     Case: 18-20576   Document: 00515350925     Page: 1   Date Filed: 03/19/2020




        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT   United States Court of Appeals
                                                  Fifth Circuit

                                                                     FILED
                                                                  March 19, 2020
                                 No. 18-20576
                                                                   Lyle W. Cayce
                                                                        Clerk
NORTH CYPRESS MEDICAL CENTER OPERATING COMPANY,
LIMITED; NORTH CYPRESS MEDICAL CENTER OPERATING
COMPANY GP, L.L.C.,

            Plaintiffs - Appellants

v.

CIGNA HEALTHCARE; CONNECTICUT GENERAL LIFE INSURANCE
COMPANY; CIGNA HEALTHCARE OF TEXAS, INCORPORATED,

            Defendants - Appellees


                Appeals from the United States District Court
                     for the Southern District of Texas


Before KING, JONES, and DENNIS, Circuit Judges.
EDITH H. JONES, Circuit Judge:
      North Cypress Medical Center Operating Co., Ltd., and North Cypress
Medical Center Operating Co. GP, L.L.C., appeal the adverse judgment
rendered by the district court on ERISA claims assigned by Cigna-insured
patients. They contend that substantively and procedurally flawed insurer
decisions resulted in underpayment of more than $40 million in benefit claims.
Because the district court correctly applied this court’s decision in Connecticut
General Life Insurance Co. v. Humble Surgical Hospital, L.L.C., which
construed an identical provision, 878 F.3d 478, 485 (5th Cir. 2017), North
Cypress’s arguments cannot be sustained. We AFFIRM.
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                                      BACKGROUND
       In 2007, the Plaintiff-Appellants (collectively, “North Cypress”) opened
a general acute care hospital. With the help of a third-party consultant, North
Cypress developed a master schedule of fees for each service. When North
Cypress provided services covered by a patient’s insurance, it reported the
scheduled fee for the services to the patient’s insurance company.                       The
insurance company was expected to pay most of the fee, while the patient, still
nominally responsible for the entire cost, would be billed for a smaller
percentage as coinsurance and possibly a deductible.
       North Cypress decided to give its patients a break on coinsurance. The
hospital offered to limit the patient’s coinsurance obligation if the patient paid
a certain amount of what he owed within 120 days. To calculate this “Prompt
Pay Discount,” North Cypress started from Medicare’s reimbursement
schedule, which provided fees far lower than North Cypress’s master schedule
for non-Medicare patients. North Cypress multiplied the Medicare fee by 125
percent, and it then applied the patient’s in-network coinsurance percentage—
even if North Cypress was not in-network for the patient’s insurance
company. 1        The resulting balances significantly reduced out-of-network
patients’ coinsurance obligations, but they also generated substantial revenue
for North Cypress without incurring collection expenses. 2


       1 According to the district court, in-network coinsurance obligations are typically 20%
of the covered service, while patients must pay 40% of fees to out-of-network providers.

       2   For example, if the typical (“Chargemaster”) cost of care were $10,000:

       When applying the prompt pay discount, rather than billing the patient $4,000
       North Cypress would calculate a much lower amount. First, instead of starting
       with the total Chargemaster cost of care, North Cypress would start with a
       lower base rate—125% of the Medicare rate for the services provided. For
       example, instead of $10,000, the base rate might be $2,500. Then instead of
       multiplying this reduced base rate by 40%, North [Cypress] would multiply it
       by 20%—the patient’s in-network coinsurance rate. As a result of the discount,
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                                       No. 18-20576
       The    Defendant-Appellees          (collectively,    “Cigna”)     administer,      and
sometimes fund, health insurance plans. All the plans at issue in this case
provide Cigna with discretionary authority to interpret the plans, and all
“specifically exclude” from coverage:
       Charges for which you are not obligated to pay or for which you are
       not billed or would not have been billed except that you were
       covered under this Agreement. 3
Cigna interpreted this language as its refusal to countenance a provider’s “fee
forgiveness,” on the ground that such practices desensitize insureds to the
higher cost of out-of-network medical care.
       Throughout the period relevant to this lawsuit, Cigna insured North
Cypress patients at out-of-network rates. 4 In a 2007 letter when it opened for
business, North Cypress acknowledged its out-of-network status but noted
that Cigna members would still be eligible for its Prompt Pay Discount. North
Cypress did not explain how it calculated that discount, and Cigna replied with
concern that North Cypress proposed to engage in fee-forgiveness.                       Cigna
emphasized that it would recognize charges only insofar as beneficiaries were
legally liable for them, adding that it might delay or deny payment until it had


       the patient in this example would be billed only $500 rather than $4,000. In
       contrast, Cigna’s responsibility was unchanged; North Cypress would file a
       claim form reporting its total Chargemaster cost to Cigna and expect the
       insurer to pay its 60% share—$6,000.

N. Cypress Med. Ctr. Operating Co. v. Cigna Healthcare (North Cypress I), 781 F.3d 182, 188
(5th Cir. 2015).

       3 The district court found that the plans in this case include this provision. On appeal,
North Cypress states in a footnote that “Cigna never established which plans contained the
Exclusion,” but North Cypress says nothing more on this point in either brief. “Failure of an
appellant to properly argue or present issues in an appellate brief renders those issues
abandoned.” United States v. Beaumont, 972 F.2d 553, 563 (5th Cir. 1992). The district
court’s factual finding is, therefore, undisputed.

       4In 2012, North Cypress became an in-network provider for Cigna, ending this
controversy.
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                                 No. 18-20576
“assurance that the charges shown on claim forms are your actual charges to
the patient and that patients will be required to pay amounts such as out-of-
network co-insurance and deductibles.” North Cypress replied that the Prompt
Pay Discount “does not waive any portion of North Cypress’s charges for a
service.” North Cypress did not explain to Cigna that the Prompt Pay Discount
was based on an entirely different fee schedule, the assumption of an in-
network coinsurance rate, and the thus-conditioned waiver of Cigna’s usual
reimbursement requirements.
      Until early November 2008, Cigna accepted claims proffered by North
Cypress, paying approximately 80% of the hospital’s bill based on its master
fee schedule. Prompted by complaints from its insureds about extraordinary
out-of-network payments, Cigna became suspicious of fee forgiveness by North
Cypress and launched an investigation. It sent 34 survey letters to Cigna plan
members and received 19 responses.         It received a range of answers and
concluded that North Cypress generally collected $100 from a Cigna-insured
patient, if anything.
      Consequently, Cigna decided to change its payment process for North
Cypress claims and notified the hospital of its new “Fee-Forgiving Protocol.”
Going forward, it would assume that North Cypress charged patients $100,
and based on this coinsurance payment, it would calculate the cost of the
procedure. Then, it would pay what the patient’s plan dictated for a procedure
of that cost at an out-of-network hospital. This assumption would be revoked
if the beneficiary (or assignee) showed that the amount submitted was actually
the amount charged and that the Cigna participant had paid the applicable
out-of-network coinsurance amount.
      North Cypress protested implementation of the Protocol and, as its
patients’ assignee, appealed claims in Cigna’s multi-level appeals process.
Consistently, North Cypress’s first appeal would be met with a letter from
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                                     No. 18-20576
Cigna conveying that the original decision was based on Cigna’s policy of not
paying charges that patients are not legally obliged to pay. The letter would
explain the process for a second appeal. According to the letter, appeals were
to be decided by a unit separate from the unit involved in the initial decision.
The district court found that Cigna adjusted some claims in favor of North
Cypress during the appeal process, but North Cypress refused to complete the
appeals process for the vast majority of its claims.
      In 2009, North Cypress sued in federal court seeking relief for claimed
underpayments of insurance by Cigna under state law, RICO, and ERISA. The
district court ruled, in relevant part, that North Cypress lacked standing to
pursue ERISA claims. 5         On appeal, this court reversed that ruling and
remanded for consideration of the ERISA claims. North Cypress I, 781 F.3d at
192–95.
      After further discovery, the district court responded to cross-motions for
summary judgment by dismissing North Cypress’s ERISA § 502(a)(3) claims
for breach of fiduciary duty, its ERISA § 503 claims for failure to provide a full
and fair review of initial benefit decisions, its ERISA § 502(c)(1)(B) claims for
refusal to provide requested plan documents, and its state contract law claims.
The court also deemed Cigna’s affirmative defense of recoupment to be waived
and denied North Cypress’s request for attorney’s fees. Finally, the court
narrowed North Cypress’s remaining claims for patient benefits under ERISA
§ 502(a)(1)(B) to those for which it had exhausted administrative remedies,
ruling that North Cypress lacked a futility excuse for non-exhaustion.




      5  The district court also dismissed appellants’ RICO claims, state insurance law
claims, and state contract law claims, granted a motion to unseal, and dismissed appellees’
ERISA counterclaims. In North Cypress I, this court upheld those rulings, except for
dismissal of the state contract law claims, which were remanded. 781 F.3d at 197–207.
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       An eight-day bench trial followed.              At trial, the court refused to
reconsider its ruling on exhaustion.             Also, the court dismissed 395 of the
exhausted claims that had not been subjected to the challenged Protocol and
had therefore been reimbursed satisfactorily.              As to the remaining 180
discretionary decisions made by Cigna regarding benefit claims subject to the
Protocol, 6 the court found no abuse of discretion and thus no violation of ERISA
§ 502(a)(1)(B). The court rejected North Cypress’s other claims. The hospital
timely appealed.
                             STANDARD OF REVIEW
       “On appeal from a bench trial, this court review[s] the factual findings of
the trial court for clear error and conclusions of law de novo.”                 Humble,
878 F.3d at 483 (alteration in original) (quoting George v. Reliance Standard
Life Ins. Co., 776 F.3d 349, 352 (5th Cir. 2015)). In reviewing de novo an
administrator’s ERISA plan interpretation, we apply the same standard as is
appropriate for the district court.              Id.   “[W]hen an administrator has
discretionary authority with respect to the decision at issue, the standard of
review should be one of abuse of discretion.”              Id. (alteration in original)
(quoting Vega v. Nat’l Life Ins. Servs., Inc., 188 F.3d 287, 295 (5th Cir. 1999)
(en banc), overruled on other grounds by Metro. Life Ins. Co. v. Glenn, 554 U.S.
105, 128 S. Ct. 2343 (2008)).
       “This court reviews a grant of summary judgment de novo, applying the
same standards as the district court. We therefore affirm the district court’s
grant of summary judgment ‘if, viewing the evidence in the light most
favorable to the non-moving party, there is no genuine dispute [as] to any
material fact and the movant is entitled to judgment as a matter of law.’”



       6  North Cypress does not dispute that Cigna had discretionary authority to determine
eligibility for benefits in this case.
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                                  No. 18-20576
LifeCare Mgmt. Servs. L.L.C. v. Ins. Mgmt. Adm’rs Inc., 703 F.3d 835, 840–41
(5th Cir. 2013) (alteration in original) (citation omitted) (quoting U.S. ex. rel.
Jamison v. McKesson Corp., 649 F.3d 322, 326 (5th Cir. 2011)).
      Finally, this court reviews a denial of attorney’s fees for abuse of
discretion, reviewing factual findings for clear error and legal conclusions de
novo. See Humble, 878 F.3d at 488; see also Dean v. Riser, 240 F.3d 505, 507
(5th Cir. 2001).
                                 DISCUSSION
      On appeal, North Cypress raises numerous issues, most of which are
connected to the impact of our first appellate decision in this case and
intervening case law. Thus, North Cypress contends the district court violated
the law of the case by not considering the legal correctness of Cigna’s plan
interpretation. Second, in contravention of our earlier opinion, the court failed
to find that Cigna had conflicts of interest, lacked good faith, and abused its
discretion in denying claims under the hospital’s Prompt Payment Discount
policy. Next, the district court erred in relying on Connecticut General Life
Insurance Co. v. Humble Surgical Hospital, L.L.C., the intervening decision of
this court that interpreted the same language at issue in Cigna’s policy here.
Moving on, North Cypress alleges that futility excused its failure to exhaust
administrative remedies for the vast majority of benefit claims at issue and
that Cigna failed to provide fair and full review of the challenged benefit
claims. Finally, the district court allegedly erred in denying damages and
failing to award attorney’s fees to North Cypress.
      None of these challenges succeeds. As will be explained, the law of the
case did not require the district court on remand to determine the legal
correctness of Cigna’s policy interpretation, and under Humble, a court need
not reach legal correctness if the insurer’s determination was not an abuse of
discretion. Humble also moots consideration of the conflicts and inferences of
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bad faith that North Cypress asserts against Cigna. In evaluating Cigna’s plan
interpretation, the district court correctly applied this court’s previous decision
in the instant controversy as well as Humble. Consequently, North Cypress’s
exhaustion argument is moot. Moreover, its procedural challenge to Cigna’s
review fails for lack of substantiating evidence, which leaves the damages issue
moot, too.   Based on the correctness of the district court’s rulings, North
Cypress can hardly establish that it had any right to obtain attorney’s fees.
                              I. Law of the Case
      Reviewing Cigna’s disposition of the challenged benefit claims, the
district court “skipped the legal correctness analysis” and proceeded to the
“functional equivalent of arbitrary and capricious review.” According to North
Cypress, this procedure violated the law of the case because, in North Cypress
I, this court allegedly ordered the trial court on remand to decide whether
Cigna’s plan interpretation was legally correct. In fact, the law of the case
stated no such imperative.
      In North Cypress I, Cigna requested that this court “affirm the grant of
summary judgment against North Cypress’s benefit underpayment claims on
the merits.” 781 F.3d at 195. The panel chose instead to “vacate and remand
to allow the district court a full opportunity to consider all of North Cypress’s
claims for underpayment of benefits and its other closely related ERISA claims
with a fully developed record.” Id. at 197. To explain the remand, the North
Cypress I panel identified “the many issues Cigna asks us to decide.” Id. at
196. For this reason, the panel stated,
      Analysis of Cigna’s plan interpretation proceeds in two steps. The
      first question is whether Cigna’s reading of the plans is “legally
      correct.” . . . On a finding that the plans, read correctly, do not
      condition coverage on collection of coinsurance, the question would
      be whether Cigna nevertheless had discretion to absolve itself of
      responsibility for payment of the greater part of thousands of
      claims. At this stage of the analysis, the inquiry would include
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                                  No. 18-20576
      among other factors, whether Cigna had a conflict of interest, as
      well as the “internal consistency of the plan” and “the factual
      background of the determination and any inferences of lack of good
      faith.”

Id. at 195–96 (quoting Threadgill v. Prudential Secs. Grp., Inc., 145 F.3d
286, 293 (5th Cir. 1998)).
      This general statement of the law, expressed in terms of the facts of the
case, is no mandate at all. Nor is it a statement of the whole law regarding
review of ERISA benefit decisions. The court’s summary omits mention of
Duhon v. Texaco, Inc., 15 F.3d 1302, 1307 n.3 (5th Cir. 1994) and Holland v.
International Paper Co. Retirement Plan, 576 F.3d 240, 246 n.2 (5th Cir. 2009)
(cited in North Cypress I, 781 F.3d at 195 n.57), in which this court established
that a party may skip the legal correctness inquiry and proceed to consider
whether the plan administrator abused its discretion, as outlined in North
Cypress I. The North Cypress I panel did not deny the authority of Duhon or
of Holland (nor could it).
      Accordingly, the district court properly relied on Holland, as well as on
Humble, 878 F.3d at 483–84, in skipping the legal correctness analysis. In so
doing, the court did not violate the law of the case and committed no error.
             II. Conflicts of Interest and Lack of Good Faith
      Law of the case aside, North Cypress contends also that the district court
erred in its evaluation of the conflicts of interest and inferences of lack of good
faith that North Cypress raised.       Under Humble, however, the abuse-of-
discretion inquiry was obviated by the existence of prior legal authority
supporting Cigna’s interpretation of identical or nearly identical language
concerning insureds’ coinsurance obligations. Humble explained that “[o]ther
courts have held that, where an administrator’s interpretation is supported by
prior case law, it cannot be an abuse of discretion—even if the interpretation

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                                       No. 18-20576
is legally incorrect.” Humble, 878 F.3d at 484. Because, as North Cypress
itself has acknowledged, the circumstances of this case match those in Humble,
Cigna’s alleged conflicting interests and lack of good faith are immaterial. 7
       If a benefit claimant (or, as here, assignee) challenges the disposition of
a claim, and the court makes no finding of legal correctness to end the inquiry,
then it must ordinarily consider whether the plan administrator’s
interpretation was arbitrary and capricious. Humble, 878 F.3d at 483. The
inquiry may generally include reviewing whether the plan administrator “had
a conflict of interest, as well as the ‘internal consistency of the plan’ and ‘the
factual background of the determination and any inferences of lack of good
faith.’” North Cypress I, 781 F.3d at 195–96 (quoting Threadgill, 145 F.3d at
293). Under Humble, however, it may not be necessary to review these factors,
at least “under the present circumstances,” where two other courts “effectively
or explicitly concluded that the [insurer’s interpretation of the] provision at
issue here was legally correct.” 878 F.3d at 485. 8
       For some of the benefit decisions in Humble, one relevant and
longstanding prior case, decided in 1991, was Kennedy v. Connecticut General
Life Insurance Co., 924 F.2d 698 (7th Cir. 1991). Id. at 485. The Kennedy court
ruled that Cigna’s interpretation of a “nearly-identical” provision as imposing
a fee forgiveness restriction was legally correct. Kennedy, 924 F.2d at 701. The
Humble court also relied on the district court’s first decision in this case, which
although vacated in North Cypress I, was controlling during most of the period



       7 The district court applied Humble, noting it need not decide the abuse of discretion
factors, but it went on to reject, based on record evidence, each of North Cypress’s complaints
concerning Cigna’s alleged conflicts of interest, internal inconsistency in the plan, and lack
of good faith. We pretermit further discussion of these findings.

       8The court in Humble cautioned that it did not adopt “a bright-line rule because even
if a legally incorrect interpretation is supported by prior case law, employing the
interpretation could cause a plan administrator to abuse its discretion.” 878 F.3d. at 485.
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covering Cigna’s dealings with Humble Surgical Hospital and had also ruled
Cigna’s interpretation to be correct. Thus, as in Humble, so it must be here:
this court must adhere to the same reasoning and result concerning the same
policy language. Cigna’s interpretation, having relevant legal support, could
not in these circumstances be an abuse of discretion.
                                III. Applying Humble
       To avoid the dispositive effect of Humble, North Cypress proposes four
critiques: Humble contradicts North Cypress I and lacks authority; Kennedy,
on which Humble relied, is inapplicable to this case; Cigna did not rely on
Kennedy in this case; and various facts render Humble distinguishable. These
are meritless.
       First, it is simply incorrect to claim that “Humble came to a different
conclusion than did N. Cypress finding that Cigna’s Exclusion interpretation is
‘legally correct.’” Humble came to no such conclusion. Instead, the court
“skip[ped]” consideration of the issue because “even if [Cigna’s] construction of
the plans’ exclusionary language was legally incorrect, its interpretation still
fell within its broad discretion.” Humble, 878 F.3d at 484. Moreover, North
Cypress I made no final determination about the legal correctness of Cigna’s
interpretation, as it merely “suggested (without deciding) that this reading
might be legally incorrect.” 9 Id. Humble remains binding.
       North Cypress contends that here, unlike in Kennedy, North Cypress left
patients legally responsible for co-payments. True or not, that contention is




       9It stated that “[t]here are strong arguments” for that conclusion, declined to rule for
Cigna on the merits of North Cypress’s ERISA claims, and vacated the district court’s
summary judgment on North Cypress’s state contract law claims, in which the district court
had determined that Cigna’s interpretation was legally correct. In vacating that holding, the
panel characterized it as “filtered through state contract law and based on a much smaller
universe of claims” than would be a final decision on the ERISA claims. 781 F.3d at 196–97.

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irrelevant for present purposes. Humble relied on Kennedy, not to determine
whether patients actually were responsible for co-payments, but rather to
determine whether Cigna reasonably required that patients be legally
responsible for co-payments. Humble, 878 F.3d at 484–85. As North Cypress
admits, the relevant interpretation in this case is the same as the
interpretation in Humble. Kennedy was reasonably invoked in Humble in
determining whether Cigna’s interpretation was an abuse of discretion, and it
is reasonably applicable here.
       North Cypress counters that, even if Kennedy applies to this case, Cigna
did not rely on Kennedy.           Indeed, a series of “facts here not present in
Humble” 10 constitute Cigna’s alleged conflicts of interest and lack of good faith.
As previously explained, however, they are immaterial.
       Finally, North Cypress does not adequately brief a challenge to the
existence of substantial evidence supporting Cigna’s decisions. 11 Even if a plan




       10  North Cypress alleges that (1) Cigna mobilized a team to pressure North Cypress
to join its provider network, (2) this team invented an approach that involved making reduced
payment, if any, to North Cypress and convincing plan sponsors to reduce reimbursement of
North Cypress, (3) Cigna created the Protocol “exclusively for North Cypress, not relying on
Kennedy,” (4) Cigna repeatedly stated a goal to force North Cypress to the negotiating table
to enter an in-network contract, (5) North Cypress reversed its Prompt Pay Discount and
billed thousands of patients the full amount of their out-of-network responsibility after the
patients failed to pay timely, (6) North Cypress did not commit fraud or provide “kickbacks,”
and (7) “Cigna used North Cypress as a pretext to plan sponsors for payments based on billed
charges from 2007-12 to make millions in additional ‘contingency fees.’”

       11 In this case, the district court ruled that substantial evidence supported Cigna’s
conclusion. North Cypress, in its initial brief, notes as a fact in its “Statement of the Case,”
that “only the original 27 ‘modest’ surveys were Cigna’s foundation to adjudicate 9,921 North
Cypress claims as ‘fee-forgiving’ on a patient responsibility of $100.” Also, North Cypress
(erroneously) faults the district court for failing to consider whether Cigna had substantial
evidence for its decision, and, in the course of arguing about the district court’s damages
rulings, it notes that the district court’s ruling “rel[ied] on . . . the erroneous finding of
‘substantial evidence’ to support Cigna’s actions.” At no point in its initial brief, however,
does North Cypress provide an argument against the district court’s finding of substantial
evidence.
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interpretation is not an abuse of discretion, particular benefit decisions must
be supported by substantial evidence. Humble, 878 F.3d at 485. With this
failure, no grounds remain on which to find that Cigna abused its discretion.
North Cypress’s ERISA § 502 claims fail.
                                IV. Remaining Issues
       North Cypress also raised the alleged “futility” of exhausting Cigna’s
appeal process for denied claims, but this process claim is moot because the
administrator’s decisions were no abuses of discretion. North Cypress’s other
process argument on appeal—against summary dismissal of its ERISA § 503
claims for the absence of a “full and fair hearing” of benefit appeals—fails to
establish any error of law or genuine dispute of material fact marring the
district court’s summary judgment. North Cypress additionally persists in
asserting some right to receive damages and attorney’s fees. Zero damages is,
however, the only appropriate measure for zero substantive success in proving
the hospital’s case. As for attorney’s fees, the fact that North Cypress achieved
temporary but fleeting success in reversing the district court’s initial legal
conclusions is necessary but not sufficient for an award where its claims were
later totally rejected after trial. See Hardt v. Reliance Standard Life Ins. Co.,
560 U.S. 242, 255, 130 S. Ct. 2149, 2158 (2010).
                                     CONCLUSION
       For the foregoing reasons, the district court’s judgment is AFFIRMED.




        An argument not included in a statement of issues nor addressed in the body of the
brief must be deemed waived. United States v. Thames, 214 F.3d 608, 612 (5th Cir. 2000).
North Cypress could not undo this waiver by raising the issue in its reply brief. Depree v.
Saunders, 588 F.3d 282, 290 (5th Cir. 2009) (“This court will not consider a claim raised for
the first time in a reply brief.”). Thus, North Cypress waived the issue of whether Cigna had
substantial evidence for its decision, and the district court’s finding of substantial evidence
stands undisputed.

                                             13
