Phelan v. Wyoming Associated Builders

FILED
United States Court of Appeals
Tenth Circuit

July 31, 2009
PUBLISH Elisabeth A. Shumaker
Clerk of Court
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

SCOTT PHELAN,

Plaintiff-Appellee,

v. No. 08-8055

WYOMING ASSOCIATED
BUILDERS,

Defendant-Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF WYOMING
(D.C. NO. 07-CV-120-CAB)

Timothy M. Stubson, Brown, Drew & Massey, LLP, Casper, Wyoming, for
Defendant-Appellant.

Jessica Rutzick, Rutzick Law Office, Jackson, Wyoming, for Plaintiff-Appellee.

Before BRISCOE, BRORBY and McCONNELL, Circuit Judges.

McCONNELL, Circuit Judge.

Scott Phelan, recently diagnosed with bone cancer at age twenty-six, was

covered by the healthcare plan of his former employer, which in turn was a
member of Wyoming Associated Builders, Inc. (“WAB”), a trade organization

that maintained a trust to provide health insurance benefits for its members’

employees. Just as Mr. Phelan was about to submit an unusually large claim

relating to his cancer treatment, WAB terminated his employer’s membership in

the insurance trust, purportedly because that employer had submitted a payment

that was both late and in the wrong form. Mr. Phelan was denied health benefits

as a result. He brought a number of claims against both WAB and his employer,

one of which alleged that WAB had breached its fiduciary duty, thus entitling him

to equitable relief under 29 U.S.C. § 1132(a)(3) of the Employee Retirement

Income Security Act (ERISA). The district court found that WAB’s stated

reasons for terminating Mr. Phelan’s employer were a pretext for avoiding

payment on Mr. Phelan’s pending claim and that the termination was arbitrary and

capricious. It ordered retroactive reinstatement of his employer’s health care

coverage as a remedy. WAB now appeals, arguing that retroactive reinstatement

is a legal remedy (and thus impermissible under § 1132(a)(3)), and also that the

termination was not arbitrary and capricious. We disagree on both grounds and

affirm the district court.

I. BACKGROUND

The Lock Shop of Cheyenne operates a locksmith business in Cheyenne,

Wyoming. It provides health insurance for its employees through Wyoming

Associated Builders, Inc., a non-profit trade organization that provides more than

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fifty other businesses with health insurance for their employees. WAB, in turn,

provides this coverage through the Wyoming Associated Builders Insurance Trust

(“WABIT”). WABIT is administered by a board of trustees who are authorized to

construe the provisions of the trust agreement, promulgate rules, and delegate

ministerial powers and duties. The WABIT board hired Josh Carnahan to serve as

plan administrator; Mr. Carnahan then delegated the day-to-day management of

the trust to Benefit Administrators, Inc., a company owned and operated by Lynn

Johnson.

Plan participants were required to pay premiums on the first day of each

month. In June 2006, WABIT promulgated a late payment policy for the first

time. The policy provided for both late payment penalties and eventual

termination. While premiums were still due on the first of each month,

“Premiums not received (postmarked) by the 10th of each month will have a 25%

of premium due, up to a maximum of $500 penalty applied. The Trust Board also

recommends the use of ACH [Automated Clearing House] transfers for premium

payment, which is available from Benefit Administrators.” Dist. Op. 8–9

(formatting omitted). As for termination, “If premiums are not paid by the 15th

of the month, the Plan Administrator is notified and if premiums are still not

received by the 20th of the month, the group is recommended by the Plan

Administrator for termination by the Trust Board, with the termination effective

retroactive back to the 1st of the month.” Id. at 9 (formatting omitted).

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 The Lock Shop ran into financial difficulties in 2006 and struggled to

make its payments on time. In June 2006, its premium check bounced. So did its

October payment. On October 30, Lynn Johnson mailed the Lock Shop a letter

informing it that its October payment had been returned for insufficient funds and

requesting repayment by either money order or cashier’s check. The Lock Shop

made its October payment on November 6.

The Lock Shop was not the only one in bad financial shape that year. In

the summer of 2006 a consultant had informed the WAB participants that use of

the plan was higher than expected. In the past year, WABIT had spent almost

$4.5 million paying out claims, but it had collected only a bit over $3.3 million in

premiums. Two claims alone totaled over $1.2 million. Although the Trust

carried stop-loss insurance that would pay claims over $75,000, the existence of

such claims would have ramifications for renewal of the stop-loss policy.

Terminating the Lock Shop’s coverage would therefore eliminate Mr. Phelan’s

very expensive claim at a time when the Trust badly needed it.

In December, the Lock Shop was again behind in its payments. Ms.

Johnson called the Lock Shop on December 13 and notified it that if its premium

payment was not posted to the account by December 20, the Lock Shop would be

terminated. Ms. Johnson also told the Lock Shop that the payment should be

made by cashier’s check or ACH. After scrambling to raise funds, Tami Austin

of the Lock Shop mailed a personal check to WAB’s bank, Hilltop National Bank,

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on the afternoon of December 19. She sent the check by Federal Express, which

assured her that the check would be delivered by the next morning. Unfortunately

for the Lock Shop and its employees, Mother Nature intervened: a severe

snowstorm hit Cheyenne that night and delayed all deliveries. The check arrived

at Hilltop National Bank at 3:15 p.m. on December 20, but the snowstorm had

forced the Cheyenne banks to close at noon. Thus, while Hilltop National Bank

had physically received the check, it was unable to post the payment into

WABIT’s account until the next day.

When Ms. Johnson and Mr. Carnahan had spoken about Lock Shop the

night before payment was due, Mr. Carnahan told Ms. Johnson to terminate Lock

Shop if the payment was not received the next day. Benefit Administrators

checked the WABIT bank account on the afternoon of December 20 and saw that

no payment had posted, so it contacted Mr. Carnahan. He immediately took

action to terminate Lock Shop from the plan. As soon as the Lock Shop learned

of its termination it appealed to the WABIT board, explaining that the payment

did indeed make it to the bank by the deadline, but that the snowstorm had

unexpectedly prevented it from making it in time to be posted on that day. The

trustees nevertheless denied the appeal on the grounds that the Lock Shop’s

payment was late and, even if it had been timely, was made by personal check

rather than cashier’s check or ACH.

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 As noted above, the Lock Shop’s termination did not occur in a vacuum.

WABIT was facing some serious financial liabilities, and the elimination of Mr.

Phelan’s claim would provide much-needed financial relief. Both Ms. Johnson

and Mr. Carnahan claimed not to have been aware of Mr. Phelan’s pending claim,

but the district court found that this strained credulity. Ms. Johnson had spoken

to Mr. Phelan’s father on November 30, and on December 8—just days before the

decision was made to terminate Lock Shop—Mr. Phelan’s father had sent Benefit

Administrators notification by certified mail that his son had been undergoing

chemotherapy and radiation therapy since October and would soon have to

undergo surgery to remove a cancerous tumor.

After a bench trial, the court found that it was this desire to avoid paying

Mr. Phelan’s expensive claim that truly motivated the Lock Shop’s termination.

While WAB contended that the termination was a reasonable application of its

administrative policies and was necessary to ensure prompt and timely payments

to the Trust, the district court found that, in truth, “the termination was prompted

by a desire to avoid further financial risk to the Trust by the payment of [Mr.

Phelan’s] cancer expenses,” Dist. Op. 30, and that “Wyoming Associated

Builders’ actions were a deliberate attempt to thwart the Lock Shop’s payment of

its premium in order to terminate the Lock Shop’s ability to provide coverage for

its employees.” Id. at 29. The district court concluded that two specific

interpretations of the policy by the benefits administrator were arbitrary and

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capricious in the sense of being a pretext for WAB’s true motivation of

eliminating an expensive cancer claim: interpreting the word “received” in

WAB’s late payment policies as requiring that the payment be actually “posted”

to the bank account, even in the midst of a huge snowstorm, and requiring that

payment be made by cashier’s check or ACH rather than personal check. Id. at

30–31. As a remedy, the court ordered WAB to “reinstate the Lock Shop’s group

coverage for the month of December, 2006.” Id. at 35. At the same time, Lock

Shop would have to pay WAB the December premium that would have been due

had WAB not terminated it from the plan. Id. at 36. Doing so would effectively

restore Mr. Phelan’s health benefits for the month of December 2006.

WAB now appeals that decision on two principal grounds. First, it argues

that a retroactive reinstatement of benefits is in fact a legal remedy masquerading

as an equitable remedy, and thus beyond the authority of the court under §

1132(a)(3) of ERISA. Second, WAB argues that its decision to terminate Lock

Shop was not arbitrary and capricious.

II. DISCUSSION

A. Is the Retroactive Reinstatement a Permissible Equitable Remedy Under
§ 1132(a)(3)?

ERISA is an intricately drafted statute whose civil enforcement scheme

“consists of several carefully integrated provisions.” Millsap v. McDonnell

Douglas Corp., 368 F.3d 1246, 1250 (10th Cir. 2004). One of those provisions is

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29 U.S.C. § 1132(a)(3), often referred to by its public law number, § 502(a)(3),

which allows a plan participant, beneficiary, or fiduciary to bring a civil action:

“(A) to enjoin any act or practice which violates any provision of this subchapter

or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to

redress such violations or (ii) to enforce any provisions of this subchapter or the

terms of the plan” (emphasis added). In light of the statutory language, the

Supreme Court has construed § 1132(a)(3) as allowing only “those categories of

relief that were typically available in equity.” Great-West Life & Annuity Ins. Co.

v. Knudson, 534 U.S. 204, 210 (2002) (quoting Mertens v. Hewitt Associates, 508

U.S. 248, 256 (1993)). While other ERISA provisions might afford a plaintiff

legal relief, this provision does not. Compensatory money damages are the

prototypical example of relief that was not typically available in equity. See

Mertens, 508 U.S. at 255; Callery v. U.S. Life Ins. Co., 392 F.3d 401, 404 (10th

Cir. 2004); see also Chaim Saiman, Restitution and the Production of Legal

Doctrine, 65 Wash. & Lee L. Rev. 993, 1009 (2008) (describing the different

shades the term “equity” carries in American law, one of which is “the process of

crafting remedies that do something other than award monetary damages to the

plaintiff as compensation for proven losses”). But see John H. Langbein, What

ERISA Means by “Equitable”: The Supreme Court’s Trail of Error in Russell,

Mertens, and Great-West, 103 Colum. L. Rev. 1317, 1349–55 (2003) (criticizing

the Court’s holding that monetary relief was a remedy not typically available in

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equity). Moreover, the Supreme Court has warned us about legal-

remedies-in-equitable-clothing, such as an “injunction” to pay damages. See

Great-West, 534 U.S. at 210 (“Almost invariably . . . suits seeking (whether by

judgment, injunction, or declaration) to compel the defendant to pay a sum of

money to the plaintiff are suits for ‘money damages,’ as that phrase has

traditionally been applied, since they seek no more than compensation for loss

resulting from the defendant’s breach of legal duty.”) (quotations omitted). We

must therefore look beyond the label on the remedy and ask whether its substance

is equitable or legal. Cf. Normandy Apts., Ltd. v. U.S. Dept. of Housing and

Urban Development, 554 F.3d 1290, 1297 (10th Cir. 2009) (examining the

substance of an injunction to determine whether it was “equitable,” and thus

subject to the Tucker Act’s limited waiver of sovereign immunity, or “legal,” in

which case immunity would bar suit).

The district court ordered “reinstatement” of the Lock Shop’s coverage for

the month of December, 2006. Although reinstatement sounds equitable, in that it

requires the defendant to take some future action, WAB contends that

reinstatement of past coverage is retroactive in focus, compensatory in nature, and

tantamount to an injunction to pay Mr. Phelan damages in the amount of his

medical bills. We do not agree. In Downie v. Indep. Drivers Assoc. Pension

Plan, 934 F.2d 1168, 1170 (10th Cir. 1991), we upheld the reinstatement of

pension benefits as a permissible equitable remedy under § 1132(a)(3). To be

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sure, as WAB points out, Downie was a case where the reinstatement restored the

pensioner’s benefits going forward and hence had the effect of allowing him to

receive future benefits; it did not simply pay compensation for past harms. See

Callery v. U.S. Life Ins. Co. in the City of New York, 392 F.3d 401, 407 (10th Cir.

2004) (“In Downie, the court used its equitable powers to restore the parties to

their original positions in order to affect the beneficiary’s ability to receive future

payments.”). WAB argues that unlike the prospective reinstatement in Downie,

the reinstatement of Lock Shop’s December coverage was purely retrospective

and would result simply in WAB compensating Mr. Phelan for medical expenses

he has already incurred.

We agree with WAB that remedies, despite their seemingly equitable form,

are generally regarded as legal if they have a retrospective focus. See id. (claim

rejected where claimant sought “equitable relief providing for payment of the

insurance on the life of [her husband]” and “to enjoin the defendants from not

paying her the life insurance benefits” because she was essentially “seek[ing]

payment of the policy proceeds”); Millsap, 368 F.3d at 1252 (backpay is

“remedially analogous to personal injury or breach of contract claims because

backpay awards compensate employees for lost wages and benefits before trial”);

see also Calhoon v. Trans World Airlines, 400 F.3d 593, 598 (8th Cir. 2005)

(reimbursement for medical bills and costs that would have been covered by

COBRA plan had the plan not been terminated was legal, not equitable). But

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reinstatement of the Lock Shop policy in this case would have prospective effect,

just as in Downie. Assuming that Lock Shop is able to continue to pay the

premiums on its policy, Lock Shop employees will continue to enjoy health care

coverage into the future. Indeed, at the time Mr. Phelan filed his lawsuit, the

relief he requested was entirely prospective in nature, with no retrospective

element at all.

The remedy imposed by the district court in this case does not track the

plaintiff’s specific injuries, but is instead both broader and narrower. It reinstates

coverage for all Lock Shop employees, not just Mr. Phelan, but it also fails to

guarantee that WAB will even pay Mr. Phelan’s medical costs. As the

reinstatement is contingent upon Lock Shop paying its December premium, the

possibility remains that the Lock Shop will fail to do so and Mr. Phelan will

remain uncovered. Whether Mr. Phelan’s medical costs will be paid depends on a

number of contingencies, including his own timely submission of the claims. All

of this shows that the true yardstick of the court’s remedy was not Mr. Phelan’s

past injuries but rather WAB’s prospective gain.

By ordering reinstatement, the court was not ordering WAB to reimburse

Mr. Phelan for his past losses, even if such a reimbursement might very well be

one practical consequence of the reinstatement. Instead, the court ordered WAB

to proceed as if the Lock Shop had not been wrongfully terminated from the plan

for the month of December. It was WAB that had benefitted from that

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termination, not only because it avoided paying Mr. Phelan’s claim but also

because it avoided paying all potential Lock Shop claims and also avoided the

accounting consequences (such as higher reinsurance premiums) of having a long-

term cancer patient on its books. By ordering reinstatement, the court unwound

this unlawful gain. The fact that the plaintiff was one victim of the unlawful

action and, consequently, a beneficiary of the remedy, does not make this

reinstatement substantively legal in nature. The reinstatement was an equitable

remedy and was therefore permissible under § 1132(a)(3). 1

B. Was the Termination Arbitrary and Capricious?

“When an ERISA plan grants a plan administrator (or its delegate)

discretion in administering the plan, we will uphold its decisions unless they are

arbitrary and capricious.” Gaither v. Aetna Life Ins. Co., 394 F.3d 792, 801 (10th

1
WAB has also appealed the district court’s denial of its motion for a
continuance in order to conduct discovery into the remedial theory of
reinstatement, which WAB described as a “new” remedial theory. The district
court disagreed that this was a new theory and found that WAB had been on
notice of the theory for some time. We review denials of a continuance for abuse
of discretion, and as the district court considered the relevant factors such as the
likelihood a continuance would accomplish its purpose, the diligence of the party
seeking the continuance, and the inconvenience to the opposing party, we cannot
say the court abused its discretion here. WAB moved for a continuance only
three days before trial, at which point it had indisputably been on notice at least a
month, and it was unclear that additional time would allow it to uncover any
additional evidence. See Rogers v. Andrus Transp. Services, 502 F.3d 1147, 1151
(10th Cir. 2007).

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Cir. 2004). 2 Both parties agree that arbitrary and capricious review governs this

case. 3 Under this arbitrary and capricious standard, we ask whether the

administrator’s decision was “reasonable and made in good faith.” Flinders v.

Workforce Stab. Plan of Phillips Petrol. Co., 491 F.3d 1180, 1193 (10th Cir.

2007) (citing Fought v. Unum Life Ins. Co. of America, 379 F.3d 997, 1003 (10th

Cir. 2004)). While “[t]he district court’s determination of whether a plan

administrator’s decision is arbitrary and capricious is a legal conclusion subject to

de novo review,” Rekstad v. U.S. Bancorp, 451 F.3d 1114, 1119 (10th Cir. 2006),

we defer to any underlying factual determinations unless they are clearly

2
Even if the trust administrators operated under a conflict of interest, as Mr.
Phelan argues, this would not alter the standard of review. See Metropolitan Life
Ins. Co. v. Glenn, --- U.S. ----, 128 S.Ct. 2343, 2350 (2008) (“We do not believe
that Firestone’s statement [that a conflict of interest should be taken into account
on judicial review of a discretionary benefit determination] implies a change in
the standard of review, say, from deferential to de novo review.”). Instead, a
conflict of interest is one of several factors that a judge can consider when
deciding whether the decision was indeed arbitrary and capricious. Id. at 2351.
3
The concurrence contends that the ERISA plan did not grant the
administrators discretion in administering the plan and that the district court
should have therefore reviewed Lock Shop’s termination de novo. Neither party
has argued this, and in fact Mr. Phelan, who would surely prefer de novo review,
states that the “district court . . . applied the appropriate standard of review.”
Aple. Br. 30. Even aside from this, the plain language of the plan states that the
Plan Administrator “shall have maximum legal discretionary authority to construe
and interpret the terms and provisions of the Plan, . . . to decide disputes which
may arise relative to a Plan Participant’s rights, and to decide questions of Plan
interpretation and those of fact relating to the plan.” App. 260. This broad grant
of discretion would seem to include the decision to terminate a plan participant
for failure to make timely payments and, in the absence of either party arguing it
does not, we see no reason to think otherwise.

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erroneous. See King v. PA Consulting Group, Inc., 485 F.3d 577, 585 (10th Cir.

2007). We especially give “due regard to the [district] court’s opportunity to

judge the credibility of witnesses.” Creative Consumer Concepts, Inc. v.

Kreisler, 563 F.3d 1070, 1078 (10th Cir. 2009); see also Anderson v. City of

Bessemer City, 470 U.S. 564, 575 (1985) (“But when a trial judge’s finding is

based on his decision to credit the testimony of one of two or more witnesses,

each of whom has told a coherent and facially plausible story that is not

contradicted by extrinsic evidence, that finding, if not internally inconsistent, can

virtually never be clear error.”). As WAB’s plan granted discretion to its

administrator and delegates, we review whether its decision to terminate Lock

Shop from the plan was arbitrary and capricious, though we defer to the district

court’s specific factual findings and credibility determinations.

WAB asserted two independent bases for Lock Shop’s termination: Lock

Shop’s failure to submit its premium payment in time for it to be posted on

December 20 and its failure to pay by cashier’s check. The district court found

that both grounds were pretexts to avoid payment of Mr. Phelan’s claim. It also

evaluated each ground under the so-called Flinders factors:

[Whether] (1) the decision was the result of a reasoned and principled
process, (2) is consistent with any prior interpretations by the plan
administrator, (3) is reasonable in light of any external standards, and
(4) is consistent with the purposes of the plan.

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Flinders, 491 F.3d at 1193 (quoting Fought, 379 F.3d at 1003) (quotations

omitted). (We in fact first articulated the Flinders factors in Fought, inspired in

part by the three-factor test recommended in Kathryn J. Kennedy’s Judicial

Standard of Review in ERISA Benefit Claim Cases, 50 Am. U. L. Rev. 1083,

1135, 1172 (2001), which in turn was inspired by an eight-factor test of the

Fourth Circuit, Booth v. Wal-Mart Stores, Inc. Assoc. Health and Welfare Plan,

201 F.3d 335, 342 (4th Cir. 2000).) As with other installments in the American

judiciary’s long-standing love affair with multi-factor tests, the Flinders factors

attempt to create a workable checklist that can replace the essential (albeit

somewhat abstract) inquiry of whether or not the decision was reasonable. The

danger with such tests is that the essential inquiry gets lost amid the factors,

which in turn take on a life of their own. Here, for instance, the district court

held that WAB’s decision to terminate the Lock Shop failed each of the Flinders

factors and was therefore unreasonable. The problem is that while we ultimately

agree that this particular decision was unreasonable, the Flinders factors do not

seem to get us there.

Take the decision to terminate because the payment was not timely

received. The plan’s late payment policy provided that “if premiums are still not

received by the 20th of the month, the group is recommended by the Plan

Administrator for termination by the Trust Board.” (Emphasis added). Dist. Op.

27. Elsewhere in the policy, the word “received” is explicitly defined to mean

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“postmarked”: the policy states that “[p]remiums not received (postmarked) by

the 10th of each month will have a 25% of premium due.” Id. (formatting

omitted). That could suggest that “received” carries the same meaning elsewhere

in the policy, but the very need to specify that “received” means “postmarked” in

one place could also suggest the word carries a different meaning in other places.

WAB claims to have resolved this ambiguity in favor of an interpretation that

meant “posted to the trust’s bank account” rather than physically received or

postmarked. The district court found that interpretation objectively unreasonable

based upon each Flinders factor.

First, the court found that the interpretation of “received” to mean “posted”

was not the result of a “reasoned and principled process.” Dist. Op. 27–28. Plan

administration is not notice and comment rule-making, though, and many

interpretations will by nature be responses to unexpected situations. Ms. Johnson,

the plan delegate, interpreted the word as meaning “posted,” informed Lock Shop

of this interpretation, and informed the board of this interpretation before the

board decided to terminate. We are not sure what additional “process” would

have pushed the balance toward reasonableness. It might be that the ad hoc

nature of the decision does not insulate WAB’s decision-making from closer

scrutiny, but it does not strike us as strong evidence that the decision must have

been unreasonable.

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 As for the second factor, the district court found that the interpretation was

not “consistent with any prior interpretations by the plan administrator” because

the Lock Shop had not been terminated for submitting payments after the 20th in

the past. Dist. Op. 28. The logic of this would seem to punish plan

administrators for accommodating plan participants and discourage them from

ever making exceptions for fear that doing so would lock them into repeating

those accommodations in the future. The third factor—that the interpretation was

not “reasonable in light of any external standards”—likewise seems inconclusive.

The district court pointed to other fields where “receipt” is deemed to occur on

the date an item is postmarked, such as the Wyoming Rules of Civil Procedure,

which construe a document to be filed on its postmark date. Dist. Op. 29 (citing

Fullmer v. Wyoming Employment Sec. Com’n, 858 P.2d 1122, 1124 (Wyo. 1993)).

This shows that interpreting “received” to mean “postmarked” is not

unreasonable, but it does not definitively preclude other interpretations.

The fourth factor—that the termination was not “consistent with the

purposes of the plan”—also offers little help in interpreting the word “received.”

While the purpose of the plan might be to “provide affordable group health

insurance benefits for eligible employees,” Dist. Op. 29, not every decision that

results in the denial of an insured’s benefits conflicts with that purpose. “[A]

fiduciary obligation, enforceable by beneficiaries seeking relief for themselves,

does not necessarily favor payment over nonpayment,” Varity Corp. v. Howe, 516

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U.S. 489, 514 (1996), as an administrator also has a duty to “preserve assets to

satisfy future, as well as present, claims and requires a trustee to take impartial

account of the interests of all beneficiaries.” Id. It is easy to be sympathetic to

the claimant standing before the court, but we must also perform the more

difficult task of remembering the faceless beneficiaries who are not now before us

but who nonetheless depend upon seemingly technical administrative deadlines

that are vital for ensuring sufficient funds to cover potential future claims. The

fact that WAB’s interpretation of “received” resulted in the loss of one person’s

benefits does not necessarily mean it violated the purposes of the plan.

We thus find ourselves in a situation where a term in the plan is ambiguous

and application of the Flinders factors does not definitively counsel one

interpretation over another. As an objective matter, WAB would seem to be

operating within the realm of reasonableness in interpreting the word “received”

to mean “posted.” It is at this point, though, that we must remind ourselves of the

essential inquiry at hand: whether the decision was “reasonable and made in good

faith.” Fought, 379 F.3d at 1003. While WAB’s interpretation of the policy

language might have been within some objective zone of reasonableness, it would

most certainly not be reasonable to adopt this reasoning as a rascally pretext for

avoiding the expensive claim of one of its beneficiaries. The district court found

as a factual matter that this was, in fact, what happened.

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 The court found that Ms. Johnson, Mr. Carnahan, and the WABIT board all

knew of Mr. Phelan’s pending claim. It found their testimony to the contrary

suspicious and not credible. Dist. Op. 30. Despite the contention that the Lock

Shop was fired for violating the late payment policy, the court found that, in fact,

“the termination was prompted by a desire to avoid further financial risk to the

Trust by the payment of [Mr. Phelan’s] cancer expenses.” Id. We must accept

this factual determination unless it is clearly erroneous, and the context of the

termination supports the finding. Lock Shop mailed sufficient payment to

WABIT’s bank, and that payment physically arrived by the December 20

deadline. It would have arrived in time to be posted on that same day, but for an

unexpectedly severe snowstorm that shut down the city of Cheyenne. While Ms.

Johnson might not have known that the bank had physically received Lock Shop’s

payment that day, the board certainly knew this by the time the Lock Shop was

officially terminated. Nonetheless, the board chose to take advantage of

ambiguous administrative rules in order to relieve itself of an expensive claim at a

time the trust was experiencing serious financial problems. Interpreting the word

“received” to mean “posted” might be objectively reasonable, but choosing this

interpretation over equally reasonable alternatives solely in order to cut loose an

expensive claim does not satisfy the obligations of good faith that plan

administrators owe their fiduciaries.

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 Having found that the actual motivation for the Lock Shop’s termination

was avoidance of Mr. Phelan’s claim, the district court was correct that the

termination was arbitrary and capricious. The Flinders factors, unfortunately, are

not very helpful in ferreting out situations where a plan administrator hides

behind an objectively reasonable rationale to justify an action taken in subjective

bad faith. This explains why the district court’s effort to reach the appropriate

result through the factors ultimately seems strained. This is not to say that the

factors had no relevance at all here—while they did not dispel WAB’s

interpretation as being entirely outside the zone of reasonableness, they did

demonstrate that its interpretation was not the only or even the most reasonable

meaning. That further bolstered the ultimate conclusion that the termination was

not the straightforward application of a clear administrative rule, but that instead

an ambiguous administrative rule provided a pretext for WAB to eliminate

coverage for one of its costlier beneficiaries. “While a fiduciary has a duty to

protect the plan’s assets . . . it also has a duty to see that those entitled to benefits

receive them. It must consider the interests of deserving beneficiaries as it would

its own.” Gaither, 394 F.3d at 807–08. Exploiting ambiguous rules for the

purpose of denying coverage is arbitrary and capricious.

The same is true of the second basis for termination the district court found

to be arbitrary and capricious: that termination was justified because payment was

made by personal rather than cashier’s check. WAB derived that supposed

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requirement not from any written policy language but from an unwritten and

internal rule of Ms. Johnson. Dist. Op. 14–15. Ms. Johnson did inform Lock

Shop that its October late payment would need to be paid by cashier’s check as its

prior check had bounced, but even Mr. Carnahan admitted that whether future

payments needed to be made by cashier’s check was ambiguous. Id. at 16. More

importantly, though, even if it was reasonable to require payment by cashier’s

check, it does not escape the fact that the district court found that the true reason

for the termination was to avoid paying Mr. Phelan’s claim. We note also that the

personal check Lock Shop submitted had adequate funds and cleared without

difficulty, which makes termination for failure to pay by cashier’s check all the

more suspect.

Accepting the district court’s factual determination that Lock Shop’s

termination was an attempt to avoid payment on Mr. Phelan’s claim, we agree that

the termination was arbitrary and capricious and that reinstatement of Lock

Shop’s December coverage was an appropriate equitable remedy.

III. CONCLUSION

We therefore AFFIRM the decision of the district court.

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08-8055, Phelan v. Wyoming Associated Builders

BRISCOE, J., Circuit Judge, concurring.

I concur in the result, but write separately to make two points regarding the

assertion by Wyoming Associated Builders, Inc. (WAB) that the decision to

terminate The Lock Shop from the insurance trust was neither arbitrary nor

capricious.

Standard of review

First, I am not persuaded, as is the majority, that we are obligated to review

the termination decision under the more onerous arbitrary and capricious standard

of review. Instead, for the reasons outlined below, I conclude de novo review

applies in this instance.

The majority places great weight on the fact that “[b]oth parties agree that

arbitrary and capricious review governs this case.” Maj. Op. at 13. But this

ignores the “well-settled [principle] that a court is not bound by stipulations of

the parties as to questions of law,” including the appropriate standard of review.

Koch v. U.S. Dep’t of Interior, 47 F.3d 1015, 1018 (10th Cir. 1995); see United

States v. Vontsteen, 950 F.2d 1086, 1091 (5th Cir. 1992) (en banc) (“No party has

the power to control our standard of review.”); Jones v. Metro. Life Ins. Co., 385

F.3d 654, 660 n. 4 (6th Cir. 2004) (“Typically, parties may not determine by

agreement [a court’s] standard of review.”). Thus, we must resolve for ourselves,

based upon controlling precedent and the relevant facts of this case, what the

proper standard of review is in this case.
 Generally speaking, a denial of benefits under an ERISA-governed plan “is

to be reviewed under a de novo standard unless the . . . plan gives the

administrator or fiduciary discretionary authority to determine eligibility for

benefits or to construe the terms of the plan.” Firestone Tire & Rubber Co. v.

Bruch, 489 U.S. 101, 115 (1989). If, however, the plan at issue confers such

discretion, then, absent procedural irregularities, we review the administrator’s

decisions under an arbitrary and capricious standard. See Kellogg v. Metro. Life

Ins. Co., 549 F.3d 818, 825-26 (10th Cir. 2008). These general standards of

review also appear to apply where, as here, there has not been a specific denial of

benefits, but rather an employer has been terminated from an ERISA-governed

plan. Cf. Paneccasio v. Unisource Worldwide, Inc., 532 F.3d 101, 108 (2d Cir.

2008) (applying same standards of review to board of directors’ decision to

terminate altogether an ERISA-governed plan).

The Plan at issue in this case states, in pertinent part, that “[i]t is the

express intent of this Plan that the Plan Administrator, or its designee, shall have

maximum legal discretionary authority to construe and interpret the terms and

provisions of the Plan, to make determinations regarding issues which relate to

eligibility for benefits, to decide disputes which may arise relative to a Plan

Participant’s rights, and to decide questions of Plan interpretation and those of

fact relating to the Plan.” App. at 260. Notably, however, the Plan focuses

exclusively on the eligibility of participating individuals for medical benefits, and

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thus is silent with respect to the payment of premiums by participating employers,

as well as with respect to the termination of employers from the Plan. Further,

although it is uncontroverted that the trustees adopted a formal written “late

payment” policy in the spring of 2006, nothing in the record on appeal indicates

that policy was intended to be part of the Plan. Nor did that “late payment”

policy grant the Plan administrator or trustees discretion to interpret its terms (or

the terms of the Plan). Lastly, the “late payment” policy afforded the Plan

administrator authority only to “recommend” termination, and provided that the

ultimate decision on termination would be made by the trustees; it is

uncontroverted that this procedure was not followed in terminating The Lock

Shop. 1

Although the written agreement that formed the Trust contains various

provisions regarding the “Powers” and “Duties” of the trustees, it likewise is

silent with respect to the payment of premiums by employers and the termination

of employers from the Plan. Thus, it cannot reasonably be said that this document

confers discretionary authority on the trustees to resolve employer terminations.

1
The record on appeal indicates that The Lock Shop was actually
terminated from the Plan by Josh Carnahan, the Plan administrator, and that the
trustees simply “affirmed” Carnahan’s decision in denying The Lock Shop’s
appeal. That procedure, however, was not authorized by the “late payment”
policy adopted by the trustees. Rather, as noted, Carnahan’s role under the “late
payment” policy was merely to “recommend” termination, and the decision
whether or not to actually terminate was supposed to rest solely with the trustees.

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 For these reasons, I conclude that a de novo standard of review applies to

the decision to terminate The Lock Shop from the insurance trust.

Merits of the termination decision

As for the merits of the termination decision, I conclude The Lock Shop did

not, in making its December 2006 premium payment, violate the late payment

policy adopted by the board of trustees on June 1, 2006. That policy reads as

follows:

Late Payment Penalties:

The WABIT program is a partial self-funded Trust
administered under Federal ERISA guidelines. As such, the
timelines [sic] of premium payments is extremely important.
Due to some abuses, there will be an immediate
implementation of a late payment penalty if premiums are not
received timely plus a reasonable grace period. Premiums are
due on the first (1st) of each month. Premiums not received
(postmarked) by the 10th of each month will have a 25% of
premium due, up to a maximum of $500 penalty applied. The
Trust Board also recommends the use of ACH transfers for
premium payment, which is available from Benefit
Administrators [the entity retained by the Trust to perform
administrative functions for the Trust, including collection of
premiums].

Termination Procedures:

The WABIT program is a partial self-funded Trust
administered under Federal ERISA guidelines and there is
NOT a premium due grace period. Premiums are due on the
first of each month. If premiums are not received by the 10th
of each month in which they are due, claim payment will be
suspended and a phone call will be made as well as penalties
applied. If premiums are not paid by the 15th of each month,
the Plan Administrator is notified and if premiums are still not

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 received by the 20th of the month the group is recommended
by the Plan Administrator for termination by the Trust Board,
with the termination retroactive back to the 1st of each month.

Id. at 272.

I agree with the district court that the term “received” is expressly defined

in the fifth sentence of the Late Payment Penalties provision of the policy to mean

“postmarked.” Under that definition, The Lock Shop’s December premium

payment was “received” by WAB and its agents on December 19, 2006, when

Tami Austin placed it in the hands of Federal Express for delivery to Hilltop Bank

on the morning of December 20, 2006. Thus, the premium payment was timely

“received” under the terms of the late payment policy.

As for The Lock Shop’s purported failure to pay its December 2006

premium via certified check or the “ACH” method of payment, no such

requirement appears in the late payment policy or elsewhere in the Plan. Instead,

the “Late Payment Penalties” provision of the late payment policy simply states

that “The Trust Board . . . recommends the use of ACH transfers for premium

payment . . . .” Id. (emphasis added). Thus, The Lock Shop’s use of a regular

check, which I note was backed by sufficient funds in The Lock Shop’s account,

was entirely proper.

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