K.M. et al v. Regence BlueShield et al
ORDER denying pltfs' 73 Motion for preliminary approval of settlement agreement. Pltfs may file a renewed motion by 2/27/15; granting pltfs' 74 Motion to Certify Class by Judge Richard A Jones.(RS)
HONORABLE RICHARD A. JONES
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
K.M., et al.,
CASE NO. C13-1214RAJ
REGENCE BLUE SHIELD, et al.
This matter comes before the court on Plaintiffs’, K.M., B.S. and Disability Rights
of Washington (“DRW”), unopposed motions for certification of settlement subclasses
and for preliminary approval of settlement agreement. Dkt. ## 74, 73. After extensive
negotiations, the parties have reached an agreement that appears to fundamentally change
the insurance landscape for all of defendants’ Washington insureds with developmental
disabilities and autism. The court applauds the parties’ efforts.
For the reasons stated below, the court GRANTS the motion for certification and
2 DENIES the motion for preliminary approval.
This case was filed on July 11, 2013, on behalf of K.M. and B.S., children with
5 autism/ASD, and on behalf of similarly situated individuals. Dkt.# 1. Plaintiff Disability
6 Rights Washington (DRW), the designated protection and advocacy organization in
7 Washington State, was added as a plaintiff in an amended Complaint filed on July 18,
8 2013. Dkt.# 13. DRW, B.S. and K.M. alleged that Regence’s
9 exclusion and limitation of coverage of neurodevelopmental (“NDT”) and Applied
10 Behavior Analysis (“ABA”) therapies to treat conditions listed in the Diagnostic and
11 Statistical Manual (DSM) violated the Washington State Mental Health Parity Act and
12 the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of
13 2008 (collectively the “Parity Acts”).
Specifically, plaintiffs challenged Regence’s uniform policy of excluding and
15 limiting NDT and ABA therapies to treat DSM-defined conditions, regardless of medical
16 necessity, as both violating the Parity Acts and breaching Regence’s insurance contracts.
17 See Dkt.# 13, ¶¶11-18. The proposed Settlement Agreement addresses this claim
18 directing, and provides prospective relief to the plaintiffs and putative class members by
19 eliminating Regence’s exclusions and treatment limits when those therapies are provided
20 to treat DSM mental health conditions. It also affirmatively requires Regence to
21 prospectively cover NDT and ABA therapies when medically necessary without caps or
22 visit limitations. And, with respect to prospective coverage of ABA therapy, Regence
23 must now follow a “best practice” model, developed in conjunction with the University
No party has requested oral argument, and the court finds oral argument unnecessary at
27 this stage.
1 of Washington and Children’s Hospital, for the delivery of effective ABA therapy to
2 insureds. See Appendix A to the Settlement Agreement.
In addition to this prospective relief, the Settlement Agreement provides a
4 $6,000,000 settlement fund to address claims for reimbursement for previously
5 uncovered NDT and ABA services.
The Court previously certified a prospective NDT subclass under Rule 23(b)(1)
7 and (b)(2). See Dkt.# 51, p. 25. Plaintiffs now move for certification of two additional
8 subclasses. The first class, the “K.M. NDT Settlement Subclass,” is composed of
9 Regence ERISA insureds with DSM conditions who received, require, or are expected to
10 require NDT therapies (speech, occupational and physical therapies) to treat their mental
11 health conditions. The second class, the “K.M. ABA Settlement Subclass,” is defined as
12 a class of Regence ERISA insureds with autism spectrum disorders (ASD) who received,
13 require, or are expected to require ABA therapy to treat their ASD.
15 A. Motion for Certification of K.M. NDT and K.M. ABA Subclasses
The parties’ agreement to settle this matter is not itself a sufficient basis for
17 approving the settlement. The settlement would require the court to certify a class and
18 dispose of the claims of its members. The court has an independent obligation to protect
19 class members. Silber v. Mabon, 957 F.2d 697, 701 (9th Cir. 1992). Even for a class
20 certified solely for purposes of settlement, the court must ensure that the class and its
21 proposed representatives meet the requirements of Federal Rule of Civil Procedure 23
22 (“Rule 23”). Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003). In addition, the
23 court must ensure that the settlement is “fair, reasonable, and adequate.” Fed. R. Civ. P.
Plaintiff proposes that the court certify NDT and ABA subclasses defined as
K.M. NDT Settlement Subclass. All individuals who:
(1) have been, are, or will be beneficiaries under an ERISA-governed
“health plan” as that term is defined by RCW 48.43.005(26), that was or
will be delivered, issued for delivery, or renewed on or after January 1,
2006 in Washington state or to Washington state residents by Regence;
(2) have received, require, or are expected to require neurodevelopmental
therapy for the treatment of a condition listed in the Diagnostic and
Statistical Manual of Mental Disorders (DSM) other than: (a) substance
related disorders, (b) life transition problems, currently referred to as
“V” codes, and diagnostic codes 302 through 302.9 as found in the
Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition,
published by the American Psychiatric Association or (c) where the
service received, required, or expected to be required is classified as
skilled nursing facility services, home health care, residential treatment,
custodial care or non-medically necessary court-ordered treatment.
Where “Regence” means: (a) Regence BlueShield and Cambia Health
Solutions, Inc., (b) any parent, affiliate or subsidiary of Regence
BlueShield; and (c) predecessors or successors in interest of any of the
foregoing. “Regence” includes Regence BlueCross BlueShield of Oregon,
Regence BlueCross BlueShield of Utah, and Regence BlueShield of Idaho
only with respect to policies issued in Washington State.
K.M. ABA Class. All individuals who:
(1) have been, are, or will be beneficiaries under an ERISA-governed
“health plan” as that term is defined by RCW 48.43.005(26), that was
or will be delivered, issued for delivery, or renewed on or after January
1, 2006, in Washington state or to Washington state residents by
(2) have received, require, or are expected to require, Applied Behavioral
Intervention Services for the treatment of autism or autism spectrum
Where “Regence” means: (a) Regence BlueShield and Cambia Health
Solutions, Inc., (b) any parent, affiliate or subsidiary of Regence BlueShield
and; (c) successors in interest of any of the foregoing. “Regence” includes
Regence BlueCross BlueShield of Oregon, Regence BlueCross BlueShield
of Utah, and Regence BlueShield of Idaho only with respect to policies
issued to persons residing in Washington State.
Where “Autism” means a diagnosis of an Autism Spectrum Disorder of
299.0, 299.10, 299.80 under the Diagnostic and Statistical Manual of
Mental Disorders published by the American Psychiatric Association (DSM
IV-TR or DSM V) (or any subsequent revisions thereto).
2 Dkt. # 74 at 3-4.
The court first considers whether the classes plaintiffs hope to certify satisfy the
4 four prerequisites of Rule 23(a): numerosity, commonality, typicality, and adequacy of
5 representation. The court will then turn to whether the class satisfies one of the three sets
6 of requirements of Rule 23(b). After that, the court will address whether the settlement
7 the parties have reached is, at least on a preliminary basis, fair, reasonable, and adequate.
1. The Four Pre-requisites of Rule 23(a): Numerosity, Commonality, Adequacy,
The two classes plaintiffs hope to certify satisfy the numerosity and commonality
requirements of Rule 23(a). There are thousands of Regence ERISA insureds who
needed, need, or will need NDT to treat a DSM condition during the class period. See
Dkt.# 9-6 at 41-42 (Exh. S to Hamburger Decl., Fox Decl., ¶9); see also
Dkt.# 51. There are also thousands of current Regence ERISA insureds diagnosed with
ASD who needed, need, or will need ABA therapy. Spoonemore Decl., Exh. C, ¶9 Dkt.
# 9-6, p. 223 (Exh. S to Hamburger Decl.). There is no question that joinder of that many
individual plaintiffs would be impracticable. Fed. R. Civ. P. 23(a)(1). The court agrees
that there are at least two common questions: With respect to the NDT subclass, do
Regence’s neurodevelopmental therapy age exclusions and limitations violate the Parity
Acts because such clauses exclude medically necessary therapy to treat DSM mental
health conditions? and (2) With respect to the ABA subclass, does Regence’s outright
exclusion of ABA therapy to treat ASD, even when medically necessary, violate the
Parity Acts? Fed. R. Civ. P. 23(a)(2); Mazza v. Am. Honda Motor Co., Inc., 666 F.3d
581, 589 (9th Cir. 2012) (commonality only requires a single significant question of law
While the numerosity and commonality requirements focus on the class, the
typicality and adequacy requirements focus on the class representatives. The
1 representatives must have “claims or defenses . . . [that] are typical of the claims or
2 defenses of the class,” and must “fairly and adequately protect the interests of the class.”
3 Fed. R. Civ. P. 23(a)(3)-(4).
Here, the plaintiffs base their claims on the same legal theory as the classes: that
5 the Parity Acts require Regence to provide coverage for medically necessary services,
6 whether NDT or ABA, to treat mental health conditions listed in the DSM, such as
7 autism. K.M.’s claims are typical of class members’ claims where he allegedly was
8 denied coverage for medically necessary NDT and ABA therapy to treat his mental
9 health conditions. Dkt. # 8, ¶¶ 5-14, 12-16; see Hanlon v. Chrysler Corp., 150 F.3d
10 1011, 1020 (9th Cir. 1998) (representative’s claims are typical “if they are reasonably
11 coextensive with those of absent class members; they need not be substantially
12 identical.”). B.S.’s claims are also typical of class members’ claims where he allegedly
13 was denied coverage for NDT therapy and requires ABA therapy. Dkt. # 6-2, pp. 5-7;
14 Dkt. # 6, ¶ 13. Additionally, as this court has already found, DRW has associational
15 standing and may serve as a class representative. Dkt. # 51, p. 10.
Questions of a class representative’s adequacy dovetail with questions of his
17 counsel’s adequacy. Fed. R. Civ. P. 23(g)(4) (“Class counsel must fairly and adequately
18 represent the interests of the class.”). The court has no difficulty concluding that counsel
19 has provided and will likely continue to provide adequate representation for the proposed
20 subclasses. Additionally, the claims and interests of plaintiffs are not in conflict with any
21 interests of the proposed subclasses. Dkt. # 6, ¶ 14; Dkt. # 8 ¶ 18.
2. The Requirements of Rule 23(b)(3)
Rule 23(b)(3) demands that “questions of law or fact common to class members
24 predominate over any questions affecting only individual members, and that a class
25 action is superior to other available methods for fairly and efficiently adjudicating the
26 controversy.” Fed. R. Civ. P. 23(b)(3). When considering a settlement class, the court
27 need not worry about whether the action could be manageably presented at trial.
1 Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620 (1997). The predominance
2 requirement focuses on the relationship between the common and individual issues, and
3 tests whether the proposed class is sufficiently cohesive to warrant adjudication by
4 representation. Abdullah v. U.S. Sec. Assocs., Inc., 731 F.3d 952, 964 (9th Cir. 2013).
Plaintiffs have demonstrated that the predominance requirement is satisfied here
6 where each class member seeks a determination regarding whether Regence’s exclusion
7 and limitation of NDT coverage violated the Parity Acts, breached their insurance
8 contracts and the fiduciary duty owed by Regence, and, if so, whether those violations
9 entitle them to damages.
The superiority of a class action is also clear where thousands of class members
11 will be eligible for a streamlined, non-judicial means of obtaining back benefits that were
12 previously excluded or limited. Class members will be able to obtain these benefits
13 without hiring additional attorneys, filing new lawsuits or even exhausting their
14 administrative appeals, and those who do not want to participate may simply “opt out” of
15 the process and pursue their claims independently.
Accordingly, the court finds that the proposed subclasses should be certified under
17 Rule 23(b)(3).
18 B. Motion for Preliminary Approval of the Settlement Agreement
Plaintiffs have also submitted an unopposed motion for preliminary approval of
20 settlement agreement. Dkt. # 73. If approved, the settlement agreement would resolve
21 three cases: the instant action, K.M. v. Regence BlueShield, Case No. 13-1214-RAJ,
22 another matter pending before this court, J.T., S.A. v. Regence BlueShield, Case No. 1223 90-RAJ, and a third action which is pending in state court, O.S.T. v. Regence BlueShield,
24 Case No. 11-2-34187-9 SEA, King County Superior Court (J. Erlick).
Although this global agreement appears to be fair and reasonable, as the court
26 previously stated in R.H. v. Premera, Case No. 12-97-RAJ, the court will not issue a
1 ruling that impacts cases which are not pending before it. The Ninth Circuit has
2 repeatedly stated that the decision to approve or reject a class action settlement is
3 committed to the sound discretion of the trial judge “because he is exposed to the
4 litigants, and their strategies, positions and proof.” Hanlon v. Chrysler Corp., 150 F.3d
5 1011, 1026 (9th Cir. 1998). Here, the court has not been engaged in the state court
6 proceedings and has not observed the litigants and their strategies, positions and proof in
7 those matters. Additionally, plaintiffs have provided the court with no authority that
8 suggests the court would have jurisdiction to bind parties to the agreement who are not
9 parties to the actions pending before this court.
Accordingly, the court directs plaintiffs’ counsel to submit a revised motion for
11 preliminary approval that clearly identifies the benefits obtained for the class members in
12 this action and for the sole plaintiff remaining in J.T., S.A. v. Regence BlueShield, Case
13 No. 12-90-RAJ. Plaintiffs’ counsel should identify the population of the K.M. NDT
14 Subclass and the K.M. ABA Subclass and the portion of the common fund allocated to
15 those subclasses. Additionally, although the settlement agreement merely allows
16 plaintiffs’ counsel to apply for fees and costs at a later date, they should nevertheless
17 preliminarily advise the court what percentage of the common fund will be sought based
18 upon the work performed in connection with the cases before this court. In short,
19 plaintiffs must separate the relief sought from this court from the relief sought in state
For the reasons stated above, the court GRANTS plaintiffs’ unopposed motion to
23 certify the K.M. NDT and K.M. ABA subclasses (Dkt. # 74), and DENIES the motion for
24 preliminary approval of settlement agreement (Dkt. # 73). Plaintiffs may file a renewed
25 motion that addresses the concerns raised by the court no later than February 27, 2015.
1 To the extent that the Settlement Agreement or Notice is revised, plaintiffs shall submit a
2 redline version in addition to the revised version.
Dated this 9th day of February, 2015.
The Honorable Richard A. Jones
United States District Judge
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