United States Court of Appeals,
Fifth Circuit.
No. 95-21020.
BELLAIRE GENERAL HOSPITAL, Plaintiff-Appellee,
v.
BLUE CROSS BLUE SHIELD OF MICHIGAN, Defendant-Appellant.
Oct. 23, 1996.
Appeal from the United States District Court for the Southern District of Texas.
Before DAVIS, JONES and EMILIO M. GARZA, Circuit Judges.
EMILIO M. GARZA, Circuit Judge:
Defendant Blue Cross Blue Shield of Michigan appeals the district court's denial of its motion
to dismiss for lack of personal jurisdiction and the district court's order that the parties submit their
dispute to the court for resolution on a written record. Blue Cross also challenges the standard of
review the district court applied to factual determinations made by Blue Cross. Finally, Blue Cross
contests the district court's award of attorneys' fees to Plaintiff Bellaire General Hospital. We affirm
in part and vacate in part, remanding for a proper determination of attorneys' fees.
I
Arlene White and Rebecca Catlin are Michigan residents and participants in health benefits
plans underwritten by Blue Cross Blue Shield of Michigan, a nonprofit corporation operating
exclusively within the State of Michigan. White was admitted to Bellaire General Hospital in Bellaire,
Texas for depression and suicidal thoughts, and received in-patient hospital care from March 11 to
April 9, 1993. Catlin was also admitted to Bellaire for depression and suicidal thoughts; she received
in-patient hospital care from May 8 to June 10, 1993.
Both women assigned their insurance claims to Bellaire. Bellaire submitted the claims to Blue
Cross for payment. In evaluating Bellaire's claim regarding White's medical treatment, a Blue Cross
registered nurse reviewed White's medical records, initially deciding to deny the claim entirely for lack
1
of medical necessity for in-patient treatment. Because Blue Cross's initial determination was a
complete denial of coverage, the claim was automatically submitted to Blue Cross's appeals
committee, which approved coverage for seven days of in-patient hospital care for White. The
committee denied coverage for the remainder of White's in-patient care. After White's treating
physician requested second-level appeal, Blue Cross submitted the claim to an independent company,
Peer Review Analysis of Massachusetts. Peer Review confirmed Blue Cross's decision to approve
coverage for seven days of care and to deny coverage for the remainder of White's hospital stay.
Thus, Blue Cross denied payment for Bellaire's claim regarding White's hospital care beyond seven
days.
Similarly, after Bellaire submitted a claim to Blue Cross for Catlin's in-patient treatment, a
Blue Cross registered nurse reviewed Catlin's medical records, also initially deciding to deny the claim
entirely for lack of medical necessity for in-patient treatment. Again, the initial claim denial was sent
automatically to Blue Cross's appeals committee which approved three days of ter Blue Cross
submitted Catlin's claim to Peer Review for second-level appeal, Peer Review concluded that Catlin's
condition did not warrant in-patient hospital treatment at all. However, Blue Cross denied payment
for Bellaire's claim regarding Catlin's treatment beyond three days.
Subsequent to Blue Cross's denial of the claims, Bellaire filed suit against Blue Cross in the
Southern District of Texas, alleging that Blue Cross had breached its insurance contracts with White
and Catlin, or, in the alternative, that Blue Cross had violated ERISA, 29 U.S.C. § 1001 et seq. Blue
Cross filed a motion to dismiss Bellaire's complaint for lack of personal jurisdiction; the district court
denied the motion without explanation. After ordering the parties to submit their dispute to the court
for resolution on a written record, the district court determined that Blue Cross had improperly
denied Bellaire's claims. The court awarded Bellaire $68,764 on its insurance claims and $7,500 in
attorneys' fees. Blue Cross appeals.
II
A
2
Blue Cross appeals the district court's denial of its motion to dismiss for lack of personal
jurisdiction. Blue Cross argues that the district court lacked personal jurisdiction over it because Blue
Cross is a nonprofit corporation operating exclusively within the State of Michigan. When, as here,
"the [alleged jurisdictional] facts are not in dispute, we review de novo a district court's determination
that its exercise of personal jurisdiction over a nonresident defendant is proper." Wilson v. Belin, 20
F.3d 644, 647-48 (5th Cir.), cert. denied, --- U.S. ----, 115 S.Ct. 322, 130 L.Ed.2d 282 (1994).
ERISA, 29 U.S.C. § 1132(e)(2), provides for nationwide service of process. Specifically,
§ 1132(e)(2) directs that "[w]here an action under this subsection is brought in a district court of the
United States, it may be brought in the district where the plan is administered, where the breach took
place, or where a defendant resides or may be found, and process may be served in any other district
court where a defendant resides or may be found."
We have previously addressed nationwide service of process provisions in federal statutes.
In Busch v. Buchman, Buchman & O'Brien, Law Firm, 11 F.3d 1255 (5th Cir.1994), we analyzed
the nationwide service of process provision contained in § 78aa of the 1934 Securities Exchange Act.1
Concluding that service of process and personal jurisdiction are conceptually related concepts, we
determined that when a federal court attempts "to exercise personal jurisdiction over a defendant in
a suit based upon a federal statute providing for nationwide service of process, the relevant inquiry
is whether the defendant has had minimum contacts with the United States." Id. at 1258. We
1
Section 78aa provides:
The district courts of the United States ... shall have exclusive jurisdiction of
violations of this chapter or the rules and regulations thereunder, and of all suits in
equity and actions at law brought to enforce any liability or duty created by this
chapter or the rules and regulations thereunder. Any criminal proceeding may be
brought in the district wherein any act or transaction constituting the violations
occurred. Any suit or action to enforce any liability or duty created by this chapter
or rules and regulations thereunder, or to enjoin any violation of such chapter or
rules and regulations, may be brought in any such district or in the district wherein
the defendant is found or is an inhabitant or transacts business, and process in such
cases may be served in any other district of which the defendant is an inhabitant or
wherever the defendant may be found....
15 U.S.C. § 78aa (West Supp.1993).
3
specified that in such a case the relevant sovereign is the United States, and held that the due process
concerns of the Fifth Amendment are satisfied and traditional notions of fair play and substantial
justice are not offended where a court exercises personal jurisdiction over a defendant residing within
the United States. Id.
The nationwide service of process provision in the statute at issue here, § 1132(e)(2) of
ERISA, mirrors the provision we considered in Busch. Though the statutes obviously address
different legislative subjects, we placed no limitation on our conclusion in Busch regarding personal
jurisdiction in cases involving federal statutes providing for nationwide service of process. Rather,
we stated:
And, when a federal court is attempting to exercise
perso nal jurisdiction over a defendant in a suit based upon a federal statute providing for
nationwide service of process, the relevant inquiry is whether the defendant has had minimum
contacts with the United States.
Busch, 11 F.3d at 1258 (emphasis added). As a result, we find that the instant case falls squarely
within our Busch holding, and hold that the district court properly exercised personal jurisdiction over
Blue Cross based on its contacts with the United States.2
2
Blue Cross argues that in the event we find that Busch controls the determination of personal
jurisdiction in this case, we must find that the district court lacked subject matter jurisdiction over
this case. Blue Cross asserts that Busch necessitates such a finding because in Busch, we
interpreted § 78aa of the 1934 Securities Exchange Act to grant subject matter jurisdiction to a
district court where " "any act or transaction constituting the violation occurred.' " Busch, 11
F.3d at 1256-57 (quoting 15 U.S.C. § 78aa (West Supp.1993)). Thus, Blue Cross contends, we
must construe § 1132(e)(2) to grant subject matter jurisdiction in the same manner.
We reject this argument. Section 1132(e)(1) of ERISA specifically states that "the
district courts of the United States shall have exclusive jurisdiction of civil actions under
this subchapter." Section 1132(e)(1) includes an exception for, inter alia, actions such as
this one brought by a participant or beneficiary "to recover benefits due him under the
terms of his plan...." The statute provides that "[s]tate courts of competent jurisdiction
and district courts of the United States have concurrent jurisdiction" over this type of
action. Nowhere in Busch do we direct that our finding regarding subject matter
jurisdiction under § 78aa of the 1934 Securities Exchange Act extends to any statute other
than the one before us in that case.
4
Although we dutifully apply Busch,3 we emphasize our disagreement with it to the extent it
concludes that the proper personal jurisdiction test in a national service of process case is whether
minimum contacts exist between the individual and the national sovereign. See id. We view personal
jurisdiction and service of process as conceptually distinct issues. We fail to apprehend how personal
jurisdiction can be separated from due process by Congressional enactment of nationwide service of
process provisions. See Busch, 11 F.3d at 1259 (Garza, J., dissenting) ("Because the personal
jurisdiction requirement is a function of the individual liberty interest, the proper focus for a personal
jurisdiction test should be on protecting an individual's liberty interest in avoiding the burdens of
litigating in a distant or inconvenient forum. Requiring that the individual defendant in a national
service of process case only reside somewhere in the United States does not protect this interest.");
see also Willingway Hosp., Inc. v. Blue Cross & Blue Shield of Ohio, 870 F.Supp. 1102, 1106
(S.D.Ga.1994) ("To allow Congress to dictate personal jurisdiction through the enactment of
nationwide service of process provisions, unquestioned by the judiciary is nonsensical.... To say that
due process has no place in a personal jurisdiction inquiry seems contrary to the whole concept of due
process."). It is far from clear to us that Blue Cross, a corporation operating exclusively within the
State of Michigan, had sufficient contacts with the State of Texas to permit the district court to
exercise personal jurisdiction over it under the traditional personal jurisdiction analysis, i.e., whether
the defendant has had minimum contacts with the forum and whether maintenance of the action in
the forum will offend traditional notions of fair play and substantial justice. See International Shoe
Co. v. State of Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945) ("[D]ue
process requires only that in order to subjepersonam, if he be not present within the territory of the
forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend
traditional notions of fair play and substantial justice.") (citation omitted). Thus, though we follow
3
See Campbell v. Sonat Offshore Drilling, Inc., 979 F.2d 1115, 1121 n. 8 (5th Cir.1992) ("It
has been long established that a legally indistinguishable decision of this court must be followed by
other panels of this court and district courts unless overruled en banc or by the United States
Supreme Court."), reh'g denied, 986 F.2d 1420 (5th Cir.1993).
5
Busch today and find that the district court properly exercised personal jurisdiction over Blue Cross
in this case, we do so with grave misgivings regarding the authority upon which we rely.
B
Blue Cross contends that the district court violated FED.R.CIV.P. 43(a) when it ordered the
parties to submit their dispute to the court for resolution on a written record.4 Blue Cross argues that
the district court's order improperly precluded Blue Cross from performing cross-examination and
redirect examination, and prevented the trier of fact from evaluating witness credibility. We review
de novo questions of law such as a district court's interpretation of the Federal Rules of Civil
Procedure. Odom v. Frank, 3 F.3d 839, 843 (5th Cir.1993).
We have not generally addressed whether Rule 43(a) prohibits a district court from requiring
parties to submit their disput es for resolution on a written record, and those courts that have
addressed this issue have reached different conclusions. Some non-ERISA cases emphasize the
importance of oral testimony to the trier of fact's ability to evaluate the credibility and demeanor of
witnesses.5 None of these cases, however, is an ERISA "records" case, i.e., a suit such as this one
in which a district court reviews an administrative decision for an abuse of discretion. In such a case,
4
Rule 43(a) provides: "In all trials the testimony of witnesses shall be taken orally in open
court, unless otherwise provided by an Act of Congress or by these rules, the Federal Rules of
Evidence, or other rules adopted by the Supreme Court."
5
See e.g., Adair v. Sunwest Bank, 965 F.2d 777, 779-80 (9th Cir.1992) (per curiam) (holding
that bankruptcy court's standard procedure requiring that direct testimony be presented by written
declaration, followed by oral testimony on cross-examination and on redirect, did not violate Rule
43(a) because procedure "permits oral cross-examination and redirect examination in open court
and thereby preserves an opportunity for the judge to evaluate the declarant's demeanor and
credibility."); In re Burg, 103 B.R. 222, 225 (9th Cir. BAP1989) (holding that bankruptcy court's
trial procedure violated Rule 43(a) by requiring direct testimony through submission of
declarations rather than through oral testimony because "basic notions of procedural due process"
dictate "that essential rights of the parties may be jeopardized by a procedure where the oral
presentation of evidence is not allowed, where the bankruptcy court's ability to gage [sic] the
credibility of a witness or evidence is questionable and where rulings on objections to the
admissibility of all direct evidence, may be unclear."); United States v. American Telephone &
Telegraph Co., 83 F.R.D. 323, 339-40 (D.D.C.1979) (holding that order directing all witnesses'
direct testimony to be presented in writing, with oral testimony on cross-examination only, would
violate Rule 43(a) because, inter alia, oral testimony is essential to evaluation of witness
demeanor and credibility)
6
the district court, in evaluating whether a plan administrator abused his discretion in making a factual
determination, may consider only the evidence that was available to the plan administrator. Southern
Farm Bureau Life Ins. Co. v. Moore, 993 F.2d 98, 102 (5th Cir.1993).6 Indeed, under Moore,
because the district court was bound to the administrative record, the parties in this case could not
have supplemented that record with additional oral testimony.7 Therefore, the district court did not
err when it required the parties to submit their dispute for resolution on a written record.8
6
In Wildbur v. ARCO Chem. Co., 974 F.2d 631, 639 (5th Cir.1992), reh'g denied, 979 F.2d
1013 (5th Cir.1992), appeal after remand, 35 F.3d 560 (5th Cir.1994), we held that a district
court is not confined to the administrative record in determining whether a plan administrator
abused his discretion in making a benefit determination. In Moore, however, we specified that
Wildbur "dealt with an administrator's interpretation of plan terms reviewed under an abuse of
discretion standard, not with factual determinations." 993 F.2d at 102. We emphasized that "the
court in Wildbur made clear that "district courts should evaluate the administrator's fact findings
regarding the eligibility of a claimant based on the evidence before the administrator....' " Id.
(quoting Wildbur, 974 F.2d at 639). Thus, in Moore we concluded that "we may consider only
the evidence that was available to the plan administrator in evaluating whether he abused his
discretion in making the factual determination[s] ... but we may consider other evidence, which
was unavailable to the plan administrator as it relates to his interpretation of the policy." Id.
Here, Blue Cross admits that the decisions made by its plan administrators were
factual determinations rather than policy interpretations. As a result, under Moore, in
evaluating whether Blue Cross's plan administrator abused its discretion in denying
Bellaire's claims, the district court could consider only the evidence that was available to
the plan administrator.
7
Blue Cross contends that the district court erroneously considered evidence that was not part
of the administrative record, in contravention of Moore. Specifically, Blue Cross argues that as
part of the written record Bellaire submitted to the court, Bellaire submitted an expert report from
Dr. Susan Backes, White's treating physician, that was not in the administrative record because it
was written after Blue Cross's second-level appeal decision.
The facts upon which the district court relied in its order were generated at the
time of White's in-patient treatment at Bellaire and were contained in the administrative
record. As a result, we reject Blue Cross's argument that the district court improperly
considered evidence unavailable to the plan administrator at the time he made his factual
determinations.
8
Though we have not previously addressed the precise issue presented in this appeal, we have
determined that a court must hold an oral hearing on a civil contempt motion. In Sanders v.
Monsanto Co., 574 F.2d 198 (5th Cir.1978), we rejected the argument that FED.R.CIV.P. 43(e),
which specifically authorizes district courts to hear motions without oral testimony, governs civil
contempt motions. We found that because a civil contempt action "is more in the nature of a trial
on the merits," Rule 43(a) controls it. We stated:
A contempt proceeding from a court order is highly factual, approximating a trial
7
C
Blue Cross next contends that the district court applied an improper standard of review to
the factual determinations made by Blue Cross. A district court should review factual determinations
made by an ERISA plan administrator for an abuse of discretion. Pierre v. Connecticut Gen. Life
Ins. Co., 932 F.2d 1552, 1562 (5th Cir.), cert. denied, 502 U.S. 973, 112 S.Ct. 453, 116 L.Ed.2d 470
(1991).
Blue Cro ss co ncedes that its decisions regarding the medical necessity of the in-patient
hospital case received by White and Catlin were factual determinations subject to abuse of discretion
review by the district court under Pierre.9 Blue Cross argues, however, that despi te the district
court's statement at the outset of its order that it would review Blue Cross's decisions for an abuse
of discretion, it actually reviewed Blue Cross's decisions under the more stringent de novo standard.
As noted, the district court specifically set forth the proper standard of review at the beginning
on the merits. Therefore, evidence ought to be presented in the method most
consistent with arriving at the truth. Historical experience has taught us that
testimonial evidence has the highest reliability because the credibility of the
witnesses can be evaluated, and the factual issues narrowed by cross-examination.
Because the contempt proceedings depend so heavily on complex facts not readily
perceivable from the record, an oral hearing within the scope of Rule 43(a) is
necessary.
Id. at 199-200.
Our concerns in Sanders, however, are not present in this case. Moore bound the
district court to consider only the evidence that was available to the plan administrator;
the parties could not enhance the administrative record with oral testimony. As a result,
witness credibility was not relevant to the district court's decision in this case.
9
Bellaire argues that the district court should have reviewed Blue Cross's claims decisions de
novo, alleging that Blue Cross had a conflict of interest as a result of an economic interest in
denying Bellaire's claims. A conflict of interest does not affect the standard of review, but rather
is a factor to be considered in evaluating whether the plan administrator abused his discretion.
See, e.g., Sweatman v. Commercial Union Ins. Co., 39 F.3d 594, 599 (5th Cir.1994) ("[A]
conflict of interest does not change the standard of review.... Instead, the district court should
weigh any potential conflict of interest in its determination of whether the plan administrator
abused its discretion.") (citations omitted); Salley v. E.I. DuPont de Nemours & Co., 966 F.2d
1011, 1014 (5th Cir.1992) ("[I]f a benefit plan gives discretion to an administrator or fiduciary
who is operating under a conflict of interest, that conflict must be weighed as a factor in
determining whether there is an abuse of discretion.") (citation omitted).
8
of its order. The order states:
2. Standard of Review
Judicial review is limited to determining whether there is substantial evidence in the record
to support Blue Cross' decision that in-patient case was medically unnecessary or whether its
refusal to pay the submitted claims was arbitrary. Duhon v. Texaco, Inc., 15 F.3d 1302, 1306
(5th Cir.1994). An arbitrary decision is one made without a rational connection between the
known facts and the decision or between the found facts and the evidence.
The district court then made detailed factual findings based on the written evidence submitted by the
parties, and concluded that Blue Cro ss had improperly denied Bellaire's claims. Blue Cross's
dissatisfaction with the district court's findings and conclusion does not demonstrate that the court
applied a standard of review different from that expressly stated in its order.
We have interpreted Blue Cross's argument on appeal to be the legal argument that the
district court failed to apply the appropriate abuse of discretion standard of review to the benefits
decisions made by Blue Cross. Blue Cross's argument, however, can also be construed as a challenge
to the district court's ultimate holding that Blue Cross abused its discretion in denying Bellaire's
claims. We review de novo the district court's holding on the question of whether a plan
administrator abused its discretion or properly denied a claim for benefits. Sweatman v. Commercial
Union Ins. Co., 39 F.3d 594, 601 (5th Cir.1994). However, we will set aside the district court's
factual findings underlying its review of the plan administrator's determination only if clearly
erroneous. Id. Thus, under Pierre, we must determine whether Blue Cross's decisions amounted to
an abuse of its discretion. Id. at 601; see also Pierre, 932 F.2d at 1562 ("[F]ederal courts owe due
deference to an administrator's factual conclusions that reflect a reasonable and impartial judgment.").
In applying the abuse of discretion standard, we analyze whether the plan administrator acted
arbitrarily or capriciously. Sweatman, 39 F.3d at 601.
White's contract provides for "[u]p to 30 days" of in-patient care for treatment of "nervous
and mental conditions," and Catlin's contract provides for "[u]p to 45 days" of in-patient care for
9
treatment of "nervous and mental conditions."10 Both contracts state that "[a] service must be
medically necessary in order to be covered." The contracts define "medical necessity" as:
Medical necessity for payment of hospital services includes all of the following:
The covered service is for the treatment, diagnosis or symptoms of an injury,
condition or disease.
The service, treatment or supply is appropriate for the symptoms and is consistent
with the diagnosis.
Appropriate means that the type, level and length of care, treatment or supply
and setting are needed to provide safe and adequate care and treatment.
For inpatient hospital stays, acute care as an inpatient must be necessitated by
the patient's condition because safe and adequate care cannot be received as
an outpatient or in a less intensified medical setting.
The services are not mainly for the convenience of the member or health care
provider.
The treatment is not generally regarded as experimental or investigational by BCBSM.
The treatment is not determined to be medically inappropriate by the Utilization
Management and Quality Assessment Programs.
In the section of the contracts entitled "Hospital Services Which are Payable," the contracts state:
In order for covered services to be payable, they must be medically necessary. (See the
definition of "Medically Necessary" in Section 2, "The Language of Health Care.")
Note: Medically necessary services which can be provided safely in an outpatient or office
location are not payable when provided on an inpatient basis.
Blue Cross denied Bellaire's claims after determining that White and Catlin's in-patient care was not
medically necessary.
Blue Cross pro vides its reviewers with a manual entitled "Criteria for Review of Adult
Inpatient Psychiatric Services." The manual is "intended to aid the reviewer in the process of
determining whether valid medical need existed for the inpatient provision of psychiatric care and
10
The district court stated that the Blue Cross contract "provides in-patient hospital care for
beneficiaries who suffer from nervous and mental disorders for up to thirty days." Though
Catlin's Blue Cross contract does contain this provision, it also contains a rider that specifies
coverage of up to forty-five days for in-patient hospital treatment for nervous and mental
disorders.
10
whether the care is in accord with accepted standards of medical practice." The manual lists examples
of "fairly specific and definable patterns of impaired behavior about which there is consensus that the
hospital is the most appropriate setting for treatment." These criteria include: a person who is
actively suicidal or demonstrates a st rong potential for suicide; a person who is actively
self-mutilative; and a person who has demonstrated "an inability to tolerate or respond to a good
faith effort at aggressive outpatient and/or partial hospitalization treatment, and there is a reasonable
hope that inpatient therapy will significantly improve the patient's condition."
In its order, the district court discussed these provisions of the insurance contracts and
detailed the above-described justifications for in-patient treatment of mental disorders. It also made
factual findings that White had attempted suicide in the past; that she had suicidal "ideations,
delusions, and hallucinations" which persisted during her in-patient treatment at Bellaire; that she
heard voices and believed herself to be possessed by a demon; that her condition deteriorated during
out-patient therapy; and that her physician believed she demonstrated a strong potential for suicide.
The district court also found that Catlin was admitted to Bellaire after her second suicide attempt in
thirty days; that she had suffered two recent drug overdoses; that out-patient therapy had not helped
her; that she attempted to harm herself during her hospital stay by scratching her wrists; and that her
physician b required to stabilize her condition. The district court then concluded that Bellaire had
"sufficiently supported its claim that in-patient hospital care was necessary for both patients."
Blue Cross argues that the district court improperly supplanted its judgment in place of Blue
Cross's reasonable claims decisions. To support this contention, Blue Cross asserts that it conducted
a reasonable investigation before denying Bellaire's claims, and contends that ample evidence
supported its conclusion that in-patient treatment for White and Catlin was not medically necessary.
Specifically, Blue Cross notes that both White and Catlin traveled without assistance from Michigan
to Bellaire Hospital in Houston; that both women completed and signed admission and consent forms
at Bellaire; that Bellaire placed neither woman on "suicide precautions;" that Bellaire removed both
11
women from "close observation" within forty-eight hours of arrival;11 that neither woman was
"self-mutilative;"12 that both women had only vague and nonspecific suicidal thoughts; and that
neither woman posed a danger to herself, others or property.13
After conducting the second-level appeal of Bellaire's claims regarding White's treatment, Blue
Cross notified Bellaire by letter that:
Based on Severity of Illness and Intensity of Service Criteria, a total of 7 days have been
approved; the remaining 22 of [sic] days are denied because Severity of Illness and Intensity
of Service Criteria are not met and the inpatient setting is not justified.
Blue Cross sent Bellaire a similar letter regarding the outcome of the second-level review of Bellaire's
claim regarding Catlin's treatment.
Blue Cross's "Criteria for Review of Adult Inpatient Psychiatric Services" manual states that
"[t]he Severity of Illness/Intensity of Service Psychiatric Criteria [SI/IS], presented in Section II,
should be the main guide to the auditor in determining the necessity of inpatient psychiatric care," and
that "[a]s much as possible, the SI/IS criteria should be used as the standard for determining the
medical necessity of inpatient care." The manual instructs that "[i]f, at the time of admission, and
throughout the hospital stay, the medical record contains documentation that at least one SI criterion
and at least one IS criterion are met, then the case should be approved."14
11
White's physician placed White on "close observation" for suicidal behavior from March 18
to March 25. Catlin's physician placed her on "close observation" for self-abusive behavior for
two days after she cut herself superficially with a razor. Thus, though the women may have been
removed from "close observation" within forty-eight hours of admission, both were returned to
that status for a period of time later in their hospital stays.
12
As noted, Catlin's record reflects that on May 30, after approximately three weeks of
treatment, she cut herself superficially with a razor.
13
The admission forms of both women reflect that upon admission their physicians determined
that they "posed an actual or imminent danger to self, others and/or property due to behavorial
[sic] manifestations of a mental disorder."
14
The SI criteria include:
a. Suicide attempt.
b. Suicidal ideation (e.g., depression with feelings of suicidal hopelessness).
12
c. Self-mutilative behavior.
d. Assaultive behavior.
e. Destructive behavior (to property).
f. Psychiatric symptoms (e.g., hallucinations, delusions, panic reaction, anxiety,
agitation, depression) severe enough to cause disordered/bizarre behavior
(e.g., catatonia, mania, incoherence, autism) or psychomotor retardation
resulting in significant interference with activities of daily living.
g. Disorientation or memory impairment severe enough to endanger the welfare of
self or others.
h. A severe eating disorder (i.e., anorexia and/or bulimia) refractory to a good faith
effort at aggressive outpatient or partial hospitalization therapy.
i. Mental disorder refractory to a thoroughly documented, good faith effort at
aggressive outpatient or partial hospitalization therapy (e.g., recurrent
psychosis not responsive to outpatient treatment; severe depression failing
to respond to 21 days of outpatient drug therapy).
j. Seizures (toxic or withdrawal).
k. History of drug ingestion with suspicion of overdose.
....
The IS criteria include:
Treatments
a. Continuous observation and control of behavior to protect self, others and/or
property (e.g., isolation, restraint, and other suicide/homicide precautions).
b. Need for close and continuous skilled medical observation due to side effects of
psychotropic medications (e.g., hypotension, arrhythmia).
c. Comprehensive multi-modal therapy plan requiring close medical supervision
and coordination due to its complexity and/or the severity of the patient's
signs and symptoms.
NOTE: Except in unusual circumstances (e.g., patient flagrantly psychotic) the
patient must see the psychiatrist in face-to-face therapy at least three
times weekly. Care not meeting this requirement must be justified by
documentation of a convincing rationale.
Such a regimen must include some combination of several or all of the following:
Milieu therapy;
13
The reports of the physicians who conducted the second-level appeals do not reflect
application of the SI/IS criteria, despite Blue Cross's assertion that the SI/IS criteria dictated the
claims denials. Rather, the reports summarize the patients' symptoms and treatment, and conclude
that the in-patient treatment White and Catlin received was not warranted by their conditions.
Our review of the record indicates that White and Catlin's conditions and treatment met the
criteria for necessary in-patient psychiatric care that Blue Cross asserted mandated denial of Bellaire's
claims. White's medical record reflects that upon admission White's t reating physician, Dr. Susan
Backes, recorded White's "major presenting problems" as, inter alia, anorexia, hallucinations,
delusions, and suicidal ideation.15 Dr. Backes also noted that White had attempted suicide in the past.
Individual psychotherapy;
Group therapy;
Family therapy;
Behavior modification;
Psychopharmacotherapy;
Occupational therapy;
Recreational therapy;
Medical supervision; and
Limited use of therapeutic passes.
Medications
d. IV or IM psychotropic medication (at least daily).
e. Significant increases, decreases, or changes of psychotropic medication(s)
requiring close and continuous skilled medical observation and supervision.
....
15
Dr. Backes noted that upon admission White posed "an actual or imminent danger to self,
others, and/or property due to behavorial [sic] manifestations of a mental disorder," and that
"[d]ue to mental disorder," White was "impaired to the degree that [she] manifest[ed] major
disability in social, familial, and/or occupational functioning." Dr. Backes also recorded "a
verified failure of outpatient treatment," and observed that White could not "clinically be managed
in a less intensive setting" and needed "the 24-hour structured therapeutic environment provided
14
White's record reflects that Dr. Backes observed suicidal ideation and delusional thoughts throughout
White's hospital stay.16 Furthermore, the physician who conducted White's "Utilization Management
Physician Review" noted on both occasions17 that White expressed suicidal ideation and delusional
thoughts, and remained a risk of danger t o herself outside the acute care setting. In addition, Dr.
Backes placed White on "close observation" for suicidal behavior from March 18 to March 25. In
sum, White's medical record contains documentation that White met at least two of Blue Cross's SI
criteria at the time of admission and throughout the hospital stay, i.e., suicide attempt and suicidal
ideation (e.g., depression with feelings of suicidal hopelessness).
White's medical record also contains documentation that she met one of Blue Cross's IS
criteria at the time of admission and throughout her hospital stay. Specifically, White's medical record
reflects that she attended daily face-to-face therapy sessions with a psychiatrist, in addition to
attending group therapy and occupational therapy sessions throughout her hospitalization.
Catlin's medical record reflects that she was admitted to Bellaire after a recent suicide attempt,
and that upon admission both Dr. Yusuf, the physician who conducted Catlin's preliminary mental
status exam, and Dr. Orlando Peccora, Catlin's treating physician, noted suicidal ideation and
depression.18 Catlin's record also reflects that Dr. Peccora o bserved suicidal ideation throughout
by a hospital."
16
Dr. Backes recorded observations of White's suicidal ideation and delusional thoughts from
the time of her admission through April 5.
17
White's record reflects that "Utilization Management Physician Review" was conducted on
March 29 and April 5.
18
Dr. Peccora recorded that upon admission Catlin posed "an actual or imminent danger to
self, others and/or property due to behavorial [sic] manifestations of a mental disorder," that she
needed "continuous skilled observation and evaluation available only in a hospital," and that "due
to mental disorder, [Catlin was] impaired to the degree that [she] manifest[ed] major disability in
social, familial, and/or occupational functioning." He also noted "a verified failure of outpatient
treatment," and observed that Catlin could not "clinically be managed in a less intensive setting"
and needed "the 24-hour structured therapeutic environment provided by a hospital."
15
Catlin's hospital stay.19 The physician who conducted Cat lin's "Utilization Management Physician
Review" noted weekly throughout her treatment that Catlin remained a risk of danger to herself
outside the acute care setting. As previously noted, during Catlin's treatment she cut herself
superficially with a razor, and was placed on "close observation" for self-abusive behavior for two
days. Thus, Catlin's medical record contains documentation that Catlin met at least three of Blue
Cross's SI criteria at the time of admission and throughout the hospital stay, i.e., suicide attempt,
suicidal ideation (e.g., depression with feelings of suicidal hopelessness), and self-mutilative behavior.
Catlin's medical record also contains documentation that Catlin met one of Blue Cross's IS
criteria at the time of admission and throughout her hospital stay. Her record reflects that she
attended daily face-to-face sessions with a psychiatrist, in addition to attending family therapy, group
therapy, and recreational therapy sessions throughout her hospitalization.
Based on the foregoing, we find that the district court's factual findings are supported by the
record, and thus are not clearly erroneous. Though Bellaire's claims were reviewed at three stages,
Blue Cross's evaluation reports do not reflect an analysis consistent with its own criteria. Moreover,
many of the facts that Blue Cross argues constitute "ample evidence" to support its claims decisions
are contradicted by other facts in the record. Thus, we agree with the district court and hold that
Blue Cross acted arbitrarily in denying Bellaire's claims. See Sweatman, 39 F.3d at 601 ("In applying
the abuse of discretion standard, we analyze whether the plan administrator acted arbitrarily or
capriciously.").
D
Blue Cross contests the district court's award of attorneys' fees to Bellaire. We review the
district court's award of attorneys' fees in an ERISA case under the abuse of discretion standard. 29
U.S.C. § 1132(g)(1); Todd v. AIG Life Ins. Co., 47 F.3d 1448, 1458 (5th Cir.1995).
In Todd, after emphasizing that attorneys' fees awards under ERISA are purely discretionary,
19
Dr. Peccora recorded observations of Catlin's suicidal ideation from the time of her admission
through May 28. Catlin's record reflects that on May 30 she cut herself superficially with a razor.
16
we discussed the analysis a district court awarding attorneys' fees under ERISA must undertake. We
noted that we had previously "generally required" consideration of the five Bowen factors,20 id. at
1458, and observed that we had previously "approved the use of the lodestar calculation in ERISA
cases, even if it ha[d] not been explicitly required." Id. at 1459. We then stated:
In an ERISA case, the determination of attorneys' fees requires the district court to apply a
two-step analysis. The court must first determine whether the party is entitled to attorneys'
fees by applying the five factors enumerated in Bowen. If the court concludes that the party
is entitled to attorneys' fees, it must then apply the lodestar calculation to determine the
amount to be awarded.
Todd, 47 F.3d at 1459 (emphasis added). We held that the district court in that case had "abused its
discretion by failing to apply both the Bowen factors and the lodestar calculation." Id.
Bellaire argues that Todd does not require the district court to "espouse its analysis and
reasoning regarding the propriety of an award of attorneys' fees," and that Todd "does not state ...
that a district court's failure to set forth a "lodestar' calculation in awarding attorneys' fees is
tantamount to an abuse of discretion." However, we stated:
[W]e find that the district court abused its discret ion by failing to apply both the Bowen
factors and the lodestar calculation. Accordingly, we vacate the district court's order
concerning attorneys' fees and remand for a proper determination of the amount, if any, to
which appellee is entitled through the application of the two-step analysis articulated above.
Id. at 1459.
Here, Bellaire submitted an affidavit to the district court in which its counsel enumerated the
tasks he had performed during prosecution of this case; he requested a fee award of $15,000. Blue
Cross's counsel also submitted an affidavit to the district court in which he stated that Blue Cross had
expended no more than $5,000 in defending Bellaire's suit. The district court awarded Bellaire
$7,500 in attorneys' fees without explanation.
20
The five Bowen factors are: (1) the degree of the opposing parties' culpability or bad faith;
(2) the ability of the opposing parties to satisfy an award of attorneys' fees; (3) whether an award
of attorneys' fees against the opposing parties would deter other persons acting under similar
circumstances; (4) whether the parties requesting attorneys' fees sought to benefit all participants
and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA
itself; and (5) the relative merits of the parties' position. Iron Workers Local No. 272 v. Bowen,
624 F.2d 1255, 1266 (5th Cir.1980), appeal after remand, 695 F.2d 531 (11th Cir.1983).
17
The record contains no discussion of the two-step analysis necessary for an award of
attorneys' fees in an ERISA case, or any explanation at all of how the district court arrived at the fee
award. As a result, we vacate the court's judgment regarding the amount of attorneys' fees, and
remand for recalculation.
III
For the foregoing reasons, we AFFIRM in part, VACATE in part, and REMAND for a proper
determination of attorneys' fees.
. . . . .
18