California Spine And Neurosurgery Institute v. Blue Cross of California

Background

California Spine and Neurosurgery Institute, doing business as San Jose Neurospine (SJN), provided surgery services to a patient identified as HR. HR was a member of an employer-sponsored Employee Retirement Income Security Act (ERISA) plan administered by Blue Cross of California. Before the surgery, HR assigned all rights and benefits under the plan to SJN. SJN sought payment under 29 U.S.C. § 1132(a)(1)(B), which allows recovery of benefits due under an ERISA plan.

SJN alleged that it contacted Blue Cross before the surgery, that Blue Cross confirmed coverage and SJN’s eligibility for payment as an out-of-network provider, and that Blue Cross did not mention the plan’s anti-assignment clause. SJN performed the surgery and submitted a claim for $93,000. Blue Cross paid $2,095.34 and treated $1,396.89 as patient coinsurance and $88,906.62 as non-covered because it exceeded the maximum allowable amount. SJN appealed, but alleged that Blue Cross did not respond.

Blue Cross moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that SJN lacked authority to bring the ERISA claim because the plan contained an anti-assignment provision. Blue Cross also argued that SJN had not alleged facts sufficient to show that the plan entitled it to the requested benefits.

Prior proceedings and appellate ruling

The court had previously granted Blue Cross’s motion to dismiss with prejudice, finding that Blue Cross had not waived the anti-assignment provision, was not equitably estopped from enforcing it, and that the assignment was therefore invalid. The Ninth Circuit reversed the judgment as to waiver, vacated the judgment as to equitable estoppel, and remanded for further proceedings.

The Ninth Circuit held that SJN’s allegations—that it notified Blue Cross about the surgery, later submitted a reimbursement claim, and Blue Cross partially denied the claim on a ground other than the anti-assignment clause—were sufficient to plead that Blue Cross waived its ability to rely on that clause. The appellate court also held that SJN had adequately alleged three of the equitable-estoppel factors that had been disputed.

Analysis

The court explained that waiver and equitable estoppel were separate issues. Because SJN had plausibly alleged waiver, it had also plausibly alleged that the anti-assignment provision did not apply and that SJN had derivative standing to bring the ERISA claim. The court emphasized that the Ninth Circuit had found only that waiver was adequately pleaded, not that waiver had been conclusively established. SJN would still have to prove waiver.

The court then considered the remaining equitable-estoppel factors. It found that SJN adequately alleged that Blue Cross knew the relevant facts, intended that SJN rely on its representations, and that SJN relied on those representations to its injury. But the court found that SJN had not alleged the fifth factor: extraordinary circumstances. The complaint described one routine pre-surgery benefits-verification call, not repeated misrepresentations over time or circumstances showing that SJN was particularly vulnerable. The court allowed SJN to reassert that argument later with a more developed record.

The court also rejected Blue Cross’s argument that SJN had not adequately stated an ERISA benefits claim. SJN identified the ERISA plan and alleged that the plan entitled it to payment at the usual, customary, and reasonable rate for out-of-network services. Although the complaint did not identify an exact page or section of the plan, the court held that the allegations were sufficient to state a claim under 29 U.S.C. § 1132(a)(1)(B).

Disposition

The court DENIED Blue Cross’s motion to dismiss. The court stated that its ruling addressed only whether SJN plausibly stated a claim for relief; SJN would still need to prove its contentions at summary judgment or trial.

Separately, the court ordered SJN to re-file its exhibits with redactions that comply with Federal Rule of Civil Procedure 5.2(a), because identifying information about HR remained legible. The court also admonished SJN to use appropriate redactions in future filings.