1

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 ofMichigan appealsthe district court's denial ofits 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

conteststhe district court's award of attorneys' fees to PlaintiffBellaire 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

exclusivelywithin the State ofMichigan. 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.

Bothwomen assigned theirinsurance claimsto 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'smedicalrecords, initiallydeciding to denythe claimentirelyfor lack
2

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, BlueCrosssubmitted the claimto 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

BlueCrossregistered nurse reviewedCatlin'smedicalrecords, also initiallydeciding to denythe 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 claimto Peer Review forsecond-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

Crossfiled 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
 

1Section 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

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 ofthe 1934 SecuritiesExchange 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
 

2Blue 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

specified that in such a case the relevant sovereign isthe 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 properlyexercised personaljurisdiction over

Blue Cross based on its contacts with the United States.2
 

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

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

minimumcontacts exist between the individual and the nationalsovereign. 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 focusfor 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 minimumcontacts with it such that the maintenance ofthe suit does not offend

traditional notions of fair play and substantial justice.") (citation omitted). Thus, though we follow
 

4Rule 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

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

partiesto 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 fromrequiring

parties to submit their disputes 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,
 

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. 

 

7Blue 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. 

 

8Though 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

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
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. 

 

9Bellaire 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

C

 Blue Cross next contends that the district court applied an improper standard of review to

the factual determinations made byBlue 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 (5thCir.), cert. denied, 502 U.S. 973, 112 S.Ct. 453, 116 L.Ed.2d 470

(1991).

Blue Cross concedes that its decisions regarding the medical necessity of the in-patient

hospital case received by White and Catlin were factual determinationssubject to abuse of discretion

review by the district court under Pierre.9 Blue Cross argues, however, that despite 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 courtspecificallyset forth the properstandard ofreview at the beginning
9

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 byBlue 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 claimfor 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'sfactualconclusionsthatreflect a reasonable and impartialjudgment.").

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
 

10The 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

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 meansthat the type, level and length of care, treatment or supply

and setting are needed to provide safe and adequate care and treatment.

For inpatient hospitalstays, 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 generallyregarded as experimentalor investigationalbyBCBSM.

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
11

whetherthe care isin accord with accepted standards ofmedical practice." The manual lists examples

of "fairly specific and definable patterns of impaired behavior about which there is consensusthat the

hospital is the most appropriate setting for treatment." These criteria include: a person who is

actively suicidal or demonstrates a strong 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 herselfto 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'sreasonable 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 notesthat both White and Catlin traveled without assistance from Michigan

to Bellaire HospitalinHouston; that both women completed and signed admission and consent forms

at Bellaire; that Bellaire placed neither woman on "suicide precautions;" that Bellaire removed both
 

11White'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. 

 

12As noted, Catlin's record reflects that on May 30, after approximately three weeks of

treatment, she cut herself superficially with a razor. 

 

13The 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." 

 

14The SI criteria include:

a. Suicide attempt.

b. Suicidal ideation (e.g., depression with feelings of suicidal hopelessness).

12

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-levelappealofBellaire's claimsregardingWhite'streatment, 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 Crosssent Bellaire a similar letter regarding the outcome ofthe second-levelreview ofBellaire's

claim regarding Catlin's treatment.

Blue Cross's "Criteria for Review of Adult Inpatient Psychiatric Services" manualstates 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 ofinpatient 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 hospitalstay, the medicalrecord contains documentation that at least one SI criterion

and at least one IS criterion are met, then the case should be approved."14
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
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.

.... 

 

15Dr. 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

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 BlueCross asserted mandated denialofBellaire's

claims. White's medical record reflects that upon admission White's treating 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.
by a hospital." 

 

16Dr. Backes recorded observations of White's suicidal ideation and delusional thoughts from

the time of her admission through April 5. 

 

17White's record reflects that "Utilization Management Physician Review" was conducted on

March 29 and April 5. 

 

18Dr. 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

White'srecord reflectsthat Dr. Backes observed suicidalideation and delusionalthoughtsthroughout

White's hospitalstay.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 to 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 hospitalstay. 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'smedicalrecord reflectsthatshe was admitted to Bellaire after a recentsuicide 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 observed suicidal ideation throughout
 

19Dr. 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

Catlin's hospital stay.19 The physician who conducted Catlin'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,

suicidalideation (e.g., depressionwithfeelings ofsuicidalhopelessness), 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'sfactualfindings 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,
 

20The 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

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 discretion 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.
18

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, andREMAND for a proper

determination of attorneys' fees.

 . . . . .