On June 12, 2018, the United States Court of Appeals for the Fifth Circuit issued a ruling in Innova Hospital San Antonio, L.P. v. Blue Cross and Blue Shield of Georgia, Inc., et al. that clarified the scope of what a provider suing as assignee of an ERISA member’s benefits must plead to state a claim for underpaid ERISA benefits. The defendant commercial insurers argued the hospital failed to meet the plausibility pleading standard on a motion to dismiss because it did not plead the identity of specific plans or specific plan language applicable to each of the hospital’s claims for underpayment. The United States District Court for the Northern District of Texas had agreed with the defendants, dismissing the hospital’s claims for ERISA plan benefits and breach of contract because the hospital did not identify the specific plan provisions at issue. The Fifth Circuit reversed the district court’s judgment granting the defendants’ motion to dismiss the hospital’s second amended complaint for failure to state a claim. See Innova Hosp. San Antonio, L.P. v. Blue Cross and Blue Shield of Georgia, Inc., et al., Case No. 14-11300 (5th Cir. June 12, 2018), available here. The plaintiff is a hospital that brought various claims for violations of ERISA (including a claim for benefits under 29 U.S.C. § 1132(a)(1)(B)) and breach of contract arising from defendants’ alleged underpayments of more than $58 million for services the hospital provided to defendants’ members. The defendants are Blue Cross and Blue Shield of Georgia, Health Care Service Corporation, and other insurance companies and third party administrators.
On appeal, the hospital argued that the district court created a “heightened pleading standard” by requiring the hospital to plead plan information that it did not have and that the defendants had been unwilling to provide. The Fifth Circuit sided with the hospital and held: “Simply put, ERISA plaintiffs should not be held to an excessively burdensome pleading standard that requires them to identify particular plan provisions in ERISA contexts when it may be extremely difficult for them to access such plan provisions.” Slip Op. at 10. In reversing the district court’s ruling, the Fifth Circuit noted that the hospital had attempted repeatedly – both before filing the lawsuit and through multiple discovery requests – to obtain the plan documents from the defendants. The defendants did not provide the plan documents and argued in the motion to dismiss that the hospital failed to plead the plan language they would not provide. Id. at 3, 8. The Fifth Circuit held that “plaintiffs alleging claims under 29 U.S.C. § 1132(a)(1)(B) for plan benefits need not necessarily identify the specific language of every plan provision at issue to survive a motion to dismiss under Rule 12(b)(6).” The court highlighted the hospital’s numerous attempts to obtain plan documents and noted that its holding “underscores the principle that when discoverable information is in the control and possession of a defendant, it is not necessarily the plaintiff’s responsibility to provide that information in her complaint.” Id. at 13.
The Fifth Circuit similarly reversed the district court’s dismissal of the hospital’s breach of contract claim, finding that the hospital sufficiently alleged a claim for breach of contract by pleading the existence of valid contracts (i.e., non-ERISA plans), performance by the hospital, breach of the contract by the defendants, and damages in the form of underpayments or non-payments. Id. at 16. The hospital had also brought a claim for breach of fiduciary duty under ERISA, 29 U.S.C. § 1132(a)(3). However, the Fifth Circuit declined to reverse the district court’s dismissal of this claim, finding that the hospital “has an adequate mechanism for redress under § 1132(a)(1)(B) and thus may not simultaneously plead claims under § 1132(a)(3).” Id. at 20. Following the Fifth Circuit’s ruling, the Innova case is remanded to the district court to consider the hospital’s claims for ERISA plan benefits and breach of contract.
