Vasseur v. Halliburton Co.

• Decision Date: 03 January 1992
• Docket Number: No. 90-4861,90-4861
• Citation: 950 F.2d 1002
• Parties: Moise VASSEUR, Plaintiff-Appellee, v. HALLIBURTON CO., and Halliburton Co. Retirees Medical Plan, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1002

950 F.2d 1002

Moise VASSEUR, Plaintiff-Appellee, v. HALLIBURTON CO., and Halliburton Co. Retirees Medical Plan Defendants-Appellants.

No. 90-4861.

United States Court of Appeals Fifth Circuit.

Jan. 3, 1992.

Virginia N. Roddy, Preaus, Roddy & Krebs, New Orleans, La., for defendants-appellants.

Elwood C. Stevens, Jr., Kleinpeter, Schwartzberg & Stevens, Morgan City, La., John A. Mouton, III, Mouton & Alexander, Lafayette, La., for plaintiff-appellee.

Appeal from the United States District Court for the Western District of Louisiana.

Before CLARK, Chief Judge, WILLIAMS, and BARKSDALE, Circuit Judges.

CLARK, Chief Judge:

Moise Vasseur, a retired employee of Halliburton Company (Halliburton), brought this ERISA ¹ action on behalf of his son Gregory to establish Gregory's right to reimbursement from Halliburton's medical plan for expenses Gregory incurred during treatment at Tangram Rehabilitation Network (Tangram). The district court determined the plan administrator acted arbitrarily and capriciously in denying coverage and the plan was not entitled to subrogation for third party payments. Halliburton and the plan appeal.

The district court erroneously construed the plan's hospital coverage to include Tangram. That part of its judgment permitting cost recovery is reversed. The court's dismissal of the plan's counterclaim for subrogation was premature. It is vacated and remanded with directions. The declaration of Gregory's entitlement to coverage for future benefits is modified. The award of attorneys' fees is vacated.

I.

Since 1980, Halliburton has maintained a series of plans covering medical expenses incurred by its employees (plans). Since 1981, it also has provided such coverage plans for retirees. Initially the plans were operated through an insurance company. Later plans have been funded by the Halliburton employees trust fund and administered by a plan administrator. Coverage and benefits provisions have been amended from time to time. ²

Moise Vasseur was an active employee participant in Halliburton's plans until June 15, 1983, the date he retired. Thereafter he was covered by medical plans applicable to retired employees. All plans involved in this action are employee benefit plans which provide medical benefits to qualified employees and former employees of Halliburton Company and their eligible dependents. All are governed by ERISA.

Gregory, an eligible dependent of Moise, was seriously injured in a motorcycle accident on February 17, 1983. He received head injuries that render him unable to take care of himself. After periods of hospitalization and treatment elsewhere, he entered Tangram, a rehabilitation facility in San Marcos, Texas. Tangram treats head-injured individuals in a noninstitutional, rural environment. It is a transitional facility for head-injured individuals caught in limbo between the hospital and reentry into society.

On the date of Gregory's accident the applicable Halliburton employee medical plan contained a definition of "hospital" which required that the institution be licensed as a hospital. A prior plan, which was in effect from September 1980 until January 1, 1981, did not contain this limitation. The plan which became effective on the latter date and all subsequent plans have limited reimbursement for hospital charges to licensed hospitals. In June 1983, after Gregory's accident, Moise retired and Gregory became covered as a dependent of a retired employee. All plans for retirees and their dependents have covered only licensed hospitals. All plans have provided that changes in coverage could be made without the consent of plan beneficiaries.

The 1987 plan contained a limitation on amendments that provided that any amendment must be without prejudice to any claim arising prior to such action. The 1986 and 1987 plans give the plan administrator final responsibility for interpreting plan terms.

Gregory submitted claims to the plan for medical charges related to injuries he sustained in the February 1983 accident. The plans paid claims he submitted from 1983 through 1986. The plan administrator refused payment, however, for charges covering treatment at Tangram, giving as reasons that Tangram did not qualify as a hospital under the plan and the plan did not cover custodial care, occupational therapy, exercise programs and remedial and/or educational evaluation and/or therapy.

The plan in effect on the date of the accident did not contain a subrogation provision. The plans in effect for subsequent years did have subrogation clauses. In the 1987 plan, the subrogation provision was substantially modified.

Vasseur originally filed a declaratory judgment action in state court. Halliburton removed the action to the district court. The plan was joined and it counterclaimed for subrogation for the benefits it had paid.

The case was submitted on uncontested facts to the court. It awarded Vasseur the charges Gregory incurred at Tangram plus attorneys' fees. The court also issued a declaratory judgment as to the applicable lifetime maximum benefits and dismissed the plan's subrogation counterclaim. Halliburton and the plan appealed.

II.

Halliburton and the plan contend the district court erred: 1) in its application of the 1987 limited change provision to include Tangram as a covered hospital; 2) in finding the plan administrator's application of the plan to Gregory's claims was arbitrary and capricious; 3) in denying the plan the right to subrogation against third parties; 4) in holding Halliburton was an ERISA fiduciary and 5) in awarding attorneys' fees to Vasseur.

A. Standard of Review

The Supreme Court in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 108, 109 S.Ct. 948, 953, 103 L.Ed.2d 80 (1989) considered "the appropriate standard of review to apply in § 1132(a)(1)(B) actions challenging denials of benefits based on plan interpretations." The Court held that "a denial of benefits ... 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." Id. at 115, 109 S.Ct. at 956. In cases where the plan grants the plan administrator such discretion, a deferential, arbitrary and capricious standard of review applies. See Pierre v. Connecticut Gen. Life Ins. Co., 932 F.2d 1552, 1556 (5th Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 453, 116 L.Ed.2d 470 (1991).

Because the applicable plan gives the plan administrator discretion to construe plan terms, the arbitrary and capricious standard applies. We reject Vasseur's contention that a de novo standard should apply because the plan administrator had a conflict of interest. The plan provisions he relies on in arguing that such a conflict of interest existed are not contained in the plan applied in the determination not to pay the Tangram charges.

B. Coverage

The district court held:

[T]he 1987 ... plan states that no amendment can be made to the prejudice of a claim arising prior to the amendment. As Vasseur was covered at the time of Gregory's accident under the provisions of the Halliburton Medical Plan containing the less restrictive definition of "hospital", he retains this benefit. The court finds that Tangram is a covered facility within the terms of the plan and that defendants were arbitrary and capricious in not finding so.

Halliburton and the plan contend this holding was error because the 1987 plan containing the limited amendments clause the court relied upon is not applicable to Gregory's claim and because the 1980 plan, whose definition of "hospital" the district court adopted, was amended before the accident and before charges were incurred at Tangram. We agree.

ERISA applies to two types of "employee benefit plans": "employee welfare benefit plans" and "employee pension benefit plans." Hansen v. Continental Ins. Co., 940 F.2d 971, 976 (5th Cir.1991) (citing 29 U.S.C. § 1002(3)). This case concerns the former, which ERISA defines as, inter alia,

any plan, fund, or program which ... is ... maintained by an employer ... to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries ... (A) medical, surgical, or hospital care or benefits....

29 U.S.C. § 1002(1). Contrary to the vesting requirements ERISA imposes on pension plans, see, e.g., 29 U.S.C. § 1053, it does not require that welfare plan benefits "vest" or that an employer maintain them at a particular level. McGann v. H & H Music Co., 946 F.2d 401, 405 (5th Cir.1991). See also Alday v. Container Corp. of Am., 906 F.2d 660, 663 (11th Cir.1990), cert. denied, --- U.S. ----, 111 S.Ct. 675, 112 L.Ed.2d 668 (1991); Musto v. American Gen. Corp., 861 F.2d 897, 901 (6th Cir.1988), cert. denied, 490 U.S. 1020, 109 S.Ct. 1745, 104 L.Ed.2d 182 (1989); and Moore v. Metropolitan Life Ins. Co., 856 F.2d 488, 492 (2d Cir.1988).

An employer can oblige itself contractually to maintain benefits at a certain level in ways that are not mandated by ERISA. E.g., Ryan v. Chromalloy Am. Corp., 877 F.2d 598, 603 (7th Cir.1989); see also Alday, 906 F.2d at 665. Absent such a contractual assurance, ERISA permits an employer to decrease or increase benefits. However, the plan must be maintained pursuant to a plan document. 29 U.S.C. § 1102(a)(1).

The district court erred in concluding that the plan administrator acted arbitrarily and capriciously in relying on the 1986 plan. First, because ERISA does not require that medical plan benefits vest, Gregory was not entitled to "retain[ ] the benefit" of language in earlier plan versions. Second, the less restrictive definition of hospital contained in the 1980 plan did not apply. As the parties stipulated, the modified 1981 plan was in effect on the date of the accident. Third, the 1987 plan requirement that amendments "shall be without prejudice to any claim arising prior...