to limit the conferral of discretion as much as we can.

The Sixth Circuit put its finger on the issue and the lack of a true distinction, when it said:

Although many of our • prior cases finding a clear grant of discretion involved ERISA plans which explicitly provided that the evidence be satisfactory “to the insurer,” “to the company” or “to us,” it does not automatically follow in the absence of such language discretion has not been granted to the plan administrator.... We agree with Aet-na that this “right to require as part of the proof of claim satisfactory evidence” means, semantically, that the evidence must be satisfactory to Aetna, the only named party with the right to request such evidence. It naturally follows that Aetna, the receiver of the evidence, would review that evidence to determine if it constitutes satisfactory proof of total disability. It is simply implausible to think that Aetna would merely hold the evidence as a safe keeper or depository for a third party unnamed in the contract to review in making benefits determinations.

Perez v. Aetna Life Ins. Co., 150 F.3d 550, 556-57 (6th Cir.1998). Just so. Our normal generous approach to the finding of discretion should dictate that Standard had discretion here.

Moreover, as far as the doctrine of contra proferentem is concerned, I am dubious about its application to the determination of whether discretion has been conferred upon an ERISA plan administrator, as opposed to its application to the construction of coverage and exclusion terms in a plan involving insurance. But even if it did properly apply, I see no significant ambiguity in the language at hand. Cf. Kunin v. Benefit Trust Life Ins. Co., 910 F.2d 534, 538-41 (9th Cir.1990). It is true that omission of the phrase “to us” does allow sophisticated linguists to argue that there is no discretion, even if discretion would otherwise exist. It is also true that sophisticated judges can make sophisticated alternative and competing arguments. That, to my mind, is not enough to create true ambiguity. Ambiguity has never meant that courts or judges differ. Were it so, conflicting rulings would always require a finding of ambiguity, which definitely is not the case. See, e.g., New Castle County v. Hartford Accident and Indem. Co., 933 F.2d 1162, 1195-96 (3d Cir.1991) (presence of conflicting judicial decisions does not mandate a finding of ambiguity); ACL Techs., Inc. v. Northbrook Property & Cas. Ins. Co., 17 Cal.App.4th 1773 , 1787 n. 39, 22 Cal.Rptr.2d 206 , 214 n. 39 (1993) (disagreement among judges of different jurisdictions does not establish ambiguity); Lower Paxton Township v. United States Fidelity & Guar. Co., 383 Pa.Super. 558 , 573 n. 4, 557 A.2d 393 , 400 n. 4 (1989) (ambiguity is not found by the mechanical process of searching for conflicting court decisions). Thus, I do not think that we should be bewitched, bothered or bewildered by those levels of sophistication. In “an ordinary and popular sense” there can be little doubt that it was the administrator to whom the proof had to be satisfactory. Perez, 150 F.3d at 556 . Equally, there can be little doubt that in the ERISA fiduciary world the satisfaction reaches the whole of the decision.

I recognize that it can be argued that the word “satisfactory” does not convey any hint of discretion, whether it is followed by the phrase “to us” or not. That seems plainly wrong. Of course, the idea of discretion does not connote limitless power. If there are objective limits to discretion, as there are in anything but the *1105 strangest circumstances, that does not detract from its existence. Discretionary decision-making does not mean standardless decision-making. See, e.g., Cooter & Gell v. Hartman Corp., 496 U.S. 884 , 405, 110 S.Ct. 2447, 2461 , 110 L.Ed.2d 359 (1990) (discretion abused on erroneous view of law or clearly erroneous assessment of evidence). Even referees, whose game calls are unappealable, do not act in a standardless world.

We should decide that a requirement of satisfactory proof gives the administrator the discretion to determine whether the claimant is entitled to benefits. We should then only patrol the periphery to assure ourselves, and beneficiaries, that there has not been arbitrary, capricious, or conflicted decision making. Absent that, we should let the administrator’s decision stand.

A final word on parsing: In this case, the district court decided that it would conduct de novo review, but that it would rely upon the record that was before the plan administrator, rather than receive new evidence. I agree with the majority that the district court did not abuse its discretion when it did that. See majority opinion at pages 1090-1092; see also Mongeluzo v. Baxter Travenol Long Term Disability Benefit Plan, 46 F.3d 938, 943-44 (9th Cir.1995). So far, so good. At that point, as I see it, the district court should have conducted a trial proceeding in which the trial record consisted of the information which was before the administrator, and should then have considered arguments regarding that record.

Here the district court mislabeled what it was doing when it called the proceeding a summary judgment, and that mislabeling has induced full scale de novo review. Had the district court used the correct label, I would suppose that we would be reviewing its factual determinations for clear error, just as we would in an appeal from any other trial. See Russian River Watershed Protection Comm. v. City of Santa Rosa, 142 F.3d 1136, 1140-41 (9th Cir.1998); Snow, 87 F.3d at 331 . But, then, it is not too surprising when an appellate court decides to rely upon the label given to a proceeding by the district court. In. fairness to the district court, however, we (and others) have previously recognized that a summary judgment based on a detailed stipulated record, which this ERISA record amounts to, can result in what is essentially a trial with review of factual determinations for clear error. See Acuff-Rose Music, Inc. v. Jostens, Inc., 155 F.3d 140, 142-43 (2d Cir.1998); Wolfe v. United States, 798 F.2d 1241 , 1243 n. 2 (9th Cir.1986); EEOC v. Maricopa County Community College Dist., 736 F.2d 510, 512-13 (9th Cir,.1984); Starsky v. Williams, 512 F.2d 109, 111 (9th Cir.1975). Thus, we have seen that we need not be mesmerized by labels. Also, although epiphanies do happen, I doubt that a judge who cannot even discover a basis in the evidence from which a reasonable trier of fact could find in favor of a party might still decide in that party’s favor based on the same evidence. But let that be; at least after today’s didactic exercise a district judge will be able to incant canorous phrases which will please our ears.

In fine, I resile from turning ERISA decision making into an aeonian logo-machy. I would, instead, allow administrators, who have satisfactory-proof discretion, to make benefit determinations unmolested by court battles, other than those that they bring upon themselves when they violate the requirement that they act as fiduciaries for, rather than as contractual adversaries of, their beneficiaries.

Thus, I respectfully dissent.

. Under either of our approaches, the district court failed to apply the proper standards when it decided this case. Although it is a bit difficult to see how the district court would be inclined to reach a different result on an abuse of discretion standard, I see no need to spill ink applying that standard to the facts of this case in light of the decision that the case will be returned to the district court to apply the even stricter de novo standard.

. Of course, just when a conflict will be found is not part of the determination of whether there is discretion in the first place. Because the disposition of this case by the majority.— the determination that requires us to use a de novo standard — turns on the conferral issue, there is no real point in exploring the conflict standard at this juncture. We have spoken to it in the past. See Atwood v. Newmont Gold Co., Inc., 45 F.3d 1317, 1322-23 (9lh Cir.1995); see also Lang v. Long-Term Disability Plan of Sponsor Applied Remote Tech., Inc., 125 F.3d 794 , 798 (9th Cir.1997). Other courts have also done so in varying ways and with varying results. See, e.g., Mers v. Marriott Int’l Group Accidental Death & Dismemberment Plan, 144 F.3d 1014 , 1020 (7th Cir.) cert. denied,-U.S.-, 119 S.Ct. 372 , 142 L.Ed.2d 307 (1998); Doyle v. Paul Revere Life Ins. Co., 144 F.3d 181, 184 (1st Cir.1998).