Lundsten v. Creative Community Living Services et al

Filing 97

ORDER signed by Judge Rudolph T. Randa on 8/20/2015. 91 Plaintiff's Motion to Alter or Amend Judgment GRANTED. 73 Plaintiff's Motion for Summary Judgment GRANTED. 78 Defendants' Motion for Summary Judgment GRANTED-IN-PART and DENIED-IN-PART. Plaintiff entitled to reasonable fees and costs; parties encouraged to meet and resolve amount. (cc: all counsel) (cb)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
JILL M. LUNDSTEN,
Plaintiff,
-vs-

Case No. 13-C-108

CREATIVE COMMUNITY LIVING SERVICES, Inc.
LONG TERM DISABILITY PLAN,
CREATIVE COMMUNITY LIVING SERVICES, Inc.,
and AETNA LIFE INSURANCE COMPANY,
Defendants.
DECISION AND ORDER
This matter comes before the Court on Jill M. Lundsten’s motion to
alter or amend the Court’s judgment dismissing her action to recover longterm disability benefits under the Creative Community Living Services,
Inc. (“CCLS”) Long Term Disability Plan (“the Plan”). Fed. R. Civ. P. 59(e).
On cross-motions for summary judgment, the Court held that Lundsten’s
claim was untimely pursuant to the contractual limitations period set forth
in the Plan. 2015 WL 1143114 (E.D. Wis. March 13, 2015).
The Court now agrees, contrary to its prior ruling, that Lundsten’s
claim is not time-barred. This error – and the waste of time and resources
that it engendered – was avoidable, and not only because the defendants’
timeliness argument is wrong. More perplexing is Lundsten’s failure to

counter that argument, as she now has, with the point that state law
provides the applicable limitations period, not the Plan language.
It is well-worn territory that Rule 59(e) should not be used to
present arguments that could have been presented before the initial entry
of judgment. Caisse Nationale de Credit Agricole v. CBI Indus., Inc., 90
F.3d 1264, 1270 (7th Cir. 1996). This is not to say that district courts
cannot consider newly-raised post-judgment arguments. As one court
observed, Rule 59(e) “accords no right to make untimely post-judgment
arguments,” but it does not impose “a limit on a trial court’s discretion to
consider such arguments.” In re UAL Corp., 360 B.R. 780, 784 (Bankr. N.D.
Ill. 2007). The Court prefers to make the correct decision, not hide its head
in the sand in the name of procedural formality. To that end, and for the
reasons that follow, Lundsten’s motion to alter or amend the Court’s
judgment is granted.
Since Lundsten’s action is not time-barred, the Court re-visited the
substantive arguments in the parties’ cross-motions for summary
judgment. The Court now finds that Lundsten is entitled to summary
judgment on her claim that the Plan’s denial of benefits was arbitrary and
capricious. Lundsten is also entitled to an award of attorney’s fees and
costs under ERISA’s fee-shifting statute. Defendants, as previously held,
-2-

are entitled to summary judgment on Lundsten’s claim that CCLS failed to
provide Plan documents in a timely manner. Defendants are also entitled
to summary judgment on their claim to recover social security disability
benefits under the Plan’s offset provision. Contrary to the Court’s prior
ruling, however, the defendants are not entitled to an award of fees and
costs.
In accordance with the foregoing and the analysis that follows, this
matter is remanded to the Plan administrator for further proceedings
consistent with this opinion.
I.

Motion to alter or amend
In ruling that Lundsten’s claim was time-barred, the Court relied

upon the contractual limitations period set forth in the Plan documents. In
so doing, the Court was not aware – because neither party highlighted this
fact in their summary judgment papers – that the Plan is insured, not selffunded. See Amended Complaint, ¶ 5 (“Creative contracted with Aetna
[Life Insurance Company] to pay LTD benefits under the Plan through a
policy of insurance Aetna issued to Creative”). More to the point, Lundsten
did not argue, in opposition to the defendants’ timeliness argument, that
insured (as opposed to self-funded) plans are subject to state insurance
regulations that apply in the instant case.
-3-

As relevant here, Wisconsin law provides that an “action on
disability insurance coverage must be commenced within 3 years from the
time written proof of loss is required to be furnished,” Wis. Stat.
§ 631.83(1)(b), and moreover, that no insurance policy may “Limit the time
for beginning an action on the policy to a time less than that authorized by
the statutes.” § 631.83(3)(a). These statutory provisions are not preempted
by ERISA because they regulate insurance within the meaning of ERISA’s
savings clause. 29 U.S.C. § 1144(b)(2)(A).
To determine whether a state law regulates insurance, courts first
ask whether it does so from a “common-sense view of the matter.” Unum
Life Ins. Co. of Am. v. Ward, 526 U.S. 358, 367 (1999). Then, courts
consider three factors to determine whether the regulation fits within the
“business of insurance” as that phrase is used in the McCarran-Ferguson
Act, 15 U.S.C. § 1011 et seq.: first, whether the practice has the effect of
transferring or spreading a policyholder’s risk; second, whether the
practice is an integral part of the policy relationship between the insurer
and the insured; and third, whether the practice is limited to entities
within the insurance industry. Ward, 526 U.S. at 367. These factors are
“guideposts, not separate essential elements … that must each be satisfied
to save the State’s law.” Id. at 374.
-4-

From a common-sense standpoint, the imposition of a minimum
limitations period for disability insurance claims involves the regulation of
disability insurance. This conclusion is bolstered by the three guideposts.
First, a limitations period that cannot be contractually lowered has the
effect of transferring more risk to insurance companies. Second, the statute
is an integral part of the policy relationship because it “dictates the terms
of the relationship between the insurer and the insured, …” Id. at 374-75.
Finally, the rule is limited to the insurance industry; indeed it is “aimed at
it.” Id. at 375.
A law saved from preemption may still be preempted if it falls
within ERISA’s “deemer clause.” § 1144(b)(2)(B). State laws that purport to
regulate insurance by “deeming” a plan to be an insurance are outside the
saving clause and remain subject to preemption, Ward at 367 n.2., but
insured plans, such as the CCLS Plan, are “subject to indirect state
insurance regulation. An insurance company that insures a plan remains
an insurer for purposes of state laws ‘purporting to regulate insurance’
after application of the deemer clause.” FMC Corp. v. Holliday, 498 U.S.
52, 61 (1990); see also Moran v. Rush Prudential HMO, Inc., 230 F.3d 959,
970 (7th Cir. 2000) (“The Supreme Court’s interpretation of the deemer
clause ‘makes clear that if a plan is insured, a State may regulate it
-5-

indirectly through regulation of its insurer and its insurer’s insurance
contracts’” (quoting FMC Corp., 498 U.S. at 64). Accordingly, Wisconsin’s
regulation of insured disability plans is not preempted under the deemer
clause.
The Court held that Lundsten’s claim is untimely because the Plan’s
three-year limitations period began running in December of 2009 and
expired in December of 2012 (Lundsten filed suit over a month later). 2015
WL 1143114, at *1. The Court reasoned as follows:
Lundsten argues that her claim for benefits under the ‘any
reasonable occupation’ standard should be treated as separate
from her claim under the ‘own occupation’ standard. This is
incorrect because the deadline for filing claims is defined in
relation to the elimination period, and the elimination period
references a single ‘period of disability.’ Accordingly, Lundsten
was asked to provide additional documentation to support the
continuation of benefits that were initially granted under the
own occupation standard. The any occupation standard
references the same period of disability that is referenced in
the elimination period. Put another way, there is no new
elimination period when the standard shifts from own
occupation to any occupation.
Id. (internal citations omitted) (emphasis added).
Lundsten argues now, as she did before, that the limitation periods
for “own occupation” and “any occupation” claims should be separate. Put
another way, and in the language of the statute, she argues that the
limitations period should run from “the time written proof of loss is
-6-

required to be furnished,” § 631.83(1)(b), Wis. Stats., on her claim for
benefits under the “any reasonable occupation” standard.1 The Court
agrees. Unlike the Plan, § 631.83(1)(b) does not tie its 3-year limitations
period to a single elimination period/period of disability. By referencing
“proof of loss,” the limitations period on a claim for “any occupation”
disability benefits begins to run when the Plan requires proof of loss on a
claim for those benefits.
Therefore, Lundsten’s claim is timely, and the Court must address
the substantive arguments presented in the parties’ cross-motions for
summary judgment.
II.

Motions for summary judgment
Summary judgment is appropriate if the record evidence reveals no

genuinely disputed material fact for trial and the movant is entitled to
judgment as a matter of law. Fed. R. Civ. P. 56(a). The Court views the
evidence in the light most favorable to the nonmoving party. Rosario v.
Brawn, 670 F.3d 816, 820 (7th Cir. 2012). On cross-motions for summary
judgment, the Court is required to adopt a “Janus-like perspective, viewing
the facts for purposes of each motion through the lens most favorable to the
At summary judgment, Lundsten argued that the limitations period for her
claim under the “any reasonable occupation” standard ran from October of 2010, at the
earliest. Plaintiff’s Proposed Findings of Fact, ¶ 15. Now, Lundsten argues that it ran
from March 19, 2012. Amended Complaint, ¶ 25. Her suit is timely in either event.
1

-7-

non-moving party.” Moore v. Watson, 738 F. Supp. 2d 817, 827 (N.D. Ill.
2010). Thus, the Court “construes all inferences in favor of the party
against whom the motion under consideration is made.” Kort v. Diversified
Coll. Servs., Inc., 394 F.3d 530, 536 (7th Cir. 2005).
A.

Background

Lundsten was employed by CCLS as a benefits coordinator in the
human resources department. Lundsten was born in 1963, has a high
school education, and began her employment with CCLS on April 16, 1996,
working full time until June 23, 2009. Lundsten’s job duties included the
following: providing clerical support to the vice president of human
resources; communicating employee status changes to company sponsored
benefit plan providers; ensuring accuracy in registers and account balances
of participants in Section 125 for health and dental plans; securing
completion of all forms to compile year-end plan data for purposes of tax
completion; informing staff on a monthly basis his/her eligibility for dental
coverage, enrollment, changes, and waiver forms; auditing monthly benefit
plan billings and preparing payment; and verifying total hours worked of
employees per pay period to ensure status coincides.
In August of 2009, Lundsten applied for disability benefits under the
CCLS Long Term Disability Plan. Lundsten indicated that her disability
-8-

was fibromyalgia, degenerative disc disease, and arthritis. Lundsten’s
application was granted under the Plan’s “own occupation” disability
standard. See Plaintiff’s Proposed Findings of Fact (“PPFF”), ¶ 4 (“From
the date that you first become disabled and until Monthly Benefits are
payable for 24 months, you will be deemed to be disabled on any day” if you
are “not able to perform the material duties of your own occupation solely
because of: disease or injury” and your “work earnings are 80% or less of
your adjusted pre-disability earnings”).
On October 6, 2010, Aetna notified Lundsten that her 24-month
“own occupation” disability period would end September 20, 2011, and that
in order to be entitled to LTD benefits after this period she must be
considered disabled from performing any reasonable occupation. Aetna
requested updated medical records evidencing Lundsten’s inability to
perform “any reasonable occupation.” The Plan defines a reasonable
occupation as “any gainful activity for which you are, or may reasonably
become fitted by: education; training; or experience; and which results in;
or can be expected to result in; any income of more than 60% of your
adjusted pre-disability earnings.” PPFF, ¶ 4.
Lundsten provided Aetna with office notes from Dr. Jeffrey Gorelick,
her treating physician, dating from November 5, 2009 through July 21,
-9-

2011. In these notes and several “Attending Physician Statements,” Dr.
Gorelick opined that Lundsten continued to meet the clinical medical
criteria for Fibromyalgia Syndrome (FMS), that her chronic pain and
fatigue were widespread, affecting her entire body, and that her pain and
fatigue resulted from FMS. Dr. Gorelick also observed that Lundsten’s
symptoms continued to worsen over time, with pain levels varying from 2
to 8 and 9, sometimes reaching 10 out of 10. Dr. Gorelick continued to
advise Lundsten to “remain out of full time work and pursue sedentary
work in a very limited capacity,” i.e., “up to 10 hours per week.”
Aetna subsequently directed Lundsten to undergo an independent
medical examination with Dr. Robert Zoeller. Dr. Zoeller interviewed
Lundsten

for

approximately

30

minutes

and

examined

her

for

approximately 20 minutes. Dr. Zoeller diagnosed Lundsten with (1) chronic
neck, upper back pain with intermittent paresthesis following previous C5C7 fusion; (2) chronic low back pain with intermittent radicular symptoms,
no evidence of neurologic impairment; (3) history of diffuse muscle pain,
fatigue, possible fibromyalgia; (4) opiate dependence; (5) electrodiagnostic
evidence of carpal tunnel syndrome; (6) generalized anxiety disorder and
major depression; and (7) symptom magnification syndrome. Regarding the
last diagnosis, Dr. Zoeller wrote:
- 10 -

Symptom magnification was evidenced by extensive
healthcare utilization, subjective complaints that are out of
proportion to objective findings, disability more than indicated
given physical findings. And some nonphysiologic findings on
examination including pain with even superficial palpation.
The diagnosis of symptom magnification syndrome is not
intended to discredit the subjective complaint of pain, its
possible basis and organic pathology, or the existence of a
certain degree of objective disability. This individual reports
symptoms that are essentially non-negotiable, to control the
environment, and result in significant implication of perceived
and expressed functional limitations. This should not be
interpreted to suggest an intentional misrepresentation of pain
disability but more likely represents a learned pattern of illness
behavior. (Emphasis added).
Dr. Zoeller concluded that Lundsten could perform light work:
Work capacity/functional impairments: Based on an extensive
review of the patient’s records, a review of diagnostic studies
that are available in the medical record, a review of
electrodiagnostic findings, and the patient’s physical
examination, it is my opinion that this individual can safely
perform light work activities. This would include lifting
weights at 11 to 20 pounds occasionally, 1 to 10 pounds
frequently and negligible weights constantly. I would also
suggest limiting overhead activities to occasional given
patient’s underlying cervical spondylosis, in particular. I
would suggest allowing position changes every 60 minutes to
accommodate myalgias. I would not define any other specific
limitations with regard to her condition. In particular, I do not
feel limiting hours is appropriate. I do believe it would be more
harmful to limit activity and hours which could only lead to
further deconditioning and increased pain in an individual
who already appears to be profoundly deconditioned. These
opinions are expressed to a reasonable degree of medical
certainty … (Emphasis added).
On September 12, 2011, Aetna invited Dr. Gorelick to respond to Dr.
- 11 -

Zoeller’s findings and asked Dr. Gorelick to provide a “medical explanation”
and “supporting objective medical evidence” if he disagreed with Dr.
Zoeller. Dr. Gorelick wrote:
Dr. Zoeller does not ask for her typical pain, does not inquire
how severe anxiety/depression was in spite of a long history of
treatment, nor fatigue. He does not comment at all on impact
of fatigue, emotional issues and memory problems have on her
day to day function. …
During the physical examination, [Dr. Zoeller] did not
comment on whether there was any joint tenderness. … He
defined the intensity of pain only in the forearms (and not in
any other areas, for reasons not clear). … He does not really
define in his physical exam which trigger points were
responsible for arm symptoms, as he does not make a
distinction between tender points and trigger points. … It was
his opinion diffuse muscle pain and fatigue was possibly
fibromyalgia, which he thought … was a diagnosis of
exclusion. He saw no records of rheumatologic studies to
exclude other potential etiologies for diffuse pain. I began
seeing her in 2006 and he did not request earlier records,
which would have noted this had been done. … He does,
however, talk about symptom magnification syndrome which
he thought was evidenced by extensive healthcare utilization
and subjective complaints out of proportion to objective
findings, disability more than indicated given physical
conditions and some non physiological findings on exam,
including pain with even superficial palpation. It is not clear to
me how he knows this is not an extreme case of fibromyalgia.
… He notes she appears to be profoundly deconditioned, but I
do not know how he comes to this conclusion based on her
physical examination … This is all in conflict with my
opinions. … I wholeheartedly disagree with Dr. Zoeller on
many of his opinions, including her ability to work. (Emphasis
added).

- 12 -

On December 15, 2011, Aetna informed Lundsten that her disability
benefits were being terminated:
Since the effective date of your LTD benefits was September
21, 2009, the any reasonable occupation test of disability
above is effective September 21, 2011. We had certified your
LTD benefits from September 21, 2009 through present based
on your primary medical conditions of chronic pain,
fibromyalgia, arthritis, shoulder and back pain, carpal tunnel
syndrome, TMJ, degenerative disc disease along with your comorbid conditions of anxiety and depression.
We completed our comprehensive clinical review based on your
primary medical conditions which included all records
including office visit notes and diagnostic test reports from Dr.
Jeffrey Gorelick, Dr. Steven Rhodes, Dr. Teresa Grimes, Dr.
Mohamed Yafai from the date of disability of June 23, 2009
through present. We also reviewed the Attending Physician
Statement completed by Dr. Gorelick dated November 23,
2010 which stated no ability to work due to spinal
degenerative disc disease, fibromyalgia, cervical and lumbar
degenerative disc disease and history of post cervical fusion
from the year 2008. …
We arranged for an Independent Medical Evaluation with a
physical with occupational medicine specialty which was
completed on August 2, 2011. The IME physician was provided
with a complete history of your medical records for his review
and he also took a complete history from you directly during
this visit on 08/02/11. The IME … stated that you could safely
perform light work activities which include lifting weights of
11 to 20 lbs. occasionally, 1 to 10 lbs frequently with negligible
weights constantly. The IME also stated you should limit
overhead activities to occasional given your underlying
cervical spondylosis in particular and suggested allowing
position changes every 60 minutes to accommodate myalgias.
The IME did not find any other specific limitations and that
you could work 8 hrs. a day at full time capacity.
- 13 -

The IME report was sent to Dr. Gorelick on September 12,
2011 for review and asked if he agree[d] or not with the
independent testing completed and provided the entire report.
If Dr. Gorelick disagreed with the IME report he was advised
to provide medical explanation and supporting objective
medical evidence. Dr. Gorelick’s response was received on
November 16, 2011 … . However, Dr. Gorelick did not offer any
objective clinical evidence that would refute the clinical
findings of the independent medical examiner.
Based on an own occupation comparison, … we reviewed your
occupation and determined that it is a sedentary physical
demand level which is less than the given like demand level
and meets the restrictions of no overhead work and allows to
change positions. You were receiving $18.10/hour at the time
… your disability began. Your reasonable wage of 60% of your
adjusted pre-disability earnings is $10.99/hour. Your own
occupation pays wages or salary at reasonable wages or
greater.
In view of this information, we are determining that you are
not prevented by reason of disease or injury from performing a
reasonable occupation … (Emphases added).
Lundsten appealed Aetna’s decision and was asked to provide
updated medical records from her various treating doctors, including Dr.
Gorelick. After seeing Lundsten on January 19, 2012, Dr. Gorelick reported
that her pain was worse than her prior visit, and observed that she had
“widespread muscular tenderness with 18/18 FMS site specific tender
points,” with the right side being more involved than the left. Dr. Gorelick
also noted that Lundsten’s pain ranged from 4 to 10, and that “due to pain

- 14 -

she has considerable functional limitations.” Finally, Dr. Gorelick stated, “I
respectfully disagree with Dr. Robert Zoeller’s opinions regarding disability
and previously sent a report to Aetna expressing this opinion. … I
suggested she remain off work indefinitely utilizing a handicap parking
sticker and follow through with Social Security Disability process.”
On February 4, 2012, Dr. Gorelick completed an “Attending
Physician Statement,” stating that Lundsten continued to experience
widespread chronic pain and had shown no improvement. Dr. Gorelick
opined that Lundsten’s fibromyalgia resulted in her being permanently
disabled from working and that her condition was unlikely to improve.
On March 14, 2012 the Social Security Administration (“SSA”)
determined that Lundsten was totally disabled – that she was unable to
engage in any substantial gainful activity, dating from June 14, 2009.
Lundsten informed Aetna of the award and told Aetna that she would
provide it. However, Lundsten did not forward a copy of the SSA
determination to Aetna, and Aetna never obtained a copy. Aetna possessed
several signed authorizations enabling Aetna to obtain all of Lundsten’s
award information, but never attempted to use those authorizations. Aetna
also never told Lundsten that she had a right to have the information
considered by Aetna.
- 15 -

On May 4, 2012, Aetna sent Lundsten’s medical records to Elena
Mendelsohn, a psychologist, and Dr. Stuart Rubin, a physical medicine
specialist, for “peer review.” Ms. Mendelsohn limited her observations to
Lundsten’s mental/psychological status, and deferred to “appropriate
medical specialists to determine the impact of claimant’s medical status on
her functionality.” Dr. Rubin observed that Lundsten “was recently
awarded retroactive Social Security Disability by the Social Security
Administration after hearing, but we have not received the notice of award,
the order or decision.” Dr. Rubin further stated that he had reviewed the
medical records provided, including the August 2, 2011 IME. Dr. Rubin
concluded:
Functional impairment is not supported at this time from
6/23/11 through 5/31/12. Although the claimant has chronic
pain, fibromyalgia, chronic widespread pain, it is unclear why
the claimant is unable to work at all during the time period in
question. In addition, multiple providers indicated the
claimant could work 8 hours per day as indicated in the
restrictions and limitations form of 8/2/11. It was also
indicated that the claimant can continuously sit, stand, and
frequently walk, and allow position changes hourly as of
8/2/11. Notes subsequent to 8/2/11, although indicating the
claimant does have widespread fibromyalgic symptoms and
has status post-cervical fusion and has chronic widespread
pain, did not indicate why the claimant is unable to work. …
On 8/2/11, it is clear this date the claimant can work 8 hours a
day. … In the Attending Physician Statement of 2/4/12, the
form indicates no change from prior. … Based on the above, it
is the opinion of this reviewer that the claimant can work at the
- 16 -

sedentary level while not torqueing the neck. The claimant
should change positions as needed every half hour at most.
(Emphasis added).
By letter dated June 15, 2012, Aetna notified Lundsten that it was
upholding the denial of benefits:
Your first date of absence from work was 6/23/09. Following
the LTD policy’s benefit elimination period, your LTD benefits
were approved through 6/22/11. LTD benefits were
terminated, effective 6/23/11, as there was a lack of
documentation to support your inability to work at any
reasonable occupation as of 6/23/11. Your diagnoses have
included the following: degenerative disc disease, cervical and
lumbar; cervical sprain/strain; low back pain; neck pain;
rotator cuff, sprain/strain; tendonitis; shoulder strain/bursitis,
bilateral; osteoarthritis, right knee; tendonitis, right biceps;
foot pain, bilateral; headaches; fibromyalgia; Major Depression
Disorder;
anxiety
disorder;
cognitive
impairment;
hyperlipidemia;
hypertension;
obesity.
There
was
documentation in your file pertaining to treatment received by
you throughout the duration of your absence from work and
all of this documentation was reviewed during the appeal.
However, as benefits were terminated as of 6/23/11 and
thereafter, comment here will include the most recent
information in the file. …
You recently advised Aetna that you were approved for Social
Security Disability (SSD) benefits. However, our disability
determination and the SSD determination are made
independently [and are] not always the same. The difference
between our determination and the SSD determination may
be driven by the SSA regulations. We have reviewed your
claim for LTD benefits consistent with the LTD policy
requirements and provisions cited above. As part of that
review, we updated clinical information from your treating
providers. Additionally, we may have information that is
different from what SSA considered, or we may not have been
- 17 -

provided with a basis for the SSD determination, and the
evidence that was relied on for the SSD determination has not
been identified to us. Therefore, even though you may be
receiving SSD benefits, we are unable to give it significant
weight in our determination, and we find that you are not
eligible for continuing LTD benefits based on the LTD policy
definition of Total Disability or Totally Disabled cited above.
…
Based upon our review, the original decision to terminate LTD
benefits, effective 6/23/11, has been upheld as there was a lack
of documentation (such as documentation of clinically
significant abnormal finding upon physical examination
and/or diagnostic testing; documentation of pain symptoms of
the severity and/or intensity to preclude your ability to work
at any reasonable occupation; documentation of significant
side effects from medication; abnormal findings upon formal
mental status examination and/or performance based tests of
psychological functioning with standardized scores, or
behavior observations with the frequency, duration, and
intensity of symptoms observed, etc.) to support your inability
to work at any reasonable occupation as of 6/23/11 and
thereafter. This decision is final and not subject to further
review. (Emphasis added).
B.

Analysis

The Court previously held, in a separate round of summary
judgment briefing, that Lundsten’s claim for benefits is subject to
deferential, arbitrary and capricious review, not de novo review. 2014 WL
2240716 (E.D. Wis. May 30, 2014). The question now becomes whether
Lundsten is entitled to summary judgment on her claim that the
defendants’ denial of benefits was arbitrary and capricious. Conversely, if

- 18 -

the denial of benefits was not arbitrary and capricious, then the defendants
are entitled to summary judgment.
Under the arbitrary and capricious standard of review, the Court
may overturn a benefit administrator’s decision only if the decision is
“downright unreasonable.” Black v. Long Term Disability Ins., 582 F.3d
738, 745 (7th Cir. 2009). This standard is deferential, but it is not a rubber
stamp. Id. In this respect, the Seventh Circuit has clarified that the phrase
downright unreasonable “should not be understood as requiring a plaintiff
to show that only a person who had lost complete touch with reality would
have denied benefits. Rather, the phrase is merely a shorthand expression
for a vast body of law applying the arbitrary-and-capricious standard in
ways that include focus on procedural regularity, substantive merit, and
faithful execution of fiduciary duties.” Holmstrom v. Metro. Life Ins. Co.,
615 F.3d 758, 766 n.5 (7th Cir. 2010). Accordingly, the Court will not
uphold a denial of benefits if the administrator fails to provide specific
reasons for rejecting evidence and denying the claim. For ERISA purposes,
the arbitrary and capricious standard is “synonymous with abuse of
discretion.” Raybourne v. Cigna Life Ins. Co. of N.Y., 576 F.3d 444, 449 (7th
Cir. 2009) (Raybourne I).
Moreover, it is undisputed that Aetna operates under an inherent
- 19 -

conflict of interest because it has discretionary authority to decide
disability claims and is also the payor of such claims. See Metro. Life Ins.
Co. v. Glenn, 554 U.S. 105, 108 (2008) (“The plan grants MetLife (as
administrator) discretionary authority to determine whether an employee’s
claim for benefits is valid; it simultaneously provides that MetLife (as
insurer) will itself pay valid benefit claims”). This conflict is “weighed as a
factor in determining whether there is an abuse of discretion.” Holmstrom,
615 F.3d at 767 (quoting Glenn, 554 U.S. at 115).
1.

SSD award

Lundsten’s primary argument is that Aetna unjustifiably failed to
consider her social security disability award. The Plan requires disability
applicants to apply for Social Security Disability (“SSD”) benefits, for which
the definition of disability is more stringent than the Plan’s “any
reasonable occupation” standard. See, e.g., Holmstrom at 763 n.4
(comparing Act’s “inability to engage in any substantial gainful activity”
definition with Plan’s “any occupation” disability definition). If awarded,
SSD benefits are used as an offset against disability benefits under the
Plan. Under these circumstances, the Plan’s failure to consider an award of
disability benefits “suggests arbitrary decision making.” Holmstrom at 773;
see also Raybourne v. Cigna Life Ins. Co. of N.Y., 700 F.3d 1076, 1087 (7th
- 20 -

Cir. 2012) (“Raybourne II”); Ladd v. ITT Corp., 148 F.3d 753, 756 (7th Cir.
1998).
In its denial letter, Aetna stated, in pertinent part, that the
difference between its determination and the SSD determination “may be
driven by the SSA regulations,” and further, that Aetna “may have
information that is different from what SSA considered,” or Aetna “may not
have been provided with a basis for the SSD determination, and the
evidence that was relied on for the SSD determination has not been
identified …” This is unsatisfactory. Aetna was required to confront this
evidence directly, not evade and prevaricate. Put another way, the issue is
whether Aetna “has a plausible explanation for the difference in the final
determinations of disability, an explanation that would lead a reviewing
court to conclude that the difference is not based on the structural conflict
of interest that is present here.” Raybourne II, 700 F.3d at 1087. Aetna did
not offer a plausible explanation for reaching a conclusion contrary to SSA.
See also Holmstrom at 773 (denial of benefits was arbitrary and capricious
where the administrator “essentially dissolved any relevance of Social
Security determinations in ERISA cases”).
Defendants argue that Aetna cannot be faulted because Lundsten
repeatedly told Aetna that she would provide a copy of the award, but
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never did. The Court credited this argument previously, but it did so in the
course of analyzing whether Aetna substantially complied with ERISA’s
time limits for deciding administrative appeals. 2014 WL 2440716, at *3
(E.D. Wis. May 30, 2014) (“In cases in which the substantial compliance
doctrine applies, a plan administrator, notwithstanding his or her error, is
given the benefit of deferential review of the administrator’s determination
about a claim under the arbitrary and capricious standard (assuming, of
course, that the plan document vests the administrator with discretion),
rather than more stringent de novo review”) (quoting Edwards v. Briggs &
Stratton Ret. Plan, 639 F.3d 355, 362 (7th Cir. 2011)). In that order, the
Court wrote:
Lundsten argues that it was unreasonable for Aetna to delay
its decision pending receipt of Lundsten’s award of Social
Security Disability Benefits. This is a strange argument
because Lundsten repeatedly told Aetna that she would
provide a copy of the award (ultimately, she never did). It is
true, as Lundsten notes, that plan administrators are required
to address this brand of evidence and ‘provide a reasonable
explanation for discounting it …’ This is an entirely different
issue from the one at hand, that being whether the defendants
substantially complied with the time limits for deciding an
appeal from the denial or termination of disability benefits.
Lundsten argues that Aetna should have obtained the
information on its own without waiting for Lundsten to
provide it. Again, this is beside the point. It is also nonsensical
in light of Lundsten’s unequivocal statements that she would
submit a copy of the award.

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2014 WL 2440716, at *6 (emphasis added) (internal citation omitted).
Lundsten’s promise and failure to provide her determination was
relevant to the Court’s substantial compliance analysis, but it is not
relevant to the Court’s analysis herein. Aetna could not rely upon
Lundsten’s promise to provide this information because Aetna was required
to offer a plausible explanation for why Lundsten was not entitled to “any
occupation” benefits in light of the SSD award. For whatever reason, Aetna
failed to do so, even though it was aware of the determination and
possessed Lundsten’s written authorization to obtain her information from
SSA. PPFF, ¶ 29. The foregoing demonstrates arbitrary decision making
and an abuse of discretion.
Aetna argues that its actions were justified under Donato v. Metro.
Life Ins. Co., 19 F.3d 375 (7th Cir. 1994). In Donato, the court refused to
consider evidence contained in the plaintiff’s Social Security disability file
because “although MetLife [the Plan Administrator] was apprised of [the
contrary] determination, the Social Security file was never before MetLife
in making Ms. Donato’s benefits determination, and MetLife was bound
only to consider what evidence and information was before it.” Id. at 380.
Thus, Aetna argues that Lundsten had a duty to forward the SSD
determination, and her failure to do so absolves Aetna of its failure to
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provide a reasonable explanation for discounting the award. Aetna’s
argument confuses the issue because Donato did not discuss or confront the
situation where a plan administrator does not offer a proper explanation
for denying benefits when SSD benefits have been awarded.2 Post-Donato
case law makes clear that Plan Administrators must consider the award
decision, especially when, as here, the claimant is required to apply for
SSD benefits as a means to lower the Plan’s liability and the SSA standard
is stricter than the Plan’s disability standard. Put more explicitly, the Plan
has an implied duty to actively seek the award determination when the
claimant, for whatever reason, fails to provide it. Aetna failed in this
regard.
2.

Lack of objective evidence

Lundsten also argues that Aetna’s denial was arbitrary and
capricious because Aetna faulted Lundsten for not providing “objective
evidence” in support of her allegations of disabling pain, thereby placing
improper weight on “the difference between subjective and objective
evidence of pain.” Hawkins v. First Union Corp. Long Term Disability Plan,
326 F.3d 914, 919 (7th Cir. 2003). “Pain often and in the case of

The Donato plaintiff “forwarded MetLife a copy of the Social Security
Administration’s decision to grant her disability benefits.” 19 F.3d at 377.
2

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fibromyalgia cannot be detected by laboratory tests. The disease itself can
be diagnosed more or less subjectively by the 18-point test …, but the
amount of pain and fatigue that a particular case of it produces cannot be.
It is ‘subjective’ …” Id.; see also Sarchet v. Chater, 78 F.3d 305, 306-07 (7th
Cir. 1996) (“fibromyalgia, also known as fibrositis” is a “common, but
elusive and mysterious, disease, much like chronic fatigue syndrome, with
which it shares a number of features. Its cause or causes are unknown,
there is no cure, and, of greatest importance to disability law, its symptoms
are entirely subjective”); Leger v. Tribune Co. Long Term Disability Plan,
557 F.3d 823, 834 (7th Cir. 2009) (“Dr. Chmell dismissed Ms. Leger’s
complaints of pain and attendant limitations on movement because there
was ‘no objective medical evidence of a disorder’ that would suggest the
severity of pain Ms. Leger was experiencing. … However, as noted in
Hawkins, even if the source of pain cannot be located, it nonetheless can be
real”).
Aetna counters that disability plans can require objective evidence
of functional limitations. See, e.g., Williams v. Aetna Life Ins. Co., 509 F.3d
317, 322 (7th Cir. 2007) (“A distinction exists however, between the
amount of fatigue or pain an individual experiences, which as Hawkins
notes is entirely subjective, and how much an individual’s degree of pain or
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fatigue limits his functional limitations, which can be objectively
measured”). To that end, Aetna invited Lundsten’s treating physician, Dr.
Gorelick, to provide a “medical explanation” and “supporting objective
medical evidence” if he disagreed with Dr. Zoeller’s conclusion that
Lundsten could perform light work. However, Aetna never indicated what
form of “supporting objective medical evidence” was necessary or sufficient
to validate her claim. “When an administrator asks for additional
information in broad terms, it is too easy to find later a reason to deem
what it was given to be insufficient. If the administrator believes that a
procedure must have certain characteristics, or that it must be performed
by a certain kind of professional, it must provide at least some level of
guidance, unless the test sought is so well-known that a claimant or her
attorney or other representative can reasonably be expected to know what
the administrator expects.” Holmstrom at 774; see also Halpin v. W.W.
Granger, Inc., 962 F.2d 685, 689 (7th Cir. 1992) (“describing additional
information needed and explaining its relevance, as required by [ERISA
regulations], enables a participant both to appreciate the fatal inadequacy
of his claim as it stands and to gain a meaningful review by knowing with
what to supplement the record”).
Compounding this error, Aetna credited the conclusion of Dr.
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Zoeller, from whom Aetna did not require the type of “objective evidence” it
faulted Dr. Gorelick for failing to provide. Selective consideration of the
evidence is “another hallmark of an arbitrary and capricious decision.”
Holmstrom at 777 (collecting cases).
3.

Own vs. any occupation

Aetna initially granted Lundsten’s application for benefits under the
“own occupation” standard. Two years later, when the time came to review
Lundsten’s claim under the “any occupation standard,” Aetna doubled-back
and found that Lundsten could perform her own occupation. Disability
plans are not estopped from altering a prior disability determination, but
in “determining whether an insurer has properly terminated benefits that
it initially undertook to pay out,3 it is important to focus on the events that
occurred between the conclusion that benefits were owing and the decision
to terminate them.” Leger, 557 F.3d at 833 (quoting McOsker v. Paul
Revere Life Ins. Co., 279 F.3d 586, 590 (8th Cir. 2002)). The previous
payment of benefits “does not decide the case” but it is “part of the overall
set of facts” for courts to consider. Holmstrom at 767.
Aetna argues that the two positions are not inconsistent because the

The Court recognizes that Aetna did not undertake to pay out “any occupation”
disability benefits, but the reasoning in this line of cases still applies because Aetna
contradicted its earlier conclusion that Lundsten could not perform her own occupation.
3

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initial primary diagnosis was degenerative disc disease, but 24 months
later, the primary diagnosis was fibromyalgia. This distinction makes little
sense, especially since both diagnoses were present initially and then later
upon reconsideration under the any occupation standard. Ultimately, there
is nothing in the record to suggest that Lundsten’s condition improved
after the initial grant of benefits. Thus, there was no evidentiary basis for
the change in benefit determination. See McOsker, 279 F.3d at 589 (“unless
information available to an insurer alters in some significant way, the
previous payment of benefits is a circumstance that must weigh against
the propriety of an insurer’s decision to discontinue those benefits”);
Kramer v. Paul Revere Life Ins. Co., 571 F.3d 499, 507 (6th Cir. 2009)
(“there is no explanation for the decision to cancel benefits that had been
paid for some five years based upon the initial determination of total
disability in the absence of any medical evidence that the plaintiff’s
condition had improved during that time”).
***
For all of the foregoing reasons, the denial of benefits in this case
was arbitrary and capricious.
III.

Remaining issues
In its first summary judgment ruling, the Court held that the
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defendants were entitled to summary judgment on Lundsten’s claim that
CCLS did not provide Plan documents in a timely manner. The Court also
held that the defendants were entitled to summary judgment on their
counterclaim for SSD benefits.4 Lundsten’s motion to alter or amend does
not address either holding, both of which are undisturbed by the Court’s
grant of relief under Rule 59(e).
The Court also held that the defendants were entitled to fees and
costs under ERISA’s fee shifting statute because Lundsten’s position
regarding the statute of limitations was not substantially justified. This
opinion eviscerates that holding. The award must be vacated and the
competing fee requests will be reconsidered anew.
ERISA’s fee-shifting statute provides that in “any action under this
subchapter … by a participant, beneficiary, or fiduciary, the court in its
discretion may allow a reasonable attorney’s fee and costs of action to
either party.” 29 U.S.C. § 1132(g)(1). Courts may award fees and costs to
either party so long as the fee claimant has achieved “some degree of
success on the merits.” Hardt v. Reliance Standard Life Ins. Co., 560 U.S.
242, 245 (2010). A claimant “does not satisfy that requirement by achieving

This claim covers the period of time that Lundsten was receiving “own
occupation” benefits.
4

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‘trivial success on the merits’ or a ‘purely procedural victor[y],’ but does
satisfy it if the court can fairly call the outcome of the litigation some
success on the merits without conducting a ‘lengthy inquir[y] into the
question whether a particular party’s success was ‘substantial’ or occurred
on a ‘central issue.’” Id. at 255.
Hardt “left open the question of whether a remand alone, without a
further recovery of benefits, would constitute ‘some success on the merits.’”
Young v. Verizon’s Bell Atl. Cash Balance Plan, 748 F. Supp. 2d 903, 90912 (N.D. Ill. 2010). However, it seems clear that even in the absence of a
monetary judgment, a “determination that a plan administrator abused its
discretion in interpreting a plan constitutes ‘some degree of success.’” Id. at
910-11; see also Rappa v. Sun Life Assur. Co. of Canada, 2014 WL 4415242,
at *1-2 (W.D. Wis. Sept. 8, 2014). The Court agrees with these cases and
finds that Lundsten qualifies for an award under Hardt.
As for the defendants, they achieved some successes in this
litigation, but Lundsten never opposed their counterclaim for SSD benefits,
and she simply abandoned her claim for non-disclosure of plan documents.
These were procedural victories on tangential issues. However, the
defendants also succeeded in persuading the Court to review the denial of
benefits under the arbitrary and capricious standard of review. This result
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was significant, at least for now, because it precluded the Court from
entering judgment on Lundsten’s claim for benefits (i.e., it limited the relief
available to remand for further consideration by the Plan). Thus, the Court
also finds that the defendants achieved some degree of success under the
Hardt standard.
Having found that both parties are eligible for a fee award, the
Court must exercise its discretion pursuant to two interlocking tests: the
“substantial justification” test, and the five-factor test. Under the former,
an award of fees to a successful party may be denied if the losing party’s
position was both “substantially justified” – meaning “something more
than nonfrivolous, but something less than meritorious” – and taken in
good faith, or if special circumstances make an award unjust. Herman v.
Cent. States, S.E. & S.W. Areas Pension Fund, 423 F.3d 684, 696 (7th Cir.
2005). Under the second test, courts look to the following factors: (1) the
degree of the offending parties’ culpability; (2) the degree of the ability of
the offending parties to satisfy personally an award of attorney’s fees; (3)
whether or not an award of attorney’s fees against the offending parties
would deter other persons acting under similar circumstances; (4) the
amount of benefit conferred on members of the pension plan as a whole;
and (5) the relative merits of the parties’ positions. Quinn v. Blue Cross &
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Blue Shield Ass’n, 161 F.3d 472, 478 (7th Cir. 1998). The five-factor test is
meant to “structure or implement, rather than to contradict” the
substantially justified test. Lowe v. McGraw-Hill Companies, Inc., 361 F.3d
335, 339 (7th Cir. 2004). Both tests ask essentially the same question: “was
the losing party’s position substantially justified and taken in good faith, or
was the party simply out to harass the opponent?” Stark v. PPM Am., Inc.,
354 F.3d 666, 673 (7th Cir. 2004).
The defendants’ litigation position in opposition to Lundsten’s
second motion for summary judgment – the one requesting remand under
the arbitrary and capricious standard – was not substantially justified. In
particular, the defendants’ argument that the Plan was free to disregard
Lundsten’s disability determination is clearly foreclosed by precedent in
the Seventh Circuit. Moreover, the defendants’ timeliness argument was
(or should have been) a non-starter because of the distinction between
insured and self-funded plans. Therefore, Lundsten is entitled to an award
under § 1132(g)(1).
On the other hand, Lundsten argued in her first summary judgment
motion that she was entitled to de novo review because Aetna decided her
appeal in an untimely manner under applicable ERISA regulations. Aetna
argued that it substantially complied with those regulations, thus saving
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its entitlement to deferential review, but Lundsten countered that a 2000
regulatory amendment “called into question the continuing validity of the
substantial compliance test, …” 2014 WL 2440716, at *4 (quoting Rasenack
v. AIG Life Ins. Co., 585 F.3d 1311 (10th Cir. 2009)). Moreover, one court
bluntly held that the “‘substantial compliance doctrine is not applicable
under the revised regulations.’” Id. (quoting Reeves v. UNUM Life Ins. Co.
of Am., 376 F. Supp. 2d 1285 (W.D. Okla. 2005)). These were interesting
and compelling arguments that have not been confronted by a court with
controlling authority in this jurisdiction. Therefore, the Court finds that
Lundsten’s litigation position was substantially justified, and the
defendants are not entitled to an award under § 1132(g)(1).
NOW, THEREFORE, BASED ON THE FOREGOING, IT IS
HEREBY ORDERED THAT:
1.

Lundsten’s motion to alter or amend the judgment [ECF No.

91] is GRANTED;
2.

Lundsten’s motion for summary judgment [ECF No. 73] is

GRANTED;
3.

Defendants’ motion for summary judgment [ECF No. 78] is

GRANTED-IN-PART and DENIED-IN-PART;
4.

Lundsten is entitled to reasonable fees and costs. The parties
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are encouraged to meet and seek a resolution of the amount of fees to be
paid consistent with this Order; and
5.

The Clerk of Court is directed to enter an amended judgment

consistent with the foregoing opinion.
Dated at Milwaukee, Wisconsin, this 20th day of August, 2015.
BY THE COURT:
__________________________
HON. RUDOLPH T. RANDA
U.S. District Judge

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