United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT

                                   ___________

                                   No. 99-3663
                                   ___________

Mary L. Schatz,                     *
                                    *
           Appellant,               * Appeal from the United States
                                    * District Court for the
     v.                             * District of Nebraska.
                                    *
Mutual of Omaha Insurance Company, *
Mutual of Omaha,                    *
                                    *
           Appellees.               *
                               ___________

                             Submitted: April 12, 2000
                                 Filed: July 20, 2000
                                  ___________

Before BOWMAN and HANSEN, Circuit Judges, and CARMAN,1 Judge.
                          ___________

BOWMAN, Circuit Judge.

    Mary L. Schatz appeals the denial by the District Court2 of her motion for
summary judgment, in which she contended that her former employer, Mutual of
Omaha Insurance Company (Mutual), arbitrarily and capriciously rejected her claim for

      1
       The Honorable Gregory W. Carman, Chief Judge, United States Court of
International Trade, sitting by designation.
      2
        The Honorable William G. Cambridge, United States District Judge for the
District of Nebraska.
long-term disability benefits. Schatz also appeals the District Court's grant of Mutual's
cross-motion for summary judgment on the same issue. We affirm.

                                            I.

       We turn first to discerning the proper standard under which to review Mutual's
decision to deny Schatz's claim for benefits under the long-term disability plan (Plan)
it administered. In general, when a long-term disability plan governed by the Employee
Retirement Income and Security Act of 1974 (ERISA)3 "gives the administrator
'discretionary authority to determine eligibility for benefits,' we review the
administrator's decision for an abuse of discretion."4 Woo v. Deluxe Corp., 

, 1160 (8th Cir. 1998) (quoting Firestone Tire & Rubber Co. v. Bruch, 

, 115 (1989)). The parties agree that ERISA governs the Plan and that Mutual had
discretionary authority to determine Schatz's eligibility for benefits.

       Even so, we have held that some less deferential standard of review is triggered
where the claimant presents "material, probative evidence demonstrating that (1) a
palpable conflict of interest . . . existed, which (2) caused a serious breach of the plan
administrator's fiduciary duty to her." 

. It is only after a
claimant clears this initial "two-part gateway requirement," that we apply the "'sliding
scale' approach" of determining just how much less deferential the nature of the plan




      3
      Pub. L. No. 93-406, 88 Stat. 829 (codified as amended at 29 U.S.C.
§§ 1001-1461 (1994 & Supp. IV 1998) and in scattered sections of 26 U.S.C.).
      4
       We think review for an "abuse of discretion" or for being "arbitrary and
capricious" is a distinction without a difference, and we use the terms interchangeably
here. See Donaho v. FMC Corp., 

, 898 n.5 (8th Cir. 1996).
                                           -2-
administrator's conflict warrants our being to the plan administrator's decision to deny
benefits. 

       In applying Woo and its progeny, the District Court determined that there was
a palpable conflict of interest, in satisfaction of the first part of the Woo gateway,
because Mutual was both "the insurer and an affiliate of the plan administrator."
Memorandum Opinion and Order at 10. Nonetheless, determining that Schatz had
made no showing that this conflict caused a serious breach of the plan administrator's
fiduciary duty to her, the District Court concluded that the second part of the Woo
gateway was not satisfied and, accordingly, that the sliding scale (and some less
deferential standard of review) was not triggered. We review de novo the District
Court's determination of the appropriate standard of review. See 

.




      5
        We also have articulated a somewhat different formulation of this analysis. See
Davolt v. The Executive Comm. of O'Reilly Automotive, 

, 809 (8th Cir.
2000) ("If . . . the record reveals evidence of a conflict of interest or that the plan
administrator is acting 'with an improper motive,' we review the plan administrator's
discretionary decision de novo.") (quoting Armstrong v. Aetna Life Ins. Co., 

, 1265-66 (8th Cir. 1997)). The kind of conflict and improper motive that
provoked de novo review in Armstrong, where the claims reviewers themselves
apparently received direct personal financial benefits for rejecting claims, is different
in kind from the sort of background conflict created by the mere fact that the same
company is both the plan administrator and the plan insurer. In Davolt, we noted that
there is no "blanket rule mandating de novo review in all cases where the insurer of a
health benefits plan is also the plan administrator. Rather, . . . the inquiry is fact
specific and limited to instances where the relationship places the ERISA benefits plan
administrator in a 'perpetual' conflict of interest." 

(holding that district
court erred in assuming "automatic" conflict of interest merely because insurer and
administrator were same entity; holding that plan administrator properly denied
coverage under plan's plain language regardless of whether decision was reviewed de
novo or according to "sliding scale").
                                           -3-
                                           A.

       We consider first the question of whether Mutual was laboring under a palpable
conflict of interest given its role as both plan administrator and insurer.6 As a general
matter, when the insurer is also the plan administrator, we have recognized something
akin to a rebuttable presumption of a palpable conflict of interest. See Barnhart v.
UNUM Life Ins. Co., 

, 587-88 (8th Cir. 1999). Indicia of bias can be
negated by "ameliorating circumstances," such as "'equally compelling long-term
business concerns'" that militate against improperly denying benefits despite the dual
role. 

(quoting Farley v. Arkansas Blue Cross & Blue Shield, 

,
777 (8th Cir. 1998)); accord 

n.5 (finding no palpable conflict
of interest even though insurer and plan administrator were same corporation because,
as nonprofit entity, it "does not have a direct profit motive in denying claims").

       Here, Mutual argues that Schatz makes "no showing of any actual bias or
conflict of interest." Brief of Appellee Mutual at 18 (emphasis added).7 Nevertheless,


      6
        For purposes of this appeal, we accept the District Court's characterization that
Mutual was both "the insurer and an affiliate of the plan administrator." Memorandum
Opinion at 10; see Joint Appendix at 62 ("Benefits under the Long-Term Disability Plan
. . . are fully insured by United of Omaha Life Insurance Company," while plan
administrator is "Mutual of Omaha Insurance Company"). Similarly, we also accept
Schatz's assertion that, in effect, there is but one "Mutual" acting as both "the Plan
Administrator . . . and also the for-profit insurance company issuing the insurance
policy under which the Plan for benefits was funded," Brief of Appellant Schatz at 30,
largely because Mutual does not dispute this structural connection. We reserve for
another day the question of precisely how the fact that a plan administrator and insurer
are mere corporate relatives—and how the degree of their consanguinity—would
impact a palpable conflict of interest analysis.
      7
       The fact that there is no "actual" bias (above and beyond the structural bias
inherent in the plan insurer and plan administrator being the same entity) may be
important to avoiding the Armstrong-Davolt conclusion that if there are "egregious
                                           -4-
given the corporate identity (and, thus, the attending structural and financial conflict of
interest) between Mutual as insurer and Mutual as plan administrator, and given that
Mutual has articulated no ameliorating circumstances to overcome this structural bias,
we conclude that the plan administrator was operating under a palpable conflict of
interest and, accordingly, that part one of the Woo two-part gateway is satisfied.

                                            B.

       This conclusion, however, does not end our inquiry. The mere fact of an
"unameliorated" structural conflict of interest does not necessarily warrant a less
deferential standard of review. Accordingly, we must next determine whether Schatz
has satisfied the second part of the Woo gateway by presenting material, probative
evidence that this palpable conflict of interest actually caused a serious breach of the
plan administrator's fiduciary duty to her. We have noted that "Woo's second prong
presents a considerable hurdle for plaintiffs." 

n.9. "The
evidence offered by the claimant must give rise to 'serious doubts as to whether the
result reached was the product of an arbitrary decision or the plan administrator's
whim.'" 

(quoting Layes v. Mead Corp., 

, 1250 (8th Cir.
1998)).

       Schatz suggests that Mutual seriously breached its fiduciary duty to her by
improperly rejecting the opinions of her treating physicians that she suffers from
chronic pain syndrome, by failing to give sufficient credence to her own subjective
reports of pain, by neglecting to develop a record on the physical duties of her position,


circumstances," 

, then our review is de novo. It is not
particularly helpful, however, in ameliorating the concerns present in part one of the
Woo analysis (i.e., that Mutual has some background bias given that Mutual's decision
(qua administrator) to deny a benefits claim would, at least in some marginal way,
benefit the bottom line of Mutual (qua insurer), who then would not have to pay out
that claim).
                                            -5-
by failing to inform her that it had reopened consideration of her claim, and by
improperly interpreting the definition of "disability" in the Plan. In essence, Schatz
posits that Mutual's decision was made without "'proper judgment.'" Brief of Appellant
Schatz at 32-34 (quoting 

). After a careful review, we are
persuaded that all of Schatz's contentions either do not properly characterize the record
or, even if true, would not as a matter of law qualify as serious breaches of Mutual's
fiduciary duty.

        There is no dispute that Schatz has suffered from chronic back pain for many
years, including the time when she was employed by Mutual as a medical review nurse.
The question is whether heightened review is warranted because Mutual's institutional
bias as both plan administrator and plan insurer caused it to seriously breach its
fiduciary duty in determining that Schatz's medical problems were insufficient to entitle
her to benefits under the terms of the Plan. The Plan defines "disability" to mean, in
relevant part, that a claimant "cannot perform all of the material duties of [claimant's]
regular occupation." Joint Appendix at 36. In the first place, because Schatz's regular
occupation as a medical review nurse for Mutual was well known to Mutual, we do not
perceive any special duty for Mutual to have requisitioned a study of the physical
demands of this position. As to whether Schatz was prevented from performing "all of
the material duties" of her job, we agree with the District Court that, overall, "the
medical evidence provided by the Plaintiff's physicians was not consistent or
conclusive." Memorandum Opinion at 10. We note, for instance, that although Schatz
had lived and worked with chronic pain for some time, her long-time treating physician
testified that his more recent opinion that Schatz should not return to work "wasn't
because of some new objective finding. It was because Mary just reported that she
couldn't tolerate the pain, that she couldn't do it and it wasn't getting better." Joint
Appendix at 77 (Deposition of Dr. Fredrick Schwartz, dated May 26, 1999); see also
Joint Appendix at 263 (Letter of Dr. Schwartz, dated March 13, 1998, stating that
Schatz's "physical examination has been essentially normal" and characterizing certain
"objective findings that correlate with Mary's pain" as "subtle"); Joint Appendix at 417

                                           -6-
(Notes of Dr. Patrick Bowman, treating physician, dated March 26, 1996, indicating
"although there is no doubt that she has a credible pain generator[,] . . . [h]er pain
behavior is somewhat exaggerated"). Dr. John Kalec—an orthopedic specialist who
performed an independent medical examination of Schatz—noted that although Schatz
reported "multiple subjective complaints," she had "an essentially normal physical
examination" and was "capable of gainful employment at a sedentary physical demand
level where she would be able to change positions as needed." Joint Appendix at 273
(Letter dated October 6, 1997).

       Having reviewed the record carefully, we are satisfied that Mutual exercised
proper judgment in determining that Schatz was not disabled under the terms of the
Plan and that, in the circumstances of this case, Mutual did not commit a serious breach
of fiduciary duty caused by its structural bias. Cf. 

("The
mere fact that [defendant] reached a decision contrary to [plaintiff's] medical
evaluators, when it based this decision on substantial evidence in the record, reports of
outside medical reviewers, and conflicting evidence in [plaintiff's] own submissions to
the record, does not raise doubts in the mind of this Court that [defendant's] decision
was arbitrary or capricious."). Because Schatz fails to traverse the Woo gateway,
Mutual's decision is not subject to less deferential review and the abuse of discretion
standard applies.

                                           II.

       In determining whether Mutual abused its discretion (that is, made a decision
that was arbitrary and capricious), we ask whether the decision to deny Schatz benefits
was supported by substantial evidence, meaning more than a scintilla but less than a
preponderance. See 

. Provided the decision "is supported
by a reasonable explanation, it should not be disturbed, even though a different
reasonable interpretation could have been made." Cash v. Wal-Mart Group Health
Plan, 

, 641 (8th Cir. 1997); accord 

(explaining

                                           -7-
that plan administrator's decision "is reasonable if a reasonable person could have
reached a similar decision, given the evidence before him, not that a reasonable person
would have reached that decision").

        In making this assessment, "[w]e consider only the evidence that was before the
administrator when the claim was denied." 

. Although Mutual's
consideration of Schatz's claim came in several stages, we need not dwell on the details
of this chronology because "Schatz is prepared to argue that even if all the information
in the Mutual claim file, compiled over a twenty month period from December of 1996
until July of 1998, is considered, Mutual's decision was an abuse of discretion." Brief
of Appellant Schatz at 23. As we have outlined above in relation to the second part of
the Woo gateway,8 this record presents substantial evidence from which the plan
administrator could have found that Schatz was not disabled under the terms of the
Plan. Mutual did not abuse its discretion and, accordingly, we will not disturb its
determination.9


      8
        We have observed that there is a close relationship between a claimant
satisfying the Woo gateway to less deferential review—by showing that a palpable
conflict of interest (or serious procedural irregularity) caused a serious breach of the
administrator's fiduciary duty—and there being a sufficient showing that the plan
administrator's decision was arbitrary and capricious. See 

n.9. Likewise, a failure to satisfy the Woo gateway requirement to less deferential
review may strongly suggest, as it does here, that a plan administrator's decision was
not arbitrary and capricious.
      9
        We note that Schatz is in the somewhat unusual position of having been granted
social security disability benefits while having been denied long-term disability benefits
by Mutual. This outcome appears to be the product of discretionary judgment applied
to a record containing conflicting evidence as well as the result of the somewhat
different standards governing social security and ERISA determinations. See Conley
v. Pitney Bowes, 

, 1049-50 (8th Cir. 1999) (holding that elaborate
schemes mandated in social security context to evaluate claimant's subjective
complaints of pain and fitness for particular jobs need not be "import[ed] wholesale,
                                           -8-
                                          III.

       Having reviewed all of Schatz's arguments, and finding no basis for reversal, we
affirm the judgment of the District Court.

      A true copy.

             Attest:

                CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




into what is essentially a private-law area"), cert. denied, 

(2000).
Compare, for example, the opinion of Dr. Kalec, described above in Part I.B., with the
opinion of Ronald Schmidt—a rehabilitation consultant who gave an opinion in Schatz's
social security disability case—who concluded that Schatz "needs to lie down
periodically throughout the day . . . which would preclude her from most if not all work
environments" and that "there are no jobs in the local and/or national economy that
exist in significant numbers that she can work." Joint Appendix at 235. We are
satisfied that the extent to which Schatz's condition impairs her ability to perform her
job—or any job—is something about which reasonable minds could disagree.
                                          -9-