### *The HONORABLE RICHARD H. KYLE, United States District Judge

for the District of Minnesota, sitting by designation. The HONORABLE CAROL E. JACKSON, United States District Judge 1 

### for the Eastern District of Missouri.



# United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________ No. 96-2282

___________ Sharon Kinkead, * * Plaintiff - Appellant, * * v. * * Appeal from the United States Southwestern Bell Corporation * District Court for the Sickness & Accident Disability * Eastern District of Missouri. Benefit Plan; Southwestern * Bell Corp. Long Term Disability * Plan for Salaried Employees; * Southwestern Bell Corporation, * * Defendants - Appellees. *

___________ Submitted: December 9, 1996 Filed: April 9, 1997

___________ Before FAGG and LOKEN, Circuit Judges, and KYLE, District Judge. *

___________ LOKEN, Circuit Judge.

Sharon Kinkead appeals the district court's dismissal of her ERISA 1 benefit claims against Southwestern Bell Corpora tion (Bell) and two of its employee benefits plans. Agreeing that Kinkead's suit is barred by he r failure to exhaust the plans' contractual appeal procedures, we affirm.

### -2- Follo wing a traffic accident, Kinkead applied for short-ter m disability benefits from the Bell plans in Septe mber 1989. On October 12, Bell terminated her employment. On December 18, the plans' Benefi t Committee notified Kinkead of its decision that she was not entitled t o further benefits. Kinkead did not ask the Commi ttee for further review of this denial, as permitted by the plans and invited by the claim denia l notice. Instead, she sued Bell for retaliatory discharge in violation of § 51 0 of ERISA, 29 U.S.C. § 1140. After this claim was dismissed, se e Kinkead v . Southwestern Bell Tel. Co. , 49 F.3d 454 (8th Cir. 1995), sh e commen ced this action to recover disability benefits allegedly due he r under the plans. See 29 U.S.C. § 1132(a)(1)(B).

The district court granted defendants' motion to dismiss on th e ground that Kinkead failed to exhaust her contractual plan remedies
. Kin kead appeals, arguing that defendants' claim denial notice wa s inadequate and, in any event, the plans do not require exhaustion of the planreview procedures. Exhaustion is a threshold legal issue we review de novo. See, e.g. , Conley v. Pitney Bowes Corp. , 34 F.3d 714 (8th Cir. 1994).

ERISA expressly provides that every employee benefit plan mus t "provide adequate notice in writing" of each claim denial, and "afford a reasonable opportunity . . . for a full and fair review" of each denial. 29 U.S. C. § 1133. The Department of Labor's implementing regulation s contain similar requirements. See 29 C.F.R. § 2 560.503-1(f) and (g). Not surpr isingly, therefore, the Bell plans at issue contain provision s requiring that partic ipants be notified of claim denials and establishing an internal procedure for further review.

### The Bell plans grant such discretionary authority to th e 2 

### Benefit Committee. -3- Federal c ourts applying ERISA have uniformly concluded that benefit claima nts must exhaust the review procedures mandated by 29 U.S.C
. § 1133(2) before bringing claims for wrongful de nial to court. See, e.g., Diaz v. United Agric. Employee Welfare Benefit Plan & Trust , 50 F.3d 1478 (9th Cir. 1995); Communications Workers of Ameri ca v. American Tel. & Tel. Co. , 40 F.3d 426 (D.C . Cir. 1994). Such exhaustion serves many important ERISA purposes. It "minimize[s] the number of frivolous ERISA lawsuits; promo te[s] the consistent treatment of benefit claims; provide[s] a nonadversarial dispute resolution process; and decrease[s] the cost an d time of c laims settlement." Makar v. Health Care Corp. of the Mid

Atlantic , 872 F.2d 80 , 83 (4th Cir. 1989). Moreover, when a benefit plan gives the decision-maker discretionary authority to determine claims, clai m denials are reviewed for abuse of discretion on the record considered by the plan decision-mak er. See Ravenscraft v. Hy-Vee Employee Benefit Plan & Trust , 85 F.3d 398, 402 (8th Cir. 1996). In these situations , 2 exhaustion "enhance[s] the ability of trustees to interpret plan provision s [and ] help[s] assemble a factual record which will assist a court i n reviewing" claim denials. Conley , 34 F.3d at 718.
With these basic principles established, we turn to Kinkead' s specific contentions on appeal.

1. The denial notice. Kinkead first argues that the Benefi t Commit tee's claim denial letter failed to comply with the notic e requireme nts set forth in the plans, 29 U.S.C. § 1133(1), and 29 C.F.R
. § 2560 .503-1(f). Therefore, defendants may not enforce the contractua l exhaustion requirement. See Conley , 34 F.3d at 718 (exhaustion no t required when claim denial notice did not advise of

### -4-

appeal procedure and claimant had no actual knowledge of that procedure).

The Committee's letter notified Kinkead that it had examined he r file, "including a me dical report from your doctor and the opinion of our Medical Advisor," and was denying her claim "bec ause medical evidence does not substantiate you were disabled." The letter advised that the Committe e "relied upon the provisions of Article 4, Paragraph 4.1 of the Plan" and went on to quote that provision. Regarding review procedures, the letter stated:

You h ave the right to request that your claim denial b e revi ewed and to review pertinent documents relating to th e denial
. If you wish your denial of claim for benefits to b e rev iewed, you or your authorized agent may submit a writte n request for review to [the Benefit Committee's Secretary]. A request for review must be submitted within sixty (60) days of yo ur receipt of this letter. It is important that an y additional information you would like to be considered at the time of review accompany your written request.
The Committee's letter adequately described the claim review pr ocess. It advi sed Kinkead she had a right to further review and to examine th e Committee 's file. It told her where and when to submit a request fo r rev iewand whether she could submit additional information. Thus, thi s case is distinguishable from Conley , where the c laim denial notice made no mentionof an appeal process. Kinkead argues that she was entitled to a clear statement that she must exhaust this review procedure. But neither the statute, the Department's regulations, nor a ny prior case imposes such
a noti ce requirement. Given the practical reasons favoring exhaustion , cla imants with notice of an available review procedure should know tha t they must take advant age of that procedure if they wish to bring wrongful benefit denial claims to court.

### -5- Kinkead f urther argues that the Committee's denial letter failed to pro vide a sufficiently detailed analysis of the reasons for denying he r claim, as we requiredin Brumm v. Bert Bell NFL Retirement Plan , 995 F.2d 1433, 1436-37 (8th Cir. 1993); Cox v. Mid-Americ a Dairymen, Inc. , 965 F.2d 569, 573-74 (8th Cir. 1992); and Richardson v. C entral States, S.E. & S.W. Areas Pension Fund , 645 F.2d 660, 665 (8th Cir. 1981). But in these cases , we were reviewing, onthe merits, final claim denial letters that did not provide an adequate e xplanation of the plan administrator's discretionary decisi on. See Collins v. Central States, S.E. & S.W. Areas Health & Welfare F und , 18 F.3d 556, 561 (8th Cir. 1994) (final denial notic e adequate if it "permit[s claimant] to challenge the denial in federal cour t and for u s to review it"). Here, on the other hand, we deal with a n initial c laim denial notice. At this early stage of the claim process , administrative efficiency is a virtue, so long as disappointed claimants
are advi sed of their right to pursue the plan's review procedures
. Therefore, the initial claim denial need not be extensive, provided that it explains the basis for the adverse initial decision sufficiently t o permit the claimant to prepare an informed request for further review.
In this case, the Committee's letter notified Kinkead that her claim
was de nied "because medical evidence does not substantiate you wer e disab led." The letter told her what medical reports the Committee ha d considered and advised her that she could review these documents and submi t additional information with her request for further review. The letter wa s suff icient to trigger an appeal process that Kinkead was required t o exhaust.

2. The Pl ans' Exhaustion Requirement. Kinkead next argues that the Bell plans create an optional review procedure, not a

### Kinkead relies on Conleyfor the proposition that benefi t 3 

### plans must explicitly require exhaustion. But the contractu al duty to exhaust was conceded in Con ley ; we considered only whether that duty should be imposed on a claimant who had no notice or kn owledge of the plan's claim review procedure. -6- proced ure that claimants must exhaust. The district court's opinio n expressl ystates that Kinkead did not raise this issue in opposin g defendants' motion to dismiss. In her reply brief to this court, Kinkead assert s that the district court overlooked her "response to defendants ' reply in support of m otion to dismiss," a pleading she did not include in the record on appeal. We conclude that this issue is not properl y preserved.

In add ition, while we agree that the need to exhaust is a questio n of contract interpretation, see Schneider Moving& Storage Co. v. Robbins , 466 U.S. 364 (1984), benefit plans are required by law to include a claim review procedure, and the duty to exhaust furthers important ERIS A pur poses. In these circumstances, any plan claim review procedure tha t meets the requirements of 29 U.S.C. § 1133 and 29 C.F.R. § 2560.503-1(f) and (g) wi ll trigger the judicially imposed duty to exhaust that remedy. 3

The judg ment of the district court is affirmed. Appellees' motio n for costs and attorney's fees is denied.
KYLE, District Judge, dissenting.
I respectfully dissent from the majo rity’s conclusion that the plans
were not required to advise Kinkead that, after being notified that he r application for benefits had been denied, she

### I concur with the majority’s conclusions that the Committee’s 4 

### claim denial letter adequately described the claim review process and provided a sufficiently detailed analysis of the reasons fo r denying Kinkead’s claim. -7- must exhaust their appeal procedures before filing suit in federal court. 4

The Court writes that “neither the statute, the Department’ s regulations, nor any prior case imposes such a n otice requirement.” ERISA itself, however, does not contain any exhaustionrequirement. The statute is silent on this issue; exhaustion is a judicially created requirement. See Conley v. Pitney Bowes , 34 F.3d 714, 716 (8th Cir. 1994).

The opinion states that: “[G]iven the practical reasons favorin g exhaustion, claimants with notice of an available review procedure should know that they must take advantage of that proce dure if they wish to bring wrongful benefit deni al claims to court.” (Emphasis added). While there are practical reasons favoring exhaustion, it do es not, in my view, follow that claimants should know that they must take advantage of thos e procedures if they wish to file a lawsuit to enforce their benefits. We
are n ot necessarily dealing with sophisticated employees or lawyer s specializi ng in ERISA claims. Requiring the plan to clearly advise a claimant of the consequences of not exhausting the administrative review process would not place a substantial burden on the plan administrators, but it would explain the adverse consequences to an uninformed claimant.

Insummary, I believe that a plan should be required to clearl y inf orma claimant that its internal review procedures must be exhauste d before, and as a condition of, seeking judicial relief. The plans under review here failed to so inform Kinkead.

### -8-

Accor dingly, I would reverse the Order of the District Court and allo w Kinkead to proceed wi th her ERISA benefit claims against Bell and its two plans.
A true copy.

Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.