Almont Ambulatory Surgery Center, LLC v. UnitedHealth Group, Inc.Almont Ambulatory Surgery Center, LLC v. UnitedHealth Group, Inc.
Proceedings (In Chambers): ORDER GRANTING EMPLOYER AND PLAN DEFENDANTS’ OMNIBUS MOTION TO DISMISS PLAINTIFFS’ AMENDED COMPLAINT UNDER
Before the Court is the Employer and Plan Defendants’ Omnibus Motion to Dis
The Omnibus Motion is GRANTED with leave to amend.
Count I is brought pursuant to
Count II is brought pursuant to
Count III is brought pursuant to
Count V is brought pursuant to
Count VI is brought pursuant to
Count VII is brought for production of documents pursuant to
As a jurisdictional issue, the Court rules that Plaintiffs’ alleged assignment does not confer standing for these ERISA Counts. Consequently, the Omnibus Motion as to Counts II, III, V, VI, and VII is GRANTED with leave to amend. Although the Court is not convinced that Plaintiffs could plead additional facts to alter this conclusion, they will be provided an opportunity to do so.
Count IV, based on estoppel, is brought against United only. It is therefore not addressed in this Order except to help explain the Court’s reasoning in regard to standing.
The Omnibus Motion as to Count VIII is GRANTED with leave to amend. Count VIII is brought pursuant to the UCL. This Count purportedly seeks to redress, inter alia, United’s allegedly discriminatory behavior against members of ERISA plans, as well as United’s improper payment methods and violations of ERISA. The
The Omnibus Motion as to Count IX is GRANTED with leave to amend. Count IX seeks declaratory relief. The Court rules that this Count is completely preempted by ERISA. As such, this Count is converted into an ERISA Count and will rise and fall with the asserted ERISA Counts that it duplicates.
In the process of granting the Omnibus Motion, the Court has rejected or declined to adjudicate particular arguments. For instance, the Court has rejected arguments that: the Employer Defendants are not proper defendants at this stage in the litigation for an ERISA benefits Count; particular forum selection clauses mandate transfer at this time; and joinder is improper.
In general, the Court does not view most plan terms as having been presented in a way that renders them cognizable at present. The Court is quite sympathetic to Defendants’ argument that Plaintiffs did not object to presentation of summary plan descriptions (“SPDs”) when this was discussed in a colloquy with the Court on August 6, 2014. The Court also notes that some of the SPDs here may constitute the terms of the plans themselves. However, pursuant to the Supreme Court’s decision in CIGNA Corp. v. Amara,
I. BACKGROUND
On March 20, 2014, Plaintiffs initiated this action by filing.a Complaint (Docket No. 1). Plaintiffs subsequently filed the FAC on June 16, 2014 (Docket No. 840), which is the current operative pleading.
A. Parties
Plaintiffs in the present action consist of: (1) thirteen ambulatory surgery centers that provide Lap-Band surgeries and services; and (2) Independent Medical Services, Inc., which is a physicians’ medical group. (FAC ¶¶ 15, 48-49).
Defendants include: (1) UnitedHealth Group, Inc., a health insurance company that allegedly did business in California through its subsidiaries; (2) UnitedHealth-care Insurance Company; and (3) United Healthcare Services, Inc. (/¿¶¶ 50-52). Defendant Optumlnsight, Inc. (also called “Optum” or “Ingenix”) is also a wholly-owned subsidiary of UnitedHealth, and served as a “Special Investigations Unit” for the claims at issue. (Id. ¶¶ 53, 915). The FAC refers to these four Defendants collectively as “United” or the “United Defendants.” (Id. ¶ 54).
B. Plaintiffs’Standing
Plaintiffs allegedly have standing as assignees of their patients’ benefits. (Id. ¶ 871). Every patient purportedly signed an “Assignments of Rights and Benefits,” assigning the patients’ health insurance benefits and an array of related rights to their providers (i.e., Plaintiffs). (Id. ¶¶ 871-73). The Assignment allegedly authorizes Plaintiffs to “take all action necessary to pursue benefits claims on the patient’s behalf.” (Id. ¶ 871).
Plaintiffs believe that Defendants’ plans do not preclude assignment because during Plaintiffs’ course of dealings with Defendants, “neither United nor Defendants ever referenced any anti-assignment provisions of any plan, ever refused to communicate with Plaintiffs based on any such anti-assignment provisions, ever refused to process any of Plaintiffs’ claims based on any such anti-assignment provisions, or ever refused to pay any of Plaintiffs’ claims based on any such anti-assignment provisions.” (Id. ¶ 875). Plaintiffs also allege that, to the extent the plans have anti-assignment provisions, Defendants have waived the right to assert those provisions. (Id. ¶ 879).
C. United Defendants and ERISA Plan Defendants
The FAC alleges that the United Defendants acted as agents for each other and for the ERISA Plan Defendants with regard to processing the claims at issue for Lap-Band services, including authorizing, receiving, pricing, and approving those claims. (Id. ¶ 852).
The FAC alleges that United acted as an administrator for both (1) the fully funded ERISA plans (ie., fully insured by United), and (2) the self-funded ERISA plans. (Id. ¶¶ 856-59). With regard to the fully funded ERISA plans, United is allegedly responsible for both administering and paying the claims, and is the plan administrator and an ERISA fiduciary for these plans. (Id. ¶ 856). With regard to self-funded ERISA plans, the plan pays the claims, but the FAC alleges that United typically administered these plans pursuant to an administrative service agreement. (Id. ¶¶ 857-858). Pursuant to the administrative service agreement, the self-funded ERISA plans delegated to United the “authority and responsibility to administer claims and make final benefits decisions.” (Id. ¶ 857). Among the administrative responsibilities delegated to United would be “providing plan members with plan documents, interpreting and applying the plan terms, making coverage and benefits decisions, handling appeals of coverage and benefits decisions, and providing for payment in the form of medical reimbursements.” (Id. ¶ 857). Some self-funded ERISA plans did not specifically designate a plan administrator, but Plaintiffs believe that United functioned as the de facto plan administrator and was “specifically designated by the plan sponsor as the Claims Administrator.” (Id. ¶¶ 859-60). As the plan administrator and/or claims administrator, United had fiduciary duties under ERISA “to ensure that out-of-network claims are properly priced and paid according to the terms of the members’ plans.” (Id. ¶ 859).
The FAC alleges that the ERISA Plan Defendants knew or should have known about United’s unlawful practices, and that by failing to prevent them, they “ratified and/or participated” in them. (Id. ¶ 880).
The cover page of the FAC lists thirteen Counts, but the body of the FAC alleges only nine Counts. The omitted Counts listed on the cover page are: (1) breach of implied-in-fact contract — authorized services/no authorization needed services; (2) breach of implied-in-fact contract — authorized services/no authorization needed— covenant of good faith and fair dealing; (3) estoppel; and (4) recovery for services rendered. The nine Counts set forth in the body of the FAC are for: failure to pay ERISA plan benefits under
The core allegations in the FAC are that United engaged in a “deliberate, willful, and concerted effort ... to indefinitely avoid paying for Lap-Band” surgeries and related services for patients who were morbidly obese. (Id. ¶¶ 2-3, 20).
Pursuant to the FAC, all of the patients relevant to this action had PPO insurance allegedly administered by United, which allowed them to select out-of-network health care providers. (Id. ¶ 4). The plaintiff surgery centers were out-of-network health care providers, and thus, were “free to charge whatever amounts they deem[ed] appropriate for their services.” (Id. ¶ 863). The FAC alleges that ERISA plans usually provide that out-of-network providers will be paid at the usual, customary, and reasonable rate (the “UCR rate”), or a percentage of the UCR rate. (Id. ¶ 864).
United allegedly either authorized Lap-Band-related procedures for these patients or informed Plaintiffs that no authorization was needed. (Id. ¶ 5). Where United authorized these procedures, it purportedly informed Plaintiffs “for nearly every claim” that the cost of the procedure would be reimbursed at the providers’ UCR rates. (Id. ¶ 22). The patients then allegedly underwent months of pre-opera-tive tests. (Id. ¶ 5).
The FAC alleges that United initially paid the claims for these services “according to the terms of the health plans that it administered.” (Id. ¶ 23). However, in 2010 it purportedly began to substantially underpay and then subsequently stopped paying claims for a majority of pre-opera-tive tests and the Lap-Band surgeries. (Id. ¶¶ 6-7, 23). As a result of United’s alleged failure to pay for these services, the FAC claims that some patients feared that United would fail to pay for future services. (Id. ¶¶ 11-12). Accordingly, some patients have purportedly been afraid to have the Lap-Band surgeries, and some patients who had the surgeries have purportedly been afraid to conduct necessary follow-up medical procedures. (Id. ¶¶ 11-12). The FAC also alleges that in the rare instances that Defendants paid Plaintiffs’ claims, “they paid far less than Plaintiffs’ usual and customary fees.” (Id. ¶ 870).
The FAC alleges that the refusal of United and the defendant employers to pay for these procedures violates ERISA and constitutes discrimination against morbidly obese individuals. (Id. ¶ 13).
The FAC alleges that Defendants violated ERISA in numerous ways, including: (1) providing pretextual excuses for refusing to pay claims, namely that they needed
Plaintiffs allege that in “almost all instances,” Plaintiffs explicitly demanded that Defendants produce specific plan documents justifying the denial of payment, but Defendants refused to do so. (Id. ¶ 31). On information and belief, Plaintiffs also allege that the terms of the health benefit plans administered by United do not permit it to deny Plaintiffs’ claims. (Id. ¶ 32). However, United allegedly conveyed fabricated rationales of denials to Plaintiffs by issuing Explanation of Benefits forms or appeal denial letters, which contained no actual reasons for denial. (Id. ¶ 882 (listing rationales for denial)). The FAC alleges that Defendants owe hundreds of millions of dollars for the services that Plaintiffs provided, and hundreds of millions of dollars in ERISA penalties. (Id. ¶ 14).
E. Pending Motions to Dismiss
A Briefing Schedule was issued (Docket No. 929, amended slightly by Docket No. 1054) establishing an Omnibus motion to dismiss schedule. This Schedule allows for one master 50-page memorandum to be filed on behalf of the employers and the plans (collectively referred to as the “Plan Defendants” in the Briefing Schedule) by lead counsel (Dorsey & Whitney LLP and Walraven & Westerfeld LLP) — the Omnibus Motion. The Briefing Schedule also permits another memorandum from the United Defendants — referred to herein as the “United Motion.” Moreover, it allows for employers/plans to file their own three-page briefs (“Supplemental Memoranda”) applying the arguments in the other motions to dismiss to their particular circumstances.
Prior to the Briefing Schedule, a motion to dismiss was filed by Defendants Aegon USA, LLC and Aegon Companies Flexible Benefits Plan (the “Aegon Motion”). (Docket No. 489). Another was filed by Defendants Baker Hughes Inc. and Baker Hughes Inc. Welfare Benefits Plan (the “Baker Hughes Motion”). (Docket No. 728). The Court permitted these Motions to remain, notwithstanding the Briefing Schedule.
In addition to the Aegon and Baker Hughes Motions, the Omnibus Motion (Docket No. 1062) and United Motion (Docket No. 1061) have been filed, as well as a number of Supplemental Memoranda from individual Defendants. All of the various motions to dismiss will collectively be referred to herein as the “Motions.”
Plaintiffs submitted Oppositions to the Omnibus (Docket No. 1201), United (Docket No. 1202), Aegon (Docket No. 1204), and Baker Hughes (Docket No. 1205) Motions. The United Defendants filed a Reply (Docket No. 1218), and a Master Reply (Docket No. 1216) was filed in support of the Omnibus Motion. The Briefing Schedule also permitted Defendants to file one-page supplements to the Master Reply, which many have done.
II. EVIDENTIARY ISSUES
A. Incorporation by Reference
“Ordinarily, a court may look only at the face of the complaint to decide a motion to dismiss.” Van Buskirk v. Cable News Network, Inc.,
Defendants have submitted various plan-related documents for the Court to consider in adjudicating the Omnibus Motion. {See, e.g., Declaration of John Christopher Nowlin (the “Nowlin Declaration”), Exs. A & B (Docket No. 1062-9); Declaration of Brenda Rodenburgh (the “Rodenburgh Declaration”), Ex. A (Docket No. 1062-10); Declaration of Bryan Westerfeld (the “Westerfeld Declaration”), Exs. 1-4 (Docket No. 1062-11); Declaration of Heather M. McCann (the “McCann Declaration”), Exs. 1-244 (Docket Nos. 1062-12 — 1062-30)). The FAC refers to and relies on the plans. (See, e.g., FAC ¶ 880 (“Specifically, United manufactured various pretextual rationales unrelated to the actual benefits available under the plans in order to unlawfully prolong the claims administration process and ultimately deny Plaintiffs’ claims outright on grounds not justified by the terms of the benefit plans.”)). Additionally, Plaintiffs have not challenged the authenticity of the plan-related documents. Plaintiffs do challenge the propriety of relying on the terms of documents that are not demonstrably reflective of the terms of the plans themselves. (Opp. to Omnibus Mot. at 12-13). However, as discussed below, the Court will only consider as determinative those terms that are contained in documents that demonstrably reflect the terms of the plans during the relevant timeframe for each claim. Accordingly, the Court can consider such plan-related documents that are germane to adjudication of the Omnibus Motion under the doctrine of incorporation by reference.
B. Requests for Judicial Notice
Plaintiffs also submit a Request for Judicial Notice in Support of Opposition to Defendants’ Motion to Dismiss (the “Request”). (Docket No. 1203). Plaintiffs ask the Court to take judicial notice of an order issued by another court in this District: Order Granting Defendants’ Motion to Dismiss, Care First Surgical Center v. ILWU-PMA Welfare Plan, et al., Case No. CV 14-01480-MMM (AGRx),
The Court may take judicial notice of a fact “that is not subject to reasonable dispute because it ... can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.”
Moreover, Defendants Perkins and Marie Callender’s LLC (“PMC”) and Perkins Flexible Benefits Plan (the “PMC Plan”) have submitted a Request for Judicial Notice in Support of Defendants Perkins and Marie Callender’s LLC and Perkins Flexible Benefits Plan’s Motion to Dismiss Plaintiffs’ Amended Complaint (the “PMC Request”). (Docket No. 1160). The PMC Request asks this Court to take judicial notice of: Findings of Fact, Conclusions of Law, and Order under Section 1129 of the Bankruptcy Code and Rule 3020 of the Bankruptcy Rules Confirming Debtors’ Second Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code (PMC Request, Ex. A (Docket No. 1160-1)); and Debtors’ Second Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code (PMC Request] Ex. B (Docket No. 1160-2)). For the reasons expressed above, the Court may take judicial notice of the existence of these documents, and does so now.
Accordingly, the Request and the PMC Request are GRANTED.
III. MOTION TO DISMISS
Defendants seek to dismiss the ERISA and state law Counts pursuant to
In ruling on a motion under
“The motions authorized by Federal
Finally, pursuant to
A. Plaintiffs’ Standing for ERISA Counts
Plaintiffs’ First and Seventh Counts can be brought only by a participant or beneficiary, according to ERISA. See
Plaintiffs are neither participants nor beneficiaries in the plans, but rather are health care providers. (FAC ¶¶ 15, 48-49). However, as discussed above, Plaintiffs
Defendants argue that the assignments themselves are invalid, as they are insufficiently definite:
Initially, all of Plaintiffs’ ERISA claims (including the claim for benefits under ERISA § 502(a)(1)(B)) must be dismissed because they have failed to allege they received a proper assignment from their patients. The assignment that Plaintiffs quote states only that the patient assigns their rights to “PROVIDERS,” without naming the providers or otherwise identifying which party obtains the assignment. Am. Compl. ¶ 873. Without any allegations demonstrating that these particular Plaintiffs received assignments from their patients, all of Plaintiffs’ ERISA claims must be dismissed.
(Omnibus Mot. at 23). Further, Defendants argue that, even if the assignments are sufficiently definite, they would not confer “the right to sue for anything other than a claim for benefits under ERISA § 502(a)(1)(B).” (Id.).
The key question becomes, therefore, whether the alleged assignments provide Plaintiffs with standing to bring their ERISA Counts.
1. ERISA Benefits Count (Count I)
a. Assignment of Rights to Benefits Under ERISA
A health care provider may have derivative standing to pursue ERISA benefits if he or she was assigned the right to reimbursement by an ERISA plan beneficiary. See Misic v. Bldg. Serv. Employees Health & Welfare Trust,
b. Whether Alleged Assignments Confer Standing for ERISA Benefits Count (Count I)
Although many cases discuss the nuances of assignment breadth, Defendants fail to cite any authority that explicitly addresses the issue of an allegedly indefinite assignee. (See Omnibus Mot. at 23).
The “Assignment of Rights and Benefits” Plaintiffs allegedly secured from “each patient” purportedly provides as follows:
I authorize my insurance company and/or my healthcare contract with my employer . (collectively, the “INSURANCE COMPANY”) to direct all payments for all professional and medical benefits under my current policy as payment for services rendered directly to PROVIDE R(s) and/or FACILITY(s) providing services or their designated associates or assignee(s) (collectively “PROVIDERS”). I assign, whether signing as patient or patient’s agent, all rights and benefits under my contract with my INSURANCE COMPANY, to any and all PROVIDERS. I give express right to PROVIDERS to obtain the insurance and benefits policy booklet, and ALL policy information from INSURANCE COMPANY, employer or any of their associates or agents. I also provide express consent and give full rights to PROVIDERS to appeal on my behalf to INSURANCE COMPANY or my employer or any of their associates or agents for any reason. I also authorize the release of anyinformation pertinent to my case to any insurance company, adjuster, attorney or other party(s) involved in this case. I authorize PROVIDERS to initiate complaint(s) to the Insurance Commissioner or any other agency for any reason on my behalf.
The assignment further permits PROVIDERS to obtain from INSURANCE COMPANY and employer or any of their agents or associates all information necessary for the determination of benefits allowed under the contract and permits the direct disclosure to PROVIDERS of all information including benefits provided including benefits & payments made on my behalf, limits and exclusions of benefits and reasons for denial of benefits or reduction in charges for services rendered.
The assignment shall allow PROVIDERS to take all action necessary to obtain the benefits I have, in good faith, been promised by INSURANCE COMPANY and employer or any of their agents dr associates all information necessary for the determination of benefits allowed under the contract and permits the direct disclosure, to PROVIDERS of all information including benefits provided including benefits & payments made on my behalf, limits and exclusions of benefits and reasons for denial of benefits or reduction in charges for services rendered.
The assignment shall allow PROVIDERS to take all action necessary to obtain the benefits I have, in good faith, been promised by INSURANCE COMPANY and/or employer on my behalf. All benefits are to be paid directly to PROVIDERS and mailed directly to 269 S. Beverly Drive, Suite 353, Beverly Hills, CA 90212. A photocopy of this assignment shall be considered as effective and valid as the original.
I understand that my insurance carrier may disallow certain diagnoses or services as medically uncovered, medically unnecessary, cosmetic or excluded. I agree to be responsible for payment of all such services rendered to the patient.
This is a direct assignment of my rights and benefits under this policy.
(FAC ¶ 873 (emphasis in original)).
In opposing Defendants’ contention that an assignment to “PROVIDERS” is insufficient to provide Plaintiffs with standing, Plaintiffs allege first that this “nitpick” does not reflect the fact that the assignment “does not refer to providers in the abstract,” but rather defines “PROVIDERS” in the context of “any or all healthcare providers who render medical services to the patient, including ‘their designated associates or assignee(s).’ ” (Opp. to Omnibus Mot. at 6 (citing FAC ¶ 873)). Plaintiffs later discuss how impractical it would be to receive assignments from patients for specific surgeons and other professionals when patients would receive services from a number of providers at the surgery centers, at multiple surgical facilities, and often on different dates. (Id. at 7). Plaintiffs further maintain that such an assignment is “both permitted and encouraged” by Mi-sic:
Assignment of trust monies to health care providers results in precisely the benefit the trust is designed to provide and the [ERISA] statute is designed to protect. Such assignments also protect beneficiaries by making it unnecessary for health care providers to evaluate the solvency of patients before commencing medical treatment, and by eliminating the necessity for beneficiaries to paypotentially large medical bills and await compensation from the plan.
(Id. at 6 (quoting Misic,
The discussion of the assignment’s context provided by Plaintiffs in the Opposition to the Omnibus Motion seems to be overreaching, as a strict reading would open the assignment up to seemingly innumerable providers who had nothing to do with the transactions at issue here. However, for purposes of adjudicating the Omnibus Motion, it follows from the allegations in the FAC that the Plaintiffs who performed the procedures corresponding to the claims at issue (for which the assignments were allegedly received) were the providers given the right to seek out benefits on the patient’s behalf, even if the name provided in the assignment is somewhat indefinite in the abstract.
As it stands, Plaintiffs have provided the text of the assignments that purportedly gave them various rights. (See FAC ¶¶ 871 (“Prior to receiving treatment, every patient of the Plaintiffs signs an ‘Assignments of Rights and Benefits’ form agreeing to, inter alia, assign his or her health insurance benefits, as well as broad array of related rights, to their providers, who are the Plaintiffs in this case.”), 872 (“Plaintiffs received an assignment of benefits for every claim at issue in this litigation.”), 873 (“This form, which was titled ‘Assignment of Rights and Benefits,’ contained an exhaustive list of the rights that each patient conveyed to Plaintiffs.”)). The alleged assignments mention explicitly that they convey “rights and benefits” under the relevant insurance policy. While there are certainly areas for more definiteness, the Court rules that the alleged assignments are sufficiently definite to survive a motion to dismiss on the issue of standing for Count I (for ERISA benefits pursuant to § 502(a)(1)(B)).
However, the Court does perceive that the “on my behalf’ language in the alleged assignment could create ambiguity. In discussing an argument that an assignment was void on its face because it contained seemingly conflicting language regarding designation of an assignee and authorized representative, the court in Care First Surgical Center v. ILWU-PMA Welfare Plan (“Care First II ”), Case No. 14-CV-01480-MMM (Dec. 26, 2014) noted that, “the interpretation of an assignment clause, like the interpretation of contract terms generally, is a question of the intent of the parties and is typically a question of fact for the jury.” Care First II at 18 (quoting Orion Tire Corp. v. Goodyear Tire & Rubber Co.,
The purported assignment here does include the following language: “I assign, whether signing as patient or patient’s agent, all rights and benefits under my contract with my INSURANCE COMPANY, to any and all PROVIDERS.” (FAC ¶ 873). As mentioned above, “[t]he Ninth Circuit has long recognized that assignments of benefits are sufficient to convey standing on an assignee to sue a plan directly under
a. Assignability of Right to Pursue Ancillary ERISA Counts
Defendants also contend that, even if the assignment is sufficient to confer standing for purposes of benefits recovery, it cannot confer standing for the ancillary ERISA Counts (such as those for statutory penalties, breach of fiduciary duty, equitable relief). (Omnibus Mot. at 23-25).
The Ninth Circuit has not explicitly stated that a beneficiary can assign the rights to sue for breach of fiduciary duty and recover penalties for non-disclosure under
However, the Ninth Circuit’s rationale in Misic for concluding that ERISA does not prohibit the assignment of ERISA benefits extends to the ERISA Counts for breach of fiduciary duty and non-disclosure. In Misic, the Ninth Circuit’s holding was driven by its determination that assignment of ERISA benefits would “facilitate the receipt of health care benefits by beneficiaries.” Simon v. Value Behavioral Health, Inc.,
Additionally, the Fifth Circuit has upheld derivative standing to sue for breach of fiduciary duties under ERISA. See Texas Life, Acc. Health & Hosp. Serv. Ins. Guar. Ass’n v. Gaylord Entm’t Co.,
In light of the above cases, the Court is persuaded that the rights to pursue ancillary ERISA Counts, such as those for breach of fiduciary duties and nondisclosure, may be assigned.
b. Whether Alleged Assignments Confer Standing for Ancillary ERISA Counts
With regard to whether the language in the alleged assignments covers the ancillary ERISA Counts, “[t]he Court’s task in interpreting the scope of an assignment is to ‘enforce the intent of the parties.’” Klamath-Lake Pharm. Ass’n v. Klamath Med. Serv. Bureau,
In the Care First Order, the court determined that the assignment at issue was sufficiently broad to cover claims for benefits, as well as claims for breach of fiduciary duty by the plan administrator and penalties for non-disclosure. Care First Order at 23. In Care First, the assignment not only discussed “ERISA rights and plan benefits,” but also states that the assignee “stands in the shoes” of the member, and explicitly references an assignment of rights to sue for penalties and sue for benefits under
While this Court is not bound by the reasoning of Care First Order, it is instructive to compare the alleged assignments in this case to that in Care First. Here, the assignment is not as explicit as the one discussed in the Care First Order. Although it grants “all rights and benefits” under the insurance contract, it does not specifically make reference to any ERISA provisions, does not mention claims for breach of fiduciary duty, and does not reference “standing in the shoes” of the patient. The assignment does, however, mention “direct disclosure to PROVIDERS of all information including benefits provided including benefits & payments made on my behalf, limits and exclusions of benefits and reasons for dеnial of benefits or reduction in charges for services rendered.” Defendants argue, though, that the “all rights and benefits under my contract with my INSURANCE COMPANY’ and “all action necessary to obtain the benefits I have, in good faith been, promised” language cuts against Plaintiffs’ standing on the ancillary ERISA Counts. (Omnibus Reply at 33 (emphasis in original)).
As mentioned briefly above, the Ninth Circuit recently evaluated an assignment in Spinedex that provided for plan payments to be made directly to the provider (Spinedex), and noted that such payments would be considered:
[PJayment toward the total charges for the professional services rendered. THIS IS A DIRECT ASSIGNMENT OF MY RIGHTS AND BENEFITS UNDER THIS POLICY. This payment, will not exceed my indebtedness to the above mentioned assignee, and I have agreed to pay, in a current manner, any balance of said professional service charges over and above this insurance payment.
Spinedex,
The alleged assignment here purports to convey “all rights and benefits under” the patient’s contract with his or her insurance company, just as the assignment in Spinedex did. (FAC ¶873 (emphasis removed)). Nowhere is there any mention of a transfer of rights that can be read to contemplate the right to bring suit to redress purported breaches of fiduciary duty. In short, “[t]he Assignment nowhere indicates that, by executing the assignment, patients were assigning to [the providers] rights to bring claims for breach of fiduciary duty.” Spinedex,
The Court also fails to see a manifestation of intent to assign the right to bring many of the other ancillary ERISA Counts. For example, Count VII seeks, in large part, statutory penalties pursuant to § 502(c) for Defendants’ alleged failure to produce particular documents. The alleged assignment here gives Plaintiffs the “express right to ... obtain the insurance and benefits policy booklet, and ALL policy information from” the insurance company. (FAC ¶ 873 (emphasis removed)). Although the purported assignment discusses receipt of documents, even this is clearly within the context of the receipt of benefits under the contract (“[t]he assignment further permits PROVIDERS to obtain from INSURANCE COMPANY and employer or any of their agents or associates all information necessary for the determination of benefits allowed under the contract”) and, moreover, seems only to authorize Plaintiffs to receive these documents, rather than effecting any transfer of rights. Again, without such indication that the right to sue for penalties was assigned, the Court. rules that Plaintiffs lack standing to bring Count VII.
Similarly, the Court sees no indication that any transfer of rights was effected with respect to the majority of Plaintiffs’ equitable Counts brought under § 502(a)(3). Count III seeks equitable relief and Count VI seeks surcharge; both Counts are premised upon alleged breaches of fiduciary duties. Count V seeks plan reformation, which essentially asserts what Plaintiffs think the plans ought to say, not what they do say. The plain text of the alleged assignments provides no indication that the parties intended a transfer of the right to bring these Counts.
At the hearing, Plaintiffs discussed the fact that, to their knowledge, none of the individual patient-assignors had brought suit under ERISA §§ 502(a)(2) or (a)(3), presumably in an effort to demonstrate further that the intent of the assignors was that their assignment be complete. In WellPoint II, the Court did note that the ERISA Subscribers brought their own claims under §§ 1132(a)(2) and (a)(3), which it listed as one factor in its analysis that Plaintiffs’ allegations were insufficient to demonstrate that the provider plaintiffs were assigned the right to pursue those claims. WellPoint II,
Finally, Plaintiffs’ § 502(a)(3) estoppel Count (Count IV) presents a more viable standing argument. Although this Count is brought only against United, the Court analyzes it here in the context of its other
It is true that some allegations point to more of a claim predicated upon what United allegedly said it would pay Plaintiffs for services (and not contingent on plan terms). (See FAC ¶ 1043 (“... [T]he United Defendants are estopped from contending that the services it authorized are not payable due to lack of authorization, and are estopped from refusing to pay the reasonable and customary value for these services.”)). However, as discussed below, in the Ninth Circuit, the core of a federal estoppel claim brought in the ERISA context is that the claimant is seeking benefits based on representations made interpreting purportedly ambiguous plan terms. See Pisciotta v. Teledyne Indus., Inc.,
The Court notes that construing this alleged assignment in general presents some difficulties. It .is neither as manifestly all-encompassing as the assignment in Care First, nor as cursory as those discussed in WellPoint II. Ultimately, however, the Court considers its decision to be consistent with Spinedex and in keeping with the intent of the parties, as expressed in the terms of the alleged assignment itself.
3. Anti-Assignment Clauses
Notwithstanding any plausible allegations regarding standing, Plaintiffs may still lack standing if Defendants can demonstrate that the relevant plans contain valid and unambiguous anti-assignment provisions: “ERISA welfare plan payments are not assignable in the face of an express non-assignment clause in the plan.” Davidowitz v. Delta Dental Plan of Cal., Inc.,
Defendants argue that many plans contain anti-assignment language, such that “Plaintiffs lack standing to sue for benefits under the terms of [those] plans.” DPI (Omnibus Mot. at 13). Plaintiffs, however, contend that the anti-assignment clauses should not be given effect because: estop-pel and waiver preclude application of the provisions; clauses that require consent of the insurer are void under California law, as are anti-assignment clauses contained in policies regulated by the California Department of Insurance; United’s counsel cannot take purportedly opposite views regarding anti-assignment clauses in this case and a related action; some purported anti-assignment clauses are ineffective to bar provider standing for some or all Counts in this case; and the United-Rep
a. Anti-Assignment Provisions and Estoppel
i. Estoppel and ERISA Benefits Decisions
As the Care First Order discusses, “[t]he Ninth Circuit has recognized that estoppel principles can apply to an ERISA beneficiary’s substantive claim for recovery of benefits.” Care First Order at 27-28 (citing Gabriel v. Alaska Elec. Pension Fund,
However, in order for estoppel to apply to a substantive claim for ERISA benefits, the Ninth Circuit requires that several elements be pleaded. First, the party invoking estoppel must demonstrate the traditional elements of estoppel: “(1) the party to be estopped must know the facts; (2) he must intend that his conduct shall be acted on or must so act that the party asserting the estoppel has a right to believe it is so intended; (3) the latter must be ignorant of the true facts; and (4) he must rely on the former’s conduct to his injury.” Gabriel v. Alaska Elec. Pension Fund,
ii. Estoppel and Anti-Assignment Clauses in ERISA Plans
The Ninth Circuit “has not expressly addressed how estoppel applies to the threshold question of derivative standing.” Care First Order at 28. However, as the Care First Order points out, “[t]hose courts that have considered the question have applied estoppel in addressing standing, although, ... they have not required that plaintiff make the additional showing the Ninth Circuit mandates in the context of recovery of benefits.” Id. at 28 (citing Riverview Health Inst. LLC v. Med. Mut. of Ohio,
In Riverwiew, medical providers seeking to bring derivative claims argued that under Sprague v. General Motors Corp.,
Similarly, in Productive MD, the court held that Aetna was estopped from asserting that a provider’s (Productive MD) assignment was rendered invalid by operation of a plan’s anti-assignment clause when “Aetna was on notice that Productive MD sought payment pursuant to a patient assignment, Productive MD was not privy to and had no legal right to access the underlying plan terms, Aetna possessed the underlying plans (and therefore knew their terms), Aetna denied Productive MD’s technical component claims in whole or in part (purportedly) based on Aetna’s interpretation and application of the plan terms — for reasons other than validity of assignment — -and, relative to the same underlying tests based on the same insurance plans, Aetna paid the physicians who sought payment for the professional component pursuant to assignments from the same patients.” Productive MD,
(1) Aetna’s conduct plausibly amounted to a representation that Productive MD’s patient assignments were acceptable both generally and under the specific plan terms; (2) Aetna, in purporting to administer the underlying policies, was presumptively aware of the underlying policy terms; (3) Productive MD reasonably construed Aetna as indicating that Productive MD could continue to receive payment from Aetna for any medically necessary tests covered by the applicable insurance plan; (4) to the extent that any policies restricted or prohibited assignment, Produсtive MD was not aware — either actually or construe-tively — of the underlying plan terms; and (5) Productive MD reasonably relied upon Aetna’s conduct to its potential detriment in performing tests without demanding payment up front or requiring its patients to inquire about their right to assign before receiving tests.
Productive MD,
Finally, in Hermann II, the court held that a plan was estopped from asserting an anti-assignment provision in its plan agreement when the documentation containing the anti-assignment clause was never provided to the plaintiff, and it was the plan’s duty to notify the plaintiff if it intended to rely on the provision, which it did not do. Hermann II,
The Care First Order notes that “Sprague, Riverview, Hermann [II], and Productive MD all recognize — explicitly or implicitly—that the principle that a representation that conflicts with the unambiguous terms of a plan agreement will not support estoppel does not apply in the derivative standing context if the assignee can show that it did not have, and could not have gained, access to the plan agreements.” Care First Order at 34.
iii. Estoppel and Anti-Assignment Clauses in the Present Case
Plaintiffs argue that “[b]ecause Defendants engaged in a consistent course of conduct that affirmed the presumptive validity of Plaintiffs’ assignments, and Plaintiffs relied on this to their detriment, Defendants are estopped from raising any anti-assignment clauses to defeat Plaintiffs’ standing.” (Opp. To Omnibus Mot. at 15).
Defendants combat the estoppel argument, inter alia, by asserting that Hermann II, relied upon by Plaintiffs (and evaluated in the Care First Order), is distinguishable since it “involve[ed] arguments raised by plans or claims administrators for the first time in litigation as a reason for the adverse benefits determination.” (Omnibus Reply at 19 (emphasis in original) (citing Hermann II,
It is true that Plaintiffs’ allegations include mention of their lack of access to relevant plan documents, such that they would presumably have been ignorant of the true facts. (See, e.g., FAC ¶ 1077 (“Plaintiffs have suffered prejudice by Defendants’ [sic] to provide the documents that Plaintiffs requested of them because
As to the other elements of traditional estoppel, the Court would presume that United had the relevant knowledge regarding plan terms, as United was allegedly tasked with claims administration. This presumption is supported by the allegations in the FAC. (See, e.g., FAC ¶ 881 (“Defendants knew full well that the terms of Plaintiffs’ benefit plans obligated it to pay Plaintiffs for the valuable medical services they had provided to beneficiaries and participants of those plans. As the claims administrator, the plans delegated to United the discretion to interpret and apply the terms of the plans.”)).
Ultimately, however, for the reasons discussed in connection with the waiver analysis below, the Court is not convinced that the pre-suit claims administration process involved activity that entitled Plaintiffs to believe that any anti-assignment provisions in the plans would not be relied upon.
The Court does not, at present, address whether the Ninth Circuit’s additional requirements for estoppel in the context of ERISA benefits (including the ambiguity requirement) also apply to estoppel on the anti-assignment issue.
b. Anti-Assignment Provisions and Waiver
i. Waiver and Anti-Assignment Clauses in ERISA Plans
“Waiver is often described as the intentional relinquishment of a known right.” Gordon v. Deloitte & Touche, LLP Grp. Long Term Disability Plan,
The Ninth Circuit’s recent decision in Spinedex implies that, under certain circumstances, the right to assert an anti-assignment clause may be waived. Spinedex,
ii. Waiver in the Present Case
Plaintiffs allege waiver as a result of the same conduct that gives rise to their estop-pel contention. (Opp. To Omnibus Mot. at 20 (“The same course of conduct that causes Defendants to be estopped also results in waiver”)). In the FAC, Plaintiffs allege that “throughout the entire administrative process for thousands of claims, neither United nor Defendants ... ever refused to pay ány of Plaintiffs’ claims bаsed on any such anti-assignment provisions.” (FAC ¶ 875 (emphasis added)).
Defendants, however, contend that standing cannot be waived, and that, assuming the Ninth Circuit would permit waiver in this ERISA context, Defendants’ assertion of the anti-assignment provisions at this stage is not inconsistent with the activities alleged to have transpired between the parties to date. (Omnibus Reply at 1921).
Defendants also point out that “waiver is defined as the intentional relinquishment of a known right.” (Id. at 21 (citing Alocozy v. U.S. Citizenship & Immig. Srvs., 704
1. Waiver of Jurisdictional Requirement
If the anti-assignment provisions bear on a standing requirement that cannot be waived, then the waiver inquiry could end here. In the Care First Order, the court evaluated a contention that the right to rely on anti-assignment provisions contained in plan documents had been waived since the defendants had failed to rely on them during the administrative process. Care First Order at 35. The plan, in turn, contended that lack of standing to sue cannot be waived (which the court construed as an assertion that standing is a jurisdictional requirement that cannot be waived) and that the anti-assignment provisions, in any event, were not waived because they “concern a party’s standing to sue and are not a substantive basis for denial of a claim.” Id. at 37, 38-39.
As to the jurisdictional argument, the court rejected the argument that a plan could never waive its right to assert an anti-assignment provision to defeat a plaintiffs claim to have prudential standing as an assignee. Care First Order at 38. In doing so, the court differentiated between Article III standing and standing under the terms of an anti-assignment provision, noting that the former pertains to subject matter jurisdiction (which a party cannot be prevented, in equity, from raising), and the latter is a prudential matter (which a party can equitably be prevented from raising). Id. at 37-38. See also Bilyeu v. Morgan Stanley Long Term Disability Plan,
Here, Defendants point out that “[district courts both within and outside of this Circuit ... have reasoned that ‘derivative standing has only been recognized in cases where there is a valid transfer of rights,’ making it ‘doubtful that a plaintiff can acquire standing by virtue of a defendant’s acquiescence.’ ” (Omnibus Reply at 20 (citing Middlesex Surgery Ctr. v. Horizon (“Middlesex”), No. CIV.A. 13-112 SRC,
However, as noted by the Care First Order, Spinedex I did not distinguish between prudential and constitutional standing, which led the Care First court to reject the argument that a plan could never waive the right to assert an anti-assignment clause in order to defeat prudential (rather than constitutional) standing. Care First Order at 38. Middlesex does not suffer from this same defect, though it cites no legal authority for its doubts that a plaintiff could acquire standing through a defendant’s acquiescence. Middlesex,
Ultimately, the Court rules that, as a general matter, waiver could be applicable to the standing issue relevant here. Whether waiver actually applies under the facts of this case, however, is discussed below.
2. Anti-Assignment Clause as Substantive Basis for Claim Denial as Opposed to Necessary for Standing
As discussed in the context of estoppel on this same issue:
Plaintiffs argue that the anti-assignment clauses were waived, or that Defendants are estopped from raising them, because they were not asserted by United during the claims administration process as a reason to deny benefits or otherwise. See Pis.’ Qpp. at 15-21.... [T]his argument fundamentally misconstrues why the anti-assignment provisions are relevant. Defendants did not rely (and are not relying now) on the anti-assignment clauses to determine the appropriate reimbursement for the claims at issue in this case, or as a reason to deny benefits due under the terms of the plans. The anti-assignment clauses are being raised now because they dictate whether a provider-assignee has standing to sue an ERISA plan where the terms of the plan forbid such an assignment.
(Omnibus Reply at 15).
In Care First, the court found that Gordon v. Deloitte & Touche, LLP Group Long Term Disability Plan,
Moreover, the Care First court discussed that, perhaps recognizing the problem with Gordon (that it pertained to a substantive, communicated reason for denial and a later-arising statute of limitations argument that the court found had not been waived), the defendants argued that the anti-assignment provision could not have been the reason for the claim denial because they had no obligation to make payments to the plaintiffs in the first place—rather, the plans allowed for payments to be made to providers purely for the convenience of the plan participants. Care First Order at 39. However, the court found this “illogical as it necessarily relie[d] on the fact that the plan agreements contained anti-assignment provisions and implie[d] that the reason for the plan’s denial of Care First’s claims was that Care First was not entitled to payment under the plan agreements under those provisions. As noted, the complaint contain[ed] no allegations concerning the reason for the denial, and the court therefore [could not] determine the matter in deciding defendants’ motion to dismiss.” Id.
Here, the analysis is somewhat complicated by the fact that adverse benefits determinations .were seemingly not always issued, such that the reasons for “denials” are potentially difficult to gauge for each claim. (See, e.g., FAC ¶ 939 (“In many cases, Defendants have held Plaintiffs’ claims submissions in limbo without allowing or denying the claims.”)). Plaintiffs assert that “[w]hen Plaintiffs did receive [Explanations of Benefits (“EOBs”) ] containing adverse benefits decisions from Defendants, these notices failed to disclose the reasons for the benefits determination with any specificity, and failed to identify any plan provisions justifying the denial of benefits.” (Id. ¶ 1028). However, Plaintiffs also discuss Defendants’ allegedly “pr,etextual reasons for denial of the claims,” (id. ¶ 954) and that United’s conduct included “[d]enying claims solely because the patients on whose behalf reimbursement was sought had allegedly failed to ‘authorize’ Plaintiffs to appeal on their behalf, even though Plaintiffs always submitted a proper assignment of benefits demonstrating such authority, and even though Defendants in practice acknowledged that assignment had occurred by dealing directly with Plaintiffs, rather than with the patients” (id. ¶ 884).
Even in light of these varied allegations, however, there are affirmative allegations in the FAC that Defendants did not assert the anti-assignment clauses during the adr ministrative process as a reason for denying claims: “At no time during the administrative process did Defendants ever state that the specific reason for the adverse benefit determination was due to an anti-assignment provision, nor did they reference a specific anti-assignment provision in any plan document.” (Mf876).
There does seem to be a meaningful distinction between asserting the anti-assignment provisions for purposes of claims denial and asserting them in order to preclude standing for a suit. However, this distinction loses its salience if there has been activity undertaken in the pre-suit claims procedures that, irrespective of their relevance to the standing issue at present, should have triggered mention and/or invocation of these anti-assignment provisions. For example, if payments were made to Plaintiffs that could only have been made to assignees, this might suggest waiver of the argument that the plans on whose behalf these payments were made prohibit assignments.
The question, therefore, becomes whether the pre-suit activity — during which the anti-assignment provisions were allegedly not mentioned — should have alerted United to the fact that Plaintiffs were operating as purported assignees, such that the failure to inform them that they could not do so means this argument might be deemed waived.
3. Pre-Suit Activity: Authorized Representatives and Assignees
Defendants argue that, “[e]ven if ERISA permits ‘standing by waiver,’ there is ‘nothing inconsistent’ about Defendants
ERISA regulations provide that “claims procedures for a plan will be deemed to be reasonable only if ... [t]he claims procedures do not preclude an authorized representative of a claimant from acting on behalf of such claimant in pursuing a benefit claim or appeal of an adverse benefit determination.”
Under the regulations governing ERISA claim procedures, plans are prohibited from “precluding] an authorized representative of a claimant from acting on behalf of such claimant in pursuing a benefit claim or appeal of an adverse benefit determination.”29 C.F.R. § 2560.503-l(b)(4) . Thus, there can be no “waiver” by allowing an “authorized representative” to participate in the claims administration process, and payments to patients’ “authorized representatives” are still payments to patients themselves and in no way implicate a plan’s anti-assignment clause. By bringing their claims here, however, as assignees, Plaintiffs are claiming that they — not the patients — now have the right to the benefits, and it is this that the plans’ anti-assignment provisions prohibit. Total Renal Care of N.C., L.L.C. v. Fresh Market, Inc.,2008 WL 623494 , at *5-7 (M.D.N.C. Mar. 6, 2008) (authorized representatives sue “on behalf of’ patients, whereas assignees file claims “in their own right”).
(Omnibus Mot. at 15 n. 10).
Plaintiffs counter by pointing out that: Defendants do not deny that they failed to raise the anti-assignment clauses. Instead, they attempt to argue that they have not waived this defense because Plaintiffs were merely acting as “authorized representatives” of the patients, not as assignees. This glib assertion is not supported by the facts. Defendants do not identify any allegations in the FAC that demonstrate that Plaintiffs were acting solely as authorized representatives. Nor does anything in the FAC suggest that Defendants ever informed Plaintiffs that they were not assignees. To the contrary: the FAC actually demonstrates that Plaintiffs, proceeding as full assignees, repeatedly raised the issue of assignments during the administrative process. Even if Plaintiffs had authorized representative status, that did not deprive them of their status as assignees. The two represent parallel methods of proceeding under ERISA. See, e.g., Biomed Pharm., Inc. v. Oxford Health Plans (N.Y.), Inc.,831 F.Supp.2d 651 , 665 (S.D.N.Y.2011) (as assignee, provider “was not required to submit either an ‘authorized representative’ or ‘designated representative form’ ”).
Numerous Defendants suggest that they were entitled to pay providers directly for “convenience” only, and without waiving their rights to raise anti-assignment. This makes no sense, because Defendants’ direct payments to Plaintiffs were part of a larger, continuous course of conduct that affirmed the validity of the assignments. As the Care First court observed in considering an identical argument, “[t]his argument isillogical as it necessarily relies on the fact that the plan agreements contained anti-assignment provisions and implies that the reason for the plan’s denial [ ] was that [the provider] was not entitled to payment under the [anti-assignment] provisions.” RJN Ex. A at p. 39:15-24 (emphasis added). Here, the FAC makes clear that Defendants never raised anti-assignment.
As explained above, even if Plaintiffs were authorized representatives, that does not mean they were not also assignees. Biomed, 831 F.Supp.2d at 665. More importantly, a patient’s authorized representative is not entitled to direct payment of benefits. Such an individual is authorized only to “pursu[e] a benefit claim or appeal of an adverse benefit determination” on behalf of another. 29 C.F.R. 2560.503-1(b)(4); Biomed,831 F.Supp.2d at 664 (defining representative as “a person to act on your behalf’).
(Opp. to Omnibus Mot. at 17, 20, 23 (emphasis in original)).
Pursuant to
The issue of receiving payment presents a more complicated question. Plaintiffs contend that “a patient’s authorized representative is not entitled to direct payment of benefits,” while Defendants posit that a payment to an “authorized representative” is still a payment to the patient, such that it does not present the scenario the anti-assignment clauses seek to prohibit— namely, providers claiming that they, rather than the patients, have the right to-benefits. Defendants cite to Middlesex for the proposition that “whether Plaintiffs have the right to submit a claim and pursue an appeal on a patient’s behalf ‘is a separate issue entirely’ from whether Plaintiffs have the right to sue under ERISA,” and that in having allowed the former, Defendants have not waived the latter. (Omnibus Reply at 15 (quoting Middlesex,
Biomed is instructive on some of the distinctions between assignees and authorized representatives. In Biomed, the defendants cited to the “Frequently Asked Questions” section of the Department of Labor’s website, which indicates that an assignment is generally not sufficient to designate the provider as an authorized representative. See Biomed, 831 F.Supp.2d at 663 n. 16 (“The ‘Frequently Asked Questions’ state: B-2: Does an assignment of benefits by a claimant to a health care provider constitute the desig
The assignment at issue in Biomed specified that it assigned to Biomed all of the patient’s rights, “including the right to sue on [the patient’s] behalf or name, under policy number [ ] issued by Oxford, to recover damages for services rendered by Biomed Pharm Inc.” Id. at 654 n. 2. As discussed above, Biomed makes the distinction between an “authorized representative,” who works on behalf of the patient with respect to a benefit decision or appeal, and an assignee, who acts on its own behalf as if it was the assignor. Id. at 664-65. This appears to be precisely the distinction that Defendants claim would render the assignments objectionable for purposes of this suit: the scenario is no longer a provider operating as an “authorized representative” on the patient’s behalf (which United purportedly would be required to allow for appeals purposes under the ERISA regulations, upon a proper showing of authorization), but rather is the provider operating for its own benefit and in its own right.
In Spinedex, the Ninth Circuit held that United had not waived its right to assert a plan’s anti-assignment provision, despite having failed to raise it during the first level appeal process, when the plan allowed the claims administrator to pay a provider directly for services rendered. Spinedex,
Regarding waiver, the Ninth Circuit discussed Harlick and noted that “an administrator may not hold in reserve a known or reasonably knowable reason for denying a claim, and give that reason for the first time when the claimant challenges a benefits denial in court.” Spinedex,
Here, the Court can see that the same might be true for plahs that similarly allow for payments to be made to providers for the convenience of participants (or potentially others). In such situations, until suit was filed, nothing had occurred that would have been within the range of conduct the anti-assignment clauses purportedly seek to prohibit. As such, allowing activity that is consistent with the proper rights of an “authorized representative” and not inconsistent with the anti-assignment clauses does not seem as though it should result in a waiver of later conduct that does come within such prohibitions.
In Care First II, the court evaluated allegations that defendants failed to raise anti-assignment clauses during the administrative process or cite it as a reason for claim denial, and therefore had waived the right to assert it in litigation. Care First II at 34. However, the court rejected this argument, noting that there were no allegations suggesting that the defendants knew the provider plaintiff was acting as an assignee, rather than an authorized representative. Id. The Care First II complaint alleged that the contracted claims administrator (Zenith, not a defendant to the action) had made representations that assignments were permitted, but the court noted that, as in Spinedex, this claims administrator had no authority to waive the provision under the terms of the plan. Id. at 34-35. The language of the relevant plan allowed for direct payment of benefits to providers, but such payment was not to imply an enforceable assignment of the benefits. Id. at 35. The complaint did not contain allegations that the plaintiff “asked defendants whether assignments were permitted.” Id. (emphasis in original). As such, the court concluded that “[b]ecause there [were] no allegations suggesting that defendants intentiоnally relinquished their rights under the anti-assignment provision, the first amended complaint fail[ed] adequately to allege waiver by defendants.” Id. Rather, in light of the facts alleged, the court found (consistent with Spinedex) that so far as the defendants knew, the plaintiff was only acting “ ‘as an authorized repre^ sentative charged with filing, collecting, or appealing a claim on behalf of the patient.’ ” Id. (quoting Spinedex,
At the hearing, Plaintiffs argued that the facts alleged in the FAC sufficiently demonstrate that United was on—notice that Plaintiffs were proceedings as assignees. In furtherance of this argument, Plaintiffs pointed out that United often challenged Plaintiffs’ authority to bring appeals and, in response, Plaintiffs allege that they provided United with their purported assignments. The FAC alleges specific instances during which the purported assignments were provided to United; the general language that reflects this submission is as follows: “Subsequently, however, United informed the Plaintiffs that their appeals were denied due to a lack of patient authorization. This was even though Plaintiffs had previously demonstrated that they held a valid assign
However, even if United’s. alleged conduct were sufficient to demonstrate waiver of a particular plan’s anti-assignment provision, the Court does not read the allegations in the FAC as demonstrating that United perceived that Plaintiffs intended to proceed as assignees rather than authorized representatives. The allegations themselves discuss assignments, but discuss their effect as authorizing Plaintiffs to make appeals on the patients’ behalf.
The allegations in the FAC are insufficient to demonstrate that Defendants intentionally relinquished any known rights pertaining to the anti-assignment clauses,
c. Consent of Insurer
Plaintiffs contend that assignability is governed by California law, since this is where the assignments were obtained by Plaintiffs. (Opp. to Omnibus Mot. at 24). Plaintiffs argue that anti-assignment clauses which require consent of the insurer, as the “most common variant of anti-assignment clause” at issue in this case does, are ineffective under California law. (Id. at 23-24 (“It is well established in California that the right to bring a suit to recover benefits under an insurance policy can be assigned even where an anti-assignment clause contained in the policy states that assignment is not valid without the consent of the insurer.”)). Plaintiffs cite to Comunale v. Traders & General Insurance Co.,
Comunale involved an assignee of an insured suing an automobile insurance company to recover the portion of a judgment against the insured that was in excess of his policy limits based on the insurer’s alleged wrongful failure to settle. Comunale,
The statement that Plaintiffs cite for support in Comunale does not support the proposition they allege: namely, that the right to bring a suit to recover benefits under an insurance policy can be assigned even where an anti-assignment clause contained in the policy states that assignment is not valid without the consent of the insurer. Comunale does not mention whether an anti-assignment provision that requires an insurer’s consent would be ineffective to preclude the transfer of a claim for benefits; rather, it only bears on this question in the case of a transfer of a cause of action for damages arising out of breach of contract. None of the citing references for Comunale address this particular issue. The Court is not convinced, therefore, that the proposition Plaintiffs proffer is actually a tenet of California law that would be applicable to anti-assignment clauses in the present case. In light of this conclusion, the Court will not evaluate whether such a California law would be preempted.
d. California DOI Regulation and California Insurance Code Section 10133(a)
Plaintiffs contend that anti-assignment clauses in plans governed by the California Department of Insurance (“DOI”) are ineffective. (Opp. to Omnibus Mot. at 24-25). For this proposition, Plaintiffs cite to California Insurance Code section 10133(a): “ ‘Upon written consent of the insured first obtained with respect to a particular claim,’ an insurer covered by the Insurance Code ‘shall pay group insurance benefits’ for ‘hospitalization or medical or surgical aid,’ contingent on certain conditions.” (Id. at 24 (emphasis in original) (citing
California Insurance Code
Upon written consent of the insured first obtained with respect to a particular claim, any disability insurer shall pay group insurance benefíts contingent upon, or for expenses incurred on account of, hospitalization or medical or surgical aid to the person or persons furnishing the hospitalization or medical or surgical aid, or, on and after January 1, 1994, to the person or persons having paid for the hospitalization or medical or surgical aid, but the amount of any such payment shall not exceed the amount of benefit provided by the policy with respect to the service or billing of the provider of aid, and the amount of the payments pursuant to one or more assignments shall not exceed the amount of expenses incurred on account of the hospitalization or medical or surgical aid. Payments so made shall discharge the insurer’s obligation with respect to the amount so paid.
Plaintiffs are not making a definitive allegation that all of the contracts with anti-assignment provisions are governed by the DOI and therefore subject to California Insurance Code
Defendants argue that California Insurance Code
The Court agrees that the provision, by its terms, does not appear to bar anti-assignment clauses. Plaintiffs cite to no authority interpreting this provision in the manner they urge. As such, the Court need not at present decide whether the provision would apply to some or all plans at issue, or whether preemption would bar its application here.
e. Almont No. 14-CV-03053 Counterclaim Position
Plaintiffs claim that United’s counsel cannot argue in this case that the assignment of benefits are invalid, and yet rely on the assignments in related case No. 14-CV-03053 to pursue “overpayment” claims against Plaintiffs. (Opp. to Omnibus Mot. at 21-22). They argue that the Court has previously recognized that this issue of United’s counsel’s potential conflict was a “a close call, given United’s position in the counterclaim,” but that the Court stated that it was “unclear” whether a conflict existed then given that information about which plans would assert anti-assignment clauses was not then before the Court. (Id. at 22 (quoting Docket No. 839 at 12)). However, Plaintiffs contend that:
That information is now before the Court. United has provided Plaintiffs with a list of the claims that they seek to recoup, which makes clear that United seeks to recover every payment ever made to Plaintiffs. (Chan Decl. ¶ 4-5.) Given the sheer breadth of United’s counterclaim, it is highly likely that United seeks to recover payments on behalf of every plan that raises anti-assignment in this casе.
(Id. at 22 (emphasis added)).
Plaintiffs further contend that:
United’s counsel attempts to claim that its positions are not inconsistent because Plaintiffs were authorized representatives, hot assignees. (See June 16, 2014 Tr. of Hrg. on Mot. to Disqualify at 10:8-11 (“Even if there’s not an assignment there may have been a payment [ ] to the plaintiffs as authorized representatives to direct payment to them.”) (statement of Mr. Lueke).) United also modified its FACC so that it alleges that Plaintiffs were authorized representatives, not assignees. (See FACC ¶¶ 314, 328.).... [E]ven if Plaintiffs were authorized representatives, that does not mean they were not also assignees. Biomed,831 F.Supp.2d at 665 . More importantly, a patient’s authorized representative is not entitled to direct payment of benefits. Such an individual is authorized only to “pursu[e] a benefit claim or appeal of an adverse benefit determination” on behalf of another. 29 C.F.R. 2560.503-1(b)(4); Biomed,831 F.Supp.2d at 664 (defining representative as “a person to act on your behalf’).
(Id. at 22-23).
Defendants counter by arguing that the FACC in No. 14-CV-03053:
[D]oes not rely upon assignments that are invalid due to anti-assignment clauses. Rather, the counterclaim asserts that the current Plaintiffs are required to return any sums negligently paid to them pursuant to Plan terms, including but not limited to situations where Plaintiffs submitted claims for benefits under 29 C.F.R. § 2560.503-1 pursuant to ‘authorized representative’ forms under [Department of Labor] regulations, where they had “valid” assignments (i.e., those not prohibited by anti-assignment clauses) under the Plan, or where they accepted payment from the Plan. In each of those instances (and potentially others), Plaintiffs are bound by plan terms requiring the return of overpay-ments. Thus, the Counterclaim only relies upon “valid” assignments, and does so' only in the alternative to other arguments and bases for recovery.
(Omnibus Reply at 21).
At present, the Court is not in a position to gauge the actual overlap on this anti-assignment issue between the two eases. Although Plaintiffs purport to “match up” the names of patients United provided in connection with the FACC in No. 14-CV-03053 and find that “at least two of the example patients” from the FACC belong to plans that assert to have anti-assignment clauses in this case (Enterprise Holdings and AT & T), this is hardly enough to establish that the relevant plan terms applicable in the two actions are the same. (Opp. to Omnibus Mot. at 22).
In any event, there seem to be a number of factual issues that bear on what is being asserted in each case with respect to which plans, dates of service, and the like. As such, ruling on the propriety of the purportedly- conflicting stances is premature at this time.
f. Continuum of Anti-Assignment Clauses
As to the specific language in the anti-assignment provisions, the Court wishes to make clear that not all anti-assignment clauses presented would defeat standing at this early stage in the proceedings. Approximately 145 groups of Defendants (ie., a plan sponsor and the corresponding plan(s)) assert anti-assignment arguments, though these will vary in effect. Plaintiffs make a variety of arguments regarding the limits of anti-assignment provisions asserted in this case, such as the fact that none of these provisions prevent the assignment of ancillary ERISA causes of action, “creditor” anti-assignment clauses are ineffective against the providers here, and some purported anti-assignment provisions permit assignment to providers without restriction. (Opp. to Omnibus Mot. at 25-28).
Regarding the first of these arguments, the Court’s discussion regarding the scope of the alleged assignments in relation to ancillary ERISA Counts dispenses with the need for further analysis here. Regarding the other arguments, the Comb outlines general categories of anti-assignment provisions and their relative merits here. As discussed below, however, 'all of these evaluations are subject to the threshold requirement that the anti-assignment provisions proffered by Defendants be manifestly reflective of the relevant operative plan terms.
So-called “creditor” or “spendthrift” provisions, discussed (though not found determinative) in the Order adjudicating the Baker Hughes Motion, are unlikely to be given effect against providers at this stage in the litigation.
Similarly, provisions allowing only for assignment with consent of a designated entity (be it the plan sponsor or otherwise) are insufficient to defeat standing at this
However, provisions that contain no exclusions or exceptions to the assignment prohibition, or contain exclusions that are clearly inapplicable in the present case, are more likely to defeat standing.
Finally, Defendants argue that “Plaintiffs do not allege in the Amended Complaint — or even assert in opposition — that the anti-assignment clauses are ambiguous, making the anti-assignment provisions valid and enforceable under Ninth Circuit precedent.” (Omnibus Reply at 14 (footnotes omitted)). In a footnote, they further contend that “[ajlthough Plaintiffs assert that an ambiguous anti-assignment clause must be construed against the drafter, Pis.’ Opp. at 21, they do not identify any ambiguity in the clauses provided in conjunction with Defendants’ Opening Brief.” (Jdn. 14).
“ ‘In interpreting the terms of an ERISA plan[,] we examine the plan documents as a whole and, if unambiguous, we construe them as a matter of law.’ ” Vaught v. Scottsdale Healthcare Corp. Health Plan,
We have held that terms in a pension plan should be interpreted in an ordinary and popular sense as would a [person] of average intelligence and experience. When disputes arise as to the meaning of one or more terms, we first look to the explicit language of the agreement to determine the clear intent of the parties. The intended meaning of even the most explicit language can, of course, only be understood in the light of the context that gave rise to its inclusion. An ambiguity exists when the terms or words of a pension plan are subject to more than one reasonable interpretation. In fact, only by excluding all alternative readings as unreasonable may we find that a plan’s language is plain and unambiguous.
McDaniel v. Chevron Corp.,
The Court recognizes that the anti-assignment language will largely not defeat standing at this stage (either because the documents submitted are not demonstrably the operative plan documents, the clauses contain exceptions, and/or the anti-assignment language itself does not manifestly cover the scenario presented in this case). However, due to the deficiencies (discussed below) in Plaintiffs’ prima facie benefits Count, invocation of anti-assignment clauses will not be required at this stage of the proceedings in order to defeat the ERISA benefits Count. Moreover, the estoppel Count is independently deficient for the reasons discussed in the Order
B. Plaintiffs’ Count Under ERISA § 502(a)(1)(B) (Count I)
1. Employers as Proper Defendants
Defendants dispute the propriety of including employer Defendants in a suit for benefits, stating: “Under Ninth Circuit law, the proper defendants for a claim for benefits are the entities with authority to resolve benefit claims (United) or the responsibility to pay them under the terms of the plan (the Plans).” (Omnibus Mot. at 7 (citing Cyr v. Reliance Standard Life Ins. Co.,
However, irrespective of payment obligations, the employers appear to be proper Defendants at this stage of the litigation due to the operation of ERISA law. Admittedly, it is unclear from the FAC which parties are actually the plan administrators for any given plan. The FAC alternately alleges that the employers and United served as plan administrator. {See, e.g., FAC ¶ 58 (“Plaintiffs are informed and believe that Defendant, AARP, is a plan sponsor and plan administrator for the AARP Employees Welfare Plan.”); ¶ 1067 (“United wаs in all instances the Claim Administrator, and in some instances, the designated Plan Administrator, to whom administrative duties were expressly delegated by the plans, and/or plan sponsors.”)). Numerous parties contend that their plan documents explicitly designate the employer as the plan administrator. (See Opp. to United Mot. at 20 n. 6 (“It appears that the large majority, though not all, of Employers have been designated as the administrators for their respective Plans.”)). However, at the very least, ERISA designates employers as the “plan sponsor” “in the case of an employee benefit plan established or maintained by a single employer.”
There is out-of-circuit precedent for the notion that a plan administrator may not be the proper party to a benefits action if the plan administrator does not participate in benefit decisions; rather, in such a case, the claims administrator that does make such choices is the proper defendant. See, e.g. Moore v. Lafayette Life Ins. Co.,
Within the Ninth Circuit, the rules regarding proper ERISA benefit claim defendants were previously a bit unclear. However, Spinedex recently provided a bit of clarity on the issue. In Spinedex, the
As Spinedex makes clear, formally designated and de facto plan administrators are proper defendants in an ERISA benefits action. Though the FAC also contains allegations that United may be a plan administrator or de facto administrator for the relevant plans, the Court is inclined to rule that it would be improper for the jointly-represented Employer Defendants to argue that they are improper defendants for Count I, brought pursuant to
Unless the relevant, operative plan doc-' uments rule out the possibility that the Employer Defendants fall into one of the Spinedex designations discussed above, the Court concludes that they are proper Defendants for Count I at present.
a. Employer Defendants That Purportedly Are Not Plan Administrators
The Court notes that there are a few Supplemental Memoranda arguing that the Employer Defendant named is not the relevant plan administrator, such as those submitted by: the Ensign Defendants (Docket No. 1088); the Medco Defendants (Docket No. 1078); the Southwest Defendants (Docket No. 1098). However, the support for these arguments stems from SPDs and/or it is unclear that the documents submitted (even if they constitute the operative plans) are relevant for each of the claims alleged in the FAC. The Court is not persuaded that it can rely on such documents to dismiss Counts against these particular entities at this time.
Similarly, the Edison Defendants argue that Edison International is neither the relevant plan’s sponsor nor its plan administrator; rather, the Edison Defendants assert that “non-party Southern California Edison Company (‘SCE’) is the plan sponsor” and “[n]on-party the Southern California Edison Company Benefits Committee (‘Committee’) is the plan administrator.” (Edison Supp. Memo. (Docket No. 1070) at 1). The relevant patient for the Edison Defendants is Patient 122, and Appendix A to the FAC (Docket No. 840-3) alleges that services were provided to Patient 122 on May 22, 2009. (FAC, Appendix A at 194). Filed with the Edison Supplemental Memorandum is the Declaration of Matthew P. Eastus (“Eastus Declaration”), to which is attached “a true and correct copy of relevant excerpts of the plan document applicable to Patient 122.” (Eastus Deck (Docket No. 1070-1) ¶ 4). The plan document reflects that Edison International is neither the plan administrator nor the
At the hearing, Plaintiffs indicated that they will replace Edison International with the proper Defendant in their amended pleading.
b. The Union Pacific Defendants
The Union Pacific Defendants note that the “single employer” framework may not apply to them as to all purportedly related plans.
At the hearing, Plaintiffs informed the Court that they had settled with the Union Pacific Defendants. As such, the Court need not weigh the relative merits of arguments pertaining to these Defendants.
2. Stating a Claim for Benefits Under the Terms of the Relevant Plans
a. Standard of Review and Benefits Determinations
ERISA § 502(a)(1)(B) authorizes participants and beneficiaries of a plan to bring -suit to recover benefits to which they are entitled under the plan. The court will then review the decision made by the administrator. See Moyle v. Liberty Mut. Retirement Ben. Plan,
If a plan does confer discretion (which it must do unambiguously), then the applicable standard of review is abuse of discretion. Id. (citing Firestone Tire & Rubber Co.,
However, “[i]f a plan gives discretion to an administrator who is operating under a conflict of interest, that conflict must be weighed as ‘a facto[r] in determining whether there is an abuse of discretion.’ ” Moyle,
Under an abuse of discretion review, the Court evaluates only the administrative record. Mitchell v. CB Richard Ellis Long Term Disability Plan,
b. Pleading Requirements
“To state a claim [for benefits under ERISA § 502(a)(1)(B) ], plaintiff must allege facts that establish the existence of an ERISA plan as well as the provisions of the plan that entitle it to benefits. A plan is established if a reasonable person ‘can ascertain the intended benefits, a class of beneficiaries, the source of financing, and procedures for receiving benefits.’ Failure to identify the controlling ERISA plans makes a complaint unclear and ambiguous.” Forest Ambulatory Surgical Associates (“Forest Ambulatory”), L.P. v. United Healthcare Ins. Co., 10-CV-04911-EJD,
In Sanctuary Surgical, the court evaluated a case in which 966 derivative ERISA claims were at issue. The Sanctuary Surgical plaintiffs, out-of-network providers, sought payment for medical services (manipulation under anesthesia procedures or “MUAs”) provided to United members. Sanctuary Surgical,
Similarly, in Forest Ambulatory, the court found allegations that “the benefits agreements on which it seeks relief ‘include employee welfare benefit plans covered by [ERISA],’ and that ‘[u]nder the terms of the relevant written ERISA plans and written Assignment Agreements, United Healthcare was obligated to pay [the provider] the amount of the Claims submitted under the ERISA plans for the procedures performed by [the provider’s] medical staff for the United Insureds’ ” too conclusory to satisfy Iqbal/Twombly pleading standards. Forest Ambulatory,
In contrast, the court in Encompass Office Solutions, Inc. v. Ingenix, Inc. (“Encompass’’),
Similarly, in In re WellPoint, Inc. Out-of-Network UCR Rates Litig. (‘WellPoint I”),
c. Sufficiency of Allegations
As a preliminary matter, Plaintiffs contend that the applicable standard of review for the benefits “decisions” here is de novo, due to United’s purported conflicts and ERISA procedural violations. (See FAC ¶¶ 893, 982-85). However, as discussed below, the pleadings are deficient such that the Court need not even evaluate the appropriate standard of review.
Defendants rely on Sanctuary Surgical, arguing that the pleading deficiencies in that case (failure of the plaintiffs to argue the terms of the relevant plans that demonstrate conditions of coverage) are applicable here. (Omnibus Mot. at 11-13). Plaintiffs, in turn, contend that “Defendants failed to comply with the ERISA regulations requiring detailed notice of every reason for the denial of the claim, including citations to specific provisions of the plan.” (Opp. to Omnibus Mot. at 37). As such, Plaintiffs reason, Defendants cannot now attempt to argue that Plaintiffs’ Count should be dismissed for failure to cite to plan terms, when the fault for Plaintiffs not having these terms readily available lies with Defendants themselves. (Id. at 37-38). Moreover, Plaintiffs distinguish Sanctuary Surgical, classifying that case as an “outlier,” and noting that “[o]ther courts have recognized ... that plausible allegations that merely describe the relevant plan provisions in general terms are moré than sufficient to put defendants on notice as to the benefits sought.” (Id. at 38 (citing Encompass,
In terms of actual allegations, Plaintiffs cite the fact that they verified that each patient had valid coverage and received either an authorization or statement that no authorization was needed; in light of this, Plaintiffs claim that “it would be implausible to conclude, in light of such representations, that the Plaintiffs’ hundreds of benefits claims all relate to non-covered patients or procedures.” (Opp. to Omnibus Mot. at 38-39 (emphasis in original)). Specifically, Plaintiffs allege in the FAC that:
The patients whose claims are at issue in this lawsuit are all morbidly obese individuals who are suffering from serious medical problems associated with their obesity.
All of these patients choose Preferred Provider Organization (“PPO”) insurance, rather than HMO insurance, through their employers so that they can receive their medical services from the physicians and other medical providers of their choice, regardless of whether those physicians are in-network or out-of-network. United Healthcare, who administers the PPO insurance for these employers, advertises on its website that the benefits of its PPO policies include: “The freedom to choose any doctor for your health care needs.”
All of these patients’ healthcare providers requested that United Healthcare authorize the patients to undergo the extensive preoperative tests necessary to determine whether they are qualified to receive Lap-Band surgery. United Healthcare ther [sic] provided authorization for the plaintiffs’ healthcare providers to perform the procedures, or were informed that no authorization was needed. After receiving the authorizations, or being informed that no authorization was necessary, the patients went through months of pre-operative tests.
No provisions in those benefit plans, whether in their Summary Plan Descriptions (SPDs) and Evidences of Coverage (EOCs), justified the failure to pay the usual and customary fees for services charged by outpatient surgical centers such as those managed and operated by the Plaintiffs, and to instead pay nothing. It was arbitrary, capricious and improper for United to do so. In fact, during the insurance verification process for most if not all of the patients in this ease, United represented to Plaintiffs that it would pay the Plaintiff Providers’ usual and customary fees. Plaintiffs sought information during this process about potential limitations on the reimbursement of Plaintiffs fee each time prior to providing services, and specifically inquired each time prior to providing services as to how United’s fee provisions would apply to their situation. Defendants withheld information in response to such requests, and therefore misled plaintiffs into thinking that the entire Plaintiffs’ usual and customary fees would be paid. Likewise, no provisions anywhere in those plans justified the failure to issue a final decision or denial on any of Plaintiffs’ claims. This was therefore arbitrary, capricious, and a breach of United’s fiduciary duties to plan participants and fiduciaries. It was also a violation of regulations promulgated v under ERISA by the Department of Labor, which require that claims be adjudicated by the claims administrator (e.g., United) within 90 days after receipt of the claim.
(FAC ¶¶ 3-5, 867-868 (emphasis added)).
The general allegations in this case closely resemble those in Sanctuary Surgical. For example, in both cases there are allegations that Plaintiffs telephoned United and received confirmation of out-of-network coverage for the requested services, and that Plaintiffs did not have access to the underlying plans and so had to rely on United’s verbal verification and promise of payment prior to rendering services. Although the court in Sanctuary Surgical imposed a rather stringent pleading requirement which the Court is not necessarily adopting, the Court does note the similarities between the two cases.
Moreover, as Defendants contend, Well-Point I and Encompass are both distinguishable, as they involve plaintiffs who “alleged specific plan terms or included specific allegations regarding the plan terms.” (Omnibus Reply at 5). In Encompass, the plaintiff alleged that certain services that it provided were covered under the insureds’ plans, and also discussed the' benefits allowed under the plans for such services. Encompass,
Here, Plaintiffs may allege that they were provided authorizations and that no plan terms “justified the failure to pay the usual and customary fees for services charged by outpatient surgical centers such as those managed and operated by the Plaintiffs, and to instead pay nothing,” but they do not actually allege that the specific services they provided to the patients at issue were covered under the terms of the relevant plans or describe the plan terms that would support such coverage. They do not plead exemplar language or even make allegations regarding such language that is then extrapolated to the remaining plans.
Furthermore, to the extent that Plaintiffs try to negate their burden to plead
Plaintiffs cannot plead coverage by alleging that they were told in phone conversations with United that benefits were available for the performed procedures. Such allegations, while perhaps relevant to the estoppel claim that they allege in Count TV (and now seek to stay), are irrelevant as to whether coverage exists under the terms of the Plans. See Pis.’ Opp. at 38; see also Sanctuary,2013 WL 149356 , at *1-7 (dismissing claim for benefits based on failure to plead coverage despite plaintiffs’ assertion that United confirmed coverage during preauthorization telephone calls). The issue in a claim for benefits under Section 502(a)(1)(B) is whether the terms of the plan provide coverage, and assurances allegedly made over the telephone are not terms of the plan.
(Omnibus Reply at 9).
In short, the Court is inclined to agree that Plaintiffs have failed to meet their pleading burden for purposes of their § 502(a)(1)(B) Count. The Court notes that this is a close call under the facts of this case, and further observes that the FAC contains allegations that bear on their ERISA benefits Count. However, the Court will provide leave to amend. In the Second Amended Complaint, Plaintiffs will have to plead that for each plan, the terms of the plan: (1) provide coverage for each of the procedures at issue in this case; and (2) dictate that these covered services would be paid according to a specific reimbursement rate (such as the reasonаble and customary fees for services charged by outpatient surgical centers), which must be specified. Plaintiffs should then allege that Defendants failed to reimburse for the covered services provided by Plaintiffs according to this reimbursement rate provided in the plans. Given the allegations in this case regarding absence of access to plan documents, the Court will permit these allegations to be made “on information and belief.”
3. Plaintiffs’ Counts as Barred by Plan Terms
Defendants also argue that Plaintiffs’ Counts are barred by various plan terms, such as anti-assignment provisions, forum selection clauses, coverage exclusions, and time limitations. (Omnibus Mot. at 13-17). Plaintiffs contend that the SPDs submitted with the Motions are not proper representations of the plans’ terms, and therefore cannot be relied upon as proof that plans contain various provisions. (Opp. to Omnibus Mot. at 12-13 (“The vast majority of submissions by Plan Defendants consist of selective excerpts from their Summary Plan Descriptions (SPDs), rather than the operative plan documents that govern the plans.”) (emphasis in original)),
a. SPDs and Plan Documents
“ERISA requires welfare benefit plans to be established and maintained pursuant to a written instrument.
An SPD is the “statutorily established means of informing participants of the terms of the plan and its benefits.” Alday v. Container Corp. of Am.,
However, the Supreme Court’s decision in CIGNA Corporation v. Amara,
In Eugene S. v. Horizon Blue Cross Blue Shield of N.J.,
In contrast, in Zalduondo v. Aetna Life Insurance Company,
b. Consideration of SPDs in This Case
Plaintiffs initially mention SPDs as part of a benefit plan. (FAC ¶ 867 (“No provisions in those benefit plans, whether in their Summary Plan Descriptions (SPDs) and Evidences of Coverage (EOCs), justified the failure to pay the usual and customary fees for services charged by outpatient surgical centers such as those managed and operated by the Plaintiffs, and to instead pay nothing.”)). However, Plaintiffs later contest the use of SPDs as proper representation of the plans in their Opposition to the Omnibus Motion: “The vast majority of Defendants submitted Summary Plan Descriptions (‘SPDs’), which are not operative plan documents and cannot be relied upon to dismiss Plaintiffs’ claims.” (Opp. to Omnibus Mot. at 2).
Defendants argue in the Omnibus Reply that for health plans, unlike the retirement plans at issue in Amara, the SPDs “almost always constitute the ‘plan’ itself (or a portion of it).” (Omnibus Reply at 8). Moreover, Defendants argue that “in a colloquy with the Court at the August 6, 2014, hearing, counsel for Plaintiffs expressly stated that he had ‘no objection’ to counsel for the Jointly Represented Defendants’ suggestion ‘to have a single affidavit that would collect and collate ... excerpts ... [from the] summary plan descriptions’ for the purpose of ‘authenticating the various [plan] provisions.’ Sec. Supp. Decl. of Heather M. McCann, Ex. 1 (Hrg. Tr. at 10:3-12:2 (Aug. 6, 2014)). As discussed at the hearing, submitting 6-10 pages of excerpts of the relevant provisions of SPDs that often exceed 60-70 pages lessens the burden on the Court. Id. at 10:11-21.” (Omnibus Reply at 8 (footnote omitted)).
The transcript for the August 6, 2014 hearing does, indeed, appear to support Defendants’ contention. However, under Amara, the Court does not have power to consider the SPDs as plan terms, without evaluating whether the SPDs are part of the plan in each instance. While several Defendants posit that SPDs often or even generally constitute the terms of the relevant plan, the Court has before it no authority demonstrating that this is always the case, such that consideration of the SPDs would be acceptable absent confirmation that this is so in each instance.
In light of Amara, statements that SPDs generally constitute the plan terms are insufficient to demonstrate that any specific SPDs proffered reflect relevant plan language. If the documents submitted are not manifestly reflective of the operative plan terms, the Court will not consider them at this time in support of arguments that any particular plan contains specific language, including anti-assignment clauses, forum selection clauses, and contractual time limitations.
c. Specific Types of Plan Terms
Separate and apart from which documents may be considered when evaluating “plan terms,” various types of terms are also at issue. As the effect of anti-assignment provisions has been previously evaluated, the Court will not reiterate this discussion here. However, the Court will discuss the effect of forum selection clauses, coverage exclusions, and time limitations.
Defendants argue that plans containing forum selection clauses “should be dismissed because their contracts explicitly govern where a legal dispute must be resolved, and it is not in this Court.” (Omnibus Mot. at 15). Alternatively, Defendants request that the cases against these Defendants be transferred “to the appropriate courts under
1. Enforceability of Forum Selection Clauses
For the reasons discussed in the Order adjudicating the Aegon Motion, the Court rules that forum selection clauses are applicable in ERISA cases such as this. Moreover, Plaintiffs have failed to demonstrate that enforcing forum selection clauses would be “unreasonable” in this case, as that term is understood under M/S Bremen v. Zapata Off-Shore Co.,
However, even resolving all of these threshold issues, the wording of the various forum selection clauses at issue here will have some bearing on their effect.
2.Permissive and Mandatory Clauses
“The prevailing rule is ... that where venue is specified with mandatory language the clause will be enforced.” Docksider, Ltd. v. Sea Tech., Ltd.,
As such, the effect of mandatory and permissive clauses will potentially vary in this case. The Court evaluates these two lines of analysis below.
3.Effect of Mandatory Forum Selection Clauses
Plaintiffs argue that “Defendants cite no cases suggesting that dismissal for improper venue under
Contrary to Plaintiffs’ argument ... the Sixth Circuit considered whether dismissal or transfer is warranted, and upheld the district court’s dismissal of the plaintiffs complaint based on the forum selection clause. Smith, [769 F.3d at 932-35 ]2014 WL 5125633 , at *8-9. Defendants’ forum selection clauses are valid and should be enforced either by dismissal underRule 12(b)(6) or, in the alternative, transferred.”
(Omnibus Reply at 30).
At the outset, the Court notes that the parties seem to disagree as to what may be the relevant basis for dismissal in light of the forum selection clauses:
In Defendants’ cited case, Smith v. Aegon Companies Pension Plan,
Here, the forum selection clause-based arguments in the Omnibus Motion are phrased in terms of dismissal or, in the alternative, transfer under
a. Transfer and
“For the convenience of parties and witnesses, in the interest of justice,” an action may be transferred pursuant to
Notably,
With this in mind, “[t]he threshold question under
“In the typical case not involving a forum-selection clause, a district court considering a
The Court now turns to the first question that determines whether
b. Propriety of Venue in This Court
General venue in diversity and federal question cases is governed by 28 U.S.C. •§ 1391(b). However, ERISA contains its own venue statute. See
Pursuant to
In the Opposition to the Aegon Motion, Plaintiffs assert that venue is proper here under
From the FAC, it is clear that “a defendant resides or may be found” in this District, rendering venue proper here. This ruling dispenses with the arguments raised in various Supplemental Memoran-da that venue is improper in this Court.
The Court further rules that transfer pursuant to
The entities that have advanced forum selection arguments are: the Alcon Defendants (Omnibus Motion); the CNA Financial Defendants (Omnibus Motion); the Conmed Defendants (Omnibus Motion); the Aegon Defendants (Docket No. 1066); the Dr. Pepper Snapple Group, Inc. Defendants (Docket No. 1149-5); the Enterprise Holdings, Inc. Defendants (Docket No. 1149-6); the OCLC Online Computer Library Center, Inc. (Docket No. 1149-14); the Payless Shoesource, Inc. Defendants (Docket Nos. 1107, 1151); the Probuild Holdings, Inc. Defendants (Docket No. 1149-16); and the Southwest Airlines Co. Defendants (Docket No. 1098).
The Court will evaluate the Payless Defendants’ forum selection clause in connection with its permissive forum selection clause analysis below.
As to the rest of these Defendants, the supporting documents provided either are SPDs that the Court cannot rely on in adjudicating the Motions, are not demonstrably thе operative plan documents that control the relevant time periods for the claims to which they correspond, and/or contain exceptions such that the Court cannot resolve their applicability at present. In sum, the Court concludes that it cannot rely at present on any of the proffered documents to transfer Counts against these entities at this time.
4. Effect of Permissive Forum Selection Clauses
The reasoning in Atlantic Marine was driven by the overarching policy of honoring the parties’ mutual intent to litigate in a designated forum. The Supreme Court stated that “a valid forum-selection
However, where the parties have a permissive forum clause, they arguably have not actually agreed “as to the most proper forum.” Instead, such parties merely consented to the jurisdiction of certain courts. “Such consent to jurisdiction ... does not mean that the same subject matter cannot be litigated in any other court.” Hunt Wesson Foods, Inc. v. Supreme Oil Co.,
Among the Defendants objecting to venue on the basis of a forum selection clause, only one set of arguably relevant, operative plan documents reflects a permissive forum selection clause: the Payless Shoe-source, Inc. Medical Plan. (See Payless Shoesource, Inc. Supp. Memo. (Docket Nos. 1107-3, 1151 — 1151-2)); Payless Shoesource, Inc. Reply (Docket No. 1225). This clause provides as follows:
Subject to the applicable provisions of the Employee Retirement Income Security Act of 1974 which provide to the contrary, this Plan shall be administered construed and enforced according to the laws of the State of Kansas or such other state as may be provided for in an HMO or other insured arrangement with respect to matters governed thereby, and in any case, shall be subject to the jurisdiction of courts situated in Kansas or such other state.
(Docket Nos. 1107-3,1151-2).
The Court will conduct the following analysis on the presumption that the transferee venue would be proper. Whether transfer would be warranted, however, requires further inquiry. The Ninth Circuit has noted that “[a] motion to transfer venue under
(1) the location where the relevant agreements were negotiated and executed, (2) the state that is most familiar with the governing law, (3) the plaintiffs choice of forum, (4) the respective parties’ contacts with the forum, (5) the contacts relating to the plaintiffs cause of action in the chosen forum, (6) the differences in the costs of litigation in the two forums, (7) the availability of compulsory process to compel attendance of unwilling non — party witnesses, and (8) the ease of access to sources of proof. Additionally, the presence of a forum selection clause is a “significant factor” in the court’s§ 1404(a) analysis. We also conclude that the relevant public policy of the forum state, if any, is at least as significant a factor in the§ 1404(a) balancing.
Id. at 498-99 (9th Cir.2000) (footnotes omitted).
Looking first to Plaintiffs’ choice of forum, this factor plainly weighs against transfer.
Regarding knowledge of the governing law, in light of dicta in Atlantic Marine, stating that “federal judges routinely apply the law of a State other than the State in which they sit,”
As to the location оf witnesses and access to sources of proof, Appendix A to the FAC indicates that the basis for suit against the Aegon Defendants arises from procedures allegedly performed by Plaintiff IMS for Patient 274. (FAC, Appendix A at 454). The FAC alleges that Plaintiff IMS is “a California professional corporation organized and existing under the laws of the State of California, with its principal place of business in Beverly Hills, California.” (FAC ¶ 49). Although it is unclear where Patient 274 resides, it certainly appears that there will at least be some witnesses or proof relevant to IMS (and, presumably, the claims related to Patient 274) located in this District. While there may also be witnesses or proof relevant to the Payless Defendants located in Kansas, this seems, at best, to render this factor neutral.
Ultimately, since the relevant procedure, patient, and billing seemingly have some nexus to this District, the Court is reluctant to make a transfer to a judicial district with a less manifest connection to the procedure at issue. The Court rules that, on balance, consideration of the convenience of the parties and witnesses and the interests of justice weighs against a transfer.
ii. Coverage Exclusions
1. Failure to Raise During Administrative Process
Plaintiffs assert that “United and the Plan Defendants attempt to raise coverage base[d] defenses that were not raised during the administrative process. Having elected to ‘hide the ball’ from the Plaintiffs during the administrative process, Defendants are precluded from raising these excuses in litigation.” (Opp. to Omnibus Mot. at 28). Plaintiffs contend that this effectively precludes Defendants from asserting here that “all conditions for coverage were not met, or whether certain kinds of procedures (e.g., bariatric surgery) were excluded from coverage entirely.” (Id. at 29-30). For this proposition, Plaintiffs rely in large part on Mitchell v. CB Richard Ellis Long Term Disability Plan,
In Mitchell, the insurer/administrator (MetLife) of a plan raised a “date of onset coverage” defense for the first time in response to an insured’s district court complaint. Mitchell,
Similarly, in Harlick, a plan administrator (Blue Shield) did not raise a medical necessity defense during the administrative process. Harlick,
Here, the analysis is complicated by the fact that the issue of “denials” is far from straightforward. Claims were allegedly denied for a variety of reasons (which Plaintiffs claim were pretextual), but at other times, no final benefits decision was purportedly issued. This does not appear to be a scenario in which an administrator indisputably had the facts available to it for application of policy exclusions and simply never did; rather, the FAC is replete with allegations that United repeatedly asked for supplemental documentation in order to process the claims at issue. (See, e.g., FAC ¶¶ 882-84, 953). (See also Omnibus Reply at 12 n. 10 (“Plaintiffs’ allegations characterizing United’s requests for further information as ‘denials’ are not sufficient under Twom-bly given their allegations that United requested additional information to decide the claims or proof of authority to proceed. And although claims that are not acted upon may be ‘deemed exhausted’ under
When denials were not definitively issued, barring assertion of coverage exclusions would not advance the purpose underlying the rule that reasons for denial be provided to the claimant. There would be no “sandbagging” in such an instance, because the claim was never denied in the first place, and therefore assertion of rationales for denial now would not present the same worrying pattern of insurers asserting rationale after rationale for denials.
In instances where claims were actually denied for other “pretextual” reasons that
Regardless, however, the Court’s conclusion regarding Plaintiffs’ failure to plead a prima facie benefits Count renders it unnecessary at present to evaluate whether certain exclusions could be properly asserted to defeat such a Count. The Court notes that exclusion arguments have been raised by approximately 322 groups of Defendants (ie., a plan sponsor and the corresponding plan(s)). However, the Court also observes that these exclusions vary in their terms and effect — for example, some may categorically preclude procedures at issue here, while others prohibit coverage from providers such as Plaintiffs. At the hearing, for example, the Medco Defendants argued that their plan contains exclusions for both surgical and non — surgical treatment for obesity.
Defendants were asked at the hearing to address the distinctions between coverage (which is Plaintiffs’ burden to sufficiently allege) and exclusions (which Defendants bear the burden of demonstrating). Defendants argued that plan terms that impose conditions before procedures are reimbursable constitute “coverage” issues, which fall under the Plaintiffs’ pleading burden (ie., in order to establish “coverage” under a particular plan for their § 502(a)(1)(B) Count, Plaintiffs must allege that such conditions were satisfied).
The Court certainly acknowledges that courts may well impose technical and specific pleading requirements for purposes of allowing a § 502(a)(1)(B) claim to survive a motion to dismiss. However, the practical realities of this case and the nature of Plaintiffs’ allegations regarding their lack of access to plan terms counsel adoption of the approach discussed above. Still, as the Court noted at the hearing, Plaintiffs are not absolved of their duties under Rule 11. To the extent that the litigation to date has provided Plaintiffs with information indicating that they cannot in good faith proceed with particular Counts against specific entities, they risk consequences if they proceed with such Counts in spite of this information.
2. Factual Issues
Plaintiffs also assert that applying coverage limitations and exclusions implicates questions of fact, such that resolution at this stage is inappropriate. (Opp. to Omnibus Mot. at 30-32). Defendants counter by arguing that “Plaintiffs cannot avoid dismissal by alleging that coverage determinations involve ‘fact issues.’ Although ‘fact issues’ might potentially preclude dismissal for certain claims if Plaintiffs had properly alleged a claim for benefits in the first instance, - they have not done so.” (Omnibus Reply at 5).
Given the Court’s analysis regarding Plaintiffs’ failure to plead a prima facie Count of entitlement to benefits, it is unnecessary to evaluate at present whether factual issues applicable to coverage exclusions might preclude dismissal.
iii. Time Limitations
1. Whether Time Limitations For Bringing Suit Were Never Triggered Due to Allegedly Deficient Benefit Decisions
Plaintiffs argue that the time limitations in various plans were never triggered because United’s letters were too deficient to do so. (Opp. to Omnibus Mot. at 32-34). Plaintiffs note that “[i]n some cases, the FAC alleges that United simply never issued a final denial,” but go on to argue that “even where a final denial issued, Defendants failed to provide proper notice under ERISA explaining why they denied the claim, how it could be perfected, and how it could be appealed.” {Id. at 32). As such, they argue that the denials were
In support of this deficiency argument, Plaintiffs cite to White v. Jacobs Engineering Group Long Term Disability Plan,
Plaintiffs also cite to Chuck v. Hewlett Packard Co.,
Unlike White, which dealt with a contractual time limitation for administrative appeals, the Court is primarily concerned at present with contractual time limitations for bringing a suit for benefits. It stands to reason that a benefits determination which failed to outline the reasons for denial under a plan would not trigger the
While Chuck does lend the implication that the same reasoning used in White might be applicable to the limitations periods for bringing suit, Chuck makes the distinction that White dealt with contractual time limitations while Chuck evaluated ERISA statutory limitations. On the whole, it seems qualitatively different to claim that inadequate benefits decisions should preclude a contractual time limit from running when Plaintiffs did not rely on benefits determinations in bringing suit, but rather seek, in part, to address these purportedly deficient benefit determinations by way of their suit. This stands in stark contrast to a scenario in which an adverse benefits decision was inadequate to apprise a claimant of what was needed in order to properly appeal the decision through the plan’s appeal procedures.
Of course, the plans’ triggering events for time limitations are also important factors here. Defendants argue that many of the relevant triggering events in this case are not related to benefits decisions. (See Omnibus Reply at 25-26). If time limitations are triggered by a final benefits determination, however, then it stands to reason that allegedly deficient benefits decisions should be insufficient to commence the running of the limitations period.
In sum, Plaintiffs’ arguments 'regarding deficient benefit decisions and contractual time limitations are unpersuasive, except to the extent that any time limitations are triggered by the date of a final benefits decision. However, in such situations, to the extent that the receipt of final benefit decisions is alleged in the FAC (as opposed to requests for additional information or other purportedly nebulous correspondence), this distinction is not applicable.
2. Whether the Time Limits For Bringing Suit Were Unreasonable Given United’s Purported Conduct
Plaintiffs contend that the contractual time limits were unreasonable given United’s purported delay tactics. (Opp. to Omnibus Mot. at 34-35). In support of this argument, Plaintiffs cite Heimeshoff v. Hartford Life & Accident Ins. Co., — U.S. —,
In Heimeshoff, the Supreme Court evaluated a suit for ERISA benefits against a long-term disability insurer. The plan at issue required a participant to bring suit within three years after “proof of loss” is due; however, proof of loss is due prior to the completion of the plan’s administrative process, such that the administrative exhaustion requirement effec
As discussed above, the Court also stated that, “even in the rare cases where internal review prevents participants from bringing § 502(a)(1)(B) actions within the contractual period, courts are well equipped to apply traditional doctrines that may nevertheless allow participants to proceed. If the administrator’s conduct causes a participant to miss the deadline for judicial review, waiver or estoppel may prevent the administrator from invoking the limitations period as a defense.” Heimeshoff,
Here, it is not clear that the Supreme Court’s discussion/distinction of Occidental would support Plaintiffs. In Occidental, an institutional backlog meant that there was little chance that claimants could bring claims that were not barred by the statute of limitations. This seems to be more of a fundamental obstacle to timeliness than United’s alleged dilatory conduct, particularly in light of the fact that Plaintiffs plead an exception to administrative exhaustion in order to bring the instant suit, and therefore do not rely on adherence to the administrative process or timelines.
In sum, Plaintiffs’ argument regarding United’s alleged conduct is not persuasive. The Court does not address at present whether any of the individual time limitations are per se unreasonable, an issue not raised by Plaintiffs.
3. Waiver/Estoppel and Time Limitations for Bringing Suit
Plaintiffs also contend that they are “entitled to assert waiver and estoppel” as to contractual time limitations. (Opp. to Omnibus Mot. at 35). Plaintiffs urge that “application of these defenses necessarily involve questions of fact that are properly not before the Court.” (Id).
As discussed above, the Supreme Court has previously stated that “in the rare eases where internal review prevents participants from bringing § 502(a)(1)(B) actions within the contractual limitations period, courts are well equipped to apply traditional doctrines that may nevertheless allow participants to proceed. If the administrator’s conduct causes a participant to miss the deadline for judicial review, waiver or estoppel may prevent the administrator from invoking the limitations peri
The Court will analyze whether these defenses apply in the present action.
a. Estoppel and Time Limitations
“As a general rule, a defendant will be estopped from setting up a statute-of-limitations defense when its own prior representations or conduct have caused the plaintiff to run afoul of the statute and it is equitable to hold the defendant responsible for that result.” Gordon,
The present case is distinguishable from LaMantia, in which the Ninth Circuit held that a plan was estopped from asserting either a contractual limitations period or the ERISA statutory limitations period. LaMantia,
Here, apart from the argument discussed below regarding a purported failure to adhere to an affirmative statutory duty to disclose time limitations, it is unclear what Plaintiffs contend Defendants did or said that would have caused them to run afoul of any applicable contractual statutes of limitations. The Court sees no allegations akin to those in LaMantia that United affirmed that the claims were open and under review pending the occurrence of certain events. It is true that LaMan-tia and the present case both do involve a situation in which additional records were requested from the claimants, but LaMan-tia includes something more: assurances that claims were being held open so as to negate the timeframe in which they otherwise would have been “deemed denied.” Indeed, Plaintiffs appear to consider United’s EOBs requesting additional, documentation to be denials (see, e.g., FAC ¶ 953 Patient 4 ¶ (D)), and the FAC contains no allegations of assurances that the appeals were pending.
Plaintiffs allege dilatory conduct on the part of United, which purportedly dragged out claim adjudication for months or years. (See, e.g., FAC ¶¶ 1023, 1027). However, Plaintiffs are plainly аware that administrative exhaustion is not always necessary to bring suit, given that they plead exceptions to this doctrine, including the exeep
In short, assuming estoppel might otherwise be applicable in this context, the Court rules that the use of estoppel to preclude application of contractual time limitations would be improper in this suit based on the allegations in the FAC.
b. California Insurance Code Section 790.10 and 10 C.C.R. Section 2695.4
Plaintiffs contend that Defendants are estopped from asserting any contractual time limitations because the deficient adverse benefit decisions never mentioned such limitations, and that the policies regulated by the California DOI require affirmative disclosure of such provisions pursuant to Ins.Code section 790.10 and 10 C.C.R. section 2695.4. (Opp. to Omnibus Mot. at 35-36).
The Ninth Circuit has already noted that this regulation is preempted as applied to self-funded plans by operation of ERISA’s deemer clause, and has declined to incorporate the disclosure requirements into the federal common law. See Scharff v. Raytheon Co. Short Term Disability Plan,
c. Waiver and Time Limitations
Plaintiffs contend that “Defendants have waived their rights to raise their contractual limitation periods because the deficient adverse benefit determinations that they issued failed to disclose the time limitations upon which Defendants now rely.” (Opp. to Omnibus Mot. at 35 (emphasis in original) (citing Moyer v. Met. Life. Ins. Co.,
In Moyer, the Sixth Circuit held that a claims administrator was obligated to send notice of a contractual time limitation for judicial review when it sent an adverse benefits determination letter to an ERISA plan participant. Moyer,
However, the Ninth Circuit (in a case that precedes Moyer), has found no such duty. Scharff,
While Scharff appears to be at odds with Moyer, and despite Scharjfs recognition of a desire for harmony among the circuits in deciding such ERISA issues, the Court is bound by Ninth Circuit precedent as it currently stands. As such, assuming that waiver might otherwise be applicable in this context, United’s purported failure to disclose (absent a duty that it do so) is not a persuasive reason to bar application of the contractual time limits here.
4. Additional Types of Time Limitations
As discussed above, the foregoing analysis largely pertains to time limitations that bear on timely initiation of suit for benеfits. To the extent that any initial claim' submission (calibrated from the date of service) is untimely under the terms of the corresponding plan, the Court would be inclined to rule that Counts pertaining to these submissions are, likewise, untimely. This is, of course, contingent upon the requirement that such limitations be contained within relevant, operative plan documents.
Administrative review timelines are discussed below in the context of administrative exhaustion.
5. Factual Issues and Time Limitations
Finally, Plaintiffs argue that “ambiguities in some of the contractual limitations create factual issues will arise that cannot be resolved now.” (Opp. to Omnibus Mot. at 36). Defendants counter:
Plaintiffs next claim that ambiguities contained in “some” of the contractual limitations periods create factual issues that cannot be resolved on a motion to dismiss. See Pis.’ Opp. at 36. The only “ambiguity” identified, however, involves the phrase (or variations on the phrase) “proof of loss.” Id. At the outset, that phrase is not contained in many of the limitations periods identified by Defendants and, as a result, does not apply to such plans. See Defs.’ Mem., App’x E. To the extent, however, that the phrase “proof of loss” appears in a contractual limitations period, there is nothing ambiguous about its meaning. Indeed, the Supreme Court addressed a plan provision requiring “participants to bring suit within three years after ‘proof of loss’ is due” in Heimeshoff,134 S.Ct. at 608 . Although the phrase was not defined, neither the Supreme Court, nor the parties, considered the phrase to be ambiguous. In fact, the Court noted that the “limitations provision at issue is quite common” and that the “vast majority of States require certain policies to include 3-year limitations periods that run from the date proof of loss is due.” Id. at 614-15. Remarkably, despite the prevalence of the phrase, Plaintiffs do not citea single case suggesting that the phrase is ambiguous.
(Omnibus Reply at 29).
Regardless, however, the Court’s conclusion regarding Plaintiffs’ failure to plead a prima facie benefits Count renders it unnecessary at present to evaluate whether certain time limitations bar this Count against the Employer and Plan Defendants. To the extent Defendants contend that these limitations bar the additional Counts against them, the Court notes that the deficiencies in either standing or the sufficiency of allegations supporting these Counts dispenses with the need to rely on such time limitations at present.
6. Failure of Plaintiffs’ Counts Due to Improper Claim Administrator, Failure to Exhaust Administrative Remedies, Assertion of Claims on Behalf of Non-Party, and Bankruptcy
Finally, United argues that Plaintiffs’ Counts fail because United was not the claims administrator during the relevant time period, certain Plaintiffs failed to exhaust their administrative remedies, and Plaintiffs attempt to assert claims on behalf of “Valley Surgical Center,” which is not a party to the action. (Omnibus Mot. at 17-19).
a. Improper Claims Administrator
Defendants argue that “[t]he only thread common to the claims against the Employer and Plan Defendants is that United was the third party claims administrator for the claims at issue, but for certain Defendants, United was not the claims administrator at the relevant time.” (Id. at 17-18). In turn, “Plaintiffs clarify that they are not seeking reimbursement through this lawsuit for claims that were not submitted to, and processed by, United.” (Opp. to Omnibus Mot. at 46). However, Plaintiffs go on to contest that the inconsistencies raised by Defendants are “not fatal, as the Appendix does not purport to be a comprehensive list of every medical service for every patient who is at issue under each plan.” (Id.).
Plaintiffs first note many apparent errors in the dates listed in the FAC, and note that they only meant to include dates for which United was the claims administrator. (Id. at 46-47). Next, Plaintiffs combat the allegations that certain Defendants never used United by citing to claims they have received on behalf of these Defendants, or entities with somewhat related names, during the relevant time period. (Id. at 47).
i. Defendants Did Not Use United During Time Periods Alleged in FAC
As to this first category, Plaintiffs are once again advised that an opposition brief is an inappropriate vehicle for correcting errors in the FAC; Plaintiffs must go through the proper procedural channels to correct errors in the operative pleading. Nevertheless, given the seeming agreement among the parties that the claims listed for the contested groups are not for the proper time periods and yet were erroneously included, the Court sees no reason why these claims should not be dismissed. As such, the Court need not evaluate at present whether the SPDs included in thе relevant declarations would be sufficient to reflect the actual claims administrator for the various plans during the time periods alleged. The parties to whom this is applicable are as follows: the ESRI Defendants (Docket No. 1062-9) (Opp. to Omnibus Mot. at 46); the Performance Food Defendants (Docket No. 1062-10) (Opp. to Omnibus Mot. at 46-47); the Shaw Group Defendants (Docket No. 1145) (Opp. to Omnibus Mot. at 47).
However, the Court cannot agree that such inaccuracies would not generally be fatal due to the fact that “the Appendix does not purport to be a comprehensive
In their Supplemental Memorandum (Docket No. 1095), the Red Wing Shoe Company Defendants argue that UMR, not United, was the claims administrator during the timeframe relevant to this suit. Support for this argument is provided in the form of an ASA attached to the Declaration of Michelle S. Lewis (the “Lewis Declaration”). (Red Wing Shoe Company Supp. Memo., Lewis Declaration (Docket No. 1095) ¶¶ 4, 6 Ex. B (Docket No. 1095)). However, while it is clear that the document appended is an ASA, it is not clear to which plan it pertains or the responsibilities it allocates. (Id.). As such, the Court is not convinced that it can rely on this document to dismiss Counts against these particular entities at this time.
Similarly, additional Defendants argue in their Supplemental Memoranda that United is not the claims administrator for the time period alleged in the FAC and Appendix A: the Ensign Defendants (Docket No. 1088); and the Whirlpool Defendants (Docket No. 1093). However, the support for these arguments stems from documents on which the Court cannot rely at this time to dismiss Counts against these particular entities.
ii. Defendants Never Used United as Claims Administrator
As to the latter category of purported errors raised in the Omnibus briefing, there appear to be extrinsic factual issues that will bear on resolution, such that dismissal is inappropriate at this early stage in the litigation. However, Plaintiffs are advised to proceed in good faith in pursuing claims for plans that are alleged not to have existed or not to have used United in the briefing to date.
The Defendants to whom this pertains, as listed in the Omnibus briefing, are the CareFusion Defendants (Docket No. 1149-2) (Opp. to Omnibus Mot. at 47).
The Union Pacific Defendants also raised a similar argument, but, as discussed above, Plaintiffs have settled with these Defendants.
b. Failure to Exhaust Administrative Remedies
Defendants argue that “[t]he claims against certain Plan and Employer Defendants should be dismissed because the facts alleged in the Amended Complaint make clear that certain Plaintiffs failed to exhaust their administrative remedies, as they must do ‘before bringing suit in federal court.’ ” (Omnibus Mot. at 18 (citations omitted)). Defendants elaborate that, “[f]or example, in many instances,
Plaintiffs, in turn, argue that the requisite administrative exhaustion under ERISA has been satisfied because: “Defendants failed to meet their antecedent duty to issue adequate claim and appeal denials, so Plaintiffs were not required to engage in further appeals, which, in any case, would be futile.” (Opp. to Omnibus Mot. at 2).
i. Exhaustion Requirement and Exceptions
As a general rule, prior to bringing an ERISA claim in federal court, a plaintiff must exhaust administrative remedies under the relevant benefit plan. Diaz v. United Agr. Emp. Welfare Benefit Plan and Trust,
There is, however, a distinction between claims for relief that only allege violations of the terms of ERISA statutes (which do not require exhaustion), and claims for relief that necessitate in inquiry into the parties’ rights and duties under a plan (which do). See Graphic Commc’ns Union, Dist. Council No. 2, AFL-CIO v. GCIU-Employer Ret. Ben. Plan,
“Generally, a failure to exhaust will be excused in two limited circumstances— when resort to administrative remedies would be futile or when the remedy provided is inadequate. The Department of Labor added another exception to the exhaustion requirement when it amended the ERISA regulations in 2000 to provide that claimants are ‘deemed to have exhausted’ their administrative remedies if a plan has failed to establish or follow claims procedures consistent with the requirements of ERISA. See
However, even so, “Courts in this Circuit have placed the burden on a ‘plaintiff seeking excuse from the exhaustion requirement [to] provide support for [the] excuse’ at the motion to dismiss stage.” WellPoint II,
1. Futility
While “ ‘bare assertions of futility’ ” are insufficient to invoke the futility exception, WellPoint I,
For example, in Diaz, a couple argued that “it would have been ‘futile’ for them to demand administrative review because both defendants have demonstrated by their continued refusal to pay that they have no intention of doing so.” Diaz,
2. Failure to Establish or Follow Claims Procedures Consistent With the Requirements of ERISA
“When an ERISA-governed plan fails to comply with its antecedent duty under
The administrative process has particular consequences on the plan’s ability to assert new rationales for claim denial:
Under ERISA, an employee benefit plan must “provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied” and must “afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.”29 U.S.C. § 1133 ; see also29 C.F.R. § 2560.503-1(g)(1) , (h)(2). Given these statutory and regulatory requirements, [the Ninth Circuit has] held that an administrator may not raise a new reason for denying benefits in its final decision, because that would effectively preclude the participant “from responding to that rationale for denial at the administrative level,” and insulate the rationale from administrative review.
Gabriel,
ii. Allegations Regarding Exhaustion in FAC
As mentioned above, Plaintiffs allege in their Opposition to the Omnibus Motion that the requisite administrative exhaustion under ERISA has been satisfied because “Defendants failed to meet their antecedent duty to issue adequate claim and appeal denials.” (Opp. To Omnibus Mot. at 2). Plaintiffs also claim that the FAC contains allegations that they “appealed claim denials for each and every Plan.” (Id. at 41(emphasis in original)). ' However, the FAC actually alleges that:
Plaintiffs have exhausted all administrative remedies available to them. They appealed virtually every adverse claim determination made by United, at least in those cases in which United rendered an actual adverse benefit decision. Plaintiffs have literally sent out tens of thousands of appeal letters on unpaid claims. These letters address each and every one of the reasons for denial provided by United.
(FAC ¶ 936 (first emphasis added)). The FAC also notes that “Plaintiffs’ diligent, persistent and thorough efforts to appeal have resulted in virtually no additional payment from United,” and, “[i]n many cases, Defendants have held Plaintiffs’ claims submissions in limbo without allowing or denying the claims.” (FAC ¶¶ 938-39). Ultimately, Plaintiffs contend that they expended time and effort appealing adverse decisions when United rendered decisions, and that United failed to process the claims in a manner consistent with ERISA, which deprived Plaintiffs of the necessary information and due process to effectively appeal, rendering Plaintiffs’ obligations to pursue further remedies exhausted under
Based upon the plain language of the FAC, there is at least the implication that fewer than all claims were actually appealed and exhausted. Although this seems to be connected to the alleged failure of United to always present a meaningful denial to which a response could be made, the FAC still fails to allege that complete exhaustion for all claims has been effected under the administrative procedures required by each plan.
1. Allegations Regarding Futility in the FAC
Even if the FAC does not allege that all claims were actually appealed and exhausted, if futility is sufficiently alleged, exhaustion may not be necessary.
Defendants argue that “in many instances, Plaintiffs acknowledge that they failed to respond to requests for information, which demonstrates a failure to exhaust.” (Omnibus Mot. at 18 (citing FAC ¶ 953, Patient 3(B) & 5(J); Franco v. Am. Gas Assoc. Lab. Pac. Coast Branch,
Plaintiffs’ contention sounds remarkably similar to the language in Diaz, which was found insufficient to establish futility. However, in Diaz, the couple received a claim decision (albeit, not in a language that the couple said they could understand) from their plan, which had adequate internal procedures in place, and
In any event, the Court construes Plaintiffs’ futility argument as a mischaracteri-zation of the “failure to observe ERISA regulations” argument, discussed below. In Brown, the Eighth Circuit evaluated a similar situation: “Although couched in terms of ‘futility,’ the gravamen of [the plaintiffs] argument in the district court and this court is simply this: [the insurer’s] failure to comply with its duty under § 1133 to afford [the plaintiff] ‘a reasonable opportunity ... for a full and fair review’ excuses her failure to exhaust. More specifically, [the plaintiff] argues [the insurer’s] failure to respond to her requests for the- Administrative Record and other documents absolves [the plaintiffs] failure to file a timely written appeal of Prudential’s decision to discontinue her LTD benefits.” Brown,
2. Allegations Regarding Failure to Observe ERISA Regulations
Even if futility and exhaustion are not alleged, if there are adequate allegations that the plan has failed to establish or follow claims procedures consistent with the requirements of ERISA, failure to exhaust may be excused. “When applying the Claims Regulations, courts have concluded substantial compliance is sufficient. ‘This means that technical noncompliance with ERISA procedures will be excused,’ provided ‘full and fair review’ of the decision is possible.” Spinedex Physical Therapy, U.S.A., Inc. v. United Healthcare of Arizona, Inc., CV-08-00457-PHX-ROS,
Here, Plaintiffs allege that “the EOBs issued by the Defendants (when they actually issued EOBs) were nearly devoid of information about the benefit plans, the reason a claim was being partially or fully denied, and the plan provisions and any internal rules or guidelines that were being used to deny the claim.” (FAC ¶ 944). Plaintiffs further allege that “[t]he EOBs issued by Defendants frequently did not ... explain that the beneficiary or participant of the plan had the right to appeal; what the plan’s review procedures were; or what the applicable time limits were. Moreover, they did not describe what information would be required to make a proper appeal, nor did it explain why such information was necessary. Thus, United’s EOBs were substantively deficient and failed to comply with any of the key requirements of Section 2560.503-l(g) of the ERISA regulations.” (IdA 946).
As discussed above, using the Brown case for guidance, it seems that there are sufficient allegations in the FAC to suggest a failure on United’s part to observe ERISA regulations. Although some of these statements encompass fewer than all of the benefit “determinations,” the conjunction of these paragraphs lends the im
In sum, the Court rules that (to the extent it is needed) Plaintiffs have sufficiently pleaded support for their exhaustion excuse to survive a motion to dismiss for those plans that used United as a claims administrator. Although some plans may contain specific requirements for claim appeal timelines or the entity to which certain levels of appeal must be made, United’s alleged role in making claims decisions, when taken in conjunction with the FAC’s allegations regarding benefit decisions, suggests that an exception to exhaustion should be recognized here.
When United is demonstrably not a plan’s claims administrator, however, there are no allegations that connect the purported claims appeal process and deficiencies to the relevant Defendants. Consequently, for these plans, the Court would agree that administrative exhaustion (or an exception thereto) has not been alleged. However, as discussed below, the Court is largely unable to address arguments that United was not a claims administrator for specific plans at this time; therefore, while the Court notes this administrative exhaustion issue at present for such plans, it will not affect the proceedings at this time,
c. Valley Surgical Center
Defendants contend that “Plaintiffs have alleged certain claims for payment of services rendered by ‘Valley Surgical Center,’ ” and that such claims asserted on behalf of a non-party cannot stand. (Omnibus Mot. at 19 (citing FAC ¶ 953, Patient 6(A))). Plaintiffs, in their Opposition to the Omnibus Motion, attempt to “clarify that they are not presently seeking to recover as to any claims submitted by Valley.” (Opp. to Omnibus Mot. at 46).
The Court agrees that Plaintiffs cannot assert claims on behalf of Valley Surgical. As such, any claim lines that purport to do so must be dismissed. Plaintiffs havе already stated that they will dismiss “the only defendants for whom Valley was the only provider claims [:] Southwest Airlines Co. and its Welfare Benefit Plan.” (Id. at 46). Plaintiffs, however, have yet to dismiss these parties.
d. Bankruptcy
While not raised in the Omnibus Motion itself, Defendants PMC and the Perkins Flexible Benefits Plan (the “PMC Plan”) argue in their Supplemental Memorandum that Plaintiffs’ Counts against them have been discharged by a Joint Plan of Reorganization entered by a bankruptcy court in 2011. (PMC Supp. Memo. (Docket No. 1159) at 2-3). Plaintiffs address this argument in their Opposition to the Omnibus Motion, so the Court will evaluate the merits here.
As stated in the PMC Supplemental Memorandum, “PMC filed for bankruptcy on June 13, 2011” (see PMC Request, Ex. A at 1), and the bankruptcy court confirmed PMC’s Joint Plan of Reorganization (“Reorganization Plan”) on November 1, 2011. (PMC Supp. Memo, at 2, 3 n. 3). The procedures allegedly at issue for PMC and the PMC Plan are an endoscopy and polysomnography purportedly performed on Patient 278 by Plaintiff IMS on December 26 and December 27, 2010. (FAC, Appendix A at 461). Because “[t]he Reorganization Plan specifies a broad discharge of all known and unknown Claims and Causes of Action, including Claims that arose before the effective date of the Reorganization Plan” (see PMC Request, Ex. B, Sec. IX(D) at 49), and since “Patient 278’s claim for benefits easily falls under the definition of ‘Claim’ and was discharged upon the bankruptcy court’s order confirming the Reorganization Plan,” PMC and the PMC Plan contend that “all causes of action against PMC should be dismissed.” (PMC Supp. Memo, at 3). PMC
Plaintiffs, in turn, argue that:
There is insufficient evidence at this stage to permit dismissal of Perkins and its plan. For instance, Perkins has not demonstrated that its health care plans were part of the bankruptcy estate. Likewise, Perkins does not contend that its health plans were wound down as part of any bankruptcy proceedings. Unlike in a Chapter 7 bankruptcy, in which health benefit plans must be wound down, an employer’s benefit plans may continue throughout a Chapter 11 bankruptcy. Indeed, Perkins’ yearly filings with the Department of -Labor from both before and after the bankruptcy demonstrate that its ERISA benefits plan has been in continuous existence since January 1,1990.
(Opp. to Omnibus Mot. at 48 (citing Request, Ex. B)). However, in their Reply, PMC and the PMC Plan point out that they do “not contend, as Plaintiffs claim, that PMC’s sponsored health care plan ceased to exist following Chapter 11 reorganization. Rather, because its health care plan contains no assets other than the general assets of PMC, Plaintiffs only possible suit for unpaid ERISA benefits is against PMC.” (PMC Reply (Docket No. 1281) at 2). Moreover, the PMC Reply posits that “Plaintiffs actually confirm this to be the case in their Opposition, where they ask the Court to take judicial notice of filings with the Department of Labor that clearly demonstrate PMC’s health plan is funded by the general assets of PMC and that health benefits are paid out by PMC’s general assets.” (Id. (citing Request, Ex. B at 55, 58, 60, 62)).
At the hearing, the PMC Defendants again argued that the relevant inquiries are merely the dates of the bankruptcy decision discharging PMC’s pre-confirmation liability as compared with the date of service for the PMC-related patient here. Given that the latter precedes the former, the PMC Defendants argued that they should be dismissed. Plaintiffs stated at the hearing that they are willing to dismiss PMC (the Employer Defendant), but not the PMC Plan.
While the Court has taken judicial notice of the publicly filed forms discussed by the parties, it does not at present use these forms to determine the truth of any facts alleged within them. Thus, while the Court might be inclined to rule that PMC’s bankruptcy discharges pre-confirmation liability against both it and the PMC Plan, it cannot at present make such a ruling.
5. Statute of Limitations
In their Supplemental Memorandum, the Whirlpool Defendants contend that the statute of limitations has expired for an ERISA benefits Count. (Whirlpool Supp. Memo. (Docket No. 1093) at 4).
“There is no federal statute of limitation applicable to lawsuits seeking benefits under ERISA.” Gordon,
The Whirlpool Defendants contend that “since services were rendered more than four years before suit was filed, any possible statute of limitations has run.” (Whirlpool Supp. Memo, at 4). However, they cite to an improper triggering date for the commencement of the relevant statute of limitations. The date of service relevant to the Whirlpool Defendants is January 16, 2010. (FAC, Appendix A at 670). The FAC alleges that United responded to Plaintiffs’ appeals of the initial claim denials on October 7, 2011, purportedly stating “that their appeals were denied due to a lack of patient authorization.” (Id. at 671). Plaintiffs purportedly “called United to inquire about status on pending claims” on December 11, 2013. (Id.). It is reasonable to assume that, based on the allegations in the FAC, October 7, 2011 is the earliest date on which the claims may have even arguably been considered finally denied. The instant suit (filed March 20, 2014) was brought well within four years from this date. As such, the Whirlpool Defendants’ timeliness argument fails.
C. Plaintiffs’ Remaining ERISA Counts Against Employer and Plan Defendants (Counts II, III, V, VII)
Plaintiffs’ remaining ERISA Counts that implicate the Employer and Plan Defendants are Counts II, III, V, and VII.
The Court has already determined that Plaintiffs lack standing to bring these Counts. The Court need not, at present, address the various other arguments raised as to why they independently fail.
D. Plaintiffs’ UCL Count (Count VIII)
“To have standing under California’s UCL, as amended by California’s Proposition 64, plaintiffs must establish that they (1) suffered an injury in fact and (2) lost money or property as a result of the unfair competition.” Birdsong v. Apple, Inc.,
Defendants contend that “[Plaintiffs’] UCL claim makes clear that ... they seek to recover derivatively for the injuries allegedly inflicted upon their subscriber-patients, as assignees of their patients’ claims for benefits.” (United Mot. at 12). However, Plaintiffs allege that they bring their UCL Count “in their own independent right, and not based upon the Assignment of Benefits Plaintiffs received from their patients.” (FAC ¶ 1083). The remedy Plaintiffs seek includes “restitution of an amount to be proved at trial, plus applicable statutory interest, which is the amount that the Defendants are obligated to pay Plaintiffs for the services Plaintiffs provided to plan participants and beneficiaries. Plaintiffs further seek an injunction prohibiting Defendants’ ongoing conduct in using inappropriate methodologies to deny or underpay Plaintiffs’ claims for medical
In WellPoint II, the court discussed Amalgamated Transit Union, Local 1756 v. Superior Court (“Amalgamated Transit”),
Here, as in WellPoint II, Plaintiffs argue that Amalgamated Transit does not apply to them, since they suffered injury in their own right. (Opp. to United Mot. at 56). Even so, the relief they seek for this Count is restitution of the amounts purportedly owed (which is also the relief sought under ERISA by virtue of the assignments, and which the assignments purportedly confer the right to pursue on behalf of the plan participants) and injunctions regarding use of proper UCR methodologies in pricing the past and future claims of plan participants (also similar to relief sought pursuant to Plaintiffs’ ERISA benеfits Count).
Unlike in WellPoint II, the FAC spells out that Plaintiffs are not seeking to recover derivatively through their assignments.
At the hearing, Plaintiffs pointed out that they are entitled to plead in the alternative, and asserted that their UCL Count is just such an alternative basis for relief (distinct from their Counts brought as assignees under ERISA). However, the wrongdoing alleged in connection with the UCL Count includes allegations that: “[t]he United Defendants have illegally discriminated against members of ERISA plans in the provision of fringe employment benefits on the protected basis of those members’ morbid obesity, in violation of the Americans with Disabilities Act” (FAC ¶ 1085(a)); “[t]he United Defendants used arbitrary, capricious and improper methods to improperly deny or underpay Plaintiffs’ claims” (idA 1085(c)); and “[t]he United Defendants willfully violated numerous provisions of ERISA, as detailed in this complaint and Appendix A, at least tens of thousands of times, which could subject United Defendants to criminal penalties under
In sum, even if Plaintiffs allege that they suffered injury in their own right, this injury does not remove them from the ambit of Amalgamated Transit based on the UCL Count as pleaded in the FAC. Plaintiffs have no standing to bring the UCL Count.
In light of this conclusion, the Court need not address various Defendants’ arguments that their plans contain choice-of-law provisions, precluding application of California’s UCL as to them in this suit. Similarly, the Court need not address arguments that the UCL Count is preempted.
E. Improper Service
Defendants argue that, “in some instances (as detailed in individual submissions submitted by the Plan Defendants), Plaintiffs have failed to properly serve the Plans.” (Omnibus Mot. at 40). The Court sees only two groups of Defendants that raise such improper service issues: the Ensign and Sodexo Defendants. Defendants contend that “[bjecause Plaintiffs failed to issue a summons to the Plan Defendants as discussed in the individual Plan’s supplemental motions, dismissal is appropriate pursuant to both
The Ensign Defendants’ Supplemental Memorandum (Docket No. 1088) contends that Plaintiffs have not served The Ensign Benefit Group Plan. (Ensign Supp. Memo, at 6). This argument, while not citing to ERISA § 502(d), appears to be linked to the Ensign Defendants’ contentions that Ensign California is not the plan administrator for the relevant plan, and United is not the claims administrator, such that service on Ensign California and United is not sufficient to effect service on the plan. (Id.). See also
Similarly, the Sodexo Defendants’ Supplemental Memorandum (Docket No. 1138) asserts that “Plaintiffs failed to issue a summons to the Sodexo Medical Plan.” (Sodexo Supp. Memo, at 2).
In light of the fact that the pertinent Defendants appear tо have received notice and the apparent lack of prejudice to Defendants, the Court is inclined to permit Plaintiffs an opportunity to enact service in a way that addresses objections raised by Defendants so as to resolve any disagreement on this matter. Service is to be effected within 10 days of the entry of this Order. The Court notes, however, that the corrections urged with regard to the Ensign Defendants seemingly require more than just mere service, as they go to the fundamental propriety of the parties named. Plaintiffs are advised to proceed accordingly.
F. Improper Joinder
Defendants argue that “the 422 Employer and Plan Defendants have different and disparate plan provisions, employment practices, and involvement with Plaintiffs, and joining them together to litigate their disputes en masse will needlessly disrupt this Court’s docket ..., financially burden their health benefits programs, and accomplish little that cannot already be addressed in a related lawsuit before the Court.” (Omnibus Mot. at 41). Plaintiffs counter by arguing that joinder is proper since the lawsuit “rises and falls on a common set of issues of both law and fact as to each plan: namely, whether United’s indiscriminate denials of Plaintiffs’ claims violated the full and fair review requirements of ERISA.” (Opp. to Omnibus Mot. at 49).
As mentioned above,
“Instead of developing one generalized test for ascertaining whether a particular factual situation constitutes a single transaction or occurrence for purposes of
Similarly, as to the “common question” requirement, “
On the whole, “[t]he transaction and common-question requirements- pre
1.Multiple Defendants and Transactions
Defendants contend that “Plaintiffs’ claims actually stem — not from the same transaction or occurrence — but from thousands of independent and unique out-of-network benefit claims.” (Omnibus Mot. at 43). More specifically, Defendants state that “in order to resolve whether United improperly denied a claim for benefits, the Court must analyze and apply the governing benefit plan. With the current joinder of parties, the Court will need to evaluate more than 400 separate plans because each contract contains different terms and exclusions.” (Id. at 48).
While, strictly speaking, each claim line and attendant claims process does implicate a different “transaction” of sorts, the Court does not believe the FAC should be read so narrowly. Rather, each discrete claim is part of the larger systematic behavior alleged in the FAC. When viewed in this sense, the Counts against each defendant arise out of the same series of transactions or occurrences. See Coughlin,
2.Common Questions of Law or Fact
Defendants contend that “[i]n essence, Plaintiffs allege that the Defendants have (a) failed to pay benefit claims and (b) failed to follow proper claims procedures. Yet each claim for benefits is associated with a unique benefit plan with distinct terms and exclusions, аs well as a disparate processing history.” (Omnibus Mot. at 47 (footnote omitted)). Plaintiffs, in turn, argue that “[precisely because United gave false reasons for denying Plaintiffs’ claims and failed to provide the information required by the ERISA regulations, the Court will not have to examine vastly different ‘processing histories’ for each of the claims at issue.” (Opp. to Omnibus Mot. at 49).
While the Court acknowledges that resolution of this case will involve specific issues unique to individual claims or groups of claims, the fact remains that the primary contentions here relate to whether United and the employers and plans that used United in an administrative capacity improperly denied claims and committed systematic violations of ERISA. As such, there are certainly issues of law or fact that are common to all parties.
3.Interests of Fairness and Economy
Defendants argue that, under
However, in light of the fact that the claim lines (and, consequently, the plan terms) implicated will be the same regardless of whether only United or all of the current Defendants are named, dismissal of the non-United Defendants does not present quite the streamlining solution posited in the Omnibus Motion for the
The Court cannot say that joinder in this case is so defective as to warrant dismissal of the non-United Defendants at this time. The Court does not presently decide whether bifurcation might be proper at a later date.
G. Declaratory Relief (Count IX)
In a footnote, Defendants argue that “Count IX fails to state a claim because a declaratory judgment action does not state a claim where there is ‘an adequate remedy at law.’ Here, because Count IX is ‘duplicative’ of Plaintiffs’ claims in Count I, Count IX cannot state an independent cause for relief.” (Omnibus Mot. at 6 n. 6 (citations omitted)).
The Court notes the overlap between Counts I and IX, and rules that Count IX is completely preempted by ERISA. To the extent it is preempted, the Count is converted into an ERISA claim, and falls into the analysis above.
At the hearing, Plaintiffs submitted on this point.
IY. CONCLUSION
The Omnibus Motion with respect to Count I is GRANTED with leave to amend. Successful amendment will require allegations that for each plan, the terms of the plan: (1) provide coverage for each of the procedures at issue in this case; and (2) dictate that these covered services would be paid according to a specific reimbursement rate (such as the reasonable and customary fees for services charged by outpatient surgical centers), which must be specified. Plaintiffs should then allege that Defendants failed to reimburse for the covered services provided by Plaintiffs according to this reimbursement rate provided in the plans. Given the allegations in this case regarding absence of access to plan documents, the Court will permit these allegations to be made “on information and belief.”
Similarly, the Omnibus Motion as to Counts II, III, Y, VI, and VII is GRANTED with leave to amend. Plaintiffs’ proffered assignment does not confer standing to bring these ERISA Counts, and although the Court is not convinced that Plaintiffs could plead additional facts to alter this conclusion, they will be provided an opportunity to do so.
The Omnibus Motion as to Count VIII is GRANTED with leave to amend. Even if Plaintiffs allegedly suffered their own injuries, it is clear that they are seeking to recover derivatively on behalf of their assignors in a way that contravenes the holding of Amalgamated Transit that such derivative UCL actions must be brought as class actions.
Finally, the Omnibus Motion as to Count IX is GRANTED with leave to amend. This Count is completely preempted by ERISA, and therefore will rise and fall with the duplicated ERISA Counts.
To the extent leave to amend is granted, the Court will issue a subsequent Order (based upon the recommendations of the parties in the statement they will file on April 10, 2015) setting a timeline for the
IT IS SO ORDERED.