                 IN THE COURT OF APPEALS OF TENNESSEE
                             AT NASHVILLE
                                  November 7, 2002 Session

MICHAEL G. CANTRELL v. WALKER DIE CASTING, INC., EMPLOYEE
                  BENEFIT PLAN, ET AL.

                Direct Appeal from the Chancery Court for Marshall County
                             No. 9942    F. Lee Russell, Judge



                   No. M2001-00693-COA-R3-CV - Filed February 7, 2003


This case involves a denial of medical benefits for injuries sustained in an automobile accident. The
Appellee was covered under an employee benefit plan which falls within the purview of the
Employee Retirement Income Security Act of 1974 (ERISA). The trial court granted summary
judgment for the Appellee as to the Appellant’s liability for payment of the expenses resulting from
the accident. We reverse the decision of the trial court, finding Appellee’s failure to exhaust his
administrative remedies prior to filing suit fatal to his cause.

  Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed; and
                                       Remanded

DAVID R. FARMER , J., delivered the opinion of the court, in which W. FRANK CRAWFORD , P.J., W.S.,
and PATRICIA J. COTTRELL, J., joined.

Thomas A. Davidson, Lewisburg, Tennessee, for the appellant, Walker Die Casting, Inc., Employee
Benefit Plan.

John H. Norton, III, Shelbyville Tennessee, for the appellee, Michael G. Cantrell.

Robert O. Binkley, Lewisburg, Tennessee, for the Intervenor/Appellee, Chattanooga-Hamilton
County Hospital Authority d/b/a Erlanger Medical Center.

                                            OPINION

        This case arises out of an automobile accident in which Michael Cantrell (Appellee) was
injured. The accident occurred shortly after midnight on October 21, 1995. There was
apparently evidence that Appellee had consumed alcohol prior to the accident. Appellee suffered
serious injuries as a result of the accident. The treatment of these injuries resulted in substantial
medical expenses. At the time of the accident Appellee was an employee of Walker Die Casting,
Inc., and his medical care was covered under Walker’s Employee Benefit Plan (“the Plan”).
       As a result of the accident, Appellee was charged with vehicular assault, reckless driving
and DUI, first offense. The vehicular assault and DUI charges were “retired,” June 3, 1996.
Appellee entered a plea of nolo contendre to the reckless driving charge on the same day.

        Appellant denied coverage for Appellee’s medical expenses based on the language of the
Plan, contained in the Employee Booklet1, under the heading “general limitations,” that provides:
        No medical care benefits will be paid by this Plan:
        6. For treatment or expenses incurred for an accident, injury or illness resulting from
        the voluntary use of prescription drugs, non-prescription drugs or alcohol which the
        use of same constitutes or contributes to the violation of any state or federal law. It
        will be determined by the Plan that violation of a state or federal law has occurred if:
                 a) the individual is convicted or found guilty of the applicable
                 charges; or
                 b) there is sufficient evidence that a state or federal law has been
                 violated and no charges were brought against the individual.
                 Sufficient evidence is defined as but not limited to: (1) blood alcohol
                 levels which exceed established state or federal minimums, (2) the
                 possession of illegal non-prescription drugs, or (3)
                 prescription/legend drugs used or taken without a written
                 prescription.

        Appellee contends that the clear wording of the plan does not exclude coverage under the
facts of this case as Appellee was charged with, but not found guilty, or convicted of, an alcohol
related offense. The parties also dispute whether Appellee ever received written explanations of
the Plan’s denial of coverage.

        Appellee brought suit against his employer, Walker Die Casting, Inc., and the Plan’s
supervisor, American Group Administrator’s, Inc. claiming that the employer was contractually
liable for his medical costs based on the aforementioned provisions of the Plan’s booklet.
Although the Plan provides for administrative review of benefit denials, Appellee did not seek
this administrative remedy prior to filing suit. The parties dispute whether, under the provisions
of the Plan, resort to such remedies was required.

        Initially, none of the parties involved realized that the Appellee’s action was a claim
falling within the purview of the Employee Retirement Income Security Act of 1974 (ERISA), 29
U.S.C. §§ 1001 et seq., and that the proper defendant was the Plan itself. Subsequent to this
realization the Appellee was allowed to amend his complaint leaving the Plan as the lone
Defendant.




        1
          It is unclear whether the Em ployee B ooklet was en tered as a trial exhibit. The language of the plan is,
however, quoted by both parties in various pleadings to an extent sufficient for us to reach our decision.

                                                        -2-
        Appellee moved for summary judgment as to the Plan’s liability, based on the
aforementioned language contained in the Employee Booklet. The trial court, in granting
summary judgment for Appellee on the issue of Appellant’s liability, found that, under its
interpretation of the language of the plan, the administrator had arbitrarily denied the Appellee’s
claims. The court further found that the permissive language of the Plan excused Appellee’s
failure to exhaust the administrative remedies available to him prior to filing suit.

        A hearing was held on August 17, 2001, on the damages aspect of Appellee’s claim
against Appellant at which Appellee was awarded $63,911.37 plus attorney’s fees. This appeal
followed.

         Further discussion of the extensive procedural history of this case, comprising a technical
record of three hundred and thirty five pages, does not bear repeating as it is well known to the
parties.

                                               Issues

        Appellant has raised eight (8) issues on appeal. Our decision relating to the following
single issue, however, pretermits discussion of the remaining seven. That single dispositive issue
is:

       Did the Trial Court err in ruling that Appellee was not required to exhaust his
       administrative remedies before filing suit in Chancery Court?

                                     Preemption of State Law

         “It is well-settled that ERISA preempts state law claims that ‘relate to’ an ERISA
employee benefit plan.” Shackelford v. Cont’l Cas. Co., 96 F. Supp. 2d 738, 741 (M.D. Tenn.
2000). Although not initially realized by either party, and arguably still not fully recognized by
Appellee, “[t]he common law cause of action urged by [Appellee in his initial complaint] relates
to his employee benefit plan, and falls within ERISA’s express preemption clause.” James v.
Provident Nat’l Assurance Co., 865 S.W.2d 23, 24 (Tenn. Ct. App. 1993) (emphasis added).
ERISA “preempts all state laws relating to any employee benefit plan covered by ERISA.”
Campbell v. Precision Rubber Prods. Corp., 737 S.W.2d 283, 285 (Tenn. Ct. App. 1987) (citing
Shaw v. Delta Airlines, Inc., 463 U.S. 85 (1983). “ERISA’s broad preemption provision makes
it clear that Congress intended to establish employee benefit plan regulation as an exclusive
federal concern with federal law to apply exclusively, even where ERISA itself furnishes no
answer.” In re: White Farm Equip. Co., 788 F.2d 1186, 1191 (6th Cir. 1986). Accordingly, we
shall look to federal law in deciding the matter before us.




                                                -3-
                                       Standard of Review

        In the present case, the trial court granted Appellee’s motion for summary judgment on
the question of Appellant’s liability for medical expenses incurred by Appellee as a result of his
injuries occurring while covered under the Appellant’s employee benefits plan. Appellant asserts
that this grant of summary judgment was in error. In Bain v. Wells, 936 S.W.2d 618, 622 (Tenn.
1997), the Tennessee Supreme Court stated that

       [t]he standards governing an appellate court’s review of a motion for summary
       judgment are well settled. Since our inquiry involves purely a question of law, no
       presumption of correctness attaches to the lower court’s judgment, and our task is
       confined to reviewing the record to determine whether the requirements of Tenn. R.
       Civ. P. 56 have been met. Cowden v. Sovran Bank/Central South, 816 S.W.2d 741,
       744 (Tenn. 1991). Tenn. R. Civ. P. 56.03 provides that summary judgment is
       appropriate where: (1) there is no genuine issue with regard to the material facts
       relevant to the claim or defense contained in the motion, Byrd v. Hall, 847 S.W.2d
       208, 210 (Tenn. 1993); and (2) the moving party is entitled to a judgment as a matter
       of law on the undisputed facts. Anderson v. Standard Register Co., 857 S.W.2d
       555, 559 (Tenn. 1993). The moving party has the burden of proving that its motion
       satisfies these requirements. Downen v. Allstate Ins. Co., 811 S.W.2d 523, 524
       (Tenn. 1991). When the party seeking summary judgment makes a properly
       supported motion, the burden shifts to the nonmoving party to set forth specific facts
       establishing the existence of disputed, material facts which must be resolved by the
       trier of fact. Byrd, 847 S.W.2d at 215.

              The standards governing the assessment of evidence in the summary
       judgment context are also well established. Courts must view the evidence in the
       light most favorable to the non moving party and must also draw all reasonable
       inferences in the nonmoving party’s favor. Byrd, 847 S.W.2d at 210-11. Courts
       should grant a summary judgment only when both the facts and the inferences to be
       drawn from the facts permit a reasonable person to reach only one conclusion. Id.

Bain v. Wells, 936 S.W.2d at 622.

                            Exhaustion of Administrative Remedies

        Appellant asserts that Appellee’s failure to exhaust his administrative remedies under the
plan should have been fatal to his claim at the trial level, precluding a grant of summary
judgment for the Appellee. Appellee counters with the assertion that the plans “permissive
language” did not require him to exhaust such administrative remedies prior to filing suit. In its
order granting summary judgment the trial court stated that




                                                -4-
         [Appellant’s] assertion that [Appellee’s] claims should be barred by reason of his
         failure to exhaust administrative remedies is without merit. That, specifically, the
         Court finds that [the plan provision addressing administrative review] does not
         constitute an “administrative remedy” that must be followed by [Appellee] before
         legal action could be commenced. That, in other words, the Court finds that this
         provision is neither mandatory nor does it amount to an exclusive remedy that must
         have been availed by the [Appellee] prior to initiating legal proceedings.

It is true that “[p]ursuant to ERISA Section 502, a civil action may be brought by a participant or
beneficiary ‘to recover benefits due to him under the terms of his plan. . . .’” Parker v. Union
Planters Corp., 203 F. Supp. 2d 888, 893 (W.D. Tenn. 2002). This right is tempered, however,
by the fact that “the administrative scheme of ERISA requires a participant to exhaust his or her
administrative remedies prior to commencing suit.” Ravencraft v. UNUM Life Ins. Co. of Am.,
212 F.3d 341, 343 (6th Cir. 2000). While ERISA “does not expressly require exhaustion of
administrative remedies, federal case law has imposed this requirement upon claimants.” Turner
v. Reg’l Health Ctr. of Oak Ridge, Inc., No. 134, 1986 Tenn. App. LEXIS 3179, at *2-3 (Tenn.
Ct. App. July 29, 1986) (citing Amato v. Bernard, 618 F.2d 559 (9th Cir. 1980)).2

        Appellee states in his brief that “while exhaustion of administrative remedies is normally
required before filing a claim for benefits under an ERISA benefit plan, there are exceptions to
this requirement.” Appellee then goes on to state that “[o]ne such exception occurs when a plan
administrator denies a claim but the provisions of ERISA relative to such a denial are not
followed.”3 A thorough review of the record reveals that this exception was not addressed at the

         2
           Tennessee has long favored the exhaustion of administrative remedies. See Jon es v. City of N ashv ille, 279
S.W.2d 267, 283 (Tenn. 1955 ), where, in discussing the exhaustion doctrine, our Tennessee Supreme C ourt opined that
“this rule and doctrine favors the preliminary adm inistrative sifting process, for obvious reasons, before the courts are
appealed to[,]” and that “clearly the administrative processes open for one should be exhausted before the courts enter
into the picture. . . .” Id. at 284.

         3
           Traditional exhaustion principles also include an exception for instances “when resort to the administrative
route is futile or the remedy inadequate.” Am ato, 618 F.2d at 568. While Appellee does not expressly argue that either
of these exceptions are applicable here, he does state that “it is clear from the acts and conduct of the Plan Administrator
in arbitrarily and capriciously denying P laintiff’s claims in the first place. . . that requesting a review by the Plan
Administrator of its action s would have bee n a useless act.” Even if we co nstrue this a s an asse rtion that the futility
exception should apply in this case, such a conclusory statement does not justify Appellee’s failure to exhaust
administrative remedies, for

         [t]he standard for adjudging the futility of resorting to the administrative remedies provided by a plan
         is whether a clear and positive indication of futility can be m ade. See, e.g., Davis v. Featherstone,
         97 F.3d 734, 737 (4th Cir. 199 6); Lindemann v. Mobil Oil Corp., 79 F.3d 647 , 650 (7th Cir. 1996);
         Makar v. H ea lth Ca re Co rp . o f M id-Atlantic (Carefirst), 872 F.2d 80 (4 th Cir. 1989 ); Fizer v.
         Safeway Stores, Inc., 586 F.2d 182 (10th Cir. 1978). A plaintiff must show that “it is certain that his
         claim will be denied on ap peal, not m erely that he doubts that an appeal will result in a different
         decision.” Lindemann, 79 F.3d at 650. See Communications Workers of Am. v. AT&T, 309 U.S.
         App. D.C. 170, 40 F.3d 426 (D.C. Cir. 1994) (“The futility exception is . . . quite restricted and has
                                                                                                             (continued...)

                                                            -5-
trial level, however, and “[i]t is well-settled that issues not raised at trial may not be raised for the
first time on appeal.” State Dep't of Human Servs. v. Defriece, 937 S.W.2d 954, 960 (Tenn. Ct.
App. 1996). At the trial level, the only argument made by Appellee concerning the
administrative procedures to be followed by Appellee were those addressing the permissive
nature of the Plan provision at issue.4 Our review of the record fails to disclose any mention of
the adequacy of the Appellant’s denials. As arguments not raised at trial are deemed waived on
appeal, we refuse to now entertain Appellee’s claims concerning the sufficiency of the denial
provided him. See Devorak v. Patterson, 907 S.W.2d 815, 818 (Tenn. Ct. App. 1995).

        The question of the adequacy of the denials notwithstanding, Appellee insists that the
permissive language contained within the Plan gave him the choice to either seek administrative
remedies or, as he chose to do, forego them. Appellee’s assertion, however, is invalid under
established ERISA jurisprudence, the issue and effect of such permissive language having been
squarely addressed by the Sixth Circuit Court of Appeals in the case of Baxter v. C.A. Muer
Corp., 941 F.2d 451 (6th Cir. 1991).

        In Baxter, an employee “attended a party on [the employer’s] premises, became
intoxicated, and had an automobile accident while driving home.” Id. at 452. As in the present
case, “[a]n application to [the employer’s] employee health benefit plan for reimbursement of the
resultant medical expenses was denied.”5 Id. After an unsuccessful attempt to gain relief in state
court, the employee brought an ERISA action in federal district court. Id. The district court
granted summary judgment for the defendants based on an amendment to the Plan which
precluded recovery by the employee. Id. at 453. In addition, the district court “[a]s an
alternative holding, . . . ruled that [the employee] had failed to exhaust the appeal procedures
prescribed in the plan and that such exhaustion was a prerequisite to suit.” Id. On appeal to the
sixth circuit court of appeals, the employee argued that “[the employer] did not provide him with
a written denial of benefits, that the plan does not make the appeal process mandatory, that he did
not retain a lawyer until after the appeal time had passed, and that requiring exhaustion of



         3
          (...continued)
         been applied only when resort to administrative remedies is clearly useless.”) (quotations and citations
         omitted).

Fallick v. Nationwide Mut. Ins. Co., 162 F.3d 41 0, 419 (6th Cir. 1998).

         4
          Appellee also claims that he did not receive notice of the denials by the Plan administrator. This contention,
however, is without merit as the initial complaint notes that the catalyst for the underlying lawsuit was the receipt of such
denials.

         5
           The denial was ap parently based on a Plan amendment that “imposed primary liability for medical expenses
arising from injuries sustained in automobile accidents on insurers issuing the no-fault insurance policies . . . drivers
[were] required by state law to carry.” A plan beneficiary who failed to carry such insurance was precluded from
recovering for medical expenses under the plan. B axter failed to m aintain such no-fault cove rage. Baxter, 941 F.2d 451
at 452.

                                                            -6-
administrative remedies under ERISA plans is discretionary.” Id. at 454. In addressing the
employee’s contentions, the Baxter court stated the following:

                 We are not persuaded that the district court abused its discretion in requiring
         exhaustion of administrative remedies here. Whether or not [the employer] issued a
         written denial of benefits, [the employee] admits that he was notified that his claim
         was denied and that he could have sought administrative review of this denial. The
         fact that permissive language was used in framing the administrative review
         provision makes no difference. See Mason v. Cont’l Group, Inc., 763 F.2d 1219,
         1226 (11th Cir. 1985), cert. denied, 474 U.S. 1087, 88 L. Ed. 2d 902, 106 S. Ct. 863
         (1986), where the court rejected an argument that use of permissive language meant
         that the claimant was not required to avail himself of the review process before filing
         a federal suit. Finally, the fact that [the employee] did not retain a lawyer promptly
         does not relieve him of the exhaustion requirement. [The employee] admits both that
         he knew his request for medical benefits had been denied and that he had received
         a copy of the . . . plan outlining the review procedure. He could have pursued the
         review procedure without the assistance of a lawyer.

Id. (emphasis added). Thus, Baxter makes it clear that the permissive nature of the language of
the Plan does not excuse Appellee’s failure to exhaust his administrative remedies.

         Moreover, Appellee asserts that he submitted his medical and medically related expenses
to Appellant “on or about August 14, 1996, and within the time allowable by the Employee
Benefit Plan.” Appellee goes on to state that “he has now received notice from these Defendants
that his request for payment of the aforesaid medical and medically-related expenses has been
denied, allegedly based on paragraph 6 of the General Limitations portion of the Employee
Benefit Plan.” Appellee’s own exhibit in support of his initial complaint clearly shows, however,
that Appellee was aware of the denial of benefits as early as April 3, 1996, when he received a
bill for services related to the accident in question which clearly states that “[y]our insurance
company has notified us that these services are not covered under your policy.” A similar letter
was received from another service provider on May 14, 1996, which included an “attached
denial” from the plan administrator which clearly states that “the plan does not provide benefits
for this type of illness/injury - see the general limitations of your employee booklet for further
explanation.” From these exhibits it is clear that Appellee was on notice of the denial of his
claims well before he submitted his medical and medically related expenses to Appellant.6




         6
          W hile the trial court questioned Appellant concerning what specific information the denial contained, the
sufficiency of the notice provided Appellee was not raise d by A ppe llee at the trial level. W e, therefore, decline to rule
on the sufficiency of the no tice received by Ap pellee. The se exhibits make it clear, however, that Appellee was aware
of the denial of his claims irrespective of the propriety of such notice.

                                                            -7-
        The Employee Benefit Plan, which Appellee obviously possessed at the time of filing the
complaint7, provides that “[i]f denial of a claim is received, the employee may request a review
by filing a written request with the Plan Administrator within sixty (60) days of the date the
employee received the denial.”8 Appellee, although having received notice of denial via the
aforementioned bills, failed to meet this deadline. Accordingly, as in Baxter, “[Appellee] admits
both that he knew his request for medical benefits had been denied and that he had received a
copy of the . . . plan outlining the review procedure. He [too] could have pursued the review
procedure without the assistance of a lawyer.” Baxter, 941 F.2d 451 at 454.

         Appellee further contends that another section of the Plan gives him the right to seek a
judicial remedy without exhausting his administrative remedies. The Plan provision which
Appellee refers to states that “[i]f you are improperly denied a benefit in full or in part, you have
a right to file suit in a federal or state court.” To accept Appellee’s argument that this provision
negates the requirement that an employee exhaust his administrative remedies would totally
defeat the announced purpose behind the requirement and eviscerate the federal case law
requiring such exhaustion of remedies.9 The purpose underlying the exhaustion requirement was
discussed in Baxter, where the court stated:

                 In Miller v. Metro. Life Ins. Co., 925 F.2d 979, 986 (6th Cir. 1991), we
         noted that “the administrative scheme of ERISA requires a participant to exhaust
         his or her administrative remedies prior to commencing suit in federal court.”
         Makar v. Health Care Corp. of Mid-Atlantic, 872 F.2d 80 (4th Cir. 1989), is to
         the same effect. The Makar court explained that although ERISA does not
         explicitly require exhaustion, ERISA does require benefit plans to provide internal
         dispute resolution procedures–and

                     Congress’ apparent intent in mandating these internal claims
                     procedures was to minimize the number of frivolous ERISA
                     lawsuits; promote the consistent treatment of benefit claims;
                     provide a nonadversarial dispute resolution process; and decrease
                     the cost and time of claims settlement. It would be ‘anomalous’ if
                     the same reasons which led Congress to require plans to provide
                     remedies for ERISA claimants did not lead courts to see that
                     those remedies are regularly utilized. Id. at 83.



         7
             Appellee quotes directly from the Plan in his co mplaint.

         8
       This portion of the Plan is quoted in A ppe llee’s resp onse to Appellant’s motion for summary judgment, filed
November 3, 1998.

         9
          As of 1998, “due to ERISA's provision for the administrative review of benefits, ten federal circuits [had] read
an exhau stion of administrative remed ies requirement into the statute.” Fallick v. Nationwide Mut. Ins. Co., 162 F.3d
410, 418 (6 th Cir. 1998).

                                                            -8-
Baxter, 941 F.2d 451 at 453 (emphasis added). In short, to allow an employee “[t]o make every
claim into a federal [or state] case would undermine the claim procedure contemplated by the
Act.”10 Costantino v. TRW, Inc., 13 F.3d 969, 974 (6th Cir. 1992) (citing Challenger v. Local
Union No. 1 of Int'l Bridge, 619 F.2d 645, 649 (7th Cir. 1980)).

                                                     Conclusion

       For the foregoing reasons, we reverse the trial court’s grant of summary judgment to the
Appellee. In addition, we dismiss the Appellee’s claim, with prejudice, for failure to exhaust his
administrative remedies. The cost of this appeal is taxed to the Appellee, Michael G. Cantrell.




                                                                 ___________________________________
                                                                 DAVID R. FARMER, JUDGE




         10
            Appellee, in support of his argument that exhaustion should not be required, cites the unpublished opinion
of Clark v. Metropolitan Life Ins. Co., No. 94-3840, 1995 U.S. App. LEXIS 35940, at *1 (6 th Cir. O ct. 5, 19 95). Clark
construes certain language within the plan as giving the employee the option, once his claim is denied, to seek a judicial
remedy without first resorting to the administrative remedies provided for in the P lan. For the reasons announced in this
opinion, we find that the holding o f Baxter, a published opinion, that administrative remedies must be exhausted prior
to seeking a judicial remedy, is the more sound decisio n as it better effectua tes the go als of ERISA and compo rts with
Tennesse e’s strong preference for exhaustion of such remedies. Acco rdingly, we cho ose to follow that line of federal
case law requiring the exhaustion of administrative remedies absent clear futility or inadequacy of the remedy such
administrative channels provide.

                                                           -9-
