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Robert T. Miller, Appellant v. American Airlines

January 25, 2011

ROBERT T. MILLER, APPELLANT
v.
AMERICAN AIRLINES, INC.; AMERICAN AIRLINES, INC., PILOT RETIREMENT BENEFIT PROGRAM FIXED INCOME PLAN (A PLAN); AMERICAN AIRLINES, INC., PENSION BENEFITS ADMINISTRATION COMMITTEE



On Appeal from the United States District Court for the Middle District of Pennsylvania (D.C. No. 2-08-cv-00277) District Judge: Honorable A. Richard Caputo

The opinion of the court was delivered by: Fisher, Circuit Judge.

PRECEDENTIAL

Argued November 16, 2010

Before: AMBRO, FISHER and WEIS, Circuit Judges.

OPINION OF THE COURT

Robert T. Miller filed suit against American Airlines, Inc., the American Airlines, Inc. Pilot Retirement Benefit Program Fixed Income Plan, and the American Airlines, Inc. Pension Benefits Administration Committee (collectively,

"American"), alleging a violation of § 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132(a)(1)(B). Miller asserted that American impermissibly terminated his long-term disability benefits, and informed him of this action in a vague and misleading letter. He further alleged that American‟s review of his case failed to consider all of his relevant diagnoses, as well as the unique requirements of his employment as a pilot. The District Court granted American‟s Motion for Summary Judgment, ruling that American‟s termination decision was proper. This appeal requires us to consider whether the administrative process that American employed complied with the procedural mandates of ERISA and, if not, whether the proper remedy is a remand to the plan administrator or a reinstatement of benefits. For the reasons stated herein, we will reverse the decision of the District Court. We hold that the termination of Miller‟s benefits was arbitrary and capricious in light of the numerous substantive deficiencies and procedural irregularities that pervaded American‟s decision-making process. We further hold that Miller is entitled to retroactive reinstatement of his disability benefits.

I.

A. Factual History

Miller was employed as a commercial airline pilot for American Airlines for nearly ten years. In August 1998, Miller suffered a psychotic episode while on duty and was subsequently admitted to the hospital. He was prescribed various medications as part of his treatment regimen. Miller‟s FAA medical certification, required for all commercial pilots, was revoked.

Miller applied for long-term disability ("LTD") benefits under the American Airlines, Inc. Pilot Retirement Benefit Program Fixed Income Plan (the "Plan"), a defined benefit plan subject to ERISA, 29 U.S.C. § 1001 et seq. Miller began receiving treatment from a psychiatrist, Dr. Abel Gonzalez, in September 1998. Dr. Gonzalez diagnosed

Miller as suffering from anxiety disorder and brief reactive psychosis. On February 3, 1999, Dr. Gonzalez reported to American that Miller had suffered brief reactive psychosis caused by physical fatigue, sleep deprivation, and emotional stress, and that his progress was "favorable." Thereafter, American awarded Miller LTD benefits in November 1999.

The Plan provides "own occupation" disability benefits, where a pilot deemed disabled from employment as a pilot for American may receive benefits even if he could work in a different capacity. Under the Plan, "[d]isability means an illness or injury verified through a qualified medical authority . . . which prevents a Member from continuing to act as an Active Pilot Employee in the Service of the Employer." (App. at 717.) In addition, an employee will no longer be eligible for LTD benefits if, among other things, "verification of such Disability can no longer be established." (Id. at 739.) The Plan vests discretionary authority with a Pension Benefits Administration Committee ("PBAC") that has the power to determine benefits eligibility. Charlotte Teklitz was the delegate of the PBAC who reviewed appeals from the denial or termination of benefits.

In May 2003, American informed Miller that it could no longer substantiate his disability and terminated his benefits as a result. Dr. Gonzalez subsequently submitted documentation reiterating that Miller had been diagnosed with anxiety and brief reactive psychosis. Dr. Gonzalez noted that Miller had taken medication until January 2000 and that he had been "asymptomatic" since the spring of 2001. (Id. at 112.) He further noted that Miller would be able to return to work once his FAA medicate certification was reinstated. In June 2003, Dr. Gonzalez provided four progress notes at American‟s request. His notes stated that Miller remained asymptomatic, that he was not taking any medication, and that pursuant to FAA regulations he was still not able to work. After receiving this information, American determined that Miller "[m]edically qualifies for [the] disability pension program" and reinstated his LTD benefits. (Id. at 148.)

Over the next two years, American periodically requested medical updates from Miller to document his disability. In response, Dr. Gonzalez provided documentation that Miller was still under his care, that he was seen monthly, and that he was not taking any medication. American subsequently noted that Miller was not expected to return to work. In August 2005, Miller provided another letter from Dr. Gonzalez reporting that Miller was asymptomatic, that he required adequate sleep to prevent manifestations of stress, and that he was not taking any medication. On October 16, 2006, Dr. Gonzalez provided four additional progress notes stating that Miller‟s diagnosis was the same, that he was doing well, that he was "in general asymptomatic with good mental stability," and that he was not taking any medication. (Id. at 107.)

On October 23, 2006, American sent Miller a letter notifying him that his LTD benefits were terminated. The letter provided:

We are in receipt of your recent correspondence from Dr. Abel Gonzalez, submitted in response to our letter of September 21, 2006 from Jeanne Spoon, RN. However, we are unable to verify either the existence of a continuing medical disability or your continued substantial progress towards obtaining your FAA medical certification.

(Id. at 98.) The letter then quoted the Plan and stated that a pilot‟s disability will cease if "verification of such Disability can no longer be established." (Id.) The letter further elaborated:

In order to receive further favorable consideration, you will need to demonstrate that you are actively pursuing obtaining your FAA medical certification.

At this time, however, verification of your continued disability cannot be established and your disability benefits under the Plan will end immediately[.]

(Id.) Significantly, the Plan does not make eligibility for LTD benefits contingent on a pilot‟s pursuing medical certification with the FAA. Upon receiving this letter, Miller contacted American and inquired as to why his benefits were terminated. In response, American referred him to the termination letter and did not provide any additional information. Miller appealed the decision to the PBAC on November 30, 2006. To support his claim, Miller included a completed appeal form stating that he continued to have active psychiatric diagnoses and submitted a letter from Dr. Gonzalez.

In this letter, Dr. Gonzalez stated that Miller "has been continually and [] permanently disabled from obtaining a Class One Medical Certificate as required by F.A.A. regulations since August of 1998." (Id. at 340.) Dr. Gonzalez further clarified that Miller "remains permanently disabled due to medical reasons." (Id.) According to Dr. Gonzalez, Miller continued to suffer from anxiety and psychosis, as he had since his original diagnosis. Dr. Gonzalez then went on to summarize Miller‟s treatment:

The necessity for this continuated [sic] treatment has and will continue to exist because of the nature of his psychiatric conditions.

More specifically, his diagnosis reveals and refers to latent vulnerability on his mental status so that prevention [sic] medical treatment, when adequate, may be sufficient. However, no medical treatment has the capacity to neither revert, undo, nor cure such condition.

(Id.) Dr. Gonzalez concluded by noting that Miller continued on active treatment necessary to preserve his health and that his prognosis was fair.

In light of the disagreement as to Miller‟s eligibility for LTD benefits, American referred the case to Western Medical Evaluators ("WME") for an outside medical review on March 27, 2007.*fn1 American directed WME to perform an "evidence-based, forensic medical review/evaluation" of Miller‟s case. (Id. at 300.) The letter from American stated that Miller‟s "[c]onditions [c]laimed" were anxiety disorder and brief reactive psychosis. (Id.) Additionally, American prompted WME to answer six specific questions regarding the evidentiary support for the "continuing presence of [Miller‟s] psychiatric diagnoses." (Id. at 301.)

In response, Drs. Seskind and Crain of WME reviewed Miller‟s file and provided American with a report on April 20, 2007. Neither performed a physical evaluation of Miller or communicated with him. Dr. Crain‟s report reviewed the documents in Miller‟s file and found that the records "did not document any psychiatric problems or explain [Miller‟s] failure to obtain the required medical certificate." (Id. at 310.) As such, Dr. Crain determined that Miller was not disabled. Dr. Seskind‟s portion of the report noted that FAA standards require that a pilot not suffer from psychosis. He then went on to say it was "crucial to note" that Miller was not undergoing psychotherapy, that he was not taking medication, and that he had not attempted to obtain his FAA medical certification. (Id. at 312.) In light of the fact that Miller had not requested a formal approval of his psychiatric designation from an FAA medical examiner and been denied this certification, Dr. Seskind found that Miller "is therefore not really disabled." (Id.) On May 22, 2007,

American sent Miller a letter which included the WME report and reaffirmed the termination decision.

B. Procedural History

On February 13, 2008, Miller filed a complaint against American in the United States District Court for the Middle District of Pennsylvania alleging a claim for benefits pursuant to ERISA § 502(a)(1)(B). Both parties filed cross-motions for summary judgment. On November 30, 2009, the Magistrate Judge issued a report and recommendation proposing that that District Court grant Miller‟s motion for summary judgment and order the retroactive reinstatement of his benefits. Miller v. American Airlines, Inc., No. 08-CV- 277, 2009 WL 6039583, at *1 (M.D. Pa. Nov. 30, 2009). According to the report, American‟s termination of Miller‟s LTD benefits was arbitrary and capricious due to numerous procedural errors on the part of American. See id.

On March 8, 2010, the District Court rejected the Magistrate‟s report and granted summary judgment in favor of American. Miller v. American Airlines, Inc., No. 08-CV- 277, 2010 WL 890016, at *11 (M.D. Pa. March 8, 2010). The District Court determined that American‟s termination decision was not arbitrary and capricious. See id. In its ruling, the District Court concluded that American had received new information from Dr. Gonzalez that Miller was "asymptomatic," and therefore properly concluded that he was no longer disabled. See id. at *8. Additionally, the District Court concluded that the termination letter sufficiently described the reasons for discontinuing Miller‟s LTD benefits. See id. at *9. Likewise, the District Court determined that American did not impermissibly rely on Miller‟s failure to obtain his FAA medical certification. See id. Finally, the District Court found that American adequately addressed Miller‟s diagnoses and job requirements as set forth in the WME report. See id. at *10.

Miller filed a timely notice of appeal.

II.

The District Court had jurisdiction under 29 U.S.C. § 1132(e)(1) and 28 U.S.C. § 1331. We have jurisdiction pursuant to 28 U.S.C. § 1291. We exercise plenary review over an order granting summary judgment. See Shook v. Avaya, Inc., 625 F.3d 69, 72 (3d Cir. 2010). "In exercising this review, '[w]e may affirm the order when the moving party is entitled to judgment as a matter of law, with the facts reviewed in the light most favorable to the non-moving party.‟" Id. (quoting Kossler v. Crisanti, 564 F.3d 181, 186 (3d Cir. 2009)); Fed. R. Civ. P. 56(c). We review a challenge by a participant to a termination of benefits under ERISA § 502(a)(1)(B) under an arbitrary and capricious standard where, as here, the plan grants the administrator discretionary authority to determine eligibility for benefits. See Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 115-16 (2008); Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). An administrator‟s decision is arbitrary and capricious "if it is 'without reason, unsupported by substantial evidence or erroneous as a matter of law.‟" Abnathya v. Hoffman-La Roche, Inc., 2 F.3d 40, 45 (3d Cir. 1993) (quotations and citations omitted).*fn2

We review various procedural factors underlying the administrator‟s decision-making process, as well as structural concerns regarding how the particular ERISA plan was funded, to determine if the conclusion was arbitrary and capricious. *fn3 See, e.g., Glenn, 554 U.S. at 116-17; Estate of Schwing v. The Lilly Health Plan, 562 F.3d 522, 525-26 (3d Cir. 2009). Whereas "[t]he structural inquiry focuses on the financial incentives created by the way the plan is organized," i.e., whether there is a conflict of interest, "the procedural inquiry focuses on how the administrator treated the particular claimant." Post v. Hartford Ins. Co., 501 F.3d 154, 162 (3d Cir. 2007). Specifically, in considering the process that the administrator used in denying benefits, we have considered numerous "irregularities" to determine "whether, in this claimant‟s case, the administrator has given the court reason to doubt its ...


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