Harrow v. Prudential Ins. Co. of America

• Decision Date: 30 January 2002
• Docket Number: No. 00-5049.,00-5049.
• Citation: 279 F.3d 244
• Parties: Stanley HARROW, on behalf of himself and all others similarly situated; Debra Harrow, Administrator of the Estate of Stanley Harrow, v. PRUDENTIAL INSURANCE COMPANY OF AMERICA; John Does No. 1-10, individually and in their fiduciary Plan Administrators of the Prudential Health Care Plans. Debra Harrow, Administrator of the Estate of Stanley Harrow, on behalf of the Estate of Stanley Harrow and all others similarly situated, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

279 F.3d 244

Stanley HARROW, on behalf of himself and all others similarly situated; Debra Harrow, Administrator of the Estate of Stanley Harrow, v. PRUDENTIAL INSURANCE COMPANY OF AMERICA; John Does No. 1-10, individually and in their fiduciary Plan Administrators of the Prudential Health Care Plans Debra Harrow, Administrator of the Estate of Stanley Harrow, on behalf of the Estate of Stanley Harrow and all others similarly situated, Appellant.

No. 00-5049.

United States Court of Appeals, Third Circuit.

Argued September 22, 2000.

Filed January 30, 2002.

Michael D. Gottsch (Argued), Ramona Mariani, Chimicles & Tikellis, Haverford, PA, Kenneth A. Jacobsen, Media, PA, Attorneys for Appellant.

James C. Orr (Argued), Kelly A. Waters, Wilson, Elser, Moskowitz, Edelman & Dicker, Newark, NJ, Attorney for Appellee, Prudential Insurance Company of America.

Before: SLOVITER, SCIRICA and GARTH, Circuit Judges.

OPINION OF THE COURT

SCIRICA, Circuit Judge.

Debra Harrow, administratrix of her husband Stanley Harrow's estate, appeals an order granting summary judgment to Prudential Insurance Company on her claim that Stanley Harrow and a putative class of plaintiffs were wrongfully denied insurance coverage for Viagra, in violation of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132(a)(1)(B) and 29 U.S.C. § 1104(a). The District Court granted Prudential's motion for summary judgment, finding plaintiff failed to exhaust administrative remedies before instituting suit. Harrow v. Prudential Ins. Co., 76 F.Supp.2d 558 (D.N.J.1999).

We will affirm.

I.

Stanley Harrow was insured under the Prudential HealthCare HMO Plan through his wife, Debra Harrow. In 1998, Mr. Harrow was prescribed Viagra, an FDA-approved drug, for diabetes-related impotence.¹ On April 21, 1998, Mr. Harrow filled his prescription for Viagra at a local pharmacy. During this visit, his pharmacist informed him that his insurance did not cover Viagra, charged him $85.99 to fill the Viagra prescription, and instructed him to call Prudential. Upon returning home, Mr. and Mrs. Harrow reviewed the Prudential HealthCare HMO Plan handbook. On that same day, Mrs. Harrow called the claims department number listed on the back of the Prudential prescription card. She was informed by an unidentified person that the plan did not cover Viagra because it was a "new drug." She was also advised to save her receipts for future reimbursement in case Viagra became covered. The Harrows never contacted Prudential again about Viagra coverage and never refilled the prescription. On May 21, 1998, a month after being told Viagra was not covered, Mr. Harrow filed suit under ERISA. In June or July of 1998, Prudential announced in a press release that it would not provide coverage for Viagra.

Prudential's procedures for receiving and resolving complaints raised by covered persons are set forth in the Prudential HealthCare HMO Plan handbook.² Under the heading "Grievance Resolution Procedure," the multi-step process is described as follows:

COMPLAINTS:

Complaints can be received by the Membership Services Coordinator in the Prudential HealthCare Member Services Department by phone, mail or a personal visit to the Prudential HealthCare office. The Membership Services Coordinator will provide an answer to the complainant within 30 days of a complaint's receipt. If your problem is not resolved to your satisfaction, you may file, in writing, a formal grievance.

GRIEVANCES:

There are two steps in the Grievance Procedure. At any state of this process, the member has the right to request that Prudential HealthCare appoint a member of its staff, who has had no direct involvement with the case, to represent the member.

STEP ONE:

If the complaint procedure does not resolve your problem to your satisfaction, you may file, in writing, a formal grievance. The initial grievance will be reviewed and investigated by an Initial Grievance Committee.... The Committee will provide a response, in writing, to the complainant within 30 days of receipt of the grievance, including the reasons for the decision and the member's appeal rights. This decision is binding unless the member appeals the decision....

STEP TWO:

APPEAL OF GRIEVANCES

If an appeal is desired, the complainant will be advised to formally request, in writing, the convening of the Second Level of Grievance Review Committee.... This committee shall consist of at least one-third Prudential HealthCare Plan members....

An ultimate appeal procedure is available to the member. If the member is not satisfied with the decision of the Second Level Grievance Review Committee, the decision may be appealed to the Pennsylvania Department of Health.

Several Prudential officials testified the outcome of the internal appellate process was not pre-determined.³ Harrow, 76 F.Supp.2d at 560. No evidence was presented demonstrating that Mr. Harrow or any proposed class member initiated a grievance or appeal under Prudential's grievance resolution procedure. Id.

II.

Prudential filed a motion to dismiss, which the District Court denied without prejudice on January 25, 1999. In the same order, the District Court adjourned, without date, plaintiff's motion for class certification so that discovery could be undertaken. The originally named plaintiff, Stanley Harrow, died on June 25, 1999 and his wife was substituted as the named plaintiff and proposed class representative.⁴ The District Court subsequently granted defendant's motion for summary judgment on December 23, 1999. Id. at 559.⁵

The District Court granted summary judgment for the defendant on plaintiff's wrongful denial of benefits claim for failure to exhaust administrative remedies: "Making one step which could be construed as an initial complaint does not constitute exhaustion of all remedies, particularly when the Plan includes a concrete description of the appeal process available." Id. at 561-62. The District Court also concluded the futility exception to the exhaustion requirement did not apply because "neither Mr. Harrow nor any identified potential class member ever pursued any appellate procedures with Prudential." Id. at 564. In addition, the District Court granted summary judgment on plaintiff's breach of fiduciary duty claim for failure to exhaust administrative remedies, concluding plaintiff was actually seeking benefits and therefore was subject to the exhaustion doctrine. Id. at 566.

This appeal followed.

III.

The District Court had jurisdiction under 28 U.S.C. § 1331. Id. at 559. We have jurisdiction under 28 U.S.C. § 1291.

IV.

We exercise plenary review over an appeal from a grant of summary judgment, applying the same standards as the District Court. Ingersoll-Rand Fin. Corp. v. Anderson, 921 F.2d 497, 498 (3d Cir.1990). We review de novo the applicability of exhaustion principles, because it is a question of law. Cf. Diaz v. United Agric. Employee Welfare Ben. Plan & Trust, 50 F.3d 1478, 1483 (9th Cir.1995) (citing Amato v. Bernard, 618 F.2d 559 (9th Cir.1980)). When the District Court declines to grant an exception to the application of exhaustion principles, we review for abuse of discretion. Id.; see also Dishman v. UNUM Life Ins. Co. of Am., 269 F.3d 974,, 2001 U.S.App. LEXIS 22599, at *23 (9th Cir. 2001); Gallegos v. Mt. Sinai Med. Ctr., 210 F.3d 803, 808 (7th Cir.2000) ("[T]he intent of Congress is best effectuated by granting district courts discretion to require administrative exhaustion."); Springer v. Wal-Mart, 908 F.2d 897, 899 (11th Cir.1990) ("[T]he decision whether to apply the exhaustion requirement is committed to the district court's sound discretion and can be overturned on appeal only if the district court has clearly abused its discretion.") (quotation omitted).⁶

V.

A. The Legal effect of Stanley Harrow's death on his claims

1. Survivability of ERISA claims

Because the original named plaintiff has died in the course of these proceedings, we must consider whether his ERISA claim survives. Actions that are remedial in nature generally survive the death of a party. Khan v. Grotnes Metalforming Sys., Inc., 679 F.Supp. 751, 756-57 (N.D.Ill.1988). Because Congress intended ERISA to be remedial, ERISA actions survive death. See 29 U.S.C. § 1001(b) ("It is hereby declared to be the policy of this chapter to protect ... the interests of participants in employee benefit plans."); see also Duchow v. N.Y. State Teamsters Conference Pension & Retirement Fund, 691 F.2d 74, 78 (2d Cir.1982); Khan, 679 F.Supp. at 756-57. Therefore, Mrs. Harrow may pursue her husband's claims.⁷

2. Mootness of Harrow's claims

We must also determine whether an Article III case or controversy survives Mr. Harrow's death. U.S. Parole Comm'n v. Geraghty, 445 U.S. 388, 395, 100 S.Ct. 1202, 63 L.Ed.2d 479 (1980) (identifying two aspects of mootness: "[W]hen the issues presented are no longer `live' or the parties lack a legally cognizable interest in the outcome.") (quoting Powell v. McCormack, 395 U.S. 486, 496, 89 S.Ct. 1944, 23 L.Ed.2d 491 (1969)). The mootness issue implicates our jurisdiction. Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 90 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998); Chong v. Dist. Dir., I.N.S., 264 F.3d 378, 383 (3d Cir.2001) ("Inasmuch as mootness would divest us of jurisdiction to consider this appeal, we are obligated to address this issue as a threshold matter.") (citing Rogin v. Bensalem Township, 616 F.2d 680, 684 (3d Cir.1980)).

Mr. Harrow initially asked for injunctive relief, declaratory relief, and damages. Mrs. Harrow concedes the claim for injunctive relief is now moot because of her husband's death. Her claim for declaratory relief is also moot because Mr. Harrow cannot benefit from a declaration of Prudential's obligations under the plan. Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941) ("Basically, the question in each case is whether the facts alleged, under all the...