5th Circuit Vacates Order in Aetna’s $8.4 Million Fight-Rules Judge Abused Discretion

5th Circuit Vacates Order in Aetna’s $8.4 Million Fight-Rules Judge Abused Discretion

On April 2, 2015, the 5th Circuit ruled a federal district Judge’s decision was an abuse of discretion and vacated the district order in favor of Aetna which prohibited provider defendants from transferring funds.

In what can only be seen as vindication, the 5th Circuit Court ruled that Hon. Judge Hughes’ decision was an abuse of discretion and vacated the district court’s order in favor of Aetna. In an extraordinary turn of events, the 5th Circuit Court ruled that Judge Hughes “essentially ordered an asset freeze from the bench” and did not have authority to do so, thereby abusing his discretion.  The appellate court also vacated Judge Hughes’ order compelling “post judgement discovery”. This is not the first time Judge Hughes has butted heads with the appellate court.

Recent court decisions have shed light on the insurance industry’s global strategy of monopolizing PPO and Managed Care discount agreements and discouraging members from accessing out of network benefits. In this case, Aetna originally filed suit in 2012 against multiple healthcare providers alleging fraud. In August, 2014, U.S. District Judge Lynn N. Hughes ruled that Aetna could take $8.4 million from multiple health care providers for allegedly defrauding the insurer of millions dollars.

In October, 2014, one of the provider defendants, Trinity, moved to disqualify Judge Hughes from the case and to vacate his prior orders. The judge holds stock in Chevron Corp., which sponsors one of 325 ERISA plans at issue in the case, amounting to a conflict of interest, Trinity argued.

Immediately after Judge Hughes’s order allowing Aetna Life Insurance Co. to take $8.4 million from the defendants the receiver for one of the defendants, Cleveland Imaging, filed a “suggestion of bankruptcy”.

Awareness of this 5th Circuit Court decision may save providers from seemingly inevitable but preventable bankruptcies, however providers and healthcare attorneys must understand their rights, including when and how a federal district court judge may abuse their discretion and authority.

“Apparently, a provider in this case has only two options, file for a bankruptcy or appeal a reversible decision to an appeals court. One defendant took the first choice, but the second took another one”, explains Dr. Zhou, president of ERISAclaim.com and national expert on ERISA compliance and appeals.

As part of the Out-of-Network provider training and compliance programs, Avym Corporation closely follows and explores important national landmark managed care lawsuits. On April 7, 2015, Avym Corporation announced case-specific brainstorming and training program for this and other dramatic developments in managed-care litigation as well as litigation support services to healthcare providers and healthcare attorneys.

Case info:

In re: 2920 ER, L.L.C., doing business as Trinity Healthcare Network, Petition for a Writ of Mandamus to the United States District Court for the Southern District of Texas, U.S.D.C. No. 4:12-CV-2451, Case No. 14-20734, in the United States Court of Appeals for the Fifth Circuit, filed on April 2, 2015.

Out of Network providers are advised to closely analyze this landmark case by evaluating and focusing on the following key elements, to the extent of the appellate court order to vacate the District Court Judge Hughes’s orders only relevant in abuse of discretion:

I.    A court order link to the court website is provided for all interested providers and attorneys to completely research this important development: http://www.ca5.uscourts.gov/opinions/unpub/14/14-20734.0.pdf

II.   On August 20, 2014, the district court entered an “opinion on partial judgment”: “The court ordered that ‘Aetna Life Insurance Co. will take $8,412,116.01’ from the defendants.” according to the court document.

III.   “After the district court entered its order granting ‘partial judgment’, the Receiver for Cleveland Imaging filed a ‘suggestion of bankruptcy’ to notify the court of Cleveland Imaging’s voluntary petition for Chapter 11 bankruptcy.” according to the court document.

IV.   “Meanwhile, 2920 filed a motion asking the district court to certify its “partial judgment” as “final and appealable” under Federal Rule of Civil Procedure 54(b) and 28 U.S.C. § 1292(b). The district court denied the motions to certify partial judgment for interlocutory appeal without explanation two days later.” according to the court document.

V.    “The district court also granted Aetna’s motion for “postjudgment discovery” in a very brief order that same day without explanation.” according to the court document.

VI.   “The district court then essentially ordered an asset freeze from the bench. The court ordered: “No payments to Spring Klein until some explanation has been made of what they’re for, no transfers that are not in response to a purchase order or some other objective commercial transaction.” according to the court document.

VII.  Fifth Circuit found Judge Hughes abused his discretion: “Because the district court did not have authority to freeze assets before judgment without following the requirements of Rule 65, the decision was an abuse of discretion that we must vacate.” according to the court document.

VIII. The 5th Circuit Court Orders and Concludes: “For the foregoing reasons, the petition for mandamus relief is DENIED, and the district court’s order signed on November 13, 2014, prohibiting 2920 from transferring funds is VACATED, as are its orders compelling “postjudgment discovery”—except to the extent that such discovery is reasonably necessary to investigate pending claims under Rule 26. We REMAND to the district court for further proceedings consistent with this opinion.” according to the court document.

Avym is dedicated to empowering providers with ERISA appeal compliance and ERISA litigation support in all cases as well as ERISA class actions.  All medical providers and Health Plans should understand several critical issues regarding the profound impact of this and other court decisions on the nation’s Out-of-Network claim denial epidemic, including how to correctly appeal every wrongful claim denial and overpayment demand and subsequent claims offsetting with valid ERISA assignment and the first ERISA permanent injunction.  In addition, when faced with pending litigation and or offsets or recoupments, providers should look for proper litigation support against all wrongful claim denials and overpayment recoupment and offsetting, to seek for enforcement and compliance with ERISA & PPACA claim regulations.



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