N O T PRECEDENTIAL

U N IT E D STATES COURT OF APPEALS

F O R THE THIRD CIRCUIT

N o . 06-2594

J O H N W. MACIEJCZAK,

Appellant

v. P R O C T E R & GAMBLE CO., PROCTER & GAMBLE DISABILITY

B E N E F IT PLAN & BENEFIT PLANS TRUST, PROCTER & GAMBLE

DISABILITY BENEFIT PLAN CORPORATE REVIEWING BOARD,

P R O C T E R & GAMBLE PAPER PRODUCTS COMPANY

O n Appeal From the United States District Court

for the Middle District of Pennsylvania

(N o . 02-cv-01041)

D istric t Judge: Honorable Thomas I. Vanaskie

S u b m itte d Under Third Circuit LAR 34.1(a)

M a y 25, 2007

B e f o r e : CHAGARES, HARDIMAN, and TASHIMA,* Circuit Judges.

(F ile d June 13, 2007)

O P IN I O N OF THE COURT C H A G A R E S , Circuit Judge.

A p p e lla n t John Maciejczak contends that the Procter & Gamble Company (c o llec tiv e ly with the other defendants, "P&G") wrongly terminated long-term disability b e n e fits due to him under the terms of an employee welfare benefit plan. See Employee R e tir e m e n t Income Security Act of 1974 ("ERISA") § 502(a)(1)(B), 29U.S.C. § 1 1 3 2 (a )(1 )(B ). The District Court sustained P&G's termination decision, and Maciejczak a p p e a ls . We write only for the parties, and thus do not state the facts separately. Because P & G 's termination of Maciejczak's benefits was not arbitrary and capricious, we will a f f ir m .

I.

W e begin with the standard of review. Where, as here, an ERISA benefit plan " g iv e s the administrator or fiduciary discretionary authority to determine eligibility for b e n e fits or to construe the terms of the plan," we review the denial of benefits under the a rb itra ry and capricious standard. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S.

1 0 1 , 115 (1989); Vitale v. Latrobe Area Hosp., 420 F.3d 278, 281-82 (3d Cir. 2005).

Under this standard, the administrator's decision "will be overturned only if it is `clearly n o t supported by the evidence in the record or the administrator has failed to comply with th e procedures required by the plan.'" Orvosh v. Program of Group Ins. for Salaried E m p lo ye e s of Volkswagen of Am., Inc., 222 F.3d 123, 129 (3d Cir. 2000) (quoting A b n athya v. Hoffman-La Roche, Inc., 2 F.3d 40, 41 (3d Cir. 1993)).

A lth o u g h this standard is deferential, we apply a more robust version of arbitrary a n d capricious review when the plan administrator is operating under a conflict of in te re s t. See, e.g., Pinto v. Reliance Standard Life Ins. Co., 214 F.3d 377 (3d Cir. 2000).

In such a case, we employ a sliding-scale approach that "approximately calibrat[es] the in te n sity of our review to the intensity of the conflict." Id. at 393. Here, the District C o u rt determined that P&G was operating under "a minor conflict of interest." Amended A p p e n d ix ("App.") 27. It thus applied a "slightly heightened version of the arbitrary and c a p ric io u s standard of review." Id. That determination is a mixed question of law and f a ct. See Kosiba v. Merck & Co., 384 F.3d 58, 64 (3d Cir. 2004). Accordingly, "our re v iew is plenary, though we review [the] district court's underlying factual findings only f o r clear error." Id.

Both parties disagree with the District Court's "slightly heightened" standard of re v ie w . P&G contends that "the standard should not have been heightened at all." P&G B rie f 14. Maciejczak argues for "more than a slightly heightened standard." Maciejczak B rie f 16. Maciejczak, however, does not articulate precisely how far down the scale our re v ie w should slide. Presumably, he would be content with the "somewhat heightened" re v ie w we applied in Smathers v. Multi-Tool, Inc., 298 F.3d 191, 199 (3d Cir. 2002), or th e "moderately heightened" standard of Kosiba, 384 F.3d at 68. He doubtless would raise no objection if we slid the standard all the way down to the "far end of the arbitrary a n d capricious `range.'" See Pinto, 214 F.3d at 394.

In determining where on the arbitrary and capricious scale to situate our review, w e must examine the totality of the circumstances. See id. at 392. Among the relevant f a cto rs are "the sophistication of the parties, the information accessible to the parties," the f in a n c ia l structure of the plan, and the presence of any procedural anomalies. See id.

"Also relevant is the current status of the fiduciary, i.e., whether the decisionmaker is a c u rre n t employer, former employer, or insurer." Kosiba, 384 F.3d at 64 (internal q u o tatio n omitted). In addition, our cases have considered the cost of paying out benefits re la tiv e to the total assets of the plan. See Pinto, 214 F.3d at 386.

Conflicts of interest are far more likely to arise when an insurance company, as o p p o s e d to the employer, both funds and administers the plan. See Pinto, 214 F.3d at 3 8 7 -8 8 . Employer-funded plans present a decreased "risk of a conflict of interest . . . b e c au s e the employer has `incentives to avoid the loss of morale and higher wage d e m a n d s that could result from denials of benefits.'" Smathers, 298 F.3d at 197 (quoting N az ay v. Miller, 949 F.2d 1323, 1335 (3d Cir. 1991)). Moreover, "the typical employerf u n d e d . . . plan is set up to be actuarially grounded, with the company making fixed c o n trib u tio n s to the . . . fund . . . ." Pinto, 214 F.3d at 388. In such circumstances, the e m p lo ye r "`incurs no direct expense as a result of the allowance of benefits, nor does it b e n e f it directly from the denial or discontinuation of benefits.'" Id. (quoting Abnathya, 2 F .3 d at 45 n.5). Conversely, heightened scrutiny may be appropriate when the "plan is `u n f u n d e d ,' that is, when it pays benefits out of operating funds rather than from a s e p a ra te ERISA trust fund." Vitale, 420 F.3d at 282.

H e re , P&G pre-funds a Long-Term Disability Trust Fund, and the plan is a d m in is te re d by a Board of Trustees consisting of P&G employees. The Trustees receive n o additional compensation for their service on the Board. Moreover, P&G's c o n trib u tio n s to the plan are determined based on an estimate of the current year's claim lia b ility and the plan's investment return. Management determines the appropriate annual c o n trib u tio n , if any, according to "anticipated claims and an actuarial determination of u n re v e a le d costs." App. 288.

These features counsel against any heightening of the arbitrary and capricious s ta n d a rd . Our cases "have noted that a situation in which the employer establishes a plan, e n su re s its liquidity, and creates an internal benefits committee vested with the discretion to interpret the plan's terms and administer benefits does not typically constitute a conflict o f interest." Stratton v. E.I. DuPont De Nemours & Co., 363 F.3d 250, 254-55 (3d Cir. 2 0 0 4 ) (internal quotations and alterations omitted). That is exactly what P&G has done h e re . Although, as the District Court noted, P&G's contributions are not "fixed," Pinto, 2 1 4 F.3d at 388, we are somewhat dubious about the District Court's conclusion that this f a c t warrants any ratcheting up of the standard of review. The record indicates that P&G m a d e no contributions to the fund in both 2001 and 2002. The mere fact that P&G will h a v e to make some contributions in the future, and that those payments are not fixed, is s c a n t evidence of any conflict of interest. The annual payment claimed by Maciejczak w a s one-tenth of one percent of the amount of payments made by the Trust to p articipa n ts . That minimal impact on the fund makes it unlikely that the Trustees were c o n f lic te d in Maciejczak's case.

Maciejczak also argues that "procedural anomalies" in P&G's claim processing ju stif y increased scrutiny. See Pinto, 214 F.3d at 394. In our view, none of the facts p o in te d out by Maciejczak constitute "anomalies" that would warrant heightened scrutiny.

About the only factor that does weigh in Maciejczak's favor is his status as a f o rm e r, as opposed to a current, employee. See Smathers, 298 F.3d at 198 ("Since S m a th e rs was no longer an employee when Multi-Tool made its decision to deny his c la im s , the counterbalancing of its monetary self-interest by possible concerns about the im p a c t of its decision on morale and wage demands would thereby be lessened."). As P & G points out, though, our cases have never applied heightened scrutiny based on this f a cto r alone. Rather, our cases have applied heightened scrutiny to claims by former e m p lo ye e s only where some other structural conflict or procedural anomaly was present.

See Kosiba, 384 F.3d at 65; Smathers, 298 F.3d at 198. As a result, we doubt that this f a cto r alone justifies any movement away from traditional arbitrary and capricious re v ie w .

But despite our reservations, we need not decide whether the District Court's slight h e ig h ten in g of the arbitrary and capricious standard was error. For our purposes, it is su f f icie n t to hold that no greater than a slight heightening was appropriate. We will th e re f o re assume arguendo that the District Court's "slightly heightened" form of a rb itr a ry and capricious review applies.

II.

A p p lyin g that standard here, we agree with the District Court that the Trustees a c te d within their discretion in terminating Maciejczak's benefits. The Trustees accepted D r. Michael Wolk's opinion that Maciejczak was not totally disabled, and rejected the c o n f lic tin g opinions of Maciejczak's treating physician and chiropractor. Because "[a] p ro f e ss io n a l disagreement does not amount to an arbitrary refusal to credit" the plan p a rtic ip a n t's doctor, the Trustees' decision was not arbitrary and capricious. See Stratton, 3 6 3 F.3d at 258; see also Black & Decker Disability Plan v. Nord, 538 U.S. 822 (2003).

Furthermore, the fact that P&G granted Maciejczak benefits in 1995 and terminated them in 2001 does not render its decision arbitrary and capricious, even under a slightly h e ig h te n e d version of that standard. The Long-Term Disability Plan specifically states th a t participants must submit to subsequent examinations to reassess their eligibility.

Under the plan, then, the prior determination of eligibility does not foreclose the Trustees f ro m reassessing continued disability. As such, the Trustees' decision to revisit and re v e rse the earlier disability finding was not arbitrary and capricious. See Ellis v. Liberty L if e Assurance Co. of Boston, 394 F.3d 262, 273-74 (5th Cir. 2004) (ERISA plan a d m in is tra to r may reverse initial grant of disability benefits in light of later-discovered e v id e n c e that recipient was not disabled at the time of the initial grant of benefits).

III.

F o r these reasons, we will affirm the District Court's judgment.

* Honorable A. Wallace Tashima, United States Court of Appeals for the Ninth C irc u it, sitting by designation.