In this appeal, we review a district court's conclusion that an ERISA plan administrator's decision to terminate the appellant's disability payments was not arbitrary and capricious. Our review requires that we confront three issues: (1) whether the district court could consider evidence not before the ERISA plan administrator; (2) whether the appellant received a "full and fair" hearing pursuant to 29 U.S.C. § 1133; and (3) whether the administrator's decision was unsupported by substantial evidence and therefore arbitrary and capricious. Because we conclude that the district court decided these issues correctly, we affirm.
Dan M. Sandoval, the plaintiff-appellant, worked as a computer operator for defendant-appellee Arco Coal Company ("Arco"), a wholly owned subsidiary of defendant-appellee Atlantic Richfield Company. Sandoval's employment with Arco began in 1964.
Sandoval was covered by an employee benefit plan ("the plan") governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. The plan included benefits for long-term disability.
In 1977, Sandoval became disabled and entitled to long-term benefits under the terms of the plan. Sandoval's disability arose "on the basis of physical impairments which included a chronic cervical strain, an ulnar neuropathy in the area of plaintiff's right wrist, and a minor carpal tunnel syndrome of the left wrist." District Court's Findings of Fact and Conclusions of Law, R., Vol. I, Doc. 100, at 2. Upon Sandoval's eligibility for benefits, Arco classified him as an "inactive employee," and he began receiving disability benefits under the terms of the plan. Sandoval also applied for and was granted total disability Social Security benefits.
In 1988, as part of the routine review of claims permitted by the plan agreement, Jacobs reviewed Sandoval's claim, requested additional information from him, and scheduled an independent medical evaluation. Dr. Moon, Sandoval's personal physician, submitted a supplemental medical evaluation in which he opined that Sandoval continued to be fully disabled due to his physical impairments. However, Dr. Walsky, the doctor who conducted the independent evaluation, concluded that Sandoval could "return to gainful employment" if he did not engage in any "heavy lifting with [his] right arm." Addendum to Defendants-Appellees' Answer Br., Defs.' Ex. H, at 3. Dr. Walsky concluded that Sandoval's impairments were relatively mild and not disabling:
Id. at 2-3. He specifically disagreed with Dr. Moon's previous diagnosis of "a C-8 and D-1 radiculopathy," stating that it was "not substantiated by the examination and x-rays that [he] reviewed." Id. at 3. Dr. Walsky recommended that Sandoval receive counseling, vocational rehabilitation, and exercise therapy, and noted that Sandoval "obviously d[id] not ever intend to be involved in gainful employment." Id. at 4. Based on this information, a Jacobs employee determined that Sandoval was no longer totally disabled under the plan's definition. Jacobs therefore terminated Sandoval's benefits.
Jacobs advised Sandoval of its decision that he was no longer totally disabled and of his right to request review of the decision. Sandoval then hired an attorney and requested review, at which point Jacobs invited him to submit any additional relevant information. Neither Sandoval nor his attorney informed Jacobs' Benefit Review Committee ("the Review Committee") of the possibility that Sandoval might suffer from any psychological impairment. As a result, the Review Committee was unaware of and did not consider disability based on psychological impairment.
After Sandoval's disability benefits were cancelled, Arco terminated his employment. Under the terms of the benefit plan, Sandoval then lost his eligibility for any future benefits.
Sandoval brought suit in New Mexico state court. Several months after the suit was filed, Sandoval had a psychological evaluation for the first time. The clinical psychologist who performed the examination diagnosed him as suffering from depression and memory loss and opined that Sandoval was totally disabled by reason of his psychological impairments together with his physical impairments.
Because the action arose under ERISA, the defendants removed the action on the basis of federal question jurisdiction to the United States District Court for the District of New Mexico. After a bench trial, the district court found that Sandoval was totally disabled because of his psychological impairments or a combination of physical and psychological impairments. However, because Sandoval had not submitted evidence of psychological disability to Jacobs, the district court concluded that Jacobs' actions were not arbitrary and capricious. The court therefore entered judgment in favor of the defendants.
Sandoval filed a timely notice of appeal. We have jurisdiction under 28 U.S.C. § 1291.
II. Standard of Review
Although not styled as such, Sandoval's complaint arises under 29 U.S.C. § 1132(a)(1)(B).
The district court's holding that the administrator's decision was not arbitrary and capricious is a legal conclusion. Hence, our review of the district court's decision, although not the underlying administrator's decision, is plenary. See Pratt, 920 F.2d at 658; cf. Phillips v. Alaska Hotel & Restaurant Employees Pension Fund, 944 F.2d 509, 515 (9th Cir.1991) (district court's decision whether trustees acted arbitrarily or capriciously is mixed question of law and fact, reviewed de novo), cert. denied, ___ U.S. ___, 112 S.Ct. 1942, 118 L.Ed.2d 548 (1992).
III. Scope of District Court's Review
Although the district court concluded that Sandoval was psychologically disabled at the time Jacobs terminated his benefits, the court also found that the Review Committee was unaware of this disability because Sandoval failed to bring it to the Review Committee's attention. In determining whether the plan administrator's decision was arbitrary and capricious, the district court generally may consider only the arguments and evidence before the administrator at the time it made that decision. See Perry v. Simplicity Engineering, 900 F.2d 963, 967 (6th Cir.1990); Voliva v. Seafarers Pension Plan, 858 F.2d 195, 196 (4th Cir.1988) ("[T]he court must consider only the record before the plan administrator at the time it reached its decision. [Courts should not consider or rely] upon evidence not part of the administrative record. [Nor should courts] consider arguments that do not appear in the administrative record.") (citations omitted); Danti v. Lewis, 312 F.2d 345, 349-50 (D.C.Cir.1962) (court should consider only evidence and arguments before trustee). As the Sixth Circuit stated in Perry:
Perry, 900 F.2d at 967 (citation omitted).
The Review Committee had before it recent medical reports from Doctors Moon
An administrator's decision is not arbitrary or capricious for failing to take into account evidence not before it. Cf. LeFebre v. Westinghouse Elec. Corp., 747 F.2d 197, 208 (4th Cir.1984) (trustees under no duty to seek out evidence contradicting evidence before them). The evidence of psychological disability developed long after the review process does not render Jacobs' decision arbitrary or capricious.
Nonetheless, Sandoval argues that the district court's subsequent finding that he was psychologically disabled requires a "remand" to the plan administrator for a new determination of disability. In support of this argument, Sandoval cites Wardle v. Central States, Southeast & Southwest Areas Pension Fund, 627 F.2d 820 (7th Cir.1980), cert. denied, 449 U.S. 1112, 101 S.Ct. 922, 66 L.Ed.2d 841 (1981). In Wardle, the Seventh Circuit stated:
Id. at 824 (citations omitted). Although we agree with the Seventh Circuit's first sentence, we respectfully disagree with the second.
IV. A "Full and Fair Review"
ERISA provides that a plan must follow certain procedural steps when denying or terminating benefits to a plan participant. First, the plan must provide the participant with written notice of the denial which sets forth the specific reasons underlying the decision. 29 U.S.C. § 1133(1). Second, the plan must "afford a reasonable opportunity ... for a full and fair review by the appropriate named fiduciary of the decision denying the claim." Id. § 1133(2). Labor regulations specify that the review procedure must permit the claimant to "(i) [r]equest a review upon written application to the plan; (ii) [r]eview pertinent documents; and (iii) [s]ubmit issues and comments in writing." 29 C.F.R. § 2560.5031(g)(1).
Sandoval argues that he failed to receive a "full and fair review" of the decision to terminate his benefits, pursuant to 29
Sandoval was represented by counsel throughout the review process. Sandoval was told of Dr. Walsky's medical diagnosis. Furthermore, the Review Committee invited Sandoval to submit additional evidence. Sandoval's counsel knew that the initial review by a Jacobs employee had resulted in a determination to reject total disability. Sandoval had the opportunity to submit additional evidence of physical or other disability to the Review Committee but declined to do so. The Review Committee noted explicitly the conflicting medical opinions and found Dr. Walsky's to be more detailed, less conclusory, and more convincing. The Review Committee had no affirmative duty to rule out a claim not before it. In short, Jacobs complied with the statutory requirements of section 1133.
Given that Jacobs complied with the statutory and regulatory requirements, Sandoval cannot complain that the procedures followed were unfair. Congress intended these review procedures "to help reduce the number of frivolous lawsuits under ERISA; to promote the consistent treatment of claims for benefits; to provide a nonadversarial method of claims settlement; and to minimize the costs of claims settlement for all concerned." Amato v. Bernard, 618 F.2d 559, 567 (9th Cir.1980). Absent such safeguards, mounting costs of administering a plan might discourage employers from establishing such plans. Cf. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54, 107 S.Ct. 1549, 1556, 95 L.Ed.2d 39 (1987) (civil enforcement scheme of 29 U.S.C. § 1132 "represents a careful balancing of the need for prompt and fair claims settlement procedure against the public interest in encouraging the formation of employee benefit plans."). Based upon our review of the record, Sandoval received a full and fair review.
V. Support by Substantial Evidence
Finally, we must consider whether Jacobs' determination that Sandoval was not disabled was arbitrary and capricious because it was unsupported by substantial evidence. "`Substantial evidence is such evidence that a reasonable mind might accept as adequate to support the conclusion reached by the [decisionmaker].' Substantial evidence requires `more than a scintilla but less than a preponderance.'" Flint v. Sullivan, 951 F.2d 264, 266 (10th Cir.1991) (citations omitted).
The evidence considered by Jacobs consisted primarily of the two doctors' reports that reached contrary conclusions as to whether Sandoval was totally disabled. A member of the Review Committee testified that Dr. Walsky's report was more detailed, that it contained more objective medical findings, and that his conclusions made more sense based on the medical evidence. On this record, we must conclude that substantial evidence supported Jacobs' determination.
Accordingly, we AFFIRM the district court's judgment.
George Lee Flint, Jr., ERISA: The Arbitrary and Capricious Rule Under Siege, 39 Cath.U.L.Rev. 133, 147-48 (1989) (footnote omitted). This Circuit has phrased the precise standard of review in several ways. See, e.g., Woolsey, 934 F.2d at 1456-57 (administrator's decision upheld unless "arbitrary and capricious, not supported by substantial evidence or erroneous on a question of law"); Naugle v. O'Connell, 833 F.2d 1391, 1393-94 (10th Cir.1987) (trustee's decision reviewed under arbitrary and capricious standard; "[a] decision is neither arbitrary nor capricious if it is based on substantial evidence and is not the result of a mistake of law"). The Supreme Court refers to the district court's review as simply "the arbitrary and capricious standard." Bruch, 101 U.S. at 109, 109 S.Ct. at 953. In our view, both lack of substantial evidence and a mistake of law would be indicia of arbitrary and capricious actions and thus may be subsumed under the arbitrary and capricious label. See Danti v. Lewis, 312 F.2d 345, 348 (D.C.Cir. 1962). Other potential indicia of arbitrary and capricious actions include bad faith or conflict of interest by the fiduciary. See, e.g., Bruch, 489 U.S. at 115, 109 S.Ct. at 956. Thus, in describing the standard of review as simply arbitrary and capricious, we intend no departure from our prior case law.