:: The Long Arm of ERISA: How Exigent Care Can Force Providers To A Distant Forum
There is no appellate authority on the issue of whether venue is proper in the district where the plan participant resides, as opposed to the district in which the plan made the decision to deny the claim, and the question has generated a deep split of opinion in district courts around the country. Because venue is improper in this district, a decision by this Court would be an advisory opinion under the facts presented. Memorial Hermann Hosp. System v. Boyd Gaming Corp. Percs Plan, Slip Copy, 2007 WL 624334 (S.D.Tex.) (February 22, 2007)
This case warrants attention because it revisits and summarizes the opposing views on the proper venue for ERISA causes of action. See :: The “Long Arm†of ERISA: An Overview of ERISA Venue Provisions The question can give at least three different answers in provider-plan disputes: where the participant resides, where the provider is located or where the plan is administered. While providing a useful catalog of decisional authority, the district court in Boyd Gaming ultimately declined to decide the issue.
The Facts
In December 2004, Harry Putnam, an employee of Boyd Racing, L.L.C. (“Boyd Racingâ€) at the Delta Down’s Casino in Louisiana, was seriously injured in an automobile accident in Montgomery County, Texas, which is in the Southern District of Texas. Putnam was a resident of Vidor, Texas, located in the Eastern District of Texas.
Putnam’s employer’s health plan was administered in Las Vegas, Nevada. The Plan had no employees or other operations in Texas or Louisiana.
After the automobile accident, Putnam was flown from the accident scene to Hermann hospital via Life Flight where he incurred medical expenses exceeding $107,000. Hermann alleged that Putnam assigned it all his rights under the Plan, specifically his right to payment for health care services provided in connection with his treatment at Hermann.
Plan Denies Payment; Hermann Sues
As an assignee of Putnam, Hermann filed suit in state court alleging a state law breach of contract claim and a federal statutory claim under ERISA. In the complaint, Hermann cited 29 U.S.C. § 1132(a) (1)(B), seeking “benefits due”. Not surprisingly, the Plan removed the suit to federal court, asserting federal question jurisdiction. Thereafter, the Plan then filed a motion to dismiss under Rule 12(b)(3) of the Federal Rules of Civil Procedure for improper venue. Alternatively, the Plan asked the Court to transfer this case to the District of Nevada pursuant to 28 U.S.C. § 1406(a).
General Rule On ERISA Venue
Venue for an ERISA action is proper either:
in the district [i] where the plan is administered,
[ii] where the breach took place, or
[iii] where a defendant resides or may be found.†29 U.S.C. § 1132(e)(2).
The parties did not dispute that venue under the first and third prongs of § 1132(e)(2) would be proper in the District of Nevada. The “sole question” before the court was whether “the breach took place†in Houston such that venue is proper in the Southern District of Texas under the second prong of § 1132(e)(2). The hospital argued that venue was proper because the Plan refused to remit payment to Hermann, a Houston resident, on a claim it submitted as Putnam’s assignee of benefits.
Lack of Controlling Authority
The district court stated:
There are no appellate cases deciding where the “breach took place†for § 1132(e)(2) purposes. However, the location of where the “breach took place†is similar to the analysis of where “the claim arose†for general venue purposes. “The determination of where ‘the claim arose’ for purposes of federal venue under [28 U.S.C.] § 1391 is a federal question whose answer depends on federal law.†Leroy v. Great Western United Corp., 443 U.S. 173, 183, 99 S.Ct. 2710, 61 L.Ed.2d 464, n .15 (1979); see Bostic, 517 F.Supp. at 636; see generally Bard v. Boston Shipping Ass’n, 471 F.3d 229, 244 (1st Cir.2006) (holding that a federal court’s “oversight of ERISA cases must be governed by principles of federal common lawâ€). Thus, in this ERISA venue dispute, the Court will look to federal law for a determination of where the claim arose and the place of performance to conclude “where the breach took place.â€
Having determined federal law should apply to determine where the claims arose and the breach took place, the court turned to the central issue – where the breach took place.
Where the Breach Took Place
The court observed that district courts have tended to decide where the “breach took place†for purposes of ERISA venue by analogy to a breach of contract claim, because ERISA benefit plans are essentially contracts among the plan, the employer and the plan participants.
The cases collected to support this view are:
Cross v. Fleet Reserve Ass’n Pension Plan, 383 F.Supp.2d 852, 856 (D.Md.2005) (citations omitted); Cole v. Central States Southeast and Southwest Areas Health and Welfare Fund, 227 F.Supp.2d 190, 195 (D.Mass.2001) (“Cole Iâ€); Cole v. Central States Southeast and Southwest Areas Health and Welfare Fund, 225 F.Supp.2d 96, 98 (D.Mass.2002) (“Cole IIâ€); Keating v. Whitmore Mfg. Co., 981 F.Supp. 890, 892 (E.D.Pa.1997); Brown Schools, Inc. v. Florida Power Corp., 806 F.Supp. 146, 151 (W.D.Tex.1992); Wallace v.Am. Petrofina, Inc., 659 F.Supp. 829, 832 (E.D.Tex.1987); Bostic v. Ohio River Co. (Ohio Division) Basic Pension Plan, 517 F.Supp. 627, 635 (S.D.W.Va.1981). See generally Chacko v. Sabre, Inc., 473 F.3d 604, 612 (5th Cir.2006) (“When interpreting plan provisions, we interpret the contract language in an ordinary and popular sense as would a person of average intelligence and experience, such that the language is given its generally accepted meaning if there is one.â€); Keszenheimer v. Reliance Standard Life Ins. Co., 402 F.3d 504, 507 (5th Cir.2005) (internal quotation marks and citations omitted)). Cf. Sereboff v. Mid Atlantic Medical Services, Inc., — U.S. —-, —-, 126 S.Ct. 1869, 1984, 164 L.Ed.2d 612 (2006) (ERISA provides remedies to enforce plan terms, one of which remedies is actions for breach of contract).
Where Performance To Be Rendered?
Unfortunately, district courts’ decisions have differed on the issue of where the “breach took place†for purposes of ERISA.The court noted that:
Some courts hold that the place where the “breach took place†is where performance was to be rendered to the participant under the Plan. See, e.g., Bostic, 517 F.Supp. at 636; Coulter v. Office and Professional Employees Int’l Union, 2003 WL 21938910 (E.D.Tenn. June 3, 2003). These courts interpret “performance†to mean where the payee was to receive payment of benefits under the plan. A focus for these courts was the perceived hardship on plan participants to have to litigate in locations distant from the participants’ residences.
The court did not view this line of cases as persuasive. Noting that the courts supporting the “where performance to be rendered” view rely heavily on the analysis of Bostic v. Ohio River Co. (Ohio Division) Basic Pension Plan, 517 F.Supp. 627, 635 (S.D.W.Va.1981), the court distinguished that case as follows:
The Bostic court, after concluding that “where the breach took place†was where the “contract is to be performed,†id. at 636 (citations omitted), acknowledged that there is “some confusion over what, precisely, is meant … by the phrase ‘the place of performance.’ “ Id. The court then concluded summarily that “read in context it is clear that [the place of performance] is the place where the recipient of benefit under the contract actually acquires his due,†specifically, “the place where pension benefits are received, which is plaintiff’s residence.†Id. at 636, 637. The Bostic court, without analysis or citation to authority, rejected the argument that the “place of performance†was where the plan made the decision to deny the claim, id. at 636-37, simply finding comfort in the result in Varsic v. United States District Court, 607 F.2d 245, 248 (9th Cir.1979) (holding that venue was appropriate in the plan participant’s district because the defendant plan was “found†in that district, by interpreting the term “found†as it is used in 28 U.S.C. § 1400(a) (the copyright venue statute) to be coterminous with “systematic and continuous activity†that makes a corporation “present†under Int’l Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945)). The result in Bostic also is weakened by the fact that the defendant stated that it believed that venue likely was location of the plan participant’s residence.
Where The Plan Is Administered?
The opposing view, preferred by the court, maintains that a claim for nonpayment of benefits allegedly due under an ERISA plan arises where the plan makes the challenged decision, i.e., the decision to deny payment of a claim. The cases collected to support this view were:
Seitz v. Bd. of Trustees, 953 F.Supp. 100, 102 (S.D.N.Y.1997) (“the alleged breach ‘took place’ in Utica because that is where all pension benefit claims are processedâ€); Boyer v. J.A. Majors Co., 481 F.Supp. 454, 459 (N.D.Ga.1979) ( “the breach, if any, occurred when the Committee instructed the trustee bank to [stop payment]â€); Turner v. CF & I Steel Corp., 510 F.Supp. 537, 541 (E.D.Pa.1981); Orgeron v. Moran Towing Corp., 1994 WL 462995 (E.D.La. Aug.22, 1994).
The court noted that the “unstated logic” supporting this view appears to be that the breach of the plan, i.e., the “wrong,†is the decision to refuse payment, which is distinct from the “injury†or “damages†arising from the breach. The breach can be said to occur where the defendant plan makes the challenged decision, while the injury or damage occurs in the plan participant’s home district.
Avoidance of Advisory Opinion
The district court ultimately concluded that the decision as to proper venue would constitute an advisory opinion and dismissed the complaint without prejudice.
Note: The balancing of interests in favor of finding venue where the plan is administered imposes a hardship on out-of-network providers that are refused payment by a plan in a distant locale. In exigent circumstances, care may be rendered without the opportunity to evaluate the finer questions of venue.
In the view of the district court, the view that claims are proper where the plan is administered had the advantage of avoiding the possibility of claims in multiple jurisdictions by providers seeking payment. While the appeal to uniformity always has an appeal in the ERISA setting, this may be a red herring from a practical perspective. After all, it is rather unlikely that a plan would be faced with treatment of a plan participant in different districts very often.
Given the split in authority, providers should take into account the risk of nonpayment by plans administered in distant locations and plan accordingly. Such planning should include basing claims to payment on independent agreement that might assist in avoiding removal jurisdiction. See, e.g., :: Assignments and Contractual Agreements Form Basis For Differing Preemption Outcomes; :: Participant Benefit Assignments Do Not Foreclose Hospital’s State Law Claims Against Health Plan
