Wit v. United Behavioral Health

Decision Date03 November 2020
Docket NumberCase No. 14-cv-02346-JCS
CourtU.S. District Court — Northern District of California
PartiesDAVID WIT, et al., Plaintiffs, v. UNITED BEHAVIORAL HEALTH, Defendant. GARY ALEXANDER, et al., Plaintiffs, v. UNITED BEHAVIORAL HEALTH, Defendant.

This case arises out of pervasive and long-standing violations of ERISA by United Behavioral Health ("UBH"). UBH denied mental health and substance use disorder treatment coverage to tens of thousands of class members using internal guidelines that were inconsistent with the terms of the class members' health insurance plans. UBH engaged in this course of conduct deliberately, to protect its bottom line. To conceal its misconduct, UBH lied to state regulators and UBH executives with responsibility for drafting and implementing the guidelines deliberately attempted to mislead the Court at trial in this matter. After the trial, the Court found for Plaintiffs. Having prevailed at trial, Plaintiffs now seek the following categories of relief: 1) declaratory relief in the form of a declaration that UBH violated the terms of the class members' plans requiring that coverage be consistent with generally accepted standards of care and clarifying class members' rights under the plans; 2) an order remanding UBH's coverage determinations for reprocessing under standards that are consistent with generally accepted standards of care; 3) injunctive relief designed to prevent UBH from harming class members in the same way in the future; and 4) appointment of a special master to monitor UBH's compliance with the Court's remedies order. After an initial round of briefing on remedies, the parties supplied supplemental briefing on specific issues at the request of the Court. Following a hearing on September 2, 2020, the parties submitted additional proposed language to be used in the Court's remedies order and UBH filed an Administrative Motion for Leave to Submit Evidence in Opposition to Proposed Remedies Order ("Administrative Motion"), Dkt. No. 478. The Court's rulings on remedies and the Administrative Motion are set forth below.1


Plaintiffs assert their claims for breach of fiduciary duty and arbitrary and capricious denial of benefits under 29 U.S.C. §§ 1132(a)(1)(B) and (a)(3). Under 29 U.S.C. § 1132(a)(1)(B), a plan participant or beneficiary may bring a civil action "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." Under § 1132(a)(3), a civil action may be brought "by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan."

"Where there has been a breach of fiduciary duty, ERISA grants to the courts broad authority to fashion remedies for redressing the interests of participants and beneficiaries." Donovan v. Mazzola, 716 F.2d 1226, 1235 (9th Cir. 1983) (citing Eaves v. Penn, 587 F.2d 453, 462 (10th Cir. 1978); Marshall v. Snyder, 572 F.2d 894, 901 (2d Cir. 1978)). "Courts also have a duty to 'enforce the remedy which is most advantageous to the participants and most conducive toeffectuating the purposes of the trust.'" Id. (quoting Eaves, 587 F.2d at 462).2 The Supreme Court explained in Varity Corp. v. Howe, that 29 U.S.C. § 1132(a)(3) is a "catchall" provision that "act(s) as a safety net, offering appropriate equitable relief for injuries caused by violations that [§ 1132] does not elsewhere adequately remedy." 516 U.S. 489, 512 (1996). The "equitable relief" authorized under § 1132(a)(3) refers to "those categories of relief that were typically available in equity (such as injunction, mandamus, and restitution, but not compensatory damages)." Mertens v. Hewitt Assocs., 508 U.S. 248, 256 (1993). In Varity, the Court stated in dicta, "[w]e should expect that where Congress elsewhere provided adequate relief for a beneficiary's injury, there will likely be no need for further equitable relief, in which case such relief normally would not be 'appropriate.'" Id. at 515. The Court did not actually decide whether plan members can seek relief under both §§ 1132(a)(1)(B) and (a)(3) for a breach of fiduciary duty. In CIGNA Corp. v. Amara, 563 U.S. 421 (2011), however, the Court found that they can.

In Amara, employees brought a class action against their employer after the employer changed the terms of their pension plan without providing adequate notice of the new plan as required by ERISA. 563 U.S. at 429. The district court found that the employees had been misledand that many of them were worse off under the new plan. Id. at 432. It ordered a two-step remedy: first, the terms of the plan would be reformed to remedy the false or misleading information and then the reformed plan would be enforced, which for at least some class members would result in the payment of benefits that would have been due under the old plan. Id. at 434-435, 440. The Court addressed whether ERISA authorized the relief fashioned by the district court and found that it did.

The Amara Court found that enforcement of the reformed plan was consistent with § 1132(a)(1)(B), "for that provision grants a participant the right to bring a civil action to 'recover benefits due . . . under the terms of his plan.'" Id. at 435. The more difficult question was whether § 1132(a)(1)(B) allowed for reformation of the plan that was to be enforced. The Court concluded that it did not because that section authorizes only the enforcement of an ERISA plan. Id. at 436-438. Nonetheless, it went on to find that reformation of the plan was allowable under § 1132(a)(3) because that remedy constituted a traditional equitable remedy. Id. at 439-440. It further found that "the fact that this relief takes the form of a money payment does not remove it from the category of traditionally equitable relief," explaining that "[e]quity courts possessed the power to provide relief in the form of monetary 'compensation' for a loss resulting from a trustee's breach of duty, or to prevent the trustee's unjust enrichment." Id. at 441.

The Ninth Circuit has held that Varity and Amara, read together, "'prohibit duplicate recoveries when a more specific section of the statute, such as § 1132(a)(1)(B), provides a remedy similar to what the plaintiff seeks under the equitable catchall provision, § 1132(a)(3).'" Moyle v. Liberty Mut. Ret. Ben. Plan, 823 F.3d 948, 961 (9th Cir. 2016), as amended on denial of reh'g and reh'g en banc (Aug. 18, 2016) (quoting Silva v. Metro. Life Ins. Co., 762 F.3d 711, 726 (8th Cir. 2014)); see also McGlasson v. Long Term Disability Coverage for All Active Full-Time & Part-Time Employees, 161 F. Supp. 3d 836, 844 (D. Ariz. 2016) ("the district court must evaluate a plaintiff's ERISA claims under both sections before deciding whether recovery of benefits under § 1132(a)(1)(B) fully compensates the plan participant for his injury, thereby rendering any other remedy duplicative, or whether an additional equitable remedy is appropriate to make the plan participant whole").

A. Background
1. Motion

Plaintiffs ask the Court to issue its "core liability findings" as a declaratory judgment. Plaintiffs' Opening Remedies Brief ("Motion") at 5-6; see also Plaintiffs' Amended Proposed Remedies Order § I.3 They contend such relief is authorized under 29 U.S.C. §§ 1132(a)(1)(B) and (a)(3) and is consistent with traditional equitable remedies. Motion at 5-6 (citing Dakotas & W. Minnesota Elec. Indus. Health & Welfare Fund by Stainbrook & Christian v. First Agency, Inc., 865 F.3d 1098 (8th Cir. 2017)).

2. Opposition

UBH argues that Plaintiffs' request for declaratory relief should be denied. Opposition at 54-55. In particular, UBH argues that the declaratory relief Plaintiffs seek should not be awarded because: 1) it merely "rehash[es]" portions of the Court's Findings of Fact and Conclusions of Law ("FFCL") and therefore will not serve a useful purpose; id. at 54 (citing United States v. Washington, 769 F.2d 1353, 1356-1357 (9th Cir. 1985); Hurd v. Garcia, 454 F. Supp. 2d 1032, 1053 (S.D. Cal. 2006)); and 2) declaratory relief under ERISA is available only to clarify the class members' rights to future benefits under their plans, not their rights to past benefits. Id. at 55 (citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 108 (1989); Williams v. Bank of Am., 2013 WL 1907529, at *5 (E.D. Cal. May 7, 2013)). With respect to the second argument, UBH asserts that Plaintiffs cannot show that the declaratory relief they seek will clarify a right to future benefits because they have not offered evidence that any plan at issue is still in effect, that any class member is a current participant or beneficiary of such a plan, or that UBH still uses its Guidelines. Id. They also argue that Plaintiffs cannot obtain the declaratory relief they seek under§ 1132(a)(3) because they have conceded that declaratory relief is available under § 1132(a)(1)(B). Id. at 54 n. 38.

UBH also objects to Paragraph 20 of the Declaratory Judgment section of Plaintiffs' Proposed Remedies Order, which states that "UBH violated Texas law throughout the Class Period by applying its own Guidelines rather than applying solely TDI Criteria to claims covered by the Texas statute." Id. at 56. UBH argues that this declaration misstates the Court's finding that UBH violated Texas law "at some point" during the class period and that UBH did not "consistently apply the TDI Criteria to claims for benefits that were governed by Texas law during the class period." Id. (quoting FFCL ¶ 167). Similarly, UBH objects to Paragraph 22, subsection b of Plaintif...

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