On Appeal from the United States District Court for the Western District of Pennsylvania (Pittsburgh), D.C. Civil No. 84-87.
Hunter and Sloviter, Circuit Judges, and Muir, District Judge.*fn*
Before us is the appeal by an employer who claims that the district court erred in holding that the action of the trustees of an ERISA-covered employee benefit plan in denying benefits to the spouse of an employee was arbitrary and capricious. We hold that the district court erred as a matter of law.
Janet Zayac is the wife of George Zayac, a coal miner employed by the Helen Mining Company (employer) at a mine in Indiana County, Pennsylvania. In July, 1982, she underwent in-hospital surgical treatment for severe obesity, which consisted of a gastric bypass, gastrojejunostomy, jejunojejunostomy and Roux-en-Y procedure. Her physician had determined that surgery was medically necessary because she was 200% of her desirable weight and other more conservative methods of treatment had been tried and were unsuccessful. She was discharged from the hospital two weeks later.
Mr. Zayac submitted to the employer's plan administrator a claim for benefits in the amount of $17,612.30 for his wife's surgery. Benefits were denied because prior approval for the surgery had not been obtained from the benefits plan administrator, as required by the plan. It is undisputed that neither the Zayacs nor their physician had sought or obtained prior approval. There is also no dispute that the lack of such approval was the sole reason the claim was denied.
The collective bargaining agent, District 2 of the United Mine Workers of America (UMWA), filed a request for Resolution of Dispute on behalf of the Zayacs with the trustees of the benefit plan. The trustees upheld denial of benefits, and the Zayacs and the union brought this action under Section 301 of the Labor Management Relations Act, 29 U.S.C. § 185, and Section 502 of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1132, seeking to overturn the trustees' decision.
After discovery, the parties agreed that the issues could be resolved by summary judgment, and filed cross-motions. The district court then awarded judgment to the Zayacs and against the employer in the amount of $17,612.30, holding that the trustees' application of the prior approval requirement in the present case was arbitrary and capricious. The employer, Helen Mining Company, has appealed.*fn1
THE RELEVANT PLAN PROVISIONS
The employer and the UMWA are signatories to the National Bituminous Coal Wage Agreement of 1981 (1981 Wage Agreement), a multi-employer collective bargaining agreement, the successor to a 1978 Wage Agreement. According to an unrebutted affidavit of a member of the Benefits Committee for the Bituminous Coal Operators' Association (BCOA), the 1978 Wage Agreement provided for the first time for the establishment and maintenance of employee benefit plans by the signatory operators rather than the trustees to provide health and other non-pension benefits to their employees. The affidavit also avers that "in establishing the employee benefit plans to be maintained and implemented by the signatory operators, BCOA and UMWA negotiators reviewed all of the interpretations that had previously been established and utilized by the Trustees and, in the course of explicit, informed and intense bargaining, adopted, revised or rejected those interpretations". What was finally agreed upon in negotiations was then inserted into the employee benefit plans to be maintained and implemented by the signatory operators.
Pursuant to the provisions of the applicable collective bargaining agreement, the employer maintained a benefit plan to provide health care benefits for employees and eligible dependents, including spouses. One of the health care benefits included within the plan was coverage of certain surgical treatments for morbid forms of severe obesity (two or more times desirable body weight). The plan sets out two prerequisites to obtaining benefits:
1. The beneficiary has a pathological, morbid form of severe obesity (200% or more of desirable weight);
2. Prior approval has been obtained from the Plan Administrator.
(emphasis added). The affidavit referred to above specifically states that the prior approval eligibility requirement was discussed and adopted as part of the benefit plan as a result of collective bargaining between the BCOA and UMWA during negotiation of the 1978 Wage Agreement. That eligibility requirement has been carried forward in employee benefit plans of signatory operators since 1978.
The trustees are given authority to make alterations in the benefit plan provisions, as they may deem to be necessary or appropriate, only "upon prior written approval by the Employers and the Union." They are also authorized and directed, after adequate notice and consultation with the employers and union, to make changes in the plans if necessary to conform the terms of the plan to the requirements of ERISA, or any other applicable federal law, ...