Memorial Hermann Health System v. Pennwelll Corporation Medical and Vision Plan et al

Filing 22

MEMORANDUM OPINION AND ORDER granting 8 MOTION to Dismiss 1 Complaint. (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)

United States District Court
Southern District of Texas

ENTERED
December 22, 2017

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

MEMORIAL HERMANN HEALTH
SYSTEM,

§
§
§
§
§
§
§
§
§
§
§
§

Plaintiff,
v.

PENNWELL CORPORATION
MEDICAL AND VISION PLAN and
PENNWELL CORP.
I

Defendants.

David J. Bradley, Clerk

CIVIL ACTION NO. H-17-2364

MEMORANDUM OPINION AND ORDER

Plaintiff, Memorial Hermann Health System, brings this action
as assignee of a patient identified as P.C., against defendants,
Pennwell Corporation Medical and Vision Plan, an employee benefit
plan ("Plan"), and Pennwell Corporation as Plan Administrator and
Fiduciary

( "Pennwell") ,

Security Act of 1974
~'

under

the

("ERISA")

as amended,

for health care benefits.

attorneys'
Pending

fees

before

reasonably
the

court

is

Employment

Retirement

29 U.S.C.

§

Income

1001, et

Plaintiff also seeks costs and

incurred

prosecuting

Defendants' ,

this

Pennwell

action.

Corporation

Medical and Vision Plan and Pennwell Corporation, Motion to Dismiss
("Defendants' Motion to Dismiss")

(Docket Entry No. 8) .

For the

reasons stated below the pending motion will be granted and this
action will be dismissed without prejudice.

I.

Factual and Procedural Background

Plaintiff initiated this action against defendants by filing
Plaintiff's Original Complaint (Docket Entry No. 1) on August 2,
2017.

Plaintiff alleges the following facts:
4.
The insurance plan issued and administered by
Defendants covered the patient, P.C. (hereinafter the
"Patient" or "P.C.") as an insured under the plan.
5.
The Patient initially presented to the hospital on
August 30, 2015 through September 2, 2015.
Upon
presentation, Plaintiff verified effective coverage for
the Patient. The Patient was initially cared for a brain
mass and a final diagnosis of cerebral embolism, cerebral
edema.
6.
Patient was re-admitted to the hospital on September
8, 2015 through September 14, 2015.
The diagnosis was
the same: cerebral embolism, cerebral edema.
7.
Patient was again re-admitted to the hospital from
September 19, 2015 through September 23, 2015 complaining
of chest pains. The diagnosis was subendo infarction and
parox ventricular tachycardia.
8.
Further, the patient had some speech pathology
therapy at the hospital from October 10, 2015 through
October 22, 2015.
9.
Plaintiff rendered medically necessary services to
P.C. and submitted their industry standard UB-04 claim
statements to Defendants' agent for payment for the
services and supplies authorized by Defendant and
provided to the Defendant's insured.
Thereafter,
Defendants' agent and administrator issued explanation of
benefits[:] 1.) for dates of service between August 30,
2015 to September 14, 2015 (Exhibit "B") on January 13,
2016, stating that the claim was not covered per plan
exclusions, and to refer to the plan document, and
2.) for dates of service on August 30, 2015 and on
September 8, 2015 (Exhibit "C") on January 8, 2016
stating that the claim was not covered per plan
exclusions, and to refer to the plan document.
3.) for
dates of service on September 19, 2015 through September
23, 2015 (Exhibit "D") on January 13, 2016 stating that
-2-

the claim was not covered per plan exclusions, and to
refer to the plan document. 4.) for dates of service on
October 10, 201[5] through October 22, 2015 (Exhibit "E")
on February 5, 2016 stating that the claim was not
covered per plan exclusions, and to refer to the plan
document.
10. Plaintiff requested an appeal of Defendants'
denial/nonpayment on January 19, 2016. This appeal also
requested plan documents.
Defendant responded with a
letter classifying the January 19, 2016 correspondence as
an appeal, and denied the claim due to plan exclusions.
The response did not contain all of the plan documents
requested. Plaintiff again requested the plan documents
from Defendant on March 21, 2016 only for Defendant to
respond with a letter dated April 21, 2016 reversing its
previous position that the Plaintiff had filed an appeal
and refusing to provide requested documents.
11. Plaintiff would show that said Defendant's Plan was
in full force and effect and covers the hospitalization
of P.C. for the admissions under the Plan (Exhibit "A").
This patient was admitted to the Hospital through the
emergency room upon representations that such coverage
was in full force and effect and would cover these
hospitalizations. 1
Based on these factual allegations, plaintiff asserts a single
statutory cause of action for recovery of benefits under ERISA
§

502 (a) (1) (B), 29 U.S.C.

§

1132 (a) (1) (B), as assignee of P.C.

In

pertinent part plaintiff asserts:
16. Defendants allege that an employee welfare benefit
plan, as that term is defined in 29 u.s.c. § 1002(1), has
been established and/or maintained by Defendants, and
that the provisions of the Employee Retirement Income
Security Act, 29 U.S.C. § 1001 et seq., (hereinafter
"ERISA"),
control the claim for benefits made by
Plaintiff, as assignee of P. C., plan participant or
beneficiary of the alleged ERISA welfare benefit plan.
P. C. executed an irrevocable assignment of insurance

1

~~

Plaintiff's Original Complaint, Docket Entry No. 1, pp. 2-4
4-11 (citing Exhibits A-K and R-W attached thereto).
-3-

benefits on September 14, 2015 in favor of Plaintiff
which provides in pertinent parts:
"In consideration of services rendered, I
hereby irrevocably assign and transfer to the
hospital for myself and my dependents, all
rights, title and interest in the benefits
payable for services rendered by the hospital
provided in any insurance policy(ies) under
which I or any of my dependents are insured.
Said irrevocable assignment and transfer shall
be for the purpose of granting the hospital an
independent right of recovery.
"
17. The Defendant, PENNWELL CORPORATION[,] is the plan
"administrator" and/or "sponsor." Accordingly, Plaintiff
brings this cause of action pursuant to 29 U.S.C.
§ 1132(a) (1) (B) to recover benefits due to them through
the assignment granted by the patient pursuant to the
terms of the employee welfare benefit plan, administered
by said Defendant for the care and treatment it provided
to P.C.
18. Plaintiff, upon information supplied by Defendants,
through its authorized agents or representatives,
believed or had reason to believe, that the care and
treatment of P.C. was payable as covered charges under
the terms and conditions of the applicable plan issued by
Defendant, PENNWELL CORPORATION, as part of the ERISA
type benefits offered to employee members and their
dependents.
19. Defendants have denied payment on the claims
submitted by Plaintiff without justifiable cause or
excuse. .
20. The irrevocable assignment of the right to payment
under the health benefit plan was executed by the patient
in favor of Plaintiff, which was intended to assign any
and all rights to payment of said benefits and causes of
action for failure to pay to Plaintiff, in consideration
of the services rendered to the patient. The assignment
was meant and intended to apply to any and all health
benefits that P.C. was entitled to for payment of the
Plaintiff's charges.
Plaintiff is an assignee of an
intended "participant" or "beneficiary" of the health
benefit plan within the meaning of 29 U.S.C. §§ 1002(8),

-4-

1132(a), and steps into the shoes of said Participant,
giving Plaintiff standing to assert this cause of action.
21.
Plaintiff, as an assignee of an intended participant
within the meaning of 29 U.S.C. § 1132(a), is entitled to
file this cause of action against the Plan and/or its
Administrator, and the policy which is liable for payment
of major medical benefits due for this patient's
admission.
It is clear that the plan of insurance was
meant and intended to pay for major medical in-patient
services and treatment, and the patient participated in
this group insurance plan or program with the intent to
provide protection from payment of hospital bills. 2
II.

Defendants' Motion to Dismiss

The only claim asserted in Plaintiff's Original Complaint is
an

ERISA

claim

for

Plan

benefits

as

an

assignee

of

P.C. 3

Defendants move to dismiss Plaintiff's Original Complaint arguing:
1.

Plaintiff's Original Complaint is subject to the
assignment provisions in the applicable ERISA Plan
and should be dismissed pursuant to ERISA.

2.

Plaintiff's Original Complaint should be dismissed
as a matter of law as Plaintiff lacks standing to
assert the ERISA claim. 4

Citing
§

Federal

502 (a) (1)

(B),

Rule

of

29 U.S.C.

Civil
§

Procedure

1132 (a) (1)

(B),

12(b) (1)

and

ERISA

defendants argue that

Id. at 5-7 ~~ 16-22 (quoting Authorization for Use/Disclosure
and Waivers/Insurance Assignments, Exhibit P, Docket Entry No. 1-1,
p. 147 or 169).
2

3

Id.
See also Plaintiff's Response to Defendants' Motion to
Dismiss ("Plaintiff's Response"), Docket Entry No. 12, p. 3 ~ 6
("Plaintiff's claim is one for unpaid medical benefits pursuant to
29 u.s.c. § 1132 (a) (1) (B).
Plaintiff asserts this claim in its
individual capacity and derivatively as the 'assignee' of the plan
member, P.C.").
4

Defendants' Motion to Dismiss, Docket Entry No. 8, p. 1.
-5-

Plaintiff's Original Complaint should be dismissed with prejudice
because "the terms of the ERISA plan prohibit assignment of claims
by the beneficiary to the Plaintiff." 5
Plaintiff responds that defendants' motion to dismiss should
be denied because it possesses standing either (1) derivatively as
an assignee of a Plan participant or beneficiary, i.e., P.C., or
(2) independently as a designated or intended representative of a
Plan participant or beneficiary under 29 C.F.R.
Asserting that defendants'

§

2560.503-1(b) (4).

motion "is more akin to a premature

motion for summary judgment without the benefit of any discovery .
• ,"

6

plaintiff asks the court to deny defendants' motion, and

[s]hould the Court determine that any aspect of
Plaintiff's jurisdiction allegations are deficient,
Plaintiff requests that the Court defer ruling on [the
motion] to allow the Plaintiff to engage in limited
discovery to obtain copies of verified plans, summary
plan descriptions and other relevant documents to
identify all plan provisions and correspondence relevant

5

Brief in Support of Defendants', Pennwell Corporation Medical
and Vision Plan and Pennwell Corporation, Motion to Dismiss
("Defendants' Brief"), Docket Entry No. 8-1, p. 2. Defendants also
argue that the assignment at issue does not extend to the
defendants' self-funded employee benefit plan because it only
assigns P.C.'s rights to benefits provided by insurance policies
under which P.C. was insured, while the self-funded plan at issue
here is not an insurance policy.
Id. at 9-10. Because the court
concludes that the Plan's anti-assignment provision controls the
outcome of this case, the court has assumed without deciding that
the assignment extends to the Plan.
6

Plaintiff's Response, Docket Entry No. 12, p. 2
-6-

~

2.

to Plaintiff's claims to establish that the Court has
subject matter jurisdiction to hear this case. 7
Alternatively,

plaintiff asks for

"leave of Court to amend its

pleading to correct any perceived deficiencies." 8
Defendants

reply

that plaintiff

lacks

derivative

standing

because the Plan's anti-assignment provision is enforceable and
unambiguous, and that plaintiff's argument regarding independent
standing finds no support in either the law or the Plaintiff's
Original Complaint. 9

A.

Standard of Review

Defendants'

challenge to plaintiff's standing concerns the

justiciability of the plaintiff's claim.
for a Better Environment,

See Steel Co. v. Citizens

118 S. Ct. 1003

(1998)

(standing is a

threshold jurisdictional question which must be addressed prior to
"In essence

and independent of the merits of a party's claims).

the question of standing is whether the litigant is entitled to
have the court decide the merits of the dispute or of particular
issues."

Warth v.

Seldin,

95

s.

Ct.

2197,

2205

(1975) .

The

standing inquiry has two components, involving "both constitutional

7

Id.

8

Id.

9

Defendants' Reply in Support of Their Motion
("Defendants' Reply"), Docket Entry No. 16.
-7-

to

Dismiss

limitations

on

federal-court

limitations on its exercise."

jurisdiction

and

prudential

Id.

Constitutional standing stems from the case or controversy
requirement of Article III and is premised on concepts of injury,
causation,

and redressability.

S. Ct. 691, 703 (1962))

Id.

(citing Baker v.

Carr,

82

See also Duarte ex rel. Duarte v. City of

Lewisville, Texas, 759 F.3d 514, 517 (5th Cir. 2014)

(recognizing

that a party satisfies the constitutional element of standing by
"present [ing]

(1) an actual or imminent injury that is concrete and

particularized,
and

( 3)

redressable

Prudential
arguably

(2)

standing

falls

fairly traceable to the defendant's conduct,
by

a

judgment

concerns

within

the

in

whether

zone

of

[his
a

her]

favor.") .

plaintiff's

grievance

interests

or

protected by

the

statutory provision invoked, whether the complaint raises abstract
questions more properly addressed by the legislative branch,

or

whether plaintiff is asserting his or her own legal rights and
interests rather than the interests of third parties.

Warth, 95

S. Ct. at 2206 ("[T]he standing question in such cases is whether
the constitutional or statutory provision on which the claim rests
properly can be understood as granting persons in the plaintiff's
position a right to judicial relief.") . 10

10

The Supreme Court has recently observed that the inquiry of
whether a party has a cause of action under a statute has "on
occasion [been] referred to as 'statutory standing. '"
Lexmark
International, Inc. v. Static Control Components, Inc., 134 S. Ct.
(continued ... )
-8-

Defendants' argument that plaintiff lacks standing to assert
a claim for benefits under ERISA challenges plaintiff's prudential
standing because it challenges plaintiff's ability to assert a
claim under a particular statute, i.e., ERISA.

Although defendants

seek dismissal for lack of subject matter jurisdiction under Rule
12 (b) (1),

prudential standing is typically treated as a merits

question properly addressed by a motion filed under Rule 12(b) (6)
for failure to state a claim to which relief may be granted.

See

Harold H. Huggins Realty, Inc. v. FNC, Inc., 634 F.3d 787, 795 &
n.2 (5th Cir. 2011)

("Unlike a dismissal for lack of constitutional

standing, which should be granted under Rule 12(b) (1), a dismissal
for lack of prudential or statutory standing is properly granted
under Rule 12(b) (6) .").
this

type of

claims.

The Fifth Circuit has, however,

standing as

a

jurisdictional

treated

limitation on ERISA

See LeTourneau Lifelike Orthothics & Prosthetics, Inc. v.

Wal-Mart Stores, Inc., 298 F.3d 348, 351 (5th Cir. 351 (5th Cir.
2002)

("[ERISA s]tanding is jurisdictional.").

In Cobb v. Central

States Southwest and Southeast Areas Pension Fund, 461 F.3d 632,
635

(5th Cir.

2006),

cert.

denied,

127 S.

Ct.

1153

(2007),

the

Fifth Circuit explained that "the issue of whether a particular

10

( • • • continued)
1377, 1387 & n.4 (2014).
While the Court noted that the term
"statutory standing" is "an improvement over .
'prudential
standing,' since it correctly places the focus on the statute,"
id., the Court added that term can also be "misleading since the
absence of a valid (as opposed to arguable) cause of action does
not implicate subject matter jurisdiction." Id.

-9-

plaintiff
litigants

falls

within one of

(participants,

the

three enumerated classes of

beneficiaries

or

fiduciaries)

is

a

jurisdictional one," and recognized that "[t]his court has 'hewed
to a

literal

construction of

1132 (a) '

§

(quoting Hermann Hospital v. MEBA Medical
~~

845 F.2d 1286,

1289

(5th Cir.

&

on this

issue."

Id.

Benefits Plan ("Hermann

1988),

overruled in part on

other grounds by Access Mediquip, L.L.C. v. UnitedHealthcare Ins.
Co.,

698 F. 3d 229

(5th Cir.

2012)

denied, 133 S. Ct. 1467 (2013)).

(en bane)

(per curiam),

cert.

The court may therefore properly

consider defendants' challenge to plaintiff's standing under Rule
12 (b) (1). See LeTourneau, 298 F. 3d at 353 ("Because LeTourneau had
neither direct nor derivative standing to bring suit, the district
court lacked jurisdiction to hear it.").
Rule 12(b) (1) challenges to subject matter jurisdiction come
in two forms: "facial" attacks and "factual" attacks.
v. Weinberger, 644 F.2d 521, 523 (5th Cir. 1981).
consists of a

Rule 12 (b) (1)

See Paterson

A facial attack

motion unaccompanied by supporting

evidence that challenges the court's jurisdiction based solely on
the pleadings.

Id.

A factual attack challenges the existence of

subject matter jurisdiction irrespective of

the pleadings,

and

matters outside the pleadings such as testimony and affidavits may
be considered.

Id.

Defendants argue that their challenge to the

plaintiff's standing is a facial attack because their motion cites
to and relies upon only the complaint and the documents attached

-10-

thereto. 11

Because copies of the assignment and the Plan upon which

defendants based their Rule 12 (b) (1)
Plaintiff's

Original

Complaint,

challenge are attached to

the

court

agrees

defendants' motion to dismiss raises a facial

Inc.,

411 B.R.

337,

343

the

not a factual

See In re Parkway Sales &

attack on the plaintiff's pleadings.
Leasing,

that

(Bankr.

E.D.

Tex.

2009) ("In a

facial attack, the defendant's motion to dismiss is based on the
face

of

the

complaint

complaint.") ;

and

Seas trunk v.

the

documents

attached

to

Darwell Integrated Technology,

*

No. 3:05-CV-0531-G, 2006 WL 1932342,

the
Inc.,

2 (N.D. Tex. July 10, 2006)

(analyzing complaint and scope of attached copyright assignment in
ruling

on

the

jurisdiction) .
courts

must

defendant's

facial

attack

to

When considering a Rule 12(b) (1)

accept

as

true

all

material

the

court's

facial attack,

allegations

of

the

complaint, and must construe the complaint in favor of the nonmoving party.

Lewis v. Knutson, 699 F.2d 230, 237 (5th Cir. 1983).

"The burden of proof for a Rule 12(b) (1) motion to dismiss is on
the party asserting jurisdiction."
F.3d 158,

161

(5th Cir.

2001),

cert.

United States, 122 S.Ct. 2665 (2002).
grounds is not on the merits.

Ramming v. United States, 281
denied sub nom.

Cloud v.

Dismissal on jurisdictional

Id.

11

See Defendants' Reply, Docket Entry No. 16: p. 2 ("PennWell
. views its Motion to Dismiss as 'facial,' and asserts that
Plaintiff has failed to meet its burden that the jurisdictional
requirements have been met.").
-11-

B.

Analysis

1.

Applicable Law

Under 29 U.S.C.

§

1132(a) (1) (B), a civil enforcement action

may be brought only by a plan participant, beneficiary, fiduciary,
or the

Secretary of

Labor.

Heal thcare providers

do not

have

standing to sue in their own right to collect benefits under an
ERISA plan, but they may obtain assignments from their patients and
thereby have derivative standing to bring ERISA actions to recover
benefits.

See North Cypress Medical Center Operating Co., Ltd. v.

Cigna Healthcare,

781

F.3d 182,

191

(quoting Harris Methodist Fort Worth v.
Inc.

Employee Health Care Plan,

n.

&

31

(5th Cir.

2015)

Sales Support Services,

426 F.3d 333-34

(5th Cir.

2005)

("It is well established that a healthcare provider, though not a
statutorily designated ERISA beneficiary, may obtain standing to
sue derivatively to enforce an ERISA plan beneficiary's claim.")).
See also Dallas County Hospital District v. Associates' Health &
Welfare Plan,

293 F.3d 282,

289

(5th Cir.

2002)

(holding that a

hospital could not have independent standing to assert an ERISA
claim without a valid, enforceable assignment from an ERISA plan
participant or beneficiary).

Courts "interpret the assignment form

in accordance with Texas contract law principles and the
under ERISA principles."

Harris, 426 F.3d at 334.

-12-

[Plan]

2.

Application of the Law to the Alleged Facts
(a)

Plaintiff Has Not Alleged Derivative Standing

Defendants argue that plaintiff lacks derivative standing to
bring a claim for Plan benefits because Plaintiff has failed to
allege that it has a valid assignment of P.C.'s rights under the
Plan.

Defendants argue that plaintiff's allegations fall short of

alleging
applicable

a

valid

assignment

anti-assignment

of

rights

P.C.'s

provision

contained

[attached to Plaintiff's Original Complaint]

because

"the

in

Plan

the

states that the

beneficiary has no right to assign his or her right to sue to
recover benefits. " 12

The anti-assignment provision in the Plan

attached to Plaintiff's Original Complaint states:
No Participant shall at any time, either during the time
in which he or she is a Participant in the Plan, or
following his or her termination as a Participant, in any
manner, have any right to assign his or her right to sue
to recover benefits under the Plan, to enforce rights due
under the Plan or to any other causes of action which he
or she may have against the Plan or its fiduciaries. 13
Plaintiff

does

not

dispute

that

the

Plan's

anti-assignment

provision bars participants from assigning their right to sue for
Plan benefits.
assignment

12

Instead,

provision

is

plaintiff

argues

unenforceable

that

against

(1)
a

the

anti-

healthcare

Defendants' Brief, Docket Entry No. 8-1, pp. 1-2.

13

See Exhibit A to Plaintiff's Original Complaint, Docket Entry
No. 1-1, p. 58 of 169.
-13-

provider, 14

( 2)

the

anti -assignment

provision

in

the

Plan

is

ambiguous and therefore unenforceable, 15 and ( 3) defendants by their
course of conduct have waived or are estopped from enforcing the
Plan's anti-assignment provision. 16

(1)

Citing

Tango

Anti-Assignment Provisions Are Enforceable

Transport

v.

Healthcare

Financial

Services

L.L.C., 322 F.3d 888, 891-94 (5th Cir. 2003), plaintiff argues that
"[t]o deny Plaintiff standing in this case is wholly inequitable
and would send a chilling effect to other health care providers
from

accepting

patients

covered

under

self

funded

plans." 17

Plaintiff also cites Hermann Hospital v. MEBA Medical & Benefits
Plan ("Hermann II"), 959 F.2d 569, 574 (5th Cir. 1992), overruled
in part on other grounds by Access Mediquip, 698 F.3d at 229, for
its holdings that an "[a]nti-[a]ssignment clause did not apply to
medical service providers," 18 and that "the anti-assignment clause
applied only to unrelated third party assignees such as a creditor
who may attempt to obtain a voluntary assignment
that

had

no

relationship,

or

'nexus',

with

to cover a debt
the

Plan

or

its

14 Plaintiff' s Response, Docket Entry No. 12, pp. 7-8 ~~ 13-16.
15Id. at 9-10 ~~ 17-18.
16Id. at 10-12 ~~ 19-23.
17Id. at 8 ~ 13.
18Id. at ~ 14.
-14-

benefits. " 19 Neither the holding in Tango nor in Hermann II support
plaintiff's

argument

that

anti-assignment

provisions

are

unenforceable against health care providers.
In Tango a participant in an ERISA plan executed a valid
assignment

of

benefits

to

a

provider

for

medical

treatment

received, and the provider assigned the participant's outstanding
accounts

to

a

health

care

collection

reimbursement from the insurer.

agency,

322 F.3d at 889.

which

sought

At issue was

whether valid assignments were limited to health care providers.
The

Fifth

Circuit

held

the

collection

agency

had

derivative

standing, as the medical provider assigned its right to payment to
the collection agency.

Id.

The Fifth Circuit explained that

denying derivative standing to health care providers
would harm participants or beneficiaries because it would
"discourage providers
from becoming assignees and
possibly from helping beneficiaries who were unable to
pay them 'up-front.'" . . . Likewise, granting derivative
standing to the assignees of health care providers helps
plan participants and beneficiaries by encouraging
providers to accept participants who are unable to pay up
front.
Conversely, to bar health care providers from
assigning their rights under ERISA, and shifting the risk
of non-payment to a third-party, would chill health care
providers' willingness to accept a patient.
Third
parties like [collection agencies] will only be willing
to purchase an assignment from a health care provider if
they can be assured that they will be afforded standing
to sue for reimbursement.

19Id.

-15-

Id. at 894.

Contrary to plaintiff's argument, Tango did not hold

that a medical provider could have derivative standing to sue an
ERISA plan without a valid assignment.
In Hermann II,

959 F.2d at 575,

the Fifth Circuit held an

insurer estopped from enforcing an anti-assignment clause "because
of its protracted failure to assert the clause when [the purported
assignee]

requested payment pursuant to a clear and unambiguous

assignment of payments for covered benefits."

Alternatively, the

Fifth Circuit analogized the anti-assignment clause at issue in
that case to clauses commonly found in spendthrift trusts and held
that even if the insurer was not estopped from enforcing the antiassignment clause,
that clause still would not have destroyed
[the
patient's] assignment of benefits to [the hospital]. We
interpret the anti-assignment clause as applying only to
unrelated, third-party assignees - other than the health
care provider of assigned benefits - such as creditors
who might attempt to obtain voluntary assignments to
cover debts having no nexus with the Plan or its
benefits, or even involuntary alienations such as
attempting to garnish payments for plan benefits.

Plaintiff's reliance on Hermann II's alternative holding is
misplaced because there is no similarity between the language of
the clause at issue in Hermann II and the language of the antiassignment provision at issue here.
in Hermann II stated:

-16-

The anti-assignment provision

No employee, dependent or beneficiary shall have the
right to assign, alienate, transfer, sell, hypothecate,
mortgage, encumber, pledge, commute, or anticipate any
benefit payment hereunder, and any such payment shall not
be subject to any legal process to levy execution upon or
attachment or garnishment proceedings against for the
payment of any claims.
959 F.2d at 574 (quoted in LeTourneau, 298 F.3d at 351).

The anti-

assignment provision at issue here states that "[n]o Participant
shall at any time .

. in any manner, have any right to assign his

or her right to sue to recover benefits under the Plan . . . " 20

This

anti-assignment provision does not in any way resemble either the
third-party creditor anti-assignment clause at issue in Hermann II
or a typical spendthrift trust provision.

Moreover, reasoning that

Congress intended employers and employees to retain contractual
freedom

over

ERISA-governed

employee-benefit

plans,

the

Fifth

Circuit subsequently recognized that anti-assignment provisions are
generally

effective

assignment invalid.

and

will

operate

See LeTourneau,

to

render

a

298 F.3d at 352

purported
("Neither

Hermann I nor Hermann II stands for the proposition that all antiassignment clauses are per se invalid vis-a-vis providers of health
care services.").
Co.

v.

See also Louisiana Health Services & Indemnity

Rapides Healthcare System,

461 F.3d 529,

2006), cert. denied, 127 S. Ct. 1831 (2007)

537

(5th Cir.

("We have held that an

assignee has derivative standing to enforce claims under ERISA

20

Exhibit A to Plaintiff's Original Complaint,
No. 1-1, p. 58 of 169.
-17-

Docket Entry

§

502, thus permitting assignments when not precluded by the plan

terms.
an

We have also held that, absent a statute to the contrary,

anti-assignment

ERISA.").
included

provision

in

a

plan

is

permissible

under

Plaintiff's argument that the anti-assignment provision
in

the

Plan

is

unenforceable

against

a

health

care

provider therefore has no merit.

(2)

The Anti-Assignment Provision is Not Ambiguous

Asserting that the "anti-assignment clause in Defendants' Plan
specifically allows for assignment of benefits for medical expenses
to a medical provider

[but that] the prohibition against any

right to sue the Plan for benefits is not clearly directed against
medical providers, " 21 plaintiff

argues

that

the

anti-assignment

clause in the Plan is - at best - ambiguous and unenforceable as to
plaintiff's standing to sue for benefits. 22

The Plan's assignment

provision states:
Benefits for medical expenses covered under this Plan may
be assigned by a Participant to the Provider as
consideration in full for services rendered;
Payment of benefits which have been assigned will be made
directly to the assignee unless a written request not to
honor the assignment, signed by the covered Employee and
the assignee, has been received before the proof of loss
is submitted. No Participant shall at any time, . . . in
any manner, have any right to assign his or her right to
sue to recover benefits under the Plan, to enforce rights

21

Plaintiff's Response, Docket Entry No. 12, p. 9

22

Id. at 10

§

18.
-18-

~

18.

due under the Plan or to any other causes of action which
he or she may have against the Plan or its fiduciaries. 23
This language expressly allows assignment of benefits for medical
expenses covered under the Plan to providers, but bars assignment
of the right

to sue to recover benefits under the

enforce rights due under the Plan.
To the contrary,

Plan or to

This language is not ambiguous.

the anti-assignment provision is unambiguously

directed at providers to whom participants assign benefits for
medical expenses covered under the Plan.
not

persuaded

that

the

Accordingly, the court is

anti-assignment

provision

is

either

ambiguous or unenforceable due to ambiguity.

(3)

Plaintiff Has Not Alleged Facts Capable of
Showing that Defendants Waived or are Estopped
from Enforcing the Anti-Assignment Provision

Relying on Hermann II, 959 F.2d at 574, plaintiff argues that
Defendants were provided with notice of the assignment
from P.C. to Plaintiff, they processed six claims for
benefits to Memorial Hermann (not P.C.), and improperly
denied all six claims without adequate explanation or
specific reference to Plan provisions.
(See Exhibits BE, Plaintiff's Original Complaint) .
Defendants also
processed and denied the six appeals brought on behalf of
Plaintiff and never raised the "anti-assignment" defense
that Defendants raise now.
Defendants' Administrator
never once raised or mentioned that Plaintiff did not
have standing to pursue the appeal or provide notice of
any anti-assignment clause in the Plan or the Plan
documents, prior to Plaintiff's appeals of Defendants'
denial of six claims.

23

Exhibi t A to Plaintiff's Original Complaint,
No. 1-1, p. 58 of 169.
-19-

Docket Entry

By accepting notice of the assignment and processing
the claims for payment made by Memorial Hermann, denying
all claims and denying the appeals from Memorial Hermann,
and by failing to provide notice of any anti-assignment
clause or plan documents, Defendants have either waived
and/or are
estopped
from
claiming any potential
enforcement of the anti-assignment clause at issue.
Plaintiff relied on Defendants['] actions in processing
its claims and appeals through its Administrator. If the
Court allows Defendants the benefit of the alleged antiassignment clause, the only party which will be harmed is
the estate of P.C., which will be obligated to pay for
the medical services out of estate proceeds.
Because
Defendants have waived or are estopped from enforcing the
anti-assignment clause at issue, Defendants' Motion to
Dismiss should be denied. (See Hermann II, at 574,
finding Defendant was estopped from enforcing the antiassignment clause in the plan, based upon the course of
dealing between the plan and the health care provider.) 24
In Hermann II,

959 F.2d 569,

the Fifth Circuit held that a

plan was estopped from raising an anti-assignment provision in its
plan agreement.

The plaintiff, a hospital to whom a patient had

assigned her rights under ERISA,
patient

was

first

admitted

had called the plan when the

and

had

been

representatives that the patient was covered.
months

while

the

patient

was

in

the

told

by

Id. at 574.

hospital

the

plan

For six
hospital

repeatedly attempted to obtain payment for the services it was
providing, but the plan continuously postponed payment, asserting
only that it was "investigating" the claim.
the anti-assignment clause for the first

Id.

time over three years

after the hospital first requested payment.

24

The plan raised

Id.

The hospital

Plaintiff's Response, Docket Entry No. 12, pp. 10-11

21.

-20-

~~

20-

argued, and the Fifth Circuit agreed, that the plan was estopped
from

relying

on

anti-assignment

the

anti-assignment

clause

was

provision

contained

in

the

because

"[t] he

documentation

establishing the Plan," but the hospital, "which was not privy to
the Plan, had no opportunity to review that documentation."

Id.

The court imposed an affirmative duty on the plan to "notify [the
hospital] of th[e anti-assignment] clause if it intended to rely on
it to avoid any attempted assignments," id., and concluded that the
plan was estopped from raising the anti-assignment provision in
light of its "protracted failure to assert the clause when
hospital]

[the

requested payment pursuant to a clear and unambiguous

assignment of payments for covered benefits."

Id. at 575.

Plaintiff's reliance on Hermann II is not persuasive because
the

complaint

conduct,

contains

which if true,

no

facts

about

the

parties'

course

of

would allow the court to conclude that

defendant has in fact waived or is estopped from relying on the
Plan's anti-assignment provision.
16.

Plaintiff alleges that

P. C. executed an irrevocable assignment of
insurance benefits on September 14, 2015 in favor
of [p]laintiff which provides in pertinent parts:
"In consideration of services rendered, I hereby
irrevocably assign and transfer to the hospital for
myself and my dependents, all rights, title and
interest in the benefits payable for services
rendered by the hospital provided in any insurance
policy(ies) under which I or any of my dependents
are insured.
Said irrevocable assignment and

-21-

transfer shall be for the purpose of granting the
hospital an independent right of recovery .
" 25
But as to the parties, course of conduct plaintiff merely alleges:
9.
Plaintiff rendered medically necessary services to
P.C. and submitted their industry standard UB-04 claim
statements to Defendants, agent for payment for the
services and supplies authorized by Defendant and
provided to the Defendant,s insured.
Thereafter,
Defendants, agent and administrator issued explanation of
benefits . . . stating that the claim[s were] not covered
per plan exclusions, and to refer to the plan document.
10. Plaintiff requested an appeal of Defendants,
denial/nonpayment on January 19, 2016. This appeal also
requested plan documents.
Defendant responded with a
letter classifying the January 19, 2016 correspondence as
an appeal, and denied the claim due to plan exclusions.
The response did not contain all of the plan documents
requested. Plaintiff again requested the plan documents
from defendant on March 21, 2016 only for Defendant to
respond with a letter dated April 21, 2016 reversing its
previous position that the Plaintiff had filed an appeal
and refusing to provide requested documents. 26
Plaintiff also alleges that "[u]pon presentation, [p]laintiff
verified effective coverage for the [p] atient, " 27 and that P. C. "was
admitted

to

the

Hospital

through

the

emergency

room

upon

representations that such coverage was in full force and effect and
would cover these hospitalizations." 28

25

~

Plaintiff, s Original Complaint,

26

Id. at 3

~~

27

Id. at 2

~ 5.

28

Id. at 4

~

16.
9-10.

11.
-22-

Docket Entry No.

1,

p.

5

The facts alleged by plaintiff are not analogous to those at
issue

in

Hermann

II

that

led

the

Fifth

Circuit

to

hold

the

defendant estopped from relying on that plan's anti-assignment
provision.

Plaintiff has not alleged that the Plan continuously

postponed payment asserting only that it was investigating the
claim,

that defendants waited until suit was filed to raise the

anti-assignment

provision

anti-assignment

clause

plaintiff

had

Plaintiff's

no

for

was

first

contained

opportunity

allegations

the

to

(supported

in

review
by

time,

or

that

documentation
before

copies

of

filing
the

the
that

suit.

parties'

correspondence attached to the Plaintiff's Original Complaint) show
that the plaintiff's claim for benefits was denied as barred by
Plan exclusions.
with

the

Moreover,

anti-assignment

because plaintiff attached the Plan

provision

to

its

original

complaint,

plaintiff undisputedly had the Plan and the Plan's anti-assignment
provision for review before

filing suit.

Therefore the

facts

alleged here are not capable of establishing a course of conduct
analogous to the course of conduct evidenced in Hermann II that the
Fifth Circuit characterized as

~protracted

failure to assert the

clause," and held estopped the defendants from enforcing the antiassignment clause at issue there.
Fifth Circuit caselaw distinguishes estoppel from waiver, and
defines waiver as "a voluntary or intentional relinquishment of a
known right."

High v. E-Systems Inc., 459 F.3d 573, 581 (5th Cir.

-23-

2006)

(citing Pitts v. American Security Life Insurance Co.,

F.2d 351,

357

(5th Cir.

1991)).

931

Although plaintiff argues that

"[d]efendants did not provide notice of the anti-assignment clause
until well over seven months after the claims were incurred, " 29
Plaintiff's Original Complaint contains no allegations capable of
showing when the defendants received notice of the assignment or
how the defendants

intentionally relinquished rights under the

anti-assignment provision.

Instead, plaintiff's allegations show

that unlike the plaintiff in Hermann II who failed to receive
notice of the anti-assignment clause until after suit was filed,
the plaintiff in this action received the anti-assignment provision
during

the

administrative

claims

process

before

filing

suit.

Plaintiff has not cited the court to any authority finding waiver
under similar circumstances.

(4)

Conclusions as to Derivative Standing

Because the Plan attached to and made part of Plaintiff's
Original

Complaint

contains

an

anti-assignment

provision,

and

because the allegations of fact contained in Plaintiff's Original
Complaint are not sufficient to establish that the anti-assignment
provision is unenforceable or that defendants by their course of
conduct have waived or are estopped from relying on the Plan's
anti-assignment provision, plaintiff has failed to carry its burden

29

Id. at 12

~

23.
-24-

to allege facts sufficient to show that the plaintiff acquired a
valid assignment needed to establish derivative standing to assert
a claim for ERISA Plan benefits.
therefore

subject

jurisdiction.

to

Plaintiff's Original Complaint is

dismissal

See LeTourneau,

for
298

lack

of

F.3d at

352

subject

matter

(rejecting the

contention that all anti-assignment clauses are per se invalid visa-vis providers

of

health care

services,

and recognizing

that

validity of an assignment depends on construction of the plan at
issue); Rapides Healthcare System, 461 F.3d at 537 ("We have held
that an assignee has derivative standing to enforce claims under
ERISA

§

502, thus permitting assignments when not precluded by the

plan terms.).

(b)

Plaintiff Has Not Alleged Independent Standing

Citing 29 C.F.R.

§

2560.503-1(b) (4), plaintiff argues that it

has "independent standing to pursue its claims against [d]efendants
as a statutor[il]y recognized and authorized representative of the
deceased patient,

P.C." 30

Section 2560.503-1(b) (4)

states that

claims procedures for an ERISA plan will be deemed reasonable only
if

they

"do

not

preclude

an

authorized

representative

for

a

claimant from acting on behalf of such a claimant in pursuing a
benefit claim or appeal of an adverse benefit determination."

The

"claims procedures" discussed by this section of the C.F.R. are,

30

Plaintiff's Response, Docket Entry No. 12, p. 12
-25-

~

24.

however, not related to causes of action asserted in federal court
but are,

instead,

related solely to administrative claims:

"the

filing of benefit claims, notification of benefit determinations,
and
§

appeal

of

2560.503-1(b).

to

act

on

the

adverse

benefit

determinations."

29

C.F.R.

Although this provision allows a representative
claimant's

behalf

when

dealing

with

plan

administrators, plaintiff has not cited any authority in support of
its argument that it provides a representative standing to file
suit against a plan or its administrators in federal court.
considering similar arguments
§

courts

have

held

that

29

In

C. F. R.

2650.503-1 (b) (4) applies to submission of administrative claims

and appeals on behalf of beneficiaries,

but does not apply to

claims asserted in civil actions filed in federal courts.
~'

No.

See

Menkowitz v. Blue Cross Blue Shield of Illinois, Civil Action

14-2946,

2014

WL

5392063,

* 3

(D.N.J.

October 23,

2014);

AllianceMed LLC v. Aetna Life Insurance Co., No. CV-16-02435-PHXJAT,

2 0 1 7 WL 3 9 4 52 4 ,

at

*3

&

n.

3

(D .

Ariz .

Jan .

Moreover, plaintiff's complaint has not cited 29 C.F.R.

30,
§

2 01 7 ) .

2650.503-

1(b) (4) as a basis for the claim to Plan benefits asserted in this
action.
§

Accordingly,

the court is not persuaded that 29 C.F.R.

2560.503-1(b) (4) provides plaintiff independent standing to sue

defendants

for ERISA Plan benefits

authorized representative.

-26-

in federal

court as

P. C.'s

III. Plaintiff's Requests for Leave to Amend

Plaintiff requested leave to amend at both the beginning and
the end of its response to defendants' motion to dismiss.

At the

beginning of the response, plaintiff wrote:
Should the Court determine that any aspect of Plaintiff's
jurisdiction
allegations
are
deficient,
Plaintiff
requests that the Court defer ruling on the Federal
Rule[] of Civil Procedure 12(b) (1) Motion to Dismiss to
allow the Plaintiff to engage in limited discovery to
obtain
copies
of
verified
plans,
summary
plan
descriptions and other relevant documents to identify all
plan
provisions
and
correspondence
relevant
to
Plaintiff's claims to establish that the Court has
subject matter jurisdiction to hear this case . . . In the
alternative, Plaintiff requests the Court grant it leave
of Court to amend its pleading to correct any perceived
deficiencies. Leave to amend should be freely given when
justice so requires. 31
At the end of its response, plaintiff writes:
As Plaintiff has independent standing to pursue claims
without an assignment, Defendants' Motion should in all
respects be denied.
Alternatively,
if necessary,
Plaintiff requests leave of Court to file an amended
Complaint to allege facts sufficient to maintain subject
matter jurisdiction in accordance with this Court's
ruling. 32
Having reviewed the plaintiff's complaint,

the defendants'

motion to dismiss, and the plaintiff's response to the defendants'
motion to dismiss,

the court has

concluded that plaintiff has

neither alleged nor argued facts capable of establishing derivative
or independent standing to prosecute
benefits.

See

§

II, above.

31

Id. at 2

~

2.

32

Id. at 14

~

26.
-27-

its

claim for ERISA Plan

"Rule 15(a) requires a trial court 'to grant leave to amend
"freely," and .
amend.'"

. evinces a bias in favor of granting leave to

Jones v. Robinson Property Group, L.P., 427 F.3d 987, 994

(5th Cir. 2005)

(quoting Lyn-Lea Travel Corp. v. American Airlines,

283 F.3d 282, 286 (5th Cir.), cert. denied, 123 S. Ct. 659 (2002)).
A court must possess a substantial reason to deny a request for
leave

to

instead,

amend,

Division,

leave

to

amend

is

left to the court's discretion.

City of Sherman,
Wiggins

but

v.

Texas,

Louisiana

____ Fed.

33 F. 3d 526,
State

529

automatic

Id.

(citing Halbert v.

(5th Cir.

University-Health

App'x ____ ,

2017 WL 4479425,

and

is,

not

1994)).

Care

In

Services

* 2 (5th Cir.

October 6, 2017), the Fifth Circuit stated that
[g]ranting leave to amend .
. is not required if the
plaintiff has already pleaded [its] "best case."
A
plaintiff has pleaded her best case after she is
"apprised of the insufficiency" of her complaint . . . A
plaintiff may indicate she has not pleaded her best case
by stating material facts that she would include in an
amended complaint to overcome the deficiencies identified
by the court.
Moreover,

a

"court need not

grant

a

futile

motion

to

amend."

Legate v. Livingston, 822 F.3d 207, 211 (5th Cir.), cert. denied,
137 S. Ct. 489 (2016) and 137 S. Ct. 1139 (2017)
v. Jordan Production Co.,

234 F.3d 863, 872-73

(citing

Stripling

(5th Cir. 2000)).

"Futility is determined under Rule 12(b) (6) standards, meaning an
amendment is considered futile if it would fail to state a claim
upon which relief could be granted."

-28-

Id.

Although plaintiff has not previously amended its complaint,
it could have done so without leave of court within 21 days after
serving its complaint or after service of defendants' Rule 12(b) (1)
motion.

Fed. R. Civ. P. 15(a) (1) (A)-(B).

Instead of amending its

complaint as a matter of right to cure the deficiencies raised by
defendants' motion to dismiss, plaintiff filed a response to the
defendants' motion arguing that its complaint sufficiently alleged
facts

capable

of

establishing both

derivative

and

independent

standing to prosecute the only claim asserted in its complaint: a
claim

for

ERISA

Plan benefits

as

P.C.'s

assignee.

Moreover,

plaintiff has neither filed a formal motion to amend nor submitted
a proposed amended complaint.

Instead,

plaintiff has urged the

court to defer ruling on the motion to dismiss until discovery can
be conducted,

and has

asked the

court

for

leave

to amend

"if

necessary." 33
Plaintiff has asked the court to defer ruling on the motion to
dismiss

to allow plaintiff

"to engage

obtain copies of verified plans,
other

relevant

documents

to

in limited discovery to

summary plan descriptions and

identify

all

plan

provisions

and

correspondence relevant to [the p]laintiff's claims to establish
that the Court has subject matter jurisdiction to hear this case." 34
Since, however, plaintiff attached to its original complaint copies

33Id.
34

Id. at 2

~

2.
-29-

of the assignment,

the Plan,

and correspondence with defendants

regarding the alleged claim for benefits, and since plaintiff has
failed

to describe what,

if any,

material

expects limited discovery to reveal,

facts

it

reasonably

the court has no reason to

concluded that limited discovery is likely to produce facts capable
of establishing plaintiff's standing to pursue an ERISA claim for
Plan benefits.

Moreover, because plaintiff failed to respond to

defendants' motion to dismiss with facts that would be capable of
establishing plaintiff's standing to assert an ERISA claim for Plan
benefits, the court concludes that amendment would be futile.

v.

Conclusions and Order

For the reasons stated in

II,

§

above,

the court concludes

that Plaintiff's Original Complaint is subject to dismissal under
Federal Rule of Civil Procedure 12 (b) (1)
facts

for failure

to allege

capable of establishing either derivative or independent

standing to prosecute a claim for ERISA Plan benefits.
For the reasons stated in

§

III, above,

the court concludes

that plaintiff has pleaded its best case and that amendment would
be futile.

Accordingly, Defendants', Pennwell Corporation Medical

and Vision Plan and Pennwell Corporation, Motion to Dismiss (Docket
Entry No. 8) is GRANTED.
SIGNED at Houston,

Texas, on this the 22nd

2017.
SIM LAKE
UNITED STATES DISTRICT JUDGE
-30-