D&htherapy Associates, LLC; Robin Dolan v. Boston Mutual Life Insurance Company

United States Court of Appeals
For the First Circuit
Nos. 10-1423; 10-1494
D&H THERAPY ASSOCIATES, LLC; ROBIN DOLAN,
Plaintiffs, Appellees/Cross-Appellants,
v.
BOSTON MUTUAL LIFE INSURANCE COMPANY,
Defendant, Appellant/Cross-Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. William E. Smith, U.S. District Judge]
Before
Lynch, Chief Judge,
Torruella and Stahl, Circuit Judges.
Brooks R. Magratten, with whom Michael J. Daly and Pierce
Atwood LLP were on brief, for appellant/cross-appellee.
Charles S. Beal, with whom Jonathan E. Pincince and Beal Law,
LLC were on brief, for appellees/cross-appellants.
April 20, 2011

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LYNCH, Chief Judge. Both parties appeal from grants of
summary judgment in this dispute concerning the benefit eligibility
language of a long-term disability benefit plan regulated by the
Employee Retirement Income Security Act (ERISA). Plaintiffs D&H
Therapy Associates, LLC (D&H), and Robin Dolan appeal from a grant
of summary judgment against their claims that Dolan was eligible
for and entitled to benefits under the plan or, in the alternative,
damages for fraud in the inducement. Defendant Boston Mutual Life
Insurance Company (Boston Mutual), in turn, appeals from entry of
summary judgment against its counterclaim that it is entitled to
reimbursement for payments already made to Dolan, which it says
were mistaken.
D&H obtained an ERISA plan from Boston Mutual in 2000.
Under the plan, employees who suffer specified reductions in
monthly earnings due to long-term disability are eligible for
benefits. Dolan is both a part-owner and an employee of D&H. In
2001, she became physically unable to continue some of her tasks as
an employee, which prompted a reduction in her monthly W-2
earnings. In 2002, she began receiving benefits under the plan.
After a 2006 audit, however, Boston Mutual terminated the benefits
and demanded Dolan return past payments. It told Dolan that she
had failed to account for her non-salary income, including earnings
from her ownership stake in D&H. With those ownership earnings
included, Boston Mutual stated, Dolan's monthly earnings had been

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higher than her pre-disability monthly earnings since 2002, and so
she was not and had never been eligible for payments.
After Dolan filed unsuccessful administrative appeals
with Boston Mutual's third-party claims administrator, she and D&H
initiated this litigation against Boston Mutual. Except as needed
we refer to both plaintiffs as Dolan. Dolan challenges her benefit
termination on two grounds. First, she argues that the plan
defines "earnings" as W-2 income such that non-salary income is not
relevant to eligibility determinations. Second, she argues that
Boston Mutual should be estopped from construing the plan otherwise
because it represented to D&H at the time of purchase that the plan
defined "earnings" as W-2 income. In the alternative, Dolan claims
that Boston Mutual's representations fraudulently induced D&H to
forego renewing its preexisting insurance policy. Boston Mutual
counterclaims that under the plan it is entitled to reimbursement
of the $163,661.57 it paid to Dolan.
The district court granted summary judgment to each party
on the claims brought by the other. As to Dolan's claims, it held
that Boston Mutual's construction of the plan's language was within
its discretion as the plan administrator and that Dolan's
fraudulent inducement claim was preempted by ERISA. As to Boston
Mutual's counterclaim, it held that the reimbursement sought did
not qualify as appropriate equitable relief under ERISA.

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D&H has been a limited liability company since 2004, when 1
it transferred its status from a partnership. A predecessor
entity, Professional Rehabilitation Network (PRN), purchased the
two long-term disability insurance policies described in this
dispute. For ease of exposition, we refer to the present limited
liability company and its predecessor entities collectively as D&H.
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We hold that Boston Mutual abused its discretion when it
determined that Dolan has never been eligible for benefits under
the plan. This holding requires entry of judgment for Dolan on
both her wrongful denial of benefits claim and on Boston Mutual's
counterclaim for recoupment of past payments. Accordingly, we
reverse the district court's entry of judgment for Boston Mutual on
Dolan's denial of benefits claim and affirm for Dolan on Boston
Mutual's counterclaim. We need not reach Dolan's equitable
estoppel argument or her fraud in the inducement claim.
I.
Dolan and her partner Kim Havunen each hold a half
ownership stake in D&H, a firm that provides physical,
occupational, and speech therapy services at several clinics in
Rhode Island. At all times relevant to this suit, Dolan and 1
Havunen were also employees of the firm. Dolan served as the
director of clinical services and as a physical therapist, while
Havunen served as the director of business operations. Like other
employees of the firm, Dolan and Havunen drew salary based on the
number of hours they worked. Their salaries were not influenced,
at least directly, by their ownership stakes in D&H.

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A. D&H's Acquisition of the Boston Mutual Plan
In 1997, D&H obtained a long-term disability insurance
policy from Guarantee Life Insurance Company (Guarantee Life). D&H
obtained the policy with the help of an insurance agent, Benefit
Services, Inc. (Benefit Services). Havunen led the efforts to
obtain this policy. She testified that she explained to a Benefit
Services representative that D&H wanted a policy that would protect
W-2 earnings such that the principals of the firm would be
insulated against loss of the salary form of their income. Havunen
understood the Guarantee Life policy to reflect this request.
According to Havunen, the policy defined protected earnings for
principals as W-2 earnings.
In 2000, the Guarantee Life policy was expiring. As D&H
considered whether to renew the policy, the same Benefit Services
representative who had assisted D&H with the Guarantee Life policy
contacted Havunen. The representative, Maureen Baker, informed
Havunen that she had received a quote from a different insurance
provider at a better rate. Havunen testified that she told Baker
that D&H would only consider switching to the new policy if the
policy protected W-2 earnings in the same manner as she understood
the Guarantee Life policy did. Havunen testified further that when
Baker identified the quote in question as belonging to Boston
Mutual, Havunen reiterated this requirement.

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To ensure that the Boston Mutual policy would meet these
specifications, Havunen testified, she and Baker met with a Boston
Mutual agent, Thomas Liszanckie. Havunen testified that Liszanckie
assured her that the Boston Mutual policy would contain the same
definitions of "earnings" and "income" as the Guarantee Life
policy. She testified as well that Liszanckie brought a written
"Group Insurance Proposal," which he said contained the requested
protection for W-2 income. Havunen testified that Liszanckie
identified the last page of the proposal as ensuring this
protection. That page includes the following statement:
"Definition of Earnings: Basic Annual Earnings shall mean the
Insured Person's earnings for the prior calendar year as reported
by the Group Policyholder on form W-2."
Havunen testified that, based on Liszanckie's statements
and the proposal's definition of earnings, D&H did not renew the
Guarantee Life policy and instead purchased the Boston Mutual
policy. When Havunen received the final language of the policy,
she expressed some concern to Baker about the policy's terms
relating to "any other income from employment," which might be
construed to include income other than W-2 income. Baker, Havunen
testified, assured her that this language only referred to other
income that may be included in W-2 earnings, like bonuses and
commissions. Havunen did not contest the final policy language.

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Baker testified that the policy laid out different 2
benefit schedules for principals and all other employees. She
acknowledged that a portion of the policy defined earnings as W-2
earnings, but speculated that this portion only applied to non-
principal employees and that a portion of the policy not present in
the record gave a separate definition of earnings that applied to
principals.
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She testified that D&H would not have signed on to the policy if
not for Liszanckie and Baker's representations.
Boston Mutual disputes Havunen's testimony concerning her
conversations with Baker, the content of the Guarantee Life policy,
and her interactions with Liszanckie. Baker testified that, in her
discussions with Havunen about both the Guarantee Life policy and
the Boston Mutual policy, Havunen told her that she wanted to
protect the K-1 income of D&H's principals, not their W-2 income.
Baker also speculated that a portion of the Guarantee Life policy
not present in the record defined earnings for principals
differently from that of other employees and included non-salary
income. Liszanckie testified that while he occasionally dropped 2
off insurance forms to customers before they signed an insurance
policy, he rarely met with the customers and he could not recall
whether he met with Havunen and Baker.
B. The Terms of the Boston Mutual Plan
Having reviewed these disputed facts concerning D&H's
decision to obtain the Boston Mutual policy, we turn to the plan
language that governs that policy. There is no dispute that the
policy, unlike the Guarantee Life policy, is governed by ERISA. We

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divide discussion of the plan's contents between provisions
concerning benefit eligibility, provisions concerning benefit
calculation, and provisions concerning overpayment of claims.
As to benefit eligibility, principals and all other
employees are eligible for benefits if they suffer a specified loss
in earnings due to disability. This applies when these individuals
"are not able to perform some or all of the material and
substantial duties of [their] regular occupation" and "have at
least a 20% loss in [their] pre-disability earnings." This
litigation does not concern what rises to an inability to perform
occupational duties.
It concerns, instead, what it means to have a 20% loss in
pre-disability earnings as defined by the plan. For both
principals and all other employees, the plan gives these
definitions concerning earnings: "Pre-disability earnings means
your monthly rate of earnings from the employer in effect just
prior to the date disability begins. Basic annual Earnings shall
mean the Insured Person's earnings for the prior calendar year as
reported by the Group Policyholder on form W-2, excluding
commissions." If an individual has earnings for less than a
calendar year, the plan provides that "Basic Annual Earnings shall
be determined by averaging the monthly earnings for each month
worked and annualizing the result."

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The plan lists a series of circumstances that justify
benefit termination. These include when an individual is "no
longer disabled," has "reached the end of the maximum payment
duration," or has "current earnings [that] exceed 80% of [his or
her] pre-disability earnings." Benefits will also be terminated
when an individual is "able to increase [his or her] current
earnings by increasing the number of hours [he or she] work[s] or
the number of duties [he or she] perform[s] in [his or her] regular
occupation but . . . do[es] not do so." The plan emphasizes, in
bolded all-capital letters, that if an individual is "disabled and
working, earning more than 80% of [his or her] pre-disability
earnings, no payment will be made."
As to benefit calculation, the plan specifies that the
maximum monthly payment is $6,000 and the minimum monthly payment
is $100 or 10%, presumably of monthly pre-disability earnings. It
includes two formulas for benefit calculation. The first applies
to individuals "earning less than 20% of [their] pre-disability
earnings," whether they are currently working or not. The second
applies to individuals working and "earning between 20% and 80% of
[their] pre-disability earnings." The plan makes no express
provision for how to calculate benefit payments for individuals who
are not working but are nonetheless earning between 20% and 80% of
their pre-disability earnings.

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The specifics of the two formulas are as follows. Under
the first, monthly payments are figured by taking the lesser of (a)
$6,000 and (b) 60% of "pre-disability earnings," and then
subtracting "any other income amounts except any income [the
individual] earn[s] or receive[s] from any form of employment."
Under the second, benefits are initially the lesser of (a) $6,000,
(b) 100% of "pre-disability earnings" minus "any other income
amounts including current income [the individual] earn[s] or
receive[s] from any form of employment," and (c) 60% of "pre-
disability earnings." After 24 months, additional payments under
this formula are determined by taking the lesser of (a) $6,000, and
(b) 60% of "pre-disability income," and then subtracting 50% of
"any income [the individual] earn[s] or receive[s] from any form of
employment" and 100% of "any other income amounts."
The policy defines "other income amounts" in six
categories. All the categories except for one pertain to benefits
and awards an individual either receives or is eligible to receive
under specified laws or employer insurance plans. The remaining
category, particularly important for our purposes, states that
"other income amounts" includes "any income you earn or receive
from any form of employment."
As to overpayment, the plan provides, "We have the right
to recover overpayments due to fraud; an error we make in
processing your claim; [or] your receipt of other income amounts."

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It also states, "If we determine that we overpaid your claim, then
we require you repay us in full. We will determine the method by
which you will repay us."
C. The Dispute Under the Boston Mutual Plan
In February 2001, shortly after D&H obtained the Boston
Mutual policy, Dolan underwent orthopedic surgery. When she
returned to work in August 2001, she worked fewer hours and
received less salary. In January 2002, Boston Mutual approved
Dolan's claim under the policy and began dispensing benefits.
These benefits continued until 2006, when Boston Mutual's third-
party claims administrator, Disability Reinsurance Management
Services (DRMS), conducted an audit.
Based on the audit, DRMS concluded that Dolan's benefit
payments had not properly taken account of business profits she
received as a principal of D&H and another entity, Associated
Professional Management, Inc. With those profits included, DRMS
calculated Dolan's pre-disability monthly earnings to be $5,833.33
and her post-disability monthly earnings in 2002 to be $7,670.67.
In an August 2006 letter, Boston Mutual informed Dolan of the audit
and asserted its right under the policy to recover overpayments due
to "fraud or error." Dolan, through her attorney, contested this
finding. She argued that this business income fell outside the
definition of "earnings" relevant for determining eligibility under
the policy.

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Notwithstanding Dolan's objections, by an October 2006
letter Boston Mutual discontinued her benefits and reasserted its
demand that she repay past benefits. The letter stated that the
benefits Dolan had received since January 2002 had resulted in an
overpayment of $145,958.32. Dolan twice appealed the termination
determination, and in each case DRMS denied the appeal. In her
appeals, Dolan argued that she had disclosed her ownership
interests at all relevant times and that the intention of D&H and
its principals in purchasing the policy had been to protect W-2
earnings. She did not submit evidence that Boston Mutual had
represented to D&H that the policy would protect W-2 earnings in
this fashion. After DRMS denied these appeals, Dolan filed this
lawsuit.
In the district court, Dolan challenged her benefit
termination under ERISA's civil enforcement provision, 29 U.S.C.
§ 1132. She argued that (1) the plain language of the plan renders
non-salary income irrelevant for benefit eligibility, and (2)
Boston Mutual should be equitably estopped from asserting otherwise
given Liszanckie's representations to Havunen. In the alternative,
Dolan argued that D&H was fraudulently induced to purchase the
Boston Mutual plan and sought damages in tort under state law. As
a remedy for fraudulent inducement, Dolan argued that she was
entitled to the benefits she would have received under the
Guarantee Life policy had D&H renewed it. Dolan also asserted

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The counterclaim originally sought $145,958.32 in 3
overpaid benefits. Boston Mutual subsequently recalculated the
amount of the overpayment.
These affidavits include Havunen's testimony concerning 4
the circumstances surrounding D&H's decision to purchase the Boston
Mutual policy, as well as some of Liszanckie's testimony. They
also include Dolan's testimony concerning her disabling condition
and interactions with Boston Mutual.
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state law contract claims, but later conceded that these claims are
preempted by ERISA.
Boston Mutual counterclaimed, demanding reimbursement
under the plan for $163,661.57 in overpaid benefits. The parties 3
cross-moved for summary judgment on Dolan's claims and Boston
Mutual's counterclaim.
Three arguments Boston Mutual made before the district
court are relevant on appeal. First, it argued that its
determination that Dolan had not been eligible for benefits was
reasonable and within the discretion afforded to certain plan
administrators under ERISA. Second, it argued that the district
court could not consider four affidavits Dolan submitted concerning
purported misrepresentations because they had not been part of the
administrative record. Third, it argued that ERISA preempts 4
Dolan's state claim for fraud in the inducement.
Initially, the district court granted Boston Mutual's
motion for summary judgment on Dolan's claims but denied both
parties' motions for summary judgment on Boston Mutual's
counterclaim. Boston Mutual moved for reconsideration of the

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denial of summary judgment as to its counterclaim in light of a
Supreme Court decision, Sereboff v. Mid Atlantic Medical Services,
Inc., 547 U.S. 356 (2006), on permissible relief under ERISA that
the district court had not considered. Dolan moved for
reconsideration of her claims in light of a recent decision of this
court, Denmark v. Liberty Life Assurance Co. of Boston, 566 F.3d 1
(1st Cir. 2009), concerning conflicts of interest in certain
discretionary decisions by ERISA plan administrators.
The district court reaffirmed its grant of summary
judgment for Boston Mutual on Dolan's claims. On reconsideration,
however, it granted Dolan's motion for summary judgment on Boston
Mutual's counterclaim. In the two decisions, the district court
held (1) Boston Mutual's eligibility determination was reasonable
and thus entitled to deference under ERISA, (2) ERISA preempts
Dolan's claim for fraud in the inducement under 29 U.S.C.
§ 1144(a), and (3) Boston Mutual's claim for reimbursement for
overpaid benefits is not "appropriate equitable relief" under 29
U.S.C. § 1132(a)(3). The district court did not expressly address
Dolan's equitable estoppel argument. It also did not address
Boston Mutual's motion to strike the four contested affidavits, as
the motion was deemed moot in light of the court's grant of summary
judgment for Boston Mutual.
In the present cross-appeals, Dolan appeals the district
court's grant of summary judgment for Boston Mutual on her claims

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We have noted that "[f]or purposes of reviewing benefit 5
determinations by an ERISA plan administrator, the arbitrary and
capricious standard is functionally equivalent to the abuse of
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and Boston Mutual appeals the district court's grant of summary
judgment for Dolan on its counterclaim.
II.
We review the district court's grants of summary judgment
de novo. Sch. Union No. 37 v. United Nat'l Ins. Co., 617 F.3d 554,
558-59 (1st Cir. 2010). In the typical case, we will reverse a
grant of summary judgment only if, making all factual inferences in
favor of the non-moving party, a rational factfinder could resolve
the legal issue for either side. Cusson v. Liberty Life Assurance
Co. of Boston, 592 F.3d 215, 223-24 (1st Cir. 2010). The presence
of cross-motions does not alter this general standard. When there
are cross-motions for summary judgment, the court must consider
each motion separately, drawing all inferences in favor of each
non-moving party in turn. Merchants Ins. Co. of N.H., Inc. v. U.S.
Fid. & Guar. Co., 143 F.3d 5, 7 (1st Cir. 1998).
Cases that concern benefit determinations under an ERISA
plan, however, are not typical cases when it comes to summary
judgment. When an ERISA plan gives an administrator discretionary
authority to determine eligibility for benefits or construe the
plan's terms, the district court must uphold the administrator's
decision unless it is "arbitrary, capricious, or an abuse of
discretion." Cusson, 592 F.3d at 224 (quoting Gannon v. Metro. 5

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discretion standard." Wright v. R.R. Donnelley & Sons Grp.
Benefits Plan, 402 F.3d 67, 74 n.3 (1st Cir. 2005). We describe
the relevant standard of review for these benefit determinations as
"abuse of discretion" review.
-16-
Life Ins. Co., 360 F.3d 211, 213 (1st Cir. 2004)) (internal
quotation marks omitted). In such cases, "summary judgment is
simply a vehicle for deciding the issue" and "the non-moving party
is not entitled to the usual inferences in its favor." Id.
(quoting Orndorf v. Paul Revere Life Ins. Co., 404 F.3d 510, 517
(1st Cir. 2005)) (internal quotation marks omitted).
The parties agree that the plan at issue here affords
Boston Mutual authority to determine benefit eligibility and
construe its terms. Accordingly, the district court reviewed
Boston Mutual's benefit determinations for abuse of discretion.
Our de novo review of the district court's grants of summary
judgment as they relate to benefit determinations must look to
whether the district court erred in finding that Boston Mutual's
determinations were within its discretion. Our de novo review of
the district court's grants of summary judgment as they relate to
other issues must employ the non-deferential review typically
employed on summary judgment. See Orndorf, 404 F.3d at 517.
III.
We address in concert the two benefit determinations
relevant to this appeal, as both rest on the same stated rationale.
Boston Mutual terminated Dolan's benefits because it deemed Dolan

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Specifically, Boston Mutual argues that S corporation 6
"pass through" income paid to working shareholders falls within the
definition of "earnings" when the term is used in isolation or in
conjunction with the term "current." It argues that this view is
consistent with case law concerning the earnings subject to federal
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ineligible for benefits under the plan, and it demanded recoupment
of past payments made to Dolan because it deemed that Dolan had
never been eligible for benefits under the plan. It has been
Boston Mutual's position that Dolan has never been eligible for
benefits because her post-disability earnings have always exceeded
her pre-disability earnings as defined by the plan. There are no
disputed facts concerning Dolan's income. The parties only dispute
how to interpret the plan's terms and thereby determine Dolan's
eligibility for benefits in light of her income.
This interpretive dispute centers on four constructions
present in the plan: "earnings," "basic annual earnings," "pre-
disability earnings," and "current earnings." Dolan argues that
the plan's definition of "basic annual earnings" defines "earnings"
as W-2 income and that a reasonable reading of the plan demands a
consistent application of this definition, irrespective of the
temporal periods "pre-disability" and "current." It has been
Boston Mutual's position that when the term "earnings" precedes the
terms "pre-disability" or "basic annual" it refers to monthly W-2
income, but when the term "earnings" is used alone or combined with
the term "current" it refers to all income that derives from
employment, including ownership income.6

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employment taxes. See Nu-Look Design, Inc. v. C.I.R., 356 F.3d
290, 291 (3d Cir. 2004); Joseph Radtke, S.C. v. United States, 895
F.2d 1196, 1197 (7th Cir. 1990); Spicer Accounting, Inc. v. United
States, 918 F.2d 90, 93 (9th Cir. 1990). Boston Mutual has not
argued that any other type of non-salary income deriving from
employment falls into these two definitions of "earnings."
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A. Existing Circuit Law
In this circuit, we have held that an ERISA benefit
determination is within the discretion of the plan administrator so
long as it is "reasoned and supported by substantial evidence."
Wright v. R.R. Donnelly & Sons Grp. Benefits Plan, 402 F.3d 67, 74
(1st Cir. 2005) (quoting Gannon, 360 F.3d at 213). We have
emphasized that our review of whether a plan administrator abused
its discretion does not require that we determine either the "best
reading" of the ERISA plan or how we would read the plan de novo.
Stamp v. Metro. Life Ins. Co., 531 F.3d 84, 94 (1st Cir. 2008)
(quoting Lennon v. Metro. Life Ins. Co., 504 F.3d 617, 624 (6th
Cir. 2007)) (internal quotation marks omitted). We have also noted
that the doctrine of contra proferentem does not apply to review of
an ERISA plan construction advanced by an administrator given
authority to construe the plan. Id. at 93 (citing Morton v. Smith,
91 F.3d 867, 871 n.1 (7th Cir. 1996)).
Challenges to benefit determinations in this circuit have
typically involved the application of contested facts to
uncontested plan terms. In Leahy v. Raytheon Co., 315 F.3d 11 (1st
Cir. 2002), for example, we noted that the relevant plan terms were

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"clear and unambiguous" but that, "[a]s in many such instances,"
the "devil is in the details" of applying the facts to those terms.
Id. at 18. Most often, plaintiffs have challenged the sufficiency
of the evidence underlying an ERISA plan administrator's factual
conclusions. See, e.g., Cusson, 592 F.3d at 229-30; Orndorf, 404
F.3d at 518. They have also challenged benefit determinations on
the grounds that the ERISA plan administrator improperly credited
certain evidence. See, e.g., Medina v. Metro. Life Ins. Co., 588
F.3d 41, 45-47 (1st Cir. 2009); Buffonge v. Prudential Ins. Co. of
Am., 426 F.3d 20, 30 (1st Cir. 2005).
We are aware of only two cases decided in this circuit
concerning purely interpretive questions like the one raised in
this appeal. Understandably, neither of these cases articulate
general guidelines as to when a plan administrator's construction
is sufficiently lacking in reason that it rises to the level of an
abuse of discretion. In the more recent case, Coffin v. Bowater
Inc., 501 F.3d 80 (1st Cir. 2007), we upheld a plan administrator's
construction because we found its construction "significantly more
persuasive" than that offered by the plaintiffs. Id. at 96. In so
holding, the court did not need to reach the more difficult
question of when a plan administrator's construction will be
sufficiently reasonable to warrant deference even though it is only
as persuasive or less persuasive than the interpretation offered by
the plaintiffs.

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In an earlier case, Kolling v. American Power Conversion
Corp., 347 F.3d 11 (1st Cir. 2003), we held it within a plan
administrator's discretion to "reasonably" construe the term
"employee," which was circularly defined by the plan as "Employee
of the Employer." Id. at 14. (citing Trombetta v. Cragin Fed. Bank
for Sav. Emp. Stock Ownership Plan, 102 F.3d 1435, 1439-40 (7th
Cir. 1996)). We held that the plan administrator had "permissibly
looked" to the insurance company's "intention in defining the
Plan's scope" and that the evidence supported its determination
regarding that intention. Id. We also held that the insurance
company had consistently applied its definition of "employee" in
the past. Id. We did not address when these indicators or others
might require a holding that a plan construction was unreasonable.
The Supreme Court has not spoken directly to how courts
should assess whether an administrator's construction of a plan
term is so unreasonable as to constitute an abuse of discretion.
In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), the
Court noted that "ERISA abounds with the language and terminology
of trust law," id. at 110, and that given this, it had held that
courts must develop a "federal common law of rights and obligations
under ERISA-regulated plans," id. (quoting Pilot Life Ins. Co. v.
Dedeaux, 481 U.S. 41, 56 (1987)) (internal quotation marks
omitted). The Court held that "[t]rust principles make a
deferential standard of review appropriate when a trustee exercises

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discretionary powers," and that when a trustee is given such power
"to construe disputed or doubtful terms . . . the trustee's
interpretation will not be disturbed if reasonable." Id. at 111.
The Court has not given precise content to this standard.
It has held that courts must consider conflicts of interest that
may arise when an administrator, like Boston Mutual, "both
determines whether an employee is eligible for benefits and pays
benefits out of its own pocket." Metro. Life Ins. Co. v. Glenn,
554 U.S. 105, 108 (2008); see also Conkright v. Frommert, 130 S.
Ct. 1640, 1647 (2010). In Glenn, the Court noted that courts "will
often take account of several different considerations of which a
conflict of interest is one." Glenn, 554 U.S. at 117. It did not
identify other relevant factors, however, and "warned against
creating formulas that will 'falsif[y] the actual process of
judging' or serve as 'instrument[s] of futile casuistry.'" Id. at
119 (quoting Universal Camera Corp. v. Nat'l Labor Relations Bd.,
340 U.S. 474, 489 (1951)) (alterations in original).
B. Law Beyond This Circuit
In the absence of clear guidance from either this court
or the Supreme Court, we look to the law of other circuits. The
circuit courts have articulated the abuse of discretion standard
afforded to ERISA plan administrators under Bruch in various ways.
Jayne E. Zanglein & Susan J. Stabile, ERISA Litigation 550 (3d ed.
2008). We do not delve into how the circuits have formulated this

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standard for all cases in which an ERISA plan administrator has
power to make benefit determinations. Rather, we limit our
attention to the question of when an ERISA plan administrator,
acting pursuant to a grant of power to construe the plan's terms,
construes the plan in a manner that is unreasonable and thus abuses
its discretion.
At the outset, we note that "[i]t is notoriously
difficult to venture a general definition of the term 'abuse of
discretion,' and none is canonical; indeed, the term has different
meanings in different legal contexts." Evans v. Eaton Corp. Long
Term Disability Plan, 514 F.3d 315, 321-22 (4th Cir. 2008). As
Judge Wilkinson wrote in Evans, the standard "draws a line--or
rather demarcates a region--between the unsupportable and the
merely mistaken, between the legal error, disorder of reason,
severe lapse of judgment, and procedural failure that a reviewing
court may always correct, and the simple disagreement that, on this
standard, it may not." Id. at 322 (citing Harry T. Edwards & Linda
Elliott, Federal Standards of Review 68 (2007)). It goes without
saying that terms like "reasonable," which underlie the standard
here, are similarly difficult to define precisely.
It also bears emphasis that this standard of review,
which concerns a fiduciary element of the role of an ERISA plan
administrator, must reflect the relevant principles of trust law,
rather than the law of contracts. Matthews v. Sears Pension Plan,

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144 F.3d 461, 465 (7th Cir. 1998); see also Bruch, 489 U.S. at 111.
As the Supreme Court has held, trust law "can ask judges to
determine lawfulness by taking account of several different, often
case-specific, factors, reaching a result by weighing all
together." Glenn, 554 U.S. at 117. In this context, our analysis
must weigh the values advanced by ERISA in empowering plan
administrators as fiduciaries, cf. Evans, 514 F.3d at 323, with the
dangers policed by the statute arising from breach of fiduciary
duty, cf. Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 141
n.8 (1985).
In their review of ERISA plan constructions like the one
presented in this case, courts beyond this circuit have looked to
the language and purpose of the plan. In some circuits, the
analysis has been conducted with reference to the consistency of an
administrator's construction with the "plain meaning" of the plan.
See Boyd v. Bert Bell/Pete Rozelle NFL Players Ret. Plan, 410 F.3d
1173, 1178 (9th Cir. 2005); Wagener v. SBC Pension Benefit Plan--
Non Bargained Program, 407 F.3d 395, 404 (D.C. Cir. 2005); Pagan v.
NYNEX Pension Plan, 52 F.3d 438, 443 (2d Cir. 1995); Fuller v. CBT
Corp., 905 F.2d 1055, 1060 (7th Cir. 1990). These circuits have
not defined how courts should determine whether an interpretation
does not accord with an ERISA plan's plain meaning.
At least four circuits have advanced more specific
standards. The Fifth Circuit has split the inquiry into two steps,

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each of which contains three guiding factors, while the Third,
Fourth, and Eighth circuits have listed a general set of
guidelines.
The Fifth Circuit first asks whether an administrator's
interpretation is "legally correct." Chacko v. Sabre, Inc., 473
F.3d 604, 611 (5th Cir. 2006). In so doing, it considers "(1)
whether the administrator has given the plan a uniform
construction; (2) whether the interpretation is consistent with a
fair reading of the plan; and (3) any unanticipated costs resulting
from different interpretations of the plan." Id. If the
interpretation is "legally correct," it must stand; if it is not,
the court considers three factors to determine if it is an abuse of
discretion: "(1) the internal consistency of the plan under the
administrator's interpretation, (2) any relevant regulations
formulated by the appropriate administrative agencies, and (3) the
factual background of the determination and any inferences of lack
of good faith." Gosselink v. Am. Tel. & Tel., Inc., 272 F.3d 722
(5th Cir. 2001).
The Third, Fourth, and Eighth circuits each employs a
multi-factor test to determine whether a plan construction
constitutes an abuse of discretion. The Third and Eighth circuits
each considers the following five factors:
(1) whether the administrator's language is
contrary to the clear language of the plan;
(2) whether the interpretation conflicts with
the substantive or procedural requirements of

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ERISA; (3) whether the interpretation renders
any language of the plan meaningless or
internally inconsistent; (4) whether the
interpretation is consistent with the goals of
the plan; and (5) whether the administrator
has consistently followed the interpretation.
Manning v. Am. Republic Ins. Co., 604 F.3d 1030, 1041-42 (8th Cir.
2010); see also Howley v. Mellon Fin. Corp., 625 F.3d 788, 795 (3d
Cir. 2010). The Fourth Circuit's "non-exhaustive" list of factors
includes these five factors as well as "whether the decisionmaking
process was reasoned and principled," "any external standard
relevant to the exercise of discretion," and "the fiduciary's
motives and any conflict of interest it may have." Carden v. Aetna
Life Ins. Co., 559 F.3d 256, 261 (4th Cir. 2009).
C. Boston Mutual's Construction of the Plan
Although these standards are instructive, we do not adopt
them or any specific guiding factors. With all due deference to
Boston Mutual's role as a fiduciary, it is clear that its
construction of the ERISA plan at issue stretches beyond the bounds
of reasonableness. This is so for a number of reasons, which are
specific to the particular case at hand.
As an initial matter, Boston Mutual's construction of the
term "earnings" cannot be applied consistently within its own
account of the plan's meaning. It has been Boston Mutual's
position that the term "earnings" refers to W-2 income when it is
used in conjunction with the terms "pre-disability" or "basic
annual." It has also been Boston Mutual's position that the term

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"earnings" refers to all income deriving from employment when it is
used alone or with the term "current." Yet the plan's express
definitions of "pre-disability earnings" and "basic annual
earnings" cannot support both of these positions at once.
The plan expressly defines "pre-disability earnings" as
well as "Basic annual Earnings" with reference to the unaccompanied
term "earnings." The plan defines "pre-disability earnings" as
"your monthly rate of earnings from the employer in effect just
prior to the date disability begins." (Emphasis added.) It
defines "Basic annual Earnings," in turn, as "the Insured Person's
earnings for the prior calendar year as reported by the Group
Policyholder on form W-2, excluding commissions. If the person has
earnings for less than a calendar year, Basic Annual Earnings shall
be determined by averaging the monthly earnings for each month
worked and annualizing the result." (Emphasis added.)
If Boston Mutual's definition of the unaccompanied term
"earnings" were applied to that unaccompanied term as used within
the plan's stated definitions of "pre-disability earnings" and
"basic annual earnings," the term "earnings" would have to refer to
both W-2 income and non-salary income when used in conjunction with
the terms "pre-disability" and "basic annual." If, on the other
hand, one accepts Boston Mutual's definition of "earnings" as used
in conjunction with "pre-disability" and "basic annual," then the
definition of the unaccompanied term "earnings" as used within the

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plan's definitions of "pre-disability earnings" and "basic annual
earnings" would have to refer only to salary income.
Boston Mutual attempts to counter this contradiction by
invoking the broader structure of the plan. It argues that "the
clear import" of the plan "is to reduce and potentially eliminate
benefit payments once the claimant earns enough money from other
sources of income." In support of this claim, Boston Mutual points
in particular to the plan's provision that benefits may be limited
by a participant's receipt of "other income amounts," a term the
plan defines, inter alia, as "[a]ny income you earn or receive from
any form of employment." Boston Mutual argues that its various
constructions of the term "earnings," notwithstanding the
definitions at the beginning of the plan, are consistent with the
plan's effort to take account of income from employment.
Specifically, Boston Mutual relies on language concerning
benefit termination. The plan states that if an employee covered
by the plan is "disabled and working, earning more than 80% of [his
or her] pre-disability earnings, no payment will be made," and
payments will stop "the date [the covered employee's] current
earnings exceed 80% of [his or her] pre-disability earnings."
(Emphasis added.) Boston Mutual argues that these provisions only
allow payment of benefits when the sum of a covered employee's W-2
income and non-salary income from employment is at least 20% less
than that individual's pre-disability W-2 income. The benefit

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The plan identifies a "minimum payment" amount, which 7
might be read to ensure a baseline payment for individuals that
meet benefit eligibility requirements but would receive a payment
of zero under the benefit calculation formula. Neither party has
invoked this provision, however, and we need not address it
further.
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formula, which sets payment amounts for those "earning" at least
20% less than their "pre-disability earnings," mirrors this
requirement under Boston Mutual's construction.
This argument elides clear divisions within the plan's
structure that distinguish between questions of benefit calculation
and questions of benefit eligibility. The plan employs the term
"earnings," in combination with various other terms, in its
provisions governing whether a payment can be made. In addition to
the provisions upon which Boston Mutual relies, the plan limits
eligibility for benefits in its definition of disability to
individuals who have "at least a 20% loss in [their] pre-disability
earnings." The plan employs the term "income," by contrast, in its
provisions governing the size of payments due to qualified
individuals. These provisions might plausibly reduce the size of
a benefit payment to zero, but they are distinct from provisions 7
concerning who is qualified to receive a payment.
Not only do "earnings" and "income" occupy different
domains of the plan; Boston Mutual has also construed these terms
quite differently. Depending on the context, Boston Mutual
construes "earnings" to mean either W-2 income or both W-2 income

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Boston Mutual cites a series of dictionary definitions 8
for the proposition that its definition of "earnings" when the term
is either unaccompanied or accompanied by the term "current" falls
within ordinary usage. Although some of the dictionary definitions
refer to "earnings" as all income deriving from labor and capital,
Boston Mutual does not assert that its definition of "earnings"
stretches this broadly.
The most logical textual source for this construction of 9
the term "earnings" when used with the term "pre-disability" is the
definition of "Basic annual Earnings." The plan defines "pre-
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and non-salary income deriving from employment. As expressly 8
defined within the plan, "other income amounts" extend beyond both
of these definitions of earnings. In its definition of "other
income amounts," the plan includes "any income you earn or receive
from any form of employment." It also includes a variety of
benefits and awards received under employment plans and government
programs. For example, the plan lists Social Security benefits due
to disability or retirement, benefits received under workers'
compensation, and sick leave benefits.
Boston Mutual's interpretation also renders meaningless
the only provision in the plan that appears to define "earnings" in
a substantive way. The plan defines "Basic annual Earnings" with
reference to W-2 earnings; elsewhere, the plan is silent as to what
counts as earnings. The plan's express definition of "pre-
disability earnings" does not mention W-2 earnings, and Boston
Mutual has not explicitly explained why it has construed the term
"earnings" to mean W-2 income when it is used with the term "pre-
disability." Under Boston Mutual's construction of the plan, the 9

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disability earnings" with reference to the insured's "monthly rate
of earnings," however, not "basic annual earnings." Thus, this
construction would suggest that "Basic annual Earnings" defines
"earnings" generally, which is not Boston Mutual's position.
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definition of "Basic annual Earnings" is only relevant to that
particular phrase. Yet the phrase does not appear once in the plan
outside the provisions that define it.
Boston Mutual makes a further structural argument that
its construction avoids a difficulty that would arise if the plan
were construed to define "earnings" as W-2 income. It argues that
if earnings were construed in that manner, principals like Dolan
could inflate their benefit payments by reclassifying their W-2
income as non-salary income. The plan expressly avoids this
purported difficulty, however. It provides that an individual will
no longer receive benefits if he or she is "able to increase [his
or her] current earnings by increasing the number of hours [he or
she] work[s] or the number of duties [he or she] perform[s] in [his
or her] regular occupation but . . . does not do so." This
provision would allow Boston Mutual to terminate the benefits of
individuals who attempted to increase their benefits in this
fashion.
It is also instructive that Boston Mutual, though
indisputably in possession of all of Dolan's tax forms at all times
relevant to this suit, did not advance its present construction of
the plan until more than four years after it began paying Dolan

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We do not reach Boston Mutual's argument that we may not 10
consider the contents of the four contested affidavits, which
contain additional factual claims concerning the consistency of
Boston Mutual's construction of the plan. The contents of these
affidavits are not necessary to our holding.
We have considered the arguments as to whether Boston 11
Mutual has taken adequate measures to "insulate [its]
decisionmaking process against the potentially pernicious effects
of structural conflicts" of interest, Denmark v. Liberty Life
Assurance Co. of Boston, 566 F.3d 1, 9 (1st Cir. 2009), and they do
not alter our conclusion.
-31-
benefits. Boston Mutual does not dispute that Dolan's tax forms
made clear that she was a principal of D&H and Associated
Professional Management, Inc., and received income in these
capacities. When Dolan filed her initial claim for benefits,
Boston Mutual apparently did not consider this other income stream
to preclude eligibility.10
If Boston Mutual wanted to offer a plan that determined
benefit eligibility by comparing pre-disability W-2 income with
post-disability income deriving from employment, it could have
drafted a plan that made this clear. Boston Mutual may not
transform an existing plan to achieve this end by construing it in
a fashion contrary to its terms. In light of the foregoing, we
hold that Boston Mutual's construction of the plan was unreasonable
and, therefore, that its determination that Dolan has never been
eligible for benefits constituted an abuse of discretion.11

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IV.
Our holding that Boston Mutual abused its discretion in
determining that Dolan has never been eligible for benefits
requires an entry of judgment for Dolan on both her wrongful denial
of benefits claim and Boston Mutual's counterclaim for recoupment
of past payments. We affirm the entry of judgment for Dolan on
Boston Mutual's counterclaim on the different ground that Boston
Mutual's determination that it overpaid benefits was an abuse of
discretion. We reverse the district court's entry of judgment for
Boston Mutual on Dolan's wrongful denial of benefits claim and
remand to the district court with instructions to enter judgment
for Dolan, subject to the provisos in this opinion.
So ordered.

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