                   UNITED STATES COURT OF APPEALS
                        FOR THE FIFTH CIRCUIT


                                No. 01-40862


                        EAST TEXAS MEDICAL CENTER,

                                                       Plaintiff-Appellee,

                                     versus

     HEARTLAND EXPRESS, INC.; HEARTLAND EXPRESS, INC. EMPLOYEE
               HEALTHCARE PLAN; THE EPOCH GROUP, LC,

                                                     Defendants-Appellants.


           Appeal from the United States District Court
                 for the Eastern District of Texas
                           (6:99-CV-633)

                              November 19, 2002


Before DAVIS, BARKSDALE, and EMILIO M. GARZA, Circuit Judges.

PER CURIAM:*

      Concerning the Employee Retirement Income Security Act, 29

U.S.C. §§ 1001, et seq., this appeal turns on whether, pursuant to

§ 1113(l), there was adequate notice of the reasons for the denial

of a benefits determination.          Heartland Express, Inc., Heartland

Express, Inc. Employee Healthcare Plan, and The Epoch Group, LC,

appeal the district court’s holding them liable under both an abuse

of   discretion   and    de   novo   standard   of   review   for   the   plan



      *
      Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
administrator’s denying coverage for expenses for treating Jessie

Pope’s   injuries.        Because    the    plan    administrator       failed   to

adequately disclose the basis for its decision, we VACATE the

judgment and     REMAND    with     instructions     to   REMAND   to    the   plan

administrator.

                                       I.

     On 2 November 1996, while trying to pass another vehicle,

Jessie Pope collided with a Ford Escort containing five people.

All involved were seriously injured; two of the Escort’s occupants

died soon after the collision.             The accident report noted:          Pope

was driving her vehicle erratically, at high speed, and passing

other vehicles; she was in possession of a legal prescription for

pain; and a blood sample was obtained.

     Pope was admitted to East Texas Medical Center (ETMC), to

which she assigned her rights and benefits under her insurance

policy. She was released three months later, with medical expenses

totaling more than $350,000.

     At the time of the collision, Pope’s husband was employed by

Heartland   Express.        It    provides    (as    plan   sponsor     and    plan

administrator) an employee benefit plan — Heartland Express, Inc.

Employee Healthcare Plan — which is self-funded and covered by

ERISA.   Pope is a plan beneficiary.

     Heartland has contracted with The Epoch Group to serve as a

third-party claims supervisor.             When a claim is filed, Epoch is


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authorized to pay or deny it, “based on the terms of the Plan

documents and upon making a reasonable effort to determine the

relevant law applicable to any situation”.         If Epoch cannot make a

decision within those guidelines, it refers the claim to Heartland,

as plan administrator.

     The plan document excludes coverage “for any expenses [the

employee or spouse] incur[s] ... as a result of having engaged in

any illegal activity other than misdemeanor traffic violations”

(illegal activity exclusion).       The plan document does not define

“illegal activity”; it does contain a choice-of-law provision: “To

the extent federal law does not apply, any questions arising under

the Plan shall be determined under the laws of the State of Iowa”.

     Under the terms of the plan document, Epoch attempted to

determine whether Pope’s medical expenses were covered.              After

learning from a supplemental police report that Pope had been

charged with manslaughter (but had not then been indicted), with

the results of the blood test pending, Epoch advised Heartland on

11 March 1997 that it could not make a determination and referred

the claim to Heartland.        The same day, Heartland informed Epoch:

“it remains our corporate position that the medical expenses claim

for ...   Pope   should   be   denied”,   citing   the   illegal   activity

exclusion.   By letter dated 31 March 1997, Epoch informed Pope that

Heartland denied the claim “based on information obtained through




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the police report and other sources” and cited the illegal activity

exclusion.    Epoch notified ETMC by separate letter.

     Pope retained an attorney and appealed the decision on 26

April 1997.    As part of that administrative appeal, she requested

all documentation and information used to make the determination

and an appearance before the Plan trustees. ETMC also appealed the

decision, requesting similar information and claiming Heartland’s

denial notice failed to provide the specific reason for the denial,

as required by 29 C.F.R. § 2560.503-1(f).

     On 27 May, approximately a month after Pope began her appeal,

the Texas Department of Public Safety crime lab submitted its

report; it determined Pope’s blood alcohol content was negative.

However, her blood test was positive for Codeine (.36 milligrams

per liter), Butalbital (10 milligrams per liter), Meprobamate (52

milligrams per liter), and Carisoprodol (less than .4 milligrams

per liter).

     Approximately a month later, on 25 June, Pope was indicted on

two counts    of   intoxication    manslaughter.     On   18   July,   Epoch

informed   Pope    the   Plan   trustees   denied   her   appeal   “[a]fter

reviewing all materials, including the 2 indictments returned on

June 25, 1997” and, again, citing the illegal activity exclusion.

     ETMC contends its appeal was not denied until a 9 March 1998

letter from Heartland’s attorney informed ETMC that Heartland’s

information indicated Pope was driving under the influence of


                                     4
alcohol and was indicted for intoxication manslaughter, which

excluded her from eligibility for benefits.                  The plan document

requires an appeal to be decided within 60 days.                   If there is a

delay in the trustees’ decision, the plan document requires the

trustees to notify the claimant of the delay.            Heartland contends:

the denial of Pope’s appeal is the only relevant appeal; and the 9

March letter was not a denial of an appeal, but merely pre-

litigation posturing by its attorneys.

       In late 1999, ETMC filed this action, with claims under ERISA

(benefits due under the plan, breach of fiduciary duty, and failure

to provide information) and state law.               On 13 March 2000, Pope

pleaded guilty to two counts of negligent homicide (a felony) and

received a probated sentence of two years imprisonment.

       At the 5 March 2001 bench trial, Defendants called a witness

to     admit   the   administrative     record;      ETMC,    a    nurse    and   a

representative of its business office to admit evidence of Pope’s

injuries and her bill.      The district court, in a 23-page opinion,

reviewed the Plan trustees’ decision under both de novo and abuse

of discretion standards of review and made extensive findings of

fact and conclusions of law.

       The district court determined: Pope’s injuries did not result

from     illegal     activity   under       either    Iowa    or    Texas     law;

alternatively, the trustees’ denial of the claim was arbitrary and

capricious.     The court held all Defendants — the Plan, Heartland,


                                        5
and Epoch — liable for benefits due; made no award on ETMC’s ERISA

claims   of    breach        of    fiduciary      duty    or     failure     to   provide

information; and denied its state law claims.

                                           II.

     Appellants-Defendants contend the district court erred in

reviewing the trustees’ decision de novo and instead should have

reviewed      for     abuse       of   discretion.             They   contend:        the

administrative record supports the trustees’ factual determination

that Pope’s injuries resulted from illegal activity; and the

trustees’ interpretation is correct under both Iowa and Texas law.

Finally, two of the Appellants-Defendants, Heartland and Epoch,

contend the         district      court   erred    in    holding      them   liable   for

benefits under ERISA.

     ETMC counters that de novo review was appropriate because of

the plan document language and the trustees’ conduct.                        Also, as it

did in district court, it asserts Heartland and the Plan trustees

failed to adequately disclose the basis for the decision, as

required by law.             It maintains that, even under an abuse of

discretion standard, the district court was correct because:                          no

evidence shows Pope was intoxicated; the denial was improper under

both Iowa and Texas law; and Heartland’s conflict of interest

lessens the deference to be given the decision.

     We agree with ETMC that the Plan’s initial denial failed to

sufficiently        comply     with    ERISA’s    notice       requirements.       ERISA


                                            6
provides certain minimum requirements that must be met when a plan

administrator denies a benefits claim. See Schadler v. Anthem Life

Ins. Co., 147 F.3d 388, 393 (5th Cir. 1998).            Section 1133 of

ERISA, in part, requires every employee benefit plan to “provide

adequate notice in writing to any participant or beneficiary whose

claim for benefits under the plan has been denied, setting forth

the   specific   reasons   for   such   denial,   written   in   a   manner

calculated to be understood by the participant”.             29 U.S.C. §

1133(1).    The then-applicable Department of Labor regulations

concerning this section provide in pertinent part:

           (f) Content of notice. A plan administrator
           ... shall provide to every claimant who is
           denied a claim for benefits written notice
           setting forth in a manner calculated to be
           understood by the claimant:

           (1) The specific reason or reasons for the
           denial; [and]

           (2) Specific reference to pertinent plan
           provisions on which the denial is based[.]

29 C.F.R. § 2560.503-1(f)(1997) (emphasis added).

      These requirements are intended to assist the claimant prepare

for further administrative review, as well as any subsequent

proceedings in federal courts.          See Schadler, 147 F.3d at 394

(quoting Matuszak v. Torrington Co., 927 F.2d 320, 323 (7th Cir.

1991)). The denial must include specific reasons for the decision;

“[b]aldfaced conclusions do not satisfy this requirement”.              Id.

(emphasis added; internal quotation marks and citations omitted).


                                    7
And, as discussed, the explanation requirement is intended to

ensure the beneficiary receives “meaningful review of that denial”.

Halpin v. W.W. Grainger, Inc., 962 F.2d 685, 689 (7th Cir. 1992)

(emphasis added).

     In Schadler, we remanded the case to the administrator to make

an initial determination because it failed to provide notice

consistent with 29 U.S.C. § 1133(1) and 29 C.F.R. § 2560.503-1(f).

147 F.3d at 399.    We concluded:   ERISA requires the district court

to review the plan administrator’s fact-finding and interpretation

of the benefit plan; but, for it to do so, the administrator must

first make factual findings and make them known to the beneficiary.

Id. at 397-98.

     Heartland’s denial, by a letter from Epoch, merely stated:

“based on information obtained through the police report and other

sources, charges have been determined to be ineligible under the

Plan”.   While Heartland complied with 29 C.F.R. § 2560.503-1(f)(2)

(requiring citation of the relevant plan provision), it failed: to

provide any facts that warranted application of the exclusion; and

to indicate how a police report filed in Texas met the illegal

activity exclusion as determined by Iowa law (the law applicable

under the plan document).      In both the initial denial and the

denial of Pope’s appeal, Heartland and the trustees failed to

explain what activity by Pope was illegal.         Additionally, the

absence of any explanation of its interpretation of the exclusion


                                    8
and the vague reference to “other sources” cannot be an explanation

“calculated to be understood by the claimant”.                        29 C.F.R. §

2560.503-1(f).

      Because of this shortcoming, the denial failed to comply with

§   2560.503-1(f)    and,   more     importantly,       29   U.S.C.    §    1133(l).

Consequently,     this    matter     should   be    remanded      to       the     plan

administrator.

      Lending further support to our conclusion that this matter

should   be    remanded   is   the   existence     of    evidence      not       before

Heartland when the denial decision was made.                 After Pope’s appeal

to the Plan trustees was denied, she pleaded guilty to negligent

homicide.     As a result of this subsequent development, one or both

of the parties should have requested a remand in the light of this

new evidence.     See, e.g., Barhan v. Ry-Ron, Inc., 121 F.3d 198, 202

n.5 (5th Cir. 1997); Moller v. El Campo Aluminum Co., 97 F.3d 85,

88-89 (5th Cir. 1996); Miller v. United Welfare Fund, 72 F.3d 1066,

1071-72 (2d Cir. 1995) (remand appropriate, unless it would be a

useless formality).

                                      III.

      For the foregoing reasons, the judgment is VACATED, and this

case is REMANDED to the district court with instructions to REMAND

to the plan administrator.

              Needless to say, the remand to the plan administrator

will begin anew the administrative review of this matter; and, if

the claim is denied, this may result in an action being again filed

                                        9
in district court. Should that happen, the district court will, of

course, write on a clean slate, based upon the issues presented and

the underlying claim-process.            Obviously, there is no way now to

know what those issues might be.

       It   goes   without   saying      that,   in     remanding   to    the    plan

administrator,      we    vacate   not   only    the    judgment    but   also    the

district court’s underlying findings of fact and conclusions of

law.    Such vacated items include, but are not limited to, the

district court’s rulings challenged in this appeal regarding the

proper standard of review for the claim-denial, the valid bases for

claim-denial, and the liability of Heartland and Epoch, with the

Plan, for benefits under ERISA.

       Again, should a new action be filed, the district court will

then address the issues then presented.                 Because we are vacating

the    judgment    and,   concomitantly,        the    underlying   findings      and

conclusions by the district court, such findings and conclusions do

not constitute the law of the case.                    Likewise, we express no

opinion about the challenges now presented on appeal, including

those concerning the applicable standard of review, proper bases

for claim-denial, and joint liability, other than to observe that

those challenges have considerable force.                 In any event, the new

administrative process on remand will result in a new claim-

decision which may possibly become the subject of a new action in

district court.      Should that be the case, we know each issue then



                                         10
presented will receive new and thorough analysis by the district

court.

                                         VACATED and REMANDED




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