# Atrium Medical Center v. United Healthcare Services, Inc.

> District Court, S.D. Ohio · September 10, 2020

URL: https://www.frixlaw.com/law-library/cases/10376321

## Case

- **Court:** District Court, S.D. Ohio
- **Decided:** September 10, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10376321

## How later opinions describe it (automated extraction)

- finding that waiver could apply if a plaintiff showed either detrimental reliance or consideration, but the plaintiff had not established waiver in this case

## Opinion text

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION

ATRIUM MEDICAL CENTER, Case No. 19-cv-680
Plaintiff, Dlott, J.
Litkovitz, M.J.
v.

UNITEDHEALTHCARE INSURANCE REPORT AND
COMPANY, et al., RECOMMENDATION
Defendants.

This matter is before the Court on defendant UnitedHealthcare Insurance Company
(United)’s Motion to Dismiss (Doc. 21), plaintiff Atrium Medical Center (Atrium)’s response in
opposition (Doc. 25), and United’s reply (Doc. 26). The Court recommends that the motion be
granted and that Atrium’s claim against United be dismissed with prejudice.
I. Background1
Atrium is a hospital that provided emergency medical services to United’s insured, Khron
Powell, between June 12, 2017 through June 18, 2017. Atrium was not an “in-network provider”
or a “contracted provider” with United during this period. On June 12, 2017, Mr. Powell
executed a document titled “General Consent and Agreement” (Doc. 19), which included a
“FINANCIAL AGREEMENT AND ASSIGNMENT” provision.2 Therein, Mr. Powell
purported to “assign to [Atrium] all insurance and other benefits to which [he was] entitled for
the services provided by [Atrium].” (Id. at PAGEID #: 64). The Certificate of Coverage, Riders,
Amendments, and Notices for Mr. Powell’s group policy (Policy) with United, however,
contains an anti-assignment provision:

1 Unless otherwise noted, background facts are taken from Atrium’s amended complaint (Doc. 15) and amendment
thereto (Doc. 19), which are accepted as true for purposes of this motion.
2 Atrium refers to this document as “Exhibit A” in its amended complaint (see Doc. 15 at ¶ 7), but it was not initially
attached thereto. Atrium corrected the omission by later filing the document as an amendment to its amended
complaint. (See Doc. 19).
You may not assign your Benefits under the Policy to a non-Network provider
without our consent. When an assignment is not obtained, we will send the
reimbursement directly to you (the Subscriber) for you to reimburse them upon
receipt of their bill. We may, however, in our discretion, pay a non-Network
provider directly for services rendered to you. In the case of any such assignment
of Benefits or payment to a non-Network provider, we reserve the right to offset
Benefits to be paid to the provider by any amounts that the provider owes us.

(Doc. 21-1, Ex. 1 to Stalinski Aff. at PAGEID #: 131).3
Upon Mr. Powell’s discharge from Atrium, a corresponding claim for $197,628.26 was
billed to United. United unilaterally paid $51,371.53 of the claim and directed Atrium to seek
the amounts of $4,462.85 and $1,242.32 directly from Mr. Powell (the Policy’s coinsurance and
deductible amounts, respectively). United then denied the $140,551.56 claim balance without
reason or explanation despite Atrium’s repeated inquiries.
On July 12, 2019, Atrium filed an action in the Court of Common Pleas for Warren
County, Ohio. The state court complaint alleged that Atrium provided medical services to
United’s insured, United improperly denied $146,256.73 of the related claim, and United ignored
Atrium’s efforts to appeal. (Doc. 2 at PAGEID #: 18). United removed the case to this Court
pursuant to 28 U.S.C. §§ 1331, 1332, and 1441 on the grounds that there is diversity of
citizenship between the parties and Atrium’s claim is preempted by the Employee Retirement
Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001, et seq. (Doc. 1).
Following removal, the Court granted leave to Atrium to amend its complaint. (See
Docs. 14, 15, 19). The amended complaint contains three counts, and only the first pertains to
United. It does not invoke ERISA or any specific cause of action but generally alleges that
United improperly denied $140,551.56 of Atrium’s claim, that United is indebted to Atrium for

3 The Court considers the Policy a pleading for purposes of United’s motion to dismiss because it is “referred to in
[the] complaint and central to the claim.” Armengau v. Cline, 7 F. App’x 336, 344 (6th Cir. 2001) (citation omitted).
Atrium “concedes [that] the Certificate of Coverage controls United’s payment obligations.” (Doc. 25 at PAGEID
#: 262).
the unpaid services rendered to Mr. Powell, and that United has failed to pay this debt
notwithstanding repeated appeals to United and requests for explanation regarding its
calculations. United moved to dismiss the amended complaint with prejudice for lack of
standing, failure to state a claim for relief, and failure to exhaust administrative remedies.

II. Standard of review
United argues that this matter should be dismissed because Atrium has neither direct nor
derivative standing under § 502(a) of ERISA. While United frames the question of Atrium’s
standing as a matter of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1), the issue of
standing raised by United is a question of “statutory standing” under ERISA (i.e., whether
Atrium is a beneficiary or participant who may sue under 29 U.S.C. § 1132(a)(1)(B)) and not
Article III standing under the Constitution. See Bridges v. American Elec. Power Co., Inc., 498
F.3d 442, 444 (6th Cir. 2007). Therefore, the appropriate standard of review is that for a motion
to dismiss under Fed. R. Civ. P. 12(b)(6).4
In deciding a motion to dismiss under Rule 12(b)(6), the Court must accept all factual

allegations as true and make reasonable inferences in favor of the non-moving party. Keys v.
Humana, Inc., 684 F.3d 605, 608 (6th Cir. 2012) (citing Harbin-Bey v. Rutter, 420 F.3d 571, 575
(6th Cir. 2005)). Only “a short and plain statement of the claim showing that the pleader is

4 Although the Sixth Circuit has sometimes referred to statutory standing in the ERISA context as jurisdictional, see
Roberts v. Hamer, 655 F.3d 578, 581 n.2 (6th Cir. 2011), the Court believes that it would not do so in this case. In
Bridges, 498 F.3d at 445, the Sixth Circuit adopted the Seventh Circuit’s analysis of ERISA statutory standing from
Harzewski v. Guidant Corp., 489 F.3d 799 (7th Cir. 2007), which held:

[e]xcept in extreme cases illustrated by our example of the attempt of the plan participant’s
creditor to enforce a claim to ERISA benefits, the question whether an ERISA plaintiff is a
“participant” entitled to recover benefits under the Act should be treated as a question of statutory
interpretation fundamental to the merits of the suit rather than as a question of the plaintiff’s right
to bring the suit.
Id. at 803-04. Atrium does not take such an extreme position.
entitled to relief” is required. Id. (quoting Fed. R. Civ. P. 8(a)(2)). “[T]he statement need only
give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Id.
(internal quotation marks omitted) (quoting Erickson v. Pardus, 551 U.S. 89, 93 (2007)).
Although the plaintiff need not plead specific facts, the “[f]actual allegations must be enough to

raise a right to relief above the speculative level” and to “state a claim to relief that is plausible
on its face.” Id. (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007)). “A
plaintiff must ‘plead[] factual content that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.’” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009)).
III. Analysis
A. Statutory standing
United first argues that Atrium does not have statutory standing to bring an ERISA claim
because there is no contractual relationship between United and Atrium, and therefore Atrium is
neither a plan participant nor a beneficiary who may bring suit to recover benefits under the

Policy. (Doc. 21 at 7) (citing Brown v. BlueCross BlueShield of Tenn., Inc., 827 F.3d 543, 545-
46 (6th Cir. 2016)). United also argues that Atrium does not have derivative standing under
ERISA because there has been no valid assignment of Mr. Powell’s benefits to Atrium as the
Policy expressly prohibits an assignment of benefits without United’s consent. While Atrium
does not mention ERISA in its complaint or response in opposition, it nevertheless argues that to
the extent that the Policy’s anti-assignment provision is enforceable, equitable doctrines prevent
United’s assertion thereof.
As a threshold matter, the Court must address whether ERISA preempts Atrium’s cause
of action against United. The Court then turns to the standing issues raised by United and
Atrium’s defenses thereto.
1. Preemption

ERISA allows for complete preemption. Loffredo v. Daimler AG, 500 F. App’x 491, 495
(6th Cir. 2012) (citing Aetna Health, Inc. v. Davila, 542 U.S. 200, 209 (2004)). A claim is
completely preempted by section 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B), if both
prongs of a two-factor test are satisfied: “(1) the plaintiff complains about the denial of benefits
to which he is entitled ‘only because of the terms of an ERISA-regulated employee benefit plan’;
and (2) the plaintiff does not allege the violation of any ‘legal duty (state or federal) independent
of ERISA or the plan terms.’” Hogan v. Jacobson, 823 F.3d 872, 879 (6th Cir. 2016) (quoting
Gardner. Heartland Indus. Partners, LP, 715 F.3d 609, 613 (6th Cir. 2013)).
Atrium’s claim against United satisfies both prongs. As to the first, its claim lacks any
state-law label and, “in essence[,]” seeks “the recovery of an ERISA plan benefit.” S. Ohio Med.

Ctr. v. Griffith, No. 1:19-cv-261, 2019 WL 5884280, at *5 (S.D. Ohio Nov. 12, 2019), report
and recommendation adopted, 2020 WL 581836 (S.D. Ohio Feb. 6, 2020) (quoting K.B. by &
through Qassis v. Methodist Healthcare - Memphis Hosps., 929 F.3d 795, 800-01 (6th Cir.
2019)). The sole relationship between Atrium and United is the Policy and whether and to what
extent United must pay the benefits delineated therein to Atrium. As to the second, Atrium
makes no argument that its claim is based on a legal duty independent of ERISA. It readily
acknowledges that “[t]he crux of [its] claim is that United has failed to act in accordance with the
Certificate of Coverage.” (Doc. 25 at PAGEID #: 262). Atrium’s claim is completely preempted
by ERISA. See Penny/Ohlmann/Nieman, Inc. v. Miami Valley Pension Corp., 399 F.3d 692, 699
(6th Cir. 2005) (“[B]ecause the contract at issue in the breach-of-contract claim is the ERISA
plan itself, the claim is clearly preempted.”) (quoting Darcangelo v. Verizon Commc’n, Inc., 292
F.3d 181, 194 (4th Cir. 2002)).
While the prevailing practice in the context of a completely preempted claim is to grant

leave to amend the complaint accordingly, this is not a requirement. See Ackerman v. Fortis
Benefits Ins. Co., 254 F. Supp. 2d 792, 818 (S.D. Ohio 2003) (citation omitted). Some courts
have “simply recognized the existence of the ERISA claim.” Id. (citations omitted). Cf.
Loffredo, 500 F. App’x at 495 (“[C]omplete preemption amounts to an exception to the well-
pleaded complaint rule that converts a state-law claim that could have been brought under § 1132
into a federal claim . . . and makes the recharacterized claims removable to federal court. . . .”)
(citations omitted) (emphasis added). The parties take no position on this point. For purposes of
its Report and Recommendation, the Court recasts Atrium’s claim against United as one arising
under 29 U.S.C. § 1132.
2. Derivative standing

Only plan participants and beneficiaries have standing to sue for civil enforcement of
benefit plans. Brown, 827 F.3d at 545 (citing 29 U.S.C. § 1132(a)(1)(B)). Merely having a right
to payment does not confer standing, derivative or otherwise. Id. at 545-46. See also Merrick,
175 F. Supp. 3d at 116 (“‘[R]ight to payment’ under the plan ‘does not a beneficiary make.’”)
(quoting Rojas v. Cigna Health and Life Ins. Co., 793 F.3d 253, 258 (2d Cir. 2015)). Atrium
does not allege that it has a contractual relationship with United such that it is a participant or
beneficiary with direct standing to sue under ERISA. Rather, Atrium alleges that Powell
assigned his right to benefits under the Policy to Atrium, thereby conferring derivative standing
on Atrium.
The Sixth Circuit recognizes derivative standing for health care providers but “only when
a patient ‘actually convey[s]’ a ‘valid assignment of benefits’ under the plan.” Brown, 827 F.3d
at 546 (quoting Cromwell v. Equicor–Equitable HCA Corp., 944 F.2d 1272, 1277 (6th Cir.
1991)). United contends that Atrium does not have a valid assignment of benefits because the

Policy expressly prohibits an assignment of benefits without United’s consent. United argues
that the anti-assignment provision contained in the Policy is enforceable and precludes statutory
standing.
Every Circuit that has considered the question has upheld the enforceability of anti-
assignment provisions in ERISA plans. See Am. Orthopedic & Sports Med. v. Indep. Blue Cross
Blue Shield, 890 F.3d 445, 453 (3d Cir. 2018) (collecting cases); Griffin v. Comm. of the UAW
Retiree Med. Benefits Trust, No. 16-12002, 2016 WL 6777854, at *2 (E.D. Mich. Nov. 16, 2016)
(citing Physicians Multispecialty Grp. v. Health Care Plan of Horton Homes, Inc., 371 F.3d
1291, 1295 (11th Cir. 2004) (collecting cases)). Courts within the Sixth Circuit have enforced
these provisions as well. See, e.g., Riverview Health Inst. LLC v. Med. Mut. of Ohio, No. 3:07-

cv-354, 2008 WL 4449482, at *8-9 (S.D. Ohio Sept. 30, 2008), aff’d, 601 F.3d 505 (6th Cir.
2010) (denying leave to amend to add estoppel claim because the policy at issue contained an
unambiguous anti-assignment provision); Children’s Hosp. Med. Ctr. of Akron v. Youngstown
Assocs. in Radiology, Inc. Welfare Plan, No. 4:11-cv-506, 2018 WL 4539282, at *3 (N.D. Ohio
Sept. 21, 2018) (dismissing complaint due to lack of standing in view of unambiguous anti-
assignment clause). Atrium does not argue otherwise, and the Court therefore finds that the anti-
assignment provision in the Policy is enforceable.
Atrium nevertheless argues that United’s course of dealing (i.e., making a payment of
benefits to and interacting with Atrium notwithstanding the anti-assignment provision) either
estops United from asserting or demonstrates waiver of United’s right to assert the anti-
assignment provision. As further basis for the application of estoppel, Atrium argues that
“[United] failed to disclose the anti-assignment provision in response to any of Atrium’s appeal
attempts and it failed to indicate the provision’s existence on any explanations of payment.”

(Doc. 25 at PAGEID #: 261).
i. Estoppel
Estoppel is available in ERISA cases but “cannot be applied to vary the terms of
unambiguous plan documents; estoppel can only be invoked in the context of ambiguous plan
provisions.” Sprague v. Gen. Motors Corp., 133 F.3d 388, 404 (6th Cir. 1998) (citing Fink v.
Union Central Life Ins. Co., 94 F.3d 489, 492 (8th Cir. 1996) and Hudson v. Delta Air Lines,
Inc., 90 F.3d 451, 458 n.12 (11th Cir. 1996)).5 Discussing estoppel in the context of an anti-
assignment provision, the Sixth Circuit has since remarked that “[n]o language in Sprague
suggests that an insurer has an affirmative duty to make health care providers or its insureds
aware of this kind of language.” Riverview, 601 F.3d at 522.

As noted above, the Policy’s anti-assignment provision reads:
You may not assign your Benefits under the Policy to a non-Network
provider without our consent. When an assignment is not obtained, we will
send the reimbursement directly to you (the Subscriber) for you to reimburse them
upon receipt of their bill. We may, however, in our discretion, pay a non-
Network provider directly for services rendered to you. In the case of any such
assignment of Benefits or payment to a non-Network provider, we reserve the
right to offset Benefits to be paid to the provider by any amounts that the provider
owes us.

5 In Bloemker v. Laborers’ Local 265 Pension Fund, 605 F.3d 436, 443 (6th Cir. 2010), the Sixth Circuit declined to
enforce this limitation “because neither of the rationales invoked by Sprague to justify its general prohibition against
application of estoppel to unambiguous provisions is sufficient to outweigh the extraordinary circumstances
presented by this case.” The Bloemker court established “extraordinary circumstances” as a necessary element to
bypass the ambiguity requirement set out in Sprague. Id. at 443-44. In Bloemker, the plaintiff had begun receiving
early retirement benefits in a certain amount pursuant to written confirmation of that amount. Id. at 438. Nearly two
years later, he was informed that he had been overpaid and was required to repay the excess. Id. The complaint at
bar does not allege any such extraordinary circumstances.
(Doc. 21-1, Ex. 1 to Stalinski Aff. at PAGEID #: 131) (emphasis added).
Consistent with Sprague, United contends estoppel does not apply because the Policy
contains an unambiguous anti-assignment provision. United cites two cases in which courts have
examined identical provisions: Merrick, 175 F. Supp. 3d at 114, and Aviation W. Charters, Inc.

v. United Healthcare Ins. Co., No. cv-14-00338, 2014 WL 5814232, at *3 (D. Ariz. Nov. 10,
2014). Like here, the plaintiffs in Merrick cited United’s “long-standing pattern and practice of
directly paying Plaintiffs for services provided under the plan” notwithstanding the anti-
assignment provision to support their estoppel claim. Id. at 120. Far from exhibiting
extraordinary circumstances, such as “intentional inducement or deception,” the court found that
the payments from United to the plaintiffs were “entirely routine. . . .” Id. at 121. The court
concluded, “[t]he fact that United made direct payments to Plaintiffs, as it was explicitly
authorized to do under the plan, does not estop it from raising the anti-assignment provision to
challenge Plaintiffs’ standing.” Id. (citation omitted) (emphasis added). In Aviation W., the
court did not discuss whether the plaintiff had alleged extraordinary circumstances but found

nothing ambiguous about the anti-assignment provision. 2014 WL 5814232 at *3. The court
found that the references in the provision to assignment and direct payment were “alternatives,
not equivalents.” Id. Moreover, it found that reading an exercise of discretion to pay directly
(one alternative) as overruling the consent-to-assignment requirement (another alternative)
“would be illogical.” Id.
Atrium argues that United’s failure to disclose the anti-assignment provision and
United’s course of dealing with Atrium are grounds to estop United from enforcing the anti-
assignment provision. Atrium cites two cases in support of this position: Productive MD, LLC v.
Aetna Health, Inc., 969 F. Supp. 2d 901 (M.D. Tenn. 2013), and Spectrum Health v. Valley
Truck Parts, No. 1:07-cv-1091, 2008 WL 2246048 (W.D. Mich. May 30, 2008). In Productive,
the court considered hundreds of claims for which a health care provider sought payment. Id. at
922. During an eight-year period, the insurance company paid professional components of these
claims but denied technical components, even where all parts of the claims would have violated

the applicable insurance policies’ anti-assignment provisions. Id. at 922-23, 927. The plaintiff
alleged that this disparate treatment was intended as punishment for refusing to join the
defendant’s provider network. Id. at 908. The court concluded that these unique facts justified
the plaintiff’s detrimental reliance for purposes of estoppel. Id. at 921-22, 927.6 In Spectrum,
the court did not consider an anti-assignment provision but remarked, in a footnote, that “[e]ven
if the Court were to conclude that Spectrum did not obtain a valid assignment from Clark, the
Court would nonetheless conclude that Defendants are estopped from raising the issue of
Spectrum’s right or authorization to pursue a claim for payment of benefits.” 2008 WL 2246048
at *4 n.4 (citing Hermann Hosp. v. MEBA Med. & Benefits Plan, 959 F.2d 569, 574 (5th Cir.
1992)). It found that the defendant’s failure to raise the validity of an assignment clause for

more than a year and a half of dealing with the alleged assignee would have established estoppel.
Id.
The cases cited by Atrium are not persuasive. The Court agrees with the two decisions
cited by United that the anti-assignment provision in the Policy is unambiguous. Atrium has
alleged no extraordinary circumstances that would upset the ordinary rule that estoppel is
unavailable to alter the meaning of an unambiguous policy term. To the extent that Atrium relies
on a duty of United to affirmatively disclose the anti-assignment provision in its course of

6 While it does not cite Bloemker, see supra n.4, or discuss extraordinary circumstances as such, Productive hints at
the distinction drawn in that case: “the alleged factual circumstances here present a much more compelling case for
the application of the estoppel doctrine than the circumstances at issue in Riverview.” Id. at 922.
dealing, the argument is foreclosed by Riverview. 601 F.3d at 522. Atrium cannot overcome its
statutory standing deficiency via estoppel.
ii. Waiver
Atrium also argues that it has statutory standing in this lawsuit because United waived its

right to assert the anti-assignment provision of the Policy. Atrium alleges that United forfeited
its right to assert this defense when it made payments to Atrium under the Policy and interacted
with Atrium despite the anti-assignment provision.
The Sixth Circuit has not ruled on whether the theory of waiver may be applied in the
ERISA context. See Trane U.S. Inc. v. Neblett, 291 F. Supp. 3d 848, 852 (M.D. Tenn. 2018);
Schornhorst v. Ford Motor Co., 606 F. Supp. 2d 658, 670 (E.D. Mich. 2009). See also
Badalament v. United of Omaha Life Ins. Co., No. 05-cv-74932, 2007 WL 1006908, at *4 (E.D.
Mich. Mar. 30, 2007) (“The federal common law of ERISA for waiver is not well-developed.”).
As a general matter, district courts are to “apply federal common law rules of contract
interpretation in making [their] determination[s].” Univ. Hosps. of Cleveland v. S. Lorain

Merchs. Ass’n Health & Welfare Benefit Plan & Tr., 441 F.3d 430, 437 (6th Cir. 2006) (quoting
Perez v. Aetna Life Ins. Co., 150 F.3d 550, 556 (6th Cir. 1998)). To the extent that ERISA is
silent, federal common law should “fill the statutory gap.” Trane, 291 F. Supp. 3d at 852
(quoting Patterson v. Chrysler Grp., LLC, 845 F.3d 756, 762 (6th Cir. 2017)). See also
Armistead v. Vernitron Corp., 944 F.2d 1287, 1298 (6th Cir. 1991), abrogated on other grounds
by M & G Polymers USA, LLC v. Tackett, 574 U.S. 427 (2015) (citing Lingle v. Norge Div. of
Magic Chef, Inc., 486 U.S. 399, 403 (1988) and discussing the incorporation of equitable
estoppel, “ERISA authorize[s] the federal courts to fashion a body of federal common law to
enforce the agreement that these statutes bring within their jurisdiction”).
Most circuits that have considered waiver in the ERISA context have either applied it or
indicated a willingness to apply it under appropriate circumstances.7 See, e.g., Am. Orthopedic,
890 F.3d at 454 (holding that “routine processing of a claim form, issuing payment at the out-of-
network rate, and summarily denying the informal appeal” did not demonstrate “an evident

purpose to surrender” an objection to a provider’s standing in a federal lawsuit such that waiver
could apply) (quoting Brown v. City of Pittsburgh, 186 A.2d 399, 401 (Pa. 1962)). Some circuits
have explicitly set an enhanced standard under which waiver can apply in the ERISA context,
holding that waiver will not be found unless the circumstances show either a detriment to the
plaintiff or a benefit to the defendant to justify the waiver. See Thomason v. Aetna Life Ins. Co.,
9 F.3d 645, 649 (7th Cir. 1993) (“The waiver that plaintiff [sought] . . . [wa]s a something-for-
nothing kind of waiver whereby [the insurer] will be held to the terms of its misleading
representations for no reason other than that it made them.”); Gordon v. Deloitte & Touche, LLP
Grp. Long Term Disability Plan, 749 F.3d 746, 753 (9th Cir. 2014) (agreeing with Thomason
that wavier in the ERISA context requires “something more” than a misrepresentation); Glass v.

United of Omaha Life Ins. Co., 33 F.3d 1341, 1348 (11th Cir. 1994) (declining to find waiver of
eligibility requirement where it was not shown that defendant knew the insured was ineligible or
that the insurer unjustly benefitted from the mistake).
Though not always explicitly stated as such, decisions in other circuits seem consistent
with this enhanced showing. The Second, Fifth, and Ninth Circuits have found waiver in
situations where insurers received an accompanying benefit in the form of reduced
administrative expense or premiums. See Lauder v. First Unum Life Ins. Co., 284 F.3d 375, 378

7 Only the Fourth Circuit has denied outright the application of waiver (and estoppel) in the ERISA context. White
v. Provident Life & Acc. Ins. Co., 114 F.3d 26, 29 (4th Cir. 1997) (“[F]ederal common law under ERISA . . . does
not incorporate the principles of waiver and estoppel. . . . ERISA . . . does not provide for such unwritten
modifications of ERISA plans.”) (citation omitted).
(2d Cir. 2002) (holding that insurer waived its right to assert lack of disability in denying a
claim, where the plaintiff had proffered evidence of her disability and the insurer initially had
requested medical records, but the insurer ultimately canceled the request to save administrative
expense); Pitts By & Through Pitts v. Am. Sec. Life Ins. Co., 931 F.2d 351, 353, 357 (5th Cir.

1991) (where insurance policy required at least ten employees, and yet insurer accepted and
cashed insurance premium checks “after learning beyond all doubt” that only one employee
remained on the group policy, insurer waived its right to enforce the ten-employee requirement);
Salyers v. Metro. Life Ins. Co., 871 F.3d 934, 938, 941 (9th Cir. 2017) (citing Pitts favorably and
finding wavier where the insurer accepted premiums despite knowing that the insured did not
meet the evidence of insurability requirement).
Within the Sixth Circuit, district courts have taken different approaches. Some courts
have concluded that wavier is never available in the ERISA context. See, e.g., Tendercare
(Mich.), Inc. v. Dana Corp., No. 02-72263, 2002 WL 31545992, at *4 (E.D. Mich. Oct. 18,
2002) (“[I]t is black letter law that standing cannot be waived.”) (citation omitted); Griffin v.

Comm. of the UAW Retiree Med. Benefits Tr., No. 16-12002, 2016 WL 6777854, at *3 (E.D.
Mich. Nov. 16, 2016) (“[C]ourts do not recognize waiver in the ERISA context.”) (citation
omitted). Others have entertained or applied the doctrine. See, e.g., Trane, 291 F. Supp. 3d at
853 (finding that waiver could apply if a plaintiff showed either detrimental reliance or
consideration, but the plaintiff had not established waiver in this case); Agee v. Jennie Stuart
Med. Ctr., No. 5:05-cv-154, 2007 WL 923090, at *6 (W.D. Ky. Mar. 23, 2007) (same);
Schornhorst, 606 F. Supp. 2d at 671-72 (discussing the split in authority but ultimately finding
“insufficient basis for application of the doctrine of waiver.”); and Health Cost Controls v.
Wardlow, 825 F. Supp. 152, 156-57 (W.D. Ky. 1993) (“HCC intentionally relinquished a known
right, and thereby waived the protection of its reimbursement provision.”).
The Court finds that the Sixth Circuit would likely join the majority of circuits that have
(or have been willing to) apply waiver in the ERISA context. The Sixth Circuit has defined

waiver as “the intentional relinquishment or abandonment of a known right.” PolyOne Corp. v.
Westlake Vinyls, Inc., 937 F.3d 692, 697 (6th Cir. 2019) (quoting United States v. Olano, 507
U.S. 725, 733 (1993)) (quotation marks and citation omitted).8 Even without reaching the
question of whether an enhanced waiver analysis is warranted, the Court concludes that waiver is
inapplicable to this case even under its basic definition, and United did not abandon its right to
assert the anti-assignment provision of the Policy to show Atrium’s lack of statutory standing in
this case.
None of Atrium’s allegations demonstrate that United intentionally relinquished the anti-
assignment provision. Particularly without any legal duty to volunteer the fact of anti-
assignment provision, United’s failure to advise Atrium of this provision falls short of an

“intentional relinquishment” thereof. Atrium also implies that because United “conducted
business as usual in processing and paying” part of the claim at issue, United waived
enforcement of the anti-assignment provision. (Doc. 25 at PAGEID #: 261). But as the Court
has already determined, the plan unambiguously provides that United had the option of paying
claims directly without assigning benefits. To interpret United’s direct payment as intentionally
relinquishing the right to enforce the anti-assignment provision would effectively write out the

8 To the extent that Wisconsin (see Doc. 21-1 at PAGEID #: 90) or Ohio law would apply on the question of waiver,
the outcome would be the same as the standards for waiver are identical. See Brunton v. Nuvell Credit Corp., 785
N.W.2d 302, 311 (Wis. 2010) (“[W]aiver is the intentional relinquishment or abandonment of a known right.”)
(quoting State v. Ndina, 761 N.W.2d 612, 670 (Wis. 2009)); State ex rel. Wallace v. State Med. Bd. of Ohio, 732
N.E.2d 960, 965 (Ohio 2000) (“‘Waiver’ is defined as a voluntary relinquishment of a known right.”).
alternative nature of the provision. See Sprague, 133 F.3d at 404 (“[T]o enforce something other
than the plan documents themselves . . . would not be consistent with ERISA.”). Cf. Am.
Orthopedic, 890 F.3d at 454 (an insurer’s routine claim processing and payment do not rise to
the level of a “clear, unequivocal, and decisive act” demonstrating intentional surrender of a

known right). Atrium cannot overcome its statutory standing deficiency via waiver.
In sum, Atrium’s state law claim against United is preempted by ERISA. To proceed,
Atrium is therefore required to demonstrate ERISA statutory standing. Because it is not an
ERISA plan participant or beneficiary, Atrium’s only avenue to statutory standing as a health
care provider is derivative. While a valid assignment of benefits under an ERISA plan may
establish derivative standing, Atrium has failed to establish a valid assignment under the United
Policy. The Policy’s anti-assignment provision is enforceable and forecloses derivative standing
for Atrium. Short of equitable relief in the form of estoppel or waiver, which are unavailable for
the reasons discussed above, Atrium has no statutory standing to bring a claim against United.
B. Failure to exhaust

Assuming, arguendo, that Atrium has derivate standing to assert a claim against United,
United argues that Atrium’s claim should nevertheless be dismissed for failure to state a claim
upon which relief can be granted. In the alternative, United argues that Atrium’s claim should be
dismissed because it has failed to exhaust its administrative remedies. For purposes of the
pending motion, even if the Court were to find that Atrium has statutory standing and raises a
plausible ERISA claim, it nevertheless has failed to exhaust its administrative remedies under the
Policy.
While the ERISA statute does not contain an administrative exhaustion requirement, the
Sixth Circuit has “read an exhaustion requirement into the statute.” Hitchcock v. Cumberland
Univ. 403(b) DC Plan, 851 F.3d 552, 560 (6th Cir. 2017) (quoting Fallick v. Nationwide Mut.
Ins. Co., 162 F.3d 410, 418 (6th Cir. 1998)). Administrative exhaustion “enables plan fiduciaries
to efficiently manage their funds; correct their errors; interpret plan provisions; and assemble a
factual record which will assist a court in reviewing the fiduciaries’ actions.” Ravencraft v.

UNUM Life Ins. Co. of Am., 212 F.3d 341, 343 (6th Cir. 2000) (quoting Makar v. Health Care
Corp. of Mid-Atl. (CareFirst), 872 F.2d 80, 83 (4th Cir. 1989)) (emphasis deleted). Dismissal
without prejudice is appropriate to the extent that a plaintiff has not established exhaustion. See
Falandays v. Penn Treat Am. Corp., 114 F. App’x 738, at *1 (6th Cir. 2004); Borman v. Great
Atl. & Pac. Tea Co., 64 F. App’x 524, 529 (6th Cir. 2003); Weiner v. Klais and Co., Inc., 108
F.3d 86, 88, 91 (6th Cir. 1997), abrogated on other grounds by Swierkiewicz v. Sorema N.A., 534
U.S. 506 (2002).
The entirety of Atrium’s allegations in the amended complaint related to exhaustion are
that “[United] has . . . repeatedly ignored [Atrium]’s appeal efforts and requests for explanations
regarding the calculation of rate of payment.” (See Doc. 15 at ¶ 14). In its response to the

motion to dismiss, Atrium alleges that “[i]t is unclear what additional attempts [it] needed to
make to exhaust its administrative remedies.” (See Doc. 25 at PAGEID #: 262).
The Policy contains a detailed “Questions, Complaints and Grievances” section, which
sets forth the internal grievance procedure that must be followed to contest any adverse action
taken by United. (See Doc. 21-1 at PAGEID #: 132-35). Atrium’s complaint and response in
opposition make no mention of this grievance procedure section, nor does Atrium allege the
specific actions it took to exhaust United’s internal grievance procedure. Atrium’s threadbare
allegations do not demonstrate exhaustion.
Atrium contends that if the Court finds it failed to exhaust its administrative remedies, the
Court should excuse the non-exhaustion based on futility. The Court finds that Atrium has not
established the futility exception to exhaustion.
Exhaustion may be excused if a plaintiff demonstrates futility—that “resorting to the

plan’s administrative procedure would simply be futile or the remedy inadequate.” Coomer, 370
F.3d at 505 (quoting Fallick, 162 F.3d at 419). Futility must be shown by a “clear and positive
indication . . . that [a plaintiff’s] claim will be denied on appeal” and “not merely . . . doubt[] that
an appeal will result in a different decision.” Id. (quoting Fallick, 162 F.3d at 419). Denial of
benefits alone is insufficient to demonstrate futility. Id. Generally, the Sixth Circuit has applied
the futility exception to exhaustion:
(1) when the “Plaintiffs’ suit [is] directed to the legality of [the plan], not to a
mere interpretation of it,” Costantino v. TRW, Inc., 13 F.3d 969, 975 (6th Cir.
1994) (emphases omitted); see also Fallick, 162 F.3d at 420, and (2) when the
defendant “lacks the authority to institute the [decision] sought by Plaintiffs,” Hill
v. Blue Cross & Blue Shield of Mich., 409 F.3d 710, 719 (6th Cir. 2005).

Dozier v. Sun Life Assur. Co. of Can., 466 F.3d 532, 535 (6th Cir. 2006).
Atrium argues that where, as here, an insurer has failed to comprehend the nature of the
plaintiff’s claim, courts will not require exhaustion based on futility. Atrium analogizes its
position to that of the plaintiffs in Costantino, 13 F.3d at 975, arguing that United “repeatedly
misunderstands or mischaracterizes Atrium’s claim.” (Doc. 25 at PAGEID #: 263).
Constantino is distinguishable. In Constantino, the plaintiffs challenged the legality of
the ERISA Plan, not the defendant’s interpretation of the Plan. The Sixth Circuit reasoned that
if the plaintiffs were to resort to the administrative process, the defendant “would merely
recalculate their benefits and reach the same result.” Costantino, 13 F.3d at 975. The court
therefore excused exhaustion of administrative remedies because it would be futile.
Here, in contrast, Atrium does not dispute the legality of United’s Policy but rather
United’s calculation of benefits under the Policy. Atrium’s amended complaint contains
allegations related entirely to calculations and payments under the Policy and not its legality.
(See Doc. 15 at ¶ 14) (“[United] has improperly denied this claim, without reason, and repeatedly

ignored [Atrium]’s appeal efforts and requests for explanations regarding the calculation of rate
of payment.”).
Atrium’s allegations are far more like those made in Borman, where the Sixth Circuit
refused to excuse exhaustion based on futility:
Borman vaguely alleged in his complaint that he had engaged in a “lengthy
period” of fruitless discussions concerning his benefit claims in controversy, and
had filed some sort of unspecified claim, with unnamed officers of A&P. He has
further asserted that the defendants had not timely informed him of the available
internal claim and review procedures, nor had they referred him to the Pension
Committee. However, in the trial court, Borman filed no affidavit nor produced
any other evidence in opposition to the Eckert affidavit and the documents offered
by the defendants in support of their motion to dismiss the complaint. Most
importantly, Borman failed to evince, or even allege, that he had made any effort
to adhere to A&P’s formal written internal benefit claim and review procedures,
or had even inquired of any A&P agent about those procedures.

64 F. App’x at 528. See also Riverview, 2008 WL 4449482 at *7 (“While Plaintiffs describe
some efforts to obtain payments from Medical Mutual of Ohio, there are no allegations detailing
any efforts to pursue administrative remedies under any of ERISA plans.”).
Like the plaintiff in Borman, Atrium generally alleges that United ignored Atrium’s
“appeal efforts” and requests for information without alleging a factual basis for such efforts and
requests. Atrium’s allegations do not engender a “clear and positive indication” of futility such
that the Court is convinced to excuse the exhaustion requirement. Coomer, 370 F.3d at 505
(quoting Fallick, 162 F.3d at 419). The Court concludes that even if Atrium has statutory
standing to bring suit, and even if Atrium has stated a plausible claim for relief under 29 U.S.C. §
1132, it has failed to demonstrate administrative exhaustion or futility thereof.9
C. Dismissal with prejudice
Were Atrium’s only deficiency its procedural failure to exhaust, dismissal without

prejudice would be appropriate. See Ravencraft, 212 F.3d at 344 (vacating and remanding
decision of the district court to dismiss a case with prejudice, where the dismissal had been based
solely on failure to exhaust). The Court also recommends here, however, that the Atrium’s claim
against United be dismissed with prejudice for lack of statutory standing. Atrium was on notice
of United’s desire to seek dismissal with prejudice and failed to respond with any indication that
it could cure a statutory standing defect. Dismissal with prejudice is appropriate. See DaVita,
Inc. v. Marietta Mem’l Hosp. Emp. Health Benefit Plan, No. 2:18-cv-1739, 2019 WL 4574500,
at *7 (S.D. Ohio Sept. 20, 2019), appeal docketed No. 19-3049 (6th Cir. Oct. 23, 2019)
(dismissing claims for which the plaintiffs had no statutory standing under ERISA with
prejudice); Merrick, 175 F. Supp. 3d at 126 (same); Martin v. Gen. Motors Corp., 753 F. Supp.

1347, 1358 (E.D. Mich. 1991) (determination that the plaintiff lacked standing under ERISA was
a decision on the merits warranting dismissal with prejudice).

9 In the context of ERISA, the Sixth Circuit has upheld dismissal at the pleading stage based on failure to exhaust.
See Hill v. Blue Cross and Blue Shield of Mich., 409 F.3d 710, 721, 723 (6th Cir. 2005) (affirming dismissal
pursuant to Fed. R. Civ. P. 12(b)(6) motion where certain plaintiffs had “not sufficiently alleged that they exhausted
the administrative remedies available to them.”).
IT IS THEREFORE RECOMMENDED THAT:
United’s motion to dismiss (Doc. 21) be GRANTED and count one of amended
complaint against United be DISMISSED WITH PREJUDICE. "°

Karen L. Litkovitz
United States Magistrate Judge

10 Atrium voluntarily dismissed defendant URSA Major Corporation without prejudice. (Doc. 33). Therefore, the
only remaining defendant in this case is Khron Powell, who has not responded to the complaint despite being served
with process. (Doc. 31).
20

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION

ATRIUM MEDICAL CENTER, Case No. 19-cv-680
Plaintiff, Dlott, J.
Litkovitz, M.J.
vs.

UNITED HEALTHCARE INSURANCE
COMPANY, et al.,
Defendants.

NOTICE
Pursuant to Fed. R. Civ. P. 72(b), WITHIN 14 DAYS after being served with a copy of
the recommended disposition, a party may serve and file specific written objections to the
proposed findings and recommendations. This period may be extended further by the Court on
timely motion for an extension. Such objections shall specify the portions of the Report objected
to and shall be accompanied by a memorandum of law in support of the objections. If the Report
and Recommendation is based in whole or in part upon matters occurring on the record at an oral
hearing, the objecting party shall promptly arrange for the transcription of the record, or such
portions of it as all parties may agree upon, or the Magistrate Judge deems sufficient, unless the
assigned District Judge otherwise directs. A party may respond to another party’s objections
WITHIN 14 DAYS after being served with a copy thereof. Failure to make objections in
accordance with this procedure may forfeit rights on appeal. See Thomas v. Arn, 474 U.S. 140
(1985); United States v. Walters, 638 F.2d 947 (6th Cir. 1981).

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10376321. Public record. Not legal advice.