ERISA is a minefield for almost every plaintiff, but medical providers probably face the biggest navigation challenge. As we have discussed in the past, benefit plans and their insurers have countless defenses when providers try to sue them for not paying or underpaying medical bills. Plans can assert (1) inadequate standing, (2) anti-assignment provisions, (3) failure to exhaust administrative remedies, and (4) federal preemption, among other more typical litigation defenses.
Perhaps the most vexing defense is the first and most important one: standing. ERISA allows for a private right of action against plans to “recover benefits,” but only by “a participant or beneficiary.” 29 U.S.C. § 1132(a)(1)(B). Providers, of course, are neither participants nor beneficiaries. As a result, providers have tried numerous arguments to justify suing under this provision, with limited success.
This week’s notable decision involves one of those methods: obtaining a power of attorney. The plaintiff in the case was Dr. Nakul Karkare, a surgeon affiliated with AA Medical, P.C. In 2022, another surgeon at AA Medical performed knee surgery on a patient, referred to as Patient JN. Patient JN was a beneficiary of the defendant benefit plan; AA Medical was out-of-network.
AA Medical submitted an invoice to the plan for the treatment, for a total of $153,579.94. The plan only paid $1,095.92, contending this was sufficient under its out-of-network provision which provides reimbursement “based on...the customary charge or the average market charge in [the patient’s] geographical area for a similar service.” AA Medical appealed, but to no avail.
Undeterred, Dr. Karkare obtained a power of attorney from Patient JN and filed this action, alleging that the plan violated its obligations under 29 U.S.C. § 1132(a)(1)(B). The district court immediately leaped into the fray, ordering Dr. Karkare sua sponte to show cause why the case should not be dismissed because of the plan’s “requirement that a physician must demonstrate a valid assignment of a claim from a beneficiary to maintain a cause of action for unpaid benefits under ERISA[.]”
Dr. Karkare responded that no assignment was necessary because he had a power of attorney from Patient JN. The district court did not agree, dismissed the case, and denied Dr. Karkare’s motion for reconsideration. Dr. Karkare appealed to the Second Circuit Court of Appeals, which issued this published decision.
The Second Circuit observed that it was “not entirely clear from the district court’s one-paragraph docket order dismissing the complaint whether the district court concluded that Karkare lacked constitutional standing, a statutory right to bring a cause of action under section 502(a), or both; the district court’s order cites various cases that address the two concepts.”
The court further noted that Dr. Karkare’s status as a provider – and not “a participant or beneficiary” – was not necessarily fatal to his statutory claim, because the federal courts “have recognized a limited exception permitting ‘physicians to bring claims under [section] 502(a) based on a valid assignment from a patient[.]’”
However, the Second Circuit emphasized that statutory rights must take a back seat to constitutional standing under Article III, and thus began its analysis there. The court recited the familiar elements of constitutional standing: “(1) an ‘injury in fact,’ defined as ‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent’; (2) a sufficient ‘causal connection between the injury and the conduct complained of’; and (3) a likelihood that ‘the injury will be redressed by a favorable decision.’”
The court noted that Dr. Karkare “does not argue that he has suffered any direct injury...[n]or can he, since the complaint alleges that another physician treated Patient JN on behalf of a corporate entity, AA Medical, that was the party entitled to the outstanding treatment fees.” Dr. Karkare did not explain in his complaint what “the precise contours of his affiliation with AA Medical were,” but regardless, “Karkare does not have standing to assert claims for any injuries suffered by that corporate entity, even if he was ‘personally aggrieved’ by the Union’s conduct and ‘may have faced the risk of financial loss as a result.’”
The Second Circuit noted that Dr. Karkare’s “theory of constitutional standing appears to be that he is suing purely in a representative capacity on behalf of Patient JN” pursuant to the power of attorney. However, according to the court this did not align with the allegations in Dr. Karkare’s complaint, which “indicate that Karkare is in fact suing in his own name and for his own benefit[.]”
The court stressed, “Our precedent is clear that a power of attorney does not confer Article III standing on the attorney-in-fact to file suit in the attorney-in-fact’s own name, even if the suit is purportedly brought on behalf of the grantor of the power-of-attorney.” Thus, the court stated that Dr. Karkare’s power of attorney only allowed him to “act as an agent or an attorney-in-fact for the grantor,” i.e., Patient JN, and did not give him “legal title to, or a proprietary interest in, the claim.” (The court noted that this analysis would be different if Dr. Karkare had an assignment from Patient JN, which would transfer legal title of the claims in question and would give him constitutional standing.)
In short, because Dr. Karkare brought the action “in his own name and for his own benefit (or that of AA Medical),” and not on behalf of Patient JN, for whom he was purporting to act, the Second Circuit concluded that he “lacks Article III standing.” Thus, the “district court lacked subject-matter jurisdiction to adjudicate this dispute,” and “dismissal of the complaint, without prejudice, was warranted.”
The Second Circuit was not done, however. The court observed that “since, based on the complaint, it seems likely (if not a near certainty) that Patient JN has standing to maintain the ERISA claim at issue here,” the court remanded to the district court “to permit Patient JN to move to be substituted into the action or to otherwise submit an amended complaint that properly asserts the ERISA claim on behalf of Patient JN.”
The Second Circuit noted that further proceedings would likely involve additional motions and rulings, including further investigation into the nature of the power of attorney, but the court declined to weigh in on those issues in advance: “we leave it to the district court to decide these (and any other related) questions in the first instance.”
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Breach of Fiduciary Duty
Tenth Circuit
Chavez-DeRemer v. Ascent Construction, No. 24-4072, __ F. App’x __, 2025 WL 1638134 (10th Cir. Jun. 10, 2025) (Before Circuit Judges Bacharach, Carson, and Rossman). The United States Department of Labor (“DOL”) brought this action against Ascent Construction, Inc., Bradley L. Knowlton, and the Ascent Construction, Inc. Employee Stock Ownership Plan, alleging that the fiduciaries breached their duties and engaged in prohibited transactions by misappropriating plan assets and otherwise mishandling the plan. In its complaint, the DOL requested a permanent injunction removing Knowlton and Ascent from their positions as trustee and plan administrator and appointing an independent fiduciary in their stead. After discovery commenced, defendants stopped actively participating in the litigation. In late January 2024, the DOL moved for discovery sanctions. The district court subsequently ordered defendants to show cause for their failure to timely answer the amended complaint and to obey its orders compelling a response to the DOL’s interrogatories. The district court warned that further compliance failures could result in a default judgment against them. When defendants’ behavior continued, the district court concluded that they willfully failed to engage in the litigation process and comply with its orders, prejudicing the DOL and interfering with the judicial process. As warned, the district court entered a default judgment against defendants under Federal Rules of Civil Procedure 16(f)(1)(C) and 37(b)(2)(A)(vi) in the amount of $288,873.64. The court also entered a permanent injunction barring Knowlton and Ascent from serving in their respective roles, and appointing an independent fiduciary whom the court authorized to terminate the plan and commence a claim submission process for the participants. Defendants appealed the district court’s entry of default judgment and the permanent injunction. The Tenth Circuit affirmed in this unpublished per curiam decision. The court of appeals found that the district court had not abused its discretion in finding the defendants’ disobedience of its orders willful. It agreed with the lower court that defendants never, including on appeal, offered any reason why they were unable to comply with the January 29, 2024 deadline to file an answer and respond to the discovery requests, or argue that their noncompliance was in any way involuntary. The appeals court further agreed that lesser sanctions would have been ineffective because defendants “continually refused to participate in [the] litigation.” Thus, the Tenth Circuit concluded that the district court acted well within its discretion to enter default judgment under the circumstances. Moreover, the court of appeals agreed with the district court’s decision to enter a permanent injunction to prevent any further unlawful handling of the Plan’s funds. “By removing Knowlton and Ascent as Plan fiduciaries, the injunction reasonably seeks to prevent additional ERIS...
