Lee Memorial Health System v. Blue Cross and Blue Shield of Florida, Inc.

Filing 79

OPINION AND ORDER sustaining 72 Objections in part and finding Objections moot in part; rejecting 68 Report and Recommendations for the reasons set forth in the Opinion and Order; granting 66 Motion for Leave to File Second Amended Complain t; and denying as moot 60 Motion for Judgment on the Pleadings. Plaintiff is directed to file the proposed Second Amended Complaint within SEVEN (7) days of entry of this order. Defendant shall have TWENTY-ONE (21) days from the docketing of the Second Amended Complaint to file a responsive pleading. Signed by Judge John E. Steele on 7/1/2019. (FWH)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
LEE MEMORIAL HEALTH SYSTEM,
Plaintiff,
v.

Case No:

2:16-cv-738-FtM-29UAM

WINN DIXIE STORES, INC.,
Defendant.

OPINION AND ORDER
This matter comes before the Court on consideration of the
Magistrate Judge’s Report and Recommendation (Doc. #68) filed
January 25, 2019, recommending defendant Winn Dixie Stores, Inc.’s
Motion

for

Judgment

on

the

Pleadings

(Doc.

#60)

be

granted,

plaintiff Lee Memorial Health System’s Motion for Leave to File
Second Amended Complaint (Doc. #66) be denied, and the case be
dismissed for lack of standing.

Lee Memorial filed an Objection

(Doc. #72) on February 21, 2019, to which Winn Dixie filed a
Response (Doc. #78) on March 13, 2019.
On May 10, 2017, Lee Memorial filed an Amended Complaint
against Blue Cross and Blue Shield of Florida, Inc. and Winn Dixie.
(Doc. #17.)

Lee Memorial alleges Winn Dixie improperly denied a

claim for health care benefits by adopting a misconstruction of a
provision in its ERISA 1 employee health benefits plan by Blue

1

Employee Retirement Income Security Act, 29 U.S.C. § 1001

Cross,

its

third-party

claims

administrator.

Acting

as

the

assignee of a Plan participant, Lee Memorial seeks damages from
Winn Dixie for non-payment of benefits for its hospital services
(Count II).

(Id. p. 10.)

Lee Memorial also seeks a declaratory

judgment against Winn Dixie as to (1) the proper interpretation of
a provision in the ERISA plan, (2) the sufficiency under ERISA of
certain procedures followed in the denial of the claim, and (3)
the proper interpretation of a separate agreement between Lee
Memorial and Blue Cross (Count I).

(Id. pp. 9-10.)

I.
A. Factual Background
The Amended Complaint contains the following material factual
allegations applying to both counts:
Shannon

Anderson

was

an

employee

of

Winn

Dixie

and

a

participant in an Employer Sponsored Benefit Plan (“the Plan”)
providing health plan coverage to Winn Dixie employees. (Doc. #17,
¶¶ 7, 15; Doc. #17-1.) 2

The Plan constitutes an employee welfare

plan within the meaning of ERISA.

(Doc. #17, ¶ 8.)

participant,

to

Anderson

had

the

right

have

her

medical

As a
and

et seq.
2

A copy of the
Amended Complaint.
plan, and Blue Cross
any funds from which

summary plan description is attached to the
(Doc. #17-1.)
The Plan is a self-insured
does not provide either insurance coverage or
benefits are paid. (Doc. #58, p. 2 n.2.)

2

hospitalization costs paid under the Plan.

(Id. ¶ 15.)

Winn Dixie, as the Plan sponsor, Plan administrator, and a
“fiduciary” of the Plan as defined by various ERISA provisions,
has the authority to control the operation and administration of
the Plan.

(Id. ¶ 9.)

Blue Cross provides third-party claims

administration for the Plan pursuant to an Administrative Services
Agreement (Doc. #17-2) and is alleged to be an interested party
and

a

fiduciary

under

ERISA.

(Doc.

#17,

¶¶

7,

11(a).)

Additionally, Blue Cross and Lee Memorial entered into a Preferred
Patient Hospital Agreement (“the Agreement”) whereby Lee Memorial
agreed to file claims with Blue Cross for health care services it
provided to covered Winn Dixie employees.

(Id. ¶¶ 11(a), 13.)

On October 3, 2013, Anderson was hospitalized after being
involved in a motor vehicle accident.

(Id. ¶ 17.)

Lee Memorial

provided hospital services to Anderson from October 3, 2013 through
October 18, 2013.

(Id. ¶¶ 16-17.)

When she was admitted into the

hospital, Anderson executed an admissions contract assigning to
Lee Memorial all rights to receive payments from Blue Cross under
the Plan for hospital services rendered.

(Id. ¶ 19.)

Lee Memorial subsequently submitted a claim to Blue Cross
under

the

Anderson.

Plan
(Id.

for
¶

payment
20.)

of

Blue

hospital
Cross

services

denied

provided

coverage

to

without

identifying a specific provision within the Plan and stated that
“the member’s injuries were the result of the member’s alcohol

3

intoxication.”

(Id. ¶ 21; Doc. #17-4.)

B. Procedural Background
In May 2017, Lee Memorial filed its Amended Complaint seeking
a declaratory judgment pursuant to 28 U.S.C. § 2201 against Blue
Cross and Winn Dixie regarding (1) the proper interpretation of
the Plan, (2) whether the denial of the claim complied with ERISA
requirements, and (3) the proper interpretation of the Agreement
between Blue Cross and Lee Memorial. (Doc. #17, ¶¶ 36-45.)

Lee

Memorial also alleged Winn Dixie violated ERISA and breached the
terms of the Plan by denying the claim submitted by Lee Memorial.
(Id. ¶¶ 46-50.)
On May 24, 2017, Blue Cross filed a motion to dismiss Lee
Memorial’s declaratory judgment claim as it applied to Blue Cross.
(Doc. #19.)

On March 9, 2018, the Court granted the motion due

to lack of standing, dismissed Count I of the Amended Complaint,
and directed the Clerk to terminate Blue Cross on the docket.
(Doc. #58, pp. 10-13.)

The case proceeded on Count II as to Winn

Dixie, who had not joined the motion to dismiss. (Id. p. 13.)
Following the dismissal of Blue Cross, Winn Dixie moved for
judgment on the pleadings, arguing Lee Memorial did not have
standing to bring suit under ERISA.

(Doc. #60.)

Lee Memorial

filed a response in opposition and contemporaneously moved for
leave to file a second amended complaint.

(Doc. #65; Doc. #66.)

Winn Dixie responded in opposition to Lee Memorial’s motion on the

4

basis that additional facts would not alter Lee Memorial’s lack of
standing.

(Doc.

#67.)

Both

motions

were

referred

to

the

Magistrate Judge.
II.
On January 25, 2019, the Magistrate Judge issued her Report
and Recommendation.

(Doc. #68.)

Regarding Winn Dixie’s motion

for judgment on the pleadings, the Magistrate Judge recommended
granting the motion and dismissing the case for lack of standing.
(Id. p. 1.)
previous

The Magistrate Judge, referring to this Court’s

order

(Doc.

#58),

found

that

Lee

Memorial

lacks

“independent standing to sue under ERISA” because “[h]ealthcare
providers are not participants, beneficiaries or fiduciaries under
ERISA,” and the assignment of rights from Anderson was ineffective
because

the

provision.”

Plan

contained

an

“unambiguous

(Doc. #68, pp. 4-5.)

anti-assignment

The Magistrate Judge also

suggested Winn Dixie “did not waive the issue of standing by
failing to raise it as an affirmative defense” because the Eleventh
Circuit “has not addressed whether lack of standing is included in
the scope of ‘avoidance or affirmative defense’ as contemplated by
Rule

8(c),”

determined

and

the

“the

presiding

non-assignment

judge

clause

Memorial] without standing under ERISA.”

in
in

this
the

case

Plan

already

left

[Lee

(Id. p. 6.)

Regarding Lee Memorial’s motion for leave to file a second
amended complaint, the Magistrate Judge recommended the motion be

5

denied.

(Id. p. 1.)

The Magistrate Judge suggested granting

leave to amend would be futile because Lee Memorial “has not
alleged facts that establish independent or derivative standing
under ERISA.”

(Id. p. 9.)

As stated above, the Magistrate Judge

found the assignment signed by Anderson was ineffectual because
the

Plan

contained

a

“clear,

unambiguous

prohibition

of

assignment,” and the additional facts alleged by Lee Memorial “do
not change that.”

(Id.)

The Magistrate Judge additionally found

that the alleged facts did not support application of the equitable
estoppel doctrine because the doctrine requires the plan provision
to be ambiguous, and “nothing is ambiguous about the non-assignment
clause, and thus equitable estoppel cannot apply here.”

(Id.)

Finally, the Magistrate Judge found that the additional facts did
“not indicate Winn Dixie waived the anti-assignment provision”
because

there

was

no

indication

Winn

intentional” waived the provision.

Dixie

“voluntarily

and

(Id. pp. 9-10.)

III.
After conducting a careful and complete review of the findings
and recommendations, a district judge may accept, reject or modify
the magistrate judge’s report and recommendation.

28 U.S.C. §

636(b)(1); United States v. Powell, 628 F.3d 1254, 1256 (11th Cir.
2010).

A district judge “shall make a de novo determination of

those portions of the report or specified proposed findings or
recommendations

to

which

objection

6

is

made.”

28

U.S.C.

§

636(b)(1); see also United States v. Farias-Gonzalez, 556 F.3d
1181, 1184 n.1 (11th Cir. 2009).

This requires that the district

judge “give fresh consideration to those issues to which specific
objection has been made by a party.”

Jeffrey S. v. State Bd. of

Educ. of Ga., 896 F.2d 507, 512 (11th Cir. 1990) (quoting H.R.
1609, 94th Cong., § 2 (1976)).

The district judge reviews legal

conclusions de novo, even in the absence of an objection.

See

Cooper-Houston v. S. Ry. Co., 37 F.3d 603, 604 (11th Cir. 1994).
IV.
A. Motion for Leave to File Second Amended Complaint
As noted, the Court has previously reviewed the question of
standing and ruled Lee Memorial lacks independent standing to
assert ERISA.

(Doc. #58.)

ERISA sets forth those parties who may

bring civil actions under the statute, and such actions “are
limited only to those parties and actions Congress specifically
enumerated.”

WestRock RKT Co. v. Pace Indus. Union-Mgmt. Pension

Fund, 856 F.3d 1320, 1322 (11th Cir. 2017) (citations omitted).
A “participant” and a “beneficiary” of an ERISA plan may bring a
civil action “to recover benefits due to him under the terms of
his plan, to enforce his rights under the terms of the plan, or to
clarify his rights to future benefits under the terms of the plan.”
29

U.S.C.

§

1132(a)(1)(B).

Additionally,

a

“participant,”

“beneficiary,” or “fiduciary” may bring a civil action for certain
injunctive and equitable relief.

7

29 U.S.C. § 1132(a)(3).

A

healthcare provider such as Lee Memorial is not a “participant,”
“beneficiary,”

or

“fiduciary”

under

ERISA,

and

thus

lacks

independent standing to sue under § 1132(a)(1)(B) or § 1132(a)(3).
(Doc. #58, p. 11); Physicians Multispecialty Grp. v. Health Care
Plan of Horton Homes, Inc., 371 F.3d 1291, 1294 (11th Cir. 2004).
Nevertheless, a healthcare provider may acquire derivative
standing to sue under ERISA by obtaining a written assignment from
a participant or beneficiary of her right to payment of medical
benefits.

Cagle v. Bruner, 112 F.3d 1510, 1515 (11th Cir. 1997).

However, “an unambiguous anti-assignment provision in an ERISAgoverned

welfare

benefit

plan

is

valid

and

enforceable.”

Physicians Multispecialty Grp., 371 F.3d at 1296.
Here,

Lee

Memorial

asserts

derivative

assignee of Anderson, a Plan participant.

standing

as

the

(Doc. #72, p. 7.)

The

assignment signed by Anderson provides:
I hereby assign to [Lee Memorial] payment from
all third party payors with whom I have
coverage or from whom benefits are or may
become payable to me, for the charges of
hospital and health care services I receive
for, related to, or connected with my
admission or treatment (past, present, or
future). . . . I also assign payment of any
available
insurance
benefits
to
the
physician(s) who provide me treatment at [Lee
Memorial].
(Doc. #17-3, p. 121 (footnote omitted).)

Per the assignment form,

“[t]hird party payors” are defined to include coverage available
from “Medicare,

Medicaid,

Tri-care,

8

or

governmental

programs;

health,

accident,

automobile,

or

other

insurance;

workers’

compensation; HMOs; self-insured employers; and any sponsors who
may contribute payment for services.”

(Id.)

Winn Dixie has

challenged the validity of this assignment based on the Plan’s
anti-assignment provision, which states, “A Covered Member is
expressly prohibited from assigning any right to payment of Covered
Expenses or any payment related to Benefits.”
6); (Doc. #17-1, p. 90.)

(Doc. #60, pp. 5-

In response, Lee Memorial seeks to amend

its complaint to “clarify factual allegations that are relevant to
the assignment,” and to “plead additional facts showing that Winn
Dixie

waived

any

anti-assignment

provision

or

equitably estopped from raising it as a defense.”
2-3.)

is

otherwise

(Doc. #66, pp.

The Magistrate Judge recommends denying the motion because

Lee Memorial “has not alleged facts that establish independent or
derivative standing under ERISA” and, therefore, amendment would
be futile.
Judge’s

(Doc. #68, pp. 9-10.)

recommendation,

Lee

In objecting to the Magistrate

Memorial

raises

relating to waiver and equitable estoppel.

several

arguments

(Doc. #72, pp. 12-19.)

Whether to allow leave to amend a pleading lies within the
discretion of the district court.
182 (1962).
court

This discretion is limited, however, in that the

“should

requires.”

Foman v. Davis, 371 U.S. 178,

freely

give

leave

[to

Fed. R. Civ. P. 15(a)(2).

amend]

when

justice

so

Permissible reasons which

justify denial include “futility of amendment,” Foman, 371 U.S. at

9

182, and an amendment is futile “when the complaint as amended
would still be properly dismissed,” Coventry First, LLC v. McCarty,
605 F.3d 865, 870 (11th Cir. 2010) (citation omitted); see also
Cockrell v. Sparks, 510 F.3d 1307, 1310 (11th Cir. 2007) (“Leave
to amend a complaint is futile when the complaint as amended would
still be properly dismissed or be immediately subject to summary
judgment for the defendant.”)

Therefore, the proposed Second

Amended Complaint must be analyzed under the traditional Federal
Rule of Civil Procedure 12(b)(6) scrutiny to determine whether it
is futile.

Farrell v. Fla. Republicans, 2013 WL 4494309, *2 (M.D.

Fla. Aug. 19, 2013).
To

survive

a

motion

to

dismiss

under

Rule

12(b)(6),

“a

complaint must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

The plausibility

requirement is “more than a sheer possibility that a defendant has
acted

unlawfully,”

Iqbal,

556

U.S.

at

678,

and

“labels

and

conclusions, and a formulaic recitation of the elements of a cause
of action will not do,” Twombly, 550 U.S. at 555.

However, the

Court must construe the allegations “in the light most favorable
to the plaintiff.”

Glover v. Liggett Grp., Inc., 459 F.3d 1304,

1308 (11th Cir. 2006).

Accordingly, the Court must determine

whether Lee Memorial’s proposed Second Amended Complaint states a

10

plausible claim for relief, including a basis for standing. 3
Lee Memorial presents an array of arguments as to why leave
to amend should be granted, but the Court finds it necessary only
to address one: whether Winn Dixie’s conduct amounts to waiver of
its right to assert the anti-assignment provision.
p. 20; Doc. #72, pp. 16-17.)

(Doc. #66-1,

The Eleventh Circuit has defined

waiver as “either an intentional or voluntary relinquishment of a
known

right,

or

conduct

giving

rise

relinquishment of a known right.”

to

an

inference

of

the

Air Prods. & Chems., Inc. v.

La. Land & Expl. Co., 867 F.2d 1376, 1379 (11th Cir. 1989)
(citations omitted).

Waiver may be express or implied, id., and

Lee Memorial alleges only an implied waiver through conduct, (Doc.
#72, pp. 13-14.)

For waiver to be implied by conduct, “the acts,

conduct or circumstances relied upon to show waiver must make out
a clear case.”
(citations

Air Prods. & Chems., Inc., 867 F.2d at 1379

omitted).

Lee

Memorial’s

proposed

Second

Amended

Complaint contains the following allegations relevant to the issue
of waiver:
•

Blue Cross “acted as the authorized agent of Winn Dixie in
administering

claims

for

the

3

Plan,”

and

Winn

Dixie

“is

As noted, the Magistrate Judge recommends denying leave to
amend because Lee Memorial has not alleged facts that “establish”
standing under ERISA.
(Doc. #68, 9.)
To the extent the
Magistrate Judge used a different standard than the “plausible”
standard under Rule 12(b)(6), the Court disagrees with that portion
of the Report and Recommendation.

11

vicariously liable for the actions and failures to act” of
Blue Cross in administering claims for the Plan;
•

Blue Cross and Winn Dixie “exercised discretionary authority
or control in the management of the Plan, making benefit
determinations and payment of claims under the Plan”;

•

Pursuant to the terms of the Plan and the Agreement between
Lee Memorial and Blue Cross, Lee Memorial “agreed to file
claims with [Blue Cross] for health care services that it
provided to Winn Dixie’s covered employees”;

•

Since the inception of the Plan, Lee Memorial “has provided
a significant amount of covered services to members of the
Plan and has acted in accordance with the direction of the
Plan

and

its

administrator

as

to

the

coordination

of

benefits”;
•

During the one-year period immediately prior to providing
services to Anderson, Lee Memorial “provided covered services
to Plan members on 15 separate admissions and received payment
from the Plan in excess of $84,000 for such services”;

•

Blue Cross has made representations to Lee Memorial “that
constitute its informal interpretation that an assignment of
benefits from Plan members is not prohibited” in situations
like Anderson’s;

12

•

Blue Cross and Winn Dixie “have, at all times, had full
knowledge as to the existence of any anti-assignment language
in the Plan” but Lee Memorial did not and had to rely on the
representations of Blue Cross;

•

Lee Memorial and Blue Cross have a well-established course of
dealings whereby Lee Memorial has obtained assignments of
benefits from Plan members “with the knowledge and consent”
of Blue Cross;

•

Neither Winn Dixie nor Blue Cross ever voiced an objection to
a claim or declined to pay a Plan claim based on the antiassignment provision, despite being provided with a billing
form that contains each assignment.

(Doc. #66-1, ¶¶ 26-28, 30-31, 64.)
Accordingly, Lee Memorial alleges it has obtained assignments
from Plan members in the past, provided those assignments to Blue
Cross as part of its billing practice, and never received an
objection based upon those assignments.

On the contrary, Blue

Cross has provided payment to Lee Memorial for services to Plan
members.

Lee

Memorial

also

alleges

Blue

Cross

made

representations to Lee Memorial suggesting assignments are not
prohibited in certain situations, including those that would apply
to Anderson.

Finally, Lee Memorial alleges Blue Cross is Winn

Dixie’s authorized agent to administer the Plan and, therefore,

13

Winn

Dixie

is

responsible

for

the

actions

of

Blue

Cross.

Construing the Second Amended Complaint in the light must favorable
to Lee Memorial, as required at this stage of the proceedings, the
Court finds these allegations sufficient to make out a clear case
of

waiver.

These

allegations,

coupled

with

Lee

Memorial’s

assertion of derivative standing based on Anderson’s assignment,
establish that the Second Amended Complaint states a claim to
relief that is plausible on its face.

Accordingly, the Court

finds amendment of the complaint would not be futile and leave to
amend

should

be

permitted.

As

such,

the

Court

rejects

the

Magistrate Judge’s recommendation that Lee Memorial’s motion be
denied.
B. Motion for Judgment on the Pleadings
As the Court has determined Lee Memorial’s Motion for Leave
to File Second Amended Complaint should be granted, Winn Dixie’s
Motion for Judgment on the Pleadings is necessarily rendered moot.
See Ray v. Bank of Am., N.A., 2015 WL 11257487, *2 (N.D. Ga. Jan.
13, 2015) (“Because Plaintiff’s motion to amend the complaint has
been granted and the amended complaint will become the operative
pleading in this case, Defendants’ motions to dismiss and for
judgment on the pleadings are DENIED as MOOT.” (citation omitted)).
Therefore,

the

Magistrate

Judge’s

recommendations

that

Winn

Dixie’s motion be granted and the case be dismissed are rejected.
Accordingly, it is now

14

ORDERED:
1. Lee Memorial’s Objections (Doc. #72) are SUSTAINED in part
and MOOT in part.

Regarding the Motion for Leave to File

Second Amended Complaint, the objection related to Winn
Dixie’s waiver is sustained.

The remaining objections are

moot.
2. The Report and Recommendation (Doc. #68) is hereby rejected
for the reasons set forth above.
3. Lee Memorial’s Motion for Leave to File Second Amended
Complaint (Doc. # 66) is GRANTED.

Lee Memorial is directed

to file the proposed Second Amended Complaint within SEVEN
(7) days of entry of this order.

Winn Dixie shall have

TWENTY-ONE (21) days from the docketing of the Second
Amended Complaint to file a responsive pleading.
4. Winn Dixie’s Motion for Judgement on the Pleadings (Doc.
#60) is DENIED as moot.
DONE and ORDERED at Fort Myers, Florida, this
July 2019.

Copies:
Hon. Douglas Frazier
United States Magistrate Judge
All Parties of Record

15

1st

day of