Power of Attorney ≠ Article III Standing: The Second Circuit Reinforces the Real-Party-in-Interest Requirement in ERISA Litigation and Opens the Door to Rule 17 Substitution

Introduction

In Karkare v. International Association of Bridge, Structural, Ornamental & Reinforcing Iron Workers Local 580, No. 22-2874 (2d Cir. June 9, 2025), the United States Court of Appeals for the Second Circuit addressed whether a physician holding only a power of attorney (“POA”) from a patient may sue an ERISA plan for unpaid medical benefits in his own name. The panel—Judges Sullivan, Robinson, and Kahn—affirmed in part, vacated in part, and remanded, holding that:

• A power of attorney does not confer Article III standing on the attorney-in-fact to sue in that person’s own name;
• The defect is jurisdictional, requiring dismissal without prejudice; but
• Because the patient (the real party in interest) likely possesses standing, the district court should consider substitution or ratification under Federal Rule of Civil Procedure 17(a)(3).

The decision clarifies the interplay between constitutional standing, ERISA’s limited cause-of-action provision (§ 502(a)(1)(B)), and the procedural safety-valve of Rule 17. It also signals to healthcare providers that POAs are not a workaround for anti-assignment clauses or for the absence of a valid assignment.

Summary of the Judgment

Dr. Nakul Karkare, affiliated with AA Medical, obtained a POA from “Patient JN” and sued the Iron Workers Local 580 Union, sponsor of a self-funded health plan, for under-reimbursing AA Medical’s $153,579.94 surgical invoice—paying only $1,095.92 based on out-of-network rules. The district court dismissed the case sua sponte, reasoning that a POA is not the equivalent of an assignment for ERISA purposes.

On appeal, the Second Circuit:

1. Agreed that Karkare, suing in his own name, lacked Article III standing because he suffered no personal injury and held no proprietary interest in the claim.
2. Observed that precedent distinguishes sharply between assignments (which transfer ownership and confer standing) and POAs (which merely grant agency powers).
3. Vacated the dismissal in part and remanded, instructing the district court to consider whether Patient JN may be substituted or joined under Rule 17, because a real party with standing existed when the complaint was filed.

Analysis

Precedents Cited and Their Influence

• W.R. Huff Asset Management Co. v. Deloitte & Touche LLP, 549 F.3d 100 (2d Cir. 2008) – Established that a POA does not create an ownership interest sufficient for standing; the Court relied heavily on Huff to reject Karkare’s claim of injury in fact.
• Advanced Magnetics, Inc. v. Bayfront Partners, Inc., 106 F.3d 11 (2d Cir. 1997) – Clarified that an “assignment” that leaves title with the assignor is really a POA; cited to underscore the non-transferable nature of Karkare’s POA.
• Cortlandt Street Recovery Corp. v. Hellas Telecommunications, 790 F.3d 411 (2d Cir. 2015) – Reinforced the need for a proprietary interest, not mere authority, to satisfy standing.
• Fund Liquidation Holdings LLC v. Bank of America Corp., 991 F.3d 370 (2d Cir. 2021) – Provided the doctrinal basis for curing defective standing allegations via Rule 17 substitution when a real party in interest existed ab initio.
• American Psychiatric Ass’n v. Anthem Health Plans, Inc., 821 F.3d 352 (2d Cir. 2016) – Distinguished between “statutory standing” under ERISA and Article III standing; used to explain that statutory qualification alone is insufficient.
• Supreme Court authorities – Lexmark Int’l v. Static Control (statutory vs. constitutional standing), Lujan (injury-in-fact test), and Summers v. Earth Island Institute (independent obligation to assess standing) frame the analysis.

Legal Reasoning

The Court’s reasoning unfolds in two steps:

1. Constitutional Standing Inquiry
   Accepting all allegations as true, the Court asked whether Karkare personally suffered an injury. Because AA Medical (not Karkare) rendered the service, any financial shortfall harmed AA Medical, not the individual physician. The POA did not cure this gap because it conveyed only agency authority without transferring claim ownership.
2. Procedural Salvage via Rule 17
   Recognizing that Patient JN—the real beneficiary—likely has standing, the Court invoked Rule 17(a)(3). That rule prevents dismissal on real-party-in-interest grounds until the proper plaintiff is given a “reasonable time” to substitute or ratify the action. Thus, the panel vacated the dismissal in part and remanded for the district court to decide whether Patient JN should be joined or substituted.

Impact on Future Litigation and ERISA Jurisprudence

• Clarifies Limitations of POAs – Healthcare providers can no longer rely on bare POAs to sidestep anti-assignment clauses or to litigate in their own names. They must either secure valid assignments or have the patient sue directly.
• Strengthens Article III Gatekeeping – District courts are reminded to scrutinize standing sua sponte and to parse complaints for real-party-in-interest issues early.
• Encourages Rule 17 Flexibility – By endorsing substitution, the Court balances strict constitutional requirements with practical fairness, preventing dismissal of potentially meritorious ERISA claims on technical pleading errors.
• Practical Repercussions for Plan Drafting – Plan sponsors should re-examine anti-assignment provisions, knowing that POAs will not undermine them.
• Litigation Strategy Shifts – Plaintiffs’ counsel will likely file ERISA suits naming both provider and patient, or will attach explicit assignments, to avoid jurisdictional challenges.

Complex Concepts Simplified

1. Article III Standing vs. Statutory Standing

• Article III standing is a constitutional requirement: the plaintiff must show a personal, concrete injury caused by the defendant that the court can redress.
• Statutory standing (better called “cause-of-action” status) asks whether the statute authorizes this type of plaintiff to sue. Under ERISA § 502(a), only participants, beneficiaries, and fiduciaries are expressly named, with a narrow judicially-created path for assignees.

2. Power of Attorney vs. Assignment

• Power of Attorney (POA): Grants someone authority to act on another’s behalf as an agent. Ownership of the claim remains with the principal. No personal injury, no standing.
• Assignment: Transfers legal title to the claim itself. The assignee becomes the owner of the claim, satisfies injury-in-fact, and may sue in its own name.

3. Federal Rule of Civil Procedure 17(a)(3)

Rule 17 ensures lawsuits are prosecuted in the name of the party who actually owns the claim. Sub-section (a)(3) gives courts discretion to allow substitution or ratification before dismissing a case where the wrong plaintiff was named inadvertently.

Conclusion

Karkare v. Iron Workers Local 580 stands for a crisp proposition: a power of attorney alone cannot manufacture Article III standing in ERISA litigation. Only those who personally own the claim—participants, beneficiaries, fiduciaries, or valid assignees—can sue in their own names. Yet, the decision also tempers this strictness by affirming Rule 17 as a procedural lifeline, preventing meritorious ERISA claims from being lost to pleading missteps. Going forward, litigants must pay scrupulous attention to their jurisdictional posture at filing, and courts are equipped with a clarified roadmap for navigating standing, statutory rights, and real-party-in-interest substitutions in the complex terrain of ERISA benefits litigation.

© 2025 – Prepared for educational purposes. Not legal advice.