City of Hope v. Seguros DeServicio ( 1998 )


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  •             United States Court of Appeals
    For the First Circuit
    No. 98-1038
    CITY OF HOPE NATIONAL MEDICAL CENTER,
    Plaintiff, Appellant,
    v.
    HEALTHPLUS, INC.,
    Defendant, Appellee.
    APPEAL FROM THE UNITED STATES DISTRICT COURT
    FOR THE DISTRICT OF PUERTO RICO
    [Hon. Juan M. Perez-Gimenez, U.S. District Judge]
    Before
    Selya, Boudin and Lipez, Circuit Judges.
    Gary L. Tysch on brief for appellant.
    Jorge E. Perez Diaz and Jos W. Vzquez Matos on brief for
    appellee.
    September 11, 1998
    LIPEZ, Circuit Judge.  Plaintiff-appellant City of Hope
    National Medical Center (City of Hope) filed an action asserting
    that defendant-appellee Health Plus, Inc. (HPI) and others were
    obligated to pay City of Hope for its treatment of Maria D. Diaz
    for leukemia.  City of Hope appeals from the judgment entered in
    the district court granting defendants' motions for a summary
    judgment, primarily on the basis of the non-assignability of Diaz's
    rights pursuant to two health insurance policies.  We affirm.
    I.
    Maria D. Diaz was diagnosed with myeloid leukemia in 1992.
    After initial treatment in Puerto Rico, she experienced a period of
    remission.  In late 1992, however, Diaz suffered a relapse of her
    cancer that required additional treatment.  Diaz was referred by
    her treating physicians to Memorial Sloane-Kettering Hospital in
    New York City for consultation and further treatment.  In January
    1993, Diaz was referred by doctors at Memorial Sloane-Kettering to
    City of Hope in Duarte, California with a recommendation that Diaz
    undergo high-dose chemotherapy with allogenic bone marrow
    transplantation (HDCT/ABMT).  Diaz was admitted to City of Hope in
    January 1993.  Diaz received extensive treatment for her leukemia
    at City of Hope (including HDCT/ABMT), ultimately receiving
    services costing in excess of $250,000.
    After Diaz's admission and the commencement of her treatment,
    City of Hope sought coverage for Diaz's medical expenses from her
    health insurers.  Diaz had two sources of health insurance: Segurio
    de Servicio de Salud de Puerto Rico, Inc. (Triple-S) was her
    primary insurance carrier (offered through her employer) and PCA
    Health Plan of Puerto Rico (formerly HealthPlus, Inc. or "HPI") was
    her secondary insurance carrier (offered through her husband's
    employer).  Except under limited circumstances, only services
    provided by physicians and hospitals that were part of the HMO
    network were covered by Diaz's HPI policy; treatment outside the
    network was only covered if it was (i) pre-approved by the HMO or
    (ii) constituted emergency medical services.  City of Hope did not
    have a contract with Diaz's HMO to provide medical services.
    Triple-S denied coverage for Diaz's treatment at City of Hope
    because Diaz's policy did not cover HDCT/ABMT.  HPI refused
    coverage because, inter alia, neither City of Hope nor Diaz had
    complied with the pre-authorization procedures mandated by Diaz's
    HMO policy.
    In April 1993, Diaz signed a document that purported to assign
    her rights under her health insurance policies to City of Hope
    "[t]o the degree permitted under any insurance policy."  The HPI
    health insurance policy at issue contained the following clause:
    "[a]ll entitlements of a member to receive covered rights are
    personal and may not be assigned."
    Alleging a breach of the health insurance plans, City of Hope
    subsequently sued Triple-S, HPI, and American Airlines Employee
    Benefit Plan (the administrator of her husband's employer's benefit
    program) for benefits and attorney's fees pursuant to the Employee
    Retirement Income Security Act (ERISA), 29 U.S.C.  1001 et seq.
    The three defendants filed answers and thereafter moved for a
    summary judgment.  The district court granted summary judgment for
    the defendants, finding, with regard to HPI, that (i) the non-
    assignment clause was valid, and precluded City of Hope's claims,
    (ii) the services rendered by City of Hope were not "emergency
    medical services," and (iii) HPI was not equitably estopped from
    denying coverage.
    City of Hope filed a timely notice of appeal.  We subsequently
    dismissed this appeal with respect to Triple-S and American
    Airlines Employee Benefit Plan because City of Hope failed to raise
    any issue regarding the district court's grant of a summary
    judgment for those appellees.  Thus, HPI is the sole remaining
    appellee.
    II.
    In considering a motion for summary judgment, the court's
    "role is to pierce the boilerplate of the pleadings and assay the
    parties' proof in order to determine whether a trial is actually
    required."  Wynne v. Tufts Univ. Sch. of Med., 
    976 F.2d 791
    , 794
    (1st Cir. 1992), cert. denied, 
    507 U.S. 1030
    (1993).  A motion for
    summary judgment should be granted "if the pleadings, depositions,
    answers to interrogatories, and admissions on file, together with
    the affidavits, if any, show that there is no genuine issue 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).  Because the lower
    court makes a judgment of law, our review of a summary judgment
    ruling is de novo.  See IAM v. Winship Green Nursing Ctr., 
    103 F.3d 196
    , 199 (1st Cir. 1998).
    1.   The Rights of City of Hope Pursuant to Diaz's Assignment
    City of Hope argues that it is a party to a valid assignment
    from Diaz.  That contention requires us to address the following
    issues: (i) whether ERISA permits the assignment of benefits under
    ERISA-regulated health insurance plans; (ii) whether City of Hope
    has standing under ERISA to assert its claim as assignee; (iii)
    whether the non-assignment provision in Diaz's contract violates
    public policy, and; (iv) whether the non-assignment provision bars
    City of Hope's claim.
    a. The Assignability of Health Care Benefits Under ERISA
    In Mackey v. Lanier Collection Agency & Services, Inc., 
    486 U.S. 825
    (1988), the Supreme Court addressed whether ERISA allowed
    or prohibited the garnishment of benefits under ERISA-regulated
    welfare plans.  The Court noted that while Congress prohibited the
    assignment or alienation of benefits under pension plans, 29 U.S.C.
    1056(d)(1), Congress did not include such a ban on the assignment
    of benefits under welfare plans, and reasoned that "Congress'
    decision to remain silent concerning the attachment or garnishment
    of ERISA welfare plan benefits 'acknowledged and accepted the
    practice, rather than prohibiting it.'" 
    Id. at 837-38
    (quoting
    Alessi v. Raybestos Manhattan, Inc., 
    451 U.S. 504
    , 516 (1981)).
    Congress prohibited the assignment of pension benefits "[t]o
    further ensure that the employee's accrued benefits are actually
    available for retirement purposes."  H.R. Rep. No. 807, 93d Cong.,
    2d Sess. 68 (1974), reprinted in 1974 U.S.C.C.A.N. 4639, 4670,
    4734.  By contrast, the assignability of welfare plan benefits may
    further the goal of ERISA "to promote the interests of employees
    and their beneficiaries in employee benefit plans."  Shaw v. Delta
    Air Lines, 
    463 U.S. 85
    , 90 (1983).  For example, "assignment to a
    health care provider facilitates rather than hampers the employee's
    receipt of health benefits."  Hermann Hosp. v. MEBA Med. and
    Benefits Plan, 
    845 F.2d 1286
    , 1289 (5th Cir. 1988).  Given these
    considerations, we agree with other circuits that the logic of the
    Supreme Court's decision in Mackey allowing the garnishment of
    benefits under ERISA-regulated welfare plans allows the assignment
    generally of welfare benefits under such plans.  See Davidowitz v.
    Delta Dental Plan of California, 
    946 F.2d 1476
    , 1478 (9th Cir.
    1991) (holding that "ERISA does not preclude welfare plan benefit
    assignments" and citing Mackey); St. Francis Regional Med. Ctr. v.
    Blue Cross and Blue Shield of Kansas, Inc., 
    49 F.3d 1460
    , 1464
    (10th Cir. 1995) (citing Mackey for the proposition that "Congress
    did not intend to enact a policy precluding [welfare plan benefits]
    assignability").
    b. City of Hope's Standing to Sue Under ERISA
    Despite our conclusion that ERISA permits the assignment of
    welfare plan benefits, we must address the basis for City of Hope's
    standing to file its ERISA lawsuit pursuant to such an assignment.
    ERISA specifically enumerates the parties with standing to sue to
    enforce ERISA's provisions: participants, beneficiaries,
    fiduciaries and the Secretary of Labor. Under ERISA, a
    "beneficiary" is defined as "a person designated by a participant
    ... who is or may become entitled to a benefit" under the plan.  29
    U.S.C.  1002(8).  "Participant" is defined as "any employee or
    former employee of an employer ... who is or may become eligible to
    receive a benefit of any type from an employee benefit plan which
    covers employees of such employer ... or whose beneficiaries may be
    eligible to receive any such benefit."  29 U.S.C.  1002(7).
    Commenting on the exclusive nature of ERISA's list of parties with
    standing, the Supreme Court has cautioned that "[t]he assumption of
    inadvertent omission is rendered especially suspect upon close
    consideration of ERISA's interlocking, interrelated, and
    interdependent remedial scheme, which is in turn part of a
    'comprehensive and reticulated statute.'"  Massachusetts Mut. Life
    Ins. Co. v. Russell, 
    473 U.S. 134
    , 146 (1985) (quoting Nachman
    Corp. v. Pension Benefit Guar. Corp., 
    446 U.S. 359
    , 361 (1980)).
    Thus, when we previously considered ERISA's standing provision, we
    stated that "since Congress has carefully catalogued a selected
    list of persons eligible to sue under ERISA, there is no plausible
    rationale for us gratuitously to enlarge the roster."  Kwatcher v.
    Massachusetts Serv. Employees Pension Fund, 
    879 F.2d 957
    , 965 (1st
    Cir. 1989).
    In light of ERISA's comprehensiveness and the Supreme Court's
    admonition to avoid expanding ERISA's class of plaintiffs, the
    Third Circuit has refused to recognize assignee standing under
    ERISA: "Congress simply made no provision in  1132(a)(1)(B) for
    persons other than participants and beneficiaries to sue, including
    persons purporting to sue on their behalf."  Northeast Dep't ILGWU
    Health and Welfare Fund v. Teamsters Local Union No. 229 Welfare
    Fund, 
    764 F.2d 147
    , 154 n.6 (3d Cir. 1985) (emphasis added).
    Although set forth as dicta because the court went on to find that
    the patient "did not, in fact, make an assignment of her claim,"
    
    id., this language
    has led to the rejection of assignee standing
    within district courts of that circuit.
    Other courts have not accorded significance to some
    distinctions in  ERISA's definitions in concluding that a health
    care provider-assignee has standing to sue pursuant to the express
    terms of the statute.  In Kennedy v. Connecticut General Life
    Insurance Co., 
    924 F.2d 698
    (7th Cir. 1991), the plaintiff health
    care provider, a chiropractor, sued the insurer for payment on the
    basis of an assignment from the wife of an employee whose employer
    had a group health policy with the insurer.  See 
    id. at 699.
     The
    Kennedy court concluded that the health care provider had standing
    as a beneficiary under ERISA, which defines beneficiary as "a
    person designated by a participant ... who is or may become
    entitled to a benefit" under the plan. 29 U.S.C.  1002(8).  This
    conclusion reflects the premise that the spouse of an employee
    covered by an ERISA-regulated welfare plan meets the definition of
    a "participant."  In fact, as the statute makes clear,
    "participant" is defined in ERISA only with reference to an
    employee or a former employee.  See 29 U.S.C.  1002(7).  The wife
    of an employee could not herself be a participant under her
    husband's plan; she could only be a beneficiary.  The Kennedy court
    did not acknowledge such a distinction, holding that the wife of
    the employee was "unquestionably a participant as  1002(7) uses
    that term ...."  
    Id. at 700.
    The district court in this case also accepted the proposition
    that the spouse of an employee meets the ERISA definition of a
    participant: "Diaz was a participant in an employee welfare benefit
    plan sponsored by  her husband's 
    employer." 983 F. Supp. at 70
    .
    It offered the further observation that "by virtue of the
    assignment, City of Hope could ostensibly become a beneficiary --
    i.e. one designated by a participant to become entitled to a
    benefit under the plan."  
    Id. at 73
    n.7 (emphasis added).  In fact,
    however, Diaz was neither an employee nor a former employee, and
    hence she did not meet ERISA's clear definition of "participant."
    Therefore, Diaz could not confer beneficiary status on City of
    Hope, given ERISA's definition of a beneficiary as "a person
    designated by a participant ... who is or may become entitled to a
    benefit" under the plan.  See 29 U.S.C.  1002(8).
    The district court did not, however, base its decision on this
    incorrect characterization of Diaz's status.  Instead, it focused
    on Diaz's status as a beneficiary of her husband's health care plan
    and concluded, in conformity with the approach of a number of
    circuits, that a health care provider, as the assignee of a
    beneficiary, "acquires derivative standing and is able to sue as a
    'beneficiary' by standing in the shoes of his assignor."  983 F.
    Supp. at 73 (citing Misic v. Building Serv. Employees Health and
    Welfare Trust, 
    789 F.2d 1374
    , 1378 (9th Cir. 1986)).  We agree with
    this approach, which is consistent with our position in Kwatcherthat there is no justification for expansion by the court of the
    roster of persons eligible to sue under ERISA.  See 
    Kwatcher, 879 F.2d at 965
    .
    The term derivative means "coming from another .... That which
    has not its own origin in itself, but owes its existence to
    something foregoing."  Black's Law Dictionary 443 (6th ed. 1990).
    It is generally understood that "the assignee acquires rights
    similar to those of the assignor, and is put in the same position
    with reference to those rights as that in which the assignor stood
    at the time of assignment."  3 Samuel Williston & Walter H.E.
    Jaeger, A Treatise on the Law of Contracts  404, at 5  (3d ed.
    1960).  If an assignee seeking relief in court stands in the place
    of an assignor, there has been a substitution rather than an
    expansion of the parties.
    In United States v. Carter, 
    353 U.S. 210
    (1957), the Supreme
    Court recognized assignee standing under the Miller Act.  The
    Miller Act protects contractors on federal construction projects
    "in lieu of the protection they might receive under state
    statutes."  
    Id. at 216.
     Like ERISA, the Miller Act confines
    standing to an enumerated class: persons who have "furnished labor
    or material in the prosecution of the work provided for in such
    contract ... and who ha[ve] not been paid in full therefor[.]"  Id.at 215 (citing 40 U.S.C.  270b(a)).  The Supreme Court rejected
    the argument that the assignees of persons who had "furnished labor
    or material" lacked standing to sue:
    The surety also argues that the trustees are not entitled
    to recover the promised contributions under  2(a) of the
    Miller Act, since they are [not] persons who have
    furnished labor or material ... [A] denial of an
    assignee's right to sue on the bond might deprive those
    for whom the security was intended of a fair chance to
    realize upon their claims by assignment....
    The trustees stand in the shoes of the employees and are
    entitled to enforce their rights.
    
    Id. at 218-20(emphasis
    added)(footnotes omitted).  In this ERISA
    context as well, we conclude that Congress did not intend to
    disturb the common law principles of assignment.  See Pilot Life
    Ins. Co. v. Dedeaux, 
    481 U.S. 41
    , 56 (1987) (discussing Congress'
    "expectations that a federal common law of rights and obligations
    under ERISA-regulated plans would develop"); see also 3 Samuel
    Williston & Walter H.E. Jaeger, A Treatise on the Law of Contracts
    446A, at 328 (3d ed. 1960) (explaining that "the assignee has,
    and has had for more than a century, a legal right ... enforceable
    in courts of law") (citing Welch v. Mandeville (US) 1 Wheat 233, 4
    L. ed. 79 (1816)).
    Although the district court recognized the validity of
    derivative standing under ERISA, it denied City of Hope standing to
    sue because it found the assignment from Diaz invalid.  This
    conclusion wrongly conflates two distinct inquiries.  The standing
    inquiry does not focus on the merits of the dispute.  It focuses
    only on "whether the litigant is entitled to have the court decide
    the merits of the dispute."  Warth v. Seldin, 
    422 U.S. 490
    , 498
    (1975).  Consequently, City of Hope's standing depends on a
    "colorable claim" that it is an assignee of a beneficiary.  SeeFirestone Tire & Rubber Co. v. Bruch, 
    489 U.S. 101
    , 117 (1989)
    (refining ERISA's definition of "participant" to include former
    employees "who have a 'colorable claim' to vested benefits"); see
    also 
    Kennedy, 924 F.2d at 700
    (applying the "colorable claim"
    standard in the standing context and citing Firestone).  As the
    assignee of an ERISA beneficiary, City of Hope satisfies the
    standing requirements of section 1132 and has a right to have the
    court decide the merits of its claim against HPI.
    c. The Non-Assignment Clause and Public Policy
    City of Hope argues that the district court erred in giving
    effect to the non-assignment clause in Diaz's HMO policy because
    such a clause is contrary to the public policy advanced by ERISA.
    In effect, City of Hope asks us to read into ERISA's allowance for
    the assignability of ERISA-regulated welfare plan benefits a bar to
    the contractual non-assignability of such benefits.  Once again,
    the Supreme Court's reasoning in Mackey is persuasive: "[Congress]
    had before it a provision to bar the alienation or garnishment of
    ERISA plan benefits, and chose to impose that limitation only with
    respect to ERISA pension benefit plans, and not ERISA welfare
    benefit plans.  In a comprehensive regulatory scheme like ERISA,
    such omissions are significant ones."  
    Mackey, 486 U.S. at 837
    .  By
    its silence on the assignability of ERISA-regulated welfare plan
    benefits, "Congress intended not to mandate assignability, but
    intended instead to allow the free marketplace to work out such
    competitive, cost effective, medical expense reducing structures as
    might evolve."  
    Davidowitz, 946 F.2d at 1481
    .
    Consistent with the other circuits which have addressed this
    issue, we hold that ERISA leaves the assignability or non-
    assignability of health care benefits under ERISA-regulated welfare
    plans to the negotiations of the contracting parties.   See St.
    Francis Reg'l Med. 
    Ctr., 49 F.3d at 1464
    (enforcing a non-
    assignment clause in an ERISA-regulated health insurance welfare
    benefit plan against a health care provider); Arkansas Blue Cross
    and Blue Shield v. St. Mary's Hosp., 
    947 F.2d 1341
    (8th Cir. 1991),
    cert. denied, 
    504 U.S. 957
    (1992) (same).  Therefore, we conclude
    that the non-assignment provision in Diaz's HMO policy is not
    contrary to public policy.
    d. The Scope of the Non-Assignment Clause
    In the alternative, City of Hope argues that even if non-
    assignment clauses in ERISA-regulated plans are generally
    enforceable, the district court erred in applying this non-
    assignment clause to its claim as a health care provider.  Instead,
    City of Hope argues that the non-assignment clause in Diaz's
    contract was intended only to preclude her ability to transfer
    rights to actual medical services to another individual, or to
    preclude the diversion of benefit funds to an unrelated debt.
    One court of appeals has adopted this distinction, finding
    that a non-assignment clause which read that "[n]o employee shall
    at any time ... have any right to assign his rights or benefits"
    did not prohibit the assignment of "causes of action arising after
    the denial of benefits" as distinguished from "rights or benefits."
    See Lutheran Med. Ctr. v. Contractors, Laborers, Teamsters, and
    Engineers Health and Welfare Plan, 
    25 F.3d 616
    , 619 (8th Cir.
    1994).  We think this approach would strain the plain meaning of
    the contract language at issue in this case that "[a]ll
    entitlements of a member to receive covered rights are personal and
    may not be assigned."  As we have previously stated,
    "straightforward language in an ERISA-regulated insurance policy
    should be given its natural meaning."  Hughes v. Boston Mut. Life
    Ins. Co., 
    26 F.3d 264
    , 268 (1st Cir. 1994) (quoting Burnham v.Guardian Life Ins. Co., 
    873 F.2d 486
    , 489 (1st Cir. 1989)).  We
    agree with the district court that under the clear terms of the
    contract, Diaz could not assign her rights to City of Hope.
    2. Equitable Estoppel
    Finally, City of Hope claims that HPI is equitably estopped
    from denying coverage.  In Law v. Ernst & Young, we explained that
    "the party to be charged [with an estoppel] must 'make [] a
    definite misrepresentation of fact to another person.'"  Law v.
    Ernst & Young, 
    956 F.2d 364
    , 368 (1st Cir. 1992) (quoting Phelps v.
    FEMA, 
    785 F.2d 13
    (1st Cir. 1986) and Restatement (Second) of Torts
    894(1) (1977)).  In support of its estoppel claim, City of Hope
    points to a March 23, 1993 fax from an HPI employee to City of Hope
    that reads: "It is important to remember as I spoke to you a month
    ago, that (Diaz) has some responsibilities to follow so she can
    have services coverage."  The fax then made reference to Section VI
    of Diaz's HMO policy, which included the terms under which health
    services would be covered.  Given the fact that Diaz's treatment
    had begun in January 1993, City of Hope argues that this reference
    in March 1993 to the procedural requirements of the health
    insurance policy held out the promise of recovery if there was
    compliance with the procedures.  We agree with the district court
    that a statement emphasizing the procedural requirements of a
    health insurance plan is far from the "definite misrepresentation
    of fact" about a willingness to pay for medical services necessary
    to establish an estoppel claim.  There is no evidence in the record
    that HPI ever represented that it would cover City of Hope's costs
    for Diaz's treatment.
    For the foregoing reasons, HPI was entitled to judgment as a
    matter of law.  The judgment of the district court is AFFIRMED.