Opinion
CIVIL ACTION NO. 3:99-CV-2746-G
May 22, 2001
MEMORANDUM ORDER
This case is before the court on the parties' motions for summary judgment. For the reasons discussed below, the partial summary judgment motion of the plaintiff Dallas County Hospital District d/b/a Parkland Memorial Hospital ("Parkland" or "the plaintiff") is denied; the motion of the defendant and third-party plaintiff Associates' Health and Welfare Plan ("the Plan" or "the defendant") for summary judgment on Parkland's ERISA claim is granted. The plaintiff's state law claims still in this case, see below at 5, are remanded to the state court from which they were previously removed, and decision on the cross-motions for summary judgment of the Plan and of International Rehabilitation Associates, Inc. d/b/a/ Intracorp ("Intracorp") is reserved to the state district judge.
All references to ERISA are to the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq.
I. BACKGROUND Factual Overview
At all times relevant to the case at bar, Leonard P. Scott ("Scott"), a 30-year-old male, was a participant in the Plan, which is an ERISA health and welfare benefit plan within the meaning of 29 U.S.C. § 1101 et seq. See [The Plan's] Appendix in Support of its Motion for Summary Judgment against [Parkland] and its Partial Motion for Summary Judgment against [Intracorp] ("Plan Appendix") at 7; Plaintiff's Second Amended Complaint ("Complaint") ¶ 6. Scott was employed by Wal-Mart Stores, Inc. as a Wal-Mart Associate, and his participation in the Plan was incidental to this employment. See Complaint ¶ 9; Plan Appendix at 7. Intracorp, the third-party defendant, was under contract with Wal-Mart Stores, Inc. to provide a service known as "Pre-Admission Certification/Continued Stay Review." See Exhibit A, attached to [The Plan's] Third Party Complaint.
On April 3, 1998, Scott was admitted to Parkland Memorial Hospital ("Parkland") in Dallas, Texas for emergency treatment of severe burns he had sustained, apparently as a result of either falling, walking, or running into a bonfire. See Joint Appendix at 0225, 229-30. At 11 a.m. on April 3 — approximately six hours after he was injured — a blood test performed at Parkland revealed that Scott had a blood alcohol concentration of 106 mg/dl. See Joint Appendix at 103, 224, 229, 328. Scott remained hospitalized at Parkland from April 3 until his death nearly three weeks later on April 21, 1998. During the course of Scott's treatment, Parkland rendered medical services to him valued at $151,522.12. See [Parkland's] Supplemental Appendix to Plaintiff's Motion for Partial Summary Judgment at 2. On at least six occasions between April 6 and April 22, 1998, representatives of Intracorp, a/k/a "Wal-Mart Action Center" or "Wal-Mart Medical Action,"[ provided Deanna Straube Hogue ("Hogue"), a utilization management nurse at Parkland, with verbal authorization for Scott's treatment at Parkland. See id. at 0557-0559. Intracorp and the Plan learned sometime before Scott's death on April 21 that he had been intoxicated at the time of his accident. See, e.g., [Parkland's] Supplemental Appendix to Plaintiff's Response to Motion for Summary Judgment ("Parkland's Supplemental Appendix") at 002-003 (Hogue's sworn affidavit testimony that she advised Wal-Mart Medical Action on April 6, 1998 of the circumstances surrounding Scott's injury, and that Scott had allegedly suffered significant burns while "drinking" with friends); Joint Appendix at 1375 (reference to "drinking" in April 15, 1998 entry of Intracorp's Patient Summary Sheet); 394 (reference to Scott having "WALKED THRU FLAMES WHILE DRINKING W/FRIENDS" in April 17, 1998 entry of Plan records). However, neither Intracorp nor the Plan advised Parkland of a provision in the Plan which excluded coverage of "[c]harges that were a result of the participant being under the influence of alcohol or drugs. . . ." Joint Appendix at 0016.
Intracorp employees answered calls pertaining to Plan participants as "Wal-Mart Action Center." Joint Appendix at 1263. Deanna Straube Hogue, a utilization management nurse at Parkland, testified — and her notes reflect — that she spoke telephonically several times with "Wal-Mart Medical Action." [Parkland's] Supplemental Appendix to Plaintiff's Response to Motion for Summary Judgment at 002-003; Joint Appendix at 0557-0559.
Sometime shortly after Scott's death, Parkland billed the Plan for the costs it had incurred in treating him. See Defendant/Third-Party Plaintiff Associates' Health and Welfare Plan's Brief in Support of Its Motion for Summary Judgment ("Plan's Summary Judgment Brief") at 5; Complaint ¶ 12. However, in early June 1998, citing the Plan's "Under the Influence" coverage exclusion, the Plan notified both Parkland and Scott of the denial of these claims. See Joint Appendix at 0397-0398, 0457-0458. Pursuant to the provisions of the medical benefits policy of the Plan, Stuart L. Whitaker, a representative of Scott's estate, timely appealed the Plan's decision to deny benefits. See Joint Appendix at 0073-0074. The Plan's Administrative Committee denied this appeal on October 7, 1998. See Joint Appendix at 0335. Parkland also filed a purported appeal of the denial of the claims for medical expenses, but the Plan advised Parkland's counsel by telephone that the Plan did not accept appeals from medical providers. See Joint Appendix at 0394. The Plan also denied Parkland's purported "final appeal" of September 28, 1999. See Joint Appendix at 0066-0070.
Procedural History
Parkland filed suit against the Plan in the 44th Judicial District Court, Dallas County, Texas on October 28, 1999. See Plaintiff's Original Petition, attached as Exhibit A to Defendant's First Amended Notice of Removal of Action Pursuant to 28 U.S.C. § 1441 ("Notice of Removal"). The Plan timely removed this action on December 9, 1999. See Notice of Removal at 1. On March 15, 2000, the court entered an order granting and denying in part the Plan's motion to dismiss Parkland's claims pursuant to F.R. CIV. P. 12(b)(6).
The following causes of action now remain in Parkland's suit against the Plan:
(1) violation of the Texas Insurance Code for misrepresentation of coverage;
(2) misrepresentation and/or negligent misrepresentation under the common law of Texas; and (3) breach of insurance plan provisions under ERISA, 29 U.S.C. § 1132 et seq. See Memorandum Order (Mar. 15, 2000); Complaint ¶¶ 18-48. On July 24, 2000, the Plan filed a third-party complaint against Intracorp, alleging that Intracorp is liable to the Plan for (1) indemnity, under both contract and the common law; (2) contribution; and (3) breach of contract. See [The Plan's] Third Party Complaint ¶¶ 7-9.01.
Intracorp filed its motion for summary judgment on the Plan's claims against Intracorp on February 6, 2001. See Intracorp's Motion for Summary Judgment Against the Plan at 1. On February 8, 2001, the Plan filed a motion for summary judgment on all of Parkland's claims, and a motion for partial summary judgment on its indemnification cause of action against Intracorp. See [The Plan's] Motion for Summary Judgment Against [Parkland] and its Partial Motion for Summary Judgment Against [Intracorp] at 1. Finally, on February 9, 2001, Parkland moved for partial summary judgment on its ERISA claims against the Plan. See [Parkland's] Motion for Partial Summary Judgment at 1.
II. ANALYSIS A. Evidentiary Burdens on Motion for Summary Judgment
Summary judgment is proper when the pleadings and evidence on file show that no genuine issue exists as to any material fact and that the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c). "[T]he substantive law will identify which facts are material." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. A movant for summary judgment makes such a showing by informing the court of the basis of its motion and by identifying the portions of the record which reveal there are no genuine material fact issues. Celotex Corporation v. Catrett, 477 U.S. 317, 323 (1986). The pleadings, depositions, admissions, and affidavits, if any, must demonstrate that no genuine issue of material facts exists. FED. R. CIV. P. 56(c).
The disposition of a case through summary judgment "reinforces the purpose of the Rules, to achieve the just, speedy, and inexpensive determination of actions, and, when appropriate, affords a merciful end to litigation that would otherwise be lengthy and expensive." Fontenot v. Upjohn Company, 780 F.2d 1190, 1197 (5th Cir. 1986).
Once the movant makes this showing, the nonmovant must then direct the court's attention to evidence in the record sufficient to establish that there is a genuine issue of material fact for trial. See Celotex, 477 U.S. at 323-24. To carry this burden, the "opponent must do more than simply show . . . some metaphysical doubt as to the material facts." Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corporation, 475 U.S. 574, 586 (1986). Instead, the nonmovant must show that the evidence is sufficient to support a resolution of the factual issue in his favor. See Anderson, 477 U.S at 249.
While all of the evidence must be viewed in a light most favorable to the motion's opponent, see Anderson, 477 U.S. at 255 (citing Adickes v. S.H. Kress Company, 398 U.S. 144, 158-59 (1970)), neither conclusory allegations nor unsubstantiated assertions will satisfy the opponent's summary judgment burden. See Little v. Liquid Air Corporation, 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc); Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.), cert. denied, 506 U.S. 825 (1992). Summary judgment is proper if, after adequate time for discovery, the motion's opponent fails to establish the existence of an element essential to its case and as to which it will bear the burden of proof at trial. See Celotex, 477 U.S. at 322-23.
B. Parkland's ERISA Claim The Effect of the Anti-Assignment Provision
Under ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), only a "participant" in a Plan or a "beneficiary" may sue to collect benefits owing under the Plan. However, in Hermann Hospital v. MEBA Medical Benefits Plan, 845 F.2d 1286, 1289-90 (5th Cir. 1988) ("Hermann I"), the Fifth Circuit held that assignees have standing to sue, provided the assignment of benefits is authorized under both ERISA and the contract. In the case at bar, Parkland alleges that an express assignment of medical benefits it received from Mildred Scott on January 14, 2000 gives Parkland standing to bring this ERISA action challenging the Plan's denial of Scott's claims. See Complaint ¶ 17, and Exhibit G, attached to Complaint. The Plan responds that Parkland lacks standing because, pursuant to an anti-assignment clause in the Plan's 1998 Summary Plan Description, assignments of claims for benefits are not valid. See Plan's Summary Judgment Brief at 16-25.
The Fifth Circuit and other courts have expressed serious reservations about the use of anti-assignment provisions in ERISA health plans. After remanding Hermann I for a determination of whether the plaintiff hospital was an assignee, the Fifth Circuit in Hermann Hospital v. MEBA Medical Benefits Plan, 959 F.2d 569, 574-75 (5th Cir. 1992) ("Hermann II"), held that the defendant was estopped to raise as a defense the plan's anti-assignment clause because of its three-year delay in raising the issue. The clause at issue provided that:
"No employee, dependent or beneficiary shall have the right to assign, alienate, transfer, sell, hypothecate, mortgage, encumber, pledge, commute, or anticipate any benefit payment hereunder, and any such payment shall not be subject to any legal process to levy execution upon or attachment or garnishment proceedings against for the payment of any claims."Id. at 573. The court then interpreted the anti-assignment clause as "applying only to unrelated, third-party assignees — other than a health care provider of assigned benefits." Id. at 575. To conclude otherwise, the court reasoned, would force the health care provider to wait until the patient's surviving husband sued the plan and then bring suit against him. Because the husband, knowing that any recovery would only be passed on to the health care provider, would lack incentive to bring suit, the "result would be inequitable." Id; see also Lutheran Medical Center of Omaha, Nebraska v. Contractors, Laborers, Teamsters and Engineers Health and Welfare Plan, 25 F.3d 616, 619-20 (8th Cir. 1994) (interpreting an anti-assignment provision and noting, among other things, that "if we declared the assignment invalid and held that [the hospital and treating physician] had no standing to bring this action the claim would revert back to the [patient and her husband], and after delay and expense to the litigants, would again be presented for decision"); Protocare of Metropolitan N.Y., Inc. v. Mutual Association Administrators, Inc., 866 F. Supp. 757, 761-62 (S.D.N.Y. 1994) (concluding that, notwithstanding an anti-assignment clause to the contrary, medical provider had standing to bring suit as a "beneficiary," and opining that "[t]o bar assignments completely, especially in a reimbursement plan, would prevent plan members with limited finances from receiving medical care.").
The public policy concerns cogently articulated by the Fifth Circuit in Hermann I create an additional basis for questioning the validity of anti-assignment provisions which bar the assignment of ERISA health plan benefits to health care providers. As the court observed,
To deny standing to health care providers as assignees of beneficiaries of ERISA plans might undermine Congress' goal of enhancing employees' health and welfare benefit coverage. Many providers seek assignments of benefits to avoid billing the beneficiary directly and upsetting his finances and to reduce the risk of non-payment. If their status as assignees does not entitle them to federal standing against the plan, providers would either have to rely on the beneficiary to maintain an ERISA suit, or they would have to sue the beneficiary. Either alternative, indirect and uncertain as they are, would discourage providers from becoming assignees and possibly from helping beneficiaries who were unable to pay them "up-front." The providers are better situated and financed to pursue an action for benefits owed for their services. Allowing assignees of beneficiaries to sue under § 1132(a) comports with the principle of subrogation generally applied in the law.Hermann Hospital v. MEBA Medical Benefits Plan, 845 F.2d 1286, 1289-90 n. 13 (5th Cir. 1988) (citation omitted); see also Misic v. Building Service Employees Health and Welfare Trust, 789 F.2d 1374, 1377 (9th Cir. 1986) (noting that the assignment of trust monies to health care providers "results in precisely the benefit the trust is designed to provide and the statute [ERISA] is designed to protect.").
Hermann II stopped short, however, of holding that anti-assignment clauses which bar the assignment of ERISA health plan benefits to medical providers are invalid. Rather than deciding that question, the Fifth Circuit interpreted the anti-assignment provision at issue in the case as not, by its express terms, applying to medical providers of assigned benefits. See Hermann II, 959 F.2d at 575 (noting that "[t]he typical `spendthrift' language of the clause is clearly intended to prevent either voluntary or involuntary assignment of payments under the Plan to those creditors of the participant or beneficiary of the Plan which have no relationship to the providing of covered benefits."). The anti-assignment clause at issue in the instant case, unlike that in Hermann II, explicitly applies to medical providers of assigned ERISA benefits. It provides that:
Medical coverage benefits of [the] Plan may not be assigned, transferred or in any way made over to another party by a participant. Nothing contained in the written description of Wal-Mart medical coverage shall be construed to make the Plan or Wal-Mart Stores, Inc. liable to any third party to whom a participant may be liable for medical care, treatment, or services.
Joint Appendix at 0017. This court must therefore determine the validity of a provision which bars the assignment of ERISA medical benefits to providers of "medical care, treatment, or services," id., and which also prohibits such providers from suing to collect such benefits in the event a claim is denied.
In Pilot Life Insurance Company v. Dedeaux, 481 U.S. 41, 56 (1987) (superseded by statute on other grounds), the Supreme Court directed that where, as here, ERISA is silent on an issue of employee benefits law, courts should develop a "federal common law of rights and obligations." In doing so, courts should be guided by the underlying objectives and policies of ERISA. See id. at 51-52. The Ninth and Tenth Circuits — apparently the only Courts of Appeals to have directly considered the validity of anti-assignment provisions such as the one at issue here — have concluded that such provisions do not contravene the public policies and congressional intent underlying ERISA. In Davidowitz v. Delta Dental Plan of California, Inc., 946 F.2d 1476 (9th Cir. 1991), for example, the Ninth Circuit reasoned as follows:
While the beneficiary's right to assign when the plan is silent furthers ERISA policies, the absolute right to assign, notwithstanding a contract anti-assignment clause, does not necessarily further these policies. As discussed above, [the health care plan] cites ERISA policies that are benefited by its co-payment non-assignment structure, including promotion of consumer cost-sensitivity to hold down medical costs. This Court is unwilling to say that the underlying ERISA policies benefited by assignments outweigh the benefits promoted by [the health care plan's] co-payment non-assignment structure.
Any construction of ERISA by this Court must be consistent with Congressional intent. Even if it could be said that required assignability promotes certain ERISA policies, this Court would not create a construction requiring assignability in the face of Congressional silence on the issue. . . . [I]f Congress had intended this result, it could have said so.Id. at 1480 (citation omitted); see also St. Francis Regional Medical Center v. Blue Cross and Blue Shield of Kansas, Inc., 49 F.3d 1460, 1464 (10th Cir. 1995) (interpreting ERISA as leaving the assignability of benefits to the free negotiation and agreement of the contracting parties). Absent any controlling Fifth Circuit authority, this court follows the holdings of the Ninth and Tenth Circuits, albeit with some reluctance. In conformity with these holdings, the court concludes that the assignment of Scott's medical benefits to Parkland by his mother is invalid.
The court notes that, as a result of following these holdings, Parkland's ERISA claim will revert back to Scott's heirs and may, "after delay and expense to the litigants, . . . again be presented for decision." Lutheran Medical Center of Omaha, Nebraska v. Contractors, Laborers, Teamsters and Engineers Health and Welfare Plan, 25 F.3d 616, 619 (8th Cir. 1994).
Parkland alternatively maintains that, even without a valid assignment of medical benefits, it has derivative standing, as an intended assignee and plan beneficiary, to assert ERISA claims against the Plan. See Parkland's Response Brief at 14-16. However, the plaintiff has not cited — and the court has not independently discovered — any cases which support this position. The court therefore declines to adopt Parkland's alternative standing theory, and concludes that Parkland lacks standing to sue the Plan for any medical benefits to which Scott may have been entitled under his ERISA plan. Accordingly, the Plan is entitled to summary judgment on Parkland's ERISA cause of action.
C. The Remaining State Law Claims
Federal court jurisdiction exists over an entire action, including state law claims, when the federal and state law claims "`derive from a common nucleus of operative fact' and are `such that [a plaintiff] would ordinarily be expected to try them all in one judicial proceeding.'" Carnegie-Mellon University v. Cohill, 484 U.S. 343, 349 (1988) (quoting United Mine Workers of America v. Gibbs, 383 U.S. 715, 725 (1966)). Yet supplemental jurisdiction is a "doctrine of discretion, not of plaintiffs right." Gibbs, 383 U.S. at 726. Consequently, "a federal court should consider and weigh in each case, and at every stage of the litigation, the values of judicial economy, convenience, fairness, and comity in order to decide whether to exercise jurisdiction over a case brought in that court involving pendent state-law claims." Carnegie-Mellon, 484 U.S. at 350.
When the federal claims are dismissed before trial and only state law claims remain, the balance of factors to be considered under the supplemental jurisdiction doctrine weigh heavily in favor declining jurisdiction; therefore, the federal court should usually decline the exercise of jurisdiction over the remaining claims and remand the case to state court. Id. at n. 7. According to the Fifth Circuit, "[o]ur general rule is to dismiss state claims when the federal claims to which they are pendent are dismissed." Parker Parsley Petroleum Co. v. Dresser Industries, 972 F.2d 580, 585 (5th Cir. 1992) (citing Wong v. Stripling, 881 F.2d 200, 204 (5th Cir. 1989)).
In the present case, the sole federal claim has been eliminated and only state law claims remain. Because the federal claim was dismissed before trial, the factors of judicial economy, convenience, fairness, and comity suggest that this court ought to decline jurisdiction over the remaining state law claims and remand the case to state court. See 28 U.S.C. § 1367(c)(3).
III. CONCLUSION
For the foregoing reasons, Parkland's motion for partial summary judgment is DENIED, and the Plan's motion for summary judgment on Parkland's ERISA claim is GRANTED. Parkland's state law causes of action (remaining after the memorandum order of March 15, 2000) are REMANDED to the state court from which they were previously removed, and decision on the Plan's and Intracorp's cross-motions for summary judgment is reserved to the state district judge. The clerk shall mail a certified copy of this order to the district clerk of Dallas County, Texas. 28 U.S.C. § 1447(c).
SO ORDERED.