Gordon et al v. New West Health Services et al
ORDER granting 49 Motion To Deny Class Certification ; denying 79 Motion for Class Certification. Plaintiffs possess the Court's permission to amend the Complaint to include a claim for class certification under Fed. R. Civ. P. Rule 23(b)(3). Signed by Judge Brian Morris on 1/25/2017. (MMS)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
GREAT FALLS DIVISION
LANCE R. GORDON and RONI A.
NEW WEST HEALTH SERVICES,
and its related affiliates, subsidiaries,
I. PROCEDURAL BACKGROUND
New West has filed a Motion to Deny Class Certification before the close of
class discovery1 and before Plaintiffs affirmatively moved to certify a class. (Doc.
49.) New West has also filed a Motion to Strike Plaintiff’s Supplemental Briefing.
(Doc. 66.) Gordon has filed a Motion for Class Certification. (Doc. 79.)
Pursuant to the Court’s July 20, 2015, Scheduling Order, discovery shall take place in two
phases. Phase One discovery shall consist of discovery regarding (1) class certification issues,
and (2) all aspects of Plaintiffs’ individual claims. Phase Two discovery shall consist of
discovery regarding class claims if a class is certified by the Court. Phase One discovery shall
close on April 15, 2016. (Doc. 24 at 2.) Additionally, Plaintiffs have until May 6, 2016, to move
for class certification. (Id.)
II. FACTUAL BACKGROUND
Plaintiff Roni A. Gordon works as an employee of the Billings Clinic and
Lance and Roni Gordon were insured for health care under New West Health
Services Billings Clinic plan in 2010 and 2011. (Doc. 35 at 2; Doc. 50 at 8.) The
policy under which the Gordons were insured remained in effect at the time that
they made a claim to New West on behalf of their minor son. (Doc. 35 at 3–4.) The
policy provides criteria for what it considers to be medically necessary treatment.
(Doc. 35 at 4.) The Gordons’ attending physician recommended inpatient
detoxification therapy, but New West denied the claim based upon its
determination that inpatient detoxification was not medically necessary. Id.
Plaintiffs admitted their minor son to Rocky Mountain Treatment Center
on May 6, 2010, for inpatient treatment. Plaintiffs’ son continued with inpatient
treatment until discharge on June 4, 2010. Id. at 5. Plaintiffs asked for
reconsideration of the denial. New West refused. Plaintiffs exhausted all
administrative remedies available to them through the Billings Clinic Plan. Id. at 6.
Plaintiffs filed their Second Amended Complaint on September 18, 2015. (Doc.
35.) Plaintiffs’ Second Amended Complaint contains three counts: (1) Request for
Declaratory Relief, (2) Civil Enforcement Claims under 29 U.S.C. § 1132(a)(1)(B)
and § 1132(a)(3), and (3) Class Action. (Id.)
III. LEGAL STANDARD
Rule 23 of the Federal Rules of Civil Procedure governs class actions. A
party seeking to certify a class action must meet the four requirements of Rule
23(a) and at least one of the subsections of Rule 23(b). Rule 23 provides more than
“a mere pleading standard,” and the plaintiff “must be prepared to prove” that it
can satisfy each of the Rule 23 requirements. Wal–Mart Stores, Inc. v. Dukes, 131
S.Ct. 2541, 2551 (2011). District courts have broad discretion to determine
whether a class should be certified. A.F. ex rel. Legaard v. Providence Health
Plan, 300 F.R.D. 474, 479 (2013).
Plaintiffs attempt to bring this action, in Count III of their Second Amended
Complaint, pursuant to the provisions of Federal Rule of Civil Procedure 23(a) and
23(b)(2), as a class action for themselves and as representatives of, and on behalf
of, all other persons similarly situated. (Doc. 35 at 15.) Plaintiffs allege that New
West follows a common policy and practice of systematically denying substance
abuse and mental health treatment in violation of the Paul Wellstone and Pete
Domenici Mental Health Parity and Addiction Equity Act of 2008 (“the Federal
Parity Act”) and Montana State Parity laws. 42 U.S.C.A. § 300gg-26 (West);
Mont. Code Ann. § 33–22–701, et seq. (West). Plaintiffs allege further that New
West uniformly employs the use of impermissible criteria for treating addiction
cases in violation of state and federal parity laws.
Plaintiffs request that this Court declare that New West wrongfully has
engaged in an unlawful pattern and practice of denying the class of Alcohol,
Mental Illness, and Drug Addiction benefits. Plaintiffs seek an injunction from this
Court that would order New West to reopen and properly adjust the class
members’ claims for Alcohol, Mental Illness, and Drug Addiction benefits using
criteria that pass muster under the Federal Parity Act. (Doc. 35 at 16-20.) Plaintiffs
further request that the Court order New West to reimburse the members of the
class for the money that they paid for such benefits that New West should have
paid, and to disgorge any money that New West earned from the profits that it
obtained from its unlawful conduct. Id.
a. The Putative Class
The Gordons originally proposed the following class for injunctive relief:
All beneficiaries as such term is used under the provisions of 29
U.S.C. §1002(8) of “ERISA plans” as that term is defined under the
provisions of 29 U.S.C. §1002(1) for which Defendant provided
insurance services known as “New West Health Plan” for such ERISA
Plans in which beneficiaries have made application for treatment for
mental health, alcohol, chemical, and/or drug abuse and/or addiction;
who were in need of alcohol and/or drug treatment; and, who were
denied said benefits by Defendant on the grounds that said treatment
was not medically necessary.
(Doc. 35 at 15–16.) The Gordons defined the class more specifically after further
They have identified a uniform policy applied by New West—the use of the
Milliman guidelines in determining medical necessity—that they allege lends a
common factual and legal issue to the class. (Doc. 80 at 19-21.) The putative class
contains all New West insurees who submitted and were denied claims for
substance abuse treatment on the basis of the Milliman guidelines. Plaintiffs claim
that only the ASAM guidelines can be used for this purpose under Montana law, to
the exclusion of the Milliman guidelines. Id.
The Gordons’ putative class contains 37 members. (Doc. 80 at 16.) New
West denied benefits completely to some of these class members and partially
denied benefits to some (e.g. approved for a shorter duration residential or
inpatient program than was claimed). (Doc. 85 at 13.) Only a portion of the 37
putative members submitted a claim for the type of residential treatment that the
Gordons claim on behalf of their son. Id. The remainder of the class submitted
claims for either detox treatment or inpatient treatment. Id.
b. Class Action Requirements
A court may certify a class when certification would conserve the resources
of the court and the parties by permitting a common issue to be litigated in an
economical fashion under Rule 23. Gen. Tel. Co. of the Sw. v. Falcon, 457 U.S.
147, 155 (1982) (quoting Califano v. Yamasaki, 442 U.S. 682, 701 (1979)).
A party seeking to certify a class action must meet the four requirements of
Federal Rule of Civil Procedure 23(a): (1) the class must prove so numerous that
joinder of all members would be impracticable; (2) there must exist questions of
law or fact common to the class; (3) the claims or defenses of the representative
party must prove typical of those of the class; and (4) the representative party must
fairly and adequately protect the interests of the class. Courts generally refer to
these requirements as numerosity, commonality, typicality, and adequacy. A party
who satisfies the Rule 23(a) prerequisites then must meet the requirements of at
least one of the subsections of Rule 23(b).
c. Rule 23(b)(2) Requirements
Plaintiffs allege that their claims satisfy Rule 23(b)(2). Fed. R. Civ. P.
23(b)(2). Rule 23(b)(2) allows certification when the opposing party “has acted or
refused to act on grounds that apply generally to the class.” Id. Plaintiffs claim that
final injunctive relief or corresponding declaratory relief proves appropriate
respecting the class as a whole. (Doc. 58 at 21.) Plaintiffs cite “recent case law
supporting class relief on facts very similar to these.” (Doc. 58 at 17.)
New West reports, however, that it has not provided claims administration
for any plans using the Benefits Booklet since December 31, 2011, and that it has
no plans to do so in the future. (Docs. 50-1 at 3; 59 at 7.) Further, New West no
longer administers any commercial health insurance plans. These factors constitute
its strongest argument against class certification.
Rule 23(b)(2) certification proves inappropriate “when the majority of the
class does not face future harm.” Maldonado v. Ochsner Clinic Foundation, 493
F.3d 521, 525 (5th Cir. 2007). New West argues that when an injunction
prohibiting future conduct “would be meaningless” to the plaintiffs, such a
situation “leaves monetary claims for retrospective damages predominant in the
case,” and certification under Rule 23(b)(2) would be improper. (Doc. 59 at 6; Id.;
see also Churchill, at *6.)
New West argues that its decision to stop providing claims administration
using the Benefits Booklet, or for commercial clients in general, has rendered moot
Plaintiffs’ claims for prospective class relief. (Doc. 59 at 7.) Rule 23(b)(2) does not
authorize claims for purely, or predominantly, retrospective relief. New West
argues, therefore, that Plaintiffs’ class claims must fail. Maldonado, 493 F.3d at
525. New West further claims that Plaintiffs lack standing to seek prospective
relief, because “neither Plaintiffs nor their son are currently covered individuals
under any plan for which New West provides claims administration.” (Doc. 59 at
New West contends that individualized, monetary damages constitute the
only remedy that Plaintiffs seek. (Doc. 59 at 1–2.) It argues that Rule 23(b)(2) and
Walmart v. Dukes prohibit class certification under Rule 23(b)(2), when each class
member would be entitled to an individualized award of monetary damages. (Id. at
2.) Plaintiffs counter that courts have permitted plaintiffs in ERISA cases to seek
equitable relief in the form of a “surcharge,” or monetary compensation for a
deficit resulting from an ERISA fiduciary’s breach of duty. Doc. 58 at 8–9 citing
N.Y. State Psychiatric Ass’n, Inc. v. UnitedHealth Grp., 798 F.3d 125, 134 (2d Cir.
Plaintiffs argue that putative class members seek a surcharge that properly
should be categorized as part of their declaratory and injunctive relief. Id. New
West claims that whether monetary relief proves equitable proves “irrelevant”
because Rule 23(b)(2) does not extend to cases in which the appropriate final relief
relates exclusively or predominantly to money damages. 1996 Advisory
Committee Note to Rule 23 at 298; Dukes, 131 S.Ct. at 2557.
Plaintiffs refer to numerous ERISA cases to support their claim that
monetary damages categorized as a surcharge should be considered equitable
relief. See, e.g., N.Y. State Psychiatric Ass’n, Inc., 798 F.3d at 125; Churchill v.
Cigna Corp., 2011 WL 3563489 (E.D. Pa. 2011). These cases and many others
have characterized certain claims for monetary damages as a surcharge that would
qualify the claim as equitable in nature for purposes of assessing the availability of
injunctive relief. See, e.g., Gabriel v. Alaska Elec. Pension Fund, 773 F.3d 945,
963 (9th Cir. 2014); Silva v. Metro Life Ins. Co., 762 F.3d 711, 724-25 (8th Cir.
2014); Kenseth v. Dean Health Plan, Inc., 722 F.3d 869, 882 (7th Cir. 2013).
The courts have addressed the concept of limited monetary damages as a
surcharge in the context of a claim for breach of fiduciary duty by a plan
administrator under ERISA. Many of the plaintiffs in these cases did not attempt,
however, to certify a class. N.Y. State Psychiatric Ass’n, Inc. and Nechis likewise
did not involve class actions. Some cases addressing the concept of surcharge
under ERISA have involved putative classes, but the cited cases address possible
causes of action under specific ERISA provisions rather than class certification
under Rule 23(b)(2). See, e.g., Bush v. Liberty Life Assurance Co. of Boston, 77 F.
Supp. 3d 900 (N.D. Cal. 2015). These cases have limited bearing on the case at
issue. Rule 23(b)(2) governs the Court’s decision with respect to class certification
rather than ERISA’s substantive provisions.
Even if this Court were to consider surcharges permissive relief under
23(b)(2), the Gordons’ putative class faces an additional standing problem.
Churchill concluded that the plaintiff’s “affiliation with Cigna [, an insurance
company,] ended sometime prior to [the] [c]ourt’s consideration of his motion for
class certification” and that the plaintiff likely lacked standing as a result.
Churchill, 2011 WL 3563489 at n. 8. The court denied the certification of the
putative class due to the plaintiff representative’s lack of standing. Id.
The Gordons no longer receive benefits under New West’s health plan.
Similar to the plaintiff in Churchill, the Gordons also would lack standing to
certify a Rule 23(b)(2) class. The Court faces only the question of certification of
the Gordons’ putative class action. The Court does not address the Gordons’ ability
to bring a claim under ERISA. Plaintiffs have not cited to any class in which a
court certified a class action under Rule 23(b)(2), where the putative class
representative no longer received benefits, or the defendant no longer engaged in
the alleged improper conduct. See also Nechis v. Oxford Health Plans, Inc., 421
F.3d 96, 101 (2d Cir. 2005) (holding that Plaintiff no longer had standing to sue
under ERISA after she stopped being covered by the plan at issue).
Plaintiffs seek to have a bifurcated class action trial. Plaintiffs argue that
such an approach should be proper in insurance and/or administrative
determination cases such as this. (Doc. 80 at 30-31.) Plaintiffs point to precedent
for this type of proceeding, wherein a court resolves common legal questions
through a class action, and money damages are determined in individual follow-on
trials. McReynolds v. Merrill Lynch, 672 F.3d 482, 491 (7th Cir. 2012).
The Court agrees that McReynolds authorized the type of bifurcated
proceeding that Plaintiffs seek here. Unlike the case at issue, however, the
plaintiffs in McReynolds v. Merrill Lynch, 672 F.3d 482 (7th Cir. 2012), sought to
enjoin ongoing practices. Id. at 483. Likewise, in Jacobsen v. Allstate Ins. Co., 310
P.3d 452, (Mont. 2013), the plaintiffs sought an injunction against the defendant’s
ongoing general business practice. Id., ¶ 40. The injunction imposed in Walters v.
Reno, 145 F.3d 1032 (9th Cir. 1998), similarly required the defendant to remedy an
existing, ongoing violation of the law. Id. at 1053.
Plaintiffs seek declaratory relief that would require New West to go back
and re-evaluate claims of the putative class members under the appropriate
standard. It remains undisputed that New West no longer provides claims
administration and has not done so since December 31, 2011. It also remains
undisputed that New West no longer administers any commercial health insurance
plans. The Court has located no case in which a claim under Rule 23(b)(2)
proceeded under similar circumstances. Rule 23(b)(2) fails to authorize claims for
purely, or even predominantly, retrospective relief. Maldonado, 493 F.3d at 525.
The Gordons’ putative class cannot be certified under Rule 23(b)(2) due to the
Gordons’ failure to identify any ongoing conduct that they seek to enjoin.
d. Certification under Rule 23(b)(3)
The Gordons have asked, in the alternative, for permission to amend their
Complaint by adding a claim for class certification under Rule 23(b)(3). (Doc. 80
at 31-34.) The Court denies class certification under Rule 23(b)(2) in this Order.
The Court will entertain Plaintiffs’ argument for class certification under Rule
23(b)(3). The Court grants Plaintiffs permission to amend their Complaint
accordingly if they so choose.
e. Rule 23(a) Requirements
The Gordons allege that this class action satisfies the prerequisites set forth
in Rule 23(a) for maintaining a class action. (Id.; Doc. 35 at 15.) Defendant New
West argues that Plaintiffs fail to meet the following Rule 23(a) requirements:
numerosity, commonality, typicality, and adequate representation. (Doc. 50 at 25–
33.) New West further claims that Plaintiffs’ proposed class cannot be ascertained
due to its overbreadth and amorphous quality. Id. at 31-33. The Court will address
in turn each of New West’s Rule 23(a) arguments.
Rule 23(a)(1) requires that Plaintiffs demonstrate that the class proves
so numerous that joinder of members would be impracticable. Fed. R. Civ. P.
23(a)(1). Rule 23(a)(1) provides no bright-line test or minimum number of class
members necessary to meet the numerosity requirement. The Court instead must
evaluate the specific facts of each case. Gen. Tel. Co. of the Nw., Inc. v. EEOC,
446 U.S. 318, 330 (1980). Classes of 15 members or fewer generally prove too
small, and classes of 16 to 39 members sometimes prove sufficiently numerous,
depending on the facts of the case. A.F. ex rel. Legaard v. Providence Health Plan,
300 F.R.D. 474, 480 (D. Or. 2013); Moore's Federal Practice § 23–05 (2d ed.
To establish numerosity, Plaintiffs proffer that the Steve Marshall affidavit
establishes that New West insured more than 20,000 Montanans during the peak
years at issue. (Doc. 58 at 33.) Plaintiffs assert that the Court should take judicial
notice that addiction disorders are common. (The New York attorney general’s
settlement agreement with Excellus states (at ¶ 8) that 11% of New Yorkers have
substance abuse disorders.) (Id.)
After more discovery, the Gordons now offer 37 putative class members.
Plaintiffs contend that, though this number is still in the “grey area,” the Court
should find numerosity because joinder in this particular case would be
impracticable. (Doc. 80 at 21-24.) Plaintiffs claim that joinder impracticability
represents the heart of the numerosity inquiry. Plaintiffs contend further that, in
this particular case, joinder would be difficult due to the heavy redactions of
contact information in discovery materials. (Doc. 80 at 23-24,) citing Twegbe v.
Pharmaca Integrative Pharmacy, 2013 WL 3802807 (N.D. Cal. July 17, 2013).
The Gordons’ putative class falls near the top of the numerosity grey area
range. This relatively high number, combined with the difficulties of joinder,
persuades the Court to agree with Plaintiffs’ arguments. The Gordons’ putative
class meets the numerosity requirement.
Commonality requires the plaintiff to demonstrate that the class
members “have suffered the same injury.” Dukes, at 2551. The Supreme Court in
Dukes noted that “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.” Id.
The Court opined that “their claims must depend upon a common contention—for
example, the assertion of discriminatory bias on the part of the same supervisor.”
The common contention must be of such a nature that it proves capable of
classwide resolution—which means that determination of its truth or falsity will
resolve an issue central to the validity of each one of the claims in one stroke. Id.
The Supreme Court in Dukes phrased the inquiry as follows:
“What matters to class certification is not the raising of common
‘questions’—even in droves—but, rather the capacity of a classwide
proceeding to generate common answers apt to drive the resolution of the
litigation. Dissimilarities within the proposed class are what have the
potential to impede the generation of common answers.”
As in Dukes, proof of commonality necessarily overlaps in this case with
Plaintiffs’ merits contention that New West unlawfully used the Milliman criteria
in determining what types of substance abuse treatment were medically necessary.
Plaintiffs argue that insurance providers in Montana must use the ASAM
guidelines to determine proper substance abuse treatment. (Doc. 80 at 19-20.)
Plaintiffs argue that New West instead used the Milliman guidelines in analyzing
the Gordons’ claim and those of the rest of the class. Plaintiffs’ proffer this alleged
unlawful practice in evaluating claims for substance abuse treatment as the
commonality of the class.
It appears preliminarily to the Court as though New West used a mix of both
the ASAM and the Milliman guidelines to determine that E.G.’s (Gordon minor)
treatment was not medically necessary. Plaintiff did cite to a New West intake
report for E.G. that purported to use only the Milliman guidelines (Doc. 80 at 12)
and the New West response to the Insurance Commissioner that heavily referenced
the Milliman guidelines (Doc. 80 at 13-15.) This intake report was not the final
decision on E.G.’s claim.
The Medical Director at New West made all final decisions on substance
abuse treatment claims after having consulted with the Behavioral and Mental
Health Specialist (Doc. 85 at 8-9.) New West’s response referenced the ASAM
guidelines as well as the Milliman Guidelines. (Doc. 80 at 13-15.) Original reports
from E.G.’s case state that both the Medical Director and the Behavioral and
Mental Health Specialist used the ASAM and Milliman guidelines to determine
that E.G.’s treatment was not medically necessary. (Doc 85 at 9.)
New West’s use of the ASAM guidelines as well as the Milliman guidelines
may prove fatal for the Gordons at the merits stage of this proceeding. It is only
necessary at the class certification stage, however, for the Court to determine that
New West treated putative class members similarly, such that a class action
judgment would resolve their claims. The Court is satisfied that the Gordons have
met this bar.
Named Plaintiffs must demonstrate that their claims are typical of the claims
of the class in order to satisfy Rule 23(a)’s typicality requirement. “The
commonality and typicality requirements of Rule 23(a) tend to merge.” Ambrosia
v. Cogent Communications, Inc., 312 F.R.D. 544, 554 (N.D. Cal. 2016), quoting
General Telephone Co. of Southwest v. Falcon, 457 U.S. 147 (1982). Under Rule
23(a)(3), the “representative’s claims are ‘typical’ if they are reasonably coextensive with those of absent class members; they need not be substantially
identical.” Legaard v. Providence Health Plan, 300 F.R.D. 474, 482 (D. Or. 2014),
quoting Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998).
New West’s use of the Milliman guidelines—either to the exclusion of, or in
conjunction with, the ASAM guidelines—provides the potential commonality
between the claims of the putative class. The Gordons credibly allege that New
West used the Milliman guidelines in adjusting their son’s claim. The Gordons’
claim shares in the commonality of the class. The Gordons’ claim satisfies the
typicality requirement as a result.
4. Adequate Representation
Courts have interpreted the adequacy requirement to encompass a multitude
of factors, including “the qualifications of counsel for the representative, an
absence of antagonism, a sharing of interests between representatives and
absentees, and the unlikelihood that a suit is collusive.” Ambrosia, 312 F.R.D. at
555, quoting Brown v. Ticor Title Ins., 982 F.2d 386, 390 (9th Cir. 1992).
The Gordons’ counsel have demonstrated that they are experienced in class
actions. (Anderson Aff., ¶ 15.) The Court does not predict any significant conflicts
of interest between the representatives and the absentees given the commonalities
between their claims. The putative class possesses adequate representation in the
Gordons and their counsel.
5. Class Ascertainability
New West additionally claims that a class must be “adequately defined and
clearly ascertainable” in order to be certified under 23(a). Doc. 50 at 31, quoting
Daniel F v. Blueshield of Cal., 305 F.R.D. 115, 120 (N.D. Cal. 2014). The Gordons
have demonstrated that an ascertainable class can be developed by offering a
defined putative class of 37 persons. (Doc. 80 at 16.) The Court is satisfied that the
putative class is adequately defined and clearly ascertainable.
Accordingly, IT IS ORDERED:
1. Plaintiffs’ Motion for Class Certification (Doc. 79) is DENIED.
2. Defendant’s Motion to Deny Class Certification (Doc. 49) is GRANTED.
3. Plaintiffs possess the Court’s permission to amend the Complaint to include
a claim for class certification under Fed. R. Civ. P. Rule 23(b)(3).
DATED this 25th day of January, 2017.
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