U.S. Renal Care v. Wellspan Health et al

Filing 103

MEMORANDUM re Mtns for summary jgmnt 75 , 87 , 88 , 90 and 95 (Order to follow as separate docket entry)Signed by Honorable Sylvia H. Rambo on 3/21/17. (ma)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
U.S. RENAL CARE, INC. d/b/a U.S.
RENALCARE CENTRAL YORK,
DIALYSIS individually and as
ASSIGNEE OF PATIENT, WW,
Plaintiff/
Counter-Defendant,
v.
WELLSPAN HEALTH, WELLSPAN
MEDICAL PLAN, THE PLAN
ADMINISTRATOR OF WELLSPAN
MEDICAL PLAN, and South Central
PREFERRED, INC.,
Defendants/
Counter-Plaintiffs.

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Civil No. 1:14-CV-2257

Judge Sylvia H. Rambo

MEMORANDUM
In this action involving a dispute between a healthcare provider and an
employee welfare benefit plan regarding alleged overpayments made to the
healthcare provider made pursuant to the plan, Plaintiff brings claims pursuant to
ERISA, as well as other state law and federal claims, regarding Defendants’
recoupment of the alleged overpayments, and Defendants have responded by
asserting counterclaims for the remainder of the overpayments. Presently before
the court are cross-motions for summary judgment. For the reasons stated herein,
the court will grant Defendants’ motion for summary judgment as to Plaintiff’s
claims, grant in part and deny in part Defendants’ motion for summary judgment
as to their counterclaims, deny Plaintiff’s motion for summary judgment as to its

own claims, and grant in part and deny in part Plaintiff’s motion for summary
judgment as to Defendants’ counterclaims.
I.

Background
In considering the instant motions for summary judgment, the court relied on

the uncontested facts or, where the facts were disputed, viewed the facts and
deduced all reasonable inferences therefrom in the light most favorable to the
nonmoving party in accordance with the relevant standard when deciding a motion
for summary judgment. See Doe v. C.A.R.S. Prot. Plus, 527 F.3d 358, 362 (3d Cir.
2008).
A.

Facts1

Plaintiff U.S. Renal Care, Inc. d/b/a U.S. Renal Care Central York Dialysis
(“Plaintiff”) is a medical services provider that offers dialysis services. Defendant
Wellspan Health (“Wellspan”) is the parent organization of Defendant Wellspan
Medical Plan (the “Plan”), which is a self-funded employee welfare benefit plan
within the meaning of § 3(1) of ERISA, 29 U.S.C. § 1002(1), that provides medical
benefits to eligible employees and their eligible dependents. Defendant South
Central Preferred, Inc. (“South Central” and, collectively with Wellspan and the
Plan “Defendants”), which is also owned by Wellspan, acts as the claims

1

The court has reviewed the parties’ respective statements of material facts, the responses
thereto, as well as the underlying administrative record. While the facts are largely undisputed,
the court has cited to the relevant portion of the administrative record where a fact is in dispute.
2

administrator, Preferred Provider Organization, and Third Party Administrator for
the Plan, and performs the fiduciary duties of plan administration, including
making initial benefits determinations. Defendants work with Pennsylvania
Preferred Health Network (“PPHN”) as their healthcare network to provide
benefits to beneficiaries under the Plan.
According to the Plan Document and Summary Plan Description,2 the Plan
provides four tiers of benefits. As an out-of-network provider within the PPHN
service area, Plaintiff was entitled to benefits payments in Tier 4, which are paid at
50% of the Usual Customary and Reasonable Charge (“UCR”) – the average costs
for medical services in a geographic area – until a beneficiary has met their out-ofpocket maximum, and at 100% of UCR thereafter.
In the event of an adverse benefit determination, the Plan states that the
administrator must provide written notice of the denial, which includes: the reasons
for the denial; a reference to the plan provisions upon which the denial was based;
a description of any additional information needed from the beneficiary to perfect
the claim; notice that the beneficiary is entitled to request a review of the claim
denial and a description of the appeal process; and a statement that the beneficiary
has a right to bring a civil action under ERISA following any denial or appeal. The
2

While there are three versions of the summary plan description relevant to the instant dispute,
one for each year of coverage in 2012, 2013, and 2014 (see Docs. 72-1 & 72-2), the terms of the
summary plan descriptions are substantially similar and therefore will be referred to as a single
summary for convenience.
3

Plan defines an adverse benefit determination as “[a] denial, reduction, or
termination of benefits; or . . . [a] failure to provide or make payment (in whole or
in part) for a benefit.”
From December 7, 2012 until October 31, 2014, Plaintiff provided dialysis
services to patient WW, who was a beneficiary of the Plan through his spouse. In
return for medical services, WW assigned all of his benefits and rights under the
Plan to Plaintiff pursuant to an Assignment of Benefits (“AOB”), which included
the assignment of any legal or administrative claims arising under any ERISA or
non-ERISA group health plan, and directed any insurance policy or health plan pay
benefits for WW directly to Plaintiff. (See Doc. 72-3.) At all relevant times,
Plaintiff was considered an “out-of-network” provider under the terms of the Plan,
and there was never any participating provider agreement or other contract
between the Plan and Plaintiff. As WW’s assignee, however, Plaintiff was entitled
to payments for services provided to WW directly from the Plan, because the Plan
followed the insurance industry custom of making payments directly to assignees
of beneficiaries. (See Doc. 83-1, ¶¶ 13, 15.) Although South Central did not receive
a copy of the AOB between WW and Plaintiff until March 24, 2013, it paid
Plaintiff as an assignee because Plaintiff indicated on its claims for covered
services that there had been an assignment of WW’s benefits. (Id. at ¶¶ 14, 16.)

4

In at least two separate phone calls, Plaintiff verified benefits with South
Central, which represented that Plaintiff was an out-of-network provider and
benefits would be paid, after a $250 deductible, at 50% of UCR until WW’s outof-pocket maximum for each benefit year had been met, and then at 100% of UCR.
On March 21, 2013, South Central sent revised Explanations of Benefits (“EOBs”)
to WW, which contained an explanation of overpayments that the Plan had made
to Plaintiff for WW’s dialysis services, and advising him of his right to appeal. On
the same date, South Central sent Plaintiff requests for refunds of the
overpayments, which stated that six claims were “paid at the incorrect
benefit/network level,” and detailed the amounts that were paid for services and the
amounts that should have been paid. South Central also sent Provider Payment
Reports to Plaintiff, which included further details about the allegedly overpaid
claims. In total, South Central requested a refund in the amount of $59,752.16 for
the six overpaid claims. Plaintiff replied to South Central via letters dated April 26,
2013, disputing that any refund was required and requesting: 1) EOBs for each
claim, including how South Central determined the overpayment; 2) the reason for
the change in benefits; 3) a copy of WW’s benefits under the Plan; and 4) the
network being used to calculate UCR.
South Central replied to Plaintiff via letters dated May 20, 2013, stating that
there had not been any change in benefits. Instead, the claims processor
5

erroneously paid the claims at the full billed amount rather than at 50% of UCR
under the terms of the Plan. Attached to each of these letters, which responded
separately to each of the six overpaid claims, were copies of the original and
revised EOBs, a spreadsheet summary detailing the correctly-processed claims, as
well as portions of the Plan document that defined UCR and advised of the Plan’s
appeal procedures should the claimant disagree with the adverse benefit
determination.
On February 21, 2014, counsel for Defendants notified Plaintiff by letter
that, in addition to the overpayments that resulted from a clerical error on behalf of
an employee of South Central covering dates of service from December 7, 2012
through January 13, 2013, and totaling $59,752.16, a second set of overpayments
occurred for dates of service from January 16, 2013 through October 16, 2013,
totaling $145,920.31, which were caused by a mathematical error on behalf of
another South Central employee. The letter further stated that if Plaintiff did not
voluntarily refund the total $205,672.47 within ten days, Defendants would recoup
the overpayments by withholding then-current and future allowable payments and
possibly filing litigation.
Plaintiff responded via counsel in a letter dated March 5, 2014, wherein it
disputed the alleged overpayments and Defendants’ right to recoup them, and
requested the methodology used to calculate the overpayment, any documents
6

relied on in making such calculation, and a complete fee schedule for dialysis
services charged by Defendants’ non-contracted payers. While counsel for Plaintiff
and Defendants continued to exchange letters reiterating their positions, and
referring to Plaintiff as WW’s assignee, South Central sent a letter dated April 30,
2014 not to Plaintiff’s counsel, but directly to WW, outlining its intention to
recoup payments from Plaintiff, advising WW of his right to appeal the adverse
benefits determination within 180 days, and attaching revised EOBs. Defendants
subsequently began to recoup the alleged overpayments by withholding payments
for services provided to WW by Plaintiff and to date has recouped a total of
$45,966.08.
B.

Procedural History
Plaintiff initiated this action by filing a complaint on November 25, 2014,

wherein it asserted claims under both ERISA and Pennsylvania state law due to
Defendants’ recoupment of its purported overpayments. (Doc. 1.) Defendants filed
a motion to dismiss the complaint on February 18, 2015 (Doc. 19), and then on
February 24, 2015, filed their own complaint against Plaintiff containing related
claims in a separate action, (Civ. No. 1:15-cv-0400, Compl., Doc. 1) (hereinafter
“counterclaims”), which the court consolidated into the instant matter on March
16, 2015 (see Doc. 25). In their counterclaims, Defendants asserted equitable
claims under ERISA relating to the alleged overpayments as well as an unjust
7

enrichment claim under Pennsylvania state law. (Id., ¶¶ 104, 107-110.) On April 6,
2015, Plaintiff filed a motion to dismiss Defendants’ counterclaims. (Doc. 30.)
By memorandum and order dated September 10, 2015, the court dismissed
Counts I and IV of Plaintiff’s complaint, which asserted, respectively, claims for
state law conversion and breach of fiduciary duty under ERISA, but declined to
dismiss Plaintiff’s ERISA claims for benefits and inadequate notice contained in
Counts II and III, or any of Defendants’ counterclaims. (See Docs. 46 & 47.)
On October 30, 2015, Plaintiff requested to expand discovery beyond the
administrative record (Doc. 57), which Defendants opposed (Doc. 60). After the
parties filed, with leave of the court, both a reply (Doc. 64) and sur-reply (Doc.
67), the court ordered Defendants to submit what they deemed to be the complete
administrative record (Doc. 70). On February 8, 2016, Defendants submitted the
administrative record (Doc. 72), and on March 24, 2016, the court denied
Plaintiff’s request to expand discovery (Doc. 74).
Following the court’s order limiting the facts in this matter to the
administrative record, the parties filed cross-motions for summary judgment both
in favor of their own claims and against the opposing party’s claims. (See Docs.
75, 87, 88, 95.) All four motions for summary judgment have been fully briefed
(Docs. 76, 83, 91, 94, 97, 99, 100, 101) and are ripe for disposition.

8

II.

Legal Standard
Federal Rule of Civil Procedure 56 sets forth the standard and procedures for

granting summary judgment. Rule 56(a) provides that “[t]he court shall grant
summary judgment if the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to summary judgment as a matter of law.”
Fed R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23
(1986). A factual dispute is “material” if it might affect the outcome of the suit
under the applicable substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986). A factual dispute is “genuine” only if there is a sufficient
evidentiary basis that would allow a reasonable fact-finder to return a verdict for
the nonmoving party. Id. at 248. When evaluating a motion for summary judgment,
a court “must view the facts in the light most favorable to the non-moving party,”
and draw all reasonable inferences in favor of the same. Hugh v. Butler Cnty.
Family YMCA, 418 F.3d 265, 267 (3d Cir. 2005).
The moving party bears the initial burden of demonstrating the absence of a
disputed issue of material fact. See Celotex, 477 U.S. at 324. “Once the moving
party points to evidence demonstrating no issue of material fact exists, the nonmoving party has the duty to set forth specific facts showing that a genuine issue of
material fact exists and that a reasonable factfinder could rule in its favor.” Azur v.
9

Chase Bank, USA, Nat’l Ass’n, 601 F.3d 212, 216 (3d Cir. 2010). The nonmoving
party may not simply sit back and rest on the allegations in its complaint; instead,
it must “go beyond the pleadings and by [its] own affidavits, or by the depositions,
answers to interrogatories, and admissions on file, designate specific facts showing
that there is a genuine issue for trial.” Celotex, 477 U.S. at 324 (internal quotations
omitted); see also Saldana v. Kmart Corp, 260 F.3d 228, 232 (3d Cir. 2001).
Summary judgment should be granted where a party “fails to make a showing
sufficient to establish the existence of an element essential to that party’s case, and
on which that party will bear the burden at trial.” Celotex, 477 U.S. at 322-23.
“Such affirmative evidence – regardless of whether it is direct or circumstantial –
must amount to more than a scintilla, but may amount to less (in the evaluation of
the court) than a preponderance.” Saldana, 260 F.3d at 232 (quoting Williams v.
Borough of W. Chester, 891 F.2d 458, 460-61 (3d Cir. 1989)).
III.

Discussion
While the current procedural posture appears somewhat convoluted due to

the presence of both Plaintiff’s claims and Defendants’ counterclaims, essentially
each side in this dispute has moved the court to award it summary judgment as to
all claims and counterclaims. Because each party has both moved for summary
judgment on its own claims and the opposing party’s claims, an award of summary
judgment to one party regarding a claim is necessarily a denial of summary
10

judgment as to the opposing party’s competing motion. Thus, the court will review
each claim and counterclaim in turn to determine whether either party is entitled to
summary judgment. In reviewing the claims, the court notes as a threshold matter
that it has previously determined that the Plan grants the plan administrator, South
Central, discretion to interpret the Plan, and thus the arbitrary and capricious
standard applies to South Central’s decisions regarding the Plan. U.S. Renal Care,
Inc. v. Wellspan Health, Civ. No. 14-cv-2257, 2016 WL 1162268, *3 (M.D. Pa.
Mar. 24, 2016). Under the arbitrary and capricious standard, the “court may
overturn a decision of the Plan administrator only if it is without reason,
unsupported by the evidence or erroneous as a matter of law.” Cottillion v. United
Ref. Co., 781 F.3d 47, 55 (3d Cir. 2015) (quoting Mitchell v. Eastman Kodak Co.,
113 F.3d 433, 439 (3d Cir. 1997)) (citations and internal quotation marks omitted).
Rather than the court making its own determination as to the correct interpretation
of a plan, the court must uphold a plan administrator’s decision “so long as the
administrator’s interpretation is rationally related to a valid plan purpose and is not
contrary to the plain language of the plan.” (Id.) (citing Dewitt v. Penn-Del
Directory Corp., 106 F.3d 514, 520 (3d Cir. 1997)).
A.

Plaintiff’s Claim for Benefits Under § 502(a) of ERISA

Plaintiff’s first remaining claim is for benefits pursuant to § 502(a) of
ERISA. Defendants argue that they are entitled to summary judgment on this claim
11

because Plaintiff failed to exhaust its administrative remedies before filing suit,
while Plaintiff argues that the exhaustion requirement should be waived due to
futility.
Generally, a plaintiff may only bring a civil action to recover benefits under
an ERISA plan after the plaintiff has “exhausted the remedies available under the
plan.” Bennett v. Prudential Ins. Co., 192 F. App’x 153, 155 (3d Cir. 2006) (citing
Weldon v. Kraft, 896 F.2d 793, 800 (3d Cir. 1990)). “The exhaustion requirement
is waived, however, where resort to the plan remedies would be futile.” Id. (citing
Berger v. Edgewater Steel Co., 911 F.2d 911, 916 (3d Cir. 1990)). Because futility
is an exception to the exhaustion requirement, “[the] party invoking this exception
must provide a clear and positive showing of futility before the District Court.”
D’Amico v. CBS Corp., 297 F.3d 287, 290 (3d Cir. 2002). As the Third Circuit has
explained:
“Whether to excuse exhaustion on futility grounds rests
upon weighing several factors, including: (1) whether
plaintiff diligently pursued administrative relief; (2)
whether plaintiff acted reasonably in seeking immediate
judicial review under the circumstances; (3) existence of
a fixed policy denying benefits; (4) failure of the
[defendant] to comply with its own internal
administrative procedures; and (5) testimony of plan
administrators that any administrative appeal was futile.
Of course, all factors may not weigh equally.”
Cottillion, 781 F.3d at 54 (quoting Harrow v. Prudential Ins. Co. of Am., 279 F.3d
244, 250 (3d Cir. 2002)).
12

Here, Plaintiff received notice of the initial adverse benefits determination,
i.e., Defendants’ assertion that it had overpaid on previous claims for patient WW
and demand for reimbursement, by letter in March 2013. That letter from South
Central, as well as several others relating to additional payments for services
provided to patient WW, provided that the overpayments occurred because the
claims were “paid at the incorrect benefit/network level” and demanded that
Plaintiff refund the alleged overpayments within thirty days. Plaintiff initially
responded to the adverse benefits determination by letter dated April 26, 2013,
wherein it refused to refund the purported overpayments and requested, inter alia,
the underlying documentation relied upon by Defendants in arriving at their
decision. Defendants responded by letters dated May 20, 2013, attaching the
relevant portions of the plan documents advising Plaintiff of appeal rights and
procedures and how UCR is calculated, as well as EOBs detailing the
overpayments.3 On February 21, 2014, Defendants sent a letter to Plaintiff wherein

3

Plaintiff claims that it never received these letters. However, under the “mailbox rule,” “if a
letter ‘properly directed is proved to have been either put into the post-office or delivered to the
postman, it is presumed . . . that it reached its destination at the regular time, and was received by
the person to whom it was addressed.’” Lupyan v. Corinthian Colls. Inc., 761 F.3d 314, 319 (3d
Cir. 2014) (quoting Rosenthal v. Walker, 111 U.S. 185, 193 (1884)). Where there is no actual
proof of delivery, receipt can be proven through circumstantial evidence such as a sworn
statement by an affiant with personal knowledge of the mailing. See id. (citing United States v.
Hannigan, 27 F.3d 890, 893 (3d Cir. 1994); see also Kyhn v. Shinseki, 716 F.3d 572, 574 (Fed.
Cir. 2013). Here, the presumption of mailing has been established by the sworn testimony of the
claims administrator for South Central, Rebecca Borge, that she personally mailed the six letters
13

they again demanded a refund of the overpayments and included a second adverse
benefits determination relating to an additional set of purported overpayments. The
letter also included summary plan descriptions for 2012 and 2013.
Turning to the factors to determine whether exhaustion of administrative
remedies was futile, it is clear that Plaintiff did not diligently pursue administrative
relief. While Plaintiff’s counsel corresponded with Defendants’ counsel regarding
the adverse benefits determinations via several letters, Plaintiff never appealed
pursuant to the appeal procedure laid out in the summary plan description. The
court cannot construe Plaintiff’s counsel’s letters refusing to refund the
overpayments as appeals where counsel had the relevant portions of the Plan
document that provided the appropriate appeal procedure. Thus, the first factor
weighs against a finding of futility.
The second factor to be considered is whether Plaintiff acted reasonably in
seeking judicial review. The parties agree that Defendants had begun recouping
overpayments by withholding subsequent payments that were otherwise due for
services provided by Plaintiff. The court finds that Plaintiff was reasonable in
on May 20, 2013. (Doc. 72-18.) The burden of production thus shifts to Plaintiff to produce
evidence to “burst the bubble” of the presumption. See McCann v. Newman Irrevocable Tr., 458
F.3d 281, 287 (3d Cir. 2006); see also Fed. R. Evid. 301. Although the evidence needed to burst
the evidentiary presumption in civil cases is minimal, Plaintiff has not met that burden here. The
only evidence offered to rebut the presumption is a sworn statement by an employee of Plaintiff
who was not employed during the time the letters were mailed and who therefore has no personal
knowledge of the mailing or of Plaintiff’s procedures at the time. Accordingly, for purposes of
deciding the motions for summary judgment, the court finds that South Central mailed, and
Plaintiff received, the May 20, 2013 letters.
14

filing suit to stop Defendants from refusing to submit payments to which Plaintiff
had a right.
The next factor is whether Defendants had a fixed policy of denying
benefits. Plaintiff has provided no evidence of any such policy, and Defendants
deny that one existed. Accordingly, the third factor also weighs against futility.
The fourth factor to be considered is Defendants’ failure to follow their own
internal administrative procedures. Plaintiff argues that Defendants failed to follow
their own procedures by not sending Plaintiff, as WW’s assignee, notices of
adverse benefits determinations, appeal procedures, and documents supporting the
reason for the benefits decisions, such as EOBs or calculations of UCR. The terms
of the Plan itself state that exhaustion of administrative remedies is not required if
the Plan fails to follow its own procedures. (See Doc. 72-1, p. 126 of 193.) While
Defendants initially sent the notices of the adverse benefits determinations and the
right to appeal to WW as required by ERISA, it subsequently provided the same
information to Plaintiff in letters dated May 20, 2013 and February 21, 2014.
Although Defendants arguably did not adhere perfectly to their internal
administrative procedures in mailing the adverse benefits decisions first directly to
WW when they had knowledge of the assignment of WW’s benefits to Plaintiff, by
providing the portions of the Plan document and appeal procedure to Plaintiff upon
request, Defendants substantially complied with their own procedures and gave
15

Plaintiff the opportunity to appeal the adverse benefits determinations. Thus, the
court finds that this factor weighs against futility.
The fifth and final factor is whether a plan administrator testified that any
administrative appeal would have been futile. No such testimony exists here, and
thus this factor also weighs against futility.
Looking at the factors together, the court finds that an appeal of the adverse
benefits determinations would not have been futile. Defendants supplied Plaintiff
with the relevant portions of the Plan documents, including the appeal procedure,
how non-participating providers were paid, and how UCR was calculated. Plaintiff
never filed an appeal, despite being advised of how to do so, Defendants did not
maintain a policy of denying appeals, and Plaintiff produced no testimony from
any of Defendants’ employees that an appeal would have been futile. Accordingly,
the court finds that Plaintiff failed to exhaust its administrative remedies before
filing its complaint, and Defendants will be awarded summary judgment as to
Plaintiff’s claim for benefits under § 502(a) of ERISA.
B.

Plaintiff’s Claim for Violation of § 502(c)(1) of ERISA

Plaintiff’s lone remaining claim against Defendants is for failure to produce
required documents pursuant to § 502(c)(1) of ERISA. Under § 502(c)(1), a plan
administrator:
who fails or refuses to comply with a request for any
information which such administrator is required by this
16

subchapter to furnish to a participant or beneficiary . . .
within 30 days after such request may in the court’s
discretion be personally liable to such participant or
beneficiary in the amount of up to $100 a day from the
date of such failure or refusal, and the court may in its
discretion order such other relief as it deems proper.
29 U.S.C. § 1132(c)(1). The information that a plan administrator must furnish to
a plan participant or beneficiary upon request includes “a copy of the latest updated
summary plan description, and the latest annual report, any terminal report, the
bargaining agreement, trust agreement, contract, or other instruments under which
the plan is established or operated.” 29 U.S.C. § 1024(b)(4). With regard to an
appeal of an adverse benefits determination, a plan administrator must also provide
upon request “all documents, records, and other information relevant to the
claimant's claim for benefits.” 29 C.F.R. § 2560.503-1(h)(2)(iii).
Plaintiff argues that it requested, and never received, fee schedules and other
documents necessary to calculate UCR for the PPHN-covered area. While such
information likely would have been relevant pursuant to an appeal, as discussed
above, Plaintiff never appealed the adverse benefits determinations. Thus, the only
document that Plaintiff requested which Defendants were required to furnish under
ERISA was the summary plan description, which Defendants did provide to
Plaintiff.4 Defendants also provided original and revised EOBs, as well as provider

4

Defendants also contend that they were not required by ERISA to send any notices of adverse
benefits determinations to Plaintiff because Plaintiff was not a participant or beneficiary under
17

payment reports. Based on the documents that Defendants provided in response to
Plaintiff’s requests, and the fact that the requests were not made during an appeal,
the court finds that Defendants did not violate §502(c)(1) of ERISA, and will
award summary judgment to Defendants as to this claim.
C.

Defendants’ Claim for Equitable Relief Under § 502(a)(3) of
ERISA

Defendants’ first counterclaim arising out of the overpayments to Plaintiff
comes pursuant to § 502(a)(3) of ERISA for “other equitable relief” in the form of
an equitable lien by agreement. An equitable lien by agreement arises where one
party retains specific property belonging to another, and allows the aggrieved
party, pursuant to a contract or agreement between the parties, to follow that
the Plan. Plaintiff was, however, the assignee of a participant and beneficiary under the Plan,
which Defendants do not dispute. Indeed, Defendants themselves argued that as WW’s assignee,
Plaintiff must stand in the shoes of WW and cannot seek relief to which WW would not be
entitled as a beneficiary under the Plan. Simply stated, Defendants cannot have it both ways.
They may not contend that Plaintiff stands in WW’s shoes in order to limit Plaintiff’s potential
remedies, but then argue that Plaintiff is not entitled to notices of adverse benefits determinations
as WW’s assignee. The Third Circuit has held that a medical provider has standing as an
assignee to enforce the assignor’s rights as a beneficiary under an ERISA plan. See CardioNet,
Inc. v. CIGNA Health Corp., 751 F.3d 165, 176 n.10 (3d Cir. 2014). In order to enforce its
“standing to assert whatever rights the assignor[] possessed,” id. at 178 (citation omitted)
(emphasis removed), an assignee medical provider receiving payments pursuant to an ERISA
plan would therefore need to receive the notice of an adverse benefits determination, requiring it
to refund those payments, including its right to appeal the decision. See Hahnemann Univ. Hosp.
v. All Shore, Inc., 514 F.3d 300, 307 n.5 (3d Cir. 2008) (stating that once a beneficiary to an
ERISA plan assigns their interest to a medical provider, the medical provider becomes the only
claimant under the plan); see also Prinicipal Mut. Life Ins. Co. v. Charter Barclay Hosp., Inc., 81
F.3d 53, 56 (7th Cir. 1996) (“[M]edical providers . . . who take assignments of their patients’
rights to reimbursement from insurers (or other payment sources) cannot protect those rights
unless the insurer notifies them when the patients’ claims are denied.”). Thus, while the court
need not decide this issue, because the May 20, 2013 letters to Plaintiff included the required
notice and right to appeal, the court rejects Defendants’ assertion that it had no obligation under
ERISA to provide this information directly to Plaintiff.
18

property into the other’s hands. See Sereboff v. Mid Atl. Med. Servs., Inc., 547 U.S.
356, 363-65 (2006) (citing Barnes v. Alexander, 232 U.S. 117, 121 (1914)). In
order to create “an equitable lien by agreement, [a] contract must: 1) identify a
particular fund distinct from the defendant’s general assets; and 2) identify a
particular share of the fund to which it is entitled.” Bd. of Trs. of Nat’l Elevator
Indus. Health Benefit Plan v. McLaughlin, Civ. No. 12-cv-4322, 2014 WL 284431,
*2 (D.N.J. Jan. 24, 2014) (citing Sereboff, 547 U.S. at 368-69). Defendants assert
that the terms of the Plan created an equitable lien by agreement, mandating that
Plaintiff return to Defendants any overpayment of benefits pursuant to the Plan.
The terms of the Plan state, in relevant part:
If, due to a clerical error [by the Plan Administrator or an
agent of the Plan Administrator], an overpayment occurs
in a Plan reimbursement amount, the Plan retains a
contractual right to the overpayment. The person or
institution receiving the overpayment will be required to
return the incorrect amount of money.
(Doc. 72-1, p. 165 of 193.) Defendants argue that this language created an
equitable right to the overpayment itself, rather than just a legal claim for monetary
damages. (See Doc. 94, pp. 13-18 of 33.) Plaintiff argues that the claim is not
equitable because the actual funds representing the overpayment are not traceable
and not attached to an identifiable fund, but, rather, to Plaintiff’s general assets.
(See Doc. 100, pp. 4-8 of 13.)

19

The United States Supreme Court held in Sereboff that there is no “tracing
requirement” for an equitable lien by agreement. Sereboff, 547 U.S. at 365. Rather,
an equitable lien by agreement attaches to the specified property changing hands,
and that property may be converted into other property without invalidating the
lien. Id. at 364-65. The Court’s decision in Sereboff distinguished its prior holding
in Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204 (2002), that
the relief sought was not equitable where an insurer attempted to impose a lien
over funds which were not in the insured’s possession and effectively sought
recovery from the insured’s general assets. Id. at 213-14. Recently, in Montanile v.
Bd. of Trs. of Nat’l Elevator Indus. Health Benefit Plan, __ U.S. __, 136 S. Ct.
651, 659 (2016), the Supreme Court held that an equitable lien by agreement is
eliminated where the fund or account into which an overpayment of benefits is
made has been completely dissipated on nontraceable items. The Court also
clarified its holding in Sereboff, stating that a plaintiff seeking relief through an
equitable lien by agreement “must still identify a specific fund in the defendant’s
possession to enforce the lien,” rather than attaching the lien to a defendant’s
general assets. Id. at 660.
Here, Plaintiff argues that the holding in Montanile defeats Defendants’
claim for an equitable lien by agreement because the overpayments were deposited
into its general operating account and therefore no specific fund is identifiable for
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purposes of a lien. The court disagrees. Relying on Sereboff, the Third Circuit has
held, under similar facts as presented here, that the relevant language of the
agreement between the parties, which stated the plaintiff would be responsible for
“‘reimburse[ment of] the full amount of any overpayment,’” was sufficient to
create an equitable lien by agreement and ordered the plaintiff to reimburse the
overpayment to the defendants. Funk v. Cigna, 648 F.3d 182, 194-95 (3d Cir.
2011) (alterations in original), abrogated on other grounds by Montanile v. Bd. of
Trs. of Nat’l Elevator Indus. Health Benefit Plan, __ U.S. __, 136 S. Ct. 651
(2016). Significantly, the language analyzed by the Funk court is nearly identical
to the language contained here in the Plan. Defendants have identified a specific
fund – overpayments deposited into Plaintiff’s operating account – and established
the particular share of that fund to which they are entitled – the amount of the
overpayments. Plaintiff’s use of the term “general” to describe its operating
account does not transform that account into “general assets.” Plaintiff’s operating
account is an identifiable fund to which Defendants can attach an equitable lien by
agreement, and Plaintiff has not asserted that the funds in the account have been
completely dissipated on nontraceable items. Accordingly, the court finds that the
language of the Plan created an equitable lien by agreement. Additionally, the
court finds that South Central’s decision to recoup the overpayments from future
payments due was not arbitrary and capricious because the terms of the Plan
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created a contractual right to the overpayments and required Plaintiff to return
them. South Central’s decision to begin recouping the overpayments, after Plaintiff
refused to voluntarily return the funds for several months, was not contrary to the
terms or purposes of the Plan and was therefore within South Central’s discretion
as Plan administrator. Thus, the court finds that Defendants are entitled to
summary judgment as to their equitable claim under § 502(a)(3) of ERISA.
D.

Defendants’ Claim for Unjust Enrichment

Defendants assert, in the alternative to their claim under § 502(a)(3) of
ERISA, a common law claim of unjust enrichment pursuant to Pennsylvania law.
Because the court has found above that Defendants are entitled to judgment as to
their claim for an equitable lien by agreement pursuant to the terms of the Plan and
§ 502(a)(3) of ERISA, their claim for unjust enrichment can no longer stand, and
must be dismissed. See US Airways, Inc. v. McCutchen, 133 S. Ct. 1537, 1551
(2013) (“[I]n an action brought under § 502(a)(3) based on an equitable lien by
agreement, the terms of the ERISA plan govern. Neither general principles of
unjust enrichment nor specific doctrines reflecting those principles . . . can override
the applicable contract.”) Accordingly, Plaintiff will be awarded summary
judgment as to Defendants’ unjust enrichment claim.

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IV.

Conclusion
In conclusion, the court finds that Plaintiff failed to exhaust its

administrative remedies regarding its claim for benefits under ERISA contained in
Count I of the complaint, and Defendants will be awarded summary judgment as to
that claim. Defendants will likewise be awarded summary judgment as to
Plaintiff’s claim in Count III for inadequate notice under ERISA because the court
finds that the May 20, 2013 letters sent to Plaintiff constituted adequate notice
under ERISA. As to Defendants’ counterclaims, the court finds that Defendants are
entitled to equitable relief pursuant to ERISA § 502(a)(3) in the form of an
equitable lien by agreement and Defendants will be awarded summary judgment
on Count I. Because the court will award judgment to Defendants as to their
ERISA claim, their alternative request for relief under a theory of unjust
enrichment may not be maintained, and Plaintiff will be awarded judgment on
Count II of Defendants’ counterclaims.
An appropriate order will issue.

s/Sylvia H. Rambo
SYLVIA H. RAMBO
United States District Judge
Dated: March 21, 2017
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