Carr et al v. United HealthCare Services, Inc.

Filing 36

ORDER denying defendant's 24 Motion for Judgment on the Pleadings by Judge Marsha J. Pechman.(RS)

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

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ALEXANDRA CARR,

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Plaintiff,
v.

CASE NO. C15-1105-MJP
ORDER ON UNITED
HEALTHCARE SERVICES, INC.’S
MOTION FOR JUDGMENT ON THE
PLEADINGS

UNITED HEALTHCARE SERVICES
INC,

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Defendant.
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The above-entitled Court, having received and reviewed
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1. United Healthcare Services, Inc.’s Motion For Judgment On The Pleadings Or, In

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The Alternative, To Compel Joinder Of A Necessary Party (Dkt. No. 24);
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2. Plaintiff’s Opposition to United Healthcare Services, Inc.’s Motion For Judgment

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On The Pleadings Or To Compel Joinder (Dkt. No. 29);
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3. United Healthcare Services, Inc.’s Reply in Support of United Healthcare
Services, Inc.’s Motion For Judgment On The Pleadings Or, In The Alternative,

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To Compel Joinder Of A Necessary Party (Dkt. No. 35);
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ORDER ON UNITED HEALTHCARE SERVICES,
INC.’S MOTION FOR JUDGMENT ON THE
PLEADINGS- 1

1 all attached declarations and exhibits and all relevant portions of the record, rules as follows:
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IT IS ORDERED that the motion for judgment on the pleadings is DENIED.

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IT IS FURTHER ORDERED that the motion to compel joinder of a necessary party is

4 DENIED.
5 Background
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Plaintiff is a beneficiary of the Kaiser Aluminum (“KA”) Fabricated Products LLC

7 Medical Choice Plus Hourly Active Union Plan (“the Plan”), an “employee welfare benefit plan”
8 under ERISA § 1002(1), 29 U.S.C. § 1002(1). Defendant United Healthcare Services, Inc.
9 (“UHC”) is the claims administrator; Plaintiff alleges that “UHC exercises discretionary
10 authority and control with respect to the administration of the Kaiser Plan, including making
11 benefit determinations and reviewing and finally deciding appeals of denied claims.” Dkt. No. 1,
12 Complaint, ¶ 3.
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The Plan provides the following limitations on outpatient mental health services: up to 20

14 visits are reimbursed at 100% coverage, the next 20 visits are covered at 50%, and no coverage is
15 provided after 40 visits. The Complaint alleges that the Plan “provides 100% coverage with no
16 treatment limitations for substantially all medical and surgical services covered under the plan,
17 and provides 100% coverage after a co-pay of $15 with no treatment limitations for a small
18 portion of medical and surgical services covered under the plan.” Id. at ¶ 10.
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In October 2008, Congress passed the Mental Health Parity and Addiction Equity Act

20 (“MHPAEA”), 29 U.S.C. § 1185a; it became effective October 2009. Basically, the act requires
21 that, if a health care plan covers mental health services, it must cover them “at parity” with
22 medical/surgical benefits; i.e., there must no limitations on mental health services not also
23 applied to medical/surgical services.
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ORDER ON UNITED HEALTHCARE SERVICES,
INC.’S MOTION FOR JUDGMENT ON THE
PLEADINGS- 2

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Plaintiff alleges that the Plan violates the MHPAEA, and that Defendant breached its

2 fiduciary duty by enforcing it. She seeks to certify a class of other individuals enrolled in large,
3 self-funded plans administered by UHC and requests, on behalf of the class:
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1. An order declaring that visit limits on mental health services are void and unenforceable;

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2. UHC be permanently enjoined from including similar plan provisions in the future or
from applying such terms if they appear in other plans;

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3. An order requiring UHC to provide “accurate information concerning mental health
coverage in all class members’ plans;”
4. “[E]quitable damages related to Defendant’s breaches of fiduciary duty; e.g., unjust
enrichment, disgorgement, restitution and surcharge.”

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Id. at ¶¶ 12, 40.
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Discussion/Analysis
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Motions to strike/disregard

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The Court turns first to motions to strike or disregard certain evidence brought by both
sides.
Plaintiff moves to strike portions of the Declaration of Jayne Sabo (Dkt. No. 25) and an
accompanying exhibit at Dkt. No. 25-8, Exhibit 5. The objectionable material concerns an email
received from a Department of Labor (“DOL”) employee containing her opinion that the Plan
did not violate the MHPAEA. The objection is brought on hearsay grounds and UHC’s defense
is a classic “exception to the hearsay rule” rejoinder (that the material at issue is not offered for
the truth of the matter asserted).
Both the objection and response miss the point. This is an FRCP 12(c) motion for
judgment on the pleadings; the standard of review (and the admissibility of extrinsic evidence) is
identical to a 12(b)(6) motion. In terms of extrinsic evidence, the Court can consider documents
physically attached to the complaint (Harris v. Amgen, Inc., 788 F.3d 916, 934 (9th Cir. 2015))

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ORDER ON UNITED HEALTHCARE SERVICES,
INC.’S MOTION FOR JUDGMENT ON THE
PLEADINGS- 3

1 and documents referenced in the complaint but not attached (Davis v. HSBC Bank Nevada,
2 N.A., 691 F.3d 1152, 1159-60 (9th Cir. 2012)). The e-mail propounded by Defendant satisfies
3 neither of those criteria and whether or not it is hearsay is irrelevant. It is simply inappropriate
4 and inadmissible in a 12(c) motion and the Court will not consider it.
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In her response to Defendant’s motion, Plaintiff

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1. Refers to the Administrative Services Agreement (“ASA”) between Kaiser Aluminum
and UHC as part of her proof regarding the fiduciary nature of Defendant’s
responsibilities and also

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2. Submitted an email chain between UHC and Kaiser Aluminum to establish that UHC and
Kaiser Aluminum were both aware that the Plan violated the MHPAEA.
Defendant does not actually move to strike the evidence, but does assert that “this Court may
only consider the pleadings and incorporated documents in deciding UHC’s motion for judgment
on the pleadings.” Dkt. No. 35, Reply at 2.
Plaintiff asserts in her response that the ASA is “incorporated in the Complaint’s
reference to the Plan documents.” The ASA, however, is not part of the Plan. Dkt. No. 25, ¶ 10.

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Concerning the email communications between Kaiser Aluminum and UHC, Plaintiff
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acknowledges in a footnote that “[t]he internal correspondence is not expressly referenced in the
complaint,” then goes on to say that they are admissible in this proceeding “because they are
consistent with the allegations in her complaint and directly refute Defendant’s assertions.”

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Response at 15, n.9.
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Plaintiff cites a string of Seventh Circuit cases which stand for the proposition that a
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plaintiff “may point to… facts consistent with the existing language of the complaint showing…
an entitlement” to prevail against a motion to dismiss. American Inter-Fidelity Exch. v.

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American Re-Insurance Co., 17 F.3d 1018, 1022, (7th Cir. 1994). Many of the cases concern
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appeals from motions to dismiss (and material submitted to the appellate court), but the principle
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ORDER ON UNITED HEALTHCARE SERVICES,
INC.’S MOTION FOR JUDGMENT ON THE
PLEADINGS- 4

1 has also been applied to responses to motions to dismiss (Jandek v. AT&T Corp. 1995 U.S. Dist.
2 LEXIS 11415, *2 (N.D.Ill. 1995)), and the logic certainly applies at both the trial court and
3 appellate level.
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In the final analysis, though, (1) the “scienter” element Plaintiff is establishing through

5 this proof is nowhere alleged in her complaint and (2) based on the Court’s finding infra that her
6 allegations are sufficient to sustain the complaint’s validity, she does not need this additional
7 proof to defeat Defendant’s motion. The Court did not take this evidence into account in
8 reaching its decision.
9 Motion to dismiss
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In attempting to demonstrate the inadequacy of Plaintiff’s complaint, Defendant makes

11 several assertions intended to establish that it had no hand in the design of the Plan, no discretion
12 in administering the Plan, no duty to ignore the Plan if it conflicted with federal law, and no idea
13 that the Plan did violate the MHPAEA (in fact, it presents evidence that the opposite was true;
14 see discussion re: DOL emails supra). UHC argues that, in the face of those facts, it breached no
15 fiduciary duty because under the law it had no fiduciary duty.
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The problem with Defendant’s motion is that it relies on factual allegations that

17 controvert Plaintiff’s allegations; i.e., that it had no hand in drafting the Plan, that it had no
18 discretion in administering the Plan, that the Plan was not in violation of the MHPAEA. Just as
19 would be true with a 12(b)(6) motion, a 12(c) motion to dismiss is not the vehicle by which to
20 raise factual allegations to defeat a claim. Unless Plaintiff’s allegations are contradicted by
21 materials which she submitted or referred to in her complaint, the Court must “accept as true all
22 of the allegations set out in [her] complaint, draw inferences from those allegations in the light
23 most favorable to [her], and construe the complaint liberally.” Rescuecom Corp. v. Google Inc.,
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ORDER ON UNITED HEALTHCARE SERVICES,
INC.’S MOTION FOR JUDGMENT ON THE
PLEADINGS- 5

1 562 F.3d 123, 127 (2nd Cir. 2009); Mediacom Southeast LLC v. BellSouth Telecommunications,
2 Inc., 672 F.3d 396, 400 (6th Cir. 2012).
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The factual allegations in Plaintiff’s complaint are adequate to support her cause of action

4 and more than sufficiently “plausible” to satisfy Iqbal/Twombly. The complaint alleges that
5 “UHC is the claims administrator for the Kaiser Plan [which] has delegated all coverage
6 decisions to UHC” and that “UHC exercises discretionary authority and control with respect to
7 the administration of the Kaiser Plan, including making benefit determinations and reviewing
8 and finally deciding appeals of denied claims.” Complaint, supra, ¶ 3.
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Defendant argues that it does not have discretionary authority, but that is a factual

10 determination based on the evidence produced regarding not only the language of the plan, but
11 the contractual agreement between UHC and Kaiser Aluminum (evidence which, while not
12 properly admissible at this stage, will undoubtedly be produced during this litigation) and the
13 policies and practices of Kaiser Aluminum and the claims administrator. Defendant’s argument
14 it was operating under the legitimate belief that the Plan didn’t violate the MHPAEA is factual
15 (based as it is on a series of emails from the DOL).
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The Court does not find adequate grounds to support an FRCP 12(c) motion and

17 Defendant’s motion will be denied on that basis.
18 Compel joinder of Kaiser Aluminum
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Under FRCP 19(a), joinder of “necessary” party is compulsory. A party is deemed

20 “‘necessary’ if (1) complete relief cannot be granted in its absence” or (2) “the absent party’s
21 participation is necessary to protect its legally cognizable interests or to protect other parties
22 from a substantial risk of incurring multiple or inconsistent obligations because of those
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ORDER ON UNITED HEALTHCARE SERVICES,
INC.’S MOTION FOR JUDGMENT ON THE
PLEADINGS- 6

1 interests.” Disabled Rights Action Committee v. Las Vegas Events, Inc., 375 F.3d 861, 879-880
2 (9th Cir. 2004).
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The Court does not find that Defendant has satisfied its burden of proof in this regard. Its

4 argument that Kaiser Aluminum is in a better position to mount the defense it was acting on
5 representations from the DOL that the Plan did not violate the MHPAEA is not persuasive.
6 UHC is in as good a position as Kaiser to assemble the evidentiary proof of that contention.
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Plaintiff has not named Kaiser Aluminum in the complaint and has crafted her relief

8 request such that she may obtain the relief she requests without Kaiser Aluminum as a party. If,
9 as UHC alleges, Kaiser Aluminum has agreed to indemnify it against any judgment, Kaiser
10 Aluminum may wish to move to intervene (or Defendant may choose to interplead the
11 company), but Plaintiff will not be required to join them as a party.
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Defendant’s motion for judgment on the pleadings or, alternatively, for an order

13 compelling Plaintiff to join Kaiser Aluminum as a necessary party will be DENIED.
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The clerk is ordered to provide copies of this order to all counsel.

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Dated this 31st day of May, 2016.

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A

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Marsha J. Pechman
United States District Judge

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ORDER ON UNITED HEALTHCARE SERVICES,
INC.’S MOTION FOR JUDGMENT ON THE
PLEADINGS- 7