                                                                                                                           Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


1-7-2004

Scorsone v. Local 1245
Precedential or Non-Precedential: Non-Precedential

Docket No. 03-1491




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                                                               NOT PRECEDENTIAL

                   THE UNITED STATES COURT OF APPEALS
                          FOR THE THIRD CIRCUIT

                                    ___________

                                    No. 03-1491
                                    ___________

                              BARBARA SCORSONE

                                           v.

       UNITED FOOD AND COM MERCIAL WORKERS UNION LOCAL 1245;
 UNITED FOOD AND COMMERCIAL WORKERS UNION LOCAL 1245 HEALTH
   PLAN, MAGNACARE; ABC CORPORATIONS 1-100; JOHN DOES 1-10, (being
fictitiously named companies and/or individuals whose identities are presently unknown)

                                    United Food and Commercial Workers
                                    Union Local 1245 Health Plan, Magnacare,

                                             Appellant
                                    ___________


          ON APPEAL FROM THE UNITED STATES DISTRICT COURT
                  FOR THE DISTRICT OF NEW JERSEY

                              (D.C. Civil No. 00-cv-05121)
                   District Judge: The Honorable W illiam H. Walls

                                    ___________

                     Submitted Under Third Circuit LAR 34.1(a)
                                 October 28, 2003


     BEFORE: SCIRICA, Chief Judge, NYGAARD, and AMBRO, Circuit Judges.
                                   (Filed January 7, 2004)

                                        ___________

                                OPINION OF THE COURT
                                     ___________


NYGAARD, Circuit Judge.

                                              I.

              In this appeal, appellants (collectively, “the Union”) challenge the District

Court’s denial of their motion for summary judgment, its decision to conduct a bench

trial, its determination that they acted arbitrarily and capriciously and its award of

attorneys’ fees. We have jurisdiction under 28 U.S.C. § 1291 and will affirm.

                                              II.

              Because we write only for the benefit of the parties we address only those

facts particularly relevant to our analysis and conclusion. In 1993, Appellee Barbara

Scorsone, the wife of a Union member and covered person under the Union’s health plan

(the health plan, its board of trustees and administrators are collectively referred to as “the

Fund”), began experiencing drooping in her eyelids. Between 1993 and 1999, Scorsone

saw a bevy of doctors in order to address this medical issue, its possible causes and

several complications she believed were related to it. In 1999, Scorsone began seeing Dr.

Ralph Mauriello, an opthamologist specializing in plastic surgery. Mauriello had, prior to

treating Scorsone, performed ptosis repair surgery on Scorsone’s brother for a similar



                                              2
problem involving drooping eyelids. After seeing Scorsone, Mauriello determined that

she could also be aided by this surgery. Scorsone elected to proceed with the surgery.

              On July 6, 1999, Mauriello sent a letter to the Fund advising it of

Scorsone’s election to undergo the surgery and several diagnostic test results supporting

the surgery. In addition, Mauriello advised the Fund that due to Scorsone’s dry eye she

would undergo the surgery for her two eyes sequentially.    At the conclusion of this

letter, Mauriello thanked the Fund “in advance for [its] approval for this surgery.” In

response to this letter Mauriello was provided with pre-notification numbers for each

surgery.1

              On August 23, 1999, Mauriello performed surgical ptosis repair on

Scorsone’s left eye and on November 11, 1999 he performed the surgery on her right eye.

              After the first surgery, the Fund sent Scorsone’s claim regarding the ptosis

repair to its third party claims management company for peer review. The information

provided to this company, which included Mauriello’s July 6, 1999 letter and several

medical reports from the doctors Scorsone had seen between 1993 and 1999, was

forwarded to Dr. Peter Laino for peer review. By letter dated August 31, 1999, Laino, an

associate professor of opthamology, offered his opinion that the ptosis repair




1.     During the bench trial, representatives of the Fund were clear that they do not
engage in pre-approval of procedures. Instead, the Fund wishes to be notified of
upcoming procedures and only after they are completed and billed does it determine
whether the procedures are covered.

                                             3
recommended by Mauriello was “ill conceived” medically and that “[c]osmetically it may

be desireable [sic] but that is a separate consideration.” (App. 263.) Based on this letter,

the Fund decided that the procedure was cosmetic and, for that reason, denied Scorsone’s

claim. On December 28, 1999, after both surgeries had been conducted and Mauriello

had been partially paid,2 Scorsone received a denial of benefits letter from the Fund.

              In response to the denial letter, Scorsone submitted additional information

to the Fund through her husband and Mauriello. This information included a letter from

her husband regarding the benefits of the surgery and a letter from Mauriello explaining

that the surgery was medically necessary, and not done for cosmetic reasons. M auriello

also included the surgical operative record and photographs of Scorsone’s eyes. The

Fund did not forward this additional material to Laino. Instead, the Fund denied

Scorsone’s appeal.

              Scorsone filed suit seeking, among other relief, compensatory damages and

attorneys’ fees. Because her claims fell under the Employee Retirement Income Security

Act’s (“ERISA’s”) pre-emptive umbrella it was removed to the District Court. 29 U.S.C.

§§ 1001-1461. After denying the Union’s motion for summary judgment and conducting

a bench trial, the District Court found in favor of Scorsone and awarded her both

compensatory damages and attorneys’ fees. This appeal followed.




2.     The Fu nd explained that partial payments m ade to M auriello were in error.
W hether this is accurate is not relevant to our analysis.

                                              4
                                            III.

              Initially, the Union argues that the District Court erred in conducting a

bench trial on Scorsone’s claims. The Union claims that because the District Court was

only permitted to consider the evidence presented to the Fund it should have looked only

at the documentary evidence and acted improperly in conducting a bench trial. The

Union is incorrect that conducting a bench trial was beyond the limits of the District

Court’s review. While it is true that the District Court could consider only the

information that was available to the Fund when it made its decisions, Mitchell v.

Eastman Kodak Co., 113 F.3d 433, 440 (3d Cir. 1997), this does not imply that the

District Court was prevented from conducting a bench trial to determine what that

information was. Through the use of a bench trial and live testimony, the District Court

was able to more fully understand what the Fund relied upon in denying Scorsone’s

claim.

              The heart of the Union’s appeal is that the District Court erred by finding

that the Fund acted arbitrarily and capriciously by denying Scorsone’s claim for her

surgical ptosis repair. When an ERISA plan gives the administrator discretion to award

benefits and construe the terms of the plan a court reviews the administrator’s actions

only to determine if they were arbitrary and capricious. Abnathya v. Hoffman-La Roche,

Inc., 2 F.3d 40, 44-45 (3d Cir. 1993). The parties do not dispute that this plan gave the



                                             5
Fund’s administrators such discretion. Thus, we, like the District Court, are limited to

determining whether the Fund’s denial of benefits was arbitrary and capricious.

              According to the Union, the Fund properly relied upon the opinion of Laino

in denying Scorsone’s claim and such reliance was well within its discretion. We

disagree. As the District Court noted, if Laino had received all the information Scorsone

and Mauriello provided to the Fund during their appeal and affirmed his initial opinion,

then the Fund’s denial of Scorsone’s claim would likely be within its discretion. Instead,

the Fund failed to supply Laino with this additional information and decided to simply

deny Scorsone’s claim without obtaining a medical opinion that considered this new

evidence. At trial, a Fund administrator who had no medical training stated that she

determined that the information supplied in response to the Fund’s initial denial was not

new and, therefore, Scorsone’s appeal was turned down without further consultation with

Laino or any other medical professional. As the District Court noted, this is not a case of

the Fund favoring the opinion of one doctor over the opinion of another. See, e.g.,

Abnathya, 2 F.3d at 47-48 (explaining that the Sixth Circuit has held that ERISA plan

administrators may, within their discretion, rely on a single independent medical

evaluation to deny benefits and holding that reliance on two such medical evaluations was

“clearly not unreasonable”). Instead, this is a case where the Fund, without requesting the

opinion of a doctor or other medical professional, denied Scorsone’s appeal of the denial

of her claim in the face of medical evidence and a medical opinion submitted by



                                             6
Mauriello that supported the payment of that claim. By failing to forward this

information on to Laino so that he could consider it in reference to his initial opinion and,

instead, simply discounting the new information and affirming the denial of Scorsone’s

claim, the Fund acted in an arbitrary and capricious manner. See, e.g., Lain v. UNUM

Life Ins. Co. of Am., 279 F.3d 337, 342 (5th Cir. 2002) (holding that a plan’s denial of a

claim for benefits in the face of medical evidence supportive of that claim is an abuse of

discretion when that denial is not founded on “concrete evidence”). Accordingly, the

District Court was correct in both denying the Union’s motion for summary judgment and

finding in favor of Scorsone after the bench trial.

              Finally, the Union claims that the District Court erred by awarding

attorneys’ fees to Scorsone. In ERISA cases, a District Court is permitted to award

attorneys’ fees after it determines:

              1)      the offending parties’ culpability or bad faith;
              2)      the ability of the offending parties to satisfy an award
                      of attorneys’ fees;
              3)      the deterrent effect of an award of attorneys’ fees
                      against the offending parties;
              4)      the benefit conferred on members of the pension plan
                      as a whole; and
              5)      the relative merits of the parties’ position.

Ursic v. Bethlehem Mines, 719 F.2d 670, 673 (3d Cir. 1983). We review the District

Court’s decision regarding attorneys’ fees for abuse of discretion. McPherson v.

Employees’ Pension Plan of Am. Re-Ins. Co., 33 F.3d 253, 256 (3d Cir. 1994).




                                              7
              It is clear that the District Court did not abuse its discretion in awarding

fees. The District Court applied each of the Ursic factors to the facts and adequately

analyzed those factors. In particular, the District Court found that the Fund’s actions

were culpable, the Fund was able to satisfy the fee award and the Fund’s participants

would be benefitted by the deterrent effect such an award would have on the Fund. The

District Court’s analysis was sound and its award of fees was well within its discretion.

                                             IV

              For the foregoing reasons we will affirm the District Court’s judgment in

favor of Scorsone, its use of a bench trial and its award of attorneys’ fees.




                                              8
_________________________


TO THE CLERK:

           Please file the foregoing opinion.




                                          /s/ Richard L. Nygaard

                                          _________________________________
                                          Circuit Judge




                                          9
