Ninth Circuit: Non-Provider Assignee Lacks Standing to Sue Insurance Carriers for Benefits under ERISA

In ABC Services Group, Inc. v. Aetna Health and Life Insurance Company; et al., No. 22-55631, 2023 WL 6532648 (9th Cir. Oct. 6, 2023), the Ninth Circuit affirmed the district court’s dismissal of Plaintiff ABC Services Group, Inc.’s claim for benefits under ERISA § 502(a)(1)(B) that it brought as a second assignee. In a short unpublished opinion, the court held that the district court did not err by dismissing Plaintiff’s complaint under Rule 12(b)(6) because Plaintiff lacks derivative authority to sue under ERISA and Plaintiff failed to sufficiently plead ERISA claims.

Plaintiff is an assignee for the benefit of creditors of Morningside Recovery, LLC, a company that provides mental health and substance abuse treatment. Aetna insured the benefit plans of patients who received treatment at Morningside. The court found that Plaintiff lacks derivative authority to bring ERISA claims as a second assignee because it is a non-provider third party that has no relationship to the patients. “Because allowing this type of transaction ‘would be tantamount to transforming health benefit claims into a freely tradable commodity,’ Plaintiff lacks authority to sue.” Even if Plaintiff had authority to sue, it did not adequately plead ERISA claims in its multiple amended complaints. Plaintiff’s “allegations do not identify any Defendant’s particular plan terms conferring a benefit on patients, nor do they specify any Defendant’s particular conduct in denying such a benefit.” While Plaintiff is not required to recite every relevant plan term, it must do more than allege that the dozens of insurance companies violated the same generalized obligation to pay for mental health and substance abuse treatment. Lastly, the court found that the district court did not abuse its discretion by denying leave to amend and Plaintiff forfeited any challenge to the denial of leave by failing to raise the issue in its opening brief.