317 F.R.D. 106
N.D. Cal.2016Background
- Plaintiffs (Wit and Alexander actions) challenge United Behavioral Health’s (UBH) coverage denials for residential, intensive outpatient, and outpatient behavioral-health treatment, alleging UBH used internal Level of Care (LOC) and Coverage Determination Guidelines (CDGs) that are unduly restrictive.
- Named plaintiffs and a sample of denied claims show UBH applied its Guidelines in clinical denials; plaintiffs contend virtually all relevant plans require coverage consistent with "generally accepted standards of care."
- UBH administers claims across thousands of employer and group plans, uses annual-updated LOC/CDG materials applied by trained peer reviewers, and maintains electronic databases (ARTT/LINX) that record whether a LOC/CDG was cited in a denial.
- Plaintiffs assert two ERISA-based claims: (1) breach of fiduciary duty for promulgating overly restrictive Guidelines and privileging cost over beneficiary interests; and (2) arbitrary and capricious denial of benefits for relying on those Guidelines. Remedies sought include declaratory/injunctive relief (adopt new Guidelines consistent with generally accepted standards/state law), reprocessing of denied claims, a limited disgorgement surcharge, and attorneys’ fees.
- The court held Plaintiffs satisfied Rule 23(a) and (b) requirements and certified the proposed Guideline and State-Mandate classes under Rules 23(b)(1), 23(b)(2), and alternatively 23(b)(3); it found the class definitions ascertainable and common questions predominate given plaintiffs’ process-focused claims and requested reprocessing remedy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rule 23(a) commonality/typicality/adequacy are met for classes challenging UBH Guidelines | The central question—whether UBH acted as fiduciary and its Guidelines deviate from generally accepted standards—is common and will generate classwide answers; named plaintiffs are typical and adequate | Variations across thousands of plans, many CDGs/LOCs, and individualized clinical presentations defeat commonality and typicality | Court: Commonality, typicality, and adequacy satisfied; common legal/factual questions will drive resolution (classwide proof possible). |
| Ascertainability of class membership | Membership can be identified from UBH electronic records showing locus of denials and whether LOC/CDG was cited | Identifying ERISA-governed plans and the specific guideline basis requires manual, individualized review making class administration infeasible | Court: Class ascertainable; databases (ARTT/LINX) and plan documents permit objective identification. |
| Appropriate Rule 23(b) vehicle: (b)(1) — risk of inconsistent adjudications and incidental monetary relief | (b)(1) appropriate because UBH owes uniform fiduciary duties and inconsistent adjudications could impose incompatible obligations; monetary relief (surcharge) is incidental | Plaintiffs’ claims seek substantial monetary recovery (out-of-pocket costs), and plan variations mean obligations differ, so (b)(1) inappropriate | Court: (b)(1) satisfied; plans share a material common requirement (compliance with generally accepted standards) and monetary relief is incidental given plaintiffs’ stipulation limiting surcharge theory. |
| Appropriate Rule 23(b) vehicle: (b)(2) — injunctive/declaratory relief final and appropriate | Injunction ordering new Guidelines and reprocessing is a final, classwide remedy for a process-based ERISA injury; parallels where remand/reprocessing approved | Reprocessing is not "final" (outcomes uncertain), may require detailed individualized reprocessing and appeals; injunction might violate Rule 65(d) for vagueness | Court: (b)(2) satisfied; reprocessing is an appropriate final remedy for process-based ERISA violations and injunction can be crafted with sufficient detail on a full record. |
| Appropriate Rule 23(b)(3) — predominance and superiority given possible individualized damages issues | Predominance met because the dispute centers on the common defect in Guidelines; superiority met because class adjudication promotes judicial economy | Individualized inquiries on damages (surcharge/out-of-pocket) and plan terms predominate; Comcast requires a classwide damages model | Court: (b)(3) also satisfied as plaintiffs dropped individualized out-of-pocket surcharge theory and proposed surcharge based on UBH administrative fees, which is classwide; class action is superior. |
| Remedy scope: whether plaintiffs seek or may obtain individualized monetary awards that would defeat (b)(1)/(b)(2) certification | Plaintiffs primarily seek injunctive/declaratory relief and reprocessing; surcharge limited to UBH’s administrative receipts for processing class claims (incidental monetary remedy) | Plaintiffs’ pleadings and some testimony show desire to recover out-of-pocket treatment costs, making monetary relief non-incidental and requiring opt-outs/notice | Court: Plaintiffs stipulated they will not pursue out-of-pocket-based surcharge on a class basis; the remaining surcharge theory is incidental and calculable classwide; remedy does not convert class to primarily monetary. |
Key Cases Cited
- Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (class-certification commonality standard) (common questions must generate common answers)
- Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997) (Rule 23(b)(1) and treating class members alike where defendant must act uniformly)
- Varity Corp. v. Howe, 516 U.S. 489 (1996) (ERISA fiduciary duties and remedial structure)
- Saffle v. Sierra Pac. Power Co., 85 F.3d 455 (9th Cir. 1996) (remand/reprocessing appropriate remedy where administrator applied wrong standard)
- Bowen v. City of New York, 476 U.S. 467 (1986) (classwide remand/reopening of benefits decisions is an appropriate remedy)
- Kartman v. State Farm Mut. Auto. Ins. Co., 634 F.3d 883 (7th Cir. 2011) (injunctive class improper when insurer owed no duty to use a particular standard; injunction would merely lay evidentiary foundation)
- Parsons v. Ryan, 754 F.3d 657 (9th Cir. 2014) (Rule 23(b)(2) class certification where centralized policies caused shared injury remediable by uniform changes)
- Comcast Corp. v. Behrend, 569 U.S. 27 (2013) (predominance requires a damages model showing classwide measurement of damages)