FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT February 17, 2016
_________________________________
Elisabeth A. Shumaker
Clerk of Court
ALLEN MESSICK,
Plaintiff - Appellant,
v. No. 15-4019
(D.C. No. 2:13-CV-01036-TS)
MCKESSON CORPORATION; (D. Utah)
MCKESSON CORPORATION SHORT
TERM DISABILITY PLAN; MCKESSON
CORPORATION LONG TERM
DISABILITY PLAN; LIFE INSURANCE
COMPANY OF NORTH AMERICA,
Defendants - Appellees.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before TYMKOVICH, Chief Judge, KELLY and LUCERO, Circuit Judges.
_________________________________
Allen Messick appeals following the district court’s entry of judgment in favor
of defendants on his claim under the Employee Retirement Income Security Act of
1974 (“ERISA”). Exercising jurisdiction under 28 U.S.C. § 1291, we vacate and
remand with instructions for the district court to remand to the plan administrator so
that Messick may file a second-level administrative appeal.
*
This order and judgment is not binding precedent, except under the doctrines
of law of the case, res judicata, and collateral estoppel. It may be cited, however, for
its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
I
Messick, as an employee of McKesson Corporation, received disability
insurance coverage under the McKesson Corporation Short Term Disability (“STD”)
Plan and the McKesson Corporation Long Term Disability (“LTD”) Plan. Life
Insurance Company of North America (“LINA”) administers both plans. Under the
STD Plan, an employee unable to perform all of the material and substantial duties of
his occupation due to sickness or injury is eligible for up to 26 weeks of STD
benefits, after which he becomes eligible for LTD benefits.
Plan documents vest LINA with discretionary authority to determine eligibility
for STD benefits. If LINA denies a claim for STD benefits, the plan provides that an
employee may appeal the denial through a two-level administrative appeals process.
Employees have 180 days to file a first-level appeal, and another 180 days to file a
second-level appeal after receiving notification of the decision in the first appeal.
LINA must decide each appeal within 45 days, although those deadlines may be
extended in certain circumstances. Beneficiaries are explicitly warned that “[n]o
legal action may be taken to gain benefits from the STD plan” until the beneficiary
has exhausted both levels of the administrative appeals process.
Messick applied for STD benefits in August 2012.1 After requesting and
receiving additional information from Messick, LINA approved STD benefits
through November 8, 2012, but denied benefits after that date. LINA also informed
1
Messick previously submitted other applications for benefits, some of which
were granted. Those prior applications are not at issue in this appeal.
-2-
Messick that it would refer his claim to the LTD department to evaluate his claim for
LTD benefits. LINA denied LTD coverage in February 2013, shortly after its partial
denial of STD benefits. In July 2013, Messick submitted through counsel a first-
level appeal of the STD denial with updated medical records and statements from
Messick’s family members. LINA denied Messick’s first-level appeal in September
2013. However, the denial letter was misaddressed and was not received by Messick
or his attorney.
Thinking that LINA had exceeded the maximum time for deciding his first-
level appeal, Messick filed suit in district court, advancing a claim for benefits under
29 U.S.C. § 1132(a)(1)(B). After learning that the first-level appeal had actually
been denied, Messick argued that his claim should be subject to de novo review
because misaddressing the administrative appeal decision constituted a serious
procedural error, see 29 C.F.R. § 2560.503-1(l), and because LINA operated under a
conflict of interest, see Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (2008). In the
alternative, Messick requested that his claim be remanded for further administrative
proceedings. The district court concluded that LINA’s decision was subject to
review under the arbitrary and capricious standard, although it granted less deference
because of the procedural irregularity. It did not explicitly consider Messick’s
alternative request for a remand of his STD claim. Ruling that LINA did not act
unreasonably in denying STD benefits, the district court entered judgment in favor of
defendants. Messick timely appealed.
-3-
II
We determine the appropriate standard of review for an ERISA claim “without
deference to the district court.” Eugene S. v. Horizon Blue Cross Blue Shield of N.J.,
663 F.3d 1124, 1130 (10th Cir. 2011). Because STD Plan documents grant
discretionary authority to LINA, we would ordinarily review LINA’s decision under
an arbitrary and capricious standard. See LaAsmar v. Phelps Dodge Corp. Life,
Accidental Death & Dismemberment & Dependent Life Ins. Plan, 605 F.3d 789, 796
(10th Cir. 2010). However, Messick argues for de novo review because a serious
procedural irregularity occurred when LINA misaddressed its denial letter to counsel,
and because of an alleged conflict of interest.
“This court has on several occasions reviewed a benefits denial de novo,
notwithstanding the fact that the Plan afforded the administrator discretion to make
benefits determinations, where there were procedural irregularities in the
administrator’s consideration of the benefits claim.” Id. at 797. In each of these
cases, the plan administrator either failed to issue a decision in the highest-level
administrative appeal, or did so long after the applicable deadline. See id. (110 days
late); Rasenack v. AIG Life Ins. Co., 585 F.3d 1311, 1314, 1317-18 (10th Cir. 2009)
(170 days late); Kellogg v. Metro. Life Ins. Co., 549 F.3d 818, 827-28 (10th Cir.
2008) (no decision); Gilbertson v. Allied Signal, Inc., 328 F.3d 625, 631, 637 (10th
Cir. 2003) (no decision). Plan administrators are entitled to deferential review, we
explained, only if their decision “is an exercise of . . . discretion vested in them by
the instrument under which they act.” Gilbertson, 328 F.3d at 631 (quotation and
-4-
emphasis omitted). Thus, if a “plan and applicable regulations place temporal limits
on the administrator’s discretion and the administrator fails to render a final decision
within those limits,” deference is not warranted. Id.
However, not all procedural irregularities require de novo review. In
Gilbertson we noted that “in the context of an ongoing, good faith exchange of
information between the administrator and the claimant, inconsequential violations of
the deadlines or other procedural irregularities would not entitle the claimant to de
novo review.” Id. at 635. And a late ruling in an administrative appeal will
nonetheless receive deference “if a claimant fails to provide meaningful new
evidence or raise significant new issues on administrative appeal and the delay does
not undermine the court’s confidence in the integrity of the administrator’s decision-
making process.” Finley v. Hewlett-Packard Co. Emp. Benefits Org. Income Prot.
Plan, 379 F.3d 1168, 1174 (10th Cir. 2004) (quotation, citation, and alterations
omitted).
The procedural irregularity at issue in this appeal differs in kind from those
considered in the above-cited cases. When a plan administrator fails to render a
timely final decision, the administrative review process terminates and the court is
presented with a complete administrative record upon which to conduct de novo
review. See, e.g., Gilbertson, 328 F.3d at 628, 636 (lack of timely decision in final
level of administrative review rendered appeal “deemed denied” by operation of law).
In this case, however, LINA’s failure to properly address its denial letter cut off the
administrative process midstream. Messick never filed a second-level appeal because
-5-
he was never informed of the first-level denial. We accordingly lack a complete
administrative record to review.
Our case law has long recognized the importance of completing the
administrative review process before filing suit. “[P]remature judicial interference
with the interpretation of a plan would impede those internal processes which result
in a completed record of decision making for a court to review.” McGraw v.
Prudential Ins. Co. of Am., 137 F.3d 1253, 1263 (10th Cir. 1998). And ERISA
contemplates “an ongoing, good faith exchange of information between the
administrator and the claimant.” Gilbertson, 328 F.3d at 635. These interests are not
served by federal court review of an incomplete administrative record.2
Moreover, Messick alleges that he would be able to “provide meaningful new
evidence or raise significant new issues” in a second-level appeal. Finley, 379 F.3d
at 1174. Had Messick been notified that his first-level appeal had been denied, he
contends that he could have submitted an updated neuropsychological evaluation,
2
Defendants highlight the fact that ERISA does not require a second-level
appeal. See Hancock v. Metro. Life Ins. Co., 590 F.3d 1141, 1154 (10th Cir. 2009).
But “it is necessary to look not just to the minimum [procedural] standards of ERISA
but also to the terms of the plan itself.” Gaither v. Aetna Life Ins. Co., 394 F.3d 792,
804 (10th Cir. 2004). Because the STD Plan required a second-level appeal as a
condition to filing suit, the administrative record is not complete until that second
appeal is final. See Holmes v. Colo. Coal. for the Homeless Long Term Disability
Plan, 762 F.3d 1195, 1203-04 (10th Cir. 2014) (a plan participant does not properly
exhaust administrative remedies by filing only a first-level appeal if a plan requires a
second-level appeal). To the extent defendants contend that the existence of a
procedural irregularity requires a violation of ERISA regulations themselves, we note
that LINA failed to provide timely notice of its first-level appeal decision to Messick
as required by 29 C.F.R. §§ 2560.503-1(i) and 2560.503-1(j).
-6-
letters from his physicians refuting the conclusions LINA made in the first-level
denial, and evidence that the material duties of his position require a higher degree of
cognitive function than that required for regular activities of daily life. This evidence
is not before us because of the procedural irregularity, and our “confidence in the
integrity of the administrator’s decision-making process” is thus undermined. Id.
We are in poor position to evaluate Messick’s claims given that our review is limited
to the existing administrative record. Holcomb v. Unum Life Ins. Co. of Am., 578
F.3d 1187, 1192 (10th Cir. 2009).
In light of a procedural irregularity and the resulting incomplete record, we
conclude that the appropriate remedy is a remand to LINA so that Messick may
pursue his second-level administrative appeal.3 See Rekstad v. U.S. Bancorp, 451
F.3d 1114, 1121 (10th Cir. 2006) (remand to plan administrator an appropriate
remedy when administrator does not gather and consider all relevant evidence and
benefits determination is not clear-cut).4
3
Because Messick does not allege that the misaddressed correspondence
resulted from bad faith, we assume that the error resulted despite LINA’s good faith
attempt to review his claims. We do not consider whether a bad faith procedural
error in an intermediate appeal would likewise warrant remand.
4
Because we remand for further administrative proceedings, we do not
consider Messick’s argument that an alleged conflict of interest requires de novo
review. Further, we decline to consider his claim for LTD benefits because those
benefits are paid only after exhausting STD benefits.
-7-
III
For the foregoing reasons, we VACATE the district court’s order and
judgment and REMAND with instructions to remand to LINA so that Messick may
pursue a second-level administrative appeal.
Entered for the Court
Carlos F. Lucero
Circuit Judge
-8-