Murphy v. WAL-MART ASSOCIATES'GROUP HEALTH PLAN

• Decision Date: 10 June 1996
• Docket Number: Civil Action No. 1:95cv12.
• Parties: Charlie MURPHY and Hazel Murphy, Plaintiffs, v. WAL-MART ASSOCIATES' GROUP HEALTH PLAN, Prudential Health Care Plans, and Dr. Allan J. Chernov, Defendants.
• Court: U.S. District Court — Eastern District of Texas

928 F. Supp. 700

Charlie MURPHY and Hazel Murphy, Plaintiffs, v. WAL-MART ASSOCIATES' GROUP HEALTH PLAN, Prudential Health Care Plans, and Dr. Allan J. Chernov, Defendants.

Civil Action No. 1:95cv12.

United States District Court, E.D. Texas, Beaumont Division.

June 10, 1996.

COPYRIGHT MATERIAL OMITTED

Kenneth Lewis, Bush, Lewis, Ramsey & Roebuck, Beaumont, TX, for plaintiffs.

Alen Magenheim and J. Preston Wrotenbery, Hirsch, Robinson, Sheiness & Glover, Houston, TX, for Wal-Mart Associates' Group Health Plan.

Katherine Youngblood, Youngblood & White, Houston, TX, for Prudential and Allan Chernov.

MEMORANDUM OPINION

HEARTFIELD, District Judge.

Before the court is Wal-Mart Associates' Group Health Plan's (Wal-Mart Plan) Motion for Summary Judgment 33 and Prudential Health Care Plan's (Prudential) Motion for Summary Judgment 64. Wal-Mart Plan moves for summary judgment on the ground that the Plan did not act in an arbitrary and capricious manner in denying plaintiffs' benefits and subsequent appeal. Prudential, a claims administrator to the Plan, moves for summary judgment on the ground that it can not be held liable to plaintiffs' under the ERISA statute. For the reasons stated in the opinion that follows, the court GRANTS both motions for summary judgment.

I. Facts

Plaintiff, Hazel Murphy, has been employed by Wal-Mart Stores, Inc. for several years. She procured health insurance under the Wal-Mart Associates' Group Health and Welfare Plan, part of an employee benefits package governed by ERISA. Mrs. Murphy paid additional premiums to have her husband, plaintiff, Charlie Murphy, covered under the Wal-Mart Plan.

In about January of 1991, Mr. Murphy was diagnosed with a form of cancer, follicular small cleave cell Non-Hodgkin's Lymphoma. Early treatments for this cancer in both Beaumont, TX and eventually at the M.D. Anderson Hospital in Houston, TX were covered by the Wal-Mart Plan. In approximately June 1994, Mr. Murphy's treating physicians at M.D. Anderson recommended that he be tested as a potential candidate for a specific treatment, high dose chemotherapy ("HDC") with autologous bone marrow transplant ("ABMT"). Wal-Mart Plan agreed to pay for testing. The test results indicated that Mr. Murphy was medically eligible for HDC with ABMT. This specialized treatment involved (1) harvesting bone marrow from Mr. Murphy, (2) purging the bone marrow of any diseased cells, (3) preserving the purged bone marrow while he underwent high dose chemotherapy, and (4) eventually whole body irradiation where the purged and preserved bone marrow would be returned to his body.

The Wal-Mart Plan required Mr. Murphy to obtain pre-approval for this particular treatment. Accordingly, Mr. Murphy sought pre-determination from the Plan to undergo the HDC with ABMT treatment. Because it was a very specialized and high risk procedure, the Plan referred Mr. Murphy's request to Prudential pursuant to an agreement between the Plan and Prudential. Under the terms of this agreement, Prudential evaluates the medical eligibility of participants to successfully undergo the type of specialized, high-risk treatment such as the one Mr. Murphy requested.

After submitting Mr. Murphy's file to several individuals, Prudential determined that the proposed treatment was not appropriate for Mr. Murphy. Prudential first assigned Mr. Murphy's case to a nurse, Ms. Anne Pape, in the Technology and Clinical Practice Assessment Unit (TCPA Unit). Ms. Pape reviewed Mr. Murphy's records, the proposed treatment, researched current medical literature, and reviewed Prudential's Internal Evaluation and Coverage Statement. She then sent the file, consisting of records selected by Murphy's own treating physicians at M.D. Anderson, to two outside oncologists. These doctors were asked to give their medical opinion on whether the proposed treatment was medically appropriate for Mr. Murphy, not to provide an opinion on the ultimate question of coverage under the Plan's definitions. Both rendered their opinion that Mr. Murphy was a medically inappropriate candidate for the treatment requested. After receiving the reports of these two independent medical experts, Ms. Pape forwarded her workup and the reports to the vice-president of medical services, Dr. Chernov. By letter dated July 5, 1994, Dr. Chernov informed the Wal-Mart Plan and M.D. Anderson that Prudential's TCPA Unit had determined Mr. Murphy's proposed treatment to be not medically appropriate for him due to his persistent bone marrow involvement and his resistance to CHOP chemotherapy. Then, by letter dated July 15, 1994, Wal-Mart Plan notified Mr. Murphy that his requested treatment was determined not to be medically appropriate. In effect, Wal-Mart Plan denied coverage of the recommended specialized treatment.

Mr. Murphy's treating doctors at M.D. Anderson requested an appeal of the Plan's denial of benefits. Although the Wal-Mart Plan required a request for appeal to be submitted in writing by the plan participant, the Plan agreed to accept M.D. Anderson's letter as an authorized request for appeal. The Administrative Committee promptly scheduled a special session to address Mr. Murphy's Appeal. Before the meeting, the committee members received a complete copy of Mr. Murphy's appeal record. The Administrative Committee met and reviewed Mr. Murphy's file, including some additional information from the treating physicians at M.D. Anderson. Relying on the recommendation of Prudential's TCPA Unit and the written opinions of the two independent oncologists, the Administrative Committee unanimously voted to affirm the decision not to preapprove the proposed treatment. The vote was based on the language of the Wal-Mart Plan, the medical condition of Mr. Murphy, the medical evaluations, and the proposed treatment. By letter dated August 31, 1994, the Wal-Mart Plan formally denies to pre-approve the requested treatment as being not medically appropriate for Mr. Murphy's specific medical condition at the time.

On November 15, 1994, plaintiffs instituted this suit in state court seeking full contractual benefits and actual and punitive damages. Defendants properly removed the case to federal court on January 5, 1995 under 28 U.S.C. § 1331 and 29 U.S.C. § 1001, et seq. (ERISA). Both defendants now move for summary judgment.

II. Summary Judgment Standard

Federal Rule of Civil Procedure 56 provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Consequently, "only disputes of fact that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).

Where the nonmovant bears the burden of proof at trial, the movant may discharge its burden by showing, that is, by pointing out to the court, that there is an absence of evidence to support the nonmovant's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2553-54, 91 L.Ed.2d 265 (1986). Once the movant has carried its burden, the burden shifts to the nonmovant to show that summary judgment should not be granted. Accordingly, the nonmovant must go beyond the pleadings, and by its own affidavits or by depositions, answers to interrogatories, and admissions on file designate specific facts showing a genuine issue for trial. Celotex, 477 U.S. at 324, 106 S.Ct. at 2553. In assessing the summary judgment evidence, the evidence of the nonmovant is to be believed and all justifiable inferences are to be drawn in the nonmovant's favor. Anderson, 477 U.S. at 255, 106 S.Ct. at 2513-14.

III. The Wal-Mart Plan

The Wal-Mart Plan gives the administrator its Administrative Committee discretionary authority to resolve all questions concerning the administration, interpretation, or application of the Plan as well as eligibility for benefits. The Wal-Mart Plan provides that:

the WAL-MART PLAN herein expressly gives the ADMINISTRATIVE COMMITTEE discretionary authority to resolve all questions concerning the administration, interpretation, or application of the WAL-MART PLAN, including, without limitation, discretionary authority to determine eligibility for benefits or to construe the terms of the Wal-Mart Plan in conducting the review of the appeal. When making its initial determination pursuant to the claim denial and appeals section of this WAL-MART PLAN document, the WAL-MART PLAN shall also have such discretionary authority.

Axe Depo., Exhibit "4," p. 54. Wal-Mart Stores contracted Prudential to provide administrative services in connection with its plan benefits. The agreement provided that "Prudential will assist Wal-Mart Plan in determining the validity of, or amount of benefits payable for, any claim for medical benefits under the Plan which is referred to Prudential by Wal-Mart Plan for such determination." Agreement Between Prudential and Wal-Mart Stores, Plaintiffs' Exhibit C, p. ASO-B1. The agreement states that "Wal-Mart Plan retains complete authority and responsibility for the Plan, its operation, and the benefits provided thereunder, and that Prudential is empowered to act on behalf of Wal-Mart Plan in connection with the Plan only as expressly stated" in their agreement or as agreed to in writing. Agreement Between Prudential and Wal-Mart Stores, Plaintiffs' Exhibit C, p. ASO-B1.

The Wal-Mart Plan offers medical benefits. "To qualify as an eligible benefit, the service must be ordered by a doctor and must be certified as medically necessary." Summary Plan Description, Plaintiffs' Exhibit A, p. D-4. A service is deemed medically necessary after several factors have been considered, including but not limited to:

A. Services which are

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