On Appeal from the United States District Court for the Western District of Pennsylvania. (D.C. Civil Action No. 92-00266E).
Before: Sloviter, Chief Judge, Mansmann and Scirica, Circuit Judges.
This case presents several questions concerning the interpretation and application of an employee health insurance plan, an area litigated with increasing frequency under the Employee Retirement Income Security of Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461 (1988). Belden & Blake Corporation appeals the district court's final judgment directing it to pay for employee Richard Heasley's liver/pancreas transplant as a treatment for pancreatic cancer which spread to both lobes of his liver. After a bench trial, the court held the transplant was not an "experimental procedure" excluded from coverage under Belden & Blake's self-funded medical insurance plan. We will vacate and remand.
Richard Heasley, now deceased, was an engineer employed by Belden & Blake Corp., an oil and gas producing company incorporated in Ohio and operating in Ohio, Pennsylvania, and New York.*fn1 In September 1991, Heasley was diagnosed as suffering from Zollinger-Ellison's Syndrome, a condition in which a pancreatic tumor produces a hormone called gastrin. Known as a gastrinoma, the condition is a type of neuroendocrine tumor. Although gastrinomas typically grow slowly and remain confined to the pancreas, any spreading tends to occur in the liver.
The treatment of a neuroendocrine tumor depends upon its size, growth rate, and the severity of its symptoms. Smaller tumors that are not growing can be treated with drug therapy, followed by surgical removal if necessary. Where, as in Heasley's case, the tumor spread to both lobes of the liver, surgical removal was not possible without destroying the liver. Before surgeons performed liver transplants, the only treatments available for these metastasized tumors were chemotherapy and drug therapy.
After diagnosing the tumor, Heasley's doctors at the University of Pittsburgh Medical Center (the "University of Pittsburgh") recommended a liver/pancreas transplant. This procedure entails replacement of the diseased liver, removal of the tumor and, if necessary, replacement of the pancreas. Heasley's doctors believed a transplant would be his best hope for a cure in light of the tumor's rapid growth and the fact it had not spread beyond his pancreas and liver. They also believed his relatively young age (42 years old) and otherwise excellent health made him a good candidate. The doctors expected the transplant would give Heasley a higher quality of life for a longer period than chemotherapy. In the meantime, they reduced the size of the tumor through chemotherapy. But after responding favorably to the first six treatments, Heasley showed no improvement from the seventh and eighth treatments. This led the doctors to worry Heasley would no longer respond to chemotherapy, a further reason for recommending the transplant.
As a Belden & Blake employee, Heasley contributed to and received coverage from the company's self-funded group medical plan.*fn2 The Plan is managed by AultCare, a Preferred Provider Organization affiliated with Aultman Hospital in Canton, Ohio, which administers claims and has significant influence over coverage determinations. The Plan covers organ transplants subject to its general exclusions, one of which bars coverage for "experimental procedures."
The University of Pittsburgh requires prospective transplant patients to make full payment for the procedure prior to surgery. Following diagnosis of his gastrinoma in September 1991, Heasley requested authorization for the procedure from Belden & Blake. On October 18, on a form labeled "AultCare Predetermination," AultCare Medical Director Gregory Haban advised Heasley the transplant would not be covered because it was "considered experimental."
An exchange of correspondence among Heasley, Belden & Blake, and AultCare followed. In a letter from his counsel to Belden & Blake on March 12, 1992, Heasley requested a Summary Plan Description and Plan Document to determine whether the denial of coverage was proper. Belden & Blake's Human Resources Manager James Ewing responded, enclosing a health insurance policy issued by McKinley Life Insurance Company that contained the "experimental procedures" exclusion. Ewing advised Heasley that Belden & Blake had converted the policy to a self-insured plan in June 1990. Noting the policy contained no provision to appeal the denial of coverage, Heasley's counsel asked Ewing to whom he could direct questions about an appeal. Ewing directed him to AultCare. Responding to Heasley's counsel on March 23, AultCare Vice President Richard Haines confirmed the denial was based on "the determination of AultCare and Belden & Blake . . . that a liver transplant for treatment of Mr. Heasley's diagnosis is experimental." When Heasley requested further information explaining the denial of coverage, AultCare offered to review its determination, and asked Heasley to answer certain questions about the transplant. Aided by his physicians, Heasley prepared written responses and sent AultCare copies of pertinent medical journal articles. Six weeks later, on July 15, AultCare Medical Director Haban advised Heasley that after reconsideration, it had decided to deny coverage on the same basis.
On August 4, Heasley filed suit against Belden & Blake in the Western District of Pennsylvania, invoking ERISA's civil actions provision, 29 U.S.C. § 1132(a)(1).*fn3 In his complaint, Heasley sought a declaration that his proposed liver/pancreas treatment was not an "experimental procedure" within the meaning of the Plan, and that Belden & Blake had breached its fiduciary duty and its contractual obligations under the Plan. Heasley requested an order directing Belden & Blake to authorize the transplant, civil penalties, attorney's fees, and costs. Belden & Blake moved to dismiss the complaint for failure to join AultCare as a necessary party, and the court denied the motion. The court then held three days of hearings, receiving expert testimony from both sides.
Following the hearings, the court found the transplant was not an "experimental procedure" under the Plan and that Belden & Blake had breached its fiduciary duty by denying coverage. It directed Belden & Blake to pay the University of Pittsburgh the full cost of the transplant. The court certified its order as a final judgment under Fed. R. Civ. P. 54(b). Belden & Blake appealed. In the meantime, Belden & Blake paid a total of $279,000 -- $208,000 to the University of Pittsburgh and $71,000 to Heasley's doctors -- and Heasley received his transplant. Shortly after we heard oral argument, Heasley died from post-operative complications associated with his transplant.*fn4
On appeal, Belden & Blake challenges the district court's choice of the de novo standard of review over its denial of coverage, its interpretation of the "experimental procedure" exclusion in the Plan, and its Conclusion that Heasley's liver transplant fell outside the exclusion. We have jurisdiction under 28 U.S.C. § 1291 (1988).
Different standards of review govern our consideration of the district court's rulings. The court's choice of the de novo standard and its definition of the term "experimental procedure" were mixed questions of law and fact, involving the the application of legal precepts, Gregoire v. Centennial School Dist., 907 F.2d 1366, 1370 (3d Cir.), cert. denied, 498 U.S. 899, 112 L. Ed. 2d 211, 111 S. Ct. 253 (1990), and the interpretation of contractual language to determine the parties' intent, PaineWebber Inc. v. Hartmann, 921 F.2d 507, 511 (3d Cir. 1990). We review the legal aspect of these determinations under a plenary standard and their factual aspects for clear error. Ram Constr. Co. v. Amer. States Ins. Co., 749 F.2d 1049, 1053 (3d Cir. 1984). Our review over the district court's ruling that Heasley's transplant was not an "experimental procedure" -- under the court's or Belden & Blake's definition of that term -- is more limited. Because the court based this ruling on its resolution of conflicting expert testimony and documentary evidence, we review for clear error. Holder v. Prudential Ins. Co. of America, 951 F.2d 89, 91 (5th Cir. 1992) (applying clear error standard to district court's ruling that high-dose chemotherapy was "experimental" treatment for breast cancer); Farley v. Benefit Trust Life Ins. Co., 979 F.2d 653, 661 (8th Cir. 1992) (same standard applied to ruling that high-dose chemotherapy for melanoma was "experimental").
We first consider whether the district court chose the proper standard of judicial review over Belden & Blake's denial of benefits. Under Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 103 L. Ed. 2d 80, 109 S. Ct. 948 (1989), a court must review de novo a company's denial of benefits "unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan," in which case we review a benefits denial under the narrower arbitrary and capricious standard. Id. at 115. Selection of an appropriate standard of judicial review therefore turns on the terms of the plan. Id. at 111.
In Luby v. Teamsters Health, Welfare & Pension Trust Funds, we held a plan's grant of discretion can either be express or implied. 944 F.2d 1176, 1180 (3d Cir. 1991). We ruled a general grant of administrative power to the plan trustees did not imply authority to decide specific disputes between beneficiary claimants. We also determined an express grant of discretion in one specific area of a plan undermined a claim that the administrator possessed implied discretion in another area of the plan. An express grant in one area, we reasoned, demonstrated that had the drafters intended to grant discretion in another area, "they knew how to say so and would have expressly done so." 944 F.2d at 1181.
In contending the Plan accorded AultCare discretion to determine whether Heasley's transplant was experimental, Belden & Blake relies on language in the Utilization ...