White v. Coca-Cola Co.

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
SEPT 10, 2008
No. 07-13938
THOMAS K. KAHN
________________________
CLERK

D. C. Docket No. 06-01118-CV-ODE-1

FRANKIE WHITE,
LEON WARNER,
Individually and On Behalf of
All Others Similarly Situated,

Plaintiffs-Appellants,

versus

THE COCA-COLA COMPANY,

Defendant-Appellee.

________________________

Appeal from the United States District Court
for the Northern District of Georgia
_________________________

(September 10, 2008)

Before BIRCH, WILSON and PRYOR, Circuit Judges.
PRYOR, Circuit Judge:

In this appeal we consider whether a plan administrator’s reduction of

benefits under a long-term-disability plan based on a participant’s receipt of Social

Security disability benefits is reasonable and entitled to deference. Frankie White

and Leon Warner appeal the summary judgment against their complaints for

benefits under the Coca-Cola Company Long Term Disability Income Plan, which

is governed by the Employee Retirement Income Security Act of 1974. 29 U.S.C.

§§ 1001–1461. White and Warner contest the plan administrator’s interpretation

of both a provision that permits an offset for the receipt of other disability benefits

and a provision that allows the plan to recoup overpayments of benefits. Because

the interpretation of the offset provision by Coca-Cola is reasonable and entitled to

deference and the interpretation of the recoupment provision by Coca-Cola is

correct, we affirm the summary judgment in favor of Coca-Cola.

I. BACKGROUND

We divide our discussion of the background of this appeal in three parts.

First, we discuss the terms of the plan. Second, we discuss White’s and Warner’s

claims for benefits. Third, we discuss the procedural history.

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A. The Plan

As the sponsor and administrator of the plan, Coca-Cola delegated its

powers to The Coca-Cola Company Benefits Committee. The plan grants the

committee exclusive responsibility and discretionary authority “to construe the

Plan and decide all questions arising under the Plan,” including the authority “to

determine the eligibility of Participants to receive benefits and the amount of

benefits to which any Participant may be entitled under the Plan.” Although the

plan permits the committee to delegate some of its powers to an administrative

services provider, the committee retains the final authority to determine the

eligibility of participants, the entitlement of participants to benefits, and all issues

arising under the plan.

For participants who were determined to be disabled under the plan before

January 1, 2003, benefits are paid from a trust funded by periodic and irrevocable

payments by Coca-Cola. Although Coca-Cola states that the claims of participants

have never been paid from the general assets of Coca-Cola, two filings with the

Internal Revenue Service, Form 5500 Annual Return/Report of Employee Benefit

Plan for the years 2003 and 2004, state that claims were paid out of the trust and

the general assets of Coca-Cola for those years. Coca-Cola filed an affidavit

stating that these filings have scrivener’s errors.

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Under the plan, the default monthly benefit is ordinarily 60 percent of the

participant’s average compensation. The plan contains in section 4.2(a) an offset

provision, which reduces the disability benefits for a participant who receives

disability benefits from other sources:

The monthly Disability Benefit payable from this Plan to the
Participant who receives disability benefits from any source described
in subsection (b) [including Social Security benefits] will be reduced
as necessary so that the total of his monthly Disability Benefit from
this Plan equals no more than the following amount:

(1) 70 percent of his Average Compensation . . . minus

(2) the amount of his monthly disability benefits payable
from all other sources;

provided that the difference will not exceed 60 percent of his
Average Compensation . . . ; and provided further that the
offset for other disability benefits will not serve to reduce the
Disability Benefit under this Plan to an amount less than 60
percent of the Participant’s Average Compensation . . . .

The plan also states that benefits under the plan will cease if benefits from other

sources “equal[] or exceed[] 70 percent of [the participant’s] Average

Compensation.”

The summary plan description provides an example of the operation of the

offset provision:

LTD payment example

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Suppose your basic monthly pay for disability purposes
is $3,000 and you do not receive benefits from other
sources.

Here’s how your LTD payment is figured:

$3,000 Basic monthly pay before disability

x 60% Maximum LTD pay replacement percentage

$1,800 Maximum monthly benefit from the LTD
plan

If you begin receiving $750 in monthly
Social Security disability payments, your
LTD benefits will be reduced as follows:

$3,000 Basic monthly pay before disability

x 70% Maximum pay replacement percentage from
all sources

$2,100 Total amount of your pay to be replaced
from all sources

-[$]750 Monthly Social Security disability payment

$1,350 Actual monthly benefit from the LTD plan

As the above example shows, the LTD Plan works with
your Social Security disability payments to bring your
monthly income to 70% of your basic monthly pay.

The summary plan description also restates that benefits cease if benefits from

other sources equal or exceed 70 percent of the participant’s average

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compensation.

The plan also contains a provision for the recoupment of any overpayment

of benefits. Section 4.2(d) of the plan states, “If the Participant receives a

retroactive payment of a disability benefit described in Subsection (b), the benefit

will be considered to have been paid throughout the period for which it was

payable.” Section 4.2(e), which is the recoupment provision, states, “Any

overpayment of Disability Benefits arising under Subsection . . . (d) will be

deducted from the Participant’s future payments [from the plan].” The summary

plan description restates these provisions.

B. White’s and Warner’s Claims for Benefits

White became disabled in 1999 and received long-term disability benefits

under the plan from August 1999 to July 2004. White received $1,720.15 a

month, which was 60 percent of his average compensation. On July 31, 2004, the

administrative services provider, Liberty Life Assurance Company of Boston,

terminated White’s disability benefits. White appealed, and the committee

reinstated White’s benefits in November 2005 retroactive to July 30, 2004.

In July 2005, the Social Security Administration awarded White disability

benefits in the amount of $1,442.10 a month retroactive to November 2001. The

Administration awarded White a lump-sum payment of $38,124.90 in retroactive

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benefits. White informed Coca-Cola of his award of Social Security benefits in

August 2005.

When Liberty Life resumed making payments to White, it applied both the

offset provision and the recoupment provision. Liberty Life reduced White’s

payments to 70 percent of his average compensation less his monthly Social

Security benefits for a total monthly payment of $564.85. Liberty Life calculated

that White had been overpaid $32,824.90 and reduced his monthly benefits under

the plan by $466.84 a month for approximately 60 months to recover the

overpayments. Liberty Life did not inform White that he could file an

administrative appeal to challenge the reduction of his benefits.

White appealed the application of the offset and recoupment provisions to

the committee in February 2006. White argued that the last proviso clause of the

offset provision creates a “60 percent floor” for his benefits and prohibits an offset

to account for his receipt of Social Security benefits. White also argued that, even

if the plan permits the offset of his future benefits to account for his Social

Security benefits, the plan and ERISA prohibit the recovery of an overpayment of

his past benefits. White attached a copy of a judicial opinion, Oliver v. Coca-Cola

Co., 397 F. Supp. 2d 1327 (N.D. Ala. 2005), in support of his appeal.

The committee retained outside counsel, Patrick DiCarlo, to evaluate

7
White’s claims and prepare a legal opinion regarding the offset and recoupment

provisions. DiCarlo concluded that, because the proviso clause was inconsistent

with other terms of the plan, the offset provision was ambiguous. DiCarlo

concluded that the committee could interpret the plan to permit an offset below 60

percent of a participant’s average compensation to account for benefits from other

sources and recover an overpayment based on a retroactive award of Social

Security benefits. DiCarlo also concluded that Coca-Cola was not bound by the

decision of the district court in Oliver. The committee adopted DiCarlo’s

interpretation of the plan and unanimously voted to deny White’s claims for

additional benefits. DiCarlo sent a letter to White that explained the final decision

of the committee.

Warner became disabled and, in March 2000, was approved for disability

benefits of $1,931.62 a month, which was 60 percent of his average compensation.

On October 15, 2002, the plan administrator, ING, informed Warner that, because

he received Social Security disability benefits of $1,474 a month beginning in

October 2000, ING would apply the offset and recoupment provisions to his

benefits. ING determined that Warner was overpaid $26,471.70 in benefits and

reduced his payments by $779.56 a month for approximately 23 months. ING

never informed Warner of his ability to file an administrative appeal, and Warner

8
did not appeal the reduction of his benefits.

C. Procedural History

White and Warner filed a complaint against Coca-Cola regarding the

reduction of their benefits. The district court granted summary judgment in favor

of Coca-Cola and denied the motion for partial summary judgment filed by White

and Warner. The district court concluded that the interpretation of the offset

provision by Coca-Cola is “de novo wrong,” but reasonable and entitled to

deference. The district court also concluded that the interpretation of the

recoupment provision by Coca-Cola is “de novo right.” The district court denied

as unnecessary the motion to compel discovery and denied as moot their motion

for class certification.

II. STANDARDS OF REVIEW

We review a summary judgment de novo. Cagle v. Bruner, 112 F.3d 1510,

1514 (11th Cir. 1997). We review a denial of discovery for abuse of discretion.

Jackson v. Cintas Corp., 425 F.3d 1313, 1316 (11th Cir. 2005). We review a

denial of class certification for abuse of discretion. Hines v. Widnall, 334 F.3d

1253, 1255 (11th Cir. 2003).

III. DISCUSSION

The district court used the framework that we established in Williams v.

9
BellSouth Telecommunications, Inc., 373 F.3d 1132, 1137–38 (11th Cir. 2004),

which provides a six-step process “for use in judicially reviewing virtually all

ERISA-plan benefit denials”:

(1) Apply the de novo standard to determine whether the claim
administrator’s benefits-denial decision is “wrong” ( i.e., the court
disagrees with the administrator’s decision); if it is not, then end the
inquiry and affirm the decision.

(2) If the administrator’s decision in fact is “de novo wrong,”
then determine whether he was vested with discretion in reviewing
claims; if not, end judicial inquiry and reverse the decision.

(3) If the administrator’s decision is “de novo wrong” and he
was vested with discretion in reviewing claims, then determine
whether “reasonable” grounds supported it (hence, review his
decision under the more deferential arbitrary and capricious
standard).

(4) If no reasonable grounds exist, then end the inquiry and
reverse the administrator’s decision; if reasonable grounds do exist,
then determine if he operated under a conflict of interest.

(5) If there is no conflict, then end the inquiry and affirm the
decision.

(6) If there is a conflict of interest, then apply heightened
arbitrary and capricious review to the decision to affirm or deny it.

Id. (footnotes omitted).

Recently, in Metropolitan Life Insurance Co. v. Glenn, the Supreme Court

cast doubt on the sixth step of this procedure. 128 S. Ct. 2343, 2350–51 (2008).

10
After the Court determined that the administrator of an ERISA plan operated

under a conflict, it considered “‘how’ [a] conflict . . . should ‘be taken into account

on judicial review of a discretionary benefit determination.’” Id. at 2350 (quoting

MetLife v. Glenn, 128 S. Ct. 1117 (2008) (mem.)). The Court concluded “that a

conflict should ‘be weighed as a factor in determining whether there is an abuse of

discretion.’” Id. (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101,

115, 109 S. Ct. 948, 957 (1989) (internal quotation marks omitted)). The Court

explained that the consideration of a conflict as a factor did not require “a change

in the standard of review” and criticized “special burden-of-proof rules, or other

special procedural or evidentiary rules, focused narrowly upon the evaluator/payor

conflict” that circuit courts had developed. Id. at 2351. The Court stated that

“[b]enefits decisions” are too numerous in nature “to come up with a

one-size-fits-all procedural system that is likely to promote fair and accurate

review. Indeed, special procedural rules would create further complexity, adding

time and expense to a process that may already be too costly for many of those

who seek redress.” Id. Although Glenn affects the sixth step of Williams, Glenn

does not alter our analysis unless Coca-Cola operated under a conflict of interest.

We divide our discussion of the merits of this controversy in two parts.

First, we address whether Coca-Cola reasonably interpreted the offset provision.

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Second, we discuss whether Coca-Cola correctly interpreted the recoupment

provision.

White and Warner also raise issues about litigation procedures that we need

not address. Because the district court was correct to grant summary judgment in

favor of Coca-Cola, the district court did not abuse its discretion in denying the

motions of White and Warner for discovery and class certification. The resolution

of the merits of this controversy obviates any issue about these procedures.

A. Coca-Cola Reasonably Interpreted the Offset Provision.

Our discussion of whether Coca-Cola reasonably interpreted the plan is

divided in four parts. First, we address why the proviso clause of section 4.2(a) is

ambiguous and the interpretation by Coca-Cola of that provision is wrong.

Second, we address the discretion of Coca-Cola to interpret the plan. Third, we

explain why the reconciliation by Coca-Cola of the conflicting provisions in the

plan is reasonable. Fourth, we address whether Coca-Cola operated under a

conflict of interest when it interpreted the plan.

1. The Interpretation by Coca-Cola of the Ambiguous Offset Provision is Wrong.

White and Warner argue that the interpretation of the offset provision by

Coca-Cola is de novo wrong because the “only plausible interpretation of Section

4.2 [of the plan] would be to place a 60% cap and a 60% floor” on the benefits that

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a participant receives. Coca-Cola responds that its interpretation is reasonable

because the proviso clause of the offset provision conflicts with other provisions

in the plan. Coca-Cola concedes that the district court correctly concluded that the

proviso clause creates an ambiguity that the district court was permitted to

construe against Coca-Cola as the drafter of the document.

We agree with Coca-Cola that the proviso clause conflicts with other

provisions of the plan. Section 4.1(b) of the plan places a cap of 60 percent of a

participant’s average compensation on the benefits a participant may receive under

the plan: “no Participant can receive a monthly benefit from this Plan in excess of

60 percent of his Average Compensation.” The proviso clause then sets a 60

percent floor for benefits under the plan: “[T]he offset for other disability benefits

will not serve to reduce the Disability Benefit under this Plan to an amount less

than 60 percent of the Participant’s Average Compensation.” But it makes no

sense to have both a 60 percent cap and a 60 percent floor when section 4.2(a)

otherwise states that disability benefits cannot exceed 70 percent of the

participant’s average compensation. The 60 percent floor in the proviso clause

also conflicts with section 3.4, which refers to the reduction of a participant’s

benefits below 60 percent of his average compensation if he receives disability

benefits from other sources. Cf. Stewart v. KHD Deutz of Am., Corp., 980 F.2d

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698, 703 (11th Cir. 1993) (identifying incompatible provisions of a benefits plan).

The problem for Coca-Cola is that this ambiguity favors White and Warner.

Ambiguities in ERISA plans are construed against the drafter of the document,

and a claimant’s reasonable interpretation is viewed as correct. Lee v. Blue

Cross/Blue Shield of Ala., 10 F.3d 1547, 1551 (11th Cir. 1994). Because the

claimants’ interpretation of a 60 percent floor is a reasonable reading of the

proviso clause, the interpretation by Coca-Cola is de novo wrong. We agree with

that ruling by the district court.

2. The Plan Vests the Committee with Discretion.

White and Warner concede that the plan grants the Benefits Committee

complete and final discretionary authority to construe the plan and decide all

questions arising under the plan, but they argue that we should not recognize that

discretion for several reasons. Their arguments fail. We address each in turn.

White and Warner argue that we should not recognize the discretion of the

committee to interpret the plan because the third-party administrator did not give

them notice of the right to appeal the application of the offset and recoupment

provisions to their benefits. We disagree. There is evidence in the record that

White and Warner had notice of their right to appeal the decisions of the third-

party administrators: the procedure for administrative appeals is outlined in every

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summary plan description issued by Coca-Cola during the relevant time period.

White also filed an administrative appeal of the decision.

White and Warner argue that the failure of the third-party administrator to

notify them of their right to appeal violates federal regulations that govern notices

sent to plan participants, see 29 C.F.R. § 2560.503-1(f)–(h), and they cite Torres v.

Pittston Co., 346 F.3d 1324, 1333 n.11 (11th Cir. 2003), for the proposition that

this failure permits courts to review the decisions of the administrator without

deference. Torres creates no such permission. In Torres, we addressed whether a

“deemed denial” of benefits under a plan receives less deference on judicial

review than does a denial that does not occur by operation of ERISA regulations.

We explained that the Labor Department “has taken the position that” failure to

comply with minimum procedural safeguards permits courts to review the

decisions of an administrator without deference. Id at n.11. We declined to adopt

that broad position. We instead recognized that some courts review deemed

denials de novo because they are not the result of plan administrators’ discretion,

and other courts “have held that the fact that the denial occurs by operation of

ERISA regulations does not alter the otherwise-applicable standard of review.”

Id. at 1332-33. As the district court observed correctly, this division of authorities

was limited to administrative failures to exercise discretion. This appeal does not

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involve an administrative failure to exercise discretion, and Torres does not, in any

event, require us to alter our standard of review.

White argues that the committee prejudged his appeal because it argued

against his position in Oliver and Byars v. Coca-Cola Co., No.

1:01-CV-3124-TWT, 2006 WL 2523095 (N.D. Ga. Aug. 28, 2006), where the

plaintiffs advocated a 60 percent floor on benefits. White has not cited any

authority to support his argument that a fiduciary’s knowledge of how a disputed

term was applied in collateral litigation renders that fiduciary incapable of

conducting a full and fair review. As the district court concluded, the consultation

of outside counsel by the committee mitigates any concerns about fairness and

prejudgment. See Adams v. Thiokol Corp., 231 F.3d 837, 845 (11th Cir. 2000).

Fairness and prejudgment may be relevant to the determination whether the

decision of the committee was arbitrary and capricious, but do not warrant a less-

deferential standard of review.

White advocates a rule where an administrator cannot provide a plaintiff a

full and fair review if the plaintiff is challenging a provision of a plan and the

administrator previously was involved in a suit about the interpretation of that

provision. This rule is unworkable. Administrators must constantly interpret

plans, and an administrator occasionally will be sued by a participant who

16
disagrees with the administrator’s interpretation.

White argues that John Howland, a member of the committee who voted to

deny White’s appeal, has a conflict of interest because he had been involved in the

initial determination to offset White’s benefits. The record does not support this

argument. The emails relied upon by White do not evidence that Howland was

involved in the initial decision to apply the offset and recoupment provisions to

White’s benefits.

The plan gives the committee discretion “to decide all questions arising

under the Plan.” The arguments of White and Warner that we should strip the

committee of this discretion fail. Because section 7.2(b) of the plan gives the

committee discretion, we review the interpretation of the offset and recoupment

provisions by the committee under the “deferential arbitrary and capricious

standard.” Williams, 373 F.3d at 1138.

3. The Interpretation of the Offset Provision by Coca-Cola is Reasonable.

“As long as a reasonable basis appears for [the] decision [of the

Committee], it must be upheld as not being arbitrary or capricious, even if there is

evidence that would support a contrary decision.” Jett v. Blue Cross & Blue

Shield of Ala., Inc., 890 F.2d 1137, 1140 (11th Cir. 1989). As we explained

earlier, the proviso clause conflicts with several provisions of the plan, which

17
creates an ambiguity. After the committee identified this ambiguity, it was

permitted to consider extrinsic evidence to resolve it. Thiokol, 231 F.3d at 844;

White v. Coca-Cola Co.

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