Barhan v. Ry-Ron Inc.

United States Court of Appeals,

Fifth Circuit.

No. 96-20782.

Constance J. BARHAN, Plaintiff-Appellant,

v.

RY-RON INC., et al., Defendants,

Charlie Thomas Chevrolet, Inc. & Affiliates Employee Benefit Plan
and Allianz Life Insurance Company of North America, Defendants-
Appellees.

Sept. 5, 1997.

Appeal from the United States District Court for the Southern
District of Texas.

Before KING, DAVIS and DeMOSS, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

Constance Barhan appeals from a district court's summary

judgment order denying her insurance benefits under her employer's

insurance plan. We affirmed in part, reversed in part and remand.

I.

In late 1992, Barhan was diagnosed with adjuvant breast

cancer. Her doctor recommended that she receive high-dose

chemotherapy with peripheral stem-cell support (HDCT/PSCS). Her

medical provider requested approval of the treatment from Barhan's

insurer, the Charlie Thomas Chevrolet, Inc. & Affiliates Employee

Benefit Plan ("the Plan"). The plan administrator, citing

exclusions in the plan for treatments not recognized by the

American Medical Association and experimental or investigational

1
procedures, denied coverage.1

Barhan filed suit against the Plan and Allianz Life Insurance

Company of North America ("Allianz") seeking a declaratory judgment

that the treatment ordered by her doctor was covered by the Plan

and that she was deprived of the "full and fair review" of her

claim required by ERISA, 29 U.S.C. § 1133(2).2 She also asked the

court to order the Plan to pay for her treatment and enter a

judgment for $30,124.44, the amount of unpaid medical expenses.

The Plan and Allianz filed motions for summary judgment, which the

district court granted.

II.

A.

On appeal, Barhan challenges the plan administrator's denial

of coverage under § 502(a)(1)(B) of the Employee Retirement Income

Security Act of 1974 (ERISA), 29 U.S.C. § 1132(a)(1)(B), and

1
According to the policy, "Covered Expenses" do not include:

L. Charges for services, supplies, or treatments not
recognized by the American Medical Association as
generally accepted and Medical Necessary for the
diagnosis and/or treatment of an active Illness or
Injury; or charges for procedures, surgical or
otherwise, which are specifically listed by the
American Medical Association as having no medical
value;

...

U. Charges for experimental or investigational
procedures, drugs, or research studies, or for any
services or supplies not considered legal in the
United States.
2
The Plan is funded, in part, under an excess risk or
stop-loss insurance policy issued by the North American Life and
Casualty Company, now known as Allianz.

2
contends that the district court erred in granting summary judgment

upholding the denial of benefits.

We review the district court's holding on the question of

whether the plan administrator abused its discretion de novo.

Sweatman v. Commercial Union Ins. Co., 39 F.3d 594, 601 (5th

Cir.1994). Summary judgment is appropriate if "the pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no genuine

issue as to any material fact and that the moving party is entitled

to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex

Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91

L.Ed.2d 265 (1986). The moving party must identify evidence that

establishes the absence of any genuine issue of material fact,

Celotex Corp., 477 U.S. at 323, 106 S.Ct. at 2553, and the court

reviewing a grant of summary judgment must evaluate the facts in

the light most favorable to the nonmovant. Todd v. AIG Life Ins.

Co., 47 F.3d 1448, 1451 (5th Cir.1995).

The district court reviews the denial of benefits for abuse

of discretion when the terms of a benefit plan governed by ERISA

give the plan administrator discretionary authority to determine

eligibility for benefits. Firestone Tire & Rubber Co. v. Bruch,

489 U.S. 101, 115, 109 S.Ct. 948, 956, 103 L.Ed.2d 80 (1989);

Duhon v. Texaco, Inc., 15 F.3d 1302, 1305-06 (5th Cir.1994). The

benefit plan here provides that, "[t]he Administrator has the sole

authority and responsibility to review and make final decisions on

all claims to benefit hereunder." This language grants the plan

3
administrator discretion; therefore, if the administrator's

decision on eligibility is supported by substantial evidence and is

not erroneous as a matter of law, it will be upheld. Wildbur v.

ARCO Chemical Co., 974 F.2d 631, 637 n. 12 (5th Cir.1992).

B.

To support its motion for summary judgment, the Plan submitted

various documents and affidavits. The district court did not

assess this evidence. Instead, it stated that in reviewing the

plan administrator's decision, it was acting as an appellate court;

accordingly, the district court determined, the parties were bound

by the Federal Rules of Appellate Procedure. Under Rule 11(a), the

appellant must designate the record to be reviewed. Fed. R.App. P.

11(a). The district court concluded that "it is Barhan's duty to

provide the administrative record upon which the Plan made its

decision" and that because Barhan failed to submit such a record,

summary judgment for the Plan was appropriate.

We disagree. While the district court acts as a reviewing

court when it examines a plan administrator's decision, we are not

persuaded that the Federal Rules of Appellate Procedure apply.

Neither the rules themselves nor ERISA provide for such an

outcome.3 Moreover, it is the plan administrator's responsibility

3
According to the rule setting forth the scope of the
Federal Rules of Appellate Procedure:

These rules govern procedure in appeals to United
States courts of appeals from the United States
district courts and the United States Tax Court; in
appeals from bankruptcy appellate panels; in
proceedings in the courts of appeals for review or
enforcement of orders of administrative agencies,

4
to compile a record that he is satisfied is sufficient for his

decision. See, e.g., 29 C.F.R. § 2560.503-1(f) (requiring that

benefits claim denial include specific reference to plan provisions

on which denial is based and description of additional material or

information necessary to perfect claim for review). Therefore, as

a practical matter, the plan administrator is ordinarily

best-positioned to submit that administrative record.4

We are persuaded that summary judgment is an appropriate

procedural vehicle for the administrator to use in obtaining a

resolution of the plan beneficiary's suit. Once the motion for

summary judgment is filed, the usual summary judgment rules

control. In this case and under those rules, the Plan bore the

initial burden of informing the court of the basis for its motion

and identifying those portions of the pleadings, depositions,

affidavits or other factual support that demonstrate that it did

not abuse its discretion in rejecting the beneficiary's claim. See

Celotex Corp., 477 U.S. at 323, 106 S.Ct. at 2552-53. Thereafter,

the nonmovant—here, Barhan—had to set forth factual support in

proper form tending to show that the plan administrator was not

entitled to summary judgment and/or that the nonmovant was entitled

boards, commissions and officers of the United States;
and in applications for writs or other relief which a
court of appeals or a judge thereof is competent to
give.

Fed. R.App. P. 1.
4
Indeed, in the analogous context of appeals from the denial
of Social Security benefits, the government is required by
statute to submit the administrative record to the district
court. 42 U.S.C. § 405(g).

5
to summary judgment. See id. at 322-23, 106 S.Ct. at 2552-53.

In this case, the Plan, in support of its motion for summary

judgment, submitted, among other documents: (1) the insurance

policy containing the exclusionary language; (2) the initial

letter refusing to authorize the treatment; (3) the affidavit of

Dr. Charles Manner, Barhan's board-certified oncologist,

recommending treatment; and (4) the affidavit of Jane Wolff,

claims manager for the third-party administrator for the Plan.

Wolff's affidavit states that the plan administrator reviewed

coverage guides of various insurers and relevant articles in

various medical journals; however, those articles were not

attached. Wolff's affidavit also states that the plan

administrator solicited the opinion of Dr. Giora Mavligit, but no

affidavit of Dr. Mavligit was submitted. In her motion opposing

summary judgment, Barhan relied on the affidavit from Dr. Manner,

already in the record.

The district court concluded that it did not need to assess

the plan administrator's factual basis for its decision because

Barhan failed to supply an administrative record. This conclusion

is inconsistent with rules governing summary judgment. Under those

rules, despite our deferential standard of review, this record does

not sufficiently demonstrate the plan administrator's entitlement

to summary judgment. The only evidence put forth by the Plan in

support of its position that the HDCT/PSCS treatment is

experimental is an affidavit of the claims manager; that affidavit

relies chiefly on hearsay evidence. See, e.g., Vidrine v. Enger,

6
752 F.2d 107, 110 (5th Cir.1984); see also Garside v. Osco Drug,

Inc., 895 F.2d 46, 50 (1st Cir.1990) (holding that "third-party's

description of an expert's supposed testimony is not suitable grist

for the summary judgment mill"). None of the documents cited in

that affidavit were presented to the court. Nor was an affidavit

of Dr. Mavligit, the Plan's expert, submitted. Summary judgment on

this record is inappropriate. Therefore, the district court's

order granting summary judgment is vacated.5

III.

Allianz, the Plan's reinsurer, argued in its motion for

summary judgment that Barhan, as the original insured, had no

rights against it. See, e.g., 13A John A. Appleman & Jean

Appleman, Insurance Law and Practice § 7681 (1976). Allianz

contends that Barhan's standing to sue it is a matter of state—in

this case, Texas—law. Under Texas law, absent a provision stating

otherwise, "the reinsurance contract allows only the reinsured

company to bring a claim against the reinsurer [and] the original

insureds have no basis for a claim against the reinsurer."

5
Upon their return to district court, both parties have a
number of options. They may put evidence into proper summary
judgment form and file additional motions for summary judgment.
See Jones v. Wike, 654 F.2d 1129, 1130 (5th Cir.1981). Moreover,
if either party concludes that additional factual development is
necessary, it may move to remand to the plan administrator for
further factual development. Cf. Duhon, 15 F.3d at 1309 n. 8.

The district court should keep in mind that ERISA cases
are appropriately handled with some informality by the plan
administrator. Many of the claims are small, and in the run
of cases, the plan administrator will be understandably
reluctant to allow investigative costs to rise to a
disproportionate level.

7
Malaysia British Assurance v. El Paso Reyco, Inc., 830 S.W.2d 919,

921 (Tex.1992). Barhan fails to demonstrate that Allianz's

contract with the Plan contains an exception to this general rule

allowing her to bring a claim; thus, summary judgment as to

Allianz is proper.

IV.

The district court's order granting summary judgment as to

Allianz is AFFIRMED. For the reasons set forth above, the order

granting summary judgment as to the Plan is REVERSED and the case

is REMANDED for reconsideration in light of this opinion.

8