Amicus Curiae Brief — Black & Decker Disability Plan v. Nord

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No.02-469 | mew as

FEB 24 203

IN THE

Supreme Court of the United States

2> >a

THE BLACK & DECKER DISABILITY PLAN,

Petitioner,

KENNETH L. NORD,

Respondent.

ON PEZPTION E@R WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF OF DELTA FAMILY-CARE DISABILITY AND

SURVIVORSHIP PLAN AND DELTA AIR LINES, INC.

AMICI CURIAE IN SUPPORT OF PETITIONER

THE BLACK & DECKER DISABILITY PLAN

D. Michael Keen Hunter R. Hughes

Deborah D. Brown Counsel of Record

DELTA AIR LINES, INC. J. Timothy McDonald

Legal Department ROGERS & HARDIN LLP

1030 Delta Boulevard 2700 International Tower

Atlanta, Georgia 30320 229 Peachtree Street, N.E.

(404) 715-2386 Atlanta, Georgia 30303

(404) 522-4700

Counsel for Amici Curiae

ician

i

QUESTION PRESENTED

t erred in holding that the treating-phys

rule must be applied in deciding claims for disability

ircul

Whether the United States Court of Appeals for the

benefits under the Employee Retirement Income Secu-

rity Act of 1974, 29 U.S.C. § 1001 et seq.

Ninth C

il

TABLE OF CONTENTS

PAGE

QUESTION PRESENTED ....................... i

INTEREST OF THE AMICI CURIAE........... l

STATEMENT OF THE CASE OF THE

ADEICT CURIAR.. 2c csccccccccsccesoesesunnnne 2

SUMMARY OF ARGUMENT ................... 8

LEGAL, ARGUDGEBINE «0 cccocscocccccestpeccsunsena 9

I. THE TREATING PHYSICIAN RULE

CANNOT BE RECONCILED WITH

THIS COURT’S DECISION IN

FIRESTONE ...cccccccccecscssncessesannnenen 9

Il. THE TREATING PHYSICIAN RULE

CANNOT BE RECONCILED WITH

ERISA GENERALLY ..........cccccccccecee 12

III. THE NINTH CIRCUIT IMPROPERLY

IMPORTED A SOCIAL SECURITY

REGULATION INTO ERISA ............... 16

CONCLUSION 2... cccccccccsvecsesenscsssesnuennen 21

ill

TABLE OF AUTHORITIES

Cases: PAGE

Abnathya v. Hoffmann-La Roche, Inc.,

PE ee BOO UP cccccccccccccccsccccs 10

Alessi v. Raybestos-Manhattan, Inc.,

EE 18

Curtiss-Wright Corp. v. Schoonejongen,

eect coeneccecee: 13, 14

Darland v. Fortis Benefits Ins. Co.,

317 F.3d 516 (6th Cir. 2003), petition for

rehearing en banc filed (Feb. 5, 2003)...... 19

Elliott v. Sara Lee Corp., 190 F.3d 601

iteceecabeasecdscecccesceces 10

Firestone Tire & Rubber Co. v. Bruch,

EE cncccecencéccesceccccecs passim

Gallo v. Amoco Corp., 102 F.3d 918

i eeeacnccencenesecccecce 10

Hale v. Trustees of United Mine Workers’

Health & Retirement Funds, 23 F.3d 899

EEE ee 19

Harris trust & Savings Bank v. Salomon

Smith Barney Inc., 530 U.S. 238

EEE EEE T TTT TT TTT TTT 13

Heckler v. Campbell, 461 U.S. 458 (1983) ...... 17, 18

Intermodal-Rail Employees Ass'n v. Atchison,

Topeka and Santa Fe Railway Co..,

ince caccocceccecctcoeces 12, 16

iv

PAGE

Madden v. ITT Long-Term Disability

Plan for Salaried Employees,

914 F.2d 1279 (9th Cir. 1990)............... 18

Marshall v. Delta Family-Care Disability

and Survivorship Plan. ~ 58 F.3d 834

(8th Cir. 2001) ...... + duteddassadacaenes 2, 10, 19

McKenzie v. General Tel. Co. of Ca.,

41 F.3d 1310 (9th Cir. 1994) ................ 10

Metropolitan Life Ins. Co. v. Massachusetts,

Gee We Hele Gren cncescecensesessscenss 12,17

Miller v. Metropolitan Life Ins. Co.,

925 F.2d 979 (6th Cir. 1991) ................ 10

Nord v. Black & Decker Disability Plan,

296 F.3d 823 (9th Cir. 2002) ................ 2,3

Pagan v. NYNEX Corp., 52 F.3d 438, 442

I a aa ce 10, 19

Paramore v. Delta Air Lines, Inc.,

129 F.3d 1446 (11th Cir. 1997).............. 10, 19

Pegram v. Herdrich, 530 U.S. 211 (2000)........ 14

Regula v. Delta Family-Care Disability

and Survivorship Plan, 266 F.3d 1130

Ls eee nee passim

Salley v. El. duPont de Nemours & Co.,

966 F.2d 1011 (Sth Cir. 1992)............... 10

Terry v. Bayer Corp., 145 F.3d 28

Ch De stccconsctcncsdscsocsnasanesecnr 10

Turner v. Delta Family-Care Disability

and Survivorship Plan, 291 F.3d 1270

(11th Cir. 2002) (per curiam) ...............

Varity Corp. v. Howe, 516 U.S. 489 (1996)......

Woolsey v. Marion Labs., Inc., 934 F.2d 1452

SPU EEEED Scctecassencessennduccesedeens

Statutes:

Employee Retirement Income Security Act

of 1974 (“ERISA”), 29 U.S.C. § 1001 ......

ERISA §§ 204(b)(1), 29 U.S.C. §§ 1054(b)(1) ..

ERISA §§ 301-08, 29 U.S.C. §§ 1081-86........

ERISA § 502(a)(1), 29 U.S.C. § 1102(a)(1).....

ERISA § 504(a)(1), 29 U.S.C. § 1104(a)(1).....

ERISA § 506(b), 29 U.S.C. § 1106(b) ...........

ERISA § 509 (a), 29 U.S.C. § 1109(a)...........

SD elie Bp Se cccccccccccccccccccssccscssse

42 U.S.C. § 42S(EMZMA) .... nc ecrccccccccecees

Regulations:

20 C.F.R. § 404.1-.2127, 416.101-2227 .........

es Oe ED Sinccdcccsdccascceccosses

ey OP A cecdccccccdececctesescssss

Ps 0 EE ccnccicnennscossoedsoncnss

PAGE

Legislative History:

H.R. Rep. No. 93-1280, p. 297 (1974), 1974

U.S.C.C.A.N. 4639, 5077, 5078.............

Miscellaneous:

Administrative Office of the United States

Courts, U.S. Courts of Appeals—

Appeals Terminated on the Merits

During the 12-Month Period Ending

March 31, 2002, www.uscourts.gov/

caseload2002/tables/bOSmar02.pdf.........

G. Bogert & G. Bogert, Law of Trusts &

Trustees (rev. 2d ed. 1980)..................

A. Scott & W. Fratcher on Trusts (4th ed. 1987).

PAGE

14

14

14

IN THE

Supreme Court of the United States

No. 02-469

oie

THE BLACK & DECKER DISABILITY PLAN,

Petitioner,

KENNETH L. NorpD,

Respondent.

ON PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ois

BRIEF OF DELTA FAMILY-CARE DISABILITY AND

SURVIVORSHIP PLAN AND DELTA AIR LINES, INC.

AMICI CURIAE IN SUPPORT OF PETITIONER

THE BLACK & DECKER DISABILITY PLAN

INTEREST OF THE AMICI CURIAE'

The Delta Family-Care Disability and Survivorship

Plan (the “Plan”) is a non-contributory employee welfare

benefit plan, established and maintained pursuant to the

' Petitioner and Respondent have consented to the filing of this

Brief. No counsel for a party authored this Brief in whole or in part.

No persons or entities other than the Amici Curiae made a monetary

contribution to the preparation or submission of this Brief.

2

Employee Retirement Income Security Act of 1974

(“ERISA”), as amended, 29 U.S.C. § 1001 et seq.’ It is

sponsored by Delta Air Lines, Inc. (“Delta”). The Plan

provides short-term disability, long-term disability and

survivorship benefits to over 80,000 non-pilot employ-

ees of Delta and their beneficiaries. The Plan has par-

ticipants in almost every state and is currently subject to

a split in the Circuits on the Question Presented. Com-

pare Regula v. Delta Family-Care Disability and Sur-

vivorship Plan, 266 F.3d 1130, 1139 (9th Cir. 2001) (2 to

1 decision) (applying treating-physician rule to ERISA

disability cases) with Turner v. Delta Family-Care Dis-

ability and Survivorship Plan, 291 F.3d 1270, 1274 (11th

Cir. 2002) (per curiam) (rejecting Regula and the treat-

ing-physician rule in ERISA disability cases) and Mar-

shall v. Delta Family-Care Disability and Survivorship

Plan, 258 F.3d 834, 842 (8th Cir. 2001) (same). The Plan

is also the Petitioner in Delta Family-Care Disability

and Survivorship Plan v. Regula, No. 01-1840 (June 13,

2002), which presents the same Question Presented as

well as a second question.

STATEMENT OF THE CASE

OF THE AMICI CURIAE

This Court has granted certiorari to the United States

Court of Appeals for the Ninth Circuit to review that

Court’s decision in Nord v. Black & Decker Disability

Plan, 296 F.3d 823 (9th Cir. 2002). In that case, a panel

of the Ninth Circuit, in an opinion written by Judge

Betty Fletcher, followed its prior decision in Regula v.

Delta Family-Care Disability and Survivorship Plan,

266 F.3d 1130 (9th Cir. 2001), also written by Judge

2‘ The text of the brief will only cite to sections of ERISA as

codified in the United States Code. Parallel citations to sections of

ERISA are found in the Table of Authorities. See supra at v.

3

Fletcher, and applied the so-called “treating-physician

rule” to a case involving an ERISA claim for long-term

disability benefits under the Black & Decker Disability

Plan.

Because the Court in Nord merely applied the treating-

physician rule that it had created in Regula, Nord,

296 F.3d at 829, much of the analysis and reasoning

behind its creation of that new ERISA rule is found in

the Regula decision. The analysis in Regula, in turn,

reflects various assumptions regarding the Plan that the

Ninth Circuit majority made without any record evi-

dence. Before explaining why the treating-physician rule

should be inapplicable to ERISA disability cases and

should be rejected by this Court, a description of the

Plan’s actual operation with respect to claims such

as Frank Regula’s, as opposed to the Ninth Circuit’s

unfounded assumptions, is necessary. This description

reflects the experiences of the Plan’s agents regarding

the Plan’s operation during the time period that Frank

Regula’s benefits were discontinued and he completed

the exhaustion of administrative remedies (i.e., the Plan

Year ending June 30, 1996). The description is stated in

general terms because there may be specific claims with

respect to which the Plan acted differently based upon

the unique facts of that particular claim.

1. The Plan provides short-term, long-term and sur-

vivorship benefits to participating non-pilot Delta

employees. To receive short-term disability benefits, a

participant must generally be unable to perform their

own job at Delta. With exceptions not relevant here,

short-term disability benefits last for a maximum of 26

weeks. After short-term disability benefits are exhausted,

a participant may apply for long-term disability benefits.

The standard for long-term disability is more rigorous.

It requires a participant to be unable to perform any part-

4

time or full-time work of any type for any employer,

including self-employment. This standard is markedly

different than the Social Security Administration stan-

dard for the payment of disability benefits. See infra at

17-18.

2. The Plan is administered by the Administrative

Committee of Delta Air Lines, Inc. (“Administrative

Committee”). The Administrative Committee is the

Plan’s Named Fiduciary and is vested with the discretion

to decide claims under the Plan. See Regula, 266 F.3d at

1144. The Administrative Committee is composed of

Delta employees as authorized by ERISA. See Firestone

Tire & Rubber Co. v. Bruch, 489 U.S. 101, 105 (1989).

The Administrative Committee is more familiar with

terms and application of the Plan than any entity outside

the Plan or any Court. In the year relevant to Regula’s

appeal to the Administrative Committee for the contin-

uation of his benefits, the Administrative Committee

heard 51 appeals regarding the denial or discontinuation

of disability benefits under the Plan. Over 25 percent of

the appealed decisions were reversed in favor of the

Claimant.’ This figure does not include other appeals

decided in favor of claimants by the Administrative Sub-

committee which provides the first level of review under

the Plan.‘

The Plan is funded by irrevocable contributions that

Delta makes to a qualified trust based upon expected

claims. The assets of the trust far exceeded the claims

3 For comparison’s sake, this is far greater than the 9.5% rever-

sal rate of the federal Courts of Appeals. See, Administrative Office

of the United States Courts, U.S. Courts of Appeals—Appeals Ter-

minated on the Merits During the 12-Month Period Ending March 31,

2002. www.uscourts. gov/caseload2002/tables/605mar02.pdf.

4 — Only those appeals denied by the Administrative Subcom-

mittee may be appealed to the Administrative Committee.

made under the Plan in the Plan year relevant to Reg-

ula’s claim. In the Plan year ending June 30, 1996, the

trust’s assets were $350,315,163.00 against claims of

$28,935,736.00. Thus, Delta had essentially pre-paid all

of the claims made against the Plan (and then some) in

those years with funds that could not revert to Delta.

Delta did this even though neither ERISA, nor any other

law, requires Delta to provide this funding through irre-

vocable contributions or otherwise. See, e.g., 29 U.S.C.

§§ 1081-86 (limiting ERISA’s funding requirement to

certain defined pension benefit plans).

After a claimant? is approved for the receipt of long-

term disability benefits, the Plan provides that those ben-

efits are continued upon its periodic receipt of additional,

current information regarding the claimant’s condition.

At the time Regula’s benefits were discontinued, this

information was usually required to be provided every

three to twelve months. See, e.g., Regula, 266 F.3d at

1134 (noting that Regula was required to submit updated

information every three months).

Once a claimant begins to receive long-term disability

benefits, there are generally only two occurrences that

lead to a thorough re-examination of eligibility for dis-

ability benefits. The first is a report to the Plan from a

third party that the claimant is actually working while

receiving benefits or engaging in activities inconsistent

with the claimed disability. As a result, despite the med-

ical evidence submitted by the claimant’s physician,

these claimants may well be ineligible for benefits under

the Plan depending upon the result of the Plan’s subse-

quent investigation. The second circumstance that nor-

mally precedes a re-examination of a claimant’s eligibility

5 The term “claimant” as opposed to “participant” is used to

distinguish a participant who has filed a claim from the other par-

ticipants in the Plan.

6

is the claimant’s own physician’s indication that the

claimant can perform some work or that claimant’s con-

dition is improving to a substantial degree.

In the first case, when there has been a report that a

claimant is actually working or engaging in activities

inconsistent with the claimed disability, the Plan will

usually first ask the claimant’s own physician for an

update on claimant’s condition and also schedule ain

examination with an independent medical expert. In the

second case, where the claimant’s own physician indi-

cates that claimant is improving or may be able to return

to work, depending on the Plan’s evaluation of the infor-

mation, the claimant’s benefits may be immediately dis-

continued or the claimant may be sent to an independent

evaluation for additional examination. The latter often

occurs when the claimant’s physician only opines that

the claimant is unable to perform his own job as opposed

to any occupation.

3. The Plan does not have as employees its own

physicians for the purpose of performing medical exam-

inations. Typically, the Administrative Committee uses

a third-party service that provides references to physi-

cians who have attained certain qualifications in the rel-

evant specialty. On occasion, the Plan itself may directly

select a physician if the Plan is aware that the physician

is an expert in the relevant field and is otherwise suitable

to examine the claimant. Ironically, of those independent

medical examiners selected by the Plan, some are physi-

cians who have treated other claimants and whose

reports and analysis were seen as thorough, reasoned and

well-founded by the Plan’s agents, regardless of whether

the physician thought that the claimant was disabled. Of

those qualified physicians from whom the Plan received

an opinion, the thoroughness of the opinion is the pri-

7

mary factor that leads the Plan to seek additional opin-

ions from that physician in other claims.

The Ninth Circuit’s decision in Regula begins its anal-

ysis from the simple misguided assumption: Claimant’s

physician good, independent physician bad. See Regula,

266 F.3d at 1139 & 1143. Given the Plan’s processes, as

described above, the Ninth Circuit’s assumption was sur-

prising and unsupported. The Ninth Circuit analysis also

starts from another false, unsupported assumption—that

Delta repeatedly sends its claimants to the same inde-

pendent physicians because they routinely find claimants

not disabled. Jd. at 1144. Not only was this argument not

advanced by Regula, but there is no record evidence for

it and the Ninth Circuit provided no citation to the

record or otherwise to validate this assumption.

It is true that, as in the Regula case, when there are

orthopaedic injuries involved the Plan usually finds it

more relevant to seek the opinion of an orthopaedist

rather than some other type of medical professional such

as a chiropractor, though the Plan accepts and analyzes

each opinion on its own merits. This reasonable prefer-

ence is also ignored by the Ninth Circuit’s analysis. All

told, there is no factual basis for the Ninth Circuit’s

assumptions that the Plan’s independent medical exam-

iners are biased, less capable or repeatedly used by the

Plan because the Plan believes they will find a claimant

able to work.

Finally, the Plan’s experience shows that using a pref-

erence in favor of the treating physician’s opinion would

result in a situation where the Administrative Committee

could not fulfill its fiduciary duty. It is not unusual that an

employee claiming an inability to work, seeks to return to

work immediately after disability benefits are discontin-

ued. Since a physician’s clearance is generally required to

return to work, that claimant’s physician often has a sudden

8

change of opinion and releases the claimant to work.

Given this knowledge, the Plan Administrator could be

forced to disregard its fiduciary duty if mandated to

defer to the treating physician’s view.°®

SUMMARY OF ARGUMENT

The treating-physician rule is contrary to this Court’s

decision in Firestone Tire & Rubber Co. v. Bruch, 489

U.S. 101 (1989) and ERISA. It conflicts with Firestone’s

holding that decisions of a fiduciary vested with dis-

cretion will not be disturbed if they are reasonable. Jd. at

111. It fails to recognize the fiduciary relationship of a

Plan Administrator and needlessly interferes with fidu-

ciary administration of the Plan by dictating the weight

of certain evidence. As applied, the rule effectively gives

the claimant’s physician the right to control receipt of

benefits, as opposed to the Plan Administrator. This

strips the ERISA claims fiduciary of its discretion and

transfers that discretion to the claimant’s physician. The

fiduciary obligation and responsibility, however, remain

with the now powerless fiduciary, while the claimant’s

physician, who is devoid of any fiduciary obligation to

the Plan and the other participants, wields the Plan’s

purse strings. For the reasons outlined below, this rule is

unnecessary given the safeguards of ERISA, and its

application serves to stand ERISA’s framework and this

Court’s decision in Firestone on their respective heads.

The Ninth Circuit attempted to justify its decision by

stating that the rule increases the consistency between

© Additionally, the Plan has seen claimants return to work in

order to qualify for special benefits that accompany various voluntary

resignation programs. These claimants too, had physicians who con-

sistently opined the claimant could not work until the special program

became available.

ee

9

ERISA disability decisions and Social Security Act, 42

U.S.C. §§ 401-33, disability decisions. This ignores the

fact that Congress lets ERISA Plan sponsors set the stan-

dard for disability in an ERISA Plan, but fixed a specific

standard for disability under Social Security. Not only

has Congress expressed no intent that these decisions

should be “consistent”, but it has established vastly dif-

ferent decision-making processes for each which reflects

an expectation of divergent results. The entire structure

of the Social Security Act was aimed at providing a

detailed regulatory complex that left administrative law

judges with only a narrow range of discretion to decide

individual cases. The regulatory addition of the treating

physician rule to the Social Security disability regula-

tions, therefore, did not significantly affect the discre-

tion of Social Security Act administrative law judges to

decide claims under the Social Security Act. On the

contrary, the ERISA Plan Administrator is subject to a

discrete set of claims regulations promulgated by the

Department of Labor which leaves the Plan Adminis-

trator’s broad discretion intact.

Thus, the application of this rule affects a significant

reduction in the discretion accorded to Plan Adminis-

trators under ERISA. The Ninth Circuit’s desire to treat

the two the same lacks any basis in logic, not to mention

law.

LEGAL ARGUMENT

I. THE TREATING PHYSICIAN RULE CANNOT

BE RECONCILED WITH THIS COURT’S DECI-

SION IN FIRESTONE

Before examining the treating physician rule’s com-

patibility with ERISA, it is important first to under-

stand the rule’s effect. Following this Court’s decision in

10

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101

(1989), the federal courts of appeals reached a consen-

sus as to the standard of review applicable to cases in

which the Plan administrator was vested with sufficient

discretion to invoke the arbitrary or capricious standard

of review. Virtually all of the courts of appeals have held

that the substantial evidence test, which requires that the

evidence supporting a decision be less than a prepon-

derance of evidence, but more than a scintilla, applies

when the applicable standard is arbitrary or capricious.

See, e.g., Terry v. Bayer Corp., 145 F.3d 28, 41 (ist Cir.

1998); Pagan v. NYNEX Corp., 52 F.3d 438, 442 (2nd

Cir. 1995); Abnathya v. Hoffmann-La Roche, Inc., 2 F.3d

40, 45 (3d Cir. 1993); Elliott v. Sara Lee Corp., 190 F.3d

601, 608 (4th Cir. 1999); Salley v. EI DuPont de Nemours

& Co., 966 F.2d 1011, 1016 (Sth Cir. 1992); Miller v.

Metropolitan Life Ins. Co., 925 F.2d 979, 984 (6th Cir.

1991); Gallo v. Amoco Corp., 102 F.3d 918, 921 (7th Cir.

1996); Delta Family-Care Disability and Survivorship

Plan v. Marshall, 258 F.3d 834, 841-43 (8th Cir 2001);

McKenzie v. General Tel. Co. of Ca., 41 F.3d 1310, 1316

(9th Cir. 1994); Woolsey v. Marion Labs., Inc., 934 F.2d

1452, 1460 (10th Cir. 1991); Paramore v. Delta Air

Lines, Inc., 129 F.3d 1446, 1452 (11th Cir. 1997).

The Ninth Circuit’s decisions in Nord and Regula sup-

planted this Firestone standard by adopting the treating-

physician rule. As crafted by the Ninth Circuit, that rule

requires that when the treating physician and the inde-

pendent physician are in conflict, the Plan administrator

and/or the reviewing court must presume that the treat-

ing physician is correct and the independent physician is

wrong unless there is substantial evidence, accompanied

by “specific, legitimate” reasons for crediting the inde-

pendent physician more than the treating physician. See

Regula, 266 F.3d at 1140. Thus, while there might be

1]

more than substantial evidence in the record as a whole

to support the Plan’s decision, all of that evidence would

be irrelevant if between the treating physician and the

independent physician the evidence was at equipoise. Jd.

The consequence of violating the treating physician

rule, as demonstrated in Regula, is the application of a

de novo standard of review. /d. at 1145 (“If the Plan fails

to carry its burden [of showing that any alleged conflict

did not affect the Plan’s decision] then we review de

novo its decision denying benefits.”) This is directly

contrary to Firestone which holds that a conflict never

results in de novo review, though it may reduce the def-

erence afforded to the administrator. Firestone, 489 U.S.

at 115. The rule further violates Firestone by conflating

various steps in the process of reviewing a benefits

claim decision. After Firestone, a court should first

inquire as to whether the Plan’s terms vest discretion in

the Plan Administrator. Jd. at 115. If such discretion was

vested in the Plan Administrator, then the Court would

move on to see whether or not there was a conflict of

interest which would affect the degree of deference

afforded to the Plan Administrator. /d. Finally, depend-

ing on which standard of review would apply, the benefit

decision would be reviewed either for reasonableness

under the abuse of discretion standard, or de novo

because the Plan did not vest discretion in the adminis-

trator. See id. The Ninth Circuit’s decision applies the

treating physician rule to the middle step in the analysis,

such that if the treating physicians opinion is not fol-

lowed, there is little, if any, chance that the fiduciary is

not operating under a conflict of interest. The Ninth Cir-

cuit’s decision to create this rule for ERISA was one

of judicial fiat and is not based on any precedent or logic. As

demonstrated below, it is virtually impossible to avoid de novo

review because even objectively supportable and reasonable

factors were not accepted by the Ninth Circuit in Regula.

12

In practice, the rule is demonstrably draconian. In

Regula, the Plan stated that the independent medical psy-

chiatrist’s opinion that Regula was malingering was

based on two factors: (1) the overall examination; and

(2) Regula’s refusal to consider prescription drug treat-

ment. This finding was unrebutted by the “treating” psy-

chologist. See id. at 1135 (describing conflicting opinions

but not noting that claimant’s physician disagreed with

or considered the finding of malingering). Further, the

“treating” psychologist (1) indicated an improper bias in

favor of Regula by assailing the report of an orthopedist

and, therefore opining outside her area of expertise in

the process, id. at 1135; and (2) proffered inconsistent

opinions, id. at 1153 (Brunetti, J., dissenting). Moreover,

the Plan preferred the opinion of the orthopedist to that

of a chiropractor because it gave more credence to the

opinions of medical doctors as opposed to osteopaths.

(Appendix to Petition in 01-1840 at 109a (no current

opinion from an M.D.)). Yet, even this was not enough

for the Ninth Circuit majority as it held that not even

these reasons were “specific, legitimate” reasons based

on substantial evidence in the record. Regula, 266 F.3d

at 1146-47. Given the virtually insurmountable level of

evidence required by this Ninth Circuit rule as shown in

its application, it is totally inconsistent with this Court’s

ruling in Firestone.

Il. THE TREATING PHYSICIAN RULE CANNOT

BE RECONCILED WITH ERISA GENERALLY

The Ninth Circuit’s rule is also inapplicable given

ERISA’s structure. To the extent the rule is outcome

determinative, it regulates the substantive content of an

employee welfare benefit plan contrary to ERISA. See

Intermodal-Rail Employees Ass'n v. Atchison, Topeka

and Santa Fe Railway Co., 520 U.S. 510, 515 (1997)

(quoting Metropolitan Life Ins. Co. v. Massachusetts.,

13

471 U.S. 724, 732 (1985)). To the extent it portends to

merely affect the claims regulation process, it is incon-

sistent with the claims regulations issued by the Depart-

ment of Labor for ERISA benefit claims. See 29 U.S.C.

§ 2560.503-1. As a result, there is no interstice for the

Ninth Circuit to create federal common law in this

instance.

The rule is also inconsistent with the structure of ERISA

when one focuses on the fiduciary duties assigned to those

who administer the Plan. Decisions under ERISA plans

are made by fiduciaries. See Firestone, 489 U.S. at 105.

These fiduciaries are subject to ERISA’s high standards

that require them to act only in the best interest of Plan

participants and beneficiaries. 29 U.S.C. § 1104(a)(1).

ERISA prohibits fiduciaries from acting in the best

interest of the Plan sponsor/employer. See 29 U.S.C.

§ 1106(b). ERISA likewise prohibits self-dealing and

dealings with parties in interest. See Harris Trust &

Savings Bank v. Salomon Smith Barney Inc., 530 U.S.

238, 242 (2000). Failing to comply with these rules sub-

jects ERISA fiduciaries to personal liability. 29 U.S.C.

§ 1109(a).

Concomitant with this high level of responsibility is a

broad recognition of the fiduciary discretion to make

decisions under the plan when the terms of the plan vest

that discretion in the fiduciary (as it is undisputed by

Respondent they both did in the Black & Decker

and Delta Plans). See Firestone, 489 U.S. at 111. When

that discretion is committed to the fiduciary, the fidu-

Ciary’s interpretation will not be disturbed so long as

it reasonable. Jd. As such, this Court has recognized that

the fiduciary has obligation first to follow the terms

of the Plan. See Curtiss-Wright Corp. v. Schoonejongen,

514 U.S. 73, 83 (1995). This is consistent with ERISA’s

requirement that each benefit Plan be established and

14

maintained “pursuant to a written instrument.” 29 U.S.C.

§ 1102(a)(1); Curtiss-Wright, 514 U.S. at 83. This

requirement enables the participant to examine the

Plan documents and determine their rights and obliga-

tions under the Plan. Cwrtiss-Wright, 514 U.S. at 83

(quoting H.R. Rep. No. 93-1280, at 297 (1974), 1974

U.S.C.C.A.N. 4639, 5077, 5078).

On the other hand, physicians who provide reports and

opinions to benefit plans are subject to none of ERISA’s

fiduciary obligations. Instead, their obligations flow

directly to their patients, and rightly so, regardless of the

terms of the Plan. See Pegram v. Herdrich, 530 U.S. 211,

218 (2000). Indeed, this Court has previously held that

even where the physician’s decision regarding eligibil-

ity for a Plan benefit is mixed with a decision about

medical treatment, the decision is not subject to ERISA’s

fiduciary obligations. Pegram, 530 U.S. at 231. Instead,

the fiduciary duty still lies with the Plan Administrator

which is solely responsible for making decisions about

“distributing [benefits] to [participants and] beneficia-

ries.” Id. at 231 (citing G. Bogert & G. Bogert, Law of

Trusts & Trustees §§ 551, 741-47, 751-75, 781-99 (rev.

2d ed. 1980); 2A, A. Scott & W. Fratcher on Trusts,

§§ 176, 181 (4th ed. 1987); 3 id., §§ 188-93; 3A id.,

§ 232).

Against this backdrop of (1) a clear assignment of

fiduciary duties and obligations to the Plan Adminis-

trator; and (2) a clear statement to Plan participants that

they must look to the Plan Administrator as the arbiter of

the Plan, the Ninth Circuit’s decision improperly shifts

the decision-making power to a non-fiduciary. This is

contrary to ERISA’s fiduciary scheme.

The Ninth Circuit’s decision also violates the funda-

mental structure of ERISA which carefully balances the

fiduciary’s decision-making power with the heavy bur-

15

den of fiduciary responsibility and liability. In trans-

ferring only the decision-making power, but leaving the

fiduciary duty responsibility and obligations on the Plan

Administrator, the Ninth Circuit has shattered the Con-

gressional design. The result is that a party with no bur-

den to follow ERISA is empowered to make the

decisions that will affect the Plan participants, while the

party that has all of the burden to make the correct deci-

sion essentially has little or no power to make the cor-

rect decision. The problem with this separation is not

merely theoretical and has manifested itself in the Ninth

Circuit’s decisions.

The Regula case is a prime example. In that case, the

Plan specifically stated that it was not crediting

Claimant’s treating psychologist because she had opined

outside her area of expertise in apparent bias and sym-

pathy for Claimant. Additionally, after first stating that

Regula was psychologically ready to return to work sub-

ject to his orthopaedic limitations, she suddenly changed

her opinion when the orthopaedic limitations were

removed. Further, the Plan explained that with respect to

the physicians, it credited the position of the

orthopaedist over the chiropractor because of a prefer-

ence for orthopaedists to make orthopaedic decisions.

The Ninth Circuit held that this simply was not good

enough to defeat the treating physician rule.

The result of the Ninth Circuit’s decision in Regula

was to shift the power to decide whether Regula’s ben-

efits would continue to (1) Regula’s psychologist opin-

ing outside her areas of expertise; and (2) Regula’s

chiropractor, neither of whom had any obligation to

actually follow the terms of the Plan. While they have a

heavy incentive to opine in favor of their own patient’s

interests, and arguably an ethical obligation to do so,

they owe no duty to any of the other participants or ben-

16

eficiaries in the Plan who have a right to know that the

claims of others will be decided under the terms of the

Plan by the Plan Administrator and that the assets of the

Plan will not be squandered on the claims of participants

who are not qualified for the Plan’s benefits in accor-

dance with those terms. Conversely, the Administrative

Committee is the one entity that is in a better position to

understand exactly how the Plan is evenly applied across

all participants and beneficiaries. It also has the fidu-

ciary responsibility under ERISA to decide claims. It

now, however, has virtually no decision-making author-

ity when the claimant’s physician opines favorably to the

claimant. Yet, the Plan Administrator still remains

responsible to all of the other participants and benefi-

Ciaries to see that the Plan is administered and its assets

spent in accordance with its terms.

The treating physician rule cannot be applied to an

ERISA plan fiduciary, consistent with ERISA’s structure.

Under this rule, decisions regarding eligibility for ben-

efits will not be made by the ERISA-fiduciary Plan

Administrator, but by the physicians of claimants who

are currently seeking benefits. These physicians are

complete strangers to the Plan with no knowledge of

how the Plan’s disability standard has been applied pre-

viously nor responsibility to apply the terms so that the

Plan’s assets are preserved only for those participants

eligible for the benefits. As a result, the Ninth Circuit’s

rule clearly contravenes ERISA’s fundamental allocation

fiduciary responsibility.

Ill, THE NINTH CIRCUIT IMPROPERLY

IMPORTED A SOCIAL SECURITY REGULA-

TION INTO ERISA

ERISA does not regulate the substantive content of

employee welfare benefit plans. Jntermodal-Rail Employ-

ees Ass'n v. Atchison, Topeka and Santa Fe Railway Co..,

17

520 U.S. 510, 515 (1997) (quoting Metropolitan Life Ins.

Co. v. Massachusetts., 471 U.S. 724, 732 (1985)). This

was one way that Congress addressed the chief concern

that in establishing ERISA it did not want “to create a

system that is so complex that administrative costs, or

litigation expenses, unduly discourage employers from

offering welfare benefit plans in the first place.” Varity

Corp. v. Howe, 516 U.S. 489, 497 (1996). Congress did

give the Department of Labor the ability to create reg-

ulations regarding how ERISA benefit claims are to

be decided and the Department has issued 29 C.F.R.

§ 2560.503-1 as a result. This regulation imposes a

mechanism for benefit claimants to administratively

appeal adverse benefits decisions. It includes the right of

the claimant to submit information in support of the

claim and to know the basis for the Plan administrator's

decision. Jd. That claim regulation specifically requires

the Plan to consult an independent medical physician

when it is not persuaded by the treating physician's

opinion. Id. § 2560-503-1(h)(3)(iii) & (4). The regula-

tion does not require that any deference be paid to the

treating physician’s opinion. See id.

Congress acted much differently in creating a public

welfare benefit system under the Social Security Act.

Within the Social Security Act, Congress has established

an elaborate, highly-regulated public disability benefit

authority. See, e.g., 42 U.S.C. §§ 401-34; 20 C.F.R.

§ 404.1-.2127, 416.101-2227. Unlike the Delta Plan in

Regula, the Social Security Act provides benefits even

when an individual might be able to perform some work.

Heckler v. Campbell, 461 U.S. 458, 461-62 (1983) (exis-

tence of jobs claimant can perform does not preclude

disability finding). Unlike ERISA Plans, which often

look at the effect of a given condition on an individual,

the Social Security Act grids automatically entitle

claimants with certain impairments to receipt of benefits

18

even if individuals with that impairment may actually be

able to work. See 20 C.F.R. § 404.1520(d). The Social

Security Act also requires a specified analysis of the job

qualifications of an individual who does not meet one of

these absolute criteria. 42 U.S.C. § 423(d)(2)(A); 20

C.F.R. § 404.1520(f). Much of this structure is necessary

because of the sheer volume—in the millions of claims

per year—that the Social Security Administration han-

dles. Heckler, 461 U.S. at 464 n.2.

Despite the obvious dissimilarity of the Social Secu-

rity Act and ERISA benefit schemes, the Ninth Circuit

held that it was only “common sense” that the results

under both should be consistent. This is wrong on at

least two levels.

First, as this Court held in Firestone, ERISA is not

based on the Social Security Act. Rather Congress

intended to incorporate much of the Labor Management

Relations Act’s fiduciary law into ERISA. See Firestone,

489 U.S. at 109. Conversely, in drafting ERISA, Congress

was only concerned with the Social Security Act in terms

of the calculation of pension benefits, not welfare bene-

fits. See 29 U.S.C. §§ 1054(b)(1)(B)(iv), 1054(b)(1)(C),

1054(b)(1)(G); Alessi v. Raybestos-Mahhattan, Inc., 451

U.S. 504, 514-15 (1981) (same).

Second, given that the eligibility standards for bene-

fits under an ERISA Plan are almost always different

than, and usually stricter than, the Social Security stan-

dard, as is the case with Delta’s Plan, there is no reason

why consistency between ERISA and Social! Security

Act decisions should be expected. The end result of this

consistency, of course, would be to reverse every Court

of Appeals (including the Ninth Circuit’s prior panel

opinion in Madden v. ITT Long-Term Disability Plan For

Salaried Employees, 914 F.2d 1279, 1285 (9th Cir. 1990))

which has held that an ERISA disability plan is not

19

bound by decisions of the Social Security, or any other,

governmental benefit program. See Delta Family-Care

Disability and Survivorship Plan v. Marshall, 258 F.3d

834, 842 n.11 (8th Cir 2001) (under the same Plan at

issue in Regula, because of the discretion granted to the

ERISA Plan Administrators, the administrator is not

bound by governmental disability decisions) need not be

followed by the Plan); Paramore v. Delta Air Lines, Inc.,

129 F.3d 1446, 1452 n. 5(11th Cir. 1997) (also con-

cerning the same Plan as at issue in Regula and distin-

guishing the Social Security Act); Pagan v. NYNEX

Pension Plan, 52 F.3d 438, 442-43 (2d Cir. 1995) (dif-

fering standards of disability between governmental and

private Plans to preclude similar results); Hale v.

Trustees of United Mine Workers’ Health & Retirement

Funds, 23 F.3d 899, 902 (4th Cir. 1994) (same). In fact,

this result has already occurred in one court of appeals.

See Darland v. Fortis Benefits Ins. Co., 317 F.3d 516,

529-30 (6th Cir. 2003) (holding that an ERISA Plan

which offsets benefits by Social Security Benefits may

be estopped from not following the Social Security dis-

ability decision), petition for rehearing en banc filed

(Feb. 5, 2003).

The reasoning behind the Ninth Circuit’s rule sup-

plants ERISA welfare benefit law with the law of the

Social Security Act. The error of this position is mani-

fest. Why would Congress have gone to such detail to

set up two drastically different schemes if it wanted

them to be the same? The answe. is that Congress did

not mean for them to be the same and it therefore made

them drastically different. As a result, the Ninth Cir-

cuit’s rule has no place.

The Ninth Circuit also thought that ERISA and the

Social Security Act were similar because both ERISA

Plan Administrators and Administrative Law Judges

20

under the Social Security Act have discretion in decid-

ing benefit claims. It is wrong to conclude, however, that

the narrow discretion under the highly regulated Social

Security scheme is the same as the broad discretion of a

Plan Administrator under ERISA. By analogy, both an

adult and a child exercise discretion in deciding what to

eat, but because the adult can drive and likely has

greater wealth, the adult’s discretion would involving

choosing between numerous restaurants within a city. At

the same time, the child’s discretion would likely be

between the types of food readily available in the home.

The Ninth Circuit would equate these acts of choice

because they both involve “discretion”. The Ninth Cir-

cuit is just as wrong in justifying importation of the

treating-physician rule from Social Security Act by com-

paring the discretion of an Administrative Law Judge

under the Social Security Act and the discretion of a

Plan Administrator under ERISA.

=~

21

CONCLUSION

For the foregoing reasons, this Court should reverse

the United States Court of Appeals for the Ninth Cir-

cuit’s decision in Nord v. Black & Decker Disability

Plan, hold that the treating-physician rule does not apply

as a matter of law pursuant to ERISA and order the

Ninth Circuit to enter judgment in favor of The Black &

Decker Disability Plan.

This 24th day of February, 2003.

HUNTER R. HUGHES

Counsel of Record

J. TIMOTHY MCDONALD

ROGERS & HARDIN LLP

2700 International Tower

229 Peachtree St., N.E.

Atlanta, Georgia 30303

(404) 522-4700

D. MICHAEL KEEN, Esq.

DEBORAH D. BROWN, Esq.

DELTA AIR LINES

Legal Department

1030 Delta Boulevard

Atlanta, Georgia 30320

(404) 715-2386

Counsel for Petitioners