Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

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TATE V. LONG-TERM DISABILITY PLAN FOR SALARIED EMPLOYEES OF CHAMPION INT’L CORP. #506 (September 19, 2008)

in 1988, Jo Ann Tate left her job with Nationwide Papers as a sales representative because of problems with anxiety and depression. Her employer’s benefits plan (the “Plan”), governed by ERISA, gave her the right to short-term and long-term disability benefits. The long-term disability program was divided into two stages. A person could receive up to two years of long-term disability on a showing that she was unable to perform the duties of her job. After two years, a person had to show that she was unable to perform the duties of any job for which she was or could be qualified. Tate received short-term disability benefits for six months and applied for and was granted long-term disability benefits in 1999. In 2003, the Plan notified Tate that she was no longer eligible for benefits because she did not meet the second stage (i.e., any job) test. The Plan based its decision terminating her benefits on the report of a physician who had not examined Tate but had access to her file. Tate appealed the denial. A second physician reviewed her file and came to the same conclusion. She based her conclusion on the facts that Tate kept her home, complied with her treatment schedule, and experienced some benefit from medication. Tate challenged the determination in district court. On cross motions for summary judgment, the court found that the Plan’s decision to terminate her benefits was arbitrary and capricious in that it consisted only of conclusory statements unsupported by fact. The court specifically noted the absence of any employability review or identification of jobs available to Tate. The Plan appeals. In addition, the court remanded in order for the Plan to make a proper determination of benefits and denied Tate’s request for attorneys’ fees. Tate appeals.

In their opinion, Judges Posner, Kanne, and Williams affirmed all aspects of the district court’s decision. On the Plan’s appeal, the Court noted its de novo review of the district court’s decision and the highly deferential, “arbitrary and capricious,” standard of review of the denial of benefits. Nevertheless, the panel found that it was arbitrary and capricious because neither physician’s report was based on any explanation or reasoning. The first physician apparently did not even review her employment file. The second physician reviewed her employment file but did not tie the conclusion that Tate was unable to work to anything that was relevant to that issue. ERISA requires the Plan to assess her qualifications to work and relate those to jobs she might be able to perform.

Tate’s appeal argued that reinstatement, not remand, was appropriate because the Plan terminated previously awarded benefits, and did not simply deny benefits. Tate relied on the fact that the Plan provided benefits for two years after the “any job” standard took effect. The Court was puzzled by the Plan’s continued payments of benefits after two years without any determination but still found no such determination and held that a remand was proper. The panel also agreed with the district court’s conclusion that obtaining a remand in an ERISA case is not equivalent to “prevailing” for purposes of attorneys’ fees awards.