Stratton v. E.I. Dupont De Nemours & Co.

• Citation: 363 F.3d 250
• Decision Date: 06 April 2004
• Docket Number: No. 03-2609.,03-2609.
• Parties: Melanie STRATTON; Jeffrey Stratton, her husband Appellants v. E.I. DUPONT DE NEMOURS & CO.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

363 F.3d 250

Melanie STRATTON; Jeffrey Stratton, her husband Appellants v. E.I. DUPONT DE NEMOURS & CO.

No. 03-2609.

United States Court of Appeals, Third Circuit.

Argued March 8, 2004.

April 6, 2004.

Stella L. Smetanka, Jonathan Will (Argued), Law Student Specially Admitted Pursuant to Third Cir. LAR 46.3 University of Pittsburgh School of Law, Pittsburgh, for Appellants.

Raymond M. Ripple (Argued), Donna L. Goodman, E.I. DuPont de Nemours & Company, Legal Department, Wilmington, for Appellee.

Before SLOVITER, NYGAARD, Circuit Judges and OBERDORFER, District Judge.^*

OPINION OF THE COURT

SLOVITER, Circuit Judge.

Appellant Melanie Stratton appeals from the order of summary judgment entered on behalf of defendant E.I. DuPont de Nemours & Co. ("DuPont"). Stratton filed this suit pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132(a)(1)(B), seeking repayment of medical benefits she incurred for a surgical procedure to treat her temporomandibular joint dysfunction ("TMJ").¹ We have jurisdiction to hear this appeal under 28 U.S.C. § 1291.

I.

Stratton had health insurance through an employer-sponsored health plan of DuPont, her husband's employer. The plan covering Stratton excludes "[c]harges for services or supplies not medically necessary for the diagnosis and treatment of the illness or injury." J.App. at 26.² It defines the term "medically necessary" as a "service or supply which is reasonable and necessary for the diagnosis or treatment of an illness or injury, in view of the customary practice in the geographical area, and is given at the appropriate level of care." J.App. at 15. It is undisputed that first Aetna U.S. Healthcare ("Aetna"), the insurance carrier for DuPont, and ultimately DuPont had discretion to administer the plan with regard to medically necessary services and supplies.

The facts set forth hereafter are taken from the record on the summary judgment motion and are not in dispute.

In 1990, Stratton's doctors diagnosed her with TMJ, and for the next ten years she suffered from headaches and the inability to open and close her mouth, chew, yawn, and laugh without pain. She underwent many forms of conservative treatment, including splint therapy, orthodontia, dental work, analgesics and muscle relaxants. After these treatments met with only temporary relief, Dr. Donald J. Macher, an oral surgeon, suggested that Stratton undergo arthroplasty surgery for her TMJ. The full medical term for this surgery is "Right and Left Temporomandibular Joint Reconstructive Arthroplasty," J.App. at 156, and it is an invasive procedure that involves repositioning discs, lysis of adhesions, and the insertion of a previously constructed splint into the mouth.

On or about November 13, 1999, Aetna initially denied coverage for the surgery but in late December requested that Stratton submit an updated magnetic resonance image ("MRI") so that her request could be further considered. The most recent MRI in Stratton's record until that date was taken February 8, 1990; at Aetna's request, Stratton obtained an updated MRI on January 3, 2000. Stratton submitted the updated MRI, which a specialist at Aetna, Dr. George Koumaras, reviewed. On January 6, 2000, Aetna denied coverage for the requested surgery on the ground that there were more conservative and medically appropriate treatments available, such as arthrocentesis or arthroscopic surgery. Arthrocentesis involves anesthetizing the affected TMJ and then flushing the joint with a sterile solution to lubricate the joint surfaces and reduce inflammation, see American Academy of Orofacial Pain, at http:// www.aaop.org/info_arthro.htm; arthroscopy involves inserting an imaging and therapy device into the affected TMJ. See id. at http://www.aaop.org/info_surgery.htm. Stratton nevertheless went ahead with the arthroplasty surgery on January 13, 2000 and covered the cost of $9,829.05 herself.

Following her surgery, Stratton continued to appeal the denial of benefits within Aetna, which waited to review the post-operative report and any other information pertinent to the surgery before making a final decision on her appeal. Aetna had three physicians review her claim, including Dr. Hendler — an independent physician from the University of Pennsylvania who is Board Certified in Oral and Maxillofacial Surgery, specializes in TMJ, and was not involved in the original decision. Dr. Hendler also decided that less invasive surgeries would have been more appropriate. Aetna denied Stratton's claim on February 10, 2000.

Stratton appealed to DuPont. DuPont reviewed the documents on which Aetna had based its denial and its own files to see how similar cases had been handled in the past to ensure that its plan was being administered consistently. On the basis of the record before it, DuPont upheld Aetna's denial of coverage and informed Stratton of this decision on April 18, 2000. The District Court held that the plan grants discretion to determine eligibility for benefits,

which triggers the arbitrary and capricious standard of review, diminished perhaps to a slightly less deferential standard because of the slight conflict of interest. But even under a heightened standard of review, the record before the administrator (Aetna) and, on appeal to the DuPont Medical Care Plan, supports the denial of coverage for plaintiff's TMJ surgery.

App. A at 6 (District Court Opinion).

On appeal, we must consider whether the District Court properly reviewed the denial of coverage under a "slightly less deferential" arbitrary and capricious standard, App. A at 6, and whether it properly granted the summary judgment motion. We exercise plenary review over a district court's grant of summary judgment. Skretvedt v. E.I. DuPont de Nemours & Co., 268 F.3d 167, 173-74 (3d Cir.2001). Summary judgment is proper if there is no genuine issue of material fact and if the moving party is entitled to judgment as a matter of law when viewing the facts in the light most favorable to the non-moving party. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). We apply the same standard that the District Court should have applied. Farrell v. Planters Lifesavers Co., 206 F.3d 271, 278 (3d Cir.2000).

Because the District Court reviewed the claim under the appropriate standard and did not err as a matter of law, we will affirm its decision.

II.

A. Standard of Review

Stratton's first argument on appeal is that the District Court should have used a heightened arbitrary and capricious standard, but it is unclear that this would entail closer scrutiny of the decision of the employer than the "slightly less deferential" arbitrary and capricious standard of review employed by the District Court in the instant case. App. A at 6. The standard of review in cases brought under ERISA for benefits denied is not always easy to apply. In the seminal case on this issue, the Supreme Court stated that "a denial of benefits challenged under [ERISA, 29 U.S.C.] § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956-57, 103 L.Ed.2d 80 (1989). In cases where an administrator exercises discretion, "[t]rust principles make a deferential standard of review appropriate" and the Court suggested that we review such exercises of discretion under the arbitrary and capricious standard. Id. at 111-12, 109 S.Ct. 948. The Supreme Court continued, "[o]f course, if a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a factor in determining whether there is an abuse of discretion." Id. at 115, 109 S.Ct. 948 (internal quotation and citation omitted).

Attempting to distill this direction into a workable standard, we have held that "when an insurance company both funds and administers benefits, it is generally acting under a conflict that warrants a heightened form of the arbitrary and capricious standard of review." Pinto v. Reliance Standard Life Ins. Co., 214 F.3d 377, 378 (3d Cir.2000). This "heightened" form of review is to be formulated on a sliding scale basis, which enables us to "review[]the merits of the interpretation to determine whether it is consistent with an exercise of discretion by a fiduciary acting free of the interests that conflict with those of beneficiaries." Pinto, 214 F.3d at 391 (quoting Doe v. Group Hospitalization & Med. Servs., 3 F.3d 80, 87 (4th Cir.1993)). In employing the sliding scale approach, we take into account the following factors in deciding the severity of the conflict: (1) the sophistication of the parties; (2) the information accessible to the parties; (3) the exact financial arrangement between the insurer and the company; and (4) the status of the fiduciary, as the company's financial or structural deterioration might negatively impact the "presumed desire to maintain employee satisfaction." Pinto, 214 F.3d at 392.

Our examination of the factors set forth in Pinto in light of the circumstances in this case leads us to conclude that the District Court did not err in holding that the instant case "triggers the arbitrary and capricious standard of review, diminished perhaps to a slightly less deferential standard because of the slight conflict of interest." App. A at 6. We assume there was a sophistication imbalance between the parties. There is no reason why Stratton would have had ERISA or claims experience, whereas DuPont, a large, successful company with many employees, had numerous such claims. In fact, DuPont reviewed its record of claims before denying Stratton's claim. It follows that this factor weighs in favor of heightening the standard. Regarding information accessibility, Stratton...