Order of Adoption
On October 4, 2016, Magistrate Judge Stephen Wm. Smith issued a memorandum and recommendation (Dkt. 54) to which the defendant objected (Dkt. 24). After considering the record and the law, the court overrules the objections and adopts the memorandum and recommendation as its memorandum and opinion. Defendant’s motion to dismiss is granted as to Elite’s § 502(c) statutory penalty claims and common law promissory estoppel claims, but denied as to Elite’s claims for benefits under ERISA § 502(a)(1)(B) and state contract law.
MEMORANDUM AND RECOMMENDATION
Before the Court is defendant Health Care Service Corporation’s motion to dismiss plaintiff Elite’s second amended complaint. Dkt. 51. The motion should be granted in part and denied in part.
This is an action by a Houston area medical provider (Elite) against a health insurance company (HCSC) challenging the denial or underpayment of nearly 1,500 separate health care claims submitted on behalf of insured patients from 2010 through 2012. Invoking both the federal Employee Retirement Income Security Act and state common law, Elite seeks to recover nearly $30 million allegedly due under the patients’ ERISA and non-ERISA plans.
Elite’s current complaint
ANALYSIS
In considering a 12(b)(6) motion to dismiss, the court must accept as true all well-pleaded facts and view the allegations in a light most favorable to the non-mov-ant. Sullivan v. Leor Energy, LLC,
Count One: ERISA § 502(a)(1)(B) Claim for Benefits Due
ERISA § 502(a)(1)(B) authorizes a suit by plan participant or beneficiary “to recover benefits due 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.” (Emphasis added). The existence of an employee welfare benefit plan is thus an essential element of a claim for benefits under § 502(a)(1)(B), and must be sufficiently pled to survive a Rule 12(b)(6) challenge. See Smith v. Reg’l Transit Auth.,
[A]ny plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits ...
29 U.S.C. § 1002(1). The existence of a “plan, fund, or program” is established “ ‘if from the surrounding circumstances a reasonable person can ascertain the intended benefits, a class of beneficiaries, the source of financing, and procedures for receiving benefits.’” Mem’l Hosp. Sys. v. Northbrook Life Ins. Co.,
HCSC’s motion urges that this count is insufficiently pled because it specifically identifies only two ERISA plans covering just two of the 1,159 separate ERISA claims listed in the complaint. Dkt. 48, ¶¶37, 38. HCSC contends that Elite has offered no good faith basis for alleging that the reimbursement provisions of these two plans are representative of the remaining un-named ERISA plans.
There is no question that, in at least these two instances, Elite has alleged an ERISA plan sufficient to support a § 502(a)(1)(B) claim. In each case the complaint names the plan, the plan sponsor, the employer, the covered employee, the plan administrator, and the claims administrator. The complaint also quotes the relevant plan language describing the “reasonable and customary” reimbursement standard which HCSC allegedly breached, not only in these two cases, but in the remainder as well. These allegations are definite enough to plead an ERISA plan under the Dillingham test adopted by the Fifth Circuit, and HCSC does not really contest the point. Instead, it focuses on the lack of particular allegations concerning the remaining plans.
It is true that Elite offers only a bare-bones assertion that the Halliburton, and Texas Instruments plans are “representative of • the larger universe” of plans at issue, but that does not render the assertion improbable. After all, HCSC is an insurance company in the business of selling and administering its health insurance plans, and Elite alleges each claim denial at issue involved an HCSC-administered policy or plan. It seems reasonable to infer that many, if not most, of the remaining HCSC policies would contain similar reimbursement language for out-of-network services. Requiring Elite to plead the specific terms of every plan governing all 1,159 ERISA claims would produce an enormous and unwieldy complaint, far exceeding the plausibility standards imposed by Twombly.
Whether the terms of every plan at issue actually support Elite’s position is more appropriately decided on motion for summary judgment. Elite has sufficiently stated a claim for benefits under § 502(a)(1)(B). HCSC’s- motion to dismiss Count One should be denied.'
Count Two: ERISA § 502(c) Statutory Penalty Claim
Elite also sues for statutory penalties under ERISA § 502(c) for HCSC’s failure to provide requested copies of documents related to the claim denials at issue. Dkt. 48, ¶ 43. ERISA § 502(c)(1)(B) makes the plan administrator personally liable for a penalty of up to $110/day when the administrator “fails or refuses to comply with a request for any information which such administrator is required by this subchap-ter to furnish to a participant or beneficiary.” ERISA’s penalty provisions must be
Elite asserted essentially the same claim in its original complaint, which was dismissed for lack of specificity. Given two chances to replead, Elite’s Second Amended Complaint still fails to state a claim under § 502(c), for three reasons: (1) Elite’s requests for information sought only information considered in denying claims, a category of information not subject to the penalty provisions of § 502(c); (2) Elite is neither a “participant” nor “beneficiary” of an ERISA benefit plan, and therefore not a proper plaintiff under § 502(c); and (3) HCSC is not the “administrator” for either of the ERISA plans identified in the complaint, and therefore not a proper defendant under this remedial provision.
Disclosure not covered by penalty mandate. Elite alleges that on two occasions (July 24, 2014 and February 11, 2015) it sent letters to HCSC with the following demand:
Please provide, within the next 30 days, copies of all documents, records, writings and any other information considered in your determination for all BCBS denied claims, including but not limited to, the following:
• Name and contact information for the plan administrator, claims administrator, and plan sponsor;
• Documents used, considered, or relied upon by the plan administrator or claims administrator in forming his/ her decision;
• Names and title of persons who the plan administrator or claims administrator consulted with in forming his/ her decision;
• Copies of the ENTIRE Master Plan;
• Copies of the Summary Plan Description;
• Copies of the Employer Plan; and
• Copies of any other documents under which the plan is established or operated.
Dkt. 48, ¶ 43. These documents were “requested for each of the 6692[sic] claims.” Id.
Elite asserts that HCSC’s refusal to provide the requested information violated two separate ERISA requirements: (1) the duty imposed by DOL regulation 29 CFR § 2560.503-l(h)(2)
Second, while ERISA § 104(b)(4) does impose certain disclosure requirements upon plan administrators, claim denial information is not among them. Section 104(b)(4) requires an administrator to provide, upon written request, “a copy of the latest vipdated summary plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.” (Emphasis added). In other words, the plan administrator is obligated to provide the participant or beneficiary with current plan documents.
By contrast, Elite’s 2014 and 2015 requests were limited to documents and information “considered in your determination for all BCBS denied claims” from July 9, 2010 through October 30, 2012. While these requests did make isolated reference to plan documents, a fair reading of the entire request .letter shows that it was not seeking current plan documents, but only those that were considered when the denial decisions were made, several years earlier. For this reason, the claim denial information requested by Elite in 2014 and 2015 did not trigger the statutory penalty for non-compliance authorized in § 502(c).
No proper plaintiff. Another problem with the statutory penalty claim is that Elite is not the proper party to bring it. Section 502(c)(1) provides that an administrator violating his duty to furnish information to a participant or beneficiary “may in the court’s discretion be personally liable to such participant or beneficiary” for the statutory penalty. (Emphasis added). In other words, this remedy is personal to the requesting participant or beneficiary, and Elite is not a party enumerated to bring suit under this provision.
In response, Elite claims that it has valid assignments from each of the hundreds of participants and beneficiaries covered by this lawsuit, conferring derivative standing to pursue statutory penalty
However, it is far from certain that the Fifth Circuit would recognize an assignment of a participant’s right to request information under ERISA § 104(b)(4) or to pursue a claim for civil penalties under ERISA § 502(c). See e.g., Shelby County Health Care Corp. v. Genesis Furniture Industries, Inc.,
But even assuming that ERISA § 502(c) assignments were legally permissible, the particular language of the assignments obtained by Elite are inadequate to the task. Elite used two different assignment forms, depending on the patient’s date of treatment. Id., ¶¶ 19-20. For those treated before July 1, 2011, the scope of assignment was narrow: “In consideration of services rendered, I hereby transfer and assign to the hospital and/or physicians indicated all rights, title and interest in any payment due me for services described as provided in the stated policy or policies of insurance.” Id., ¶ 19 n.5. This assignment is limited to the patient’s right to payment due for services provided, and says nothing about the right to request plan documents or to sue for civil penalties. See Quality Infusion Care, Inc. v. Aetna Life Ins. Co., Inc., No. H-05-2929,
The second assignment form, used for those treated on or after July 1, 2011, was broader. In addition to the earlier language, this assignment includes “any legal or administrative claim or chose in action ... concerning medical expenses incurred,” specifically including “ERISA breach of fiduciary duty claims.” It also includes the right to “obtain information regarding the claim to the same extent as me.” Id. ¶ 20 n.6. This language is likewise defective, in two respects. First, the only types of claims specifically mentioned are claims “concerning medical expenses” or “breach of fiduciary duty,” neither of which are brought under ERISA § 502(c). Moreover, the assignment does not cover the predicate for a civil penalty claim under ERISA 104(b)(4), i.e. a ‘written request of any participant or beneficiary” for current plan documents. The assignment only gives Elite the right to obtain information “regarding the claim,” as opposed to current plan documents, which as noted earlier is the only type of information subject to ERISA § 104(b)(4). Indeed, it would be quite odd for plan participants to assign away all their rights to obtain current plan documents, in perpetuity, to a single medical provider rendering medical services on a single occasion. Before reaching such a remarkable result, far more precise language than that presented here would be necessary (again, assuming that
In sum, neither of the assignment forms used by Elite were adequate to confer derivative standing to bring statutory penalty claims under ERISA § 502(c).
No proper defendant. Similarly, ERISA § 502(c) specifically names only the “administrator” as a proper party defendant. “Administrator” is a defined term under ERISA § 3(16)(A):
The term “administrator” means—
(i) the person specifically so designated by the terms of the instrument under which the plan is operated;
(ii) if an administrator is not so designated, the plan sponsor;
(iii) in the case of a plan for which an administrator is not designated and a plan sponsor cannot be identified, such other person as the Secretary may be regulation prescribe.
Courts have routinely held that only a plan “administrator” as defined here may be held liable for statutory penalties under ERISA § 502(c). See Thomas v. Reliance Standard Life Ins. Co.,
Elite alleges that HCSC “acted as and/or was designated as the plan administrator” for all claims covered by this case. Dkt 48, ¶ 14. HCSC denies this assertion, and argues, correctly, that Elite has failed to identify a single ERISA plan that designates HCSC as administrator.
In response, Elite contends that HCSC “undertook the duties of plan administrator and was effectively the de facto plan administrator.” Dkt. 48, ¶ 14. However, the theory that ERISA § 502(c) imposes liability upon “de facto” administrators has no anchor in the statutory text. ERISA”s definition of “administrator” permits only three possibilities — the administrator is either (1) ‘the person specifically so designated in the plan;” (2) absent a plan designation, the “plan sponsor;” or (3) absent a plan designation or identifiable plan sponsor, “such other person” as DOL regulations may prescribe. ERISA § 3(16)(A). Notably missing from this precise definition is anyone who might de facto undertake the functional duties of a plan administrator. Cf. ERISA § 3(21)(A) (defining “fiduciary” in terms of the functional duties performed).
The defacto administrator argument has been flatly rejected by at least eight circuits. See Lee v. Burkhart,
The Fifth Circuit has yet to weigh in with a published decision. In an early case, the court acknowledged the “intuitive appeal” of the defacto administrator doctrine in certain limited circumstances, but expressly declined to resolve the issue. Fisher v. Metropolitan Life Ins. Co.,
Thus, Elite’s assertion of defacto administrator liability under ERISA § 502(c) defies the great weight of authority, as well as the precise, non-functional terms ERISA employs to define the term “administrator.” Mindful also that statutory penalty provisions are to be strictly construed, this court declines to expand the scope of ERISA § 502(c) liability beyond the single party enumerated by Congress — the plan administrator.
For all these reasons, Count Two should be dismissed for failure to state a claim for civil penalties under ERISA § 502(c).
Count Three: Breach of Contract
In Count Three, Elite sues for breach of contract to recover the unpaid benefits it is allegedly owed under private and state-provided plans not covered by ERISA. The elements of a breach of contract claim in Texas are (1) the existence of a valid contract, (2) performance or tendered performance by the plaintiff, (3) breach of contract by the defendant, and (4) damages sustained by the plaintiff as a result of the breach. Aguiar v. Segal,
HCSC again argues that Elite’s failure to identify the plan provisions involved dooms its breach of contract claims, noting that the second amended complaint does not identify any non-ERISA plans. Elite alleges, however, that “[t]he operative plan terms for the private [non-ERISA] plans... are in no way different than the exemplar operative plan terms for the ERISA plans.” Dkt. 48, ¶53. Thus, according to the complaint, the quoted plan terms of the Halliburton and Texas Instruments plans are representative of the terms of the non-ERISA plans, and HCSC similarly failed to pay usual and customary rates in violation of the plan provisions. These allegations are sufficient to survive HCSC’s 12(b)(6) challenge.
HCSC’s motion to dismiss Count Three should be denied.
Count Four: Promissory Estoppel
Count Four presents a state law claim based on promissory estoppel. Elite alleges that before performing the scheduled medical services, it routinely called HCSC to verify coverage. On each occasion, Elite claims that HCSC represented “that payments would be made in accordance with the ‘Allowable Amount,’ as defined in the health insurance plan.” Dkt. 48, ¶ 59. Moreover, Elite asserts it is industry custom to pay usual and customary rates, and HCSC had “a duty to alert [Elite] if the operative plan language dif
Under Texas law, promissory estoppel requires: “(1) a promise, (2) foreseeability of reliance thereon by the promi-sor, and (3) substantial reliance by the promisee to his detriment.” Miller v. Raytheon Aircraft Co.,
Elite’s promissory estoppel claim is founded upon precisely the same promise as that which undergirds its breach of contract claim — that HCSC would pay the “allowable amount” as defined in the underlying health plan. Because Elite has identified no other promise different than the one allegedly contained in the written plan, the doctrine of promissory estoppel is superfluous, and hence inapplicable. Count Four should be dismissed.
CONCLUSION
For these reasons, Elite’s § 502(c) statutory penalty claims and common law promissory estoppel claims should be dismissed with prejudice. HCSC’s motion to dismiss Elite’s claims for benefits under ERISA § 502(a)(1)(B) and state contract law should be denied.
The parties have 14 days from service of this Memorandum and Recommendation to file written objections. Failure to file timely objections precludes appellate review of factual findings or legal conclusions, except for plain error. See 28 U.S.C. § 636(b)(1)(C): Fed. R. Civ. P. 72.
Notes
. Elite was twice granted leave to amend in order to address deficiencies pointed out in earlier motions to dismiss by HCSC. Dkt. 26 & 31. Also, the Second Amended Complaint incorporates closely similar allegations from a recently consolidated case, Civil Action H-16-573, asserting the same causes of action against the same defendant for a later set of claims arising from mid-2011 to 2012. Dkt, 46.
. DOL regulation 29 C.F.R. § 2560.503~l(h) reads in pertinent part:
(h) Appeal of adverse benefit determinations—
(1) In general. Every employee benefit plan shall establish and maintain a procedure by which a claimant shall have a reasonable opportunity to appeal an adverse benefit determination to an appropriate named fiduciary of the plan, and under which there will be a full and fair review of the claim and the adverse benefit determination.
(2) Full and fair review. Except as provided n paragraphs (h)(3) and (h)(4) of this section, the claims procedures of a plan will not be deemed to provide ... full and fair review... unless the claims procedures—
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(iii) Provide that a claimant shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits.
. The 5th Circuit has ruled that challenges to ERISA claim procedures are evaluated under a “substantial compliance” standard, a looser standard than that applied to ERISA 502(c) violations. Lacy v. Fulbright & Jaworski LLP,
. For these reasons the Court finds unpersuasive the contrary decision in Brown v. Aetna Life Ins. Co.,