United States District Court, D. Minnesota
Louis J. Peterson, D.C., on behalf of Patients, E, I, K L, N, P, Q, and R, and on behalf of all others similarly situated, Plaintiff,
UnitedHealth Group Inc., United HealthCare Services, Inc., United HealthCare Insurance Company, United Healthcare Service LLC, Defendants. Riverview Health Institute, on its own behalf and on behalf of all others similarly situated, Plaintiff,
UnitedHealth Group, Inc., United HealthCare Services, Inc., United HealthCare Insurance Company, Optum, Inc., Defendants.
R. THORSON UNITED STATES MAGISTRATE JUDGE.
two cases are brought by Dr. Louis Peterson and Riverview
Health Institute-two healthcare providers-on behalf of
certain of their patients against UnitedHealth Group Inc. and
various of its affiliates (collectively “United”
or “Defendants”). United acts as the
administrator for numerous health plans governed by the
Employee Retirement Income Security Act
(“ERISA”), 29 U.S.C. 1001 et seq.
According to Plaintiffs, United has wrongfully failed to pay
them and other providers who have treated patients enrolled
in United-administered plans. Instead of paying the providers
what they are owed, Plaintiffs allege, United withholds some
or all of their payments in order to offset overpayments that
United claims to have made to the providers in connection
with their treatment of different patients enrolled in
different plans. Plaintiffs allege that this practice-known
as “cross-plan offsetting”-violates ERISA and the
terms of the plans.
matter is before the Court on Plaintiffs' Motions for
Leave to File Second Amended Complaints (Civ. No. 14-2101,
Doc. No. 193; Civ. No. 15-3064, Doc. No. 132). Defendants
consent to certain of the proposed amendments but not to
others. In particular, Defendants consent to amendments that
add new at-issue offsets, “clean up” existing
allegations, amend the class definition in Peterson,
and remove the class allegations from Riverview.
Defendants oppose the proposed amendments that bring new
causes of action, liability theories, and claims for relief;
in particular, Defendants oppose the addition of a claim for
fiduciary breach under ERISA § 1132(a)(2) in
Peterson, and any related theories in both cases
outside of those previously alleged for the purpose of
Plaintiffs' § 1132(a)(1)(B) claims. For those
amendments that Defendants agree to, an Amended Complaint may
be filed in conformity with those agreed-upon proposed
amendments on or before April 17, 2019. This
Order addresses the remaining proposed amendments that are
contested by Defendants. Those amendments include: in the
Peterson Complaint, paragraphs 6, 18, 21, 26, 30,
31, 33, 40, 49, 50, 51, 52, 55, 56, 57, 58, and Prayer for
Relief sub-sections (B), (C), (F), and (H); in the
Riverview Complaint, paragraphs 6, 39, 40, 42, 48,
51, 52, 53, 54, and Prayer for Relief sub-sections (A), and
(B). The Court held a hearing on Plaintiffs' motions on
March 27, 2019. (Civ. No. 14-2101, Doc. No. 206; Civ. No.
15-3064, Doc. No. 143.) As further stated below, Plaintiffs
unduly delayed seeking the contested amendments, and the
Defendants would be prejudiced if the amendments are allowed
at this stage of the proceedings. Therefore, Plaintiffs'
motions are denied.
following summary is provided as context for what Plaintiffs
knew about the basis for a fiduciary-based cause of action
and when they knew it, and to emphasize what Plaintiffs have
communicated about what Phase I of this case was supposed to
encompass. This background highlights Plaintiffs' undue
delay in bringing a § 1132(a)(2) breach of fiduciary
duty cause of action or alleging other related facts,
theories, and requests for relief, and underscores why
Defendants would be prejudiced by Plaintiffs adding such
allegations and claims now.
Early Motions to Dismiss in Peterson
filed their initial Complaint in the Peterson case
almost five years ago on June 23, 2014, bringing three counts
- (1) for benefits due under ERISA § 1132; (2) for
injunctive and declaratory relief under ERISA § 1132;
and (3) for notice and appeal rights under ERISA § 1132.
In their fact section of that initial Complaint, Plaintiffs
alleged that “Defendants are ERISA fiduciaries with
respect to the United Plans, ” and stated that
“United's actions also violate its fiduciary duties
and other obligations under ERISA” (Civ. No. 14-2101,
Doc. No. 1, Compl. ¶¶ 2, 7), however, they asserted
no specific cause of action for breach of fiduciary duties
pursuant to § 1132(a)(2).
moved to dismiss soon thereafter, and Plaintiffs filed a
First Amended Class Action Complaint as a matter of right
pursuant to Federal Rule of Civil Procedure 15 on September
10, 2014. The First Amended Class Action Complaint dropped
the third count but retained the first two counts. Count I
was amended to more specifically state a claim for benefits
due under ERISA § 1132(a)(1)(B) (hereinafter “the
§ 1132(a)(1)(B) benefits cause of action”). Count
II was amended to more specifically state a claim for
injunctive and declaratory relief under ERISA §
1132(a)(3) (hereinafter “the § 1132(a)(3)
injunctive and declaratory relief cause of action”).
Plaintiffs retained factual allegations regarding Defendants
being fiduciaries who violated fiduciary duties similar to
those referenced above. (Civ. No. 14-2101, Doc. No. 33, Am.
Compl. ¶ 2 (“Defendants are ERISA fiduciaries with
respect to all United Plans.”); ¶ 6 (“These
offsets violate the terms of the United Plans, and
United's application of this policy violates ERISA as
well as United's fiduciary duties as a claims
administrator.”); see also Am. Compl.
¶¶ 53-55, 58 (making allegations about United's
duties as a fiduciary).) Again, Plaintiffs failed to assert a
separate cause of action for breach of fiduciary duties.
October 8, 2014, Defendants moved to dismiss the First
Amended Class Action Complaint. (Civ. No. 14-2101, Doc. No.
39.) In addition to raising arguments about standing and lack
of requisite authorization, Defendants argued that Plaintiffs
failed to allege sufficient facts to plausibly establish an
ERISA violation. Within their argument, Defendants asserted
that Plaintiffs' Complaint could be read as
“purport[ing] to assert that ERISA prohibits plans from
reallocating overpayments through offsets without
regard to plan language” (i.e., a per se
violation), which they asserted failed as a matter of law.
(Civ. No. 14-2101, Doc. No. 41, Mem. of Law in Supp. of
Defs.' Mot to Dismiss at 22.) In their response,
Plaintiffs argued among other things that if no plan language
authorized cross-plan offsets, then Defendants' offset
practice nonetheless violated ERISA, citing common law
responsibilities of ERISA fiduciaries. (Civ. No.
14-2101, Doc. No. 51, Pls.' Opp'n to Defs.' Mot.
to Dismiss First Am. Compl. 11-12.) Still, no effort was made
to assert a § 1132(a)(2) cause of action.
Introduction of Threshold Issues
hearing on Defendants' motion to dismiss, United States
District Judge Patrick J. Schiltz inquired as to whether this
case should proceed with identifying and deciding threshold
THE COURT: . . . But, essentially, it seems to boil down to
was there authority in the plan. You've heard me say
it's just not something I'm going to take on in a
Rule 12 motion.
Is there any reason that we could not do the kind of staged
discovery that I suggest, which is you identify the threshold
issues; we have a limited discovery on those; we bring those
here; if you survive that, then we go into the much more
complicated issues of liability and damage?
MR. COWART: No, Your Honor. I think that would be fine
THE COURT: Okay. I'd like you to try to . . . But
let's try to actually discover everything that's
involved in this case. Could be a pretty long, expensive
discovery, but let's try to identify threshold issues,
get those teed up as quickly as we can. I'll have you
back here. We'll take care of those. If there's still
a case, we'll turn to the next phase.
MR. COWART: That sounds reasonable, Your Honor.
(Civ. No. 14-2101, Doc. No. 60 at 43-44.)
January 23, 2015, Judge Schiltz granted Defendants'
motion in part, dismissing two of the three original named
Plaintiffs for lack of standing, but finding that Dr.
Peterson had standing to proceed. (Civ. No. 14-2101, Doc. No.
56.) Defendants answered the Amended Complaint on February 2,
2015. (Civ. No. 14-2101, Doc. No. 61.) The undersigned held a
Pretrial Scheduling Conference on March 30, 2015, after the
parties had submitted their Joint Rule 26(f) Report. (Civ.
No. 14-2101, Doc. Nos. 63, 64.) In the Joint Rule 26(f)
Report, Plaintiff stated that “[t]he only disputed
factual issue is whether United Plans permit the offset
policy, and that issue can be resolved through review of
relevant Plan documents.” (Civ. No. 14-2101, Doc. No.
63 at 4.) In their Report, the parties agreed “on the
(a) scope of the threshold issues which will be the subject
of the first phase of this staged discovery, and (b) a plan
and schedule for conducting that discovery.” (Civ. No.
14-2101, Doc. No. 63 at 6.) They also agreed “that the
focus of this first phase of staged discovery would be on
identifying representative Plans and patients of Dr. Peterson
covered by those representative Plans, and testing Dr.
Peterson's authorization (and hence derivative standing)
to bring those claims.” (Id.) The parties then
composed the agreed-upon threshold issues:
Agreed threshold issues:
a. Whether, as Plaintiff contends, plan language in
“representative” United Plans did not authorize
United's cross-plan offsets, which Plaintiff contends
renders the cross-plan offsets illegal; or whether, as United
contends, plan language in “representative”
United Plans supports United's defense that those United
Plans expressly or impliedly authorized cross-plan offsets.
In support of this defense, United relies on the legal
standard set forth in Quality Infusion Care, Inc. v.
Health Care Serv. Corp., 628 F.3d 725 (5th Cir. 2010).
Tr. 27, 28; 51.
b. Whether Dr. Peterson's standing in this action is
supported by authorized representative forms signed by
patients who have authorized-and continue to authorize-Dr.
Peterson's bringing the claims in this action on their
behalf, notwithstanding Defendants' assertion of a
conflict of interest. Tr. 27-28; 51.
(Doc. No. 63 at 6.)
Pretrial Scheduling Order issued in April 2015. (Case No.
14-2101; Doc. No. 65.) The Scheduling Order allowed for two
months of discovery, and set a dispositive motion heard-by
date on the threshold issues for September 30, 2015. In a
status report to the Court on April 27, 2015, Plaintiff
represented that he did not anticipate adding additional
parties and made no mention of needing to add additional
claims or causes of action. (Case No. 14-2101; Doc. No. 66.)
On June 19, 2015, the parties then stipulated to Plaintiff
filing a Second Amended Complaint, which dropped several
patients on whose behalf Dr. Peterson had sued but retaining
the same two counts from their previous Complaint - a §
1132(a)(1)(B) benefits cause of action and a §
1132(a)(3) injunctive and declaratory relief cause of action.
(Case No. 14-2101; Doc. No. 74, Stipulation, approved by the
Court at Doc. No. 76; see also Doc. No. 77, Second
Complaint Filed in Riverview Included a §
1132(a)(2) Fiduciary Breach Cause of Action
month later, on July 15, 2015, Plaintiff filed its initial
Complaint in the Riverview case, bringing three
counts: (1) for benefits due under ERISA § 1132(a)(1)(B)
(hereinafter “the § 1132(a)(1)(B) benefits cause
of action”); (2) for injunctive and declaratory relief
under ERISA § 1132(a)(3) (hereinafter “the §
1132(a)(3) injunctive and declaratory relief cause of
action”); and (3) for fiduciary breach under ERISA
§§ 1132(a)(2) and 1109 (hereinafter “the
§ 1132(a)(2) fiduciary breach cause of action). (Civ.
No. 15-3064, Doc. No. 1.) The Riverview case was
then reassigned to United States District Judge Schiltz and
the undersigned as a related case with Peterson.
(Civ. No. 15-3064, Doc. No. 12.) The Court extended the
deadline for answering the Complaint to September 21, 2015,
and on that date, Defendants filed a motion to dismiss. (Civ.
No. 15-3064, Doc. Nos. 21, 26.) After Defendants moved to
dismiss, Plaintiff voluntarily dismissed its §
1132(a)(2) fiduciary breach cause of action. (Civ. No.
15-3064, Doc. No. 36.) Plaintiff did not seek to add the
§ 1132(a)(2) fiduciary breach cause of action in the
Peterson case at that time.
First Motion for Summary Judgment in the Peterson
August 2015, the parties filed cross-motions for summary
judgment in the Peterson case, which were heard by
Judge Schiltz on September 30, 2015. (Civ. No. 14-2101, Doc.
Nos. 83, 89.) In Plaintiff's motion, he argued that
United's interpretation of the plan terms was not
“reasonable” under the Finley test,
“especially because United's boundless
discretionary theory violates a fiduciary's duty of
loyalty to administer an ERISA plan ‘with an eye single
to the interests of the participants and
beneficiaries.'” (Civ. No. 14-2101, Doc. No. 91,
Pl's Mem. in Supp. of Cross-Mot. for Summ. J. on Phase 1
Issues (“Pl's Mem. on SJ #1”) 2 (citation
omitted); see also Id. at 2-3 (citing case for the
proposition that blurring lines between separate plans
constitutes a breach of fiduciary duties).) Plaintiff made
the argument that “this case is about the rule of law
and whether United can do what it wants, when it wants,
without regard to plan terms, trust law principles, the
Finley factors, or other restraints on a
fiduciary's powers. (Id. at 3-4.) Among other
arguments under Finley, Plaintiff argued that the
Finley factor considering “conflicts with the
substantive or procedural requirements of the ERISA
statute” weighed in his favor “[e]ven on the
limited Phase I record.” (Id. at 16.)
Plaintiff argued that it was “clear that United's
interpretation of unidentified Exemplar Plan terms as
permitting cross-plan offsets conflicts with fundamental
principles of ...