Herzfeld v. Teva Pharm. USA, Inc.

JOHN HERZFELD, Plaintiff, v. TEVA PHARMACEUTICALS USA, INC. OMNIBUS WELFARE PLAN, et al., Defendants.

Case No. 2:18-CV-09784-ODW (SSx)

United States District Court Central District of California

April 14, 2020

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS [39][40]

I. INTRODUCTION

Plaintiff John Herzfeld brings this denial of benefits action against his ERISA-governed welfare benefit plan, its administrator, claim fiduciary, insurance network, and an independent review organization. (See Compl., ECF No. 1.) Defendants Teva Pharmaceuticals USA Inc. Omnibus Welfare Plan (the "Plan"), Meritain Health, Inc. ("Meritain"), and Aetna Life Insurance Company ("Aetna") move to dismiss. (Plan Mot. to Dismiss ("Plan Mot."), ECF No. 39; Meritain & Aetna Mot. to Dismiss ("M&A Mot."), ECF No. 40.) For the reasons that follow, the Court GRANTS in part and DENIES in part the Meritain & Aetna Motion and DENIES the Plan Motion. (ECF Nos. 39, 40.)¹

II. BACKGROUND

The Court addressed the relevant factual allegations in its Order granting Defendant MCMC, LLC's² motion to dismiss and incorporates that discussion here by reference. (See Order Granting MCMC Mot. to Dismiss, ECF No. 34.)

Jack Herzfeld ("Herzfeld") is a dependent of Jeffrey Herzfeld, who was employed by Teva Pharmaceuticals USA, Inc. (Compl. ¶¶ 2, 8.) Teva Pharmaceuticals USA, Inc. is the Plan Administrator and Sponsor of the Plan, an ERISA-governed welfare benefit plan. (Compl. ¶ 9.) Herzfeld, eighteen years old at the initiation of this lawsuit, was diagnosed with Duchenne Muscular Dystrophy ("DMD") at the age of six. (Compl. ¶ 14.) Herzfeld's DMD "has caused degeneration and weakness in his muscles such that he requires a wheelchair for mobility and effectively has no use of his arms without assistance." (Compl. ¶ 4.)

At his doctors' recommendation, Herzfeld requested coverage for a myo-electric elbow-wrist orthoses ("EWO") called the MyoPro. (Compl. ¶¶ 22-27, 57-60.) Although Herzfeld alleges the MyoPro has gained widespread acceptance in the medical community, Quantum Health Inc. ("Quantum") denied Herzfeld's request for coverage, finding the MyoPro to be "Experimental and/or Investigational." (Compl. ¶¶ 32, 61.) Herzfeld submitted first and second level internal appeals of the denial, both of which Quantum denied. (Compl. ¶¶ 51-54, 62-73.) Herzfeld alleges that Quantum did not consider relevant evidence or follow procedures required for the appeals. (See Compl. ¶¶ 57-75.) Herzfeld requested an external review and Quantum assigned MCMC. (Compl. ¶¶ 74-75.) MCMC upheld Quantum's coverage denial, finding the MyoPro to be "experimental and investigational," and Herzfeld alleges MCMC's review was biased, predetermined, and failed to comply with required procedures. (Compl. ¶¶ 76-89.) Herzfeld alleges Meritain was obligated to ensure the integrity of these reviews but did not. (Compl. ¶ 106.)

Herzfeld filed the instant suit against the Plan, Quantum as a Plan Administrator, Meritain as the Plan's Claims Fiduciary and Third Party Administrator, Aetna as the provider of network health care services under the Plan, and MCMC as the external reviewer (collectively, "Defendants"). (Compl. ¶¶ 9-13.) He claims that Defendants wrongfully denied pre-certification coverage for the MyoPro, given its widespread acceptance in the medical community, and also breached their fiduciary duties and denied a full and fair review in the process. (Compl. ¶ 6.) He asserts three causes of action under ERISA: (1) denial of benefits under 29 U.S.C. § 1132(a)(1)(B), (2) violation of fiduciary duties under 29 U.S.C. § 1132(a)(3), and (3) denial of full and fair review under 29 U.S.C. § 1133. (Compl. ¶¶ 94-115.)

Meritain and Aetna move to dismiss all causes of action against them. The Plan moves to dismiss Herzfeld's second and third causes of action.

III. LEGAL STANDARD

A court may dismiss a complaint under Rule 12(b)(6) for lack of a cognizable legal theory or insufficient facts pleaded to support an otherwise cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988). To survive a dismissal motion, a complaint need only satisfy the minimal notice pleading requirements of Rule 8(a)(2)—a short and plain statement of the claim. Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003). The factual "allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). That is, the complaint must "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted).

The determination of whether a complaint satisfies the plausibility standard is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679. A court is generally limited to the pleadings and must construe all "factual allegations set forth in the complaint . . . as true and . . . in the light most favorable" to the plaintiff. Lee v. City of Los Angeles,250 F.3d 668, 679 (9th Cir. 2001). However, a court need not blindly accept conclusory allegations, unwarranted deductions of fact, and unreasonable inferences. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

Where a district court grants a motion to dismiss, it should generally provide leave to amend unless it is clear the complaint could not be saved by any amendment. See Fed. R. Civ. P. 15(a); Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). However, leave to amend "is properly denied . . . if amendment would be futile." Carrico v. City and Cty. of San Francisco, 656 F.3d 1002, 1008 (9th Cir. 2011).

IV. DISCUSSION

Meritain and Aetna seek dismissal of all three causes of action, arguing Herzfeld fails to allege sufficient facts to state a claim against them. (See M&A Mot. 5-6.) The Plan moves to dismiss Herzfeld's second and third causes of action, arguing that the equitable relief Herzfeld seeks is barred as duplicative of the first cause of action, which provides an adequate remedy. (See Plan Mot. 5.) The Court addresses each motion in turn.

A. Meritain & Aetna Motion [40]

1. Denial of Benefits, 29 U.S.C. § 1132(a)(1)(B)

Herzfeld asserts a first cause of action for denial of benefits under 29 U.S.C. § 1132(a)(1)(B). (Compl. ¶¶ 94-101.) He claims that Defendants, including Meritain and Aetna, breached the terms of the Plan by refusing to pre-certify coverage for the MyoPro. (Compl. ¶ 99.) Meritain and Aetna argue that Herzfeld fails to allege sufficient facts to support that either of them breached the terms of the Plan or could be liable for denial of benefits. (M&A Mot. 10-12.)

ERISA provides that a plan participant or beneficiary may bring a civil action "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B). Potential liability for denial of benefits undersubsection (a)(1)(B) is not limited to a Plan or the Plan administrator, but the defendant must be someone "responsible for paying legitimate benefits claims" or who can "redress[] the act or practice which violates any provision of" ERISA. Cyr v. Reliance Standard Life Ins. Co., 642 F.3d 1202, 1206, 1207 (9th Cir. 2011) (internal quotation marks omitted). "[P]roper defendants under § 1132(a)(1)(B) . . . at least include ERISA plans, formally designated plan administrators, insurers or other entities responsible for payment of benefits, and de facto plan administrators that improperly deny or cause improper denial of benefits." Spinedex Physical Therapy USA Inc. v. United Healthcare of Ariz., Inc., 770 F.3d 1282, 1297 (9th Cir. 2014). Suits may also be brought "against the plan as an entity and against the fiduciary of the plan." Id. (emphasis omitted); see 29 U.S.C. § 1002(21)(A) (a fiduciary is any entity that exercises discretionary authority or control over the plan's management, administration, or disposition of assets). Thus, a plaintiff must allege that the defendant is one of the listed entities or a de facto plan administrator with discretionary authority over claims.

As to Aetna, Herzfeld appears not to oppose dismissal of the first cause of action. (See generally Opp'n M&A Mot. ("Opp'n M&A"), ECF No. 48; M&A Reply 2, ECF No. 51.) "Failure to oppose constitutes a waiver or abandonment of the issue." Heraldez v. Bayview Loan Servicing, LLC, No. CV 16-1978-R, 2016 WL 10834101, at *2 (C.D. Cal. Dec. 15, 2016), aff'd, 719 F. App'x 663 (9th Cir. 2018) (citing Stichting Pensioenfonds ABP v. Countrywide Fin. Corp., 802 F. Supp. 2d 1125, 1132 (C.D. Cal. 2011)). Further, Herzfeld alleges only that Aetna provides healthcare services for the Plan through its network (Compl. ¶ 12), but otherwise includes no allegations that Aetna was responsible for resolving or paying claims, nor that it played any role in the benefit denial (see generally Compl.). As such, dismissal of the first cause of action against Aetna is appropriate. The Court DISMISSES this cause of action against Aetna, with leave to amend.

As to Meritain, the parties agree that Meritain did not make the benefit determination here; Quantum did. (M&A Mot. 12; Opp'n M&A 12-13.) However, under Spinedex and Cyr, whether a party actually makes the ultimate determination is not dispositive. Plaintiff need only allege that the defendant is one of the contemplated entities and "den[ies] or cause[s] improper denial of benefits." Spinedex, 70 F.3d at 1297.

Herzfeld alleges Meritain is the Claims Fiduciary and Third Party Administrator of the Plan, which arguably brings Meritain within the universe of proper defendants. (Compl. ¶ 11.) However, he fails to describe Meritain's role as Claims Fiduciary and Third Party Administrator and his remaining allegations against Meritain...