IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________________________
No. 01-40995
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LETOURNEAU LIFELIKE ORTHOTICS & PROSTHETICS, INC., as assignee of
Pamela L. Nichols,
Plaintiff-Appellee,
versus
WAL-MART STORES, INC.; WAL-MART ASSOCIATES HEALTH & WELFARE PLAN;
COMMITTEE OF THE WAL-MART ASSOCIATES HEALTH & WELFARE PLAN,
Defendants-Appellants.
_________________________________________________
Appeal from the United States District Court
for the Eastern District of Texas
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July 10, 2002
Before HIGGINBOTHAM, WIENER and BENAVIDES, Circuit Judges.
WIENER, Circuit Judge:
Plaintiff-Appellee LeTourneau Lifelike Orthotics &
Prosthetics, Inc. (“LeTourneau”) filed this action in district
court against the captioned Defendants-Appellants, seeking $9,767
in payment for replacing part of a prosthetic device that
LeTourneau had furnished to Pamela L. Nichols, a beneficiary of the
defendant Wal-Mart Associates Health & Welfare Plan (the “Plan”).
In addition to asserting that claim under Section 502 of ERISA,1
1
29 U.S.C. § 1132(a).
LeTourneau advanced the Texas common law claim of quantum meruit.
The state law claim and all claims against defendant Wal-Mart
Stores, Inc. were eventually dismissed on an agreed motion.
Following a bench trial, the court entered judgment for LeTourneau
against the Plan in the amount of its principal demand, plus
prejudgment interest, attorney’s fees, costs, and post-judgment
interest. Concluding that LeTourneau lacked standing to bring this
action, we reverse the district court’s determination to the
contrary, vacate the judgment for LeTourneau, and remand with
instructions to dismiss the complaint.
I. FACTS AND PROCEEDINGS
Nichols was a beneficiary of the Plan by virtue of her
husband’s participation. The Plan is governed by ERISA, sponsored
by Wal-Mart Stores, Inc., and administered by an administrative
committee. The Plan’s Summary Plan Description (“SPD”) contained
the following anti-assignment clause:
ASSIGNMENT
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.
....
2
Assignment Overview
Except as permitted by the Plan or as required by state
Medicaid law, no attempted assignments of benefits will
be recognized by the Plan.2
When Nichols became a patient of LeTourneau in December 1996, she
signed a form containing a direct payment authorization which
permitted the Plan to pay LeTourneau directly for “all things to
which” Nichols was “entitled” under the Plan. Nichols’s physician
had prescribed the above-knee leg prosthesis in question, which was
covered by the Plan. She received the prosthesis from LeTourneau
early in 1997. Based on the direct payment authorization in
Nichols’s entry form, the Plan paid $19,553 directly to LeTourneau
for the device and the services related to fitting it.
About a year-and-a-half after Nichols received the original
prosthesis, the same physician prescribed a new socket for it.
LeTourneau contacted the Plan’s agent, Blue Cross/Blue Shield, and
confirmed that Nichols was still a beneficiary of the Plan; at that
time, however, neither Nichols nor LeTourneau sought either prior
approval for replacing the socket or verification of coverage of
Nichols for this service. LeTourneau replaced the socket and
submitted a claims form to Blue Cross/Blue Shield, seeking payment
of $9,767.
2
The Plan did not, in contrast, prohibit participants or
beneficiaries from authorizing the Plan to make direct prepayments
to health care benefit providers, like LeTourneau, for covered
services.
3
Sometime later, LeTourneau was informed that the Plan would
pay nothing at that time, adding that confirmation as to medical
necessity was required regarding the new socket and other
components. LeTourneau eventu2ally submitted a copy of the
physician’s prescription for the socket and a Certificate of
Medical Necessity which was signed and dated by the doctor more
than a year after the Plan had notified LeTourneau of its denial.
On the same day that the Certificate of Medical Necessity was
signed by Nichols’s doctor and delivered to the Plan, the Plan
furnished LeTourneau an Explanation of Benefits and advised that
the Plan was denying the new socket charges based on the following
provision in the “Other Covered Expenses” section of the SPD:
Standard prostheses limited to artificial
limbs, artificial eyes, breast implants where
the breast tissue is removed, or initial
placement of contact lenses or glasses after
cataract surgery; limited to once every three
years. Replacement will be allowed when the
original prosthesis was medically necessary
and only when a change of prescription occurs.
NOTE: The Plan must be given prior approval of
your prosthesis supplier.
Without further efforts to explore administrative
reconsideration, LeTourneau brought the instant action as Nichols’s
assignee. The Plan contested LeTourneau’s standing because (1)
Nichols’s direct payment authorization was not the equivalent of an
assignment of benefits, and (2) even if it were, it would be
invalid for purposes of LeTourneau’s pursuing an ERISA Section 502
claim, given the SPD’s anti-assignment clause. After denying the
4
Plan’s motion for summary judgment, the district court conducted a
bench trial. Implicitly rejecting the challenge to standing, the
court accepted LeTourneau’s contentions that Nichols’s direct
payment authorization was an assignment of benefits and, relying on
our decision in Hermann Hospital v. MEBA Medical & Benefits Plan
(Hermann II),3 held that an employee benefits plan cannot enforce
an anti-assignment clause against a provider of medical services.
The court rendered judgment in favor of LeTourneau and the Plan
timely filed a notice of appeal.
II. ANALYSIS
A. Standard of Review
On appeal from a bench trial, we review the factual findings
of the trial court for clear error.4 We review conclusions of law
de novo, including the trial court’s determination of its own
standard of review of an ERISA administrator’s determination of
eligibility for benefits.5
B. LeTourneau’s Standing
3
959 F.2d 569 (5th Cir. 1992).
4
Kona Tech. Crop. v. S. Pac. Transp. Co., 225 F.3d 595, 601
(5th Cir. 2000).
5
Id.; Meditrust Fin. Servs. Corp. v. The Sterling Chems.,
Inc., 168 F.3d 211, 213 (5th Cir. 1999).
5
Standing is jurisdictional.6 LeTourneau has no direct claim
against the Plan; and, absent a valid assignment of benefits from
Nichols, LeTourneau would have no derivative standing to sue the
Plan under ERISA Section 502.7 In finding the presence of a valid
assignment and rejecting the Plan’s anti-assignment assertion, the
district court relied entirely on Hermann II, in which the ERISA
plan at issue contained the following anti-assignment clause:
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.8
Although we held for the hospital, we did so primarily on the basis
of estoppel: The ERISA Plan was estopped from enforcing its anti-
assignment clause because of the Plan’s protracted failure to
assert anti-assignment when the hospital requested payment under an
assignment of payment provision for covered benefits.
Here, however, the district court did not rely on estoppel.
Rather, it relied on our alternative holding in Hermann II that the
anti-assignment clause was ineffectual against the hospital. In
that alternative holding, we concluded that the anti-assignment
6
Florida Dept. of Ins. v. Chase Bank of Texas, 274 F.3d 924,
928-29 (5th Cir. 2001) (citing Valley Forge Christian College v.
Americans United for Separation of Church and State, Inc., 454 U.S.
464, 475-76 (1982)).
7
See generally Hermann II, 959 F.2d at 572.
8
Hermann II, 959 F.2d at 574.
6
clause there at issue would not preclude the hospital’s recovery
from the plan because the clause applied only to unrelated, third-
party assignees, such as creditors who might attempt to obtain
voluntary assignments to cover debts having no nexus with a plan or
its benefits, or even involuntary alienation such as attempts to
garnish such payments.
The district court’s reliance on Hermann II’s alternative
holding, which analogized that anti-assignment clause to anti-
assignment clauses commonly found in spendthrift trusts, is
misplaced. There simply is no similarity between the language of
the Plan’s anti-assignment clause and the wording of the clause
that we analyzed in Hermann II. In no way resembling typical
spendthrift trust provisions or the third-party creditor anti-
assignment clause provision in Hermann II, the Plan’s anti-
assignment clause states that “no attempt at assignments or
benefits will be recognized by the Plan” and, most significantly,
that “[n]othing 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.” This language
is unquestionably directed at providers of health care services
such as LeTourneau in precisely the way that the anti-assignment
language Hermann II was not.
We have previously stated that “we must ... interpret ERISA
plans’ provisions as they are likely to be ‘understood by the
7
average plan participant,’ consistent with ERISA’s statutory
drafting requirements.”9 When, as in the instant case, the plan
administrator is vested with discretion to review plan terms and
decide claims for benefits, we review the administrator’s
interpretation of an SPD’s terms only for abuse of discretion.10
In Hermann I11 we held that “ERISA allows the assignment of health
care benefits” but noted that the validity of the assignment
depends on a construction of the plan at issue.12 Neither Hermann
I nor Hermann II stands for the proposition that all anti-
assignment clauses are per se invalid vis-à-vis providers of health
care services. Furthermore, neither Hermann opinion mandates that
any putative assignment somehow grants derivative standing to the
provider, as an assignee, to sue on behalf or standing in the shoes
9
Walker v. Wal-Mart Stores, Inc., 159 F.3d 938, 940 (5th
Cir. 1998) (per curiam)(quoting 29 U.S.C. § 1022(a)(1)); see also
Fallo v. Piccadilly Cafeterias, Inc., 141 F.3d 580, 583 (5th Cir.
1998) (“ERISA requires plan administrators to provide its
participants with an accurate, comprehensive, and easy to
understand summary of the Plan.”); id. at 583 n.14 (“‘The summary
plan description ... shall be written in a manner calculated to be
understood by the average plan participant, and shall be
sufficiently accurate and comprehensive to reasonably apprise such
participants and beneficiaries of their rights and obligations
under the plan.’" (quoting 29 U.S.C. § 1022(a)(1))).
10
See McCall v. Burlington Northern/Santa Fe Co., 237 F.3d
506, 512 (5th Cir. 2000), cert. denied, 122 S. Ct. 57 (2001).
11
Hermann Hospital v. MEBA Medical & Benefits Plan, 845 F.2d
1286 (5th Cir. 1988).
12
Id. at 1289, 1290.
8
of the plan’s beneficiary. On the contrary, our case law affirms
“the well-settled principle that Congress did not intend that ERISA
circumscribe employers' control over the content of benefit plans
they offered to their employees” as well as “Congress's intent that
employers remain free to create, modify and terminate the terms and
conditions of employee benefits plans without governmental
interference.”13 We are aware of no statute or case law, and
LeTourneau has invited our attention to none, that would preclude
application of these principles to the anti-assignment clause here
under consideration. Applying universally recognized canons of
contract interpretation to the plain wording of the instant anti-
assignment clause leads inexorably to the conclusion that any
purported assignment of benefits from Nichols to LeTourneau would
be void.
This conclusion is underscored by the fact that the Plan
dutifully paid LeTourneau for the original prosthesis, never
attempting to deny responsibility by relying on the anti-assignment
clause. In other words, the Plan did not attempt to make its anti-
assignment provisions trump the direct payment authorization that
Nichols validly exercised; rather, the Plan fully honored it by
paying LeTourneau in full for the original prosthesis. The Plan’s
subsequent invoking of the anti-assignment clause to challenge
LeTourneau’s derivative standing to bring an ERISA section 502
13
McGann v. H & H Music Co., 946 F.2d 401, 407 (5th Cir.
1991), cert. denied, 506 U.S. 981 (1992).
9
claim for the replacement socket is consistent with the Plan’s
implicit acknowledgement that the contents of the entry form signed
by Nichols, although ineffective to assign her other contractual or
statutory rights under ERISA, did effectively assign to her health
care services provider her right to receive payments for duly
covered claims. Again, the anti-assignment provision in Hermann II
is so distinguishable from the Plan’s that our rejection of
facially dissimilar distinctions in Hermann II are wholly
inapposite here.
At oral argument, LeTourneau conceded —— as it had to —— that,
prior to providing the new socket for Nichols’s prosthesis, it
never bothered to seek advance authorization through Blue
Cross/Blue Shield or the Plan; neither did it attempt to verify
that such a replacement, if made within less than three years
following the initial installation of the prosthesis, would be
covered. LeTourneau’s decision to verify nothing other than that
Nichols was still a beneficiary of the Plan nicely illustrates the
distinctions that are at work here: The fact that a health care
services provider verifies beneficiary status and has a direct
payment authorization in hand is worth nothing when coverage of the
service provided to the beneficiary has not been verified or pre-
approved, and is ultimately determined in the discretion of the
plan administrator not to be covered. Any right that Nichols
herself might have enjoyed as a beneficiary to challenge Wal-Mart’s
denial of coverage and to claim entitlement to socket replacement
10
despite the passage of less than three years could not be assigned
to any third party, including her provider of health care services;
and without an assignment, the provider, LeTourneau, could have no
standing to pursue coverage, either administratively or judicially.
Regrettably for LeTourneau, by failing to verify coverage for
Nichols’s socket replacement in advance, it assumed the risk (as it
candidly conceded in oral argument) that coverage might be denied
by the Plan’s administrator. Because of the anti-assignment
provision of the Plan, LeTourneau had no derivative standing to
assert coverage retrospectively as Nichols’s assignee.
III. CONCLUSION
The district court erred as a matter of law in holding the
anti-assignment provision in the Plan’s SPD ineffective as to
LeTourneau. Because that clause is valid vis-à-vis LeTourneau, it
renders nugatory any purported assignment of benefits from the
beneficiary, Nichols. And, absent an enforceable assignment of
benefits, LeTourneau had no standing to sue the Plan for Nichols’s
benefits under ERISA Section 502. Therefore, we must reverse the
court’s ruling on the inapplicability of the Plan’s anti-assignment
clause to LeTourneau and vacate the court’s judgment in favor of
LeTourneau. Consequently, we need not and therefore do not
consider whether the district court erred when it determined that
(1) Nichols’s direct payment authorization was an assignment, (2)
the Plan improperly denied payment in reliance on the “Other
11
Covered Expenses” provision of the SPD, (3) it need not refer the
claim to the plan administrator once it determined that the anti-
assignment clause did not apply to LeTourneau, (4) the standard of
review to employ in analyzing the Plan’s interpretation of and
reliance on the “once every three years” limitation to deny
coverage for replacing Nichols’s knee socket, or (5) the Plan did
indeed afford coverage for replacement of the socket, irrespective
of timing.
Because LeTourneau had neither direct nor derivative standing
to bring this suit, the district court lacked jurisdiction to hear
it. We therefore reverse the court, vacate its judgment in favor
of LeTourneau, and remand this case with instructions to dismiss it
at LeTourneau’s cost.
REVERSED, JUDGMENT VACATED, AND CASE REMANDED with instructions to
dismiss at plaintiff’s cost.
12