On Appeal from the United States District Court for the District of New Jersey (D.C. No. 2-08-cv-05208) District Judge: Hon. Faith S. Hochberg
The opinion of the court was delivered by: Jordan, Circuit Judge.
Before: CHAGARES, JORDAN and GREENAWAY, JR., Circuit Judges.
This case arises out of a decision by Connecticut General Life Insurance Company ("CIGNA"), as the third- party administrator of "The Lucent Technologies, Inc. Long Term Disability Plan for Management or LBA Employees" (the "Plan"),*fn1 to deny Alcatel-Lucent USA, Inc. ("Lucent") employee Robert Funk's claim for long-term disability benefits under the Plan. Funk challenged that decision in the United States District Court for the District of New Jersey pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"). The District Court granted summary judgment for Funk on both his claim for long-term disability benefits and on CIGNA's counterclaim under ERISA to recover overpaid benefits.
CIGNA and the other appellants appeal from that decision and order.*fn2 For the following reasons, we will vacate the District Court's order and remand with respect to CIGNA's denial of benefits, and we will reverse the District Court's order with respect to CIGNA's counterclaim for overpaid benefits.
A. The Parties And The ERISA Plan At Issue
Funk worked as a member of Lucent's technical staff.*fn3 At all times relevant to this appeal, he was a participant in Lucent's Plan, which was governed by ERISA and selffunded by Lucent through a trust. CIGNA administered the Plan. As Plan administrator, CIGNA had "full discretionary authority and power to ... determine eligibility for [Plan] benefits [and] to interpret and construe the terms and provisions of the [Plan]." (App. 2 at 585.)
Pursuant to the Plan, a participant could be eligible to receive long-term disability ("LTD") benefits after he had received short-term disability benefits for 26 weeks. The Plan provided LTD benefits in two phases. Phase one began immediately after the 26-week short-term disability period and ran for one year. To receive LTD benefits for that one- year period, the putatively disabled participant had to show that he was prevented by reason of such disability, other than accidental injury arising out of and in the course of employment of the Company, from engaging in his ... occupation or employment at the Company, for which the Eligible Employee is qualified, based on training, education or experience.
(App. 2 at 167.) However, for a Plan participant to receive LTD benefits beyond the one-year period, i.e., to move on to phase two, CIGNA, "in [its] sole opinion [as] the [Plan] Administrator," had to be persuaded that the participant was incapable of performing the requirements of any job for any employer for which the individual is qualified or may reasonably become qualified by training, education or experience, other than a job that pays less than 60 percent of the
Eligible Employee's Eligible Pay that would have been in effect on the day preceding the day that the Eligible Employee's Short Term Disability Benefits ceased. (Id.)
The Plan also provided that LTD benefits could be reduced by certain offsets, including Social Security disability benefits. Pursuant to the Plan, "[a]ny retroactive award of Social Security benefits which covers any portion of the period for which Plan benefits have been paid shall be considered as an offset of such Plan benefits and be payable to [CIGNA] by the recipient." (App. 2 at 172.)
B. CIGNA's Denial Of Funk's Claim For Phase
On December 7, 2004, Funk began a leave of absence due to depression and related disorders. In August 2005, after receiving short-term disability benefits for 26 weeks, Funk applied to CIGNA for LTD benefits.*fn4 In support of his application, Funk submitted a claim form and the treatment records from his mental healthcare providers, Dr. Pinchuck, his psychiatrist, and Mr. Libby, his psychotherapist.*fn5 Funk's submissions indicated that he had a history of alcohol abuse and had been experiencing stress from his financial situation and his relationship with his wife. Pinchuck's and Libby's treatment notes described Funk as suffering from, among other things, depression, anxiety, and paranoia. The notes indicated that Funk had difficulty concentrating, making decisions, and otherwise performing daily tasks. Both Pinchuck and Libby opined that Funk was unable at that time to return to work in his former position.
CIGNA forwarded Funk's treatment records to Dr. Mohsin Qayyum for independent review. Qayyum opined that the information provided to him supported the conclusion that, "due to severe psychiatric symptoms[,]" Funk could not return to work. (App. 2 at 436.) Accordingly, Funk was awarded LTD benefits for a one-year period retroactive to June 28, 2005.
In June 2005, Funk executed an agreement providing that his LTD benefits under the Plan were to be reduced by any Social Security benefits he ultimately received and that he would reimburse CIGNA "for any LTD overpayment ... that may occur as a result of" having received Social Security benefits. (App. 2 at 566.) In August 2005, he executed a similar agreement (together with the June 2005 agreement, the "Reimbursement Agreements").
In January 2006, CIGNA notified Funk that it would again be reviewing his case to determine if he would remain eligible for benefits beyond the phase one period. The review required Funk to complete a disability questionnaire and to provide current treatment information from his mental healthcare providers.
Funk submitted the questionnaire, listing bad tremors, lack of concentration, tiredness, short-term memory loss, aggression, depression, and paranoia as reasons why he could not return to work. Libby provided notes from therapy sessions, including observations that Funk's relationship with his wife had improved, that he was "communicating his feelings much clearer," that he had "been able to use the skills learned in session to manage his depression - which is now under control," and that he had "continue[d] to improve but need[ed] regular sessions [and] proper med[ication] to avoid regression." (App. 2 at 426.) Libby also reported that Funk was still suffering from confusion, depression, helplessness, and hopelessness and could not at that time return to work. Pinchuck did not provide updated treatment notes, stating that they were "sent before" and that "you can't read my handwriting anyway." (App. 2 at 374.) He instead provided an updated evaluation of Funk, which indicated that Funk was not abusing substances and that he exhibited fair judgment and insight along with "grossly intact" cognition. (Id. at 375.) However, Pinchuck also indicated that Funk still suffered from depression and anxiety, scored a 40 on the Global
Assessment of Functioning ("GAF")*fn6 , exhibited limited capacity to socialize and perform daily tasks, and ...