IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_______________

No. 98-40204

_______________

MEDITRUST FINANCIAL SERVICES CORPORATION,

NEW MEDICO ASSOCIATES, INCORPORATED,

and

OTIS ALCORN,

as Next Friend of Juanita Revels,

Plaintiffs-Appellants,

VERSUS

THE STERLING CHEMICALS, INCORPORATED, MEDICAL BENEFITS PLAN

FOR HOURLY-PAID EMPLOYEES,

Defendant-Appellee.

_________________________

Appeal from the United States District Court

for the Southern District of Texas

_________________________

March 4, 1999

Before JONES, SMITH, and EMILIO M. GARZA, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

Meditrust Financial Services Corporation, New Medico

Associates, Incorporated, and Otis Alcorn (collectively

“Meditrust”) appeal a summary judgment in their action to recover

medical coverage benefits under 29 U.S.C. § 1132(a)(1)(B), a

provision of the Employee Retirement Income Security Act of 1974
2

(“ERISA”). Concluding that the district court applied the proper

standard of review to the plan administrator's actions and that the

administrator did not abuse its discretion in denying the claim, we

affirm. 

I.

Juanita Revels suffered severe closed head injuries in an

automobile accident. Initially, she fell into a coma. When she

regained consciousness, she was rehabilitated at New Medico

Associates, Incorporated (“New Medico”). Because she was a

dependent of her step-father, Otis Alcorn, Revels’s treatment was

covered by The Sterling Chemicals, Incorporated, Medical Benefits

Plan for Hourly-Paid Employees (“the Plan”). After several years

of treatment, however, her parents terminated the treatment against

her doctor’s advice. 

After regressing for nearly a year, Revels returned to New

Medico for in-patient treatment, which New Medico billed at an outpatient rate. When New Medico submitted Revels’s new round of

treatment to the Plan, the expenses were denied as “not medically

necessary in terms of generally accepted medical standards.”

Although the Plan initially refused payment, the plan

administrator, Metropolitan Life Insurance Company (“MetLife”),

agreed to review the claim. After the claim was reviewed by a

MetLife physician, the Plan denied the claim as not medically

necessary because the treatment was not rehabilatory but merely
3

custodial in nature. 

Revels’s family appealed the claim several times. Although

Meditrust’s expert and treating physicians claim the treatment was

medically necessary, five MetLife physicians reviewed the claim six

times and concluded that it was not. Meditrust filed a § 1132(a)-

(1)(B) action under ERISA to recover benefits improperly denied.

Following cross-motions for summary judgment, the district court

granted summary judgment to the Plan, holding that (1) the language

of the Plan vested the administrator with discretion to determine

eligibility for benefits and to interpret the terms of the Plan;

(2) the determination of medical necessity was a factual inquiry

subject to abuse of discretion review; and (3) the administrator

neither abused its discretion nor acted in bad faith. 

II.

We review summary judgment de novo, employing the same

standards as did the district court. See Urbano v. Continental

Airlines, Inc., 138 F.3d 204, 205 (5th Cir.), cert. denied,

119 S. Ct. 509 (1998). Summary judgment is appropriate when,

viewing the evidence in the light most favorable to the nonmoving

party, no genuine issue of material fact exists, and the moving

party is entitled to judgment as a matter of law. See Celotex

Corp. v. Catrett, 477 U.S. 317, 322-24 (1986); see also FED. R. CIV.
1 Because the parties agreed to submit the case to the district court by

motion, the Plan argues that the clearly erroneous standard of review should

apply to that court's factual determinations. Application of the clearly

erroneous standard would not be appropriate, however, because the district court

employed a summary judgment standard of review in dismissing the claim. See

Pasant v. Jackson Nat’l Life Ins. Co., 52 F.3d 94, 96 (5th Cir. 1995) (employing

de novo standard of review in appeal from dismissal on cross-motions for summary

judgment).

4

P. 56(c).1

III.

A.

We review de novo the district court’s decision regarding the

appropriate standard of review to be applied to an ERISA

administrator’s eligibility determination. See Branson v.

Greyhound Lines, Inc., Amalgamated Council Retirement & Disability

Plan, 126 F.3d 747, 756 (5th Cir. 1997), cert. denied, 118 S. Ct.

1362 (1998). Unless the terms of the plan give the administrator

“discretionary authority to determine eligibility for benefits or

to construe the terms of the plan,” an administrator’s decision to

deny benefits is also reviewed de novo. Firestone Tire & Rubber

Co. v. Bruch, 489 U.S. 101, 115 (1989). If the language of the

plan grants such discretion, a court will reverse an

administrator’s decision only for abuse of discretion. See id.

Regardless of the administrator’s ultimate authority to determine

benefit eligibility, however, factual determinations made by the

administrator during the course of a benefits review will be

rejected only upon the showing of an abuse of discretion. See
2 Meditrust questions Pierre's application of abuse of discretion review

to factual determinations, noting that other circuits have criticized it. See

Rowan v. UNUM Life Ins. Co. of Am., 119 F.3d 433, 435-36 (6th Cir. 1997); Ramsey

v. Hercules Inc., 77 F.3d 199, 202-05 (7th Cir. 1996); Luby v. Teamsters Health,

Welfare & Pension Trust Funds, 944 F.2d 1176, 1183-84 (3d Cir. 1991); Reinking

v. Philadelphia Am. Life Ins. Co., 910 F.2d 1210, 1213-14 (4th Cir. 1990).

5

Pierre v. Connecticut Gen. Life Ins. Co., 932 F.2d 1552, 1562 (5th

Cir. 1991).2 We agree with the district court that the Plan’s

decision was a factual determination triggering abuse-of-discretion

review. 

Meditrust contends that the determination of medical necessity

requires the interpretation of the terms “medical necessity” and

“generally accepted medical standards.” Meditrust calls these

“terms of art” within the medical and insurance fields. Moreover,

Meditrust argues that determining whether the rehabilitative or

custodial treatment fits within the medical necessity language is

a purely interpretive question. We disagree.

The Plan persuasively argues that the decision to deny

benefits based on lack of medical necessity involves a review of

the facts in Revels’s hospital records and a determination of

whether there is factual support for her claim. The Plan’s experts

reviewed Revels’s records for specific signs of medical

improvement. To determine whether further medical treatment was

necessary, these doctors used their medical expertise to make a

judgment about the likelihood of improvement in Revels’s medical

condition. 

Therefore, these medical assessments do not constitute an
3 See Bellaire Gen. Hosp. v. Blue Cross Blue Shield, 97 F.3d 822, 828 (5th

Cir. 1996) (“Blue Cross concedes that its decisions regarding medical necessity

of the [treatment] were factual determinations subject to abuse of discretion

review by the district court under Pierre.”); Sweatman, 39 F.3d at 598 (“Sweatman

concedes that MetLife’s determination that she was not disabled was more factual

in nature than interpretive . . . .”) (internal quotations omitted).

6

issue of contract interpretation. Deciding the medical progress of

a patient through analysis of medical reports and records is

similar to the factual determinations we have reviewed for abuse of

discretion in other ERISA cases.3 Therefore, we affirm the

district court’s conclusion that it should review the Plan’s

decision for abuse of discretion because the Plan made a factual

determination.

B.

Because we review “a district court’s determination of whether

a plan administrator abused its discretionSSa mixed question of law

and factSSde novo,” Sweatman, 39 F.3d at 600, 601, we review the

Plan’s decision from the same perspective as did the district

court, and we directly review the Plan’s decision for an abuse of

discretion. “'In applying the abuse of discretion standard, we

analyze whether the plan administrator acted arbitrarily or

capriciously.'” Id. at 601 (quoting Salley v. E.I. DuPont de

Nemours & Co., 966 F.2d 1011, 1014 (5th Cir. 1992)).

We recognize that this court in Pierre refused to equate the

“abuse of discretion” and “arbitrary and capricious” standards.

“Our thorough consideration leads us to the conclusion that the

arbitrary and capricious standard for factual determinations is
4 When panel decisions are in conflict, the earlier one controls. See

Narvaiz v. Johnson, 134 F.3d 688, 694 (5th Cir.) (“It is more than

well-established that, in this circuit, one panel may not overrule the decision,

right or wrong, of a prior panel in the absence of en banc reconsideration or

superseding decision of the Supreme Court.”), cert. denied, 118 S. Ct. 2364

(1998).

5 See, e.g., Switzer v. Wal-Mart Stores, Inc., 52 F.3d 1294, 1298 (5th Cir.

1994) (“[T]he decisions of the plan administrator can only be reversed if found to

be arbitrary and capricious.”); Izzarelli v. Rexene Prods. Co., 24 F.3d 1506, 1513

n.13 (5th Cir. 1994) (referring to “our abuse of discretion/arbitrary and capricious

standard . . . .”); Duhon v. Texaco, 15 F.3d 1302, 1306 (5th Cir. 1994) (“The

standard of review we apply in our review of the plan administrator’s decision is

the arbitrary and capricious or abuse of discretion standard . . . .”).

7

inapplicable . . . .” Pierre, 932 F.2d at 1562. We are bound,

however, by an earlier decision of this circuit4 that expressly

preserves the arbitrary and capricious standard for the review of

a plan administrator’s decision, even in light of Bruch. “As long

as the interpretations or fact-findings are not arbitrary or

capricious, we do not upset them.” Penn v. Howe-Baker Eng'rs,

Inc., 898 F.2d 1096, 1100 (5th Cir. 1990). The Penn court went on

to point out that “the way to review a decision for abuse of

discretion is to determine whether the plan committee acted

arbitrarily or capriciously.” Id. at 1100 n.2A. We agree with the

Wildbur court that there is only a “semantic, not a substantive,

difference” between the arbitrary and capricious and the abuse of

discretion standards in the ERISA benefits review context. See

Wildbur, 974 F.2d at 635. 

We also note that cases after Pierre have used the “arbitrary

and capricious” standard as part of abuse-of-discretion review.5

Similarly, we decline to follow Pierre to the extent that it
6 With one exception, our sister circuits also have folded the “arbitrary

and capricious” standard into the “abuse of discretion” standard in the wake of

Bruch. See, e.g., Vizcaino v. Microsoft Corp, 120 F.3d 1006, 1009 (9th Cir.

1997) (“[T]he exercise of [the Plan’s] discretion is reviewed under the arbitrary

or capricious standard, or for abuse of discretion, which comes to the same

thing.” (internal quotations omitted)); Sheppard & Enoch Pratt Hosp., Inc.,

32 F.3d 120 (4th Cir. 1994) (reviewing denial of benefits under “arbitrary and

capricious or abuse of discretion” standard); Abynathya v. Hoffmann-La Roche,

Inc., 2 F.3d 40 (3d Cir. 1993) (holding that arbitrary and capricious standard

is essentially the same as abuse of discretion standard); Callahan v. Rouge Steel

Co., 941 F.2d 456, 458 (6th Cir. 1991) (reviewing denial of benefits under

arbitrary and capricious standard but also weighing conflicts of interest as a

factor); Brown v. Blue Cross & Blue Shield, 89 F.3d 1556, 1562 (11th Cir. 1990)

(“We therefore hold that the abuse of discretion, or arbitrary and capricious,

standard applies to cases such as this one [reviewing denial of benefits].”).

But see Morton v. Smith, 91 F.3d 867 (7th Cir. 1996) (applying abuse-ofdiscretion standard in general but applying arbitrary-and-capricious standard

when fiduciaries are bound to interpret plan under broad standard of good

faith).

8

rejects the use of the “arbitrary and capricious” analysis as part

of abuse-of-discretion review.6 

C.

When reviewing for arbitrary and capricious actions resulting

in an abuse of discretion, we affirm an administrator’s decision if

it is supported by substantial evidence. A decision is arbitrary

only if “made without a rational connection between the known facts

and the decision or between the found facts and the evidence.”

Bellaire, 97 F.3d at 828-29. Assuming that both parties were given

an opportunity to present facts to the administrator, our review of

factual determinations is confined to the record available to the

administrator. See Wildbur, 974 F.2d at 639. 

Although Meditrust cites several alleged instances of bad

faith and challenges the procedures employed during the review
7 We have upheld an administrator’s denial of benefits based on an

independent review of the claimants’ medical records. “[The Plan Administrator]

did not rely on Sweatman’s physician’s diagnoses only to ignore their advised

(continued...)

9

process, there is not sufficient support in the record to hold the

administrator’s denial of benefits arbitrary or capricious.

Meditrust’s argument that the Plan violated 29 U.S.C. § 1133 by

failing to provide a “full and fair review” of Revels’s claim is

not persuasive. The Plan reviewed Revels’s medical records six

times, concluding on each occasion that the treatment was not

medically necessary. 

Meditrust further avers that these reviews were inadequate

because the Plan’s physicians were insufficiently trained and

relied on incomplete records. Meditrust does not, however, point

to any authority requiring the Plan to provide medical specialists

when reviewing a claim. 

Our review of the record supports the district court’s finding

that the Plan fully and adequately reviewed Revels’s claim. The

denial letters expressly contain the basis for the denial: “[T]he

above mentioned therapy is educational and maintenance in nature,

rather than medically necessary for the treatment of an illness

and/or injury.” (Emphasis added.) Moreover, the Plan’s review was

based on a full record. In fact, a collection agency retained by

New Medico forwarded to the Plan “all of the medical records and

supporting documentation . . . necessary . . . to review” Revels’s

claim prior to the fifth and sixth reviews.7 The Plan’s review of
7(...continued)

treatment. Rather, [the Plan Administrator] denied Sweatman’s claim based on the

opinions of [independent doctors] disagreeing with those of Sweatman’s

physicians.” Sweatman, 39 F.3d at 603.

10

Revels’s claim, using a number of qualified physicians and based on

all the hospital records, constitutes enough of a “rational

connection between the known facts and the decision” to survive

arbitrary and capricious review. 

IV.

In summary, the district court applied the appropriate

standard of review and addressed each of Meditrust’s arguments.

Our review of the record reveals that the Plan did not abuse its

discretion in denying coverage. The judgment is AFFIRMED.