LB Surgery Center, LLC v. The Boeing Company et al
OPINION AND ORDER. For the reasons stated in the accompanying Opinion and Order, the Court grants Defendants' motions to dismiss [31, 34]. The Court dismisses the first amended complaint with prejudice and terminates this case. All pending motions and/or dates are terminated as moot. Mail ILND 450. Civil case terminated. Signed by the Honorable Sara L. Ellis on 11/8/2017:Mailed notice(rj, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
LB SURGERY CENTER, LLC d/b/a
GREATER LONG BEACH SURGERY
THE BOEING COMPANY, HEALTH CARE )
SERVICE CORPORATION d/b/a BLUE
CROSS BLUE SHIELD OF ILLINOIS, and
THE BOEING COMPANY EMPLOYEE
BENEFIT PLANS COMMITTEE,
No. 17 C 282
Judge Sara L. Ellis
OPINION AND ORDER
Having provided medical services to beneficiaries of Defendant The Boeing Company’s
(“Boeing”) welfare benefit plan and not received payment for the full amount due, Plaintiff LB
Surgery Center, LLC d/b/a Greater Long Beach Surgery Center (“LB Surgery) filed suit against
Defendants Boeing, The Boeing Company Employee Benefit Plans Committee (the “Plan
Administrator”), and Health Care Service Corporation d/b/a Blue Cross and Blue Shield of
Illinois (“BCBSIL”). LB Surgery alleges that Defendants violated the Employee Retirement
Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., by failing to provide benefits
in violation of ERISA § 502(a)(1)(B) (Count I), breaching their fiduciary duties of loyalty and
care in violation of § 502(a)(3) (Count II), failing to provide a full and fair review of claims in
violation of § 503 (Count III), and failing to provide LB Surgery with requested Plan-related
documents in violation of § 502(c)(1)(B) (Count IV). Defendants have moved to dismiss the
claims against them. Because the Court finds that the anti-assignment provision in the Boeing
welfare benefit plan bars LB Surgery from bringing an action under ERISA, the Court dismisses
the first amended complaint with prejudice.
Boeing provides healthcare insurance to its employees through a self-insured welfare
benefit plan, The Boeing Company Master Welfare Plan (the “Plan”). ERISA governs the Plan.
The Plan Administrator, a committee of Boeing employees, serves as the administrator of the
Plan. BCBSIL, a commercial healthcare insurance company, provides administrative services to
Boeing for the Plan. Under the Plan, employees have access to BCBSIL’s network of providers.
These providers are considered in-network providers, meaning they agree to accept negotiated
lower amounts for their services. Out-of-network providers, in contrast, are not bound by the
negotiated lower amounts, with payment instead based on the usual, customary, and reasonable
rate for the service in the same geographic area.
The Plan includes an anti-assignment provision:
Health care benefits payable under the applicable Component
Benefit Programs shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge by any person, institution, or otherwise.
The Plan or any Component Benefit Program may, at the sole and
absolute discretion of the Plan Administrator, pay benefits directly
to an institution in which the Participant or Dependent has been
The facts in the background section are taken from LB Surgery’s first amended complaint and are
presumed true for the purpose of resolving Defendants’ motions to dismiss. See Virnich v. Vorwald, 664
F.3d 206, 212 (7th Cir. 2011); Local 15, Int’l Bhd. of Elec. Workers, AFL-CIO v. Exelon Corp., 495 F.3d
779, 782 (7th Cir. 2007). LB Surgery references exhibits in its first amended complaint, but those
exhibits are not attached to the first amended complaint. The Court assumes that LB Surgery references
the same exhibits it filed in conjunction with its initial complaint and so cites to those here. The Court
cautions LB Surgery that an amended complaint supersedes a prior complaint, meaning that all exhibits
referenced in the first amended complaint should have been filed with that complaint. See Scott v.
Chuhak & Tecson, P.C., 725 F.3d 772, 782–83 (7th Cir. 2013) (“[W]hen a plaintiff files an amended
complaint, the amended complaint supersedes the original complaint.”). Additionally, although a court
normally cannot consider extrinsic evidence without converting a motion to dismiss into one for summary
judgment, where a document is referenced in the complaint and central to plaintiff’s claims, the Court
may consider it in ruling on the motion to dismiss. Hecker v. Deere & Co., 556 F.3d 575, 582–83 (7th
admitted as inpatient or to any provider of health care services or
supplies in consideration for medical or hospital or dental services
or supplies rendered or to be rendered regardless of the presence or
absence of an assignment of benefits or other form of benefit
directive. The Plan or any Component Benefit Program may also,
at the sole and absolute discretion of the Plan Administrator, pay
benefit claims directly to a Participant or Dependent regardless of
any purported benefit assignment. . . .
No Participant or Dependent may assign to any person, institution,
or otherwise his or her right to file a claim and/or an appeal under
the Plan’s claims and appeal procedures (as described in Section
4.4) or to initiate any action or proceeding (legal, equitable, or
otherwise) against the Plan (including the Component Benefit
Programs thereunder), Plan Administrator, Company, EBPC, or
trustee, including, without limitation, a suit for statutory penalties
under ERISA for an alleged failure to provide plan or claim-related
documents, with the sole exception of an assignment of the right to
appeal an urgent care claim as specifically provided in applicable
Department of Labor regulations.
Doc. 32-1 at 19.
LB Surgery operates a surgical center in Long Beach, California that provides
gastroenterology, gynecology, ophthalmology, orthopedic, otolaryngology, plastic surgery,
podiatry, and urology services. LB Surgery is an out-of-network provider for Boeing
beneficiaries. Certain beneficiaries of the Plan, JR, CP, KN, MC, SW, and LF, received medical
services from LB Surgery. In exchange for receiving medical services, these beneficiaries
executed an assignment of their benefits under the Plan to LB Surgery. The assignment
provides, as relevant here:
I hereby assign my right to assert any and all causes of action for
judicial review to Greater Long Beach Surgery Center. This
assignment is wholly personal to this entity. My assignee may
“stand in my shoes”, as that phrase is understood under assignment
law. I intend for my personal standing under ERISA’s disclosure
and civil enforcement procedures under 29 U.S.C. §§ 1024 and
1132 to be hereby transferred to my assignee, so that it may seek
judicial review of denied claims and/or disclosure under 29 U.S.C.
§ 1132(a)(1)(B), 29 U.S.C. § 1132(a)(1)(A), and/or 29 C.F.R.
2560.503-1. This assignment specifically includes an assignment
of my rights to seek relief as a claimant under 29 U.S.C. § 1132(c),
and my rights to seek attorney fees under 29 U.S.C. § 1132(g).
Doc. 1-1 at 1.
After the beneficiaries received medical services from LB Surgery, LB Surgery billed the
beneficiaries and provided BCBSIL with the bills as well. In each case, BCBSIL covered only a
portion of the amounts LB Surgery charged, determining that LB Surgery’s charges exceeded the
allowed amounts payable to a non-participating provider or the priced amount for the services
rendered. LB Surgery then filed appeals on behalf of the beneficiaries with respect to the claim
denials and also requested the beneficiaries’ summary plan descriptions. Defendants have not
issued payment for the unpaid charged amounts or provided LB Surgery with the requested
summary plan descriptions.
A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not
its merits. Fed. R. Civ. P. 12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir.
1990). In considering a Rule 12(b)(6) motion to dismiss, the Court accepts as true all wellpleaded facts in the plaintiff’s complaint and draws all reasonable inferences from those facts in
the plaintiff’s favor. AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011). To survive
a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of a
claim’s basis but must also be facially plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct.
1937, 173 L. Ed. 2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.
Ct. 1955, 167 L. Ed. 2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Iqbal, 556 U.S. at 678.
Defendants argue that the Plan’s anti-assignment clause bars all of LB Surgery’s claims.
In order to bring an action under ERISA, LB Surgery must be a participant, beneficiary, or
fiduciary of the Plan. 2 See 28 U.S.C. § 1132(a). LB Surgery acknowledges that it does not
directly qualify as a participant or beneficiary of the Plan, but instead it seeks to recover as an
assignee of the Plan’s beneficiaries. The Seventh Circuit has held that “when a ‘participant’
assigns to a medical provider the right to receive the participant’s entitlement under the plan, this
makes the provider a ‘beneficiary’” under ERISA. Penn. Chiropractic Ass’n, 802 F.3d at 928
(citing Kennedy v. Conn. Life Ins. Co., 924 F.2d 698 (7th Cir. 1991)). But a Plan can prohibit
assignments, which has the effect of barring the assignee’s claims under ERISA. See Morlan v.
Universal Guar. Life Ins. Co., 298 F.3d 609, 615 (7th Cir. 2002) (“[C]laims for welfare benefits
. . . are assignable, provided of course that the ERISA plan itself permits assignment,
assignability being a matter of freedom of contract in the absence of a statutory bar.”); Kennedy,
924 F.2d at 700 (“Because ERISA instructs courts to enforce strictly the terms of plans, an
assignee cannot collect unless he establishes that the assignment comports with the plan.”);
DeBartolo v. Blue Cross/Blue Shield of Ill., No. 01 C 5940, 2001 WL 1403012, at *5 (N.D. Ill.
Nov. 9, 2001) (“A health care provider’s right to recover under ERISA as an assignee . . .
depends on the health care provider having a valid, enforceable assignment agreement. An
assignment is not valid and enforceable if the plan contains an anti-assignment provision.”).
Here, the Plan contains just such an anti-assignment provision, specifically barring the
assignment of the right “to initiate any action or proceeding (legal, equitable, or otherwise) . . .
Although courts have often discussed this as an issue of standing, the Seventh Circuit has clarified that
the issue should instead be understood as whether the plaintiff’s claim “comes within the zone of interests
regulated by” ERISA, i.e., whether LB Surgery qualifies as a participant or beneficiary as defined by
ERISA. See Penn. Chiropractic Ass’n v. Indep. Hosp. Indem. Plan, Inc., 802 F.3d 926, 928 (7th Cir.
including, without limitation, a suit for statutory penalties under ERISA for an alleged failure to
provide plan or claim-related documents.” Doc. 32-1 at 19. In light of this clear anti-assignment
provision, LB Surgery cannot proceed on its ERISA claims against Defendants, despite the fact
that it received assignments from the six beneficiaries of the Plan named in this suit. See Univ.
of Wis. Hosps. & Clinics Auth. v. Aetna Health & Life Ins. Co., 144 F. Supp. 3d 1048, 1053
(W.D. Wis. 2015) (dismissing provider’s ERISA claims in light of plan’s clear anti-assignment
provision); DeBartolo, 2001 WL 1403012, at *5.
LB Surgery attempts to overcome the anti-assignment provision with two arguments,
neither of which have merit. First, LB Surgery argues that the anti-assignment provision must
clearly prohibit the assignment of claims arising after the denial of benefits, relying on two cases
from outside this circuit. See Doc. 40 at 5 (citing Lutheran Med. Ctr. of Omaha, Neb. v.
Contractors, Laborers, Teamsters, & Eng’rs Health & Welfare Plan, 25 F.3d 616, 619 (8th Cir.
1994), abrogated on other grounds by Martin v. Ark. Blue Cross & Blue Shield, 299 F.3d 966
(8th Cir. 2002), and Riverview Health Inst. v. UnitedHealth Grp. Inc., 153 F. Supp. 3d 1032,
1035 (D. Minn. 2015)). The anti-assignment clauses in the two cases, however, differ from that
found here, prohibiting generally the assignment of “rights or benefits” under the Plan instead of,
as here, the “right . . . to initiate any action or proceeding (legal, equitable, or otherwise) against
the Plan.” See Lutheran Med. Ctr., 25 F.3d at 619; Riverview Health Inst., 153 F. Supp. 3d at
1035 (noting that language barring assignment of “claims for benefits” addresses “claim[s] filed
with an insurer, not a lawsuit brought against an insurer for denying a claim for benefits”).
Because the Plan’s anti-assignment provision specifically bars the assignment of the right to
“initiate any action or proceeding (legal, equitable, or otherwise)” against Defendants—language
barring lawsuits brought against an insurer—even under the Eighth Circuit’s narrow reading of
anti-assignment provisions, LB Surgery cannot bring its claims under ERISA.
Next, LB Surgery argues that Defendants cannot assert the anti-assignment clause
because they did not raise it in their prior dealings with LB Surgery and have made payments
directly to LB Surgery for these beneficiaries’ claims. But the Plan’s anti-assignment clause
specifically indicates that direct payments may be made at the discretion of the Plan
Administrator notwithstanding the prohibition on assignment. See Doc. 32-1 at 19 (providing
that “[h]ealth care benefits . . . shall not be subject in any manner to . . . assignment” but that the
Plan “may, at the sole and absolute discretion of the Plan Administrator, pay benefits directly to
. . . any provider of health care services”). Courts have routinely enforced anti-assignment
clauses despite provisions allowing direct payment to providers. See OSF Healthcare Sys. v.
Weatherford, No. 10-1400, 2012 WL 996900, at *5 (C.D. Ill. Mar. 23, 2012) (retention of
discretion to pay provider did not affect enforceability of anti-assignment provision); Zhou v.
Guardian Life Ins. Co. of Am., No. 01C 4816, 2001 WL 1631868, at *2 (N.D. Ill. Dec. 17, 2001)
(plan indicated that payments to providers did not waive the anti-assignment provision). Failure
to raise the anti-assignment provision also has no bearing on determining LB Surgery’s ability to
sue under ERISA. See Middlesex Surgery Ctr. v. Horizon, No. 13-112(SRC), 2013 WL 775536,
at *4 (D.N.J. Feb. 28, 2013) (“Whether [the provider] had the right to submit a claim and pursue
[an] appeal on [the participant’s] behalf is a separate issue entirely from whether [the provider]
has the right to sue under § 502(a). In recognizing the former, Defendant has not acquiesced in
the latter.”); DeBartolo v. Health & Welfare Dep’t of Constr. & Gen. Laborers’ Dist. Council of
Chicago & Vicinity, No. 1:09-cv-0039, 2010 WL 3273922, at *5 (N.D. Ill. Aug. 17, 2010)
(“Even if [plaintiff] had asserted an ERISA estoppel claim under 29 U.S.C. § 1132(a)(3), the
failure of a representative of the Fund to inform him that the Plan prohibited assignments of
medical benefits and the Fund’s payment to him would not estop the Fund from enforcing the
Plan’s unambiguous anti-assignment clause.”). Therefore, these arguments do not prevent the
application of the anti-assignment provision to keep LB Surgery from being deemed a
beneficiary for ERISA purposes.
Finally, LB Surgery argues that even if the Court enforces the anti-assignment provision,
it may pursue payment as an authorized representative of its patients. But nowhere in the first
amended complaint does LB Surgery claim to be the beneficiaries’ authorized representative;
instead, LB Surgery brings claims solely as their assignee. Moreover, even treating LB Surgery
as the beneficiaries’ authorized representative, LB Surgery still does not qualify as a beneficiary
under § 1132(a)(1)(B) so as to be entitled to bring suit under ERISA. To qualify as an ERISA
beneficiary, LB Surgery must be “entitled to a benefit” under the Plan, not just be “someone
authorized to vindicate another’s right to benefits.” Univ. of Wis. Hosps. & Clinics Auth. v.
Costco Emp. Benefits Program, No. 15-cv-412-bbc, 2015 WL 9455851, at *2 (W.D. Wis. Dec.
23, 2015). “Representing an ERISA beneficiary does not make a provider an ERISA beneficiary
itself.” Id. Therefore, LB Surgery’s alternative theory does not save its claims, and the Court
dismisses LB Surgery’s claims with prejudice. 3
Because the Court finds that the anti-assignment provision in the Plan bars LB Surgery’s claims, the
Court need not discuss the additional arguments raised by BCBSIL in support of dismissal.
For the foregoing reasons, the Court grants Defendants’ motions to dismiss [31, 34]. The
Court dismisses the first amended complaint with prejudice and terminates this case.
Dated: November 8, 2017
SARA L. ELLIS
United States District Judge
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