Dallas County Hosp. v. Associates' Health & Welf.

• Decision Date: 19 June 2002
• Docket Number: No. 01-10988.,01-10988.
• Citation: 293 F.3d 282
• Parties: DALLAS COUNTY HOSPITAL DISTRICT, doing business as Parkland Memorial Hospital, Plaintiff-Appellant, v. ASSOCIATES' HEALTH AND WELFARE PLAN, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

293 F.3d 282

DALLAS COUNTY HOSPITAL DISTRICT, doing business as Parkland Memorial Hospital, Plaintiff-Appellant, v. ASSOCIATES' HEALTH AND WELFARE PLAN, Defendant-Appellee.

No. 01-10988.

United States Court of Appeals, Fifth Circuit.

June 19, 2002.

James M. Orr (argued), Blair Grant Francis, Francis & Orr, Dallas, TX, for Plaintiff-Appellant.

Leslie Ross Higman (argued), Wal-Mart Stores, Bentonville, AR, for Defendant-Appellee.

Creswell Dean Davis, Paul Matthew O'Neil, Davis & Davis, Austin, TX, for Texas Hosp. Ass'n, Amicus Curiae.

Donald P. Wilcox, Texas Medical Ass'n, Austin, TX, for Texas Medical Ass'n, Amicus Curiae.

Appeal from the United States District Court for the Northern District of Texas.

Before DUHÉ, DeMOSS and CLEMENT, Circuit Judges.

CLEMENT, Circuit Judge:

Dallas County Hospital District d/b/a Parkland Memorial Hospital (the "Hospital") appeals from the district court's summary dismissal of its ERISA claim for lack of standing. We agree with the district court that the Hospital lacks independent standing as a beneficiary, but we find that the Hospital has sufficiently shown that it may have standing derivatively as an assignee of a beneficiary. Accordingly, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

I. FACTS AND PROCEEDINGS

On April 3, 1998, Leonard P. Scott was admitted to the Hospital for emergency treatment of severe burns Scott sustained after falling or walking into a bonfire. He remained hospitalized until his death on April 21, 1998. During that time, the Hospital rendered medical services and provided goods to Scott valued at $151,522.12.

At all relevant times, Scott was a participant in the Associates' Health and Welfare Plan (the "Plan"), an employee welfare benefit plan within the meaning of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. Several times during Scott's stay at the Hospital, Hospital representatives contacted Wal-Mart Stores, Inc. ("Wal-Mart"), Scott's employer and the sponsor of the Plan, through its authorized representative, International Rehabilitation Associates, Inc. d/b/a Intracorp ("Intracorp"), to request approval for the hospitalization and to report on Scott's condition. During these interactions, the Hospital informed Plan representatives that Scott had been drinking at the time of his accident. Through Intracorp, the Plan certified to the Hospital that Scott's treatment and hospitalization were medically necessary, although at no time did the Plan guarantee payment of benefits.

After Scott's death, the Hospital billed the Plan for the services rendered and goods furnished to Scott. In June 1998, the Plan notified Scott's mother and the Hospital that the claim for benefits had been denied, citing a Plan provision excluding benefits for "charges for any treatment or service that was the result of the participant being under the influence of alcohol or drugs." Both Scott's representative and the Hospital appealed the Plan's denial of benefits pursuant to Plan procedure, but their appeal was ultimately rejected by the Wal-Mart Administrative Appeals Committee.

Thereafter, in October 1999, the Hospital sued the Plan in Texas state court. The Plan removed the case to federal court on the ground that ERISA governed the Hospital's claims and moved to dismiss the Hospital's state law causes of action on account of preemption. The district court granted the motion in part, but left the Hospital with its claims for misrepresentation of coverage in violation of the Texas Insurance Code and common law misrepresentation and/or negligent misrepresentation, in addition to its ERISA claim. Thereafter, the Plan named Intracorp as a third-party defendant, claiming a right to indemnity and contribution and asserting breach of contract.

After extensive discovery, the parties filed motions for summary judgment in February 2001. The district court granted summary judgment to the Plan on the Hospital's ERISA claim because it determined that the Hospital lacked standing. Due to its dismissal of the Hospital's sole federal claim, the district court remanded the remaining state law claims to state court, and accordingly, reserved the decision on the Plan's and Intracorp's cross-motions for summary judgment to the state court. The Hospital now appeals the district court's dismissal of its ERISA claim.

II. STANDARD OF REVIEW

We review the district court's grant of summary judgment de novo, applying the same standard as the district court. Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir.1998). Summary judgment is proper if the record discloses no genuine issue as to any material fact. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

III. DISCUSSION

ERISA confers standing to sue to recover benefits due under a plan on "participants" and "beneficiaries." 29 U.S.C. § 1132(a); Vega v. National Life Ins. Servs., Inc., 188 F.3d 287, 291 (5th Cir.1999). Because a health care provider has no independent right of standing to seek redress under ERISA, such a provider must be capable of classification as a participant or a beneficiary to invoke ERISA. Memorial Hosp. Sys. v. Northbrook Life Ins. Co., 904 F.2d 236, 249 (5th Cir.1990).

The Hospital does not contend to be, nor is it, a participant in the Plan. Rather, the Hospital maintains that it possesses standing either (1) derivatively, as an assignee of a beneficiary, or (2) independently, as a designated or intended beneficiary.

A. Derivative Standing as an Assignee

The Hospital's claim to derivative ERISA standing is predicated on the "Assignment of Medical Benefits" executed in its favor by Mildred Scott, Scott's mother and sole heir.¹ It is clear in this Circuit that a health care provider may possess standing under ERISA by virtue of a valid assignment. In sharp contrast to the express prohibition of the assignment of benefits under an ERISA pension plan, 29 U.S.C. § 1056(d), ERISA contains no provision prohibiting the assignment of benefits under an ERISA welfare plan, nor does it contain language that "even remotely suggests that such assignments are proscribed or ought in any way to be limited." Hermann Hosp. v. MEBA Med. & Benefits Plan ("Hermann I"), 845 F.2d 1286, 1289 (5th Cir.1988). Finding the absence of such proscriptive language in the context of welfare plans to be "significant," this court in Hermann I held that a health care provider with a valid assignment of plan benefits has a derivative right of standing under ERISA. It reasoned that "[a]n assignment to a health care provider facilitates rather than hampers the employee's receipt of health benefits" and thus would further ERISA's policies. The court explained:

To deny standing to health care providers as assignees of beneficiaries of ERISA plans might undermine Congress' goal of enhancing employees' health and welfare benefit coverage. Many providers seek assignments of benefits to avoid billing the beneficiary directly and upsetting his finances and to reduce the risk of non-payment. If their status as assignees does not entitle them to federal standing against the plan, providers would either have to rely on the beneficiary to maintain an ERISA suit, or they would have to sue the beneficiary. Either alternative, indirect and uncertain as they are, would discourage providers from becoming assignees and possibly from helping beneficiaries who were unable to pay them "up-front." The providers are better situated and financed to pursue an action for benefits owed for their services. Allowing assignees of beneficiaries to sue under § 1132(a) comports with the principle of subrogation generally applied in the law.

Id. at 1289 & n. 13. Having determined that a health care provider with a valid assignment may possess standing, the Hermann I court remanded the case for further proceedings to determine whether the hospital possessed a valid assignment in light of the language in the plan forbidding the assignment of benefits.

On appeal after remand, the court held that, despite the plan's anti-assignment clause, the provider had a valid assignment and thus had standing to sue the plan. Hermann Hosp. v. MEBA Med. & Benefits Plan ("Hermann II"), 959 F.2d 569, 573-75 (5th Cir.1992). It found that the plan was estopped to assert its anti-assignment clause "because of its protracted failure to assert the clause when Hermann requested payment pursuant to a clear and unambiguous assignment of payments for covered benefits." Id. at 575. Furthermore, the court noted that even if the plan had not been estopped from invoking the anti-assignment clause, the clause would not have invalidated the assignment of benefits received by the hospital because the clause and its "typical `spendthrift' language" applied "only to unrelated, third-party assignees — other than the health care provider of assigned benefits — such as creditors [of] debts having no nexus with the Plan or its benefits."² Id. The court continued:

The anti-assignment clause should not be applicable, however, to an assignee who, as here, is the provider of the very services which the plan is maintained to furnish. Were we to conclude otherwise, health care providers such as [the hospital], which is entitled to payment for the services it provided as benefits covered under the Plan, would be unable to recover for those services unless [the participant] were to sue [the plan] for recovery of benefits and [the hospital] in turn sue [the participant]. Such a result would be inequitable as [the participant], knowing that any recovery from [the plan] would immediately go to [the hospital], would have no incentive to pursue payment — and might be reluctant to sue the Plan maintained by his own employer or his own union. Thus, the anti-assignment clause, even if timely asserted, would likely not have prevented [the beneficiary] from assigning to ...