Budd v. Blue Cross and Blue Shield of Montana, Inc.
Filing
207
OPINION AND ORDER denying (184) Motion to Certify Class in case 2:09-cv-00025-SEH Signed by Judge Sam E Haddon on 12/27/2016. Associated Cases: 2:09-cv-00025-SEH, 6:09-cv-00062-SEH (ELL)
FILED
DEC 2 7 2016
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BUTTE DIVISION
KEVIN BUDD, RAY LEE, MARTIN
MANGAN, SHIRLEY MANGAN and
KENNETH WALSH on behalf of
themselves and all others similarly
situated,
Plaintiffs,
Clerk, U.S. District Court
District Of Montana
Helena
)
)
)
)
No. CV-09-25-BU-SEH
)
vs.
CARING FOR MONTANANS, INC.,
BLUE CROSS BLUE SHIELD of
MONTANA, INC., HEAL TH CARE
SERVICES CORPORATION, INC.,
and JOHN DOES 3 through 20,
)
Defendants.
OPINION AND ORDER
)
)
)
)
TYSON S. P ALLISTER,
)
Plaintiff,
)
vs.
)
CARING FOR MONTANANS, INC.,
BLUE CROSS BLUE SHIELD of
MONTANA, INC., HEALTH CARE
SERVICES CORPORATION, INC.,
and JOHN DOES 3 through 20,
)
)
)
Defendants.
)
This Document Relates To:
BOTH ACTIONS
)
No. CV-09-62-H-SEH
Background
On August 26, 2016, Plaintiffs moved for Class Certification. 1 Defendant
Caring for Montanans, Inc. ("CFM") responded on September 9, 2016. 2 Plaintiffs
filed a reply. 3 Both CFM and Plaintiffs responded to the Court's Order4 requesting
additional information as to one of Plaintiffs' fiduciary duty claims. 5 A hearing on
the motion was held on December 5, 2016. The matter is fully submitted.
This seven-year old action arises from CFM's (formerly known as Blue
Cross Blue Shield of Montana, Inc. ("BCBSMT")) denial of medical benefits to
Plaintiffs on the basis of policy exclusionary language subsequently deemed
invalid by the Montana Supreme Court in BCBSMT v. Montana State Auditor and
Commissioner oflnsurance. 6 The exclusionary language essentially denied
coverage ifthe insured was injured and the responsible party's automobile or
premise liability insurance would apply. In an opinion entered on September 24,
2009, the State Auditor court found the exclusion to be invalid and did not
1
Doc. 184.
2
Doc. 189.
3
Doc. 192.
4
Doc. 198.
5
Doc. 200 (CFM); Doc. 201 (Plaintiffs).
6
218 P.3d 475 (Mont. 2009).
2
comport with Montana law.
Multiple lawsuits were filed following the State Auditor decision. Both of
the above-captioned matters were originally commenced in state court and
removed to this Court, which, in tum, remanded all state law claims back to state
court. State court class action litigation ensued. Proceedings in this Court were
stayed pending resolution of the state court actions. After two interlocutory
appeals, the Montana Supreme Court, on May 24, 2016, affirmed the state district
court's approval of a Stipulation and Settlement Agreement ("Settlement
Agreement") between BCBSMT and the state court class. 7
This Court lifted its stay on July 5, 2016, to address any remaining claims
solely within the jurisdiction of the federal courts under the Employee Retirement
Income Security Act ("ERISA"). 8 Plaintiffs Pallister, Walsh, and the Mangans are
known members of the state court class. Plaintiff Budd was denied class
membership for lack of standing because CFM had paid his claims in full shortly
after he filed suit. Plaintiffs apprised the Court that Plaintiff Lee is not
appropriately a party to this lawsuit. 9 He will be dismissed. Plaintiffs now seek
certification for two different classes.
7
In re BCBSMT, 372 P.3d 457, 465 (Mont. 2016).
8
29 u.s.c. §§ 1001-1461.
9
Doc. 193 at 7; Doc. 194 at 9.
3
Discussion
"The class action is 'an exception to the usual rule that litigation is
conducted by and on behalf of the individual named parties only. "' 10 "In order to
justify a departure from that rule, 'a class representative must be part of the class
and "possess the same interest and suffer the same injury" as the class
members.'" 11 The Court has broad discretion in deciding whether to certify a
class. 12 In exercising its discretion, the Court may need "'to probe behind the
pleadings before coming to rest on the certification question' ...." 13 This probe
may well "entail some overlap with the merits of the plaintiffs underlying
claim." 14
Federal Rule of Civil Procedure 23 governs class certification. Its
application involves distinct sets of requirements and accompanying analyses:
Rule 23(a) requirements and Rule 23(b) requirements. The party seeking class
action bears the burden of demonstrating he or she has met the requirements of
10
Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 348 (2011) (quoting Califano v.
Yamasaki, 442 U.S. 682, 700-01 (1979)).
11
Id at 348-349 (quoting East Tex. Motor Freight System, Inc. V. Rodriguez, 431 U.S.
395, 403 (1977)).
12
Bateman v. American Multi-Cinema, Inc., 623 F.3d 708, 712 (9th Cir. 2010).
13
Wal-Mart, 564 U.S. at 350 (quoting Gen. Tel. Co. ofSouthwest v. Falcon, 457 U.S.
147, 160 (1982)).
14
Id at 351.
4
both. 15
"Rule 23(a) ensures that the named plaintiffs are appropriate
representatives of the class whose claims they wish to litigate." 16 The Rule has
four elements:
( 1) the class is so numerous that joinder of all members is
impracticable;
(2) there are questions of law or fact common to the class;
(3) the claims or defenses of the representative parties are typical of
the claims or defenses of the class; and
(4) the representative parties will fairly and adequately protect the
interests of the class.
The four elements are commonly referred to as "numerosity," "commonality,"
"typicality," and "adequate representation," respectively. 17 All four Rule 24(a)
elements must be found to be present before proceeding to the Rule 23(b) analysis.
I.
Certification for Class (a) is Improper because Plaintiffs Lack
Standing to Assert the Proposed Class's Claims
Article III of the United States Constitution gives this Court jurisdiction
only over "cases and controversies." 18 "[T]he doctrine of standing serves to
15
Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1186 (9th Cir. 2001).
16
Wal-Mart, 564 U.S. at 349.
17
Id at 349.
18
Whitmore v. Arkansas, 495 U.S. 149, 154-55 (1990).
5
identify those disputes which are appropriately [to be] resolved through the
judicial process." 19 To establish standing, "[t]he plaintiff must have (1) suffered an
injury in fact, (2) that is fairly traceable to the challenged conduct of the
defendant, and (3) that is likely to be redressed by a favorable judicial decision." 20
"To establish injury in fact, a plaintiff must show that he or she suffered 'an
invasion of a legally protected interest' that is 'concrete and particularized' and
'actual or imminent, not conjectural or hypothetical. "'21 "The party invoking
federal jurisdiction bears the burden of establishing [each of] these elements. " 22
Plaintiffs provide the following definition for its first proposed class,
identified as Class (a):
(a)
19
CFM state class action members who were BRISA insureds and
have breach of fiduciary duty claims against CFM for: ( 1)
failing to provide notice regarding the settlement in [Diaz v.
BCBSMT23 ]; and (2) proposing to give BRISA beneficiaries'
funds to Montana Healthcare Foundation. 24
Id. at 155.
20
Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016) (citing Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560--61 (1992); Friends of the Earth, Inc. v. Laidlaw Envtl. Services
(I'OC), Inc., 528 U.S. 167, 180-181 (2000)).
21
Id. at 1548 (citing Lujan, 504 U.S. at 560).
22
Lujan, 504 U.S. at 561 (citing FWIPBS, Inc. v. Dallas, 493 U.S. 215, 231 (1990);
Warth v. Seldin, 422 U.S. 490, 508 (1975).
23
267 P.3d 756 (Mont. 2011).
24
Doc. 185 at 10.
6
The Court will address each. However, neither alleged action by CFM ((1) or (2))
gives rise to a cognizable injury to Plaintiffs.
Plaintiffs allege a breach of fiduciary duty arose when CFM failed to tell the
state court class members of the Diaz case, in which plaintiffs received 100% of
their wrongfully denied benefits. They argue such a duty is derived from the duty
of loyalty set forth in 29 U.S.C. § 1104(a).25 However,§ 1104(a), i.e. the "Prudent
man standard of care," primarily sets forth a fiduciary's duties in handling plan
assets such as minimizing expenses of administering the plan, diversifying plan
investments, and managing the plan in accordance with the governing documents.
It does not impose any duty to disclose information of any sort to plan participants
or beneficiaries.
On the other hand, § 1021 of ERIS A imposes on fiduciaries of a plan the
duty to disclose and report certain information to plan participants and
beneficiaries. Such information includes summary plan descriptions and annual
financial reports. It does not include information regarding a lawsuit in which the
participants and beneficiaries have no interest. The Diaz class was comprised
solely of State of Montana employees. 26 None of the Plaintiffs in this case were
25
See id. at 15-17.
26
267 P.3d at 159 ("[I]t is clear the members of the class will be individuals insured
under the State plan").
7
state employees or participants in the Diaz plan. In other words, the outcome of
Diaz was entirely irrelevant to Plaintiffs' recovery. CFM had no duty to disclose
anything about Diaz to Plaintiffs.
Even if there were some duty to disclose Diaz, Plaintiffs fail to show how a
failure to disclose caused them any injury. Plaintiffs may understandably feel
slighted by the fact they recovered 50-75% of their denied claims, while Diaz
class members recovered 100%. But the bottom line is that the Montana Supreme
Court in In re BCBSMT approved the Settlement Agreement as fair and
reasonable. 27 This Court should not and will not now engage in a collateral attack
of that decision.
CFM had no fiduciary duty to disclose to Plaintiffs the Diaz case. Even if
they did, Plaintiffs were not injured by a lack of disclosure. As such, Plaintiffs
have no standing to assert the claim. Such claim cannot serve as the basis for a
class action lawsuit.
The second claim of Class (a) is that CFM' s potential transfer of
$150,000,000 to the Montana Healthcare Foundation ("MHF") breaches a
fiduciary duty owed to Plaintiffs. Curiously lacking from Plaintiffs' complaint is
any mention of this now asserted fiduciary claim. 28 Plaintiffs' failure to plead it
27
372 P.3d at 465.
28
See Doc. 181.
8
procedurally bars its use as a basis to certify a class. The claim fails on substantive
grounds as well.
The crux of Plaintiffs' argument is that they should recover the remaining
25-50% of their claims before a third-party, MHF, receives anything. Plaintiffs
assert CFM is proposing to give away "state class action members' money." 29
However, those funds do not belong to Plaintiffs. Under the Settlement
Agreement, Plaintiffs are entitled to 50-75% of their claims and no more.
Settlements necessarily involve compromise by all parties. An unfortunate
reality of many class action settlements is that individual claims may be
compromised in a class settlement process approved by the court. Moreover, all of
the state court class action members were given the notice and opportunity
required by the Due Process Clause to opt out of the class and any future
settlement. None of them decided to do so or to pursue individual claims. 30 They
cannot now be heard to complain.
ERISA imposes certain fiduciary duties on those who manage plan
participants' assets. 31 Plaintiffs consistently cite to and argue from cases
29
Doc. 185 at 15.
30
Pa/lister v. BCBSMT, 302 P.3d 106, 107-08 (Mont. 2013).
31
See, e.g., 29 U.S.C. §§ 1104, 1106.
9
concerning BRISA pension plans. This case involves an BRISA "welfare plan," 32
specifically a health care plan. The distinction, although not discussed at length by
either party to this lawsuit, is paramount and appears directly in numerous
provisions of ERIS A. 33
In its most basic form, BRISA pension plans function as follows: the
employee or employer makes contributions into the plan; fiduciaries (trustees),
who are bound by duties set forth in BRISA, manage the plan's assets by making
investments and by paying administration costs and related expenses. Eventually,
and generally after retirement, the employee receives regular payments out of the
plan. Nothing of that sort happened here. Plaintiffs are never going to receive a
pension-type payment based upon the premiums paid for their insurance policies.
Nor is there any allegation that their plans maintained a fund to pay claims.
The Plaintiffs, through their several employers, bought medical insurance
from CFM. The asset the Plaintiffs received in exchange for the premiums paid
was the insurance contract. Premiums paid to CFM became the property of CFM.
It was under no BRISA-based duty to consider the premium money paid to CFM
32
29 u.s.c. § 1002(1).
33
See, e.g., 29 U.S.C. § 1103(b)(l), (2) (ERISA section mandating the formation of a
trust to hold all assets of an employee benefit plan except "any assets of a plan which consist of
insurance contracts or policies issued by an insurance company ... [and] any assets of such an
insurance company or any assets of a plan which are held by such an insurance company.")
10
as anything other than its property. Premiums paid to CFM upon receipt by CFM
belonged to CFM, not to the Plaintiffs or to their plans.
The Montana Supreme Court determined that Plaintiffs in the courtapproved settlement were entitled to 50-75% of the benefits which had been
withheld due to the exclusionary language. Plaintiffs' claim to anything more is
without justification. Whatever CFM may do with the $150,000,000 cannot
possibly injure Plaintiffs because they have no "legally protected interest" in those
funds. 34 Plaintiffs simply have no standing to assert the second breach of fiduciary
claim, and it cannot serve as a basis for certification of a class.
The Court has a duty to independently assess standing in all cases before it.
Even the most gentle of probing into Class (a)'s claims reveal their fatal infirmity:
Plaintiffs lack standing to assert such claims.
II.
Certification for Class (b) is Improper because Numerosity and
Typicality are not Present
The class definition of Plaintiffs' proposed second class is Class (b ):
(b)
34
CFM insureds who, submitted claims on or after March 1,
2001, to the present (or on whose behalf claims were
submitted) to CFM for medical expenses arising from the
automobile/premises accidents where CFM failed to pay the
claim due to the possible availability of automobile or premises
liability insurance, but where CFM did not apply the denial
Lujan, 504 U.S. at 560.
11
codes used to define the CFM state class action. 35
Plaintiff Budd is the only person proposed as class representative for this
class.
"The typicality requirement is designed to assure that the named
representative's interests are aligned with those of the class." 36 The most glaring
deficiency with Class (b) is that Budd does not qualify as a class member, let alone
a class representative. It is undisputed that Budd's claims were paid in full. CFM
has not "failed to pay the claim" as contemplated by the proposed class
definition. 37 Budd's only interest in this lawsuit is to seek recovery of attorneys'
fees and interest. 38 Any members of proposed Class (b) would be pursuing benefits
CFM allegedly failed to pay. Budd's interests are not aligned with those of the
proposed class. As such, typicality is not present.
Plaintiffs have likewise failed to prove numerosity for proposed Class (b ).
The Settlement Agreement's definition of "Class" includes the following:
(a)
35
BCBSMT insureds under policies issued or renewed in the
State of Montana, who (i) were injured in an automobile or
Doc. 185 at 11.
36
Jordan v. County of Los Angeles, 669 F.2d 1311, 1321 (9th Cir. 1982), vacated on
other grounds, 459 U.S. 810 (1982).
37
Doc. 185 at 11.
38
See Doc. 181 at 12.
12
premises accident; and (ii) submitted claims for dates of service
on or after December 29, 2000 through December 31, 2008 (or
on whose behalf claims were submitted) to BCBSMT for
medical expenses arising from the automobile and/or premises
accident where BCBSMT's auto and/or premises exclusions
were applied to the submitted claim.
(c)
BCBSMT insureds under policies issued or renewed in the
State of Montana, who (i) were injured in an automobile or
premises accident; and (ii) did not submit a claim for dates of
service on or after December 29, 2000 through December 31,
2008 (or on whose behalf a claim was not submitted) to
BCBSMT for medical expenses arising from the automobile
and/or premises accident. 39
The two settlement agreement definitions of "Class" cover any and all claims that
were or could have been denied due to the contract exclusionary language. Under
the Settlement Agreement affirmed by the Montana Supreme Court, all members
of those classes have released all of their benefits due claims against CFM.
Plaintiffs' proposed Class (b) cannot possibly contain anything other than
previously released claims. Numerosity is thus zero. The requirement is clearly not
met.
Ill
Ill
39
Doc. 187-7 at 3.
13
ORDERED:
Plaintiffs' Motion for Class Certification40 is DENIED.
-+"'-
DATED this
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__
._...____~--'-----"-----,6~~~~..__..._~--
/ SAME. H A D D O N \
United States District Judge
40
Doc. 184.
14
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