L. et al v. Aetna Life Insurance Company

Filing 49

Order by Hon. Samuel Conti granting 41 Motion to Dismiss.(sclc2, COURT STAFF) (Filed on 6/12/2014)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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United States District Court

For the Northern District of California

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) Case No. CV 13-2554 SC
)
ELIZABETH L., JAMES L., and
) ORDER GRANTING MOTION TO
OLIVIA L., individually and as ) DISMISS
representatives of the class of )
similarly situated individuals; )
and L.M. and N.M. as guardians )
of M.M., and as representatives )
of the class of similarly
)
situated individuals;
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)
Plaintiffs,
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v.
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AETNA LIFE INSURANCE CO.,
)
)
Defendant.
)
)
)

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I.

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INTRODUCTION
Now before the Court is Defendant Aetna Life Insurance Co.'s

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("Defendant") motion to dismiss the above-captioned Plaintiffs'

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first amended complaint.

ECF Nos. 39 ("FAC"), 41 ("MTD").

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motion is fully briefed.

ECF Nos. 46 ("Opp'n"), 47 ("Reply").

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Court finds it appropriate for decision without oral argument.

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Civ. L.R. 7-1(b).

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GRANTS Defendant's motion to dismiss, with leave to amend on two

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narrow points.

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///

The

For the reasons explained below, the Court

The

1 II.

BACKGROUND

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Plaintiffs challenge Defendant's denials of coverage under two

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employer-sponsored health benefits plans.

Plaintiffs Olivia L. and

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M.M., both minors, obtained mental health treatment at two

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different residential treatment facilities located in Utah.

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1-4.

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covered by health plans or health insurance policies provided

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through their parents' employers and governed by the Employee

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Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, et seq.

FAC ¶¶

At the times they were treated, Olivia L. and M.M. were

United States District Court

For the Northern District of California

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Id. ¶¶ 4-9.

Defendant, which administrated or insured those plans,

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denied Olivia L. and M.M.'s families coverage for those residential

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stays.

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residential treatment facilities did not satisfy the plans'

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requirement that covered facilities be staffed 24/7 with licensed

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mental health professionals, though the parties appear to agree

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that the facilities met the plan's other relevant requirements.

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Id. ¶¶ 1-4, 26-27, 30, 32, 34, 42-47.

It based its denial on its determination that the

The basis of Defendant's denial is the central issue of this

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case: do the plans demand such 24/7 staffing in addition to the

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other requirements?

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assert that Defendant's position is unsupported by the plans' plain

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language.

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are ambiguous, and that Defendant's inconsistent treatment of

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similarly situated claimants violates ERISA's fiduciary duty or

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claims processing requirements.

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///

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Defendant maintains that they do.

Plaintiffs

Plaintiffs also contend, alternatively, that the plans

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The plans are distinct, but the disputed language is the same in
each. Following the parties' convention, the Court addresses the
plans singularly for the remainder of this Order.

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Based on this dispute, Plaintiffs assert two causes of action

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against Defendant.

The first is a claim for benefits under ERISA.

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The second is a claim for declaratory and injunctive relief.

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claims depend on resolution of the central issue described above.

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Defendant now moves to dismiss.

Both

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7 III.

LEGAL STANDARD

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A motion to dismiss under Federal Rule of Civil Procedure

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12(b)(6) "tests the legal sufficiency of a claim."

Navarro v.

United States District Court

For the Northern District of California

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Block, 250 F.3d 729, 732 (9th Cir. 2001).

"Dismissal can be based

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on the lack of a cognizable legal theory or the absence of

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sufficient facts alleged under a cognizable legal theory."

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Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.

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1988).

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should assume their veracity and then determine whether they

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plausibly give rise to an entitlement to relief."

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Iqbal, 556 U.S. 662, 679 (2009).

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must accept as true all of the allegations contained in a complaint

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is inapplicable to legal conclusions.

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elements of a cause of action, supported by mere conclusory

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statements, do not suffice."

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Twombly, 550 U.S. 544, 555 (2007)).

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complaint must be both "sufficiently detailed to give fair notice

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to the opposing party of the nature of the claim so that the party

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may effectively defend against it" and "sufficiently plausible"

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such that "it is not unfair to require the opposing party to be

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subjected to the expense of discovery."

"When there are well-pleaded factual allegations, a court

Ashcroft v.

However, "the tenet that a court

Threadbare recitals of the

Id. (citing Bell Atl. Corp. v.

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The allegations made in a

Starr v. Baca, 652 F.3d

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1202, 1216 (9th Cir. 2011). 2

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3 IV.

DISCUSSION

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The disputed language at issue in this case -- the plan's

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definitions of "Residential Treatment Facility" and "Behavioral

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Health Provider/Practitioner" ("BHP") -- reads:

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Residential Treatment Facility (Mental Disorders)

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This is an institution that meets all of the
following requirements:

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United States District Court

•
For the Northern District of California

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On-site licensed Behavioral Health Provider 24
hours per day/7 days a week. 3

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. . .

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•

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Meets any and all applicable licensing
standards established by the jurisdiction in
which it is located.

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Behavioral Health Provider/Practitioner
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•
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A licensed organization or professional
providing diagnostic, therapeutic or
psychological services for behavioral health
conditions.

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MTD at 3; ECF No. 24-1 ("Sparks Decl.") Ex. A ("Elizabeth L. Plan")

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at 94 (Residential Treatment Facility definition), Ex. B ("M.M.

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Plan") at 93 (same); Elizabeth L. Plan at 80 (BHP definition), M.M.

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Plan at 80 (same).
To state a claim for benefits under ERISA, plan participants

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and beneficiaries have to plead facts making it plausible that a

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The Court declines to address the parties' dispute over which
ERISA standard of review -- de novo or abuse of discretion -should apply in this case. Even on a de novo standard, the Court
concludes (as explained below) that the plan is unambiguous, and
Defendant's interpretation of its terms is correct.
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In reference to this bullet point's being the basis of
Plaintiffs' exclusion for coverage, the parties and the Court call
it the "24/7 exclusion" or the "24/7 requirement."

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provider owes benefits under the plan.

See 29 U.S.C. §

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1132(a)(1)(B); Iqbal, 556 U.S. at 677.

In interpreting an ERISA

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plan, the Court must apply contract principles derived from state

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law, guided by policies expressed in ERISA and other federal labor

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law.

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982, 985 (9th Cir. 1997).

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the plan's terms in an ordinary and popular sense, as would a

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person of average intelligence and experience.

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v. Safeco Life Ins. Co., 916 F.2d 1437, 1441 (9th Cir. 1990)).

United States District Court

In doing so, the Court must interpret

Id. (citing Evans

In resolving disputes over ERISA plans, the Court must look

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For the Northern District of California

Richardson v. Pension Plan of Bethlehem Steel Corp., 112 F.3d

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first to the agreement's specific language and determine the

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parties' clear intent, relative to the context giving rise to the

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language's inclusion.

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944 F.2d 1287, 1293 (6th Cir. 1991)).

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construe each provision consistently with the entire document such

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that no provision is rendered nugatory.

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488 F.3d 1189, 1194 (9th Cir. 2007) (citing Richardson, 112 F.3d at

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985).

Id. (citing Armistead v. Vernitron Corp.,
Finally, the Court must

Gilliam v. Nev. Power Co.,

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A.

Plain Language and Interpretation Under ERISA

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Plaintiffs argue first that the Court should apply the

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interpretation they supplied in the first round of briefing on

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Plaintiffs' original complaint: essentially, that the plan does not

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require a BHP to be on-site 24/7 if the facility is properly

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licensed under state law, since the facility itself could be an

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"organization" under the plan's definition of a "BHP."

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("MTD I"), 27 ("Opp'n I"); see supra at 4 (providing the definition

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of "BHP").

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17, 2013 Order Granting Defendant's Motion to Dismiss.

ECF Nos. 24

The Court rejected that interpretation in its December

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ECF No. 36

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("Dec. 17 Order").
The Court reiterates that its rejection was based on

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principles of contract interpretation.

If the licensed residential

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treatment facility is itself the on-site licensed organization per

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the definition of BHP, as Plaintiffs submit, then there would be no

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reason for the plan to include the 24/7 requirement, because

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satisfaction of the plan's licensing requirement would always

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satisfy the 24/7 BHP requirement.

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Plaintiffs' interpretation of the plan would render the 24/7

Dec. 17 Order at 7.

Adopting

United States District Court

For the Northern District of California

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exclusion nugatory and incomprehensible, because the plan clearly

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establishes two distinct requirements.

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licensure requirement alone would meet the 24/7 BHP requirement,

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the 24/7 exclusion would be meaningless.

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(citing Gilliam, 488 F.3d at 1194; Richardson, 112 F.3d at 985).

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Plaintiffs' argument on this point still fails.

If satisfaction of the

Dec. 17 Order at 7

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Plaintiffs' second argument is that satisfaction of the

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licensure requirement would not necessarily satisfy the 24/7

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requirement.

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contend that the Court's December 17 Order held that compliance

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with Utah licensure laws alone could satisfy the plan's

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requirements.

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that Order, Plaintiffs proceed from this premise to discuss Utah

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licensing law, concluding that under Utah law, the residential

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treatment program -- as opposed to an organization, facility, or

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professional -- is what obtains licensure to operate a residential

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mental health treatment facility.

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Plaintiffs explain, a licensed program may or may not be an

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organization or professional who provides diagnostic, therapeutic,

Opp'n at 6-7.

On this point, Plaintiffs seem to

Apparently seeking to find some contradiction in

And under Utah law, as

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or psychological services for behavioral health conditions.

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treatment facility's satisfaction of "any and all" licensure

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standards only requires the facility to be run by a licensed

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"program."

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improper conclusion, Plaintiffs contend that the Court was wrong.

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As explained below, the Court disagrees.

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Id. at

Therefore, Plaintiffs conclude, a covered residential

Reading the December 17 Order as having made that

The Court finds, as a preliminary matter, that Plaintiffs
appear to have misread the Order.

As explained above, the Court's

United States District Court

For the Northern District of California

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statement that a licensed residential treatment facility would

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itself always satisfy the 24/7 requirement was an explanation,

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provided through a hypothetical statement, of why Plaintiffs'

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argument was incorrect under principles of contract interpretation.

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Substantively, the Court does not find Plaintiffs' argument

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convincing, especially since their logical conclusion is that the

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plan's licensure requirement and 24/7 exclusion must both be

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distinct.

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under Utah law to provide residential treatment necessarily be a

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licensed organization or professional providing diagnostic,

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therapeutic or psychological services for behavioral health

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problems as the [December 17 Order] postulates? No.").

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circumstances, the Court finds that Plaintiffs fail to address

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either "any and all" applicable licensing standards, or the 24/7

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requirement that remains the subject of this dispute.

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Opp'n at 8 ("Will a program that is properly licensed

Under these

A covered "Residential Treatment Facility" for mental health

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treatment must comply with all relevant Utah licensure laws,

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including those for the provision of mental health services -- not

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just the bare minimum licensure requirements for a "residential

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treatment program."

Mental health services have their own

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additional licensure requirements under Utah law, 4 and engaging in

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the practice of mental health therapy without a license is a felony

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in Utah, per Utah Code sections 58-60-109(1)(a) and 58-60-111(1).

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The plan requires all covered residential treatment facilities to

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satisfy all of these licensure standards, meaning those for

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programs and mental-health-specific treatment facilities alike.

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Moreover, such compliance remains separate from the 24/7

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requirement per the plan's terms.

Since Plaintiffs fail to plead

United States District Court

For the Northern District of California

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that the facilities where they were treated satisfied the 24/7

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requirement, in addition to the licensure requirements, the Court

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finds that Plaintiffs fail to state an ERISA claim for benefits

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under the plan.
Plaintiffs' ERISA claim is therefore DISMISSED.

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If Plaintiffs

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can plead facts indicating that the 24/7 requirement was satisfied,

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they may do so, but any attempts to re-plead failed arguments

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without new supporting facts may be dismissed with prejudice.

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B.

Ambiguity

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The Court also finds, again, that the plan's terms are

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unambiguous.

Ambiguity exists only when an ERISA plan's provisions

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are subject to two reasonable competing definitions.

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Cont'l Cas. Co., 167 F.3d 502, 507 (9th Cir. 2007).

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claim that an average person of ordinary intelligence and

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experience could reasonably believe their interpretation of the

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plan's language, described above.

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not convinced.

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remains convoluted and unreasonable, and the Court cannot find that

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See supra at 5-8.

Deegan v.
Plaintiffs

The Court is

Plaintiffs' alternative interpretations of the plan

See, e.g., Utah Code §§ 58-60-102(7), -103(1)(a)-(b), -109(1)(a).

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a reasonable person of average intelligence and experience would

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adopt Plaintiffs' interpretations.

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import extrinsic evidence, such as the opposition brief's

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referenced, but unattached and unquoted, Utah District Court

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documents, to find ambiguity here.

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F.3d 1437, 1444 (9th Cir. 1995) (holding that consideration of

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extrinsic evidence is precluded unless a plan's terms are

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ambiguous).

The Court also declines to

Cinelli v. Sec. Pac. Corp., 61

As one change from their prior pleadings, Plaintiffs' FAC now

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United States District Court

For the Northern District of California

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makes the argument, previously raised improperly, that Defendant

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treated other similarly situated claimants differently under the

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same plan language.

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claim-denial expert who assists Defendant's insureds with appeals

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for denials of coverage, that Defendant has previously paid claims

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for residential mental health treatment even if the treatment was

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not provided at a facility with 24/7 BHP staffing.

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(citing FAC ¶¶ 24-25, 27, 45, 56).

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contend that Defendant treated in-network residential treatment

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facilities differently from non-network facilities.

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language, which, as noted in this Order and the December 17 Order,

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the Court finds clear.

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Employed by MarkAir, Inc., 293 F.3d 1139, 1143 (9th Cir. 2002)

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(citing Richardson, 112 F.3d at 985) (holding that consideration of

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extrinsic evidence to interpret plan terms is inappropriate if the

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plan is unambiguous).

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rejects Plaintiffs' effort to interpret the language through

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Defendant's alleged actions in other cases.

Plaintiffs now allege, per the experience of a

Opp'n at 11

Additionally, Plaintiffs

Id. & FAC ¶

None of this supports a finding of ambiguity based on the plan

See Bergt v. Retirement Plan for Pilots

Since the plan is not ambiguous, the Court

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Plaintiffs also revisit their contention that the plan is

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ambiguous because other sections of Defendant's plans regarding

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treatment in other types of facilities -- "hospitals," "psychiatric

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hospitals," and "skilled nursing facilities" -- state specifically

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that certain other types of 24/7 staffing are required.

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clause that a "hospital" must provide "twenty-four (24) hour-a-day

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R.N. [registered nurse] service."

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Court is not convinced that this argument proves the plan's

Opp'n at

For example, Defendant's definition of "hospital" includes the

Elizabeth L. Plan at 85-86.

The

United States District Court

For the Northern District of California

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ambiguity.

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are not incorporated into or referenced by the provisions under

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which Plaintiffs seek coverage.

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fact that, as addressed above, the definition of "Residential

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Treatment Facility" has two distinct requirements for coverage: the

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licensure requirement and the 24/7 requirement.

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Those definitions relate to different provisions that

They therefore do not alter the

Plaintiffs' arguments do not merit reading out one requirement

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or the other, and they do not prove to the Court that the plan is

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ambiguous.

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these contentions.

The Court therefore rejects Plaintiffs' claims based on

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C.

Unpled Claims

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Plaintiffs' opposition brief also raises the possibility that

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Defendant's allegedly inconsistent treatment of claimants with

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identical plan language constitutes violations of both Defendant's

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statutory fiduciary duty under ERISA, as well as regulations

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concerning ERISA claim processing.

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U.S.C. § 1104(a)(1)(D); 29 C.F.R. § 2560.503-1(b)(5)).

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separate allegations from Plaintiffs' claims concerning their

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denial of benefits under Defendants' plan, and they do not support

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Opp'n at 12-13 (citing 29
These are

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Plaintiffs' claims based on 29 U.S.C. § 1132(a)(1)(B) (providing

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that plan participants may recover "benefits due under the terms of

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[their] plan").

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plead these theories properly, but they are instructed to avoid

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raising new factual and legal allegations in their opposition

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briefs in future disputes (should they arise).

Plaintiffs have leave to amend their complaint to

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D.

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The Court DISMISSES Plaintiffs' declaratory relief claim

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because it is based on the same theories as Plaintiffs' dismissed

United States District Court

For the Northern District of California

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Declaratory Relief

ERISA claim.

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V.

CONCLUSION
As explained above, Defendant Aetna Life Insurance Co.'s

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motion to dismiss the above-captioned Plaintiffs' complaint is

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GRANTED, and the complaint is DISMISSED with leave to amend.

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Plaintiffs have thirty (30) days to file an amended complaint

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addressing (1) the fiduciary duty claim they described in their

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opposition but did not plead, or (2) more narrowly, facts showing

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that the 24/7 requirement was met, as discussed above.

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If Plaintiffs fail to file an amended complaint within the
allotted time, the Court may dismiss this action with prejudice.

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IT IS SO ORDERED.

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Dated: June 12, 2014
UNITED STATES DISTRICT JUDGE

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