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Lee Memorial Health System v. Winn Dixie Stores, Inc.

United States District Court, M.D. Florida, Fort Myers Division

July 1, 2019

LEE MEMORIAL HEALTH SYSTEM, Plaintiff,
v.
WINN DIXIE STORES, INC., Defendant.

          OPINION AND ORDER

          JOHN E. STEELE SR. UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on consideration of the Magistrate Judge's Report and Recommendation (Doc. #68) filed January 25, 2019, recommending defendant Winn Dixie Stores, Inc.'s Motion for Judgment on the Pleadings (Doc. #60) be granted, plaintiff Lee Memorial Health System's Motion for Leave to File Second Amended Complaint (Doc. #66) be denied, and the case be dismissed for lack of standing. Lee Memorial filed an Objection (Doc. #72) on February 21, 2019, to which Winn Dixie filed a Response (Doc. #78) on March 13, 2019.

         On May 10, 2017, Lee Memorial filed an Amended Complaint against Blue Cross and Blue Shield of Florida, Inc. and Winn Dixie. (Doc. #17.) Lee Memorial alleges Winn Dixie improperly denied a claim for health care benefits by adopting a misconstruction of a provision in its ERISA[1] employee health benefits plan by Blue Cross, its third-party claims administrator. Acting as the assignee of a Plan participant, Lee Memorial seeks damages from Winn Dixie for non-payment of benefits for its hospital services (Count II). (Id. p. 10.) Lee Memorial also seeks a declaratory judgment against Winn Dixie as to (1) the proper interpretation of a provision in the ERISA plan, (2) the sufficiency under ERISA of certain procedures followed in the denial of the claim, and (3) the proper interpretation of a separate agreement between Lee Memorial and Blue Cross (Count I). (Id. pp. 9-10.)

         I.

         A. Factual Background

         The Amended Complaint contains the following material factual allegations applying to both counts:

         Shannon Anderson was an employee of Winn Dixie and a participant in an Employer Sponsored Benefit Plan (“the Plan”) providing health plan coverage to Winn Dixie employees. (Doc. #17, ¶¶ 7, 15; Doc. #17-1.)[2] The Plan constitutes an employee welfare plan within the meaning of ERISA. (Doc. #17, ¶ 8.) As a participant, Anderson had the right to have her medical and hospitalization costs paid under the Plan. (Id. ¶ 15.)

         Winn Dixie, as the Plan sponsor, Plan administrator, and a “fiduciary” of the Plan as defined by various ERISA provisions, has the authority to control the operation and administration of the Plan. (Id. ¶ 9.) Blue Cross provides third-party claims administration for the Plan pursuant to an Administrative Services Agreement (Doc. #17-2) and is alleged to be an interested party and a fiduciary under ERISA. (Doc. #17, ¶¶ 7, 11(a).) Additionally, Blue Cross and Lee Memorial entered into a Preferred Patient Hospital Agreement (“the Agreement”) whereby Lee Memorial agreed to file claims with Blue Cross for health care services it provided to covered Winn Dixie employees. (Id. ¶¶ 11(a), 13.)

         On October 3, 2013, Anderson was hospitalized after being involved in a motor vehicle accident. (Id. ¶ 17.) Lee Memorial provided hospital services to Anderson from October 3, 2013 through October 18, 2013. (Id. ¶¶ 16-17.) When she was admitted into the hospital, Anderson executed an admissions contract assigning to Lee Memorial all rights to receive payments from Blue Cross under the Plan for hospital services rendered. (Id. ¶ 19.)

         Lee Memorial subsequently submitted a claim to Blue Cross under the Plan for payment of hospital services provided to Anderson. (Id. ¶ 20.) Blue Cross denied coverage without identifying a specific provision within the Plan and stated that “the member's injuries were the result of the member's alcohol intoxication.” (Id. ¶ 21; Doc. #17-4.)

         B. Procedural Background

         In May 2017, Lee Memorial filed its Amended Complaint seeking a declaratory judgment pursuant to 28 U.S.C. § 2201 against Blue Cross and Winn Dixie regarding (1) the proper interpretation of the Plan, (2) whether the denial of the claim complied with ERISA requirements, and (3) the proper interpretation of the Agreement between Blue Cross and Lee Memorial. (Doc. #17, ¶¶ 36-45.) Lee Memorial also alleged Winn Dixie violated ERISA and breached the terms of the Plan by denying the claim submitted by Lee Memorial. (Id. ¶¶ 46-50.)

         On May 24, 2017, Blue Cross filed a motion to dismiss Lee Memorial's declaratory judgment claim as it applied to Blue Cross. (Doc. #19.) On March 9, 2018, the Court granted the motion due to lack of standing, dismissed Count I of the Amended Complaint, and directed the Clerk to terminate Blue Cross on the docket. (Doc. #58, pp. 10-13.) The case proceeded on Count II as to Winn Dixie, who had not joined the motion to dismiss. (Id. p. 13.)

         Following the dismissal of Blue Cross, Winn Dixie moved for judgment on the pleadings, arguing Lee Memorial did not have standing to bring suit under ERISA. (Doc. #60.) Lee Memorial filed a response in opposition and contemporaneously moved for leave to file a second amended complaint. (Doc. #65; Doc. #66.) Winn Dixie responded in opposition to Lee Memorial's motion on the basis that additional facts would not alter Lee Memorial's lack of standing. (Doc. #67.) Both motions were referred to the Magistrate Judge.

         II.

         On January 25, 2019, the Magistrate Judge issued her Report and Recommendation. (Doc. #68.) Regarding Winn Dixie's motion for judgment on the pleadings, the Magistrate Judge recommended granting the motion and dismissing the case for lack of standing. (Id. p. 1.) The Magistrate Judge, referring to this Court's previous order (Doc. #58), found that Lee Memorial lacks “independent standing to sue under ERISA” because “[h]ealthcare providers are not participants, beneficiaries or fiduciaries under ERISA, ” and the assignment of rights from Anderson was ineffective because the Plan contained an “unambiguous anti-assignment provision.” (Doc. #68, pp. 4-5.) The Magistrate Judge also suggested Winn Dixie “did not waive the issue of standing by failing to raise it as an affirmative defense” because the Eleventh Circuit “has not addressed whether lack of standing is included in the scope of ...


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