Jerry Buttram v. Central States , 76 F.3d 896 ( 1996 )

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No. 95-2372
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Jerry Buttram; Juston Buttram, *
*
Appellants, *
*
v. *
*
Central States, Southeast and *
Southwest Areas Health and *
Welfare Fund, *
*
Appellee. *
* Appeal from the United States
------------------ * District Court for the
* Eastern District of Missouri.
Central States, Southeast and *
Southwest Areas Health and *
Welfare Fund, Trustees of an *
Illinois Trust, *
*
Appellee, *
*
v. *
*
Ford Motor Company, a Delaware *
corporation; Elmer C. *
Oberhellmann, *
*
Defendants, *
*
Jerry Buttram; Juston Buttram, *
*
Appellants. *
__________
Submitted: December 12, 1995
Filed: February 16, 1996
__________
Before MAGILL, GOODWIN,* and MURPHY, Circuit Judges.
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*THE HONORABLE ALFRED T. GOODWIN, United States Circuit
Judge for the Ninth Circuit, sitting by designation.
MAGILL, Circuit Judge.
Jerry Buttram appeals the district court's1 grant of summary
judgment to Central States in this action governed by the Employee
Retirement Income Security Act (ERISA), 29 U.S.C. § 1132(a)(1)(B).
Buttram alleged that Central States improperly denied him
reimbursement for home nursing care under Central States' employee
health benefits plan. Because the benefits plan gave the plan
administrator discretionary interpretive authority and the
administrator's plan interpretation denying benefits was
reasonable, we affirm.
I.
Jerry Buttram's son, Juston, suffered a severe spinal cord
injury in an automobile accident on August 17, 1984, leaving him
with quadriplegia. Juston received medical treatment at Freeman
Hospital and St. John's Hospital in Missouri and at Craig
Rehabilitation Hospital in Colorado, before returning home in 1985.
Because Jerry Buttram's employer contributed to Central States'
Health and Welfare Fund, Buttram was reimbursed $226,083.45 through
February 1989 to cover the costs of Juston's hospitalization and
institutional care.
Jerry Buttram asked Central States to pay for home nursing
care in 1985 and again in late 1987, but in 1988 Central States
denied this request. Buttram was entitled to three levels of
review of this decision. The first-level appeal was initiated by
the Buttrams and apparently denied; although Central States
normally offers a written explanation to the applicant and notifies
1
The Honorable George Gunn, United States District Judge for
the Eastern District of Missouri, adopting the review and
recommendation of the Honorable William S. Bahn, United States
Magistrate Judge for the Eastern District of Missouri.
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the applicant of the right to further appeal this decision, there
is no proof that such notice was ever sent to Buttram. Because
Buttram did not receive notice of his right to further review, his
claims were not reviewed at a second-level appeal.
Nothing more was heard on this issue until 1993. In the
interim, Buttram filed suit in 1989 against Central States,
arguing, inter alia, that Central States impermissibly denied
reimbursement to the Buttrams for the cost of renovations to their
home and van, needed to accommodate Juston. In 1993, Buttram
amended this complaint to include a claim for reimbursement for
home nursing services provided by Virginia Buttram, Juston's
mother. These services included help with hygiene, dressing,
eating, and other daily living acts.
The magistrate judge ordered Buttram to pursue administrative
remedies and submit his claims to the plan trustees. In evaluating
the claim for benefits, the plan trustees relied on two reports,
dated September 9, 1993 and February 3, 1994, written by Dr. W.B.
Buckingham, the plan's reviewing physician. Dr. Buckingham noted
that "[t]he nature of a spinal cord transection is total and
permanent, and there is no known medical or surgical procedure that
will restore function below the level of transection." Appellant's
App. at 143. Any services rendered after Juston's discharge from
Craig Hospital could not restore any function and thus should be
considered custodial services. Id. Dr. Buckingham further noted
that the care at issue in this case, including help with feeding,
dressing, and hygiene, is not generally considered medical
treatment, but rather is part of the management of these patients
by the family caregivers. Dr. Buckingham analogized to the care
given to an infant which, while important to the health of the
infant, is not considered to be "medical care" as that term is
commonly used.
The plan trustee also reviewed evidence, submitted by Buttram,
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that the care given by Virginia Buttram had helped to improve the
mental and physical condition of Juston. Specifically, to the
extent that the care permitted Juston to leave his home and
interact with his surroundings, it ensured that Juston would be
able to enjoy psychologically rewarding activities and lead a long
and productive life. However, even Dr. Simowitz, one of Juston's
treating physicians, conceded that Juston's physical condition was
irreversible and that the care given by Virginia Buttram only
prevented further debilitation. Dr. Simowitz did note, though,
that to the extent that such care prevented disease and infection,
it could "broadly" be considered "medical treatment."
On February 22, 1994, the trustees reviewed, and rejected, the
claim for home nursing services.2 The trustees based this decision
on Plan Sections 1.24(a)(3) (prohibiting reimbursement for medical
care rendered by a patient's family member); Plan Section 4.02
(prohibiting reimbursement for care that is not standard medical
care); and, for care given after January 1, 1998, Plan Section 4.16
(prohibiting reimbursement for custodial care, as defined by Plan
Section 1.18).3 The trustees noted that the care given by Virginia
2
The trustees also denied reimbursement to the Buttrams for
the money spent renovating their house and van in order to
accommodate Juston's return home. This issue was not pursued on
appeal.
3
Prior to January 1, 1988, custodial care was defined as
care rendered to a patient who (1) has a mental or physical
disability that is expected to continue for a prolonged period of
time; (2) requires a protected controlled environment in an
institution; (3) requires assistance and support concerning the
essence of daily living; and (4) is not under active and specific
medical, surgical, or psychiatric treatment that will reduce the
disability to the extent necessary to function outside the
protected environment. Plan Section 1.18, reprinted in
Appellee's App. at 271.
On February 11, 1988, the plan trustees amended this
definition, effective retroactive to January 1, 1988, by deleting
the first two requirements. After this date, the prohibition on
reimbursement for custodial care was applicable to Juston because
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4
Buttram was analogous to the care given to an infant, which,
although necessary, would not lessen Juston's physical infirmities.
The district court upheld this denial of benefits.4 Applying
an abuse of discretion standard of review, the district court
concluded that Central States' interpretation of its plan to
exclude the nursing services was reasonable. Further, performing
a precautionary de novo review of the denial, the court held that
the action was proper. This appeal followed.
II.
While ERISA itself does not specify the standard of review for
a plan administrator's determinations, the Supreme Court has held
that where a benefits plan gives the "administrator or fiduciary
discretionary authority to determine eligibility for benefits or to
construe the terms of the plan," then a court should review the
plan administrator's decision only for abuse of discretion.
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989); see
also Cox v. Mid-America Dairymen, Inc., 965 F.2d 569, 571 (8th Cir.
1992), aff'd after remand, 13 F.3d 272 (8th Cir. 1993). Because it
is undisputed that the benefits plan at issue grants discretionary
interpretive authority to the plan trustees,5 we review the
benefits determination for abuse of discretion.
institutionalization was no longer an element of custodial care.
4
The district court did not base the denial of benefits on
Plan Section 1.24(a)(3), which prohibits reimbursement for
medical care rendered by a family member.
5
Central States' health benefits plan states that "any
construction adopted by the Trustees in good faith shall be
binding upon the Union, Employees and Employers. The Trustees
are vested with discretionary and final authority in construing
plan documents of the Health and Welfare Fund." Trust Agreement,
Art. IV, § 17.
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5
Buttram offers two arguments in support of overturning the
plan administrator's determination. First, he contends that a
"less deferential" abuse of discretion standard should be applied
because of the presence of procedural irregularities in this case.
Second, he argues that the substantive decision denying benefits
was an abuse of discretion. We address each argument in turn.
A.
In certain situations, factors external to the actual decision
on the merits can mandate the application of a less deferential
abuse of discretion standard. Under the common law of trusts,
which is our guide in reviewing the benefits determinations of
ERISA plan trustees, see Bruch, 489 U.S. at 110-11, where the plan
trustee labors under a conflict of interest, see Restatement
(Second) of Trusts § 187 cmt. d (1959), or where, in the exercise
of his power, he acts dishonestly, see id. cmt. f, or from an
improper motive, see id. cmt. g, or he fails to use judgment in
reaching his decision, see id. cmt. h, the resulting decision may
be accorded stricter scrutiny.6
6
Although all courts agree that such events trigger a less
deferential standard of review, the circuits are split on how
this lesser degree of deference actually alters the review
process. Some circuits use a "sliding scale" approach, under
which a reviewing court will always apply an abuse of discretion
standard, but it decreases the deference given to the conflicted
administrator's decision in proportion to the seriousness of the
conflict. See Doe v. Group Hospitalization & Medical Serv., 3
F.3d 80, 87 (4th Cir. 1993); Van Boxel v. Journal Co. Employees'
Pension Fund, 836 F.2d 1048, 1052-53 (7th Cir. 1987).
Other circuits apply a "presumptively void" test, under
which a decision rendered by a conflicted plan administrator is
presumed to be an abuse of discretion unless the administrator
can demonstrate that either (1) under de novo review, the result
reached was nevertheless "right," or (2) the decision was not
made to serve the administrator's conflicting interest. See
Atwood v. Newmont Gold Co., Inc., 45 F.3d 1317, 1323 (9th Cir.
1995) (citing George T. Bogert, Trusts § 95, at 341-42 (6th ed.
1987); Brown v. Blue Cross & Blue Shield of Ala., Inc., 898 F.2d
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6
For this heightened review to apply, the beneficiary must show
(1) that a serious procedural irregularity existed, which (2)
caused a serious breach of the plan trustee's fiduciary duty to the
plan beneficiary. See Atwood v. Newmont Gold Co., Inc., 45 F.3d
1317, 1323 (9th Cir. 1995). However, absent material, probative
evidence, beyond the mere fact of the apparent irregularity,
tending to show that the administrator breached his fiduciary
obligation, see id. (requiring plaintiff to come forward with
specific evidence of conflict of interest); see also Cuddington v.
Northern Ind. Pub. Serv. Co., 33 F.3d 813, 816 (7th Cir. 1994)
(same), we will apply the traditional abuse of discretion analysis
to discretionary trustee decisions.
Buttram notes that he never received written notice in 1988
when his benefits claim was denied, he never received his second-
level appeal, and his third-level appeal took place seven years
after his application for benefits; we interpret these claims as
alleging that the plan trustees failed to use their judgment in
rendering the decision or that their decision was arbitrary or made
on a whim.7 Buttram further notes that his third-level appeal
occurred only after suit had been filed and after the trustees had
moved for summary judgment, on the grounds that Buttram was not
entitled to benefits. Buttram contends that the plan trustees
1556, 1566-67 (11th Cir. 1990), cert. denied, 498 U.S. 1040
(1991).
This Circuit has not yet decided which of the two tests to
employ. We do not have occasion to answer the question in this
case, however, because we conclude that the procedural
irregularities at issue are not sufficiently egregious as to
amount to evidence of abuse of discretion.
7
These procedural irregularities could, in certain
situations, also constitute circumstantial evidence of bad faith
or improper motives on the part of the plan trustees. However,
Buttram has not contended that the plan trustees acted out of bad
faith or improper motives, and so we will confine the discussion
to the lack-of-judgment analysis.
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7
therefore acted under a conflict of interest and that the outcome
was a foregone conclusion. Neither of these contentions has merit.
Buttram did not come forward with any evidence establishing
that the plan trustees failed to use judgment in rendering their
decision. We note first that Buttram could have satisfied this
burden by providing material, probative circumstantial evidence
that left the court with serious doubts as to whether the result
reached was the product of an arbitrary decision or the plan
administrator's whim; see Restatement (Second) of Trust § 187 cmt.
h. For example, where the plan trustee does not inquire into the
relevant circumstances at issue; where the trustee never offers a
written decision, so that the applicant and the court cannot
properly review the basis for the decision; or where procedural
irregularities are so egregious that the court has a total lack of
faith in the integrity of the decision making process, a court may
infer that the trustee did not exercise judgment when rendering the
decision. Such circumstantial evidence was not offered by Buttram.
Although the procedural irregularities in this case give us
pause, they do not demonstrate that the actual decision reached in
1994 was arbitrary or whimsical. Before the plan trustees denied
the benefits application in 1994, the plan's medical consultant
twice reviewed the files and made extensive findings and
recommendations, and the trustees reviewed contrary evidence
submitted by the Buttrams in support of their application. Upon
rejecting the application for benefits after reviewing the files at
the February 22, 1994 meeting, the trustees offered a thorough
written opinion. We are not left with a firm conviction that the
denial of benefits was the result of an arbitrary decision or whim.
It is important to remember that it is not the existence of
procedural irregularities per se that will cause a court to employ
a heightened standard of review when evaluating a plan
administrator's decision. Rather, those irregularities must have
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8
some connection to the substantive decision reached; i.e., they
must cause the actual decision to be a breach of the plan trustee's
fiduciary obligations. When, as here, the procedural
irregularities do not demonstrate that the actual decision was
reached without reflection and judgment, a deferential standard of
review is appropriate.
That the trustees conducted the third-level review after
Buttram had filed his complaint and after the trustees had moved
for summary judgment does not affirmatively show that the plan
trustees violated their fiduciary obligations by acting out of
self-interest; nor does it show that the result reached was a
foregone conclusion. Buttram has not come forward with any
evidence beyond the mere fact of the apparent conflict of interest,
which on its own is insufficient to warrant heightened review; see
Atwood, 45 F.3d at 1323. We agree with the district court that any
apparent conflict of interest would not have affected the decision
making process for, in this case, the presence of a lawsuit and the
specter of immediate judicial review would cause the trustees to be
more, not less, scrupulous in carrying out their fiduciary
obligations.
Further, Buttram's allegation that the denial of benefits was
a foregone conclusion is belied by the record. Between the filing
of the summary judgment motion and the administrative decision to
deny benefits, the trustees solicited further evidence in this
case, receiving reports from both its own medical consultant and
from the Buttrams' doctors. The issue was placed on the February
22 meeting and debated at that time, and a thorough written opinion
was offered. Buttram has offered no probative evidence that the
outcome was a foregone conclusion.
Because there was no evidence that the plan trustees failed to
use judgment in reaching their decision or that they labored under
a conflict of interest, the substantive decision will be reviewed
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9
under the traditional abuse of discretion analysis.
B.
Under an abuse of discretion standard, the plan
administrator's plan construction will be upheld, if reasonable.
Finley v. Special Agents Mut. Ben. Ass'n, Inc., 957 F.2d 617, 621
(8th Cir. 1992) (citing Bruch, 489 U.S. at 111); see also
Restatement (Second) of Trusts § 187 cmt. e (trustee must act
within the bounds of reasonable judgment). This Court considers
five factors in evaluating reasonableness: (1) whether the
interpretation is consistent with the goals of the plan, (2)
whether the interpretation renders any plan language meaningless or
inconsistent, (3) whether the interpretation conflicts with the
requirements of the ERISA statute, (4) whether the administrators
have interpreted the words at issue consistently, and (5) whether
the interpretation is contrary to the clear language of the plan.
Finley, 957 F.2d at 621; see also Lutheran Medical Ctr. v.
Contractors Health Plan, 25 F.3d 616, 621-22 (8th Cir. 1994)
(applying Finley factors).
In this case, Central States argues that reimbursement for
nursing care given by Juston's mother is prohibited because the
care was given by a family member (prohibited by Plan
Section 1.24(a)(3)),8 the care amounts to custodial care
(prohibited by Plan Section 1.18), and in any event, because it is
custodial care, the care is not standard medical care (prohibited
8
Plan Section 1.24(a)(3) applies only to medical care given
by a family member. Because Central States argues that the care
at issue is custodial, and not medical, care, this provision only
applies in the alternative; that is, the provision applies only
if the court disagrees with Central States and determines that
the care given in fact was medical care.
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10
by Plan Section 4.02).
The denial of post-1988 benefits was clearly not an abuse of
discretion. First, the care given meets the definition of
custodial care, because Juston's injury will last the remainder of
his life, there is little hope for extensive recovery, and the
services rendered concern the basic activities of daily living.
Second, the trustees credited the conclusions of its reviewing
physician that the care at issue, because it concerned help with
hygiene, dressing, and eating, could not be considered medical
care, but was rather more akin to the care given by a mother to a
newborn child, and thus is not covered by the plan; see Plan
Section 4.02 (limiting coverage to standard medical care).9
The denial of pre-1988 benefits was also not an abuse of
discretion, although this is a closer question because the
custodial care limitation is not applicable.10 However, Plan
Section 4.02, which prohibits reimbursement for care that is not
standard medical care, supports the committee's determination. As
Dr. Buckingham noted, the care at issue in this case is not
generally considered to be standard medical care. In light of the
plan's policy of not providing for long-term nonmedical care, this
decision is not an abuse of discretion. Alternatively, even if the
care were standard medical care, § 1.24(a)(3), which prohibits
reimbursement for care given by a family member, would apply.
The district court correctly noted that this plan
9
The trustees apparently rejected the conclusions of
Juston's treating physician, Dr. Simowitz, that, accepting that
preventing debilitation is the same as reducing the patient's
disability, the care at issue may broadly be defined as medical
treatment.
10
As noted above, the custodial care limitation was not
relied upon by the trustees in rejecting the application for pre-
1988 benefits.
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11
interpretation meets the five Finley factors. The decision to deny
coverage is "consistent with the Plan's goal of not providing long-
term coverage for non-medical care to a person suffering from an
irreversible injury;[11] does not render Plan language meaningless
or internally inconsistent; does not conflict with ERISA; and is
not contrary to the clear language of the Plan. Furthermore, there
is no indication that the Trustees have ever interpreted this
provision differently." Review and Recommendation at 16-17,
reprinted in Appellant's App. at 193, 208-09 (adopted by the
district court, see Mem. and Order, March 22, 1995, reprinted in
Appellant's App. at 235).
III.
We conclude that the decision of the plan trustees denying
benefits was reasonable. Accordingly, we affirm.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
11
The Buttrams submitted evidence that the care given by
Virginia Buttram helped Juston to more fully participate in daily
living activities. This misses the point. While this care may
be necessary, the plan was not intended to cover nonmedical care
to a person suffering from an irreversible injury. Because
Juston's physical condition at this point is irreversible,
Virginia Buttram's services could not reduce the extent of the
physical injury. The expenses incurred in this case, while
perhaps necessitated by the injuries received by Juston, are
nonetheless collateral to those injuries. They do not fall
within the ambit of the health benefits plan.
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12