L. et al v. Aetna Life Insurance Company

Filing 63

ORDER by Judge Samuel Conti granting 55 motion to dismiss. (sclc2, COURT STAFF)(Filed on 2/23/2015).

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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;
)
)
Plaintiffs,
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v.
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AETNA LIFE INSURANCE CO.,
)
)
Defendant.
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)
)

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I.

INTRODUCTION

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

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("Aetna") motion to dismiss Plaintiffs' second amended complaint.

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ECF Nos. 50 ("SAC"), 55 ("Mot.").

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Nos. 56 ("Opp'n"), 57 ("Reply"), and appropriate for decision

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without oral argument under Civil Local Rule 7-1(b).

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reasons explained below, the motion to dismiss is GRANTED.

The motion is fully briefed, ECF

For the

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26 II.

BACKGROUND

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The facts of this case have been exhaustively summarized in

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two prior orders granting motions to dismiss, and the Court need

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not repeat them at length here.

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Order"); 47 ("Second Dismissal Order").

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See ECF Nos. 36 ("First Dismissal

In short, Plaintiffs Olivia L. and M.M. challenge Aetna's

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denials of coverage for residential mental health treatment under

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two health benefit plans governed by the Employee Retirement Income

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Security Act of 1974 ("ERISA").

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denied coverage because it determined the residential mental health

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treatment facilities at issue did not satisfy the plans'

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requirement that covered facilities be staffed 24/7 with licensed

29 U.S.C. § 1001, et seq.

Aetna

United States District Court

For the Northern District of California

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mental health professionals.

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"24/7 requirement" and the Court will do so as well.

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the dispute is whether the plans demand such 24/7 staffing in

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addition to the other requirements.

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Plaintiffs assert that Aetna's position is unsupported by the

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plans' plain language.

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The parties refer to this as the
The nub of

Aetna maintains that they do.

The Court has twice granted motions to dismiss Plaintiffs'

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complaint with leave to amend.

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Court granted leave to amend on two narrow points.

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Court granted leave to amend to plead that the 24/7 requirement is

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satisfied by the residential mental health treatment facilities.

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In so doing, the Court warned that "any attempts to re-plead failed

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arguments without new supporting facts may be dismissed with

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prejudice."

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granted leave to amend to assert a previously unpleaded claim for

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breach of fiduciary duty.

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In the most recent dismissal, the

Second Dismissal Order at 8.

First, the

Second, the Court

Now Aetna seeks dismissal with prejudice on the grounds that

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(1) Plaintiffs have again failed to plead that the 24/7 requirement

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is satisfied, and (2) their breach of fiduciary duty allegations

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suffer from several factual and legal defects.

Plaintiffs oppose.

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3 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.

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

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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.

"Dismissal can be based

United States District Court

For the Northern District of California

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1988).

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

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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."

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1202, 1216 (9th Cir. 2011).

Ashcroft v.

However, "the tenet that a court

Threadbare recitals of the

Id. (citing Bell Atl. Corp. v.
The allegations made in a

Starr v. Baca, 652 F.3d

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26 IV.

DISCUSSION

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The relevant plan language -- the plans' definitions of

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"Residential Treatment Facility" and "Behavioral Health

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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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•

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

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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

United States District Court

For the Northern District of California

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•
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A licensed organization or professional
providing diagnostic, therapeutic or
psychological services for behavioral health
conditions.

Second Dismissal Order at 4.
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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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)).

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Richardson v. Pension Plan of Bethlehem Steel Corp., 112 F.3d
In doing so, the Court must interpret

Id. (citing Evans

In interpreting an ERISA plan, the Court must look first to

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the agreement's specific language and determine the parties' clear

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intent, relative to the context giving rise to the language's

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inclusion.

Id. (citing Armistead v. Vernitron Corp., 944 F.2d

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1287, 1293 (6th Cir. 1991)).

Finally, the Court must construe each

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provision consistently with the entire document such that no

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provision is rendered nugatory.

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

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985).

Gilliam v. Nev. Power Co., 488

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A.

The 24/7 Requirement

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Plaintiffs begin by reiterating their now-familiar argument

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that the plans do not require a BHP to be on-site 24/7 if the

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facility is properly licensed under state law, since the facility

United States District Court

For the Northern District of California

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itself could be an "organization" under the plans' definition of a

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"BHP."

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before based on principles of contract interpretation, and the

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Court now rejects it for a third and final time.

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repeatedly misunderstood the Court's conclusion, so while the

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Court's interpretation has not changed, the Court will explain

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matters more exhaustively this time.

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Opp'n at 6-7.

The Court has rejected this argument twice

Plaintiffs have

The plans' definition of a BHP is broad, and includes licensed

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organizations or professionals "providing diagnostic, therapeutic

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or psychological services for behavioral health conditions."

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Second Dismissal Order at 4.

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explained, there are problems with Plaintiffs' interpretation of

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"organization" in the definition of a BHP, but even assuming for

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the sake of argument that Plaintiffs are right and a facility can

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fall within the plans' definition of BHP, the remainder of their

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interpretation remains flawed.

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Aside from the definition of a BHP, the plans define a "Residential

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Treatment Facility" as "an institution" that has both (1) an "[o]n-

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site licensed Behavioral Health Provider 24 hours per day/7 days a

As the Court has previously

See First Dismissal Order at 8-9.

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week" and (2) meets "any and all" licensing standards in the

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jurisdiction in which it is located.

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Second Dismissal Order at 4.

The problem with Plaintiffs' view arises when trying to

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harmonize the definition of BHP with the 24/7 requirement.

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Assuming for the sake of argument that the facilities here, as

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Plaintiffs argue, meet the definition of a BHP, the Court cannot

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imagine what it would mean for the facilities to be "on-site . . .

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24 hours per day/7 days a week."

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on-site 24/7 because a facility is a site.

Id.

By definition a facility is
In other words, reading

United States District Court

For the Northern District of California

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the words "Behavioral Health Provider" in the 24/7 requirement to

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include facilities is to simultaneously read "[o]n-site" and "24

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hours per day/7 days a week" out of the plan, because such terms

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have no meaning when applied to facilities.

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interpretation would also read the word "licensed" out of the 24/7

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requirement because to be a BHP an organization must already be

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"licensed" -- a requirement the definition of BHP does not impose

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on professionals.

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to accord with common sense, let alone the rules of contract

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interpretation.

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Id.

Such an

As a result, Plaintiffs' interpretation fails

See Gilliam, 488 F.3d at 1194.

Plaintiffs' detour into the Utah Administrative Code and a

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recent case, Lynn R. v. ValueOptions, No. 2:12-CV-1201 TS, 2014 WL

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4232519 (D. Utah Aug. 26, 2014), does not alter this conclusion.

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In Lynn R., as in this case, the plaintiff challenged the denial of

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coverage for residential mental health care.

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provided coverage for residential treatment centers, which the plan

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defined as having "a level of care that requires 24-hour on-site

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supervision as well as an array of therapeutic activities and

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education (as appropriate)."

Id. at *2.

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The plan documents

Finding this language

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ambiguous, the Court relied on dictionary definitions and Utah

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regulations in concluding that "[w]hile supervision involves some

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degree of authority, the term does not necessarily connote formal

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qualifications held by the person who supervises."

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As a result, the Court rejected the Plan's interpretation that the

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"on-site supervision" language required the presence of licensed

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professionals 24 hours a day.

Id. at *8-9.

Id.

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Plaintiffs argue that Lynn R. "provides another basis for the

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Plaintiffs' argument that satisfying Utah's licensing requirements

United States District Court

For the Northern District of California

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for being a residential treatment center does not always satisfy

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the separate requirement that a residential treatment facility must

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provide an 'on-site licensed Behavioral Health Provider 24 hours

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per day/7 days a week.'"

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the Court has pointed out before, this argument rests on

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Plaintiffs' misinterpretation of the Court's prior orders.

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Second Dismissal Order at 6-7.

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has said the 24/7 requirement is rendered nugatory under

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Plaintiffs' interpretation because Utah law already requires on-

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site BHPs 24/7 (and thus would be required to satisfy the "any and

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all applicable licensing standard" requirement).

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Instead, the problem with Plaintiffs' interpretation is and always

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has been that it reads the words "on-site," "licensed" and "24

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hours per day/7 days a week" out of the plan, and would thus allow

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a facility to only satisfy the requirement it meet "any and all"

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state licensing standards.

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and the plans' unambiguous language explains, the plan imposes two

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distinct requirements: compliance with the 24/7 requirement and all

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local licensing requirements.

Opp'n at 7.

But that is irrelevant.

As

See

Neither the parties nor the Court

Id. at 4.

But as the Court has repeatedly found

Id.

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In other words, because a

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facility will always satisfy the 24/7 requirement, Plaintiffs'

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reading leaves "no reason . . . to include the 24/7 Exclusion

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because satisfaction of the plans' licensing requirement" alone

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would be sufficient.

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First Dismissal Order at 7.

Although Plaintiffs argue in their opposition that "[t]he SAC

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pleads facts that demonstrate the two facilities at issue in this

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case, New Haven and Waterfall Canyon, satisfied the requirement

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that those facilities provide an 'on-site licensed Behavioral

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Health Provider 24 hours per day/7 days a week,'" the SAC does no

United States District Court

For the Northern District of California

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such thing.

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would only satisfy the 24/7 requirement only if the Court accepted

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Plaintiffs' unreasonable interpretation of the plan.

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21, 41-44, 58-62.

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interpretation and thus finds that Plaintiffs have failed to plead

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the satisfaction of the 24/7 requirement.

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Opp'n at 8.

Instead, the facts alleged in the SAC

See SAC ¶¶

The Court has rejected this flawed

Plaintiffs' remaining arguments are unavailing.

First, there

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is no basis for Plaintiffs' argument (raised for the first time in

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this, the third motion to dismiss on this very issue) that Aetna's

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argument in this case is simply a post-hoc rationalization for its

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denial of benefits not raised in the pre-litigation appeals

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process.

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"Aetna denied coverage . . . on the basis that the facility did not

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have a licensed health care professional on-site 24 hours per day/7

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days a week and, therefore, . . . the provider was not eligible for

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coverage under the medical benefit plan Aetna insures or

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administers."

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this is not a case where "an ERISA plan administrator [asserted] a

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reason for denial of benefits that it had not given during the

On the contrary, Plaintiffs' own allegations show that

SAC ¶ 8; see also id. at ¶¶ 43, 58-62.

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As a result,

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administrative process."

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699, 719-20 (9th Cir. 2012).

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Harlick v. Blue Shield of Cal., 686 F.3d

Furthermore, Plaintiffs are wrong to suggest that the Court

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has held them to a higher pleading requirement than the standard in

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Federal Rule of Civil Procedure 8(a).

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Aetna's motion to dismiss, the Court granted leave to amend to

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"plead facts indicating that the 24/7 requirement was satisfied."

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Second Dismissal Order at 8.

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because the existence of additional facts beyond those pleaded

In its last order granting

In Plaintiffs' view this is improper

United States District Court

For the Northern District of California

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cannot be evaluated without denying the motion to dismiss and

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allowing the parties to collect and analyze the pre-litigation

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appeal documents and the facilities' licensure.

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Again Plaintiffs have misread the Court's orders.

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Plaintiffs another chance to plead facts showing the satisfaction

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of the 24/7 requirement, the Court was not asking Plaintiffs to

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provide facts showing that they satisfy the 24/7 requirement as

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they (mistakenly) interpret it.

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giving Plaintiffs an opportunity to "plead sufficient facts"

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demonstrating they have satisfied the 24/7 requirement as the Court

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has held it must be interpreted.

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Because Plaintiffs have not done so, instead opting to simply "re-

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plead failed arguments without new supporting facts," these claims

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are DISMISSED WITH PREJUDICE.

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also Foman v. Davis, 371 U.S. 178, 182 (1962) (suggesting dismissal

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with prejudice is appropriate in light of "repeated failure to cure

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deficiencies by amendments previously allowed . . .").

See Opp'n at 9-10.
In giving

Instead, the Court was simply

See Iqbal, 556 U.S. at 687.

Second Dismissal Order at 8; see

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B.

Breach of Fiduciary Duty

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The Court's prior dismissal order granted Plaintiffs leave to

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amend to plead a claim for equitable relied based on alleged

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violations of fiduciary duty first referenced in their opposition

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to Aetna's second motion to dismiss.

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Plaintiffs' theory is that in processing claims, Aetna improperly

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distinguishes between network and non-network facilities by

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requiring only non-network facilities satisfy the 24/7 requirement.

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In Plaintiffs' view this is inconsistent with the plan language and

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results in Aetna being unjustly enriched Aetna at Plaintiffs'

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expense.

United States District Court

For the Northern District of California

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Second Dismissal Order at 8.

As a result, Plaintiffs seek "appropriate equitable

relief" under 29 U.S.C. Section 1132(a)(3).
The problem with this theory is it too depends on Plaintiffs'

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mistaken reading of the 24/7 requirement.

Plaintiffs' view is that

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by applying the 24/7 requirement to only non-network facilities,

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Aetna is able to "line its own pockets and deny claims to some

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participants and beneficiaries . . . ."

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¶ 83-86 (arguing that this distinction resulted in Aetna "unjustly

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enrich[ing] itself at claimants' expense . . .").

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Aetna could be enriched by such a practice would be if it were

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required to pay these benefits in the first place.

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the only way such a practice would save Aetna money (which it could

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then unjustly retain) is if Aetna were denying benefits it is

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obligated to pay under the plan.

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if a facility does not satisfy the 24/7 requirement then Aetna is

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not required to pay benefits.

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a claim for breach of fiduciary duty based on unjust enrichment

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because Aetna cannot be unjustly enriched by not paying claims it

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is not required to pay in the first place.

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only enforcing the 24/7 requirement against claims for treatment at

Opp'n at 11; see also SAC

But the only way

In other words,

But as the Court explained above,

As a result, Plaintiffs cannot state

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In short, if Aetna is

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non-network facilities, then that means Aetna and the plan are

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losing money they should retain by paying benefits not due, not

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retaining money they should pay out by denying benefits due.

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may be an actionable breach of fiduciary duty on some other theory,

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but it is not actionable as unjust enrichment.

That

As a result, Aetna's motion to dismiss Plaintiffs' second

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cause of action is GRANTED.

Nonetheless, amendment may not futile

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because Plaintiffs may be able to state an actionable theory for

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breach of fiduciary duty based on these facts.

Accordingly, the

United States District Court

For the Northern District of California

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Court GRANTS leave to amend on that theory and that theory alone.

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Any attempt to replead the first cause of action or further

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reliance on the now-thrice-rejected interpretation of the 24/7

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requirement will be dismissed with prejudice.

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V.

CONCLUSION
As explained above, Aetna's motion to dismiss is GRANTED WITH

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PREJUDICE as to Plaintiffs' first cause of action and WITHOUT

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PREJUDICE as to Plaintiffs' second cause of action.

Leave to amend

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is granted solely as to the second cause of action.

Plaintiffs

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

If Plaintiffs

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fail to file an amended complaint within the allotted time or

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otherwise fail to comply with the Court's instructions regarding

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rejected legal theories, the Court may dismiss this action with

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prejudice.

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IT IS SO ORDERED.

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Dated: February 23, 2015
UNITED STATES DISTRICT JUDGE

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