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Memorial Hermann Health System v. Pennwell Corp.

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

December 22, 2017

MEMORIAL HERMANN HEALTH SYSTEM, Plaintiff,
v.
PENNWELL CORPORATION MEDICAL AND VISION PLAN and PENNWELL CORP., Defendants.

          MEMORANDUM OPINION AND ORDER

          SIM LAKE UNITED STATES DISTRICT JUDGE

         Plaintiff, Memorial Hermann Health System, brings this action as assignee of a patient identified as P.C., against defendants, Pennwell Corporation Medical and Vision Plan, an employee benefit plan ("Plan"), and Pennwell Corporation as Plan Administrator and Fiduciary ("Pennwell"), under the Employment Retirement Income Security Act of 1974 ("ERISA") as amended, 29 U.S.C. § 1001, et seq., for health care benefits. Plaintiff also seeks costs and attorneys' fees reasonably incurred prosecuting this action. Pending before the court is Defendants', Pennwell Corporation Medical and Vision Plan and Pennwell Corporation, Motion to Dismiss ("Defendants' Motion to Dismiss") (Docket Entry No. 8). For the reasons stated below the pending motion will be granted and this action will be dismissed without prejudice.

         I. Factual and Procedural Background

         Plaintiff initiated this action against defendants by filing Plaintiff's Original Complaint (Docket Entry No. 1) on August 2, 2017. Plaintiff alleges the following facts:

4. The insurance plan issued and administered by Defendants covered the patient, P.C. (hereinafter the "Patient" or "P.C") as an insured under the plan.
5. The Patient initially presented to the hospital on August 30, 2015 through September 2, 2015. Upon presentation, Plaintiff verified effective coverage for the Patient. The Patient was initially cared for a brain mass and a final diagnosis of cerebral embolism, cerebral edema.
6. Patient was re-admitted to the hospital on September 8, 2015 through September 14, 2015. The diagnosis was the same: cerebral embolism, cerebral edema.
7. Patient was again re-admitted to the hospital from September 19, 2015 through September 23, 2015 complaining of chest pains. The diagnosis was subendo infarction and parox ventricular tachycardia.
8. Further, the patient had some speech pathology therapy at the hospital from October 10, 2015 through October 22, 2015.
9. Plaintiff rendered medically necessary services to P.C. and submitted their industry standard UB-04 claim statements to Defendants' agent for payment for the services and supplies authorized by Defendant and provided to the Defendant's insured. Thereafter, Defendants' agent and administrator issued explanation of benefits[:] 1.) for dates of service between August 30, 2015 to September 14, 2015 (Exhibit "B") on January 13, 2016, stating that the claim was not covered per plan exclusions, and to refer to the plan document, and 2.) for dates of service on August 30, 2015 and on September 8, 2015 (Exhibit "C") on January 8, 2016 stating that the claim was not covered per plan exclusions, and to refer to the plan document. 3.) for dates of service on September 19, 2015 through September 23, 2015 (Exhibit "D") on January 13, 2016 stating that the claim was not covered per plan exclusions, and to refer to the plan document. 4.) for dates of service on October 10, 201 [5] through October 22, 2015 (Exhibit "E") on February 5, 2016 stating that the claim was not covered per plan exclusions, and to refer to the plan document.
10. Plaintiff requested an appeal of Defendants' denial/nonpayment on January 19, 2016. This appeal also requested plan documents. Defendant responded with a letter classifying the January 19, 2016 correspondence as an appeal, and denied the claim due to plan exclusions. The response did not contain all of the plan documents requested. Plaintiff again requested the plan documents from Defendant on March 21, 2016 only for Defendant to respond with a letter dated April 21, 2016 reversing its previous position that the Plaintiff had filed an appeal and refusing to provide requested documents.
11. Plaintiff would show that said Defendant's Plan was in full force and effect and covers the hospitalization of P.C. for the admissions under the Plan (Exhibit "A"). This patient was admitted to the Hospital through the emergency room upon representations that such coverage was in full force and effect and would cover these hospitalizations.[1]

         Based on these factual allegations, plaintiff asserts a single statutory cause of action for recovery of benefits under ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), as assignee of P.C. In pertinent part plaintiff asserts:

16. Defendants allege that an employee welfare benefit plan, as that term is defined in 29 U.S.C. § 1002(1), has been established and/or maintained by Defendants, and that the provisions of the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq., (hereinafter "ERISA"), control the claim for benefits made by Plaintiff, as assignee of P.C, plan participant or beneficiary of the alleged ERISA welfare benefit plan. P.C. executed an irrevocable assignment of insurance benefits on September 14, 2015 in favor of Plaintiff which provides in pertinent parts:
"In consideration of services rendered, I hereby irrevocably assign and transfer to the hospital for myself and my dependents, all rights, title and interest in the benefits payable for services rendered by the hospital provided in any insurance policy(ies) under which I or any of my dependents are insured. Said irrevocable assignment and transfer shall be for the purpose of granting the hospital an independent right of recovery. . ." 17. The Defendant, PENNWELL CORPORATION[, ] is the plan "administrator" and/or "sponsor." Accordingly, Plaintiff brings this cause of action pursuant to 29 U.S.C. § 1132(a)(1)(B) to recover benefits due to them through the assignment granted by the patient pursuant to the terms of the employee welfare benefit plan, administered by said Defendant for the care and treatment it provided to P.C.
18. Plaintiff, upon information supplied by Defendants, through its authorized agents or representatives, believed or had reason to believe, that the care and treatment of P.C. was payable as covered charges under the terms and conditions of the applicable plan issued by Defendant, PENNWELL CORPORATION, as part of the ERISA type benefits offered to employee members and their dependents.
19. Defendants have denied payment on the claims submitted by Plaintiff without justifiable cause or excuse. . .
20. The irrevocable assignment of the right to payment under the health benefit plan was executed by the patient in favor of Plaintiff, which was intended to assign any and all rights to payment of said benefits and causes of action for failure to pay to Plaintiff, in consideration of the services rendered to the patient. The assignment was meant and intended to apply to any and all health benefits that P.C. was entitled to for payment of the Plaintiff's charges. Plaintiff is an assignee of an intended "participant" or "beneficiary" of the health benefit plan within the meaning of 29 U.S.C. §§ 1002(8) 1132(a), and steps into the shoes of said Participant, giving Plaintiff standing to assert this cause of action.
21. Plaintiff, as an assignee of an intended participant within the meaning of 29 U.S.C. § 1132(a), is entitled to file this cause of action against the Plan and/or its Administrator, and the policy which is liable for payment of major medical benefits due for this patient's admission. It is clear that the plan of insurance was meant and intended to pay for major medical in-patient services and treatment, and the patient participated in this group insurance plan or program with the intent to provide protection from payment of hospital bills.[2]

         II. Defendants' Motion to Dismiss

         The only claim asserted in Plaintiff's Original Complaint is an ERISA claim for Plan benefits as an assignee of P.C.[3]Defendants move to dismiss Plaintiff's Original Complaint arguing:

1. Plaintiff's Original Complaint is subject to the assignment provisions in the applicable ERISA Plan and should be dismissed pursuant to ERISA.
2. Plaintiff's Original Complaint should be dismissed as a matter of law as Plaintiff lacks standing to assert the ERISA claim.[4]

         Citing Federal Rule of Civil Procedure 12(b)(1) and ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), defendants argue that Plaintiff's Original Complaint should be dismissed with prejudice because "the terms of the ERISA plan prohibit assignment of claims by the beneficiary to the Plaintiff."[5] Plaintiff responds that defendants' motion to dismiss should be denied because it possesses standing either (1) derivatively as an assignee of a Plan participant or beneficiary, i.e., P.C., or (2) independently as a designated or intended representative of a Plan participant or beneficiary under 29 C.F.R. § 2560.503-1(b)(4). Asserting that defendants' motion "is more akin to a premature motion for summary judgment without the benefit of any discovery. . ., "[6] plaintiff asks the court to deny defendants' motion, and

[s]hould the Court determine that any aspect of Plaintiff's jurisdiction allegations are deficient, Plaintiff requests that the Court defer ruling on [the motion] to allow the Plaintiff to engage in limited discovery to obtain copies of verified plans, summary plan descriptions and other relevant documents to identify all plan provisions and correspondence relevant to Plaintiff's claims to establish that the Court has subject matter jurisdiction to hear this case.[7]

         Alternatively, plaintiff asks for "leave of Court to amend its pleading to correct any perceived deficiencies."[8]

         Defendants reply that plaintiff lacks derivative standing because the Plan's anti-assignment provision is enforceable and unambiguous, and that plaintiff's argument regarding independent standing finds no support in either the law or the Plaintiff's Original Complaint.[9]

         A. Standard of Review

         Defendants' challenge to plaintiff's standing concerns the justiciability of the plaintiff's claim. See Steel Co. v. Citizens for a Better Environment, 118 S.Ct. 1003 (1998) (standing is a threshold jurisdictional question which must be addressed prior to and independent of the merits of a party's claims). "In essence the question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or of particular issues." Warth v. Seldin, 95 S.Ct. 2197, 2205 (1975). The standing inquiry has two components, involving "both constitutional limitations on federal-court jurisdiction and prudential limitations on its exercise." Id.

         Constitutional standing stems from the case or controversy-requirement of Article III and is premised on concepts of injury, causation, and redressability. Id. (citing Baker v. Carr, 82 S.Ct. 691, 703 (1962)). See also Duarte ex rel. Duarte v. City of Lewisville, Texas, 759 F.3d 514, 517 (5th Cir. 2014) (recognizing that a party satisfies the constitutional element of standing by "present[ing] (1) an actual or imminent injury that is concrete and particularized, (2) fairly traceable to the defendant's conduct, and (3) redressable by a judgment in [his or her] favor."). Prudential standing concerns whether a plaintiff's grievance arguably falls within the zone of interests protected by the statutory provision invoked, whether the complaint raises abstract questions more properly addressed by the legislative branch, or whether plaintiff is asserting his or her own legal rights and interests rather than the interests of third parties. Warth, 95 S.Ct. at 2206 ("[T]he standing question in such cases is whether the constitutional or statutory provision on which the claim rests properly can be understood as granting persons in the plaintiff's position a right to judicial relief.").[10]

         Defendants' argument that plaintiff lacks standing to assert a claim for benefits under ERISA challenges plaintiff's prudential standing because it challenges plaintiff's ability to assert a claim under a particular statute, i.e., ERISA. Although defendants seek dismissal for lack of subject matter jurisdiction under Rule 12(b)(1), prudential standing is typically treated as a merits question properly addressed by a motion filed under Rule 12(b)(6) for failure to state a claim to which relief may be granted. See Harold H. Huggins Realty, Inc. v. FNC, Inc., 634 F.3d 787, 795 & n.2 (5th Cir. 2011) ("Unlike a dismissal for lack of constitutional standing, which should be granted under Rule 12(b)(1), a dismissal for lack of prudential or statutory standing is properly granted under Rule 12(b)(6)."). The Fifth Circuit has, however, treated this type of standing as a jurisdictional limitation on ERISA claims. See LeTourneau Lifelike Orthothics & Prosthetics, Inc. v. Wal-Mart Stores, Inc., 298 F.3d 348, 351 (5th Cir. 351 (5th Cir. 2002) ("[ERISA s]tanding is jurisdictional."). In Cobb v. Central States Southwest and Southeast Areas Pension Fund, 461 F.3d 632, 635 (5th Cir. 2006), cert, denied, 127 S.Ct. 1153 (2007), the Fifth Circuit explained that "the issue of whether a particular plaintiff falls within one of the three enumerated classes of litigants (participants, beneficiaries or fiduciaries) is a jurisdictional one, " and recognized that "[t]his court has 'hewed to a literal construction of § 1132(a)' on this issue." Id. (quoting Hermann Hospital v. MEBA Medical & Benefits Plan ("Hermann I"), 845 F.2d 1286, 1289 (5th Cir. 1988), overruled in part on other grounds by Access Mediquip, L.L.C. v. UnitedHealthcare Ins. Co., 698 F.3d 229 (5th Cir. 2012) (en banc) (per curiam), cert. denied, 133 S.Ct. 1467 (2013)) . The court may therefore properly consider defendants' challenge to plaintiff's standing under Rule 12(b)(1). See LeTourneau, 298 F.3d at 353 ("Because LeTourneau had neither direct nor derivative standing to bring suit, the district court lacked jurisdiction to hear it.").

         Rule 12(b)(1) challenges to subject matter jurisdiction come in two forms: "facial" attacks and "factual" attacks. See Paterson v. Weinberger, 644 F.2d 521, 523 (5th Cir. 1981) . A facial attack consists of a Rule 12(b)(1) motion unaccompanied by supporting evidence that challenges the court's jurisdiction based solely on the pleadings. Id. A factual attack challenges the existence of subject matter jurisdiction irrespective of the pleadings, and matters outside the pleadings such as testimony and affidavits may be considered. Id. Defendants argue that their challenge to the plaintiff's standing is a facial attack because their motion cites to and relies upon only the complaint and the documents attached thereto.[11] Because copies of the assignment and the Plan upon which defendants based their Rule 12(b)(1) challenge are attached to Plaintiff's Original Complaint, the court agrees that the defendants' motion to dismiss raises a facial - not a factual - attack on the plaintiff's pleadings. See In re Parkway Sales & Leasing, Inc. . 411 B.R. 337, 343 (Bankr. E.D. Tex. 2009) ("In a facial attack, the defendant's motion to dismiss is based on the face of the complaint and the documents attached to the complaint."); Seastrunk v. Darwell Integrated Technology, Inc., No. 3:05-CV-0531-G, 2006 WL 1932342, * 2 (N.D. Tex. July 10, 2006) (analyzing complaint and scope of attached copyright assignment in ruling on the defendant's facial attack to the court's jurisdiction). When considering a Rule 12(b)(1) facial attack, courts must accept as true all material allegations of the complaint, and must construe the complaint in favor of the non-moving party. Lewis v. Knutson, 699 F.2d 230, 237 (5th Cir. 1983). "The burden of proof for a Rule 12(b)(1) motion to dismiss is on the party asserting jurisdiction." Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001), cert, denied sub nom. Cloud v. United States, 122 S.Ct. 2665 (2002) . Dismissal on jurisdictional grounds is not on the merits. Id.

         B. Analysis

         1. Applicable Law

         Under 29 U.S.C. § 1132(a)(1)(B), a civil enforcement action may be brought only by a plan participant, beneficiary, fiduciary, or the Secretary of Labor. Healthcare providers do not have standing to sue in their own right to collect benefits under an ERISA plan, but they may obtain assignments from their patients and thereby have derivative standing to bring ERISA actions to recover benefits. See North Cypress Medical Center Operating Co., Ltd. v. Cigna Healthcare, 781 F.3d 182, 191 & n. 31 (5th Cir. 2015) (quoting Harris Methodist Fort Worth v. Sales Support Services, Inc. Employee Health Care Plan, 426 F.3d 333-34 (5th Cir. 2005) ("It is well established that a healthcare provider, though not a statutorily designated ERISA beneficiary, may obtain standing to sue derivatively to enforce an ERISA plan beneficiary's claim.")). See also Dallas County Hospital District v. Associates' Health & Welfare Plan, 293 F.3d 282, 289 (5th Cir. 2002) (holding that a hospital could not have independent standing to assert an ERISA claim without a valid, enforceable assignment from an ERISA plan participant or beneficiary). Courts "interpret the assignment form in accordance with Texas contract law principles and the [Plan] under ERISA principles." Harris, 426 F.3d at 334.

         2. Application of the Law ...


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