Beverly Oaks Physicians Surgical Center, LLC v. Blue Cross Blue Shield of Illinois et al

Filing 38

ORDER GRANTING DEFENDANTS MOTION TO DISMISS SECOND AMENDED COMPLAINT WITHOUT LEAVE TO AMEND 31 by Judge Ronald S.W. Lew ( MD JS-6. Case Terminated ) (lc)

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1 O 2 JS-6 3 4 5 6 7 8 9 UNITED STATES DISTRICT COURT 10 CENTRAL DISTRICT OF CALIFORNIA 11 12 13 BEVERLY OAKS PHYSICIANS SURGICAL CENTER, LLC, A 14 California Limited Liability Company 15 Plaintiff, 16 17 v. 18 BLUE CROSS BLUE SHIELD OF 19 ILLINOIS; and Does 1 through 100; 20 21 22 Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CV 18-3866-RSWL-JPR ORDER re: Defendant’s Motion to Dismiss Plaintiff’s SAC [31] Currently before the Court is Defendant Blue Cross 23 Blue Shield of Illinois’ (“Defendant”) Motion to 24 Dismiss Plaintiff’s Second Amended Complaint [31] 25 (“Motion”). Having reviewed all papers submitted 26 pertaining to this Motion, the Court NOW FINDS AND 27 RULES AS FOLLOWS: the Court GRANTS Defendant’s Motion 28 WITHOUT LEAVE TO AMEND. 1 1 2 I. BACKGROUND 3 A. Factual Background 4 Plaintiff Beverly Oaks Physicians Surgical Center, 5 LLC, (“Plaintiff”) brings this Action against Defendant 6 for recovery of benefits under the Employee Retirement 7 Income Security Act of 1974 (“ERISA”). Plaintiff is an 8 ambulatory surgery center located in Sherman Oaks, 9 California. Second Am. Compl. (“SAC”) ¶ 3, ECF No. 30. 10 Defendant is a managed care company that, among other 11 things, insures and/or administers employer health 12 plans typically governed by ERISA. Id. ¶ 6. Defendant 13 carries out its health insurance business activities in 14 each state where covered employees and their dependents 15 are located. Id. ¶ 8. Plaintiff brings this Action as 16 the purported assignee of patients seeking recovery of 17 ERISA benefits they allege Defendant owes them. Id. ¶¶ 18 14-16. 19 Plaintiff provided surgery center facility services 20 to eleven patients1 enrolled in the Teamsters Western 21 Region & Local 177 Health Care Plan (“Teamsters Plan”), 22 a health plan governed by ERISA.2 Id. ¶¶ 10, 11. 23 24 25 1 Patients A, B, C, D, F, G, H, I, J, L, and N are all covered under the Teamsters Plan. SAC ¶ 10. 2 Plaintiff previously alleged that it also provided 26 services to two patients—M and K—enrolled in the Woodward, Inc. 27 Plan and Williams Lea Inc. Health Care Plan (collectively, “Woodward and Williams Lea Plans”), and for one patient, Patient 28 E, whom Plaintiff was unable to locate an applicable ERISA Plan document for. First Am. Compl. (“FAC”) ¶¶ 31, 12-14, ECF No. 18. 2 1 Plaintiff alleges that all of these patients assigned 2 their health plan benefits to Plaintiff and that 3 Plaintiff submitted seventeen claims for medical 4 services provided to these patients. 5 see id., Ex. A, ECF No. 30-1. Id. ¶¶ 21, 46; Plaintiff alleges that 6 Defendant failed to pay Plaintiff’s full billed 7 charges, and that as an assignee of these benefits, it 8 is entitled to recover additional payments from 9 Defendant. 10 Id. ¶¶ 38, 39. Defendant has provided the Teamster’s Summary Plan 11 Description document (“Teamsters SPD”). Id. ¶ 17. The 12 Teamsters SPD contains the following clause in a 13 section titled “General Provisions”: “Participants are 14 generally responsible for notifying the Fund of changes 15 in family circumstances. Benefits are not assignable, 16 although the Fund will honor qualified medical child 17 support orders.” Id. The parties dispute whether this 18 clause is a valid anti-assignment provision (“AAP”). 19 The Teamsters SPD is not by itself the Teamsters Plan 20 document, but it expressly references Article X of the 21 Teamsters Plan Rules and Regulations. Id. ¶ 18. 22 Article X of the Teamster Plan Rules and Regulations, 23 Section B provides: 24 25 Benefits payable hereunder shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge by any person; however, any Eligible 26 27 The Court granted Defendant’s Motion to Dismiss Plaintiff’s FAC 28 without leave to amend as to these three patients, and as such, these claims are no longer before the Court. 3 1 Employee may direct that benefits due him/her, except benefits payable under Article III, be paid to an institution in which he/she or his/her Dependent is hospitalized, or to any provider of medical, dental or vision care services or supplies in consideration for Hospital, medical, dental or vision care services rendered or to be rendered. 2 3 4 5 Notwithstanding the foregoing, the Fund will honor any “qualified medical child support order” as defined by ERISA Section 609, received with respect to the Fund, and will make any payment required by ERISA Section 609 to a State which has acquired rights under that Section. 6 7 8 9 Id. ¶ 20; see id., Ex. D at 59. 10 B. Procedural Background 11 Plaintiff filed its Complaint [1] on May 9, 2018 12 for recovery of benefits under ERISA. Defendant filed 13 a Motion to Dismiss [13] on August 6, 2018. This Court 14 granted Defendant’s Motion to Dismiss with leave to 15 amend [17] on November 8, 2018.3 On November 29, 2018, 16 Plaintiff filed its First Amended Complaint (“FAC”) 17 [18]. On December 13, 2018, Defendant filed a Motion 18 to Dismiss Plaintiff’s FAC [19], which the Court 19 granted on February 27, 2019 [29]. Specifically, the 20 Court dismissed without leave to amend Plaintiff’s 21 claims under the Woodward & Williams Lea Plans, and 22 Plaintiff’s claim brought on behalf of Patient E. The 23 Court granted leave to amend solely as to Plaintiff’s 24 25 26 27 28 3 The Court found that Plaintiff did not adequately allege standing to bring an ERISA claim on behalf of the patients, as 13 of the 14 patients’ plans appeared to contain anti-assignment provisions, and Plaintiff did not allege the terms of or identify the remaining patient’s plan (Patient E). See Order 13:26-14:11, ECF No. 17. The Court also found that Defendant did not adequately plead estoppel or waiver. Id. 4 1 claims under the Teamsters Plan. 2 On March 20, 2019, Plaintiff filed its SAC [30]. 3 On April 3, 2019, Defendant filed the instant Motion to 4 Dismiss Plaintiff’s SAC [31]. Plaintiff timely opposed 5 [33], and Defendant timely replied [34]. 6 II. DISCUSSION 7 A. Legal Standard 8 Federal Rule of Civil Procedure 12(b)(6) allows a 9 party to move for dismissal of one or more claims if 10 the pleading fails to state a claim upon which relief 11 can be granted. A complaint must “contain sufficient 12 factual matter, accepted as true, to state a claim to 13 relief that is plausible on its face.” Ashcroft v. 14 Iqbal, 556 U.S. 662, 678 (2009)(quotation omitted). 15 Dismissal is warranted for a “lack of a cognizable 16 legal theory or the absence of sufficient facts alleged 17 under a cognizable legal theory.” Balistreri v. 18 Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 19 1988)(citation omitted). 20 In ruling on a 12(b)(6) motion, a court may 21 generally consider only allegations contained in the 22 pleadings, exhibits attached to the complaint, and 23 matters properly subject to judicial notice. Swartz v. 24 KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). A court 25 must presume all factual allegations of the complaint 26 to be true and draw all reasonable inferences in favor 27 of the non-moving party. Klarfeld v. United States, 28 944 F.2d 583, 585 (9th Cir. 1991). 5 The question is not 1 whether the plaintiff will ultimately prevail, but 2 whether the plaintiff is entitled to present evidence 3 to support the claims. Jackson v. Birmingham Bd. of 4 Educ., 544 U.S. 167, 184 (2005) (quoting Scheuer v. 5 Rhodes, 416 U.S. 232, 236 (1974)). While a complaint 6 need not contain detailed factual allegations, a 7 plaintiff must provide more than “labels and 8 conclusions” or “a formulaic recitation of the elements 9 of a cause of action.” 10 U.S. 544, 555 (2007). Bell Atl. Corp. v. Twombly, 550 However, a complaint “should not 11 be dismissed under Rule 12(b)(6) ‘unless it appears 12 beyond doubt that the plaintiff can prove no set of 13 facts in support of his claim which would entitle him 14 to relief.’” Balistreri, 901 F.2d at 699 (citing 15 Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). 16 B. Discussion 17 This case is now before the Court for the third 18 time in the context of a motion to dismiss for failure 19 to state a claim regarding the issue of standing under 20 ERISA. To have standing to state a claim under ERISA, 21 “a plaintiff must fall within one of ERISA's nine 22 specific civil enforcement provisions, each of which 23 details who may bring suit and what remedies are 24 available.” Reynolds Metals Co. v. Ellis, 202 F.3d 25 1246, 1247 (9th Cir. 2000) (citing 29 U.S.C. §§ 26 1132(a)(1)-(9)). ERISA's civil enforcement provision, 27 29 U.S.C. §1132(a), identifies plan participants, 28 beneficiaries, fiduciaries, and the Secretary of Labor 6 1 as “[p]ersons empowered to bring a civil action.” See 2 Misic v. Bldg. Serv. Emps. Health & Welfare Trust, 789 3 F.2d 1374, 1378 (9th Cir. 1986). A non-participant 4 health care provider cannot bring claims for benefits 5 on its own behalf, but must do so “derivatively, 6 relying on its patient’s assignments of their benefits 7 claims.” Spinedex Physical Therapy USA Inc. v. United 8 Healthcareof Arizona, Inc., 770 F.3d 1282, 1289 (9th 9 Cir. 2014). A plaintiff lacks standing if the relevant 10 ERISA plan contains a valid and unambiguous AAP. See 11 id. at 1296 (affirming district court’s holding that an 12 anti-assignment provision prevented patients from 13 assigning claims); Davidowitz v. Delta Dental Plan of 14 Cal., Inc., 946 F.2d 1476, 1477 (9th Cir. 1991)(“ERISA 15 welfare plan payments are not assignable in the face of 16 an express non-assignment clause in the plan.”).4 17 The Court previously granted Defendant’s Motion to 18 19 4 Plaintiff argues that there is a conflict in the Ninth 20 Circuit, specifically that enforcing AAPs is inconsistent with Misic. Plaintiff brings this argument now, for the first time, 21 despite briefing this issue twice before this Court on a motion to dismiss, and despite the Court laying out the Ninth Circuit 22 case law twice before in its Orders. Contrary to Plaintiff’s there is no Ninth 23 argument,the enforceability Circuit split that the Court is aware of as to of AAPs. Misic held that there is no 24 statutory bar to assignments of welfare benefits, but did not 25 26 27 28 itself deal with AAPs. In fact, every Ninth Circuit decision since Misic that has addressed AAPs, has found them to be enforceable. See, e.g., DB Healthcare, LLC v. Blue Cross Blue Shield of Arizona, Inc., 852 F.3d 868, 876 (9th Cir. 2017); Spinedex Physical Therapy USA Inc. v. United Healthcare of Arizona, Inc., 770 F.3d 1282, 1296 (9th Cir. 2014); Brand Tarzana Surgical Inst., Inc. v. Int’l Longshore & Warehouse Union-Pac. Mar. Ass’n Welfare Plan, 706 F. App’x 442, 443 (9th Cir. 2017). 7 1 Dismiss Plaintiff’s FAC [19], in which it dismissed 2 Plaintiff’s claims on behalf of the patients enrolled 3 under the Woodward and Williams Lea Plans finding that 4 a valid AAP barred those claims. See Order re Def.’s 5 Mot. to Dismiss FAC, ECF No. 29. As to the eleven 6 patients under the Teamsters Plan, the Court found that 7 the purported AAP within the Teamsters SPD would bar 8 Plaintiff’s claims if it were found to be valid and 9 unambiguous, but the Court declined to make such a 10 determination. As such, the Court dismissed 11 Plaintiff’s claim under the Teamster’s Plan but granted 12 leave to amend because it found that it was at least 13 plausible the Rules and Regulations of the Teamsters 14 Plan, not before the Court at the time, could elaborate 15 on whether Plaintiff’s claims fall within an exception 16 in which the AAP would not apply. 17 See id. The Teamsters SPD contains the following clause 18 that Defendant argues, as it has previously, is a valid 19 AAP: 20 21 22 Participants are generally responsible for notifying the Fund of changes in family circumstances. Benefits are not assignable, although the Fund will honor qualified medical child support orders. 23 SAC ¶ 17. Plaintiff’s SAC now attaches the Rules and 24 Regulations from the Teamsters Plan for the first time. 25 Defendant argues that with the terms of the Teamsters 26 Plan before the Court now, there is no doubt that the 27 AAP bars Plaintiff’s claims. 28 8 Plaintiff argues that the 1 language contained in the Rules and Regulations of the 2 Teamsters Plan itself is materially different from the 3 purported AAP in the Teamsters SPD. Specifically, 4 Plaintiff argues that the SPD is not absolute and that 5 the Rules and Regulations contain an exception for 6 benefits payable to a medical services provider in 7 consideration for hospital, medical, dental, or vision 8 care services rendered or to be rendered. 9 6:5-19, ECF No. 33. Pl.’s Opp’n The relevant language contained in 10 the Rules and Regulations, Section B of Article X 11 General Provision (“Section B”), provides: 12 13 14 15 16 17 Benefits payable hereunder shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge by any person; however, any Eligible Employee may direct that benefits due to him/her, except benefits payable under Article III, be paid to an institution in which he/she or his/her Dependent is hospitalized, or to any provider of medical, dental or vision care services or supplies in consideration for Hospital, medical, dental or vision care services rendered or to be rendered. 18 19 20 21 Notwithstanding the foregoing, the Fund will honor any ‘qualified medical child support order’ as defined by ERISA Section 609, received with respect to the Fund, and will make any payment required by ERISA Section 609 to a State which has acquired rights under that Section. 22 SAC ¶ 20; see id., Ex. D, Teamsters Plan Rules and 23 Regulations 59, ECF No. 30-4. 24 Defendant argues that Section B is nothing more 25 than a direct payment provision. Indeed, Section B 26 prohibits the assignment of benefits, but allows 27 “Eligible Employees” to direct any benefits other than 28 9 1 those payable under Article III, to be paid to a 2 provider. Id. ¶ 20. The ability to assign benefits, 3 and the ability to direct payment are not mutually 4 exclusive, and here, the Court construes Section B to 5 prohibit assignments but allow direct payments to 6 providers. The Court has twice now emphasized that 7 provisions allowing direct payments to the Provider do 8 not afford the Provider “beneficiary” status under 9 ERISA. See DB Healthcare, LLC v. Blue Cross Blue 10 Shield of Arizona, Inc., 852 F.3d 868, 875 (9th Cir. 11 2017) (“Neither a designation in a health benefit plan 12 nor an assignment by a patient allowing a health care 13 provider to receive direct payment for health services 14 entitles a health care provider to “benefits” on its 15 own behalf.”); FAC Order at 18; Order re Mot. to 16 Dismiss Compl. 13, ECF No. 17. Even if Section B’s 17 direct payment provision did confer standing to 18 Plaintiff, it explicitly excludes benefits payable 19 under Article III, which governs eligible medical 20 expenses like the claims at issue here. 21 at 33. See SAC, Ex. D Consequently, the Court rejects Plaintiff’s 22 argument that Section B contains an exception to the 23 AAP. 24 Plaintiff alternatively argues that even if the AAP 25 is valid, it would be contrary to the Financial 26 Responsibility Agreement signed between Plaintiff and 27 its patients. By signing this document the patients 28 agree that the Financial Responsibility Agreement: 10 1 2 3 4 5 6 7 8 9 10 11 [] [I]s a direct assignment of my rights and benefits under my insurance plan or policy. I further instruct and direct my insurance plan or policy to pay all entitled plan benefits at the stated plan benefit level directly to [Beverly Oaks] related to services rendered. I understand under applicable ERISA, state and/or federal regulatory guidelines that I have the right and authority to direct where payment for services rendered is sent. If my current policy prohibits direct payment to the provider of service, I under my rights per state and federal ERISA regulations hereby instruct and direct my insurance plan or policy to provide documentation stating such non-assignability clause to myself and [Beverly Oaks]. Upon proof of non-assignability documentation, I then instruct that my insurance plan or policy make out the check to me and mail it directly to [Beverly Oaks] at the address listed on the submitted claim for the professional or medical expense benefits. 12 13 SAC ¶ 27; see id., Ex. B, Financial Responsibility 14 Agreement, ECF No. 30-2. However, the Court has 15 already directly rejected this argument, finding that 16 this agreement is between Plaintiff and its patients, 17 and does not reflect the terms of an ERISA Plan, nor 18 does it trump the AAP. See FAC Order at 20 (citing DB 19 Healthcare, 852 F.3d at 876) (“While this agreement 20 does demonstrate the patients’ willingness to assign 21 benefits, the ‘governing employee benefit plans contain 22 non-assignment clauses that override any purported 23 assignments.’”). 24 In sum, the Court finds that Section B does not 25 contradict the Teamsters SPD, but in fact is consistent 26 in providing an express AAP. As a result, Plaintiff 27 lacks standing to bring its claims on behalf of the 28 patients under the Teamsters Plan. 11 See Spinedex, 770 1 F.3d at 1296 (affirming district court’s holding that 2 an anti-assignment provision prevented patients from 3 assigning claims); Mull for Mull v. Motion Picture 4 Industry Health Plan, 865 F.3d 1207, 1210 (9th Cir. 5 2017) (citation omitted) (finding SPDs are enforceable 6 “so long as the SPD neither adds to nor contradicts the 7 terms of existing Plan documents”). Because Plaintiff 8 has previously been allowed two attempts to cure its 9 deficiencies, and because the Rules and Regulations of 10 the Teamsters Plan now shows there is a valid AAP 11 denying Plaintiff standing, the Court GRANTS 12 Defendant’s Motion to Dismiss Plaintiff’s SAC WITHOUT 13 LEAVE TO AMEND as any further amendment would be 14 futile.5 15 /// 16 /// 17 /// 18 /// 19 /// 20 21 5 Defendant argues that the Rules and Regulations establish 22 that Plaintiff’s claims are barred by a one-year contractual limitations period. The Rules and Regulations read that “[a]ny 23 legal action or suit to secure judicial review of a claim within 24 determination must be filedTrusteesone year of the date of the final determination of the or their claim-review 25 delegate, or judicial review is time barred.” 26 27 28 SAC, Ex. D at 60. The claims at issue were in 2014 and 2015, but Plaintiff brought this Action on May 9, 2018. The parties dispute whether there was a final determination here, causing the time to run, however the Court need not address this argument as it already found that the Rules and Regulations contain a valid AAP and that any amendment would be futile. 12 1 2 III. CONCLUSION Based on the foregoing, the Court GRANTS 3 Defendant’s Motion to Dismiss Plaintiff’s SAC WITHOUT 4 LEAVE TO AMEND. 5 6 IT IS SO ORDERED. 7 8 DATED: June 20, 2019 9 s/ RONALD S.W. LEW HONORABLE RONALD S.W. LEW Senior U.S. District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 13

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