Cell Science Systems Corp. v. Louisiana Hlth Svc a ( 2020 )

Case: 18-31034 Document: 00515347305 Page: 1 Date Filed: 03/17/2020
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 18-31034 March 17, 2020
Lyle W. Cayce
CELL SCIENCE SYSTEMS CORPORATION, Clerk
Plaintiff - Appellant
v.
LOUISIANA HEALTH SERVICE ; INDEMNITY COMPANY, doing business
as Blue Cross Blue Shield of Louisiana,
Defendant - Appellee
Appeal from the United States District Court
for the Middle District of Louisiana
USDC No. 3:17-CV-1658
Before DAVIS, HO, and ENGELHARDT, Circuit Judges.
PER CURIAM:*
This case comes before our court on a motion to dismiss for lack of subject
matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), based on
standing. We AFFIRM the judgment of the district court.
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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No. 18-31034
I.
Cell Science Systems Corporation (CSS) is the developer of the ALCAT
test, a blood test used by healthcare providers to identify food and chemical
sensitivities in their patients. The dispute in the instant matter arose when
Blue Cross Blue Shield of Louisiana (BCBSLA) refused payment to CSS for
ALCAT tests that had been administered to patients who were participants
and/or beneficiaries of health benefit plans managed by BCBSLA. CSS is not
a participating provider in BCBSLA’s network of providers. Because it has no
contractual relationship with BCBSLA, CSS sought reimbursement for the
ALCAT tests pursuant to purported assignments of benefits from the patients.
The plans at issue are governed by the Employee Retirement Income
Security Act (ERISA). 29 U.S.C. §1001, et seq. CSS filed suit against BCBSLA
as the plan administrator and plan fiduciary. In its initial complaint, CSS
asserted claims under §502(a)(1)(B), §502(c), and §502(a)(3). BCBSLA filed a
motion to dismiss for lack of jurisdiction and failure to state a claim. While
BCBSLA’s motion to dismiss was pending, CSS filed an amended and
supplemental complaint. On August 20, 2018, the district court, concluding
that CSS had failed to demonstrate standing, granted BCBSLA’s motion and
dismissed the matter without prejudice under Rule 12(b)(1) for lack of subject
matter jurisdiction.
II.
We review de novo a grant of a motion to dismiss, applying the same
standards as the district court. LeClerc v. Webb, 419 F.3d 405, 413 (5th Cir.
2005). Here, the motion to dismiss was brought under Rule 12(b)(1) and Rule
12(b)(6). “When a motion to dismiss for lack of jurisdiction is filed in
conjunction with other Rule 12 motions, the court should consider the Rule
12(b)(1) jurisdictional attack before addressing any attack on the merits.”
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Crenshaw-Logal v. City of Abilene, Tex., 436 F. App’x 306, 308 (5th Cir. 2011)
(per curiam) (quoting Ramming v. United States, 281 F.3d 158, 161 (5th Cir.
2001)). On a Rule 12(b)(1) motion to dismiss, the party asserting jurisdiction
bears the burden of proving that jurisdiction exists. Ramming, 281 F.3d at
161.
III.
A. ERISA Standing
Our first inquiry is whether standing is jurisdictional. On appeal, CSS
contends that the district court erred in treating standing as a jurisdictional
issue. Our court’s precedent, however, indicates that the district court did not
err in so doing. See Lee v. Verizon Commc’ns, Inc., 837 F.3d 523, 533 (5th Cir.
2016) (“As a matter of subject matter jurisdiction, standing under ERISA §
502(a) is subject to challenge through Rule 12(b)(1).”); Cobb v. Central States,
461 F.3d 632, 635 (5th Cir. 2006) (“[S]tanding to bring an action founded on
ERISA is a jurisdictional matter.”); LeTourneau Lifelike Orthotics &
Prosthetics, Inc. v. Wal-Mart Stores, Inc., 298 F.3d 348, 351 (5th Cir. 2002)
(“Standing is jurisdictional. [A]bsent a valid assignment of benefits . . . ,
[Plaintiff] would have no derivative standing to sue . . . under ERISA Section
502.”); Hermann Hosp. v. MEBA Med. & Benefits Plan, 959 F.3d 569, 572 (5th
Cir. 1992) (Hermann II), overruled on other grounds by Access Mediquip, L.L.C.
v. UnitedHealthcare Ins. Co., 698 F.3d 229 (5th Cir. 2012), (analyzing ERISA
standing as a question of subject matter jurisdiction).
Rather than accept this precedent, CSS attempts to reframe the standing
analysis altogether. CSS contends that Article III standing is a jurisdictional
prerequisite but that the standing at issue here is prudential standing and
should be considered under Rule 12(b)(6) rather than Rule 12(b)(1). See Harold
H. Huggins Realty, Inc. v. FNC, Inc., 634 F.3d 787, 795-96 (5th Cir. 2011). CSS
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further submits that the Supreme Court drew this distinction between Article
III standing and prudential standing in Lexmark International, Inc. v. Static
Control Components, Inc., 572 U.S. 118 (2014). In Lexmark, the Court was
tasked with determining whether the plaintiff had standing to sue under the
substantive statute. 1 572 U.S. at 127–28. However, the primary inquiry there
was whether the plaintiff fell within the class of persons that has a right to
sue. Id. This required the Court to apply a zone-of-interests analysis, using
traditional tools of statutory interpretation, to determine whether the statute
encompassed the particular plaintiff’s claim. Id. Notably, the Court clarified
that labeling the zone-of-interests test as one of prudential standing is a
misnomer because the test is more properly viewed as one of statutory
interpretation. Id.; see Superior MRI Servs., Inc. v. Alliance Healthcare Servs.,
Inc., 778 F.3d 502, 506 (5th Cir. 2015).
Here, however, there is no issue of statutory interpretation and therefore
no need to apply the zone-of-interests test in our standing analysis. CSS
clearly does not fall within the class of persons to whom the ERISA statute
gives the right to sue. See Dialysis Newco, Inc. v. Cmty. Health Sys. Grp.
Health Plan, 938 F.3d 246, 250 (5th Cir. 2019) (“ERISA does not supply the
provider with a basis for bringing its claim directly against the [plan
administrator/fiduciary]; instead, the provider’s standing to bring this lawsuit
must be derived from the beneficiary and it is subject to any restrictions
contained in the plan.”). Yet, CSS contends it has standing through purported
assignments of benefits from the patients, who have a right to sue under the
statute as plan participants and/or beneficiaries. Consequently, before us is
an issue of third-party standing. The Lexmark Court, by contrast, expressly
1 As a factual distinction from the instant case, the plaintiff in Lexmark brought a
claim of false advertising; thus, the relevant statute at issue there was the Lanham Act, not
ERISA.
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declined to address this discrete issue. Lexmark, 572 U.S. at 127 n.3. (“This
case does not present any issue of third-party standing, and consideration of
that doctrine’s proper place in the standing firmament can await another
day.”).
Moreover, our court has since directly addressed the limited applicability
of Lexmark to questions of prudential standing. See Superior MRI, 778 F.3d
at 506. In Superior MRI, the plaintiff cited Lexmark for the proposition that
prudential standing may not be used as a jurisdictional bar. Id. at 505–06.
However, our court clarified that such an application of Lexmark is misplaced:
“[b]ecause the Lexmark holding deals only with the zone-of-interests test and
not with the requirement that a party assert its own rights, Lexmark does not
control here.” Id. at 506. Like the plaintiff in Superior MRI, CSS must “assert
its own rights” to demonstrate standing. See id. at 504–06. Such a
requirement is jurisdictional in nature. Cf. Dialysis Newco, 938 F.3d at 250
(concluding that a district court lacks jurisdiction where the provider cannot
demonstrate standing through a valid assignment of benefits). Seeing no
reason to revisit our precedent regarding standing under ERISA, “we are
bound to follow our precedent until the Supreme Court squarely holds to the
contrary.” 2 See Superior MRI, 778 F.3d at 506 (citing Exelon Wind 1, L.L.C. v.
Nelson, 766 F.3d 380, 394 (5th Cir. 2014)).
Because Rule 12(b)(1) applies, we next consider whether the attack on
the complaint is facial or factual. “A ‘facial attack’ on the complaint requires
the court merely to look and see if plaintiff has sufficiently alleged a basis of
subject matter jurisdiction, and the allegations in his complaint are taken as
2 Our court’s consistent treatment of ERISA standing as a jurisdictional issue is
further underscored by Lee v. Verizon, a post-Lexmark decision, wherein our court held, “[a]s
a matter of subject matter jurisdiction, standing under ERISA § 502(a) is subject to challenge
through Rule 12(b)(1).” Lee, 837 F.3d at 533.
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true for the purposes of the motion. A ‘factual attack,’ however, challenges the
existence of subject matter jurisdiction in fact, irrespective of the pleadings,
and matters outside the pleadings, such as testimony and affidavits, are
considered. Moreover, a ‘factual attack’ under Rule 12(b)(1) may occur at any
stage of the proceedings, and plaintiff bears the burden of proof that
jurisdiction does in fact exist.” Menchaca v. Chrysler Credit Corp., 613 F.2d
507, 511 (5th Cir. 1980) (citing Mortensen v. First Federal Savings & Loan
Ass'n, 549 F.2d 884, 891–92 (3d Cir. 1977)).
We agree with the district court that BCBSLA has launched a factual
attack because it has challenged the underlying facts supporting the
complaint, i.e. the validity of the assignment, rather than merely challenging
the allegations on their face. Therefore, the court may take material outside
of the pleadings, such as affidavits, testimony, and other evidentiary materials,
into account when evaluating the issue of jurisdiction. Irwin v. Veterans
Admin., 874 F.2d 1092, 1096 (5th Cir. 1989).
Additionally, because a factual attack was raised, the burden of proof
shifts to CSS. “If a defendant makes a ‘factual attack’ upon the court's subject
matter jurisdiction over the lawsuit, the defendant submits affidavits,
testimony, or other evidentiary materials. In the latter case a plaintiff is also
required to submit facts through some evidentiary method and has the burden
of proving by a preponderance of the evidence that the trial court does have
subject matter jurisdiction.” Paterson v. Weinberger, 644 F.2d 521, 523 (5th
Cir. 1981). Moreover, “when a factual attack is made upon federal jurisdiction,
no presumptive truthfulness attaches to the [plaintiff’s] jurisdictional
allegations, and the court is free to weigh the evidence and satisfy itself as to
the existence of its power to hear the case.” Evans v. Tubbe, 657 F.2d 661, 663
(5th Cir. 1981). Accordingly, in order to survive the Rule 12(b)(1) motion to
dismiss for lack of jurisdiction, CSS was required to put forth evidence of valid
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and enforceable assignments of benefits from the ERISA plan participants
and/or beneficiaries.
B. Assignment of Benefits
We now turn to the substantive question of whether CSS has established
a valid assignment, and therefore has standing. Our court has held that
“ERISA health care benefits are assignable. ERISA contains no anti-
assignment provision with regard to health care benefits of ERISA-governed
medical plans, nor is there any language in the statute which even remotely
suggests that such assignments are proscribed or ought in any way to be
limited.” Hermann Hosp. v. MEBA Med. & Benefits Plan, 845 F.2d 1286, 1289
(5th Cir. 1988) (Hermann I).
CSS contends that the contracts assign all rights to CSS, pointing to an
example in a document submitted by BCBSLA that reads in relevant part:
“I hereby assign all medical benefits to which I am entitled to CSS
Ltd., Corp. If insurance payments for CSS are sent directly to me,
I will endorse and send to CSS promptly . . . I assume responsibility
for payment if insurance claim is denied and for any monies owed
for any co-insurance or deductible amounts. I will insure payment
of any outstanding balance due after claim is processed.”
CSS alleges that this language covers all medical benefits and all rights to
payment. Conversely, BCBSLA contends that even assuming these forms are
valid and enforceable, they do not assign the right to file suit for benefits or for
breach of fiduciary duty, or the right to request plan documents. To support
its position, BCBSLA cites to controlling precedent stating that “only an
express and knowing assignment of an ERISA fiduciary breach claim is valid.”
Texas Life, Acc. Health & Hosp. Serv. Ins. Guar. Ass’n v. Gaylord
Entertainment Co., 105 F.3d 210, 218–19 (5th Cir. 1997) (holding that a broad
provision assigning the rights of anyone accepting benefits under the relevant
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act was insufficient to assign the fiduciary breach claims). Additionally,
following CSS’s Rule 26(a) disclosures wherein CSS failed to disclose
assignment forms for several of the claimed patients, BCBSLA challenged the
factual allegation that CSS had actually obtained valid assignments on behalf
of all of the claimed plan participants. Accordingly, the burden then shifted to
CSS to produce evidence of valid and enforceable assignments.
Yet, despite having leave to amend its complaint and to file supplemental
briefs, CSS did not submit any materials attempting to prove subject matter
jurisdiction, instead focusing on its contention that it should not have to
provide evidence at this stage in the pleadings. However, as our precedent
makes clear, Rule 12(b)(1) requires the district court to evaluate jurisdiction,
with the burden of proof on CSS. CSS nevertheless failed to attach any of the
purported assignments to its complaint, its amended and supplemental
complaint, or any of the four briefs submitted in response to the pending
motion to dismiss. As the district court noted, this repeated failure
undermines the allegation that CSS had obtained valid assignments of rights
it asserts herein. Because CSS failed to meet its burden of proving, by a
preponderance of the evidence, that it had obtained valid assignments, the
district court correctly concluded that BCBSLA is entitled to dismissal.
But even assuming arugendo that the language of the form cited by CSS
assigns a right to bring suit, there can be no valid assignment because the
contract includes anti-assignment language:
A Member’s rights and Benefits under this Contract are personal
to the Member and may not be assigned in whole or in part by the
Member. We will recognize assignments of benefits to Hospitals if
both this Contract and the Provider are subject to La. R.S. 40:2010.
If both this Contract and the Provider are not subject to La. R.S.
40:2010, We will not recognize assignments or attempted
assignments of benefits. Nothing contained in the written
description of health coverage shall be construed to make the
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health plan or Us liable to any third party to whom a Member may
be liable for the cost of medical care, treatment, or services.
CSS counters that BCBSLA is estopped from asserting the anti-assignment
language.
C. Estoppel
In order “[t]o establish an ERISA-estoppel claim, the plaintiff must
establish: (1) a material misrepresentation; (2) reasonable and detrimental
reliance upon the representation; and (3) extraordinary circumstances.” Mello
v. Sara Lee Corp., 431 F.3d 440, 444–45 (5th Cir. 2005). On the first element,
CSS contends that BCBSLA made a material misrepresentation by failing to
assert the anti-assignment language until now, instead denying payment
because the tests were allegedly “investigational.” To support this assertion,
CSS relies heavily on our decision in Hermann II in which our court held that
the plan was estopped from asserting an anti-assignment clause after failing
to assert the clause at any point during the three years of ongoing investigation
and communication regarding the claim; yet, the plan relied on the anti-
assignment clause in ultimately denying the claim. Hermann II, 959 F.2d at
574–75. Unlike the plan in Hermann II, here, BCBSLA did not invoke the
anti-assignment clause to deny the claim; it invoked the anti-assignment claim
only as a challenge to jurisdiction. There is no indication from the record that
BCBSLA either misrepresented or misled CSS with respect to its intention to
enforce the anti-assignment clause in its plan. See Mello, 431 F.3d at 445
(citing Weir v. Federal Asset Disposition Ass’n, 123 F.3d 281, 289–90 (5th Cir.
1997)).
CSS then argues that it reasonably and detrimentally relied on
BCBSLA’s alleged preauthorization of the test and the past payments covering
the test. Our court has held that a party’s reliance is not reasonable if it is
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inconsistent with the clear and unambiguous terms of the plan documents. Id.at 447 (citing Sprague v. GMC, 133 F.3d 388, 404 (6th Cir. 1998)). On this
element, CSS’s argument is again misplaced. CSS may have reasonably and
detrimentally relied on BCBSLA’s preauthorization and prior payments in
believing the claim would not be denied. Yet, that reliance is irrelevant to
BCBSLA’s representations with respect to the anti-assignment clause CSS
wishes to estop because the anti-assignment clause clearly and unambiguously
prohibits a participant’s assignment of benefits.
Finally, CSS must show “extraordinary circumstances.” See id. at 444–
45. Although, as the district court noted, our court has not specifically defined
the term, we have recognized the Third Circuit’s approach with approval. High
v. E-Systems, Inc., 459 F.3d 573, 580 n.3 (5th Cir. 2006). This approach
generally defines extraordinary circumstances as those that involve bad faith,
fraud, or concealment, as well as possibly when “a plaintiff repeatedly and
diligently inquired about benefits and was repeatedly misled” or when
“misrepresentations were made to an especially vulnerable plaintiff.” Id. CSS
relies on essentially the same argument it presented for the first element—the
fact that BCBSLA brought up the anti-assignment provision now rather than
when the payments were denied. Once again, CSS fails on this element
because it has presented no allegation, argument, or evidence demonstrating
“extraordinary circumstances” in this case. Therefore, BCBSLA is not
estopped from asserting the anti-assignment provisions in the plan.
IV.
For the reasons set forth above, CSS has failed to demonstrate by a
preponderance of the evidence that it has standing to bring suit; accordingly,
the district court did not err in granting the motion to dismiss under Rule
12(b)(1) for lack of subject matter jurisdiction. We AFFIRM.
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