Juliano v. The Health Maintenance Org. of NJ

• Decision Date: 01 August 1999
• Docket Number: Docket Nos. 98-9662
• Citation: 221 F.3d 279
• Parties: (2nd Cir. 2000) LOUIS G. JULIANO, <A HREF="#fr1-*" name="fn1-*">* . Plaintiff-Appellant-Cross-Appellee, v. THE HEALTH MAINTENANCE ORGANIZATION OF NEW JERSEY, INC., dba U.S. HEALTHCARE, Defendant-Appellee-Cross-Appellant. (L), 99-7022(XAP)
• Court: U.S. Court of Appeals — Second Circuit

Page 279

221 F.3d 279 (2nd Cir. 2000)

LOUIS G. JULIANO,^*. Plaintiff-Appellant-Cross-Appellee, v. THE HEALTH MAINTENANCE ORGANIZATION OF NEW JERSEY, INC., dba U.S. HEALTHCARE, Defendant-Appellee-Cross-Appellant.

Docket Nos. 98-9662(L), 99-7022(XAP)

August Term, 1999

UNITED STATES COURT OF APPEALS

SECOND CIRCUIT

Argued Nov. 29, 1999

Decided Aug. 1, 2000

Appeal and cross-appeal from a judgment of the United States District Court for the Southern District of New York (Kimba M. Wood, Judge; Nicholas Tsoucalas, Judge, sitting by designation) granting partial summary judgment in favor of the defendant and awarding the plaintiff damages following a bench trial.

Vacated and remanded.

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

CHARLES B. UPDIKE, Schoeman, Updike & Kaufman, LLP (Scott M. Riemer, of counsel), New York, NY, for Plaintiff-Appellant-Cross-Appellee.

KENNETH J. KELLY, Epstein Becker & Green, P.C. (Mark J. Goldberg, of counsel), New York, NY, for Defendant-Appellee-Cross-Appellant.

Mary Ellen Signorille and Melvin Radowitz, Washington, DC, for Amicus Curiae AARP.

Before: McLAUGHLIN, STRAUB, and SACK, Circuit Judges.

SACK, Circuit Judge:

This is an appeal and cross-appeal from a judgment entered by the United States District Court for the Southern District of New York (Kimba M. Wood, Judge; Nicholas Tsoucalas, Judge, sitting by designation). The plaintiffs, Louis and Ibolya Juliano (the "Julianos"), brought this action under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§1001-1461, against The Health Maintenance Organization of New Jersey, doing business as U.S. Healthcare ("USH"), to recover medical benefits that allegedly were due to them and attorneys' fees that they incurred in the attempt to recover them. Mrs. Juliano suffered from multiple sclerosis. USH is a health maintenance organization ("HMO") as that term is used in the Health Maintenance Organization Act of 1973 (the "HMO Act"), 42 U.S.C. §300e et seq. The district court granted partial summary judgment in favor of USH, concluding that the benefits to which the plaintiffs claimed they were entitled under their HMO contract with USH were not "medically necessary" and therefore USH was not obligated under the contract to provide them. The district court decided, however, that the Julianos were entitled to the "value" of the alternative benefits that USH had offered as of the date they satisfied the requirements for securing those benefits from USH. After a bench trial held to determine when the Julianos had perfected their right to the alternative benefits offered by USH, the district court found that the Julianos had perfected those rights twenty-nine days before Mrs.Juliano's death, and it therefore awarded Mr.Juliano twenty-nine days worth of benefits, which it valued at $24,360.

On appeal, Mr.Juliano argues that the district court erred in granting partial summary judgment in favor of USH and denying his attorneys' fees request. On its cross-appeal, USH contends that the district court erred in calculating the damage award by using the cost that USH would have incurred in providing the benefits it had offered rather than the actual cost to the Julianos of the care they obtained for Mrs. Juliano.

We vacate the judgment of the district court and remand for further proceedings consistent with this opinion.

BACKGROUND

At all times pertinent to this appeal, Mr. Juliano was a partner in the New York City law firm of Bigham Englar Jones & Houston. On January 1, 1993, the firm signed a Group Master Contract (the "Contract") with USH. Under the Contract, USH would provide health benefits to those firm employees who opted to become members of a plan governed thereby. On the same day, Mr.Juliano, for himself and his wife, elected to become a member of the "Patriot V HMO Plan" (the "Plan") provided pursuant to the Contract. Dr. Joseph A. Schwenkler, who had been Mrs. Juliano's principal physician since late 1987, was designated by the Julianos as Mrs. Juliano's primary care physician under the Plan. It is undisputed that the Contract qualifies as an employee welfare benefit plan under ERISA. See 29 U.S.C. §§1002(1).

In 1964, Mrs. Juliano was diagnosed as suffering from multiple sclerosis. Multiple sclerosis is a chronic disease that may be caused by a failure of the immune system. Neurological deterioration is typical and often results in decreased function first in the lower extremities and then in the upper extremities.

By the early 1990's, Mrs. Juliano had become bedridden, quadriplegic, barely capable of speech, unable to eat, and without a "gag reflex" to enable her to swallow. When she was not in the hospital, she received twenty-four-hour-a-day, seven-day-a-week nursing care at home. The major challenge facing her care-givers was to keep her airway clear. Her nurses were required continually to place a "Yankaur suction" (essentially a long plastic catheter attached to a suction producing machine) in the back of her mouth and throat to remove and clear fluids.

Mrs. Juliano's source of food was nutrients delivered to her stomach through a gastrostomy tube. The tube and the area on her body surrounding its point of insertion required twice-daily cleaning. During feedings, Mrs. Juliano's nurses insured that the nutrients were being digested properly by checking her stomach contents every three hours or so. This was done by inserting a syringe into the feeding tube and "pulling" the secretions out to see how much feeding material remained in the stomach. Depending on the results of the sampling, the nurses would either continue the feeding or wait for further digestion.

A Foley catheter was employed to dispose of Mrs. Juliano's urine. It required thrice-daily cleaning and periodic checking to insure that her urine flow was adequate.

As a result of being bedridden, Mrs. Juliano developed a large decubitus (bedsore) on her hip that required regular cleansing to prevent infection. She had to be physically moved in bed every two hours to prevent the bedsore from worsening. For similar reasons, Mrs. Juliano was completely removed from bed at least three or four times a day with the use of a crane-like device. This task was made difficult by Mrs. Juliano's quadriplegia and by the fact that her legs were in splints because her leg bones had fractured from severe osteoporosis.

Mrs. Juliano succumbed to her disease on February 7, 1995, while this litigation was pending in the district court.

Shortly after becoming a USH member in January 1993, Mr. Juliano tried to secure coverage under the Contract for his wife's home care. Under the Julianos' prior healthcare plan, reimbursement of what Mr. Juliano told this Court was eighty percent of Mrs. Juliano's medical expenses was made "without incident." On January 5, 1993, less than a week after the inception of the Julianos' membership in the Plan, Mrs. Juliano's primary care physician, Dr. Schwenkler, wrote a letter to USH informing it that Mrs. Juliano "require[d] private duty nursing" and that he "strongly recommend[ed] that her present home-care be continued under her [USH] benefits." USH responded in a six-line letter to Dr. Schwenkler dated January 20, 1993, stating that the "request for private duty nursing is denied as this is not a covered benefit under the [USH] plan," but that Mrs. Juliano would be entitled to treatment at a skilled nursing facility and that such care could be arranged through USH's Patient Management division.

On February 5, 1993, in response to USH's letter, the benefits coordinator at Mr. Juliano's law firm wrote to USH asserting that the private duty nursing requested for Mrs.Juliano by Dr. Schwenkler was a covered benefit available under the Plan. Several days later, on February 8, Dr. Schwenkler wrote on his prescription pad that Mrs. Juliano "requires 24-hour around-the-clock nursing care." It appears to be undisputed that the note was delivered to USH.

On February 24, 1993, USH responded by letter to the February 5 letter from the law-firm benefits coordinator. USH did not claim that private duty nursing was not a covered benefit. It asserted instead that it had "determined... that the most cost-effective way of providing 24 hour skilled nursing care is in a nursing facility as opposed to through home care" as requested. In a March 8 follow-up letter, USH said that it was not obligated to provide services in the home "simply because an enrollee requests them." It reiterated its position that "[i]f a choice can be made among severally [sic] medically appropriate alternative services or settings, medical case management may include consideration of whether a particular service or setting is cost-effective." Hence, USH offered Mrs. Juliano twenty-four hour nursing care in a skilled nursing facility.

The Julianos pursued their claim for home care through USH's grievance and appeal system. After an exchange of letters between USH and a lawyer retained by the Julianos, USH referred the matter to a "Grievance Review Committee." By letter dated May 12, 1993, USH reiterated its decision that it was not required to provide services in the Julianos' home upon their request and that it was within its discretion to offer Mrs. Juliano care in a nursing facility instead. On May 27, 1993, through counsel, the Julianos appealed the May 12 decision of the Grievance Review Committee to USH's Board of Directors. On June28, 1993, rather than hearing from the Board, the Julianos received a letter from a representative of the Grievance Appeal Committee indicating that the Committee had performed a second review of Mrs. Juliano's claim, and had rejected it. USH reiterated that its reason for denying home care for Mrs. Juliano was that there was "a medically appropriate cost effective alternative... available" a skilled nursing facility and that Mrs. Juliano was therefore not entitled to home care.

On July 23, 1993, the Julianos...