American Chiropractic Ass'n v. American Specialty Health Inc.

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 14-1832
_____________
AMERICAN CHIROPRACTIC ASSOCIATION, on its own behalf and in a
representational capacity on behalf of its members;
STEVEN G. CLARKE, D.C., individually, and on behalf of all other similarly situated
Doctors of Chiropractic;
CAROL A. LIETZ, individually, and on behalf of all other similarly situated health
insurance subscribers,
Appellants
v.
AMERICAN SPECIALTY HEALTH INCORPORATED;
AMERICAN SPECIALTY HEALTH NETWORKS, INC;
CONNECTICUT GENERAL LIFE INSURANCE COMPANY;
CIGNA CORPORATION
______________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
(D.C. Civ. Action No. 2-12-cv-07243)
District Judge: Honorable Nitza I. Quinones Alejandro
_______________________
Argued: November 19, 2014
_______________________
Before CHAGARES, HARDIMAN, and SHWARTZ, Circuit Judges
(Filed: September 11, 2015 )
D. Brian Hufford, Esq. [ARGUED]
Jason S. Cowart, Esq.
Zuckerman Spaeder
1185 Avenue of the Americas
31st Floor
New York, NY 10036
Anthony F. Maul, Esq.
Suite 201
68 Jay Street
Brooklyn, NY 11201
Catherine Pratsinakis, Esq.
Steven A. Schwartz, Esq.
Chimicles & Tikellis
361 West Lancaster Avenue
One Haverford Centre
Haverford, PA 19041
Joe R. Whatley, Jr. Esq.
Whatley, Drake & Kallas
1540 Broadway
37th Floor
New York, NY 10036
Counsel for the Appellants
Joshua B. Simon, Esq. [ARGUED]
Warren Haskel, Esq.
Frank M. Holozubiec, Esq.
William H. Pratt, Esq.
Kirkland & Ellis
601 Lexington Avenue
New York, NY 10022
Michael P. Daly, Esq.
Richard M. Haggerty, Jr., Esq.
Drinker, Biddle & Reath
18th & Cherry Streets
One Logan Square, Suite 2000
Philadelphia, PA 19103
Andrew Z. Edelstein, Esq.
Elizabeth D. Mann, Esq.
Mayer Brown
2
355 South Grand Avenue
Suite 3800
Los Angeles, CA 90071
Charles A. Rothfeld, Esq.
Mayer Brown
1999 K. Street, N.W.
Washington, DC 20006
Francine F. Griesing, Esq.
Kathryn G. Legge, Esq.
Griesing Law
1717 Arch Street
Suite 360
Philadelphia, PA 19103
Counsel for the Appellees
_____________________________
OPINION*
_____________________________
SHWARTZ, Circuit Judge.
The District Court dismissed this putative class action against American Specialty
Health, Inc. and American Specialty Health Networks, Inc. (collectively, “ASHN”) and
Cigna Corporation and Connecticut General Life Insurance Company (collectively,
“CIGNA”), for alleged violations of the Employee Retirement Income Security Act of
1974 (“ERISA”) related to claims processing and benefit determinations. For the reasons
set forth herein, we affirm in part, vacate in part, and remand for further proceedings.
I1
*
This disposition is not an opinion of the full court and pursuant to I.O.P. 5.7 does
not constitute binding precedent.
3
CIGNA issues ERISA-governed health insurance plans, oversees coverage
decisions, and provides for payment or reimbursement of benefits to its subscribers.
CIGNA “delegate[s]” to ASHN, a network of more than 21,000 chiropractors that
contracts with health plans, the responsibility for administering its chiropractic-related
insurance claims. JA 54.
Carol A. Lietz is a subscriber to a CIGNA plan,2 who received chiropractic
services from a chiropractor within the CIGNA network. Lietz’s chiropractor submitted
a claim to ASHN for reimbursement for these services. Although Lietz’s chiropractor
received $88.00, the “Explanation of Benefits” form (“EOB”) Lietz received from
CIGNA stated that the amount billed to her account, and hence applied to her deductible,
was $127.28. Lietz alleges that nothing in the EOB stated that her account would be
billed for more than the $88.00 her provider received. Lietz complained to her
chiropractor about the charge. When he asked ASHN to explain why he received less
than the $127.28 reported to Lietz, ASHN simply told him that he was reimbursed in
accordance with the fee schedule set forth in his contract with ASHN and that any other
agreements concerning the transaction were confidential.
1
Because we are reviewing orders dismissing claims based upon Fed. R. Civ. P.
12(b)(1) for lack of standing and 12(b)(6) for failure to state a claim and no other
evidence was provided, we draw these facts from the complaint and assume they are true.
In re Schering Plough Corp. Intron/Temodar Consumer Class Action, 678 F.3d 235, 243
(3d Cir. 2012).
2
The Court granted CIGNA’s motion to supplement the record with an affidavit
asserting that Lietz was not a participant in her ERISA-governed CIGNA plan after the
Complaint was filed.
4
Steven G. Clarke is a chiropractor with High Street Rehabilitation, LLC, whose
patients include those covered by CIGNA health plans. He accepts assignments from
CIGNA insureds that authorize him to receive payment from CIGNA for the services he
provides. The “Assignment of Benefits” (“AOB”) forms state:
I authorize payment of medical benefits to High Street
Rehabilitation, LLC for all services rendered. I understand
that I am financially responsible for all charges whether or
not they are paid by insurance (commercial, worker’s
compensation, auto, etc.). In the event of an unpaid balance, I
am aware that my bill will be sent to the collection agency
and that I will be held responsible for any and all charges
incurred, including attorney fees.
JA 78. He contends that this AOB grants him “standing to pursue the ERISA claims.”
JA 48. He alleges that ASHN and CIGNA did not pay him the amounts to which he was
entitled and seeks, among other things, reimbursement for his services.3
The American Chiropractic Association (“ACA”) is a national association of
chiropractors that seeks to “promote the chiropractic profession and the services of
Doctors of Chiropractic for the benefit of patients they serve.” JA 50. ACA does this by,
among other things, assisting chiropractors and patients who “have been negatively
impacted by improper insurance company policies and procedures.” JA 50.
3
Clarke also alleged that the AOB entitled him to obtain other equitable relief but
he withdrew that claim during oral argument. See Oral Argument at 3:42, N. Jersey
Brain & Spine Ctr. v. Aetna, Inc. (No. 14-2101), available at
http://www2.ca3.uscourts.gov/oralargument/audio/14-
2101NJBrainSpineCenterv.Aetna.mp3. As a result, the summary of the Complaint omits
references to the equitable relief he sought.
5
Lietz, Clarke, and ACA filed a three-count putative class action complaint alleging
that ASHN and CIGNA violated ERISA. Count I is an ERISA benefits claim under 29
U.S.C. § 1132(a)(1)(B). It targets, among other things, CIGNA and ASHN’s allegedly
false and misleading EOBs that “reported a billed amount that was different from the
amount actually billed by the provider[] and where the allowed amount was different
from the allowed amount reported to the provider.” JA 114-15. Lietz seeks to enjoin
CIGNA and ASHN from “pursuing the[se] policies,” and Clarke and Lietz seek
“reimburse[ment of] benefits which were denied or reduced as a result of such policies.”
JA 116. Lietz and ACA also seek “declaratory and injunctive relief” to enforce the plan
terms and to “clarify their rights to future benefits.” JA 116.
Count II is an ERISA breach of fiduciary duty claim under 29 U.S.C. § 1132(a)(3).
It alleges that CIGNA and ASHN breached their fiduciary duties under ERISA through
“falsification of EOBs” and “various ASHN policies which are designed to discourage
the provision of chiropractic care.” JA 116. Lietz and ACA seek “appropriate equitable
relief,” including the removal of CIGNA and ASHN as fiduciaries of their ERISA plans.
JA 117.
Count III alleges that CIGNA and ASHN have violated various state anti-
discrimination, prompt pay, and “utilization management” statutes for which ACA alone
seeks “appropriate declaratory and injunctive relief.” JA 117.
The District Court dismissed the complaint pursuant to Fed. R. Civ. P. 12(b)(1)
and 12(b)(6) for lack of statutory standing and for failure to state a claim. As to Lietz, the
6
District Court held that she failed to show that she exhausted the administrative remedies
set forth in CIGNA’s plan or that doing so would be futile. As to Clarke, the District
Court held that he lacked standing because the AOB assigned him only the right to
receive reimbursement from his patient’s insurance carrier, not the right to “pursue
litigation under ERISA.” Am. Chiropractic Ass’n v. Am. Specialty Health Inc., 14 F.
Supp. 3d 619, 628 (E.D. Pa. 2014). Finally, as to ACA, the District Court held that it
lacked associational standing because it failed to show that any of its members had
standing in their own right and that its claims would not require their individualized
participation.
II4
We conduct plenary review of an order dismissing a complaint under Rule
12(b)(1) for lack of standing and 12(b)(6) for failure to state a claim. In re Schering
Plough Corp. Intron/Temodar Consumer Class Action, 678 F.3d 235, 243 (3d Cir. 2012).
When reviewing both types of dismissals, we “must accept as true all material allegations
set forth in the complaint, and must construe those facts in favor of the nonmoving
party.” Id. We will address Lietz’s, Clarke’s, and ACA’s claims in turn.
III
A
4
The District Court had jurisdiction under 28 U.S.C. § 1331. We have jurisdiction
under 28 U.S.C. § 1291.
7
The District Court dismissed Lietz’s claims for failing to exhaust her
administrative remedies or to show that she should be excused from having to exhaust
them. Except in limited circumstances, we “will not entertain an ERISA claim unless the
plaintiff has exhausted the remedies available under the plan.” Harrow v. Prudential Ins.
Co. of Am., 279 F.3d 244, 249 (3d Cir. 2002) (quotation marks omitted). Exhaustion is a
judicially created “nonjurisdictional prudential” requirement, Metro. Life Ins. Co. v.
Price, 501 F.3d 271, 279 (3d Cir. 2007), that plaintiffs must satisfy for ERISA benefits
claims but not for claims arising from violations of ERISA’s substantive provisions, such
as breach of fiduciary duty claims, Zipf v. Am. Tel. & Tel. Co., 799 F.2d 889, 891-93 (3d
Cir. 1986). The ERISA exhaustion requirement is an affirmative defense, so the
defendant bears the burden of proving failure to exhaust. Price, 501 F.3d at 280; Paese v.
Hartford Life & Accident Ins. Co., 449 F.3d 435, 446 (2d Cir. 2006).5
Here, the District Court erred by shifting the burden onto Lietz to establish that
she had exhausted her administrative remedies instead of requiring CIGNA and ASHN to
demonstrate that she had not. See, e.g., Price, 501 F.3d at 280 (citing Paese, 449 F.3d at
446). It cannot be conclusively established from the complaint whether Lietz failed to
adequately pursue her administrative remedies or whether it would have been futile for
her to have done so given the allegations that the defendants misled her about the benefits
5
Because the exhaustion defense often requires consideration of materials outside
the pleadings and is thus typically resolved on summary judgment, see, e.g., Harrow, 279
F.3d at 249-52, it is not generally the basis for dismissal under Rule 12(b)(6). Whether
failure to exhaust “may be the basis for dismissal for failure to state a claim depends on
whether the allegations in the complaint suffice to establish that ground, not on the nature
of the ground in the abstract.” Jones v. Bock, 549 U.S. 199, 215 (2007).
8
she was receiving and employed a uniform policy of denying similar benefits requests.
We will therefore vacate the District Court’s dismissal of Lietz’s claims in Count I.6
The District Court also erred in dismissing Count II on exhaustion grounds. Count
II purports to assert a claim for breach of fiduciary duty under 29 U.S.C. § 1132(a)(3).
As stated above, we generally apply the exhaustion requirement only to a claim “for a
denial of ERISA benefits,” not to one “arising from violations of [ERISA’s] substantive
statutory provisions.” Harrow, 279 F.3d at 252. While it is true that the exhaustion
requirement may still apply where an ERISA benefits claim is merely “recast” or
“artfully plead[ed]” as one for breach of fiduciary duty, id. at 252-53, the District Court
did not conduct this analysis.7 Thus, we are left to conclude that the District Court
simply applied its exhaustion ruling to a cause of action for which exhaustion may not
have been required. For these reasons, we will vacate the dismissal of Count II.
This, however, does not end our discussion concerning Lietz’s claims. After this
appeal was filed, CIGNA supplemented the record asserting that Lietz is no longer a
6
Nothing herein bars the parties from addressing exhaustion via summary
judgment motions.
7
An ERISA fiduciary duty claim is “actually” one for benefits “where the
resolution of the claim rests upon an interpretation and application of an ERISA-
regulated plan rather than upon an interpretation and application of ERISA.” Harrow,
279 F.3d at 254 (quotation marks omitted); compare id. at 254-55 (classifying plaintiff’s
challenge to denial of coverage for Viagra prescriptions a benefits claim rather than a
breach of fiduciary duty claim), with In re Unisys Corp. Retiree Med. Benefit ERISA
Litig., 57 F.3d 1255, 1264 (3d Cir. 1995) (“[W]hen a plan administrator affirmatively
misrepresents the terms of a plan or fails to provide information when it knows that its
failure to do so might cause harm, [it] has breached its fiduciary duty . . . .”). We leave
for the District Court to decide whether Count II states a breach of fiduciary claim, is
actually one for benefits, or neither.
9
participant in a CIGNA plan. As a result, there is a question as to whether she is entitled
to pursue her requests for declaratory or injunctive relief. We will therefore remand to
the District Court to decide whether she remains a CIGNA participant or beneficiary and,
if not, whether that renders moot her claims seeking declaratory or injunctive relief. See
Harrow, 279 F.3d at 249.
B
We next review the dismissal of Clarke’s reimbursement claim for lack of
standing. A plaintiff must have “constitutional, prudential, and statutory standing” to
bring a civil action under ERISA. Leuthner v. Blue Cross & Blue Shield of Ne. Pa., 454
F.3d 120, 125 (3d Cir. 2006). ERISA allows a “participant [in] or beneficiary” of an
ERISA plan to bring a civil action to “recover benefits due to him under the terms of his
plan, to enforce his rights under the terms of the plan, or to clarify his rights to future
benefits under the terms of the plan.” 29 U.S.C. § 1132(a)(1)(B). A medical provider
may also “obtain standing to sue by assignment from a plan participant.” CardioNet, Inc.
v. CIGNA Health Corp., 751 F.3d 165, 176 n.10 (3d Cir. 2014).
Here, Clarke received an assignment from his patients “authoriz[ing] payment of
medical benefits to High Street Rehabilitation, LLC for all services rendered.”8 JA 78.
We recently held that an assignment of the right to payment also assigns the right to
8
For the reasons set forth in note 3, supra, Clarke is deemed to have withdrawn his
requests for declaratory and injunctive relief under Count I and for any relief under Count
II.
10
enforce that right by bringing suit under ERISA to collect money owed.9 N. Jersey Brain
& Spine Ctr. v. Aetna, Inc., No. 14-2101, --- F.3d --- (3d Cir. Sept. 11, 2015). Such an
assignment “serves the interest of patients by increasing their access to care” and reduces
the likelihood of medical providers “billing the beneficiary directly and upsetting his
finances.” CardioNet, 751 F.3d at 179 (quotation marks omitted). Moreover, the right to
enforce recognizes that, as compared to patients, most providers “are better situated and
financed to pursue an action for benefits owed for their services.” Conn. State Dental
Ass’n v. Anthem Health Plans, Inc., 591 F.3d 1337, 1352-53 (11th Cir. 2009) (quotation
marks omitted).
While Clarke’s assignment made clear that the patient remained “financially
responsible for all charges whether or not they are paid by insurance,” JA 78, this does
not mean that the assignment did not give him the right to take steps to collect payment
9
Our ruling is consistent with those reached by our sister circuit courts.
Montefiore Med. Ctr. v. Teamsters Local 272, 642 F.3d 321, 330-32 (2d Cir. 2011)
(holding that the medical provider’s having been assigned the “right to reimbursement”
from its patients “forms the ERISA-related basis for legal action regarding those claims
for reimbursement” (quotation marks omitted)); Conn. State Dental Ass’n v. Anthem
Health Plans, Inc., 591 F.3d 1337, 1352 (11th Cir. 2009) (“Our own cases confirm that
assignment of the right to payment is enough to create standing.”); Tango Transp. v.
Healthcare Fin. Servs. LLC, 322 F.3d 888, 894 (5th Cir. 2003) (“denying derivative
standing to health care providers would harm participants or beneficiaries because it
would discourage providers from becoming assignees and possibly from helping
beneficiaries who were unable to pay them up-front” (quotation marks omitted)); I.V.
Servs. of Am., Inc. v. Inn Dev. & Mgmt., Inc., 182 F.3d 51, 54 n.3 (1st Cir. 1999)
(“Benefits Assignment Form” at issue “easily clears th[e] low hurdle” of ERISA standing
notwithstanding that form allegedly “only assigned” plan participant’s right to “receive
payments, not her other rights, including the right to file suit”); Misic v. Bldg. Serv.
Emps. Health & Welfare Trust, 789 F.2d 1374, 1376, 1379 (9th Cir. 1986) (finding
derivative standing for dentist who “provided dental services to beneficiaries of the trust,
who in return assigned Dr. Misic their rights of reimbursement from the trust”).
11
from the patient’s insurer.10 As other courts have held, a patient’s continued
responsibility to pay her provider amounts not covered by the insurance carrier is not a
basis to vitiate the assignment. See, e.g., Tango Transp. v. Healthcare Fin. Servs. LLC,
322 F.3d 888, 889, 892-93 (5th Cir. 2003). It is fair “to expect that a patient who
receives medical care will be required to pay for it,” Montefiore Med. Ctr. v. Teamsters
Local 272, 642 F.3d 321, 330 (2d Cir. 2011), and that “[i]f provider-assignees cannot
[obtain an assignment to] sue the ERISA plan for payment, they will bill the participant
or beneficiary directly for the insured medical bills.” Cagle v. Bruner, 112 F.3d 1510,
1515 (11th Cir. 1997) (per curiam). Thus, the AOB affords Clarke standing to sue his
10
We note that Clarke’s AOB assigns him the right to sue his patient’s insurance
company—presumably depriving the patient of this right—and the right to seek payment
from his patient. It does not, however, require Clarke to first seek payment from the
insurance company. Thus, the AOB could place the patient in the position of being sued
for payment by the doctor but being precluded from obtaining reimbursement from the
insurance company because she gave that right to the doctor. Because this appeal
concerns Clarke’s invocation of the AOB only to sue CIGNA and ASHN, we need not
address whether this scenario vitiates the assignment.
12
patients’ insurers for reimbursement for services he provided,11 and we will therefore
vacate the order dismissing Clarke’s claims for reimbursement under Count I.12
C
Finally, we examine the District Court’s dismissal of ACA’s claims for lack of
associational standing. Generally, an association or organization “may” have standing to
sue “where (1) the organization itself has suffered injury to the rights and/or immunities it
enjoys; or (2) where it is asserting claims on behalf of its members and those individual
members have standing to bring those claims themselves.” Blunt v. Lower Merion Sch.
Dist., 767 F.3d 247, 279 (3d Cir. 2014). When an association or organization sues on
behalf of its members—as here—“it is claiming that it has representational standing.” Id.
An entity has associational or representational standing when:
(a) its members would otherwise have standing to sue in their
own right; (b) the interests it seeks to protect are germane to
the organization’s purpose; and (c) neither the claim asserted
nor the relief requested requires the participation of individual
members in the lawsuit.
11
Clarke also has Article III standing to pursue this relief, as he alleges that he
sustained an injury in fact by the defendants’ failure to fully pay for the services he
rendered that he contends were covered by the CIGNA plan. See Spinedex Physical
Therapy USA Inc. v. United Healthcare of Ariz., Inc., 770 F.3d 1282, 1287-91 (9th Cir.
2014) (holding that medical provider had Article III standing under form assigning its
patients’ “rights and benefits” even though medical provider “ha[d] not sought payment
from its assigning patients for any shortfall” prior to bringing suit); N. Cypress Med. Ctr.
Operating Co., Ltd. v. Cigna Healthcare, 781 F.3d 182, 193-94 (5th Cir. 2015) (following
Spinedex and noting that “[t]he fact that the patient assigned her rights elsewhere does
not cause them to disappear” so as to deprive provider–assignee Article III standing).
12
Because Clarke’s assignment places him in the shoes of his CIGNA-insured
patients, Clarke must satisfy any applicable pre-suit conditions before suing for
reimbursement, such as exhaustion. We leave for the District Court to determine whether
Clarke has done so or should be excused from doing so.
13
Addiction Specialists, Inc. v. Twp. of Hampton, 411 F.3d 399, 405 (3d Cir. 2005)
(quoting Hunt v. Wash. State Apple Adver. Comm’n, 432 U.S. 333, 343 (1977)).
To meet the first prong, the association must allege facts demonstrating that its
members “would have standing in their own right.” Goode v. City of Phila., 539 F.3d
311, 325 (3d Cir. 2008). In practice, this means that the association “must ‘make specific
allegations establishing that at least one identified member had suffered or would suffer
harm.’” Blunt, 767 F.3d at 280 (quoting Summers v. Earth Island Inst., 555 U.S. 488,
498 (2009)). Under the second prong, the interests that the association seeks to protect
must be germane to its purpose. Under the third prong, the association must demonstrate
that neither its claims nor its requested relief “requires the participation of individual
members in the lawsuit.” Hunt, 432 U.S. at 343. While the need for “some” level of
individual participation “does not necessarily bar associational standing,” Pa. Psychiatric
Soc’y v. Green Spring Health Servs., Inc., 280 F.3d 278, 283 (3d Cir. 2002), such
standing is permitted only where the claims do not require “a fact-intensive-individual
inquiry,” id. at 286. Because claims for monetary relief often require such an individual
inquiry, associations “generally” cannot sue for monetary damages. Id. at 284; United
Food & Commercial Workers Union Local 751 v. Brown Grp., Inc., 517 U.S. 544, 546
(1996). Where associations seek injunctive or declaratory relief, however, participation
of the individual members “may be unnecessary.” Pa. Psychiatric Soc’y, 280 F.3d at 284
n.3.
14
Applying these considerations, we conclude that ACA lacks associational
standing. Although Clarke, an individual member, has standing, he only seeks monetary
reimbursement for services he provided to CIGNA-insured patients. The scope of his
standing thus permits him to seek a type of relief that associations generally are not
permitted to pursue on their members’ behalf. Blunt, 767 F.3d at 289 (finding no
associational standing where “individual student plaintiffs are seeking monetary
reimbursement” such that “organizational representation of th[em would be] insufficient
without their personal participation in this litigation”). Because ACA has not shown that
any of its members possess standing to seek non-monetary relief, ACA lacks
representational standing and the District Court correctly dismissed its ERISA and state
law claims. Goode, 539 F.3d at 325.13
IV
For the foregoing reasons, we will: (1) with respect to Count I, vacate the order
dismissing Lietz’s claims and Clarke’s claims for reimbursement and remand, but affirm
the order dismissing ACA’s claims; (2) with respect to Count II, vacate the order
dismissing Lietz’s claims and remand, but affirm the order dismissing Clarke’s and
ACA’s claims; and (3) with respect to Count III, affirm the order dismissing ACA’s
claims.
13
The District Court declined to exercise supplemental jurisdiction over the state
law claims ACA alleged in Count III, 28 U.S.C. § 1367(c). We may affirm this dismissal
“on any ground supported by the record,” Tourscher v. McCullough, 184 F.3d 236, 240
(3d Cir. 1999), and do so here.
15