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Clark v. K-Mart Corp.

filed: May 22, 1992.


On Appeal from the United States District Court for the Western District of Pennsylvania. (D.C. Civil No. 91-1431)

Before: Greenberg and Scirica, Circuit Judges, and Debevoise, District Judge*fn*

Author: Debevoise


DEBEVOISE, District Judge.

Appellant, K-Mart Corporation ("K-Mart"), appeals from an order of the district court enjoining it from denying medical benefits to appellee, Susan Clark, for a procedure known as high dose chemotherapy with autologous bone marrow transplant ("HDCT/ABMT"). K-Mart also appeals from an order fixing the bond in the amount of $1,000. The jurisdiction of the district court was based upon the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. ("ERISA"). This Court has jurisdiction pursuant to 28 U.S.C. § 1292(a)(1).

We conclude that the order granting preliminary injunctive relief constituted an abuse of discretion and must be reversed. In light of this determination the appeal from the order setting the bond is moot and will be dismissed.


Appellee, a 35-year old mother of two children, was employed by K-Mart at all times relevant to this action. Her husband is employed at a metal fabrication plant.

In January 1988 appellee underwent a right modified radical mastectomy. Thereafter she was treated for six months with chemotherapy and radiation. In the summer of 1990 she noted hip pain, and tests revealed bone metastases. She was treated with additional chemotherapy and radiation, but in February 1991 her pain recurred.

On June 19, 1991, at the request of appellee's physician, Jeffrey E. Shogan, M.D., Director, Bone Marrow Transplant Program of the Allegheny General Hospital in Pittsburgh, evaluated appellee's condition. He confirmed the diagnosis of metastatic breast cancer and concluded that conventional therapy held out little hope for appellee to secure prolonged disease-free survival. He further concluded that HDCT/ABMT was an appropriate treatment and that appellee was a suitable candidate for the treatment, which he proposed to perform at Allegheny General Hospital.

Until that time K-Mart's self-funded Comprehensive Health Care Plan (the "Plan") had paid appellee's medical and surgical expenses. K-Mart, through its Director of Employee Benefits, is the administrator of the Plan, but, as provided in the Plan, it has entered into an Administrative Services Contract with Blue Cross and Blue Shield of Michigan ("Blue Cross"). Among Blue Cross' responsibilities is the administration of claims for health benefits. The Plan provides that claims for payment or reimbursement be submitted to Blue Cross. If a claim is denied there is provision for an appeal to Blue Cross, and if a claimant is unsuccessful on appeal there is provision for further appeal to K-Mart's Director of Employee Benefits.

The Plan pays for certain transplants "as well as accepted bone marrow procedures" (emphasis added). The Plan excludes from coverage certain medical procedures. Critical to this case, among the excluded procedures are those which are "experimental or investigational."*fn1 The Plan assigns to Blue Cross a major role in the administration of the exclusion provisions. The Plan Summary instructs a beneficiary that "if you receive or plan to receive services not listed above and are doubtful of coverage, submit a claim to [Blue Cross] for a determination of benefits." With respect to the exclusion at issue in this case, it is defined as "any procedure . . . considered by the claims administrator to be experimental or investigational" (emphasis added).

HDCT/ABMT is a procedure of relatively recent origin whereby a patient is given extremely high, lethal doses of chemotherapy, far more than the patient could tolerate during conventional chemotherapy. The patient must first undergo an initial procedure wherein bone marrow cells are removed from and stored outside the body. In some circumstances the bone marrow is purged while it is outside the body in an effort to destroy microscopic residual cancer cells. The bone marrow cells are later reinjected into the patient after the course of massive dose chemotherapy has been completed.

While HDCT/ABMT may be effective for some forms of cancer, it may not be effective for others. A multitude of factors must be considered and a wide variety of procedures have to be tried, tested and evaluated before HDCT/ABMT becomes an accepted mode of treatment for a particular cancer condition. It is now generally accepted in medical circles that HDCT/ABMT is no longer in its experimental stage as a treatment for Hodgkin's disease, lymphoma, neuroblastoma and acute leukemia.

Dr. Shogan, who proposed to treat appellee with HDCT/ABMT, is board certified in internal medicine and oncology. He has held teaching positions in the past and is currently an Assistant Professor of Medicine at the University of Pennsylvania. Since 1989 when he became Director of the Allegheny General Hospital's Bone Marrow Transplant Program he has performed 50 transplants, of which 30 were for metastatic breast cancer. In Dr. Shogan's opinion the procedure as applied to metastatic breast cancer is no longer experimental or investigational.

The cost of the procedure is upwards of $150,000. Hospitals are generally unwilling to permit the procedure to be performed unless they are assured in advance of payments and consequently appellee sought advance determination that the Plan would cover the cost. To that end on July 8, 1991 Dr. Shogan wrote to K-Mart to seek a commitment that the Plan would pay for the treatment he proposed to administer to appellee. The letter described appellee's condition and the benefits to be expected from HDCT/ABMT, and the letter set forth the reasons why Dr. Shogan believed that this treatment for metastatic breast cancer should not be considered experimental.

K-Mart sent the letter to Blue Cross for a determination of eligibility. On August 19 or 20, 1991 the letter arrived on the desk of Seymour A. Adelson, M.D. Dr. Adelson is Blue Cross' senior medical consultant in the area of medical policy. He describes himself as the interface between the medical and business world, and among his duties is the application of medical plan documents and collective bargaining agreements to medical benefit claims. In recent years he has devoted considerable attention to the question whether plans which Blue Cross administered covered HDCT/ABMT generally and particularly as applied to metastatic breast cancer.

Upon reviewing Dr. Shogan's letter he concluded that the treatment appellee sought was experimental and thus excluded from coverage under the Plan. This determination was communicated to Glyn Soehner, manager of K-Mart's welfare benefit plans.

Failing to obtain approval of payment, appellee instituted this action on August 27. The complaint sought declaratory and injunctive relief. Prompt action was urgent, because if appellee's condition deteriorated she might no longer be eligible under the protocols established for treatment.

Moving with great dispatch the district court conducted a hearing on the application for a preliminary injunction on September 11. The principal witnesses were Dr. Shogan and Dr. Adelson who each addressed the issue whether the proposed treatment was experimental. Immediately upon the Conclusion of the hearing the court placed an opinion on the record in which it set forth its reasons for issuing an injunction ordering K-Mart to pay for HDCT/ABMT in the event appellee qualified for it and elected to proceed with it. The district court concluded that the Plan gives Blue Cross, the claims administrator, authority to decide whether claims are within the exclusions and that the determination of Blue Cross in this case was arbitrary and capricious. In the alternative the district court held that if it were to apply a de novo standard of review it would hold that HDCT/ABMT for metastatic breast cancer is not experimental.

The district court fixed the bond in the sum of $1000 over K-Mart's ...

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