On January 24, 2014, in McClain v. Eaton Corporation Disability Plan, et al., the Sixth Circuit dispensed with prevalent efforts by plaintiffs to erode the arbitrary and capricious standard of review under ERISA, and reaffirmed that the standard directs courts to be "extremely deferential" in their review of plan administrator decisions as long as those decisions aren't "irrational."
In this long term disability benefits case, the applicable plan language required the plaintiff, Karen McClain, to be unable to engage in "any occupation or perform any work for compensation or profit." McClain injured her back at work, and after treatment, asserted that she was unable to return to her job. While the medical proof regarding her restrictions was not entirely clear in the administrative record, even under the most confining restrictions, McClain's physicians concluded that she could perform part-time sedentary work. The plan administrator denied her claim because she was not unable to perform any work, and that determination was upheld on initial and final appeal. The district court held that the plan administrator's decision was not arbitrary and capricious.
On appeal, McClain made two primary arguments that the plan administrator's decision was arbitrary and capricious:
- variations in the specific restrictions the plan administrator relied upon amounted to "post hoc rationalization" in support of its initial determination; and
- McClain was effectively restricted from any real occupation because the part-time work she could have performed would have reduced her earnings to less than one-third of what she had earned previously.
The Sixth Circuit rejected both arguments, and in doing so, took the opportunity to explain in detail what "extreme deference" means and to address language from other circuits that appeared to have eroded the level of deference owed to plan administrators. The Sixth Circuit noted that ERISA plaintiffs in the Sixth Circuit had come to frequently rely on language out of several Seventh Circuit opinions, stating that arbitrary and capricious review is not without "some teeth," and courts should not merely "rubber stamp" plan administrator determinations. Affirming the "extreme" level of "deference" required, the Sixth Circuit concluded that, "though the standard is not without some teeth, it is not all teeth." As long as the plan administrator's decision was not "irrational" under the terms of the plan, that decision is entitled to deference.
Within this context, the Sixth Circuit made quick work of McClain's two primary arguments, concluding that variations in the restrictions given to her during the administrative process were not ad hoc rationalizations because her claim had been consistently denied because she did not meet the definition of disability, and concluding that a rational plan administrator could conclude that her ability to work part-time meant she was not unable to work in any occupation, even though she would have earned less than a third of her prior wages.
This opinion will be helpful for plan administrators in defending benefits decisions because, in reaffirming the deferential standard in ERISA, it neutralizes case law frequently relied upon by ERISA plaintiffs attempting to erode the standard of review. In addition, in rejecting McClain's argument that earning less than a third of her prior wages was tantamount to no occupation at all, the Sixth Circuit once again confirms the importance of the plan language. Plan administrators who can rationally justify their decisions under the applicable plan language are well-positioned with this case. We expect to see this one cited frequently in ERISA cases where the arbitrary and capricious standard applies.
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