Miller v. United Welfare Fund

• Decision Date: 19 December 1995
• Docket Number: D,No. 1108,1108
• Citation: 72 F.3d 1066
• Parties: 19 Employee Benefits Cas. 2378 Goldie MILLER, as Executrix of the Estate of Sarah M. Potok, Plaintiff-Appellee, v. UNITED WELFARE FUND, Defendant-Appellant. ocket 94-7908.
• Court: U.S. Court of Appeals — Second Circuit

Page 1066

72 F.3d 1066

19 Employee Benefits Cas. 2378

Goldie MILLER, as Executrix of the Estate of Sarah M. Potok Plaintiff-Appellee, v. UNITED WELFARE FUND, Defendant-Appellant.

No. 1108, Docket 94-7908.

United States Court of Appeals Second Circuit.

Argued Jan. 18, 1995.

Decided Dec. 19, 1995.

Stephen H. Kahn, New York City (Opton Handler Gottlieb Feiler Landau & Hirsch), for Defendant-Appellant United Welfare Fund.

Bernard D'Orazio, New York City (Khosrova & D'Orazio), for Plaintiff-Appellee Goldie Miller.

Before: WALKER, JACOBS and CALABRESI, Circuit Judges.

WALKER, Circuit Judge:

Goldie Miller ("Miller") brought suit against the United Welfare Fund (the "Fund") under Sec. 502(a)(1)(B) of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. Sec. 1132(a)(1)(B), on behalf of her sister, Sarah Potok ("Potok"), to recover medical benefits for private duty nursing care that Potok received following an unusually complex multiple coronary bypass surgery. The district court for the Eastern District of New York (John R. Bartels, District Judge ), concluded that the Fund had acted arbitrarily and capriciously in denying the benefits. Miller v. United Welfare Fund, 851 F.Supp. 71, 74-75 (E.D.N.Y.1994). After denying both parties' motions for summary judgment, the district court held a bench trial that resulted in a judgment for Miller directing the Fund to pay medical expenses for private duty nursing care, plus interest and attorneys' fees. Miller v. United Welfare Fund, No. 93 Civ. 2057, slip op. at 10 (E.D.N.Y. May 30, 1994). The Fund appeals the judgment. We vacate and remand.

BACKGROUND

On May 1, 1989, Sarah Potok became a participant in the Fund, which is an employee welfare benefit plan as defined by Sec. 3(1) of ERISA, 29 U.S.C. Sec. 1002(1). In the fall of 1990, Potok's cardiologist, Dr. James A. Blake, diagnosed her as suffering from Chronic Obstructive Pulmonary Disease. Although Potok was a poor candidate for cardiac surgery because of her advanced age and severe lung damage, Dr. Blake recommended cardiac surgery since diagnostic studies indicated she would survive no more than three months without such treatment.

In late October, Potok underwent multiple coronary bypass surgery performed by Dr. Samuel Lang at New York Hospital (the "Hospital"). Complications prevented a routine bypass procedure and required an innovative surgical alternative. According to Dr. Blake, Potok's surgery was successful, but she experienced a number of problems because of the unusual nature of the operation as well as her advanced age and poor health. She remained in the cardiothoracic intensive care unit for an entire week, as compared with the more typical stay of one to one-and-a-half days. Potok was then transferred to the cardiothoracic step-down unit for a brief period, and finally to the cardiothoracic telemetry unit, the "regular floor" for post-cardiac surgery patients.

During the post-operative period, Potok contracted pneumonia and experienced breathing difficulty and heart arrhythmia. She also had a stroke, which heightened her sense of disorientation and hindered her expressive abilities. Faced with these circumstances, Dr. Blake recommended to Miller that Potok have full private duty nursing care in the telemetry unit. Miller thereupon On December 18, 1990, Miller claimed $14,060.50 from the Fund for reimbursement of the costs of her sister's private duty nursing care. With the claim, Miller submitted a copy of the following letter from Dr. Blake dated December 6, 1990:

hired private duty nursing care for the duration of her sister's stay in the telemetry unit. Approximately five weeks after her admission, Potok was finally discharged from the hospital to a rehabilitation center. Eventually, she was able to return home and live independently. Unfortunately, in March of 1991, Potok died from an unrelated cause.

I am writing in regard to my patient Sarah Potok. Mrs. Potok is an elderly female who recently underwent coronary artery bypass surgery for severe unstable angina. Her immediate postoperative course was complicated by pneumonia, arrhythmia and disorientation. Because of the severity of her illness the medical team recommended to her that she have full time private duty nursing. Beginning on November 4th and continuing to November 26th, Mrs. Potok received 24 hour private nursing. This nursing performed thorough pulmonary toilet, continually monitored her mental status, as well as her rhythm.

Mrs. Potok made a meaningful recovery and can look forward to returning to an active and productive life. It is undoubtedly the case that the thorough nursing care which she received is in large part responsible for the superb improvement which this patient demonstrated. Thank you once again. If I can be of any further assistance please do not hesitate to ask.

In March and April of 1991, Aetna, the Fund's claim processor, requested additional information, including a copy of the nursing notes. After reviewing the claim with the additional information in hand, one of Aetna's claims adjudicators concluded that the private duty nurses performed routine tasks that could have been performed by floor nurses and that therefore the private duty nurses were not "medically necessary." Miller received a letter from Aetna, dated June 26, 1991, denying the claim and advising Miller that she had a right to appeal and to review the relevant documents.

In February 1992, Miller appealed by letter to the Board of Trustees of the Fund (the "Trustees" or the "Board"), fiduciaries of the plan as defined by Sec. 3(21) of ERISA, 29 U.S.C. Sec. 1002(21). On April 29, 1992, a four-member subcommittee of the Board reviewed Potok's claim. Edward Byrne ("Byrne"), the Fund's administrator, prepared a three-sentence report for the Trustees that stated that Miller sought payment for the private duty nursing care, listed the documentation Miller had submitted, and set forth the amount in question. During the brief meeting to consider the appeal, Byrne had Potok's complete claim file before him, including Dr. Blake's letter, the nurses' notes, Aetna's analysis of the claim, and Miller's correspondence. In contrast, Byrne only provided the subcommittee members with a copy of his three-sentence report. Neither the Trustees nor any Fund staff member had a medical background, and they consulted no medical experts in connection with their review of the claim. After discussing Byrne's brief report, the subcommittee denied the claim.

In a letter dated June 23, 1992, the Trustees informed Miller that

[i]n order for private duty nursing services to be considered medically necessary, they must be such that the nature of the illness or injury must require constant medical care that could not have been provided by the general nursing staff. The services provided by the private duty nurses, could have easily been performed by the general nursing staff.

(emphasis in original). Aetna had cited this same reason, nearly verbatim, in its earlier denial letter.

On April 15, 1993, Miller, as executrix of Potok's estate, brought suit against the Fund in the Civil Court of the City of New York. The Fund removed the action to the Eastern District of New York because it was governed by ERISA. Shortly thereafter, the parties cross-moved for summary judgment: the Fund, on the basis that the court should defer to the Board's decision; and Miller, on the basis that the Trustees' decision was "arbitrary and capricious, and deprived [Potok] In support of its summary judgment motion, the Fund submitted an affidavit of the Aetna representative who denied the claim. She stated that she had done so because the care was not medically necessary since the private nurses performed routine nursing duties. Miller offered excerpts from a deposition of Byrne and an affidavit from a registered nurse, Maria Daly Cho, who after reviewing the nursing notes concluded that the nurses provided more than routine patient care.

of [her] rights guaranteed by ERISA." Miller, 851 F.Supp. at 73.

After considering the conflicting affidavits, the district court denied the motions for summary judgment. Id. at 74-75. The district court concluded, however, that of the three items in Miller's file--Dr. Blake's letter, the nursing notes, and Aetna's recommendation and denial--only the denial supported the Fund's decision. Id. at 74. It further found that in relying on Aetna's denial alone, the Fund had deprived Miller of her right to a full and fair review as required by Sec. 503, 29 U.S.C. Sec. 1133, and thereby had acted "arbitrarily and capriciously." Id. at 75.

On May 2, 1994, the district court held a bench trial. Noting its previous finding that the Trustees' denial of the claim was "arbitrary and capricious," Miller, No. 93 Civ. 2057, slip op. at 2, the court reviewed de novo Miller's assertions that the nursing services were medically necessary and therefore covered by the plan, id. In so doing it considered evidence outside the administrative record, such as testimony from Dr. Blake, which it credited in full since the Fund "offered no medical evidence at trial in the form of a physician's testimony, and therefore failed to rebut Dr. Blake's opinion." Id. at 5. The district court concluded that Miller had "demonstrated by a preponderance of the evidence that [the private nursing] services were medically necessary, and therefore covered by the Benefits Plan." Id. at 7.

Even though the action was only for the benefit of a single plan participant, the court awarded Miller attorneys' fees since the court concluded that such an award was likely to deter similar conduct, the Fund could satisfy the modest fee request, and the Fund did not act in good faith in failing to offer testimony of a physician at trial. Id. at 8. With interest, the total judgment awarded to Miller, including fees and costs, was $39,450.13. Id. at 10. The Fund appeals from this judgment.

DISCUSSI...