Beverly Oaks Psc, LLC v. Blue Cross & Blue Shield of Il ( 2020 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
BEVERLY OAKS PHYSICIANS No. 19-55820
SURGICAL CENTER, LLC, A
California Limited Liability D.C. No.
Company, 2:18-cv-03866-
Plaintiff-Appellant, RSWL-JPR
v.
OPINION
BLUE CROSS AND BLUE SHIELD OF
ILLINOIS; DOES, 1 through 100,
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of California
Ronald S.W. Lew, District Judge, Presiding
Submitted August 14, 2020 *
Pasadena, California
Filed December 17, 2020
*
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
2 BEVERLY OAKS V. BLUE CROSS & BLUE SHIELD
Before: Kim McLane Wardlaw and Richard R. Clifton,
Circuit Judges, and Jennifer Choe-Groves, ** Judge.
Opinion by Judge Choe-Groves
SUMMARY ***
Employee Retirement Income Security Act
The panel reversed the district court’s dismissal of a
healthcare provider’s claim for benefits under the Employee
Retirement Income Security Act, and remanded the case to
the district court.
The panel held that plaintiff, an assignee of its patients,
sufficiently alleged that defendant waived or was equitably
estopped from raising an anti-assignment provision in
ERISA plan documents as a reason for denying the benefits
claim for the first time in litigation. Specifically, defendant
confirmed that ERISA plan benefits were available during
pre-surgery conversations, plaintiff submitted the claim
form to defendant indicating that it sought to recover
benefits via a patient assignment, and defendant either
denied in full or underpaid the claims during the
administrative claim process without asserting the anti-
assignment provision as a ground for denying a full
reimbursement.
**
The Honorable Jennifer Choe-Groves, Judge for the United States
Court of International Trade, sitting by designation.
***
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
BEVERLY OAKS V. BLUE CROSS & BLUE SHIELD 3
COUNSEL
Richard D. Williams and Mina Hakakian, Williams Law
Firm PC, Los Angeles, California, for Plaintiff-Appellant.
Raymond A. Cardozo and David J. de Jesus, Reed Smith
LLP, San Francisco, California; Martin J. Bishop, Reed
Smith LLP, Chicago, Illinois; Amir Shlesinger, Reed Smith
LLP, Los Angeles, California; for Defendant-Appellee Blue
Cross and Blue Shield Of Illinois.
OPINION
CHOE-GROVES, Judge:
Plaintiff-Appellant Beverly Oaks Physicians Surgical
Center, LLC (“Beverly Oaks”) appeals the district court’s
dismissal of its claim for benefits under the Employee
Retirement Income Security Act of 1974 (“ERISA”).
Beverly Oaks contends that Defendant-Appellee Blue Cross
and Blue Shield of Illinois (“Blue Cross”) waived or is
equitably estopped from raising an anti-assignment
provision as a reason for denying a benefits claim for the first
time in litigation when Blue Cross confirmed that plan
benefits were available during pre-surgery conversations,
Beverly Oaks submitted the claim form to Blue Cross
indicating that it sought to recover benefits via a patient
assignment, and Blue Cross either denied in full or underpaid
the claims during the administrative claim process without
asserting the anti-assignment provision as a ground for
denying full reimbursement. Because we agree that Beverly
Oaks stated an ERISA claim for benefits under a theory of
waiver or equitable estoppel, we reverse and remand.
4 BEVERLY OAKS V. BLUE CROSS & BLUE SHIELD
I
Beverly Oaks, an out-of-network healthcare provider,
performed medical procedures on 14 patients who were
covered under employer-sponsored health insurance plans
administered by Blue Cross. Eleven patients were covered
under the Teamsters Western Region & Local 177 Health
Care Plan (“Teamsters Plan”). One patient was covered
under the Williams Lea Health Care Plan (“Williams Lea
Plan”) and another under the Woodward, Inc. Health Care
Plan (“Woodward Plan”). The remaining patient with the
unknown insurance plan is identified in the record as
“Patient E.” 1
The language in the Summary Plan Description2
accompanying the Teamsters Plan bars a participant from
assigning benefits (“Participants are generally responsible
for notifying the Fund of changes in family circumstances.
Benefits are not assignable, although the Fund will honor
qualified medical child support orders.”). Further, the
Teamsters Plan Rules and Regulations reiterates that
benefits are not assignable. 3 Both the Williams Lea and
1
Beverly Oaks does not challenge in this appeal the dismissal of the
claim as to Patient E.
2
“The [Summary Plan Description] is the statutorily established
means of informing participants of the terms of the plan and its benefits.”
Pisciotta v. Teledyne Indus., Inc., 91 F.3d 1326, 1329 (9th Cir. 1996)
(citations omitted).
3
Article X, Section B, of the Teamsters Plan Rules and Regulations
provides:
Benefits payable hereunder shall not be subject in any
manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge by any
BEVERLY OAKS V. BLUE CROSS & BLUE SHIELD 5
Woodward Plans contain identical provisions barring the
assignment of benefits. 4
As a precondition to receiving medical treatment, the
patient signed Beverly Oaks’ Financial Responsibility
Agreement, assigning Beverly Oaks the right to collect
benefits under their Blue Cross insurance plans. Before
providing each patient medical services, Beverly Oaks
contacted Blue Cross to determine benefit coverage and
eligibility for out-of-network benefits. In these pre-surgery
conversations, Blue Cross represented to Beverly Oaks that
benefits were paid on an out-of-network basis at a “typical”
rate of 50% to 100% of the claim and provided additional
information such as the deductible amount and the patient’s
account type.
After surgery, Beverly Oaks submitted a claim to Blue
Cross on behalf of the patient. Beverly Oaks indicated on
the claim form that it sought to collect ERISA benefits via a
person; however any Eligible Employee may direct
that benefits due him/her, except benefits payable
under Article III, be paid to an institution in which
he/she or his/her Dependent is hospitalized, or to any
provider of medical, dental or vision care services or
supplies in consideration for Hospital, medical, dental
or vision care services rendered or to be rendered.
4
The anti-assignment provision reads:
A Covered Patient’s claim for benefits under this
Health Care Plan is expressly non-assignable and non-
transferable in whole or in part to any person or entity,
including any Provider, at anytime before or after
Covered Services are rendered to a Covered
Person. . . . Any such assignment or transfer of a claim
for benefits or coverage shall be null and void.
6 BEVERLY OAKS V. BLUE CROSS & BLUE SHIELD
patient assignment of benefits. Blue Cross processed and
adjudicated each claim during the administrative claim
process, either denying the claim in full or issuing a small
reimbursement for the amount Beverly Oaks claimed. At no
time during the pre-surgery conversations or during the
administrative claim process did Blue Cross advise Beverly
Oaks that it intended to assert an anti-assignment provision
as a basis for denying reimbursement sought under a patient
assignment of benefits.
In short, Beverly Oaks submitted 17 claims to Blue Cross
totaling over $1,400,000 for services rendered to 14 patients.
Blue Cross denied in full or reimbursed Beverly Oaks less
than 10% of the claimed benefits, just over $130,000 in total.
Beverly Oaks brought this action against Blue Cross to
recover additional benefits on the submitted claims under
ERISA. Beverly Oaks attached to the complaint the
Financial Responsibility Agreement between Beverly Oaks
and its patients, an exemplar of the submitted claim or billing
form, and a summary chart showing the claims for benefits
that Beverly Oaks sought to recover. Beverly Oaks alleged
that Blue Cross waived or was equitably estopped from
asserting the anti-assignment provision in the plan
documents because Blue Cross did not assert that provision
either during the pre-surgery telephone conversations or the
administrative claim process.
Blue Cross moved to dismiss, arguing that Beverly Oaks
lacked standing to receive benefits because the anti-
assignment provision in the patients’ healthcare plans were
valid, enforceable, and thus barred a non-plan beneficiary or
participant from collecting benefits. Blue Cross cited cases
rejecting arguments that a plan administrator waived an anti-
assignment provision by not asserting it before litigation.
BEVERLY OAKS V. BLUE CROSS & BLUE SHIELD 7
The district court agreed and dismissed Beverly Oaks’
complaint with leave to replead.
Beverly Oaks repleaded the ERISA claim and advanced
again its argument that Blue Cross waived or was equitably
estopped from asserting the anti-assignment clause as a basis
to deny benefits when asserted for the first time in litigation.
Blue Cross moved to dismiss and reasserted that the anti-
assignment provisions in the insurance plans barred the
patient from assigning benefits to a provider such as Beverly
Oaks and thus Beverly Oaks lacked standing to bring an
ERISA denial of benefits claim. The district court found that
the repleaded allegations lacked “any new facts sufficient to
establish waiver or estoppel” and reaffirmed its conclusion
that “when raising an [anti-assignment provision] to contest
standing, it is not waived for failure to raise it during the
claim administration process.” The district court reiterated
that evidence of direct communications and payment do not
show a clear and convincing waiver of the anti-assignment
provision. 5
Beverly Oaks’ appeal followed and we have jurisdiction
under 28 U.S.C. § 1291.
II
We review de novo the district court’s order granting a
motion to dismiss under Federal Rule of Civil Procedure
12(b)(6). Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir.
2005). In conducting this review, we accept as true the
pleaded factual allegations and “construe those facts in the
5
The district court granted Beverly Oaks leave to amend only the
claims based on the Teamsters Plan. Upon repleading and with Blue
Cross moving to dismiss, the district court held that the language in the
Teamsters Plan precluded a patient from assigning benefits.
8 BEVERLY OAKS V. BLUE CROSS & BLUE SHIELD
light most favorable to the plaintiff.” Smith v. Pac. Props.
and Dev. Corp., 358 F.3d 1097, 1099 (9th Cir. 2004). We
may also “consider materials that are submitted with and
attached to the [c]omplaint”; “judicial notice of matters of
public record”; and “unattached evidence on which the
complaint necessarily relies if: (1) the complaint refers to the
document; (2) the document is central to the plaintiff’s
claim; and (3) no party questions the authenticity of the
document.” United States v. Corinthian Colls., 655 F.3d
984, 998–99 (9th Cir. 2011) (internal quotation marks and
citations omitted).
III
Beverly Oaks contends on appeal that the district court
erred in finding as a matter of law that it failed to adequately
plead that Blue Cross’ conduct supported a theory of waiver
or that Blue Cross was equitably estopped from asserting the
anti-assignment provision as a defense for the first time in
litigation as a basis to deny benefits. 6 We agree.
A
When making a claim determination under ERISA, “an
administrator may not hold in reserve a known or reasonably
knowable reason for denying a claim, and give that reason
for the first time when the claimant challenges a benefits
denial in court.” Spinedex Physical Therapy USA Inc. v.
United Healthcare of Ariz., Inc., 770 F.3d 1282, 1296 (9th
Cir. 2014) (“Spinedex”); Harlick v. Blue Shield of Cal.,
686 F.3d 699, 719 (9th Cir. 2012) (“A plan administrator
may not fail to give a reason for a benefits denial during the
6
Beverly Oaks does not challenge in this appeal the enforceability
of the anti-assignment provisions.
BEVERLY OAKS V. BLUE CROSS & BLUE SHIELD 9
administrative process and then raise that reason for the first
time when the denial is challenged in federal court[.]”).
It is settled law that “health care providers are not
‘beneficiaries’ within the meaning of ERISA’s enforcement
provisions.” DB Healthcare, LLC v. Blue Cross Blue Shield
of Ariz., Inc., 852 F.3d 868, 874 (9th Cir. 2017); 29 U.S.C.
§ 1132(a)(1) (noting that only participants and beneficiaries
have standing to bring a lawsuit). “[A] non-participant
health care provider . . . cannot bring claims for benefits on
its own behalf. It must do so derivatively, relying on its
patients’ assignments of their benefits claims.” DB
Healthcare, LLC, 852 F.3d at 874 (quoting Spinedex,
770 F.3d at 1298).
“Anti-assignment clauses in ERISA health plans are
valid and enforceable.” Spinedex, 770 F.3d at 1296 (citation
omitted). Yet, a plan administrator can waive the right to
enforce an anti-assignment provision. See id. at 1296–97
(concluding that the defendant-claims administrator did not
raise the anti-assignment provision during the administrative
claim process because “there [wa]s no evidence that [the
claims administrator] was aware, or should have been aware,
during the administrative process that [the plaintiff-medical
provider] was acting as its patients’ assignee”).
Waiver is “the intentional relinquishment of a known
right.” Gordon v. Deloitte & Touche LLP Grp. Long Term
Disability Plan, 749 F.3d 746, 752 (9th Cir. 2014) (citing
Intel Corp. v. Hartford Accident & Indem. Co., 952 F.2d
1551, 1559 (9th Cir. 1991) (Waiver occurs when “a party
intentionally relinquishes a right, or when that party’s acts
are so inconsistent with an intent to enforce the right as to
induce a reasonable belief that such right has been
relinquished.”)). To show that Blue Cross waived the anti-
assignment provision that would otherwise foreclose
10 BEVERLY OAKS V. BLUE CROSS & BLUE SHIELD
Beverly Oaks from having statutory standing in this ERISA
action, Beverly Oaks must plead sufficient facts that Blue
Cross “was aware or should have been aware, during the
administrative [claim] process that [Beverly Oaks] was
acting as its patients’ assignee.” See Spinedex, 770 F.3d
at 1297.
Here, Beverly Oaks pleaded adequately facts supporting
waiver. On the claim form submitted to Blue Cross, Beverly
Oaks indicated that it was acting as its patient’s assignee. 7
Blue Cross processed the claim form, denied in full or
underpaid Beverly Oaks’ billed charges, and at no time
during the administrative claim process did Blue Cross raise
the anti-assignment provision as a basis to deny benefits.
These allegations show plausibly that Blue Cross should
have at least been aware that Beverly Oaks sought to collect
plan benefits through a patient assignment because Beverly
Oaks marked the appropriate box on the claim form
indicating that it was pursuing plan benefits through a patient
assignment. See Spinedex, 770 F.3d at 1297. The
allegations also show plausibly that Blue Cross’ silence and
payment was “so inconsistent with an intent to enforce” the
anti-assignment clause as to “induce a reasonable belief that
[the right to enforce the clause] ha[d] been relinquished.”
See Intel Corp., 952 F.2d at 1559. Further, that Blue Cross
“h[e]ld in reserve a known or reasonably knowable reason
for denying a claim, and g[a]ve that reason for the first time
when [Beverly Oaks] challenge[d] a benefits denial in court”
supports the waiver allegations. See Spinedex, 770 F.3d at
1296; Harlick, 686 F.3d at 720 (“ERISA and its
implementing regulations are undermined where plan
7
The claim form attached as an exhibit to the original Complaint
and First Amended Complaint shows a “Y” in box 53, indicating that
Beverly Oaks asserted its claim via a patient assignment of benefits.
BEVERLY OAKS V. BLUE CROSS & BLUE SHIELD 11
administrators have available sufficient information to assert
a basis for denial of benefits, but choose to hold that basis in
reserve rather than communicate it to the beneficiary.”
(internal quotation marks and citations omitted)).
The two unpublished decisions of our court upon which
Blue Cross relies, Brand Tarzana Surgical Institute, Inc. v.
International Longshore & Warehouse Union-Pacific
Maritime Ass’n Welfare Plan, 706 F. App’x 442 (9th Cir.
2017) (“Brand Tarzana”) and Eden Surgical Center v.
Cognizant Technology Solutions Corp., 720 F. App’x 862
(9th Cir. 2018) (“Eden Surgical Center”), are unpersuasive.
Those decisions are not binding on us as precedent, and, as
such, cannot supersede our holdings in Spinedex and
Harlick, which are binding. Moreover, those decisions do
not ultimately support the position advocated by Blue Cross
here.
In Brand Tarzana, we stated that an “anti-assignment
provision . . . is a litigation defense, not a substantive basis
for claim denial.” 706 F. App’x at 443. That statement,
however, does not undermine Spinedex’s holding that an
insurer or claim administrator may waive the ability to raise
an anti-assignment provision as a defense when they take
action inconsistent with that provision or are aware that the
claimant is acting as an assignee. See 770 F.3d at 1296.
Indeed, Brand Tarzana faithfully and accurately applied
Spinedex. See 706 F. App’x at 443–44 (“There is no
evidence that the Plan or its vendors took action inconsistent
with the anti-assignment provision or that they were aware,
or should have been aware, that Brand was acting as an
assignee.”) (citing Spinedex, 770 F.3d at 1297).
Eden Surgical Center is similarly unavailing. The court
there held that the plaintiff’s waiver argument failed because
the “[d]efendants raised the anti-assignment provision after
12 BEVERLY OAKS V. BLUE CROSS & BLUE SHIELD
the suit commenced to contest [the plaintiff]’s standing to
sue, not as a reason to deny benefits.” Eden Surgical Center,
720 F. App’x at 863. That holding also does not conflict
with Spinedex.
Absent from Eden Surgical Center and Brand Tarzana
is a rationale for condoning an insurer or plan
administrator’s course of conduct in failing to raise the anti-
assignment provision during the administrative claims
process and then later asserting that provision as a “litigation
defense” to avoid payment of benefits. Further, relying on
Eden Surgical Center and Brand Tarzana to accept the
“litigation defense” as a basis to deny waiver leaves an
insurer or plan administrator unaccountable for prior
conduct contrary to its litigation position.
The district court erred in finding waiver inapplicable as
a matter of law. Under Spinedex, Beverly Oaks alleged
plausibly that Blue Cross waived the anti-assignment
provisions in the Teamsters, Williams Lea, and Woodward
Plans. Blue Cross thus cannot raise the anti-assignment
provision for the first time in litigation when Blue Cross held
that provision in reserve as a reason to deny benefits.
B
Beverly Oaks also alleged facts that showed plausibly
that Blue Cross made an actionable misrepresentation and
was thus equitably estopped from raising the anti-
assignment provisions as a litigation defense contrary to its
prior conduct. To be sure, Beverly Oaks has actually
asserted only a single claim, for failure to pay ERISA plan
benefits. It has argued alternative legal theories to support
that claim, namely waiver and equitable estoppel, but both
are offered to support the same claim, so our conclusion
regarding the waiver argument is enough to reinstate this
BEVERLY OAKS V. BLUE CROSS & BLUE SHIELD 13
action. Nonetheless, in case it might matter as the case
proceeds, Beverly Oaks should be allowed to proceed with
its estoppel argument as well, based on its pleading.
Equitable estoppel “holds the fiduciary to what it had
promised and operates to place the person entitled to its
benefit in the same position he would have been in had the
representations been true.” Gabriel v. Alaska Elec. Pension
Fund, 773 F.3d 945, 955 (9th Cir. 2014) (internal quotation
marks and citations omitted). Under this theory of relief, a
plaintiff must allege the traditional equitable estoppel
requirements: “(1) the party to be estopped must know the
facts; (2) he must intend that his conduct shall be acted on or
must so act that the party asserting the estoppel has a right to
believe it is so intended; (3) the latter must be ignorant of the
true facts; and (4) he must rely on the former’s conduct to
his injury.” Id. (citations omitted). In the ERISA context,
the plaintiff must allege three additional requirements:
“(1) extraordinary circumstances; (2) that the provisions of
the plan at issue were ambiguous such that reasonable
persons could disagree as to their meaning or effect; and
(3) that the representations made about the plan were an
interpretation of the plan, not an amendment or modification
of the plan.” Id. at 957 (internal quotation marks and
citations omitted). “[E]xtraordinary circumstances” in this
context may be established by alleging facts that show a
defendant made a promise that they reasonably should have
expected to induce action or forbearance on the plaintiff’s
part, combined with a showing of repeated
misrepresentations over time. Id. (internal citations and
quotation marks omitted).
Drawing all reasonable inferences in Beverly Oaks’
favor, it is plausible that (1) Blue Cross knew about the anti-
assignment provisions; (2) Beverly Oaks had a basis for
14 BEVERLY OAKS V. BLUE CROSS & BLUE SHIELD
believing that Blue Cross intended to provide benefits for the
claimed procedures; (3) Beverly Oaks was unaware of the
anti-assignment provisions; and (4) Beverly Oaks relied on
Blue Cross’ acquiescence of the patients’ assignment of
benefits to its detriment. See id. at 955–57. Beverly Oaks
has also adequately pleaded facts to satisfy the three
equitable estoppel requirements specific to the ERISA
context. Beverly Oaks has adequately pleaded extraordinary
circumstances. It pleaded that Blue Cross made it a promise
(“[I]n each telephone communication [Blue Cross’]
representative advised [Beverly Oaks’] representative that
[Beverly Oaks] was eligible to receive payment as an out of
network provider[.]”), that was reasonable to expect to, and
did, induce Beverly Oaks into action (“If [Blue Cross’]
representatives would have stated in any of these telephone
communications that [Blue Cross] intended to rely upon an
anti-assignment clause as a basis to bar payment, [Beverly
Oaks] would not have performed surgery center facility
services for the ERISA Plan in question, or any of its
members or their dependents.”). These misrepresentations
continued over time throughout the administrative review
process. Beverly Oaks pleaded that the anti-assignment
provisions at issue were ambiguous. It pleaded that the
representations Blue Cross made about the plan were
interpretations of the plan and not amendments or
modifications. That was sufficient.
IV
Accordingly, we reverse and remand.
REVERSED and REMANDED.