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A California federal district court judge has entered judgment in part in favor of both a class of patients and United Behavioral Health (UBH) in a fight over coverage for mental health and substance abuse disorder treatments. The court found that UBH's overly restrictive coverage guidelines breached fiduciary duties under the Employee Retirement Income Security Act (ERISA).
The case is Wit et al. v. UnitedHealthcare Insurance Co. et al., Case Number 3:14-cv-02346, U.S. District Court for the Northern District of California.
The consolidated class of ERISA plan participants first filed suit in 2014. The case returned to the U.S. District Court after a 2023 decision from the U.S. Court of Appeals for the Ninth Circuit overturned two lower court rulings from 2019 and 2020 that overwhelmingly favored the patient class. After a ten-day bench trial, the judge found that UBH had rubber-stamped claims for short-term treatment and summarily denied claims for long-term treatment. Under those decisions, UBH would have had to reprocess about 67,000 denied claims and be overseen by a special master to ensure compliance with new coverage guidelines for ten years.
The lower court's rulings were paused during the appeals process, which culminated in the Ninth Circuit decision, first from a panel in January 2023 and then after rehearing in August. The Ninth Circuit ruling overturned class certification and reversed judgment on the claim related to denying benefits, finding that the district judge had misinterpreted the terms of the ERISA plans. Although the Ninth Circuit did not overturn class certification on the fiduciary breach claim, it partially overturned the judgment. It ordered the lower court to determine whether administrative exhaustion provisions in the plans applied to the remaining portions of the ERISA fiduciary breach claim.
On remand, the district court concluded that the class was entitled to a partial judgment on the fiduciary breach claim, finding that UBH breached its fiduciary duties of loyalty and care. The court's decision also pointed out the Ninth Circuit's specific finding that UBH violated its fiduciary duty to follow plan terms. The judge also noted that the misinterpretation of the plans that the Ninth Circuit panel found erroneous was unrelated to the outcome of the fiduciary breach claim.
The district court judge further found that the remaining portions of the ERISA fiduciary breach claim were not subject to the plan's requirement of administrative exhaustion. In support of that finding, the judge pointed to the 2014 Ninth Circuit decision in Spinedex Physical Therapy USA Inc. v. United Healthcare of Ariz. Inc. The Ninth Circuit found that administrative exhaustion was not required on an ERISA fiduciary breach claim based on willful and systematic misconduct. According to the judge, it was precisely willful and systematic misconduct in the form of UBH's overly restrictive claim guidelines that led to the breach of fiduciary duties of loyalty and care in this case.
UBH argued that due to the Ninth Circuit's finding that the judge had misinterpreted plan terms, the class fiduciary breach claims were based on the individual plan terms instead of the ERISA statute. However, the judge rejected that argument, characterizing the claim as statutory; the judge noted that “the fact that a breach of fiduciary duty claim is in some way related to a plan term does not change a challenge based on willful and systematic conduct into an individualized claim for benefits under the plan.”
Finally, the district court judge's order directed the parties to meet and discuss how to proceed in the case, requiring them to submit either separate or joint proposals to the court by mid-September. More specifically, the judge ordered the parties to determine whether any injunctive or declaratory relief previously granted and not overturned by the Ninth Circuit requires modification.
The district court's consideration of the fiduciary breach claim was delayed when the parties disagreed about how to restart the case on remand. Ultimately, the Ninth Circuit issued a mandamus ruling in September 2024 that eliminated any further action on the claim related to the denial of benefits.
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