Court Opinion

ID: 6103671
Source: CourtListenerOpinion
Date Created: 2022-01-14 18:01:09.297944+00
Date Added: 2024-06-11T08:53:39.513284
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

BRISTOL SL HOLDINGS, INC., a               No. 20-56122
California corporation, in its capacity
as the owner of the claims for Sure            D.C. No.
Haven, Inc., a California corporation,     8:19-cv-00709-
                  Plaintiff-Appellant,        PSG-ADS

                  v.
                                             OPINION
CIGNA HEALTH AND LIFE INSURANCE
COMPANY, a Connecticut
corporation; CIGNA BEHAVIORAL
HEALTH, INC., a Connecticut
corporation,
               Defendants-Appellees.

     Appeal from the United States District Court
          for the Central District of California
   Philip S. Gutierrez, Chief District Judge, Presiding

        Argued and Submitted October 20, 2021
                 Pasadena, California

                  Filed January 14, 2022

   Before: Andrew J. Kleinfeld, Ryan D. Nelson, and
         Lawrence J. VanDyke, Circuit Judges.

               Opinion by Judge VanDyke
2     BRISTOL SL HOLDINGS V. CIGNA HEALTH & LIFE

                          SUMMARY *

                              ERISA

     The panel reversed the district court’s judgment in favor
of Cigna Health and Life Insurance Company in an ERISA
action brought by Bristol SL Holdings, Inc., and remanded.

    Through a bankruptcy proceeding, Bristol became the
successor-in-interest to Sure Haven, which serviced patients
insured by Cigna. Bristol alleged that Cigna violated ERISA
and state law by denying Sure Haven’s claims for
reimbursement for services provided. The district court
dismissed Bristol’s ERISA claim, as an assignee of a
healthcare provider, for lack of derivative standing, or lack
of authority to bring a claim under ERISA.

    The panel held that, under ERISA, a non-participant
health provider cannot bring claims for benefits on its own
behalf, but must do so derivatively, relying on its patients’
assignments of their benefits claims. Agreeing with other
circuits, the panel held that other assignees also may have
derivative standing if extending standing would align with
the goal of ERISA. The panel distinguished Simon v. Value
Behav. Health, Inc., which denied derivative standing to a
lawyer who had acquired over 600 benefit claims assigned
to him by numerous mental-health facilities, which in turn
had been assigned those claims by hundreds of patients,
because expanding derivative standing to such a person
would be tantamount to transforming health benefit claims
into a freely tradable commodity. The panel concluded that
    *
      This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
     BRISTOL SL HOLDINGS V. CIGNA HEALTH & LIFE          3

many of the concerns about commodifying health benefit
claims, prevalent throughout Simon, were absent here. In
addition, refusing to allow derivative standing for Bristol
would create serious perverse incentives that would
undermine the goal of ERISA. The panel held that the first
assignee as a successor-in-interest through bankruptcy
proceedings who owns all of one healthcare provider’s
health benefit claims has derivative standing under ERISA.

   The panel addressed other claims in a separate
memorandum disposition filed simultaneously with this
opinion.

                       COUNSEL

Dorothy F. Easley (argued), Easley Appellate Practice
PLLC, Miami, Florida; Matt Lavin and Aaron Modiano,
Arnall Golden Gregory LLP, Washington, D.C.; John W.
Tower, Law Office of John W. Tower, Encinitas, California;
for Plaintiff-Appellant.

William P. Donovan Jr. (argued), McDermott Will & Emery
LLP, Los Angeles, California, for Defendants-Appellees.
4    BRISTOL SL HOLDINGS V. CIGNA HEALTH & LIFE

                         OPINION

VANDYKE, Circuit Judge:

                   I. INTRODUCTION

    At issue is a dispute between a healthcare treatment
center (Sure Haven, and Bristol as its assignee) and an
insurance company (Cigna) over approximately $8.6 million
worth of services that Sure Haven provided to Cigna’s
insureds. The crux of the disagreement is whether Sure
Haven entered into an enforceable agreement with Cigna to
treat patients covered by Cigna through a series of
“verification” and “authorization” phone calls that Sure
Haven claims it relied on in providing the medical services.

                   II. BACKGROUND

A. Factual Background

    Sure Haven was an accredited mental-health and
substance-abuse treatment center that regularly serviced
patients insured by Cigna. According to Bristol, Sure Haven
went out of business and was forced into bankruptcy when
Cigna abruptly stopped reimbursing for services provided,
ultimately refusing to pay Sure Haven for services it
rendered to 106 Cigna-insured patients. Bristol became the
successor-in-interest to Sure Haven through a bankruptcy
proceeding.

    Sure Haven was an out-of-network provider for Cigna,
which meant that the two parties did not have a standing
contract governing medical rates and coverage. Sure Haven
would therefore regularly call Cigna to verify coverage and
get approval for various services before performing
treatment. This process included at least one verification call
     BRISTOL SL HOLDINGS V. CIGNA HEALTH & LIFE               5

and authorization call per covered patient. The verification
call served to ensure at the outset that the patient’s insurance
was active and included out-of-network services. Once
verified, Sure Haven would make authorization calls before
providing specific services to the patients to ensure that
Cigna would approve the service. During the period at issue
here, Sure Haven made 106 verification calls (one for each
patient) and 706 authorization calls to Cigna.

    The parties heavily dispute what these calls included and
established. According to Bristol, Sure Haven’s verification
calls with Cigna included establishing a percentage
reimbursement of the “usual, customary, and reasonable
rate” (UCR), which means the percentage of costs that Cigna
would cover for a given patient’s services. Cigna would give
varying percentages of UCR for each of the 106 patients.
After the UCR percentage was established, Sure Haven
would make follow-up authorization calls to Cigna for pre-
approval of specific services. When Cigna permitted a
service, it would give a “unique ‘authorization number’” to
confirm prior approval when Sure Haven billed for that
provided service. The parties continued this practice for
almost a year, with Sure Haven providing reimbursable
services worth over $8.6 million to Cigna insured patients,
which Cigna stopped reimbursing. Bristol alleges that Cigna
continued authorizing treatment during this time despite
deciding internally not to pay these claims.

    Cigna tells a different story. According to Cigna, the
verification calls established only that the insured had out-
of-network benefits and other related information (e.g.,
deductibles, out-of-pocket maximums, etc.). For out-of-
network providers, payment could not be determined until
after the claim was received, reviewed, and justified. And
contrary to Bristol’s claims, nowhere in this process were
6    BRISTOL SL HOLDINGS V. CIGNA HEALTH & LIFE

UCRs discussed, nor did any Cigna representative promise
to pay a percentage of the UCR. Moreover, Cigna claims
that nearly all the verification and authorization calls were
automatically routed to hear certain disclaimers before any
subsequent conversation. For the authorization calls, Cigna
insists the following would play:

       Please be aware, pre-approval is not a
       guarantee of coverage.           Coverage and
       covered services are contingent upon the
       patient’s eligibility on the date(s) services are
       rendered and the patient’s covered services
       plans and policies. Coverage and covered
       services also may be dependent on your
       CIGNA HealthCare network participation. If
       you are not a participating provider in the
       plan’s network, out-of-network covered
       services may apply.

A similar warning that the information given in a verification
call “does not guarantee coverage or payment” also played
automatically.

    Regarding the stoppage of payments, Cigna maintains
that it began denying all of Bristol’s claims because Sure
Haven was violating the benefit plan’s requirement by not
collecting the portion of the payment due from the members
themselves in addition to collecting the portion due from
Cigna. After it purchased all Sure Haven’s claims against
Cigna in Sure Haven’s bankruptcy proceeding, Bristol sued
Cigna as Sure Haven’s assignee.

B. Procedural History

   The litigation below progressed over a series of amended
complaints by Bristol, with the district court eventually
        BRISTOL SL HOLDINGS V. CIGNA HEALTH & LIFE                         7

ruling for Cigna on all claims. Bristol’s first complaint was
filed in April of 2019, and asserted twelve causes of action,
which Cigna moved to dismiss. The court ruled for Cigna,
and granted Bristol leave to amend. In October of 2019,
Bristol filed its first amended complaint, which added an
Employee Retirement Income Security Act of 1974 (ERISA)
claim and had ten state law claims. Most relevant for our
purposes here was the district court’s dismissal of the ERISA
claim with prejudice. The district court ruled that Bristol
lacked standing to bring a claim under ERISA because
neither ERISA’s text nor this circuit’s case law granted
standing to an assignee of a healthcare provider. 1

     After further evidentiary and merits proceedings in the
litigation that are not relevant here, Cigna eventually moved
for summary judgment on the remaining claims in Bristol’s
second amended complaint, which the district court granted.
With final judgment rendered, Bristol brought this appeal. 2

    1
       While the district court ruling and much of our circuit’s case law
refers to this as a question of standing, it is arguably better understood as
a question of whether ERISA authorizes a cause of action for the party.
See DB Healthcare, LLC v. Blue Cross Blue Shield of Ariz., Inc.,
852 F.3d 868, 873–74 (9th Cir. 2017) (explaining the distinction).
    2
      In addition to derivative standing under ERISA, Bristol appeals
numerous other claims raised below. Those claims are addressed in a
separate memorandum disposition filed simultaneously with this
opinion. That disposition reverses the district court’s summary judgment
ruling for Cigna on Bristol’s breach of contract and promissory estoppel
claims, and affirms the district court’s dismissal of Bristol’s fraudulent
inducement claim and its denial of Bristol’s motion for leave to amend
the complaint.
8       BRISTOL SL HOLDINGS V. CIGNA HEALTH & LIFE

                         III. ANALYSIS

    We have jurisdiction under 28 U.S.C. § 1291, and we
review de novo the district court’s dismissal for failure to
state a claim. See DB Healthcare, LLC v. Blue Cross Blue
Shield of Ariz., Inc., 852 F.3d 868, 873 n.5 (9th Cir. 2017).

    The text of ERISA authorizes “a participant or
beneficiary” of an ERISA plan to bring a civil action. 3 See
29 U.S.C. § 1132(a)(1)(B). Circuit case law has made clear
that healthcare providers are not “beneficiaries” within the
meaning of ERISA. See DB Healthcare, LLC, 852 F.3d at
874. Therefore, “a non-participant health care provider . . .
cannot bring claims for benefits on its own behalf. It must
do so derivatively, relying on its patients’ assignments of
their benefits claims.” Spinedex Physical Therapy USA Inc.
v. United Healthcare of Ariz., Inc., 770 F.3d 1282, 1289 (9th
Cir. 2014).

    It is well-established that assignees are generally allowed
to bring suit on behalf of the assignor. See Sprint Commc’ns
Co., L.P. v. APCC Servs., 554 U.S. 269, 275 (2008)
(“[H]istory and precedent are clear on the question before
us: Assignees of a claim, including assignees for collection,
have long been permitted to bring suit.”). This general
principle extends into the ERISA context. See Misic v. Bldg.
Serv. Emps. Health & Welfare Tr., 789 F.2d 1374, 1378 (9th
Cir. 1986); Spinedex, 770 F.3d at 1288.

    But there are certain limits to such derivative standing
for assignees bringing ERISA claims. Most prominently,

    3
      ERISA also allows the Secretary of Labor, a State, or employer to
bring a civil action under certain circumstances not relevant here. See
29 U.S.C. § 1132(a).
     BRISTOL SL HOLDINGS V. CIGNA HEALTH & LIFE           9

our circuit denied derivative standing to Stephen Simon, a
lawyer who had acquired over 600 benefit claims assigned
to him by numerous mental-health facilities, who in turn had
been assigned those claims by hundreds of patients. See
Simon v. Value Behav. Health, Inc., 208 F.3d 1073, 1080
(9th Cir. 2000), amended by 234 F.3d 428 (9th Cir. 2000),
and overruled on other grounds by Odom v. Microsoft Corp.,
486 F.3d 541 (9th Cir. 2007). The panel in Simon explained
that we had previously only extended derivative standing to
“health care providers to whom beneficiaries had assigned
their benefit claims after receiving medical care from such
providers.” Id. at 1081. Granting standing to these
healthcare providers furthered the congressional purposes
behind ERISA because it enhanced the efficiency and ease
of billing among all the interested parties. See id.

    But the Simon panel worried that expanding derivative
standing to someone like Simon would

       be tantamount to transforming health benefit
       claims into a freely tradable commodity. It
       could lead to endless reassignment of claims,
       and it would allow third parties with no
       relationship to the beneficiary to acquire
       claims solely for the purpose of litigating
       them.

Id. Presented with the request to extend standing to Simon,
the court concluded, “[w]e do not see how such a result
would further ERISA’s purpose.” Id.

    Looking beyond the nuanced rationale given in Simon
for refusing to extend derivative standing in that case, the
district court here read Simon to stand for the general
proposition that “[t]he Ninth Circuit has declined to extend
this derivative standing to assignees of health care
10   BRISTOL SL HOLDINGS V. CIGNA HEALTH & LIFE

providers”—period. Because Bristol is “an assignee of the
health care provider,” the district court concluded that it
lacked derivative standing.

    But a closer reading of the case law shows that much of
the reasoning applied to Simon is inapplicable to Bristol.
First, Simon was an attorney who aggregated hundreds of
unrelated claims from numerous different health facilities,
akin to a bill-collector. See id. at 1080. Here, Bristol is the
successor-in-interest to Sure Haven through bankruptcy
proceedings and is only bringing claims that belonged to one
health care provider (Sure Haven), which were all denied for
the same reason. Second, Simon filed lawsuits across the
nation against approximately 1,600 defendants, many of
which were blatantly defective. See id.; Gables Ins.
Recovery, Inc. v. Blue Cross & Blue Shield of Fla., Inc.,
813 F.3d 1333, 1339–40 (11th Cir. 2015) (collecting
examples of Simon’s litigation). Bristol’s claims are much
more focused and specific. Third, Simon had no relationship
to the ultimate beneficiaries, and acquired these claims for
the sole purpose of litigation. Bristol, on the other hand, is
the bankruptcy successor-in-interest to Sure Haven.
Together, these considerations demonstrate that many of the
concerns about commodifying health benefit claims—which
were prevalent throughout Simon—are absent here.

    Moreover, Bristol’s claim to bring a cause of action
under ERISA already fits comfortably within our circuit’s
existing case law. When evaluating causes of action under
ERISA, our court has examined whether extending standing
would align with the “general goal of ERISA.” Misic, 789
F.2d at 1377. Refusing to allow derivative standing in this
unique circumstance would create serious perverse
incentives that would undermine the goal of ERISA.
Without the type of derivative standing claimed by Bristol in
     BRISTOL SL HOLDINGS V. CIGNA HEALTH & LIFE            11

this case, Cigna could force healthcare providers like Sure
Haven into bankruptcy, thereby ensuring that it would likely
never have to pay for the services it authorized. Against such
a harsh legal backdrop, future providers like Sure Haven
would be forced to require patients to foot the entire bill up
front (which many would be unable to do), and then make
those patients seek reimbursement from the insurer for its
share. Our court has already recognized this concern when
it allowed derivative standing for healthcare providers.
“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.” Misic, 789 F.2d at 1377.

    This conclusion also finds support in other circuits, many
of which have extended derivative standing in similar
circumstances—where the Simon concerns were less
manifest. See, e.g., Brown v. Sikora & Assocs., Inc.,
311 Fed. App’x 568, 570 (4th Cir. 2008) (unpublished)
(collecting cases) (“[O]ur sister circuits have consistently
recognized [derivative] standing when based on the valid
assignment of ERISA health and welfare benefits by
participants and beneficiaries.”). For example, the Eleventh
Circuit extended derivative standing to an assignee of a
medical provider after explicitly distinguishing that case
from Simon. See Gables, 813 F.3d at 1340. The Fifth Circuit
similarly granted standing to an assignee of a health plan
provider. See Tango Transp. v. Healthcare Fin. Servs. LLC,
322 F.3d 888, 889 (5th Cir. 2003).

   Both the Eleventh and Fifth Circuit cases are consistent
with Simon’s rationale. As discussed above, our court in
Simon distinguished derivative standing for healthcare
12   BRISTOL SL HOLDINGS V. CIGNA HEALTH & LIFE

providers because doing so furthered ERISA’s purpose,
while derivative standing for an attorney aggregating wholly
unrelated claims frustrated ERISA’s purpose. The Fifth
Circuit—echoing our court in Misic—explained at length
how derivative standing for assignees of healthcare
providers in a context like this furthers the purpose of
ERISA, stating:

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

Tango, 322 F.3d at 894 (internal quotation marks and
citations omitted).

    Admittedly, some of the other circuits’ cases can be read
as extending derivative standing beyond what our court in
Misic and Simon may have anticipated. But it is clear the
     BRISTOL SL HOLDINGS V. CIGNA HEALTH & LIFE             13

district court overextended Simon’s holding to reject
derivative standing for any and every assignee other than a
health care provider, no matter how differently situated that
assignee may be from Simon himself. Therefore we
conclude, similar to what other circuits have done, that
Bristol has derivative standing under the facts of this case.
In holding that Bristol has derivative standing under ERISA
here, we need not decide every possible variation under
which an assignee would (or would not) have an ERISA
cause of action. See Tango, 322 F.3d at 894; Gables,
813 F.3d at 1340. Our ruling today is a modest one: We hold
only that the first assignee as a successor-in-interest through
bankruptcy proceedings who owns all of one healthcare
provider’s health benefit claims has derivative standing.
Granting Bristol standing here is consistent with Misic, is not
inconsistent with Simon, and furthers the purpose of ERISA.

                    IV. CONCLUSION

    For the reasons stated herein, we hold that Bristol is
entitled to derivative standing under ERISA. Therefore, the
district court’s ruling on the matter is REVERSED and
REMANDED for further proceedings consistent with this
opinion.