Fossen v. Caring for Montanans, Inc.
993 F. Supp. 2d 1254
D. Mont.
2014

Background

  • Plaintiffs (Fossen) sued Blue Cross Blue Shield of Montana (BCBSM) alleging improper premium increases tied to health status and asserting state-law claims (UTPA §33-18-206(2), SEHIAA, breach of contract, class and common-fund requests). The Amended Complaint rested principally on Montana’s “little HIPAA” (§33-22-526(2)).
  • This case returned on remand after the Ninth Circuit affirmed summary judgment for Defendant on preemption grounds: the federal HIPAA/ERISA provision (29 U.S.C. §1182(b)(1)) preempted the identical Montana statute and the association (AMI/MCCT) was not a bona fide association under ERISA; thus no federal anti-discrimination violation. Fossen v. Blue Cross & Blue Shield of Mont., Inc., 660 F.3d 1102 (9th Cir. 2011).
  • On remand Plaintiffs moved to remand to state court or to certify questions to the Montana Supreme Court; the court denied both motions and proceeded to analyze the remaining state-law claims.
  • The court concluded Montana’s Unfair Trade Practices Act (UTPA) generally grants enforcement authority to the Montana Insurance Commissioner and authorizes a private cause of action only in a narrow set of claims-handling situations under §33-18-242; Montana law does not provide a general private right to enforce §33-18-206(2) (rate-discrimination).
  • The court held Plaintiffs’ Count 3 (UTPA discrimination), Count 4 (breach of contract/ covenant of good faith grounded on the same statutes), and related class/common-fund claims fail as a matter of law: no private right to enforce the cited statutes, no cognizable breach tied to an unenforceable statutory violation, ERISA preempts or bars certain common-law claims, and Plaintiffs lack actual damages/restitution that is equitable and traceable.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Whether remand or certification to Montana Supreme Court is required Fossen: state claims raise unsettled state-law questions warranting remand/certification BCBSM: state claims are clear, dependent on federal ruling, and remand wastes resources Denied — court declined remand and certification
Whether §33-22-526(2) (little HIPAA) claim survives after ERISA ruling Fossen: state statute supports discrimination and contract claims despite federal ruling BCBSM: §33-22-526(2) is preempted / not violated as to employer-group rating here Held preempted/invalid basis — no viable claim under §33-22-526(2)
Whether UTPA §33-18-206(2) provides an independent private right for rate-discrimination Fossen: §33-18-206(2) prohibits unfair rate discrimination and supports private suit BCBSM: UTPA confers enforcement to Insurance Commissioner; private actions limited to §33-18-242 claims-handling exceptions Held: no private cause of action under §33-18-206(2); Plaintiffs cannot sue under general UTPA provision
Whether breach of contract / implied covenant claims survive (and restitution is available) Fossen: breach and restitution (return of premiums) follow from alleged statutory violations BCBSM: breach claim improperly depends on statutes lacking private enforcement; restitution is not appropriate equitable relief under ERISA and funds are not traceable Held: Counts fail — breach claim invalid, equitable restitution unavailable; class/common-fund claims moot

Key Cases Cited

  • Fossen v. Blue Cross & Blue Shield of Mont., 660 F.3d 1102 (9th Cir. 2011) (affirming preemption ruling and ERISA analysis of association status)
  • Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment burden and standard)
  • Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (summary judgment standard on genuine issue of material fact)
  • Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (summary judgment and inferences to nonmoving party)
  • Shupak v. New York Life Ins. Co., 780 F. Supp. 1328 (D. Mont. 1991) (Montana Model Insurance Code and absence of implied private right under UTPA)
  • Moradi-Shalal v. Fireman’s Fund Ins. Co., 46 Cal.3d 287 (Cal. 1988) (NAIC Model Act does not create private cause of action)
  • Mertens v. Hewitt Associates, 508 U.S. 248 (equitable relief under ERISA does not include compensatory/punitive damages)
  • Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (limitations on restitution as ERISA equitable relief)
  • Sereboff v. Mid Atl. Med. Servs., Inc., 547 U.S. 356 (equitable lien/restitution requires identifiable funds)
  • Bilyeu v. Morgan Stanley Long Term Disability Plan, 683 F.3d 1083 (9th Cir. 2012) (tracing requirement for equitable restitution under ERISA)
  • Grochowski v. Phoenix Constr., 318 F.3d 80 (2d Cir. 2003) (impermissible end-run around statutes lacking private remedy)
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