Crocco v. Xerox Corp.

• Decision Date: 17 February 1998
• Docket Number: No. 1002,D,1002
• Citation: 137 F.3d 105
• Parties: Pens. Plan Guide (CCH) P 23945S Kimberly J. CROCCO, Plaintiff-Appellee, v. XEROX CORPORATION and Patricia M. Nazemetz, Defendants-Appellants and AMERICAN PSYCHMANAGEMENT, INC., Defendant. ocket 97-7304.
• Court: U.S. Court of Appeals — Second Circuit

Page 105

137 F.3d 105

Pens. Plan Guide (CCH) P 23945S

Kimberly J. CROCCO, Plaintiff-Appellee, v. XEROX CORPORATION and Patricia M. Nazemetz Defendants-Appellants and AMERICAN PSYCHMANAGEMENT, INC., Defendant.

No. 1002, Docket 97-7304.

United States Court of Appeals Second Circuit.

Argued Jan. 30, 1998.

Decided Feb. 17, 1998.

Andrew P. Nemiroff, Greenwich, CT, for Plaintiff-Appellee.

Marc L. Zaken, Stamford, CT, for Defendants-Appellants.

Mary Ellen Signorille and Melvin Radowitz, Washington, DC, for amicus curiae American Association of Retired Persons, in support of plaintiff-appellant.

Before CALABRESI and CABRANES, JJ. ^*

CALABRESI, Circuit Judge.

Background

Plaintiff Kimberly J. Crocco worked for defendant Xerox Corporation ("Xerox") and participated in its employee benefits plan (the "Plan"). She received inpatient treatment at the Rye Psychiatric Hospital Center from February 2 through June 5, 1990, and sought benefits under the Plan to cover the costs of her hospitalization. American Psychmanagement, Inc. ("APM"), a private entity (which had contracted with Xerox to provide pre-admission and concurrent review--or "case management"--of mental health treatment covered by the Plan), certified coverage for Crocco's treatment, but only from February 2 through March 3. It denied certification of Crocco's treatment after March 3.

Crocco asked for and received from APM two levels of "administrative" review of this partial denial of certification. When APM refused to alter its original determination, Crocco requested that defendant Nazemetz, the Plan Administrator, conduct a review of the decision--a review to which Crocco was entitled under § 503(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"). See 29 U.S.C. § 1133(2) (requiring a "full and fair review" by the plan administrator of a decision denying a plan participant's claim for benefits).

In due course, Nazemetz affirmed APM's partial denial of benefits.

In a letter to Crocco's attorney, Nazemetz explained her decision this way:

Please note that treatment which is not certified by [APM] is not eligible for reimbursement under the Plan. Since APM determined that the level of acute care provided to [Crocco] was inappropriate for reimbursement after March 3, 1990, such treatment was not certified and therefore, is ineligible for reimbursement under the Plan.

Crocco v. Xerox Corp., 956 F.Supp. 129, 136 (D.Conn.1997) (quoting Nazemetz's decision) (first alteration in original).

At that point, Crocco filed this action in the United States District Court for the District of Connecticut (Ellen B. Burns, Judge), seeking review of Nazemetz's decision. In her complaint, which named Nazemetz, Xerox, and APM as defendants, Crocco alleged, inter alia, that she had been denied a "full and fair review" of her claim for benefits, in derogation of her rights under ERISA § 503(2), 29 U.S.C. § 1133(2).

The district court held, as a matter of law, that APM was not a fiduciary under ERISA, and therefore dismissed Crocco's claims against it. See Crocco, 956 F.Supp. at 136-37. (That ruling is not before us on appeal.) The court also determined that Xerox was a proper defendant. See id. at 137-38. It then concluded that Nazemetz's decision denying Crocco benefits should be reviewed only to determine whether it was "arbitrary and capricious." Id. at 138.

After conducting a thorough analysis of the administrative record and hearing the testimony of Nazemetz, the court found that, even under this highly deferential standard, Nazemetz had failed to conduct the statutorily prescribed "full and fair review." ¹ See id. at 139-42. Accordingly, the court remanded the cause to Nazemetz so that the administrator could carry out a review of the denial of benefits that complied with the requirements of § 503(2). The court retained jurisdiction over any subsequent appeals of that decision. See id. at 144.

Discussion

I. Is Xerox a proper party defendant?

In Leonelli v. Pennwalt Corp., 887 F.2d 1195 (2d Cir.1989), we held that, "[i]n a recovery of benefits claim, only the plan and the administrators and trustees of the plan in their capacity as such may be held liable." Id. at 1199. Recognizing this rule, the district court nonetheless found that Xerox had control, indirectly, over the administration of the plan, and hence that it could be sued for benefits. Crocco, 956 F.Supp. at 137-38 (citing Curcio v. John Hancock Mut. Life Ins. Co., 33 F.3d 226, 234 (3d Cir.1994); Law v. Ernst & Young, 956 F.2d 364, 372-73 (1st Cir.1992); Daniel v. Eaton Corp., 839 F.2d 263, 266 (6th Cir.1988); Adamo v. Anchor Hocking Corp., 720 F.Supp. 491, 498 (W.D.Pa.1989); Ansari-Springs v. Caterpillar, Inc., No. C-94-0742 MHP, 1995 WL 27525, at * 2-3 (N.D.Cal. Jan. 19, 1995)). In other words, the district court appears to have held that Xerox was a de facto co-administrator, along with Nazemetz. ²

We believe, however, that our reasoning in Lee v. Burkhart, 991 F.2d 1004 (2d Cir.1993), precludes a finding that an employer is a de facto co-administrator jointly liable with the named administrator in a suit to recover benefits under ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B). In Lee, we rejected a claim that an insurance company--under contract to provide assistance in the management of an employer's self-funded employee benefits plan--was an unnamed plan administrator. See id. at 1010. In doing so, we expressly stated our disagreement with decisions of the First and Eleventh Circuits holding employers responsible as de facto administrators under ERISA §§ 502(a)(1)(A) and 502(c), 29 U.S.C. §§ 1132(a)(1)(A), 1132(c). See id. at 1010 n. 5 (citing Rosen v. TRW, Inc., 979 F.2d 191, 193-94 (11th Cir.1992); Law, 956 F.2d at 372-74). And we cited with approval the Tenth Circuit's decision in McKinsey v. Sentry Insurance, 986 F.2d 401 (10th Cir.1993), which criticized the view that an employer could be a de facto administrator, and held that "[29 U.S.C. s] 1002(16)(A) provides that if a plan specifically designates a plan administrator, then that individual or entity is the plan administrator for purposes of ERISA," id. at 404. ³ In short, then, we think that the reasoning--if not necessarily the holding--of Lee precludes employer liability, as a de facto co-administrator, in a suit brought under § 502(a)(1)(B), where the employer has designated a plan administrator in accordance with 29 U.S.C. § 1002(16)(A).

Because it is clear from the Plan documents that Xerox was neither the designated Plan administrator nor a Plan trustee, and because it could not, under the rationale underlying Lee, be a de facto co-administrator for purposes of § 502(a)(1), it cannot be held liable for benefits due to Crocco under the plan. It is, therefore, entitled to dismissal of the claims against it.

II. The Plan administrator's denial of Crocco's appeal

For substantially the reasons stated by the district court in its Memorandum of Decision, which appears at 956 F.Supp. 129, we affirm the district court's judgment that Nazemetz did not provide a "full and fair review" of APM's certification decision (and hence, that Nazemetz's ratification of APM's decision was arbitrary and capricious). ⁴

Because we do so, we need not consider, and do not embrace or reject the district court's analysis of, the separate questions of (a) whether the notice of denial that APM provided to Crocco was defective, (b) whether APM's fee arrangement and other contractual obligations to Xerox constituted a conflict of interest, and (c) what the consequences of such a conflict, if it existed, would be. We also decline to decide one other issue central to this case; it concerns our jurisdiction to hear this appeal, and deserves some attention.

III. Jurisdiction

Appellants in their brief flag the question of whether we have jurisdiction over this appeal (and assert that we do). ⁵ The Ninth Circuit has held that a district court order remanding a claim to a plan administrator is a final appealable order. See Snow v. Standard Ins. Co., 87 F.3d 327, 330 (9th Cir.1996). The First and Eleventh Circuits, by contrast, have refused to treat such orders as immediately reviewable. See Petralia v. AT&T Global Info. Solutions Co., 114 F.3d 352, 353-54 (1st Cir.1997); Shannon v. Jack Eckerd Corp., 55 F.3d 561, 563-64 (11th Cir.1995).

While we have not yet had occasion to rule on this question, we held in Perales v. Sullivan, 948 F.2d 1348 (2d Cir.1991), that, although a district court's remand to an administrative agency is not ordinarily appealable, see, e.g., Lyons v. Barrett, 851 F.2d 406, 409 (D.C.Cir.1988); Daviess County Hosp. v. Bowen, 811 F.2d 338, 341 (7th Cir.1987), "[a]n exception to the finality requirement is recognized when the agency to which the case is remanded seeks to appeal, and that agency would be unable to appeal after the proceedings on remand." Perales, 948 F.2d at 1353. Appellants argue that a finding of appellate jurisdiction in this case is warranted either in accord with our reasoning in Perales or under the collateral order exception to the final judgment rule, see Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546-47, 69 S.Ct. 1221, 1226, 93 L.Ed. 1528 (1949).

"[T]he normal rule is to decide jurisdiction before the merits," Browning-Ferris Indus. v. Muszynski, 899 F.2d 151, 159 (2d Cir.1990), and this court does not depart from this principle lightly. In Browning-Ferris, however, we set forth several factors relevant to determinations of when it is appropriate to invoke the doctrine of "hypothetical jurisdiction." See id. And, considering the jurisdictional issue here in the light of the Browning-Ferris factors, "we conclude that the interests of 'judicial efficiency and restraint' justify our consideration of the merits." RNR Enters., Inc. v. SEC, 122 F.3d 93, 96 (2d Cir.1997) (citation omitted).

The assumption of jurisdiction in this case will not do injustice to the parties. See id.; Browning-Ferris...