Heffner v. Blue Cross And Blue Shield Of AlabamaHeffner v. Blue Cross And Blue Shield Of Alabama
M. Stephen Dampier, Law Office of M. Stephen Dampier, P.C., Fairhope, AL, Ellen Mary Doyle, Joel R. Hurt, Malakoff, Doyle & Finberg, P.C., Pittsburgh, PA, Joseph Michael Druhan, Jr., Johnston, Druhan, LLP, Mobile, AL, for Appellee.
Mary Ellen Signorille, AARP Foundation Lit., Washington, DC, for AARP, Amicus Curiae.
Appeal from the United States District Court for the Middle District of Alabama.
CARNES, Circuit Judge:
In this interlocutory appeal we must decide whether the district court abused its discretion in certifying, under
We conclude that the district court abused its discretion in certifying under
I.
In 1997 Robert Heffner began working as a division claims manager at Consolidated Insurance Management Corporation in Mobile, Alabama. Shortly thereafter, he and his family enrolled in a group health care plan sponsored by Funding Plus of America, Inc., made available through his employment with Consolidated. The Heffners’ coverage under the Funding Plus Plan began April 1, 1997.
The Funding Plus Plan is an “employee welfare benefit plan” governed by ERISA, see
To the extent that it has discretionary authority or control over a plan, Blue Cross is a fiduciary under ERISA. See
Under ERISA, each plan participant or beneficiary must be provided a summary plan description (SPD) within 90 days of enrollment.
Upon enrolling in the Funding Plus Plan, Heffner received a copy of the Funding Plus SPD, which was prepared by Blue Cross specifically for that plan in June 1995. Blue Cross used standardized templates to generate each plan‘s SPD, varying the language according to the specific requirements of the plan. Blue Cross issued new SPDs for the Funding Plus Plan in August 1998 and June 1999 to reflect amendments made to the plan.
Both the August 1998 and June 1999 SPDs also incorporated language that Blue Cross contends was a scrivener‘s error and which is the root of this lawsuit. Specifically, those SPDs indicated that no deductible was required for certain medical services obtained from a Participating Provider Organization (PPO). For example, the June 1999 SPD provided under the heading “PPO” in the Prescription Drugs section that coverage of brand name drugs was: “80% when purchased at a Participating Pharmacy, subject to the calendar year deductible.” That provision was set out in the SPD in a table like this one:
| PRESCRIPTION DRUGS | ||
|---|---|---|
| Benefit | PPO | Non-PPO |
| Point-of-Sale Drug Program | Generic: 100% when purchased at a Participating Pharmacy, subject to the calendar year deductible Brand Name: 80% when purchased at a Participating Pharmacy, subject to the calendar year deductible Note: No benefits are available for prescription drugs purchased at a Non-Participating Pharmacy in Alabama Mental and Nervous drugs are covered at 50%, subject to the calendar year deductible | Generic: 100% of the allowed amount, subject to the calendar year deductible Brand Name: 80% of the allowed amount, subject to the calendar year deductible Note: No benefits are available for prescription drugs purchased at a Non-Participating Pharmacy in Alabama Mental and Nervous drugs are covered at 50%, subject to the calendar year deductible |
The June 1999 SPD, in the General Provisions section, also provided that the calendar year deductible1 for services obtained from a PPO was, in fact, “No deductible.” That provision of the SPD was set out in table form like this:
| GENERAL PROVISIONS | ||
|---|---|---|
| PPO | Non-PPO | |
| Calendar Year Deductible | No deductible | $200 per person per calendar year; maximum of three deductibles per family |
Read together, these two provisions indicate that the plan covered eighty percent of the cost of brand name drugs purchased at a participating pharmacy subject to a calendar year deductible of nothing. Other provisions that could be read this way included those involving durable medical equipment, ambulance service, chiropractic services, and outpatient psychiatric services for some plan participants.
Heffner interpreted the June 1999 SPD provisions as imposing no calendar year deductible for prescription drugs and was not pleased when Blue Cross imposed one.2 After discussing the matter with members of the human resources department where he worked, Heffner contacted Blue Cross three times from September 1999 to March 2000. He demanded that Blue Cross reimburse him for the “improperly withheld” deductibles. Blue Cross responded that there was a deductible requirement for all drug benefits under the Funding Plus Plan and advised Heffner that he could request arbitration if he wished to dispute its interpretation.
Arbitration was never begun. Instead, Heffner filed suit against Blue Cross in the Middle District of Alabama in July 2000. Heffner sought to represent a class of plaintiffs to whom Blue Cross issued SPDs containing language identical or similar to the “No deductible” language in the Funding Plus SPD and against whom Blue Cross had imposed deductibles. Heffner asserted two counts against Blue Cross on behalf of the class and sought various forms of relief which we will describe in more detail later.
During class issues discovery, Blue Cross produced evidence that it used SPD templates containing the “No deductible” language from April 1997 through September 2000, two months after this lawsuit was filed, and that SPDs containing that language may have been sent to plan participants and beneficiaries as late as October 2001. By its own estimate, Blue Cross stated that during that time, the language may have found its way into SPDs for approximately 1,241 employee benefit plans, including 627 plans underwritten and administered by Blue Cross and 614 self-funded plans.3 These plans covered potentially 240,000 individuals.
The court found that all four
The district court determined that Blue Cross had acted on grounds generally applicable to the class by “uniformly appl[ying] deductibles to PPO services despite plan language indicating that no deductible was required.” Order at 26. The court also determined that the relief sought—(1) a declaration of rights, (2) injunctive and equitable relief, (3) disgorgement, (4) interest and lost earnings, and (5) restitution—would be appropriate for all class members if Heffner succeeded on the merits. Id. at 27. The court rejected Blue Cross’ contention that the plaintiffs sought predominantly monetary relief, finding instead that the “character of the relief” was still injunctive. Id. at 27-28. In a footnote, the court indicated “that certification under Rule 23(b)(1)(A) & (B) along with Rule 23(b)(3) would also be appropriate. . . .” Id. at 25 n. 7.
We granted Blue Cross’
II.
We review the district court‘s class certification order only for abuse of discretion. Cooper v. Southern Co., 390 F.3d 695, 711 (11th Cir.2004). “‘As long as the district court‘s reasoning stays within the parameters of Rule 23‘s requirements for the certification of a class, the district court decision will not be disturbed.‘” Id. (quoting Hines v. Widnall, 334 F.3d 1253, 1255 (11th Cir.2003) (citations omitted)). However, “an abuse of discretion occurs if the judge fails to apply the proper legal standard or to follow proper procedures in making the determination, or makes findings of fact that are clearly erroneous.” Birmingham Steel Corp. v. TVA, 353 F.3d 1331, 1335 (11th Cir.2003) (citation, quotation marks, and alterations omitted).
III.
We will begin our analysis of the class certification issue with an assessment of the plaintiffs’ claims in light of the “carefully crafted and detailed enforcement scheme” created by
A.
The plaintiffs’ first claim seeks to enforce their rights under their respective plans where the SPDs produced by Blue Cross stated that the calendar year deductible was “no deductible.” The plaintiffs seek two remedies with this claim: (1) a declaration that Blue Cross was required to determine claims under these plans “without the calculation or assessment of a calendar year deductible“; and (2) “injunctive and equitable relief” requiring Blue Cross “to re-calculate and remove all deductibles which were assessed . . . or imposed” in contravention of the “no deductible” language of the SPDs. Complaint at 15.
We construe plaintiffs’ first claim as arising under
Not only that, but the existence and amount of a plan‘s deductible directly affects the value of benefits offered under the plan. All other things being equal, imposing a deductible decreases the value of the plan‘s benefits, and the value of those benefits varies inversely with the amount of the deductible. Viewed in these real economic terms, not having to pay a deductible is a benefit of a plan. An action to recover overstated deductibles, to enforce a “no deductible” provision of a plan, or to enjoin the imposition of deductibles that are not authorized by the plan is just as properly brought under
Plaintiffs’ second pleaded claim seeks relief for Blue Cross’ breach of its fiduciary duties. As part of this claim, the plaintiffs allege that Blue Cross improperly “favored itself at the expense of its participants and beneficiaries” by imposing the deductibles in contravention of the SPD language. Complaint at 16. With this claim the plaintiffs seek “appropriate equitable relief,” including disgorgement of Blue Cross’ profits “from its improper administration of calendar year . . . deductibles,” “restitution of the amounts overpaid to the providers by the participants and beneficiaries,” and unspecified “other relief . . . requiring [Blue Cross] to remedy its wrongs. . . .” Id. at 17.
In certain circumstances, however, relief to individual plan members or beneficiaries for a breach of fiduciary duty may be available under
We construe plaintiffs’ second claim seeking individualized relief for Blue Cross’ breach of fiduciary duties as arising under
C.
We note that as part of their second claim the plaintiffs also allege that Blue Cross’ employee bonus program created conflicts of interest between its employees and plan participants and “may have caused its employees . . . to engage in prohibited transactions, in violation of [ERISA § 406(b)(3),] 29 U.S.C. § 1106(b)(3).” Complaint at 16.
Without addressing the plaintiffs’ ERISA claims separately, the district court certified this class action under
A.
At first blush, plaintiffs’ claims to recover their deductibles and to obtain other equitable relief seem to fit neatly into the
The plaintiffs have also requested relief that is appropriately awarded in
Based on just this analysis, we would leave the class certification order undisturbed. However, we have to go further because reliance is a critical element of the plaintiffs’ case, and it renders certification under
[Heffner‘s] recovery of benefits claim does not rest on a theory of inconsistent plan documents, plan terms, or ambiguities. Instead, [Heffner] argues that the language in his 1998 and 1999 plans regarding deductibles for PPO services was unambiguous and that [Blue Cross] failed to adhere to this clear language. In other words, the instant case is an action to enforce the plan provisions as written and for Plaintiff to succeed on this claim, individual participant interpretation and reliance does not necessarily need to be proven.
Order at 21. This reasoning is flawed. It ignores Blue Cross’ position, which is not refuted by the plaintiffs, that formal ERISA plan documents other than the SPDs show that none of the plans insured or administered by Blue Cross provided deductible-free coverage. If that position is correct, under our Branch decision, each plaintiff would have to prove reliance on his SPD‘s “no deductible” term in order to prevent Blue Cross from enforcing a calendar year deductible provision contained in other plan documents. See 955 F.2d at 1579.
The district court agreed with the plaintiffs that the SPD and “the plan” are one and the same. That much is clear from the district court‘s amendment of the proposed class definition, limiting it to only “those participants and beneficiaries whose SPDs contain language defining the summary plan description as the plan.” Order at 22. An examination of several ERISA sections, however, reveals that the summary plan description is not the sum total of an ERISA plan. For instance,
Other ERISA provisions also show that the SPD is not the only ERISA plan document that counts. For example,
In short, the SPD does not necessarily contain all of the information about a plan, and the plan is governed by documents other than the SPD. As the term “summary plan description” suggests, the SPD is a document that describes, in summary fashion, the relevant features of an employee benefit plan. This does not mean that the SPD is unimportant. As this Court has acknowledged, the SPD is a critical feature of the ERISA regulatory scheme because it “simplif[ies] and explain[s] a voluminous and complex document” to plan participants and beneficiaries. See McKnight, 758 F.2d at 1570. And where a plan participant or beneficiary relies on a provision in the SPD that conflicts with the plan, he or she may enforce the terms of the SPD over the terms of the plan.
The plaintiffs do not take issue with these general propositions. Instead, they contend that because each Blue Cross SPD defined itself as “the plan,” it was the plan, and the district court is not required to determine whether the calendar year deductible provisions in the SPDs conflicted with provisions in the other plan documents. Therefore, in the plaintiffs’ view, they may enforce the “no deductible” language in the SPDs regardless of whether they individually relied on that language.
The plaintiffs rely on Alday v. Container Corp. of America, 906 F.2d 660 (11th Cir. 1990), to support their position. In that case, the plaintiff challenged his former employer‘s modification of the benefits and premiums of its retiree medical insurance plan in which the plaintiff participated. 906 F.2d at 662. The district court granted summary judgment to the defendants, id., apparently because the SPD provided that the employer could terminate or modify the plan. Id. at 665. On appeal, the plaintiff contended that, in addition to the formal plan documents, the district court should have considered communications between the employer and its employees which failed to state that the employer reserved the right to modify the plan. Id. These communications were not formal plan documents. Id. at 665-66.
In rejecting the plaintiff‘s argument in Alday, we held that because the SPD in that case “clearly functioned as the plan document required by ERISA” and unambiguously conferred on the employer the right to modify the plan, the other communications should be ignored. Id. at 666. This was an extension of the rule we had announced in Nachwalter v. Christie, 805 F.2d 956 (11th Cir.1986), that oral representations cannot modify unambiguous terms of an employee benefit plan. See Alday, 906 F.2d at 665.
The plaintiffs in the present case assert that each Blue Cross SPD functions as “the plan” and unambiguously states that there is no calendar year deductible. Therefore, they contend, under Alday it is not necessary to refer to other “communications” in order to determine what each plan provides as its calendar year deductible. Because, in their view, other plan documents are not relevant to whether the plan participants and beneficiaries were required to pay a calendar year deductible, they should not be required to show reliance on the SPD in this case.
The defect in the plaintiffs’ reasoning is that the other documents that Blue Cross asserts should be considered are not just “communications” between Blue Cross and the plan sponsors, participants, or beneficiaries, which is all that was involved in the Alday and Nachwalter cases. The other documents at issue in this case—the group health plan applications accepted by Blue Cross—are formal plan documents that, as we have explained, ERISA expressly provides may govern the administration of employee benefit plans. Alday does not preclude consideration of other plan documents where there is an unambiguous SPD. The holdings of Nachwalter and Alday merely prohibit courts from considering communications or documents that are not formally sanctioned by ERISA where there is an unambiguous SPD. That is not what we have in this case.
In support of their position that the SPD is the plan and therefore they are not required to prove reliance on the no deductible term in the SPD, the plaintiffs point to two statements in the Funding Plus SPD that equate the SPD and the plan. First, the introductory paragraph states: “This booklet is a ‘summary plan description’ or ‘plan’ as defined by ERISA.” Second, the SPD defines “Plan” as: “This Summary Plan Description describing the benefits of your Employee‘s Health Benefits Plan.” However, we are not convinced that those statements are to be taken as literally as the plaintiffs wish. A more logical understanding of them is that they are merely shorthand explanations of ERISA terms meant to be understood by plan participants and beneficiaries.
Read together, these SPD provisions apprise participants and beneficiaries that in order to be fully aware of their plan‘s coverage, they must refer to the contract, which includes both the group health plan application and the SPD. A contract between a group and an insurer such as Blue Cross is specifically listed as an ERISA document which may control a plan‘s operation. See
The district court erred by refusing to consider the deductible provisions of other plan documents such as the group health plan applications before determining whether the claims asserted by Heffner were proper for class treatment. If, as Blue Cross contends, those documents provide for calendar year deductibles greater than zero and thereby conflict with the SPDs, each plaintiff in this class action must prove reliance on the “no deductible” language of the calendar year deductible provision in his or her plan‘s SPD.
C.
Our conclusion that each class member in the present case must prove reliance on the SPD‘s calendar year deductible provision if it conflicts with the same provision in the other plan documents is not undermined by the fact that the class complaint pleads claims arising under both
Besides, the underlying factual allegations are the same for both claims: Blue Cross issued SPDs stating there was no calendar year deductible but then imposed those deductibles anyway. In these circumstances, we see no reason why the plaintiffs should not be required to prove reliance on the SPD in order to obtain the relief they seek under both
V.
We turn now to the effect of our resolution of the reliance issue on the question of whether the district court properly certified the plaintiffs’ ERISA claims under
Even if Heffner proves that he purchased prescription drugs in reliance on the Funding Plus SPD‘s calendar year deductible provision, only he will be entitled to relief on that proof. Other class members will not. “[F]inal injunctive relief or corresponding declaratory relief with respect to the class as a whole” would not be warranted. See
As we have explained, “the claims contemplated in a (b)(2) action are class claims, claims resting on the same grounds and applying more or less equally to all members of the class.” Holmes v. Continental Can Co., 706 F.2d 1144, 1155 (11th Cir.1983). Moreover, the forms of relief available in
Success by the class representative in this case, however, will not result in relief to other class members. That is because, in order to be entitled to the relief that the class seeks, each plaintiff must prove reliance on the SPD of his or her plan. Injunctive or declaratory relief, and any other equitable relief based on it, will not automatically flow to the class “as a whole” even if Heffner succeeds in proving reliance on his SPD. Accordingly, we hold that it was an abuse of discretion to certify under
The plaintiffs also claim that Blue Cross violated
The district court did not mention, much less discuss, this aspect of the plaintiffs’ case in its certification order. Because “we are unable to review class certification decisions before they are made,” we must remand the case to the district court for consideration of this issue. See Martinez-Mendoza v. Champion Int‘l Corp., 340 F.3d 1200, 1216 (11th Cir.2003); see also Kirkpatrick v. J.C. Bradford & Co., 827 F.2d 718, 726 (11th Cir.1987) (district court abused its discretion by failing to address separately class claims under different securities law provisions).
VII.
Lastly, we address this two-sentence statement of the district court in a footnote of its order: “As the Court finds that certification is proper under
In taking this action, we express no opinion as to whether this class is properly certifiable under
VIII.
The District Court‘s order certifying the plaintiff class is VACATED, and the case is REMANDED to the District Court for further proceedings consistent with this opinion.
Honorable J. Owen Forrester, United States District Judge for the Northern District of Georgia, sitting by designation