Michaeleen Kosiba; Celeslie Epps-Malloy v. Merck & Company

1
PRECEDENTIAL
THE UNITED STATES COURT OF
APPEALS FOR THE THIRD CIRCUIT
_______________
NO. 02-2668
MICHAELEEN KOSIBA; CELESLIE
EPPS-MALLOY
v.
MERCK & COMPANY; UNUM LIFE
INSURANCE
COMPANY OF AMERICA; MERCK &
CO., LONG TERM
DISABILITY PLAN FOR UNION
EMPLOYEES
Celeslie Epps-M alloy,
Appellant
__________________
On Appeal From The United States
District Court For The District Of New
Jersey
(D.C. No. 98-cv-03571)
District Judge: Honorable Mary Little
Cooper
Argued June 28, 2004
Before: AMBRO, BECKER, and
GREENBERG, Circuit Judge
(Filed September 13, 2004 )
CHARLES F. SZYMANSKI (Argued)
Markowitz & Richman
121 South Broad Street
Suite 1100
Philadelphia, PA 19107
Attorney for Appellant
PETER J. HECK (Argued)
Del Mauro, DiGiaimo, Knepper & Heck
8 Headquarters Plaza
North Tower
Morristown, NJ 07960
Attorney for Appellee
______________________
OPINION
______________________
BECKER, Circuit Judge.
Plaintiff Celeslie Epps-Malloy is a
former employee of defendant Merck &
Co. (“Merck”), who participated in
Merck’s ERISA-based Long Term
Disability Plan for Union Employees (the
“Plan”).1 At times relevant, Merck, as
overall plan administrator, had delegated
responsibility for claims administration to
defendant U N UM Life Insurance
1Michaleen Kosiba, the other named
plaintiff in this case, settled her case
against the defendants in the District
Court, and is not participating on appeal.

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Company of America (“UNUM”).2
Following an at-work injury and a
diagnosis of sarcoidosis and fibromyalgia,
Epps-Malloy applied for and received
long-term disability (LTD) benefits from
the defendants in 1993. During a periodic
review conducted in 1996, the defendants
terminated Epps-Malloy’s benefits, finding
that she was no longer totally disabled
under the terms of the Plan. During the
course of the Plan’s administrative appeals
process, Merck requested that Epps-
Malloy undergo an independent medical
e x a m i n a ti o n , a n d d e s i g n a te d a
pulmonologist, Dr. Gautam Dev, to
evalu ate her. Dr. Dev’s report
contradicted Epps-M alloy’s treating
physicians’ diagnoses, and on this basis
the defendants upheld their denial of
continued benefits. Epps-M alloy then
filed this suit under 29 U.S.C. §
1132(a)(1)(B), seeking benefits allegedly
due her under the terms of the Plan.
Epps-M alloy’s c la im surviv ed
summary judgment, and the District Court
held a Fed. R. Civ. P. 52(a) bench trial on
a stipulated documentary record. The
Court concluded that under Pinto v.
Reliance Standard Life Insurance Co., 214
F.3d 377 (3d Cir. 2000), and its progeny,
the structural arrangement among Merck,
the Plan, and UNUM did not warrant a
departure from the traditional “arbitrary
and capricious” standard of review over
ERISA plan fiduciaries’ discretionary
decisions regarding benefits. Turning to
the merits of Epps-Malloy’s claim, the
District Court found, principally because
of Dr. Dev’s report, that the defendants’
denial of benefits was not arbitrary and
capricious.
On appeal, we concentrate on the
District Court’s first conclusion. We agree
with the District Court that the record in
this case does not support finding a
financial conflict of interest (which, under
Pinto’s “sliding scale” approach, would
warrant a standard of judicial review less
deferential than arbitrary and capricious
review), and that delegation by Merck to
UNUM of claims administration would
ordinarily preclude heightened review.
However, there is evidence of procedural
bias in Merck’s intervention in the appeals
process to request an independent medical
exam. This is especially problematic
because the record before the defendants
prior to Dr. Dev’s examination provided
reasonably sound as well as unequivocal
support for Epps-Malloy’s claim for
benefits; the choice to request a third
medical opinion therefore strongly
suggests a desire to generate evidence to
counter Epp s-M alloy’s physicians’
diagnoses. Because Merck’s intervention,
notwithstanding its delegation of claims
administration to a large and experienced
carrier, undermines the defendants’ claim
to the deference normally accorded an
ERISA plan fiduciary with discretionary
authority, we conclude that the District
Court should have applied a moderately
heightened arbitrary and capricious
2We shall refer to Merck, the Plan, and
UNUM collectively as “the defendants”
except where it is necessary to
distinguish them.

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standard of review. Additionally, with
respect to the merits, the District Court
fa iled to ad dr es s E pp s-M all oy’ s
fibromyalgia diagnosis, an omission which
itself alone would require a new trial. For
these reasons, we will reverse the
judgment of the District Court and remand
for a new trial.
I. Factual Background and Procedural
History
Although the District Court, which
rendered its opinion following a Fed. R.
Civ. P. 52(a) bench trial on a stipulated
documentary record, gave a lengthy
account of the parties’ factual contentions,
it by and large did not make findings of
fact as required by Rule 52(a). As such,
what follows is not so much the District
Court’s factual findings as it is our own
summary of the record before us.
A. Epps-Malloy’s Medical History
Epps-Malloy was employed by Merck
as a cook and food-service attendant. She
suffered an injury at work in 1991, and
was diagnosed with fibromyalgia, chronic
pain syndrome, and sarcoidosis.3 She was
granted short-term disability benefits by
the defendants in October 1992. In
October 1993, she was approved for LTD
benefits, but was reminded that periodic
requests for medical information would be
made in the future to ensure continued
eligibility (i.e., to determine that she
continued to be completely disabled under
the Plan). Around the same time, Epps-
Malloy applied for Social Security
disability benefits. In 1994, an
administrative law judge overruled the
Social Security Administration’s (SSA)
initial determination denying her Social
Security benefits, and awarded her Social
Security long-term disability benefits,
finding her permanently disabled.
Epps-M alloy’s benefits were provided
under the terms of the Merck & Co. Long
3It is unclear from the record whether
there was any causal relationship
between the injury—a stack of food
service trays falling on Epps-
Malloy—and the ailments that form the
basis of her claim. Fibromyalgia (also
referred to as fibromyositis) is “any of a
group of nonarticular rheumatic disorders
characterized by pain, tenderness, and
stiffness of muscles and associated
connective tissue structures.”
Merriam-Webster Medical Dictionary
(2002), at http://www.dictionary.com.
The cause is unknown. Sarcoidosis is “a
disease of unknown origin marked by
formation of granulomatous lesions that
appear especially in the liver, lungs, skin,
and lymph nodes.” American Heritage
Stedman’s Medical Dictionary (2002), at
http://www.dictionary.com. A
granuloma, in turn, is a “[c]hronic
inflammatory lesion characterised by
large numbers of cells of various types
(macrophages, lymphocytes, fibroblasts,
giant cells), some degrading and some
repairing the tissues.” On-line Medical
Dictionary, at http://cancerweb.ncl.ac.uk/
omd/index.html.

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Term Disability Plan fo r Un ion
Employees, an ERISA plan. By the Plan’s
terms, “[Merck] shall pay the cost of the
benefits provided under the Plan,” though
the Plan gives discretion to the
M a n a g e m e n t P e n s i o n I n v e s t m e nt
Committee to choose “any funding
method, or combination of funding
methods which are permissible under
ERISA.” The District Court found that no
evidence was introduced on how Merck
actually funded the plan, and the parties do
not dispute this on appeal. The Plan
allocates fiduciary responsibility among a
committee of Merck’s Board of Directors
( w h i c h h a s c e r ta i n po w e r s o f
appointment); the Merck Management
Pension Investment Committee (which is
responsible for the investment and
management of Plan funds); and Merck
itself, which is the plan administrator. As
plan administrator, Merck has the power to
appoint a claims administrator, who “shall
determine claims for benefits by
Participants under the Plan.” At the time
Epps-M alloy’s LTD benefits were first
granted, Thomas L. Jacob & Associates
(“TLJ”) was Merck’s appointed claims
administrator; later, appellee UNUM was
the claims administrator. Notwithstanding
this appointment, the Plan confers on
Merck (as plan administrator) the powers
“to construe the Plan”; “to decide all
questions of eligibility”; and “to request
and receive from all Participants such
information [as is] necessary for the proper
administration of the Plan.”
B. Termination of Epps-Malloy’s LTD
Benefits
In May 1996, as part of a periodic
review of Epps-Malloy’s benefits, UNUM
requested information from her treating
physicians, Dr. Panullo and Dr. David
Williams. Dr. Panullo was Epps-Malloy’s
gynecologist. Epps-M alloy’s disability is
not related to any gynecological condition,
s o D r . P a n u l l o ’ s re p o r t s a r e
irrelevant—though they seem to have been
misunderstood by UNUM, at some points,
to indicate that Epps-M alloy was entirely
able to work, when they in fact say only
that no gynecological problems prevented
Epps-Malloy from working. We therefore
say no more about Dr. Panullo.
Dr. Williams’s notes from January 16,
1996, refer to Epps-Malloy’s sarcoidosis
and her fibromyalgia. According to his
notes, the sarcoidosis had been diagnosed
by a 1989 bronchoscopy; the record does
not disclose when the initial fibromyalgia
diagnosis was made. Dr. Williams’s June
14, 1996, notes state that “[s]arcoidosis is
her diagnosis as well as fibromyalgia,” and
he indicated that she was being medicated
for fibromyalgia. In response to an
UNUM questionnaire dated October 28,
1996, Dr. Williams stated that Epps-
Malloy was “disabled to light activity
because of shortness of breath” and that
his prognosis for her to return to gainful
employment on a part-time basis or full-
time basis was “never.”
UNUM informed Epps-Malloy on
December 31, 1996 that it was terminating
her benefits. The letter explained that a
review of medical documentation,
including information from Drs. Panullo
and Williams, led UNUM to conclude that

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she no longer met the definition of being
“unable to perform any and every duty” of
her occupation, as required by the Plan.
The letter also stated that “there is no
evidence to support that you are medically
incapable to perform the duties of your
occupation.” The letter further informed
Epps-Malloy that she would have to come
forward with objective medical evidence
of her disability.
Epps-Malloy administratively appealed
this decision. She provided additional
information to UNUM, including the name
of her new treating physician, Dr. Fred
McQueen. Dr. McQueen repeated the
fibromyalgia diagnosis, stated “[s]he
cannot return to gainful employment,” and
that he did “not feel it in her best interest
to be under any stress due to triggering her
sarcoid remission.” Dr. McQueen
concluded: “Permanently & totally
disabled. Suffers with severe anxiety. She
cannot cope with stress.”
Upon receiving Dr. McQueen’s report,
UNUM wrote to Epps-Malloy stating that
“Merck & Company has requested an
Independent Medical Exam.” The
defendants designated Dr. Dev to perform
the examination. We rescribe Dr. Dev’s
r e p o r t i n t h e m a r g i n ; 4
4 I saw Celeslie Epps-M alloy on 5/8/97.
The patient is a 47 year old female with a
history of sarcoidosis reportedly
diagnosed by a transbronchial biopsy in
1987. The patient currently presents for
medical evaluation for her complaints of
shortness of breath on minimal exertion
and also complains of cough, which is
non-productive and worse upon laying
down. The patient also has post-nasal
drip and chronic sinus problems. Her
exercise tolerance is minimal, and she is
barely able to achieve her day-to-day
activities. The patient was treated in the
past with steroids; however, could not
tolerate them because of what appears to
be psychosis and marked degree of
weight gain. She has a history of
smoking one pack per day for six years.
[Physical exam reveals nothing
amiss; pulmonary function was
normal; blood gases were near
normal]
My impression of Mrs. Epps-
Malloy is that her
symptomatology is not
commensurate with her clinical
presentation. Considering the
normal pulmonary function test
and near normal arterial blood
gas, I have a difficult time
ascribing sarcoidosis as a cause of
her symptomatology. She appears
to be somewhat emotional and I
cannot reliably exclude
malingering behavior. On the
contrary, the endobronchial
sarcoid may be leading to a
persistent cough and dyspnea.
Chronic sinusitis can also
exacerbate a respiratory condition
and lead to some degree of
shortness of breath. The patient’s
impaired cardiac status is also a
possibility and an exercise stress

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in sum, Dr. Dev concluded that a diagnosis
of sarcoidosis was “incompatible with her
clinical presentation”—i.e., that he
disagreed with the sarcoidosis diagnosis.
He did not opine on her fibromyalgia
diagnosis. Based on Dr. Dev’s report,
UNUM upheld its decision denying
benefits.
C. Proceedings Before the District Court
Epps-Malloy filed this suit, seeking
benefits allegedly due her under the terms
of the Plan under 29 U.S .C. §
1132(a)(1)(B), and other relief. Merck
counterclaimed to recoup, under the terms
of the Plan, the Social Security disability
benefits Epps-M alloy had received. The
counterclaim was settled, and the District
Court denied summary judgment on Epps-
Malloy’s § 1132(a)(1)(B) claim. The case
therefore proceeded to a trial on the merits,
which was conducted as a Fed. R. Civ. P.
52(a) bench trial on a stipulated
documentary record. Canvassing Pinto v.
Reliance Standard Life Insurance Co., 214
F.3d 377 (3d Cir. 2000), and its progeny,
the District Court first concluded that an
“arbitrary and capricious” standard of
review applied to its judicial review of the
defendants’ denial of benefits. The Court
then concluded that their denial of benefits
was not arbitrary and capricious. It
therefore entered judgment for the
defendants.
II. Our Standard of Review Over the
District Court’s Decision
In the post-Pinto era, we appear to
have had only one case in the same
procedural posture as this one, i.e., an
appeal from a bench trial. In Goldstein v.
Johnson & Johnson, 251 F.3d 433, 441 (3d
Cir. 2001), we stated (without further
elaboration or citation) that in such an
appeal “[w]e have plenary review over a
district court’s conclusions of law, and we
review its factual conclusions for clear
error.” This is, of course, the usual
standard of review on appeal from a bench
trial. See In re Unisys Savings Plan Litig.,
173 F.3d 145, 149 (3d Cir. 1999).
Determining the proper standard of
judicial review under Pinto is a question of
applying law to fact; accordingly, our
review is plenary, though we review a
district court’s underlying factual findings
only for clear error. Because we conclude
the District Court applied too deferential a
standard of judicial review, we do not
reach the merits of Epps-Malloy’s claim.
III. Standard of Judicial Review over
Unum’s Determination of Epps-Malloy’s
test might be able to help
answer some of the
unanswered questions.
I feel, based on her pulmonary
function tests and arterial blood
gas information, that her present
diagnosis is incompatible with her
clinical presentation.
Dr. Dev’s description of when and how
Epps-Malloy’s sarcoidosis was first
diagnosed conflicts with that of Dr.
Williams; it is not clear whether this
inconsistency is significant.

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Claim
Our principal task is to determine
whether the District Court applied the
appropriate standard of judicial review to
the defendants’ decision to deny LTD
benefits to Epps-Malloy. We begin with a
discussion of Pinto and our cases
following it, and then turn to the proper
standard of judicial review in this case.
A. Pinto and Its Progeny
We held in Pinto that, in reviewing an
ERISA plan fiduciary’s discretionary
determination regarding benefits, a court
must take into account the existence of the
structural conflict of interest present when
a financially interested entity also makes
benefit determinations. Specifically, we
adopted a “sliding scale” approach, in
which district courts must “consider the
nature and degree of apparent conflicts
with a view to shaping their arbitrary and
capricious review of the benefits
d e t e r m in a t i o n s o f d i s c re t i o n a r y
decisionmakers.” Pinto, 214 F.3d at 393.
This “sliding scale” method “intensif[ies]
the degree of scrutiny to match the degree
of the conflict.” Id. at 379.
Pinto offered a nonexclusive list of
factors to consider in assessing whether a
structural conflict of interest warranting
heightened review exists. The sliding-
scale approach “allows each case to be
examined on its facts.” Id. at 392. Among
the factors we identified were “the
sophistication of the parties, the
information accessible to the parties, and
the exact financial arrangement between
the insurer and the company.” Id. Also
relevant is “the current status of the
fidu ciary,” id., i.e., whethe r the
decisionmaker is a current employer,
former employer, or insurer. Our cases
have addressed various combinations of
these factors. In Pinto itself, we
concluded that “heightened arbitrary and
capricious review,” id. at 393, or review
“on the far end of the arbitrary and
capricious ‘range,’” id. at 394, was
appropriate because Pinto’s insurer both
made benefits determinations and funded
the benefits, and because of various
procedural anomalies that tended to
suggest that “whenever it was at a
crossroads, [the insurer defendant] chose
the decision disfavorable to Pinto.” Id.
Turning to Pinto’s progeny, we first
note that in some cases the parties stipulate
to the applicable standard of judicial
review, or at least do not contest the
District Court’s choice of a standard of
review. See, e.g., McLeod v. Hartford Life
& Accident Ins. Co., 372 F.3d 618, 623-24
& nn.3-4 (3d Cir. 2004); Orvosh v.
Program of Group Ins. for Salaried
Employees of Volkswagen of Am., Inc.,
222 F.3d 123, 129 (3d Cir. 2000). Other
cases, though they cite Pinto, are factually
too far removed from the facts of this case
to provide meaningful guidance. See, e.g.,
Goldstein, 251 F.3d 433 (unfunded
executive deferred compensation, or “top
hat,” plan).
While Pinto addressed the case of an
i n s u r e r b o t h m a k i n g b e n e f i t s
determinations and paying claims, it did
not definitively decide whether any form
of heightened review applies to employers

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both making benefits determinations and
paying claims. When an employer pays
claims out of its general operating
funds—the situation most likely to
introduce a structural conflict because the
employer feels an immediate “sting” from
paying a claim—the plan is referred to as
“unfunded” or sometimes “self-funded.”
This is in contrast to “the typical
employer-funded pension plan” which “is
set up to be actuarially grounded, with the
company making fixed contributions to the
pension fund.” Pinto, 214 F.3d at 388.
We confronted (but were ultimately
able to avoid) ruling on the issue of
whether heightened review applies to
employers making benefits determinations
and paying claims in Skretvedt v. E.I.
DuPont de Nemours & Co., 268 F.3d 167
(3d Cir. 2001). That case concerned
(among other things) an employer-
administered unfunded benefit plan, and
noted that “a heightened standard of
review might be applicable to the
[employer-controlled] Board’s denial of
Skretvedt’s claim for the unfunded . . .
benefits, because of the potential conflict
under Pinto.” Id. at 175. We reached this
question less than a year later, in Smathers
v. Multi-Tool, Inc./Multi-Plastics, Inc.
Employee Health & Welfare Plan, 298
F.3d 191 (3d Cir. 2002). In Smathers, we
concluded that an employer’s unfunded
and self-adminstered benefits plan
presented a conflict that, though “not
extraordinary,” did warrant “somewhat
heightened” scrutiny, requiring “a more
penetrating review of [the] administrator’s
decisionmaking process than would
normally be conducted under the arbitrary
and capricious standard.” Id. at 199. Most
recently, we approved a district court’s
holding that the unfunded and self-
administered benefit plan in Stratton v. E.I.
DuPont de Nemours & Co., 363 F.3d 250,
255 (3d Cir. 2004), warranted only a
“slightly heightened form of arbitrary and
capricious review.”
As we noted in Pinto itself, the
financial and administrative relationship
between the employer and the benefit plan
is not the only relevant consideration. For
example, in Stratton, we observed that
while an employer administering an
unfunded plan may have a financial
incentive to deny the claims of its
employees, it thereby risks “the loss of
morale and higher wage demands that
could result from denials of benefits.” 363
F.3d at 254 (quoting Nazay v. Miller, 949
F.2d 1323, 1335 (3d Cir. 1991)); see also
Smathers, 298 F.3d at 198; Pinto, 214 F.3d
at 389. We have recognized the inverse as
well: When a former employee seeks
b e n e f it s , t h i s c o n f l ic t-mitiga tin g
consideration is not present. See
Smathers, 298 F.3d at 198 (“Since
Smathers was no longer an employee when
Multi-Tool made its decision to deny his
claims, the counterbalancing of its
monetary self-interest by possible concerns
about the impact of its decision on morale
and wage demands would thereby be
lessened.”).
Indeed, we made the general point
about the short-circuiting of incentives by
imperfect information flow in Pinto itself:
[M]any claims for benefits are
made after individuals have left

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active employment and are
seeking pension or disability
benefits. Details about the
handling of those claims,
w h e t h e r r e s p o n s ib l e o r
irresponsible, are unlikely to
seep into the collec tive
knowledge of still-ac tive
employees. If Pinto’s claim is
denied, few at Rhone-Poulenc
will learn of it, and Reliance
Standard will have little motive
to heed the economic advice of
the Seventh Circuit that “it is a
poor business decision to resist
paying meritorious claims for
benefits.”
214 F.3d at 388 (quoting Mers v. Mariott
Int’l Group Accidental Death &
Dismemberment Plan, 144 F.3d 1014,
1020 (7th Cir. 1998)); see also id. at 392
(noting the relevance of the current
relationship between the fiduciary and
beneficiary). In short, our precedents
recognize that the situation of an
individual claiming benefits from her
former employer may, for Pinto purposes,
be more akin to that of an insured claiming
benefits from an insurance company than
that of an employee claiming benefits from
her current employer.
Our precedents establish at least one
more cause for heightened review:
demonstrated procedural irregularity, bias,
or unfairness in the review of the
claimant’s application for benefits. The
Pinto panel’s decision to apply heightened
review turned almost as much on the
procedures afforded to Pinto as it did on
her insurer’s financial conflict of interest.
See Pinto, 214 F.3d at 393 (“[L]ooking at
the final decision, we see a selectivity that
appears self-serving in the administrator’s
use of [one doctor’s] expertise.”); id.
(“[i]nconsistent treatment of the same
facts”); id. at 394 (suggesting that
“whenever it was at a crossroads, Reliance
Standard chose the decision disfavorable
to Pinto”). Though no case since Pinto
appears to have turned on evidence of
procedural bias or unfairness, the
corresponding negative pregnant appears
in several of our cases. See Skretvedt, 268
F.3d at 175-76 (considering but rejecting
allegations of decisionmaker bias in the
benefits review system); Goldstein, 251
F.3d at 435-36 (noting that heightened
review would be required when “the
beneficiary has put forth specific evidence
of bias or bad faith in his or her particular
case”); Bill Gray Enters., Inc. Employee
Health & Welfare Plan v. Gourley, 248
F.3d 206, 216 (3d Cir. 2001) (“[U]nless
specific evidence of bias or bad-faith has
been submitted, plans . . . are reviewed
under the traditional arbitrary and
capricious standard.”); id. at 216 n.8
(“Gourley has failed to allege bias on the
part of the plan administrator . . . .”).
B. The Appropriate Standard of Review
in This Case
We begin with the financial and
administrative arrangement between
Merck and the Plan. The District Court
found that Epps-M alloy had offered no
evidence on the mechanism by which
Merck funds the Plan beyond the bare
statement in the Plan itself that “[M erck]

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shall pay the cost of the benefits provided
under the Plan.” By the Plan’s terms,
Merck is the plan administrator, and even
though it has delegated claim s
administrative authority to UNUM , it
exercises ultimate administrative authority
as evidenced by its request that Epps-
Malloy be examined by Dr. Dev. But
since Epps-Malloy has not excluded the
possibility that Merck pays for the benefits
it administers through fixed contributions
to an actuarially grounded fund, thereby
leaving Merck with no immediate financial
conflict of interest, we do not impose a
heightened standard of review on this
ground.5 We reiterate, however, our
conclusion above that Epps-M alloy’s
status as a former employee might well
trigger some heightened level of review if,
for example, Merck pays Plan benefits out
of its general operating funds.
Ep ps -M all oy’ s a r g u m e n t f or
heightened review draws more support
from our discussion in Pinto of procedural
bias. As described above, Merck
intervened in Epps-Malloy’s appeal
process, requesting that she submit to an
“Independent Medical Exam,” ultimately
conducted by Dr. Dev. Merck surely has
the authority under the plan to require such
an exam—the Plan empowers Merck as
Administrator “to request and receive from
all Participants such information [as is]
necessary for the proper administration of
the Plan.” But the circumstances under
which Merck made this request necessarily
raise an inference of bias: At the time of
the request, every piece of evidence in
Epps-M alloy’s record—the opinions of
two doctors ( D rs. Williams and
McQueen), a consistent medical history,
and an SSA determination that she was
totally disabled— supported her contention
that she was disabled.6 The District
5The District Court may, of course,
allow the parties on remand to
supplement the record to introduce
evidence of the Plan’s actual funding
mechanism. While we have held that, in
general, the record for arbitrary-and-
capricious review of ERISA benefits
denial is the record made before the plan
administrator, and cannot be
supplemented during litigation, see
Mitchell v. Eastman Kodak Co., 113 F.3d
433, 440 (3d Cir. 1997), when a court is
deciding what standard of review to
employ—arbitrary-and-capricious
review, or some higher standard under
Pinto—it may consider evidence of of
potential biases and conflicts of interest
that is not found in the administrator’s
record. The Plan’s funding mechanism
might well be evidence of this sort. See,
e.g., Stratton, 363 F.3d at 254-55
(considering an ERISA plan’s funding
and decisionmaking mechanisms in
deciding on a level of review); Skretvedt,
268 F.3d at 174-75 (same). We leave
this decision to the sound discretion of
the District Court.
6We express no view on the relevance
vel non in the ERISA benefits context of
an SSA finding of total disability. It is
enough for our purposes here to note that
the SSA ruling gives at least some

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Court’s discussion is consistent with this
view: It recognized that Epps-Malloy’s
physician’s reports uniformly supported
her contentions (though they were, in some
aspects, incomplete), and that the
defendants’ denial of benefits was
grounded on Dr. Dev’s report, augmented
by medical opinions offered by one Nurse
Girardo based on a review of Epps-
Malloy’s file.
It is in this light that we must view
Merck’s request for an independent
medical examination. We have a claimant
seeking continued LTD benefits whose
treating physicians offer unequivocal
support for her claims, and a plan
administrator that has delegated claims
administration to a large insurance
company intervening—not at the initial
determination stage, but at the appeal
stage— with a request for an additional
medical examination to be performed by a
physician of its own choosing. This
situation arguably has a quality to it that
undermines the administrator’s claim to
the deference normally owed to plan
fiduciaries. Given how favorable the
record was to Epps-Malloy prior to Dr.
Dev’s examination, the most natural
inference is that by intervening and
ordering the retention of Dr. Dev, thus
seeking evidence to counter Epps-Malloy’s
physicians’ evaluation, Merck was not
being a disinterested fiduciary.
That said, we acknowledge the
possibility that Merck acted with a good
faith belief that Epps-Malloy’s application
was a close call, and that it could resolve
perceived ambiguities with a third
physician’s opinion. Independent medical
examinations are not uncommon in the
claims administration world, and this is
responsible plan administration that we
would not wish to deter. At this stage,
however, we are considering only how
searching a review of the defendants’
benefits determination to undertake. Epps-
Malloy’s suit will rise or fall with the
merits of her underlying claim (including
Dr. Dev’s opinion), modulated by the
deference owed to the defendants’
decision. For a responsible fiduciary, we
trust that the incentive to collect enough
information to make a responsible claims
determination will outweigh the incentive
to avoid requesting more information in
the hopes of maintaining the most
deferential standard of review. And we
trust that courts will not penalize plan
administrators for seeking independent
medical examinations at appropriate stages
of the claims determination process.
We conclude that the procedural bias
we have described in Epps-Malloy’s
appeals process warrants a moderately
heightened arbitrary and capricious
standard of review. Naturally, a
significantly heightened arbitrary and
capricious standard of review would be
warranted if Merck also acted under a
financial conflict of interest, but, as noted
above, the record before us does not
demonstrate such a conflict. Because the
District Court applied an unmodified
arbitrary and capricious standard of review
to the defendants’ actions, we will set
support for Epps-Malloy’s claim for
ERISA benefits.

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aside the judgment and remand for a new
trial on the merits under an appropriate
standard of judicial review. Because the
question whether the de fend ants’
determination can stand is essentially an
ultimate issue of fact, it is appropriate for
the District Court to undertake that inquiry
in the first instance. See Fed. R. Civ. P.
52(a); cf. Pullman-Standard v. Swint, 456
U.S. 273, 287 (1982) (holding that clearly
erroneous review applies to ultimate issues
of fact as well as subsidiary findings of
fact).
IV. The District Court’s Conclusion on
the Merits
Even if we were not setting aside the
District Court’s conclusion on the merits
because of the standard of review it
applied, we would be constrained to do so
because it did not adequately address the
defendants’ denial of LTD benefits to
Epps-Malloy in light of her diagnosis of
fibromyalgia. While one diagnosis in
Epps-M alloy’s records is sarcoidosis, she
was also diagnosed with fibromyalgia.
Not only did her doctors ascribe aspects of
her disability to fibromyalgia, the ALJ
appears to have granted SSA benefits to
Epps-Malloy principally on the basis of
her fibromyalgia. As noted above, Dr.
Dev’s report is the defendants’ best
counter to Epps-Malloy’s physicians’
diagnoses, but, as the District Court itself
found, “[Dr. Dev] did not address the
previous diagnosis of fibromyalgia or any
other condition.” This is hardly surprising,
as Dr. Dev is a pulmonologist, and
fibromyalgia is most commonly treated by
a rheumatologist.
It would be premature to hold that,
given the record on Epps-M alloy’s alleged
fibromyalgia, the defendants’ denial of
benefits to her was impermissible as a
matter of law. Doctor Dev did, in fact,
apparently perform a musculo-skeletal
examination, finding “unremarkable”
results; this may be evidence that Epps-
Malloy was not disabled by fibromyalgia.
But it is plain that the District Court did
not adequately address the defendants’
treatment of Epps-M alloy’s fibromyalgia
diagnosis. On remand, the District Court
should separately consider the defendants’
determinations regarding the two distinct
infirmities from which Epps-Malloy
allegedly suffers.
That Court’s review of these
determinations should be based on the
record available to the plan administrator
in making its own decision; if there is not
sufficient evidence in the defendants’
record to support their decision as to the
fibromyalgia claim, then it must be
reversed. See Mitchell v. Eastman Kodak
Co., 113 F.3d 433 (3d Cir. 1997); cf.
Sandoval v. Aetna Life & Cas. Ins. Co.,
967 F.2d 377, 381 (10th Cir. 1992) (“In
effect, a curtain falls when the fiduciary
completes its review, and for purposes of
determining if substantial evidence
supported the decision, the district court
must evaluate the record as it was at the
time of the decision.”). While the District
Court may take further evidence to aid in
its understanding of the medical issues
involved, it must base its ultimate
determination on the record before the

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plan administrator, not its own judgment
of whether Epps-Malloy was disabled. We
leave it to the District Court to determine
whether the defendants’ treatment of Epps-
Malloy’s fibromyalgia claims met the
moderately heightened arbitrary and
capricious standard that we have
identified.
V. Conclusion
Because the original bench trial
proceeded on too deferential a standard of
review, we will reverse the judgment of
the District Court and remand for a new
trial on the merits.

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