Shih v. Blue Cross & Blue Shield of Tex., Inc.

• Decision Date: 10 February 2022
• Docket Number: Civil Action 4:21-CV-01530
• Parties: PATRICK SHIH, M.D., P.A., Plaintiff, v. BLUE CROSS & BLUE SHIELD OF TEXAS INC, et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

PATRICK SHIH, M.D., P.A., Plaintiff, v. BLUE CROSS & BLUE SHIELD OF TEXAS INC, et al., Defendants.

Civil Action No. 4:21-CV-01530

United States District Court, S.D. Texas, Houston Division

February 10, 2022

MEMORANDUM & ORDER

Keith P. Ellison, United States District Judge

Pending before the Court is Plaintiff Patrick Shih, M.D., P.A.'s Motion for Reconsideration of the Court's Order denying remand on August 20, 2021 (Doc. 33), as well as the Parties' Joint Motion to Modify the Scheduling Order (Doc. 39). The Court held a hearing on these motions on December 17, 2021, at which it took the motions under advisement. Plaintiff subsequently submitted a Notice of Supplemental Authority (Doc. 44), and Defendant responded (Doc. 46), as to the Motion for Reconsideration.

After considering the Parties' oral argument and the various filings related to the issue of remand, the Court DENIES IN PART AND GRANTS IN PART Plaintiff's Motion for Reconsideration. The Court, which now retains jurisdiction over this case, also GRANTS the Parties' Joint Motion to Modify. (Doc. 39.) The Court sets forth its reasoning below.

I. BACKGROUND

Plaintiff Patrick Shih, M.D., P.A. (“Shih”) brought this medical billing dispute against Blue Cross & Blue Shield of Texas, Inc. (“BCBSTX” or “Defendant”) and various employers whose health plans BCBSTX administers. Shih allegedly provided both emergent and pre- authorized non-emergent medical services, as an out-of-network provider, to over 200 patients with BCBSTX plans, and that BCBSTX underpaid Shih by nearly $4 million. Shih sued Defendants in state court on six contract theories as well as for tortious interference, violation of unspecified Texas health laws, and violation of the Texas Prompt Payment of Claims Act. BCBSTX removed.

Shih filed a Motion to Remand on June 9, 2021. (Doc. 21.) The Court denied that motion at a hearing on August 20, 2021; it also issued a Memorandum & Opinion (“Order”) as to the bases of its decision for the benefit of the parties. (Doc. 32.) Plaintiff filed a Motion for Reconsideration (Doc. 33) as to the Court's ruling on the Motion to Remand. The Motion for Reconsideration is now before the Court. Also pending is an Agreed Motion to Modify the Scheduling Order (Doc. 39).

II. MOTION FOR RECONSIDERATION

A. Legal Standards

“Rule 59(e) governs motions to alter or amend a final judgment, ” while “Rule 54(b) allows parties to seek reconsideration of interlocutory orders and authorizes the district court to ‘revise[] at any time' ‘any order or other decision . . . [that] does not end the action[.]'” Austin v. Kroger Texas, L.P., 864 F.3d 326, 336 (5th Cir. 2017) (quoting Fed.R.Civ.P. 54(b)). The Court has not yet issued a final judgment and thus applies Rule 54(b).

Under Rule 54(b), “district courts have inherent power to reconsider interlocutory orders and reopen any part of a case before entry of a final judgment.” Mallory v. Eyrich, 922 F.2d 1273, 1282 (6th Cir. 1991) (internal citations omitted). Nevertheless, motions for reconsideration under Rule 54, like those under Rule 59, “serve the narrow purpose of allowing a party to correct manifest errors of law or fact or to present newly discovered evidence.” Waltman v. Int'l. Paper Co., 875 F.2d 468, 473 (5th Cir. 1989); see also S. Snow Mfg. Co. v. SnoWizard Holdings, Inc., 921 F.Supp.2d 548, 565 (E.D. La. 2013). “[T]his broad discretion must be exercised sparingly in order to forestall the perpetual reexamination of orders and the resulting burdens and delays.” SnoWizard, 921 F.Supp.2d at 564-65. “A motion for reconsideration may not be used to rehash rejected arguments or introduce new arguments.” LeClerc v. Webb, 419 F.3d 405, 412 n.13 (5th Cir. 2005). Classic reasons for granting reconsideration include: “(1) the judgment is based upon a manifest error of fact or law; (2) newly discovered or previously unavailable evidence exists; (3) manifest injustice would otherwise result; (4) there has been serious misconduct by counsel; and (5) an intervening change in controlling law alters the appropriate outcome.” Livingston Downs Racing Ass'n, Inc. v. Jefferson Downs Corp., 259 F.Supp.2d 471, 475-76 (M.D. La. 2002).

This case concerns ERISA preemption. ERISA preemption is governed, as the parties agree, by the two-prong test of Aetna Health Inc. v. Davila, 542 U.S. 200 (2004). Under Davila's conjunctive test, removal is appropriate if (1) the plaintiff, “at some point in time, could have brought Plaintiff's claim under ERISA § 502(a)(1)(B), ” and (2) “there is no other independent legal duty that is implicated by a defendant's actions.” Id. at 210.

B. Reconsideration of Remand

Plaintiff offers three grounds for reconsideration: (1) as to the first Davila prong, that the Court erroneously deemed a jurisdictional argument waived; (2) that the Court misapplied the standard for the second Davila prong and failed to specifically address the “Memorial Hospital Rule”; and (3) that the Court improperly shifted the burden of proof for removal to the Plaintiff. In the alternative to remand, Plaintiff seeks leave to voluntarily dismiss its claims relating to patient encounters forming the basis of federal jurisdiction.

1. Davila Prong One

In the Order now on reconsideration, the Court held:

Shih also contends that the Blue Cross plans at issue contained anti-assignment provisions that void any alleged assignments-but this argument is based on the plans' general anti-assignment provision and ignores their express carve-out for a “written assignment of benefits.” And to the extent that Shih contended in [its] Reply Brief that the anti-assignment's carve-out provision was not triggered because the “written assignment [was not] delivered to the Carrier with the claim for benefits, ” that argument was not raised in the Motion to Remand and therefore will not be considered.

(Doc 32, at 3-4) (citations omitted).

Plaintiff argues that it was a clear error of law to exercise subject-matter jurisdiction based on a finding that Plaintiff waived the anti-assignment issue. See, e.g., Wisconsin Dep't of Corr. v. Schacht, 524 U.S. 381, 389 (1998) (citations omitted) (“No party can waive the defect or consent to jurisdiction . . . No. court can ignore the defect; rather a court, noticing the defect, must raise the matter on its own.”); Goodrich v. U.S., 3 F.4th 776, 778-79 (5th Cir. 2021) (“Jurisdiction cannot be waived, and it is the duty of a federal court first to decide, sua sponte if necessary, whether it has jurisdiction before the merits of the case can be addressed. When courts lack subject matter jurisdiction over a case, they lack the power to adjudicate the case and must dismiss it.”) (internal quotation marks and citations omitted). Because jurisdiction is not waivable, Plaintiff urges the Court to “give a fresh eye to the anti-assignment issue, and its potential implications to the validity of the any judgment rendered in this Court.” Doc. 33, at 6-7. The Court agrees with Plaintiff that subject-matter jurisdiction cannot be waived. It thus reconsiders the applicability of the anti-assignment provision on the merits.

i. The Anti-Assignment Provisions

The first prong of Davila is met “if an individual, at some point in time, could have brought his claim under ERISA § 502(a)(1)(B).” Davila, 542 U.S. at 210. However, “when an ERISA plan contains a valid anti-assignment provision, a putative assignment to a healthcare provider is invalid and cannot bestow the provider with standing to sue under the plan.” Dialysis Newco, Inc. v. Cmty. Health Sys. Grp. Health Plan, 938 F.3d 246, 251 (5th Cir. 2019) (citing LeTourneau Lifelike Orthotics & Prosthetics, Inc. v. Wal-Mart Stores, Inc., 298 F.3d 348, 352-53 (5th Cir. 2002)). The Parties agree that a written assignment of benefits, which creates derivative standing, is distinct from a direct-payment authorization. See Dialysis Newco, 938 F.3d at 254 (5th Cir. 2019) (“[T]he district court order[] . . . erred by failing to see the degree of distinction between a direct-payment authorization and a full-on assignment of benefits. A direct-payment authorization means only that the beneficiary tells the administrator to forward the checks owed to him or her on to the provider instead. An assignment of benefits is more than that.”). But they disagree as to whether the anti-assignment provisions here allowed the assignment of benefits, or merely authorized direct payments.

“In construing ERISA plan provisions, ” the Fifth Circuit interprets “the contract language ‘in an ordinary and popular sense as would a person of average intelligence and experience[.]'” Garcia v. Best Buy Stores L.P., No. CIV. A. H-07-851, 2009 WL 2982788, at *8 (S.D. Tex. Sept. 10, 2009) (quoting Wegner v. Standard Ins. Co., 129 F.3d 814, 818 (5th Cir. 1997)), aff'd, 416 Fed.Appx. 384 (5th Cir. 2011). “[W]hen construing the policy's language, the court must give effect to all contractual provisions so that none will be rendered meaningless.” Holman v. Life Ins. Co. of N. Am., 533 F.Supp.3d 502, 509 (S.D. Tex. 2021). “If policy language is worded so that it can be given a definite or certain legal meaning, it is not ambiguous and [will be] construe[d] [] as a matter of law.” Id. (internal quotation marks and citation omitted) (alteration in original).

The ERISA Plans at issue contain a provision that reads:

Except as provided in the section Assignment and Payment of Benefits, rights and benefits under the Plan are not assignable, either before or after services and supplies are provided.

Under an ordinary construction of this language, the Plans provide that rights and benefits are assignable as detailed in another section: the carve-out provision titled, “Assignment and Payment of Benefits.” That section reads:

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