HealthSouth Rehabilitation Hosp. v. American Nat. Red Cross

• Decision Date: 03 December 1996
• Docket Number: No. 95-2645,95-2645
• Citation: 101 F.3d 1005
• Parties: 20 Employee Benefits Cas. 2230 HEALTHSOUTH REHABILITATION HOSPITAL, Plaintiff-Appellant, v. AMERICAN NATIONAL RED CROSS, d/b/a American Red Cross South Carolina Blood Services Region, Defendant-Appellee, and Aetna Insurance Company of America; Alberta Shaw; Derrick Wagner, individually and as Parents and Natural Guardians of Eric Shaw, a Minor under the age of Eighteen (18) Years, Defendants.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1005

101 F.3d 1005

20 Employee Benefits Cas. 2230

HEALTHSOUTH REHABILITATION HOSPITAL, Plaintiff-Appellant, v. AMERICAN NATIONAL RED CROSS, d/b/a American Red Cross South Carolina Blood Services Region, Defendant-Appellee and Aetna Insurance Company of America; Alberta Shaw; Derrick Wagner, individually and as Parents and Natural Guardians of Eric Shaw, a Minor under the age of Eighteen (18) Years, Defendants.

No. 95-2645.

United States Court of Appeals Fourth Circuit.

Argued Sept. 27, 1996.

Decided Dec. 3, 1996.

ARGUED: Annette Roney Drachman, Laddaga, Crout & Drachman, P.A., Charleston, SC, for Plaintiff-Appellant. Daniel J. Westbrook, Nelson, Mullins, Riley & Scarborough, L.L.P., Columbia, SC, for Defendant-Appellee. ON BRIEF: Linda C. Garrett, Laddaga, Crout & Drachman, P.A., Charleston, SC, for Plaintiff-Appellant. Alice V. Harris, Nelson, Mullins, Riley & Scarborough, L.L.P., Columbia, SC, for Defendant-Appellee.

Before ERVIN and HAMILTON, Circuit Judges, and SPENCER, United States District Judge for the Eastern District of Virginia, sitting by designation.

Affirmed by published opinion. Judge HAMILTON wrote the opinion, in which Judge ERVIN and Judge SPENCER joined.

OPINION

HAMILTON, Circuit Judge:

This is a suit for damages filed by HealthSouth Rehabilitation Hospital (HealthSouth) pursuant to the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.A. §§ 1001-1461 (West Supp.1995). The sole remaining defendant in this case is the American National Red Cross, South Carolina Blood Services Region (Red Cross). HealthSouth's claims against the other defendants have either been settled or resolved. The district court granted summary judgment to Red Cross, and we now affirm.

I.

Red Cross maintains "For Your Benefit," a self-insured ERISA welfare plan (Plan) for its employees. Red Cross is the plan administrator, and Aetna Life Insurance Company (Aetna) provides administrative and ministerial services to Red Cross pursuant to a contract. According to that contract, Aetna had the authority to make determinations on behalf of Red Cross with respect to benefit payments under the Plan and to pay out those benefits, subject to Red Cross's reserved right to modify any such determinations. Aetna had no contractual authority to modify the Plan by declaring coverage for non-covered procedures, nor to bestow beneficiary status on non-beneficiaries.

Derrick Wagner (Wagner) is a Red Cross employee and the natural father of Eric Shaw. Red Cross provides all employees with a summary Plan description, and according to practice, one was distributed to Wagner. That summary explains that an employee may enroll himself as a Plan participant and his spouse and dependent children as Plan beneficiaries. In June 1989, Wagner completed a Plan enrollment form in which he elected to obtain medical coverage for himself only. At first, Wagner checked the box "yes" to indicate coverage election for dependent children but then marked through the "yes" box and checked "no" and initialed the change. No premium payments for Eric Shaw's coverage under the Plan were ever made by Wagner or received by the Red Cross. Accordingly, Eric Shaw never satisfied the Plan definition of "beneficiary."

On January 4, 1994, Alberta Shaw, Eric Shaw's mother, took Eric Shaw to HealthSouth, in Florence, South Carolina, for rehabilitation therapy. Alberta Shaw represented to HealthSouth that Eric was covered by Wagner's Red Cross Plan and signed a document assigning the right to all benefits payable from any and all insurance policies over to HealthSouth. Alberta Shaw also presented HealthSouth with an insurance card which advised health care providers to contact Aetna to certify hospital admissions or verify coverage. That card also states that it does not guarantee coverage.

Before HealthSouth admitted Eric, the hospital's Admissions Coordinator called an Aetna representative to verify coverage. That Aetna representative erroneously informed the Admissions Coordinator that Eric Shaw was a covered beneficiary under the Plan with no deductible and one hundred percent coverage for approved charges. A "confirmation fax" was also sent to Aetna by HealthSouth on January 4, 1994, but no response was received by HealthSouth to the confirmation fax until February 15, 1994.

Based on Aetna's oral assurances, Eric Shaw was admitted at HealthSouth and underwent treatment for several weeks. Throughout Eric's stay at the hospital, Aetna was called on a weekly basis to obtain pre-certification for additional days of treatment. That pre-certification was always orally given. However, on February 15, 1994, an Aetna employee contacted HealthSouth and stated that the earlier oral confirmation of beneficiary status was in error. Aetna also informed HealthSouth for the first time that Eric Shaw was not a beneficiary under the Plan. HealthSouth discharged Eric Shaw on February 17, 1994, after he had incurred $82,967 in expenses. The hospital submitted that bill to Aetna, but Red Cross declined to pay because Wagner had never elected to secure coverage for Eric.

HealthSouth brought an action against Red Cross, Aetna, Derrick Wagner, and Alberta Shaw, seeking to recoup Eric Shaw's hospital bills. The hospital alleged two claims against Red Cross in its amended complaint. First, the hospital alleged that Aetna acted as Red Cross's designated agent when Aetna orally confirmed Eric Shaw's coverage under Wagner's health insurance plan with Red Cross. Accordingly, HealthSouth asserted that Aetna's "interpretation" modified the Plan and Red Cross was bound by that modification. HealthSouth further maintained that because of the modification, Eric Shaw became a beneficiary and Red Cross was liable for Eric Shaw's hospital costs of $82,967. Second, HealthSouth alleged that it had become a valid assignee of any rights Eric Shaw had under the Plan and because Red Cross refused to pay the benefits allegedly owed to Eric as a now "confirmed" beneficiary of the Plan, Red Cross had breached the fiduciary duties it owed to HealthSouth as assignee. 29 U.S.C.A. § 1104(a)(1).

Red Cross filed a motion for summary judgment, claiming that HealthSouth did not have standing to bring the suit because Eric Shaw was not a beneficiary or an employee of a qualifying ERISA plan. 29 U.S.C.A. § 1132(a). HealthSouth opposed summary judgment and in its memorandum in opposition, indicated that if the district court was inclined to grant summary judgment to Red Cross, HealthSouth requested leave to amend its complaint to add an estoppel claim. HealthSouth also objected to the discovery restrictions imposed on it by the district court.

The district court granted summary judgment to Red Cross and in so doing rejected all of HealthSouth's claims, including the attempt to amend its complaint. HealthSouth timely brought this appeal questioning the district court's grant of summary judgment on its modification claims, the district court's discovery ruling, and the district court's refusal to entertain its proposed amendment to the complaint to add a promissory estoppel theory of recovery.

II.

Whether Red Cross was entitled to summary judgment is a matter of law which we review de novo. Higgins v. E.I. DuPont de Nemours & Co., 863 F.2d 1162, 1167 (4th Cir.1988). Granting summary judgment as a matter of law is appropriate when the pleadings, depositions, affidavits, and other documents in the record leave no issue of any material fact which needs to be passed on by a jury. Fed.R.Civ.P. 56(c). Accordingly, the moving party must negate any material issue of fact and prove its entitlement to judgment on the relevant legal principles. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). In determining whether a genuine issue has been raised, the court must construe all inferences and ambiguities in favor of the nonmoving party. United States v. Diebold, 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962).

III.

HealthSouth contends that the district court erred when it concluded that HealthSouth had no standing to bring its ERISA claims. We disagree.

In order to establish its right to derivative standing because of Alberta Shaw and Eric Shaw's assignment of rights, HealthSouth would have to show that Eric Shaw was somehow "made" a beneficiary by Aetna's oral assurances that Eric Shaw's hospital expenses would be covered. Other than the Secretary or a fiduciary, an ERISA action may be brought only by a "participant" or a beneficiary to an ERISA plan. 29 U.S.C.A. § 1132(a) (West 1994). ERISA defines "participant" as "any employee or former employee of an employer ... who is or may become eligible to receive a benefit of any type from an employee benefit plan ... or whose beneficiaries may be eligible to receive any such benefit." 29 U.S.C.A. § 1002(7). Therefore, a person who is neither a participant nor a beneficiary lacks standing to bring an ERISA action against a fiduciary or plan administrator. See Stanton v. Gulf Oil Corp., 792 F.2d 432, 434-35 (4th Cir.1986); see also Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d 1272, 1277-78 (6th Cir.1991), cert. denied, 505 U.S. 1233, 113 S.Ct. 2, 120 L.Ed.2d 931 (1992).

HealthSouth maintains that because of Aetna's agreement with Red Cross, Aetna possessed either actual or apparent authority to confer beneficiary status on Eric Shaw. The district court correctly concluded, however, that any discretionary authority over administration of the Plan rested solely with Red Cross. See 29 C.F.R. § 2509.75-8 (1994); see also Haidle v. Chippenham Hosp., Inc., 855 F.Supp. 127, 131-32 (E.D.Va.1994); Baker Hosp. v. Aetna Life Ins. & Casualty Co., No. 91-2004, 1991 WL 179113 (unpublished) (4th Cir. October 25, 1991). ¹ In order to have the authority to amend or alter an ERISA plan, Aetna would have to be a fiduciary and thus, be cloaked with discretionary control respecting management of the Plan,...