Hammack v. Baroid Corporation

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT
_______________

No. 97-40632
_______________

JOE HAMMACK; ANN HAMMACK,

Plaintiffs,

JOE HAMMACK,

Plaintiff-Appellant,

VERSUS

BAROID CORPORATION, formerly doing business as N L
Industries, Incorporated; THE PENSION AND EMPLOYEE
BENEFITS COMMITTEE OF N L INDUSTRIES, INCORPORATED,

Defendants,

BAROID CORPORATION, formerly doing business as N L
Industries, Incorporated,

Defendant-Appellee.

_________________________

Appeal from the United States District Court
for the Southern District of Texas
_________________________
June 9, 1998

Before KING, SMITH, and STEWART, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

In this case arising under the Employment Retirement Income

Security Act (“ERISA”) of 1974, 29 U.S.C. § 1001 et seq., Joe

Hammack sued Baroid Corporation, demanding coverage under the

company's health plan for his wife's hospital bills. The district
court concluded that the Medicare as Secondary Payer (“MSP”)

statute, 42 U.S.C. § 1395y(b), does not apply and awarded Hammack

$124, a fraction of what he had sought. Finding no error, we

affirm.

2
 I.

When Hammack retired from his job with NL Industries in 1985,

at age 55, he was under an NL Industries health plan that qualifies

as a benefit plan under ERISA.1 The plan provided, in relevant

part:

If you retire either directly from active employment or
from an approved company disability plan under a company
sponsored retirement plan, Option A of the medical plan
will continue at no cost to you and your eligible
dependents. . . . Once you or your spouse becomes
eligible for Medicare, benefits will be calculated by
reducing covered medical expenses by the amount of
Medicare payments. In calculating benefits payable, it
is assumed that both you and your dependents have both
part A and B Medicare coverage.

At the time of Hammack's retirement, his wife, Ann, was over 65.

In 1988, Ann Hammack incurred outpatient medical bills

totaling close to $1,000. Baroid paid part of these bills, another

insurer paid part, and the Hammacks paid the remainder.

At some point before February 1989, Baroid notified the

Hammacks that they were best advised to purchase Medicare, because

the benefits under the Baroid plan would be calculated as though

they had enrolled in Medicare, regardless of whether they actually

had. In February 1989, the Hammacks contacted the Social Security

Administration. Shortly thereafter Ann Hammack paid the required

premium and enrolled in Medicare Part B but not in Part A.

Ann Hammack was hospitalized twice in 1989: once from April 6

through April 9, and once from June 9 through June 14, resulting

in bills totaling $5,670.26. Medicare covered part of these

1
Baroid is NL Industries's successor-in-interest and has assumed
responsibility for the health plan.

3
expenses. Baroid covered part as well, but it calculated the

benefits as though Ann Hammack were enrolled in both Part A and

Part B, resulting in reduced payouts to the Hammacks.

II.

Joe and Ann Hammack sued Baroid in state court,2 and Baroid

removed to federal court. Following a bench trial, the court

concluded that Baroid did not abuse its discretion in determining

the Hammacks' benefits. The court ordered Baroid to pay the

Hammacks $124SSthe amount of a bill that Baroid stipulated it had

wrongly failed to pay. The court submitted factual findings and

conclusions of law in a seven-page order. On the final page the

court stated: “FINAL JUDGMENT should issue. It is so ORDERED.”

The court did not, however, file a separate document noting that

this was a final judgment.

Twenty months after this order was issued, Joe Hammack

returned to the court and requested entry of judgment. The court

granted the motion and issued a single-page, separate document

reflecting the final judgment.

We address two questions. First we must decide whether we

have jurisdictionSSor whether Hammack, by waiting twenty months to

seek a separate document noting the entry of final judgment, waived

his right to appeal. The second questionSSassuming we have

jurisdictionSSis whether the district court erred in concluding

that, because Hammack was a retiree, the MSP statute did not apply.

2
Ann Hammack does not appeal the district court judgment.

4
 IV.

Baroid charges that Hammack's lengthy delay in seeking entry

of judgment constitutes waiver of his right to appeal. Under FED.

R. APP. P. 4(a)(1), a civil litigant ordinarily has thirty days

after “entry of the judgment or order appealed from” to file notice

of appeal. This rule in turn refers us to FED. R. CIV. P. 58 and

79(a). Rule 58 contains what is known as the “separate document”

rule: “Every judgment shall be set forth on a separate document.

A judgment is effective only when so set forth and when entered as

provided in Rule 79(a).” Rule 79(a) requires the court to record

the entry of a final judgment in its civil docket.

A.

Baroid does not dispute that Hammack complied with the plain

language of the rule by filing his notice of appeal within thirty

days.3 Instead, Baroid argues that, when a party that has received

a final judgment waits so long before seeking a separate document,

we should construe the delay as waiver of the right to appeal.

Such a rule, Baroid suggests, will promote certainty and finality

in litigation. This question is res nova in this circuit.

Baroid's position is not entirely lacking in legal support.

In Fiore v. Washington County Community Mental Health Ctr.,

960 F.2d 229 (1st Cir. 1992) (en banc), the court, concerned about

reviving long dormant cases years after the parties considered them

3
Nor does Baroid dispute that the seven-page order cannot qualify as a
“separate document” for purposes of FED. R. CIV. P. 58.

5
over, drew an outer limit:

We believe it appropriate, absent exceptional
circumstances, to infer waiver where a party fails to act
within three months of the court's last order in the
case. . . . A party wishing to pursue an appeal and
awaiting the separate document of judgment from the trial
court can, and should, within that period file a motion
for entry of judgment.

Id. at 236. The court explained that this three-month window would

ensure that a failure to appeal was a matter of “choice, not

confusion.” Id. at 236 n.11. Baroid urges us to adopt Fiore's

rule and apply it in this case to quash Hammack's appeal.4

B.

The Supreme Court recognized waiver of the separate document

requirement in Bankers Trust Co. v. Mallis, 435 U.S. 381 (1978).

There, the Court permitted waiver when the district court intended

its opinion and order as the final decision in the case, when the

judgment of dismissal was entered in the docket, and when neither

party objected to the taking of the appeal. The Court envisioned

its rule as preventing needless delay: Were the appeals court to

dismiss the case for want of jurisdiction, the district court would

simply issue a separate document and the appellant would once again

take an appealSS”Wheels would spin for no practical purpose.” Id.

at 385. But the Court tempered its willingness to read rule 58

4
Only one other circuit has considered this rule. In Rubin v.
Schottenstein, Zox & Dunn, No. 96-3017, 1998 U.S. App. LEXIS 9004, at *20 (6th
Cir. May 7, 1998) (en banc), the court expressly rejected Fiore's approach and
adopted the panel's view that while construing a three-month delay as waiver of
the separate document requirement “may be a pragmatic resolution of the problem,
it is not supported by the rules or the Supreme Court's statements on the issue.”
Rubin v. Schottenstein, Zox & Dunn, 110 F.3d 1247, 1253 n.4 (6th Cir. 1997).

6
flexibly, explaining that the rule should not be construed to cut

off the rights of appellants. “The rule should be interpreted to

prevent loss of the right of appeal, not to facilitate loss.” Id.

at 386 (quoting 9 JAMES W. MOORE, ET AL., MOORE'S FEDERAL PRACTICE

¶ 110.08[2], at 119-20 (2d ed. 1970)).

In construing rule 58, we have been faithful to the teaching

of Mallis and have avoided interpreting the rule to extinguish

appeals. For example, in Baker v. Mercedes Benz of N. Am.,

114 F.3d 57 (5th Cir. 1997), we characterized the rule as “a safety

valve preserving a litigant's right to appeal in the absence of a

separate document judgment.” We held that under rule 58, a

litigant could not have forfeited his right to appeal absent a

separate document judgment, concluding that a party's “right to

appeal cannot be prejudiced by failing to file a notice of appeal

when no Rule 58 separate document judgment has been entered.” Id.

at 60. We specifically noted that “[i]f a separate document

judgment is not entered . . . the time for filing an appeal does

not begin to accrue until a judgment complying with the Rule 58

dictates has been entered.” Id. Similarly, in Simon v. City of

Clute, Tex., 825 F.2d 940 (5th Cir. 1987), we all but foreclosed

Baroid's argument by explaining that the separate document

requirement “may be waived to allow an appeal in the absence of a

separate document [as in Mallis], but not to cause a forfeiture of

the right to appeal.” Id. at 942 (footnote omitted).5

5
See also Seiscom Delta, Inc. v. Two Westlake Park (In re Seiscom Delta,
Inc.), 857 F.2d 279, 283 (5th Cir. 1988) (noting that Mallis “should be read, where
(continued...)

7
 While we have yet squarely to consider the First Circuit's

approach in Fiore, the logic of our caselaw counsels its rejection.

To the extent that we have permitted waiver of the separate

document requirement, it has been in situations similar to that in

MallisSSwhere neither party objects to the taking of an appeal and

strict application of the rule would prove a pointless and

burdensome exercise. We have never employed the doctrine to

extinguish a party's right of appeal, even when, as Baroid

suggests, doing so might promote finality and certainty.6

Accordingly, we reject Fiore and hold that a party's delay in

seeking a separate document judgment cannot constitute waiver of

his right to appeal. Under the plain language of FED. R. APP.

P. 4(a)(1) and FED. R. CIV. P. 58, the thirty-day period for taking

an appeal does not begin to run until the court has issued a

separate document and records entry of the final judgment in its

civil docket. Should a court fail to issue a separate document, a

(...continued)
reasonably possible, to protect the right of appeal”). In Seiscom Delta, we
underscored that rule 58 should not be used to extinguish an appellant's rights
when the district court has entered an ambiguous order:
Where . . . a party is severely prejudiced by lack of entry of a
judgment because it is unclear whether a final judgment has indeed
been entered, rule 58 should be applied mechanically . . . to favor
the right of appeal by allowing the party in jeopardy to appeal from
the separate-document judgment once one has been entered.
Id.
6
We note that Hammack's 20-month delay is unusually long. In Baker,
114 F.3d at 59, the appellant, having received what appeared to be a final
judgment, waited just over two months before seeking a separate document. In
Simon, 825 F.2d at 942, while the appellants waited 17 months before seeking a
writ of mandamus from the court of appeals, they repeatedly sought entry of final
judgment from the district court during this period. What is unusual about this
case is not only the length of the delay, but Hammack's total silence throughout.

8
party seeking finality remains free to request one.

V.

We now turn to the merits. Hammack argues that the provision

of Baroid's plan under which a retiree's benefits are reduced by

the amount of potential Medicare payments is invalid because it

violates the MSP statute. He contends that the district court

erred by deeming the statute inapplicable to retirees.

The district court concludedSSand Hammack concedesSSthat

Baroid's plan endows its administrator with discretionary authority

to make eligibility determinations and construe the plan's terms.7

When an administrator is vested with such authority, its decisions

are reviewed by a federal court for abuse of discretion. Firestone

Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989).

In reviewing the district court's legal conclusions, such as

whether the plan administrator abused its discretion, our standard

of review is de novo. We review the district court's findings of

fact for clear error. Sunbeam-Oster Co. Group Benefits Plan v.

Whitehurst, 102 F.3d 1368, 1373 (5th Cir. 1996); Switzer v. Wal-

Mart Stores, Inc., 52 F.3d 1294, 1298 (5th Cir. 1995).

A.

7
Specifically, the plan provides that the administrator shall have general
responsibility for “Determination of Benefit eligibility” and “all powers
necessary to carry out the provisions of the pertinent documents and . . . the
exclusive right to construe such documents and to determine and resolve any
question that may arise in connection with its funding, application or
administration . . . .”

9
 Under the MSP statute as it read in 1988 and 1989 when Ann

Hammack received medical treatment, Medicare could not be the

primary coverage for “employees” with private coverage through

their employer. The statute provided:

A group health planSS

(I) may not take into account, for any item or service
furnished to an individual 65 years of age or older at
the time the individual is covered under the plan by
reason of the current employment of the individual (or
the individual's spouse), that the individual is entitled
to benefits under this subchapter under section 426(a) of
this title, and

(II) shall provide that any employee age 65 or older, and
any employee's spouse age 65 or older, shall be entitled
to the same benefits under the plan under the same
conditions as any employee, and the spouse of such
employee, under age 65.

42 U.S.C. § 1395y(b)(1)(A)(i) (1988). Thus, the statute prohibited

employers from designating Medicare as the primary payer for active

employeesSSthe working agedSSbut not for retirees. See Provident

Life & Accident Ins. Co. v. Leonard, 526 So. 2d 721, 722 (Fla. Ct.

App. 1988) (holding that MSP statute applies only to active

employees, not retirees), review denied, 563 So. 2d 633 (1990).

Hammack argues that a 1993 amendment expanded the statute to

include retirees. Presently, the statute applies to individuals

with “current employment status,” which is defined as an employee,

an employer, or anyone “associated with the employer in a business

relationship.” 42 U.S.C. § 1395y(b)(1)(A)(i), (b)(1)(E)(ii). But

even if we were to apply the amended version of a statute to claims

that arose before the amendments were enacted, it is not evident

that the result would differ, for courts have continued to hold the

10
MSP statute inapplicable to retirees.8

B.

Hammack deploys two additional arguments. First, he suggests

that any interpretation excluding retirees is inconsistent with the

MSP statute's purpose, viz., to reduce Medicare outlays by ensuring

that private insurers pay first.9 Yet theories of underlying

intent or purpose cannot trump statutory languageSSand Hammack

points to no such language commanding the result he demands.

In fact, the text of the statute indicates precisely the

opposite: By limiting the statute's scope to “employees,” Congress

consciously excluded retirees. The MSP statute reversed the order

of payment in certain situations where Medicare beneficiaries enjoy

an alternate source of health care coverage; it does not follow

that the statute reversed the order of payment in all situations.

Second, Hammack argues that Baroid's decision to reduce

payments under its plan by the amount the participants could

8
See, e.g., Medicare Benefits Defense Fund v. Empire Blue Cross Blue
Shield, 938 F. Supp. 1131, 1135 (E.D.N.Y. 1996) (“When an individual continues
working past sixty-five or past the date when his or her covered spouse becomes
sixty-five, the Medicare Secondary Payer statute becomes applicable.”) (internal
citation omitted); Perry v. Metropolitan Life Ins. Co., 852 F. Supp. 1400, 1407
(M.D. Tenn. 1994) (“Attributing the usual meaning to the statutory language leads
to the logical conclusion that the MSP statute applies only to health care plans
which cover individuals who are working or have an otherwise active employment
status.”), rev'd on other grounds sub nom. Perry v. United Food & Commercial
Workers Dist. Union, 64 F.3d 238 (6th Cir. 1995).
9
See, e.g., Blue Cross & Blue Shield v. Shalala, 995 F.2d 70, 73 (5th Cir.
1993) (“Congress designed the MSP statute to prevent group health plans from
providing that the plan will be the secondary payer if Medicare coverage
exists.”); Baptist Mem. Hosp. v. Pan Am. Life Ins. Co., 45 F.3d 992, 997 (6th
Cir. 1995) (quoting Provident Life & Accident Ins. Co. v. United States,
740 F. Supp. 492, 495 (E.D. Tenn. 1990)) (reasoning that by enacting MSP statute,
“Congress sought to reduce Medicare spending and to insure the continued fiscal
integrity of the Medicare program”).

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receive under Medicare was contrary to the plan's intent of

providing free medical care to its former employees. Setting aside

the question how Hammack elicits such a sweeping intent, we do not

agree that, by designating Medicare as primary payer for retired

employees, Baroid is thereby precluded from limiting its

obligations.

In sum, we agree with the district court that because Hammack

was a retiree, the MSP statute does not apply. Accordingly, the

provision in Baroid's plan is not void under the statute, and the

administrator did not abuse its discretion in discounting Hammack's

payments by the amount of potential Medicare benefits.10

AFFIRMED.

10
Hammack's “argument” seeking attorney's fees is limited to a breezy
request at the conclusion of his brief. He appears not to have raised this claim
in the district court, nor has he chosen to call to our attention any evidence
or precedent in support of his claim. His request is therefore denied.

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