K.D. v. Anthem Blue Cross, No. 2:21-cv-343-DAK-CMR, 2023 WL 6147729 (D. Utah Sep. 20, 2023) (Judge Dale A. Kimball)

Despite Congress’ clear and repeated attempts to eliminate disparities in the treatment of mental health and addiction claims when compared to other kinds of claims for medical benefits, ERISA plaintiffs have had only rare success in asserting mental health parity claims. This case represents one such success, which is probably not coincidentally from a district court in the Tenth Circuit.

Plaintiff A.D. has a long history of mental health disorders stemming from the death of her biological father by suicide when she was just 10 years old. In early adulthood, during her college years, A.D.’s health declined significantly. She was ultimately admitted to Fulshear Ranch Academy’s Treatment to Transition program, a nine-to-twelve-month program where patients first receive treatment in a residential treatment setting and then in a less intensive transitional living setting.

Anthem Blue Cross and Blue Shield let her stay at Fulshear for only sixteen days, however, after which it determined that A.D. no longer met the plan’s internal criteria for medical necessity because she was no longer acutely suicidal or a danger to others. In this action, A.D. and her mother K.D. challenged this determination and Anthem’s denial of benefits for A.D.’s continued treatment. They alleged two causes of action: a benefit claim under ERISA Section 502(a)(1)(B), and an equitable relief claim under Section 502(a)(3), based on alleged violations of the Mental Health Parity and Addiction Equity Act, as incorporated into ERISA.

The parties filed competing motions for judgment. The court began by resolving the dispute over the appropriate standard of review. It agreed with Blue Cross and the Plan that abuse of discretion review applied, given that the plan grants discretionary authority to Blue Cross and there were not serious procedural irregularities in the case warranting de novo review.

With the standard of review settled, the court got to the meat of the benefit claim. Noting that that A.D.’s “treatment providers opined that A.D. needed continued residential treatment…to maintain her improvements” and to prevent relapse to “self-harm and dysfunctional behaviors” the court concluded that the medical opinions supported “a finding that A.D.’s needs could not be met at a lower level of care after only a few days of inpatient treatment.” Moreover, quoting the Tenth Circuit’s recent decision in D.K. v. United Behavioral Health, 67 F.4th 1224 (10th Cir. 2023), the court concluded that defendants completely failed to “meaningfully engage” with the opinions of A.D.’s healthcare providers and determined that cutting off care after such a brief stay in a structured medical environment was not appropriate or medically necessary given A.D.’s long-standing and complicated mental health issues.

The court pointed out that “Defendants relied solely on conclusory statements that they relayed without factual support,” while at the same time, “ignor[ing] the opinions of A.D.’s treating professionals.” Thus, “Anthem’s denial letters leave the plan beneficiaries and this court with more questions regarding the decision than reasons supporting it.” This failure to have a meaningful dialogue with A.D.’s treating physicians, failure to address all of the relevant medical evidence, and failure to communicate clearly the reasons for the denial, all added up to an abuse of discretion by Anthem. The appropriate remedy for these many failings, the court concluded, was a remand to defendants “to make adequate findings or to explain adequately the grounds” for their decision.

The court then turned to the Parity Act claim. Plaintiffs argued that defendants violated the Parity Act because Anthem’s internal guidelines permit discharging residential mental health patients at any time after their admittance, but only allow discharging medical/surgical patients “after they are provided with a course of treatment and have completed [at least] two stages of their planned course of treatment.” The court agreed with plaintiffs both that these internal guidelines made a distinction between mental healthcare and other types of healthcare and these disparate discharge criteria violated the Parity Act.

In reaching this conclusion, the court reasoned that this materially different treatment protocol for medical/surgical patients versus mental health patients “significantly limits benefits for mental health treatment.” Moreover, the court pointed out how A.D.’s specific experience demonstrates how defendants can use these violative criteria to cut off a nine-to-twelve-month program designed to treat long-standing mental health disorders after only a matter of days, causing the exact type of harm and lack of access to mental health treatment that the Parity Act was designed to ameliorate.

Thus, this case proved the unusual Parity Act win for plaintiffs, who were granted judgment with respect to this second cause of action. Regarding appropriate equitable remedies for this claim, the court stayed its decision on the matter until after defendants reached a new decision on remand of the benefits claim.

The court concluded with an invitation to plaintiffs to submit a motion for reasonable attorneys’ fees and costs under Section 502(g)(1).

Your ERISA Watch editors see this decision as further proof of a turning tide, at least within the Tenth Circuit, for patients claiming wrongful denials of mental health claims.

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

Breach of Fiduciary Duty

Second Circuit

Popovchak v. UnitedHealth Grp., No. 22-CV-10756 (VEC), 2023 WL 6125540 (S.D.N.Y. Sep. 19, 2023) (Judge Valerie Caproni). In the United States healthcare billing is opaque. In this action, three beneficiaries of ERISA-governed healthcare plans, plaintiffs Alexandra Popovchak, Oscar Gonzalez, and Melanie Webb, are seeking some transparency. The trio have sued UnitedHealth Group Incorporated and its subsidiaries United Healthcare Insurance Company, United Healthcare Services, Inc., and UnitedHealthcare Service LLC for recovery of benefits, breaches of fiduciary duties, self-dealing, and co-fiduciary liability. The plaintiffs allege in their complaint that the United defendants have enacted a scheme to enrich themselves, to the detriment of the ERISA plans and their participants and beneficiaries. Plaintiffs allege that defendants have done this by calculating eligible expenses using proprietary repricing methodologies which result in benefit payments to out-of-network providers far below the market geographic rates that United is required by the terms of the plans to pay. According to plaintiffs, United then charges “savings fees” to the ERISA plans, even though defendants do not reach agreements with the providers and are generating no savings. As a result, the plans are charged expenses for these illusory savings, and the plan participants are left to pay the difference between the billed amounts and the tiny sums United ends up paying to the providers. In the case of Mr. Gonzalez, for instance, defendants allegedly paid just $1,914.21 of his $81,500 in medical bills, leaving him on the hook for nearly $80,000, despite being insured. The complaint thus “alleges that Defendants’ conduct was primarily motivated by their interest in profiting from purported savings fees through a scheme that redounded to the Plan participants’ detriment,” through which defendants allegedly siphoned billions of dollars from the Plans. Defendants moved to dismiss all but the claims for benefits. Their motion was granted in part and denied in part in an order covering a lot of ground. The court began by addressing the timeliness of plaintiffs’ claims and considering whether plaintiffs had exhausted administrative procedures prior to taking legal action. First, the court held that the claims were timely given defendants’ failure to comply with ERISA’s requirement that denial letters give notice of applicable statutes of limitations. Next, the court was satisfied that plaintiffs appealed their denials at least twice prior to bringing their ERISA action, and concluded that they were not required to appeal any more times in order to have properly exhausted their administrative procedures. With these preliminary matters settled, the court moved on to determining whether plaintiffs stated their claims. Starting with plaintiffs’ breach of fiduciary duty claims, the court determined that plaintiffs adequately pled that defendants acted disloyally, but that plaintiffs’ claims for failure to satisfy the plans’ written terms and failure to treat similarly situated claimants the same were duplicative of the claims for benefits. With respect to plaintiffs’ claim for breach of duties of loyalty and care and for self-dealing under Section 502(a)(2), the court found that these claims satisfied Rule 8 pleading and were distinct from the claims for benefits. Specifically, the court held that plaintiffs alleged enough to infer losses to the plans caused by defendants’ conduct and that “Defendants effectively transferred Plan assets that should have gone to benefit payments under the Plans to themselves.” The court therefore declined to dismiss these claims. However, the court granted the motion to dismiss Defendants UnitedHealth Group Incorporated and United Healthcare Insurance Company entirely from this action, concluding that the complaint was devoid of factual allegations that these two defendants “engaged in the conduct that gave rise to Plaintiffs’ claims.” Finally, with respect to plaintiffs’ request for a jury trial, the court stressed that it was unclear whether the damages plaintiffs sought were legal or equitable in nature. However, “because the Second Circuit has long held that ERISA benefit claims do not trigger the right to a jury trial, the Court grants Defendants’ motion to strike Plaintiffs’ jury demand without prejudice to Plaintiffs renewing their demand in the event they seek damages for breach of fiduciary duty.” Thus, at the end of this lengthy decision most of plaintiffs’ complaint was left intact, and, as a result, this interesting and important healthcare case will move forward.

Hockenstein v. Cigna Health & Life Ins. Co., No. 22-cv-4046 (ER), 2023 WL 6124047 (S.D.N.Y. Sep. 19, 2023) (Judge Edgardo Ramos). Plaintiff Jeremy Hockenstein brings this putative class action seeking monetary and injunctive relief against Cigna Health and Life Insurance Company under ERISA for failing to fully reimburse the cost of COVID-19 tests as required under the Families First Coronavirus Response Act and the CARES Act. Mr. Hockenstein asserts three causes of action in his complaint, each alleging a violation of both ERISA Sections 502(a)(1)(B) and (a)(3). In the first count, Mr. Hockenstein alleges that Cigna failed to fully reimburse the tests in violation of its statutory requirements, its fiduciary duties, and its discretionary authority under the plan. In the second, Mr. Hockenstein claims that Cigna provided insufficient notice and failed to accurately disclose reasons for denials in its explanation of benefits. Finally, Mr. Hockenstein’s third cause of action claims that Cigna failed to conduct a full and fair review of the appeals. Cigna moved for partial dismissal, seeking dismissal of all three causes of action only under Section 502(a)(3). The court granted in part and denied in part the partial motion to dismiss. To begin, the court denied the motion to dismiss Count 1 pursuant to Section 502(a)(3). It held that Section 502(a)(3) is an appropriate avenue for relief because there is no remedy available under the terms of the plan for COVID testing reimbursement “making Hockenstein’s claim under § 502(a)(3) proper.” Additionally, the court was satisfied that money damages for breach of fiduciary duties are available under Section 502(a)(3), and that these are proper forms of equitable relief. The court did however grant the motion to dismiss the Section 502(a)(3) claims for insufficient notice and failure to conduct a full and fair review, as Cigna is neither the plan nor the plan administrator. “Accordingly, because Hockenstein cannot allege that Cigna is the Plan or Plan Administrator, there is no underlying § 503 violation and the § 502(a)(3) claims under Counts II and III are dismissed.” The court granted dismissal of these two claims without leave to amend, because it concluded that amendment could not help plaintiffs plausibly allege that Cigna is the plan or plan administrator, making amendment futile.

Rolleri & Sheppard CPAS, LLP v. Knight, No. 3:22-CV-1269 (OAW), 2023 WL 6141142 (D. Conn. Sep. 20, 2023) (Judge Omar A. Williams). Plaintiffs John Rolleri and Ryan Sheppard and defendant Michael Knight were all partners in a firm together called Knight Rolleri Sheppard CPAs, LLP. Defendant Darlene Knight, Michael’s wife, also worked at the firm, and both Mr. and Mrs. Knight were trustees and fiduciaries of the firm’s ERISA-governed Cash Balance Plan. In this action, Mr. Rolleri and Mr. Sheppard allege that the Knights unlawfully transferred $1.6 million in plan assets into personal accounts and that the couple was silent about their improper withdrawals of money. Plaintiffs bring two claims against defendants – breach of fiduciary duty and civil theft. Three motions were before the court. First, plaintiffs filed a motion seeking a prejudgment remedy of damages and interest. Second, defendants moved to dismiss the complaint for lack of standing. Third, plaintiffs moved for a temporary restraining order and preliminary injunction. The court began with the motion to dismiss for lack of standing. The court granted the motion to dismiss the Rolleri & Sheppard CPAs, LLP firm. It agreed with the Knights that this firm does not exist as a legal entity and that neither Mr. Rolleri nor Mr. Sheppard purport to have expelled Mr. Knight from the firm. It also held that plaintiffs failed to show that continued operation of the Knight Firm would have been unlawful “and consequently they have failed to show that their attempted dissociation of Mr. Knight was proper under Connecticut law.” Regarding Mr. Rolleri and Mr. Sheppard, themselves, however, the court denied the motion to dismiss either individual plaintiff for lack of standing, as it is undisputed that both men are trustees and fiduciaries of the Cash Balance Plan and as such they have standing under ERISA to bring suit for breach of fiduciary duty. Next, the court addressed plaintiffs’ prejudgment remedy motion, which it denied. Ultimately, the court found it unclear that Mr. Knight stole from the Plan and that the money he took was not in fact his own. “Each of the defendants and each of the individual plaintiffs simultaneously is an employer, trustee, fiduciary, and participant under the Plan, and each has distinct rights and responsibilities in each role, under the contours of ERISA and the facts of this case. The interplay of these various roles is not entirely clear at this early stage of litigation. Plaintiffs’ bare legal conclusion that Defendants stole from the Plan, absent any contractual or statutory basis for that conclusion, is insufficient to show probable cause.” Although the court expressed that plaintiffs may be able to prove their claims of civil theft and breach of fiduciary duty, it stated that the present record does not support granting their motion for prejudgment remedy. Finally, because the temporary restraining order motion asks for injunctive relief dependent on the court granting the prejudgment remedy motion, the court also denied the temporary restraining order motion.

Class Actions

Tenth Circuit

Anderson v. Coca-Cola Bottlers’ Ass’n, No. 21-2054-JWL, 2023 WL 6064605 (D. Kan. Sep. 18, 2023) (Judge John W. Lungstrum). A putative class of participants of the Coca-Cola Bottlers’ Association 401(k) Plan moved for final approval of class action settlement and awards of attorneys’ fees, costs, expenses, and class representative service awards in this lawsuit alleging breaches of fiduciary duties. In an order from April 28, 2023, the court preliminarily certified the class and preliminarily approved the settlement. Following that decision, notice was sent to the nearly 40,000 class members, and a final settlement approval hearing was held. In this decision the court granted plaintiffs’ motion, certified the settlement class, approved the $3.3 million settlement, and authorized attorney fee awards, costs, expense, and class representative service awards. To begin, the court certified the non-opt-out settlement class pursuant to Federal Rule of Civil Procedure 23(a) and Rule 23(b)(1)(B), reiterating its earlier positions that the class is adequately numerous, the named plaintiffs are typical of the absent class members and adequate representatives of their interests, that common issues of law and fact unite the class, and that class adjudication is practical and just. Finally, the court noted that no putative class member objected to certification of the settlement class or sought to opt out. Next, the court evaluated the settlement amount and concluded that it is fair, reasonable, and adequate, the result of informed arms-length negotiations made in good faith. “In the view of the Court, class counsel and class representatives have adequately represented the class in this litigation.” Notably, one class member did object to the settlement amount, finding it to be an unfairly low recovery. In fact, the $3.3 million settlement amount is far less than the maximum damages of $19 million, or even the maximum $6 million in damages had defendants prevailed on their offset claim. Nevertheless, the court saw the settlement amount as providing adequate relief and overruled the one objection as lacking substantive support. As a result, the settlement amount was granted final approval. Additionally, the court took no issue with the proposed allocation methods of the settlement amount, which provided for pro rata distribution based on each member’s account balance in the fund and would either automatically distribute the amounts into plan accounts or allow for members to receive a check or rollover instead. The court also stated that adequate notice was mailed to all 39,967 class members. The court then addressed fee, cost, and service awards. First, the court awarded the requested 1/3 award of the settlement fund as attorneys’ fees – a total of $1.1 million. It found that this award was reasonable and fair given the great work and many hours performed by experienced ERISA counsel and the result they achieved. The court also wrote that “such an award would represent a customary fee in a case like this one, which presented complex issues under ERISA.” Plaintiffs’ counsel were also awarded their requested $9,245.80 for reimbursement of their incurred out-of-pocket costs. Further, the court awarded $42,764.00 in expenses incurred by the settlement administrator, and $15,000 for incurred expenses paid to an independent reviewing fiduciary. Last, the court awarded total service awards for the two named plaintiffs of $15,000. It gave the named plaintiff who brought the action a $12,000 award for his time and effort, and it awarded $3,000 to the second named plaintiff who became involved only at the settlement stage. Accordingly, with this decision, this class action has come to a close.

Disability Benefit Claims

Ninth Circuit

Iravani v. Unum Life Ins. Co. of Am., No. 21-cv-09895-HSG, 2023 WL 6048785 (N.D. Cal. Sep. 15, 2023) (Judge Haywood S. Gilliam, Jr.). After nearly a decade of continuing to approve and pay long-term disability benefits to plaintiff Sharareh Iravani, defendant Unum Life Insurance Company of America terminated Ms. Iravani’s benefits and demanded payment of over $9,000 in “overpaid” benefits. Ms. Iravani applied for and first started receiving disability benefits in 2010 after pain from cervical and lumbar radiculopathy, spinal stenosis, degenerative disc disease, and chronic migraine headaches left her unable to continue working as a cosmetic beauty specialist for Saks Fifth Avenue. Following an unsuccessful administrative appeal, Ms. Iravani brought this ERISA action to challenge Unum’s termination of her benefits. The parties filed competing motions for judgment under Federal Rule of Civil Procedure 52. They agreed that de novo review applied. Giving no deference to the claim administrator’s decision, the court found that there was sufficient evidence to establish that Ms. Iravani is disabled and entitled to benefits under the terms of her policy. The court disagreed with Unum that there was convincing evidence in the medical record of improvement of Ms. Iravani’s conditions, finding, to the contrary, that Ms. Iravani’s treating providers were in agreement that she had reached maximum medical improvement “and that she nonetheless remained disabled due to her permanent restrictions,” including with regard to her “ability to sit, stand, and walk.” On the topic of Ms. Iravani’s chronic pain, the court stated that the medical record established that she complained of constant moderate to severe pain of “7 at its best and 10 at its worst,” on a scale of 0 to 10. It found these ongoing complaints of pain credible and consistently documented throughout the years. Ms. Iravani’s musculoskeletal conditions are degenerative, and the court conveyed that Unum had failed to explain how these conditions “would improve over time, particularly in light of Plaintiff’s…age (61 at the time Unum terminated her benefits.)” Finally, the court credited the opinions of Ms. Iravani’s treating physicians, many of whom had an extensive treatment history with her, over those of Unum’s reviewing doctors. Based on these findings, the court was persuaded that Ms. Iravani met her burden of proving entitlement to benefits, finding that she has been “continuously disabled since 2010,”  and that her “medical conditions prevent her from performing any gainful occupation to which she is reasonably fitted by education, training, or experience.” Therefore, the court granted Ms. Iravani’s motion for judgment and denied Unum’s cross-motion for judgment.

Turkoly v. Lincoln Nat’l Life Ins. Co., No. 3:21-cv-1019-SI, 2023 WL 6147194 (D. Or. Sep. 20, 2023) (Judge Michael H. Simon). In early 2019, plaintiff Tracey K. Turkoly stopped working in her high-paid position as Global Account manager for Docusign, Inc. Ms. Turkoly was experiencing symptoms from both autoimmune and mental-health disorders. She applied for and began receiving disability benefits. After paying long-term disability benefits for approximately 10 months, defendant Lincoln National Life Insurance Company terminated the benefits and concluded that Ms. Turkoly could continue working in her current profession. Ms. Turkoly commenced this action seeking to overturn that decision under ERISA Section 502(a)(1)(B). The parties filed cross-motions for judgment on the administrative record under de novo review. The court concluded that Ms. Turkoly proved by a preponderance of the evidence her entitlement to benefits for the first 24 months, i.e., the “own occupation” benefit period, and ordered these benefits be reinstated. It also remanded the case to Lincoln for consideration of the “any occupation” portion of her claim. In particular, the court viewed the “key” medical opinion to be “the neuropsychological evaluation from Dr. Ludolph” which was performed over four days. The results of that testing, the court concluded, “show that Turkoly would be unable to perform her managerial job. The deficits in executive functioning and memory found by Dr. Ludolph would preclude Turkoly from performing this position as performed in the national economy, as Dr. Ludolph concluded in her supplemental report.” This objective screening confirming Ms. Turkoly’s cognitive impairments was highly persuasive to the court, especially as Lincoln emphasized in its denial letter that Ms. Turkoly’s medical records contained no such results. “The denial letter made clear that the lack of objective cognitive testing was critical to Lincoln’s denial of Turkoly’s claim.” Thus, because Ms. Turkoly “obtained the evidence that Lincoln asserted was critical,” and that evidence supported a finding of entitlement to benefits, the court was convinced that Ms. Turkoly met her burden of establishing disability as defined by the plan. As a result, Ms. Turkoly’s motion for judgment was granted and Lincoln’s motion for judgment was denied.

Discovery

Sixth Circuit

Williamson v. American Mar. Officer Plans, No. 3:18-CV-00100-GNS, 2023 WL 6096939 (W.D. Ky. Sep. 17, 2023) (Magistrate Judge Regina S. Edwards). After nine years of trying, plaintiff Robert C. Williamson, as executor of decent Larry Henning’s estate, was finally successful in his claim for accidental death benefits and was paid $200,000 in benefits from insurance provider LINA. Now, Mr. Williamson argues he is entitled to make-whole relief in the form of prejudgment interest on the payment of those benefits. He has moved to conduct limited discovery on the issue of interest. Defendants LINA and American Maritime Officer Plans responded in opposition. The matter was referred to Magistrate Judge Edwards. In this order Judge Edwards denied Mr. Williamson’s discovery request. The court held that despite being referred to as “limited” by Mr. Williamson, the requests for production and interrogatories sought were overly broad and voluminous both in terms of scope and topic and “in no way limited or tailored.” Judge Edwards wrote that, “[t]he breadth of these requests would be considered unreasonable in most ordinary cases; their breadth is particularly offensive in an ERISA action.” And, as this is an ERISA action, the court focused on the Sixth Circuit’s strict standards against allowing most discovery beyond the administrative record. Allegations of bias alone, the court expressed, were insufficient to open up discovery beyond the administrative record. Furthermore, the court found Mr. Williamson’s cited caselaw off topic and distinguishable because it did not apply to his lone claim here regarding prejudgment interest. In sum, the court was not persuaded that Mr. Williamson established any sufficient justification to warrant “the sweeping discovery he has requested.”

ERISA Preemption

Sixth Circuit

BlueCross BlueShield of Tenn. v. Bettencourt, No. 1:21-CV-00271-JRG-CHS, 2023 WL 6096870 (E.D. Tenn. Sep. 18, 2023) (Judge J. Ronnie Greer). In October 2021, the New Hampshire Insurance Department issued an Order to Show Cause and Notice of Hearing to Bluecross Blueshield of Tennessee after it learned that a resident of New Hampshire was denied coverage for medically necessary fertility treatment as required by New Hampshire state insurance laws. The order alleged that BCBST violated several New Hampshire laws “when it issued health insurance to a New Hampshire resident that did not include required coverage for fertility treatments and refused to cover [the resident’s] treatments.” In response to the Show Cause Order, BCBST brought this ERISA action seeking injunctive and declaratory relief from the Show Cause Order and enforcement of legal proceedings and related penalties stemming from the denial of the fertility treatment. Throughout litigation, BCBST has maintained that this case involves a choice-of-law dispute over whether New Hampshire or Tennessee’s fertility mandates apply. It argues that it would have to violate its fiduciary duties, as well as the terms of the plan, which states that it is governed by Tennessee law, if it were required to comply with New Hampshire’s laws. The New Hampshire Insurance Department disagrees. It relied on ERISA’s Saving Clause to bolster its argument that state insurance-regulating laws are not preempted by ERISA and that it therefore remains within the state’s power to regulate insurance companies and insurance contracts. Bluecross of Tennessee previously moved for summary judgment. Its motion was denied on June 26, 2023, when the court issued an order and opinion (summarized in Your ERISA Watch’s July 12^th newsletter) holding that “the choice-of-law provision under the PhyNet Plans was irrelevant, much less dispositive.” Furthermore, the court held that insurance companies cannot rely on terms of ERISA plans or their fiduciary duties under ERISA “to shield themselves from state insurance regulation.” Therefore, the court not only denied BCBST’s summary judgment motion, but it also gave notice of its intent to grant summary judgment to the New Hampshire Insurance Department and gave BCBST time to file supplemental briefing to explain why the Insurance Department is not entitled to such relief. BCBST took that opportunity and filed its supplemental briefing, to which the New Hampshire Insurance Department responded. In this order, the court found no question of fact or law remaining as to New Hampshire’s fertility treatment mandate and granted summary judgment to the New Hampshire Insurance Department on all claims arising from it. The court wrote, “[b]eyond some clever paraphrasing of the Court’s June 26 Order and subtle suggestions, BCBST has not seriously argued that New Hampshire’s fertility benefits mandate is not saved from ERISA preemption.” The court stated that it would not fashion any common-law rule mandating that an ERISA plan’s choice-of-law provision controls which state’s mandates apply to a policy, because such a ruling “would leave the States ‘powerless to alter the terms of the insurance relationship in ERISA plans,’ even when such alternations would ultimately affect the administration of the plan.” Accordingly, the court found as a matter of law that BCBST cannot shield itself from New Hampshire’s insurance laws and that the state Insurance Department is entitled to summary judgment on the claims stemming from the fertility treatment mandate. However, the court concluded that there remains a question of law as to New Hampshire’s unfair insurance practices law, and whether this law too is saved from preemption under ERISA pursuant to the test articulated in Kentucky Association of Health Plans, Inc. v. Miller. Consequently, the court ordered further briefing on this issue, and reserved ruling on the topic and the claims as they relate to that law for now.

Exhaustion of Administrative Remedies

Eleventh Circuit

Howell v. Argent Trust Co., No. 1:2022cv03959, 2023 WL 6165712 (N.D. Ga. Sep. 21, 2023) (Judge Steven D. Grimberg). Participants of The North Highland Company Employee Stock Ownership and 401(k) Plan bring this breach of fiduciary duty and prohibited transaction putative class action against trustee Argent Trust Company and individual executive officers and directors of the company. In their action plaintiffs allege that defendants reorganized the company and manipulated stock transactions, stock valuations, and tax benefits to the financial detriment of plan participants. They maintain that defendants’ “scheme diluted the Plan’s equity interests, diminished its control in the assets, and allowed the Individual Defendants (with Argent’s ‘blessing’) to further dilute the Plan’s equity stake over time.” They further claim they were not paid fair market value for the stock transactions. Before the court was plaintiffs’ motion to stay the action until 30 days after they have finished exhausting their administrative remedies. They argued that staying the case was necessary because the statute of limitations has expired on some of their claims, and they will therefore not be able to replead those claims that would become time-barred if the court dismissed the action pending administrative exhaustion. In this order the court denied the motion to stay the lawsuit pending the completion of the administrative review of plaintiffs’ claims. It agreed with defendants “that the Eleventh Circuit requires exhaustion before a plaintiff may pursue an ERISA suit…[and that] Plaintiffs have failed to state a claim because they did not (and could not) plead exhaustion.” The court went on to concur further with defendants “that Plaintiffs’ own delay does not provide a sufficient basis to stay this case.” To the court, plaintiffs failed to justify their delay in seeking relief, their failure to exhaust remedies prior to bringing suit, and their decision to wait until the last day possible to file their ERISA action. It stated that plaintiffs could not excuse the exhaustion requirement, as they did not argue either that administrative remedies would be futile or that they were “denied meaningful access to the administrative review scheme.” The court would not read case law cited by plaintiffs “as holding that, whenever a plaintiff’s claims may be barred if the federal case is dismissed pending exhaustion, then the case should be stayed. Such a reading would effectively excuse the exhaustion requirement in any case where a plaintiff unreasonably delayed in pursuing administrative remedies – contrary to the Eleventh Circuit’s strict application of the exhaustion requirement in ERISA cases.” Accordingly, the court saw “nothing inequitable about declining to stay this case simply because Plaintiffs inexplicably ran themselves up against the six-year limitations period.” As a result, plaintiffs’ motion to do so was denied and the parties were directed to inform the court whether the case should be dismissed without prejudice.

Medical Benefit Claims

Tenth Circuit

Singhisen v. Health Care Serv. Corp., No. 20-1012-SLP, 2023 WL 6048788 (W.D. Okla. Sep. 15, 2023) (Judge Scott L. Palk). In the summer of 2019 plaintiff Robert Singhisen suffered a stroke connected to a congenital heart defect. In October of that same year, Mr. Singhisen underwent heart surgery at Oklahoma Heart Hospital to repair the congenital defect. Defendant Health Care Service Corporation, the administrator and insurance provider, denied Mr. Singhisen’s claim for benefits as not medically necessary, maintaining he had no “history of cryptogenic stroke.” Two separate appeals stemmed from the denial. The first was brought by the hospital, the second was brought by a lawyer representing Mr. Singhisen. Mr. Singhisen claims that he had no knowledge of the hospital’s appeal and that he never authorized the hospital to file any appeal on his behalf. In his legal action, Mr. Singhisen seeks reversal of the denial on both procedural grounds and on the merits. He argues that defendant denied him a full and fair review of his appeal, and asserts a claim to that effect, as well as a claim for statutory penalties for failure to produce plan documents upon request. In addition, he argues that the de novo review standard should apply to his claim for recovery of benefits because of Health Care Service Corp.’s procedural defects. In response, defendant contends that only the hospital’s appeal was authorized by the plan and thus subject to ERISA’s procedural requirements. This dispute between the parties was central to defendant’s motions before the court. It moved to strike evidence outside the administrative record, including affidavits from Mr. and Mrs. Singhisen and materials from the American Stroke Association defining a “cryptogenic stroke.” In the alternative, defendant moved for leave to file a surreply. The court began with the motion to strike. First, it declined to strike affidavits Mr. Singhisen and his wife submitted attesting to the fact that the provider did not have the authority to file an appeal on Mr. Singhisen’s behalf. To the court, the affidavits did not raise any new argument but were instead a response to defendant’s argument. Moreover, the court stated that exceptional circumstances warranted the admission of the affidavits, as permitting them would be helpful in order to resolve the issue of whether the hospital’s appeal was the only authorized appeal subject to ERISA regulations. “Resolution of this issue may impact both Plaintiff’s procedural claim regarding the alleged denial of fair and full review, and Plaintiff’s substantive claim regarding the proper standard of review. Under these circumstances, the court may consider matters outside the administrative record.” As for the American Stroke Association documents, the court reserved ruling on the issue for the time being, deeming “it prudent to first obtain further briefing on the preliminary issue of the authorized (i.e., controlling) appeal.” Accordingly, briefing on this yet-to-be-resolved topic was requested and the court granted defendant’s alternative motion for surreply with instructions on what it needs to further address and discuss in its briefing.

Pleading Issues & Procedure

Second Circuit

Elkowitz v. UnitedHealthcare of N.Y., No. 17-cv-4663(DLI)(PK), 2023 WL 6140183 (E.D.N.Y. Sep. 20, 2023) (Judge Dora L. Irizarry). A professional corporation of physicians in New York sued UnitedHealthcare of New York, Inc. in 2017 under state law and ERISA for underpayments of healthcare services the doctors provided. The deadline for motions to amend the pleadings occurred on February 28, 2018. Over four years later, after discovery has taken place and settlement negotiations between the parties have stagnated, the physicians moved to amend their complaint to add new defendants, related corporate entities to United, referred to collectively as the Oxford Health Insurance defendants. The motion was referred to a Magistrate Judge, who issued a Report and Recommendation recommending the court deny the motion to amend. The Magistrate concluded that plaintiff unduly delayed filing the motion to amend and failed to show good cause pursuant to Federal Rule of Civil Procedure 16 to permit amendment over four years after the relevant deadline. Additionally, the Magistrate viewed the amendment as unduly prejudicial to UnitedHealthcare and found that it would significantly delay resolution of the already lengthy proceedings. Finally, the Report concluded that the proposed amendment was futile because it is barred by the applicable statutes of limitations, and state and federal relation-back doctrines do not apply. Plaintiff objected to the Magistrate’s Report. In this order the court overruled plaintiff’s objections, adopted the report entirely, and denied the motion to amend the complaint. The physicians argued that they had acted with sufficient diligence to establish good cause to justify amending at this juncture of the action. They also maintained that defendant would not be prejudiced, and that amendment would not greatly delay resolution of the lawsuit. Moreover, plaintiff averred that the relation-back doctrine should apply because UnitedHealthcare and Oxford Health Insurance have a shared corporate identity. Finally, plaintiff stressed that United engaged in “systematic deceptiveness” and the interests of justice would be served by including the new defendants. The court disagreed on all points. “Plaintiff’s first, second, and fourth objections are not properly raised because, in part, they raise arguments that already were addressed by the magistrate judge and, in part, present new arguments that could have been, but were not raised before the magistrate judge.” As for the application of the relation-back doctrine, the court concluded that the Magistrate had not erred as plaintiff failed to establish that the Oxford Health Insurance parties had actual notice of this action. In sum, the court held that plaintiff established no new evidence or law that the Magistrate had overlooked and presented no compelling argument to justify granting the motion to amend their complaint after so many years of ongoing litigation.

Fifth Circuit

William J. v. Blue Cross Blue Shield of Tex., No. 3:22-CV-1919-G, 2023 WL 6149126 (N.D. Tex. Sep. 19, 2023) (Judge A. Joe Fish). Plaintiff William J., individually and on behalf of his minor child, J.J. sued the Texas Instruments Incorporated Welfare Benefit Plan, his employer, Texas Instruments Incorporated, and the plan’s insurer, Blue Cross and Blue Shield of Texas, challenging the plan’s denial of coverage for medical treatment J.J. received. William J. brought claims under Sections 502(a)(1)(B) and (a)(3). Defendants moved to dismiss the complaint. On May 24, 2023, the court granted in part and denied in part defendants’ motions to dismiss. It granted the motions to dismiss the part of plaintiff’s Section 502(a)(1)(B) claim based on an alleged lack of a full and fair review and the entirety of plaintiff’ Section 502(a)(3) claim, but denied the motions to dismiss the benefits claim under 502(a)(1)(B). Defendants jointly moved to reconsider, or in the alterative, alter or amend that opinion pursuant to Federal Rules of Civil Procedure 54(b) and 59(e). Defendants’ motion was denied. The court disagreed with defendants’ argument that it made a clear error in interpreting the Supreme Court’s decision in Amara as holding that the terms of the summary plan description were not part of the plan documents. It thus declined to consider the citations to the summary plan description when determining whether plaintiffs alleged sufficient facts to state a claim for relief under Section 502(a)(1)(B). To the contrary, the court held “the Supreme Court prohibits the exact thing that the defendants in this case seek to do: make the SPD the plan itself and legally binding.” The court stressed that the Supreme Court in Amara “cautioned that if courts are able to enforce the terms of the SPD as the terms of the plan itself, plan administrators would have ‘the power to set plan terms indirectly by including them in the summary plan descriptions’… Were this court to interpret Amara in the way that the defendants encourage, this exact outcome would be likely.” Thus, the court stated that defendants cannot rely on terms to support their denial if they exist only in the SPD and are not in the plan itself. Because the motion for reconsideration was entirely dependent on this failed argument, the court denied defendants’ motion.

Provider Claims

Ninth Circuit

Douglas v. Cal. Physicians’ Service, No. CV 23-1738-MWF, 2023 WL 6038191 (C.D. Cal. Sep. 6, 2023) (Judge Michael W. Fitzgerald). Healthcare provider Dr. Raymond Douglas brings this lawsuit against California Physicians’ Service d/b/a Blue Shield of California and Bluecross and Blueshield of Minnesota seeking payment for unpaid medical bills in connection with treatment he provided to an insured patient suffering from an inflammatory autoimmune disease of the eyes. Dr. Douglas asserts that under the terms of the patient’s ERISA-governed healthcare plan, he is entitled to “100% of the Allowed Amount” for the pre-approved covered service but was underpaid hundreds of thousands of dollars for the treatment he provided. Dr. Douglas brings a claim for recovery of benefits under Section 502(a)(1)(B), as well as a claim for attorneys’ fees and costs pursuant to Section 502(g)(1). The Blue Cross defendants moved to dismiss the complaint for failure to state a claim. Their motion was granted, with leave to amend, by the court in this order. It agreed with defendants that while Dr. Douglas “alleges a specific plan term entitling [him] to ‘100% of the Allowed Amount,’ Plaintiff has not alleged sufficient facts establishing what the ‘Allowed Amount’ was and that Defendants paid less than this amount.” Without this information, the court expressed that the provider failed to state a claim for recovery of benefits. It clarified that plaintiffs in ERISA actions must “identify the provisions of the [ERISA] plan that entitle them to benefits.” The court noted that the plan clearly states that “the Allowed Amount for a Nonparticipating Provider…can be significantly less than that Nonparticipating Provider’s billed charges.” As a result, the plan language suggests that Dr. Douglas may not be entitled to the full billed amount, and the complaint does not point to any specific plan term entitling Dr. Douglas to the amount he billed, nor even necessarily to an amount higher than that already paid by defendants. Accordingly, the court found the complaint deficient as currently pled and granted the motion to dismiss but did so without prejudice. If Dr. Douglas can amend his complaint to add more detailed allegations about how defendants underpaid him, the court stated that his complaint would then cross the line from possibility to plausibility of entitlement to relief.