Peterson, D.C. et al v. UnitedHealth Group Inc. et al

Filing 210

ORDER denying (193) Motion to Alter/Amend/Supplement Pleadings in case 0:14-cv-02101-PJS-BRT; denying (132) Motion to Alter/Amend/Supplement Pleadings in case 0:15-cv-03064-PJS-BRT. (Written Opinion). Signed by Magistrate Judge Becky R. Thorson on 4/12/2019. Associated Cases: 0:14-cv-02101-PJS-BRT, 0:15-cv-03064-PJS-BRT(MSK)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

Louis J. Peterson, D.C., on behalf of Patients,
E, I, K L, N, P, Q, and R, and on behalf of all
others similarly situated,

Civ. No. 14-2101 (PJS/BRT)

Plaintiff,
v.
UnitedHealth Group Inc., United HealthCare
Services, Inc., United HealthCare Insurance
Company, United Healthcare Service LLC,
Defendants.
______________________________________
Riverview Health Institute, on its own behalf
and on behalf of all others similarly situated,

Civ. No. 15-3064 (PJS/BRT)

Plaintiff,
v.
UnitedHealth Group, Inc., United HealthCare
Services, Inc., United HealthCare Insurance
Company, Optum, Inc.,

ORDER

Defendants.

These two cases are brought by Dr. Louis Peterson and Riverview Health
Institute—two healthcare providers—on behalf of certain of their patients against
UnitedHealth Group Inc. and various of its affiliates (collectively “United” or
“Defendants”). United acts as the administrator for numerous health plans governed by

the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. 1001 et seq.
According to Plaintiffs, United has wrongfully failed to pay them and other providers
who have treated patients enrolled in United‐administered plans. Instead of paying the
providers what they are owed, Plaintiffs allege, United withholds some or all of their
payments in order to offset overpayments that United claims to have made to the
providers in connection with their treatment of different patients enrolled in different
plans. Plaintiffs allege that this practice—known as “cross‐plan offsetting”—violates
ERISA and the terms of the plans.
This matter is before the Court on Plaintiffs’ Motions for Leave to File Second
Amended Complaints (Civ. No. 14-2101, Doc. No. 193; Civ. No. 15-3064, Doc.
No. 132). Defendants consent to certain of the proposed amendments but not to others. In
particular, Defendants consent to amendments that add new at-issue offsets, “clean up”
existing allegations, amend the class definition in Peterson, and remove the class
allegations from Riverview. Defendants oppose the proposed amendments that bring new
causes of action, liability theories, and claims for relief; in particular, Defendants oppose
the addition of a claim for fiduciary breach under ERISA § 1132(a)(2) in Peterson, and
any related theories in both cases outside of those previously alleged for the purpose of
Plaintiffs’ § 1132(a)(1)(B) claims. For those amendments that Defendants agree to, an
Amended Complaint may be filed in conformity with those agreed-upon proposed
amendments on or before April 17, 2019. This Order addresses the remaining proposed
amendments that are contested by Defendants. Those amendments include: in the
Peterson Complaint, paragraphs 6, 18, 21, 26, 30, 31, 33, 40, 49, 50, 51, 52, 55, 56, 57,
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58, and Prayer for Relief sub-sections (B), (C), (F), and (H); in the Riverview Complaint,
paragraphs 6, 39, 40, 42, 48, 51, 52, 53, 54, and Prayer for Relief sub-sections (A), and
(B). The Court held a hearing on Plaintiffs’ motions on March 27, 2019. (Civ. No. 142101, Doc. No. 206; Civ. No. 15-3064, Doc. No. 143.) As further stated below, Plaintiffs
unduly delayed seeking the contested amendments, and the Defendants would be
prejudiced if the amendments are allowed at this stage of the proceedings. Therefore,
Plaintiffs’ motions are denied.
BACKGROUND
The following summary is provided as context for what Plaintiffs knew about the
basis for a fiduciary-based cause of action and when they knew it, and to emphasize what
Plaintiffs have communicated about what Phase I of this case was supposed to
encompass. This background highlights Plaintiffs’ undue delay in bringing a § 1132(a)(2)
breach of fiduciary duty cause of action or alleging other related facts, theories, and
requests for relief, and underscores why Defendants would be prejudiced by Plaintiffs
adding such allegations and claims now.
I.

Early Motions to Dismiss in Peterson
Plaintiffs filed their initial Complaint in the Peterson case almost five years ago on

June 23, 2014, bringing three counts – (1) for benefits due under ERISA § 1132; (2) for
injunctive and declaratory relief under ERISA § 1132; and (3) for notice and appeal
rights under ERISA § 1132. In their fact section of that initial Complaint, Plaintiffs
alleged that “Defendants are ERISA fiduciaries with respect to the United Plans,” and
stated that “United’s actions also violate its fiduciary duties and other obligations under
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ERISA” (Civ. No. 14-2101, Doc. No. 1, Compl. ¶¶ 2, 7), however, they asserted no
specific cause of action for breach of fiduciary duties pursuant to § 1132(a)(2).
Defendants moved to dismiss soon thereafter, and Plaintiffs filed a First Amended
Class Action Complaint as a matter of right pursuant to Federal Rule of Civil Procedure
15 on September 10, 2014. The First Amended Class Action Complaint dropped the third
count but retained the first two counts. Count I was amended to more specifically state a
claim for benefits due under ERISA § 1132(a)(1)(B) (hereinafter “the § 1132(a)(1)(B)
benefits cause of action”). Count II was amended to more specifically state a claim for
injunctive and declaratory relief under ERISA § 1132(a)(3) (hereinafter “the § 1132(a)(3)
injunctive and declaratory relief cause of action”). Plaintiffs retained factual allegations
regarding Defendants being fiduciaries who violated fiduciary duties similar to those
referenced above. (Civ. No. 14-2101, Doc. No. 33, Am. Compl. ¶ 2 (“Defendants are
ERISA fiduciaries with respect to all United Plans.”); ¶ 6 (“These offsets violate the
terms of the United Plans, and United’s application of this policy violates ERISA as well
as United’s fiduciary duties as a claims administrator.”); see also Am. Compl. ¶¶ 53–55,
58 (making allegations about United’s duties as a fiduciary).) Again, Plaintiffs failed to
assert a separate cause of action for breach of fiduciary duties.
On October 8, 2014, Defendants moved to dismiss the First Amended Class
Action Complaint. (Civ. No. 14-2101, Doc. No. 39.) In addition to raising arguments
about standing and lack of requisite authorization, Defendants argued that Plaintiffs failed
to allege sufficient facts to plausibly establish an ERISA violation. Within their
argument, Defendants asserted that Plaintiffs’ Complaint could be read as “purport[ing]
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to assert that ERISA prohibits plans from reallocating overpayments through offsets
without regard to plan language” (i.e., a per se violation), which they asserted failed as a
matter of law. (Civ. No. 14-2101, Doc. No. 41, Mem. of Law in Supp. of Defs.’ Mot to
Dismiss at 22.) In their response, Plaintiffs argued among other things that if no plan
language authorized cross-plan offsets, then Defendants’ offset practice nonetheless
violated ERISA, citing common law responsibilities of ERISA fiduciaries. 1 (Civ. No. 142101, Doc. No. 51, Pls.’ Opp’n to Defs.’ Mot. to Dismiss First Am. Compl. 11–12.) Still,
no effort was made to assert a § 1132(a)(2) cause of action.
II.

Introduction of Threshold Issues
At the hearing on Defendants’ motion to dismiss, United States District Judge

Patrick J. Schiltz inquired as to whether this case should proceed with identifying and
deciding threshold issues:
THE COURT:
. . . But, essentially, it seems to boil down to
was there authority in the plan. You’ve heard me say it’s just not something
I’m going to take on in a Rule 12 motion.

Defendants also argued that Count I (Plaintiffs’ § 1132(a)(1)(B) benefits cause of
action) and Count II (Plaintiffs’ § 1132(a)(3) injunctive and declaratory relief cause of
action) should be condensed into one count under § 1132(a)(1)(B), since the relief sought
under a § 1132(a)(3) claim would be available under § 1132(a)(1)(B), and because
§ 1132(a)(3) only applies when no other provision under ERISA could allow the relief
sought by Plaintiffs. (Case No. 14-2101, Doc. No. 41 at 28.) Plaintiffs responded that
Count II was brought under § 1132(a)(3) in case remedies were not available under
§ 1132(a)(1)(B), and that they were allowed to bring alternative theories at the motion to
dismiss stage. (Civ. No. 14-2101, Doc. No. 51 at 17–18.) These two causes of action,
therefore, have been tied together since the inception of the Peterson lawsuit, which cuts
against Plaintiffs’ argument now that liability on the § 1132(a)(3) injunctive and
declaratory relief cause of action was reserved for a later phase in the case.

1

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Is there any reason that we could not do the kind of staged discovery
that I suggest, which is you identify the threshold issues; we have a limited
discovery on those; we bring those here; if you survive that, then we go into
the much more complicated issues of liability and damage?[2]
MR. COWART:[3] No, Your Honor. I think that would be fine with
us.
THE COURT:
Okay. I’d like you to try to . . . But let’s try to
actually discover everything that’s involved in this case. Could be a pretty
long, expensive discovery, but let’s try to identify threshold issues, get
those teed up as quickly as we can. I’ll have you back here. We’ll take care
of those. If there’s still a case, we’ll turn to the next phase.
MR. COWART:

That sounds reasonable, Your Honor.

(Civ. No. 14-2101, Doc. No. 60 at 43–44.)
On January 23, 2015, Judge Schiltz granted Defendants’ motion in part,
dismissing two of the three original named Plaintiffs for lack of standing, but finding that
Dr. Peterson had standing to proceed. (Civ. No. 14-2101, Doc. No. 56.) Defendants
2

More than two years after this hearing, after Phase I issues were framed and
presented to the Court, Judge Schiltz ruled in favor of Plaintiffs on liability as to the
counts before him (i.e., Counts I and II), which was consistent with what Plaintiffs
sought. (See Case No. 14-2101, Doc. No. 142 at 35; Case No. 15-3064, Doc. No. 89 at 35
(“This Court should therefore find United liable under Counts I and II.”); Case No. 142101, Doc. No. 142 at 36; Case No. 15-3064, Doc. No. 89 at 36 (“This Court should
grant Plaintiffs’ Motion for Summary Judgment, deny United’s cross-motion, and find
that United’s cross-plan offsets violate United’s plans and ERISA.”); Civ. No. 14-2101,
Doc. No. 97, Pl’s Reply Mem. in Supp. of Cross-Mot. for Summ. J. on Phase 1 Issues
(“Pl’s Reply on SJ #1”) 15 (requesting the Court to grant his motion “for Partial
Summary Judgement on Liability”); Case No. 14-2101, Doc. No. 184, 1/15/19 Decision
by Eighth Circuit at 3 (referencing that the district court “entered partial summary
judgment to the plaintiffs on the issue of liability”).) Plaintiffs’ current position that
liability on Count II was not addressed (leaving an opportunity to add new causes of
action) conflicts with their past positions and the record.
3

Mr. Cowart is counsel for Plaintiffs in both the Peterson and the Riverview cases.

6

answered the Amended Complaint on February 2, 2015. (Civ. No. 14-2101, Doc.
No. 61.) The undersigned held a Pretrial Scheduling Conference on March 30, 2015, after
the parties had submitted their Joint Rule 26(f) Report. (Civ. No. 14-2101, Doc. Nos. 63,
64.) In the Joint Rule 26(f) Report, Plaintiff stated that “[t]he only disputed factual issue
is whether United Plans permit the offset policy, and that issue can be resolved through
review of relevant Plan documents.” (Civ. No. 14-2101, Doc. No. 63 at 4.) In their
Report, the parties agreed “on the (a) scope of the threshold issues which will be the
subject of the first phase of this staged discovery, and (b) a plan and schedule for
conducting that discovery.” (Civ. No. 14-2101, Doc. No. 63 at 6.) They also agreed “that
the focus of this first phase of staged discovery would be on identifying representative
Plans and patients of Dr. Peterson covered by those representative Plans, and testing
Dr. Peterson’s authorization (and hence derivative standing) to bring those claims.” (Id.)
The parties then composed the agreed-upon threshold issues:
1. Agreed threshold issues:
a. Whether, as Plaintiff contends, plan language in “representative” United
Plans did not authorize United’s cross-plan offsets, which Plaintiff
contends renders the cross-plan offsets illegal; or whether, as United
contends, plan language in “representative” United Plans supports
United’s defense that those United Plans expressly or impliedly
authorized cross-plan offsets. In support of this defense, United relies on
the legal standard set forth in Quality Infusion Care, Inc. v. Health Care
Serv. Corp., 628 F.3d 725 (5th Cir. 2010). Tr. 27, 28; 51.
b. Whether Dr. Peterson’s standing in this action is supported by
authorized representative forms signed by patients who have
authorized—and continue to authorize—Dr. Peterson’s bringing the
claims in this action on their behalf, notwithstanding Defendants’
assertion of a conflict of interest. Tr. 27-28; 51.

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(Doc. No. 63 at 6.) 4
A Pretrial Scheduling Order issued in April 2015. 5 (Case No. 14-2101; Doc.
No. 65.) The Scheduling Order allowed for two months of discovery, and set a
dispositive motion heard-by date on the threshold issues for September 30, 2015. In a
status report to the Court on April 27, 2015, Plaintiff represented that he did not
anticipate adding additional parties and made no mention of needing to add additional
claims or causes of action. (Case No. 14-2101; Doc. No. 66.) On June 19, 2015, the
parties then stipulated to Plaintiff filing a Second Amended Complaint, which dropped
several patients on whose behalf Dr. Peterson had sued but retaining the same two counts
from their previous Complaint – a § 1132(a)(1)(B) benefits cause of action and a
§ 1132(a)(3) injunctive and declaratory relief cause of action. (Case No. 14-2101; Doc.

4

The parties requested a date by which to add/amend parties but did not request a
more general deadline for amending pleadings (id. at 7), which is consistent with Judge
Schiltz’s prior ruling that two of the Plaintiffs were dismissed from the case “without
prejudice” and his statements regarding teeing up threshold issues that either would end
the case or lead the Court to questions on liability and damages.
5

This Scheduling Order ultimately governed both the Peterson and Riverview cases
for “Phase I” discovery once the Riverview case was filed. Accordingly, Plaintiffs’
motions to amend could be analyzed under Federal Rule of Civil Procedure 16. See In re
Gen. Elec. Co. Sec. Litig., No. 09 Civ. 1951 DLC, 2012 WL 2892376, at *4–6 (S.D.N.Y
July 12, 2012) (analyzing motion to amend under Fed. R. Civ. P. 16, even when the
scheduling order did not set any schedule for submission of an additional amended
complaint). Because this Court denies Plaintiffs’ motions to amend under the more liberal
Rule 15 standard, it need not address whether Plaintiffs met the Rule 16 good cause
standard. The Court notes, however, that it would find Plaintiffs have not provided good
cause to amend the schedule to allow for their proposed amendments. And, the Court
notes that Plaintiff’s proposed amendments in Riverview violate the most recent
scheduling order as the proposed amendments are beyond the scope of those allowed.
(Case No. 15-3064, Doc. No. 130 at 3.)

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No. 74, Stipulation, approved by the Court at Doc. No. 76; see also Doc. No. 77, Second
Am. Compl.)
III.

Complaint Filed in Riverview Included a § 1132(a)(2) Fiduciary Breach
Cause of Action

One month later, on July 15, 2015, Plaintiff filed its initial Complaint in the
Riverview case, bringing three counts: (1) for benefits due under ERISA § 1132(a)(1)(B)
(hereinafter “the § 1132(a)(1)(B) benefits cause of action”); (2) for injunctive and
declaratory relief under ERISA § 1132(a)(3) (hereinafter “the § 1132(a)(3) injunctive and
declaratory relief cause of action”); and (3) for fiduciary breach under ERISA §§
1132(a)(2) and 1109 (hereinafter “the § 1132(a)(2) fiduciary breach cause of action).
(Civ. No. 15-3064, Doc. No. 1.) The Riverview case was then reassigned to United States
District Judge Schiltz and the undersigned as a related case with Peterson. (Civ. No. 153064, Doc. No. 12.) The Court extended the deadline for answering the Complaint to
September 21, 2015, and on that date, Defendants filed a motion to dismiss. (Civ. No. 153064, Doc. Nos. 21, 26.) After Defendants moved to dismiss, Plaintiff voluntarily
dismissed its § 1132(a)(2) fiduciary breach cause of action. 6 (Civ. No. 15-3064, Doc.
No. 36.) Plaintiff did not seek to add the § 1132(a)(2) fiduciary breach cause of action in
the Peterson case at that time.

6

Therefore, it was reasonable for Defendants to believe that any § 1132(a)(2)
fiduciary breach cause of action would not be asserted in either case and they could
prepare their cases accordingly.

9

IV. First Motion for Summary Judgment in the Peterson case
In August 2015, the parties filed cross-motions for summary judgment in the
Peterson case, which were heard by Judge Schiltz on September 30, 2015. (Civ. No. 142101, Doc. Nos. 83, 89.) In Plaintiff’s motion, he argued that United’s interpretation of
the plan terms was not “reasonable” under the Finley test, 7 “especially because United’s
boundless discretionary theory violates a fiduciary’s duty of loyalty to administer an
ERISA plan ‘with an eye single to the interests of the participants and beneficiaries.’”
(Civ. No. 14-2101, Doc. No. 91, Pl’s Mem. in Supp. of Cross-Mot. for Summ. J. on
Phase 1 Issues (“Pl’s Mem. on SJ #1”) 2 (citation omitted); see also id. at 2–3 (citing case
for the proposition that blurring lines between separate plans constitutes a breach of
fiduciary duties).) Plaintiff made the argument that “this case is about the rule of law and
whether United can do what it wants, when it wants, without regard to plan terms, trust
law principles, the Finley factors, or other restraints on a fiduciary’s powers. (Id. at 3–4.)
Among other arguments under Finley, Plaintiff argued that the Finley factor considering
“conflicts with the substantive or procedural requirements of the ERISA statute” weighed

7

The Finley test, used in reviewing administrators’ plan interpretations, includes
consideration of the following factors:
whether their interpretation is consistent with the goals of the Plan, whether
their interpretation renders any language in the Plan meaningless or
internally inconsistent, whether their interpretation conflicts with the
substantive or procedural requirements of the ERISA statute, whether they
have interpreted the words at issue consistently, and whether their
interpretation is contrary to the clear language of the Plan.
Finley v. Special Agents Mut. Benefit Ass’n, Inc., 957 F.2d 617, 621 (8th Cir. 1992).

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in his favor “[e]ven on the limited Phase I record.” (Id. at 16.) Plaintiff argued that it was
“clear that United’s interpretation of unidentified Exemplar Plan terms as permitting
cross-plan offsets conflicts with fundamental principles of ERISA and the common law
of trusts upon which ERISA is based,” and that “[p]aramount is the duty of loyalty.” (Id.)
Plaintiff cited not only to 28 U.S.C. § 1104(a), which states that “a fiduciary shall
discharge his duties with respect to a plan solely in the interest of the participants and
beneficiaries,” but also cited to duties that exist at common law. 8 (Id.)
On October 1, 2015, Judge Schiltz issued an order denying both parties’ cross
motions. (Civ. No. 14-2101, Doc. No. 101.) Judge Schiltz focused his order in particular
on one Finley factor, stating that “[o]ne of the Finley factors that the Court must consider
is whether United’s interpretation of the plans conflicts with the substantive or procedural
requirements of ERISA.” (Id. at 2.) Judge Schiltz stated:
At oral argument, United argued that fiduciaries of the plans have directed
United to engage in cross-plan offsetting, and that these directives should
remove any concern that United’s use of cross-plan offsets may conflict
with ERISA. Evidence regarding these directives is not in the record,
however, and (because United did not clearly raise this argument until oral
argument) the parties have not briefed how the existence of such evidence
might affect the analysis under Finley.
8

Plaintiff argued breach of loyalty at length in this summary-judgment briefing.
This includes in his Reply brief where he disputes United’s contention that he did not
plead breach of ERISA’s duty of loyalty. Plaintiff then cites to some paragraphs from his
Second Amended Complaint where he contends that he alleged breach of fiduciary
duties. (Civ. No. 14-2101, Doc. No. 97, Pl’s Reply on SJ #1 at 5, n.2.) If he was able to
make such an extensive argument about breach of loyalties based on the Phase I
discovery addressing this Finley factor, there is no good reason why Plaintiff could not
have sought to amend his Complaint then to add a § 1132(a)(2) fiduciary breach cause of
action, or other further factual allegations at that time. This was over three and a half
years ago.

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...
In short, both parties have raised issues that might very well affect
the Court’s analysis of the Finley factors, thereby raising the specter of the
Court having to do the analysis twice – once now and once after additional
discovery and briefing. The Court would prefer to conduct only one Finley
analysis based on all of the evidence that reasonably relates to that
analysis.[ 9]
(Id. at 2.) Therefore, Judge Schiltz denied the parties’ motions without prejudice and
directed them to meet with the undersigned to “develop a plan for discovery of additional
evidence relevant to the Finley factors,” and “propose a plan for bringing and briefing a
new round of summary-judgment motions following that discovery.” (Id. at 3.)
V.

Period after First Round of Summary-Judgment Motions
In the months that followed Judge Schiltz’s order, the undersigned held several

status conferences with the parties. (Doc. No. 102, Minute Entry for 10/15/15 status
conference; Doc. No. 105, Minute Entry for 10/29/15 status conference; Doc. No. 108,
Minute Entry for 11/5/15 status conference.) Also, in the Riverview case, on November
20, 2015, the parties stipulated to Plaintiff filing an Amended Complaint. (Case. No. 153064, Doc. No. 45.) On November 25, 2015, the undersigned issued a Consolidated
Amended Order Regarding Phase I Proceedings, which allowed for Riverview to file the
proposed Amended Complaint, and which also addressed discovery and motions for

9

At the March 2019 hearing before the undersigned, Plaintiffs conceded that the
facts that would support a § 1132(a)(2) fiduciary breach cause of action would overlap
with the facts that would support this Finley factor. After learning that Judge Schiltz only
wanted to do an analysis once that related to breach of fiduciary duties, Plaintiffs should
have sought leave to amend to add any additional fiduciary duty allegations or cause of
action no later than immediately following Judge Schiltz’s October 1, 2015 Order.

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Phase I. (Case No. 14-2101, Doc. No. 109; Case No. 15-3064, Doc. No. 48.) The
undersigned also set a new briefing schedule for new motions for summary judgment.
(Case No. 14-2101, Doc. No. 109 at 7–8; Case No. 15-3064, Doc. No. 48 at 7–8.)
On December 30, 2015, Judge Schiltz denied Defendants’ pending motion to
dismiss in the Riverview case, holding that the anti-assignment provisions in the plans
administered by United did not prohibit the patients from assigning their causes of action
to Riverview. (Civ. No. 15-3064, Doc. No. 52.) Riverview filed its Amended Complaint
on January 29, 2016, which again left the § 1132(a)(2) fiduciary breach cause of action
out. (Case No. 15-3064, Doc. No. 57, Am. Compl.)
VI. Second Round of Summary-Judgment Motions for Phase I – Peterson
and Riverview
Plaintiffs filed their memorandum for summary judgment on Phase I issues on
April 8, 2016. (Case No. 14-2101, Doc. No. 140; Case No. 15-3064, Doc. No. 87.)
Although Plaintiffs began their brief stating that “[a]dditional Phase I discovery ordered
by the Court to enable it to conduct a Finley-based analysis has revealed breathtaking
levels of duplicity and self-dealing by United that reinforces the need for entry of
summary judgment in Plaintiffs’ favor,” Plaintiffs made no mention of the potential for a
separate fiduciary breach cause of action to be brought in the future. (Case No. 14-2101,
Doc. No. 142 at 1; Case No. 15-3064, Doc. No. 89 at 1; see also Case No. 14-2101, Doc.
No. 142 at 20–24; Case No. 15-3064, Doc. No. 89 at 20–24 (making Finley factor
analysis and referencing the common law duties; Case No. 14-2101, Doc. No. 142 at 32–
34; Case No. 15-3064, Doc. No. 89 at 32–34 (making additional arguments with respect

13

to United’s fiduciary duties).) And, in direct contrast to Plaintiffs’ present view that
Phase I was to address a narrow set of issues regarding Count I with more litigation to
come on other causes of action, Plaintiffs argued the opposite:
United repeatedly claims that the scope of Phase 1 summary judgment is
extremely limited, and that it is free to raise future arguments for why
cross-plan offsets are lawful . . . . But this Court made clear that it viewed
Phase 1 Rule 56 motions as “dispositive motions” on “threshold issues” of
the legality of cross-plan offsets.
(Case No. 14-2101, Doc. No. 142 at 4, n.4; Case No. 15-3064, Doc. No. 89 at 4, n.4.)
Plaintiffs now argue that they should be allowed to add additional allegations, a new
cause of action, and requests for relief, when their position during the second round of
summary-judgment motions was that class certification discovery would be the next step
following a favorable ruling. 10 (Case No. 14-2101, Doc. No. 159, Pls.’ Reply Mem. 18;
Case No. 15-3064, Doc. No. 106, Pls.’ Reply Mem. 18 (requesting the Court to “grant
Plaintiffs’ Renewed Motion for Partial Summary Judgment on Liability” and to “direct
the parties to commence class certification discovery”).)
On March 14, 2017, Judge Schiltz issued his order on the cross-motions for
summary judgment, granting Plaintiffs’ motions. (Case No. 14-2101, Doc. No. 169,

10

Again, Plaintiffs’ current argument that liability on their § 1132(a)(3) injunctive
and declaratory relief cause of action was reserved for a later phase is contrary to the
positions Plaintiffs took previously, as they specifically requested the Court to rule on
liability for both Counts I and II of their Complaint. (Case No. 14-2101, Doc. No. 142 at
35; Case No. 15-3064, Doc. No. 89 at 35 (“This Court should therefore find United liable
under Counts I and II.”); Case No. 14-2101, Doc. No. 142 at 36; Case No. 15-3064, Doc.
No. 89 at 36 (“This Court should grant Plaintiffs’ Motion for Summary Judgment, deny
United’s cross-motion, and find that United’s cross-plan offsets violate United’s plans
and ERISA.” (emphasis added).)

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3/14/17 Order 36; Case No. 15-3064, Doc. No. 111, 3/14/17 Order 36.) In the order, the
Court addressed the fiduciary duties imposed by ERISA and the Finley factor that
considers conflicts with the substantive or procedural requirements of the ERISA statute.
(Case No. 14-2101, Doc. No. 169, 3/14/17 Order 19–34; Case No. 15-3064, Doc.
No. 111, 3/14/17 Order 19–34.) At one point, the Court stated the following:
In light of this case law and the strict fiduciary duties imposed by ERISA,
cross-plan offsetting is, to put it mildly, a troubling use of plan assets—one
that is plainly in tension with “the substantive or procedural requirements
of the ERISA statute . . . .” Finley, 957 F.2d at 621. In stark terms, crossplan offsetting involves using assets from one plan to satisfy debt allegedly
owed to a separate plan – a practice that raises obvious concerns under
§§ 1104 and 1106. These concerns are particularly acute in this case, in
which every offset that United orchestrated did not just benefit a different
unrelated plan, but benefited United itself.
(Case No. 14-2101, Doc. No. 169, 3/14/17 Order 21; Case No. 15-3064, Doc. No. 111,
3/14/17 Order 21; see also id. at 29 (stating that “cross-plan offsetting raises serious
concerns under ERISA”), 33 (stating that “cross-plan offsetting is in tension with
ERISA’s fiduciary rules”).) The Court certified the order for immediate appeal, finding
that “an immediate appeal from the order may materially advance the ultimate
termination of the litigation.” (Id. at 34.) At no time prior to this point had either case
been stayed. And at no time prior to this point or immediately following this order did
Plaintiffs bring a motion to amend to add a § 1132(a)(2) fiduciary breach cause of action.
Defendants filed an application to proceed with an interlocutory appeal and the
United States Court of Appeals for the Eighth Circuit granted the application. On April 6,
2017, this Court then stayed both the Peterson and Riverview cases pending the outcome
of that appeal. (Case No. 14-2101, Doc. No. 170; Case No. 15-3064, Doc. No. 112.) The
15

cases remained stayed for almost two years. On January 15, 2019, the Eighth Circuit
affirmed the Court’s ruling on summary judgment. 11 (Case No. 14-2101, Doc. No. 184.)
VII.

Post-Appeal

The undersigned held a status conference with counsel for all parties on
January 29, 2019. (Case No. 14-2101, Doc. No. 189; Case No. 15-3064, Doc. No. 129.)
No mention was made at that time that Plaintiffs would be seeking to amend the
Complaint to add new counts. The parties were directed to meet and confer and
informally submit a proposed plan and schedule for the two cases to the undersigned by
February 12, 2019. The parties jointly submitted their proposals on February 12, 2019.
The parties agreed that the Riverview case would proceed as an individual case and the
Peterson case would proceed as a proposed class action case. It was represented to the
undersigned regarding Riverview that –
[t]he parties believe that they can address all remaining issues in the case,
including new offsets identified by Riverview, new plan-based defenses
Defendants may have with respect to those offsets, and Defendants’ state
law and common law defenses, in a relatively brief discovery period. Then,
the parties contemplate proceeding to cross-motions for summary judgment
to address all outstanding issues relating to facts, law, and remedies.
(Case No. 15-3064, Doc. No. 148-1, 2/12/19 informal letter submission.) It was
represented to the undersigned regarding Peterson that –

11

Similar to Judge Schiltz, the Eighth Circuit stated that “the practice of cross-plan
offsetting is in some tension with the requirements of ERISA. While we need not decide
here whether cross-plan offsetting necessarily violates ERISA, at the very least it
approaches the line of what is permissible.” (Case No. 14-2101, Doc. No. 184, Eighth
Circuit Decision 10.)

16

Defendants intend to file a narrow motion to strike the class allegations
based on the Court’s prior rulings dismissing two named plaintiffs from the
case. After resolution of that motion, the parties agree there should be a sixmonth class discovery period, followed by briefing on Plaintiff’s motion for
class certification.
(Case No. 15-3064, Doc. No. 148-1, 2/12/19 informal letter submission.) 12
Based on the input of counsel and the needs of each of the cases, the undersigned
issued separate scheduling orders in the two cases. In Peterson, allowing for either the
filing of a stipulated Third Amended Complaint or a motion seeking leave to amend
(because Plaintiff was seeking to proceed as a proposed class action) by February 28,
2019, acknowledging that Defendants might bring a motion to strike the class allegations,
and setting a status conference for March 5, 2019, and a discovery conference for April
17, 2019. (Case No. 14-2101, Doc. Nos. 190, 192.) In Riverview, setting a schedule for
the case that comported with Plaintiff’s representation that “there are relatively few issues
remaining to reach a final judgment on the merits,” and the parties’ belief “that they can

12

It is apparent through this joint letter submission by the parties, that Plaintiffs were
in agreement that Defendants’ state law and common law defenses might be addressed
following the finding of liability on the current counts. This Court makes no finding and
takes no position as to what defenses may or may not apply following Judge Schiltz’s
ruling. However, at least Defendants’ flagged the potential for such litigation following
Phase I; Plaintiffs did not flag to the Court or Defendants that they would be seeking
proposed amendments that included new causes or action and claims for relief. (See Case
No. 14-2101, Doc. No. 124, Defs.’ Mem. of Law in Supp. of Defs.’ Mot for Summ J. 12,
n.8; Case No. 15-3064, Doc. No. 71, Defs.’ Mem. of Law in Supp. of Defs.’ Mot for
Summ J. 12, n.8 (“United continues to reserve all rights and defenses that go beyond the
scope of Phase I discovery, including without limitation any objections or defenses it may
have to the propriety of class certification, any rights or defenses it may have based on
common law or state laws, and any defenses it may have to the claims of particular
plaintiffs (such as whether a particular plan is actually governed by ERISA).”) (emphasis
added).)

17

address all remaining issues in the case, including new offsets identified by Riverview,
new plan-based defenses Defendants may have with respect to those offsets, and
Defendants’ state law and common law defenses, in a relatively brief discovery period.”
(Case No. 15-3064, Doc. No. 130.) The undersigned set February 28, 2019, as the date by
which amended pleadings must be filed and served. In doing so, the Court noted: “The
parties agreed on the following: Plaintiff must ‘file a stipulation or motion for leave to
amend to identify new offsets and remove class allegations.’” (Id.)
On February 28, 2019, Plaintiffs filed the present motions to amend. As stated
above, in Peterson, the Second Amended Complaint (the operative Complaint) asserts
two counts – a § 1132(a)(1)(B) benefits cause of action and a § 1132(a)(3) injunctive and
declaratory relief cause of action. Plaintiff now seeks to add a § 1132(a)(2) fiduciary
breach cause of action, 13 to assert his § 1132(a)(3) injunctive and declaratory relief cause
of action as two counts – one under § 1132(a)(3)(A) and one under § 1132(a)(3)(B), 14 to

13

Again, this § 1132(a)(2) fiduciary breach cause of action was previously dropped
from the Riverview Complaint in the Fall of 2015. (Case No. 15-3064; Doc. No. 36.)

14

Plaintiff proposes an amendment that would seek injunctive and declaratory relief
under § 1132(a)(3)(A), which, according to Plaintiff, allows for Plaintiff and the Class to
“enjoin any act or practice which violates any applicable provision of ERISA or the terms
of United Plans.” (Case No. 14-2101, Doc. No. 193-1 at ¶ 54.) Plaintiff proposes
amending a supporting allegation for this cause of action as follows:
United systematically violates (and violated) the terms of the
United Plans and ERISA /or ERISA, including breaching its fiduciary
duties under ERISA, by failing to cause those plansPlans to pay benefits for
Covered Services, or by taking benefits that were issued by such Plans
rather than paying the ONET providers of the United Insureds, in order to
offset alleged overpayments that United caused those plansother United
(Footnote Continued on Next Page)
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add additional factual and supporting allegations, and to add requests for relief.15 In
Riverview, the First Amended Complaint (the operative Complaint) also asserts two
counts – a § 1132(a)(1)(B) benefits cause of action and a § 1132(a)(3) injunctive and
declaratory relief cause of action. Plaintiff does not seek to add a § 1132(a)(2) fiduciary
breach cause of action, but does seek to assert its § 1132(a)(3) injunctive and declaratory
relief cause of action as two counts – one under § 1132(a)(3)(A) and one under

(Footnote Continued From Previous Page)
Plans to make on claims submitted with respect to different United
Insureds.
(Case No. 14-2101, Doc. No. 193-1 at ¶ 55.)
Plaintiff also proposes an amendment that would seek other equitable relief under
§ 1132(a)(3)(B) in a separate count, which, according to Plaintiff, allows Plaintiff and the
Class to “obtain other appropriate equitable relief under ERISA (i) to redress violations
of ERISA or the terms of the United Plans or (ii) to enforce any provisions of ERISA of
the terms of the United Plans.” (Case No. 14-2101, Doc. No. 193-1 at ¶ 57.) Plaintiff
proposes adding a new supporting allegation for this cause of action as follows:
United systematically violates (and violated) the terms of the United
Plans and ERISA, including breaching its fiduciary duties under ERISA, by
failing to cause those Plans to pay benefits for Covered Services, or by
taking benefits that were issued by such Plans rather than paying the ONET
providers of the United Insureds, in order to offset alleged overpayments
that United caused other United Plans to make on claims submitted with
respect to different United Insureds.
(Case No. 14-2101, Doc. No. 193-1 at ¶ 58.)
15

Plaintiff also seeks to make other amendments, which as referenced above are not
contested and therefore are not mentioned here.

19

§ 1132(a)(3)(B), 16 to add additional factual and supporting allegations, and to add
requests for relief.
Defendants argue that the motions should be denied, both because Plaintiffs have
previously disavowed any claim based on a per se violation of ERISA and represented
that they were pursuing only plan-language based theories of liability, 17 and because they
have unduly delayed in seeking the amendments and the amendments would be
prejudicial to Defendants. Plaintiffs respond asserting that they have not disavowed
claims of fiduciary breach because their § 1132(a)(1)(B) benefits causes of action and
§ 1132(a)(3) injunctive and declaratory relief causes of action have both relied upon
already-asserted factual allegations regarding fiduciary duties – the former by way of the

16

Plaintiff’s proposed amendments for the § 1132(a)(3)(A) and § 1132(a)(3)(B)
causes of action are virtually identical to the proposed amendments for the
§ 1132(a)(3)(A) and § 1132(a)(3)(B) causes of action in the Peterson case. See supra n.
14; (Case No. 15-3064, Doc. No. 132-1 at ¶¶ 50–51, 53–54).
17

Defendants point to various exchanges in the record where Plaintiffs have
appeared to limit their theories of liability to those linked to plan language only. (See Civ.
No. 14-2101, Doc. No. 104, 9/30/15 Mot. Hr’g Tr., at 49:22-25 (citing that when asked
by Judge Schiltz at the first summary-judgment hearing whether a fiduciary per se
violates ERISA by allowing plans to engage in cross-plan offsetting, Plaintiffs responded,
“So no is the short answer. The longer answer is our position is not that it is inherently a
violation of the duty of loyalty or the ban on prohibited transactions to engage in crossplan offsets”); see also Civ. No. 14-2101, Doc. No. 168, 8/24/16 Mot. Hr’g Tr., at 21:1722:6 (confirming to Judge Schiltz that “cross-plan offsetting in and of itself does not
violate ERISA”), and at 53:8-16 (“THE COURT: But you’ve told me that cross-plan
offsetting doesn’t in and of itself violate ERISA, that it’s possible for fiduciaries to
engage in cross-plan offsetting without violating ERISA. MR. COWART: I hope I’ve
been clear. Our position is that in this litigation we’re not saying that there is a
categorical ban against cross-plan offsetting. We don’t think we need to go there because
we think that there is no plan language in there.”).) At no time during these exchanges did
Plaintiffs flag the potential of a new fiduciary breach cause of action.

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Finley analysis, and the latter because it encompasses ERISA “violations.” Plaintiffs also
assert that “[t]he contested amendments adding a new claim under § 1132(a)(2) in
Peterson do nothing more than provide another form of relief to remedy the already
alleged breaches.” (Doc. No. 203 at 2.)
II.

Analysis
Although Federal Rule of Civil Procedure 15(a) provides that leave to amend a

pleading “shall be freely given when justice so requires,” amendment is not an absolute
right, as “undue delay, bad faith, or dilatory motive, repeated failure to cure deficiencies
by amendments previously allowed, undue prejudice to the non-moving party, or futility
of the amendment may be grounds to deny [the] motion.” Doe v. Cassel, 403 F.3d 986,
991 (8th Cir. 2005) (quotations omitted). “Delay alone is not enough to deny a motion to
amend; prejudice to the nonmovant must also be shown.” Id. (quoting Bediako v. Stein
Mart, Inc., 354 F.3d 835, 841 (8th Cir. 2004)).
This Court need not reach the question of whether Plaintiffs previously disavowed
the claims that they are now seeking to add to the Complaints because the Court denies
Plaintiffs’ motions based on undue delay and prejudice to Defendants.
A.

Plaintiffs Unduly Delayed in Seeking to Amend

Plaintiffs’ primary argument is that they are “fully justified in amending the
complaints to account for the evidence uncovered during Phase I and the interpretation of
ERISA that DOL offered as amicus curiae in the Eighth Circuit.” (Doc. No. 203 at 6.)
First, Plaintiffs’ contention that the amicus curiae submission before the Eighth Circuit
shed light on something new is perplexing. The argument that the amicus curiae raised
21

regarding per se violations of ERISA was the very one that Plaintiffs had represented to
Judge Schiltz that they were not pursuing in this litigation. Moreover, as is evident from
the background summary provided above, Plaintiffs’ contention that more causes of
action were contemplated to be litigated after Phase I is contrary to their own positions
taken throughout these cases.
Plaintiffs waited too long before seeking leave to amend to add the contested
allegations, causes of action, and requests for relief. Plaintiffs did not just learn of the
facts underlying these claims. Indeed, they made factual allegations regarding
Defendants’ status as fiduciaries back in 2014 when the original Peterson Complaint was
filed, and pled a § 1132(a)(2) fiduciary breach cause of action in the Riverview case when
that original Complaint was filed in July 2015. Over and over again, Plaintiffs have made
arguments relating to fiduciary duties in briefing to the Court throughout Phase I. And the
Court’s orders, at a minimum, provided Plaintiffs with an opportunity to timely follow-up
with a request to amend. Plaintiffs did not. Instead, Plaintiffs waited until after summaryjudgment rulings (rulings that analyzed fiduciary duties as it pertained to the Finley
factors and as such were rulings that Judge Schiltz had indicated that he only wanted to
address once) and an appeal to the Eighth Circuit concluded. This four to five years
period of delay is undue delay. 18 See Soo Line R. Co. v. Werner Enterprises, No. 12-1089

18

In making this Order, the Court is in no way commenting on whether fiduciary
duties or prohibited transaction related facts and arguments are already encompassed by
Plaintiffs’ existing § 1132(a)(1)(B) and § 1132(a)(3) claims, which still remain in the
case at this time. The Court here is simply ruling that Plaintiffs are too late to add the
disputed amendments.

22

(DSD/JSM), 2013 WL 3771391, at *1–2 (D. Minn. July 17, 2013) (affirming the denial
of motion for leave to amend under Rule 15 for undue delay); see also In re Acceptance
Inc. Cos., Sec. Litig., 352 F. Supp. 2d 928, 933 (D. Neb. 2003) (“[T]he Eighth Circuit
Court of Appeals . . . has stated that when a motion to amend a complaint is based on
allegedly new information that the plaintiff knew, or through the exercise of reasonable
effort could have known at an earlier time, the motion should be denied.”).
B.

Defendants Would Suffer Prejudice if Plaintiffs Were Granted Leave
to File another Amended Complaint as Proposed

This case has gone through years of litigation on what was supposed to be the
threshold issues in the case. Within Phase I of the case, extensive discovery was
exchanged, two motions for summary judgment were briefed and argued, and an Eighth
Circuit appeal was exhausted with liability determined – all on the issues that Plaintiffs
agreed were the threshold issues in the case on Counts I and II. Plaintiffs had indicated
that if they won on these threshold issues, this case should then proceed directly to class
certification (in Peterson) and then damages. (See Case No. 14-2101, Doc. No. 159, Pls.’
Reply Mem. 18; Case No. 15-3064, Doc. No. 106, Pls.’ Reply Mem. 18 (requesting the
Court to “grant Plaintiffs’ Renewed Motion for Partial Summary Judgment on Liability”
and to “direct the parties to commence class certification discovery”); Case No. 15-3064,
Doc. No. 148-1, 2/12/19 informal letter submission.) Adding new causes of action that
potentially trigger new claims for recovery would fundamentally alter the nature of this
case and result in undue resources expended by Defendants in litigating this case. See Lee
v. Driscoll, No. CIV14-4146, 2016 WL 1337248, at *4 (D.S.D. Mar. 31, 2016) (finding

23

prejudice where plaintiffs “did not move to amend the complaint until after discovery had
closed and on the same day that Defendants filed a motion to dismiss and for summary
judgment based on the claims in the current complaint”).
Plaintiffs argue that there is no prejudice because Defendants would not need to
conduct any additional discovery. To the contrary, Defendants would be entitled to fact
and expert discovery regarding the Plaintiffs’ claims, and also discovery not foreseen
relating to the adequacy of proposed class representatives for the new claims. See
McAninch v. Wintermute, 491 F.3d 759, 766–67 (8th Cir. 2007) (affirming denial of leave
to amend where “the proposed amendment could have resulted in the burdens of
additional discovery and delay to proceedings”); Bediako v. Stein Mart, Inc., 354 F.3d
835, 841 (8th Cir. 2004) (“[W]hen late tendered amendments involve new theories of
recovery and impose additional discovery requirements, courts are less likely to find an
abuse of discretion due to the prejudice involved.”) (quotations omitted); Johnson v. BE
& K Constr. Co., No. 3:08-CV-00150-RP-RAW, 2010 WL 11493755, at *2 (S.D. Iowa
Mar. 5, 2010) (finding prejudice because “allowing a new claim at this point in the
litigation may require reopening discovery . . . and summary judgment proceedings
would likely be delayed to permit both sides to supplement their motion papers to address
the fact a new claim has entered the case”). Therefore, Defendants would be prejudiced if
Plaintiffs were granted leave to amend.

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ORDER
Based on the above, IT IS HEREBY ORDERED that:
1.

Plaintiffs’ Motions for Leave to File Second Amended Complaints (Civ.

No. 14-2101, Doc. No. 193; Civ. No. 15-3064, Doc. No. 132) are DENIED.
2.

Plaintiffs may file an Amended Complaint in conformity with this Order

and which incorporate only the agreed-upon proposed amendments as described by
Defendants in their opposition on or before April 17, 2019. Therefore, the following
paragraphs must be removed from Plaintiffs’ proposed Amendment Complaints: in the
Peterson Complaint, paragraphs 6, 18, 21, 26, 30, 31, 33, 40, 49, 50, 51, 52, 55, 56, 57,
58, and Prayer for Relief sub-sections (B), (C), (F), and (H); in the Riverview Complaint,
paragraphs 6, 39, 40, 42, 48, 51, 52, 53, 54, and Prayer for Relief sub-sections (A), and
(B).

Date: April 12, 2019.
s/ Becky R. Thorson___________
BECKY R. THORSON
United States Magistrate Judge

25