Opinion ID: 4576558
Heading Depth: 3
Heading Rank: 2

Heading: The Assignment of Benefits

Text: Aside from Count I, the remainder of DaVita’s complaint alleges violations of ERISA. Before assessing the merits of these claims, we must answer a threshold question: May DaVita raise these claims through its status as an assignee of Patient A?8 The district court answered 8This is distinct from the question of standing, see Cranpark, Inc. v. Rogers Grp., Inc., 821 F.3d 723, 730 (6th Cir. 2016), which merits only brief discussion in this case. Article III standing requires a plaintiff to have “(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely No. 19-4039 DaVita, Inc. et al. v. Marietta Mem. Hosp. et al. Page 18 “no” as to Counts III through VI and did not address the issue as to Counts II and VII. See DaVita, 2019 WL 4574500, at  & n.2.9 MedBen, named as a defendant in Counts II and IV–VI, argues that DaVita’s “equitable ERISA claims”—which correspond to Counts IV–VI, but not II—should be dismissed for lack of standing. MedBen Br. at 48. Marietta and the Plan, named as defendants in Counts II–III and VII,10 argue only that Count III should be dismissed for lack of standing. Marietta Br. at 10. The putative basis for DaVita’s right to bring the six ERISA claims is the Assignment of Benefits form that Patient A signed prior to receiving treatment from DaVita. The form reads: I hereby assign to Facility and DaVita all of my right, title and interest in any cause of action and/or any payment due to me (or my estate) under any employee benefit plan, insurance plan, union trust fund, or similar plan (‘Plan’), under which I am a participant or beneficiary, for services, drugs or supplies provided by Facility to me or my dependents for purposes of creating an assignment of benefits under ERISA or any other applicable law. I also hereby designate DaVita as a beneficiary under any such Plan and instruct that any payment be made solely to and sent directly to DaVita. If I receive any payment directly from any Plan for services, drugs or supplies provided to me by DaVita, including insurance checks, I recognize that such payment sent directly to me was to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016), as revised (May 24, 2016) (citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 560–61 (1992)). Assuming a valid assignment from Patient A to DaVita, DaVita has standing if Patient A suffered an injury in fact. See Springer v. Cleveland Clinic Emp. Health Plan Total Care, 900 F.3d 284, 287–88 (6th Cir. 2018) (“Non-participant health care providers cannot bring their own ERISA claims—they do so derivatively, relying on the participants’ contractually defined rights and therefore the participants’ standing at the time of the assignment.”). The complaint clearly alleges injuries in fact, describing Patient A’s exposure to “higher copayments, coinsurance amounts, and/or deductibles.” R. 1 (Compl. ¶ 48) (Page ID #16–17). These risks allegedly arose due to the Plan’s denial of benefits, which Patient A was entitled to receive in a nondiscriminatory manner by law. As our decision in Springer makes clear, “injury does not depend on allegation of financial loss.” 900 F.3d at 287. In Springer, as here, the provider—not the participant— had incurred a financial loss due to underpayment by the primary plan. The principal difference between Springer and this case—Springer’s provider was allegedly underpaid under the terms of the health plan, whereas here, the provider was allegedly underpaid under the terms of the MSPA—does not render Springer inapposite. In both cases, the participants were allegedly denied benefits, even if they “were never at imminent risk of out-of-pocket expenses.” Id. (quoting N. Cypress Med. Ctr. Operating Co. v. Cigna Healthcare, 781 F.3d 182, 192 (5th Cir. 2015)). The fact that DaVita did not bill Patient A for the amount that it believes it was underpaid does not alter this conclusion. See Spinedex Physical Therapy USA Inc. v. United Healthcare of Ariz., Inc., 770 F.3d 1282, 1289 (9th Cir. 2014) (rejecting the proposition that “because [the provider] has not sought payment from its assigning patients for any shortfall, those patients do not have the ‘injury in fact’ necessary for Article III standing”). Accordingly, DaVita has Article III standing to bring its ERISA claims. 9But see supra note 2. 10For Count III, only Marietta is named as a defendant. See R. 1 (Compl. ¶¶ 71–73) (Page ID #24–25). No. 19-4039 DaVita, Inc. et al. v. Marietta Mem. Hosp. et al. Page 19 inappropriate and I agree to immediately endorse and forward such payment to DaVita. R. 1 (Compl. ¶ 31) (Page ID #10–11). This form clearly confers a right on DaVita to bring Count II, and the defendants do not argue otherwise.11 Count II is a claim for unpaid benefits, inter alia, under 29 U.S.C. § 1132(a)(1)(B) of ERISA; it specifically alleges that the defendants “fail[ed] to pay DaVita what they were obligated to pay.” Id. ¶ 69–70 (Page ID #23–24). The form undoubtedly assigns Patient A’s rights as a beneficiary under ERISA to DaVita: “I hereby assign . . . all of my right, title[,] and interest in any cause of action and/or any payment due to me . . . under any [plan], under which I am a participant or beneficiary, for services . . . provided by [DaVita] . . . for purposes of creating an assignment of benefits under ERISA. . . . I also hereby designate DaVita as a beneficiary under any such Plan . . . .” R. 1 (Compl. ¶ 31) (Page ID #10–11) (emphasis added).12 11The only argument that any of the defendants makes with respect to standing and Count II is that DaVita failed to plead an injury by Patient A and therefore lacks standing. See Marietta Br. at 9–10. This is incorrect for reasons discussed above. See supra note 8. 12The concurrence raises a new argument that neither party submitted to the district court, that the district court did not consider in its decision, and that neither party briefed. The concurrence submits that DaVita cannot enforce the MSPA through § 1132(a)(1)(B) because the provision merely “allows plan participants to sue to enforce their rights under a plan’s terms” and does “not allow them to invalidate those terms[.]” Concurring Op. at 52. “A nearby paragraph—§ 1132(a)(3)—. . . [gives] parties a cause of action to challenge a plan’s legality.” Id. at 53. Yes, §§ 1132(a)(1)(B) and 1132(a)(3) are distinct. “[Section 1132(a)(1)(B)] speaks of ‘enforc[ing]’ the ‘terms of the plan,’ not of changing them.” CIGNA Corp. v. Amara, 563 U.S. 421, 436 (2011) (alteration in original) (citing 29 U.S.C. § 1132(a)(1)(B)). A common § 1132(a)(1)(B) challenge involves the following scenario: a plan—in contravention of its own specifications or an employer’s promises—improperly denies benefits to a claimant. In these situations, the proper, and logical, remedy is a court’s invoking § 1132(a)(1)(B) to enforce a plan as written. Section 1132(a)(3), on the other hand, provides that a “participant, beneficiary, or fiduciary” may seek “to enjoin any practice or act which violates [ERISA]” or “to obtain other appropriate equitable relief[,]” 29 U.S.C. § 1132(a)(3), such as plan reformation, monetary compensation, and equitable estoppel, see Amara, 563 U.S. at 441–42. But the two provisions are not oil and water. Courts may first reform a plan’s terms per § 1132(a)(3) before proceeding to enforce the reformed plan per § 1132(a)(1)(B). See Amara, 563 U.S. at 435, 438–40; see also Laurent v. PricewaterhouseCoopers LLP, 945 F.3d 739, 747–49 (2d Cir. 2019) (describing plan reformation under § 1132(a)(3) and subsequent enforcement of the reformed plan under § 1132(a)(1)(B) as a two-step process). In the present case, DaVita alleges that the as-written Plan is illegal. DaVita does not want to—nor should a court—enforce a purportedly illegal plan; instead, DaVita seeks an equitable remedy. In its complaint, under “Count II,” DaVita asks the district court to “sever[]” the “terms [of the Plan] that violate federal law” and “reimburse DaVita pursuant to the terms of the Plan document and other applicable law.” R. 1 (Compl. ¶ 66) (Page ID #22). Accordingly, DaVita seeks benefits that Patient A would have received under a lawful version of the Plan. A court’s awarding Patient A’s unpaid benefits per the as-written Plan would not change the fact that the Plan may No. 19-4039 DaVita, Inc. et al. v. Marietta Mem. Hosp. et al. Page 20 As to Counts III through VI, by contrast, we conclude that DaVita lacks an assigned right or interest in them. DaVita raises these four breach-of-fiduciary-duty claims under § 1104(a)(1)(B) and quotes the assignment selectively to argue that “Patient A assigned ‘any illegally discriminate against those with ESRD. See Hill v. Blue Cross & Blue Shield of Mich., 409 F.3d 710, 718 (6th Cir. 2005). Should DaVita succeed upon remand, “[o]nly injunctive relief of the type available under § 1132(a)(3) will provide the complete relief sought by [DaVita] by requiring [the Plan] to alter the manner in which it administers [dialysis claims].” Id; see also Amara, 563 U.S. at 440 (“[A] maxim of equity states that equity suffers not a right to be without a remedy.”) (internal quotation marks and alterations omitted). Perhaps the concurrence is concerned that DaVita explicitly cited only to § 1132(a)(1)(B) in Count II. But we cannot torpedo DaVita’s claim simply because counsel did not write out “§ 1132(a)(3)” under “Count II” in the complaint. Again, DaVita explicitly seeks equitable relief in Count II in line with § 1132(a)(3). If a missing number unsettles the concurrence, perhaps it would be proper for the district court to allow DaVita to amend Count II to add “§ 1132(a)(3)” to the end of ¶ 66 pursuant to Federal Rule of Civil Procedure 15(a)(2). See FED. R. CIV. P. 15(a)(2). The concurrence adds that it “does not see” how DaVita can “fix this problem” by relying on § 1132(a)(3) because the subsection purportedly “permits equitable relief to remedy ‘a practice which violates any provision of this subchapter,’ not a practice that violates a different law.” Concurring Op. at 53 (citing 29 U.S.C. § 1132(a)(3)). We consider the full text of § 1132(a)(3), which provides that a “participant [or] beneficiary” may bring a civil action “(A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan[.]” 29 U.S.C. § 1132(a)(3) (emphasis added). Here, DaVita does not merely allege that it should be reimbursed more for providing dialysis services because the Plan violates the MSPA; DaVita also complains that the Plan’s “singl[ing] out dialysis services for further reimbursement limitations[,]” R. 1 (Compl. ¶ 27) (Page ID #9), violates other terms of the Plan that reimburse other in-network or out-of-network services at higher rates. Cf. Star Dialysis, 401 F. Supp. 3d at 1140 (permitting DaVita to amend its claim to “alleg[e] a violation of the Plan terms” when DaVita’s complaint “pled only that it was not paid ‘the usual and customary rates for DaVita’s services,’ and that DaVita was paid a ‘small fraction of the usual and customary amounts DaVita charges and receives for its services.’”). Specifically, DaVita complains that the Plan reimburses services received from in-network providers but offers “no network of contracted dialysis providers.” R. 1 (Compl. ¶ 25) (Page ID #8). Further, DaVita alleges, “[t]he Plan generally provides for reimbursement based on a ‘reasonable and customary’ fee if a provider is ‘out-of-network.’” Id. ¶ 26. For most outof-network services, the “reasonable and customary” fee follows the healthcare industry’s understanding of “reasonable and customary”: “a measure of reimbursement based on providers’ billed charges in a particular geographic area.” Id. (Page ID #8–9). However, per DaVita, dialysis treatments are the Plan’s only out-of-network service subject to an “alternative basis for payment” that is based on a percentage of “the current Medicare allowable fee.” Id. ¶ 27 (Page ID #9); see also id. ¶ 49 (Page ID #17) (“In other words, the [] Plan manipulates the definition of ‘reasonable and customary’ to be based on a percentage of Medicare (contrary to the general industry understanding of usual, customary, and reasonable rates), and does so solely for out-of-network dialysis services.”). To the extent that DaVita asks the district court to reform the Plan to extend its in-network reimbursement rates to dialysis providers or to reimburse dialysis services based on the “reasonable and customary” fee that the Plan uses to reimburse every other out-of-network service, id. ¶ 52 (Page ID #18), DaVita seeks appropriate equitable relief to enforce the terms of the Plan per § 1132(a)(3), id. at ¶ 55 (Page ID #20). Of course, these allegations are intertwined with DaVita’s complaints that the Plan violates the MSPA. Id. ¶ 52 (Page ID #18) (“[T]hese provisions removing dialysis patients’ access to in-network options, drastically reducing reimbursement, and singling out dialysis benefits for heightened scrutiny run afoul of the MSPA[] . . . .”). This overlap is expected, as DaVita, in Count I, relies on the MSPA’s private right of action to sue Defendants. But DaVita’s MSPA claims do not undermine DaVita’s concurrently stating sufficient facts that the Plan’s dialysis reimbursement provisions violate the Plan’s terms for reimbursing in-network and other out-of-network services and do not bar DaVita’s seeking equitable relief to “redress such violations.” 29 U.S.C. § 1132(a)(3). No. 19-4039 DaVita, Inc. et al. v. Marietta Mem. Hosp. et al. Page 21 cause of action’ to DaVita, under ‘ERISA or any other applicable law.’” Appellant Br. at 59. It may not be immediately apparent from the Assignment of Benefits form that Patient A successfully assigned to DaVita their right to seek legal and equitable relief as to unpaid benefits per Count II but failed to assign their right to challenge Defendants’ fiduciary duties per Counts III–VI. But a close examination of the form’s textual jungle reveals the difference. As highlighted above, the form stresses Patient A’s transferring their rights as a beneficiary. The form links “any cause of action” and “any payment due” to the patient’s status as a “beneficiary” and to the patient’s “creating an assignment of benefits under ERISA.” Thus, Patient A did not assign “any cause of action under ERISA or any other applicable law” for any purpose whatsoever; rather this patient assigned causes of action brought to recover benefits. See DaVita, Inc. v. Amy’s Kitchen, Inc., 379 F. Supp. 3d 960, 970 (N.D. Cal. 2019) (examining similar language and concluding that it “suggests that, at most, Patient 1 transferred to DaVita the right to bring suit for payment of benefits, rather than for ‘any cause of action’ whatsoever”). Further, the policy stipulates that Patient A “designate[s] DaVita as a beneficiary under [the] Plan”; nowhere does the form explicitly designate DaVita as an inheritor of Patient A’s fiduciary relationship with Defendants. DaVita protests that “[i]f the parties intended only for Patient A to assign some causes of action, DaVita and Patient A could have said so,” Appellant Br. at 59–60, but the entirety of the assignment, as discussed, shows that they did. Moreover, the title of the assignment is “Assignment of Benefits,” which informs the issue of the assignment’s scope. DaVita’s final argument is that there must be a distinction between “any cause of action” and “any payment due,” and linking the “any cause of action” language to the recoupment of benefits renders it surplusage. See Appellant Br. at 61; Reply Br. at 29. But “any cause of action” could mean something different from “any payment due” without interpreting the former phrase to mean “any cause of action under any existing law.” For instance, the assignment could mean that DaVita is the assignee of both Patient A’s interest in lawsuits related to payments as well as Patient A’s receipt of payments outside the context of litigation. As to Count VII, Defendants Marietta and the Plan—the only parties named as defendants for this claim, see R. 1 (Compl. ¶¶ 91–94) (Page ID #29)—have forfeited any No. 19-4039 DaVita, Inc. et al. v. Marietta Mem. Hosp. et al. Page 22 argument that the assignment does not allow DaVita to bring this claim as an assignee. 13 And unlike Article III standing, this issue is waivable. “Article III ‘standing . . . is jurisdictional and not subject to waiver.’” LPP Mortg., Ltd. v. Brinley, 547 F.3d 643, 647 (6th Cir. 2008) (quoting Lewis v. Casey, 518 U.S. 343, 349 n.1 (1996)). The question of whether Patient A transferred their interest to DaVita, by contrast, deals not with Article III standing but with the real-party-ininterest requirement of Federal Rule of Civil Procedure 17, which states that “[a]n action must be prosecuted in the name of the real party in interest.” Fed. R. Civ. P. 17(a)(1); see Fed. R. Civ. P. 17(a)(1)(A)–(G) (“The following may sue in their own names without joining the person for whose benefit the action is brought: (A) an executor; (B) an administrator; (C) a guardian; (D) a bailee; (E) a trustee of an express trust; (F) a party with whom or in whose name a contract has been made for another’s benefit; and (G) a party authorized by statute.”). We have explained that the distinction between this requirement and Article III standing is “critical . . . because the real-party-in-interest requirement is generally viewed as ‘an affirmative defense that can be waived,’ while Article III standing is plaintiff’s burden to prove and can be raised at any point.” Cranpark, Inc. v. Rogers Grp., Inc., 821 F.3d 723, 730 (6th Cir. 2016) (citation omitted). Challenges under this requirement may be “waived or forfeited.” Id. Because DaVita has Article III standing and because Marietta and the Plan make no argument that DaVita cannot bring Count VII as an assignee, we consider this count as well. We reject the concurrence’s overly formalistic and novel textual challenge that § 1182(a)(1) “applies to a plan’s rules of eligibility, not to its rules concerning covered benefits.” Concurring Op. at 54. Section 1182(a)(1) covers “rules for eligibility (including continued eligibility) of any individual to enroll under the terms of the plan based on . . . health statusrelated factors[,]” including a person’s “[m]edical condition[.]” 29 U.S.C. § 1182(a)(1). The regulations governing § 1182 are clear—“rules for eligibility” and “rules for continued eligibility” encompass benefits provisions. See 29 C.F.R. § 2590.702(b)(1)(i) (“A group health plan . . . may not establish any rule for eligibility (including continued eligibility) of any individual to enroll for benefits under the terms of the plan . . . that discriminates based on any 13With respect to Count VII, Marietta and the Plan argue only that DaVita has “fail[ed] to state a claim for [a] violation of 29 U.S.C. §1182(a)(1) in Count VII of the Complaint.” Marietta Br. at 11. These defendants present no argument related to standing or the real-party-in-interest requirement. See id. at 11–12. No. 19-4039 DaVita, Inc. et al. v. Marietta Mem. Hosp. et al. Page 23 health factor that relates to that individual . . . .”). The regulations specify that “rules for eligibility” include “rules relating to” “[e]ligibility for benefit packages”; “[b]enefits (including rules relating to covered benefits, benefit restrictions, and cost-sharing mechanisms such as coinsurance, copayments, and deductibles)”; “[c]ontinued eligibility”; and “[t]erminating coverage (including disenrollment) of any individual under the plan.” Id. § 2590.702(b)(1)(ii). Put simply, rules governing a plan’s benefits are “rules for eligibility.” Logic also dictates that a capacious reading of the section—not the concurrence’s narrow exposition—is appropriate. Consider how a policy’s benefits provisions can operate in a manner that impermissibly affects eligibility or enrollment. Here, DaVita does not merely allege that the Plan discriminates against those with ESRD—DaVita also complains that the Plan’s benefits terms force all persons with ESRD to involuntarily leave the Plan and enroll in Medicare. A superficial glance at § 1182(a)(2)(B) provides tepid support for an interpretation that excludes rules governing benefits from “rules for eligibility.” See 29 U.S.C. § 1182(a)(2)(B) (“[Section 1182(a)(1)] shall not be construed . . . to prevent such a plan or coverage from establishing limitations or restrictions on the amount, level, extent, or nature of the benefits or coverage for similarly situated individuals enrolled in the plan or coverage.”). But, again, the provision’s accompanying regulations support our understanding that § 1182(a)(1) bars plans from limiting benefits based on a health status-related factor: “a plan may limit or exclude benefits in relation to a specific disease or condition, limit or exclude benefits for certain types of treatments or drugs, or limit or exclude benefits based on a determination of whether the benefits are experimental or not medically necessary, but only if the benefit limitation or exclusion applies uniformly to all similarly situated individuals and is not directed at individual participants or beneficiaries based on any health factor of the participants or beneficiaries.” Id. § 2590.702(b)(2)(i)(B) (emphasis added). The regulations contain countless illustrative examples of how rules that govern a plan’s benefits may or may not violate § 1182, which further No. 19-4039 DaVita, Inc. et al. v. Marietta Mem. Hosp. et al. Page 24 buttresses our understanding of this provision. See 29 C.F.R. § 2590.702(b)(2)(i)(D) (Examples 1–7).14