Gluth v. Wal-Mart Stores, Inc

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
JOHN W. GLUTH,
Plaintiff-Appellee,
v.
WAL-MART STORES, INCORPORATED;
WAL-MART STORES INCORPORATED
ASSOCIATES HEALTH AND WELFARE
No. 96-1307
TRUST,
Defendants-Appellants,
and
WAL-MART GROUP HEALTH PLAN,
Appellant.
Appeal from the United States District Court
for the District of South Carolina, at Rock Hill.
Matthew J. Perry, Jr., Senior District Judge.
(CA-93-2682)
Argued: May 5, 1997
Decided: July 3, 1997
Before MURNAGHAN and HAMILTON, Circuit Judges, and
LEGG, United States District Judge for the District of Maryland,
sitting by designation.
_________________________________________________________________
Vacated and remanded with instructions by unpublished per curiam
opinion.
COUNSEL
ARGUED: Ashley Bryan Abel, ABEL & HENDRIX, P.A., Spartan-
burg, South Carolina, for Appellants. Stonewall Jackson Kimball,
III,
KIMBALL, DOVE & SIMPSON, P.A., Rock Hill, South Carolina,
for Appellee.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
At age fifty-seven, John Gluth (Gluth) underwent emergency sur-
gery on December 30, 1992, to remove a significant portion of his
prostate gland in order to relieve urine retention in the urinary
tract
caused by benign prostatic hypertrophy (BPH). 1 Gluth subsequently
filed a claim for payment of medical expenses related to his
surgery
under the health care benefits plan sponsored by his employer, Wal-
Mart Stores, Inc. (Wal-Mart). The parties agree that such plan,
enti-
tled the Wal-Mart Associates' Group Health Plan (the Plan), is sub-
ject to the provisions of the Employee Retirement Income Security
Act of 1974 (ERISA), 29 U.S.C. §§ 1001 to 1461. The Plan's admin-
istrator is an administrative committee (the Administrative Commit-
tee), which under the terms of the Plan had discretion to make
benefit
decisions and to interpret the terms of the Plan. The
Administrative
Committee denied Gluth's claim under the provision of the Plan that
excluded coverage of medical expenses for any illness, injury or
symptom (including secondary conditions and complications) that
was medically documented as existing during the twelve months pre-
ceding the participant's effective date of coverage.
_________________________________________________________________
1 The prostate gland of one who suffers from BPH enlarges
sufficiently
to compress the urethra and cause some overt urinary obstruction,
result-
ing in urinary retention.
2
Contending that the Administrative Committee abused its discre-
tion by denying his claim, Gluth filed this action against Wal-Mart
seeking review of that decision. See 29 U.S.C. § 1132(a)(1)(B).
After
a bench trial, the district court concluded that the Administrative
Committee abused its discretion in denying Gluth's claim and
entered
judgment in his favor for payment of the medical expenses related
to
his surgery. The district court also awarded Gluth attorney's fees
and
costs. See 29 U.S.C. § 1132(g)(1).
After the district court entered judgment, Gluth moved to add the
Wal-Mart Group Health and Welfare Trust (the Trust) 2 as a defen-
dant. The district court granted the motion. Wal-Mart and the Trust
filed a timely appeal. For reasons that follow, we vacate the
district
court's judgment in favor of Gluth, the district court's award of
attor-
ney's fees and costs in favor of Gluth, and the order adding the
trust
as a defendant, and remand with instructions.
I.
On February 18, 1992, Dr. Robert Lindemann (Dr. Lindemann), a
specialist in internal medicine and Gluth's personal physician,
con-
ducted a routine physical examination of Gluth. Although Gluth did
not expressly relate any symptoms of urinary tract obstruction or
urine retention or any symptoms indicative of any prostate gland
ill-
ness during the examination, a digital rectal examination performed
by Dr. Lindemann indicated a slight enlargement of Gluth's prostate
gland. Specifically, the digital rectal examination gave a reading
of
BPH 1+, with the 1+ indicating the slight enlargement. A prostate
gland specific antigen (PSA) test, which is a test used to diagnose
prostate cancer in its earliest stages, showed that Gluth had an
ele-
vated PSA level of 7.1. An elevated PSA level may be caused by an
enlarged prostate gland. Concerned by the results of the PSA test,
Dr.
Lindemann referred Gluth to a urologist, Dr. W. D. Livingston (Dr.
Livingston), for evaluation, which evaluation did not take place
until
October 1, 1992. Gluth began working for Wal-Mart nearly two
months after Dr. Lindemann examined him. 3 Gluth subsequently
_________________________________________________________________
2 The trust funded the Plan.
3 Gluth actually worked for Sam's Wholesale Club, a division of
Wal-
Mart.
3
obtained health care coverage under the Plan, effective July 12,
1992.
The Plan, by its terms, excluded coverage of medical expenses for
any illness that existed within the twelve months preceding a
partici-
pant's effective date of coverage. Specifically, the Plan provided
that:
Any charge with respect to any PARTICIPANT for any
ILLNESS, INJURY OR SYMPTOM (including secondary
conditions and complications) which was medically docu-
mented as existing, or for which medical treatment, medical
service, or other medical expense was incurred within 12
months preceding the EFFECTIVE DATE of these benefits
as to that PARTICIPANT, shall be considered PRE-
EXISTING and shall not be eligible for benefits under this
Plan, until the PARTICIPANT has been continuously cov-
ered by the Plan 12 CONSECUTIVE months.
(J.A. 32).
Dr. Lindemann subsequently filed a medical expense form with the
Plan on behalf of Gluth for payment of medical expenses related to
his February 18, 1992 examination of Gluth. In making this filing,
Dr.
Lindemann coded Gluth's claim as "600" under the International
Classification of Diseases (ICD). Under the ICD, code 600 includes,
among other diseases, benign prostate gland enlargement.
On September 23, 1992, Dr. Christian Magura (Dr. Magura), a
urologist, examined Gluth at a prostate cancer screening clinic.
Dr.
Magura's digital rectal examination of Gluth showed a 2+ increase
in
his BPH reading. Furthermore, Gluth related to Dr. Magura that
within the preceding six months he had experienced a strong need to
urinate with little or no urine coming out, a symptom of BPH. Part
of that time period preceded Gluth's effective date of coverage. As
did Dr. Lindemann in February of 1992, Dr. Magura also referred
Gluth to Dr. Livingston, a urologist, for further examination. Dr.
Liv-
ingston's notes from his examination of Gluth on October 1, 1992,
indicate that Gluth related symptoms of BPH, but did not specify
how
long he had been experiencing such symptoms.
By December 26, 1992, Gluth's prostate gland had enlarged to
such an extent that it caused him acute urinary retention,
necessitating
4
a trip to the emergency room of a nearby hospital. Four days later,
Dr.
Magura surgically removed a large portion of Gluth's prostate gland
to alleviate the urinary retention. Dr. Magura's pre and post
operative
reports show that he gave Gluth a pre and post operative diagnosis
of
BPH and urinary retention.
The Plan initially denied Gluth's claim for medical expenses
related to his surgery on the basis that they were for an illness,
BPH,
that was medically documented as existing within the twelve months
preceding Gluth's effective date of coverage. Gluth appealed to the
Administrative Committee.4 As part of its review, the
Administrative
Committee requested an expert medical opinion regarding the merits
of Gluth's claim from Dr. James Arkins (Dr. Arkins), a member of
the Plan's medical advisory council. 5
Dr. Arkins practices family medicine and has nineteen years expe-
rience treating mostly persons over fifty years of age. He reviewed
Gluth's complete claim file. The file included most of Gluth's
medi-
cal records and benefit claim forms, including Dr. Lindemann's
report
of his February 18, 1992 examination of Gluth and Dr. Magura's pre
and post operative reports.6 He also reviewed the language of the
Plan
that excluded preexisting illnesses. Based on: (1) his
interpretation of
Dr. Lindemann's February 18, 1992 report as diagnosing Gluth with
BPH;7 (2) Dr. Lindemann's referral of Gluth to a urologist due to
an
_________________________________________________________________
4 Under the terms of the Plan, the Administrative Committee served
as
its administrator and had discretionary authority to resolve all
questions
concerning the administration, interpretation or application of the
Plan,
including, without limitation, discretionary authority to determine
eligi-
bility for benefits or to construe the terms of the Plan in
conducting the
review of an appeal.
5 Under the Plan, its medical advisory council was "[t]he group of
med-
ical practitioners appointed by the Administrative Committee to
assist in
the review of medical claims as and when medical expertise is
needed."
(J.A. 405).
6 Apparently, the claim file did not contain a copy of Dr. Magura's
report from his September 23, 1992 examination of Gluth. Thus, the
claim file did not contain a record documenting Gluth's complaint
on
that date that within the preceding six months he had experienced
a
strong need to urinate with little or no urine coming out.
7 Dr. Arkins reasoned that Dr. Lindemann would not have noted a BPH
1+ reading from his digital rectal examination of Gluth, if he did
not con-
sider Gluth to be suffering from BPH at the time.
5
elevated PSA, where an elevated PSA can be the result of prostate
gland enlargement; (3) a review of the other medical records
(includ-
ing pre and post operative diagnosis by Dr. Magura of BPH and uri-
nary retention); (4) the medical relationship between BPH and
urinary
retention; and (5) his medical training in general and experience
in
treating men over fifty years of age; Dr. Arkins reported to the
Administrative Committee that the medical expenses related to
Gluth's surgery were for an illness, BPH, that had been medically
documented as existing during the twelve months preceding Gluth's
effective date of coverage. As a result of its own review of
Gluth's
claim file and its consideration of Dr. Arkins' opinion, the
Adminis-
trative Committee affirmed the initial denial of Gluth's claim. In
doing so, the Administrative Committee interpreted the term
"illness,"
as used in the Plan, to include BPH.
At trial, the district court considered the evidence that was
before
the Administrative Committee when it affirmed the initial denial of
Gluth's claim for benefits. The district court also considered
evidence
that was not before the Administrative Committee. For example, the
district court heard and considered the testimony of Dr. Lindemann
that he did not intend his recording of a BPH 1+ reading from his
dig-
ital rectal examination of Gluth to indicate that Gluth suffered
from
an illness. The district court also heard and considered testimony
by
Dr. Magura on what the district court considered the ultimate issue
in
the case--whether Gluth suffered from any illness, injury or
symptom
(including secondary conditions and complications) medically docu-
mented as existing or for which medical treatment, medical service
or
other medical expense was incurred within the twelve months preced-
ing Gluth's effective date of coverage. According to Dr. Magura's
trial testimony, Gluth did not so suffer. Wal-Mart objected at
trial to
the district court's admission of this testimony.
After consideration of all of the evidence, the district court con-
cluded that the Administrative Committee had abused its discretion
in
denying Gluth's claim for medical expenses related to his December
30, 1992 surgery. According to the district court, the abuse of
discre-
tion stemmed from denying benefits on a record that lacked substan-
tial evidence that Gluth had suffered from any illness, injury or
symptom (including secondary conditions and complications), which
was medically documented as existing, or for which he received med-
6
ical treatment, medical service, or incurred other medical expense
within the twelve months preceding his effective date of coverage.
Instead, the district court stated, "there were the opinions of two
doc-
tors Dr. Lindemann, the examining doctor on February 18, 1992 and
Dr. Magura, a urologist, who both testified that Mr. Gluth's BPH
and
PSA level were not pre-existing conditions to the acute urinary
reten-
tion." (J.A. 44) (emphasis added). The district court concluded
that it
was unreasonable for the Administrative Committee to rely on Dr.
Arkins' interpretation of Gluth's medical records"when it is
evident
that Dr. Arkins and Dr. Lindemann use the term BPH differently and
according to Dr. Lindemann his diagnosis of Mr. Gluth as having
BPH did not mean that the prostate gland was an abnormal size nor
did it mean that Mr. Gluth had any symptom of prostate illness or
uri-
nary tract illness." (J.A. 44-45). The district court ultimately
entered
judgment in favor of Gluth, ordering that Gluth"be paid his
benefits
for surgery, hospitalization, and related treatment under the
[Plan]."
(J.A. 3); see 29 U.S.C. § 1132(a)(1)(B). The district court also
awarded Gluth $30,910.00 in attorney's fees and costs, see 29
U.S.C.
§ 1132(g)(1), and granted Gluth's opposed motion to add the Trust
as
a defendant.
II.
At the outset of our review of the district court's decision, we
must
be mindful of the appropriate standard for judicial review of a
deci-
sion by the administrator of an ERISA benefits plan to deny a claim
for benefits. Unless an ERISA benefits plan expressly gives its
administrator discretionary authority to determine eligibility for
bene-
fits or to construe its terms, a reviewing court uses a de novo
standard
of review. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101,
114-15 (1989). If an ERISA benefits plan does give its
administrator
discretionary authority to determine eligibility for benefits or to
con-
strue its terms, a reviewing court may only reverse the denial of
bene-
fits upon a conclusion that the administrator abused its
discretion. See
id. at 111; Bernstein v. Capital Care, Inc., 70 F.3d 783, 787 (4th
Cir.
1995). Under the abuse of discretion standard of review, a
reviewing
court should not disturb the administrator's decision if it is
reason-
able. See id.; De Nobel v. Vitro Corp., 885 F.2d 1180, 1187 (4th
Cir.
1989). The decision of a plan administrator is reasonable if the
deci-
sion is: (1) "``the result of a deliberate, principled reasoning
process'"
7
and (2) "``supported by substantial evidence.'" Bernstein, 70 F.3d
at
787 (quoting Baker v. United Mine Workers of Am. Health & Retire-
ment Funds, 929 F.2d 1140, 1144 (6th Cir. 1991)). Finally, when
reviewing a plan administrator's decision under the abuse of
discre-
tion standard, a court may consider only the record that was before
the plan administrator at the time the plan administrator reached
its
decision. See Shepard v. Enoch Pratt Hosp. v. Travelers Ins. Co.,
32
F.3d 120, 125 (4th Cir. 1994).
The parties do not dispute that the Plan gave the Administrative
Committee discretionary authority to make benefit eligibility deci-
sions and to construe the terms of the Plan. Accordingly, the
district
court was bound to review the Administrative Committee's decision
to deny Gluth's claim for abuse of discretion, which it did. Thus,
Gluth's eligibility for benefits turns on whether the
Administrative
Committee abused its discretion in denying Gluth's claim on the
basis
that his medical expenses were for an illness, BPH, that was medi-
cally documented as existing within the twelve months preceding
Gluth's effective date of coverage.
On appeal, Wal-Mart and the Trust (collectively the appellants)
contend that the district court erred in concluding that the
Administra-
tive Committee abused its discretion in denying Gluth's claim. In
this
regard, the appellants specifically challenge the district court's
con-
clusion that the record before the Administrative Committee lacked
substantial evidence that Gluth's medical expenses were for an
illness
that was medically documented as existing within the twelve months
preceding Gluth's effective date of coverage. As part of this chal-
lenge, the appellants contend the district court erroneously
considered
and relied upon evidence that was not before the Administrative
Com-
mittee. We agree with the appellants on these points.
Initially, we note that the district court erred as a matter of law
by
considering and relying upon Dr. Lindemann's trial testimony inter-
preting his own report as not diagnosing Gluth with BPH and Dr.
Magura's trial testimony that Gluth did not suffer from any
illness,
injury or symptom medically documented as existing within the
twelve months preceding Gluth's effective date of coverage. Neither
Dr. Lindemann's nor Dr. Magura's testimony was before the Admin-
istrative Committee at the time that it decided to deny Gluth's
claim.
8
Although it may be appropriate for a court conducting a de novo
review of a plan administrator's decision denying benefits to
consider
evidence that was not taken into account by the plan administrator,
when a court is constrained to review a plan administrator's
decision
denying benefits under the abuse of discretion standard,
consideration
of evidence not before the plan administrator is proscribed. See
Shepard, 32 F.3d at 125.
When reviewed within the proper scope, the reasonableness of the
Administrative Committee's decision to deny Gluth's claim is
undeni-
able. First, rather than relying on its own experience in reviewing
the
merits of claims for medical expenses, the Administrative Committee
sought and obtained the opinion of a medical professional who had
experience treating men over fifty. This evinces a principled
approach
by the Administrative Committee to reviewing the merits of Gluth's
claim. See Bernstein, 70 F.3d at 788. Thus, the first requirement
of
the "reasonableness" standard is met.
Second, the Administrative Committee's decision is supported by
substantial evidence, satisfying the second requirement of the
"rea-
sonableness" standard. See id. The Supreme Court has defined sub-
stantial evidence as "``such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion.'" Richardson v.
Perales, 402 U.S. 389, 401 (1971) (quoting Consolidated Edison Co.
of New York v. NLRB, 305 U.S. 197, 229 (1938)). Here, Gluth's claim
file contained a medical report dated within the twelve months pre-
ceding Gluth's effective date of coverage that noted a BPH 1+ read-
ing from a digital rectal examination. The same report noted an
elevated PSA level, with such elevation potentially caused by an
enlarged prostate gland and a recommendation that Gluth see a
urolo-
gist at his earliest convenience due to his elevated PSA level. The
claim file also showed that Dr. Lindemann used ICD Code 600, when
ICD Code 600 includes benign prostate gland enlargement as a dis-
ease. The claim file further showed that Dr. Magura had made a pre
and post operative diagnosis of BPH and urinary retention. Finally,
the claim file contained Dr. Arkins' professional medical opinion
that
the medical records contained in the claim file documented that
Gluth
suffered from an illness, BPH, during the twelve months preceding
his effective date of coverage that ultimately necessitated the
removal
of a large portion of his prostate gland. We have no doubt that a
rea-
9
sonable mind might accept this evidence as adequate to support the
conclusion that Gluth's medical expenses were for an illness, BPH,
that was medically documented as existing during the twelve months
preceding his effective date of coverage. This is especially true
in
light of the Administrative Committee's authority under the Plan to
interpret the meaning of terms in the Plan such as "illness."
In sum, the district court erred as a matter of law in considering
evidence not before the Administrative Committee and in ultimately
concluding that the Administrative Committee had abused its discre-
tion in denying Gluth's claim for medical expenses related to his
sur-
gery.
III.
We next address the Trust's challenge to the district court's grant
of Gluth's opposed motion to amend the complaint post judgment to
name it as a defendant. The record is unclear as to why Gluth made
such a motion and why the district court granted it over Wal-Mart's
objection. Suffice it to say that the district court erred in
granting
Gluth's motion, because the Trust, as the funding mechanism for the
Plan with no control over its administration, is not a proper
defendant
in this action. See Gelardi v. Pertec Computer Corp., 761 F.2d
1323,
1324-25 (9th Cir. 1985) (ERISA permits suits to recover benefits
only
against the employee benefits plan as an entity). 8
IV.
In conclusion, we vacate the district court's judgment in favor of
Gluth, the district court's award of attorney's fees and costs in
favor
_________________________________________________________________
8 We note that Gluth named the wrong defendant from the beginning
by initially bringing this action against his employer, Wal-Mart,
who had
no control over the administration of the Plan. See Daniel v. Eaton
Corp.,
839 F.2d 263, 266 (6th Cir. 1988) (unless an employer is shown to
con-
trol administration of an employee benefit plan, it is not a proper
defen-
dant in an ERISA action seeking benefits; rather, the plan is the
proper
party). However, because Wal-Mart proceeded in the litigation
without
moving for dismissal on that basis, Wal-Mart waived its right to
chal-
lenge the propriety of Gluth naming it as a defendant. See id.10
of Gluth and the district court's order adding the Trust as a
defendant
and remand with instructions to enter judgment in favor of Wal-Mart
and the Plan.9
VACATED AND REMANDED WITH INSTRUCTIONS
MURNAGHAN, Circuit Judge, concurring:
While I concur in the judgment as validly expressing the current
law, it comes to a sorry result bearing in mind ERISA's concern
with
protecting the interests of plan participants such as Gluth. At
trial, the
urologist physicians who treated Gluth related their conclusions
that
at the time of Dr. Lindemann's examination of Gluth, Gluth did not
suffer from the BPH illness, but rather suffered from only benign
prostrate enlargement, which at Gluth's age was not unusual.
Credit-
ing Dr. Lindemann's and Dr. Magura's testimony, the district court
found that Gluth did not suffer from a preexisting illness as
defined
under the terms of the Plan. Rather, Gluth's acute urinary
retention
was an initial condition, not a secondary condition as a result of
his
BPH. Notably, the testimony at trial, particularly from Drs. Linde-
mann and Magura based on their examinations and treatment of Gluth
far outweighed Dr. Arkins', a non-urologist, conclusion that Gluth
suffered from a preexisting illness based on Dr. Arkin's 2-3 minute
review of Gluth's medical file.
Notwithstanding the above, the majority opinion is anchored on the
premise that Gluth did not offer any of the explanations of the
sort
offered by Gluth at trial to the Administrative Committee at the
time
_________________________________________________________________
9 Gluth moves on appeal to amend his complaint to add the Plan as
a
defendant. Presumably, this motion was in response to Wal-Mart's
argu-
ment on appeal that the judgment and the award of attorney's fees
and
costs should be vacated and the case dismissed due to his suing it
rather
than the Plan. See Daniel, 839 F.2d at 266 (6th Cir. 1988).
In an effort to avoid Gluth bringing this same action against the
Plan,
we grant Gluth's motion on appeal to name the Plan as a defendant.
See
Fed. R. Civ. P. 21 ("Parties may be dropped or added by order of
the
court on motion of any party or of its own initiative at any stage
of the
action and on such terms that are just."). We believe, in the
circum-
stances of this case, granting Gluth's motion is just. See id.11
the Committee reviewed his file and ultimately decided to deny
bene-
fits. Thus, reliance is placed on failure of proof before the
Adminis-
trative Committee to reach a result most likely, as the district
court
found, incorrect in fact. The apparent incorrectness emerged when
the
case was tried. I do not contend, however, that the majority
opinion
conveys the law inaccurately in this area. Application of that law
leads to the inescapable conclusion that an Administrative Commit-
tee's most likely incorrect decision can outweigh the federal
district
judge's likely correct decision evidenced at the time of trial
provided
the Administrative Committee has not abused its discretion in deny-
ing benefits. In the instant case, I concur that the evidence
before the
Administrative Committee at the time of its consideration of
Gluth's
application adequately supports the Committee's decision to deny
benefits. As I stated at the outset of my concurrence, while the
result
is apparently legally proper, the unfortunate result does not
coincide
with ERISA's objective that an honest, hard-working employee
should receive health benefits when genuinely needed.
12