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Red Oak Hospital, LLC v. Macys, Inc.

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

November 2, 2017

MACYS, INC., et al, Defendants.



         Before the Court are Defendants' Motion to Dismiss (Document No. 25), Plaintiffs Response to Defendants' Motion to Dismiss (Document No. 28), Defendants' Reply in Support of its Motion to Dismiss (Document No. 31), Plaintiffs Motion for Attorney's Fees (Document No. 35), and Defendants' Response in Opposition to Plaintiffs Motion for Attorney's Fees (Document No. 37). After considering these documents, the facts in the record, and the applicable law, the Court concludes that Defendants' Motion to Dismiss (Document No. 25) is MOOT and Plaintiffs Motion for Attorney's Fees (Document No. 35) is DENIED. Further, because the Court holds that there is no longer a case or controversy at issue in this case, the case is DISMISSED as MOOT.


         Plaintiff Red Oak Hospital, LLC, filed this action alleging that Defendants Macys, Inc. and Macys, Inc. Welfare Benefit Plan (collectively “Defendants”) violated the Employee Retirement Income Security Act (ERISA) by failing to compensate Plaintiff after Plaintiff provided medical services to one of Defendants' plan beneficiaries.

         According to the First Amended Complaint (Document No. 18), Macys provides medical benefits through its Welfare Benefit Plan to its employees. Macys contracted Cigna Healthcare as a third-party administrator to administer the benefits of the Plan and to take advantage of Cigna's network of healthcare providers.[1] Plaintiff has not entered into an agreement with Cigna, so Plaintiff is considered an out-of-network provider of medical services. As a result of Plaintiffs status as an out-of-network provider, the Plan does not necessarily cover services provided by Plaintiff.

         In March 2016, a Plan Beneficiary (the Patient) received medical services from Plaintiff. Plaintiff alleges that those services qualified as emergency services under the Emergency Medical Treatment and Active Labor Act (EMTALA) and that those services were worth $38, 413.92. Before providing the services, Plaintiff had the Patient sign a Legal Assignment of Benefits and Designation of Authorized Representative form.

         After providing the services to the Patient, Plaintiff submitted its healthcare claims to Defendants through Cigna for $38, 413.92. Plaintiff argues that Defendants reduced Plaintiffs “Billed Amount” through Viant, a third-party company. On April 30, 2016, Cigna issue a check to Plaintiff for $14, 849.50. Plaintiff received the check on May 6, 2016. When Plaintiff attempted to deposit the check on May 13, 2016, however, the check was returned because Cigna stopped payment on the check.

         Plaintiff contacted Cigna and told the company that it was going to issue a bill to the Patient for the amount of the services provided. According to Plaintiff, Cigna asked Plaintiff not to bill the Patient and told Plaintiff that it would reissue the payment. Plaintiff claims that it did not receive payment before filing this lawsuit. Further, Plaintiff claims that when the Plan sent an explanation of benefits to the Patient, the explanation stated that the Plan had paid $0.00 and that the Patient owed $0.00 for the services provided by Plaintiff.

         After not receiving payment, Plaintiff sent an appeal letter to Defendants and the Department of Labor on June 3, 2016. Plaintiff also filed a complaint with the Texas Department of Insurance. Several weeks later, on June 21, 2016, Plaintiff filed this lawsuit.

         After Plaintiff filed its First Amended Complaint seeking relief under 29 U.S.C. § 1132(a)(1)(B), Defendants filed their Motion to Dismiss under Fed.R.Civ.P. 12(b)(6), arguing that Plaintiff failed to state a claim because coverage for the medical services provided by Plaintiff was excluded under the Plan.

         While the Motion to Dismiss was pending in this Court, the parties conducted discovery. Through that discovery, Plaintiff discovered that Cigna had reprocessed its claim and issued a check for $14, 849.50 in response to a Texas Department of Insurance complaint. Plaintiff now seeks attorney's fees under 29 U.S.C. § 1132(g)(1).


         A. Mootness

         “Article III of the Constitution grants the Judicial Branch authority to adjudicate 'Cases' and 'Controversies.' In our system of government, courts have 'no business' deciding legal disputes or expounding on law in the absence of such a case or controversy.” Already, LLC v. Nike, Inc., 568 U.S. 85, 90 (2013) (quoting DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 341 (2006)). A case or controversy must be present at all stages of a case. K.P. v. LeBlanc, 729 F.3d 427, 438 (5th Cir. 2013). “Generally, any set of circumstances that eliminates actual ...

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