Angelina Emergency Medicine Associates PA v. Health Care Service Corporation

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

ANGELINA EMERGENCY §

MEDICINE ASSOCIATES PA, et §

al., §

§

Plaintiffs, §

§ Civil Action No. 3:18-CV-00425-X

v. §

§

HEALTH CARE SERVICE §

CORPORATION, et al., §

§

Defendants. §

MEMORANDUM OPINION AND ORDER

This case is in all ways an absolute unit1—in the serious nature of its subject

matter, in the scope of claims brought, and in the amount of damages sought. The

plaintiffs (over fifty physicians associations) brought multiple federal, state

statutory, and state common law claims against some forty-odd defendants, a bunch

of insurance companies and medical organizations, alleging they’d been underpaid

for emergency services they provided to patients.

To facilitate a swifter, cleaner resolution of this mammoth matter, the Court

split discovery in half, focusing on “identification and clarification of the [legal]

claims” in Phase 1. In accordance with the Court’s scheduling order, the defendants

filed a joint omnibus motion to dismiss several of the plaintiffs’ claims after Phase 1

1 See, e.g., Absolute Unit, KNOW YOUR MEME, https://knowyourmeme.com/memes/absolute-

unit; see also Emilia Petrarca, Why Is “Absolute Unit” a Menswear Meme?, THE CUT (Feb. 8, 2018),

https://www.thecut.com/2018/02/absolute-unit-meme.html (“[A]n absolute unit is something or

someone that is comically oversize.”).

had concluded, arguing that these claims could be cast aside solely on legal grounds.

That motion to dismiss is now ripe.

Having considered these filings, the Court GRANTS IN PART and DENIES

IN PART the defendants’ omnibus motion to dismiss. The Court DISMISSES

WITH PREJUDICE: (1) all claims based on quantum meruit (Count III); (2) all

claims pursuant to Texas Insurance Code sections 541.060, 1271.155, and 1301.0053

(Count VI); and (3) all claims under the Texas Prompt Pay Act (Count VII). The Court

also DISMISSES WITHOUT PREJUDICE all claims based on breach of the duty

of good faith and fair dealing (Count IV). And finally, the Court DISMISSES AS

MOOT any non-ERISA-based claims involving Capital BlueCross and Care First,

Inc. (“CareFirst”). However, the Court DENIES the motion to dismiss with respect

to: (1) defendants’ anti-assignment provision defense; (2) jurisdiction over any

remaining claims involving Blue Cross and Blue Shield of South Carolina (“South

Carolina Blue”) and Blue Cross and Blue Shield of Florida, Inc., d/b/a Florida Blue

(“Florida Blue”); and (3) any remaining ERISA-based claims involving Capital

BlueCross, and CareFirst.

* * *

When delivering its opinions, the Court customarily first recites the facts of

the case, then the applicable law, and then its reasoning. Given the complexity of

this case, the Court instead organizes this opinion and order by claim, according to

the organization the parties followed in their respective motion and response.2 When

2 See Doc. 212 and Doc. 218.

the Court reaches a particular claim, it will then recite the pertinent facts and law

that relate specifically to it. The Court believes this method of organization will make

its holdings easier to understand and apply. However, the Court must detail at the

outset the overall legal standard it follows when confronting any motion to dismiss.

To survive a motion to dismiss, the plaintiff must plead “enough facts to state

a claim to relief that is plausible on its face.”3 If the Court’s analysis requires factual

determinations, the Court must accept all well-pleaded facts as true and view them

in the light most favorable to the plaintiff.4 Documents that a defendant attaches to

a motion to dismiss are considered part of the pleadings if referred to in the complaint

and otherwise central to its claims.5

In this specific instance, though, the Court focuses its gaze primarily on the

law, not the facts. And when doing so, the Court doesn’t accept as true “conclusory

allegations, unwarranted factual inferences, or legal conclusions.”6 The Court’s

plumb line, as usual, is plausibility, meaning “more than a sheer possibility that a

defendant has acted unlawfully.”7 In that vein, the Court may dismiss claims for a

variety of law-related reasons. For instance, dismissal of a claim is proper if it fails

to plead all required elements necessary to obtain relief.8 Put another way, the Court

3 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

4 Sonnier v. State Farm Mut. Auto. Ins. Co., 509 F.3d 673, 675 (5th Cir. 2007).

5 Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498–99 (5th Cir. 2000).

6 Southland Sec. Corp. v. Inspire Ins. Solutions, Inc., 365 F.3d 353, 361 (5th Cir. 2004).

7 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

8 Blackburn v. City of Marshall, 42 F.3d 925, 931 (5th Cir. 1995).

may find a claim that lacks a required element implausible because we cannot “draw

the reasonable inference that the defendant is liable for the misconduct alleged.”9

In summary, the primary purpose of this motion to dismiss is not to rule on

factual matters that require further discovery, but to determine which legal claims—

if any—can be dismissed as a matter of law. Accordingly, the Court now turns to the

first dispute of law between the parties.

I. Quantum Meruit (Count III)

In their response to the defendants’ motion to dismiss, the plaintiffs helpfully

categorized the health insurance claims at issue into four “buckets”:

• Insurance claims made in Texas by patients insured in Texas by Blue Cross

Blue Shield of Texas (“Texas Blue”). The Court refers to this first bucket

as Texas Blue Insured;

• Insurance claims made in Texas by patients insured in Texas by self-funded

ERISA-governed plans administered by Texas Blue. The Court refers to

this second bucket as Texas Blue Self-Funded;

• Insurance claims made in Texas by patients insured outside of Texas by

other Blue Plan providers processed by Texas Blue. The Court refers to this

third bucket as BlueCard Insured; and

9 Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). The Court may find claims

implausible (and thus dismiss them) even without “judicially noticeable facts available to contradict

them.” Denton v. Hernandez, 504 U.S. 25, 33 (1992); see also Starrett v. U.S. Dep’t of Def., 763 F. App’x

383, 384 (5th Cir. 2019).

• Insurance claims made in Texas by patients insured outside of Texas by

self-funded ERISA-governed administered by other Blue Plan providers.

The Court refers to this fourth bucket as BlueCard Self-Funded.10

In their complaint, the plaintiffs argue they may recover in quantum meruit

as to the Texas Blue Insured and BlueCard Insured insurance claims. Quantum

meruit is a state-law equitable remedy founded in unjust enrichment.11 To recover

from the defendant, the plaintiff must show that (1) they rendered valuable services

or materials (2) to the defendant (3) which the defendant accepted, used, and enjoyed,

and (4) the circumstances placed the defendant on reasonable notice that the plaintiff

expected compensation for the services or materials.12 And it isn’t enough for a

plaintiff to simply show that his actions benefitted the defendant. “[T]he plaintiff

must show that his efforts were undertaken for the person sought to be charged”—

i.e., the defendant.13

The complaint states that by “providing medically necessary emergency

services” to the defendants’ insurance customers, the plaintiffs “conferred a benefit”

on them by satisfying their “obligations to arrange and pay for healthcare services”

for these members.14 But saddling someone with a debt to repay hardly qualifies as

a benefit. And the very phrasing of the plaintiffs’ quantum meruit claim implies its

10 Doc. 218 at 15.

11 Bashara v. Baptist Mem’l Hosp. Sys., 685 S.W.2d 307, 310 (Tex. 1985).

12 Id.

13 Truly v. Austin, 744 S.W.2d 934, 937 (Tex. 1988) (emphasis in original).

14 Doc. 55 at 57.

failure. Serving a defendant’s customers is hardly the same as serving the defendant

itself.

On these points, the Court finds Encompass Office Solutions, Inc. v. Ingenix,

Inc.15 highly persuasive. In that case a provider of medical facilities and equipment

(Encompass) sued an insurer (United) using the same line of logic: underpayment of

insurance claims + provision of services to United members = recovery in quantum

meruit.16 The district court correctly reasoned that “[e]ven if United received some

benefit as a result of Encompass providing medical services to its insureds, a

proposition the court finds dubious, Encompass’s services were rendered to and for

its patients, not United.”17 Recovery in quantum meruit cannot be had from an

insurer based on services rendered to an insured, because those services aren’t

directed to or for the benefit of the insurer.18 As our sister district courts have

repeatedly pointed out, “a ripened obligation to pay money to the insured . . . hardly

15 775 F. Supp. 2d 938 (E.D. Tex. 2011).

16 Id. at 966; see also Mid-Town Surgical Ctr., LLP v. Blue Cross Blue Shield of Tex., 2012 WL

1252512 at *3 (S.D. Tex. Apr. 11, 2012).

17 Id.

18 The plaintiffs argue that Encompass and similar cases can be distinguished because “the

courts in those cases found that plaintiffs did not allege they provided services specifically to

defendants.” Maybe the plaintiffs were relying on a different case called Encompass. See, e.g.,

Encompass, 775 F. Supp. 2d at 966 (“Encompass counters that it has provided valuable services to

United . . . . (emphasis added)). And the Court is unpersuaded by the other district court cases the

plaintiffs marshal in their favor. As a representative example, DAC Surgical Partners, 2011 WL

3841946 (S.D. Tex. Aug. 30, 2011), in which a Southern District of Texas court ruled that the plaintiffs

stated their quantum meruit claim by merely alleging provision of a benefit, provides no indication of

the facts that made this ruling plausible—which is the standard at the motion to dismiss stage. Id. at

*6; but see Denton, 504 U.S. at 33; Southland, 365 F.3d at 361 (noting that “conclusory allegations”

cannot survive a motion to dismiss).

can be called a benefit.”19 The plaintiffs’ claims for recovery under quantum meruit

therefore fail on the law, and Count III is dismissed.20

II. Breach of Duty of Good Faith and Fair Dealing (Count IV)

Next, the Court addresses the defendants’ alleged breach of duty of good faith

and fair dealing. Texas courts have held that this implied covenant, rarely imposed

in the state’s common law, may arise in the insurance context based on “the parties’

unequal bargaining power . . . .”21 Plaintiffs may state a cause of action under this

tort by alleging “that there is no reasonable basis for denial of a claim or delay in

payment or a failure on the part of the insurer to determine whether there is any

reasonable basis for the denial or delay.”22

The plaintiffs argue that the defendants breached their duty of good faith and

fair dealing under the Texas Blue Insured and BlueCard Insured policies. Their

allegations sound familiar: because the plaintiffs provided medical services to

patients carrying these policies, “who assigned their rights to benefits under the plans

for services to” the plaintiffs, and the defendants “significantly underpaid” for those

19 Travelers Indem. Co. of Conn. v. Losco Grp., Inc., 150 F. Supp. 2d 556, 563 (S.D. NY 2001);

see also Encompass, 775 F. Supp. 2d at 966 n.11 (quoting Travelers), Tex. Spine & Joint Hosp., Ltd. v.

Blue Cross & Blue Shield of Tex., 2015 WL 13649419 at *7 n.9 (E.D. Tex. May 28, 2015) (not reported)

(also quoting Travelers).

20 The defendants also argue that the plaintiffs’ quantum meruit claims should be dismissed

because such a claim is unavailable under Texas law where it duplicates a contract remedy. As the

defendants’ other argument on benefits is enough to dismiss the claim, the Court declines to address

this line of reasoning.

21 Arnold v. Nat’l Cty. Mut. Fire Ins. Co., 725 S.W.2d 165, 167 (Tex. 1987). This heavily implies,

by the way, that this tort should primarily (perhaps only) be exercised in relation to this unbalanced

bargaining relationship—i.e., by an insured directly against an insurer, not by the insured’s assignee.

22 Id.

services and “failed to provide . . . adequate written explanations” for this

underpayment, the plaintiffs may recover.23

In their motion to dismiss, the defendants argue first that the plaintiffs haven’t

stated a claim for breach of this duty because an assignor can only assign ripened

torts. To clarify, under Texas law, an assignment is simply a transfer of some right,

interest, or property. It “operates by way of agreement or contract.”24 And it is a

long-established principle of Texas common law that “contracts . . . are not favored,

and an instrument is not given effect as an assignment of an expectancy or future

interest unless it clearly manifests the intention . . . to sell, assign or convey [the]

expectancy or future interest.”25 The Court notes that the plaintiffs have not pled

that the patients who assigned them this as-yet-unripe tort expected it to ripen in the

future.26 So the Court is inclined to dismiss this claim, but without prejudice in order

to allow repleading.

Moreover, the plaintiffs have failed to plead or argue an independent injury,

as required by Texas law. In USAA Texas Lloyds Co. v. Menchaca,27 the Texas

Supreme Court held that:

23 Doc. 55 at 59.

24 Univ. of Tex. Med. Branch at Galveston v. Allan, 777 S.W.2d 450, 453 (Tex. App.—Houston

[14th Dist.] 1989).

25 McConnell v. Corgey, 262 S.W.2d 944, 947 (Tex. 1953).

26 See Wolters Village Mgmt. Co. v. Merchs. and Planters Nat’l Bank of Sherman, 223 F.2d 793,

798 (5th Cir. 1955) (“It is clear that in general a right expected to arise in the future may be the subject

of assignment, if expected to arise under a contract in existence at the time of the assignment.”).

27 545 S.W.3d 479 (Tex. 2018).

if an insurer’s statutory violation causes an injury independent of the

loss of policy benefits, the insured may recover damages for that injury

even if the policy does not grant the insured a right to benefits. . . . [but]

only if the damages are truly independent of the insured’s right to

receive policy benefits.28

Essentially, under Texas law, assuming for the sake of argument that assignment

actually occurred, the plaintiffs must show (or at the very least allege with sufficient

particularity) that they suffered some injury independent of their right to repayment

under the policy in order to recover for breach of the duty of good faith and fair

dealing.29

The plaintiffs fail to allege an independent injury in their complaint.30 They

allege the defendants underpaid them when reimbursing the Texas Blue Insured and

BlueCard Insured insurance claims (an alleged injury that is not “independent of the

loss of policy benefits”) and that defendants didn’t timely provide them with policy

28 Id. at 499–500.

29 The plaintiffs argue that they may still recover under the “entitled-to-benefits” rule

regardless of their success on the “independent-injury” rule. See id. at 495. The “entitled-to-benefits”

rule allows recovery of benefits under an insurance policy by an insured as actual damages “if the

insurer’s statutory violation causes the loss of the benefits.” Id. Existing Fifth Circuit caselaw does

indeed construe these two rules as separate routes for recovery for violations of the duty of good faith

and fair dealing. See Lyda Swinerton Builders, Inc. v. Okla. Sur. Co., 903 F.3d 435, 452 (5th Cir.

2018). But because, as detailed below, the Court finds that the plaintiffs lack standing on every alleged

state law claim, the plaintiffs may not recover under the “entitled-to-benefits” rule. See id. (holding

that a statutory violation must cause the loss of policy benefits for recovery under the “entitled-to-

benefits” rule to occur).

30 The Court would normally allow repleading to let the plaintiffs plead a specific independent

injury. However, when given the opportunity to state what independent injury they had suffered in

their response, they pointed only to the paragraph in their complaint that alleged they were entitled

to damages. This is the definition of conclusory pleading. The Court sees no way that the plaintiffs

could state a claim under the independent-injury rule.

documents, a delay which (even if there were an injury) still flows from the alleged

denial of benefits to the plaintiffs.31

Because the plaintiffs didn’t plead all the elements needed to ground a claim

for breach of the duty of good faith and fair dealing, the Court dismisses without

prejudice Count IV, the claim for breach of the duty of good faith and fair dealing.32

III. State Law Claims (Counts V, VI, and VII)

That takes care of the two common-law claims at issue. But what about

statutory claims? The plaintiffs make several such claims, as previously mentioned,

and the Court will deal with them in the order presented in the defendants’ omnibus

motion to dismiss.

First off, the parties have mostly divergent ideas about how many of the

allegedly underpaid claims are governed by state law—namely, several provisions of

the Texas Insurance Code33 and the Texas Prompt Pay Act. They at least agree that

these Insurance Code and Prompt Pay Act provisions don’t apply to Texas Blue Self-

Funded or BlueCard Self-Funded insurance claims, because ERISA preempts them.34

And indeed it does. ERISA supersedes “any and all State laws insofar as they may

31 See Provident Am. Ins. Co. v. Castaneda, 988 S.W.2d 189, 199 (Tex. 1998) (holding that

injuries that stem or flow from denial of benefits are not “independent”).

32 The defendants also argue that plaintiffs haven’t alleged sufficient facts to back up their

claim of breach. This determination would require a factual analysis, and this claim is eminently

resolvable on other grounds, so the Court declines to address this argument.

33 Specifically, sections 541.060, 1271.155, and 1301.0053.

34 Doc. 212 at 24; Doc. 218 at 32 n.11; see also Ellis v. Liberty Life Assur. Co. of Boston, 394

F.3d 262, 274–75 (5th Cir. 2004).

now or hereafter relate to any employee benefit plan,”35 unless they “regulate[]

insurance . . . .”36 So the statutes at issue only apply, if they apply at all, to Texas

Blue Insured and BlueCard Insured insurance claims.

The defendants argue that the state statutes only apply to claims under

insurance policies sold in Texas—i.e., the Texas Blue Insured claims, not the

BlueCard Insured claims. The plaintiffs respond that the text of these state statutes

isn’t so limiting. To discern who’s right, the Court must “begin by analyzing the

statutory language, ‘assum[ing] that the ordinary meaning of that language

accurately expresses the legislative purpose.’”37 By starting with the text, the Court

will “find the best reading of the statute by interpreting the words of the statute,

taking account of the context of the whole statute, and applying any appropriate

semantic canons.”38 The Court will perform this analysis statute by statute,

addressing other arguments brought forth by the parties as it does.

A. Emergency Care Statutes

The Court will begin by interpreting the Insurance Code’s emergency care

statutes. Here’s the first, focused on exclusive providers:

If an out-of-network provider provides emergency care as defined

by Section 1301.155 to an enrollee in an exclusive provider benefit plan,

35 29 U.S.C. § 1144(a).

36 § 1144(b)(2)(A).

37 Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 251 (2010), see also Entergy Gulf

States, Inc. v. Summers, 282 S.W.3d 433, 445 (Tex. 2009) (Hecht, J. concurring) (“Ascertaining the

meaning of a statutory text (or any text for that matter) begins with the language used, and if that

language is plain enough, absent some obvious error or an absurd result, that is where the task ends.”).

38 Brett M. Kavanaugh, Fixing Statutory Interpretation, 129 HARV. L. REV. 2118, 2163 (2016)

(book review).

the issuer of the plan shall reimburse the out-of-network provider at the

usual and customary rate or at a rate agreed to by the issuer and

the out-of-network provider for the provision of the services and any

supply related to those services.39

And the second: “A health maintenance organization [(“HMO”)] shall pay for

emergency care performed by non-network physicians or providers at the usual and

customary rate or at an agreed rate.”40 Going forward, the Court will refer to the

former law as the Exclusive Provider Statute and the latter as the HMO Statute.

The plaintiffs argue that the defendants violated both of these statutes by

“significantly underpaying the [insurance] claims submitted . . . for emergency

services” and seek damages totaling at minimum the difference between the usual

and customary rate for the services provided and the amount the defendants paid for

these services.41 The defendants retort in several ways, which the court will address

in turn.

First, the defendants argue that the Exclusive Provider Statute only applies to

“exclusive provider benefit plan[s],” and according to the definitions section of

Insurance Code section 1301, these are exclusively plans “in which an insurer

excludes” some or all benefits to an insured.42 An “insurer” refers to a set of insurance

companies “authorized to issue, deliver, or issue for delivery in this state health

39 TEX. INS. CODE § 1301.0053(a).

40 Id. at § 1271.155(a).

41 Doc. 55 at 59–60.

42 TEX. INS. CODE § 1301.001(1).

insurance policies.”43 Therefore, say the defendants, the Exclusive Provider Statute

does not apply to the BlueCard Insured insurance claims.

The Court agrees wholeheartedly. The text of the definitions section of section

1301 of the Insurance Code clearly cabins exclusive provider benefit plans to those

issued or delivered within the state of Texas. Courts do and should look to definitions

for interpretational guidance.44 So the plaintiffs have failed to state a claim by not

pleading that the providers connected to the BlueCard Insured insurance claims were

authorized to issue or deliver insurance policies in Texas.

The plaintiffs also fail to allege the most basic element of a violation of the

Exclusive Provider Statute: that the defendants’ reimbursements were lower than

the usual and customary rate. They merely gesture at “significant underpayment,”

but seem noncommittal as to what rate of payment would be adequate. This does not

pass muster.45 Still, if these were the only defects in the plaintiffs’ Exclusive Provider

and HMO Statute claims, the Court would allow repleading.

But unfortunately, the plaintiffs’ entire claim under both the Exclusive

Provider and HMO Statutes rests on the notion that a private right of action exists

to enforce these laws. It does not. SCOTX has made it abundantly clear that Texas

statutes create a private right of action “only when a legislative intent to do so

43 Id. at § 1301.001(5).

44 See, e.g. United States v. Fior D’Italia, Inc., 536 U.S. 238, 244 (2002); Conlon by Conlon v.

Heckler, 719 F.2d 788, 800 (5th Cir. 1983).

45 Twombly, 550 U.S. at 555 (“Factual allegations must be enough to raise a right to relief

above the speculative level . . . .”).

appears in the statute as written.”46 The Court sees no indication of any intent to

give out-of-network healthcare providers (or associations of them) a private right of

action anywhere in the words of the Exclusive Provider or HMO Statutes. And the

plaintiffs tellingly have not argued that such an intent is present. Their claims under

the Exclusive Provider and HMO Statutes, also known as Count V, therefore fail as

a matter of law because the Texas Legislature has not provided the plaintiffs with a

right of action.

B. Claim Settlement Statute

The plaintiffs next turn to Insurance Code section 541.060, a statute

prohibiting insurers from “failing to attempt in good faith to effectuate a prompt, fair,

and equitable settlement of . . . a claim with respect to which the insurer’s liability

has become reasonably clear.”47 The plaintiffs first state that they have standing to

bring suit on behalf of each patient due to assignment of benefits.48 The defendants

46 Brown v. Arturo De La Cruz, 156 S.W.3d 560, 567 (Tex. 2004). The Court is also persuaded

by the reasoning in Apollo MedFlight, LLC v. BlueCross BlueShield of Texas, 2019 WL 4894263, at *3

(N.D. Tex. Oct. 4, 2019), which analyzes the statutes at issue here under the Brown standard and

comes to the same conclusion the Court now reaches.

47 TEX. INS. CODE § 541.060(a)(2)(A).

48 Doc. 55 at 60–61. Insurance Code section 541.151(1) provides a private right of action for

“[a] person . . . against another person” whom they allege has acted in a manner defined as “an unfair

method of competition or unfair or deceptive act or practice in the business of insurance.” The plaintiffs

must rely on assignment from their patients because the Texas Supreme Court has already ruled that

third parties do not have standing to sue for unfair claim-settlement practices under Insurance Code

section 541.060 and 541.151. See Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 384 (Tex. 2000);

Allstate Ins. Co. v. Watson, 876 S.W.2d 145, 150 (Tex. 1994); see also Companion Prop. and Cas. Ins.

Co. v. Opheim, 2014 WL 4209586, at *2 (N.D. Tex. Aug. 26, 2014) (Fish, J.) (unpublished).

disagree, arguing that claims under Insurance Code section 541.060 may not be

assigned. The Court will address this threshold question before moving further.49

Though both parties marshal an impressive array of persuasive authority

gleaned from federal district courts, the Court holds that interpretation of state law

is generally best left to state courts.50 And the Court is in luck, because the Texas

Supreme Court has settled this question of law. When directly addressing a state

appeals-court split over whether claims under the Deceptive Trade Practices Act—of

which Insurance Code section 541 is a part—were assignable, Texas’ highest civil

court stated that allowing assignment “would defeat the primary purpose of the

statute—to encourage individual consumers to bring such claims themselves.”51 The

Texas Supreme Court held, accordingly, that Deceptive Trade Practice “claims

generally cannot be assigned by an aggrieved customer to someone else.”52 This

Court, likewise, will not allow third-party standing by assignment to thwart the

“clear intent of the Legislature.”53 The Court holds that claims brought under section

49 United States v. One 18th Century Columbian Monstrance, 797 F.2d 1370, 1374 (5th Cir.

1986).

50 See Hardy v. Univ. Interscholastic League, 759 F.2d 1233, 1235 (5th Cir. 1985) (agreeing

with other circuit precedent that “the validity of . . . state-law claims . . . [is] a matter of state law best

determinable by the state courts”).

51 PPG Indus., Inc. v. JMB/Houston Ctrs. Partners Ltd. P’ship, 146 S.W.3d 79, 82 (Tex. 2004).

52 Id. at 92. The Texas Supreme Court noted a few exceptions, none of which are applicable

here. And the very wording of the Texas Supreme Court’s holding assumes that the third party in

question has been assigned a ripe claim—i.e., the customer (or patient, in this instance) was

“aggrieved” before making the assignment. Because the specific grievance alleged here—

underpayment of insurance claims to third-party healthcare providers—doesn’t even involve the

patient and occurred after patients assigned anything to the plaintiffs, the Court fails to see how the

plaintiffs can reasonably claim they have standing to bring Count VI.

53 Id. at 85.

541 of the Insurance Code may not be assigned to third parties, and therefore that

plaintiffs lack standing to sue.54 The Court dismisses Count VI.

C. Texas Prompt Pay Act

Finally, the plaintiffs press a claim under Insurance Code section 1301 et seq.,

also known as the Texas Prompt Pay Act. They allege that, as to any insurance claims

made after June 5, 2014, the defendants “improperly underpaid and untimely paid

. . . timely submitted clean [insurance] claims” for emergency care and did not

determine these clean insurance claims “were payable at the rate of payment” the

plaintiffs set forth.55 To determine whether this is so, as before, the Court begins with

the text of the statute.

The Prompt Pay Act defines a clean insurance claim (somewhat unhelpfully)

as “a claim that complies with [Insurance Code] Section 1301.131.”56 That referenced

section contains a litany of elements an insurance claim must satisfy to be considered

“clean.”57 Section 1301.103 requires payment of clean claims (or notice of

nonpayment) within either 30 or 45 days to the “preferred provider” who submitted

it, depending on how the claim was submitted.58

54 Because the Court holds that the plaintiffs lack standing, it declines to address their other

arguments regarding Count VI.

55 Doc. 55 at 62.

56 TEX. INS. CODE § 1301.101.

57 The Court will at this point refrain from determining whether any allegedly unpaid or

underpaid insurance claim in this case is “clean,” as that would mean delving into facts the Court

doesn’t yet have.

58 § 1301.103. See also § 843.338. The Court notes that the Fifth Circuit has ruled that section

1301.103 is preempted as to any insurance claims made under Federal Employee Health Benefits Act-

governed plans. See Health Care Serv. Corp. v. Methodist Hosps. of Dallas, 814 F.3d 242, 253–55 (5th

Cir. 2016) (recognizing preemption by 5 U.S.C. § 8902). The Court also notes that the relevant

The Prompt Pay Act’s clean-claim deadlines apply as well to insurance claims

by out-of-network (or nonpreferred) providers who offer emergency care “as required

by state or federal law[.]”59 The plaintiffs claim that they are required to provide

emergency care by law, and may therefore recover under the Prompt Pay Act.60 The

defendants make two counter-arguments in their motion to dismiss: that the

plaintiffs lack standing because they are not required to provide emergency care, and

that the plaintiffs cannot recover penalties because they are out-of-network

providers. But the Court does not need to reach the latter argument, because the

plaintiffs lack standing to sue under federal and state law.

The pertinent federal law, a subpart of the Emergency Medical Treatment and

Labor Act (“Emergency Treatment Act”), reads in relevant part as follows:

If any individual (whether or not eligible for benefits under this

subchapter) comes to a hospital and the hospital determines that the

individual has an emergency medical condition, the hospital must

provide either . . . within the staff and facilities available at the hospital,

for such further medical examination and such treatment as may be

required to stabilize the medical condition, or . . . for transfer of the

individual to another medical facility. . . .61

definition of “preferred provider” only includes physicians, health care providers, or organizations of

physicians or health care providers that “contract[] with an insurer.” TEX. INS. CODE § 1301.001(8).

As the plaintiffs are admittedly out-of-network and thus not preferred, see Doc. 55 at 7, section 1301

only applies to them in limited fashion through section 1301.069.

59 Id. at § 1301.069(2)(A).

60 42 U.S.C. §§ 1395dd(b)(1); TEX. HEALTH & SAFETY CODE 311.022.

61 42 U.S.C. § 1395dd(b)(1)(A)–(B) (whole lotta emphases added).

Simply put, the plaintiffs are physicians’ associations.62 They are not a hospital.63

The plain text of this federal statute does not require them to do anything. It places

the entire onus to provide emergency medical treatment or transfer on hospitals. The

Court can find no precedential or persuasive case requiring physicians’ associations

(or individual physicians, for that matter) to provide emergency treatment based on

the Emergency Treatment Act.64 Neither do the plaintiffs provide one. The

Emergency Treatment Act does not provide the plaintiffs with standing to sue under

the Prompt Pay Act.

And neither does the plaintiffs’ proffered state statute apply to them. Section

311.022 of Texas’s Health & Safety Code prohibits “[a]n officer, employee, or medical

staff member of a general hospital” from denying emergency services due to the

patient’s “[in]ability to pay[,] . . . race, religion, or national ancestry.”65 First, again,

the plaintiffs are not “[a]n officer, employee, or medical staff member” at a hospital.

Some individual physician members of the plaintiff organizations may be covered. All

62 See Doc. 218 at 39 (“Plaintiffs are groups of physicians . . .”).

63 Generally, hospitals tend not to employ physicians and instead have affiliations or admitting

privileges with physicians. This practice often stems from state laws requiring individuals to be

licensed to practice medicine and state judicial decisions interpreting those laws to prohibit hospitals

from employing physicians. See DEP’T OF HEALTH & HUMAN SERVS., OFFICE OF THE INSPECTOR GEN.,

STATE PROHIBITIONS ON HOSPITAL EMPLOYMENT OF PHYSICIANS (1991) (available at

https://oig.hhs.gov/oei/reports/oei-01-91-00770.pdf).

64 The plaintiffs offhandedly gesture at 42 U.S.C. § 1395dd(d)(1)(B), which imposes penalties

on “any physician who is responsible for the examination, treatment, or transfer of an individual in a

participating hospital” who negligently violates Emergency Treatment Act requirements. But this

statute doesn’t require physicians to perform emergency medical care. It penalizes any physician

whom a hospital requires to perform such care for doing so negligently. It has nothing to do with this

suit.

65 TEX. HEALTH & SAFETY CODE § 311.022(a).

of them may be. But the plaintiffs themselves are admittedly not. Second, based on

the plain meaning of the text, this statute is not a blanket requirement to provide

emergency services. It only prohibits the denial of such services based on

unacceptable discrimination.

Because the plaintiffs have not established (and cannot establish) based on the

pleadings that the Prompt Pay Act applies to them, the Court holds that they lack

standing to sue under it. The Court dismisses Count VII with prejudice.66

IV. Anti-Assignment Provisions

Not much more remains for the Court to address, besides a number of defenses

marshaled in the omnibus motion to dismiss. Its discussion of these matters applies

only to any remaining legal claims.

The defendants argue that many claims brought by the plaintiffs should be

dismissed because the policies at issue contained anti-assignment provisions, so those

policyholders could not have assigned their right to repayment to the plaintiffs. The

plaintiffs responded that, to the extent those plans contained anti-assignment

provisions, they were waived, or the defendants were estopped from enforcing them

due to the defendants’ alleged past voluntary and intentional practice of paying the

plaintiffs directly.

The Court does not have enough evidence to dismiss this claim because the

claim hinges on several factual determinations that have not yet been made. For

66 The Court will not further address the defendants’ argument that plaintiffs have no right to

penalties under the Prompt Pay Act as out-of-network providers because of its dispositive holding on

standing.

example, the defense of ERISA estoppel, which the plaintiffs assert, requires (1)

material misrepresentation, (2) reasonable and detrimental reliance upon the

representation, and (3) extraordinary circumstances.67 The Court has not yet

determined whether any of these elements are satisfied, and further discovery is

needed before it can. Furthermore, the Court has not yet held an evidentiary hearing

on the previously filed declarations that the defendants offer to show that plaintiffs

lack standing due to these anti-assignment provisions. We are not yet at the fact-

weighing stage. So, the Court must decline to dismiss any claims based on the

defendants’ anti-assignment arguments as of yet.68

V. Remaining Claims Against South Carolina Blue and Florida Blue

Now for several jurisdictional challenges regarding certain defendants. South

Carolina Blue and Florida Blue don’t think they should be here at all. South Carolina

Blue argues that all its insurance claims in this suit can only be brought before a

South Carolina review board.69 And South Carolina Blue further claims, along with

Florida Blue, that all insurance claims at issue that involve them are self-insured

(i.e., BlueCard Self-Funded) claims that they do not pay, only administer.70

67 Mello v. Sara Lee Corp., 431 F.3d 440, 444–45 (5th Cir. 2005). Because the plaintiffs assert

this specific variety of estoppel, the Court notes that their defense can only apply to ERISA-governed

policies with anti-assignment clauses.

68 See Lawal v. Lynch, 156 F. Supp. 3d 846, 852 (S.D. Tex. 2016) (holding that district courts

have “wide discretion” in resolving Rule 12(b)(1) subject-matter jurisdiction issues brought up in

motions to dismiss).

69 Doc. 212 at 50.

70 Id. at 51.

Again, as before, the Court believes dismissal on these grounds is premature

before discovery. These are disputed assertions of fact, not purely or primarily legal.

And the Court has held no evidentiary hearing on the matter. The Court will

therefore exercise its discretion to deny dismissal on this jurisdictional ground

because the plaintiff “has [not] had a chance to discover the facts necessary to

establish jurisdiction.”71

VI. Remaining Claims Against Capital BlueCross

Defendant Capital BlueCross adopts a different approach than South Carolina

Blue and Florida Blue. It argues that this court has no personal jurisdiction over

claims in which it’s involved.

Personal jurisdiction is established when (1) the defendant has sufficient

minimum contacts with the forum state, (2) the plaintiff’s cause of action arises from

those contacts, and (3) the exercise of personal jurisdiction is both fair and

reasonable.72 Capital BlueCross protests that it lacks sufficient minimum contacts

with Texas (the forum state of this suit) because they have not engaged in actions

that substantially connect them to Texas. It claims it has no physical presence in

Texas and does not conduct business here, based on existing declarations attached to

its motion to dismiss. Moreover, Capital BlueCross argues that because it never had

a contract with any of the plaintiffs or engaged in conduct connected to Texas with

71 Williamson v. Tucker, 645 F.2d 404, 414 (5th Cir. 1981).

72 Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266, 271 (5th Cir. 2006). ERISA allows for

nationwide service of process, so rather than looking for sufficient minimum contacts with Texas, we

look for sufficient contacts anywhere in the United States. See 29 U.S.C. § 1132(e)(2).

respect to any of the insurance claims at issue, it cannot “reasonably anticipate being

haled into court” in Texas.73

When considering whether to dismiss a complaint for lack of personal

jurisdiction, the Court “may consider affidavits, interrogatories, depositions, oral

testimony, or any combination of the recognized methods of discovery.”74 And the

Court should accept all “uncontroverted allegations, and resolve in [the plaintiffs’]

favor all conflicts between the facts contained in the parties’ affidavits and other

documentation.”75

The defendants rely on a declaration filed with their earlier motion to dismiss

which states that Capital Blue Cross exclusively serves customers in “central

Pennsylvania and the Lehigh Valley” and provides group insurance for businesses in

the same general area.76 Rather than disputing any of these facts, the plaintiffs argue

that “when a federal court is attempting to exercise personal jurisdiction over a

defendant in a suit based upon a federal statute providing for nationwide service of

process, the relevant inquiry is whether the defendant has had minimum contacts

with the United States,” not any one state. Strange as it seems, the Fifth Circuit has

confirmed this principle.77 Because ERISA provides for nationwide service of process

73 World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).

74 Revell v. Lidov, 317 F.3d 467, 469 (5th Cir. 2002) (internal quotations and citations removed).

75 Alpine View Co. Ltd. v. Atlas Copco AB, 205 F.3d 208, 215 (5th Cir. 2000).

76 See Doc. 122-1, at 2.

77 Busch v. Buchman, Buchman & O’Brien, Law Firm, 11 F.3d 1255, 1258 (5th Cir. 1994). The

Court fails to see the connection between service of process and personal jurisdiction, but the Court is

nonetheless duty-bound to follow the Fifth Circuit’s lead.

and Capital Blue Cross has minimum contacts with the United States, the Court has

personal jurisdiction over Capital Blue Cross with respect to claims under it.78

The plaintiffs go further, though, arguing that pendent personal jurisdiction

means the Court also has jurisdiction over their asserted state-law-based claims

against Capital BlueCross. But because the Court has already dismissed all state-

law claims for lack of standing above, Capital BlueCross’s motion regarding these

claims is moot.

VII. Remaining Claims Against CareFirst

And finally, CareFirst argues that it is not a proper party to this suit because

it “does not offer health insurance, administer insurance plans, or pay insurance

claims.”79 The defendants offer this assertion as grounds for both 12(b)(2) and

12(b)(6) dismissal. But the declaration they reference most notably states that

CareFirst has no significant contacts with the plaintiffs or the forum state, let alone

a sufficient minimum number.80 As with the Capital BlueCross claims, this makes

no difference: CareFirst has sufficient minimum contacts with the United States, and

the Court may therefore exercise jurisdiction over it with respect to claims under laws

allowing nationwide service of process (like ERISA).81

78 29 U.S.C. § 1132(e)(2).

79 Doc. 212 at 61–62.

80 See Doc. 128-1, see also World-Wide Volkswagen, 444 U.S. at 297.

81 And also, as above, CareFirst’s arguments to dismiss the plaintiffs’ state-law-based claims

are moot.

With regard to whether CareFirst is an insurer (and whether it is possible to

state a claim against it under ERISA or relevant state law at all), plaintiffs respond

that determining CareFirst’s business structure and practices is inappropriate at this

point.82 The Court agrees with the plaintiffs. CareFirst’s arguments on this point go

to whether it should be part of a lawsuit on this subject anywhere in the United

States. As such, this is a merits-based argument under Rule 12(b)(6). But prior to

factual discovery, courts ought not dismiss claims that hinge on undeveloped facts.83

Such a determination is more appropriate at the summary judgment stage.84

* * *

To sum up, the Court GRANTS the defendants’ motion to dismiss with respect

to Counts III, V, VI, and VII, which are hereby DISMISSED WITH PREJUDICE.

And the Court DISMISSES WITHOUT PREJUDICE Count IV. The Court lastly

DISMISSES AS MOOT all state-law-based claims against Capital BlueCross and

CareFirst. But the Court DENIES the motion to dismiss with respect to the

defendants’ anti-assignment defense, subject-matter jurisdiction over South Carolina

Blue and Florida Blue, and personal jurisdiction regarding any remaining ERISA

82 Doc. 218 at 69–70.

83 The Court declines to consider the aforementioned declaration without an evidentiary

hearing when making its 12(b)(6) determination because the declaration itself was not referred to in

the plaintiffs’ complaint. See Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir.

2004) (holding that “[d]ocuments that a defendant attaches to a motion to dismiss are considered part

of the pleadings if they are referred to in the plaintiff’s complaint and are central to her claim”).

84 See FED. R. CIV. P. 12(b) (“[If] matters outside the pleading are presented to and not excluded

by the court, the motion shall be treated as one for summary judgment.”).

claims over Capital BlueCross and CareFirst. The plaintiffs may refile their

combined complaint with the only changes being reflective of these rulings within 28

days of this motion.

IT IS SO ORDERED this 10th day of December, 2020.

Lindh STARR

UNITED STATES DISTRICT JUDGE

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