Opinion ID: 78513
Heading Depth: 3
Heading Rank: 1

Heading: First Davila Inquiry

Text: The first inquiry is whether Rutt and Egan, at some point in time, could have brought [their] claim under ERISA § 502(b)(1)(B). Davila, 542 U.S. at 210, 124 S.Ct. at 2496. This part of the test is satisfied if two requirements are met: (1) the plaintiff's claim must fall within the scope of ERISA; and (2) the plaintiff must have standing to sue under ERISA. Id. at 211-12, 124 S.Ct. at 2496-97; Marin Gen. Hosp., 581 F.3d at 947-49. We first consider whether the claims are within the scope of § 502(a)(1)(B), because if they are not, standing to assert them is irrelevant. Rutt and Egan argue that their claims are not cognizable under § 502(a) because the relief they seek is unavailable under ERISA. They stress that they are not seeking benefits under an ERISA plan, but instead seek to collect unpaid amounts they are owed under their Provider Agreements as a result of Anthem's use of improper payment methods, such as downcoding and bundling, under the guise of utilization review. Moreover, they assert, their state law claims are the types of claims federal courts have consistently held are not even defensively preempted under ERISA § 514. The Court emphasized in Davila, however, that merely referring to labels affixed to claims to distinguish between preempted and non-preempted claims is not helpful because doing so would `elevate form over substance and allow parties to evade' the pre-emptive scope of ERISA. Davila, 542 U.S. at 214, 124 S.Ct. at 2498 (quoting Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 211, 105 S.Ct. 1904, 1911, 85 L.Ed.2d 206 (1985)). The factual allegations of the complaint do support Rutt and Egan's argument that their claims involve the rate of payment under their Provider Agreements. [9] Yet, a closer look discloses more. Plaintiffs' allegations implicate not only the rate of payment under their Provider Agreements, but also the right of payment. For example, in paragraph 10(a) under Class Allegations, Rutt and Egan allege that Anthem breached its contractual obligations by engaging in various acts, including systematically denying and/or reducing Dentists' reimbursement for medically necessary services through (i) improper denials. And, in paragraph 10(b), Rutt and Egan allege that Anthem denied medically necessary claims through the use of so-called `guidelines' which do not comply with accepted medical/dental treatment standards. As the Fifth Circuit observed in Lone Star, such allegations concern coverage issues that fall within ERISA. Lone Star, 579 F.3d at 531. Finally, paragraphs 10(g) and (h) complain that Anthem committed ERISA procedural violations by failing to provide an adequate explanation for the denial of claims for reimbursement and failing to ensure that procedures exist to properly consider plaintiffs' and members of the class' claims for reimbursement, both initially and in the appeals process. Significantly, the Provider Agreements say nothing about Anthem's obligations to provide an explanation when it denies a claim for reimbursement or to provide procedures for reviewing claims for reimbursement. Rather, ERISA § 503 imposes those obligations. 29 U.S.C. § 1133(1) and (2) (requiring every ERISA plan to provide adequate notice in writing to any participant or beneficiary whose claim for benefits ... has been denied and to afford a reasonable opportunity ... for a full and fair review of denied claims). Rutt and Egan repeated these same allegations in paragraphs 21(a), (g) and (h) as part of their general Factual Allegations and again in paragraphs 26(a), (g) and (h) as part of their breach of contract claim. [10] What we have, then, is really a hybrid claim, part of which is within § 502(a) and part of which is beyond the scope of ERISA. Because Rutt and Egan complain, at least in part, about denials of benefits and other ERISA violations, their breach of contract claim implicates ERISA. Rutt and Egan must have had standing to assert ERISA claims, and because they are providers, they could only have derivative standing through assignments. Thus, unlike Anesthesia Care, supra, the existence of assignments does matter in this case. In the district court, Anthem presented claim forms that Rutt and Egan submitted to Anthem for reimbursement for dental services. Lynn Appicelli, a Project Manager in Anthem's Government Programs division, confirmed in an affidavit that the attached forms were typical of claim forms that Anthem receives from Connecticut dentists. The claim forms contain the following language: I hereby authorize payment of the dental benefits otherwise payable to me directly to the below named dental entity. Anthem contends that these claim forms suffice to show an assignment of benefits by Rutt's and Egan's patients. We agree. Rutt and Egan contend that the claim forms cannot be valid assignments for two reasons, both of which we reject. [11] First, they point out that each of the three sample plan documents Anthem submitted preclude assignments. For example, they note that the first plan states: The Member or Covered Person may not assign benefits to a provider, except when parents are divorced. Citing Physicians Multispecialty Group v. Health Care Plan of Horton Homes, Inc., 371 F.3d 1291 (11th Cir.2004), in which this Court held that an unambiguous anti-assignment provision renders an assignment ineffective, Rutt and Egan contend that any purported assignment by their patients was invalid. As Anthem notes, however, each of the sample plans also contains an exception specifically permitting the assignment of dental benefits: Notwithstanding the terms of any provision regarding the payment of benefits ... a Member may assign the benefits to a Dentist or oral surgeon... in accordance with the Connecticut Laws concerning Assignment of Benefits to a Dentist or oral surgeon. Thus, the plans specifically authorized the assignments to Rutt and Egan. Rutt and Egan also contend that the claim forms are ineffective to create standing because they convey only the right to receive payment of benefits and not the patient's right to file an action under § 502(a). They cite a number of unreported district court cases holding that an assignment of the right to payment of benefits that does not include the right to pursue litigation is not an unequivocal assignment that creates derivative ERISA standing. See North Jersey Ctr. for Surgery, P.A. v. Horizon Blue Cross Blue Shield of N.J., Inc., No. 07-4812(HAA), 2008 WL 4371754, at  (D.N.J. Sept. 18, 2008) (The scope of the assignment is essential to establishing derivative standing as courts have made distinctions between assignments that only give the provider the right to reimbursement for medical serviceswhich are not ERISA claimsand assignments that give the provider a full assignment of benefits, which are ERISA claims.) (citing Cooper Hosp. Univ. Med. Ctr. v. Seafarers Health & Benefits Plan, No. 05-5941, 2007 WL 2793372, at  (D.N.J. Sept. 25, 2007), and Touro Infirmary v. Am. Mar. Officer, No. 07-1441, 2007 WL 4181506, at -6 (E.D.La. Nov. 21, 2007)); Somerset Orthopedic Assocs., P.A. v. Aetna Life Ins. Co., No. 06-867(MLC), 2007 WL 432986, at  (D.N.J. Feb. 2, 2007) (holding that the defendant failed to show an assignment sufficient for ERISA preemption purposes, as the assignment authorizes nothing more than direct payment to the plaintiff). We find these cases unpersuasive and decline to follow them. Our own cases confirm that assignment of the right to payment is enough to create standing. Healthcare providers may acquire derivative standing ... by obtaining a written assignment from a `beneficiary' or `participant' of his right to payment of benefits under an ERISA-governed plan. Physicians Multispecialty Group, 371 F.3d at 1294 (citing Hobbs, 276 F.3d at 1241); see also HCA Health Servs. of Ga., Inc. v. Employers Health Ins. Co., 240 F.3d 982, 989, 991 (11th Cir.2001) (recognizing standing based on an assignment authorizing payment of insurance benefits directly to the provider). Moreover, as noted in Cagle v. Bruner, 112 F.3d 1510 (11th Cir. 1997), in which this Court first recognized derivative standing, an assignment furthers ERISA's purposes only if the provider can enforce the right to payment. Of course, an assignment will not facilitate a plan participant's or beneficiary's receipt of benefits if the plan does not pay the benefits it owes, and provider-assignees are not permitted to sue on the participant's or beneficiary's behalf. If provider-assignees cannot sue the ERISA plan for payment, they will bill the participant or beneficiary directly for the insured medical bills, and the participant or beneficiary will be required to bring suit against the benefit plan when claims go unpaid. On the other hand, if provider-assignees can sue for payment of benefits, an assignment will transfer the burden of bringing suit from plan participants and beneficiaries to providers[, who] are better situated and financed to pursue an action for benefits owed for their services. Id. at 1515 (citations omitted) (alteration in original). See also I.V. Servs. of Am., Inc. v. Inn Dev. & Mgmt., Inc., 7 F.Supp.2d 79, 84 (D.Mass.1998) (An assignment to receive payment of benefits necessarily incorporates the right to seek payment. As Plaintiff argues, the right to receive benefits would be hollow without such enforcement capabilities.). Finally, as the Seventh Circuit observed in Kennedy v. Connecticut General Life Insurance Co., 924 F.2d 698 (7th Cir.1991), cited with approval in Cagle, all one needs for standing under ERISA is a colorable claim for benefits, and [t]he possibility of direct payment is enough to establish subject matter jurisdiction. Id. at 700-01. Rutt's and Egan's rights to direct payment of benefits are thus sufficient to confer standing. We conclude that Anthem has carried its burden of showing that Rutt and Egan received valid assignments from their ERISA patients. Furthermore, although Anthem did not link any particular assignment to a particular ERISA plan, the Appicelli affidavit sufficiently demonstrates that the submitted assignments in the claim forms are representative of assignments Rutt and Egan received for services they rendered, which would necessarily include patients covered by ERISA plans administered by Anthem.