Lutheran Medical Center of Omaha, Neb. v. Contractors, Laborers, Teamsters and Engineers Health and Welfare Plan

• Citation: 25 F.3d 616
• Decision Date: 25 May 1994
• Docket Number: No. 93-1695,93-1695
• Parties: , 18 Employee Benefits Cas. 1348 LUTHERAN MEDICAL CENTER, OF OMAHA, NEBRASKA, d/b/a Lutheran General Hospital d/b/a Richard H. Young Memorial Hospital, a non-for-profit Nebraska Corp.; William H. Henderson, M.D., Plaintiffs-Appellees, v. CONTRACTORS, LABORERS, TEAMSTERS AND ENGINEERS HEALTH AND WELFARE PLAN, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

Page 616

25 F.3d 616

62 USLW 2799, 18 Employee Benefits Cas. 1348

LUTHERAN MEDICAL CENTER, OF OMAHA, NEBRASKA, d/b/a Lutheran

General Hospital d/b/a Richard H. Young Memorial Hospital, a non-for-profit Nebraska Corp.; William H. Henderson, M.D., Plaintiffs-Appellees, v. CONTRACTORS, LABORERS, TEAMSTERS AND ENGINEERS HEALTH AND WELFARE PLAN, Defendant-Appellant.

No. 93-1695.

United States Court of Appeals,

Eighth Circuit.

Submitted Dec. 16, 1993.

Decided May 25, 1994.

Jeffrey Miller, Omaha, NE, argued (M.H. Weinberg, on the brief), for appellant.

Steven Davidson, Omaha, NE, argued (Jonathan R. Breuning, on the brief), for appellee.

Before MORRIS SHEPPARD ARNOLD, Circuit Judge, JOHN R. GIBSON ^*, Senior Circuit Judge, and BARTLETT ^**, District Judge.

JOHN R. GIBSON, Senior Circuit Judge.

The Contractors, Laborers, Teamsters and Engineers Health and Welfare Plan appeals from a judgment of the district court ¹ awarding Lutheran Medical Center of Omaha and Dr. William Henderson benefits related to the medical costs incurred by Frances Rodriguez, 814 F.Supp. 799. The Plan argues on appeal that the district court: (1) erred in ruling Lutheran and Henderson had standing to sue the Plan; (2) erred in concluding the trustees' denial of benefits was arbitrary and capricious; (3) erred in admitting a letter from one of the Plan's attorneys regarding another participant's claims; (4) erroneously applied plan benefit limitations; and (5) abused its discretion in awarding prejudgment interest and attorney fees to Lutheran and Henderson. We affirm.

On August 24, 1988, Rodriguez was admitted to Bishop Clarkson Hospital, a medical-surgical hospital in Omaha, as a result of a drug overdose. She was subsequently admitted to Richard H. Young Memorial Hospital, a psychiatric facility operated by Lutheran, from August 31 to October 29, 1988, January 11 to April 4, 1989, and May 21 to May 26, 1989, for treatment of major depression. Rodriguez was discharged from her last hospitalization in May 1989 with instructions to continue anti-depressant medication and psychotherapy sessions with Dr. Henderson. Rodriguez did not see Dr. Henderson again and died of lung and brain cancer in 1990.

The Plan, Rodriguez's health benefits provider, denied coverage for her three hospitalizations in Richard H. Young Hospital. The Plan sent a notice of denial to Rodriguez, stating as the explanation for the denial: "suicide attempt non-coveraged, per plan summary page 27(g)." The section to which the Plan referred in its letter states:

This provision does not cover: ... (g) injury or sickness resulting from any attempt at suicide or from any intentionally self-inflicted injury, whether the covered person is sane or insane.

Mr. Rodriguez appealed the trustees' decision to deny coverage, and the trustees affirmed their decision. In October 1989, the Rodriguezes made an assignment to Lutheran and Dr. Henderson, who filed suit against the Plan.

The district court found that the Rodriguezes validly assigned their benefit payments to Lutheran and Henderson, that Mrs. Rodriguez was covered under the Plan for her hospitalizations and related services, and that the Plan's denial of coverage was arbitrary and capricious. The Plan appealed.

I.

The Plan first argues Lutheran and Henderson, as assignees of Mr. and Mrs. Rodriguez, lacked standing to bring an action to recover the charges for Mrs. Rodriguez's hospital and medical services. Specifically, the Plan argues that the language of the Plan's Agreement and Declaration of Trust prohibits assignment of rights, that the district court erred in finding the Plan was estopped from relying on the Plan's assignment provisions, and that the assignments violate the Plan's policy regarding health care provider assignments. The district court found the assignments valid.

Under 29 U.S.C. Sec. 1132(a)(1)(B) (1988) only a "participant" in a plan or a "beneficiary" may sue to collect benefits owing under a plan. The circuits have taken different approaches to the issue of whether an assignee may sue. In Northeast Department ILGWU Health and Welfare Fund v. Teamsters Local No. 229 Welfare Fund, 764 F.2d 147, 153-54 & n. 6 (3d Cir.1985), the Third Circuit held that assignees may not sue under section 1132(a)(1)(B) because Congress did not list them in the section. However, that court held assignees who sue to enforce substantive rights under ERISA may obtain standing under section 1331(a), which supplies jurisdiction for federal common law claims. Id. at 156. The Ninth Circuit, in Misic v. Building Services Employees Health and Welfare Trust, 789 F.2d 1374 (9th Cir.1986), held that assignees stand in the shoes of beneficiaries and thus may sue to collect benefits. Id. at 1376-79. In Hermann Hospital v. MEBA Medical & Benefits Plan, 845 F.2d 1286, 1289-90 (5th Cir.1988), the Fifth Circuit held that assignees have standing, provided the assignment of benefits is authorized under both ERISA and the contract. Finally, in Kennedy v. Connecticut General Life Insurance Co., 924 F.2d 698, 700 (7th Cir.1991), the Seventh Circuit held that an assignee has standing to sue as long as the assignee has a "colorable claim to benefits." In other words, that court held that jurisdiction is lacking only when "the language of the plan is so clear that any claim as an assignee must be frivolous." Id. The issue of standing is one of first impression in this circuit. We are persuaded by the reasoning in Hermann and Misic, which require us to consider whether the assignment by the Rodriguezes was valid and whether ERISA authorizes the assignment. See 845 F.2d at 1289-90; 789 F.2d at 1378-79.

At the outset, we recognize that nothing in ERISA prohibits a plan participant from assigning a cause of action to a health care provider after the services have been rendered and the loss incurred, nor any language suggesting Congress intended to restrict such assignments. Denying standing to health care providers as assignees of beneficiaries may undermine the goal of ERISA, namely to improve benefit coverage for employees. Hermann, 845 F.2d at 1289 n. 13.

The Plan contends that the language of section 22 of the Declaration of Trust precludes Lutheran and Henderson from bringing an action as assignees. Section 22 provides:

No employee shall at any time, either during the life of said Trust, or upon the termination thereof, or upon his withdrawal or severance therefrom, in any manner, have any right to assign his rights or benefits under such Plan or this Trust, or to receive a cash consideration in lieu of such benefits.

This anti-assignment clause does not prevent Lutheran and Henderson from suing the Plan. Section 22 clearly prohibits assignment of "rights or benefits" under the Plan, but does not prohibit assignment of causes of action arising after the denial of benefits. Here, the Rodriguezes assigned their cause of action, not the right to receive benefits under the Plan.

Finally, the record shows the Plan has paid benefits to assignees for several years. Indeed, the Plan Administrator testified that the Plan pays benefits directly to health care providers. Moreover, the 1985 Summary Plan Description, which under ERISA must be available to all plan participants, clearly states that a participant "may assign benefits to a hospital or doctor, if you wish...." Because the Plan's actual practice is not in conformity with its strict anti-assignment provision, we conclude that nothing in the contract precludes a finding that Lutheran and Henderson have standing as assignees.

We observe that if we declared the assignment invalid and held that Lutheran and Henderson had no standing to bring this action the claim would revert back to the Rodriguezes, and after delay and expense to the litigants, would again be presented for decision.

We affirm the district court's ruling that the assignments are valid and that Lutheran and Henderson have standing to bring this action as assignees.

II.

The Plan next argues the district court erred in determining the trustees' denial of Rodriguez's claim was arbitrary and capricious.

Although ERISA expressly authorizes judicial review of decisions to deny benefits, it does not specify the standard of review. See 29 U.S.C. Sec. 1132(a)(1)(B); Cox v. Mid-America Dairymen, Inc., 965 F.2d 569, 571 (8th Cir.1992). In Firestone Tire & Rubber Company v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956-57, 103 L.Ed.2d 80 (1989), the Supreme Court held that generally a reviewing court should apply a de novo standard to a denial of benefits. However, if the plan gives the "administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan," then we will reverse a decision to deny benefits only if it was arbitrary and capricious. Id.; see also Cox, 965 F.2d at 571. The district court stated it would reach the same result under both standards, and then applied the harsher arbitrary and capricious standard. ² We determine as a threshold matter whether the Plan gives the trustees discretion to deny benefits.

Among other things, the Plan's Agreement and Declaration of Trust confers upon the trustees the power and authority to: (1) establish and administer the Plan; (2) determine eligibility of an employee's dependents in the Plan; (3) compromise, settle, arbitrate and release claims or demands against the Plan as the trustees deem advisable; (4) decide all questions regarding amount, nature and duration of benefits; and (5) determine the means by which benefits are provided. The document also provides: "The benefits shall be provided and maintained by such means as the Trustees shall in their sole discretion determine." Article VI, Sec. 4.

In Collins v. Central States, Southeast and Southwest Areas Health and Welfare Fund, 18 F.3d 556, 559 (8th Cir.1994), this court applied a deferential arbitrary-and-capricious standard when the plan gave the trustees power to...