919 F.3d 266
5th Cir.2019Background
- Encompass provided in‑office surgical equipment and staff; it submitted separate claims to BCBSLA while out‑of‑network and obtained assignments from patients.
- BCBSLA began denying Encompass claims after discovering Encompass billed a technical component (TC) modifier that produced payments BCBSLA considered duplicative of the doctors’ Global Fee for in‑office surgery.
- BCBSLA sent a widely circulated Cantrell letter telling in‑network physicians not to use Encompass and threatening contract termination; Encompass received the letter in 2010, called for clarification, and got no substantive response.
- Encompass sued for ERISA relief (for claims under ERISA plans), state contract claims (non‑ERISA plans), and torts (defamation and tortious interference). Jury verdict 1 favored BCBSLA on prescription and contract; district court granted a new trial for an erroneous jury instruction. On retrial, Encompass prevailed on ERISA, contract, and tort claims.
- On appeal BCBSLA challenged (1) the district court’s grant of a new trial (arguing the arbitrary‑and‑capricious instruction was proper), (2) the jury’s finding that prescription was tolled by contra non valentem, and (3) the ERISA rulings (standing by assignment, contract limitations, and abuse of discretion in claim denials).
- The Fifth Circuit affirmed: new trial was proper due to erroneous jury instruction; contra non valentem could apply on these facts; and BCBSLA abused its discretion under ERISA by inconsistently denying Encompass’s covered claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court abused discretion in granting a new trial based on an erroneous jury instruction for non‑ERISA contract claims | Encompass argued the jury should be instructed under Louisiana contract law, not an arbitrary‑and‑capricious standard | BCBSLA argued the Prompt Payment Statute and plan language support an arbitrary‑and‑capricious (insurer‑standard) instruction | Affirmed: new trial proper because the original charge imported the wrong elevated standard and confused jurors |
| Whether prescription on tort claims was suspended by contra non valentem | Encompass contended the Cantrell letter misrepresented BCBSLA internal policies and Encompass reasonably could not discover falsity until later despite diligence | BCBSLA argued Encompass had the letter, consulted counsel, and therefore had constructive knowledge; prescription should bar tort claims | Affirmed: factual record permitted jury to find contra non valentem tolled prescription; judgment as a matter of law denied |
| Whether anti‑assignment provisions barred Encompass’s ERISA §502(a)(1)(B) claims | Encompass asserted BCBSLA waived anti‑assignment defenses by paying and communicating with Encompass on claims | BCBSLA argued plan anti‑assignment clauses precluded Encompass’s standing | Affirmed: district court properly found waiver as an equitable issue for the court, so assignment/standing not barred |
| Whether BCBSLA abused its discretion in denying Encompass’s ERISA claims | Encompass argued plans covered Encompass services and BCBSLA’s denial was inconsistent and unsupported | BCBSLA argued Global Fee logic made Encompass payments duplicative and within administrator discretion | Affirmed: court found BCBSLA’s interpretation internally inconsistent and denial arbitrary and capricious; therefore abuse of discretion |
Key Cases Cited
- Wells v. Zadeck, 89 So.3d 1145 (La. 2012) (explaining contra non valentem tolling principle)
- Quixx Temp. Servs., Inc. v. Nat'l Council on Comp. Ins., 665 So.2d 120 (La. Ct. App. 1995) (illustrating discovery rule application where falsity was not immediately discoverable)
- Simmons v. Templeton, 723 So.2d 1009 (La. Ct. App. 1998) (tolling until discovery of falsified statements in financial disclosures)
- Rozas v. Dep't of Health & Human Res., 522 So.2d 1195 (La. Ct. App. 1988) (refusing tolling where plaintiff had constructive knowledge and failed to diligently obtain known records)
- Heimeshoff v. Hartford Life & Accident Ins. Co., 571 U.S. 99 (U.S. 2013) (plan limitations periods enforceable if reasonable and known)
- N. Cypress Med. Ctr. Operating Co. v. Cigna Healthcare, 781 F.3d 182 (5th Cir. 2015) (ERISA abuse‑of‑discretion framework and plan interpretation principles)
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (U.S. 1989) (standard for judicial review of denial of ERISA benefits)
- Bellaire Gen. Hosp. v. Blue Cross Blue Shield of Mich., 97 F.3d 822 (5th Cir. 1996) (example of abuse‑of‑discretion analysis under ERISA)