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Herzberger v. Standard Ins. Co.

United States Court of Appeals for the Seventh Circuit

January 12, 2000, Argued ; February 23, 2000, Decided

No. 99-1944, No. 99-3116


 [*329]  Posner, Chief Judge. We have consolidated for decision two appeals that raise the same issue regarding the scope of judicial review of decisions by administrators of ERISA welfare or pension plans to deny benefits sought by participants in or beneficiaries of such plans. The issue is whether language in plan documents to the effect that benefits shall be paid when the plan administrator upon proof (or satisfactory proof) determines that the applicant is entitled to them confers upon the administrator a power of discretionary judgment, so that a court can set it aside only if it was "arbitrary and capricious," that is, unreasonable, and not merely incorrect, which is the question for the court when review is plenary ("de novo"). The cases directly on point say "no," ruling that the language in the plan [**2]  documents must confer discretion in clearer terms. Kinstler v. First Reliance Standard Life Ins. Co., 181 F.3d 243, 251-52 (2d Cir. 1999); Kearney v. Standard Ins. Co., 175 F.3d 1084, 1089-90 (9th Cir. 1999) (en banc); Brown v. Seitz Foods, Inc. Disability Benefit Plan, 140 F.3d 1198, 1200 (8th Cir. 1998); Bounds v. Bell Atlantic Enterprises Flexible Long-Term Disability Plan, 32 F.3d 337, 339 (8th Cir. 1994); Haley v. Paul Revere Life Ins. Co., 77 F.3d 84, 87-89 (4th Cir. 1996). Some of our cases, however, may seem to come close to answering "yes." Ramsey v. Hercules Inc., 77 F.3d 199, 205-06 (7th Cir. 1996); Patterson v. Caterpillar, Inc., 70 F.3d 503, 505 (7th Cir. 1995); Donato v. Metropolitan Life Ins. Co, 19 F.3d 375, 379-80 (7th Cir. 1994); Bali v. Blue Cross & Blue Shield Ass'n, 873 F.2d 1043, 1047 (7th Cir. 1989). The Patterson case comes closest, holding (as does Perez v. Aetna Life Ins. Co., 150 F.3d 550, 555-58 (6th Cir. 1998) (en banc), which involved the same language), that discretion is conferred by providing in the plan just that the benefits [**3]  decision shall be based on such proof as shall be "required" by the plan administrator.  [*330]  Perez explains that this phraseology implies that the administrator shall determine how much proof is enough, which the court thought a subjective standard. Another of our cases, Perlman v. Swiss Bank Corp. Comprehensive Disability Protection Plan, 195 F.3d 975 (7th Cir. 1999), involved a plan that conditioned benefits on satisfactory proof, but though we reviewed the denial of benefits under the deferential standard, the majority and dissenting opinions assumed rather than decided that it was the proper standard to use. See id. at 980; id. at 985. The proper standard was simply not an issue.

It is highly desirable to have a uniform national rule. Many employers have branches in more than one state and transfer employees from state to state with some frequency. An employee so transferred will remain under the same ERISA plan; but if courts in different states interpret identical plan language differently, the employee's rights under his plan (rights that as a practical matter include the right of judicial review) may change with every transfer--and usually [**4]  without his knowing it. Maybe all the holdings can be reconciled; but there is at least a superficial tension, a difference in tone and emphasis, between our cases and Perez, on the one hand, and the cases in the other circuits on the other hand, with our cases seeming more inclined to interpret ambiguous language in favor of an inference that it grants discretion to the plan administrator. We write today to clarify our position and reduce the tension. Because we are endeavoring to state a general rule with which aspects of some of our decisions may be inconsistent, we circulated this opinion in advance of publication to all the judges of the court in regular active service, pursuant to 7th Cir. R. 40(e); none voted to hear the case en banc.

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205 F.3d 327 *; 2000 U.S. App. LEXIS 2579 **; 24 Employee Benefits Cas. (BNA) 1083

Carolyn Herzberger, Plaintiff-Appellant, v. Standard Insurance Company, Defendant-Appellee. Beverly A. Johnson, Plaintiff-Appellant, v. Prudential Insurance Company of America, Defendant-Appellee.

Prior History:  [**1]  Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 98 C 2203. Harry D. Leinenweber, Judge.

Appeal from the United States District Court for the Western District of Wisconsin. No. 98 C 750. Barbara B. Crabb, Judge.

Disposition: Reversed and Remanded.


benefits, plan administrator, cases, judicial review, discretionary, disability, rights, entitlement, confer, scope of judicial review, disability benefits, satisfactory proof, plenary review, plans, deferential, employees

Civil Procedure, Appeals, Standards of Review, De Novo Review, Pensions & Benefits Law, ERISA, Civil Litigation, General Overview, Handling of Claims, Judicial Review, Scope of Review, Contracts Law, Contract Conditions & Provisions, Labor & Employment Law, Employment Relationships, Employment Contracts, Breaches, Administrative Law, Civil Litigation, Discovery, Methods of Discovery, Stipulations