Court Opinion

ID: 815595
Source: CourtListenerOpinion
Date Created: 2013-01-17 20:58:27+00
Date Added: 2024-06-11T08:50:15.921661
License: Public Domain

FILED
                            NOT FOR PUBLICATION                             JAN 17 2013

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS

                            FOR THE NINTH CIRCUIT

JENNIFER LUKAS; JOYCE WATTERS,                   No. 11-16051

              Plaintiffs - Appellants,           D.C. No. 2:09-cv-02423-WBS-
                                                 DAD
  v.

UNITED BEHAVIORAL HEALTH; IBM                    MEMORANDUM *
MEDICAL AND DENTAL EMPLOYEE
WELFARE BENEFIT PLANS,

              Defendants - Appellees.

                    Appeal from the United States District Court
                       for the Eastern District of California
                    William B. Shubb, District Judge, Presiding

                             Argued November 7, 2012
                             Submitted January17, 2013
                              San Francisco, California

Before: BERZON and FERNANDEZ, Circuit Judges, and SMITH, District
Judge.**

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
       **
             The Honorable William E. Smith, District Judge for the U.S. District
Court for the District of Rhode Island, sitting by designation.
      Appellants Jennifer Lukas and Joyce Watters appeal the district court’s

judgment in favor of Appellees United Behavioral Health (UBH) and IBM Medical

and Dental Employee Welfare Benefit Plans (Plan) in Appellants’ suit under the

Employee Retirement Income Security Act of 1974 (ERISA) for improperly denied

benefits. Appellants allege that Appellees abused their discretion in denying their

claim for benefits for Lukas’s residential treatment for an eating disorder and co-

morbid conditions at Alta Mira Treatment Center (Alta Mira) on the ground that

her treatment was not medically necessary. We review de novo the district court’s

choice and application of the standard of review to Appellees’ decision to deny

benefits, Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 962 (9th Cir. 2006)

(en banc), and we reverse.

      While the parties agree that the district court correctly reviewed the denial of

benefits under an abuse of discretion standard, the court erred in holding that

Appellees did not abuse their discretion in this case. Because of IBM’s dual role as

evaluator and payor of claims, the Plan Administrator operated under a conflict of

interest. See id. at 965. This conflict “must be weighed as a facto[r] in

determining whether there is an abuse of discretion.” Id. (quoting Firestone Tire &

Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)) (internal quotation marks omitted)

(alteration in original). The importance of a conflict in the abuse of discretion

                                           2
analysis depends upon the facts of the particular case. Here, we must weigh the

conflict “heavily” for two reasons. First, Appellees failed to adequately investigate

Appellants’ claim and failed to ask Appellants for necessary evidence. See id. at

968. Each of Appellants’ two appeals was denied based on a supposed lack of

documentation of Lukas’s condition at the time of her treatment at Alta Mira.

Despite this apparent absence of necessary information, at no point in the appeals

process did Appellees request additional medical records from Appellants.

Second, when Appellants nonetheless did submit reliable evidence, Appellees gave

insufficient credit to that evidence. See id. In support of their second appeal,

Appellants submitted a letter from Victoria Green, a member of the Alta Mira staff.

Green’s letter outlined several specific reasons why residential treatment was

medically necessary for Lukas. While the reviewing physician hired by the Plan

Administrator nominally considered Green’s letter, neither the physician nor the

Administrator even attempted to explain why that letter failed to substantiate

Appellants’ claim.

      “A procedural irregularity, like a conflict of interest, is a matter to be

weighed in deciding whether an administrator’s decision was an abuse of

discretion.” Id. at 972. In the present case, serious procedural violations plagued

every level of Appellees’ review process. Most troubling among these violations is

                                           3
Appellees’ repeated failure to explain the rationale behind the denial of Appellants’

claim. UBH failed to issue any written denial of its initial adverse benefit

determination. This was a clear violation of ERISA regulations. See 29 C.F.R. §

2560.503-1(g)(1).

      In denying Appellants’ first appeal, UBH’s reviewing physician succinctly

stated, “it is my determination that Medical Necessity Requirements for the

Residential Treatment Level of Care are not met. Care could have occurred with

Outpatient providers.” This conclusory statement did not constitute the

“meaningful dialogue” required by ERISA. See Booton v. Lockheed Med. Benefit

Plan, 110 F.3d 1461, 1463 (9th Cir. 1997); see also 29 C.F.R. § 2560.503-1(j)(1),

(j)(5)(ii). Appellees’ failure to provide any comprehensible explanation for

denying Appellants’ claim is rendered even more problematic by the fact that they

had in their possession internal notes containing a much more complete articulation

of their rationale. Appellees failed to provide Appellants with these notes even

after Appellants specifically requested a complete copy of UBH’s case file on

Lukas. This constituted yet another violation of ERISA regulations. See 29 C.F.R.

§ 2560.503-1(h)(2)(iii). Additionally, despite the fact that UBH’s denial was

expressly based on its level of care guidelines, at least one version of the letter

                                            4
denying the first appeal did not contain the criteria set forth in those guidelines, as

required by ERISA regulations.1 See id. § 2560.503-1(j)(5)(i).

       More procedural irregularities occurred during the course of the second

appeal. First, the Plan Administrator failed to identify the reviewing physician

whose advice it obtained in connection with that appeal. See id. § 2560.503-

1(h)(3)(iv). Second, Appellees once again failed to explain the denial of

Appellants’ claim. The denial letter stated only that “[t]here was not enough

current justification in the documentation presented to meet medical necessity

criteria for residential level of care.”

       In light of the Plan Administrator’s conflict of interest and the serious

procedural violations committed by Appellees, the decision to deny benefits for

Lukas’s treatment at Alta Mira constituted an abuse of discretion. In the seven

months leading up to her arrival at Alta Mira, Lukas repeatedly failed in intensive

outpatient treatment and even residential treatment. Victoria Green, in a letter

       1
          There are two versions of the denial of the first appeal in the record, one of
which contains the guidelines criteria and one of which does not. While it appears
that Appellants received the version containing the guidelines criteria at some
point, it is unclear when and how they received it. The district court made no
factual finding on this point. In any case, given the various other significant
procedural violations committed by Appellees, this particular irregularity is not
crucial to the result reached by this court.

                                            5
submitted to the Plan Administrator, provided specific reasons why residential

treatment was medically necessary for Lukas. While at Alta Mira, Lukas required

monitoring during and after meals, monitoring of her exercise, and daily blind

weigh-ins. Appellees never gave any indication as to why this letter was

insufficient to substantiate Appellants’ claim, instead falling back on the purported

lack of documentation of Lukas’s condition when she began treatment at Alta Mira

and any eating disorder symptoms or other issues she experienced during

treatment. Reliance upon a lack of documentation was unreasonable because it

was not supported by the record and because Appellees’ numerous procedural

violations deprived Appellants of the opportunity to provide additional relevant

records. Moreover, the fact that Lukas’s treatment, which included close

monitoring of her eating and related behaviors, was ultimately successful does not

indicate that the treatment was not medically necessary at the outset. Because the

Plan Administrator was obligated to award benefits on the administrative record,

we reverse and remand with instructions to the district court to direct an award of

benefits to Appellants and to conduct any further proceedings consistent with this

order. See Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 681 (9th

Cir. 2011).

      REVERSED.

                                          6