The opinion of the court was delivered by: Thomas I. Vanaskie, Chief Judge Middle District of Pennsylvania
Plaintiff John Maciejczak initiated this action under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et. seq., to challenge the termination of his long-term disability benefits in 2001 by the Proctor & Gamble Company (collectively with the other Defendants, "P&G"). The parties have consented to have the Court decide the merits of the case on the submitted record.
Because P&G's Long-Term Disability Allowance ("LTDA") Plan accords discretion to P&G to determine eligibility for benefits, this Court reviews P&G's decision to terminate Mr. Maciejczak's benefits under an arbitrary and capricious standard of review. A slightly heightened standard of review is warranted in this case, however, because P&G both administered and funded the plan. Even under this slightly heightened standard of review, though, P&G's decision to terminate Mr. Maciejczak's long-term disability benefits was not arbitrary and capricious. Consequently, judgment will be entered in favor of P&G.
On June 14, 2002, P&G removed this case from state court, asserting that this Court has jurisdiction over the case on both federal question and diversity of citizenship bases. (Dkt. Entry 1.) The Plaintiff alleged violations of state law and ERISA in his complaint. (Id.)
On September 30, 2002, P&G moved to dismiss the state law claims. (Dkt. Entry 10.) By Memorandum and Order dated March 17, 2003, this Court dismissed the state law claims for bad faith, asserted under 42 Pa. C. S. § 8371, as preempted by ERISA. (Dkt. Entry 20.)
On July 31, 2003, P&G moved for summary judgment on Plaintiff's remaining ERISA claim. (Dkt. Entry 23.) The parties agreed that review of P&G's decision to terminate Mr. Maciejczak's benefits should be under an arbitrary and capricious standard. This Court, however, determined that heightened scrutiny of P&G's decision was appropriate because the Plan Trustees were potentially burdened by a conflict of interest in making disability determinations. Maciejczak v. Proctor & Gamble Co., No. CV-02-1041 (M.D. Pa. July 7, 2004) (Dkt. Entry 32). Specifically, this Court was concerned by evidence indicating that P&G directly paid the benefits awarded under the plan while also selecting the Trustees who made benefit determinations. Id. at 16-17. This Court was also concerned by possible procedural anomalies in the manner in which P&G handled Mr. Maciejczak's claim. Id. at 19-21. Summary judgment for P&G was deemed inappropriate under this heightened scrutiny because P&G failed to explain why it had found Mr. Maciejczak only partially disabled in 2001, but totally disabled in 1995, particularly as medical evidence appeared to indicate that his condition had worsened since 1995. Id. at 21-23.
On January 21, 2005, this Court approved the parties' agreement that the Court decide the merits of the case based on the record before the Court on P&G's summary judgment motion, supplemented with three additional filings further detailing the structure and funding of P&G's LTDA Plan.*fn1 (Dkt. Entry 47.) The parties have filed pretrial memoranda and supplemental briefs, and this matter is now ripe for resolution.
Plaintiff was employed as a maintenance technician by Defendant Procter & Gamble Company when he sustained a disabling back injury on November 19, 1994. (Defs.' Statement of Material Facts ("SMF") (Dkt. Entry 23) ¶ 5.) At the time of his injury, Plaintiff was a participant in an ERISA-covered disability plan sponsored by P&G. (Id. ¶ 1.)
P&G's disability plan includes a temporary benefits plan, the P&G Disability Benefit Plan (sometimes referred to as the Basic Disability Plan), and a long-term benefits plan, the LTDA Plan. Plan participants initially receive benefits for the first fifty-two (52) weeks of disability under the Basic Disability Plan. (See The P&G Disability Benefit Plan ("Plan Document") (Dkt. Entry 26, Ex. A) at 17.) After fifty-two (52) weeks of disability, benefits are governed by the LTDA Plan. (See id.; Letter from Defs.' Atty. (Dkt. Entry 26).) P&G summarizes the LTDA plan as follows:
Apart from the [P&G Disability Benefit] Plan, the Company will provide continuing disability payments to a Participant in the Plan who has been totally disabled for more than 52 weeks, and who has received benefits from the Plan. They shall receive payments at the rate of 50 percent of the recipient's Rate of Earnings at the time of disability. . . . The terms and definitions of The Procter & Gamble Disability Benefit Plan will otherwise apply, as applicable. (Plan Document at 17) (emphasis added.)
"Total disability" is defined as "a mental or physical condition resulting from illness or injury which is generally considered totally disabling by the medical profession. Usually, total disability involves a condition of such severity as to require care in a hospital or restriction to the immediate confines of the home."*fn2 (Id. art. II, § 16.) The plan defines "partial disability" as "a mental or physical condition resulting from an illness or injury because of which the Participant cannot perform regular duties but can perform other useful duties." (Id. art. II, § 11.) Significantly, the LTDA plan affords benefits only for total disability.
The LTDA Plan is administered by two company-appointed Trustees. They are vested with discretionary authority to interpret the plan and to make disability benefit determinations. (Id. art. VII, § 1(h).) The Trustees are volunteers who work in other jobs with P&G and receive no additional pay for their Trustee-related duties. (Id. art. VII, § 1(f); see also Tr. of Hoffman's Dec. 7, 2004 Dep. for the Carpenter Case presented as part of the Appendix in this case ("Hoffman Dep. I") (Dkt. Entry 50) at 14-15.)
The Trustees may establish a three-person review board to conduct an initial investigation and recommendation concerning a participant's eligibility for benefits. (Plan Document, art. VIII, §§ 2-4.) Members of the review board work in other positions at P&G and receive no additional pay for their review board-related activities. (Hoffman Dep. I at 28.) P&G also pays case managers from an outside company, Gates McDonald, to provide medical reviews for the Trustees. (Id. at 23-24.)
P&G may require participants receiving benefits under the plan to undergo an examination by a doctor of its choice. (Id. art. VI, § 6(d).) If the examination shows that the participant is no longer totally disabled, benefits may be discontinued. (Id.)
Benefits under the LTDA Plan are paid from a trust account funded by P&G. (Hoffman Dep. I at 16-17.) P&G utilizes an actuarial firm to estimate the LTDA Plan's unrevealed costs and future liabilities. (Id. at 35-36.) Based on these estimates, P&G determines how much money to contribute to the trust fund. (Id. at 16-17.) If the trust account lacks sufficient funds to pay benefits, P&G must make up the deficiency. (Id. at 16.)
Under the Basic Disability and LTDA plans, "[a] participant who may be eligible to receive Social Security, State disability or other legislated or governmental benefits must apply for such benefits and inform the Trustees as to the result of such application in order to be eligible for benefits." (Plan Document art. VI, § 4; id. at 17.) Disability payments under both plans are reduced by the amount of social security disability benefits received. (Plan Document art. VI, § 4; id. at 17.)
B. Mr. Maciejczak's Disability Claim
After experiencing extreme back pain while working on November 19, 1994, Mr. Maciejczak went to his family physician, Dr. Cheryle Stone, who diagnosed him as having degenerative disc disease and three herniated discs. (Administrative File ("AF") (Dkt. Entry 23-1) at 451.)*fn3 He subsequently began receiving total disability benefits under P&G's Basic Disability Plan. (Id. at 371.) Mr. Maciejczak also saw other doctors who confirmed Dr. Stone's diagnosis. (Id. at 451-52.)
P&G encouraged Mr. Maciejczak to file for social security disability benefits in April of 1995. (Id. at 371.) The Social Security Administration initially denied benefits to Mr. Maciejczak, finding him to be only partially disabled. (Id.)
In September of 1995, P&G asked Mr. Maciejczak to submit to an independent medical examination ("IME") by Michael D. Wolk, M.D. (Id. at 451-55.) Dr. Wolk reviewed Mr. Maciejczak's medical record, including magnetic resonance imaging ("MRI") and radiology reports from 1994.*fn4 (Id. at 453-54.) In Dr. Wolk's opinion, Mr. Maciejczak had "significant" degenerative disc disease with evidence of left-sided herniation of the L4-L5 disc and disc protrusion of the L2-L3 and L4-L5 discs.*fn5 (Id. at 454.) Dr. Wolk nonetheless concluded that the pain expressed by Mr. Maciejczak was "magnified beyond what [was] present objectively and clinically and there [was] no evidence . . . of persistent radiculopathy."*fn6 (Id.) He did not recommend surgery for Mr. Maciejczak. (Id. at 454-55.) Dr. Wolk disagreed with another doctor's conclusion that Mr. Maciejczak was totally disabled, stating that "it is my opinion with a reasonable degree of medical certainty that he is capable of at least performing sedentary type work as long as he is able to change positions." (Id. at 455.)
Despite Dr. Wolk's opinion, the Trustees awarded Mr. Maciejczak total disability benefits under the LTDA Plan after his fifty-two (52) weeks of eligibility under the Basic Disability Plan ended on November 27, 1995. (Defs.' SMF ¶ 5.) In November of 1996, Mr. Maciejczak's second appeal for social security benefits succeeded. (AF at 371.) In accordance with the provisions of the LTDA plan, his disability payments were reduced by the social security payments. (Defs.' SMF ¶ 6.)
In November of 1999, P&G conducted a review of Mr. Maciejczak's continued eligibility for LTDA benefits. (Id. ¶ 8.) Mr. Maciejczak's medical records were reviewed on behalf of the Trustees by Dr. Elizabeth Genovese. (Id. ¶ 8.) Her review appears to have been limited to Dr. Wolk's 1995 report, ...