                              In the

United States Court of Appeals
               For the Seventh Circuit

No. 08-2451

M ICHAEL M ARRS, on behalf of himself and
    all others similarly situated,
                                       Plaintiff-Appellant,
                              v.

M OTOROLA , INC., et al.,
                                               Defendants-Appellees.


             Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
           No. 05 C 5463—Susan E. Cox, Magistrate Judge.



      A RGUED M AY 26, 2009—D ECIDED A UGUST 14, 2009




  Before E ASTERBROOK, Chief Judge, and B AUER and
P OSNER, Circuit Judges.
  P OSNER, Circuit Judge. This suit under ERISA for disabil-
ity payments presents the recurring question whether
an employee welfare benefits plan creates an entitle-
ment to lifetime benefits rather than just to benefits that
can be terminated by an amendment to the plan.
 In 1997 Michael Marrs, an employee of Motorola, ceased
working because of a psychiatric condition and began
2                                                No. 08-2451

drawing disability benefits under Motorola’s Disability
Income Plan. Six years later Motorola amended the plan
to place a two-year limit on benefits for disability re-
sulting from certain “Mental, Nervous, Alcohol, [or] Drug-
Related” (MNAD) conditions, including Marrs’s. Such
limitations on MNAD conditions are common in em-
ployee disability plans. Rogers v. Department of Health &
Environmental Control, 174 F.3d 431, 435 (4th Cir. 1999); see,
e.g., Krolnik v. Prudential Ins. Co., No. 08-2616, 2009 WL
1838298, at *1 (7th Cir., June 29, 2009); Hackner v. Long
Term Disability Plan for Employees of Havi Group LP, 81 Fed.
App’x 589, 591 (7th Cir. 2003); Kahane v. UNUM Life Ins.
Co., 563 F.3d 1210, 1212 (11th Cir. 2009); Steven J. Sacher
et al., Employee Benefits Law 1003-05, 1147-48 (2d ed. Supp.
2008); cf. Dana L. Kaplan, “Can Legislation Alone Solve
America’s Mental Health Dilemma? Current State Legisla-
tive Schemes Cannot Achieve Mental Health Parity,” 8
Quinnipiac Health L.J. 325, 328-30 (2005). Previously,
however, Motorola had imposed no time limit on the
receipt of such benefits. Although Marrs had already
received benefits for more than two years, he was given
an additional two years of benefits, starting on the date
of the amendment. That period has ended and the
benefits have ceased.
  His suit is on behalf of himself and others in the
same position, and a class action has been certified. The
district court granted summary judgment in Motorola’s
favor. In an earlier stage of the litigation, the district
court had dismissed two other claims under Rule 12(b)(6).
Marrs renews them on appeal, but they are too clearly
without merit to require us to discuss them.
No. 08-2451                                               3

  Marrs contends that the application of the amendment
to persons in his situation violates a provision of the
disability-income plan that, like the provision in Article V
of the U.S. Constitution according to which a state
cannot by constitutional amendment be deprived of its
right to two senators without its consent, limits Motorola’s
power to amend the plan. The provision states that no
amendment “shall adversely affect the rights of any
Participant to receive benefits with respect to periods
of Disability prior to the adoption date of the [amend-
ment].” Marrs interprets “periods of Disability prior to
the adoption date” to mean one or more periods of dis-
ability that began before the plan was amended but may
not have ended before then.
  That is a forced reading. The reference in the plan to
“periods” rather than “period” suggests the segmentation
of a period of disability, with some segments (“periods”)
lying before and some after the amendment. It is true
that the plan defines the term “Period of Disability” to
mean “one or more periods of absence from Active Em-
ployment due to Disability,” and if we substituted “Period
of Disability prior to the plan” for “periods of Disability
prior to the plan” we would come closer to Marrs’s pre-
ferred interpretation. But the plan provides that only
words the initial letters of which are capitalized are
defined terms, and so “periods of Disability” cannot be
equated to “Period of Disability.”
  Marrs’s interpretation is further undermined by the
disability plan that was in force in 1997 when he stopped
working and that states that if a participant became
disabled prior to 1994, the benefit levels specified in the
4                                               No. 08-2451

disability income plan in force then would “continue
in force until [the participant] returns to work for thirty
(30) days.” This provision would be surplusage in the
superseding plan (where it also appears) if the plan
guaranteed the continuation of disability benefits with-
out diminution even if, as in Marrs’s case, the disability
did not arise before 1994.
  Whether this interpretation of the plan, which is the
plan administrator’s interpretation, is correct or not, it
is reasonable; and we are inclined to stop with that ob-
servation. But Marrs asks us to give no weight to the ad-
ministrator’s interpretation because the administrator
labored under a conflict of interest: Motorola is both the
plan administrator and the payor of benefits awarded
under the plan.
  Marrs cites the Supreme Court’s recent decision in
Metropolitan Life Ins. Co. v. Glenn, 128 S. Ct. 2343 (2008),
which addresses the significance of a conflict of interest
by the plan administrator when, as in that case and this
one, the plan commits the decision whether to award
benefits to the administrator’s discretion. (If the plan
did not confer discretion on the administrator, his
decision would be entitled to no deference by the review-
ing court.)
  Marrs reads Glenn to require “a more penetrating
inquiry into the actions of a conflicted administrator”
than the earlier case law, which was all over the
map—see Kathryn J. Kennedy, “Judicial Standard of
Review in ERISA Benefit Claim Cases,” 50 Am. U. L. Rev.
No. 08-2451                                                 5

1083, 1135-62 (2001); see also Denmark v. Liberty Life Assur-
ance Co., 566 F.3d 1, 6 (1st Cir. 2009)—had required.
Although normally an employer can amend a welfare
benefits plan without regard to the employees’ interests,
Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 443-44 (1999);
Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 78 (1995),
remember that Marrs’s claim is that the amendment
curtailing his benefits violated the plan, and that is a
claim of wrongful denial of benefits and so the Supreme
Court’s concern with “conflicted” administrators would
seem pertinent.
   True, the issue in this case is the interpretation of a
plan document rather than the application of the plan’s
criteria for an award of benefits to particular facts; and
the interpretation of a contract, unless extrinsic evidence
is considered, is usually treated as an issue of law, which
an appellate tribunal therefore resolves without
deferring to the opinion of the first-line decision maker.
But when an ERISA plan gives the plan administrator
discretion to interpret its terms as well as to determine
eligibility for benefits under terms the meaning of which
is not questioned, the court can, as the parties to this
case agree, reject the administrator’s interpretation only
if it is unreasonable (“arbitrary and capricious”). Firestone
Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989); Carr v.
Gates Health Care Plan, 195 F.3d 292, 294 (7th Cir. 1999)
(“under the arbitrary and capricious standard, the ad-
ministrator’s decision will only be overturned if it is
‘downright unreasonable.’ A denial of benefits will not be
set aside if the denial was based upon a reasonable inter-
pretation of the plan documents”) (citations omitted);
6                                               No. 08-2451

Call v. Ameritech Management Pension Plan, 475 F.3d 816,
822 (7th Cir. 2007). And both the original and the
amended plan in this case confer discretion on the plan
administrator to “construe and interpret the Plan, decide
all questions of fact and questions of eligibility and deter-
mine the amount, manner and time of payment of any
benefits hereunder” (emphasis added).
  The administrator is not by virtue of such a grant of
authority free to disregard unambiguous language in
the plan, id. at 822-23; Swaback v. American Information
Technologies Corp., 103 F.3d 535, 540 (7th Cir. 1996)
(“if fiduciaries or administrators of an ERISA plan contro-
vert the plain meaning of a plan, their actions are
arbitrary and capricious”)—that would be unreasonable.
But the administrator’s use of interpretive tools to disam-
biguate ambiguous language is, one would think, by the
terms of the plan entitled to deferential consideration by
a reviewing court.
  Yet Vallone v. CNA Financial Corp., 375 F.3d 623 (7th Cir.
2004), although noting that the plan in that case gave
the plan administrator interpretive discretion, treats the
question whether benefits claimed by the plaintiffs had
vested as a straight issue of contract interpretation. The
court seemed to give no weight to the plan administrator’s
judgment, though in the end agreeing with the administra-
tor’s denial of benefits. But the court was mirroring the
parties’ emphasis, and it did not say that the grant of
interpretive discretion to a plan administrator is entitled
to no weight, although one passage in the opinion could
be thought to imply this. See id. at 632. Any such implica-
No. 08-2451                                                   7

tion would be in tension with the Firestone and Carr
decisions—and the former is a Supreme Court decision,
which is a trump.
   Confusion may have been injected into the issue of
deference to interpretive discretion by cases which say
that the interpretation of an ERISA plan is governed by
the ordinary federal common law principles of contract
interpretation, e.g., Ruttenberg v. United States Life Ins. Co.,
413 F.3d 652, 659 (7th Cir. 2005); Mathews v. Sears Pension
Plan, 144 F.3d 461, 465 (7th Cir. 1998); Dobson v. Hartford
Financial Services Group, Inc., 389 F.3d 386, 399 (2d Cir.
2004), and by cases in this circuit that say that welfare
benefits plans are presumed not to create lifetime bene-
fits. Hackett v. Xerox Corp. Long-Term Disability Income Plan,
315 F.3d 771, 774 (7th Cir. 2003); Rossetto v. Pabst Brewing
Co., 217 F.3d 539, 543 (7th Cir. 2000); contra, Gibbs v. CIGNA
Corp., 440 F.3d 571, 576 (2d Cir. 2006). But these statements,
so far as applicable to plans in which the administrator is
given interpretive discretion, are properly understood as
aids to determining whether the denial of benefits by the
administrator is reasonable, rather than as warrants for a
court’s resolving interpretive disputes without any defer-
ence to the administrator’s exercise of interpretive discre-
tion. Thus, as explained in Ross v. Indiana State Teacher’s
Ass’n Ins. Trust, 159 F.3d 1001, 1011 (7th Cir. 1998), “al-
though, generally, ambiguities in an insurance policy are
construed in favor of an insured, in the ERISA context in
which a plan administrator has been empowered to
interpret the terms of the plan, this rule does not obtain.
See Morton v. Smith, 91 F.3d 867, 871 n. 1 (7th Cir. 1996)
(explaining that rule of contra proferentem applies only
8                                               No. 08-2451

when courts undertake de novo review of an administra-
tor’s interpretation of an ERISA plan).”
  The play between principles of contract interpretation
and the scope of review of a plan administrator’s
decision is illustrated by Hackett. The court had to deter-
mine which version of a plan controlled the deter-
mination of entitlement to disability benefits. The earlier
version did not grant interpretive authority to the plan
administrator, but the later one did, so we had to deter-
mine as a matter of contract law which plan controlled
because that would determine the standard of review
of the plan administrator’s interpretation that we
should use. 315 F.3d at 773-74. In this case both plans
confer interpretive authority on the plan administrator.
   But maybe the court in Vallone thought that an alleged
misinterpretation of a plan’s eligibility criteria is less
serious than an alleged misinterpretation of a plan provi-
sion that affects an employer’s right to amend it without
trampling on vested rights, and therefore that appellate
review of the latter claim should be less deferential.
Neither Vallone nor, to our knowledge, any other case
says that. Nor is it apparent why the interpretive
principles (including the scope of judicial review of the
first-line interpreter’s decision) that govern the two
types of issue should differ. In any event we do not
think that the Glenn decision has the significance that
Marrs attaches to it even if it is fully applicable to cases
involving the interpretation of plan amendments alleged
to infringe on vested rights.
  When a payment of benefits comes out of the plan
administrator’s pocket, the administrator has an
No. 08-2451                                                 9

incentive to resolve a close case in favor of a denial of
benefits. But that incentive may be outweighed by
other incentives, such as an employer’s interest in main-
taining a reputation among current and prospective
employees for fair dealing—a reputation that may enable
him to obtain a better-quality employee at a lower cost in
wages and benefits. E.g., Williams v. Interpublic Severance
Pay Plan, 523 F.3d 819, 821-22 (7th Cir. 2008). Then too,
the employees who actually decide benefits claims at
the plan-administrator level may not be acutely con-
cerned with the financial implications of a benefits
award for their employer. Id. at 821; Perlman v. Swiss
Bank Corp. Comprehensive Disability Protection Plan, 195
F.3d 975, 981 (7th Cir. 1999). But especially when a firm is
struggling (which may or may not be the case here—there
is nothing in the record bearing on the question), an
opportunity for short-run economies may dominate
decision making by benefits officers. In any event, a
majority of the Supreme Court Justices consider the
potential conflict of interest of a plan administrator (or
its staff) serious enough to be given weight in judicial
review of the denial of benefits.
  But how much weight should it be given? The nub of
the Glenn opinion is the following passage:
    [W]hen judges review the lawfulness of benefit
    denials, they will often take account of several dif-
    ferent considerations of which a conflict of interest
    is one. This kind of review is no stranger to the judicial
    system. Not only trust law, but also administrative
    law, can ask judges to determine lawfulness by
10                                               No. 08-2451

     taking account of several different, often case-
     specific, factors, reaching a result by weighing all
     together. In such instances, any one factor will act as
     a tiebreaker when the other factors are closely bal-
     anced, the degree of closeness necessary depending
     upon the tiebreaking factor’s inherent or case-
     specific importance. The conflict of interest at issue
     here, for example, should prove more important
     (perhaps of great importance) where circumstances
     suggest a higher likelihood that it affected the
     benefits decision, including, but not limited to, cases
     where an insurance company administrator has a
     history of biased claims administration. It should
     prove less important (perhaps to the vanishing
     point) where the administrator has taken active steps
     to reduce potential bias and to promote accuracy,
     for example, by walling off claims administrators
     from those interested in firm finances, or by im-
     posing management checks that penalize inaccurate
     decisionmaking irrespective of whom the inaccuracy
     benefits.
128 S. Ct. at 2351 (citations omitted). A dissent by
Justice Scalia argued that a conflict of interest should
only prompt an inquiry into the existence of improper
motive that would render the plan administrator’s
decision unreasonable. If the decision is reasonable, he
argued, in the sense in which “a reasonable decision is
one over which reasonable minds seeking the ‘best’ or
‘right’ answer could disagree,” the fact that the admini-
strator had a conflict of interest is irrelevant, id. at 2360,
“unless the conflict actually and improperly motivates
the decision.” Id. at 2357 (emphasis in original).
No. 08-2451                                                11

  There are two ways to read the majority opinion. One,
which tracks its language and has been echoed in
opinions in this and other circuits, e.g., Jenkins v. Price
Waterhouse Long Term Disability Plan, 564 F.3d 856, 861-62
(7th Cir. 2009); Holland v. Int’l Paper Co. Retirement Plan,
No. 08-30967, 2009 WL 2050688, at *4-*5 (5th Cir. July 16,
2009), makes the existence of a conflict of interest one
factor out of many in determining reasonableness. That
sounds like a balancing test in which unweighted factors
mysteriously are weighed. Such a test is not conducive
to providing guidance to courts or plan administrators.
“Multifactor tests with no weight assigned to any factor
are bad enough from the standpoint of providing an
objective basis for a judicial decision; multifactor tests
when none of the factors is concrete are worse.” Menard,
Inc. v. Commissioner, 560 F.3d 620, 622-23 (7th Cir. 2009)
(citations omitted); see also Sullivan v. William A. Randolph,
Inc., 504 F.3d 665, 671 (7th Cir. 2007); Short v. Belleville
Shoe Mfg. Co., 908 F.2d 1385, 1394 (7th Cir. 1990) (concur-
ring opinion); Stevens v. Tillman, 855 F.2d 394, 399-400
(7th Cir. 1988).
   If that’s the test the Supreme Court has adopted, we
must bow. But it is not clear that the rudderless balancing
test suggested by the passage that we quoted was intended
to be the last word on the standard that should guide
decision in these cases. The test can be made more direc-
tive, without contradicting the Court’s opinion, by first
recognizing that while a decision may look reasonable if
one just reads the decision and the record, a decision that
is “reasonable” rather than clearly correct is a decision that
might just as well have gone the other way, United States v.
Williams, 81 F.3d 1434, 1437-38 (7th Cir. 1996), as when
12                                              No. 08-2451

“reasonable” is used, as it often is, to mean that a ruling
was not an abuse of discretion. Call v. Ameritech Manage-
ment Pension Plan, supra, 475 F.3d at 822. If the circum-
stances indicate that probably the decision denying
benefits was decisively influenced by the plan administra-
tor’s conflict of interest, it must be set aside, just as a
decision by a judge who should have recused himself
must be set aside even if he might well have reached
the same decision had there been no basis for recusal.
  The likelihood that the conflict of interest influenced
the decision is therefore the decisive consideration, as
seems implicit in the majority opinion’s reference to
indications of “procedural unreasonableness” in the plan
administrator’s handling of the claim in issue, 128 S. Ct. at
2352, and its suggestion that efforts by a administrator
to minimize a conflict of interest would weigh in favor
of upholding his decision. Id. at 2351. It is thus not the
existence of a conflict of interest—which is a given in
almost all ERISA cases—but the gravity of the conflict, as
inferred from the circumstances, that is critical. For exam-
ple, the terms of employment of the staff that decides
benefits claims might, consistent with the Williams and
Perlman cases of this court, affect a determination of
how likely it is that those employees would slant their
decisions in favor of their employer’s short-term interest
in minimizing his benefits expense.
  Justice Scalia appears to believe that if the plan ad-
ministrator has no improper motive, the existence of a
conflict of interest cannot have affected the denial of
benefits: “if one is to draw any inference about a fiduciary
No. 08-2451                                              13

from the fact that he made an informed, reasonable, though
apparently self-serving discretionary decision, it should
be that he suppressed his selfish interest (as the settlor
anticipated) in compliance with his duties of good faith
and loyalty.” Id. at 2360 (emphasis in original). But if, as
we have suggested, both a decision in favor of the appli-
cant for benefits and a decision against may be rea-
sonable, the plan administrator’s conflict of interest may
cause him unconsciously to decide against the applicant
and thus in favor of the plan’s financial welfare; hence
the majority Justices’ interest in whether the plan estab-
lishes safeguards designed to minimize such a tendency.
There are no indications in this case, however, that the
plan administrator labored under a conflict of interest
serious enough to influence his decision consciously or
unconsciously—a decision that was otherwise entirely
reasonable—decisively. The district court’s decision must
therefore be
                                                 A FFIRMED.




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