AllianceMed LLC v. Aetna Life Insurance Company et al

Filing 19

ORDER granting 9 Defendant Aetna's motion to dismiss. ORDERED that Plaintiff AllianceMed's motion for leave to amend the complaint (Doc. 14 ) is DENIED. ORDERED that AllianceMed has 30 days to file an amended complaint to cure the defi ciencies identified herein. If AllianceMed fails to file an amended complaint within 30 days of the date of this Order, the Clerk of the Court shall, without further Court order, enter judgment of dismissal, with prejudice as to this entire case a nd as to all Defendants. FURTHER ORDERED that AllianceMed shall effect service of the Amended Complaint and Summons upon all Defendants no later than 30 days after the filing of the Amended Complaint. Signed by Senior Judge James A Teilborg on 1/30/17. (EJA)

1

WO

2
3
4
5
6

IN THE UNITED STATES DISTRICT COURT

7

FOR THE DISTRICT OF ARIZONA

8
9

AllianceMed LLC,
Plaintiff,

10
11

ORDER

v.

12

No. CV-16-02435-PHX-JAT

Aetna Life Insurance Company, et al.,

13

Defendants.

14
15
16

Pending before the Court is Aetna Life Insurance Company’s and Aetna Heath,

17

Inc.’s (collectively “Aetna”) motion to dismiss Plaintiff AllianceMed, LLC’s complaint

18

for lack of subject-matter jurisdiction. (Doc. 9). Also pending before the Court is

19

AllianceMed’s motion for leave to amend or correct the complaint. (Doc. 14). The Court

20

now rules on the motions.

21

I.

Background

22

AllianceMed is a company that performs medical billing services on behalf of

23

North Valley Outpatient Surgery Center (“North Valley”). (Doc. 1 at ¶ 10). Patient S.G.

24

is a beneficiary of an employee health benefit plan administered by Aetna and governed

25

by the Employee Retirement Income Security Act (“ERISA”) (Id. at ¶ 6). In November

26

2014, S.G. underwent two surgical procedures at North Valley. After the first surgery,

27

S.G. signed a designation of authorized representative form (“DARF”) naming

28

AllianceMed as S.G.’s “authorized representative” for the purposes of filing insurance

1

claims and appealing unfavorable outcomes. In relevant part, the DARF provided:

2

I, the undersigned, (“Principal”) have insurance and/or employee healthcare
benefits coverage (collectively “Benefits”) with the named Insurer/Payor
(“Payor”), and hereby assign Matthew Perez, individually and as a Manager
of AllianceMed, LLC, and any employees of AllianceMed who assists with
my healthcare claim(s) (collectively (“AllianceMed”), as my designated
Authorized Representative. I hereby authorize AllianceMed to adjudicate
all claim(s) and appeals and undertake all administrative and legal
processes on my behalf so that all claim(s) are paid to satisfaction of the
provider(s) who rendered healthcare services to me and I owe payment.
Furthermore, I grant AllianceMed complete discretionary authority
necessary to fulfill its role as my Authorized Representative to adjudicate
my healthcare claim(s) from Payor.

3
4
5
6
7
8

For valuable consideration received and for adjudicating these claims on
my behalf, I hereby convey to AllianceMed, to the full extent permissible
under contract, law and/or equity (including but not limited to, ERISA, the
Patient Protection and Affordable Care Act, state laws, any applicable
employee group health plan(s) and any insurance policy) all remedies I may
be entitled to stemming from or pertaining to the healthcare expenses I
incurred as a result of the medical services/treatments I received within the
past three (3) months and/or any services/treatments I will receive for a
period of one (1) year hereafter. The abovementioned conveyance is subject
to any assignment of payment I have made to the any [sic] healthcare
provider who rendered said medical services/treatments.

9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

(Doc. 9-2, Exhibit A). On S.G.’s behalf, AllianceMed submitted two claims for
payment from Aetna, one for each of the surgical procedures. Both of S.G.’s claims were
denied. (Doc. 1 at ¶¶ 14–15, 19–20). AllianceMed then submitted first- and second-level
appeals to Aetna, seeking a reversal of the adverse benefit terminations. Aetna denied
each of the appeals. (Id. at ¶¶ 16–17, 22–23).
AllianceMed then filed this action under 29 U.S.C. § 1132, claiming that Aetna
violated its policy obligations to S.G. when it refused to pay for benefits for the surgical
procedures. (Doc. 1 at ¶ 27). Aetna now moves to dismiss AllianceMed’s complaint
under Federal Rule of Civil Procedure (“Rule”) 12(b)(1), arguing that AllianceMed does
not have standing to bring the suit. (Doc. 9 at 1).
II.

Analysis
Article III standing is “a species of subject-matter jurisdiction,” and a litigant may

seek dismissal for lack of standing under Rule 12(b)(1). Cariajano v. Occidental
Petroleum Corp., 645 F.3d 1216, 1227 (9th Cir. 2011); Kingman v. Reef Atoll Invs.,
L.L.C. v. United States, 541 F.3d 1189, 1195 (9th Cir. 2008) (“Unless the jurisdictional
-2-

1

issue is inextricable from the merits of a case, the court may determine jurisdiction on a

2

motion to dismiss for lack of jurisdiction under Rule 12(b)(1)”). In ruling on a challenge

3

under Rule 12(b)(1), the Court presumes that a cause lies outside of its subject-matter

4

jurisdiction until the Plaintiff proves otherwise. Kokkonen v. Guardian Life Ins. Co. of

5

Am., 511 U.S. 375, 377 (1994). If the Court concludes that it lacks subject-matter

6

jurisdiction over a claim, it must dismiss the claim in its entirety. Arbaugh v. Y&H Corp.,

7

546 U.S. 500, 514 (2006).

8

The language of ERISA expressly limits which parties have standing to sue to

9

enforce the terms of an ERISA-governed insurance policy. Under 29 U.S.C. § 1132(a), a

10

civil action filed pursuant to an ERISA plan may be brought only by the Secretary of

11

Labor or a plan participant, beneficiary, or fiduciary. See Spinedex Physical Therapy

12

USA, Inc. v. United Healthcare of Ariz., 770 F.3d 1281, 1289 (9th Cir. 2014). However,

13

plan participants have the right to assign their health and welfare benefits to a healthcare

14

provider. Eden Surgical Cent. v. B. Braun Med., Inc., 420 Fed.Appx. 696, 697 (9th Cir.

15

2011) (citing Misic v. Bldg. Serv. Emp. Health & Welfare Trust, 789 F.2d 1374, 1378

16

(9th Cir. 1986)). After such an assignment, the assignee “stands in the shoes” of the plan

17

participant, giving the assignee standing to sue as a beneficiary of the policy. Misic, 789

18

F.2d at 1378; see also 29 U.S.C. § 1132(a). In Misic, the Ninth Circuit Court of Appeals

19

explained that allowing an assignee of benefits to sue under ERISA was consistent with

20

extensive case law “reflecting the premise that a valid assignment confers upon the

21

assignee standing to sue in place of the assignor.” Id. Although a non-participant, such as

22

a healthcare provider, cannot bring claims on its own behalf, it may do so “derivatively,

23

relying on its patients’ assignments of their benefit claims.” Spinedex, 770 F.3d at 1289.1

24

After considering the language of the DARF, the Court has concluded that

25

AllianceMed is not an assignee of S.G.’s insurance policy. The DARF gave AllianceMed

26
1

27
28

The Circuit Court further noted that this premise is valid even when there is a
statutory provision limiting the parties who have standing to bring suit, so long as the
assignment is valid under the governing rules. Id. (citing United States v. Carter, 353
U.S. 210, 215 (1982) (discussing an assignment of a contract governed by the Miller
Act)).
-3-

1

the authority to represent S.G. in the internal payment, claims, and appeal process. But it

2

did not give AllianceMed a contractual right to collect benefits under the plan. To the

3

contrary, the DARF included a disclaimer that any “remedies” to which S.G. was entitled

4

under the plan would be collectible by AllianceMed only “subject to any assignment of

5

payment . . . to any healthcare provider.” (Doc. 9-2 at 2). Notably, AllianceMed neither

6

argues nor alleges that it is an assignee or beneficiary of the policy. Instead, it contends

7

that under 29 U.S.C. § 1132, an “authorized representative” also has standing to enforce

8

an ERISA policy. (Doc. 1 at 3 ¶ 9; Doc. 13 at 2). But this argument is inconsistent with

9

the rules governing Article III standing, which require a plaintiff to “have suffered, or be

10

threatened with, an actual injury traceable to the defendant and likely to be redressed by a

11

favorable judicial decision.” Lewis v. Continental Bank Corp., 494 U.S. 472, 477 (1990).

12

Because AllianceMed is not entitled to benefits under S.G.’s insurance policy, it cannot

13

have sustained injury when those benefits were denied.2 Accordingly, AllianceMed has

14

no standing to sue to enforce the policy as a beneficiary. See 29 U.S.C. § 1132(a).

15

Similarly, the Court also rejects AllianceMed’s argument that precluding an

16

authorized representative from bringing suit in federal court is contrary to the Code of

17

Federal Regulations (“C.F.R.”) governing ERISA. AllianceMed cites 29 C.F.R. §

18

2560.503-1(b)(4), which provides that the claims procedures for an ERISA-governed

19

insurance policy are valid only if they “do not preclude an authorized representative of a

20

claimant from acting on behalf of such claimant in pursuing a benefit claim or appeal of

21

an adverse benefit determination.” 29 C.F.R. § 2560.503-1(b)(4). But the “claims

22

procedures” discussed by this section of the C.F.R. are internal claims procedures: “the

23

filing of benefit claims, notification of benefit determinations, and appeal of adverse

24

benefit determinations.” 29 C.F.R. § 2560-503.1(b). Although the C.F.R. allows a

25

representative to act on the claimant’s behalf when dealing with the insurance company,

26
27
28

2

Similarly, the DARF did not obligate AllianceMed to pay any of the medical
expenses S.G. incurred as a result of North Valley’s care. Because AllianceMed had no
obligation to pay for the care underlying the insurance claims, it was not injured when the
claims were denied.
-4-

1

it does not bestow upon that representative standing to file suit against the company in

2

federal court.3 AllianceMed does not have standing to sue Aetna as S.G.’s authorized

3

representative.

4

AllianceMed has also filed a motion for leave to amend the complaint to add

5

Matthew Perez as a plaintiff in the action. (Doc. 14). But such an amendment would not

6

cure the lack of standing because the DARF was not an assignment of benefits to

7

Matthew Perez. Accordingly, Matthew Perez does not have standing to sue Aetna, and

8

adding him as a plaintiff would be futile to cure the jurisdictional deficiencies outlined

9

above. The motion is therefore denied.4

10

III.

Conclusion

11

For the reasons stated above,

12

IT IS ORDERED that Defendant Aetna’s motion to dismiss (Doc. 9) is

13
14
15

GRANTED.
IT IS FURTHER ORDERED that Plaintiff AllianceMed’s motion for leave to
amend the complaint (Doc. 14) is DENIED.

16

IT IS FURTHER ORDERED that AllianceMed has 30 days to file an amended

17

complaint to cure the deficiencies identified herein. If AllianceMed fails to file an

18

amended complaint within 30 days of the date of this Order, the Clerk of the Court shall,

19
3

20
21

For the same reasons, the Court also rejects AllianceMed’s argument that Aetna
waived its challenge to AllianceMed’s authority to file suit when it did not object to
AllianceMed’s participation in the internal claims process. (See Doc. 13 at 4).
4

22
23
24
25
26
27
28

Under previous Ninth Circuit precedent, this Court was required to grant leave to
amend, sua sponte, when granting a motion to dismiss, unless a pleading could not be
cured by the allegation of other facts. See Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir.
2000_ (en banc). However, this precedent has been called into question by recent Ninth
Circuit decisions in light of the amendment to Rule 15, which now allows parties twentyone days from responsive pleadings and motions to dismiss to amend as of
right. See Lacey v. Maricopa County, 693 F.3d 896, 927 (9th Cir. 2012) (citing Doe v.
United States, 58 F.3d 494, 497 (9th Cir. 1995)). Further, when a plaintiff
requests leave to amend, the Court must consider the following factors: (1) undue delay,
(2) bad faith, (3) prejudice to the opposing party, (4) futility of amendment, and (5)
whether plaintiff has previously amended his complaint. Western Shoshone Nat. Council
v. Molini, 951 F.2d 200, 204 (9th Cir. 1991). Here, amending the complaint would not be
futile to cure the jurisdictional deficiencies. Accordingly, although the Court denies
AllianceMed’s request to amend the complaint as it proposed in its motion, it will grant
AllianceMed leave to amend the complaint pursuant to the filing of this order.
-5-

1

without further Court order, enter judgment of dismissal, with prejudice as to this entire

2

case and as to all Defendants.

3

IT IS FURTHER ORDERED that AllianceMed shall effect service of the

4

Amended Complaint and Summons upon all Defendants no later than 30 days after the

5

filing of the Amended Complaint.

6

Dated this 30th day of January, 2017.

7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

-6-