PUBLISH
UNITED STATES COURT OF APPEALS
Filed 11/13/96
TENTH CIRCUIT
JOSEPH W. CHAMBERS,
Plaintiff - Appellant,
v. No. 95-3134
FAMILY HEALTH PLAN
CORPORATION, aka Healthcare
America Plans, Inc.,
Defendant - Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
(D. Ct. No. 93-CV-1287)
Kenneth L. Weltz (Michael D. Herd and Kenneth P. Leyba with him on the
briefs), Curfman, Harris, Rose, Weltz, Metzger & Smith, Wichita, KS, appearing
for the Appellant.
Charles E. Millsap (Lyndon W. Vix with him on the brief), Fleeson, Gooing,
Coulson & Kitch, appearing for the Appellee.
Before PORFILLIO, TACHA, and BRORBY, Circuit Judges.
TACHA, Circuit Judge.
Joseph Chambers brought suit against Family Health Plan Corporation
(“FHP”) seeking judicial review of FHP’s decision to deny him healthcare
benefits under the Employee Retirement Income Security Act of 1974 (“ERISA”),
29 U.S.C. § 1132(a)(1)(B). The parties agreed to have a federal magistrate judge
hear the case pursuant to 28 U.S.C. § 636(c)(1). The magistrate judge entered
judgment for FHP and Chambers appeals. We have jurisdiction under 28 U.S.C.
§ 1291 and affirm.
BACKGROUND
Chambers, a retired employee of the National Cooperative Refinery
Association, is a beneficiary of a prepaid healthcare plan provided by FHP (“the
Plan”). In February of 1990, Chambers learned that he suffered from pulmonary
embolization, a condition which results in the accumulation of blood clots in the
arteries to the lungs. The condition is fatal if untreated. Other than a lung
transplant, the only known treatment is pulmonary thrombo-endarterectomy
(“PTE”), a procedure which involves the surgical removal of blood clots from
affected arteries.
After diagnosing Chambers, his doctors in Wichita advised him to undergo
a PTE procedure. They recommended that Dr. Kenneth Moser at the University
of California San Diego Medical Center (“UCSDMC”) perform the surgery.
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Chambers made a claim for health insurance benefits to FHP under the Plan to
cover the cost of the PTE treatment.
FHP assigned the investigation of the Chambers’s claim to Dr. Andrew
Nachtigall, FHP’s medical director. Dr. Nachtigall thereafter began investigating
how the medical community characterized PTE. On March 9, 1990, Dr.
Nachtigall notified Chambers in writing that FHP considered PTE to be an
“experimental” procedure that was not covered by the Plan.
Jeff Chambers, the plaintiff’s son, filed a formal grievance with FHP on
behalf of his father. Because of the plaintiff’s declining health, FHP accelerated
the grievance process to the final step, a hearing before the board of directors of
FHP (“Board”). Approximately one week before the hearing, FHP informed
Chambers that he should be prepared to present his father’s claim for benefits and
any information regarding the experimental nature of the PTE procedure at the
hearing.
On April 26, 1990, the Board conducted a thirty-minute hearing to consider
Chambers’s claim. Jeff Chambers told the Board that although PTE was an
uncommon procedure, Dr. Moser had performed it “for years.” Relying on
information provided by his father’s doctors, Chambers told the Board that the
procedure was not experimental. Chambers also submitted information and
journal articles from Dr. Moser describing the procedure. Dr. Nachtigall
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presented a report on the results of his investigation. At the conclusion of the
hearing, the Board told Chambers that he could submit additional information to
the Board.
On May 1, 1990, the Board sent a letter to Joseph Chambers, denying
insurance benefits for the PTE procedure because it was “experimental.”
Chambers successfully underwent PTE treatment later that month at UCSDMC.
Although Chambers proceeded to submit evidence to FHP to support his claim for
coverage, FHP continued to deny benefits to Chambers.
Chambers brought suit against FHP, seeking to recover the expenses he
incurred in connection with the PTE procedure and for attorneys’ fees. At trial,
FHP filed a motion in limine to prevent the magistrate judge from considering
evidence that was not in the administrative record in reviewing FHP’s decision to
deny Chambers benefits. The magistrate judge granted the motion and thus
refused to consider any evidence presented to FHP after May 1, 1990, the date of
FHP’s final decision to deny coverage. The magistrate stated that if she had been
able to conduct a de novo review of all the evidence, she would have found that
FHP’s denial of coverage was erroneous. Based only on the evidence submitted
to FHP on or before May 1, 1990, the judge concluded that FHP’s decision was
not arbitrary and capricious.
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Chambers makes four arguments on appeal. First, Chambers contends that
FHP failed to follow ERISA’s procedural requirements. Second, Chambers
argues that the magistrate judge erred in limiting the scope of review to evidence
submitted to FHP on or before May 1, 1990. Third, Chambers asserts that FHP’s
decision denying him health insurance benefits was arbitrary and capricious,
especially in light of FHP’s conflict of interest. Finally, Chambers contends the
magistrate erred in failing to award him attorneys’ fees.
DISCUSSION
I. ERISA’s Procedural Requirements
Chambers devotes a significant portion of his brief to arguing that FHP
failed to follow several of ERISA’s procedural requirements in denying him
benefits. Specifically, Chambers alleges that FHP failed to inform him of the
“specific reasons” for its denial of coverage as required by 29 U.S.C. § 1133(1)
and 29 C.F.R. § 2560.503-1(f)(1). Chambers also contends that FHP failed to tell
him the type of information he needed to submit to FHP to appeal its initial
decision as required by 29 C.F.R. § 2560.503-1(f)(3)-(4). Chambers next
maintains that FHP failed to tell him the evidence that FHP relied upon in making
its decision as required by 29 C.F.R. § 2560.503-1(g)(1)(iii). Finally, Chambers
argues that FHP failed to conduct a “full and fair review” of the claim by refusing
to review information submitted by Chambers and by refusing to collect and
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review reasonably available information from other sources as required by 29
U.S.C. § 1133(2) and 29 C.F.R. § 2560.503.1(g)(1).
As a preliminary matter, we must determine whether Chambers may
properly appeal these procedural claims despite his failure to raise the claims
before the magistrate judge. Although the magistrate’s Memorandum and Order
did not discuss his procedural claims, Chambers nevertheless argues that because
the record contains “numerous references” to FHP’s alleged procedural violations
he adequately preserved the issue for appeal.
Chambers asserts that the complaint, pretrial order, and his trial brief refer
to FHP’s violations of “ERISA, 29 U.S.C. § 1001, et seq.” He argues that this is
a clear reference to all applicable ERISA sections and regulations, including
ERISA’s procedural requirements. We disagree that such a general reference is
sufficient to preserve the issues for appeal.
Chambers also contends that both the complaint and pretrial order allege
that FHP acted arbitrarily and capriciously to “interfere” with his rights. He
maintains that such “interference” includes FHP’s failure to follow ERISA
procedures. We reject his contention that such broad language sufficiently raised
the issue below such that it preserved his right to appeal his procedural claims.
Chambers next maintains that because he discussed FHP’s procedural
irregularities in his trial brief, he adequately preserved his procedural claims for
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appeal. The trial brief has some general discussion about FHP’s investigation of
PTE, the notice given to Chambers, the reasons for denying his claim, and the
disclosure of the information FHP consulted. We find, however, that these
allegations were made only to show that FHP’s ultimate decision was arbitrary
and capricious, not that FHP violated any particular procedural requirement. The
failure of Chambers to cite any cases or regulations upon which he now relies
bolsters our conclusion.
Finally, Chambers argues that he preserved his procedural ERISA claims
because his proposed findings of fact and conclusions of law requested that the
magistrate judge find that FHP’s “actions and failures to act” were arbitrary and
capricious. We find that this conclusory language, coupled with his failure to cite
any cases or regulations, fails to preserve his procedural claims for appeal.
Despite Chambers’s failure to raise his procedural claims, we must
determine whether we should nevertheless address the claims on appeal. "Absent
compelling reasons, we do not consider arguments that were not presented to the
district court." Crow v. Shalala, 40 F.3d 323, 324 (10th Cir. 1994). As in Crow,
"we see no reason to deviate from the general rule” and will not adress the merits
of his procedural claims. Id.
II. Scope of Review
A. Requirements of Federal Rule of Appellate Procedure 3
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As a preliminary matter, FHP argues that Chambers, in appealing the
magistrate judge’s decision limiting the scope of review, failed to comply with
the jurisdictional requirements of Federal Rule of Appellate Procedure 3, which
requires that a party appealing a decision must designate the particular “judgment,
order, or part thereof appealed from.” FHP argues that while the trial court
granted FHP’s motion in limine on December 13, 1994, the plaintiff’s notice of
appeal refers only to the court’s order on March 31, 1995. FHP contends that the
notice of appeal, by referring only to the order on March 31, 1995, did not state
the proper “order . . . appealed from.”
On December 13, 1994, the magistrate judge granted FHP’s motion in
limine. After granting the motion, the judge added:
And I would invite the parties to address this further in your
proposed findings if you choose to do so. I’m not asking you to do
it, but if you still want to revisit that issue, you are welcome to do so.
But I have ruled on the record on the motion in limine, just as Mr.
Millsap wanted me to.
The magistrate formalized her decision granting the motion in limine by filing a
minute order on the docket on December 15, 1995.
Consistent with the magistrate’s invitation to revisit the issue, Chambers
submitted proposed findings of fact and conclusions of law that would have
permitted the judge to consider evidence submitted to FHP after the date of its
decision to deny Chambers benefits. Chambers argued that “[i]n light of the
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foregoing realities, the court should consider the proffered testimony for it clearly
establishes that FHP was arbitrary and capricious in denying coverage under the
plan.” The magistrate, however, rejected this argument in its Memorandum and
Order dated March 31, 1995. Although the magistrate noted that FHP’s motion in
limine “was granted” at the conclusion of trial, the judge proceeded to examine
the issue in her March 31 decision. After discussing the relevant law, the
magistrate then stated: “Accordingly, FHP’s motion in limine is granted; the
court must base its findings and conclusions regarding the quality of FHP’s
decision only on evidence presented to FHP on or before May 1, 1990.”
(Emphasis added).
Chambers filed a notice of appeal regarding matters decided in the
“Memorandum and Order dated March 31, 1995.” In light of the magistrate
judge’s invitation to “revisit” the evidentiary issue, the plaintiff’s proposed
findings of fact and conclusions of law, and the magistrate’s discussion and
resolution of the issue in her Memorandum and Order on March 31, we hold the
March 31 order was the final order disposing of the evidentiary matter. Thus,
Chambers’s notice of appeal complied with Rule 3.
B. Admissibility of Evidence
Chambers argues that the magistrate judge abused her discretion in limiting
her review of FHP’s denial of benefits to the evidence presented to FHP on or
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before the date of its final decision. In granting FHP’s motion in limine, the
magistrate judge relied on Sandoval v. Aetna Life & Casualty. Ins. Co., 967 F.2d
377 (10th Cir. 1992). In Sandoval, the plaintiff, who suffered from a physical
impairment, received disability benefits under an ERISA plan. Id. at 378. During
a routine claims review, the plan administrator determined that the plaintiff was
no longer totally “disabled” under the plan’s definition and terminated his
disability benefits. Id. at 378-79. During the grievance process, the administrator
asked the plaintiff to submit any additional information that he believed the
administrator should consider in reviewing its decision. Id. at 379. The review
committee ultimately upheld the decision to terminate the plaintiff’s benefits. Id.
After filing suit, the plaintiff’s psychologist found that he was totally
disabled due to a psychological impairment. Id. At trial, the district court agreed
that the plaintiff was totally disabled. Id. The court, however, refused to
consider such evidence in determining whether the administrator’s decision had
been arbitrary and capricious, finding that the plaintiff had not submitted any
evidence that he might be psychologically impaired during the grievance process.
Id. We agreed that in determining whether the plan administrator's decision was
arbitrary and capricious, the reviewing court “generally may consider only the
arguments and evidence before the administrator at the time it made that
decision.” Id. at 380.
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Most circuits have held that in reviewing decisions of plan administrators
under the arbitrary and capricious standard, the reviewing court may consider only
the evidence that the administrators themselves considered. See Miller v. United
Welfare Fund, 72 F.3d 1066, 1071 (2d Cir. 1995) (“[A] district court's review
under the arbitrary and capricious standard is limited to the administrative
record.”); Lee v. Blue Cross/Blue Shield, 10 F.3d 1547, 1550 (11th Cir. 1994)
(requiring courts "to look only to the facts known to the administrator"); Taft v.
Equitable Life Assurance Soc’y, 9 F.3d 1469, 1471-72 (9th Cir. 1993) (fearing
that examination beyond the administrative record would too easily lead to
findings of abuse of discretion, defeating the goal of ERISA to resolve disputes
expeditiously); Abnathya v. Hoffmann-La Roche, Inc., 2 F.3d 40, 48 n. 8 (3d Cir.
1993) (holding that evaluations submitted after the committee’s final decision
cannot be considered in determining whether the decision was arbitrary and
capricious); Oldenburger v. Central States Southeast & Southwest Areas Teamster
Pension Fund, 934 F.2d 171, 174 (8th Cir. 1991) (“We limit our review to the
evidence that was before a pension fund's board of trustees when the final
decision was made.”); Perry v. Simplicity Eng'g, 900 F.2d 963, 967 (6th Cir.
1990) (noting that both de novo and arbitrary and capricious standards of review
do "not mandate or permit the consideration of evidence not presented to the
administrator"). But see Wildbur v. ARCO Chem. Co., 974 F.2d 631, 638-42 (5th
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Cir. 1992) (allowing district courts to look beyond the administrative record to
review the administrator's plan interpretation, but not to review "the historical
facts underlying a claim"). Nevertheless, Chambers urges us to disregard
Sandoval and these other cases for three reasons.
First, Chambers relies on Wildbur in arguing that the magistrate should
have considered evidence outside the administrative record in reviewing FHP’s
decision. In that case, the Fifth Circuit held that while a district court should
evaluate an administrator’s fact findings regarding the eligibility of a claimant
based on the administrative record, the court may look to evidence which is not
part of the administrative record in reviewing the administrator’s interpretation of
the plan. Wildbur, 974 F.2d at 642. Chambers argues that whether PTE was
“experimental” involves interpretation of plan language. We disagree.
Determining whether PTE is “experimental” is analogous to deciding whether the
plaintiff in Sandoval was “disabled.” Both of these turn on issues of historical
fact. See Wildbur, 974 F.2d at 640 n.17 (“Like . . . Sandoval, the case turned on
an issue of historical fact . . . .”). Thus, even under Wildbur, the magistrate judge
did not abuse her discretion in limiting the scope of review to evidence presented
to FHP on or before its final decision.
Second, Chambers argues that the magistrate judge should have considered
additional evidence because of several “procedural irregularities” in the review
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process. See Vanderklok v. Provident Life & Accident Ins. Co., 956 F.2d 610,
617 (6th Cir. 1992); Masella v. Blue Cross & Blue Shield, 936 F.2d 98, 105 (2d
Cir. 1991); Wolfe v. J.C. Penney Co., 710 F.2d 388, 393 (7th Cir. 1983). As we
discussed in Part I, Chambers failed to allege that FHP violated any particular
procedural requirement under ERISA, and we will not address the merits of his
procedural claims on appeal. Similarly, we will not address how FHP’s
procedural errors, if any, affect the scope of review. The record contains no
evidence that Chambers raised this issue to the magistrate judge. Because the
magistrate did not have the opportunity to decide the impact of FHP’s procedural
errors on the scope of review, we decline to address the issue as well.
Finally, Chambers contends that this case involves “exceptional
circumstances” which would allow the district court to review evidence not
presented to the plan administrator. Quesinberry v. Life Ins. Co. of North Am.,
987 F.2d 1017, 1027 (4th Cir. 1993). The plaintiff’s reliance on Quesinberry is
misplaced. In Quesinberry, the Fourth Circuit held that a district court could
consider evidence not in the administrative record when conducting a de novo
review of an administrator’s decision. In contrast, as we will discuss shortly, we
must review FHP’s decision under an arbitrary and capricious standard. Thus, we
adhere to our holding in Sandoval and conclude that the magistrate judge did not
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abuse her discretion in limiting the scope of review to evidence presented to FHP
prior to its final decision on May 1, 1990.
III. FHP’s Decision
A. Standard of Review
Although ERISA gives a plan beneficiary the right to judicial review of
benefit denials, the statute did not establish the standard of review for such
decisions. In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989),
the Supreme Court held that “a denial of benefits challenged under
§ 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit
plan gives the administrator or fiduciary discretionary authority to determine
eligibility for benefits or to construe the terms of the plan.”
In this case, the Plan excludes from coverage “medical [or] surgical . . .
procedures . . . which in the judgment of FHP are experimental.” The Plan
expressly gives FHP discretion to determine whether to deny a claimant insurance
benefits for an “experimental” procedure. Thus, under Firestone, a reviewing
court must uphold FHP’s decision to deny Chambers benefits unless it was
arbitrary and capricious. 1 Though the magistrate judge recognized that an
1
We have consistently stated that we review an administrator’s decision under an
“arbitrary and capricious” standard, rather than an “abuse of discretion” standard, when
an ERISA plan gives the administrator discretion. See, e.g., Sandoval, 967 F.2d at 380.
Some circuit courts have recently distinguished between these two standards and have
concluded that the abuse of discretion standard is more appropriate. See, e.g., Morton v.
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arbitrary and capricious standard applied, the magistrate reasoned that she should
give less deference to FHP’s decision because FHP operated under a conflict of
interest in deciding the plaintiff’s claim. She concluded that because every Board
member who decided Chambers’s claim had a financial interest in FHP, a pure
arbitrary and capricious standard was inappropriate. We agree and thus address
exactly how such a conflict of interest affects our standard of review.
In Firestone, the Supreme Court briefly discussed the effect of a conflict of
interest on the standard of review of an administrator’s decision. The Court
stated:
Of course, if 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 ‘facto[r] in determining whether there is an
abuse of discretion.’
Id. at 115 (quoting Restatement (Second) of Trusts § 187 cmt. d (1959)). Since
Firestone, all of the circuit courts agree that a conflict of interest triggers a less
Smith, 91 F.3d 867, 870 (7th Cir. 1996) ([T]he arbitrary-and-capricious standard is
appropriate when discretion is limited only by good faith. When the plan administrators
have the discretion to make reasonable constructions of the terms of the plan, courts
should review their interpretations for the abuse of discretion.). Most courts, however,
have held that this is a "distinction without a difference." Cox v. Mid-America Dairymen,
Inc., 965 F.2d 569, 572 n.3 (8th Cir. 1992); see also Canseco v. Construction Laborers
Pension Trust, 93 F.3d 600, 605 (9th Cir. 1996) (“We have equated the abuse of
discretion standard with ‘arbitrary and capricious’ review.”); Wildbur v. ARCO Chemical
Co., 974 F.2d 631, 635 n.7 (5th Cir. 1992) (noting only a "semantic, not a substantive,
difference" between the two terms). We agree and adhere to the arbitrary and capricious
standard of review.
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deferential standard of review. The courts, however, differ over how this lesser
degree of deference alters their review process.
Some circuits use a "sliding scale" approach. Under this approach, the
reviewing court will always apply an arbitrary and capricious standard, but the
court must decrease the level of deference given to the conflicted administrator's
decision in proportion to the seriousness of the conflict. See Sullivan v. LTV
Aerospace & Defense Co., 82 F.3d 1251, 1255 (2d Cir. 1996) (“[We] adhere to
the arbitrary and capricious standard of review in cases turning on whether the
decision was based on an alleged conflict of interest, unless the conflict
affected the choice of a reasonable interpretation.”); Taft v. Equitable Life
Assurance Soc’y, 9 F.3d 1469, 1474 (9th Cir. 1993) (“Because [of a conflict of
interest], we therefore impose a more stringent version of the abuse of discretion
standard . . . .”) (internal quotations omitted); Doe v. Group Hospitalization &
Medical Servs., 3 F.3d 80, 87 (4th Cir. 1993) (“In short, the fiduciary decision
will be entitled to some deference, but this deference will be lessened to the
degree necessary to neutralize any untoward influence resulting from the
conflict.”); Wildbur, 974 F.2d at 638 (“We note that the arbitrary and capricious
standard may be a range, not a point. There may be in effect a sliding scale of
judicial review of trustees' decisions . . . --more penetrating the greater is the
suspicion of partiality, less penetrating the smaller that suspicion is . . . .”); Van
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Boxel v. Journal Co. Employees' Pension Trust, 836 F.2d 1048, 1052-53 (7th Cir.
1987) (“[F]lexibility in the scope of judicial review need not require a
proliferation of different standards of review; the arbitrary and capricious
standard may be a range, not a point. There may be in effect a sliding scale of
judicial review of trustees' decisions.”).
Other circuits apply a "presumptively void" test. Under this approach, a
decision rendered by a conflicted plan administrator is presumed to be arbitrary
and capricious unless the administrator can demonstrate that either (1) under de
novo review, the result reached was nevertheless "right" or (2) the decision was
not made to serve the administrator's conflicting interest. As the court in Brown
v. Blue Cross & Blue Shield, 898 F.2d 1556, 1566-67 (11th Cir. 1990), cert.
denied, 498 U.S. 1040 (1991), explained:
[W]hen a plan beneficiary demonstrates a substantial conflict of
interest on the part of the fiduciary responsible for benefits
determinations, the burden shifts to the fiduciary to prove that its
interpretation of plan provisions committed to its discretion was not
tainted by self-interest. That is, a wrong but apparently reasonable
interpretation is arbitrary and capricious if it advances the conflicting
interest of the fiduciary at the expense of the affected beneficiary or
beneficiaries unless the fiduciary justifies the interpretation on the
ground of its benefit to the class of all participants and beneficiaries.
See also Atwood v. Newmont Gold Co., 45 F.3d 1317, 1323 (9th Cir. 1995)
(“Where the affected beneficiary has come forward with material evidence of a
violation of the administrator's fiduciary obligation, we should not defer to the
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administrator's presumptively void decision.”); Kotrosits v. GATX Corp.
Non-Contributory Pension Plan for Salaried Employees, 970 F.2d 1165, 1173 (3d
Cir.) (“[W]here such a party shows the kind of conflict of interest that could
realistically be expected to bias the decision makers [Firestone] counsels in favor
of withholding deference.”), cert. denied, 506 U.S. 1021 (1992).
In Pitman v. Blue Cross & Blue Shield, 24 F.3d 118 (10th Cir. 1994), we
touched upon the appropriate standard of review when a conflict of interests
exists. In remanding the case, we “offered” the Fourth Circuit’s view of
Firestone in Doe v. Group Hospitalization & Medical Servs., 3 F.3d 80 (4th Cir.
1993). We stated:
To the extent that Blue Cross has discretion to avoid paying claims,
it thereby promotes the potential for its own profit. . . . . In short, the
fiduciary decision will be entitled to some deference, but his
deference with be lessened to the degree necessary to neutralize any
untoward influence resulting from the conflict.
24 F.3d at 123 (quoting Doe, 3 F.3d at 86). In purporting to “offer” the sliding
scale approach to the district court on remand, however, we cited two other cases
which have expressly adopted the “presumptively void” test. Id. (citing Brown,
898 F.2d at 1568, and Bass v. Prudential Ins. Co. of America, 764 F. Supp. 1436,
1440 (D. Kan. 1991)). Thus, some of the district courts in our circuit have
employed the “presumptively void” test when there is a conflict of interest. See
Torre v. Federated Mut. Ins. Co., 897 F. Supp. 1332, 1360-62 (D. Kan. 1995);
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Torre v. Federated Mut. Ins. Co., 854 F. Supp. 790, 814 (D. Kan. 1994). But see
Hammers v. Aetna Life Ins. Co., 925 F. Supp. 718, 722 (D. Kan. 1996)
(“Deference is greatly diminished, however, when the claims administrator is
acting under a conflict of interest.”). In this case, the magistrate judge joined this
trend by expressly adopting the presumptively void test developed by the Eleventh
Circuit in Brown and used in Torre and Bass.
We reject the “presumptively void” test as inconsistent with our holding in
Pitman and the Supreme Court’s dictum in Firestone. We conclude that the
sliding scale approach more closely adheres to the Supreme Court’s instruction to
treat a conflict of interest as a “facto[r] in determining whether there is an abuse
of discretion.” Firestone, 489 U.S. at 115. Moreover, as we stated in a pre-
Firestone decision, “the arbitrary and capricious standard is sufficiently flexible
to allow a reviewing court to adjust for the circumstances alleged, such as trustee
bias in favor of a third-party or self-dealing by the trustee.” Sage v. Automation,
Inc. Pension Plan & Trust, 845 F.2d 885, 895 (10th Cir. 1988).
In sum, we review de novo the magistrate judge’s application of the
arbitrary and capricious standard to FHP’s decision denying Chambers benefits.
Pitman, 24 F.3d at 121. Thus, we will uphold FHP’s decision unless it was
arbitrary and capricious, keeping in mind that FHP’s conflict of interest is merely
a factor in applying this flexible standard.
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B. Applying the Arbitrary and Capricious Standard
We hold that FHP did not act arbitrarily and capriciously in concluding that
the PTE procedure was “experimental.” We agree with the magistrate judge that
in deciding to deny Chambers his benefits, the Board members, who were
stockholders of FHP, operated under a significant conflict of interest. Despite
this, the evidence strongly supports FHP’s decision. On May 1, 1990, the
following evidence was before FHP:
(1) Despite twenty years of experience with PTE, the procedure still
had a 13% to 15% mortality rate at UCSDMC and a 30% to 50% rate
in France;
(2) Dr. Moser and his staff at UCSDMC were the only practice group
successfully performing the procedure;
(3) Dr. Moser, who originated the procedure and would supervise the
plaintiff’s treatment, described the procedure as an “experiment with
nature.”
(4) The medical community performed the PTE procedure in an
almost exclusively investigational setting at only two teaching
facilities, UCSDMC and Duke University;
(5) Medical practitioners at other major medical institutions, such as
the Mayo Clinic, referred their patients to UCSDMC for the
procedure;
(6) The Health Care Financing Administration, an organization
responsible for determining national government-funded coverage,
had not decided whether to cover the procedure or not;
(7) Blue Cross and Blue Shield of Kansas, the state’s largest insurer,
“strongly” considered the procedure experimental;
(8) Blue Cross and Blue Shield’s written guidelines defined
procedures as experimental if performed only in investigational
settings;
(9) Employees at Dorth Coombs, a Wichita company that administers
healthcare plans, stated that the company would cover PTE because
the procedure was in the Physician’s Current Procedural Terminology
book;
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(10) Medical directors of Equicor and Prime Health, two Kansas
health maintenance organizations, had never heard of the procedure;
(11) The Oschsner Clinic, a health maintenance organization in New
Orleans, covered the procedure on a case-by-case basis;
(12) The medical department responsible for handling California
medicare considered the procedure to be investigational.
We conclude that although the Board suffered from a conflict of interest, FHP’s
determination that PTE was an experimental procedure was reasonable in light of
the administrative record. Accordingly, we find that FHP’s decision to deny
Chambers benefits was not arbitrary and capricious.
IV. Attorneys’ Fees
Despite the fact that Chambers has not prevailed on any of his substantive
and procedural ERISA claims, his attorneys argue that he is entitled to attorneys’
fees pursuant to 29 U.S.C. § 1132(g)(1), which states:
In any action under this subchapter . . . by a participant, beneficiary,
or fiduciary, the court in its discretion may allow a reasonable
attorney's fee and costs of action to either party.
Chambers complains that the magistrate judge abused her discretion in declining
to award Chambers attorneys fees and by failing to address the issue in her
memorandum and order. We addressed a similar problem in Morgan v.
Independent Drivers Ass'n Pension Plan, 975 F.2d 1467, 1471-72 (10th Cir.
1992):
We have held that if a party seeks attorneys' fees under § 1132(g)(1),
and the district court denies the request without explanation, a
remand is necessary. . . . Although the statute does not expressly
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require that a party prevail as a condition to receiving an award of
attorneys' fees . . ., we have remanded cases for denial of fees
without explanation only when the party seeking fees had prevailed
at least partially . . . .
As the instant case is presented to us, plaintiffs did not prevail
on any of their claims. . . . Therefore, although we adhere to the rule
that a district court must enunciate the reasons for a denial of a
request for attorneys' fees, when the party seeking fees did not
prevail on any of its claims we decline to remand to require the
district court to state that the party did not prevail.
(Citations omitted). Because Chambers, like the plaintiff in Morgan, did not
prevail on any of his claims, we decline to award Chambers attorneys’ fees or to
remand to the issue to the district court for a determination of the issue.
AFFIRMED.
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