International Longshore & Warehouse Union-Pacific Maritime Association Welfare Plan Board of Trustees et al v. South Gate Ambulatory Surgery Center, LLC et al
Filing
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ORDER DENYING MOTION FOR SUMMARY JUDGMENT AND VACATING HEARING by Hon. William Alsup denying 126 Motion for Summary Judgment.(whalc1, COURT STAFF) (Filed on 9/24/2012)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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For the Northern District of California
United States District Court
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INTERNATIONAL LONGSHORE &
WAREHOUSE UNION-PACIFIC
MARITIME ASSOCIATION WELFARE
PLAN BOARD OF TRUSTEES,
Plaintiff,
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No. C 11-01215 WHA
ORDER DENYING MOTION
FOR SUMMARY JUDGMENT
AND VACATING HEARING
v.
SOUTH GATE AMBULATORY
SURGERY CENTER, LLC and
JEFFREY HO,
Defendants.
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AND RELATED COUNTERCLAIMS.
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INTRODUCTION
In this ERISA action for recovery of alleged overpayments, defendants move for
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summary judgment of all claims against them. For the reasons stated below, the motion is
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DENIED. The hearing scheduled for October 4 is VACATED.
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STATEMENT
The background of this action has been described in a prior order denying defendants’
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motion to dismiss (Dkt. No. 69). International Longshore & Warehouse Union-Pacific Maritime
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Association Welfare Plan is an ERISA plan. Plaintiff International Longshore & Warehouse
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Union-Pacific Maritime Association Welfare Plan Board of Trustees is the plan administrator
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and trustee. Defendant Jeffrey Ho, M.D., is a physician who provided medical services to plan
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members at defendant South Gate Ambulatory Surgery Center’s facilities. The plan paid claims
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submitted by defendants for medical services provided to plan members.
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The plan reimbursed “usual, customary, and reasonable” rates for medical care that was
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medically necessary, met established treatment protocols in the United States, and was not
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experimental (Wechsler Decl. ¶ 12; Dkt. No. 132 at A182, A186). Dr. Ho and other providers at
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South Gate billed the plan for many procedures that were not medically necessary and inflated
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charges beyond reasonable rates (Busch Decl. ¶ 6; Pasvankas Decl. ¶¶ 3–8; Wechsler Decl. ¶¶ 2,
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17). Unaware of this overbilling at the time, the board permitted defendants to submit invoices
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as the plan members’ assignees (Wechsler Decl. ¶ 14). In this action, the board now seeks the
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For the Northern District of California
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return of money paid to defendants (Compl. ¶¶ 12–15, 26–27).1
Last year, defendants moved to dismiss this action on the grounds that the restitution
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remedy sought by the board is not an equitable remedy provided by Section 502(a)(3) of ERISA.
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The order denying defendants’ motion to dismiss rejected this argument, assuming the truth of
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all facts pled. The order held that plaintiffs had pled sufficient facts to make the existence of an
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equitable lien by agreement plausible: “Plaintiffs have pled sufficient facts to make it plausible
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that defendants, via contractual assignment from plan members, agreed to a lien on the alleged
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overpayments and erroneous payments when they submitted claims to the plan” (Dkt. No. 69
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at 6). Now, in a summary judgment motion, defendants argue there was no lien by agreement
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because all assignments by plan members were void pursuant to an anti-assignment provision.
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ANALYSIS
Summary judgment is proper when the “pleadings, depositions, answers to
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interrogatories, and admissions on file, together with the affidavits, show that there is no genuine
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issue as to any material fact and that the moving party is entitled to judgment as a matter of law.”
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FRCP 56(c). An issue is genuine only if there is sufficient evidence for a reasonable fact-finder
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Defendants request judicial notice of certain plan documents. The board has not objected and in fact
cites those same plan documents, which were also appended to the operative complaint. Therefore, defendants’
request to take judicial notice is granted for the following documents: the plan’s agreement (Dkt. No. 132 at
A21–150), the summary plan description (Dkt. No. 132 at A151–71), the coastwise indemnity plan (Dkt. No.
132 at A172–207), and South Gate’s financial responsibility forms (Dkt. No. 132 at B208–10).
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to find for the non-moving party, and material only if the fact may affect the outcome of the case.
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Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248–49 (1986).
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A plan fiduciary may bring a civil action under ERISA to obtain “appropriate equitable
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relief” to redress violations of the terms of the plan. 29 U.S.C. 1132(a)(3). The Supreme Court
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has construed this statute “to authorize only ‘those categories of relief that were typically
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available in equity.’” Sereboff v. Mid Atl. Med. Servs., Inc., 547 U.S. 356, 361 (2006). There is
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no dispute that the board is a fiduciary able to seek equitable claims pursuant to
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Section 502(a)(3)(B).
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The dispute on summary judgment is whether there existed an equitable lien by
agreement, subject to restitution, on the overpayments to defendants. Our court of appeals
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For the Northern District of California
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recently established three criteria for securing an equitable lien by agreement in a Section
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502(a)(3)(B) ERISA action:
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First, there must be a promise by the beneficiary to reimburse the
fiduciary for benefits paid under the plan in the event of a recovery
from a third party. Second, the reimbursement agreement must
specifically identify a particular fund, distinct from the
beneficiary’s general assets, from which the fiduciary will be
reimbursed. Third, the funds specifically identified by the
fiduciary must be within the possession and control of the
beneficiary.
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Bilyeu v. Morgan Stanley Long Term Disability Plan, 683 F.3d 1083, 1092–93 (9th Cir. 2012)
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(quotations marks and citations omitted). A party need not be a signatory to a plan to be bound
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by it. CGI Technologies and Solutions, Inc. v. Rose, 683 F.3d 1113, 1117–18 (9th Cir. 2012).
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The narrow issue raised by defendants’ motion for summary judgment is whether assignments by
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plan members to defendants were void ab initio.
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The gravamen of the complaint is that defendants overbilled the plan for medical charges
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above and beyond what was medical necessary and at unreasonable rates. The ultimate question
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is whether the plan, through its trustee, has a right to seek restitution of these overpayments.
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This involves issues that go beyond the four-corners of the plan documents and assignment
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provisions. Defendants’ motion, however, presents only a narrow contractual question of
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whether there existed a non-void assignment provision to healthcare providers under the plan’s
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terms. Defendants contend that the plan members could not assign anything and therefore any
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lien cannot be by virtue of assignment. This argument is rejected because the record supports
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that the plan members could assign their benefits to defendants. It is unnecessary to reach other
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issues in this action not raised by defendants. For example, this order does not reach other
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theories of equitable relief, such as constructive trust, nor address other elements required for a
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lien by agreement, such as identification of a particular fund and evidence that said fund is
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within the possession and control of defendants. Defendants also do not distinguish between
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assignment of medical benefits and delegation of duties to reimburse for overbilling; instead,
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defendants argue that all contractual assignments by plan members were void pursuant to an
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anti-assignment provision.
After reviewing the plan documents in the present record, this order finds that a
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reasonable interpretation can be made that the plan allowed for assignments to defendants,
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raising a genuine dispute of material fact and precluding summary judgment. In interpreting the
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terms of an ERISA plan, a court must examine the plan documents as a whole, and if
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unambiguous, construe them as a matter of law. Vaughn v. Scottsdale Healthcare Corp. Health
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Plan, 546 F.3d 620, 626 (9th Cir. 2008).
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[T]erms in a pension plan should be interpreted in an ordinary and
popular sense as would a person of average intelligence and
experience. When disputes arise as to the meaning of one or more
terms, we first look to the explicit language of the agreement to
determine the clear intent of the parties. The intended meaning of
even the most explicit language can, of course, only be understood
in the light of the context that gave rise to its inclusion. An
ambiguity exists when the terms or words of a pension plan are
subject to more than one reasonable interpretation. In fact, only by
excluding all alternative readings as unreasonable may we find that
a plan’s language is plain and unambiguous.
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McDaniel v. Chevron Corp., 203 F.3d 1099, 1110 (9th Cir. 2000) (quotation marks and citations
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omitted).
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Both parties agree that the plan’s agreement, the plan’s summary plan description, and
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the coastwise indemnity plan are the “foundational” documents for interpreting the plan’s terms
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(Br. 8–9, 16–17; see Opp. 4). Both parties also agree that defendants required the plan’s
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beneficiaries, to
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assign to [South Gate] all benefits under any insurance policy,
health plan, worker’s compensation or other third party payor
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liable to the patient, in consideration of the services rendered by
[South Gate]. The patient also hereby assigns benefits to all
physicians involved in the care of the patient while at [South Gate]
(the physicians billings will usually be billed separately from
[South Gate’s] billings)
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(Dkt. No. 132 at B-208). Again, the sole issue contested on summary judgment is whether the
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plan’s terms allowed assignments to defendants (see Reply Br. 14–16).2
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Contrary to defendants, there was express language in the plan’s agreement that allowed
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for assignment of medical claims to healthcare providers and collection of overpayments by the
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board. Paragraph 5.74 of the plan’s agreement provided:
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If a third party provider of Benefits hereunder, through error,
misrepresentation, or fraud, receives payment of Welfare Fund
assets in an amount greater than the amount authorized under the
Plan, the Trustees, in their sole, absolute, and unreviewable
discretion, may collect the amount of any such overpayment(s) and
any amounts expended or incurred in investigating the matter and
collecting the overpayment(s) (including, but not limited to,
expenses of the Trustees’ staff and reasonable fees of any
investigators, attorneys, and/or consultants retained by or on behalf
of the Trustees). The Trustees may, in their sole, absolute, and
unreviewable discretion, disallow any future assigned Benefit
claims presented by such provider, and take any other action they
may deem necessary or appropriate under the circumstances.”
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(Dkt. No. 132 at A90) (emphasis added). Although the terms “assignment” and “provider” were
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not defined by the plan’s agreement itself, the plan’s summary description clarified some of the
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ambiguity. The plan’s summary description, which defendants admit is a foundational plan
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document, stated:
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Assignment.
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Generally, Welfare Plan benefits or the rights to receive such
benefits may not be assigned to any third party other than doctors
or other providers of care.”
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(Dkt. No. 132 at A167) (emphasis added). This reasonably suggests that defendants, who were
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providers of medical care, could have been assigned a beneficiary’s medical benefits under the
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To repeat, both parties agree that the coastwise indemnity plan is a foundational document for
purposes of interpreting the plan’s terms (Dkt. No. 132 at A172–207). The coastwide indemnity plan is
allegedly the plan’s self-funded indemnity program for medical, surgical, and hospital benefits (Welscher Decl.
¶ 8). Neither side, however, has pointed to the provision where the plan’s agreement expressly incorporates by
reference the coastwise indemnity plan. Nevertheless, for purposes of this motion, this order will rely on the
parties’ representation that the coastwise indemnity plan’s terms are “foundational” for interpreting the plan’s
terms.
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plan’s assignment terms. Since this was the sole issue raised by defendants’s motion, their
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request for summary judgment is DENIED.
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Defendants argue that assignments of plan benefits were void ab initio because of a
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subsequent anti-assignment paragraph also found in the plan’s agreement. Paragraph 6.24 of the
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plan’s agreement stated:
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No Benefits, monies or property of the Welfare Fund shall be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge by any
Longshoreman, Pensioner, Social Security Retiree, or any other
person for any purpose other than by the Trustees for purposes
herein provided, and any attempt to do so shall be void; provided,
that pursuant to Section 609(b) of ERISA, (a) payment for Benefits
with respect to a person with Eligibility shall be made in
accordance with any assignment of right made by or on behalf of
such person as required by state plan for medical assistance
approved under title XIX of the Social Security Act pursuant to
section 1912(a)(1) of such Act (as in effect on the date of the
enactment of the Omnibus Budget Reconciliation Act of 1993)
(hereinafter referred to as a “State Approved Medical Assistance
Plan”), and (b) to the extent that payment has been made under a
State Approved Medical Assistance Plan in any case for Benefits,
for which the Plan has a legal liability, payment by the Plan for
such Benefits will be made in accordance with any state law that
provides that the State has acquired the rights with respect to a
Participant to such payment for such Benefits.
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(Dkt. No. 132 at A92) (emphasis added). According to defendants, this anti-assignment
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provision rendered void attempts by the plan’s beneficiaries to assign their medical benefits to
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defendants. Not necessarily. One key exception in the above-quoted provision came from the
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phrase “other than by the Trustees for purposes herein provided.” It is ambiguous whether the
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“herein” meant within the paragraph itself — which went on to discuss purposes that are
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irrelevant to the issue in this action, such as assignment for person with coverage under a State
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Medicaid program — or the entire plan agreement, which had the purpose of providing medical
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coverage for beneficiaries.
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The board argues that the anti-assignment provision stood only for the proposition that
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assignments by plan members were void if the board rejected those assignments. That is,
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assignments accepted as valid by the board were enforceable. There is evidence in the record
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that the board permitted assignments to defendants (Wechsler ¶ 14). There is also sufficient
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evidence to support the board’s interpretation of the plan’s terms and raise a genuine dispute of
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material fact. First, the coastwise indemnity plan, another agreed-upon foundational plan
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document, described the board as falling outside the anti-assignment provision:
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Under provisions of the [plan’s agreement], Welfare Plan benefits
are not subject to assignment by a participant, beneficiary or any
other person except the Trustees, and any attempt to do so shall be
void.
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(Dkt. No. 132 at A183) (emphasis added). Second, the plan’s summary description described the
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above-quoted provision as follows (Dkt. No. 132 at A167):
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Generally, Welfare Plan benefits or the rights to receive such
benefits may not be assigned to any third party other than doctors
or other providers of care. However, ERISA provides that in the
case of persons with coverage under a State Medicaid program,
automatic assignment of benefits to State Medicaid agencies is
enforceable against the Plan.
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This description of the anti-assignment provision expressly stated that healthcare providers could
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be assigned the plan’s benefits.
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Defendants also base their argument on a provision of coastwise indemnity plan that
stated:
Where benefits are paid directly to a doctor, hospital or other
provider of care (other than a State Medicaid agency), such direct
payments are provided at the discretion of the Trustees as a
convenience to Plan participants and do not imply an enforceable
assignment of Welfare benefits or the right to receive such
benefits.
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(Dkt. No. 132 at A183). This provision is insufficient to preclude a genuine dispute regarding
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assignment. The plain language of this provision stood only for the proposition that direct
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payments themselves “d[id] not imply an enforceable assignment.” The provision was silent as
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to whether the Board could have approved assignments expressly or by means other than direct
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payment. Indeed, one reasonable inference of this language, by negative implication, is that the
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board could have expressly approved assignments to a doctor or hospital, such as defendants, but
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that direct payment by itself should not have been interpreted to mean express approval of an
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assignment. That is, if all assignments were void ab initio, as defendants argue, there would be
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no need to include a superfluous provision about implications of direct payments.
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CONCLUSION
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For the reasons stated, the motion for summary judgment is DENIED. The hearing
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scheduled for October 4 is VACATED.
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IT IS SO ORDERED.
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Dated: September 24, 2012.
WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE
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For the Northern District of California
United States District Court
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