Court Opinion

ID: 2965534
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Date Added: 2024-06-11T15:01:03.965371
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<pre>                 United States Court of Appeals <br>                     For the First Circuit <br> <br> <br> <br> <br> <br>No. 98-1038 <br> <br>              CITY OF HOPE NATIONAL MEDICAL CENTER, <br> <br>                      Plaintiff, Appellant, <br> <br>                                v. <br> <br>                        HEALTHPLUS, INC., <br> <br>                       Defendant, Appellee. <br> <br> <br> <br>           APPEAL FROM THE UNITED STATES DISTRICT COURT <br> <br>                 FOR THE DISTRICT OF PUERTO RICO <br> <br>        [Hon. Juan M. Perez-Gimenez, U.S. District Judge] <br> <br> <br> <br>                              Before <br> <br>            Selya, Boudin and Lipez, Circuit Judges. <br>                                 <br>                                 <br> <br> <br> <br>     Gary L. Tysch on brief for appellant. <br>     Jorge E. Perez Diaz and Jos W. Vzquez Matos on brief for <br>appellee. <br> <br> <br> <br> <br>September 11, 1998 <br> <br> <br> <br>                                

                                 <br>                                 <br> <br>     LIPEZ, Circuit Judge.  Plaintiff-appellant City of Hope <br>National Medical Center (City of Hope) filed an action asserting <br>that defendant-appellee Health Plus, Inc. (HPI) and others were <br>obligated to pay City of Hope for its treatment of Maria D. Diaz <br>for leukemia.  City of Hope appeals from the judgment entered in <br>the district court granting defendants' motions for a summary <br>judgment, primarily on the basis of the non-assignability of Diaz's <br>rights pursuant to two health insurance policies.  We affirm. <br>                               I. <br>     Maria D. Diaz was diagnosed with myeloid leukemia in 1992.  <br>After initial treatment in Puerto Rico, she experienced a period of <br>remission.  In late 1992, however, Diaz suffered a relapse of her <br>cancer that required additional treatment.  Diaz was referred by <br>her treating physicians to Memorial Sloane-Kettering Hospital in <br>New York City for consultation and further treatment.  In January <br>1993, Diaz was referred by doctors at Memorial Sloane-Kettering to <br>City of Hope in Duarte, California with a recommendation that Diaz <br>undergo high-dose chemotherapy with allogenic bone marrow <br>transplantation (HDCT/ABMT).  Diaz was admitted to City of Hope in <br>January 1993.  Diaz received extensive treatment for her leukemia <br>at City of Hope (including HDCT/ABMT), ultimately receiving <br>services costing in excess of $250,000. <br>     After Diaz's admission and the commencement of her treatment, <br>City of Hope sought coverage for Diaz's medical expenses from her <br>health insurers.  Diaz had two sources of health insurance: Segurio <br>de Servicio de Salud de Puerto Rico, Inc. (Triple-S) was her <br>primary insurance carrier (offered through her employer) and PCA <br>Health Plan of Puerto Rico (formerly HealthPlus, Inc. or "HPI") was <br>her secondary insurance carrier (offered through her husband's <br>employer).  Except under limited circumstances, only services <br>provided by physicians and hospitals that were part of the HMO <br>network were covered by Diaz's HPI policy; treatment outside the <br>network was only covered if it was (i) pre-approved by the HMO or <br>(ii) constituted emergency medical services.  City of Hope did not <br>have a contract with Diaz's HMO to provide medical services. <br>     Triple-S denied coverage for Diaz's treatment at City of Hope <br>because Diaz's policy did not cover HDCT/ABMT.  HPI refused <br>coverage because, inter alia, neither City of Hope nor Diaz had <br>complied with the pre-authorization procedures mandated by Diaz's <br>HMO policy.  <br>     In April 1993, Diaz signed a document that purported to assign <br>her rights under her health insurance policies to City of Hope <br>"[t]o the degree permitted under any insurance policy."  The HPI <br>health insurance policy at issue contained the following clause: <br>"[a]ll entitlements of a member to receive covered rights are <br>personal and may not be assigned." <br>     Alleging a breach of the health insurance plans, City of Hope <br>subsequently sued Triple-S, HPI, and American Airlines Employee <br>Benefit Plan (the administrator of her husband's employer's benefit <br>program) for benefits and attorney's fees pursuant to the Employee <br>Retirement Income Security Act (ERISA), 29 U.S.C.  1001 et seq.  <br>The three defendants filed answers and thereafter moved for a <br>summary judgment.  The district court granted summary judgment for <br>the defendants, finding, with regard to HPI, that (i) the non- <br>assignment clause was valid, and precluded City of Hope's claims, <br>(ii) the services rendered by City of Hope were not "emergency <br>medical services," and (iii) HPI was not equitably estopped from <br>denying coverage. <br>     City of Hope filed a timely notice of appeal.  We subsequently <br>dismissed this appeal with respect to Triple-S and American <br>Airlines Employee Benefit Plan because City of Hope failed to raise <br>any issue regarding the district court's grant of a summary <br>judgment for those appellees.  Thus, HPI is the sole remaining <br>appellee.   <br>                              II. <br>     In considering a motion for summary judgment, the court's <br>"role is to pierce the boilerplate of the pleadings and assay the <br>parties' proof in order to determine whether a trial is actually <br>required."  Wynne v. Tufts Univ. Sch. of Med., 976 F.2d 791, 794 <br>(1st Cir. 1992), cert. denied, 507 U.S. 1030 (1993).  A motion for <br>summary judgment should be granted "if the pleadings, depositions, <br>answers to interrogatories, and admissions on file, together with <br>the affidavits, if any, show that there is no genuine issue as to <br>any material fact and that the moving party is entitled to judgment <br>as a matter of law."  Fed. R. Civ. P. 56(c).  Because the lower <br>court makes a judgment of law, our review of a summary judgment <br>ruling is de novo.  See IAM v. Winship Green Nursing Ctr., 103 F.3d <br>196, 199 (1st Cir. 1998). <br>     1.   The Rights of City of Hope Pursuant to Diaz's Assignment  <br>     City of Hope argues that it is a party to a valid assignment <br>from Diaz.  That contention requires us to address the following <br>issues: (i) whether ERISA permits the assignment of benefits under <br>ERISA-regulated health insurance plans; (ii) whether City of Hope <br>has standing under ERISA to assert its claim as assignee; (iii) <br>whether the non-assignment provision in Diaz's contract violates <br>public policy, and; (iv) whether the non-assignment provision bars <br>City of Hope's claim.  <br>          a. The Assignability of Health Care Benefits Under ERISA <br>     In Mackey v. Lanier Collection Agency & Services, Inc., 486 <br>U.S. 825 (1988), the Supreme Court addressed whether ERISA allowed <br>or prohibited the garnishment of benefits under ERISA-regulated <br>welfare plans.  The Court noted that while Congress prohibited the <br>assignment or alienation of benefits under pension plans, 29 U.S.C. <br> 1056(d)(1), Congress did not include such a ban on the assignment <br>of benefits under welfare plans, and reasoned that "Congress' <br>decision to remain silent concerning the attachment or garnishment <br>of ERISA welfare plan benefits 'acknowledged and accepted the <br>practice, rather than prohibiting it.'" Id. at 837-38 (quoting <br>Alessi v. Raybestos Manhattan, Inc., 451 U.S. 504, 516 (1981)).   <br>     Congress prohibited the assignment of pension benefits "[t]o <br>further ensure that the employee's accrued benefits are actually <br>available for retirement purposes."  H.R. Rep. No. 807, 93d Cong., <br>2d Sess. 68 (1974), reprinted in 1974 U.S.C.C.A.N. 4639, 4670, <br>4734.  By contrast, the assignability of welfare plan benefits may <br>further the goal of ERISA "to promote the interests of employees <br>and their beneficiaries in employee benefit plans."  Shaw v. Delta <br>Air Lines, 463 U.S. 85, 90 (1983).  For example, "assignment to a <br>health care provider facilitates rather than hampers the employee's <br>receipt of health benefits."  Hermann Hosp. v. MEBA Med. and <br>Benefits Plan, 845 F.2d 1286, 1289 (5th Cir. 1988).  Given these <br>considerations, we agree with other circuits that the logic of the <br>Supreme Court's decision in Mackey allowing the garnishment of <br>benefits under ERISA-regulated welfare plans allows the assignment <br>generally of welfare benefits under such plans.  See Davidowitz v. <br>Delta Dental Plan of California, 946 F.2d 1476, 1478 (9th Cir. <br>1991) (holding that "ERISA does not preclude welfare plan benefit <br>assignments" and citing Mackey); St. Francis Regional Med. Ctr. v. <br>Blue Cross and Blue Shield of Kansas, Inc., 49 F.3d 1460, 1464 <br>(10th Cir. 1995) (citing Mackey for the proposition that "Congress <br>did not intend to enact a policy precluding [welfare plan benefits] <br>assignability"). <br>          b. City of Hope's Standing to Sue Under ERISA <br>     Despite our conclusion that ERISA permits the assignment of <br>welfare plan benefits, we must address the basis for City of Hope's <br>standing to file its ERISA lawsuit pursuant to such an assignment.  <br>ERISA specifically enumerates the parties with standing to sue to <br>enforce ERISA's provisions: participants, beneficiaries, <br>fiduciaries and the Secretary of Labor. Under ERISA, a <br>"beneficiary" is defined as "a person designated by a participant <br>... who is or may become entitled to a benefit" under the plan.  29 <br>U.S.C.  1002(8).  "Participant" is defined as "any employee or <br>former employee of an employer ... who is or may become eligible to <br>receive a benefit of any type from an employee benefit plan which <br>covers employees of such employer ... or whose beneficiaries may be <br>eligible to receive any such benefit."  29 U.S.C.  1002(7).  <br>Commenting on the exclusive nature of ERISA's list of parties with <br>standing, the Supreme Court has cautioned that "[t]he assumption of <br>inadvertent omission is rendered especially suspect upon close <br>consideration of ERISA's interlocking, interrelated, and <br>interdependent remedial scheme, which is in turn part of a <br>'comprehensive and reticulated statute.'"  Massachusetts Mut. Life <br>Ins. Co. v. Russell, 473 U.S. 134, 146 (1985) (quoting Nachman <br>Corp. v. Pension Benefit Guar. Corp., 446 U.S. 359, 361 (1980)).  <br>Thus, when we previously considered ERISA's standing provision, we <br>stated that "since Congress has carefully catalogued a selected <br>list of persons eligible to sue under ERISA, there is no plausible <br>rationale for us gratuitously to enlarge the roster."  Kwatcher v. <br>Massachusetts Serv. Employees Pension Fund, 879 F.2d 957, 965 (1st <br>Cir. 1989). <br>     In light of ERISA's comprehensiveness and the Supreme Court's <br>admonition to avoid expanding ERISA's class of plaintiffs, the <br>Third Circuit has refused to recognize assignee standing under <br>ERISA: "Congress simply made no provision in  1132(a)(1)(B) for <br>persons other than participants and beneficiaries to sue, including <br>persons purporting to sue on their behalf."  Northeast Dep't ILGWU <br>Health and Welfare Fund v. Teamsters Local Union No. 229 Welfare <br>Fund, 764 F.2d 147, 154 n.6 (3d Cir. 1985) (emphasis added).   <br>Although set forth as dicta because the court went on to find that <br>the patient "did not, in fact, make an assignment of her claim," <br>id., this language has led to the rejection of assignee standing <br>within district courts of that circuit. <br>     Other courts have not accorded significance to some <br>distinctions in  ERISA's definitions in concluding that a health <br>care provider-assignee has standing to sue pursuant to the express <br>terms of the statute.  In Kennedy v. Connecticut General Life <br>Insurance Co., 924 F.2d 698 (7th Cir. 1991), the plaintiff health <br>care provider, a chiropractor, sued the insurer for payment on the <br>basis of an assignment from the wife of an employee whose employer <br>had a group health policy with the insurer.  See id. at 699.  The <br>Kennedy court concluded that the health care provider had standing <br>as a beneficiary under ERISA, which defines beneficiary as "a <br>person designated by a participant ... who is or may become <br>entitled to a benefit" under the plan. 29 U.S.C.  1002(8).  This <br>conclusion reflects the premise that the spouse of an employee <br>covered by an ERISA-regulated welfare plan meets the definition of <br>a "participant."  In fact, as the statute makes clear, <br>"participant" is defined in ERISA only with reference to an <br>employee or a former employee.  See 29 U.S.C.  1002(7).  The wife <br>of an employee could not herself be a participant under her <br>husband's plan; she could only be a beneficiary.  The Kennedy court <br>did not acknowledge such a distinction, holding that the wife of <br>the employee was "unquestionably a participant as  1002(7) uses <br>that term ...."  Id. at 700.  <br>     The district court in this case also accepted the proposition <br>that the spouse of an employee meets the ERISA definition of a <br>participant: "Diaz was a participant in an employee welfare benefit <br>plan sponsored by  her husband's employer."  983 F. Supp. at 70.  <br>It offered the further observation that "by virtue of the <br>assignment, City of Hope could ostensibly become a beneficiary -- <br>i.e. one designated by a participant to become entitled to a <br>benefit under the plan."  Id. at 73 n.7 (emphasis added).  In fact, <br>however, Diaz was neither an employee nor a former employee, and <br>hence she did not meet ERISA's clear definition of "participant."  <br>Therefore, Diaz could not confer beneficiary status on City of <br>Hope, given ERISA's definition of a beneficiary as "a person <br>designated by a participant ... who is or may become entitled to a <br>benefit" under the plan.  See 29 U.S.C.  1002(8).  <br>     The district court did not, however, base its decision on this <br>incorrect characterization of Diaz's status.  Instead, it focused <br>on Diaz's status as a beneficiary of her husband's health care plan <br>and concluded, in conformity with the approach of a number of <br>circuits, that a health care provider, as the assignee of a <br>beneficiary, "acquires derivative standing and is able to sue as a <br>'beneficiary' by standing in the shoes of his assignor."  983 F. <br>Supp. at 73 (citing Misic v. Building Serv. Employees Health and <br>Welfare Trust, 789 F.2d 1374, 1378 (9th Cir. 1986)).  We agree with <br>this approach, which is consistent with our position in Kwatcherthat there is no justification for expansion by the court of the <br>roster of persons eligible to sue under ERISA.  See Kwatcher, 879 <br>F.2d at 965. <br>     The term derivative means "coming from another .... That which <br>has not its own origin in itself, but owes its existence to <br>something foregoing."  Black's Law Dictionary 443 (6th ed. 1990).  <br>It is generally understood that "the assignee acquires rights <br>similar to those of the assignor, and is put in the same position <br>with reference to those rights as that in which the assignor stood <br>at the time of assignment."  3 Samuel Williston & Walter H.E. <br>Jaeger, A Treatise on the Law of Contracts  404, at 5  (3d ed. <br>1960).  If an assignee seeking relief in court stands in the place <br>of an assignor, there has been a substitution rather than an <br>expansion of the parties. <br>     In United States v. Carter, 353 U.S. 210 (1957), the Supreme <br>Court recognized assignee standing under the Miller Act.  The <br>Miller Act protects contractors on federal construction projects <br>"in lieu of the protection they might receive under state <br>statutes."  Id. at 216.  Like ERISA, the Miller Act confines <br>standing to an enumerated class: persons who have "furnished labor <br>or material in the prosecution of the work provided for in such  <br>contract ... and who ha[ve] not been paid in full therefor[.]"  Id.at 215 (citing 40 U.S.C.  270b(a)).  The Supreme Court rejected <br>the argument that the assignees of persons who had "furnished labor <br>or material" lacked standing to sue: <br>     The surety also argues that the trustees are not entitled <br>     to recover the promised contributions under  2(a) of the <br>     Miller Act, since they are [not] persons who have <br>     furnished labor or material ... [A] denial of an <br>     assignee's right to sue on the bond might deprive those <br>     for whom the security was intended of a fair chance to <br>     realize upon their claims by assignment.... <br> <br>     The trustees stand in the shoes of the employees and are <br>     entitled to enforce their rights.   <br> <br>Id.  at 218-20(emphasis added)(footnotes omitted).  In this ERISA <br>context as well, we conclude that Congress did not intend to <br>disturb the common law principles of assignment.  See Pilot Life <br>Ins. Co. v. Dedeaux, 481 U.S. 41, 56 (1987) (discussing Congress' <br>"expectations that a federal common law of rights and obligations <br>under ERISA-regulated plans would develop"); see also 3 Samuel <br>Williston & Walter H.E. Jaeger, A Treatise on the Law of Contracts <br> 446A, at 328 (3d ed. 1960) (explaining that "the assignee has, <br>and has had for more than a century, a legal right ... enforceable <br>in courts of law") (citing Welch v. Mandeville (US) 1 Wheat 233, 4 <br>L. ed. 79 (1816)). <br>     Although the district court recognized the validity of <br>derivative standing under ERISA, it denied City of Hope standing to <br>sue because it found the assignment from Diaz invalid.  This <br>conclusion wrongly conflates two distinct inquiries.  The standing <br>inquiry does not focus on the merits of the dispute.  It focuses <br>only on "whether the litigant is entitled to have the court decide <br>the merits of the dispute."  Warth v. Seldin, 422 U.S. 490, 498 <br>(1975).  Consequently, City of Hope's standing depends on a <br>"colorable claim" that it is an assignee of a beneficiary.  SeeFirestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117 (1989) <br>(refining ERISA's definition of "participant" to include former <br>employees "who have a 'colorable claim' to vested benefits"); see <br>also Kennedy, 924 F.2d at 700 (applying the "colorable claim" <br>standard in the standing context and citing Firestone).  As the <br>assignee of an ERISA beneficiary, City of Hope satisfies the <br>standing requirements of section 1132 and has a right to have the <br>court decide the merits of its claim against HPI.         <br>          c. The Non-Assignment Clause and Public Policy <br>     City of Hope argues that the district court erred in giving <br>effect to the non-assignment clause in Diaz's HMO policy because <br>such a clause is contrary to the public policy advanced by ERISA.  <br>In effect, City of Hope asks us to read into ERISA's allowance for <br>the assignability of ERISA-regulated welfare plan benefits a bar to <br>the contractual non-assignability of such benefits.  Once again, <br>the Supreme Court's reasoning in Mackey is persuasive: "[Congress] <br>had before it a provision to bar the alienation or garnishment of <br>ERISA plan benefits, and chose to impose that limitation only with <br>respect to ERISA pension benefit plans, and not ERISA welfare <br>benefit plans.  In a comprehensive regulatory scheme like ERISA, <br>such omissions are significant ones."  Mackey, 486 U.S. at 837.  By <br>its silence on the assignability of ERISA-regulated welfare plan <br>benefits, "Congress intended not to mandate assignability, but <br>intended instead to allow the free marketplace to work out such <br>competitive, cost effective, medical expense reducing structures as <br>might evolve."  Davidowitz, 946 F.2d at 1481.   <br>     Consistent with the other circuits which have addressed this <br>issue, we hold that ERISA leaves the assignability or non- <br>assignability of health care benefits under ERISA-regulated welfare <br>plans to the negotiations of the contracting parties.   See St. <br>Francis Reg'l Med. Ctr., 49 F.3d at 1464 (enforcing a non- <br>assignment clause in an ERISA-regulated health insurance welfare <br>benefit plan against a health care provider); Arkansas Blue Cross <br>and Blue Shield v. St. Mary's Hosp., 947 F.2d 1341 (8th Cir. 1991), <br>cert. denied, 504 U.S. 957 (1992) (same).  Therefore, we conclude <br>that the non-assignment provision in Diaz's HMO policy is not <br>contrary to public policy.  <br>          d. The Scope of the Non-Assignment Clause <br>     In the alternative, City of Hope argues that even if non- <br>assignment clauses in ERISA-regulated plans are generally <br>enforceable, the district court erred in applying this non- <br>assignment clause to its claim as a health care provider.  Instead, <br>City of Hope argues that the non-assignment clause in Diaz's <br>contract was intended only to preclude her ability to transfer <br>rights to actual medical services to another individual, or to <br>preclude the diversion of benefit funds to an unrelated debt. <br>     One court of appeals has adopted this distinction, finding <br>that a non-assignment clause which read that "[n]o employee shall <br>at any time ... have any right to assign his rights or benefits" <br>did not prohibit the assignment of "causes of action arising after <br>the denial of benefits" as distinguished from "rights or benefits."  <br>See Lutheran Med. Ctr. v. Contractors, Laborers, Teamsters, and <br>Engineers Health and Welfare Plan, 25 F.3d 616, 619 (8th Cir. <br>1994).  We think this approach would strain the plain meaning of <br>the contract language at issue in this case that "[a]ll <br>entitlements of a member to receive covered rights are personal and <br>may not be assigned."  As we have previously stated, <br>"straightforward language in an ERISA-regulated insurance policy <br>should be given its natural meaning."  Hughes v. Boston Mut. Life <br>Ins. Co., 26 F.3d 264, 268 (1st Cir. 1994) (quoting Burnham v.Guardian Life Ins. Co., 873 F.2d 486, 489 (1st Cir. 1989)).  We <br>agree with the district court that under the clear terms of the <br>contract, Diaz could not assign her rights to City of Hope. <br>     2. Equitable Estoppel <br>     Finally, City of Hope claims that HPI is equitably estopped <br>from denying coverage.  In Law v. Ernst & Young, we explained that <br>"the party to be charged [with an estoppel] must 'make [] a <br>definite misrepresentation of fact to another person.'"  Law v. <br>Ernst & Young, 956 F.2d 364, 368 (1st Cir. 1992) (quoting Phelps v. <br>FEMA, 785 F.2d 13 (1st Cir. 1986) and Restatement (Second) of Torts <br> 894(1) (1977)).  In support of its estoppel claim, City of Hope <br>points to a March 23, 1993 fax from an HPI employee to City of Hope <br>that reads: "It is important to remember as I spoke to you a month <br>ago, that (Diaz) has some responsibilities to follow so she can <br>have services coverage."  The fax then made reference to Section VI <br>of Diaz's HMO policy, which included the terms under which health <br>services would be covered.  Given the fact that Diaz's treatment <br>had begun in January 1993, City of Hope argues that this reference <br>in March 1993 to the procedural requirements of the health <br>insurance policy held out the promise of recovery if there was <br>compliance with the procedures.  We agree with the district court <br>that a statement emphasizing the procedural requirements of a <br>health insurance plan is far from the "definite misrepresentation <br>of fact" about a willingness to pay for medical services necessary <br>to establish an estoppel claim.  There is no evidence in the record <br>that HPI ever represented that it would cover City of Hope's costs <br>for Diaz's treatment. <br>     For the foregoing reasons, HPI was entitled to judgment as a <br>matter of law.  The judgment of the district court is AFFIRMED.</pre>

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