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March 17, 1996

FRANK A. TROIKE, et al., Defendants.

The opinion of the court was delivered by: SHADUR

 This action was originally brought by Mary and Donald Olson (collectively "Olsons") in the Circuit Court of Cook County against Frank Troike ("Troike"), Alfred Jensen ("Jensen"), John Tiernan ("Tiernan"), Michael Cronin ("Cronin") and Richard Ugolini ("Ugolini") in their capacity as trustees (collectively "Trustees") of the Central Steel & Wire Company Medical Plan (the "Plan"). Olsons seek a declaration of health insurance coverage and the payment of medical bills incurred as a result of a motorcycle accident in which Donald sustained injuries. Because this action involves an employer-sponsored welfare benefit plan, it necessarily implicates the Employee Retirement Income Security Act of 1974 ("ERISA," 29 U.S.C. §§ 1001-1461), thus supporting Trustees' removal of the case to this District Court.

 Both sides have now moved for summary judgment under Fed. R. Civ. P. ("Rule") 56. They have complied with General Rule ("GR") 12(M) and 12(N) that this District Court has adopted to facilitate the resolution of Rule 56 motions, under which the litigants must respectively submit factual statements in support of and in opposition to such motions. *fn1" With the cross-motions now being fully briefed, the issues are ready for decision. Although both motions must be denied for the reasons set forth in this memorandum opinion and order, this action is remanded to Trustees and dismissed without prejudice so that Trustees may deal with Olsons' claim appropriately.

 Summary Judgment Standards

 Under familiar Rule 56 analysis, a party seeking summary judgment bears the burden of establishing the lack of a genuine issue of material fact ( Celotex Corp. v. Catrett, 477 U.S. 317, 324, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986)). This Court is called upon to draw inferences in the light most favorable to the non-moving party, but it is "not required to draw every conceivable inference from the record--only those inferences that are reasonable ( Bank Leumi Le-Israel, B.M. v. Lee, 928 F.2d 232, 236 (7th Cir. 1991) and cases cited there). Where as here cross-motions for summary judgment are involved, these principles require the Court to take a dual perspective--one that this Court has frequently described as Janus-like. In this instance that problem does not exist, for the underlying facts are not in dispute--instead the parties are at odds only about whether as a matter of law Trustees properly exercised their duties as administrators of the Plan.


 Central Steel & Wire Company ("Central Steel") has established the Plan as a self-funded group health plan administered by Trustees pursuant to Article III of the Central Steel Health Plan Trust Agreement ("Trust Agreement" or, where a specific provision is being cited, "TA")(T. 12(M) P1). At all times relevant to this litigation Mary was an employee of Central Steel and a participant in the Plan. Mary's husband Donald was covered by the Plan as a "dependent" (T. 12(M) P2).

 At about 1 p.m. on July 3, 1995 Donald was brought to the Christ Hospital and Medical Center ("Christ Hospital") emergency room after being involved in a single-vehicle motorcycle accident (T. 12(M) P6; Complaint P3(C)). As a result of the accident Donald suffered a tear in his right upper eyelid and a fractured vertebra (T. App. 62, 77). Donald remained hospitalized until July 11 and accumulated more than $ 35,000 in medical bills (T. App. 74; O. 12(N) P9; Complaint P5).

 At 6:22 p.m. on July 3 a toxicology report was taken, reflecting Donald's blood alcohol level to be .235 mL/dL (T. 12(M) P7), *fn2" or nearly 2 1/2 times the then-existing Illinois level of legal intoxication. *fn3" That same report also indicated the presence of THC in Donald's system, suggesting that Donald had previously used marijuana (T. 12(M) P7; O. 12(N) P7). On July 5, while Donald was still hospitalized, Dr. John Olivieri was called in for a consultation to take place the next day regarding Donald's chemical dependency (T. App. 20). Dr. Olivieri's July 6 notes as to that consultation recite Donald's .235 mL/dL alcohol content, his positive test for marijuana and the fact that Donald had "apparent DT's [delirium tremens] with withdrawal" (id.). Dr. Olivieri treated Donald on July 6, 7 and 10, and he later diagnosed Donald with Alcohol Dependency and Alcoholic Psychosis, as those terms are defined by the diagnosis codes on Donald's Health Insurance Claim Form covering Dr. Olivieri's services (T. 12(M) P9; O. 12(N) P9; T. App. 21). Dr. Olivieri charged $ 227 for those services (id.).

 Olsons submitted claims under the Plan for all of the expenses incurred as a result of Donald's hospitalization and follow-up treatment. On October 24, 1995 Trustees wrote Mary a letter denying Olsons' claims in their entirety (T. App. 155). Trustees based that denial on exclusions contained in Plan § 11.1, which provides in pertinent part (T. App. 136-37):

No benefits will be provided...with respect to:
(m) Expenses incurred in connection with the treatment of either alcoholism, drug addiction or both.
(n) Expenses incurred in connection with the treatment of a condition caused by alcoholism, drug addiction or the illegal use of drugs.

 Then on February 2, 1996 Trustees wrote a letter denying Olsons' appeal from that denial--they concluded on reviewing the record before them (T. App. 157-58):

Mr. Olson's injuries are the direct result of the excessive use of alcohol (a classic manifestation of alcoholism) and/or the use of illegal drugs. Thus, the Board concludes that Mr. Olson's medical claims were expenses incurred to treat a condition caused by alcoholism, drug addiction or the illegal use of drugs. *fn4"

 This action followed.

 Standard of Review

 Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 103 L. Ed. 2d 80, 109 S. Ct. 948 (1989) is the seminal case defining the standards for reviewing ERISA determinations by plan fiduciaries such as Trustees:

As this case aptly demonstrates, the validity of a claim to benefits under an ERISA plan is likely to turn on the interpretation of terms in the plan at issue. Consistent with established principles of trust law, we hold that a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.

 And Morton v. Smith, 91 F.3d 867, 870 (7th Cir. 1996) (citations omitted) has recently elaborated on Firestone, identifying just how the appropriate judicial standard of review is to be gleaned from an ERISA benefits plan:

We have previously held that Firestone did not establish a single standard for reviewing the discretionary decision-making of plan fiduciaries. Rather, Firestone presented a "smorgasbord of possibilities" for standards of review. The extent of discretion determines the extent of judicial deference. When fiduciaries have the discretion to make "reasonable" interpretations of a plan, their decisions are reviewed according to the familiar abuse-of-discretion standard. A decision constitutes an abuse of discretion when it is "not just clearly incorrect but downright unreasonable." When fiduciaries are bound to interpret the plan under the broad standard of good faith, their discretion is even more extensive, and judicial review is even more deferential. Courts will then examine the exercise of this degree of discretion to determine whether it is arbitrary and capricious.

 In this instance TA Art. III, § 2 (reproduced at T. App. 150) plainly commits Trustees to the exercise of "good faith" in construing the Plan and Trust Agreement:

Section 2. Delivery of the Plan to the Trustees. The Company shall deliver to the Trustees a copy of the Plan and of each amendment thereto. The Trustees shall have the power to construe this Trust Agreement, the Plan and the terms used herein, and any construction adopted by the Trustees in good faith shall be binding upon the Company, Participants, Beneficiaries and any other person or persons dealing with or having any claims arising out of or with respect to the Trust or Plan.

 Hence Morton requires that this Court review Trustees' denial of Olsons' claim under the "arbitrary and capricious" standard.

 By way of a parenthetical observation on that score, it is worth noting that the earlier quotation from Firestone, 489 U.S. at 115 identified two categories of discretionary authority that, if granted to ERISA trustees, replace de novo review with a dramatically lessened level of judicial scrutiny: (1) discretion "to determine eligibility for benefits" and (2) discretion "to construe the terms of the plan." Every careful lawyer who drafts a plan or trust agreement post-Firestone might then be expected to echo that language to provide the greatest leeway for the plan's fiduciaries. But oddly enough TA Art. III, § 2 speaks only in terms of allowing Trustees the second type of discretion and is wholly silent as to the first. That distinction has not been picked up by Olsons' counsel as a possible predicate for any sharper scrutiny of Trustees' factual determinations--indeed, their counsel concedes at O. Mem. 2 that "the language of the Health Plan" permits review only under "the so-called deferential or arbitrary and capricious standard of review." This opinion has thus reviewed Trustees' decision in its entirety under the arbitrary and capricious standard, without expressing any ultimate view as to whether plan documents that are drafted (as here) in a more limited fashion than permitted under Firestone may call for a sharper look at what the plan fiduciaries have done in the unmentioned area--that question may await another day.

 To return to the situation here, Olsons--although conceding that the language of the Trust Agreement would ordinarily require application of the deferential "arbitrary and capricious" standard (Olson Mem. 2)--suggest two reasons for more exacting scrutiny in this case. Each of those suggestions, however, must be quickly dispatched in light of firmly established principles of ERISA law in this Circuit.

 First, Olsons argue that Trustees' positions as directors and executive officers of Central Steel (held concurrently with their positions as Plan Trustees) create a "patent conflict of interest" that should minimize the deference paid to their decisions as Trustees. *fn5" Because the Plan is self-funded--in part by cash injections from Central Steel's general corporate funds--Olsons suggest that Trustees were predisposed to deny their health benefit claim to minimize corporate expenditures. But that line of reasoning was rejected in Gallo v. Amoco Corp., 102 F.3d 918, 921 (7th Cir. 1996) (citations omitted and adapted to this case):

To give a plan administrator such power [discretion to interpret the plan], when the administrator is the employer, may seem a case of putting the fox in charge of the henhouse. Although the employer cannot appropriate the plan's assets directly, the fewer the benefits paid out the likelier the plan is to become overfunded, in which case the employer can reduce his contributions; and if the plan is terminated, assets not required to satisfy the participants' claims can be recaptured by the employer. But that is not the whole picture. Retirement benefits are a valued component of total compensation, so that the ...

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