Letourneau Lifelike Orthotics v. Wal-Mart Stores

• Citation: 298 F.3d 348
• Decision Date: 10 July 2002
• Docket Number: No. 01-40995.,01-40995.
• Parties: LETOURNEAU LIFELIKE ORTHOTICS & PROSTHETICS, INC., as assignee of Pamela L. Nichols, Plaintiff-Appellee, v. WAL-MART STORES, INC.; Wal-Mart Associates Health & Welfare Plan; Committee of the Wal-Mart Associates Health & Welfare Plan, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

298 F.3d 348

LETOURNEAU LIFELIKE ORTHOTICS & PROSTHETICS, INC., as assignee of Pamela L. Nichols, Plaintiff-Appellee, v. WAL-MART STORES, INC.; Wal-Mart Associates Health & Welfare Plan; Committee of the Wal-Mart Associates Health & Welfare Plan, Defendants-Appellants.

No. 01-40995.

United States Court of Appeals, Fifth Circuit.

July 10, 2002.

Bruce M. Partain (argued), Wells, Peyton, Greenberg & Hunt, Beaumont, TX, for Plaintiff-Appellee.

Leslie Ross Higman (argued), Wal-Mart Stores, Bentonville, TX, for Defendants-Appellants.

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

Before HIGGINBOTHAM, WIENER and BENAVIDES, Circuit Judges.

WIENER, Circuit Judge:

Plaintiff-Appellee LeTourneau Lifelike Orthotics & Prosthetics, Inc. ("LeTourneau") filed this action in district court against the captioned Defendants-Appellants, seeking $9,767 in payment for replacing part of a prosthetic device that LeTourneau had furnished to Pamela L. Nichols, a beneficiary of the defendant Wal-Mart Associates Health & Welfare Plan (the "Plan"). In addition to asserting that claim under Section 502 of ERISA,¹ LeTourneau advanced the Texas common law claim of quantum meruit. The state law claim and all claims against defendant Wal-Mart Stores, Inc. were eventually dismissed on an agreed motion. Following a bench trial, the court entered judgment for LeTourneau against the Plan in the amount of its principal demand, plus pre-judgment interest, attorney's fees, costs, and post-judgment interest. Concluding that LeTourneau lacked standing to bring this action, we reverse the district court's determination to the contrary, vacate the judgment for LeTourneau, and remand with instructions to dismiss the complaint.

I. FACTS AND PROCEEDINGS

Nichols was a beneficiary of the Plan by virtue of her husband's participation. The Plan is governed by ERISA, sponsored by Wal-Mart Stores, Inc., and administered by an administrative committee. The Plan's Summary Plan Description ("SPD") contained the following anti-assignment clause:

ASSIGNMENT

Transferring to Another Party

Medical coverage benefits of this Plan may not be assigned, transferred or in any way made over to another party by a participant. Nothing contained in the written description of Wal-Mart medical coverage shall be construed to make the Plan or Wal-Mart Stores, Inc., liable to any third-party to whom a participant may be liable for medical care, treatment, or services.

....

Assignment Overview

Except as permitted by the Plan or as required by state Medicaid law, no attempted assignments of benefits will be recognized by the Plan.²

When Nichols became a patient of LeTourneau in December 1996, she signed a form containing a direct payment authorization which permitted the Plan to pay LeTourneau directly for "all things to which" Nichols was "entitled" under the Plan. Nichols's physician had prescribed the above-knee leg prosthesis in question, which was covered by the Plan. She received the prosthesis from LeTourneau early in 1997. Based on the direct payment authorization in Nichols's entry form, the Plan paid $19,553 directly to LeTourneau for the device and the services related to fitting it.

About a year-and-a-half after Nichols received the original prosthesis, the same physician prescribed a new socket for it. LeTourneau contacted the Plan's agent, Blue Cross/Blue Shield, and confirmed that Nichols was still a beneficiary of the Plan; at that time, however, neither Nichols nor LeTourneau sought either prior approval for replacing the socket or verification of coverage of Nichols for this service. LeTourneau replaced the socket and submitted a claims form to Blue Cross/Blue Shield, seeking payment of $9,767.

Sometime later, LeTourneau was informed that the Plan would pay nothing at that time, adding that confirmation as to medical necessity was required regarding the new socket and other components. LeTourneau eventually submitted a copy of the physician's prescription for the socket and a Certificate of Medical Necessity which was signed and dated by the doctor more than a year after the Plan had notified LeTourneau of its denial.

On the same day that the Certificate of Medical Necessity was signed by Nichols's doctor and delivered to the Plan, the Plan furnished LeTourneau an Explanation of Benefits and advised that the Plan was denying the new socket charges based on the following provision in the "Other Covered Expenses" section of the SPD:

Standard prostheses limited to artificial limbs, artificial eyes, breast implants where the breast tissue is removed, or initial placement of contact lenses or glasses after cataract surgery; limited to once every three years. Replacement will be allowed when the original prosthesis was medically necessary and only when a change of prescription occurs. NOTE: The Plan must be given prior approval of your prosthesis supplier.

Without further efforts to explore administrative reconsideration, LeTourneau brought the instant action as Nichols's assignee. The Plan contested LeTourneau's standing because (1) Nichols's direct payment authorization was not the equivalent of an assignment of benefits, and (2) even if it were, it would be invalid for purposes of LeTourneau's pursuing an ERISA Section 502 claim, given the SPD's anti-assignment clause. After denying the Plan's motion for summary judgment, the district court conducted a bench trial. Implicitly rejecting the challenge to standing, the court accepted LeTourneau's contentions that Nichols's direct payment authorization was an assignment of benefits and, relying on our decision in Hermann Hospital v. MEBA Medical & Benefits Plan (Hermann II),³ held that an employee benefits plan cannot enforce an anti-assignment clause against a provider of medical services. The court rendered judgment in favor of LeTourneau and the Plan timely filed a notice of appeal.

II. ANALYSIS

A. Standard of Review

On appeal from a bench trial, we review the factual findings of the trial court for clear error.⁴ We review conclusions of law de novo, including the trial court's determination of its own standard of review of an ERISA administrator's determination of eligibility for benefits.⁵

B. LeTourneau's Standing

Standing is jurisdictional.⁶ LeTourneau has no direct claim against the Plan; and, absent a valid assignment of benefits from Nichols, LeTourneau would have no derivative standing to sue the Plan under ERISA Section 502.⁷ In finding the presence of a valid assignment and rejecting the Plan's anti-assignment assertion, the district court relied entirely on Hermann II, in which the ERISA plan at issue contained the following anti-assignment clause:

No employee, dependent or beneficiary shall have the right to assign, alienate, transfer, sell, hypothecate, mortgage, encumber, pledge, commute, or anticipate any benefit payment hereunder, and any such payment shall not be subject to any legal process to levy execution upon or attachment or garnishment proceedings against for the payment of any claims.⁸

Although we held for the hospital, we did so primarily on the basis of estoppel: The ERISA Plan was estopped from enforcing its anti-assignment clause because of the Plan's protracted failure to assert anti-assignment when the hospital requested payment under an assignment of payment provision for covered benefits.

Here, however, the district court did not rely on estoppel. Rather, it relied on our alternative holding in Hermann II that the anti-assignment clause was ineffectual against the hospital. In that alternative holding, we concluded that the anti-assignment clause there at issue would not preclude the hospital's recovery from the plan because the clause applied only to unrelated, third-party assignees, such as creditors who might attempt to obtain voluntary assignments to cover debts having no nexus with a plan or its benefits, or even involuntary alienation such as attempts to garnish such payments.

The district court's reliance on Hermann II's alternative holding, which analogized that anti-assignment clause to anti-assignment clauses commonly found in spendthrift trusts, is misplaced. There simply is no similarity between the language of the Plan's anti-assignment clause and the wording of the clause that we analyzed in Hermann II. In no way resembling typical spendthrift trust provisions or the third-party creditor anti-assignment clause provision in Hermann II, the Plan's anti-assignment clause states that "no attempt at assignments or benefits will be recognized by the Plan" and, most significantly, that "[n]othing contained in the written description of Wal-Mart medical coverage shall be construed to make the Plan or Wal-Mart Stores, Inc., liable to any third-party to whom a participant may be liable for medical care, treatment, or services." This language is unquestionably directed at providers of health care services such as LeTourneau in precisely the way that the anti-assignment language Hermann II was not.

We have previously stated that "we must ... interpret ERISA plans' provisions as they are likely to be `understood by the average plan participant,' consistent with ERISA's statutory drafting requirements."⁹ When, as in the instant case, the plan administrator is vested with discretion to review plan terms and decide claims for benefits, we review the administrator's interpretation of an SPD's terms only for abuse of discretion.¹⁰ In Hermann I¹¹ we held that "ERISA allows the assignment of health care benefits" but noted that the validity of the assignment depends on a construction of the plan at issue.¹² Neither Hermann I nor Hermann II stands for the proposition that all anti-assignment clauses are per se invalid vis-à-vis providers of health care services. Furthermore, neither Hermann opinion mandates that any putative assignment somehow grants derivative standing to the provider, as an assignee, to sue on behalf or standing in...