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refusing to consider unpled theories of liability raised for the first time in opposition to defendant's motion to dismiss
Summary of this case from Kajberouni v. Bear Valley Cmty. Servs. Dist.Opinion
Case No. CV 13-2554 SC
06-12-2014
ELIZABETH L., JAMES L., and OLIVIA L., individually and as representatives of the class of similarly situated individuals; and L.M. and N.M. as guardians of M.M., and as representatives of the class of similarly situated individuals; Plaintiffs, v. AETNA LIFE INSURANCE CO., Defendant.
ORDER GRANTING MOTION TO
DISMISS
I. INTRODUCTION
Now before the Court is Defendant Aetna Life Insurance Co.'s ("Defendant") motion to dismiss the above-captioned Plaintiffs' first amended complaint. ECF Nos. 39 ("FAC"), 41 ("MTD"). The motion is fully briefed. ECF Nos. 46 ("Opp'n"), 47 ("Reply"). The Court finds it appropriate for decision without oral argument. Civ. L.R. 7-1(b). For the reasons explained below, the Court GRANTS Defendant's motion to dismiss, with leave to amend on two narrow points.
II. BACKGROUND
Plaintiffs challenge Defendant's denials of coverage under two employer-sponsored health benefits plans. Plaintiffs Olivia L. and M.M., both minors, obtained mental health treatment at two different residential treatment facilities located in Utah. FAC ¶¶ 1-4. At the times they were treated, Olivia L. and M.M. were covered by health plans or health insurance policies provided through their parents' employers and governed by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, et seq. Id. ¶¶ 4-9. Defendant, which administrated or insured those plans, denied Olivia L. and M.M.'s families coverage for those residential stays. It based its denial on its determination that the residential treatment facilities did not satisfy the plans' requirement that covered facilities be staffed 24/7 with licensed mental health professionals, though the parties appear to agree that the facilities met the plan's other relevant requirements. Id. ¶¶ 1-4, 26-27, 30, 32, 34, 42-47.
The basis of Defendant's denial is the central issue of this case: do the plans demand such 24/7 staffing in addition to the other requirements? Defendant maintains that they do. Plaintiffs assert that Defendant's position is unsupported by the plans' plain language. Plaintiffs also contend, alternatively, that the plans are ambiguous, and that Defendant's inconsistent treatment of similarly situated claimants violates ERISA's fiduciary duty or claims processing requirements.
The plans are distinct, but the disputed language is the same in each. Following the parties' convention, the Court addresses the plans singularly for the remainder of this Order.
Based on this dispute, Plaintiffs assert two causes of action against Defendant. The first is a claim for benefits under ERISA. The second is a claim for declaratory and injunctive relief. Both claims depend on resolution of the central issue described above. Defendant now moves to dismiss.
III. LEGAL STANDARD
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) "tests the legal sufficiency of a claim." Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). "Dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988). "When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). However, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The allegations made in a complaint must be both "sufficiently detailed to give fair notice to the opposing party of the nature of the claim so that the party may effectively defend against it" and "sufficiently plausible" such that "it is not unfair to require the opposing party to be subjected to the expense of discovery." Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).
The Court declines to address the parties' dispute over which ERISA standard of review -- de novo or abuse of discretion -- should apply in this case. Even on a de novo standard, the Court concludes (as explained below) that the plan is unambiguous, and Defendant's interpretation of its terms is correct.
IV. DISCUSSION
The disputed language at issue in this case -- the plan's definitions of "Residential Treatment Facility" and "Behavioral Health Provider/Practitioner" ("BHP") -- reads:
Residential Treatment Facility (Mental Disorders)MTD at 3; ECF No. 24-1 ("Sparks Decl.") Ex. A ("Elizabeth L. Plan") at 94 (Residential Treatment Facility definition), Ex. B ("M.M. Plan") at 93 (same); Elizabeth L. Plan at 80 (BHP definition), M.M. Plan at 80 (same).
This is an institution that meets all of the following requirements:
• On-site licensed Behavioral Health Provider 24 hours per day/7 days a week.Behavioral Health Provider/Practitioner
. . .
• Meets any and all applicable licensing standards established by the jurisdiction in which it is located.
• A licensed organization or professional providing diagnostic, therapeutic or psychological services for behavioral health conditions.
In reference to this bullet point's being the basis of Plaintiffs' exclusion for coverage, the parties and the Court call it the "24/7 exclusion" or the "24/7 requirement."
To state a claim for benefits under ERISA, plan participants and beneficiaries have to plead facts making it plausible that a provider owes benefits under the plan. See 29 U.S.C. § 1132(a)(1)(B); Iqbal, 556 U.S. at 677. In interpreting an ERISA plan, the Court must apply contract principles derived from state law, guided by policies expressed in ERISA and other federal labor law. Richardson v. Pension Plan of Bethlehem Steel Corp., 112 F.3d 982, 985 (9th Cir. 1997). In doing so, the Court must interpret the plan's terms in an ordinary and popular sense, as would a person of average intelligence and experience. Id. (citing Evans v. Safeco Life Ins. Co., 916 F.2d 1437, 1441 (9th Cir. 1990)).
In resolving disputes over ERISA plans, the Court must look first to the agreement's specific language and determine the parties' clear intent, relative to the context giving rise to the language's inclusion. Id. (citing Armistead v. Vernitron Corp., 944 F.2d 1287, 1293 (6th Cir. 1991)). Finally, the Court must construe each provision consistently with the entire document such that no provision is rendered nugatory. Gilliam v. Nev. Power Co., 488 F.3d 1189, 1194 (9th Cir. 2007) (citing Richardson, 112 F.3d at 985).
A. Plain Language and Interpretation Under ERISA
Plaintiffs argue first that the Court should apply the interpretation they supplied in the first round of briefing on Plaintiffs' original complaint: essentially, that the plan does not require a BHP to be on-site 24/7 if the facility is properly licensed under state law, since the facility itself could be an "organization" under the plan's definition of a "BHP." ECF Nos. 24 ("MTD I"), 27 ("Opp'n I"); see supra at 4 (providing the definition of "BHP"). The Court rejected that interpretation in its December 17, 2013 Order Granting Defendant's Motion to Dismiss. ECF No. 36 ("Dec. 17 Order").
The Court reiterates that its rejection was based on principles of contract interpretation. If the licensed residential treatment facility is itself the on-site licensed organization per the definition of BHP, as Plaintiffs submit, then there would be no reason for the plan to include the 24/7 requirement, because satisfaction of the plan's licensing requirement would always satisfy the 24/7 BHP requirement. Dec. 17 Order at 7. Adopting Plaintiffs' interpretation of the plan would render the 24/7 exclusion nugatory and incomprehensible, because the plan clearly establishes two distinct requirements. If satisfaction of the licensure requirement alone would meet the 24/7 BHP requirement, the 24/7 exclusion would be meaningless. Dec. 17 Order at 7 (citing Gilliam, 488 F.3d at 1194; Richardson, 112 F.3d at 985). Plaintiffs' argument on this point still fails.
Plaintiffs' second argument is that satisfaction of the licensure requirement would not necessarily satisfy the 24/7 requirement. Opp'n at 6-7. On this point, Plaintiffs seem to contend that the Court's December 17 Order held that compliance with Utah licensure laws alone could satisfy the plan's requirements. Apparently seeking to find some contradiction in that Order, Plaintiffs proceed from this premise to discuss Utah licensing law, concluding that under Utah law, the residential treatment program -- as opposed to an organization, facility, or professional -- is what obtains licensure to operate a residential mental health treatment facility. And under Utah law, as Plaintiffs explain, a licensed program may or may not be an organization or professional who provides diagnostic, therapeutic, or psychological services for behavioral health conditions. Id. at 10. Therefore, Plaintiffs conclude, a covered residential treatment facility's satisfaction of "any and all" licensure standards only requires the facility to be run by a licensed "program." Reading the December 17 Order as having made that improper conclusion, Plaintiffs contend that the Court was wrong. As explained below, the Court disagrees.
The Court finds, as a preliminary matter, that Plaintiffs appear to have misread the Order. As explained above, the Court's statement that a licensed residential treatment facility would itself always satisfy the 24/7 requirement was an explanation, provided through a hypothetical statement, of why Plaintiffs' argument was incorrect under principles of contract interpretation.
Substantively, the Court does not find Plaintiffs' argument convincing, especially since their logical conclusion is that the plan's licensure requirement and 24/7 exclusion must both be distinct. Opp'n at 8 ("Will a program that is properly licensed under Utah law to provide residential treatment necessarily be a licensed organization or professional providing diagnostic, therapeutic or psychological services for behavioral health problems as the [December 17 Order] postulates? No."). Under these circumstances, the Court finds that Plaintiffs fail to address either "any and all" applicable licensing standards, or the 24/7 requirement that remains the subject of this dispute.
A covered "Residential Treatment Facility" for mental health treatment must comply with all relevant Utah licensure laws, including those for the provision of mental health services -- not just the bare minimum licensure requirements for a "residential treatment program." Mental health services have their own additional licensure requirements under Utah law, and engaging in the practice of mental health therapy without a license is a felony in Utah, per Utah Code sections 58-60-109(1)(a) and 58-60-111(1). The plan requires all covered residential treatment facilities to satisfy all of these licensure standards, meaning those for programs and mental-health-specific treatment facilities alike. Moreover, such compliance remains separate from the 24/7 requirement per the plan's terms. Since Plaintiffs fail to plead that the facilities where they were treated satisfied the 24/7 requirement, in addition to the licensure requirements, the Court finds that Plaintiffs fail to state an ERISA claim for benefits under the plan.
See, e.g., Utah Code §§ 58-60-102(7), -103(1)(a)-(b), -109(1)(a).
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Plaintiffs' ERISA claim is therefore DISMISSED. If Plaintiffs can plead facts indicating that the 24/7 requirement was satisfied, they may do so, but any attempts to re-plead failed arguments without new supporting facts may be dismissed with prejudice.
B. Ambiguity
The Court also finds, again, that the plan's terms are unambiguous. Ambiguity exists only when an ERISA plan's provisions are subject to two reasonable competing definitions. Deegan v. Cont'l Cas. Co., 167 F.3d 502, 507 (9th Cir. 2007). Plaintiffs claim that an average person of ordinary intelligence and experience could reasonably believe their interpretation of the plan's language, described above. See supra at 5-8. The Court is not convinced. Plaintiffs' alternative interpretations of the plan remains convoluted and unreasonable, and the Court cannot find that a reasonable person of average intelligence and experience would adopt Plaintiffs' interpretations. The Court also declines to import extrinsic evidence, such as the opposition brief's referenced, but unattached and unquoted, Utah District Court documents, to find ambiguity here. Cinelli v. Sec. Pac. Corp., 61 F.3d 1437, 1444 (9th Cir. 1995) (holding that consideration of extrinsic evidence is precluded unless a plan's terms are ambiguous).
As one change from their prior pleadings, Plaintiffs' FAC now makes the argument, previously raised improperly, that Defendant treated other similarly situated claimants differently under the same plan language. Plaintiffs now allege, per the experience of a claim-denial expert who assists Defendant's insureds with appeals for denials of coverage, that Defendant has previously paid claims for residential mental health treatment even if the treatment was not provided at a facility with 24/7 BHP staffing. Opp'n at 11 (citing FAC 55 24-25, 27, 45, 56). Additionally, Plaintiffs contend that Defendant treated in-network residential treatment facilities differently from non-network facilities. Id. & FAC 5 28. None of this supports a finding of ambiguity based on the plan language, which, as noted in this Order and the December 17 Order, the Court finds clear. See Bergt v. Retirement Plan for Pilots Employed by MarkAir, Inc., 293 F.3d 1139, 1143 (9th Cir. 2002) (citing Richardson, 112 F.3d at 985) (holding that consideration of extrinsic evidence to interpret plan terms is inappropriate if the plan is unambiguous). Since the plan is not ambiguous, the Court rejects Plaintiffs' effort to interpret the language through Defendant's alleged actions in other cases.
Plaintiffs also revisit their contention that the plan is ambiguous because other sections of Defendant's plans regarding treatment in other types of facilities -- "hospitals," "psychiatric hospitals," and "skilled nursing facilities" -- state specifically that certain other types of 24/7 staffing are required. Opp'n at 14. For example, Defendant's definition of "hospital" includes the clause that a "hospital" must provide "twenty-four (24) hour-a-day R.N. [registered nurse] service." Elizabeth L. Plan at 85-86. The Court is not convinced that this argument proves the plan's ambiguity. Those definitions relate to different provisions that are not incorporated into or referenced by the provisions under which Plaintiffs seek coverage. They therefore do not alter the fact that, as addressed above, the definition of "Residential Treatment Facility" has two distinct requirements for coverage: the licensure requirement and the 24/7 requirement.
Plaintiffs' arguments do not merit reading out one requirement or the other, and they do not prove to the Court that the plan is ambiguous. The Court therefore rejects Plaintiffs' claims based on these contentions.
C. Unpled Claims
Plaintiffs' opposition brief also raises the possibility that Defendant's allegedly inconsistent treatment of claimants with identical plan language constitutes violations of both Defendant's statutory fiduciary duty under ERISA, as well as regulations concerning ERISA claim processing. Opp'n at 12-13 (citing 29 U.S.C. § 1104(a)(1)(D); 29 C.F.R. § 2560.503-1(b)(5)). These are separate allegations from Plaintiffs' claims concerning their denial of benefits under Defendants' plan, and they do not support Plaintiffs' claims based on 29 U.S.C. § 1132(a)(1)(B) (providing that plan participants may recover "benefits due under the terms of [their] plan"). Plaintiffs have leave to amend their complaint to plead these theories properly, but they are instructed to avoid raising new factual and legal allegations in their opposition briefs in future disputes (should they arise).
D. Declaratory Relief
The Court DISMISSES Plaintiffs' declaratory relief claim because it is based on the same theories as Plaintiffs' dismissed ERISA claim.
V. CONCLUSION
As explained above, Defendant Aetna Life Insurance Co.'s motion to dismiss the above-captioned Plaintiffs' complaint is GRANTED, and the complaint is DISMISSED with leave to amend. Plaintiffs have thirty (30) days to file an amended complaint addressing (1) the fiduciary duty claim they described in their opposition but did not plead, or (2) more narrowly, facts showing that the 24/7 requirement was met, as discussed above.
If Plaintiffs fail to file an amended complaint within the allotted time, the Court may dismiss this action with prejudice.
IT IS SO ORDERED.
__________
UNITED STATES DISTRICT JUDGE