C.P. v. United Healthcare Ins. Co., No. 2:21-cv-378-BSJ, 2023 WL 4108368 (D. Utah Jun. 21, 2023) (Judge Bruce S. Jenkins)

A dialogue is beginning to take place in courts in the Tenth Circuit between families seeking payment for their mental healthcare claims and the courts tasked with weighing the reasonableness of the denials they’ve received from their ERISA-governed benefit plans. And the courts are beginning to listen. As this court said, it “has become well-acquainted with these types of cases over the law few years. Concerned parents and guardians seek mental health care for their struggling school-aged children, who are suffering from serious mental, behavioral, or substance abuse challenges. After trying self-help and outpatient-type resources, they turn to residential treatment centers, hoping that the 24-hour supervision and care available through these programs will help their children.” As the court recognized, care from residential treatment centers often does help, “result[ing] in successful outcomes for these children.”

However, this care does not come cheap. And, in reality, payment from healthcare plans often doesn’t come at all. Without insurance, most families cannot afford this life-saving care for their loved ones. “As this case demonstrates, the availability of medical insurance coverage, even when it appears nominally available for these treatments, is often illusory.”

Such was the case here. Plaintiff C.P. sued United Healthcare Insurance Company after it denied treatment at a residential treatment center for her son, I.P. United maintained that the facility, Maple Lake Academy for Boys, was not a licensed residential treatment center, but rather a non-covered therapeutic boarding school providing educational services. In one of United’s many denial letters during the long internal appeals process, it also added another reason for denial, stating that the care was not “medically necessary,” although it never discussed I.P.’s medical treatment records. Both during the internal appeals process and throughout litigation, plaintiff offered proof that Maple Lake is, in fact, a licensed residential treatment center in the state of Utah. “Plaintiff provided copies of Maple Lake’s State of Utah licensing certificate, copies of the Utah Administrative Code relating to such licensing and setting forth the requirements to receive a license, and federal data indicating that Maple Lake was classified as a ‘psychiatric residential treatment facility.’”

In this decision on the parties’ cross-motions for summary judgment, the court expressed “little doubt that United came early (or perhaps pre-disposed) to the view that Maple Lake was not a residential treatment center, and, in turn, denied the claims on that basis as an excluded service.” In fact, in the over 11,000-page administrative record in this case, the court stated that there was no evidence that United investigated whether Maple Lake satisfied the plan’s definition of a covered residential treatment facility. Not only did the court find that United’s conclusion that Maple Lake was not a psychiatric residential treatment program erroneous, but it also found that United’s failure to investigate Maple Lake’s status and its failure to engage in a meaningful dialogue with plaintiff over the evidence she offered resulted in a failure to provide a full and fair review of the family’s benefit claims. As a result, the court ruled that United’s actions in denying benefits were an abuse of discretion and granted summary judgment in favor of plaintiff.

Nevertheless, plaintiff was not awarded benefits. Instead, because United touched on the issue of medical necessity in its last denial letter, the court stated that “there remains at least some doubt as to whether the administrative record establishes that United’s decisions to deny benefits were wholly unreasonable.” As a result, the court concluded that remand was the appropriate relief. However, the court put some guardrails on the scope of what United may consider during remand. For one, the court prohibited United from making any assertion challenging Maple Lake’s status as a licensed covered facility. Included in this limitation, the court stated that the fact Maple Lake provided educational services to its minor patients cannot be used as grounds to consider Maple Lake a boarding school. Under Utah licensing requirements medical facilities like Maple Lake are legally mandated to provide educational programs for the children under their care. Additionally, the court held that United is not allowed to introduce any new rationale for denying coverage.

Because the court determined that remand is the proper remedy, the court concluded that plaintiff’s claim under the Mental Health Parity and Addiction Equity Act was mooted.

In multiple places throughout the decision, the court quoted language from a Tenth Circuit decision, Gaither v. Aetna Life Ins. Co., 394 F.3d 792 (10th Cir. 2004), stating that on top of ERISA fiduciaries’ responsibility to protect plan assets against spurious claims, fiduciaries also have “a duty to see that those entitled to benefits receive them.” In this instance, the court found that United failed in that regard.

Ultimately, the court’s decision ended where it began, with talk about ERISA’s requirement that plan administrators communicate with participants and beneficiaries. These discussions, the court said, require “an exchange. We talk. We listen. We ask questions. We seek more information. We deliberate. We thoughtfully respond. And often we repeat the process. This is back-and-forth that the Tenth Circuit has now rightfully recognized is required under ERISA.”

While health insurers have not yet proven that they are listening, the courts are beginning to demonstrate that they are. We here at Your ERISA Watch are too, and we want pieces like today’s notable decision to be part of that conversation. The problems have been identified. We are hopeful the solutions soon will follow. One thing is sure, we’ll keep reporting on this situation, and we’ll keep you, our readers, abreast of any and all developments as they occur.

Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.

Class Actions

Third Circuit

Ahrendsen v. Prudent Fiduciary Servs., No. 21-2157, 2023 WL 4139151 (E.D. Pa. Jun. 22, 2023) (Judge Harvey Bartle III). Participants of the World Travel, Inc. Employee Stock Ownership Plan (“ESOP”) brought a breach of fiduciary duty and prohibited transaction class action against the parties responsible for the plan’s 2017 stock transaction which plaintiffs argued was the product of self-dealing and done without due diligence, resulting in an overpayment of between $8.6 million and $22.4 million. After conducting extensive discovery and engaging in negotiations, the parties reached a settlement totaling $8.7 million. The court previously granted preliminary certification of the settlement class under Rule 23 and preliminarily approved the settlement. Notice was sent to the class members, and defendants served settlement notices to the U.S. Attorney General and state attorneys general in accordance with the Class Action Fairness Act. The court then held a hearing on the fairness of the settlement pursuant to Rule 23(e)(2). No class member objected to the settlement. Now plaintiffs move unopposed for certification of the settlement class, final approval of class action settlement, and for attorneys’ fees, costs, and service awards. In this decision the court granted plaintiffs’ motions. The court once again affirmed its earlier conclusions that the proposed class meets all the requirements of Rules 23(a) and 23(b)(1)(A) and (B). As for the settlement itself, the court was convinced that it is fair, reasonable, and adequate, and the result of informed arms-length negotiations. Each class member will receive approximately $9,300 in individual payments. The court found this amount equitable, appropriate, and within the norms for ERISA class action recoveries. Similarly, the total $8.7 million settlement, which is 39% of the maximum possible recovery, was found to be adequate relief for the class. For these reasons, the court approved the settlement. Finally, the court evaluated the requested attorneys’ fees, costs, and class representative service awards. Plaintiffs sought attorneys’ fees of one-third of the settlement amount, or $2.9 million, costs of $85,149.70 for reimbursement of their expenses, and service awards between $10,000 and $15,000 for the four named plaintiffs. The court was satisfied that these amounts were all fair, typical, and appropriate. Regarding the requested fee award, the court agreed with its sister courts that one-third of the total settlement fund is suitable for complex ERISA class actions. Furthermore, checking the amount using the lodestar method yielded a 2.77 multiplier, which the court concluded was within the typical range of multipliers, typically between one and four, and frequently awarded in similar common fund cases. For these reasons, the court granted plaintiffs’ motions and this class action will now come to a close.


Eighth Circuit

Hunt v. United Parcel Serv., No. 4:22-cv-00973-LPR, 2023 WL 4054680 (E.D. Ark. Jun. 16, 2023) (Judge Lee P. Rudofsky). Plaintiff Justin Craig Hunt applied for benefits under the UPS/IBT Full-Time Employee Pension Plan after he became disabled while employed at UPS. His claim for pension benefits was denied on the basis that he had less than 10 years of service credit, which UPS maintains is the minimum number of years required for benefit eligibility under the plan. In this action, Mr. Hunt alleges that the denial of his benefit claim was in violation of the plan terms and that UPS failed to respond to his requests for document production. Mr. Hunt subsequently filed an objection to the completeness of the administrative record and has moved for limited discovery, requesting document production and interrogatory responses, including a Rule 30(b)(6) deposition with a corporate representative to testify about the administrative precedents applied to his case. In this decision the court mostly denied Mr. Hunt’s discovery requests, granting it only in one respect. The court agreed with Mr. Hunt that he “is entitled to know whether UPS’s review of his claim for benefits was conducted pursuant to some internal rule, guideline, protocol, or other similar criterion.” Given this, the court ordered UPS to apprise Mr. Hunt of whether the review of his claim was conducted pursuant to some such rule, and if so, to provide him with the particulars of that rule. However, in all other respects, the court denied the discovery request. It concluded that Mr. Hunt’s motion was devoid of necessary facts to establish what “relevant document, record, or other information he believes he is entitled to receive,” or even why discovery is necessary. Without these details, the court held that it was impossible for it to judge whether discovery might be beneficial to it when it comes time to ultimately rule on the case.

Medical Benefit Claims

Tenth Circuit

L.E. v. Deseret Mut. Benefit Adm’rs, No. 2:20-cv-00707-RJS-DBP, 2023 WL 4083381 (D. Utah Jun. 20, 2023) (Judge Robert J. Shelby). Plaintiff L.E. sued the administrator of her ERISA-governed healthcare plan, defendant Deseret Mutual Benefit Administrators, for violating ERISA after Deseret Mutual began denying her claims for outpatient psychotherapy sessions with a licensed clinical psychologist in January of 2020. L.E. asserts that her healthcare claims should have been covered under the terms of the plan and that she has accrued significant out-of-pocket expenses as a result of these inappropriate denials. The parties filed cross-motions for summary judgment. In addition, L.E. moved to supplement the administrative record. The court started with L.E.’s motion to supplement the administrative record. L.E. sought to include documents she maintained are “highly relevant to the issue of whether or not she appointed the law firm that represented her as her personal representative,” a topic which goes straight to the parties’ dispute over whether L.E. properly exhausted her administrative remedies prior to filing suit. The court ultimately denied the motion to supplement the administrative record, concluding that L.E.’s request was untimely, procedurally improper, and the documents themselves were unnecessary for the court to rule on the issue of exhaustion. Regarding exhaustion, the court concluded that “any failure by L.E. to exhaust her administrative remedies was excused by [defendant’s] unresponsiveness.” With these preliminary matters addressed, the court then evaluated whether L.E.’s claim for breach of good faith and fair dealing was preempted by ERISA. It concluded that it was, as the only connection L.E. had to Deseret Mutual was connected to the ERISA plan and “the entire factual basis for L.E.’s common law claim…involves the Plan and her treatment by the plan administrator.” Finally, the court concluded that because it deemed L.E.’s failure to exhaust excused due to Deseret Mutual’s failure to engage in a “meaningful dialogue” with her during its handling of her benefit claims, the circumstances here favored remanding to Deseret Mutual. As things stand now, the court concluded that it could not fairly judge the merits of L.E.’s two ERISA claims – her claim for benefits and her claim for breach of fiduciary duty – because the administrative process was interrupted, meaning the record was not fully developed prior to this litigation. Accordingly, the court granted in part and denied in part both parties’ summary judgment motions and remanded for a full and fair review by Deseret Mutual. In addition, the court denied, at this time, L.E.’s requests for attorneys’ fees and prejudgment interest as it concluded she has not yet achieved “some success on the merits.”


Ninth Circuit

Hamer v. JP Morgan Chase Long-Term Disability Benefit Plan, No. 22-cv-06886-LB, 2023 WL 4053801 (N.D. Cal. Jun. 16, 2023) (Magistrate Judge Laurel Beeler). Plaintiff Anthony Hamer, the co-conservator of the estate of Kenneth Morrison, brought this ERISA suit against JP Morgan Chase, its long-term disability benefit plan, and Prudential Insurance Company of America, asserting six claims for violations of ERISA seeking monetary and equitable relief. Decedent was a former vice president of JP Morgan Chase. He became permanently mentally and physically disabled after he was injured in a taxi accident in Connecticut in 1995. The plaintiff alleges that defendants underreported Mr. Morrison’s base salary at the time he became disabled, meaning they significantly underpaid his disability benefits from the time he became permanently disabled in 1995 until his death in 2022. In addition, the complaint alleges that defendants failed to maintain relevant documents from the 1990s, including the 1995 operative plan document and Mr. Morrison’s compensation records. Defendants moved to dismiss the claims for equitable relief pursuant to Federal Rules of Civil Procedure 12(b)(1) and (b)(6). In addition, they moved to transfer venue to the District of Connecticut on the ground that the relevant events occurred there. In this order the court granted the motion to transfer and declined to decide the partial motion to dismiss. Specifically, the court agreed with defendants that transferring the case to Connecticut served the convenience of the parties and therefore promoted the interests of justice. Regarding plaintiff’s forum choice, the court found that the Mr. Hamer’s choice of the Northern District of California was only entitled to a minimum amount of deference “given that the dispute’s only connection to this district is Mr. Hamer and the role he played.” On balance, the court found that because “the operative facts and local interest centered in Connecticut,” defendants carried their burden to demonstrate that transfer was appropriate in this instance.