Court Opinion

ID: 2973962
Source: CourtListenerOpinion
Date Created: 2015-09-22 17:10:44.228361+00
Date Added: 2024-06-11T11:43:48.824593
License: Public Domain

NOT RECOMMENDED FOR PUBLICATION
                             File Name: 06a0497n.06
                                Filed: July 14, 2006

                                      No. 05-5792

                        UNITED STATES COURT OF APPEALS
                             FOR THE SIXTH CIRCUIT

EDWARD J. WEBB, JR.,

      Plaintiff-Appellee,                           On Appeal from the United
                                                    States District Court for the Eastern
v.                                                  District of Tennessee

CARITEN INSURANCE COMPANY,

      Defendant-Appellant.
                                           /

BEFORE:      RYAN and COOK, Circuit Judges; and GWIN, District Judge.*

      RYAN, Circuit Judge.        Cariten Insurance Company appeals a district court

decision awarding benefits, statutory penalties, and attorney fees to Edward J. Webb, Jr.,

under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1000-1461.

We think the district court erred in applying the statute, and, therefore, we REVERSE.

                                               I.

      In late 2002, Edward J. Webb, Jr., was diagnosed with advanced multiple myeloma,

a hematologic cancer of the plasma cells. At the time, Webb was an attorney with Hunter,

Smith, and Davis, LLP, and was a beneficiary under the law firm’s group health insurance

policy, which was issued by Cariten Insurance Company. During the time in question, there

were two Benefit Plans in effect, one entered into on October 1, 2002, and a second one

      *
       The Honorable James S. Gwin, United States District Judge for the Northern District
of Ohio, sitting by designation.
(No. 05-5792)                               -2-

entered into on October 1, 2003. It is conceded that administration of the plans was

governed by ERISA. Hunter, Smith, and Davis, LLP, was listed as the “Plan Sponsor” in

the October 1, 2002, Plan and as the “Plan Sponsor and Administrator” in the October 1,

2003, Plan.

       Webb was initially treated by Dr. Alan Forbush, an internist designated by Cariten.

Dr. Forbush referred Webb to a Cariten-approved oncologist, Dr. Koyamangalath Krishnan,

who recommended that Webb be treated at the Arkansas Cancer Research Center (ACRC)

at the University of Arkansas. ACRC, however, was not a designated service provider in

Cariten’s “network” of providers. Cariten determined that the services Webb needed for

treatment of his illness were available at the Thompson Cancer Survival Center (TCSC) in

Knoxville,    Tennessee,   a   Cariten-participating   or   “in-network”   provider   facility.

Consequently, Cariten advised Webb in January 2003, that it would not pay in-network

rates for treatment at ACRC. A request for Cariten to reconsider this decision, which

included a letter from Dr. Krishnan describing ACRC as Webb’s “best chance,” was denied.

Despite Cariten’s refusal to pay for Webb’s treatment at ACRC at in-network rates, Webb

decided that he would go to ACRC for part of his treatment anyway. Cariten agreed to pay

for Webb’s treatment at ACRC at the substantially lower “out-of-network” rates.

       A number of parties contacted Cariten over the following months attempting to

persuade the company to enter into negotiations with ACRC for the cost of Webb’s

treatment. Several individuals, purporting to act on Webb’s behalf, requested information

from Cariten regarding the company’s fee schedules. Cariten, however, did not provide

such information and did not enter into negotiations with ACRC. In December 2003, the

company received a letter from Anthony Seaton, an attorney for Webb, threatening legal
(No. 05-5792)                                 -3-

action to obtain the requested fee schedule information and other relief. Cariten offered

to release the information providing Webb first fill out a form recognizing Seaton as his

representative and a form authorizing the release. Webb completed the forms and sent

them to Cariten, whose counsel then sent a letter to Seaton detailing the “fee schedule

rates.” Cariten continued its refusal to pay for Webb’s ACRC treatment at in-network rates.

                                              II.

       On February 27, 2004, Webb filed an ERISA lawsuit against Cariten in federal

district court. He sought “to recover benefits due to him under . . . [his employer’s health

benefit] plan,” according to 29 U.S.C. § 1132(a)(1)(B). He also requested statutory

penalties on the theory that Cariten had violated 29 U.S.C. § 1132(c) when it refused for

several months to provide requested fee schedule information. At a hearing on Cariten’s

motion for judgment on the pleadings, the district court found that there was no evidence

that Webb was unable to receive the treatment he needed at TCSC, only that ACRC was

better and even a “premier” facility. On this basis, the district court concluded that Cariten’s

decision not to pay for Webb’s treatment at ACRC at in-network rates was not “arbitrary or

capricious” in terms of the Benefit Plan. The court then observed that had Cariten been

open to the idea, it was likely that ACRC would have taken Webb as a patient and charged

Cariten the same amount of money that TCSC would have charged, that is, in-network

rates. The court then held that Cariten’s refusal to enter into negotiations with ACRC was

“unreasonable and even inhumane.” Warming to the subject, the court, as though pressing

the parties to settle their dispute, ordered Cariten to begin negotiations with ACRC

immediately and to pay ACRC the lesser of its charges for Webb’s treatment and the

amount Cariten would have paid TCSC for the same treatments. The court then referred
(No. 05-5792)                                 -4-

the case to a magistrate judge with instructions to recommend appropriate sanctions and

attorney fees against Cariten. On the magistrate judge’s recommendation, the district court

assessed a $12,550 statutory penalty against Cariten for a violation of 29 U.S.C. §

1132(c)(1)—failure of a plan administrator to respond to a request for information—and

$54,000 in attorney fees under 29 U.S.C. § 1132(g). The district court incorporated all the

foregoing into a judgment which Cariten has appealed. The company challenges the district

court’s order requiring the insurer “negotiate” with ACRC and pay for Webb’s treatment

according to the district court’s formula. It claims that such “relief” is not authorized by

Webb’s ERISA-governed health plan.

                                              III.

       When interpreting ERISA plans, “federal courts apply ‘general rules’ of contract law

as part of the federal common law.” Cassidy v. Akzo Nobel Salt, Inc., 308 F.3d 613, 615

(6th Cir. 2002). These general rules of contract law dictate that a court should “give[] effect

to the unambiguous terms of the contract.”           Univ. Hosps. of Clev. v. South Lorain

Merchants Ass’n, 441 F.3d 430, 437 (6th Cir. 2006). The October 1, 2002, ERISA Plan,

which was in effect when Cariten made its January 2003 benefit determination on Webb’s

claim, gave the insurer no discretionary authority to grant or deny benefits. Accordingly,

we review Cariten’s determination de novo. Evans v. Unumprovident Corp., 434 F.3d 866,

875-76 (6th Cir. 2006).

       Cariten argues that the district court’s decision ordering Cariten to negotiate with

ACRC and fixing the formula for payment of ACRC’s charges granted Webb relief not

authorized under the Benefit Plan because “[t]he Plan nowhere requires Cariten to pay In-

Network benefits for Out-of-Network treatment,” nor does it require Cariten to negotiate with
(No. 05-5792)                                 -5-

out-of-network facilities. Before fashioning its equitable remedy, the district court correctly

held that there is no contractual obligation under the Plan requiring Cariten to pay ACRC

at in-network rates. And we hold that there is nothing in the Plan requiring Cariten to

negotiate with ACRC. In fact, the Plan clearly defines “participating” and “non-participating”

providers and spells out “in-network” and “out-of-network” benefits. We note that there is

no evidence in the record that TCSC was unable to provide the treatment Webb needed.

       Webb nonetheless argues that it was “arbitrary or capricious” for Cariten to deny

benefit payments to ACRC at in-network rates. He claims he had little choice but to go to

ACRC for the best available treatment because he was faced with “life or death.” While

Webb’s decision to seek treatment immediately at what he believed to be the “premier”

cancer treatment facility is understandable, it did not obligate Cariten, either under the law

of contracts or ERISA, to pay for Webb’s treatment at rates not agreed to by Cariten in the

insurance contract, especially when the same treatment was offered by a participating

provider at rates Cariten was obligated to pay.

       The district court’s order directing Cariten to enter into negotiations with ACRC and

to pay ACRC amounts in excess of what the Benefit Plan required, was not authorized by

the ERISA plan and was beyond the court’s authority. The judgment must be set aside.

                                              IV.

       Further, Cariten’s failure to respond to requests for information should not have

resulted in an award of statutory penalties under ERISA. District courts have discretion

under ERISA to award limited statutory penalties against a plan “administrator,” 29 U.S.C.

§ 1132(c)(1), but not others. See Caffey v. UNUM Life Ins. Co., 302 F.3d 576, 584-85 (6th
(No. 05-5792)                                  -6-

Cir. 2002). ERISA further provides that the plan administrator is the one “specifically so

designated by the terms of the instrument under which the Plan is operated” or, if no

“administrator is . . . so designated,” the administrator is the “plan sponsor.” 29 U.S.C. §

1002(16)(A)(i)-(ii). The October 1, 2003, Benefit Plan identifies Hunter, Smith, and Davis,

LLP, Webb’s employer, as the “Plan Sponsor and Administrator.” The October 1, 2002,

Benefit Plan is silent as to the identity of the plan administrator, but identifies Hunter, Smith,

and Davis, LLP, as the “Plan Sponsor.” Under both plans, then, the law firm, not Cariten,

was the plan administrator. See Caffey, 302 F.3d at 585. Webb’s argument and the district

court’s conclusion that Cariten should be “considered” the plan administrator because

Cariten had access to the relevant information is mistaken. ERISA does not recognize a

putative plan administrator especially when a statutory administrator has been named in

the plan document and statutory penalties may be awarded, if at all, only against the “real”

plan administrator. Cariten was not the “administrator” of the Benefit Plan and, as we have

held before, “an insurance company, which is not a plan administrator, cannot be liable for

statutory damages for failure to comply with an information request.” Caffey, 302 F.3d at

584.

                                               V.

       Lastly, we note that the district court’s award of attorney fees was an abuse of

discretion. Historically, we have reviewed attorney fees awarded under ERISA according

to the multi-factor test laid out in Maurer v. Joy Technologies, Inc., 212 F.3d 907, 919 (6th

Cir. 2000), but we have also held that it is always “‘an abuse of discretion for the district

court to award attorney’s fees to a losing party.’” Cattin v. General Motors Corp., 955 F.2d
(No. 05-5792)                              -7-

416, 427 (6th Cir. 1992) (quoting Bittner v. Sadoff & Rudoy Indus., 728 F.2d 820, 829 (7th

Cir. 1984)).

                                           VI.

        For the above reasons, we REVERSE the district court’s judgment awarding relief

to Webb, as well as the decision ordering Cariten to pay statutory penalties and attorney

fees.