Cob Clearinghouse v. Aetna U.S. Healthcare, 02-3645.

Decision Date05 April 2004
Docket NumberNo. 02-3645.,02-3645.
Citation362 F.3d 877
PartiesCOB CLEARINGHOUSE CORPORATION, also known as Digital Healthcare, Inc., Plaintiff-Appellant, v. AETNA U.S. HEALTHCARE, INC.; Great West Life and Annuity Insurance Co.; Blue Cross & Blue Shield of Kansas City; Connecticut General Life Insurance Company, Defendants-Appellees.
CourtU.S. Court of Appeals — Sixth Circuit

Steven M. Ott (argued and briefed), Ott & Associates, Cleveland, OH, for Appellant.

Andrew S. Pollis (argued and briefed), Robert J. Fogarty (briefed), Hahn, Loeser & Parks, Cleveland, OH, Mark J. Schwemler (briefed), Elliott, Reihner, Siedzkowski & Egan, Blue Bell, PA, Christopher S. Williams, Henry G. Grendell (briefed), Calfee, Halter & Griswold, Cleveland, OH, Shaunda A. Patterson-Strachan, Stephen H. Goldberg, Waldemar J. Pflepsen, Jr., Jorden Burt LLP (briefed), Washington, D.C., for Appellees.

Before SILER and COOK, Circuit Judges; BERTELSMAN, District Judge.*

COOK, Circuit Judge.

Plaintiff-Appellant, COB Clearinghouse Corp. (COB), appeals the district court's dismissal of its claims against Aetna U.S. Healthcare, Inc., Great West Life and Annuity Insurance Company, Blue Cross and Blue Shield of Kansas City, and Connecticut General Life Insurance Co. (collectively the Insurers). We affirm.

A. Procedure

COB filed a Complaint against the Insurers, alleging that it was an authorized agent of Goodyear Tire & Rubber (Goodyear), Bridgestone-Firestone, Inc. (Bridgestone), Babcock & Wilcox, Progressive Processing, Inc. (Progressive), FirstMerit Bank (FirstMerit), Cambridge Industries, Inc. (Cambridge), and State Industries, Inc. (State) (collectively the Employers). The Employers provide ERISA-regulated health care benefits plans to their employees and their employees' dependents. COB claimed that it represented the interests of the Employers pursuant to contracts it had entered into with each Employer.

The Insurers, on the other hand, contracted with different employers to provide similar health care benefits through non-ERISA health insurance policies.

The Complaint set forth five claims. Count One alleged a violation of the Employee Retirement Income Security Act ("ERISA"), and Count Two alleged "federal common law claims." Counts Three through Five alleged claims for unfair and deceptive insurance practices, bad faith, and unjust enrichment.

The Insurers1 filed Motions to Dismiss the Complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), arguing that COB lacked standing to bring the claims and failed to state a claim upon which relief could be granted. The district court agreed, finding that COB had no standing to bring Counts One and Two and, therefore, the district court had no subject matter jurisdiction over the case.2 Counts Three through Five were dismissed as state law claims which were preempted by ERISA. COB has appealed only the district court's dismissal of Counts One and Two.

B. Coordination of Benefits Issues

COB's Complaint raised allegations relating to "coordination of benefits" issues. The necessity for health insurers to coordinate health benefits arises when two (or more) health care plans provide benefits to the same individual. The insurers must then determine who is primarily and who is secondarily liable for the payment of that individual's health care benefits. This determination can sometimes be made by reviewing the provisions of the individual insurance contracts. In some instances, however, the insurance contracts may conflict. For example, each may state that it provides only secondary coverage under the circumstances. See McGurl v. Trucking Employees of North Jersey Welfare Fund, Inc., 124 F.3d 471, 473 (3d Cir. 1997). Many states, including Ohio,3 have resolved these conflicts by adopting part or all of the Model Regulations set forth by the National Association of Insurance Commissioners (NAIC), an independent group of state insurance regulatory commissioners. See McGurl, 124 F.3d at 483.4 That state law would apply in cases where coordination of benefits is required between two plans which are not subject to ERISA.

ERISA, however, provides no guidance on coordination of benefits issues. See Regents of the Univ. of Mich. v. Employees of Agency Rent-A-Car Hosp. Assoc., 122 F.3d 336, 339 (6th Cir.1997). In cases involving two ERISA-regulated plans, therefore, federal courts have fashioned federal common law to resolve these issues. McGurl, 124 F.3d at 484 (adopting "employer first" rule, providing that plan which covers beneficiary as employee is primary and plan which covers beneficiary as dependent of employee is secondary). See also PM Group Life Ins. Co. v. Western Growers Assur. Trust, 953 F.2d 543, 548 (9th Cir.1992); Reinforcing Iron Workers v. Mich. Bell Tel. Co., 746 F.Supp. 668, 670-71 (E.D.Mich.1990) (adopting the "birthday rule," declaring plan of employee whose birthday occurs earlier in the year primarily responsible for medical benefits of a minor, where parents are both covered by separate ERISA plans).

COB alleged that, in this case, certain beneficiaries were insured both under one of the Employers' self-funded ERISA plans and under one of the Insurers' non-ERISA policies. COB claimed that the Insurers' policies were primary, presumably because the coordination of benefits clauses of the applicable insurance contracts conflicted. COB then argued that the district court should extend the federal common law established in McGurl to these cases that involve only one ERISA-regulated plan. Under such a rule, COB contends that the Employers paid claims for which the Insurers were primarily liable and they were only secondarily liable.

C. COB's Contracts with the Employers

COB bases its claim to being an authorized agent of the Employers upon the contract — called either the "Audit Agreement" or the "Recovery Service Agreement" — that it entered into with each Employer. While the contracts with the seven Employers were each slightly different, the agreements generally provided that COB would review each Employer's records, use its "proprietary systems" to determine if the Employer made payments under its health care plan for which the Employer was only secondarily liable, and attempt to collect payment from the party that COB believed to be primarily liable in exchange for a percentage of the amounts recovered.

The relevant provisions of the Goodyear, Bridgestone, Progressive, Babcock & Wilcox, and FirstMerit agreements were substantively identical. Each of these five agreements contained an "agency clause," appointing COB its agent for certain purposes:

[Employer will] make [COB,] and its contractors, [the Employer's] agents for the purpose of carrying out an audit of coordination of benefits issues, and the subrogation and collection of indemnities due as a result of such audit as provided for and privileged by standard rules [or law] (for example, Section 3902.13(F) of the Ohio Revised Code or the rule[s] of the [NAIC], as interpreted by the state at issue on any given claim).

Those agreements then required COB to make three attempts to collect every claim and "further pursue every claim of a value exceeding $500.00 for the period of at least one year, or until collection of the correct indemnity, or settlement of the claim, whichever occurs first." The agreements all provided, however, that COB would "commence no litigation in the name of [the Employer], or on its behalf, without prior notice to [the Employer]."

The other two agreements were similar. The State agreement differed in that it authorized COB to report potential claims to State, but did not authorize COB to pursue them. The Cambridge agreement differed in that it authorized COB to "conduct litigation to recover amounts owed" without requiring prior notice to Cambridge.


The district court dismissed those counts COB appeals — Counts One and Two of COB's Complaint — on the ground that COB did not have standing to bring the case. "We review a district court's decision to grant a motion to dismiss for lack of subject matter jurisdiction de novo." Joelson v. United States, 86 F.3d 1413, 1416 (6th Cir.1996). "For purposes of ruling on a motion to dismiss for want of standing, both the trial and reviewing courts must accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party." Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975). Having invoked the jurisdiction of the federal courts, however, it is the plaintiff's burden to demonstrate that jurisdiction is proper. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992); Kardules v. City of Columbus, 95 F.3d 1335, 1346 (6th Cir.1996).

Assuming, as we must, that COB was an authorized agent of the Employers under the terms of the parties' agreements, we must determine whether such an authorized agent has standing under ERISA to pursue these claims.

ERISA strictly limits standing. 29 U.S.C. § 1132(a)(3)5 provides, in pertinent part, that:

A civil action may be brought —

. . .

(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan....

And courts narrowly construe ERISA to permit only the parties specifically enumerated to bring suit. See Simon v. Value Behavioral Health, Inc., 208 F.3d 1073, 1081 (9th Cir.2000) (citing Franchise Tax Bd. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 27, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983)). See also Teagardener v. Republic-Franklin...

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