:: Eleventh Circuit Rejects Application Of “De Facto” Administrator Doctrine To Claims Administrator
We have also recognized the de facto administrator doctrine in several cases in addition to Hamilton. . . . Each of the foregoing cases, however, is distinguishable from the instant case in a significant respect: Hamilton, Garren, and Rosen applied the de facto administrator doctrine to employers, not to third-party administrative services providers. Oliver v. Coca Cola Company, Broadspire Services, Inc., — F.3d —-, 2007 WL 2429394 (C.A.11) (August 29, 2007)
In this ERISA claim for benefits case, the Eleventh Circuit augments its prior views on the scope of the de facto administrator doctrine. In effect, the opinion attempts to clarify when a party, not designated as a plan administrator, may nonetheless properly be named as a defendant as such based upon functional aspects of actual plan administration.
The decision ultimately reaffirms the applicability of the doctrine in the Eleventh Circuit, but circumscribes the ambit of the doctrine to exclude administrative service providers on the facts presented. In so holding, the Court reversed the district court’s judgment against Broadspire, the administrative service provider.
Prior Eleventh Circuit Cases
Though the plan document designated the employer as the plan administrator, the plaintiff drew upon prior Eleventh Circuit caselaw to argue that Broadspire was properly named as a defendant. In Hamilton v. Allen-Bradley Co, 244 F.3d 819, 824 (11th Cir.2001), the Court had held that the plan document is not dispositive with respect to the identity of the plan administrator, and that it is necessary to examine “the factual circumstances surrounding the administration of the plan, even if these factual circumstances contradict the designation in the plan document.â€
In Hamilton, a plan participant sued her employer, Allen, arguing that she had been wrongly denied disability benefits under the applicable ERISA plan. 244 F.3d at 822-23. Under that plan, Allen was not designated as the plan administrator; rather, an insurance company, UNAM, was the named plan administrator. Id. The district court granted summary judgment in favor of the employer, Allen, on the ground that it was not the plan administrator, and on appeal, we reversed. We held that “[t]he key question†was “whether Allen had sufficient decisional control over the claim process that would qualify it as a plan administrator….†Id. at 824.
Additional Cases Recognizing The Doctrine
The Eleventh Circuit reviewed its prior holdings on the issue, as follows:
We have also recognized the de facto administrator doctrine in several cases in addition to Hamilton.
- In Rosen v. TRW, Inc., we reversed the dismissal, for failure to state a claim, of a complaint against an employer not named in the plan document as an administrator, and permitted the plaintiff to pursue “the claim that the company was the de facto plan administrator and the committee was an inactive entity.†979 F.2d 191, 193-94 (11th Cir.1992). We held that “if a company is administrating the plan, then it can be held liable for ERISA violations, regardless of the provisions of the plan document.†Id.
- Similarly, in Garren v. John Hancock Mutual Life Insurance Co., we stated that “[t]he proper party defendant in an action concerning ERISA benefits is the party that controls administration of the plan.†114 F.3d 186, 187 (11th Cir.1997) (per curiam).
A Significant Distinction
The Court noted that the prior cases applied the doctrine to employers. In the case at bar, Oliver sought to have the doctrine applied to the claims administrator. This was a distinction with a difference in the view of the Court:
Each of the foregoing cases, however, is distinguishable from the instant case in a significant respect: Hamilton, Garren, and Rosen applied the de facto administrator doctrine to employers, not to third-party administrative services providers. At issue in those cases were plans with frameworks similar to that in this case: an employer established an ERISA plan and then outsourced responsibility for administering claims to a separate entity.
In Hamilton and Rosen, plan participants brought suit against employers that had sought to avoid liability as plan administrators, not, as here, against the third-party claims administrator. . . . In Garren, the plaintiff brought suit against the third-party claims administrator, and the court held that the true plan administrator was the employer.
In fact, the Eleventh Circuit rejected the doctrine in a previous case where the plaintiff sought to have the doctrine applied to a third party administrator. See Baker v. Big Star Div. of the Grand Union Co., 893 F.2d 288 (11th Cir.1989). And so it was to be with Broadspire.
The Court opined:
Were we to find Broadspire a de facto plan administrator on these facts, we would undercut the ability of employers to contract out the administrative tasks associated with operating an ERISA plan, a practice we upheld in Baker. See id. at 290. Indeed, it is hard to imagine how an administrative services provider could fulfill its functions without engaging in the types of activity that, in Hamilton, triggered the application of the de facto administrator doctrine. See Hamilton, 244 F.3d at 824 (finding that employer was de facto administrator because, inter alia, it distributed disability benefit application forms and “field[ed] questions about the plan from employeesâ€). . . . Because Broadspire is merely an administrative services provider, and because, under the Plan, Coca-Cola, through the Committee – not Broadspire – makes the final decision on benefits claims, we are bound by Baker to hold that Coca-Cola is the plan administrator. See Baker, 893 F.2d at 289-90. Accordingly, the appropriate standard of review was arbitrary and capricious, see Hunt, 119 F.3d at 912, and the district court erred in applying de novo review. Moreover, under Baker, Broadspire is not a proper defendant in this action. 893 F.2d at 290.
Note: The Eleventh Circuit noted a similar conclusion had been reached by the First Circuit:
The First Circuit, which also recognizes the de facto administrator doctrine in some contexts, see Law v. Earnst & Young, 956 F.2d 364, 372-73 (1st Cir.1992), has also declined to apply the de facto administrator doctrine to a third party administrative services provider in circumstances similar to those here. See Terry v. Bayer Corp., 145 F.3d 28, 35 (1st Cir.1998) (“[W]hen the plan administrator retains discretion to decide disputes, a third party service provider, such as Northwestern, is not a fiduciary of the plan, and thus not amenable to a suit under [ERISA].â€) (citations omitted).
Proper Standard of Review - The plan language expressly granted discretion to the Committee-to which Coca-Cola delegated authority to determine final appeals-to interpret the Plan and to determine eligibility of Plan participants to receive benefits. Since the plan did not confer such discretion on Broadspire, which administered initial claims and first-level appeals, the plaintiff argued that the district court should review its conclusions de novo. Rejecting this view, the opinion states:
Accordingly, the appropriate standard of review turns on whether Coca-Cola-acting through the Committee-or Broadspire was the plan administrator. The district court found that Broadspire was the true plan administrator, and consequently applied de novo review, correctly observing that the Plan does not confer discretion upon Broadspire. As explained subsequently, however, we find that Coca-Cola was the plan administrator, that the appropriate standard of review was arbitrary and capricious, and that the district court erred in holding otherwise.
Claims Administrator As Fiduciary - Based upon the foregoing, it is evident why the “plan administrator” issue was so important – the issue implicated the proper standard of review. The case does not stand for the proposition that claims administrators cannot be proper defendants based on other facts and/or claims, such as functional fiduciary status.
Oliver Prevails - For the sake of completeness, note that the ultimate outcome of the case was in the claimant’s favor, even on the deferential arbitrary and capricious standard of review. The plan administrator’s interpretation of plan language as to benefit limitations was determined to be unreasonable.
Under the HCA Health Services analysis, we find that Coca-Cola’s interpretation of the Plan is both wrong and unreasonable, and that Oliver’s interpretation, while rendering the “offset†provision largely toothless, is nonetheless reasonable, given the text of § 4.2(a).
See also - The de facto administrator doctrine is discussed in more detail in :: Requests For ERISA Plan Information: Claims Administrator Held Not Subject To Penalties
