Jin Zhou v. Guardian Life Insurance Company of America

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 02-1074
J IN Z HOU ,
Plaintiff-Appellant,
v.
G UARDIAN L IFE I NSURANCE C OMPANY OF A MERICA ,
Defendant-Appellee.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 01-C-4816—Ronald A. Guzmán, Judge.
____________
A RGUED M AY 30, 2002—D ECIDED J ULY 1, 2002
____________
Before F LAUM , Chief Judge, and H ARLINGTON W OOD , J R .,
and M ANION , Circuit Judges.
F LAUM , Chief Judge. Jin Zhou, a licensed chiropractor,
treated Arleen Baker from June to October of 2000. Baker
participated in an insurance plan for which Guardian Life
Insurance Co. of America (“Guardian”) administered the
claims. Baker assigned Zhou the right to receive payment
from Guardian. That is, rather than bill Baker directly,
Baker permitted Zhou to submit the costs of his treatment
directly to Guardian. When Guardian denied full payment
of these claims, Zhou filed suit. The district court dismissed
Zhou’s claims because he failed to exhaust his administra-
tive remedies and, alternatively, because the rights Bak-

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2 No. 02-1074
er attempted to assign were unassignable. For the reasons
stated below, we affirm the district court’s decision.
I. BACKGROUND
From June 13, 2000 to October 27, 2000, Zhou saw Baker
in his office over thirty times. Baker assigned her reim-
bursement rights under her healthcare plan (“the Plan”)
to Zhou, who submitted a bill to Guardian for the ser-
vices he rendered during the above period. Guardian, in
turn, forwarded Zhou’s record of treatments to an indepen-
dent medical review consultant. The consultant determined
that, after September 9, 2000, Baker required only one of-
fice visit for chiropractic treatment per week. On October
27, 2000, based upon this report, Guardian determined that
the claims submitted by Zhou exceeded what was medically
necessary and partially denied payment. However, Guard-
ian invited Zhou to submit additional documentation and
to request further review of its claim decision.
On December 19, 2000, after some correspondence and
telephone contact between the parties, Zhou filed an appeal
of Guardian’s partial denial of benefits. In this letter, Zhou
claimed that the procedural notice afforded to him by
Guardian was inadequate under the Employee Retirement
Income Security Act (“ERISA”) because, inter alia, “it
fail[ed] to provide the specific reason or reasons for deni-
al and the specific reference to pertinent documents on
which the denial is based.” In addition, Zhou requested that
Guardian provide him with Plan documents, the names
of Guardian employees who reviewed his claim, as well
as all internal Guardian communications pertaining to
his file. On April 4, 2001, Zhou sent a second letter, reit-
erating his request for certain documents. Guardian ac-
knowledged receipt of Zhou’s appeal and request for in-
formation on April 30, 2001. In its correspondence to Zhou,

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No. 02-1074 3
Guardian indicated that his appeal (and his requests for
information) would be reviewed by Guardian’s legal depart-
ment.
On June 6, 2001, Guardian issued its response to Zhou’s
appeal and request for information. In this response,
Guardian stood by its partial denial of benefits—citing
a report from a second medical consultant who confirmed
that the number of treatments given by Zhou to Baker
exceeded medical necessity. With respect to Zhou’s requests
for information, Guardian told him that it was not the Plan
sponsor, or Plan fiduciary. Rather, Guardian identified it-
self as a fiduciary only with respect to the processing and
payment of claims. According to Guardian, Zhou was re-
quired to seek the governing Plan documents from the
actual Plan sponsor. In addition, Guardian flatly refused
to identify the individuals who participated in the re-
view and partial denial of Zhou’s claim or to release any
internal Guardian communications. Lastly, Guardian in-
vited Zhou to pursue a further appeal of its decisions.
Zhou declined to pursue further administrative appeals
and instead, on June 25, 2001, filed suit. In his complaint,
Zhou alleged two separate theories of recovery under
ERISA. First, Zhou sought to recover payment of benefits.
Next, Zhou claimed that, in failing to release Plan docu-
ments, Guardian violated ERISA’s disclosure and reporting
requirements.
Guardian moved to dismiss Zhou’s complaint on two
principal grounds: that he failed to exhaust his administra-
tive remedies by pursuing further appeals and that, as a
third-party assignee of benefits, he lacked standing to bring
suit. The district court granted Guardian’s motion, stating
that Zhou’s complaint merited dismissal on both grounds.
This appeal has ensued.

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4 No. 02-1074
II. DISCUSSION
At the outset, we need not reach the issue of whether
Zhou lacks standing to bring suit under the Plan as a third-
party assignee of benefits. Instead, this case may be re-
solved solely on exhaustion grounds.
As a pre-requisite to filing suit, an ERISA plaintiff must
exhaust his internal administrative remedies. Doe v. Blue
Cross & Blue Shield United of Wisc., 112 F.3d 869, 873 (7 th
Cir. 1992). This requirement furthers the “goals of minimiz-
ing the number of frivolous lawsuits” and enables the
preparation of a more complete factual record for judicial
review. Gallegos v. Mt. Sinai Medical Center, 210 F.3d
803, 807-08 (7 th Cir. 2000). Accordingly, we review a dis-
trict court’s decision to dismiss a complaint on exhaustion
grounds for an abuse of discretion. See, e.g., Shawnee Trail
Conservancy v. U.S. Dept. of Agriculture, 222 F.3d 383, 389
(7 th Cir. 2000). A party appealing under this standard bears
a heavy burden, for “a decision constitutes an abuse of
discretion when it is not just clearly incorrect, but down-
right unreasonable.” Cincinnati Ins. Co. v. Flanders Elec.
Motor Svc., 131 F.3d 625, 628 (7 th Cir. 1997). We find that
the district court did not abuse its discretion in dismissing
Zhou’s complaint.
Zhou admits that he did not exhaust his administrative
remedies and pursue further administrative appeals of the
partial denial of his claim. Perhaps in an effort to cure
this defect, Zhou now claims that he was excused from
exhaustion by the alleged futility of further appeal. There
is indeed an exception to the exhaustion requirement when
further administrative appeal is futile. See Lindeman v.
Mobil Oil Corp., 79 F.3d 647, 650 (7 th Cir. 1996). However,
for a party to come within the futility exception, he “must
show that it is certain that [his] claim will be denied on
appeal, not merely that he doubts that an appeal will result
in a different decision.” Id. Save for bald allegations and

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No. 02-1074 5
conclusory statements, Zhou has proffered no facts that
would lead this court to find that it was a certainty that
further administrative appeal would result in a denial of his
claim. When a party has proffered no facts indicating that
the review procedure that he initiated will not work, the
futility exception does not apply. See, e.g., Talamine v.
Unum Life Ins. Co. of America, 803 F. Supp. 198, 201 (N.D.
Ill. 1992).
In light of Zhou’s failure to support his assertions that
further administrative appeal would have been futile, and
the deferential standard of review that we must exercise,
the district court’s opinion is AFFIRMED .
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-97-C-006—7-1-02

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