ERISA Reprocessing Class Actions: Circuit Courts Should Address Flaws

Health Highlights

Editor’s Note: The article below was originally published in the Defense Research Institute’s ERISA Report, Vol. 13, Issue 1 (May 17, 2018).


In an increasing number of cases, courts have used Federal Rule of Civil Procedure 23(b)(2) to certify classes seeking injunctive and declaratory relief that includes, among other things, an injunction ordering the defendant to “reprocess” past claims for healthcare benefits. These cases have allowed plaintiffs to bypass the more searching requirements of Rule 23(b)(3) that are normally taken into account when weighing whether to certify a class seeking money.

While some district courts have adopted the approach, it has several potential flaws that circuit courts—which have yet to weigh in on the issue—may need to address.

Rule 23(b)(3) Poses Certification Hurdles for Plaintiffs in Traditional Damages Actions

Rule 23(b)(3)’s predominance, superiority, and manageability requirements pose significant hurdles for ERISA plaintiffs attempting to certify classes seeking wrongfully denied health benefits.

For example, in Dennis F. v. Aetna Life Ins., No. 12-CV-02819-SC, 2013 WL 5377144 (N.D. Cal. Sept. 25, 2013), minors with mental health conditions sought class certification against Aetna, the administrator of their ERISA plans. Id. at *1. The plaintiffs alleged that their proposed classes satisfied commonality because all their contracts covered “medically necessary” treatment, and because “medically necessary” determinations were made using Aetna’s Level of Care Assessment Tool (LOCAT). Id. at *1-4. The plaintiffs complained that Aetna used the LOCAT incorrectly, failing to properly “score” subscribers and wrongly denying coverage. Id. at *2. The court denied class certification for lack of commonality, holding that “medically necessary” determinations were unique and made individually for each member. Id. at *4. The court explained that while the LOCAT scores “strongly correlated” with coverage decisions and were “probative” of medical necessity determinations, they were not dispositive. Id. Aetna successfully argued that LOCAT scores were used in addition to, not in place of, clinical judgment. Id. The company showed a number of instances in which a subscriber’s LOCAT score would have denied coverage but was trumped by clinical judgment. Id. Because clinical judgment determinations were unique, the court denied certification under Rule 23(b)(3). Id.

Some Recent “Reprocessing” Class Actions Have Bypassed Rule 23(b)(3)

Recognizing the hurdles posed by Rule 23(b)(3), some ERISA plaintiffs have recently disclaimed monetary health benefits and instead sought injunctions requiring the plans to (1) adopt a new standard for processing claims, and then (2) “reprocess” past denied claims for health benefits under that new standard.

Federal district courts are split on whether this tactic is permissible, with cases being decided both ways.

For example, in Des Roches v. California Physicians’ Serv., 320 F.R.D. 486 (N.D. Cal. 2017), the plaintiffs argued that the defendants’ medical necessity guidelines for residential and intensive outpatient treatment of mental health and substance abuse disorders were overly restrictive. Plaintiffs sought an injunction requiring the ERISA plan to reprocess previously denied claims under a more lenient standard. The district court certified the class but on grounds unique to ERISA. The court relied heavily on Ninth Circuit authority holding that where a plan administrator with discretion to construe plan terms misconstrues a term, the court should remand the claim to the plan administrator rather than award benefits in the first instance:

[I]n Saffle v. Sierra Pac. Power Co. Bargaining Unit Long Term Disability Income Plan, 85 F.3d 455, 461 (9th Cir. 1996), the Ninth Circuit held that when a district court determines that an ERISA plan administrator has “construe[d] a plan provision erroneously” and thus “applied an incorrect standard to its benefits determination,” the court “should not itself decide whether benefits should be awarded.” Id. at 456 (emphasis added). Instead, the court should “remand to the administrator for it to make that decision under the plan, properly construed.” Id. at 456. Thus, far from being improper retrospective relief, the reprocessing injunction that Plaintiffs seek is precisely the sort of final relief that the Court should order under binding Ninth Circuit precedent.

Likewise, the plaintiffs in Meidl v. Aetna, Inc., No. 15-CV-1319 (JCH), 2017 WL 1831916 (D. Conn. May 4, 2017) sought a similar reprocessing injunction. And the court certified a class on similar grounds:

The language of Rule 23(b)(2) fits the situation here: the defendants have “acted,” by creating and applying [a certain clinical policy], or “refused to act,” by refusing to cover [a certain] treatment for Major Depressive Disorder, “on grounds that apply generally to the class, so that final injunctive relief,” in the form of an order to reprocess all class members’ claims without regard to [the clinical policy], would be “appropriate respecting the class as a whole.” Fed. R. Civ. P. 23(b)(2).

In addition, in Wit v. United Behavioral Health, 317 F.R.D. 106 (N.D. Cal. 2016), the plaintiffs also sought a reprocessing injunction, which the court certified:

[C]ertification under Rule 23(b)(2) is appropriate here because all of the class members have been subjected to the same [medical necessity] Guidelines which, according to Plaintiffs, are more restrictive than the generally accepted standards that are a precondition for coverage under all of their plans. … While application of the Guidelines may not have had an identical impact on every member of the proposed classes, the Guidelines constitute “shared grounds” for all of the members of the proposed classes to proceed on a collective basis. … Moreover, the Plaintiffs’ injury can be remedied for all class members by requiring [the plan] to modify its Guidelines and reprocess claims that were denied under the allegedly defective guidelines.

Not all courts are in accord, and splits of authority exist. For example, in another case within the Ninth Circuit, Gordon v. New W. Health Servs., No. CV 15-24-GF-BMM, 2017 WL 365484 (D. Mont. Jan. 25, 2017), a putative class challenged a health plan’s use of the Milliman guidelines for mental health and substance abuse residential treatment determinations, arguing the guidelines violated federal and Montana mental health parity laws. The plaintiffs alleged that the plan should have been using another set of guidelines, the ASAM guidelines, rather than Milliman; and they sought a surcharge and declaratory relief requiring the plan to reprocess claims under ASAM. Id. at *4. The court denied class certification under 23(b)(2) because 23(b)(2) does not allow retrospective relief, and there was no prospective conduct that the plaintiffs could enjoin because the defendant had stopped acting as a claims administrator:

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. 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.

Gordon, 2017 WL 365484, at *4 (citing Maldonado v. Ochsner Clinic Found., 493 F.3d 521, 525 (5th Cir. 2007)).

No Circuit Court Has Approved Classwide ERISA “Reprocessing,” and the Approach Has Several Flaws That a Circuit Court May Eventually Address

No circuit court has weighed in on whether claims reprocessing is a remedy that can be scaled classwide under Rule 23(b)(2). The “reprocessing” tactic has several potential flaws that circuit courts may eventually address.

Issue One: An “injunction for reprocessing” is a disguised request for individual monetary relief that should be subject to the more stringent requirements of Rule 23(b)(3).

Rule 23(b) permits certification of three categories of classes, each with its own requirements. When adding these requirements in 1966, the Advisory Committee gave examples of the types of cases appropriate in each category—and examples of cases not appropriate for class treatment at all.

Rule 23(b)(2) permits certification where “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” Fed. R. Civ. P. 23(b)(2). As examples of proper 23(b)(2) actions, the Advisory Committee pointed to civil rights cases “where a party is charged with discriminating unlawfully against a class, usually one whose members are incapable of specific enumeration.” Rule 23 Adv. Comm. Notes—1966 Amend. The committee also made clear that 23(b)(2) “does not extend to cases in which the appropriate final relief relates exclusively or predominantly to money damages.” Id.

In contrast, Rule 23(b)(3) permits certification where “questions of law or fact common to class members predominate over any questions affecting only individual members, and … a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3). This is determined by a nonexhaustive list of factors, including “the class members’ interests in individually controlling the prosecution or defense of separate actions” and “the likely difficulties in managing a class action.” Fed. R. Civ. P. 23(b)(3)(A) (D).

In the case of reprocessing injunctions, a proposed injunction for reprocessing arguably relates “predominantly to money damages” and would require individualized assessments of each class member’s entitlement to benefits, raising “significant questions, not only of damages but of liability and defenses of liability” that would effectively “degenerate in practice into multiple lawsuits separately tried.” Rule 23 Adv. Comm. Notes—1966 Amend. Thus, Rule 23(b)(2) appears to be the wrong vehicle for certification of reprocessing classes, which should be subject to the more stringent requirements of Rule 23(b)(3).

Further, outside the ERISA context, courts regularly hold that injunctions that would result in individualized monetary awards should be certified, if at all, under Rule 23(b)(3).

For example, in Zinser v. Accuflix Research Institute, Inc., 253 F.3d 1180 (9th Cir. 2001), the Ninth Circuit held that relief claimed to be primarily injunctive was in fact primarily a request for monetary relief and could not be certified under Rule 23(b)(2). The Zinser plaintiffs brought a product liability class action regarding allegedly dangerous pacemakers. Id. at 1185. As relief, they sought “medical monitoring” providing that, among other things, the defendant would establish a fund to pay for past and future damages and compensate future medical treatment. Id. at 1195-96. The Ninth Circuit held that this type of relief was primarily monetary rather than equitable. Id. In doing so, the Ninth Circuit contrasted the relief to other primarily equitable medical monitoring programs that might be proper under 23(b)(2)—for example, where an injunction required medical monitoring to detect disease, and where the damages sought would include only the cost of that monitoring program. Id. Because the plaintiffs’ relief ultimately would require the defendant to pay for medical treatment deemed necessary under the monitoring program, the relief was monetary and thus improper under Rule 23(b)(2). Id.

California district courts have rejected certification under Rule 23(b)(2) on similar facts. For example, in Cholakyan v. Mercedes-Benz, USA, LLC, 281 F.R.D. 534 (C.D. Cal. 2012), the plaintiff sought declaratory and injunctive relief on behalf of the putative class declaring that a certain model of vehicles manufactured during the class period had a defectively designed water management system, and compelling Mercedes-Benz to implement a program through which class members who paid for repairs to the allegedly defective system could be reimbursed. Id. at 560. The court held that “[t]he purported ‘injunctive’ relief … would have the same effect” as seeking compensatory damages because “the end result would be individualized monetary payments to qualifying class members.” Id. And the requested relief “essentially plac[ed] the onus on defendant to assess the compensation due individual class members, rather than resolving the issue of individualized relief in the context of the litigation.” Id. Rejecting the plaintiff’s attempt to “design” the injunction “to avoid the need to comply with Rule 23(b)(3) while preserving the possibility that some class members will be able to obtain monetary relief,” the court found that “the proposed class [wa]s not appropriate for certification under Rule 23(b)(2).” Id. at 560-61.

Other district courts around the country have reached similar holdings—that requests for nominally “equitable” relief were actually disguised requests for money. See, e.g., Miller v. Mellon Long Term Disability Plan, 721 F. Supp. 2d 415, 423 (W.D. Pa. 2010) (“When the Court looks past the label here, it is clear that the equitable relief requested by Plaintiff is essentially a claim for benefits expressed in equitable language.”) (quotation omitted); Clark v. Feder Semo & Bard, P.C., 527 F. Supp. 2d 112, 117 n.1 (D.D.C. 2007) (“Since the equitable relief requested by plaintiff is essentially a claim for benefits expressed in equitable language, plaintiff has not sought appropriate equitable relief under § 502(a)(3).”) (quotation omitted); Craft v. Health Care Serv. Corp., No. 14-cv-5853, 2016 WL 1270433, *6 (N.D. Ill. Mar. 31, 2016) (the ERISA plaintiffs’ request to reprocess denied residential mental health claims—“repackaged as a claim seeking an injunction requiring Defendants to reprocess all claims for [residential treatment] denied within the statute of limitations—seeks essentially the same relief and is based on the same underlying conduct” as their claim for money benefits); Chorosevic v. MetLife Choices, No. 4:05-CV-2394 CAS, 2009 WL 723357, *11 (E.D. Mo. Mar. 17, 2009) (“This claim for reprocessing of benefits is essentially a request for an injunction to enforce a contractual obligation to pay money past due. This is precisely what the Supreme Court disallowed under § 1132(a)(3) in Great-West [Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002)]); Fairview Health Servs. v. Ellerbe Becket Co. Employee Med. Plan, No. CIV.06-2585(MJDAJB), 2007 WL 978089, *6 (D. Minn. Mar. 28, 2007) (“The equitable relief Fairview requests, ordering the Plan to process and pay the Gratz Claim in accordance with the terms of the Plan, is a claim for benefits expressed in equitable language.”). See also Jaffee v. U.S., 592 F.2d 712, 714-15 (3d Cir. 1979) (finding a medical monitoring program to be a disguised request for money); Richards v. Delta Air Lines, Inc., 453 F.3d 525, 527-531 (D.C. Cir. 2006) (“Though framed in terms of declaratory and injunctive relief,” the plaintiffs’ ultimate purpose was to “require[] Delta … to pay each class member compensation” resulting from the allegedly unlawful underpayment policy and was “merely [an] attempt[] to reframe a damages claim”).

Issue Two: An injunction for reprocessing only initiates the process for final relief to class members.

Rule 23(b)(2) applies only to classes seeking “final injunctive relief or corresponding declaratory relief.” Fed. R. Civ. P. 23(b)(2) (emphasis added). But arguably the relief sought in reprocessing class actions would provide only preliminary relief that necessarily requires future proceedings and likely further individual lawsuits. See Jamie S. v. Milwaukee Pub. Sch., 668 F.3d 481, 499 (7th Cir. 2012) (denying certification of a reprocessing class under Rule 23(b)(2) because “if as a substantive matter the relief sought would merely initiate a process through which highly individualized determinations of liability and remedy are made[,] this kind of relief would be classwide in name only, and it would certainly not be final.”); Cholakyan, 281 F.R.D. at 560 (denying certification under 23(b)(2) of a proposed injunction that “essentially plac[ed] the onus on defendant to assess the compensation due individual class members, rather than resolving the issue of individualized relief in the context of the litigation”).

In a reprocessing class action, it is likely that ERISA plans will determine after reprocessing that some class members are still not entitled to coverage even under alternate, court-approved standards—for example, if the member was ineligible, if the original claim was untimely, or if the treatment is not medically necessary even under more lenient standards. Those members may disagree with the plan’s determination, either because they contend that the plan did not properly apply the alternate standards, or because they contend that they were entitled to coverage on other grounds. Those members may want to seek judicial review of the plan’s post-remand decisions. In these circumstances, a reprocessing injunction would not provide for final injunctive relief. It would merely initiate a process through which individualized monetary awards could be recovered, and would also lead to further litigation.

Issue Three: An injunction for reprocessing may be impermissibly retrospective.

Injunctive relief and declaratory relief operate only prospectively. See, e.g., Loya v. I.N.S., 583 F.2d 1110, 1114 (9th Cir. 1978) (“Injunctive relief is designed to deter future misdeeds, not to punish for past conduct.”) (citing Rondeau v. Mosinee Paper Corp., 422 U.S. 49, 62 (1975); Dombrowski v. Pfister, 380 U.S. 479, 485 (1965)); Philips Med. Capital, LLC v. Med. Insights Diagnostics Ctr., Inc., 471 F. Supp. 2d 1035, 1048 (N.D. Cal. 2007) (“Declaratory relief is inappropriate where other adequate remedies are available to redress past conduct.”).

As a result, Rule 23(b)(2) class actions—which permit only injunctive and declaratory relief—are not available to provide retrospective relief.

Reprocessing injunctions focus on the past. Their stated purpose is to remedy wrongful denials that have already occurred. This may also expose that injunctive relief and declaratory relief are not the appropriate tools to address ERISA plaintiffs’ claims for past monetary relief.


In sum, while ERISA “reprocessing” class actions have gained traction in some district courts across the country, not all courts agree. The approach has several potential flaws that will need to be addressed by circuit courts. ERISA practitioners should be aware of these trends and should watch for circuit courts to eventually decide the issue.



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