Steven Menz v. Procter & Gamble Health Care P ( 2008 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
_________
No. 07-1997
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Steven Menz, *
*
Plaintiff-Appellant, *
*
v. * Appeal from the United States
* District Court for the Eastern
Procter & Gamble Health Care Plan; * District of Missouri.
The Procter & Gamble Company; *
The Procter & Gamble *
Manufacturing Company; Healthlink, *
Inc.; Healthlink HMO, Inc.; D.A. *
Tiersch; J.G. Hagopiang; J.P. *
Dierkes, Trustees; Procter & Gamble *
Benefit Plan Trust; The Epoch *
Group, L.C., *
*
Defendants-Appellees. *
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Submitted: January 18, 2008
Filed: March 27, 2008
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Before COLLOTON and SHEPHERD, Circuit Judges, and GOLDBERG,1 Judge.
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GOLDBERG, Judge.
1
The Honorable Richard W. Goldberg, United States Court of International
Trade, sitting by designation.
Plaintiff Steven Menz filed this action to review the denial of benefits under an
employee benefits plan. Menz seeks benefits for a secondary or “back-up” prosthetic
left arm and hand. The defendants filed motions for judgment on the administrative
record which were granted by the district court.2 For the reasons that follow, we
affirm.
I. BACKGROUND
A. Relevant Facts
Steven Menz, a self-employed rancher, was injured in a work-related accident,
resulting in the amputation of his left arm above the elbow. Menz is a beneficiary of
The Procter & Gamble Health Care Plan (“The Plan”),3 which is an employee benefits
plan governed by the Employee Retirement Income Security Act (“ERISA”). The
Plan provides health benefits to the employees of The Procter & Gamble Company
and The Procter & Gamble Manufacturing Company (collectively “Procter &
Gamble”) and their beneficiaries. Procter & Gamble is the Plan Administrator, and
it retained The EPOCH Group, L.C. (“EPOCH”), Healthlink, Inc., and Healthlink
HMO, Inc. (collectively “Healthlink”) to process claims for benefits submitted to the
Plan.
After Menz’s accident, his physician recommended that Menz receive benefits
for two prostheses to replace his amputated arm–one myoelectric arm for primary use,
and one body-powered arm to be used as a back-up. (J.A. 197-98.) On January 29,
2004, the Plan determined that benefits would be allowed for one myoelectric
prosthetic arm. Menz then sought benefits for a second myoelectric arm (instead of
2
The Honorable Frederick R. Buckles, United States Magistrate Judge for the
Eastern District of Missouri, sitting by consent of the parties pursuant to 28 U.S.C. §
636(c).
3
The plaintiff’s wife, Jennifer Menz, is an employee of Procter & Gamble.
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a body-powered arm) to be used as a back-up. Healthlink, one of the Plan’s claim
processors, denied certification of the back-up myoelectric arm on February 13, 2004.4
(J.A. 284.)
Menz continued to seek a secondary myoelectric prosthesis through
administrative procedures. On April 22, 2005, EPOCH, on behalf of the Plan, sent a
letter to Menz denying his claim. The Plan denied the claim for a back-up prosthesis
because (1) the Plan does not cover items of comfort or convenience; (2) the Plan does
not cover back-up items; (3) Menz failed to obtain pre-certification/pre-authorization;
(4) the Plan does not cover work-related injuries; and (5) the Plan does not cover
items owed by third parties. (J.A. 279-83.)
Next, Menz appealed the Plan’s denial of benefits. The Plan conferred with an
independent medical reviewer to determine if a back-up myoelectric prosthesis was
“medically necessary” pursuant to the Plan’s terms. The medical reviewer advised
that the back-up prosthesis was not medically necessary. The day after the reviewer
made this determination, Menz submitted a physician’s letter and a prescription for
the myoelectric arm for the Plan’s consideration. The Plan forwarded these
documents to the independent reviewer, but the reviewer advised that the additional
information did not alter her original determination concerning medical necessity. As
a result, the Plan denied Menz’s first appeal.
Menz filed a second appeal of the Plan’s determination. The Plan sought the
advice of a second independent medical reviewer to determine if a back-up prosthesis
was medically necessary for Menz. The second reviewer, while suggesting that a
back-up prosthetic would be “appropriate,” ultimately concluded that it was not
4
Healthlink declined to certify benefits for two myoelectric arms. At the time
of the non-certification, Healthlink had not yet been informed that the Plan had
approved benefits for one arm on January 29, 2004.
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medically necessary under the terms of the Plan. The Plan denied Menz’s second
appeal, but permitted him an additional 45 days to submit supplemental information
for the Plan’s reconsideration of its decision. Menz submitted a letter from his
physician. On April 11, 2006, after reviewing the letter, the Plan informed Menz that
it would not amend its previous denial of benefits. Menz then filed the present cause
of action against the Plan, Procter & Gamble, Procter & Gamble Benefit Plan Trust,
D.A. Tiersch, J.G. Hagopiang, and J.P. Dierkes (trustees of the Procter & Gamble
Benefit Plan Trust), EPOCH and Healthlink.
In the proceedings below, the defendants moved for judgment on the
administrative record, which the district court granted.5 Menz now raises three issues
in this appeal: (1) the Plan’s denial of benefits was an abuse of discretion because the
Plan applied the wrong version of the Summary Plan Description when determining
“medical necessity,” (2) the district court erred when it applied the abuse of discretion
standard of review, because serious procedural irregularities in the claims process
warranted a less deferential standard of review, and (3) the district court erred when
it held that Healthlink was not a proper party.
B. Waiver
As an initial matter, many of the issues that Menz raises on appeal are
foreclosed due to waiver. In his second issue on appeal, Menz argues that the district
court should have reviewed the Plan’s denial of benefits with less deference because
of the cumulative effect of several “serious procedural irregularities” in the
administrative process. Several of the alleged irregularities were never brought to the
5
The Plan, Procter & Gamble, the Plan trustees and EPOCH jointly filed a
motion for judgment on the administrative record. Healthlink filed a separate motion,
asserting that the Plan did not abuse its discretion and that Healthlink was not a proper
party to the lawsuit. The district court granted both motions in separate opinions on
the same day.
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attention of the district court and are therefore waived.6 See Woods v. Perry, 375 F.3d
671, 674 n.2 (8th Cir. 2004). The only remaining issues relating to Menz’s procedural
irregularity claim are (1) that Menz was subjected to excessive levels of administrative
review, and (2) that the administrative record was incomplete.
Additionally, the portion of Menz’s appeal disputing the reasonableness of the
Plan’s denial of benefits rests entirely on the premise that the Plan and the district
court relied on the wrong version of the Summary Plan Description. Menz never
argued before the district court that a different Summary Plan Description should have
governed his claim. As such, this issue is waived.
Due to the fact that most of Menz’s arguments on appeal are waived, we will
only address the following remaining issues: (1) whether the district court should have
applied a less deferential review because Menz’s claim was subjected to excessive
levels of review, (2) whether the administrative record is incomplete, (3) whether
Healthlink is a proper party to this action.
II. DISCUSSION
A. Excessive Levels of Review
Menz appeals the district court’s grant of judgment on the administrative
record, which we treat as a form of summary judgment and review de novo. See
Ridell v. Unum Life Ins. Co. of Am., 457 F.3d 861, 864 (8th Cir. 2006).
6
The issues that Menz failed to raise before the district court are the following:
(1) that the district court should not have applied the abuse of discretion standard of
review because the Plan has a “per se conflict of interest,”(2) that the Plan failed to
conduct an independent medical examination of Menz; (3) that the Plan failed to
provide the credentials of the independent reviewers; (4) that the Plan failed to
consider a primary medical issue.
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We also review de novo the district court’s determination of the appropriate
standard of review to apply to a denial of benefits under ERISA. See Barham v.
Reliance Standard. Life Ins. Co., 441 F.3d 581, 584 (8th Cir. 2006). When a plan
grants the administrator discretionary authority to determine eligibility for benefits or
to construe the terms of the plan, a denial of benefits is reviewed under an abuse of
discretion standard. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115
(1989). In the present case, it is undisputed that the Plan grants discretionary authority
to its administrator (Procter & Gamble) to determine eligibility and to interpret the
terms of the plan. However, even where the administrator has discretionary authority,
a less deferential standard of review may be warranted if a plaintiff shows that a
“serious procedural irregularity existed” which caused a “serious breach of the plan
trustee’s fiduciary duty to the plan beneficiary.” Buttram v. Cent. States, Se. & Sw.
Areas Health & Welfare Fund, 76 F.3d 896, 900 (8th Cir. 1996).
Menz believes that a serious procedural irregularity occurred because his claim
was subjected to excessive levels of review. An employee benefits plan has an
obligation to establish and maintain reasonable claims procedures. See 29 C.F.R. §
2560.503-1(b) (2007). Claims procedures are reasonable if they, inter alia,“do not
contain any provision, and are not administered in a way, that requires a claimant to
file more than two appeals of an adverse benefit determination prior to bringing a civil
action under section 502(a) of [ERISA.]” Id. § 2560.503-1(c)(2).
It appears that Menz did participate in more than two appeals of his denial of
benefits,7 but “the mere presence of a procedural irregularity is not enough to strip a
plan administrator of the deferential standard of review.” McGarrah v. Hartford Life
Ins. Co., 234 F.3d 1026, 1031 (8th Cir. 2000). A less deferential standard is only
warranted when a beneficiary shows that the plan administrator, “in the exercise of its
7
Essentially, Menz appealed Healthlink’s February 2004 denial of certification,
and then twice appealed EPOCH’s denial of benefits.
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power, acted dishonestly, acted from an improper motive, or failed to use judgment
in reaching its decision.” Neumann v. AT&T Commc’ns, Inc., 376 F.3d 773, 781 (8th
Cir. 2004). Additionally, the irregularity “must have some connection to the
substantive decision reached . . . .” Buttram, 76 F.3d at 901.
The Plan admits that certain “procedural mistakes were made” during the
processing of Menz’s claim, and that there was some confusion as to which entity was
responsible for handling the claim–Healthlink or EPOCH. See Appellee Procter &
Gamble’s Br. 33. The Plan attempted to remedy any errors or confusion by allowing
him a new appeal process to give him the opportunity to demonstrate the validity of
his request for benefits. Menz fails to demonstrate how permitting an additional
appeal had any connection to the substantive decision reached or that the Plan acted
with an improper motive. On the contrary, Menz had further opportunity to
supplement the record in support of his claim. Menz has not raised “serious doubts as
to whether the result reached was the product of an arbitrary decision or the plan
administrator’s whim,” and he has not demonstrated that “the actual decision was
reached without reflection and judgment . . . .” Buttram, 76 F.3d at 900-01.
Accordingly, the district court did not err when it reviewed the Plan’s decision for
abuse of discretion, despite the fact that Menz’s claim was subject to more than two
appeals.
B. Completeness of Administrative Record
Menz argues that the case must be remanded because the Plan did not submit
a complete administrative record. Specifically, he claims he did not receive policy,
procedures and handling guidelines that are relevant to the denial of his claim
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pursuant to 29 C.F.R. § 2560.503-1.8 The district court correctly noted that Menz has
“not established with any specificity what evidence he believes was omitted, or what
role such evidence may have played in the Adminstrator’s decision to deny his claim.”
Menz v. Procter & Gamble Health Care Plan, 2007 U.S. Dist. LEXIS 25854, at *10
(E.D. Mo. Mar. 22, 2007). Menz makes no further effort on appeal to specify what
documents he lacks or their relevance. As such, Menz’s contention is meritless.
Menz also claims that the administrative record was incomplete because it did
not include any “administrative agreements” between the Plan and Healthlink. Menz
does not attempt to demonstrate how these administrative agreements would be
8
In relevant part, this regulation states that:
A document, record, or other information shall be considered
“relevant” to a claimant’s claim if such document, record, or other
information
(i) Was relied upon in making the benefit determination;
(ii) Was submitted, considered, or generated in the course of making the
benefit determination, without regard to whether such document, record,
or other information was relied upon in making the benefit
determination;
(iii) Demonstrates compliance with the administrative processes and
safeguards required pursuant to paragraph (b)(5) of this section in
making the benefit determination; or
(iv) In the case of a group health plan or a plan providing disability
benefits, constitutes a statement of policy or guidance with respect to the
plan concerning the denied treatment option or benefit for the claimant’s
diagnosis, without regard to whether such advice or statement was relied
upon in making the benefit determination.
29 C.F.R. § 2560.503-1(m)(8).
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relevant pursuant to 29 C.F.R. § 2560.503-1. Instead, he claims that they are required
to prove that the Plan denied his claim due to a conflict of interest. If Menz could
prove that a conflict of interest existed that had some connection with the Plan’s
decision to deny the claim, a less deferential standard of review would be warranted.
See Woo v. Deluxe Corp., 144 F.3d 1157, 1160-61 (8th Cir. 1998). To demonstrate
that a less deferential standard should apply, Menz must show that “(1) a palpable
conflict of interest or a serious procedural irregularity existed, which (2) caused a
serious breach of the plan administrator’s fiduciary duty to [him].” Id. at 1160.
Often, a palpable conflict of interest will be apparent from the administrative
record. See Farley v. Ark. Blue Cross & Blue Shield, 147 F.3d 774, 776 n.4 (8th Cir.
1998). If a conflict of interest is not apparent from the record, the district court may
permit discovery and supplementation of the record to establish these facts if the
plaintiff makes a showing of good cause. Cf. Brown v. Seitz Foods, Inc. Disability
Benefit Plan, 140 F.3d 1198, 1200 (8th Cir. 1998). Menz never requested that the
court permit limited discovery or supplementation of the record, and he did not make
any showing of good cause to do so. He cannot for the first time on appeal argue that
he was unable to prove a palpable conflict of interest existed when he did not even
attempt to reopen discovery or request supplementation of the record. A less
deferential standard of review is not warranted under these circumstances.
C. Healthlink
In the proceedings below, Healthlink filed a separate motion for judgment on
the administrative record. The district court granted Healthlink’s motion on two
grounds: (1) Healthlink is not a proper party and (2) the Plan’s denial of benefits was
not an abuse of discretion. Because Menz fails to demonstrate that the Plan abused
its discretion in its denial of benefits, it is unnecessary to address whether Healthlink
is a proper party.
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III. CONCLUSION
In light of the foregoing, the district court’s grant of summary judgment on the
administrative record is AFFIRMED. The appellees’ motion to strike portions of the
appellant’s addendum is DENIED AS MOOT.
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