Murphy v. UnitedHealthcare Insurance Company

Filing 52

ORDER GRANTING IN PART AND DENYING IN PART 42 MOTION TO DISMISS. Signed by Judge Beth Labson Freeman.(blflc2S, COURT STAFF) (Filed on 4/1/2016)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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BERI MURPHY, et al.,

Case No. 15-cv-03799-BLF

Plaintiffs,
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v.
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United States District Court
Northern District of California

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UNITEDHEALTHCARE INSURANCE
COMPANY, et al.,

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ORDER GRANTING IN PART AND
DENYING IN PART MOTION TO
DISMISS

Defendants.

[Re: ECF 42]

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On March 31, 2016, the Court heard oral argument on Defendants’ Motion to Dismiss

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pursuant to Federal Rules of Procedure 12(b)(1) and 12(b)(6). Mot., ECF 42. The Court has

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considered the parties’ briefing and oral argument. For the reasons stated on the record and below,

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Defendants’ Motion to Dismiss is GRANTED IN PART and DENIED IN PART.

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I.

LEGAL STANDARD

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Federal Rule of Civil Procedure 12(b)(1) requires that each named Plaintiff prove that

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there is a live controversy between him/her and the defendants. See Kokkonen v. Guardian Life

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Ins. Co., 511 U.S. 375, 377 (1994); Ass’n of Am. Med. Colls. v. United States, 217 F.3d 770, 778–

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79 (9th Cir. 2000). To survive a motion to dismiss under Federal Rule 12(b)(6), “a complaint must

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contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its

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face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550

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U.S. 544, 570 (2007)).

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II.

DISCUSSION
A. Defendants

Defendants argue—and Plaintiffs concede—that the majority of the named Defendants are

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not proper defendants in this case. See Mot. at 1, 8-9; Opp. at 12. In the Ninth Circuit, a plaintiff

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may press an ERISA claim “against the plan as an entity and against the fiduciary of the plan.”

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Spinedex Physical Therapy USA Inc. v. United Healthcare of Arizona, Inc., 770 F. 3d 1282, 1297-

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98 (9th Cir. 2014) (internal quotation marks omitted).

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Plaintiffs Murphy, Favichia, and Amendt allege that their health benefit plans were
provided by UnitedHealthcare Insurance Company (“UHIC”), Sutter Health Sacramento Sierra

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Region Self-Funded Health Plan, and Sutter VNA & Hospice Self-Funded Health Plan,

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respectively. First Amended Compl. (“FAC”) ¶¶ 11, 13, 15. Plaintiffs also allege that Optum Rx is

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the third-party pharmacy benefit claims administrator for each of these plans. Id. ¶¶ 13, 15, 18.

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The parties agree that no other Defendants are proper defendants at this stage. Accordingly, the

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United States District Court
Northern District of California

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Court GRANTS Defendants’ Motion to Dismiss the other Defendants without prejudice.

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B. Plaintiff Murphy
Defendants argue that Ms. Murphy’s claims are moot because UHIC granted her coverage

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for Harvoni in the course of its administrative process. Mot. at 7. As a result, they contend, she

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fails the live controversy requirement of Rule 12(b)(1). Id. Ms. Murphy responds that she is a

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proper plaintiff even if her claim is moot because her claim is capable of repetition, yet evades

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review and because UHIC granted her claim only to make her claim “inherently transitory,” such

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that it expired before the Court could consider class certification of it. Opp. at 7 (citing United

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States Parole Commission v. Geraghty, 445 U.S. 388, 399 (1980)).

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For either of these exceptions to apply, “the named plaintiff [must] have a personal stake at

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the outset of the lawsuit.” Geraghty, 445 U.S. at 398. To have such a stake for an ERISA claim, “a

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claimant must avail . . . herself of a plan’s own internal review procedures before bringing suit in

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federal court.” Diaz v. United Agr. Employee Welfare Ben. Plan and Trust, 50 F.3d 1478, 1483

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(9th Cir. 1995) (citation omitted). Here, Ms. Murphy filed suit in the middle of her administrative

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appeal—that is, before exhausting her administrative remedies. Thus, Ms. Murphy did not “have a

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personal stake at the outset of the lawsuit” and her claim is now moot.

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At the hearing, Ms. Murphy argued that UHIC improperly denied her request for urgent

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review of her administrative appeal and that a claim for that misconduct was ripe at the time of
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filing. But that denial does not form the basis of Ms. Murphy’s claims as pled, nor does it appear

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to be reflective of the purported class’ allegations. Accordingly, the Court GRANTS Defendants’

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Motion to Dismiss Ms. Murphy’s claims with leave to amend.

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C. Plaintiff Favichia
Defendants similarly argue that Ms. Favichia lacks standing to bring her claim because she

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failed to exhaust her administrative remedies before filing suit. See Diaz, 50 F. 3d at 1483. Ms.

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Favichia concedes that she filed a second request for treatment rather than appealing her initial

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denial, but argues that she can plead around this deficiency. Opp. at 12-17. Accordingly, the Court

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GRANTS Defendants’ Motion to Dismiss Ms. Favichia’s claims with leave to amend.

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United States District Court
Northern District of California

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D. ERISA § 502(a)(3) Claims
Finally, Defendants seek dismissal of Plaintiffs’ ERISA § 502(a)(3) claim, see 29 U.S.C. §

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1132(a)(3), on the grounds that they could get adequate relief under their ERISA § 502(a)(1)(B)

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claim, see 29 U.S.C. § 1132(a)(1)(B). Mot. at 10. Plaintiffs respond that the two claims are

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distinguishable because their § 502(a)(3) claim seeks not only monetary relief for denial of past

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benefits, but also class-wide injunctive and equitable relief. Opp. at 17.

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In light of Plaintiffs claim for injunctive relief—and Defendants’ withdrawal of their

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argument that a change in policy since this lawsuit was filed has mooted the claim, see Reply at 7,

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ECF 45—it is not clear at this stage of the lawsuit that benefits under § 502(a)(1)(B) would

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provide Plaintiffs a sufficient remedy for their § 502(a)(3) claim. See, e.g., Caplan v. CAN Short

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Term Disability Plan, 479 F.Supp, 2d 1108, 1113 (N.D. Cal. 2007); Davis v. Bank of America

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GroupBenefits Program, No. C10-5199, 2011 WL 1298860 at *4 (N.D. Cal. Apr. 4, 2011).

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Accordingly, the Court DENIES Defendants’ Motion to Dismiss the § 502(a)(3) claim.

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IT IS SO ORDERED.
Dated: April 1, 2016
______________________________________
BETH LABSON FREEMAN
United States District Judge

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