In Eden Surgical Ctr. v. Cognizant Tech. Sols. Corp., No. 16-56422, 2018 U.S. App. LEXIS 10597 (9th Cir., Apr. 26, 2018), the U.S. Court of Appeals for the Ninth Circuit upheld the District Court’s Order dismissing the Complaint of an out-of-network healthcare provider attempting to pursue its patient’s rights under an ERISA plan based on an assignment of benefits. The defendant health plan’s claim administrator, Aetna, determined that benefits were not payable under the plan because the patient had not satisfied the plan’s deductible. Plaintiff brought this action on behalf of its patient challenging that benefit determination. The Ninth Circuit found that the plaintiff’s Complaint was properly dismissed by the district court because the patient’s health benefit plan did not permit assignments.

The Ninth Circuit first noted plaintiff’s concession that it did not have an independent contractual relationship with Aetna or the Defendant health plan, that it was proceeding based on the assignment of benefits signed by its patient and that it had no direct standing under ERISA to pursue any claim for benefits under the patient’s plan. Although plaintiff acknowledged that the patient’s plan included an anti-assignment provision that voided the assignments, plaintiff argued that the Court should not enforce this term.

Specifically, plaintiff challenged the enforceability of the plan’s anti-assignment provision based on the doctrines of equitable estoppel and waiver. In support of its estoppel claim,  plaintiff argued that Aetna made two misrepresentations: (1) Aetna incorrectly advised plaintiff regarding the applicable reimbursement rate payable under the plan for its services; and (2) Aetna informed plaintiff that the health benefit plan did not include an anti-assignment provision four months after the services were rendered. The Ninth Circuit rejected plaintiff’s equitable estoppel arguments on the ground that Aetna’s representations about the rate of payment were irrelevant to the Court’s standing analysis and would have no impact on whether the plan’s anti-assignment provision was enforceable. The Ninth Circuit also rejected plaintiff’s equitable estoppel argument based on Aetna’s alleged misrepresentation about the existence of an anti-assignment provision in the plan on the ground that any reliance plaintiff placed on that misrepresentation was unreasonable. The Ninth Circuit explained that plaintiff could have requested and obtained  a copy of the relevant plan document from its patient (i.e. the assignor) prior to filing its lawsuit in order to determine whether the plan included an anti-assignment provision, but it unreasonably failed to do so.

Notably, throughout its opinion, the Ninth Circuit refers to the plaintiff’s right to bring an action under ERISA §502(a) as “standing.” However, in Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 1387 (2014), the Supreme Court clarified that the question whether a plaintiff has a right of action under a statute is not a “standing” question because it does not “implicate subject matter jurisdiction, i.e., the court’s statutory or constitutional power to adjudicate the case.” Id. at 1386 n.4 (emphasis in original). Despite the Supreme Court’s determination on this issue, many courts continue to refer to the right of a party to bring an action under ERISA as “standing.”

Plaintiff also argued that the Defendant waived its right to rely on the plan’s anti-assignment provision because it did not reference it in its benefit determination letters during the administrative claim and appeal review process. The Ninth Circuit rejected this argument on the ground that the anti-assignment provision was not asserted as a basis for its denial of the patient’s benefit claim and thus, it was not required to be included in the determination letters. The Ninth Circuit found that the Defendant properly raised the anti-assignment provision for the first time after the lawsuit was filed to contest plaintiff’s standing to pursue the lawsuit.

Based on these findings, the Ninth Circuit affirmed the District Court’s dismissal of plaintiff’s Complaint on the ground that the plan’s anti-assignment provision was valid and enforceable and thus, plaintiff lacked derivative standing to pursue any action against the patient’s health plan.