Gold v. McCombs Enterprises Flexible Benefits Cafeteria Plan and Trust

Filing 29

REPORT AND RECOMMENDATIONS recommending to GRANT 15 Motion for Summary Judgment. Signed by Judge Nancy Stein Nowak. (mailed on 2/17/12, by certified mail or forwarded electronically)(rf)

UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION

STEVEN D GOLD
Plaintiff,
v.
MCCOMBS ENTERPRISES FLEXIBLE
BENEFITS CAFETERIA PLAN
AND TRUST
Defendant.

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CIVIL ACTION NO.
SA-11-CV-267 LG (NN)

REPORT AND RECOMMENDATION
TO:

Honorable Louis Guirola, Jr.
Chief United States District Judge
Southern District of Mississippi
This report and recommendation addresses the defendant’s motion for summary

judgment.1 I have jurisdiction to enter this report and recommendation under 28 U.S.C. § 636(b)
pursuant to the district court’s order of referral.2 After considering the parties’ submissions and
the applicable law, I recommend granting the motion.
Nature of the case. Plaintiff Steven D. Gold is a beneficiary of defendant McCombs
Enterprises Flexible Benefits Cafeteria Plan and Trust, a self-insured employee benefit plan
covered under the Employee Retirement Income Security Act (“ERISA”). The plan’s fiduciary
and administrator is McCombs Enterprises (“McCombs”), its manager is Humana Insurance
Company (“Humana”), and its governing document is the Summary Plan Description (the

1

Docket entry #15.

2

Docket entry #19.

“Plan”).3 In April 2010, Gold sustained injuries in a car accident. Humana paid $142,418.34 on
Gold’s behalf for medical expenses incurred as a result of that accident.4 The owner of the other
car involved in the accident was insured up to $250,000.00, and Gold’s car insurance policy
included under-insured motorist coverage of $100,000.00 and personal injury coverage of
$2,500.00.5 Gold recovered $352,500.00 under those policies. The Plan stated:
[T]his Plan shall be repaid the full amount of the covered expenses it pays from any
amount received from others for the bodily injuries or losses which necessitated such
covered expenses. If, and only if, this Plan, in its sole discretion, determines that the
beneficiary cannot be made whole by the limits of all sources of recovery which are,
were, or will be available to the beneficiary, this Plan shall be repaid the pro-rata
portion of the amount of the covered expenses it pays from any amount received from
others for the bodily injuries or losses which necessitated such covered expenses; the
“pro-rata portion” shall be determined by this Plan in its sole discretion. Without
limitation, “amounts received from others” specifically includes, but is not limited
to, liability insurance, worker’s compensation, uninsured motorists, underinsured
motorists, “no-fault” and automobile med-pay payments or recovery from any
identifiable fund regardless of whether the beneficiary was made whole.
This Plan’s right to repayment is, and shall be, prior and superior to the right of any
other person or entity, including the beneficiary.6

Based on that language, Humana sought reimbursement for the full $142,418.34 it paid on
Gold’s behalf. Also citing that language, Gold requested that Humana reduce the amount it
sought to be reimbursed because the amount he received under the car insurance policies was not
enough to fully cover the costs related to his injuries.

3

Docket entry #17, ex. B, Bargender Decl., ex. 1, p. 90 of summary plan description.

4

Docket entry #17, ex. A, LeCaptain Decl., ex. 1.

5

Docket entry #1, Compl., ¶10.

6

Docket entry #17, ex. B, Bargender Decl., ex. 1, p. 75 of summary plan description (emphases
added).
2

Humana denied Gold’s request7 and enforced a subrogation lien for the full amount it had
paid.8 Gold, at this point represented by an attorney, appealed Humana’s denial of his request
through the Plan’s internal appeals procedure.9 Humana denied the appeal because it determined
that Gold “c[ould] be made whole” by the amount he recovered under the car insurance
policies.10 Gold filed a second level appeal11 with McCombs, which upheld Humana’s decision
by similarly concluding that Gold “c[ould] be made whole.”12
Gold brought this suit, alleging that McCombs abused its discretion by arbitrarily and
capriciously rejecting his request to reduce the amount Humana sought to be reimbursed in
contravention of the Plan’s “made whole” provision, and seeking a pro-rata reduction of the
amount reimbursed.13 The defendant moved for summary judgment, arguing that the Plan
provides that it is entitled to a full reimbursement of all amounts received from other sources
regardless of whether Gold was made whole, and does not require Humana or McCombs to
undertake a “made whole” analysis. The defendant also argued that even if the Plan required a
“made whole” analysis, the Plan gave Humana and McCombs discretion as to whether the
evidence provided by Gold supported the conclusion that he was not made whole, and that

7

Docket entry #18, Gold ex. 5.

8

Docket entry #18, Gold ex. 13.

9

Docket entry #18, Gold ex. 14.

10

Docket entry #18, Gold ex. 15.

11

Docket entry #18, Gold ex. 16.

12

Docket entry #18, Gold ex. 17.

13

Docket entry #1, Compl. ¶¶ 13, 17.
3

discretion was not abused.
Standard of review. “A summary judgment motion is properly granted only when,
viewing the evidence in the light most favorable to the nonmoving party, the record indicates that
there is no genuine issue as to any material fact and that the moving party is entitled to judgment
as a matter of law.”14 “[A] district court reviewing a denial of benefits under ERISA is to apply a
de novo review unless the plan gives the administrator ‘discretionary authority to determine
eligibility for benefits or to construe the terms of the plan.’”15 As an initial matter, the parties
dispute whether the Plan gives such discretion to McCombs, the plan administrator. Gold argues
that “[n]owhere does the Plan attempt to confer discretionary authority to determine eligibility for
benefits so as to invoke the abuse of discretion of [sic] standard.”16 The defendant, relying on
Wildbur v. Arco Chemical Company, argued that by naming McCombs as the plan administrator,
fiduciary and claim fiduciary, and by providing that beneficiaries can appeal denials of benefits
to the plan administrator, the Plan effectively confers discretion upon McCombs.17 Resolving
this dispute is only necessary to determine whether the Plan allowed for full reimbursement
regardless of whether Gold was made whole and whether the Plan required a “made whole”

14

Barker v. Halliburton Co., 645 F.3d 297, 299 (5th Cir. 2011) (internal quotation marks omitted).

15

Dutka ex rel. Estate of T.M. v. AIG Life Ins. Co., 573 F.3d 210, 212 (5th Cir. 2009) (quoting
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)).
16

Docket entry #18, Mem. in Supp. of Pl.’s Resp. to Def.’s Mot. for Summ. J., p. 6.

17

See Wildbur v. Arco Chem. Co., 974 F.2d 631, 636–37 (5th Cir. 1992) (holding that plan
administrator had discretionary authority where Plan stated that the administrator “shall made an
independent determination of the applicant’s eligibility for benefits under the Plan,” which
determination “shall be final and conclusive upon all persons if supported by substantial evidence
in the record”).
4

analysis. This case can, however, be decided by assuming that the Plan required Humana and
McCombs to undertake a “made whole” analysis.18 The parties agree that McCombs’s factual
determination that Gold was made whole by the car insurance proceeds is reviewed for an abuse
of discretion.19
Applicable law. “In applying the abuse of discretion standard to an administrator’s
factual determinations,” courts “analyze whether the administrator acted arbitrarily or
capriciously.”20 “A decision is arbitrary if it is made without a rational connection between the
known facts and the decision.”21 “In addition to not being arbitrary and capricious, the plan
administrator’s decision to deny benefits must be supported by substantial evidence.”22
“‘Substantial evidence is more than a scintilla, less than a preponderance, and is such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion.’”23 An inherent
conflict of interest exists where, as here, the plan administrator (McCombs) both pays benefits

18

Neither party addressed the significance of the following Plan language: “This Plan has the sole
right to construe and prescribe the meaning, scope and application of each and all of the terms of this
Plan, including, without limitation, the benefits provided thereunder, the obligations of the
beneficiary and the recovery rights of this Plan; such construction and prescription by this Plan shall
be final and uncontestable.” Docket entry # 17, ex. B, Bargender Decl., ex. #1 at p. 74 of summary
plan description. This language appears to unequivocally give McCombs, as the plan administrator,
discretionary authority to interpret the Plan.
19

See Dutka, 573 F.3d at 212 (“[W]ith or without a discretion clause, a district court rejects an
administrator’s factual determinations in the course of a benefits review only upon the showing of
an abuse of discretion.”).
20

21

Id. at 213.

Anderson v. Cytec Indus., 619 F.3d 505, 512 (5th Cir. 2010) (internal quotation marks omitted).

22

23

Id.

Id. (quoting Corry v. Liberty Life Assurance Co. of Boston, 499 F.3d 389, 398 (5th Cir. 2007).
5

and maintains discretionary control over the ultimate benefits decision.24 Such a conflict is one
factor to consider when determining whether a plan administrator abused its discretion, but
where “claimants do not present evidence of the degree of the conflict, the court will generally
find that any conflict is ‘not a significant factor.’”25
McCombs did not abuse its discretion. In support of his request that Humana reduce
the amount it sought to be reimbursed, Gold submitted medical records attached to an eight-page
letter detailing his history of back problems, a summary of expenses related to his injuries, and
his own estimate of his likely recovery from a jury.26 According to the information he submitted,
Gold had received $352,500.00 in car insurance proceeds, Humana had so far paid $110,796.52,
and Gold himself had paid $6,500 in medical expenses.27 According to Gold, a jury would award
him $1,785,000.00 in damages, including past and future medical expenses ($215,000.00), past
and future pain and suffering ($450,000.00), past and future physical impairment ($400,000.00),
past and future lost earning capacity ($570,000.00), loss of household services ($75,000.00), and
disfigurement ($75,000.00).28 Gold did not provide additional supporting materials in his first
level appeal to Humana or in his second level appeal to McCombs.29

24

Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 111 (2008).

25

McDonald v. Harford Life Group Ins. Co., 361 F. App’x 599, 608 (5th Cir. 2010) (quoting
Holland v. Int’l Paper Co. Retirement Plan, 576 F.3d 240, 249 (5th Cir. 2009)).
26

Docket entry #18, Gold ex. 1.

27

Id.

28

Id.
29

Gold submitted an expert’s report in opposition to the defendant’s motion for summary
judgment. This report was not submitted to Humana or McCombs and is therefore outside the
6

Humana’s letter denying Gold’s first level appeal and McCombs’s letter denying his
second level appeal both stated that they had determined that Gold was “made whole in [his]
recovery for the injuries sustained” in April 2010.30 Gold argued that McCombs’s determination
was arbitrary and capricious and not supported by substantial evidence because McCombs
provided “no analysis at all.”31 Gold further argued that McCombs’s determination was arbitrary
because “[n]o consultants were obtained, no vocational experts are identified, and it appears that,
notwithstanding the fact the Plan paid Mr. Gold’s medical expenses and were sent a majority of
his records, they neglected to review the very medical records on which the charges were
based.”32 McCombs argued in response that the administrative record, which was Gold’s
responsibility to supplement,33 contained only Gold’s own and his attorney’s opinions about the
extent of his expenses, and that the medical records did not “include any notes or other
indications from Gold’s treating physicians that would support Gold’s claims regarding the value

administrative record and cannot now be considered. See Crosby v. La. Heal Serv. and Indem. Co.,
647 F.3d 258, 263 (5th Cir. 2011) (prohibiting admission of evidence relevant to a benefits
determination “unless the evidence is in the administrative record, relates to how the administrator
has interpreted the plan in the past, or would assist the court in understanding medical terms and
procedures”).
30

Docket entry #18, Gold exs.15 & 17.

31

Docket entry #18, Mem. in Supp. of Pl.’s Resp. to Def.’s Mot. for Summ. J., p. 8.

32

Id. at 9.

33

See Gooden v. Provident Life & Accident Ins. Co., 250 F.3d 329, 335 (5th Cir. 2001) (“[T]he
burden is not solely on the administrator to generate evidence relevant to deciding the claim.”). See
also Holland, 576 F.3d at 250 (“ERISA does not require a Plan Administrator to seek consultation
of a vocational expert.”).
7

of his claim.”34 McCombs further argued that its conflict of interest as both the payer and final
evaluator of claims should not weigh heavily against it because Gold failed to provide any
evidence showing how its decision was influenced by that conflict.
McCombs is correct that the administrative record does not support the future medical
expenses Gold claims. The record contains nothing authoritative to contradict McCombs’s
determination that Gold was made whole by the $352,000.00 received from the car insurance
policies. Moreover, Gold provided no evidence other than the existence of a conflict of interest
to demonstrate the conflict influenced McCombs’s decision-making process. Gold sought
additional discovery to preclude summary judgment, but no need exists for additional discovery
under the circumstances of this case because there is no indication discovery will lead to relevant
evidence. Nothing indicates McCombs’s determination that Gold was made whole was arbitrary
or capricious. McCombs’s determination is supported by the record.
Recommendation. I recommend granting the defendant’s motion for summary judgment
(docket entry #15) because no material factual dispute exits concerning whether McCombs
abused its discretion in determining that Gold was made whole for the injuries sustained in his
car accident or whether McCombs is entitled to reimbursement under the Plan’s terms. If the
district judge accepts this recommendation, the court can enter a final summary judgment in
favor of defendant McCombs Enterprises Flexible Benefits Cafeteria Plan and Trust.
Instructions for service and notice of right to object/appeal. The United States
District Clerk shall serve a copy of this report and recommendation on all parties by either
(1) electronic transmittal to all parties represented by attorneys registered as a “filing user” with
34

Docket entry # 21, Def.’s Reply in Supp. of its Mot. for Summ. J., p. 5.
8

the clerk of court, or (2) by mailing a copy to those not registered by certified mail, return receipt
requested. Written objections to this report and recommendation must be filed within 14 days
after being served with a copy of same, unless this time period is modified by the district court.35
Such party shall file the objections with the clerk of the court and serve the objections on all
other parties. A party filing objections must specifically identify those findings, conclusions or
recommendations to which objections are being made and the basis for such objections; the
district court need not consider frivolous, conclusive or general objections. A party’s failure to
file written objections to the proposed findings, conclusions and recommendations contained in
this report shall bar the party from a de novo determination by the district court.36 Additionally,
failure to file timely written objections to the proposed findings, conclusions and
recommendations contained in this report and recommendation shall bar the aggrieved party,
except upon grounds of plain error, from attacking on appeal the unobjected-to proposed factual
findings and legal conclusions accepted by the district court.37
SIGNED on February 16, 2012.

_____________________________________
NANCY STEIN NOWAK
UNITED STATES MAGISTRATE JUDGE

35

28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b).

36

Thomas v. Arn, 474 U.S. 140, 149-52 (1985); Acuña v. Brown & Root, 200 F.3d 335, 340 (5th
Cir. 2000).
37

Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1428-29 (5th Cir. 1996).
9