Metcalf v. Blue Cross Blue Shield of Michigan et al
Filing
30
OPINION and ORDER - The Court ADOPTS Judge Stewart's Findings and Recommendations (Dkt. 24 ), as supplemented herein. For the reasons set forth in Judge Stewart's Findings and Recommendation, as supplemented above, Defendants' motion to dismiss for failure to state a claim (Dkt. 11 ) is GRANTED as to Claim 3 and otherwise DENIED. Plaintiff's Claim 3 is DISMISSED with leave to replead as a separate ERISA violation. Signed on 11/5/2015 by Judge Michael H. Simon. (mja)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
ROBERT METCALF,
Plaintiff,
Case No. 3:14-cv-00302-ST
OPINION AND ORDER
v.
BLUE CROSS BLUE SHIELD OF
MICHIGAN, a Michigan corporation;
DAIMLER TRUCKS NORTH AMERICA,
LLC, a Delaware corporation; and DAIMLER
TRUCKS NORTH AMERICA LLC
GROUP HEALTH PLAN,
Defendants.
Steven P. Krafchick, KRAFCHICK LAW FIRM, PLLC, 100 W Harrison, South Tower, Suite
300, Seattle, Washington 98119. Of Attorneys for Plaintiff.
Robert B. Miller, KILMER VOORHEES & LAURICK, P.C., 732 NW 19th Avenue, Portland,
Oregon 97209-1302. Of Attorneys for Defendants.
Michael H. Simon, District Judge.
United States Magistrate Judge Janice M. Stewart issued Findings and Recommendation
in this case on August 27, 2014. Dkt. 24 (hereinafter “F&R”). Judge Stewart recommended that
Defendants’ motion to dismiss for failure to state a claim be denied as to Claims 1 and 2 and
granted as to Claim 3, with leave to replead as a separate ERISA violation.
PAGE 1 – OPINION AND ORDER
Under the Federal Magistrates Act (“Act”), the Court may “accept, reject, or modify, in
whole or in part, the findings or recommendations made by the magistrate.” 28 U.S.C.
§ 636(b)(1)(C). If a party files objections to a magistrate’s findings and recommendations, “the
court shall make a de novo determination of those portions of the report or specified proposed
findings or recommendations to which objection is made.” Id.; Fed. R. Civ. P. 72(b)(3). For
those portions of a magistrate’s findings and recommendations to which neither party has
objected, the Act does not prescribe any standard of review. See Thomas v. Arn, 474 U.S. 140,
152 (1985) (“There is no indication that Congress, in enacting [the Act], intended to require a
district judge to review a magistrate’s report to which no objections are filed.”). Nor, however,
does the Act “preclude further review by the district judge[] sua sponte . . . under a de novo or
any other standard.” Thomas, 474 U.S. at 154. Indeed, the Advisory Committee Notes to Fed. R.
Civ. P. 72(b) recommend that “[w]hen no timely objection is filed,” the Court review the
magistrate’s recommendations for “clear error on the face of the record.”
Defendants timely filed an objection, Dkt. 26, to which Plaintiff Metcalf (“Metcalf”)
responded. Dkt. 28. Defendants object to the portion of Judge Stewart’s F&R recommending that
Defendants’ motion be denied as to Claims 1 and 2. As no party has objected to the portion of
the F&R regarding Claim 3, the Court reviews that portion for clear error on the face of the
record. As no such error is apparent, the Court adopts that portion of the F&R. The Court
reviews de novo the portion of the F&R regarding Claims 1 and 2 and adopts that portion as
supplemented below.
BACKGROUND
Robert Metcalf is a chiropractor in North Carolina. He regularly treats individual
participants enrolled in Defendant Daimler Trucks North America LLC Group Health Plan
(“Plan”). Healthcare providers who participate in the Plan are paid directly by the Plan; nonPAGE 2 – OPINION AND ORDER
participating providers are typically paid by their patients, who must then file a claim with the
Plan for reimbursement. Metcalf does not participate in the Plan. Instead, he makes the following
arrangement with his patients: They assign their right to reimbursement directly to Metcalf and
authorize him to pursue their claims on their behalf, as well as any other rights they have under
the Plan in connection with his services. Both patient and provider benefit from this
arrangement: Metcalf’s patients get treated without having to pay out of pocket, and Metcalf
streamlines his cash flow.
Insurance plans, however, typically incentivize healthcare providers to participate—and
thereby subject the providers to cost constraints—with the promise of “quick, certain and direct
payment from the insurer.”1 That incentive is reduced if non-participating providers may strike a
deal with their patients, as Metcalf has done. The Employee Retirement Income Security Act of
1974 (“ERISA”),2 the federal law governing employer health insurance plans, is silent as to
whether healthcare benefits may be assigned.3 Accordingly, the consensus among the federal
courts is that ERISA neither mandates nor prohibits the assignability of healthcare benefits;
Congress intended that issue to be open to bargaining between insurer and insured. See F&R at
7-8 (collecting cases).
The Plan at issue in this case does not contain an anti-assignment clause. The
assignments to Metcalf were, therefore, valid.4 But Metcalf alleges that although he regularly
pursued claims on behalf of his patients insured by the Plan, Defendants have refused to pay him.
1
See generally Renfrew Ctr. v. Blue Cross & Blue Shield of Cent. N.Y., Inc., 1997 WL
204309, at *3-4 (N.D.N.Y. Apr. 10, 1997).
2
29 U.S.C. §§ 1001-1461.
3
In “striking contrast” to this silence, ERISA does contain a “complex and extensive
provision prohibiting assignment of pension benefits.” Misic v. Bldg. Serv. Emps. Health &
Welfare Trust, 789 F.2d 1374, 1376 (9th Cir. 1986) (emphasis added).
4
Defendants seem to agree: In their Objection to the F&R, they concede that they “[do]
not challenge the validity of the assignments here.” Dkt. 26 at 11.
PAGE 3 – OPINION AND ORDER
Accordingly, he asserts four claims for relief, two of which are at issue here: first, his claim
under 29 U.S.C. § 1132(a)(1)(B), for denying claims for benefits; and second, his claim under
§ 1132(a)(3), for failing to conduct a full and fair review of his claims.
DISCUSSION
Defendants argue that Metcalf failed to state a claim for relief because he is not a
statutory “beneficiary,” has standing only derivative of his assignors, and has no right upon
which to sue. The arguments in Defendants’ Objection all depend on one basic factual premise:
that Defendants have already paid all benefits owed—not to Metcalf, but to the participants, his
patients.5 Defendants argue that they have thereby discharged their obligations under ERISA and
the Plan.
The Court’s analysis proceeds as follows. First, regardless of the merits of Defendants’
argument, several parts of Metcalf’s claims survive. Next, as a matter of statutory interpretation,
the assignee of a participant is a “beneficiary” under ERISA with an independent cause of action.
Finally, under federal common law, an ERISA obligation may not be discharged, in the presence
of a valid assignment, by paying the participant–assignor rather than the assignee.
A. The Benefits at Issue
Defendants’ basic factual premise—that they have already paid the benefits owed—is
contested: Metcalf alleges that some of the several hundred claims for benefits at issue were not
paid to anyone. Dkt. 1 at 8. At this stage of the litigation, the Court must accept that well-pleaded
material allegation as true. See Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1140 (9th
5
At earlier stages in the litigation, Defendants appear to have additionally argued both
that the assignments at issue were invalid and that Metcalf lacked standing to sue. Those
arguments did not depend on this premise—but Defendants have failed to renew those arguments
in their Objection. Indeed, they have conceded that the assignments are valid, see supra n.4, and
that Metcalf, at a minimum, has derivative standing as an assignee, see Dkt. 26 at 6 (“[Metcalf’s]
standing is derivative . . . .”).
PAGE 4 – OPINION AND ORDER
Cir. 2012). Furthermore, in addition to payment of past benefits, Metcalf seeks injunctive relief
for any future benefits his patients may assign him, Dkt. 1 at 18, as well as retrospective and
prospective relief regarding his entitlement to Explanations of Benefits and other procedural
rights. Dkt. 1 at 15-16, 18. Whether Defendants paid some past benefits directly to participants
does not affect this portion of Metcalf’s claims. Therefore, with respect to his requests for
injunctive relief for future benefits, relief regarding procedural rights, and unpaid benefits,
Metcalf’s claims survive: The only portion of Metcalf’s claims for relief still in question is that
concerning past benefits that Defendants have already paid.
B. Beneficiaries under ERISA
The ERISA provisions under which Metcalf brings his claims, 29 U.S.C. § 1132(a)(1)(B)
and § 1132(a)(3), allow suit to be brought by a “beneficiary.” Defendants argue that Metcalf is
not a “beneficiary” as defined by the statute. The litigation thus far has addressed this issue as a
matter of standing. In fact, however, it is a question on the merits. After the Supreme Court’s
recent decision in Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (2014),
the question is properly addressed as whether ERISA provides Metcalf with a cause of action.
1. Statutory Standing
Defendants argue that Metcalf lacks statutory standing under ERISA because he is not a
statutory “beneficiary.” If Metcalf lacks standing under ERISA, Defendants assert, he has
standing only as an assignee, derivative of his assignors’ standing. Because his assignors have
been paid, they have no injury, and therefore no standing—and thus Metcalf has no standing,
Defendants maintain. If Defendants are correct that Metcalf lacks standing to bring a claim, then
any inquiry into the merits of an assignee’s rights under ERISA is foreclosed.
In Lexmark, the Supreme Court clarified its jurisprudence on the requirement of statutory
“standing”—by eliminating it. Although the court below had analyzed the issue and the parties
PAGE 5 – OPINION AND ORDER
had presented the question in terms of the plaintiff’s “standing to sue under the Lanham Act,”
134 S. Ct. at 1385, the Supreme Court recast the issue as a question on the merits: whether the
plaintiff had a statutory cause of action. See id. at 1387 (“In sum, the question this case presents
is . . . whether Static Control has a cause of action under the statute.”) The Court expressly
abjured both the “standing” label and the jurisdictional nature of the inquiry. Id. n.4.6
After Lexmark, the jurisdictional standing analysis under these circumstances is simply
the familiar constitutional standing inquiry: whether Metcalf has “suffered or [is] imminently
threatened with a concrete and particularized ‘injury in fact’ that is fairly traceable to the
challenged action of the defendant and likely to be redressed by a favorable judicial decision.”
See id. at 1386 (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)). That
requirement is surely satisfied here. The remaining inquiry is simply “whether a legislatively
conferred cause of action encompasses [Metcalf’s] claim.”7 See id. at 1387.
2. Cause of Action
Whether Congress has provided Metcalf with a cause of action boils down to the original
question—whether the term “beneficiary” in §§ 1132(a)(1)(B) & (a)(3) encompasses assignees—
albeit now as a question on the merits, to be answered using “traditional tools of statutory
interpretation.” See Lexmark, 134 S. Ct. at 1387. The plain text of the statute defines a
“beneficiary” as “a person designated by a participant, or by the terms of an employee benefit
plan, who is or may become entitled to a benefit thereunder.” 29 U.S.C. § 1002(8). To Judge
Stewart, this definition was “sufficiently broad to include a person such as Metcalf who has been
6
For an excellent scholarly summary of Lexmark, see Richard M. Re, The Doctrine
Formerly Known as “Statutory Standing”, Re’s Judicata (Aug. 27, 2014, 2:30 PM),
http://richardresjudicata.wordpress.com/2014/08/27/the-doctrine-formerly-known-as-statutorystanding/.
7
The Ninth Circuit has not decided an ERISA statutory standing case since Lexmark, but
this analysis accords with that in Nat’l Health Plan Corp. v. Teamsters Local 469, 2014 WL
4589917, at *2 (3d Cir. Sept. 16, 2014).
PAGE 6 – OPINION AND ORDER
designated by participants . . . to receive benefits and pursue claims.” F&R at 9. As a matter of
plain text, this Court agrees.
Defendants, however, object that such an interpretation is precluded by Misic v. Bldg.
Serv. Emps. Health & Welfare Trust, 789 F.2d 1374 (9th Cir. 1986). Plaintiffs respond that Judge
Stewart’s interpretation is required by Misic. But Misic neither precludes nor requires such an
interpretation. Misic analyzed the issue under the rubric of standing; the court did not reach the
statutory interpretation of “beneficiaries” because the doctor–assignee had, in his complaint,
alleged that he was “stand[ing] in the shoes of the [b]eneficiaries.” Id. at 1378 (quoting the
complaint) (second alteration in original). That is, he had alleged that his standing was
derivative. Misic held only that that allegation adequately established standing. The court
expressed no opinion on whether Dr. Misic could have alleged standing in his own right, nor on
whether an assignee could be a “beneficiary” under ERISA.8
In most cases, Misic has provided sufficient authority for assignees to bring suit.
Accordingly, the Ninth Circuit has not had occasion to address squarely whether the statutory
definition of “beneficiary” encompasses assignees. By making payments directly to individual
participants, Defendants have sidestepped the reasoning of Misic, which raises the question
anew. But the Sixth Circuit, addressing this specific question, concluded that “[a] health care
provider may assert an ERISA claim as a ‘beneficiary’ of an employee benefit plan if it has
received a valid assignment of benefits.” Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d
8
Indeed, the Misic court specifically noted that “in at least one case, assignees of persons
statutorily permitted to sue under ERISA [had] themselves been permitted to sue under ERISA,”
789 F.2d at 1378 n.4 (citing Nw. Adm’rs, Inc. v. Con Iverson Trucking, Inc., 749 F.2d 1338, 1339
(9th Cir. 1984)), leaving open the possibility that Dr. Misic could have brought suit in his own
right.
PAGE 7 – OPINION AND ORDER
1272, 1277 (6th Cir. 1991). This authority is persuasive and comports with the plain text of the
statutory definition.
In addition to analyzing the plain text and precedent, Lexmark directs that “a statutory
cause of action extends only to plaintiffs whose interests ‘fall within the zone of interests
protected by the law invoked.’” 134 S. Ct. at 1388 (quoting Allen v. Wright, 468 U.S. 737, 751
(1984)). The breadth of the zone-of-interests test “varies according to the provisions of law at
issue.” Id. at 1389 (quoting Bennett v. Spear, 520 U.S. 154, 164 (1997)). To determine which
interests Congress intended to protect, Lexmark looked to the Lanham Act’s statement of policy.
ERISA’s statement of policy provides that the purpose of the law is “to protect . . . the
interests of participants in employee benefit plans and their beneficiaries.” 29 U.S.C. § 1001(b).
In addition, Congress intended that assignability be a freely bargainable term in a healthcare
plan. Davidowitz v. Delta Dental Plan of Cal., 946 F.2d 1476, 1480-81 (1991). Taken together,
these two propositions support the conclusion that where participants in a plan have bargained
for the right to assign benefits, permitting an assignee to sue under ERISA protects not only the
assignee, but the participant as well. Therefore, the interests of the assignee of a participant are
well within the zone of interests protected by ERISA.9
In sum, the plain text of the statute encompasses assignees, who have been “designated
by a participant” to become “entitled to a benefit” under a healthcare plan. See 29 U.S.C.
9
This approach comports with related precedent. In Franchise Tax Bd. of Cal. v. Constr.
Laborers Vacation Trust for S. Cal., 463 U.S. 1 (1983), the Supreme Court held that a state tax
board attempting to levy participants’ benefits did not have a cause of action under ERISA. Id. at
27. The Court did not engage in a zone-of-interests analysis, but the state tax board’s interests
were adverse to those of the participants. And in Simon v. Value Behavioral Health, Inc., 208
F.3d 1073 (9th Cir. 2000), overruled on other grounds by Odom v. Microsoft Corp., 486 F.3d
541, 551 (9th Cir. 2007), the Ninth Circuit held that the assignee of an assignee did not have
standing, both because he was not included in the plain text of the statute and because
“transforming health benefit claims into a freely tradable commodity” would do nothing to
further ERISA’s purpose of protecting participants and beneficiaries.
PAGE 8 – OPINION AND ORDER
§ 1002(8). This interpretation is supported by persuasive authority. See Cromwell, 944 F.2d at
1277. And the interests of an assignee fall within the zone of interests protected by ERISA.
Therefore, the assignee of a participant has a cause of action as a “beneficiary” under
§§ 1132(a)(1)(B) & (a)(3).
C. ERISA Assignments as a Matter of Federal Common Law
Given its silence regarding whether healthcare benefits can be assigned, it is unsurprising
that ERISA is also silent regarding the rights and obligations relating to such assignments. Of
particular relevance here, ERISA says nothing about whether an ERISA obligation can be
discharged, despite a valid assignment, by paying the assignor rather than the assignee. In the
absence of statutory guidance, the federal courts “are to develop a ‘federal common law of rights
and obligations under ERISA-regulated plans.’” Firestone Tire & Rubber Co. v. Bruch, 489 U.S.
101, 110 (1989) (quoting Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56 (1987)).
In that endeavor, the federal courts are to be guided by two sources: “the policies
expressed in ERISA and other federal labor laws,” and state law, from which they may borrow
where appropriate. Padfield v. AIG Life Ins. Co., 290 F.3d 1121, 1125 (9th Cir. 2002) (quotation
marks omitted). But under ERISA federal common law, “borrowed” state law neither applies of
its own force nor is incorporated as the rule of decision. Evans v. Safeco Life Ins. Co., 916 F.2d
1437, 1439 (9th Cir. 1990); Kunin v. Benefit Trust Life Ins. Co., 910 F.2d 534, 539 (9th
Cir. 1990). Instead, state law is merely a source of guidance, alongside the policies of ERISA, in
the development of “a uniform federal common law.” Evans, 916 F.2d at 1440.
Here, referring to Oregon and North Carolina law, Judge Stewart concluded that
the state law governing assignments permits Metcalf, as the
assignee, . . . to pursue claims to recover unpaid (denied) benefits
and for benefits paid to the assignors (and not paid by the assignors
to Metcalf) which failed to discharge the Plan’s obligation after the
Plan was allegedly notified of the Assignments.
PAGE 9 – OPINION AND ORDER
F&R at 15. This appears to conform to the general rule: according to the Restatement (Second) of
Contracts, after an obligor receives notice of an assignment, the obligor may discharge the
obligation only by paying the assignee. § 338. Defendants object that this reference to state law
impairs the uniformity of decisions under ERISA. But this is not so. The F&R “did not simply
‘adopt’ state law, but looked to state law in order to advance the development of federal common
law.” F&R at 12 n.2. Accordingly, even if a State were to adopt a different rule for assignments
of general contract obligations, the rule for ERISA obligations would remain the same.
Defendants also urge that, in the ERISA context, adopting the general rule for
discharging an assigned obligation would result in doctrinal inconsistency. The Oregon commonlaw rule is that an assignor may not collect on an obligation that she has assigned to another. In
re Martin, 167 B.R. 609, 616 (Bankr. D. Or. 1994) (citing Commercial National Bank v.
Portland, 37 Or. 33, 38-39 (1900)). In contrast, Defendants argue, the ERISA rule is that either
an assignor or an assignee may collect. Hansen v. Aetna Health & Life Ins. Co., 1999 WL
1074078, at *6 (D. Or. Nov. 4, 1999).10
Defendants’ reliance on Hansen is misplaced. In Hansen, the defendant insurance
company refused to pay the assignee, and the plaintiff–participant had to pay out of her own
pocket, in effect repudiating the assignment. See id. at *6. Under those facts, denying the
plaintiff the right to sue comported neither with the policies underlying ERISA nor with common
sense. It is doubtful that the same rule would apply absent similar facts. See F&R at 14
(observing that “an assignment, in some cases, may deprive the assignor of her right to sue”).
The Oregon rule notwithstanding, the common law generally has evolved rules to permit
10
Defendants also cite Cagle v. Bruner, 112 F.3d 1510 (11th Cir. 1997), for the
proposition that both a participant and her assignee have standing to sue to collect. But Cagle
stands only for the proposition that a participant may assign her right to benefits and retain the
right to sue to enforce “distinct interests.” Id. at 1515.
PAGE 10 – OPINION AND ORDER
assignees to collect on more fragile assignments without subjecting obligors to double liability.
See generally Rest. (2d) of Contracts § 331 (discussing “[p]artially [e]ffective” assignments).
Doubtless, the federal common law under ERISA will do the same.
In addition to state law, the policies underlying ERISA also weigh against permitting
insurance companies to pay an assignor and deprive the assignee of the right to collect. The right
to assign claims, where not bargained away, benefits participants by enabling them to receive
treatment without having to establish their solvency or pay potentially large medical bills up
front. Misic, 789 F.2d at 1377. To providers, the primary incentive to accept assignments in lieu
of payment is a streamlined and simplified billing structure. If the insurance company could
undo that incentive at its option, providers would have no reason to accept assignments or pursue
uncertain claims on their clients’ behalf; the assignment-based business model would cease to
exist. An insurance company that would rather have providers streamline their billings only by
participating in the plan already has an appropriate mechanism available under the law: bargain
for an anti-assignment clause. Where it has not, and it is notified of a valid assignment, it must
honor the assignment and pay the assignee.
CONCLUSION
The Court ADOPTS Judge Stewart’s Findings and Recommendations (Dkt. 24), as
supplemented herein. For the reasons set forth in Judge Stewart’s Findings and
Recommendation, as supplemented above, Defendants’ motion to dismiss for failure to state a
claim (Dkt. 11) is GRANTED as to Claim 3 and otherwise DENIED. Plaintiff’s Claim 3 is
DISMISSED with leave to replead as a separate ERISA violation.
IT IS SO ORDERED.
DATED this 5th day of November, 2014.
/s/ Michael H. Simon
PAGE 11 – OPINION AND ORDER
Michael H. Simon
United States District Judge
PAGE 12 – OPINION AND ORDER
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