Moise Vasseur v. Halliburton Co., and Halliburton Co. Retirees Medical Plan

Citations: 950 F.2d 1002; 1992 U.S. App. LEXIS 72; 1992 WL 746Docket: 90-4861

Court: Court of Appeals for the Fifth Circuit; January 3, 1992; Federal Appellate Court

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Moise Vasseur, a retired Halliburton employee, initiated an ERISA lawsuit to secure reimbursement for medical expenses incurred by his son, Gregory, who suffered severe injuries in a motorcycle accident. The district court ruled that Halliburton's plan administrator acted arbitrarily in denying coverage for treatment at Tangram Rehabilitation Network and that the plan had no right to subrogation for third-party payments. However, the appellate court found that the district court misinterpreted the plan’s definition of “hospital” to include Tangram, resulting in the reversal of that part of the judgment. The court also vacated the dismissal of Halliburton's counterclaim for subrogation as premature and modified the declaration regarding Gregory's entitlement to future benefits. Additionally, the award of attorneys' fees was vacated. Halliburton's medical plans, effective since 1980 for employees and since 1981 for retirees, have undergone various amendments and are governed by ERISA. Gregory, as a dependent, became eligible for coverage upon Moise's retirement in June 1983. The plans explicitly require that covered facilities be licensed hospitals, a stipulation that was not present in earlier plans. The 1986 and 1987 plans grant the plan administrator final authority to interpret plan terms.

Gregory filed claims for medical expenses resulting from a February 1983 accident, which were paid by the plan from 1983 to 1986. However, claims for treatment at Tangram were denied by the plan administrator, citing that Tangram was not considered a hospital under the plan and that the plan excluded coverage for custodial care, occupational therapy, exercise programs, and educational evaluations. The plan in effect at the time of the accident lacked a subrogation provision, though subsequent plans included such clauses with significant modifications in 1987.

Initially, Vasseur sought a declaratory judgment in state court, which was removed to district court by Halliburton. The plan was joined in the action and counterclaimed for subrogation of benefits paid. The court ruled in favor of Vasseur, awarding him the costs incurred at Tangram and attorneys' fees, while dismissing the plan's subrogation counterclaim. Halliburton and the plan appealed, arguing that the district court erred in several respects: including Tangram as a covered hospital under the 1987 plan, finding the plan administrator's decisions arbitrary and capricious, denying the plan's subrogation rights, recognizing Halliburton as an ERISA fiduciary, and awarding attorneys' fees.

The Supreme Court's decision in Firestone Tire and Rubber Co. v. Bruch established that benefit denials should be reviewed under a de novo standard unless the plan grants the administrator discretionary authority. In this case, the plan conferred discretion on the administrator, necessitating an arbitrary and capricious standard of review. The district court held that the 1987 plan's amendment clause protected claims prior to its amendment, allowing Gregory to utilize the less restrictive definition of "hospital" from the earlier plan, which included Tangram. Halliburton and the plan contested this ruling, asserting that the 1987 plan's amendment clause did not apply to Gregory’s claim and that the earlier plan's definition had been altered before the accident and Tangram charges were incurred. The court agreed with Halliburton and the plan's position.

ERISA governs two types of employee benefit plans: employee welfare benefit plans and employee pension benefit plans, with this case focusing on the former. An employee welfare benefit plan is defined as a program maintained by an employer to provide medical benefits to participants or their beneficiaries. Unlike pension plans, ERISA does not mandate that welfare plan benefits vest or be maintained at a specific level, allowing employers flexibility to modify benefits unless they have made a contractual commitment to do otherwise. 

The district court wrongly determined that the plan administrator acted arbitrarily by relying on the 1986 plan. ERISA's lack of vesting requirements means Gregory was not entitled to benefits based on earlier plan language. The applicable plan at the time of Gregory's accident was the modified 1981 plan, which defined hospital coverage more restrictively than the 1980 plan. The 1987 plan did not retroactively create rights not available in previous plans. 

The claim under the 1986 plan defined incurred charges based on when services were rendered. The administrator’s decision to apply the 1986 plan was valid, as Tangram did not meet the definition of a hospital under that plan. The court incorrectly referenced the 1980 plan's definition of a hospital, which had been amended. Vasseur acknowledged that Tangram was not licensed as a hospital in Texas, and the 1980 plan's less restrictive rules were no longer applicable. As a result, the plan administrator acted properly in denying coverage for treatment at Tangram. The district court's judgment awarding expenses for Vasseur's treatment is reversed, and judgment is rendered in favor of the appellants.

Subrogation rights were dismissed by the district court due to the plan's insertion of the clause after Gregory's accident and medical claims arose, which was deemed prejudicial to Vasseur's claim. The 1987 plan provision limiting amendments does not retroactively prevent the assertion of subrogation rights that arose upon payment of benefits. Discrepancies exist regarding when the subrogation clause was included in the plan, with indications that it was part of the 1984 plan, necessitating a clarified record for proper adjudication. The district court's dismissal of the subrogation counterclaim was vacated and remanded for further proceedings.

Regarding fiduciary status, Halliburton was confirmed as an ERISA fiduciary. Vasseur did not claim breach of fiduciary duty but sought reimbursement for charges from Tangram. The plan administrator's refusal to pay these charges was not deemed arbitrary or capricious, rendering the fiduciary status of Halliburton moot.

On attorneys' fees, 29 U.S.C. § 1132(g)(1) allows courts discretion in awarding reasonable fees in ERISA actions. Factors established in Iron Workers Local No. 272 v. Bowen indicate that awarding fees to Vasseur was improper, and thus the district court's award was vacated.

The district court ruled that Gregory was entitled to a lifetime maximum benefit of $500,000, a limit established in 1987 for covered dependents. Halliburton contended that this declaration was erroneous, citing that ERISA allows plan terms to be modified unless explicitly stated otherwise. The case raises the question of whether the plan provided any restrictions on modifications to lifetime maximum benefits.

Gregory is likely to incur ongoing medical treatment expenses, but the court's statement that he is entitled to a maximum benefit of $500,000 under dependent coverage may be overly broad regarding future rights. Gregory could qualify for the 1987 plan's increased lifetime maximum if he continues to incur covered medical expenses related to his prior 1983 claim. Vasseur, Gregory’s representative, has consistently paid plan costs since the 1987 provisions were added, which could make Gregory eligible for benefits under those terms. The extent of these benefits remains uncertain as the plan has not yet covered expenses exceeding the initial maximum limit. The plan administrator has not interpreted the relevant amendment provisions, leaving it unclear whether future claims related to Gregory's 1983 injury will be treated as pre-amendment claims. If so, Gregory's right to reimbursement would be protected under the limited amendment language, independent of ERISA. The court finds that declaratory relief on Gregory's future benefits is premature. Consequently, the judgment awarding benefits for treatment at Tangram is reversed, with the case remanded for further determination of the plan's entitlement to relief, and previous decisions regarding attorneys' fees and Gregory's future benefits are vacated. The relevant legal framework includes Section 1132(a)(1)(B) of ERISA, which allows a plan participant to seek recovery of benefits and clarification of rights under the plan. A brief chronology outlines the progression of the Halliburton Group Medical Plan and key changes affecting Gregory's claims.