United States District Court, C.D. California
Almont Ambulatory Surgery Center, LLC, et al.
UnitedHealth Group, Inc., et al
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Attorneys for Plaintiff: Not Present.
Attorneys for Defendant: Not Present.
Honorable MICHAEL W. FITZGERALD, United States District Judge.
Proceedings (In Chambers): ORDER GRANTING EMPLOYER AND PLAN DEFENDANTS' OMNIBUS MOTION TO DISMISS
PLAINTIFFS' AMENDED COMPLAINT UNDER Fed.R.Civ.P. 12(B)(6), AS WELL AS 12(B)(2), (4), AND (5), 20(a) AND 28 U.S.C. § 1404(a)                                                                                 
Before the Court is the Employer and Plan Defendants' Omnibus Motion to Dismiss Plaintiffs' Amended Complaint Under Fed.R.Civ.P. 12(b)(6), as well as 12(b)(2), (4), and (5), 20(a) and 28 U.S.C. § 1404(a). (Docket No. 1062). The Court notes that this master memorandum simply addresses arguments common to many of the Employer and Plan Defendants. However, the Court will refer to this document as the " Omnibus Motion," and will apply the reasoning expressed herein to the pending motions submitted by individual Employer and Plan Defendants. The Court read and considered the papers on the Omnibus Motion (as well as Employer and Plan Defendant Supplemental Memoranda), and held a hearing on April 1, 2015. For the reasons stated below, the Court GRANTS the Motion.
The Omnibus Motion is GRANTED with leave to amend.
Count I is brought pursuant to 29 U.S.C. § 1132(a)(1)(B) (also referred to as ERISA § 502(a)(1)(B)) to recover benefits under the terms of the various plans implicated in this action (in addition to related relief under this provision). The Court rules that Count I fails to adequately state a claim for benefits under the terms of the relevant plans. However, it is quite likely that the deficiencies in Count I can easily be corrected; it is a close call whether the First Amended Complaint (" FAC" ) is sufficient. Therefore, the Omnibus Motion as to this Count is GRANTED with leave to amend.
Count II is brought pursuant to 29 U.S.C. § 1132(a)(2) (ERISA § 502(a)(2)), alleging various breaches of fiduciary duty and seeking removal of United as a plan administrator and/or claims administrator for the plans at issue or, alternatively, an order compelling United to honor the terms of the plans.
Count III is brought pursuant to 29 U.S.C. § 1132(a)(3) (ERISA § 502(a)(3)) for injunctive and other equitable relief to address Defendants' purported breaches of fiduciary duties; among the relief sought in connection with this Count is an order requiring the Defendants to timely re-process claims and provide a full and fair review of both past and future claims.
Count V is brought pursuant to 29 U.S.C. § 1132(a)(3) (ERISA § 502(a)(3)) and seeks plan reformation to correct purported discrimination against morbidly obese participants.
Count VI is brought pursuant to 29 U.S.C. § 1132(a)(3) (ERISA § 502(a)(3)) and seeks the equitable remedy of surcharge due to purported breaches of fiduciary duty.
Count VII is brought for production of documents pursuant to 29 U.S.C. § § 1024(b), 1104, 1133(2), as well as statutory and injunctive relief pursuant to 29 U.S.C. § 1132(c)(1) (ERISA § 502(c)(1)), and equitable relief pursuant to 29 U.S.C. § 1132(a)(3) (ERISA § 502(a)(3)).
As a jurisdictional issue, the Court rules that Plaintiffs' alleged assignment does not confer standing for these ERISA Counts. Consequently, the Omnibus Motion as to Counts II, III, V, VI, and VII is GRANTED with leave to amend. Although the Court is not convinced that Plaintiffs could plead additional facts to alter this conclusion, they will be provided an opportunity to do so.
Count IV, based on estoppel, is brought against United only. It is therefore not addressed in this Order except to help explain the Court's reasoning in regard to standing.
The Omnibus Motion as to Count VIII is GRANTED with leave to amend. Count VIII is brought pursuant to the UCL. This Count purportedly seeks to redress, inter alia, United's allegedly discriminatory behavior against members of ERISA plans, as well as United's improper payment methods and violations of ERISA. The
Count also seeks redress for misrepresentations United allegedly made to Plaintiffs regarding payment for claims. The relief sought in connection with this Count is an injunction enjoining Defendants from engaging in further unfair business practices, as well as disgorgement of any money that has been acquired from Plaintiffs by virtue of the unfair practices. However, even if Plaintiffs allegedly suffered their own injuries, it is clear that they are seeking to recover derivatively on behalf of their assignors in a way that contravenes the holding of Amalgamated Transit Union, Local 1756 v. Superior Court (" Amalgamated Transit" ), 46 Cal.4th 993, 95 Cal.Rptr.3d 605, 209 P.3d 937 (2009), that such derivative UCL actions must be brought as class actions. In re WellPoint, Inc. Out-of-Network UCR Rates Litig., 903 F.Supp.2d 880, 897-98 (C.D. Cal. 2012).
The Omnibus Motion as to Count IX is GRANTED with leave to amend. Count IX seeks declaratory relief. The Court rules that this Count is completely preempted by ERISA. As such, this Count is converted into an ERISA Count and will rise and fall with the asserted ERISA Counts that it duplicates.
In the process of granting the Omnibus Motion, the Court has rejected or declined to adjudicate particular arguments. For instance, the Court has rejected arguments that: the Employer Defendants are not proper defendants at this stage in the litigation for an ERISA benefits Count; particular forum selection clauses mandate transfer at this time; and joinder is improper.
In general, the Court does not view most plan terms as having been presented in a way that renders them cognizable at present. The Court is quite sympathetic to Defendants' argument that Plaintiffs did not object to presentation of summary plan descriptions (" SPDs" ) when this was discussed in a colloquy with the Court on August 6, 2014. The Court also notes that some of the SPDs here may constitute the terms of the plans themselves. However, pursuant to the Supreme Court's decision in CIGNA Corp. v. Amara, 563 U.S. 421, 131 S.Ct. 1866, 179 L.Ed.2d 843 (2011), the Court does not have power to consider the SPDs as plan terms without evaluating whether the SPDs constitute the plan in each instance. The Court further observes that some Defendants arguably have presented the relevant plan documents for consideration. However, for the reasons discussed below, it is largely unnecessary at present to rely on these terms.
On March 20, 2014, Plaintiffs initiated this action by filing a Complaint (Docket No. 1). Plaintiffs subsequently filed the FAC on June 16, 2014 (Docket No. 840), which is the current operative pleading.
Plaintiffs in the present action consist of: (1) thirteen ambulatory surgery centers that provide Lap-Band surgeries and services; and (2) Independent Medical Services, Inc., which is a physicians' medical group. (FAC ¶ ¶ 15, 48-49).
Defendants include: (1) UnitedHealth Group, Inc., a health insurance company that allegedly did business in California through its subsidiaries; (2) UnitedHealthcare Insurance Company; and (3) United HealthCare Services, Inc. ( Id. ¶ ¶ 50-52). Defendant OptumInsight, Inc. (also called " Optum" or " Ingenix" ) is also a wholly-owned subsidiary of UnitedHealth, and served as a " Special Investigations Unit" for the claims at issue. ( Id. ¶ ¶ 53, 915). The FAC refers to these four Defendants collectively as " United" or the " United Defendants." ( Id. ¶ 54).
The other Defendants are ERISA plans (the " Plan Defendants" ) and the employers (the " Employer Defendants" ) who sponsor those ERISA plans. ( Id. ¶ ¶ 58-848). The FAC refers to these Defendants, along with " the Administrators of the ERISA Plans," as the " ERISA Plan Defendants." ( Id. ¶ 849).
B. Plaintiffs' Standing
Plaintiffs allegedly have standing as assignees of their patients' benefits. ( Id. ¶ 871). Every patient purportedly signed an " Assignments of Rights and Benefits," assigning the patients' health insurance benefits and an array of related rights to their providers ( i.e., Plaintiffs). ( Id. ¶ ¶ 871-73). The Assignment allegedly authorizes Plaintiffs to " take all action necessary to pursue benefits claims on the patient's behalf." ( Id. ¶ 871).
Plaintiffs believe that Defendants' plans do not preclude assignment because during Plaintiffs' course of dealings with Defendants, " neither United nor Defendants ever referenced any anti-assignment provisions of any plan, ever refused to communicate with Plaintiffs based on any such anti-assignment provisions, ever refused to process any of Plaintiffs' claims based on any such anti-assignment provisions, or ever refused to pay any of Plaintiffs' claims based on any such anti-assignment provisions." ( Id. ¶ 875). Plaintiffs also allege that, to the extent the plans have anti-assignment provisions, Defendants have waived the right to assert those provisions. ( Id. ¶ 879).
C. United Defendants and ERISA Plan Defendants
The FAC alleges that the United Defendants acted as agents for each other and for the ERISA Plan Defendants with regard to processing the claims at issue for Lap-Band services, including authorizing, receiving, pricing, and approving those claims. ( Id. ¶ 852).
The FAC alleges that United acted as an administrator for both (1) the fully funded ERISA plans ( i.e., fully insured by United), and (2) the self-funded ERISA plans. ( Id. ¶ ¶ 856-59). With regard to the fully funded ERISA plans, United is allegedly responsible for both administering and paying the claims, and is the plan administrator and an ERISA fiduciary for these plans. ( Id. ¶ 856). With regard to self-funded ERISA plans, the plan pays the claims, but the FAC alleges that United typically administered these plans pursuant to an administrative service agreement. ( Id. ¶ ¶ 857-858). Pursuant to the administrative service agreement, the self-funded ERISA plans delegated to United the " authority and responsibility to administer claims and make final benefits decisions." ( Id. ¶ 857). Among the administrative responsibilities delegated to United would be " providing plan members with plan documents, interpreting and applying the plan terms, making coverage and benefits decisions, handling appeals of coverage and benefits decisions, and providing for payment in the form of medical reimbursements." ( Id. ¶ 857). Some self-funded ERISA plans did not specifically designate a plan administrator, but Plaintiffs believe that United functioned as the de facto plan administrator and was " specifically designated by the plan sponsor as the Claims Administrator." ( Id. ¶ ¶ 859-60). As the plan administrator and/or claims administrator, United had fiduciary duties under ERISA " to ensure that out-of-network claims are properly priced and paid according to the terms of the members' plans." ( Id. ¶ 859).
The FAC alleges that the ERISA Plan Defendants knew or should have known about United's unlawful practices, and that by failing to prevent them, they " ratified and/or participated" in them. ( Id. ¶ 880).
D. Primary Allegations
The cover page of the FAC lists thirteen Counts, but the body of the FAC alleges only nine Counts. The omitted Counts listed on the cover page are: (1) breach of implied-in-fact contract--authorized services/no authorization needed services; (2) breach of implied-in-fact contract--authorized services/no authorization needed--covenant of good faith and fair dealing; (3) estoppel; and (4) recovery for services rendered. The nine Counts set forth in the body of the FAC are for: failure to pay ERISA plan benefits under 29 U.S.C. § 1132(a)(1)(B); enforcement for breach of fiduciary duty under 29 U.S.C. § 1132(a)(2); enforcement for injunctive and other appropriate equitable relief, and full and fair review of ERISA claims under 29 U.S.C. § 1132(a)(3); estoppel under 29 U.S.C. § 1132(a)(3); reformation of plan terms under 29 U.S.C. § 1132(a)(3); equitable remedy of surcharge/unjust enrichment under 29 U.S.C. § 1132(a)(3); failure to produce documents under 29 U.S.C. § § 1024(b), 1104, and 113(a)(2); violation of the California Business and Professions Code section 17200, et seq. (the " UCL" ); and declaratory relief.
The core allegations in the FAC are that United engaged in a " deliberate, willful, and concerted effort . . . to indefinitely avoid paying for Lap-Band" surgeries and related services for patients who were morbidly obese. ( Id. ¶ ¶ 2-3, 20).
Pursuant to the FAC, all of the patients relevant to this action had PPO insurance allegedly administered by United, which allowed them to select out-of-network health care providers. ( Id. ¶ 4). The plaintiff surgery centers were out-of-network health care providers, and thus, were " free to charge whatever amounts they deem[ed] appropriate for their services." ( Id. ¶ 863). The FAC alleges that ERISA plans usually provide that out-of-network providers will be paid at the usual, customary, and reasonable rate (the " UCR rate" ), or a percentage of the UCR rate. ( Id. ¶ 864).
United allegedly either authorized Lap-Band-related procedures for these patients or informed Plaintiffs that no authorization was needed. ( Id. ¶ 5). Where United authorized these procedures, it purportedly informed Plaintiffs " for nearly every claim" that the cost of the procedure would be reimbursed at the providers' UCR rates. ( Id. ¶ 22). The patients then allegedly underwent months of pre-operative tests. ( Id. ¶ 5).
The FAC alleges that United initially paid the claims for these services " according to the terms of the health plans that it administered." ( Id. ¶ 23). However, in 2010 it purportedly began to substantially underpay and then subsequently stopped paying claims for a majority of pre-operative tests and the Lap-Band surgeries. ( Id. ¶ ¶ 6-7, 23). As a result of United's alleged failure to pay for these services, the FAC claims that some patients feared that United would fail to pay for future services. ( Id. ¶ ¶ 11-12). Accordingly, some patients have purportedly been afraid to have the Lap-Band surgeries, and some patients who had the surgeries have purportedly been afraid to conduct necessary follow-up medical procedures. ( Id. ¶ ¶ 11-12). The FAC also alleges that in the rare instances that Defendants paid Plaintiffs' claims, " they paid far less than Plaintiffs' usual and customary fees." ( Id. ¶ 870).
The FAC alleges that the refusal of United and the defendant employers to pay for these procedures violates ERISA and constitutes discrimination against morbidly obese individuals. ( Id. ¶ 13).
The FAC alleges that Defendants violated ERISA in numerous ways, including: (1) providing pretextual excuses for refusing to pay claims, namely that they needed
additional medical records; (2) failing to provide specific reasons for non-payment of claims (and, in some cases, refusal to process claims) or the plan provisions on which the denial was based; (3) failing to state explicitly what additional records were needed to perfect the claims; (4) failing to provide all requested plan and other documents used to deny the claims; and (5) failing to provide a timely decision on Plaintiffs' claims ( i.e., within 90 days of United Healthcare's receipt of claim submission). ( Id. ¶ ¶ 8-9, 13, 23-26, 29-30, 882, 884).
Plaintiffs allege that in " almost all instances," Plaintiffs explicitly demanded that Defendants produce specific plan documents justifying the denial of payment, but Defendants refused to do so. ( Id. ¶ 31). On information and belief, Plaintiffs also allege that the terms of the health benefit plans administered by United do not permit it to deny Plaintiffs' claims. ( Id. ¶ 32). However, United allegedly conveyed fabricated rationales of denials to Plaintiffs by issuing Explanation of Benefits forms or appeal denial letters, which contained no actual reasons for denial. ( Id. ¶ 882 (listing rationales for denial)). The FAC alleges that Defendants owe hundreds of millions of dollars for the services that Plaintiffs provided, and hundreds of millions of dollars in ERISA penalties. ( Id. ¶ 14).
E. Pending Motions to Dismiss
A Briefing Schedule was issued (Docket No. 929, amended slightly by Docket No. 1054) establishing an Omnibus motion to dismiss schedule. This Schedule allows for one master 50-page memorandum to be filed on behalf of the employers and the plans (collectively referred to as the " Plan Defendants" in the Briefing Schedule) by lead counsel (Dorsey & Whitney LLP and Walraven & Westerfeld LLP)--the Omnibus Motion. The Briefing Schedule also permits another memorandum from the United Defendants--referred to herein as the " United Motion." Moreover, it allows for employers/plans to file their own three-page briefs (" Supplemental Memoranda" ) applying the arguments in the other motions to dismiss to their particular circumstances.
Prior to the Briefing Schedule, a motion to dismiss was filed by Defendants Aegon USA, LLC and Aegon Companies Flexible Benefits Plan (the " Aegon Motion" ). (Docket No. 489). Another was filed by Defendants Baker Hughes Inc. and Baker Hughes Inc. Welfare Benefits Plan (the " Baker Hughes Motion" ). (Docket No. 728). The Court permitted these Motions to remain, notwithstanding the Briefing Schedule.
In addition to the Aegon and Baker Hughes Motions, the Omnibus Motion (Docket No. 1062) and United Motion (Docket No. 1061) have been filed, as well as a number of Supplemental Memoranda from individual Defendants. All of the various motions to dismiss will collectively be referred to herein as the " Motions."
Plaintiffs submitted Oppositions to the Omnibus (Docket No. 1201), United (Docket No. 1202), Aegon (Docket No. 1204), and Baker Hughes (Docket No. 1205) Motions. The United Defendants filed a Reply (Docket No. 1218), and a Master Reply (Docket No. 1216) was filed in support of the Omnibus Motion. The Briefing Schedule also permitted Defendants to file one-page supplements to the Master Reply, which many have done.
II. EVIDENTIARY ISSUES
A. Incorporation by Reference
" Ordinarily, a court may look only at the face of the complaint to decide a motion to dismiss." Van Buskirk v. Cable New Network, Inc., 284 F.3d 977, 980 (9th Cir. 2002). However, " a district court ruling
on a motion to dismiss may consider a document the authenticity of which is not contested, and upon which the plaintiff's complaint necessarily relies." Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998) (footnote omitted), superseded by statute on unrelated grounds.
Defendants have submitted various plan-related documents for the Court to consider in adjudicating the Omnibus Motion. ( See, e.g., Declaration of John Christopher Nowlin (the " Nowlin Declaration" ), Exs. A & B (Docket No. 1062-9); Declaration of Brenda Rodenburgh (the " Rodenburgh Declaration" ), Ex. A (Docket No. 1062-10); Declaration of Bryan Westerfeld (the " Westerfeld Declaration" ), Exs. 1-4 (Docket No. 1062-11); Declaration of Heather M. McCann (the " McCann Declaration" ), Exs. 1-244 (Docket Nos. 1062-12 - 1062-30)). The FAC refers to and relies on the plans. ( See, e.g., FAC ¶ 880 (" Specifically, United manufactured various pretextual rationales unrelated to the actual benefits available under the plans in order to unlawfully prolong the claims administration process and ultimately deny Plaintiffs' claims outright on grounds not justified by the terms of the benefit plans." )). Additionally, Plaintiffs have not challenged the authenticity of the plan-related documents. Plaintiffs do challenge the propriety of relying on the terms of documents that are not demonstrably reflective of the terms of the plans themselves. (Opp. to Omnibus Mot. at 12-13). However, as discussed below, the Court will only consider as determinative those terms that are contained in documents that demonstrably reflect the terms of the plans during the relevant timeframe for each claim. Accordingly, the Court can consider such plan-related documents that are germane to adjudication of the Omnibus Motion under the doctrine of incorporation by reference.
B. Requests for Judicial Notice
Plaintiffs also submit a Request for Judicial Notice in Support of Opposition to Defendants' Motion to Dismiss (the " Request" ). (Docket No. 1203). Plaintiffs ask the Court to take judicial notice of an order issued by another court in this District: Order Granting Defendants' Motion to Dismiss, Care First Surgical Center v. ILWU-PMA Welfare Plan, et al., Case No. CV 14-01480-MMM, (AGRx) (C.D. Cal. July 28, 2014) (the " Care First Order" ). (Request, Ex. A (Docket No. 1203-1)). Plaintiffs also ask the Court to take judicial notice of Form 5500 filings made by Defendant Perkins & Marie Callender's, Inc., filed with the United States Department of Labor for the years 2009 through 2013. (Request, Ex. B (Docket No. 1203-2)).
The Court may take judicial notice of a fact " that is not subject to reasonable dispute because it . . . can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed.R.Evid. 201(b)(2). Courts may take judicial notice of public records, including court records from another case. See United States v. Howard, 381 F.3d 873, 876 n.1 (9th Cir. 2004) (taking judicial notice of court records in another case). The Care First Order is a court record, and thus, it is taken from sources whose accuracy cannot reasonably be questioned. Therefore, the Court may take judicial notice of the Care First Order and does so now. But the Court " can only take judicial notice of the existence of those matters of public record . . . but not of the veracity of the arguments and disputed facts contained therein." United States v. S. Cal. Edison Co., 300 F.Supp.2d 964, 974 (E.D. Cal. 2004) (emphasis in original). With regard to the persuasiveness of the legal reasoning in the Care First Order, the Court will give it its due weight.
Similarly, as to the public Form 5500 filings, the Court " may take judicial notice of the existence of certain matters of public record . . . [but] may not take judicial notice of one party's opinion of how a matter of public record should be interpreted." S. Cal. Edison, 300 F.Supp.2d at 974. See also In re Unumprovident Corp. Secs. Litig., 396 F.Supp.2d 858, 875 (E.D. Tenn. 2005) (taking judicial notice of forms filed with the SEC, but noting that the court was " only taking judicial notice of the existence of these documents and the specific statements and/or allegations contained within the documents," because " [i]t would be improper for the Court to rely upon these documents to determine disputed factual issues and by taking judicial notice of these documents at this time the Court in no way intends to make any determination as to the truth of any of the facts alleged or otherwise asserted in the documents themselves" ). As such, the Court may take judicial notice of the existence of these Form 5500 filings, and does so now.
Moreover, Defendants Perkins and Marie Callender's LLC (" PMC" ) and Perkins Flexible Benefits Plan (the " PMC Plan" ) have submitted a Request for Judicial Notice in Support of Defendants Perkins and Marie Callender's LLC and Perkins Flexible Benefits Plan's Motion to Dismiss Plaintiffs' Amended Complaint (the " PMC Request" ). (Docket No. 1160). The PMC Request asks this Court to take judicial notice of: Findings of Fact, Conclusions of Law, and Order under Section 1129 of the Bankruptcy Code and Rule 3020 of the Bankruptcy Rules Confirming Debtors' Second Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code (PMC Request, Ex. A (Docket No. 1160-1)); and Debtors' Second Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code (PMC Request, Ex. B (Docket No. 1160-2)). For the reasons expressed above, the Court may take judicial notice of the existence of these documents, and does so now.
Accordingly, the Request and the PMC Request are GRANTED.
III. MOTION TO DISMISS
Defendants seek to dismiss the ERISA and state law Counts pursuant to Federal Rules of Civil Procedure 12(b)(6), (4), (5), 20(a) and 28 U.S.C. § 1404(a).
In ruling on a motion under Federal Rule of Civil Procedure 12(b)(6), the Court follows Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). " To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Iqbal, 556 U.S. at 678 (citations omitted). " 'All allegations of material fact in the complaint are taken as true and construed in the light most favorable to the plaintiff.'" Williams v. Gerber Prods. Co., 552 F.3d 934, 937 (9th Cir. 2008) (quoting Stoner v. Santa Clara Cnty. Office of Educ., 502 F.3d 1116, 1120 (9th Cir. 2007)) (holding that a plaintiff had plausibly stated that a label referring to a product containing no fruit juice as " fruit juice snacks" may be misleading to a reasonable consumer).
" The motions authorized by Federal Rules 12(b)(4) and 12(b)(5) permit the defendant to challenge departures from the proper procedure for serving the summons and complaint and the contents of the former for purposes of giving notice of the action's commencement." 5B Charles Alan Wright, Arthur R. Miller, et al., Federal Practice and Procedure § 1353 (3d ed. rev. 2014) (footnote omitted). " An objection under Rule 12(b)(4) concerns the form of the process rather than the manner or method of its service. Technically,
therefore, a Rule 12(b)(4) motion is proper only to challenge noncompliance with the provisions of Rule 4(b) or any applicable provision incorporated by Rule 4(b) that deals specifically with the content of the summons." Id. (footnote omitted). In contrast, Federal Rule of Civil Procedure 12(b)(5) permits dismissal of an action based on insufficient service of process. The line between a Rule 12(b)(4) and 12(b)(5) motion often becomes blurred in practice, such that " [s]everal courts that have dealt with this problem simply have treated a combination of the two motions as a proper procedure." 5B Charles Alan Wright, Arthur R. Miller, et al., Federal Practice and Procedure § 1353 (3d ed. rev. 2014) (footnote omitted). " Once service is challenged, plaintiffs bear the burden of establishing that service was valid under Rule 4." Brockmeyer v. May, 383 F.3d 798, 801 (9th Cir. 2004) (citing 4A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1083 (3d ed. 2002 & Supp. 2003)). " [S]ervice of process is the means by which a court asserts its jurisdiction over the person." SEC v. Ross, 504 F.3d 1130, 1138 (9th Cir. 2007). " [I]n the absence of proper service of process, the district court has no power to render any judgment against the defendant's person or property unless the defendant has consented to jurisdiction or waived the lack of process." Id. at 1138-39.
Federal Rule of Civil Procedure 20(a) permits the joinder of claims against multiple defendants if the claims against each defendant arise out of the same transaction or occurrence and any question of fact or law is common to all parties. Fed.R.Civ.P. 20(a). Even if these requirements are met, however, the district court must evaluate whether allowing joinder would " 'comport with the principles of fundamental fairness' or would result in prejudice to either side." Visendi v. Bank of Am., N.A., 733 F.3d 863, 870 (9th Cir. 2013) (quoting Coleman v. Quaker Oats Co., 232 F.3d 1271, 1296 (9th Cir. 2000)) (internal quotation marks omitted). While " [m]isjoinder of parties is not a ground for dismissing an action," it is within the discretion of the district court to " add or drop a party." Fed.R.Civ.P. 21; see also Visendi, 733 F.3d at 870 (9th Cir. 2013) (" Standing alone, '[m]isjoinder of parties is not a ground for dismissing an action.' Fed.R.Civ.P. 21. Rather, 'the court may at any time, on just terms, add or drop a party.' Id. " ).
Finally, pursuant to 28 U.S.C. § 1404(a), " [f]or the convenience of parties and witnesses, in the interest of justice," an action may be transferred to another " district or division" where it may have been initially brought or a " district or division to which all parties have consented." 28 U.S.C. § 1404(a).
A. Plaintiffs' Standing for ERISA Counts
Plaintiffs' First and Seventh Counts can be brought only by a participant or beneficiary, according to ERISA. See 29 U.S.C. § 1132(a)(1)(B) (providing that a civil action to recover benefits ( i.e., Count I) may be brought by " a participant or beneficiary" ); 29 U.S.C. § 1132(c)(1) (providing that an administrator who fails to comply with a document request ( i.e., Count VII) may be personally liable to " such participant or beneficiary" ). Plaintiffs' Second Count may be brought " by the Secretary [of Labor], or by a participant, beneficiary, or fiduciary," 29 U.S.C. § 1132(a)(2), and Plaintiffs' Third, Fourth, Fifth, and Sixth Counts may be brought " by a participant, beneficiary, or fiduciary," 29 U.S.C. § 1132(a)(3).
Plaintiffs are neither participants nor beneficiaries in the plans, but rather are health care providers. (FAC ¶ ¶ 15, 48-49). However, as discussed above, Plaintiffs
claim to have standing for their ERISA Counts by virtue of assignments received from the relevant patients. ( Id. ¶ 871).
Defendants argue that the assignments themselves are invalid, as they are insufficiently definite:
Initially, all of Plaintiffs' ERISA claims (including the claim for benefits under ERISA § 502(a)(1)(B)) must be dismissed because they have failed to allege they received a proper assignment from their patients. The assignment that Plaintiffs quote states only that the patient assigns their rights to " PROVIDERS," without naming the providers or otherwise identifying which party obtains the assignment. Am. Compl. P873. Without any allegations demonstrating that these particular Plaintiffs received assignments from their patients, all of Plaintiffs' ERISA claims must be dismissed.
(Omnibus Mot. at 23). Further, Defendants argue that, even if the assignments are sufficiently definite, they would not confer " the right to sue for anything other than a claim for benefits under ERISA § 502(a)(1)(B)." ( Id. ).
The key question becomes, therefore, whether the alleged assignments provide Plaintiffs with standing to bring their ERISA Counts.
1. ERISA Benefits Count (Count I)
a. Assignment of Rights to Benefits Under ERISA
A health care provider may have derivative standing to pursue ERISA benefits if he or she was assigned the right to reimbursement by an ERISA plan beneficiary. See Misic v. Bldg. Serv. Employees Health & Welfare Trust, 789 F.2d 1374, 1377 (9th Cir. 1986) (per curiam) (concluding that a health care provider had standing to sue in place of his assignors, pursuant to valid assignments of the right to reimbursement under a health care plan). See also In re WellPoint, Inc. Out-of-Network UCR Rates Litig. (" WellPoint II" ), 903 F.Supp.2d 880, 896 (C.D. Cal. 2012) (" The Ninth Circuit has long recognized that assignments of benefits are sufficient to convey standing on an assignee to sue a plan directly under § 1132(a)(1)(B)." ).
b. Whether Alleged Assignments Confer Standing for ERISA Benefits Count (Count I)
Although many cases discuss the nuances of assignment breadth, Defendants fail to cite any authority that explicitly addresses the issue of an allegedly indefinite assignee. ( See Omnibus Mot. at 23).
The " Assignment of Rights and Benefits" Plaintiffs allegedly secured from " each patient" purportedly provides as follows:
I authorize my insurance company and/or my healthcare contract with my employer (collectively, the " INSURANCE COMPANY" ) to direct all payments for all professional and medical benefits under my current policy as payment for services rendered directly to PROVIDER(s) and/or FACILITY(s) providing services or their designated associates or assignee(s) (collectively " PROVIDERS" ). I assign, whether signing as patient or patient's agent, all rights and benefits under my contract with my INSURANCE COMPANY, to any and all PROVIDERS. I give express right to PROVIDERS to obtain the insurance and benefits policy booklet, and ALL policy information from INSURANCE COMPANY, employer or any of their associates or agents. I also provide express consent and give full rights to PROVIDERS to appeal on my behalf to INSURANCE COMPANY or my employer or any of their associates or agents for any reason. I also authorize the release of any
information pertinent to my case to any insurance company, adjuster, attorney or other party(s) involved in this case.
I authorize PROVIDERS to initiate complaint(s) to the Insurance Commissioner or any other agency for any reason on my behalf.
The assignment further permits PROVIDERS to obtain from INSURANCE COMPANY and employer or any of their agents or associates all information necessary for the determination of benefits allowed under the contract and permits the direct disclosure to PROVIDERS of all information including benefits provided including benefits & payments made on my behalf, limits and exclusions of benefits and reasons for denial of benefits or reduction in charges for services rendered.
The assignment shall allow PROVIDERS to take all action necessary to obtain the benefits I have, in good faith, been promised by INSURANCE COMPANY and/or employer on my behalf. All benefits are to be paid directly to PROVIDERS and mailed directly to 269 S. Beverly Drive, Suite 353, Beverly Hills, CA 90212. A photocopy of this assignment shall be considered as effective and valid as the original.
I understand that my insurance carrier may disallow certain diagnoses or services as medically uncovered, medically unnecessary, cosmetic or excluded. I agree to be responsible for payment of all such services rendered to the patient.
. . .
This is a direct assignment of my rights and benefits under this policy.
(FAC ¶ 873 (emphasis in original)).
In opposing Defendants' contention that an assignment to " PROVIDERS" is insufficient to provide Plaintiffs with standing, Plaintiffs allege first that this " nitpick" does not reflect the fact that the assignment " does not refer to providers in the abstract," but rather defines " PROVIDERS" in the context of " any or all healthcare providers who render medical services to the patient, including 'their designated associates or assignee(s).'" (Opp. to Omnibus Mot. at 6 (citing FAC ¶ 873)). Plaintiffs later discuss how impractical it would be to receive assignments from patients for specific surgeons and other professionals when patients would receive services from a number of providers at the surgery centers, at multiple surgical facilities, and often on different dates. ( Id. at 7). Plaintiffs further maintain that such an assignment is " both permitted and encouraged" by Misic :
Assignment of trust monies to health care providers results in precisely the benefit the trust is designed to provide and the [ERISA] statute is designed to protect. Such assignments also protect beneficiaries by making it unnecessary for health care providers to evaluate the solvency of patients before commencing medical treatment, and by eliminating the necessity for beneficiaries to pay
potentially large medical bills and await compensation from the plan.
( Id. at 6 (quoting Misic, 789 F.2d at 1377)).
The discussion of the assignment's context provided by Plaintiffs in the Opposition to the Omnibus Motion seems to be overreaching, as a strict reading would open the assignment up to seemingly innumerable providers who had nothing to do with the transactions at issue here. However, for purposes of adjudicating the Omnibus Motion, it follows from the allegations in the FAC that the Plaintiffs who performed the procedures corresponding to the claims at issue (for which the assignments were allegedly received) were the providers given the right to seek out benefits on the patient's behalf, even if the name provided in the assignment is somewhat indefinite in the abstract.
As it stands, Plaintiffs have provided the text of the assignments that purportedly gave them various rights. ( See FAC ¶ ¶ 871 (" Prior to receiving treatment, every patient of the Plaintiffs signs an 'Assignments of Rights and Benefits' form agreeing to, inter alia, assign his or her health insurance benefits, as well as broad array of related rights, to their providers, who are the Plaintiffs in this case." ), 872 (" Plaintiffs received an assignment of benefits for every claim at issue in this litigation." ), 873 (" This form, which was titled 'Assignment of Rights and Benefits,' contained an exhaustive list of the rights that each patient conveyed to Plaintiffs." )). The alleged assignments mention explicitly that they convey " rights and benefits" under the relevant insurance policy. While there are certainly areas for more definiteness, the Court rules that the alleged assignments are sufficiently definite to survive a motion to dismiss on the issue of standing for Count I (for ERISA benefits pursuant to § 502(a)(1)(B)).
However, the Court does perceive that the " on my behalf" language in the alleged assignment could create ambiguity. In discussing an argument that an assignment was void on its face because it contained seemingly conflicting language regarding designation of an assignee and authorized representative, the court in Care First Surgical Center v. ILWU-PMA Welfare Plan (" Care First II " ), Case No. 14-CV-01480-MMM, (Dec. 26, 2014) noted that, " the interpretation of an assignment clause, like the interpretation of contract terms generally, is a question of the intent of the parties and is typically a question of fact for the jury." Care First II, at *33 (quoting Orion Tire Corp. v. Goodyear Tire & Rubber Co., 268 F.3d 1133, 1138 (9th Cir. 2001). Similarly, Care First II observed that " [i]f from the entire transaction and the conduct of the parties it clearly appears that the intent of the parties was to pass title to the chose in action, then an assignment will be held to have taken place." Id. (quoting McCown v. Spencer, 8 Cal.App.3d 216, 225, 87 Cal.Rptr. 213 (1970)).
The purported assignment here does include the following language: " I assign, whether signing as patient or patient's agent, all rights and benefits under my contract with my INSURANCE COMPANY, to any and all PROVIDERS." (FAC ¶ 873). As mentioned above, " [t]he Ninth Circuit has long recognized that assignments of benefits are sufficient to convey standing on an assignee to sue a plan directly under § 1132(a)(1)(B)." WellPoint II, 903 F.Supp.2d at 896. At this early stage in the proceedings, the Court rules that the language of the assignment is sufficient to confer standing for Count I, as the possible ambiguity discussed would seemingly be an inappropriate issue to resolve at present.
2. Ancillary ERISA Counts
a. Assignability of Right to Pursue Ancillary ERISA Counts
Defendants also contend that, even if the assignment is sufficient to confer standing for purposes of benefits recovery, it cannot confer standing for the ancillary ERISA Counts (such as those for statutory penalties, breach of fiduciary duty, equitable relief). (Omnibus Mot. at 23-25).
The Ninth Circuit has not explicitly stated that a beneficiary can assign the rights to sue for breach of fiduciary duty and recover penalties for non-disclosure under 29 U.S.C. § 1132(c). See Eden Surgical, 420 Fed.Appx. at 697 (" [A]ssuming (without deciding) that the right to bring claims under § 1132(c) is free-standing and may be assigned . . . ." ). See also Spinedex Physical Therapy USA Inc. v. United Healthcare of Arizona, Inc. (" Spinedex" ), 770 F.3d 1282, 1292 (9th Cir. 2014) (holding that patients did not assign their rights to bring claims for breach of fiduciary duty in light of the wording and context of purported assignment, though not discussing whether rights might otherwise have been assignable).
However, the Ninth Circuit's rationale in Misic for concluding that ERISA does not prohibit the assignment of ERISA benefits extends to the ERISA Counts for breach of fiduciary duty and non-disclosure. In Misic, the Ninth Circuit's holding was driven by its determination that assignment of ERISA benefits would " facilitate the receipt of health care benefits by beneficiaries." Simon v. Value Behavioral Health, Inc., 208 F.3d 1073, 1081 (9th Cir. 2000) amended, 234 F.3d 428 (9th Cir. 2000) and overruled on other grounds by Odom v. Microsoft Corp., 486 F.3d 541 (9th Cir. 2007) (en banc) (summarizing the reasoning in Misic ); see also Misic, 789 F.2d at 1377 (reasoning that " [h]ealth and welfare benefit trust funds are designed to finance health care," and the " [a]ssignment of trust monies to health care providers results in precisely the benefit the trust is designed to provide and the statute is designed to protect" ). As the Care First Order noted, the assignment of claims for breach of fiduciary duty and non-disclosure would facilitate ERISA's purposes. Care First Order (concluding that the assignment of both rights would facilitate ERISA's purposes). The Court applies this same logic to all of the ancillary ERISA Counts at issue here.
Additionally, the Fifth Circuit has upheld derivative standing to sue for breach of fiduciary duties under ERISA. See Texas Life, Acc. Health & Hosp. Serv. Ins. Guar. Ass'n v. Gaylord Entm't Co., 105 F.3d 210, 216 (5th Cir. 1997). Notably, in support of its conclusion, the Fifth Circuit reasoned that derivative standing for a breach of fiduciary duty claim " does not frustrate ERISA's purposes," but rather helps ensure that funds are available for the plan. Id. at 214-16.
In light of the above cases, the Court is persuaded that the rights to pursue ancillary ERISA Counts, such as those for breach of fiduciary duties and non-disclosure, may be assigned.
b. Whether Alleged Assignments Confer Standing for Ancillary ERISA Counts
With regard to whether the language in the alleged assignments covers the ancillary ERISA Counts, " [t]he Court's task in interpreting the scope of an assignment is to 'enforce the intent of the parties.'" Klamath-Lake Pharm. Ass'n v. Klamath Med. Serv. Bureau, 701 F.2d 1276, 1283 (9th Cir. 1983). " [T]he Ninth Circuit has recently reiterated that courts must look to the language of an ERISA assignment itself to determine the scope of the assigned claims." WellPoint II, 903 F.Supp.2d 880, 896 (C.D. Cal. 2012) (citing Eden Surgical Ctr. v. B. Braun Med., Inc.,
420 Fed.Appx. 696, 697 (9th Cir. 2011)). " Once a claim has been assigned . . . the assignee is the owner and the assignor generally lacks standing to sue on it." Id. at 897.
In the Care First Order, the court determined that the assignment at issue was sufficiently broad to cover claims for benefits, as well as claims for breach of fiduciary duty by the plan administrator and penalties for non-disclosure. Care First Order, at *40. In Care First, the assignment not only discussed " ERISA rights and plan benefits," but also states that the assignee " stands in the shoes" of the member, and explicitly references an assignment of rights to sue for penalties and sue for benefits under 29 U.S.C. § 1132(a)(1)(B). Id. Similarly, the Care First court found that the assignment was sufficiently definite to cover claims for breach of fiduciary duty under 29 U.S.C. § 1132(a)(2) because they granted the provider all of the patients' " ERISA rights," including the right to commence " any legal process relating to a claim submitted on [the patients'] behalf for health insurance benefits" and " all causes of action for judicial review." Id. Pursuant to Misic, and distinguishing the assignment in WellPoint II, the Care First Order grounded its decision of assignability regarding rights to sue for benefits, penalties for non-disclosure, and breach of fiduciary duty in the assignments' grant of rights to bring claims under civil enforcement provisions of ERISA § 502 and the " stands in the shoes" language. Care First Order, at *42.
While this Court is not bound by the reasoning of Care First Order, it is instructive to compare the alleged assignments in this case to that in Care First. Here, the assignment is not as explicit as the one discussed in the Care First Order. Although it grants " all rights and benefits" under the insurance contract, it does not specifically make reference to any ERISA provisions, does not mention claims for breach of fiduciary duty, and does not reference " standing in the shoes" of the patient. The assignment does, however, mention " direct disclosure to PROVIDERS of all information including benefits provided including benefits & payments made on my behalf, limits and exclusions of benefits and reasons for denial of benefits or reduction in charges for services rendered." Defendants argue, though, that the " all rights and benefits under my contract with my INSURANCE COMPANY " and " all action necessary to obtain the benefits I have, in good faith been, promised" language cuts against Plaintiffs' standing on the ancillary ERISA Counts. (Omnibus Reply at 33 (emphasis in original)).
As mentioned briefly above, the Ninth Circuit recently evaluated an assignment in Spinedex that provided for plan payments to be made directly to the provider (Spinedex), and noted that such payments would be considered:
[P]ayment toward the total charges for the professional services rendered. THIS IS A DIRECT ASSIGNMENT OF MY RIGHTS AND BENEFITS UNDER THIS POLICY. This payment, will not exceed my indebtedness to the above mentioned assignee, and I have agreed to pay, in a current manner, any balance of said professional service charges over and above this insurance payment.
Spinedex, 770 F.3d at 1292. The court reasoned that " [t]he entire focus of the Assignment is payment for medical services provided by" the relevant provider. Id. Within this context, the court did not consider the " rights and benefits" language sufficient to confer standing for a fiduciary duty claim. Id. Admittedly, Spinedex was reviewing a summary judgment
decision, but its analysis is instructive despite the differing procedural postures of that case and this one.
The alleged assignment here purports to convey " all rights and benefits under" the patient's contract with his or her insurance company, just as the assignment in Spinedex did. (FAC ¶ 873 (emphasis removed)). Nowhere is there any mention of a transfer of rights that can be read to contemplate the right to bring suit to redress purported breaches of fiduciary duty. In short, " [t]he Assignment nowhere indicates that, by executing the assignment, patients were assigning to [the providers] rights to bring claims for breach of fiduciary duty." Spinedex, 770 F.3d at 1292 (citing Britton v. Co--op Banking Grp., 4 F.3d 742, 746 (9th Cir. 1993) (" [I]t is essential to an assignment of a right that the [assignor] manifest an intention to transfer the right to another person. . . ." (quoting Restatement (Second) of Contracts § 324 (1981))). As such, the Court rules that Plaintiffs lack standing for their breach of fiduciary duty Count.
The Court also fails to see a manifestation of intent to assign the right to bring many of the other ancillary ERISA Counts. For example, Count VII seeks, in large part, statutory penalties pursuant to § 502(c) for Defendants' alleged failure to produce particular documents. The alleged assignment here gives Plaintiffs the " express right to . . . obtain the insurance and benefits policy booklet, and ALL policy information from" the insurance company. (FAC ¶ 873 (emphasis removed)). Although the purported assignment discusses receipt of documents, even this is clearly within the context of the receipt of benefits under the contract (" [t]he assignment further permits PROVIDERS to obtain from INSURANCE COMPANY and employer or any of their agents or associates all information necessary for the determination of benefits allowed under the contract" ) and, moreover, seems only to authorize Plaintiffs to receive these documents, rather than effecting any transfer of rights. Again, without such indication that the right to sue for penalties was assigned, the Court rules that Plaintiffs lack standing to bring Count VII.
Similarly, the Court sees no indication that any transfer of rights was effected with respect to the majority of Plaintiffs' equitable Counts brought under § 502(a)(3). Count III seeks equitable relief and Count VI seeks surcharge; both Counts are premised upon alleged breaches of fiduciary duties. Count V seeks plan reformation, which essentially asserts what Plaintiffs think the plans ought to say, not what they do say. The plain text of the alleged assignments provides no indication that the parties intended a transfer of the right to bring these Counts.
At the hearing, Plaintiffs discussed the fact that, to their knowledge, none of the individual patient-assignors had brought suit under ERISA § § 502(a)(2) or (a)(3), presumably in an effort to demonstrate further that the intent of the assignors was that their assignment be complete. In WellPoint II, the Court did note that the ERISA Subscribers brought their own claims under § § 1132(a)(2) and (a)(3), which it listed as one factor in its analysis that Plaintiffs' allegations were insufficient to demonstrate that the provider plaintiffs were assigned the right to pursue those claims. WellPoint II, 903 F.Supp.2d at 897. Admittedly, the Court does not have the same situation before it, but it nevertheless concludes that the wording of the alleged assignments themselves is sufficient to support the Court's ruling.
Finally, Plaintiffs' § 502(a)(3) estoppel Count (Count IV) presents a more viable standing argument. Although this Count is brought only against United, the Court analyzes it here in the context of its other
assignment rulings. At the hearing, United argued that what Plaintiffs are really seeking via this Count is payment outside of the plan terms (based on purported representations made by United), and, as such, this does not seek to vindicate rights or benefits under the insurance contracts.
It is true that some allegations point to more of a claim predicated upon what United allegedly said it would pay Plaintiffs for services (and not contingent on plan terms). ( See FAC ¶ 1043 (" . . .[T]he United Defendants are estopped from contending that the services it authorized are not payable due to lack of authorization, and are estopped from refusing to pay the reasonable and customary value for these services." )). However, as discussed below, in the Ninth Circuit, the core of a federal estoppel claim brought in the ERISA context is that the claimant is seeking benefits based on representations made interpreting purportedly ambiguous plan terms. See Pisciotta v. Teledyne Indus., Inc., 91 F.3d 1326, 1331 (9th Cir. 1996) (stating that, in the Ninth Circuit, when the additional prerequisites of plan ambiguity and representations made involving an oral interpretation of the plan are also alleged, " [a]n ERISA beneficiary may recover benefits under an equitable estoppel theory upon establishing a material misrepresentation, reasonable and detrimental reliance upon the representation and extraordinary circumstances" (citations omitted)). The alleged assignment here includes mention of the benefits " promised" to a participant: " The assignment shall allow PROVIDERS to take all action necessary to obtain the benefits I have, in good faith, been promised by INSURANCE COMPANY and/or employer on my behalf." The Court rules that the alleged assignment confers standing for Plaintiffs' Count for estoppel pursuant to § 502(a)(3). Of course, to the extent that this Count ultimately seeks relief that is not based on the plan terms (and an interpretation of an ambiguous provision therein), it will be unsuccessful under Ninth Circuit authority for reasons unrelated to standing.
The Court notes that construing this alleged assignment in general presents some difficulties. It is neither as manifestly all-encompassing as the assignment in Care First, nor as cursory as those discussed in WellPoint II. Ultimately, however, the Court considers its decision to be consistent with Spinedex and in keeping with the intent of the parties, as expressed in the terms of the alleged assignment itself.
3. Anti-Assignment Clauses
Notwithstanding any plausible allegations regarding standing, Plaintiffs may still lack standing if Defendants can demonstrate that the relevant plans contain valid and unambiguous anti-assignment provisions: " ERISA welfare plan payments are not assignable in the face of an express non-assignment clause in the plan." Davidowitz v. Delta Dental Plan of Cal., Inc., 946 F.2d 1476, 1481 (9th Cir. 1991).
Defendants argue that many plans contain anti-assignment language, such that " Plaintiffs lack standing to sue for benefits under the terms of [those] plans." (Omnibus Mot. at 13). Plaintiffs, however, contend that the anti-assignment clauses should not be given effect because: estoppel and waiver preclude application of the provisions; clauses that require consent of the insurer are void under California law, as are anti-assignment clauses contained in policies regulated by the California Department of Insurance; United's counsel cannot take purportedly opposite views regarding anti-assignment clauses in this case and a related action; some purported anti-assignment clauses are ineffective to bar provider standing for some or all Counts in this case; and the United-Represented
Defendants have failed to present the actual plan documents such that the plan terms can be evaluated. (Opp. to Omnibus Mot. at 15-28). As to the last of these contentions, the Court will evaluate the effect of the documents presented in connection with the Defendants' arguments against Plaintiffs' § 502(a)(1)(B) Count. Regarding the rest of the arguments, the Court takes them in turn in the following sections.
a. Anti-Assignment Provisions and Estoppel
i. Estoppel and ERISA Benefits Decisions
As the Care First Order discusses, " [t]he Ninth Circuit has recognized that estoppel principles can apply to an ERISA beneficiary's substantive claim for recovery of benefits." Care First Order, at *46 (citing Gabriel v. Alaska Elec. Pension Fund, 755 F.3d 647, 655-58 (9th Cir. 2014) (noting that " appropriate equitable relief" pursuant to 29 U.S.C. § 1132(a)(3) may include holding the fiduciary " to what it had promised" (quoting CIGNA Corp. v. Amara, 563 U.S. 421, 131 S.Ct. 1866, 1879, 179 L.Ed.2d 843 (2011))).
However, in order for estoppel to apply to a substantive claim for ERISA benefits, the Ninth Circuit requires that several elements be pleaded. First, the party invoking estoppel must demonstrate the traditional elements of estoppel: " (1) the party to be estopped must know the facts; (2) he must intend that his conduct shall be acted on or must so act that the party asserting the estoppel has a right to believe it is so intended; (3) the latter must be ignorant of the true facts; and (4) he must rely on the former's conduct to his injury." Gabriel v. Alaska Elec. Pension Fund, 773 F.3d 945, 955 (9th Cir. 2014) (quoting Greany v. W. Farm Bureau Life Ins. Co., 973 F.2d 812, 821 (9th Cir. 1992) (internal quotation marks omitted). In addition, the party asserting estoppel " must also allege: (1) extraordinary circumstances; (2) 'that the provisions of the plan at issue were ambiguous such that reasonable persons could disagree as to their meaning or effect'; and (3) that the representations made about the plan were an interpretation of the plan, not an amendment or modification of the plan." Id. at 957 (quoting Spink v. Lockheed Corp., 125 F.3d 1257, 1262 (9th Cir. 1997)). See also Pisciotta v. Teledyne Indus., Inc., 91 F.3d 1326, 1331 (9th Cir. 1996) (per curiam) (explaining that the Ninth Circuit has required an ERISA beneficiary seeking to recover benefits under a theory of equitable estoppel to plead material misrepresentation, reasonable and detrimental reliance, and extraordinary circumstances, as well as the additional prerequisites that the plan terms were ambiguous and representations were made to the claimant involving an oral interpretation of the plan).
ii. Estoppel and Anti-Assignment Clauses in ERISA Plans
Riverview Health Inst. LLC v. Med. Mut. Of Ohio
601 F.3d 505
Hermann Hosp. v. MEBA Med. and Benefits Plan (" Hermann II" )
959 F.2d 569
overruled on other grounds by
Access Mediquip, L.L.C. v. UnitedHealthcare Ins. Co.
698 F.3d 229
Productive MD, LLC v. Aetna Health, Inc.
969 F.Supp.2d 901
N. Jersey Brain and
Spine Ctr. v. Saint Peter's Univ. Hosp., Civil Action No. 13-74 (ES), 2013 WL 5366400, at *7 (D.N.J. Sept. 25, 2013); Gregory Surgical Servs., LLC v. Horizon Blue Cross Blue Shield of N.J., Inc., Civil Action No. 06-0462 (JAG), 2007 WL 4570323, at *4 (D.N.J. Dec. 26, 2007)).
In Riverview, medical providers seeking to bring derivative claims argued that under Sprague v. General Motors Corp., 133 F.3d 388 (6th Cir. 1998) (en banc), a plan was estopped from relying on an anti-assignment provision when it failed to demonstrate that it affirmatively informed participants and beneficiaries about the provision or provided documentation of the anti-assignment provision to any of them. Riverview, 601 F.3d at 521-22. In support of this argument, the providers submitted affidavits from insureds which stated that they were never advised/informed/told that their benefits were not assignable; the affidavits did not, however, state that the plan had failed to make plan documents available. Id. at 522. However, the court rejected providers' argument, holding instead that Sprague did not support the providers' contention, but rather that " Sprague merely says that a party's reliance can rarely, if ever, be reasonable or justifiable if such reliance is 'inconsistent with the clear and unambiguous plan terms of plan documents available to or furnished to the party.'" Id. at 522 (emphasis in original) (quoting Sprague, 133 F.3d at 404).
Similarly, in Productive MD, the court held that Aetna was estopped from asserting that a provider's (Productive MD) assignment was rendered invalid by operation of a plan's anti-assignment clause when " Aetna was on notice that Productive MD sought payment pursuant to a patient assignment, Productive MD was not privy to and had no legal right to access the underlying plan terms, Aetna possessed the underlying plans (and therefore knew their terms), Aetna denied Productive MD's technical component claims in whole or in part (purportedly) based on Aetna's interpretation and application of the plan terms--for reasons other than validity of assignment--and, relative to the same underlying tests based on the same insurance plans, Aetna paid the physicians who sought payment for the professional component pursuant to assignments from the same patients." Productive MD, 969 F.Supp.2d at 922. Moreover, for a period of time, " Aetna regularly paid Productive MD's claims made pursuant to patient assignments." The court stated that these circumstances led to Productive MD's reasonable reliance that its assignments were valid. Id. at 922-23. The court noted that, " [h]ad Aetna challenged Productive MD's assignments at any stage . . . Productive MD might have acted differently," such as by changing their assignment form to contain language acceptable Aetna, ensuring that patients gave notice to Aetna when required to do so, or not performing tests " without having the patients first confirm that they could assign their rights to Productive MD." Id. at 923. The Productive MD court found that these circumstances satisfied the five-factor estoppel test articulated in Sprague :
(1) Aetna's conduct plausibly amounted to a representation that Productive MD's patient assignments were acceptable both generally and under the specific plan terms; (2) Aetna, in purporting to administer the underlying policies, was presumptively aware of the underlying policy terms; (3) Productive MD reasonably construed Aetna as indicating that Productive MD could continue to receive payment from Aetna for any medically necessary tests covered by the applicable insurance plan; (4) to the extent that any policies restricted or prohibited assignment, Productive MD was not aware--either actually or constructively
--of the underlying plan terms; and (5) Productive MD reasonably relied upon Aetna's conduct to its potential detriment in performing tests without demanding payment up front or requiring its patients to inquire about their right to assign before receiving tests.
Productive MD, 969 F.Supp.2d at 923-24.
Finally, in Hermann II, the court held that a plan was estopped from asserting an anti-assignment provision in its plan agreement when the documentation containing the anti-assignment clause was never provided to the plaintiff, and it was the plan's duty to notify the plaintiff if it intended to rely on the provision, which it did not do. Hermann II, 959 F.2d at 574. The plaintiff in Hermann II was a hospital that had provided service to a patient and had received an assignment of rights from this same patient. Id. The hospital called the plan when the patient was first admitted and was informed by the plan that the patient was covered. Id. The patient was in the hospital for six months and, during this time, the hospital repeatedly tried to receive payment for the services provided; the plan, however, repeatedly postponed payment, but asserted that it was merely " investigating" the claim. Id. The Hermann II court, in effect, imposed on the plan an affirmative duty to inform the hospital of the anti-assignment clause if it intended to rely upon it, and found that the plan's " protracted failure to assert the clause when [the hospital] requested payment pursuant to a clear and unambiguous assignment of payments for covered benefits" resulted in the plan being estopped from asserting the provision. Id. at 574-75.
The Care First Order notes that " Sprague, Riverview, Hermann [II], and Productive MD all recognize -- explicitly or implicitly -- that the principle that a representation that conflicts with the unambiguous terms of a plan agreement will not support estoppel does not apply in the derivative standing context if the assignee can show that it did not have, and could not have gained, access to the plan agreements." Care First Order, at *60-61.
iii. Estoppel and Anti-Assignment Clauses in the Present Case
Plaintiffs argue that " [b]ecause Defendants engaged in a consistent course of conduct that affirmed the presumptive validity of Plaintiffs' assignments, and Plaintiffs relied on this to their detriment, Defendants are estopped from raising any anti-assignment clauses to defeat Plaintiffs' standing." (Opp. To Omnibus Mot. at 15).
Defendants combat the estoppel argument, inter alia, by asserting that Hermann II, relied upon by Plaintiffs (and evaluated in the Care First Order), is distinguishable since it " involve[ed] arguments raised by plans or claims administrators for the first time in litigation as a reason for the adverse benefits determination." (Omnibus Reply at 19 (emphasis in original) (citing Hermann II, 959 F.2d at 574)). Defendants, therefore, argue that the instant case is distinguishable because Defendants here are not asserting the anti-assignment provisions as a basis for claim denial, but rather invoke them to " preclude Plaintiffs from obtaining derivative standing to sue for benefits." ( Id. ). As such, Defendants argue, they " are not estopped from asserting the anti-assignment clauses merely because they were not raised during the claims adjudication process." ( Id. ).
It is true that Plaintiffs' allegations include mention of their lack of access to relevant plan documents, such that they would presumably have been ignorant of the true facts. ( See, e.g., FAC ¶ 1077 (" Plaintiffs have suffered prejudice by Defendants' [sic] to provide the documents that Plaintiffs requested of them because
Plaintiffs were unable to identify -- and are still unable to identify -- the specific plan provisions upon which the Defendants purportedly based their denials. Thus, Plaintiffs are unable to effectively appeal Defendants' denials of their claims. Moreover, Plaintiffs lacked access, and continue to lack access to, documents explaining or justifying United's internal claims review procedure, and the time limits applicable to such procedures." )). At the hearing, Defendants argued that the FAC fails to allege that Plaintiffs lacked access to these documents from the patient-assignors, and, therefore, Plaintiffs' estoppel argument fails. However, reading the FAC in the light most favorable to Plaintiffs, the Court cannot agree. Although the allegations in the FAC that Plaintiffs lacked access to or knowledge of the anti-assignment provisions focus more on Defendants' alleged behavior, rather than categorical assertions that they did not have knowledge of the provisions from any source, the Court is reading the FAC as a whole. The above-cited language sufficiently alleges that Plaintiffs lacked access to the underlying plan documents. Cf. Care First II, at *58 (" Because Care First does not allege that it did not review the ...