Wit v. United Behavioral Health

• Decision Date: 26 January 2023
• Docket Number: s. 20-17363,21-15193,s. 20-17364,21-15194
• Parties: David WIT; Natasha Wit; Brian Muir; Brandt Pfeifer, on behalf of the Estate of his deceased wife, Lauralee Pfeifer; Lori Flanzraich, on behalf of her daughter Casey Flanzraich; Cecilia Holdnak, on behalf of herself, her daughter Emily Holdnak; Gary Alexander, on his own behalf and on behalf of his beneficiary son, Jordan Alexander; Corinna Klein; David Haffner, on behalf of themselves and all others similarly situated, Plaintiffs-Appellees, Linda Tillitt; Mary Jones, Intervenor-Plaintiffs-Appellees, v. UNITED BEHAVIORAL HEALTH, Defendant-Appellant. Gary Alexander, on his own behalf and on behalf of his beneficiary son, Jordan Alexander; Corinna Klein; David Haffner, on behalf of themselves and all others similarly situated, Plaintiffs-Appellees, Michael Driscoll, Intervenor-Plaintiff-Appellee, v. United Behavioral Health, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

58 F.4th 1080

David WIT; Natasha Wit; Brian Muir; Brandt Pfeifer, on behalf of the Estate of his deceased wife, Lauralee Pfeifer; Lori Flanzraich, on behalf of her daughter Casey Flanzraich; Cecilia Holdnak, on behalf of herself, her daughter Emily Holdnak; Gary Alexander, on his own behalf and on behalf of his beneficiary son, Jordan Alexander; Corinna Klein; David Haffner, on behalf of themselves and all others similarly situated, Plaintiffs-Appellees,

Linda Tillitt; Mary Jones, Intervenor-Plaintiffs-Appellees,

v.UNITED BEHAVIORAL HEALTH, Defendant-Appellant.

Gary Alexander, on his own behalf and on behalf of his beneficiary son, Jordan Alexander; Corinna Klein; David Haffner, on behalf of themselves and all others similarly situated, Plaintiffs-Appellees,

Michael Driscoll, Intervenor-Plaintiff-Appellee,

v.United Behavioral Health, Defendant-Appellant.

Nos. 20-17363

21-15193

Nos. 20-17364

21-15194

United States Court of Appeals, Ninth Circuit.

Argued and Submitted August 11, 2021 San Francisco, California

Filed January 26, 2023

Miguel A. Estrada (argued), Geoffrey M. Sigler, Lucas C. Townsend, and Matthew S. Rozen, Gibson Dunn & Crutcher LLP, Washington, D.C.; April N. Ross, Cromwell & Morning LLP, Washington, D.C.; Jennifer S. Romano and Andrew Holmer, Cromwell & Moring LLP, Los Angeles, California; Nathaniel P. Bualat and Thomas F. Koegel, Crowell & Moring LLP, San Francisco, California; for Defendant-Appellant

Caroline E. Reynolds (argued), David A. Reiser, and Andrew N. Goldfarb, Zuckerman Spaeder LLP, Washington, D.C.; D. Brian Hufford, Jason S. Cowart, Zuckerman Spaeder LLP, New York, New York; Adam Abelson, Zuckerman Spaeder LLP, Baltimore, Maryland; Peter K. Stris, Stris & Maher LLP, Los Angeles, California; Meiram Bendat, Meiram Bendat, Santa Barbara, California; for Plaintiffs-Appellees.

Michael B. Kimberly and Sara P. Hogarth, McDermott Will & Emery LLP, Washington, D.C.; Joshua B. Simon, Warren Haskel, and Richard Diggs ; McDermott Will & Emery LLP, New York, New York; for Amicus Curiae America's Health Insurance Plans Inc.

Andrew J. Pincus, Archis A. Parasharami, and Daniel E. Jones, Mayer Brown LLP, Washington, D.C.; Avi M. Kupfer, Mayer Brown LLP, Chicago, Illinois; Daryl Joseffer and Jennifer B. Dickey, United States Chamber Litigation Center Inc, Washington, D.C.; for Amicus Curiae the Chamber of Commerce of the United States of America.

Joana S. McCallum, Manatt Phelps & Phillips LLP, Los Angeles, California; Joseph E. Laska, and Nathaniel A. Cohen, San Francisco, California; for Amicus Curiae Association for Behavioral Health and Wellness.

Aaron M. Panner and Eric J. Maier, Kellogg Hansen Todd Figel & Frederick PLLC, Washington, D.C.; Alison L. Andersen, ArentFox Schiff LLP, Washington, D.C.; Jack R. Bierig and Neil Lloyd, ArentFox Schiff LLP, Chicago, Illinois; Wendy Qiu, Holland & Knight LLP, Los Angeles, California; for Amici Curiae American Psychiatric Association, American Medical Association, California Medical Association, Southern California Psychiatric Society, Northern California Psychiatric Society, Orange County Psychiatric Society, Central California Psychiatric Society and San Diego Psychiatric Society.

Melissa Moore and Stephen Silverman, Senior Attorneys; Jeffrey Hahn, Counsel for Litigation; G. William Scott, Associate Solicitor for Plan Benefit Security; Elena Goldstein, Acting Solicitor of Labor; United States Department of Labor, Office of the Solicitor, Plan Benefits Security Division, Washington, D.C.; for Amicus Curiae Secretary of Labor.

Ari Dybnis and Martine N. D'Agostino, Deputy Attorney Generals; Karli Eisenberg, Supervising Deputy Attorney General; Renu R. George, Senior Assistant Attorney General; Rob Bonta, Attorney General of California, Office of the Attorney General, Oakland, California; for Amicus Curiae State of California.

Kevin Costello, Center for Health Law & Policy Innovation, Harvard Law School, Cambridge, Massachusetts; Abigail K. Coursolle and Elizabeth Edwards, National Health Law Program, Los Angeles, California; for Amici Curiae National Health Law Program, et al.

Sarah W. Rice, Deputy, Public Protection Bureau; Maria R. Lenz, Assistant Attorney General; Peter F. Neronha, Attorney General; Rhode Island Office of the Attorney General, Providence, Rhode Island; Thomas Ryan, Assistant Attorney General; Clare Kindall, Solicitor General; William Tong, Attorney General of Connecticut, Office of the Attorney General, Hartford, Connecticut; Sarah A. Hunger, Deputy Solicitor General; Kwame Raoul, Attorney General of Illinois, Office of the Illinois Attorney General, Chicago, Illinois; for Amici Curiae states of Rhode Island, Connecticut, and Illinois.

Before: Morgan Christen and Danielle J. Forrest, Circuit Judges, and Michael M. Anello,^* District Judge.

ANELLO, District Judge:

United Behavioral Health ("UBH") appeals from the district court's judgment finding it liable to classes of Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA") plaintiffs under 29 U.S.C. §§ 1132(a)(1)(B) and (a)(3), as well as several pre-and post-trial orders, including class certification, summary judgment, and a remedies order. UBH contends on appeal that Plaintiffs lack Article III standing, and that the district court erred at class certification and trial in several respects. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we reverse in part.

I

UBH is one of the nation's largest managed healthcare organizations. It administers insurance benefits for mental health conditions and substance use disorders for various commercial health benefit plans. In this role, UBH processes coverage requests made by plan members to determine whether the treatment sought is covered under the respective plans. UBH retains discretion to make these coverage determinations "for specific treatment for specific members based on the coverage terms of the member's plan."

Individually named plaintiffs David and Natasha Wit, Brian Muir, Brandt Pfeifer, Lori Flanzraich, Cecilia Holdnak, Gary Alexander, Corinna Klein, David Haffner, Linda Tillitt, and Michael Driscoll (collectively, "Plaintiffs") are all beneficiaries of ERISA-governed health benefit plans for which UBH was the claims administrator. Plaintiffs all submitted coverage requests, which UBH denied.

Plaintiffs initiated this action on behalf of three putative classes, asserting, at issue here, two claims against UBH. The first is for breach of fiduciary duty pursuant to 29 U.S.C. § 1132(a)(1)(B) and "to the extent the injunctive relief Plaintiffs seek is unavailable under that section, they assert the claim under 29 U.S.C. § 1132(a)(3)(A)." Second, Plaintiffs brought an improper denial of benefits claim under 29 U.S.C. §§ 1132(a)(1)(B) and (a)(3)(B). Both of Plaintiffs' claims hinge on a theory that UBH improperly developed and relied on internal guidelines that were inconsistent with the terms of the class members' plans and with state-mandated criteria.¹

Among the individually named Plaintiffs, there are ten different ERISA plans. Among the class members, there may be as many as 3,000 different plans. The Parties stipulated to a sample class of 106 members, from which they submitted a sample of health insurance plans (the "Plans"). Plaintiffs alleged that the Plans provided coverage for treatment consistent with generally accepted standards of care ("GASC") or were governed by state laws specifying certain criteria for making coverage or medical necessity determinations. Some of the plans administered by UBH were fully insured plans where UBH served a dual role as a plan administrator and insurer, both authorized to determine the benefits owed and responsible for paying such benefits.

The Plans provide that a precondition for coverage is that treatment be consistent with GASC. The Plans contain additional conditions and exclusions, and Plaintiffs did "not dispute that a service that is consistent with [GASC] may, nonetheless, be excluded from coverage under a particular class member's plan." For example, some plans may exclude "[s]ervices that extend beyond the period necessary for evaluation, diagnosis, the application of evidence-based treatments, or crisis intervention to be effective." Some plans also may require that the service be the "least costly alternative." The Plans grant UBH discretion to interpret these various terms and determine whether a requested service is covered. To assist with the process of making these determinations, UBH developed internal guidelines used by UBH's clinicians in making coverage determinations. These guidelines include the challenged Level of Care Guidelines and Coverage Determination Guidelines ("Guidelines"). The Level of Care Guidelines are used for plans that limit coverage to medically necessary services. The Coverage Determination Guidelines are used for plans not containing a medical necessity requirement.

Plaintiffs alleged that these Guidelines were more restrictive than GASC and were also more restrictive than state-mandated criteria for making medical-necessity or coverage determinations. Plaintiffs further alleged that UBH breached its fiduciary duties to act solely in the interests of the participants and beneficiaries to develop coverage criteria consistent with GASC. UBH also allegedly breached its fiduciary duties by developing guidelines inconsistent with criteria explicitly mandated by state laws. Plaintiffs also contended UBH breached its duties by promulgating self-serving, cost-cutting guidelines that are more restrictive than the Plans. As to their denial of benefits claim, Plaintiffs argued that UBH violated ERISA by improperly denying Plaintiffs benefits based on its Guidelines, which are more restrictive than the Plans or criteria mandated by state laws.

Plaintiffs sought certification of three proposed classes as to both claims: (1) the Wit Guideline Class; (2) the Wit State Mandate Class; and (3) the Alexander Guideline Class. The Wit Guideline Class was...