Elite Center for Minimally Invasive Surgery, LLC v. Health Care Service Corp.
221 F. Supp. 3d 853
S.D. Tex.2016Background
- Elite (a Houston-area medical provider) sued Health Care Service Corporation (HCSC) over denials/underpayments of ~1,500 claims from 2010–2012, seeking nearly $30 million under ERISA and state law.
- Second Amended Complaint asserts four counts: (1) benefits under ERISA § 502(a)(1)(B), (2) statutory penalties under ERISA § 502(c) for failure to provide claim-related documents, (3) breach of contract under state law for non-ERISA plans, and (4) promissory estoppel.
- Elite alleges derivative standing via assignments from patients and identifies two named ERISA plans (Halliburton and Texas Instruments) as exemplars for many other unnamed plans listed in an exhibit.
- HCSC moved to dismiss all counts under Fed. R. Civ. P. 12(b)(6), arguing among other things that Elite failed to plead plan terms/administrator status for most claims and that ERISA § 502(c) penalties do not apply to HCSC.
- The court denied dismissal of the ERISA benefits claim and the state breach-of-contract claim, but dismissed with prejudice Elite’s ERISA § 502(c) statutory-penalty claim and promissory estoppel claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of § 502(a)(1)(B) pleading (existence of ERISA plans) | Elite: two named plans are representative of many HCSC-administered plans; Exhibit lists claims and IDs | HCSC: Elite must identify the specific terms of each ERISA plan covering the 1,159 claims | Denied dismissal — alleging two exemplar plans + claim list is sufficient at pleading stage; disputes for summary judgment |
| § 502(c) statutory penalties (failure to provide documents) | Elite: requested documents relevant to denials; assignments give derivative standing; HCSC acted as de facto administrator | HCSC: requested materials are not the statutory categories subject to § 502(c); Elite lacks participant/beneficiary standing for penalties; HCSC is not plan administrator | Granted dismissal — requested materials not covered by § 502(c), assignments insufficient for penalty claims, and de facto administrator theory rejected |
| Breach of contract (non-ERISA plans) | Elite: operative terms of non-ERISA plans mirror the exemplar ERISA plan terms; HCSC breached usual-and-customary/payment obligations | HCSC: complaint fails to identify non-ERISA plan terms and thus fails to state a contract claim | Denied dismissal — allegations that exemplar plan terms apply to non-ERISA plans are sufficient to survive 12(b)(6) |
| Promissory estoppel under Texas law | Elite: HCSC made promises (pre-service verifications) inducing reliance to provide services | HCSC: any alleged promise is covered by (and duplicative of) the written plan terms | Granted dismissal — promissory estoppel duplicative of contract claims; contract remedy governs |
Key Cases Cited
- Sullivan v. Leor Energy, LLC, 600 F.3d 542 (5th Cir. 2010) (pleading standards for Rule 12(b)(6))
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for complaints)
- Mem’l Hosp. Sys. v. Northbrook Life Ins. Co., 904 F.2d 236 (5th Cir. 1990) (Dillingham test for existence of an ERISA plan)
- Smith v. Reg’l Transit Auth., 756 F.3d 340 (5th Cir. 2014) (ERISA plan-pleading requirements)
- Tango Transp. v. Healthcare Fin. Servs. LLC, 322 F.3d 888 (5th Cir. 2003) (validity of provider assignments for ERISA benefit claims)
- Halo v. Yale Health Plan, Dir. of Benefits & Records Yale Univ., 819 F.3d 42 (2d Cir. 2016) (§ 502(c) penalty scope and claim-procedure disclosures)
- Lee v. ING Groep, N.V., 829 F.3d 1158 (9th Cir. 2016) (limitations on § 502(c) penalties for claim-procedure violations)
- Medina v. Metro. Life Ins. Co., 588 F.3d 41 (1st Cir. 2009) (§ 502(c) penalty interpretation)
- Brown v. J.B. Hunt Transp. Servs., Inc., 586 F.3d 1079 (8th Cir. 2009) (claim-procedure disclosure/issues under ERISA)
- Wilczynski v. Lumbermens Mut. Cas. Co., 93 F.3d 397 (7th Cir. 1996) (distinguishing plan obligations from administrator obligations)
- VanderKlok v. Provident Life & Accident Ins. Co., 956 F.2d 610 (6th Cir. 1992) (limits on § 502(c) remedies)
- Groves v. Modified Ret. Plan for Hourly Paid Emps. of Johns Manville Corp., 803 F.2d 109 (3d Cir. 1986) (ERISA claim-procedure/penalty analysis)
- Lacy v. Fulbright & Jaworski LLP, 405 F.3d 254 (5th Cir. 2005) (substantial compliance standard for ERISA claim-procedure challenges)
- Fisher v. Metro. Life Ins. Co., 895 F.2d 1073 (5th Cir. 1990) (noting de facto administrator doctrine but declining to decide its applicability)