IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
__________________________
No. 01-10988
__________________________
DALLAS COUNTY HOSPITAL DISTRICT, doing business as Parkland
Memorial Hospital,
Plaintiff-Appellant,
versus
ASSOCIATES’ HEALTH AND WELFARE PLAN,
Defendant-Appellee.
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Appeal from the United States District Court
for the Northern District of Texas
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June 19, 2002
Before DUHÉ, DeMOSS and CLEMENT, Circuit Judges.
CLEMENT, Circuit Judge:
Dallas County Hospital District d/b/a Parkland Memorial
Hospital (the “Hospital”) appeals from the district court’s summary
dismissal of its ERISA claim for lack of standing. We agree with
the district court that the Hospital lacks independent standing as
a beneficiary, but we find that the Hospital has sufficiently shown
that it may have standing derivatively as an assignee of a
beneficiary. Accordingly, we affirm in part, reverse in part, and
remand for further proceedings consistent with this opinion.
I. FACTS AND PROCEEDINGS
On April 3, 1998, Leonard P. Scott was admitted to the
Hospital for emergency treatment of severe burns Scott sustained
after falling or walking into a bonfire. He remained hospitalized
until his death on April 21, 1998. During that time, the Hospital
rendered medical services and provided goods to Scott valued at
$151,522.12.
At all relevant times, Scott was a participant in the
Associates’ Health and Welfare Plan (the “Plan”), an employee
welfare benefit plan within the meaning of the Employee Retirement
Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq. Several
times during Scott’s stay at the Hospital, Hospital representatives
contacted Wal-Mart Stores, Inc. (“Wal-Mart”), Scott’s employer and
the sponsor of the Plan, through its authorized representative,
International Rehabilitation Associates, Inc. d/b/a Intracorp
(“Intracorp”), to request approval for the hospitalization and to
report on Scott’s condition. During these interactions, the
Hospital informed Plan representatives that Scott had been drinking
at the time of his accident. Through Intracorp, the Plan certified
to the Hospital that Scott’s treatment and hospitalization were
medically necessary, although at no time did the Plan guarantee
payment of benefits.
After Scott’s death, the Hospital billed the Plan for the
services rendered and goods furnished to Scott. In June 1998, the
Plan notified Scott’s mother and the Hospital that the claim for
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benefits had been denied, citing a Plan provision excluding
benefits for “charges for any treatment or service that was the
result of the participant being under the influence of alcohol or
drugs.” Both Scott’s representative and the Hospital appealed the
Plan’s denial of benefits pursuant to Plan procedure, but their
appeal was ultimately rejected by the Wal-Mart Administrative
Appeals Committee.
Thereafter, in October 1999, the Hospital sued the Plan in
Texas state court. The Plan removed the case to federal court on
the ground that ERISA governed the Hospital’s claims and moved to
dismiss the Hospital’s state law causes of action on account of
preemption. The district court granted the motion in part, but
left the Hospital with its claims for misrepresentation of coverage
in violation of the Texas Insurance Code and common law
misrepresentation and/or negligent misrepresentation, in addition
to its ERISA claim. Thereafter, the Plan named Intracorp as a
third-party defendant, claiming a right to indemnity and
contribution and asserting breach of contract.
After extensive discovery, the parties filed motions for
summary judgment in February 2001. The district court granted
summary judgment to the Plan on the Hospital’s ERISA claim because
it determined that the Hospital lacked standing. Due to its
dismissal of the Hospital’s sole federal claim, the district court
remanded the remaining state law claims to state court, and
accordingly, reserved the decision on the Plan’s and Intracorp’s
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cross-motions for summary judgment to the state court. The
Hospital now appeals the district court’s dismissal of its ERISA
claim.
II. STANDARD OF REVIEW
We review the district court’s grant of summary judgment de
novo, applying the same standard as the district court. Morris v.
Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir. 1998).
Summary judgment is proper if the record discloses no genuine issue
as to any material fact. Fed. R. Civ. P. 56(c); Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986).
III. DISCUSSION
ERISA confers standing to sue to recover benefits due under a
plan on “participants” and “beneficiaries.” 29 U.S.C. § 1132(a);
Vega v. National Life Ins. Servs., Inc., 188 F.3d 287, 291 (5th
Cir. 1999). Because a health care provider has no independent
right of standing to seek redress under ERISA, such a provider must
be capable of classification as a participant or a beneficiary to
invoke ERISA. Memorial Hosp. Sys. v. Northbrook Life Ins. Co., 904
F.2d 236, 249 (5th Cir. 1990).
The Hospital does not contend to be, nor is it, a participant
in the Plan. Rather, the Hospital maintains that it possesses
standing either (1) derivatively, as an assignee of a beneficiary,
or (2) independently, as a designated or intended beneficiary.
A. Derivative Standing as an Assignee
4
The Hospital’s claim to derivative ERISA standing is
predicated on the “Assignment of Medical Benefits” executed in its
favor by Mildred Scott, Scott’s mother and sole heir.1 It is clear
in this Circuit that a health care provider may possess standing
under ERISA by virtue of a valid assignment. In sharp contrast to
the express prohibition of the assignment of benefits under an
ERISA pension plan, 29 U.S.C. § 1056(d), ERISA contains no
provision prohibiting the assignment of benefits under an ERISA
welfare plan, nor does it contain language that “even remotely
suggests that such assignments are proscribed or ought in any way
to be limited.” Hermann Hosp. v. MEBA Med. & Benefits Plan
(“Hermann I”), 845 F.2d 1286, 1289 (5th Cir. 1988). Finding the
absence of such proscriptive language in the context of welfare
plans to be “significant,” this court in Hermann I held that a
health care provider with a valid assignment of plan benefits has
a derivative right of standing under ERISA. It reasoned that “[a]n
assignment to a health care provider facilitates rather than
hampers the employee’s receipt of health benefits” and thus would
further ERISA’s policies. The court explained:
1
By agreement dated January 14, 2000, Mrs. Scott
transferred and assigned to the Hospital her “right, title, and
interest” in “any payment due me, as beneficiary and heir of
Leonard P. Scott, as provided for in any . . . employee benefit
plan(s) on account of the charges for the hospital goods and
services furnished or provided to Leonard P. Scott by the
Hospital during the period from and including April 3, 1998
through and including April 21, 1998.” Due to Mr. Scott’s
condition during his stay at the Hospital, he was unable to
execute an assignment of benefits.
5
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.
Id. at 1289 & n.13. Having determined that a health care provider
with a valid assignment may possess standing, the Hermann I court
remanded the case for further proceedings to determine whether the
hospital possessed a valid assignment in light of the language in
the plan forbidding the assignment of benefits.
On appeal after remand, the court held that, despite the
plan’s anti-assignment clause, the provider had a valid assignment
and thus had standing to sue the plan. Hermann Hosp. v. MEBA Med.
& Benefits Plan (“Hermann II”), 959 F.2d 569, 573-75 (5th Cir.
1992). It found that the plan was estopped to assert its anti-
assignment clause “because of its protracted failure to assert the
clause when Hermann requested payment pursuant to a clear and
unambiguous assignment of payments for covered benefits.” Id. at
575. Furthermore, the court noted that even if the plan had not
been estopped from invoking the anti-assignment clause, the clause
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would not have invalidated the assignment of benefits received by
the hospital because the clause and its “typical ‘spendthrift’
language” applied “only to unrelated, third-party assignees — other
than the health care provider of assigned benefits — such as
creditors [of] debts having no nexus with the Plan or its
benefits.”2 Id. The court continued:
The anti-assignment clause should not be applicable,
however, to an assignee who, as here, is the provider of
the very services which the plan is maintained to
furnish. Were we to conclude otherwise, health care
providers such as [the hospital], which is entitled to
payment for the services it provided as benefits covered
under the Plan, would be unable to recover for those
services unless [the participant] were to sue [the plan]
for recovery of benefits and [the hospital] in turn sue
[the participant]. Such a result would be inequitable as
[the participant], knowing that any recovery from [the
plan] would immediately go to [the hospital], would have
no incentive to pursue payment — and might be reluctant
to sue the Plan maintained by his own employer or his own
union. Thus, the anti-assignment clause, even if timely
asserted, would likely not have prevented [the
beneficiary] from assigning to [the hospital] the right
to payment for benefits it furnished as the provider of
the health care services covered under the Plan.
Id. Thus, while the Hermann II court expressed serious concerns
about the efficacy of anti-assignment provisions, it did not
resolve the question whether all such clauses are enforceable. As
2
The plan’s anti-assignment clause provided:
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.
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such, the question whether anti-assignment clauses in ERISA-
governed welfare plans are enforceable remains unresolved in this
Circuit.3
In this case, just as in Hermann II, the Plan argues that the
assignment received by the Hospital is invalid because the Plan
forbids the assignment of benefits.4 Indeed, the Plan contains
several provisions devoted to the topic of assignment, as follows:
Transferring to Another Party
Medical coverage benefits of this 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.
Written Assignment to Provider
If authorized in writing by a participant, the Plan
Administrator may pay a benefit directly to a provider of
3
The vast majority of courts (and apparently all the
circuit courts) that have considered the issue have concluded
that an assignment is ineffectual if the plan contains an
anti-assignment provision. See City of Hope Nat’l Med. Ctr. v.
Healthplus, Inc., 156 F.3d 223, 228-29 (1st Cir. 1998); St.
Francis Reg’l Med. Ctr. v. Blue Cross & Blue Shield, 49 F.3d
1460, 1464-65 (10th Cir. 1995); Davidowitz v. Delta Dental Plan,
946 F.2d 1476, 1481 (9th Cir. 1991); see also, e.g., Neurological
Res. v. Anthem Ins. Cos., 61 F. Supp. 2d 840, 845-46 (S.D. Ind.
1999); Parkside Lutheran Hosp. v. R.J. Zeltner & Assocs., 788 F.
Supp. 1002, 1004-05 (N.D. Ill. 1992); Washington Hosp. Ctr. Corp.
v. Group Hospitalization & Med. Servs., Inc., 758 F. Supp. 750,
755 (D.D.C. 1991). These courts have reasoned that ERISA leaves
“the assignability of benefits to the free negotiations and
agreement of the contracting parties.” E.g., St. Francis, 49
F.3d at 1464.
4
The Plan also argued in the district court that the
assignment was invalid under state law for lack of consideration.
The district court did not reach that question, and therefore it
is not properly before us at this time.
8
a medical service instead of the participant as a
convenience to the participant. When this is done, all
the Company’s or Plan’s obligations to the eligible
participant with respect to such benefit shall be
discharged by such payment. The Plan reserves the right
to not honor assignment to any provider.
Medicaid Assignment
If an associate or dependent is covered by a state plan
under Medicaid and if required under applicable law, the
Plan will honor an assignment of payment to Medicaid.
Network Assignment
Due to our health care network guidelines in several
states, assignment may be made directly to the provider
in states where a statewide health care network exists.
NOTE: Claim payment for non-network providers or for
electronic claims without assignment may be made directly
to the participant. The participant will then be
responsible for paying the claims.
Assignment Overview
Except as permitted by the Plan or as required by a state
Medicaid law, no attempted assignments of benefits under
the Plan will be valid and will not be recognized by the
Plan.
The Plan contends, and the district court agreed, that the
anti-assignment language in the Transferring to Another Party and
Assignment Overview clauses clearly invalidates the assignment in
question here. In response, the Hospital acknowledges the Plan’s
anti-assignment language, but asserts that the Plan’s provisions on
assignment, when read together, indicate that the Plan does not
completely bar the assignment of benefits. Specifically, it
contends that the Plan’s Network Assignment clause creates an
exception to the general prohibition on assignments in favor of
network providers who have received a valid assignment of benefits.
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As such, the Hospital, which claims to be such a network provider,5
argues that the assignment it received was not prohibited, but
rather was anticipated and approved by the Plan.
The Plan does not dispute that the Hospital qualifies as a
network provider. However, it disputes the Hospital’s contention
that the Network Assignment clause contemplates the assignment of
medical coverage benefits, submitting instead that it merely
authorizes the direct payment of benefits to such providers.6
According to the Plan, that the Network Assignment clause does not
contemplate an assignment of benefits is evidenced in the
Assignment Overview clause, which provides that “[e]xcept as
permitted by the Plan . . . , no attempted assignments of benefits
under the Plan will be valid and will not be recognized by the
Plan.”
In interpreting the Plan document, we read its provisions not
in isolation, but as a whole. See McCall v. Burlington
Northern/Santa Fe Co., 237 F.3d 506, 512 (5th Cir. 2000). We
interpret plan provisions according to their plain meaning, and any
ambiguities will be resolved against the Plan. Id.
5
The Hospital’s network provider status is derived from
its participation in the Blue Cross Blue Shield of Texas, Inc.
(“Blue Cross”) Blue Choice Network and, in turn, from Blue
Cross’s managed care contract with Wal-Mart.
6
It distinguishes direct payment from assignment of
benefits by explaining that direct payment discharges an
obligation owed solely to the participant, whereas an assignment
operates to transfer the right to benefits under the Plan.
10
As a starting point, we observe that the Plan contains
sweeping language forbidding the assignment of benefits. The plain
language of the Transferring to Another Party and Assignment
Overview clauses indicates that, as a general rule, the Plan will
not honor assignments of benefits. Nevertheless, by equally plain
terms, the Plan acknowledges that the prohibition on assignments is
not necessarily absolute, as the Assignment Overview clause
indicates that there may be exceptions “as permitted by the Plan.”
Indeed, a further reading of the Plan document reveals that
the Plan has authorized such an exception in the Network Assignment
clause. In the clearest of terms, the Plan authorizes assignments
to network providers by directing that “assignment may be made
directly to the provider.” Despite the Plan’s assertion that the
provision merely authorizes direct payment to network provisions,
we find that the Plan clearly speaks in terms of assignment and
makes no mention of direct payment. We must interpret the
provision to mean what it says, and it plainly says that assignment
may be made to network providers. To the extent there is an
ambiguity, it is construed against the Plan.
Therefore, as the Plan has authorized assignments of benefits
to network providers and as it is undisputed that the Hospital is
a network provider, we find that the Hospital has made a sufficient
showing of standing as an assignee. Accordingly, we reverse that
portion of the district court’s order finding otherwise and
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remanding the Hospital’s pendent state law claims, and we remand
for further proceedings consistent with this opinion.
B. Independent Standing as a Designated Beneficiary
or as an Intended Third-Party Beneficiary
We now turn to the Hospital’s alternative argument that, even
without a valid assignment, it possesses standing as a designated
beneficiary or as an intended third-party beneficiary. For
purposes of ERISA, the term “beneficiary” means “a person
designated by a participant, or by the terms of an employee benefit
plan, who is or may become entitled to a benefit thereunder.” 29
U.S.C. § 1002(8). The Hospital attempts to portray itself as a
beneficiary by claiming that it is or may become entitled to a Plan
benefit pursuant to the managed care contract between Wal-Mart and
Blue Cross.
We cannot accept the Hospital’s contention that it is a
beneficiary for purposes of ERISA. There has been absolutely no
showing that the Hospital has been designated as such either by Mr.
Scott or in the Plan document. The fact that it may be entitled to
a benefit under the Wal-Mart/Blue Cross contract, which is not
itself an ERISA plan, is of no relevance in determining whether it
is an ERISA beneficiary. Likewise, the Hospital’s argument it has
standing as a third-party beneficiary fails. This court has
previously held that ERISA does not countenance third-party
beneficiary claims. See Morales v. Pan Am. Life Ins. Co., 914 F.2d
83, 87 (5th Cir. 1990). Accordingly, we affirm that portion of the
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district court’s order refusing to recognize that the Hospital
possess independent standing as a beneficiary.
IV. CONCLUSION
Because we agree with the district court that the Hospital
lacks independent standing as a beneficiary, we AFFIRM in part.
However, because we find that the Hospital has sufficiently shown
that it may have standing derivatively as an assignee of a
beneficiary, we REVERSE in part and REMAND for further proceedings
consistent with this opinion.
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