Dallas County Hospital District v. Associates' Health & Welfare Plan

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

__________________________

No. 01-10988
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DALLAS COUNTY HOSPITAL DISTRICT, doing business as Parkland
Memorial Hospital,

Plaintiff-Appellant,

versus

ASSOCIATES’ HEALTH AND WELFARE PLAN,

Defendant-Appellee.

__________________________________________________

Appeal from the United States District Court
for the Northern District of Texas
________________________________________________
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

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 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.

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 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.

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 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.

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 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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