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Your ERISA Watch – Healthcare Providers Lack Standing Due to Enforceable Anti-assignment Clause in ERISA-governed Plans

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This week’s notable decision is Howard Bloom, D.C. v. Independence Blue Cross et al., No. CV 14-2582, __F.Supp.3d__, 2018 WL 5275227 (E.D. Pa. Oct. 24, 2018), a case challenging the enforceability of anti-assignment clauses in ERISA-governed health insurance plans.  Unfortunately for the healthcare providers, since the Third Circuit took up and decided this issue in Am. Orthopedic & Sports Med. v. Indep. Blue Cross, 890 F.3d 445 (3d Cir. 2018), district courts within the Third Circuit have been enforcing these anti-assignment clauses.  The fate of Plaintiffs here is no different.  The court agreed with Defendants and found that the providers do not have standing to bring ERISA claims.

First, the providers do not have direct standing to bring ERISA claims because they are neither participants nor beneficiaries under ERISA.

Second, the providers may have acquired derivative standing to sue under ERISA via an assignment of rights from patients who were participants under Defendants’ member plans but the anti-assignment clauses in the plans means that the plan participants couldn’t have transferred their standing to the providers in the first place.

The anti-assignment clause at issue states: The right of a Covered Person to receive benefit payments under this coverage is personal to the Covered Person and is not assignable in whole or in part to any person, Hospital, or other entity nor may benefits of this coverage be transferred, either before or after Covered Services are rendered. However, a Covered Person can assign benefit payments to the custodial parent of a Dependent covered under the Booklet/Certificate, as required by law.

American Orthopedic made clear that “anti-assignment clauses in ERISA-governed plans are enforceable and waivable only by a clear, unequivocal, and decisive act.”  The court found that American Orthopedic governs the dispute here and the providers did not have either the right to receive payments or the right to sue under ERISA.  Defendants did not waive their right to enforce the anti-assignment clause through their course of dealing.  Specifically, Defendants’ continued direct payment for disputed services or their pre-confirmation of coverage did not constitute waiver.

The court granted Defendants’ motion for summary judgment.  The court dismissed the ERISA claims and declined to exercise supplemental jurisdiction over the remaining state law claims.

Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.

Attorneys’ Fees

Fifth Circuit

Weiner v. Blue Cross and Blue Shield of Louisiana, No. 3:2017cv00949, 2018 WL 5279316 (N.D. Tex. Oct. 24, 2018) (Magistrate Judge David L. Horan).  The court previously determined that Dr. Weiner has no right to sue BCBSLA for the claims brought in this lawsuit because of an anti-assignment prohibition in the health benefit plan and that BCBSLA did not abuse its discretion in denying coverage.  The court granted in part BCBSLA’s motion for attorney’s fees.  Notably, the court factored in the fact that BCBSLA sought an early settlement and offered Plaintiff a monetary amount in the settlement that was multiples of the amount of benefits Plaintiff placed at issue and he refused the settlement.  The court also found that the claimed rates of $385.00 and $275.00 per hour are reasonable and within the market rate for attorney handling this type of litigation in the Dallas area of these attorneys’ experience level.

Ninth Circuit

White v. The Senior Leaders Severance Pay Plan of Danaher Corporation and Its Affiliated Companies, No. 217CV03476ODWJCX, 2018 WL 5304771 (C.D. Cal. Oct. 22, 2018) (Judge Otis D. Wright).  The court previously granted summary judgment to Defendant on Plaintiff’s claim for denied severance benefits.  The court denied its subsequent motion for attorneys’ fees after considering the Hummell factors.  Plaintiff did not bring his lawsuit in bad faith so there would be no deterrence.  There is no dispute Plaintiff could satisfy a fee award but this factor and the “benefit to all plan participants” factor is neutral.  The only factor in favor of a fee award is the relative merits of the parties’ position.

Breach of Fiduciary Duty

Third Circuit

Procter & Gamble U.S. Bus. Servs. Co. on Behalf of Procter & Gamble Profit Sharing Tr. & Employee Stock Ownership Plan v. Procter & Gamble U.S. Bus. Servs. Co. on Behalf of Procter & Gamble Profit Sharing Tr. & Employee Stock Ownership Plan, No. 3:17-CV-00762, 2018 WL 5113169 (M.D. Pa. Oct. 19, 2018) (Judge A. Richard Caputo).  In this messy interpleader action over the proper beneficiary to the decedent’s savings plans’ benefits, the court granted the Estate’s proposed amendment for its counterclaim against P&G for breach of its fiduciary duties for failing to disclose material information to the deceased plan participant concerning his beneficiary designations.  The amendment is not futile because there are documents that could show P&G did not provide affirmative or even unambiguous notice of the participant’s beneficiary elections.

Fourth Circuit

Self Insured Services Company v. Panel Systems, Inc., No. 3:18-CV-400 (DJN), 2018 WL 5260025 (E.D. Va. Oct. 22, 2018) (Judge David J. Novak).  Panel Systems delegated authority to Plaintiff SISCO to act as the independent fiduciary and plan administrator of Panel Systems’ self-insured health plan.  SISCO sued Panel Systems for indemnity for its costs, expenses, damages and attorney’s fees arising out of a separate action where it had initially denied coverage for medical benefits.  Panel Systems filed a counterclaim seeking damages for SISCO’s alleged breach of fiduciary duties, including attorney’s fees Panel Systems paid in the other lawsuit.  The court granted judgment to SISCO on the counterclaim because the attorneys’ fees it paid are not losses to the Plan.  Without losses to the Plan, ERISA does not provide the vehicle through which Panel Systems may obtain its desired relief.

Ninth Circuit

Cave v. Delta of California, No. 18-CV-01205-WHO, 2018 WL 5292059 (N.D. Cal. Oct. 23, 2018) (Judge William H. Orrick).  The court granted dismissal of Plaintiff’s breach of fiduciary duty claims under Section 502(a)(2) and 502(a)(3), finding that there is no viable claims under those provisions where the gravamen of Plaintiff’s complaint is that her dentist fraudulently recommended crowns on two teeth, Delta Dental paid for the submitted claims without analyzing the x-rays, and she suffered unnecessary pain and suffering as a result.

Class Actions

First Circuit

Tracey v. MIT, No. CV 16-11620-NMG, 2018 WL 5114167 (D. Mass. Oct. 19, 2018) (Judge Nathaniel M. Gorton).  In this case, alleging excessive recordkeeping fees and imprudent investment lineups for the MIT defined contribution plan, Defendants do not oppose class certification with respect to the claims of excessive recordkeeping fees but they do challenge the separate claim regarding the prudence of the Plan’s investment lineup.  The court granted Plaintiff’s motion for class certification.  The court found no substantial intra-class conflict in the proposed class because the crux of this case hinges on whether defendants acted imprudently with respect to the Plan and not the investments of individual participants.

Sixth Circuit

Cassell, et al. v. Vanderbilt University, et al., No. 3:16-CV-2086, 2018 WL 5264640 (M.D. Tenn. Oct. 23, 2018) (Judge Chenshaw).  In this case alleging breach of fiduciary duties with respect to the Vanderbilt University Retirement Plan and the Vanderbilt University New Faculty Plan, the court granted class certification of all participants and beneficiaries of the Plan, excluding Defendants, from August 10, 2010, through the date of any judgment in this case. The court appointed Schlichter, Board & Denton LLP as class counsel.


Sixth Circuit

Canter v. Ankermes Blue Care Elect Preferred Provider Plan, et al., No. 1:17-CV-399, 2018 WL 5289033 (S.D. Ohio Oct. 24, 2018) (Magistrate Judge Karen L. Litkovitz).  The court found that Plaintiff alleged a factual foundation of bias entitling him to discovery because BCBS has an inherent conflict of interest.  The court granted Plaintiff’s motion to compel in part.  Defendant has to respond to Interrogatories seeking: request for citation to Plan provision, request to identify every element of the claims investigation, citations to plan/certificate of insurance provisions, request for information related to appeal, information related to authorization requirement and designation as a “high dollar claim;” information on entity known as “MCMC;” and billing amount discrepancies.  Defendant also has to produce documents relating to:  administrative procedures, policy or guidance regarding BCBS’s appeal program, classification of “high dollar cases,” contracts with MCMC, and how services are billed.

Medical Benefit Claims

Fourth Circuit

Palmetto Health v. Nucor Corp. Grp. Health Plan, No. 3:17-CV-2807-RMG, 2018 WL 5300187 (D.S.C. Oct. 25, 2018) (Judge Richard Mark Gergel).  The court granted judgment to the self-funded health plan.  The court determined that the Plan’s decision to deny payment of medical expenses for the participant’s motorcycle accident, which occurred while he was intoxicated, is supported by the evidence in the record and proper under the Plan’s exclusion for payment of benefits resulting from an illegal act.

Pension Benefit Claims

Seventh Circuit

Scarber v. United Airlines, Inc., No. 15 C 9147, 2018 WL 5264240 (N.D. Ill. Oct. 23, 2018) (Judge Harry D. Leinenweber).  United denied Plaintiff “Early Out Plan” benefits because he failed to submit an online election bid form via the “Unimatic/CSS” system, which was one of two requirements for the lump-sum benefit.  Plaintiff alleged that United employees assisted him in enrolling in the Plan and submitted the online bid form on his behalf.  The court granted summary judgment to United.  Plaintiff’s Section 502(a)(1)(B) claim fails because the Plan required the online bid form and Plaintiff did not do that.  Because Plaintiff failed to show the United employees owed him any duty of care in helping him enroll in the Plan, his negligence/negligent supervision claims are preempted by ERISA.  Even if not preempted by ERISA, Plaintiff failed to prove that the employees were particularly unfit for their positions.

Ninth Circuit

In re: Verity Health Sys. of California, Inc., et al., No. 2:18-BK-20151-ER, 2018 WL 5281624 (Bankr. C.D. Cal. Oct. 22, 2018) (Bankr. Judge Ernest M. Robles).  Objectors challenged the Debtors’ proposed treatment of certain defined benefit pension obligations on the basis that the Debtors’ non-payment of the pension funding obligations constitutes an impermissible breach of the unrejected CBAs.  The court found that the Objectors’ request for a determination that certain pension underfunding obligations constitute an administrative expense is not properly before the court at this time and Section 1113 does not require the debtors to immediately pay the underfunding obligations.

Provider Claims

Third Circuit

Howard Bloom, D.C. v. Independence Blue Cross et al., No. CV 14-2582, __F.Supp.3d__, 2018 WL 5275227 (E.D. Pa. Oct. 24, 2018) (Judge McHugh).  See Notable Decision summary above.

Fifth Circuit

Houston Home Dialysis v. Blue Cross and Blue Shield of Texas, et al., No. CV H-17-2095, 2018 WL 5249996 (S.D. Tex. Oct. 22, 2018) (Judge Lee H. Rosenthal).  Blue Cross moved to dismiss Home Dialysis’s claims on the basis that it “lacks standing to assert one patient’s claims because of an anti-assignment clause, and that state sovereign immunity bars the claims arising from two other patients’ plans because the State of Texas would be liable to pay the judgment.”  The court denied the motion without prejudice so that the arguments may be considered on a more complete record of summary judgment motions or at trial.

Eleventh Circuit

Griffin v. United Healthcare of Georgia, Inc., et al., No. 18-10208, 2018 WL 5304739 (11th Cir. Oct. 25, 2018) (Before JILL PRYOR, NEWSOM and JULIE CARNES, Circuit Judges).  The court determined that Defendants’ failure to respond to Dr. Griffin’s inquiry about the existence of an anti-assignment provision is insufficient to establish a “clear case” that they intentionally and voluntarily relinquished their rights under the anti-assignment provision.  Though the anti-assignment provision does not bar a claim for failure to provide plan documents, Dr. Griffin obtained a second assignment to bring this claim years after she initially requested the plan documents.  Since she did not have the right to the documents at the time that she requested them (and the patient had not requested them), there is no plausible allegation that Defendants failed to provide plan documents in response to a request by a person who was entitled to them at the time of the request.

Statute of Limitations

Second Circuit

Haynes v. The Hartford Life and Accident Insurance Co., No. 318CV378MADDEP, 2018 WL 5253051 (N.D.N.Y. Oct. 22, 2018) (Judge Mae A. D’Agostino).  The court granted Defendants’ motion to dismiss on the basis that Plaintiff’s action is time-barred by the contractual limitations period.  The certificate of insurance for the life and accident insurance benefits provides that legal action cannot be taken “more than 3 years after the date Proof of Loss is required to be furnished according to the terms of The Policy.”  Here, Plaintiff became disabled in August 2013, he applied for the Waiver of Premium benefit on January 14, 2014, Hartford upheld the denial on appeal on April 8, 2015, and Plaintiff filed the lawsuit on March 27, 2018.  The court determined that “the proof-of-loss provision and limitations provision bar any legal action brought more than three years and 90 days after Plaintiff’s last working day,” or late 2017.


Tenth Circuit

D.K., K.K. & A.K. v. United Behavioral Health & Alcatel-Lucent Medical Expense Plan for Active Management Employees, No. 2:17-CV-01328, 2018 WL 5281467 (D. Utah Oct. 24, 2018) (Judge Dale A. Kimball).  The court denied Defendants motion for a court order dismissing Plaintiffs’ claims on the grounds of improper venue, or in the alternative to transfer this action to the United States District Court for the District of New Jersey pursuant to 28 U.S.C. § 1404(a). The court determined that venue is proper in Utah because UBH can be found in this forum.  Due process under the Fifth Amendment is satisfied where UBH maintained a P.O. Box address in Utah and directed Plaintiffs to send their claims to that address.  Since this is an ERISA case where the scope of the court’s review is generally limited to the Record typically produced by Defendants in electronic format, there is no significant inconvenience.

Your ERISA Watch authored by Michelle L. Roberts, Esq., Partner


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