Pennsylvania Chiropractic Association et al. vs. Blue Cross Blue Shield Association et al.

Filing 565

MEMORANDUM OPINION AND ORDER signed by the Honorable Matthew F. Kennelly on 12/28/2011. (mk)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

PENNSYLVANIA CHIROPRACTIC
ASSOCIATION, et al.,

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Plaintiffs,
vs.
BLUE CROSS BLUE SHIELD
ASSOCIATION, et al.,
Defendants.

Case No. 09 C 5619

MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
The plaintiffs in this case are chiropractic physicians, an occupational therapist,
and a clinical social worker/trauma specialist who have provided services to members
of health care plans insured or administered by the defendants; professional
associations whose members are chiropractic physicians; a residential treatment
facility; and a subscriber to a health care plan.1 The defendants are Blue Cross and
Blue Shield of America (BCBSA) and individual Blue Cross and Blue Shield entities
(BCBS entities). BCBSA is a national umbrella organization that facilitates the activities
of individual BCBS entities. Individual BCBS entities insure and administer health care

1

The Court assumes familiarity with the plaintiffs’ allegations in this case and will
summarize them only briefly here. A more detailed recounting of the plaintiffs’
allegations can be found in the Court’s May 17, 2010 decision. Pennsylvania
Chiropractic Ass’n v. Blue Cross Blue Shield Ass’n, No. 09 C 5619, 2010 WL 1979569
(N.D. Ill. May 17, 2010).
1

plans to Blue Cross and Blue Shield customers (BCBS insureds) in various regions.
Plaintiffs allege that defendants improperly took money belonging to plaintiffs.
They allege that defendants would initially reimburse the provider plaintiffs for medical
services they provided to BCBS insureds. Sometime afterward, plaintiffs allege,
defendants would make a false or fraudulent determination that the payments had been
in error. Defendants then would demand that individual plaintiffs repay the supposedly
overpaid amounts immediately. If plaintiffs refused to return the payments, defendants
would forcibly recoup the amounts they sought by withholding payment on other,
unrelated claims for services plaintiffs provided to other BCBS insureds. The
subscriber plaintiff, Katherine Hopkins, alleges that she was held liable for portions of a
bill for services she received at Miami Valley Hospital after her insurer, Anthem Ohio,
demanded recoupment from the chiropractic provider who treated her.
Plaintiffs allege further that when defendants made these repayment demands,
they typically did not provide adequate information regarding available review
procedures. Plaintiffs allege that defendants sometimes failed to offer any appeal
process at all. When an appeal process was available, plaintiffs allege, defendants
refused to provide details about which patients, claims, and plans were claimed to be
the subject of overpayment or “effectively ignored” plaintiffs’ appeals. Fourth Am.
Compl. ¶ 18. Plaintiffs contend that this conduct deprived them of their right to a “full
and fair review” under section 503 of ERISA, 29 U.S.C. § 1133.
Plaintiffs sue on behalf of themselves and, in the case of association plaintiffs,
on behalf of their members. They also sue on behalf of a putative class of
similarly-situated individual plaintiffs.
2

Plaintiffs filed their first amended complaint on November 16, 2009. In that
complaint, plaintiffs alleged that defendants’ actions violated the Racketeer Influenced
and Corrupt Organizations Act (RICO), the Employee Retirement Income Security Act
(ERISA), and Florida law. On May 17, 2010, the Court granted a motion by defendants
to dismiss the RICO claims for failure to state a claim. Pennsylvania Chiropractic Ass’n
v. Blue Cross Blue Shield Ass’n, No. 09 C 5619, 2010 WL 1979569 (N.D. Ill. May 17,
2010).
Plaintiffs filed a second amended complaint on June 29, 2010. The second
amended complaint reasserted the RICO and ERISA claims from the first amended
complaint. Plaintiffs added a claim of RICO conspiracy and an ERISA claim on behalf
of Hopkins and the putative class of subscribers she represents. The Court dismissed
the RICO claims as well as Hopkins’ ERISA claim against WellPoint, Inc., a BCBS
entity. Pennsylvania Chiropractic Ass’n v. Blue Cross Blue Shield Ass’n, No. 09 C
5619, 2010 WL 3940694 (N.D. Ill. Oct. 6, 2010).
Plaintiffs filed a third amended complaint on January 20, 2011 and a corrected
third amended complaint on January 27, 2011. The corrected third amended complaint
amended Hopkins’ ERISA claims and added defendants with regard to those claims.
With leave from the Court, plaintiffs filed a fourth amended complaint on
February 17, 2011, in which they added plaintiff Susanna Wood and defendants that
are wholly-owned subsidiaries of WellPoint, Inc., altered the proposed class definition,
and added further detail regarding particular recoupments.
Plaintiffs assert their ERISA claims in three counts in the fourth amended
complaint. In count one, plaintiffs seek to recover the unpaid benefits they allege
3

defendants improperly recouped, pursuant to section 502(a)(1)(B) of ERISA. See
Fourth Am. Compl. ¶¶ 507-17. That provision permits a plan participant or beneficiary
to bring a civil action “to recover benefits due to him under the terms of the 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.” 29 U.S.C. § 1132(a)(1)(B).
In counts two and four, plaintiffs request injunctive and other equitable relief
under section 502(a)(3) of ERISA. Id. ¶¶ 518-25, 531-35. That provision authorizes a
plan participant, beneficiary, or fiduciary to bring a civil action “(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[.]” 29 U.S.C. § 1132(a)(3).
In count three, certain plaintiffs allege violations of section 627.419 of the Florida
Code.2 Id. ¶¶ 526-30. Plaintiffs Florida Chiropractic Association and Dr. Peri Dwyer
(the “Florida plaintiffs”) bring this claim against defendant Blue Cross Blue Shield of
Florida (BCBSF). BCBSF policies cover only a single physical medical modality or
procedure code per patient per day and a limited number of spinal manipulations per

2

Section 627.419 states:

Notwithstanding any other provision of law, when any health insurance policy,
health care services plan, or other contract provides for the payment for medical
expense benefits or procedures, such policy, plan, or contract shall be construed
to include payment to a chiropractic physician who provides the medical service
benefits or procedures which are within the scope of a chiropractic physician’s
license. Any limitation or condition placed upon payment to, or upon services,
diagnosis, or treatment by, any licensed physician shall apply equally to all
licensed physicians, without unfair discrimination to the usual and customary
treatment procedures of any class of physicians.
4

calendar year. The Florida plaintiffs contend that these limits discriminate against
medical services provided by chiropractors in violation of section 627.419. They seek
to recover withheld benefits and request an injunction against future violations.
Plaintiffs have moved to certify the case as a class action pursuant to Federal
Rule of Civil Procedure 23. They ask the Court to certify three classes. First, they
request certification of a Provider Class consisting of:
[a]ll health care providers who, from six years prior to the filing date of this
action to the class certification order date (“ERISA Class Period”),
provided health care services to patients insured under health care plans
governed by ERISA and insured or administered by Defendants and who,
after having received payments from Defendants, were subjected to
retroactive requests for repayment of all or a portion of such payments or
had subsequent payments withheld as an offset against the amount
allegedly owed.
Pls.’ Notice of Mot. to Certify Class (dkt. no. 461) at 1. Second, plaintiffs request
certification of a Subscriber Class, defined as:
[a]ll health care subscribers who, from six years prior to the filing date of
this action to the class certification order date (“ERISA Class Period”),
received health care services under health care plans governed by ERISA
and insured or administered by Defendant WellPoint and who, after
having received benefits, either directly or through payments to their
providers, were either subjected to retroactive requests for repayment of
all or a portion of such payments or had subsequent payments withheld
as an offset against the amount allegedly owed, or were balance billed by
their providers for amounts that had been subject to repayment demands
or offsets.
Id. at 1-2. Finally, plaintiffs request certification of a Florida Chiropractic Discrimination
Class. Plaintiff Dwyer serves as the representative for this putative class. The class
definition includes:
[a]ll Doctors of Chiropractic in the state of Florida who, from six years prior
to the filing date of this action to the class certification order date
(“Chiropractic Discrimination Class Period”) provided health care services
5

to patients insured under ERISA health care plans insured or
administered by BCBS entities and who, after having treated patients for
more than 26 visits, were denied payment or who, after having provided
more than one physical therapy modality on the same date as chiropractic
manipulation, were denied reimbursement based on a determination that
the services were not Covered Services.
Id. at 3. Defendants oppose certification on the ground that plaintiffs do not satisfy the
requirements of Rule 23.
On September 20, 2011, Judge Federico A. Moreno entered an order in Love v.
Blue Cross & Blue Shield Ass’n, No. 03 C 21206 (S.D. Fla.), in which he granted a
defense motion to enforce an injunction against Dr. Gregory Kuhlman, a plaintiff in this
case. Judge Moreno’s order requires Dr. Kuhlman to withdraw all of his claims in this
action against the BCBS defendants with which he settled his claims in the Love
litigation. It also requires plaintiffs to “cease prosecution of all claims asserted on
behalf of Love class members.” Docket no. 544. Plaintiffs then moved for voluntary
dismissal without prejudice of Kuhlman’s claims. Defendants interposed no objection to
that request but contended this was insufficient to comply with Judge Moreno’s order.
After further skirmishing both here and before Judge Moreno, plaintiffs modified the
proposed definition of each of the proposed classes as follows:
Plaintiffs exclude from the definitions all members of the settlement
classes in Love v. Blue Cross Blue Shield Ass’n, No. 03-21296-CV (S.D.
Fla.) (including a separate settlement with Defendant Highmark, Inc.),
Shane v. Humana, Inc., Master File No. 00-1334 (S.D. Fla.) (to the extent
the settlement involves Defendants WellPoint, Inc. and Blue Cross Blue
Shield of Georgia), Dolan v. Excellus, Inc., No. 9768-01 (Monroe County,
N.Y.), or Medical Society of the State of New York v. Excellus, Inc., No.
9769-01 (Monroe County, N.Y.), as applicable to the particular
Defendants in this action that were settling defendants in each such case.
Pls.’ Notice of Amendment to Proposed Provider Classes (dkt. no. 549) at 2 (filed Oct.
6

17, 2011). Plaintiffs represent, and defendants do not dispute, that these
developments do not eliminate any of the proposed class representatives other than
Kuhlman.
Discussion
A court may certify a case as a class action if the party seeking certification
meets all the requirements of Federal Rule of Civil Procedure 23(a) and one of the
requirements of Rule 23(b). Rule 23(a) requires the party seeking certification to
demonstrate that the class is so numerous that joinder of all members is impracticable
(numerosity); there are questions of law or fact common to the proposed class
(commonality); the class representative’s claims are typical of the claims of the class
(typicality); and the representative will fairly and adequately represent the interests of
the class (adequacy). Fed. R. Civ. P. 23(a)(1)-(4).
Rule 23(b) sets forth four circumstances under which a class action may be
maintained. See Fed. R. Civ. P. 23(b). Rule 23(b)(1)(A) permits class certification if
separate actions by or against individual class members would create a risk of “varying
adjudications with respect to individual class members that would establish
incompatible standards of conduct for the party opposing the class.” Rule 23(b)(1)(B)
permits class certification if separate actions by or against individual class members
would, as a practical matter, be dispositive of the interests of nonparty class members
or substantially impair or impede their ability to protect their interests. Rule 23(b)(2)
permits class certification if “the party opposing the class has acted or refused to act on
grounds generally applicable to the class, thereby making appropriate final injunctive
relief or corresponding declaratory relief with respect to the class as a whole.” Finally,
7

Rule 23(b)(3) permits class certification if “questions of law or fact common to the
members of the class predominate over any questions affecting only individual
members” and class resolution is “superior to other available methods for the fair and
efficient adjudication of the controversy.”
Plaintiffs bear the burden of proving they are entitled to class certification.
Oshana v. Coca-Cola Co., 472 F.3d 506, 513 (7th Cir. 2006) (citation omitted). The
Court is not limited to the allegations in plaintiffs’ complaint when assessing whether to
certify a class but instead “should make whatever factual and legal inquiries are
necessary under Rule 23.” Szabo v. Bridgeport Machs., Inc., 249 F.3d 672, 676 (7th
Cir. 2001). See generally Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551
(2011).
I.

Provider Class
Plaintiffs allege that the Provider Class satisfies the threshold requirements of

Rule 23(a) and seek certification of that class pursuant to Rules 23(b)(3), 23(b)(1)(A),
and 23(b)(2). Defendants concede that the Provider Class satisfies Rule 23(a)’s
numerosity requirement but dispute plaintiffs’ remaining arguments. Defendants also
contend that the Provider Class is overly broad and therefore not ascertainable. The
Court begins its analysis with Rule 23(b) because it finds that issue dispositive.
A.

Rule 23(b)(3) certification

As the Court explained earlier, it may certify a class under Rule 23(b)(3) if
common questions predominate over individual factual and legal questions and a class
action provides a superior vehicle for adjudication of the plaintiffs’ claims.

8

The predominance criterion “tests whether proposed classes are sufficiently
cohesive to warrant adjudication by representation.” Amchem Prods., Inc. v. Windsor,
521 U.S. 591, 623 (1997) (citation omitted). In essence, the Court must determine
“whether plaintiffs can, through individualized cases, offer proof on a class-wide basis.”
Schmidt v. Smith & Wollensky, LLC, 268 F.R.D. 323, 329 (N.D. Ill. 2010) (citation
omitted); see also Ross v. RBS Citizens, N.A., No. 09 C 5685, 2010 WL 3980113, at *6
(N. D. Ill. Oct. 8, 2010) (“Plaintiffs need . . . show that common proof will predominate
with respect to their claims.”). To put it another way, plaintiffs must show “that the
elements of liability are capable of proof at trial through evidence that is common to the
class rather than individual to the members.” Driver v. Apple Illinois, LLC, 265 F.R.D.
293, 303 (N.D. Ill. 2010). The predominance criterion is “far more demanding” than
Rule 23(a)’s commonality requirement, under which a plaintiff must establish simply that
common issues exist. Amchem Prods., Inc., 521 U.S. at 623-24.
Plaintiffs’ central argument is that a common question exists regarding whether
defendants violated ERISA through “uniform policies in making repayment demands.”
See Pls.’ Br. in Support of Class Certification at 39. Plaintiffs argue that this question
will predominate the litigation. They also contend that a number of additional common
questions exist regarding whether ERISA applies to defendants’ recoupments, the
existence of an exhaustion requirement under ERISA, the liability of host and home
plans for out-of-state recoupments associated with the Blue Card program, the
standard of review applicable to defendants’ benefit determinations, and the
appropriate remedy for defendants’ alleged ERISA violations. See Fourth Am. Compl.

9

¶ 500.
Defendants disagree. They counter that to succeed, each plaintiff must prove
with respect to each challenged recoupment that: (1) the applicable plan was an
ERISA-governed plan; (2) the plan participant was financially liable for the recoupment
such that it qualified as an “adverse benefit determination” under ERISA; (3) the plaintiff
had a right to enforce, through a valid assignment, the plan participant’s rights under
ERISA to collect benefits; (4) the plaintiff had a right to enforce, through designation as
the plan participant’s duly appointed “authorized representative,” the plan participant’s
rights under ERISA to notice and review; (5) the defendants failed to provide notice and
review that complied with ERISA; (6) the defendants’ affirmative defenses fail; and (7)
the recoupment was invalid. According to defendants, each of these issues involves an
individualized inquiry. The individual questions, defendants argue, predominate over
any common questions.
1.

Issues regarding assignments of benefits

Defendants contend that among other individual issues, individual questions
regarding assignments of benefits will predominate the litigation. They argue that at
least some plaintiffs did not receive assignments from plan participants for each claim
subject to a recoupment demand and that at least some of the assignments that
plaintiffs did receive were invalid under the terms of the particular plans at issue.
Section 503 of ERISA applies to “claims for benefits by participants and
beneficiaries.” 29 C.F.R. § 2560.503-1(a); see also 29 U.S.C. § 1132(a)(1). ERISA
defines “beneficiary” to include a person designated by a plan participant to receive her
benefits. Kennedy v. Conn. Gen. Life Ins. Co., 924 F.2d 698, 700 (7th Cir. 1991).
10

Subject matter jurisdiction exists under ERISA if the plaintiff has a colorable claim to
benefits: “[t]he possibility of direct payment is enough to establish subject matter
jurisdiction.” Id. at 700-01.
Plaintiffs seem to contend that the threshold jurisdictional question regarding
their entitlement to sue is the end of the inquiry for class certification purposes. They
argue that whether any particular plaintiff or class member has a valid assignment for a
particular claim will arise, if at all, only at an advanced stage of the litigation, after the
Court has ordered class-wide relief. Pls.’ Reply Mem. in Support of Mot. for Class
Certification at 15. Plaintiffs argue that “[f]or a class to be certified . . ., the Class
Members are not required to prove an entitlement to ‘collect,’ but only to assert
common issues; the question of ‘collection’ arises only after a finding on the merits.” Id.
at 15.
It is not quite that simple. Though the threshold jurisdictional inquiry likely is a
common question, the Court is required to assess not whether jurisdiction can be
proved in common, but whether liability is a common issue. Proving a plan’s liability to
an assignee under section 502 involves more than establishing that subject matter
jurisdiction exists.
ERISA does not prohibit a participant from assigning a claim for health and
welfare benefits, but it also does not preclude a health and welfare plan from prohibiting
assignments. Moylan v. Universal Guar. Life Ins. Co., 298 F.3d 609, 615 (7th Cir.
2002). A number of the plans at issue in this case contained anti-assignment
provisions. See Defs.’ Ex. 2 at 50-56. Defendants rely on these provisions to contend
that many, though likely not all, of the assignments that plaintiffs took are unenforceable
11

and do not confer plan beneficiary status entitling plaintiffs to ERISA-prescribed appeal
procedures.
Plaintiffs contend that the defendants whose plans contained anti-assignment
provisions waived them by dealing directly with plaintiffs as service providers. But
defendants argue that they paid plaintiffs directly pursuant to contractual provisions in
their provider agreements and the underlying plan documents, not in reliance on
assignments. And at least some of the plans at issue expressly reserved for
defendants the right to make direct payments to in-network health providers, while
simultaneously prohibiting plan participants from assigning their rights to benefits. See
id. at 51-55. Though there is no controlling authority on the point – indeed there is little
authority at all – there is law supporting the proposition that direct payment to a provider
does not waive reliance on a plan’s anti-assignment provision if the plan also authorizes
direct payment. See Gregory Surgical Servs., LLC v. Horizon Blue Cross Blue Shield of
N.J., Inc., No. 06 C 0462, 2007 WL 4570323, at *4 (D.N.J. Dec. 26, 2007) (direct
payments to providers do “not constitute a waiver if authorized under the [insurance]
plans at issue”); Zhou v. Guardian Life Ins. Co. of Am., No. 01 C 4816, 2001 WL
1631868, at *2 (N.D. Ill. Dec. 17, 2001) (same); Renfrew Ctr. v. Blue Cross & Blue
Shield of Central N.Y., Inc., No. 94 C 1527, 1997 WL 204309, at *4 (N.D.N.Y. Apr. 10,
1997) (insurer’s “retention of discretion to make direct payment is in no way inconsistent
with disallowing patient assignment”).
A plan can waive its right to enforce an anti-assignment provision by engaging in
conduct inconsistent with the provision. See, e.g., Glen Ridge Surgicenter, LLC v.

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Horizon Blue Cross Blue Shield of N.J., Inc., No. 08 C 6160, 2009 WL 3233427, at *5
(D.N.J. Sept. 30, 2009) (“Although Horizon’s direct payments to GRS would not
constitute a waiver [of anti-assignment provisions] if authorized under the Horizon plans
at issue, the Complaint alleges a course of conduct beyond direct reimbursement for
medical services.”); Gregory Surgical Servs., LLC, 2007 WL 4570323, at *4. The Court
is unpersuaded, however, that the waiver inquiry is susceptible to determination on a
class-wide basis given the large number of different plans involved. It is highly likely
that different plans conducted dealings with providers and participants in different ways
– just as they appear to have had different practices regarding challenges and appeals
by providers. Plaintiffs have not shown otherwise.
Plaintiffs also contend that by making recoupment claims under ERISA,
defendants have waived any argument that ERISA does not apply. There is certainly
authority that if a plan sues under ERISA to recoup plan funds paid out to a nonparticipant, the non-participant may raise ERISA issues in defense of the suit. See,
e.g., Longaberger Co. v. Kolt, 586 F.3d 459, 468-71 (6th Cir. 2009). But in such cases,
the plan itself has invoked ERISA. In the present case, the suit was filed not by a plan
but by plaintiffs as recipients of plan funds. Plaintiffs offer no evidence that the
defendants expressly invoked ERISA in recouping or attempting to recoup the
payments at issue. And the plans’ mere demand for recoupment, without more, does
not amount to an invocation of ERISA. The Seventh Circuit has made it clear that a
plan may invoke common law, and not exclusively ERISA, in attempting to recoup plan
funds that it contends were improperly paid out. See Trustees of AFTRA Health Fund

13

v. Biondi, 303 F.3d 765 (7th Cir. 2002).
Although plaintiffs have asserted generalized waiver arguments that apply in
common to all of the defendants, for the reasons just described the Court cannot say
that determination of those issues is likely to be a significant focus of the litigation.
Rather, it is considerably more likely that determination of the issue of waiver will
require the Court to determine whether a particular defendant’s course of conduct is
inconsistent with enforcement of the anti-assignment term of a particular benefit plan.
This cannot be accomplished on a class-wide basis via class claims that include not
only all of the provider plaintiffs but also all of the defendants.
2.

Nature and extent of review / appeal of recoupments

Plaintiffs argue that the main focus of their proof of liability involves a common
practice or policy among the defendants of failing to provide ERISA-compliant
procedures for review of recoupments. Defendants contend that this, too, is an
individualized issue.
“ERISA sets certain minimum requirements for procedures and notification when
a plan administrator denies a claim for benefits.” Halpin v. W.W. Grainger, Inc., 962
F.2d 685, 690 (7th Cir. 1992). It mandates that:
[i]n accordance with regulations of the Secretary, every employee benefit plan
shall –
(1) provide adequate notice in writing to any participant or beneficiary whose
claim for benefits under the plan has been denied, setting forth the specific
reasons for such denial, written in a manner calculated to be understood by the
participant, and
(2) afford a reasonable opportunity to any participant whose claim for benefits
has been denied for a full and fair review by the appropriate named fiduciary of
the decision denying the claim.
14

29 U.S.C. § 1133. “Adequate notice” of an adverse benefit determination includes
notice of “[t]he specific reason or reasons for the adverse determination”; “[r]eference to
the specific plan provisions on which the determination is based”; “[a] description of any
additional material or information necessary for the claimant to perfect the claim”; “[a]
description of the plan’s review procedures . . . , including a statement of the claimant’s
right to bring a civil action under section 502(a) of the Act”; and a statement describing
any “internal rule, guideline, protocol, or other similar criterion . . . relied upon in making
the adverse benefit determination.” 29 C.F.R. § 2560.503-1(g). A “reasonable
opportunity . . . for a full and fair review” affords claimants “at least 60 days following
receipt of a notification of an adverse benefit determination within which to appeal the
determination”; “the opportunity to submit written comments, documents, records, and
other information relating to the claim for benefits”; “reasonable access to, and copies
of, all documents, records, and other information relevant to the claimant’s claim for
benefits” upon request; and “a review that takes into account all comments, documents,
records, and other information submitted by the claimant relating to the claim.” 29
C.F.R. § 2560.503-1(h); see also id. (setting forth additional requirements for group
health plans and plans providing disability benefits).
There is no question that the standard under ERISA for notice and review, as
described above, is common to the class. But it is insufficient for the Court to stop right
there, as plaintiffs appear to suggest. Establishing liability requires plaintiffs to prove
not just the applicable standard but also that defendants violated it. That is not
necessarily a cut-and-dried question. “In determining whether a plan complies with the
applicable regulations, substantial compliance is sufficient.” Halpin, 962 F.2d at 690;
15

see also Ponsetti v. GE Pension Plan, 614 F.3d 684, 693 (7th Cir. 2010) (same).
The mere fact that many defendants denied that ERISA applied to the
recoupments or refused to call their review procedures “ERISA appeals” does not
establish that they engaged in common practices such that liability can be determined
on a class-wide basis. It stands to reason that the issue of substantial compliance turns
on what (if any) procedures defendants provided, not what they chose to call those
procedures. Plaintiffs cite no authority suggesting otherwise.
Plaintiffs’ own complaint appears to undercut their contention that defendants
engaged in uniform or near-uniform misconduct. In it, plaintiffs charge that different
defendants failed to adequately disclose the basis for repayment demands; failed to
disclose copies of plan materials upon plaintiffs’ request; failed to provide notice of
appeal rights; provided inadequate notice of appeal rights; failed to offer appeals;
offered cursory, non-compliant appeals; and/or ignored plaintiffs’ participation during
more comprehensive appeals. Compare, e.g., Fourth Am. Compl. ¶¶ 106-68
(allegations of plaintiffs Korsen and Barlow) with id. ¶¶ 169-97 (allegations of plaintiff
Leri). In addition, plaintiffs appear to concede that some defendants provided the class
representatives with at least some opportunity to appeal the challenged recoupments,
though they contend these opportunities were inadequate under ERISA.
Plaintiffs rely on two sources in support of their contention that defendants
engaged in uniform misconduct in violation of ERISA. First, plaintiffs’ expert, Dr. Steven
Foreman, opined that defendants’ recoupment processes were “nearly identical.” See
Pls.’ Ex. 22 at 15. Dr. Foreman, however, was referring primarily to defendants’
processes for identifying potential overpayments, not the notice and review procedures
16

they utilized when executing the challenged recoupments. Id. at 15-18. Proof of liability
in this case necessarily is focused primarily on the process by which defendants
accomplished the recoupments rather than on how they zeroed in on particular
opportunities for recoupment. Dr. Foreman’s report cites no evidence to support the
proposition that defendants utilized uniform notice and review procedures.
Second, plaintiffs rely on a summary of deposition excerpts in which they identify
admissions from various representatives of defendants regarding ERISA noncompliance. See Pls.’ Ex. 24 at 1-23. Yet the exhibit describes varied conduct. It
reflects that some defendants provided no appeal rights whatsoever, others provided
cursory appeals, and still others offered multi-level appeals. Likewise, the exhibit
suggests that some defendants advised plaintiffs of their appeal rights, others gave no
notice, and still others provided notice that was inadequate. Plaintiffs’ exhibit thus
refutes, rather than supports, their contention that there was a common class-wide
practice. This is not terribly surprising, given the fact that plaintiffs challenge the
conduct of over twenty different BCBS entities.
The Court concludes that individual issues regarding whether and how each
defendant substantially complied with ERISA’s notice and review requirements likely will
consume a great deal of the Court’s attention.3 To be sure, common questions exist
3

The Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes suggests that
plaintiffs’ failure to establish that all of the defendants engaged in a common course of
misconduct may also defeat their ability to satisfy the less demanding commonality
requirement of Rule 23(a). To establish commonality, plaintiffs must establish that
common questions exist. Fed. R. Civ. P. 23(a). The Court held in Wal-Mart Stores that
a putative class of plaintiffs failed to satisfy this standard, reasoning:
(continued...)
17

regarding whether ERISA governs defendants’ recoupment efforts at all – for example,
whether the recoupments qualify as “adverse benefit determinations” governed by
ERISA. Moreover, it may very well be true that all of the defendants’ procedures
violated ERISA in some way. Nonetheless, plaintiffs have not shown that the class is
“sufficiently cohesive” to warrant adjudication by representation, Amchem Prods., Inc.,
521 U.S. at 623-24, or that they will be able to offer proof of defendants’ violations on a
class-wide basis. See Schmidt, 268 F.R.D. at 329; Ross, 2010 WL 3980113, at *6.
See generally Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 158-59 & n.15 (1982)
(reversing district court’s certification of a class because plaintiffs failed to show that
defendants engaged in a uniform policy or practice of discrimination).
3.

Summary

It is likely that the two issues the Court has just addressed – whether plaintiffs
are entitled to invoke ERISA and, if so, whether defendants’ practices comport with
ERISA’s requirements – will be the major focus of the litigation. Plaintiffs have failed to
persuade the Court that either of these issues are susceptible of determination on a
3

(...continued)
Commonality requires the plaintiff to demonstrate that the class members have
suffered the same injury. This does not mean merely that they have all suffered
a violation of the same provision of law. Title VII, for example, can be violated in
many ways – by intentional discrimination, or by hiring and promotion criteria that
result in disparate impact, and by the use of these practices on the part of many
different superiors in a single company. Quite obviously, the mere claim by
employees of the same company that they have suffered a Title VII injury, or
even a disparate-impact Title VII injury, gives no cause to believe that all their
claims can productively be litigated at once. Their claims must depend upon a
common contention – for example, the assertion of discriminatory bias on the
part of the same supervisor.
Wal-Mart Stores, Inc., 131 S. Ct. at 2551.
18

class-wide basis. As a result, the Court need not address the parties’ arguments
regarding whether other significant issues are common or individual issues. The Court
concludes that plaintiffs have failed to show that common issues predominate over
individualized issues. For this reason, the Court need not deal with Rule 23(b)(3)’s
superiority requirement or the requirements of Rule 23(a) with regard to the proposed
Provider Class.
Plaintiffs propose as an alternative that the Court certify a series of classes, each
consisting of those providers that were the subject of recoupments by a particular
defendant. There is at least some chance that this would avoid the problems the Court
has just discussed. In particular, the issues of waiver of a particular plan’s antiassignment term and a particular plan’s procedures for review and appeal of
recoupment determinations may be susceptible of common determination on a plan-byplan basis. But although plaintiffs’ current motion raises this as a possibility, it does so
only in cursory fashion, without significant discussion. The Court will not consider this
alternative unless and until plaintiffs take the time and effort to address it fully and
defendants have the opportunity to do the same.
B.

Rule 23(b)(1)(A) certification

Plaintiffs next assert that the Provider Class satisfies Rule 23(b)(1)(A), which
applies if separate actions by or against individual class members would risk
establishing incompatible standards of conduct for the party opposing the class. “Rule
23(b)(1)(A) takes in cases where the party is obliged by law to treat the members of the
class alike (a utility acting toward customers; a government imposing a tax), or where
the party must treat all alike as a matter of practical necessity (a riparian owner using
19

water as against downriver owners).” Amchem Products, Inc., 521 U.S. at 614 (citation
and internal quotation marks omitted) (cited with approval in Wal-Mart Stores, Inc., 131
S. Ct. at 2558 n.11). This part of Rule 23 “is concerned with the risk of inconsistent or
varying adjudications that might establish incompatible standards of conduct for the
defendant.” Spano v. The Boeing Co., 633 F.3d 574, 588 (7th Cir. 2011).
Plaintiffs contend that separate adjudications would result in incompatible
standards of conduct for defendants because they would “expos[e] Defendants to
multiple lawsuits for uniform misconduct.” Pls.’ Br. in Support of Class Certification at
36. The premise of this argument, however, is flawed. As the Court discussed in the
previous section, plaintiffs’ contention that all of the BCBS entities in this suit engaged
in “uniform misconduct” of the sort contemplated by Rule 23(b)(1)(A) is not supported
by the record. Though there are certainly similarities, as well as overlap, in how
different BCBS entities dealt with the possibility of provider challenges to recoupment
determinations, they did not all deal with this in a way that can fairly be described as
“uniform.” And as discussed in the previous section, though ERISA and its governing
regulations prescribe certain procedures for benefit denials, the law does not appear to
require lock-step compliance. Rather, substantial compliance is sufficient. The
analysis of whether a particular BCBS entity’s procedures substantially comply with
ERISA (assuming ERISA applies) likely will differ from the analysis of whether a
different BCBS entity’s procedures substantially comply. Given these circumstances,
plaintiffs have not established the predicate for certification of an all-plaintiffs, alldefendants class under Rule 23(b)(1)(A).
The Court might view certification under this part of Rule 23 differently were
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plaintiffs requesting certification of defendant-by-defendant classes. But as the Court
has discussed, plaintiffs have not yet pursued that point adequately in a way that
permits the Court to make a reasoned assessment of whether certification would be
permissible and appropriate.
C.

Rule 23(b)(2) certification

Finally, plaintiffs contend that they are entitled to certification of the Provider
Class under Rule 23(b)(2). Rule 23(b)(2) certification is appropriate if “the party
opposing the class has acted or refused to act on grounds generally applicable to the
class, thereby making appropriate final injunctive relief or corresponding declaratory
relief with respect to the class as a whole.” Fed. R. Civ. P. 23(b)(2). The Supreme
Court has clarified that:
[t]he key to the (b)(2) class is the indivisible nature of the injunctive or declaratory
remedy warranted – the notion that the conduct is such that it can be enjoined or
declared unlawful only as to all of the class members or as to none of them. In
other words, Rule 23(b)(2) applies only when a single injunction or declaratory
judgment would provide relief to each member of the class. It does not authorize
class certification when each individual class member would be entitled to a
different injunction or declaratory judgment against the defendant. Similarly, it
does not authorize class certification when each class member would be entitled
to an individualized award of monetary damages.
Wal-Mart Stores, Inc., 131 S. Ct. at 2557 (citations and internal quotation marks
omitted). Plaintiffs argue that they qualify for Rule 23(b)(2) certification because they
challenge defendants’ uniform misconduct and because the recovery of damages in an
ERISA action constitutes equitable relief.
The fact that monetary relief may be characterized as equitable “is irrelevant.
The Rule does not speak of ‘equitable’ remedies generally but of injunctions and
declaratory judgments.” Id. at 2560. What is significant for this purpose is that plaintiffs
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seek, among other things, monetary relief. This would not defeat certification under
Rule 23(b)(2) were the request for monetary relief “merely incidental to the grant of an
injunction or declaratory relief: ‘incidental’ in the sense of requiring only a mechanical
computation.” Randall v. Rolls-Royce Corp., 637 F.3d 818, 825 (7th Cir. 2011); see
also Wal-Mart Stores, Inc., 131 S. Ct. at 2560. The Court is not persuaded, based on
the present record, that this is the case regarding the monetary relief that plaintiffs
request.
In addition, and perhaps more importantly, plaintiffs have failed to persuade the
Court that they seek an injunctive or declaratory remedy that is of an “indivisible
nature.” At a minimum, it is likely that, if plaintiffs prevailed, any injunctive relief to
which they might be entitled would differ on a plan-by-plan basis.
D.

Conclusion

Because plaintiffs have failed to establish that the proposed Provider Class
qualifies for class certification under any of the provisions of Rule 23(b), the Court
denies certification of that class. It therefore need not address whether the class is
ascertainable and whether it satisfies the numerosity, commonality, typicality, and
adequacy requirements of Rule 23(a).
II.

Florida Chiropractic Discrimination Class
The claims of the proposed Florida Chiropractic Discrimination Class involve

certain practices of a single Blue Cross entity, Blue Cross Blue Shield Florida (BCBSF).
In 2007, BCBSF rewrote its billing guidelines for chiropractic physicians. The rewrite
included something called the single modality project, which limited chiropractic

22

physicians’ reimbursement to one physical therapy modality on the same day a patient
received chiropractic manipulation. Plaintiffs allege that this in effect required the
patient to return to the physician’s office the next day for additional modalities – in other
words, to visit the office twice for treatment the patient otherwise would have received in
a single visit. Because patients’ insurance policies typically limit the number of
physician visits for which they are covered, the effect of BCBSF’s new policy, plaintiffs
allege, was to reduce the amount of care for which patients were covered and, in turn,
to reduce the amount that chiropractic physicians were reimbursed by BCBSF. The
policy also precluded full reimbursement if the chiropractor exceeded the “one physical
therapy modality” limitation.
Plaintiffs allege that BCBSF’s changed practice violated section 627.419 of the
Florida Code, which provides in relevant part that “[a]ny limitation or condition placed
upon payment to, or upon services, diagnosis, or treatment by, any licensed physician
shall apply equally to all licensed physicians, without unfair discrimination to the usual
and customary treatment procedures of any class of physicians,” including
chiropractors. According to plaintiffs, the imposition of the single modality rule unfairly
discriminated against the usual and customary treatment procedures of chiropractors
as compared with other classes of physicians.
Plaintiff Peri Dwyer, the proposed representative for this class, is an in-network
provider for BCBSF. She seeks to represent a class – actually two subclasses – of
Florida chiropractors (1) who, after having treated patients for more than twenty-six
visits, were denied payment, or (2) who, after having provided more than one physical
therapy modality on the same date as chiropractic manipulation, were denied
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reimbursement on the ground that the services were not covered by the patient’s
insurance. Dwyer seeks certification under Rules 23(b)(1)(A) and 23(b)(2) and not
under Rule 23(b)(3).
Defendants oppose plaintiffs’ motion on three grounds. First, they argue that the
proposed class is not ascertainable and that, in any event, identification of class
members would be a time-consuming and individualized task. Second, defendants
argue that Dwyer’s claim is atypical because she is subject to particularized defenses
not applicable to the class as a whole. Third, defendants argue that the proposed class
does not meet the requirements of Rules 23(b)(1)(A) or 23(b)(2).
Defendants argue in a footnote that plaintiffs have not shown that the class
meets Rule 23(a)’s numerosity requirement. The objection is insufficiently developed to
warrant discussion.4 In addition, defendants do not contend that the proposed class
fails to meet the commonality and adequacy of representation requirements of Rule
23(a). They have thus effectively conceded that the class meets these requirements.
As a result, the Court focuses its discussion on the three points defendants have

4

In any event, defendants’ objection is lacking in merit. It is true that plaintiffs
have not been able at this point to identify the number of chiropractors who are
members of the class as defined, but that is not dispositive under the circumstances.
“[P]laintiffs are not required to specify the exact number of persons in the class.”
Marcial v. Coronet Ins. Co., 880 F.2d 954, 957 (7th Cir. 1989). But although plaintiffs
“cannot rely on conclusory allegations that joinder is impractical or speculation as to the
size of the class in order to prove numerosity,” id., a court may rely on common sense
assumptions in determining whether the numerosity requirement is met. See, e.g.,
Reed v. Advocate Health Care, 268 F.R.D. 573, 578 (N.D. Ill. 2009). Given BCBSF’s
estimate of the cost savings that would result from the change to its chiropractic billing
guidelines (between $3 million and $8.5 million per year) and the average amount of
the individual modality charge ($50 to $75), common sense reflects that the number of
chiropractors affected by the change far exceeds the minimum necessary to meet Rule
23’s numerosity requirement.
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raised.
A.

Ascertainability of the class

Defendants argue that the definition of the proposed class is overly broad
because it supposedly includes all sorts of providers, not just chiropractors, from all fifty
states, not just Florida. They also argue that the class definition is flawed because it
does not link the class definition to the reimbursement limitations that plaintiffs
challenge as improperly discriminatory.
These arguments are entirely lacking in merit. Defendants evidently misread the
proposed class definition. As plaintiffs point out, the class definition proposed in their
motion expressly limits the class to Florida chiropractors. It likewise expressly limits the
class to chiropractors affected by the twenty-six visit limitation or the single modality
restriction.
Defendants also contend that determining who is a class member would have to
be done on a chiropractor-by-chiropractor basis and would unduly difficult and timeconsuming. In this regard, defendants cite the Seventh Circuit’s decision in Oshana v.
Coca-Cola Co., 472 F.3d 506 (7th Cir. 2006), in which the court stated that a plaintiff
seeking class certification must show “that the class is indeed identifiable as a class”
and that the class definition “must be definite enough that the class can be
ascertained.” Id. at 513.
Plaintiffs’ proposed class definition unquestionably meets these requirements.
The proposed class in Oshana was insufficiently definite because the claims of the
class required the plaintiffs to prove deception that caused damage, yet the class

25

definition by its terms included persons who had not been deceived and thus could not
prove causation of any injury. Id. at 513-14. The class definition proposed by plaintiffs
in the present case suffers from no such infirmity. It defines the class as including only
those affected by the particular allegedly unlawful practices at issue.
Defendants’ real argument seems to be that class membership must be
determined on an individual basis and that this will be time-consuming and difficult. Of
course class membership must be determined for each proposed member; how could it
be otherwise? Oshana imposes no prohibition on class certification simply because the
court will be required to determine who is as a class member. In any event, it is
overwhelmingly likely that any given chiropractor’s membership can be determined
without undue effort, by reference to documents, specifically, contracts with in-network
providers containing BCBSF’s revised chiropractic billing guidelines and entries within
BCBSF’s data processing system reflecting claim denials based on the limitations at
issue.
Finally, defendants contend that the class includes chiropractors who suffered no
actual injury. They note that in at least some instances, chiropractors denied
reimbursement for a particular visit or procedure would have billed their patients for the
balance due and would have been paid. If this happens, defendants argue, the
provider is no worse off and lacks standing to sue.
The Court seriously doubts that this is a legitimate “standing” argument. Though
it is true that any chiropractor denied reimbursement in a particular instance might seek
to have the patient pay the balance, the certainty and timing of payment is
unquestionably affected. In addition, the likely combined effect of BCBSF’s practices,
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in at least some instances, would be to reduce the total number of procedures provided
by a chiropractor to a given patient and thus the overall amount of money the
chiropractor can bill and collect. These are sufficient injuries to confer standing to sue
even if the chiropractor ultimately may collect the full amount he or she bills to a given
patient.
B.

Typicality

Rule 23(a)’s typicality requirement “primarily directs the district court to focus on
whether the named representatives’ claims have the same essential characteristics as
the claims of the class at large.” Muro v. Target Corp., 580 F.3d 485, 492 (7th Cir.
2009) (internal quotation marks and citation omitted). “The presence of even an
arguable defense peculiar to the named plaintiff or a small subset of the plaintiff class
may destroy the required typicality of the class as well as bring into question the
adequacy of the named plaintiff’s representation.” CE Design Ltd. v. King Architectural
Metals, Inc., 637 F.3d 721, 726 (7th Cir. 2011) (internal quotation marks and citation
omitted). The concern is that the class representative will be “distracted by the
presence of a possible defense applicable only to him so that the representation of the
rest of the class will suffer.” Id. (internal quotation marks and citation omitted).
Defendants’ first argument regarding typicality is that the class includes all sorts
of providers and all sorts of Blue Cross entities. That argument is flawed for the
reasons discussed earlier; defendants based the argument on a misunderstanding of
the class definition that plaintiffs propose. Contrary to defendant’s argument, the
proposed class is limited such that it includes only Florida chiropractors and is focused

27

on reimbursement denials occasioned by the challenged changes in BCBSF’s billing
guidelines.
Defendants also contend that Dwyer is subject to unique defenses. They argue
that despite the fact that her provider agreement with BCBSF barred her from billing
patients for the balance of their bills that was not reimbursed by the insurer, she did so
nonetheless. Defendants have made no effort, however, to explain how this is a
defense to liability (as opposed to, perhaps, a factor affecting the relief to which she
might be entitled). In any event, defendants have overstated Dwyer’s deposition
testimony. She stated that she sometimes balance-bills patients, not that she always
does so. Documents reflect that Dwyer was denied insurance reimbursements, and
she testified that she was ninety percent certain that she had, in fact, suffered a
financial loss. The fact that she might have suffered less of an injury than some other
potential class members does not undercut typicality. In any event, there is no reason
to believe that this “defense,” if that is what it is, does not affect numerous class
members.
For these reasons, the Court concludes that plaintiffs have satisfied Rule 23(a)’s
typicality requirement.
C.

Rule 23(b)(1)(A) and 23(b)(2)

Because plaintiffs have met Rule 23(a)’s requirements with regard to the Florida
Chiropractic Discrimination Class, the Court turns to Rule 23(b) and addresses first
plaintiffs’ request to certify the class under Rule 23(b)(2). Plaintiffs request both
injunctive relief and damages on their claim under Florida law.
Because plaintiffs challenge a standardized practice by BCBSF, this is a
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situation in which “a single injunction or declaratory judgment would provide relief to
each member of the class.” Wal-Mart Stores, Inc., 131 S. Ct. at 2557. But Rule
23(b)(2) certification, which does not allow prospective class members an opportunity to
opt out of the litigation, tends to be disfavored in cases like this one in which monetary
relief is a significant component of the requested relief. See Randall, 637 F.3d at 82526; see generally Wal-Mart Stores, Inc., 131 S. Ct. at 2557 (Rule 23(b)(2) “does not
authorize class certification when each class member would be entitled to an
individualized award of monetary damages.”), 2560 (leaving open the possibility that
claims involving “incidental” monetary relief may be certified under Rule 23(b)(2)).
Contrary to plaintiffs’ argument, the monetary relief they seek is not, in the
Court’s view, “mechanically computable.” Randall, 637 F.3d at at 826. It would require
not simply identifying patient visits for which reimbursement was denied, but also
examining whether the particular class member had received payment for that particular
visit from the patient (if so, it was the patient who suffered the loss, not the physician).
For this reason, the Court concludes that the class cannot appropriately be certified
under Rule 23(b)(2).
Plaintiffs contend that the Florida Chiropractic Discrimination Class satisfies Rule
23(b)(1)(A) because separate actions by individual class members would risk
establishing incompatible standards of conduct for the defendants. As indicated earlier,
Rule 23(b)(1)(A) is intended for cases “where the party is obliged by law to treat the
members of the class alike . . . ” Amchem Products, Inc., 521 U.S. at 614.
This is certainly a situation in which the insurer is required to treat members of
the class alike: the Florida statute on which plaintiffs base their claim imposes a non29

discrimination requirement. That said, though it is a close question, the Court is
unpersuaded that Rule 23(b)(1)(A) permits certification of the proposed Florida
Chiropractic Discrimination Class. The key factor in this regard is the one the Court just
cited in declining to certify the class under Rule 23(b)(2), namely, the fact that damages
are a significant part of the relief requested and cannot simply be determined on a
formulaic basis. Given these circumstances, the interest of individual class members in
maintaining control over their own claims – which, because Rule 23(b)(1)(A) does not
permit opt-outs, they would be unable to do if the Court certifies the class – outweighs
the interest in obtaining a single adjudication regarding whether BCBSF’s billing
guidelines violate Florida law.
For these reasons, the Court denies plaintiffs’ request to certify the proposed
Florida Chiropractic Discrimination Class.
III.

Subscriber Class
Finally, plaintiffs move for certification of a Subscriber Class represented by

Hopkins. Defendants oppose certification on the ground that Hopkins is not a typical
class member because she does not satisfy the class definition. They provide evidence
that Hopkins was billed only for the deductible and co-insurance that she owed; she
was never balance-billed any additional amount due to Anthem Ohio’s recoupment from
provider Miami Valley Hospital of a duplicate payment; and the recoupment did not
affect the amount Hopkins owed. The Court defers consideration of plaintiffs’ motion
for certification of the Subscriber Class pending resolution of WellPoint’s motion for
summary judgment regarding Hopkins.

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IV.

Motions to exclude expert reports
Because the Court has denied or deferred certification of plaintiff’s proposed

classes, it need not address defendants’ motion to exclude Dr. Foreman’s expert report
and opinions. For their part, plaintiffs have moved to exclude the expert reports and
opinions of Brian Flood and Dr. Eric Gaier. As plaintiffs themselves concede,
“[d]efendants do not rely upon them in opposing the class motion.” Pls.’ Reply Br. in
Support of Class Certification at 39 n.37. The Court nonetheless denies plaintiffs’
motion. The Court agrees with defendants that Flood and Gaier are sufficiently
qualified, that they do not impermissibly assert legal conclusions, and that Gaier’s
opinions are sufficiently reliable.
Conclusion
For the reasons stated above, the Court denies plaintiffs’ motion for certification
of the Provider and Florida Chiropractic Discrimination Classes and defers
consideration of plaintiffs’ motion for certification of the Subscriber Class [dkt. no. 460].
In addition, the claims of plaintiff Gregory Kuhlman are voluntarily dismissed without
prejudice. The Court terminates defendant’s motion to cite supplemental authority [dkt.
no. 539], their motion for leave to file response [dkt. no. 541], and several documents
incorrectly docketed as motions [dkt. nos. 551, 552 & 553]. The Court will set the next
status hearing once it rules on the motion for summary judgment concerning the claims
of plaintiff Katherine Hopkins.
s/ Matthew F. Kennelly
MATTHEW F. KENNELLY
United States District Judge
Date: December 28, 2011
31