homampour - 16-07-13 - opposition to mtd re …files.courthousenews.com/2016/08/11/harvoni dismiss...

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PLAINTIFFS’ OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS PLAINTIFFS’ SECOND AMENDED COMPLAINT

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Glenn R. Kantor, Esq., SBN 122643 E-mail: [email protected] Timothy J. Rozelle, Esq., SBN 298332 E-mail: [email protected] KANTOR & KANTOR, LLP 19839 Nordhoff Street Northridge, California 91324 Telephone: (818) 886-2525 Facsimile: (818) 350-6272 Attorneys for Plaintiffs ARAM HOMAMPOUR, JOHN BARTELS and JON NAKA on behalf of themselves and all others similarly situated

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

ARAM HOMAMPOUR, JOHN BARTELS, and JON NAKA on behalf of themselves and all others similarly situated,

Plaintiff,

v. CALIFORNIA PHYSICIANS’ SERVICE dba BLUE SHIELD OF CALIFORNIA, BLUE SHIELD OF CALIFORNIA LIFE AND HEALTH INSURANCE COMPANY, Defendant.

Case No.: 3:15-cv-05003-WHO Hon. William H. Orrick PLAINTIFFS’ OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS PORTIONS OF PLAINTIFFS’ SECOND AMENDED COMPLAINT Date: August 10, 2016 Time: 2:00 p.m. Courtroom 2 Trial Date: None set

Plaintiffs ARAM HOMAMPOUR, JOHN BARTELS, and JON NAKA, on

behalf of themselves and all others similarly situated, hereby respectfully submit

their opposition to the Motion of Defendants CALIFORNIA PHYSICIANS’

SERVICE dba BLUE SHIELD OF CALIFORNIA, BLUE SHIELD OF

CALIFORNIA LIFE AND HEALTH INSURANCE COMPANY (collectively

“Defendants” or “Blue Shield”), to dismiss their Second Amended Complaint.

/ / /

Case 3:15-cv-05003-WHO Document 33 Filed 07/13/16 of 30

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TABLE OF CONTENTS

I. INTRODUCTION ........................................................................................... 1

II. FACTUAL AND PROCEDURAL BACKGROUND .................................... 2

III. LEGAL ARGUMENT .................................................................................... 5

A. Defendants’ Amendment of Its Harvoni Medical Policy, After

Filing of the Class Action Lawsuit, Does Not Render Plaintiffs’

Claims Moot .......................................................................................... 5

1. Plaintiff Naka and Bartels’ Claims Are Not Moot As They

Never Received Approval for Harvoni ..................................... 11

2. Defendants’ Relied Upon Authorities Are Either

Distinguishable or Inapposite ................................................... 12

B. Blue Shield and Blue Shield Life Are Both Proper Defendants ......... 16

C. Plaintiffs Have Properly Pleaded That They Are Entitled to

Disgorgement of Profits Under ERISA § 1132(a)(3) ......................... 22

IV. CONCLUSION ............................................................................................. 25


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TABLE OF AUTHORITIES

CASES

Adarand Constructors, Inc. v. Slater,

528 U.S. 216 (2000) ........................................................................................ 6

Allee v. Medrano,

416 U.S. 802 (1974) ........................................................................................ 6

Alves v. Harvard Pilgrim Health Care, Inc.,

204 F.Supp.2d 198 (D. Mass. 2002) ............................................................. 21

Buus v. WAMU Pension Plan,

No. C07-0903 MJP, 2007 WL 4510311

(W.D. Wash. Dec. 18, 2007) .......................................................................... 21

Cady v. Anthem Blue Cross Life & Health Ins. Co.,

583 F. Supp. 2d 1102 (N.D. Cal. 2008) ........................................................ 21

Chorosevic v. MetLife Choices,

No. 4:05-cv-2394 CAS, 2009 WL 723352

(E.D. Mo. Mar. 17, 2009) ......................................................................... 15, 16

Cigna Corp. v. Amara,

563 U.S. 421 (2011) ................................................................................ 22, 24

City News & Novelty, Inc. v. City of Waukesha,

531 U.S. 278 (2001) ........................................................................................ 6

Davis v. Bailey,

No. CIVA05CV00042 WYD-O ES, 2005 WL 3527286

(D. Colo. Dec. 22, 2005) ................................................................................ 21

Engelhardt v. Paul Revere Life Insurance Company,

77 F.Supp.2d 1226 (M.D. Ala. 1999) .......................................................... 6, 7

Englert v. Prudential Ins. Co.,

2016 WL 2770526 (N.D. Cal. 2016) ............................................................. 24


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Fallick v. Nationwide Mut. Ins. Co.,

162 F.3d 410 (6th Cir. 1998) ................................................................... 19, 20

Friends of the Earth v. Laidlaw Envtl. Servs., Inc.,

528 U.S. 167 (2000) ................................................................................ 5, 6, 7

In re UnumProvident Corp. ERISA Benefits Denial Actions,

No. 03 Civ. 1000, MDL No. 03 Md. 1552, 2010 WL 323191

(E.D.Tenn. Jan.19, 2010) ............................................................................... 15

Keir v. Unumprovident Corp. No. 02 CIV. 8781 (DLC),

2010 WL 356878 (S.D.N.Y. Sept. 14, 2010) ................................................. 14

Kerns v. Caterpillar, Inc.,

499 F.Supp.2d 1005 (M.D. Tenn. 2007) ..................................................... 7, 8

Kirk v. Lockheed Martin Grp. Benefits Plan No. 594,

2015 WL 4638243 (N.D. Cal. Aug. 4, 2015) .......................................... 13, 14

Lamuth v. Hartford Life & Acc. Ins. Co.,

30 F.Supp.3d 1036 (W.D. Wash. 2014) ...................................................... 8, 9

Lujan v. Defenders of Wildlife,

504 U.S. 555 (1992) ...................................................................................... 18

Montanile v. Board of Trustees of the Nat’l Elevator Industry

Health Benefit Plan,

136 S. Ct. 651 (Jan. 20, 2016) ....................................................................... 22

Moyle v. Liberty Mut. Ret. Ben. Plan,

No. 13-56330, 2016 WL 2946271 (9th Cir. May 20, 2016) ............. 22, 23, 24

Mullin v. Scottsdale Healthcare Corp. Long Term Disability Plan,

2016 WL 107838 (D. Ariz. 2016) ................................................................. 24

New York State Psychiatric Ass’n, Inc. v. UnitedHealth Grp.,

798 F.3d 125 (2d Cir. 2015) .................................................................... 23, 24

Payton v. County of Kane,

308 F.3d 673 (7th Cir. 2002) ......................................................................... 21


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Porter v. Bowen,

496 F.3d 1009 (9th Cir. 2007) ......................................................................... 8

Ralston v. Mortgage Inv'rs Grp., Inc.,

No. 5:08-CV-00536-JF PSG, 2011 WL 4081696

(N.D. Cal. Sept. 12, 2011) .............................................................................. 20

Santomenno v. Transamerica Life Ins. Co.,

310 F.R.D. 451 (C.D. Cal. 2015) .................................................................. 20

Sheet Metal Workers Pension Trust of Northern Cal. v. Trayer

Engineer Corp.,

2016 WL 1745676 (N.D. Cal. May 3, 2016) ................................................ 23

Silk v. Metro. Life Ins. Co.,

310 Fed. App’x. 138 (9th Cir. 2009) ............................................................. 13

Silva v. Metro. Life Ins. Co.,

762 F.3d 711 (8th Cir. 2014) ......................................................................... 23

Sutton v. Medical Serv. Assoc. of Pennsylvania,

1993 WL 273429 (E.D.Pa.1993) ................................................................... 20

United States v. Concentrated Phosphate Export Assn.,

393 U.S. 199 .................................................................................................... 6

Valliere v. Teamsters Local No. 264, No. C08–624, 2009 WL 2595663

(W.D.N.Y. Aug. 20, 2009) ............................................................................... 9

STATUTES

29 U.S.C. § 1132(a)(1)(B) ................................................................................. passim

29 U.S.C. § 1132(a)(3) ....................................................................................... passim


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I. INTRODUCTION

This is an ERISA action in which the plaintiffs Aram Homampour, John

Bartels and Jon Naka (“Plaintiffs”) sought prescription drug benefits under the

terms of their California Physicians’ Service dba Blue Shield of California (“Blue

Shield”) health benefit plans for the wrongful denials of their requests for Harvoni

for the treatment of Hepatitis C. Additionally, Plaintiff alleges class claims

involving the uniform practice of both Blue Shield and Blue Shield of California

Life and Health Insurance Company (“Blue Shield Life”) of categorically barring

coverage for Harvoni for the treatment of Hepatitis C. Both Defendants have

categorically denied prior authorization requests and claims for Harvoni treatment

for the treatment of Hepatitis C. SAC, at ¶¶ 92, 106.

In their Motion to Dismiss, Defendants first assert that Plaintiffs’ claims are

moot and therefore should be dismissed on the basis of lack of subject matter

jurisdiction. Defendants argue that the claims are moot because they have updated

their Harvoni medical policy to expand coverage for Harvoni. Defendants’

arguments ignore significant case law and are therefore without merit.

Second, Plaintiffs have intentionally named both Blue Shield and Blue Shield

Life as defendants in this class action suit. Plaintiffs have described the relationship

between Blue Shield and Blue Shield Life in the context of a corporation-wide

practice of denying Harvoni for the treatment of Hepatitis C. It is settled law that

once a potential ERISA class representative establishes his individual standing to

sue his own ERISA-governed plan, there is no additional constitutional standing

requirement related to his suitability to represent the putative class members of

other plans. Therefore, Plaintiffs take the firm position that both Defendants are

proper defendants in this action.

Finally, and related to the issue of mootness, Defendants’ erroneously argue

that disgorgement of profits under section 29 U.S.C. § 1132(a)(3) is not recoverable

as a matter of law. By misleadingly arguing that Plaintiffs seek derivative remedies


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for monetary compensation under § 1132(a)(1)(B) and § 1132(a)(3), Defendants

extrapolate that Plaintiffs have not been harmed by its “voluntary conduct” to

notify and encourage Blue Shield members to resubmit prior authorization requests

for Harvoni. Defs.’ Mtn. to Dismiss, at 5. Therefore, because Plaintiffs’

§ 1132(a)(1)(B) claims are allegedly satisfied, and their § 1132(a)(3) claims are

unrecoverable as a matter of law, Defendants conclude that Plaintiffs’ Second

Amended Complaint (“SAC”) should be dismissed with prejudice.

All of the above theories are unsupported by case law, and Plaintiffs

therefore request that Defendants’ Motion to Dismiss be denied in its entirety.

II. FACTUAL AND PROCEDURAL BACKGROUND

On October 10, 2014, the FDA approved Harvoni, a prescription drug that

dramatically changes the lives of those infected with Hepatitis C. Harvoni is a once-

daily tablet that clinical studies show can cure Hepatitis C in as little as eight weeks

with few side effects. Since 2014, the standard of care in the medical community

for treating Hepatitis C patients is Harvoni, which provides a cure rate of 95%-99%

at a cost of $99,000 for a 12-week treatment. SAC at ¶ 7. Harvoni is far more

effective than other treatment options, and also eliminates the harmful side effects

associated with other available treatments such as Viekira Pak and Sovaldi,

prescription medications utilized in combination with ribavirin. SAC at ¶ 8.

In January of 2015, Blue Shield chose Viekira Pak, manufactured by drug

company AbbVie, as the preferred Hepatitis C drug treatment on its 2015

commercial drug coverage list (formulary). SAC at ¶ 58.

Blue Shield’s drug coverage list, which became effective in February 2015,

applied to all of the company’s commercial, fully-insured customers, including

Plaintiffs. Blue Shield’s pharmacy benefit manager and self-insured customers,

such as large employers, also followed the drug list. SAC at ¶ 59.

Due to Harvoni’s superiority, Plaintiffs and their treating providers made

prior authorization requests for Harvoni to Blue Shield. SAC at ¶¶ 20, 38, 55.


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Plaintiffs’ prior authorization requests for Harvoni were initially denied, at least

once or several times, by Blue Shield on the grounds that, for example:

According to the Blue Shield medical necessity criteria for coverage of Harvoni for the treatment of Hepatitis C, evidence of compensated or advanced liver disease confirmed by a biopsy with a METAVIR score (a score that ranges from F0-F4 and assesses the health of the liver) of F3 or F4, or other accepted measure of fibrosis (scar) scoring is required. . . . A January 21, 2015, FibroSPECT fibrosis score was consistent with F0-F1. . . . Therefore this patient does not meet the Blue Shield medical necessity criteria for coverage of Harvoni for the treatment of hepatitis C.

SAC at ¶¶ 6-7.

Plaintiffs sought coverage for Harvoni treatment under Blue Shield plans,

which provide coverage for medically necessary care in exchange for the payment

of premiums. Mr. Homampour’s Plan defines “medically necessary” as follows:

a. Consistent with Blue Shield medical policy; and,

b. Consistent with the symptoms or diagnosis; and,

c. Not furnished primarily for convenience of the patient, the

attending Physician or other provider; and,

d. Furnished at the most appropriate level which can be provided

safely and effectively to the patient.

SAC at ¶¶ 25, 37, 55.

Harvoni met all of these requirements. Nothing in the language of the plans

required that members allow their medical conditions to deteriorate to severe

fibrosis in order for their care to be considered “Medically Necessary.” SAC at

¶ 70. However, Defendants did not use the plan definitions of “Medically

Necessary” to deny Plaintiffs’ prior authorization requests for Harvoni. Id. Rather,

Defendants applied a more restrictive test -- their internally-developed Harvoni

medical policy -- in an effort to increase company profits by limiting the number of

patients who would qualify for this life-saving medication. Id.


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Furthermore, Defendants were determined to urge Plaintiffs to take the

cheaper and less effective Viekira Pak instead of Harvoni. For example, on May 13,

2015, Plaintiff Bartels received his first (of three) prior authorization denial for

Harvoni in which Blue Shield explained in pertinent part that his requests were

denied for the following reasons:

Harvoni is covered for the treatment of chronic hepatitis C infection in patients with severe liver disease as evidenced by a METAVIR fibrosis score 3 or 4, and for patients with minimal liver disease or no fibrosis seen on biopsy when there is evidence of extrahepatic complications. From the information provided, it does not appear that you have severe liver disease as evidenced by a METAVIR fibrosis score 3 or 4, or other accepted measure of fibrosis scoring, and there is no evidence of extrahepatic complications.

After an evaluation for medical necessity, the request for Harvoni cannot be approved due to no medical rationale provided for why therapy with Viekira and ribavirin cannot be used. Coverage of Viekira has been authorized, should you choose to prescribe the preferred hepatitis C virus therapy.

SAC at ¶ 39.

By using their internally generated restrictive Harvoni medical policy,

Defendants breached the provisions of Plaintiffs’ and putative class members’

plans. SAC at ¶ 86. Furthermore, Defendants engaged in a practice of pressuring

their insureds to request authorization for the cheaper Viekira Pak rather than

Harvoni. Although Plaintiff Homampour did not request Viekira Pak at the medical

recommendation of his treating provider, Blue Shield forced and pressured him to

request authorization for Viekira Pak. SAC, at ¶ 28-35. Eventually, after the filing

of this lawsuit and Blue Shield’s commensurate reformatory actions, Plaintiff

Homampour was authorized to receive Harvoni on May 12, 2016, over one year

after he initially requested authorization. Mtn. to Dismiss, at 5-6.

Unlike Plaintiff Homampour, Plaintiffs Bartels and Naka never received

Harvoni, and were instead forced to take Viekira Pak during the pendency of this

lawsuit. As a result, Defendants were unjustly enriched by their decision to

artificially ration Harvoni only for individuals with severe liver fibrosis, i.e., F3 or


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F4 staging scores. Instead of paying Harvoni’s initial sticker price, which was

roughly $99,000 per 12-week regimen, Blue Shield may now cover Harvoni at costs

which have decreased significantly below that original price. Defendants hedged

their bets that the longer they waited to amend their internal Harvoni medical

policy, the less they would have to pay to cover Harvoni for their insureds. SAC, at

¶ 120.

III. LEGAL ARGUMENT

A. Defendants’ Amendment of Its Harvoni Medical Policy, After

Filing of the Class Action Lawsuit, Does Not Render Plaintiffs’

Claims Moot

Defendants’ decision to remove the barriers to coverage of Harvoni after the

filing of this class action lawsuit does not render moot Plaintiffs’ claims. In fact, it

is well-settled law that a defendant’s voluntary cessation of a challenged practice

does not automatically or easily moot a plaintiff’s claims.

The seminal case addressing the mootness of legal claims following post-

filing cessation of a challenged practice is Friends of the Earth v. Laidlaw Envtl.

Servs., Inc., 528 U.S. 167 (2000). In Friends of the Earth, the plaintiffs had

standing at the time their complaint was filed, because they were prohibited from

recreationally using a river and surrounding areas due to the defendants’ pollution

of the river. 528 U.S. at 164. However, subsequent to the filing of the complaint,

the company voluntarily complied with applicable permits and ultimately shut

down the polluting facility, and the Court of Appeals dismissed the claims as moot.

Id. at 189. The Supreme Court reversed, observing:

It is well settled that “a defendant’s voluntary cessation of a challenged practice does not deprive a federal court of its power to determine the legality of the practice.” City of Mesquite, 455 U.S., at 289, 102 S.Ct. 1070. “[I]f it did, the courts would be compelled to leave ‘[t]he defendant ... free to return to his old ways.’” Id., at 289, n. 10, 102 S.Ct. 1070 (citing United States v. W.T. Grant Co., 345 U.S. 629, 632, 73 S.Ct. 894, 97 L.Ed. 1303 (1953)). In accordance with this principle, the standard we have announced for determining whether a case has been mooted by the defendant's voluntary conduct is


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stringent: “A case might become moot if subsequent events made it absolutely clear that the allegedly wrongful behavior could not reasonably be expected to recur.” United States v. Concentrated Phosphate Export Assn., 393 U.S. 199, 20 (1968). The “heavy burden of persua[ding]” the court that the challenged conduct cannot reasonably be expected to start up again lies with the party asserting mootness. Ibid.

Id. (emphasis added; parallel citations omitted).

This burden to show that it is “absolutely clear the allegedly wrongful

behavior could not reasonably be expected to recur” is “formidable.” Id. at 190. See

also City News & Novelty, Inc. v. City of Waukesha, 531 U.S. 278, 284 (2001)

(“general rule that voluntary cessation of a challenged practice rarely moots a

federal case”); Allee v. Medrano, 416 U.S. 802, 810-812 (1974) (action “does not

become moot merely because the conduct complained of has terminated”); United

States v. Concentrated Phosphate Export Assn., 393 U.S. 199,203 (1968)

(defendant’s statement that it has changed its position “cannot suffice to satisfy the

heavy burden”); Adarand Constructors, Inc. v. Slater, 528 U.S. 216, 222 (2000)

(“Voluntary cessation of challenged conduct moots a case, however, only if it is

‘absolutely clear that the allegedly wrongful behavior could not reasonably be

expected to recur.’”) (emphasis in original).

In the ERISA context, courts have routinely held that the voluntary cessation

of a challenged practice does not moot the challenging claims. For example, in

Engelhardt v. Paul Revere Life Insurance Company, 77 F.Supp.2d 1226 (M.D. Ala.

1999), an insurer reversed its benefit denial once the beneficiary filed suit and wrote

the beneficiary a letter stating future monthly benefits would be paid “to the extent

you continue to be eligible for said benefits.” Id. at 1235. The insurer sought

dismissal of the plaintiff’s claim for “future disability benefits.” The court

interpreted that claim as the plaintiff’s “request ‘to clarify his rights to future

benefits’ under the policy, which is a remedy expressly available under ERISA.” Id.

It noted the plaintiff was not seeking an unconditional declaration that he was

forever entitled to benefits, but rather was “simply requesting a legal ruling to


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ensure that his policy conforms” with representations in a prior writing. The court

rejected the insurer’s claim that its letter was sufficient assurance:

In finding that summary judgment is due to be entered in favor of Plaintiff on his claim requesting a clarification of future rights under the policy, the court has not overlooked Paul Revere’s statement in a letter written to Plaintiff that “[f]uture monthly benefits will be paid to the extent you continue to be eligible for said benefits under the terms of the benefits plan.” . . . While the court does not question the integrity of Paul Revere's representation, without a legal ruling, Paul Revere would be “free to return to [its] old ways.” United States v. WT Grant Co., 345 U.S. 629, 632 (1953).

Based on the history of this case, in particular Paul Revere’s post-lawsuit reconsideration of its denial of Plaintiff s claim for benefits and ensuing payment, the court finds that a judgment clarifying Plaintiff's rights under the policy to future benefits will wholly eliminate the possibility of any recurring violation. See id. (holding that a “voluntary cessation of allegedly illegal conduct does not deprive the tribunal of power to hear and determine the case, i.e., does not make the case moot[,]” where “there exists some cognizable danger of recurrent violation”).

Id. (emphasis added; reference omitted at ellipsis; parentheses in original).

Similarly, in Kerns v. Caterpillar, Inc., 499 F.Supp.2d 1005 (M.D. Tenn.

2007), the defendant claimed the beneficiaries’ lawsuit was moot, because it had

reversed its prior adverse determination and written to the beneficiaries assuring

them it would not change its position again. Id. at 1009, 1023. As in Engelhardt, the

court observed that ERISA “specifically allows plan participants to bring an action

for a declaratory judgment to clarify their rights to future benefits under an ERISA

plan.” Id. at 1024. The Kerns court held that the ERISA plan administrator’s

voluntary conduct could moot the case only if it was “absolutely clear” the

allegedly wrongful behavior could not reasonably be expected to recur. Id. (citing

Friends of the Earth, Inc., 528 U.S. at 189).

Kerns emphasized that the “heavy burden” of showing the challenged

conduct will not recur rests on the party claiming mootness. Id. And, as in

Engelhardt, Kerns rejected the defendant’s assurance that it would not adopt its

prior position:


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Caterpillar’s voluntary decision to waive the premiums for now in light of its position that the benefits are not vested and are subject to change does not “make it absolutely clear that the allegedly wrongful behavior could not reasonably be expected to recur.” The plaintiffs are entitled to have those issues resolved now, and they should not have to wait until Caterpillar changes its mind . . . The court finds that Caterpillar’s actions have raised a definite and concrete controversy regarding the plaintiffs’ rights to benefits under the plan and, therefore, the plaintiffs may bring this action to clarify their rights to future benefits under the plan. The plaintiffs’ claims are not moot.

Id. at 1025.

Most recently, in Lamuth v. Hartford Life & Acc. Ins. Co., 30 F.Supp.3d

1036 (W.D. Wash. 2014), an ERISA participant’s action against a plan insurer

seeking plan benefits and clarification of rights with regard to her date of disability

was not rendered moot when, after the action was commenced, Hartford awarded

the participant the benefits sought in the action. Id. at 1038. Hartford had repeatedly

denied benefits based on its position that the plan’s pre-existing conditions

limitation applied based on the participant’s date of disability. Id. Hartford only

agreed to pay Lamuth’s benefits after she sued, and it was not absolutely clear that

Hartford could not reasonably be expected to reexamine her benefit eligibility based

on the pre-existing conditions limitation. Id.

In fact, the court looked at Hartford’s “equivocal conduct to date” and

determined that Hartford had failed to demonstrate that it is “absolutely clear” that

it will not “return to its old ways.” Id. at 1045 (citing Porter v. Bowen, 496 F.3d

1009, 1017 (9th Cir. 2007)). Specifically, the court analyzed the likelihood of

Hartford reexamining Lamuth’s date of disability and again denying her benefits:

While it is currently paying benefits, it has refused to agree to Dr. Lamuth’s proposed dismissal stipulations that include a determination that February 15, 2013 was her Date of Disability. Nor has Hartford pointed to any of its own proposed stipulations that would call for dismissal of the suit in exchange for a legally binding agreement that it will not again change its position with regard to Dr. Lamuth's Date of Disability. Indeed, even the letter Hartford sent to Dr. Lamuth's counsel informing him of its decision to award benefits did not expressly state that Hartford will use the February 15, 2013 Date of Disability going forward or otherwise promise that Hartford will not again revisit the issue; it merely explained that it had determined that


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Dr. Lamuth “is eligible for LTD benefits under the terms of The Policy” and reiterated that “Dr. Lamuth's LTD claim moving forward will be considered based on the merits.”

Id. at 1044-45.

This conclusion is consistent with those of other courts addressing similar

“about-face” changes of position prompted only by litigation and only equivocally

offered in out-of-court statements. Id.; see also Valliere v. Teamsters Local No.

264, No. C08–624, 2009 WL 2595663, *3 (W.D.N.Y. Aug. 20, 2009) (defendant’s

promise in a post-lawsuit letter not to change its position did not moot the

beneficiary’s claim for declaration of his rights nor did it “deprive the tribunal of

power to hear and determine the case” where “there exists some cognizable danger

of recurrent violation.”).

Here, Defendants changed the offending Harvoni medical policy with

perhaps the intended consequence of picking off the Plaintiffs’ claims for Harvoni

benefits. Defs.’ Mtn. to Dismiss, at 5. Plaintiff Homampour received authorization

for Harvoni on May 12, 2016. Id., at 6. Glaringly missing from Defendants’ moving

papers, however, is any mention of the status of Plaintiff Bartels’ or Plaintiff Naka’s

requests to receive Harvoni treatment.

Missing as well from Defendants’ motion is any recognition that its updated

Harvoni medical policy still restricts access to Harvoni. The medical policy still

contains unlawful and restrictive conditions for a significant swath of putative class

members with a fibrosis staging score of F0, in contravention of Defendants’ health

plans’ definitions of medical necessity.

In fact, one of the new requirements imposed by Defendants’ medical policy

is that Harvoni be prescribed for a Hepatitis C regimen that is “aligned with

nationally recognized treatment guidelines.” See Exhibit A, B to Dckt. 29-1, Decl.

of Jennifer Garrison. In doing so, Defendants are referring to the very same

American Association for the Study of Liver Diseases and Infectious Diseases

Society of America (AASLD/IDSA) guidelines which it ignored beginning on


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October 10, 2014, when Harvoni was approved by the United States Food and Drug

Administration, through the pendency of this lawsuit.

In September 2014, AASLD recommend antiviral treatment for all patients

with chronic Hepatitis C (CHC), but prioritized direct-acting antiviral-based CHC

treatment for certain subgroups, particularly those with advanced hepatic fibrosis or

cirrhosis.1 By October 2015, AASLD clarified its recommendation by removing

any insinuation of patient prioritization in its guidelines.2 The AASLD released a

position statement stating:

Our recent addition to the Guidance prepared by a committee of leading liver experts from AASLD and The Infectious Diseases Society of America (IDSA) proposed that the sickest patients be treated first, but all patients who receive advice from their doctor to take newest medications should not be denied. The decision across the board should be in the hands of the clinician and the patient to make the decision. Unfortunately payers across America are denying treatment when a doctor has prescribed it for their patient. We adamantly disagree with this decision.3

Here, Defendants have not demonstrated that Plaintiffs Bartels and Naka

have received Harvoni, nor do they show that members with a F0 liver fibrosis

staging score will be undeterred from receiving access to Harvoni. Furthermore,

Defendants have not demonstrated that they will cease their persistent efforts to

persuade their members to take the cheaper drug alternative, Viekira Pak. [cite

letters in record] As a result, Defendants cannot meet their burden to show

mootness as it relates to the named plaintiffs or the putative class members.

1 American Association for the Study of Liver Diseases/Infectious Diseases Society of America/International Antiviral Society- USA. Recommendations for testing, managing, and treating hepatitis C. Available from: http://www.hcvguidelines.org/. 2 American Association for the Study of Liver Diseases/InfectiousDiseases Society of America/International Antiviral Society-USA. Hepatitis C guidance underscores the importance of treating HCVinfection: panel recommends direct-acting drugs for nearly all patients with chronic hepatitis C. Available from: http://hcvguidelines.org/sites/default/files/when-and-in-whom-to-treat-press-release-october-2015.pdf. 3 See http://www.aasld.org/aasld-position-treating-patients-chronic-hcv (emphasis added).


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1. Plaintiff Naka and Bartels’ Claims Are Not Moot As They

Never Received Approval for Harvoni

Mr. Naka sought coverage for Harvoni treatment under a Blue Shield HMO

Plan. SAC, at ¶ 55. Blue Shield denied Mr. Naka’s prior authorization requests for

Harvoni. Id., at ¶ 56. After Plaintiff Naka was denied Harvoni treatment, he and his

treating provider, Dr. Sammy Saab, believed that the only way he would be

approved for any Hepatitis C drug treatment was to make a prior authorization

request for Viekira Pak. Decl. of Jon Naka, at ¶ 3. Mr. Naka was approved for

Viekira Pak as Blue Shield indicated in a letter to him on October 6, 2015 that

Viekira Pak met the drug coverage requirements as determined by the Blue Shield

Pharmacy & Therapeutics Committee. Id., at ¶ 2. Mr. Naka received authorizations

for Viekira Pak from October 18, 2015 to January 18, 2016. Id., at ¶ 4.

Any distinction between the coverage guidelines for Harvoni and Viekira Pak

was not based upon scientific evidence or medical considerations. SAC, at ¶ 124.

Rather, Defendants adopted and applied the Harvoni Medical Policy in a manner to

steer insureds toward a cheaper drug, Viekira Pak, which it procured at a reduced

price in comparison to Harvoni. Id., at ¶ 123.

Mr. Naka never received coverage for Harvoni. Decl. of Jon Naka, at ¶ 7.

Similarly, Plaintiff Bartels received unsolicited communications from Blue

Shield urging him to submit a prior authorization request for Viekira Pak. There

was no clinical or medical basis for these communications.

In mid-April 2016, a CVS Specialty Pharmacy representative contacted

Mr. Bartels to inform him that he had been approved for Viekira Pak. Decl. of John

Bartels at ¶ 5. This communication came just days after Blue Shield allegedly

updated its Harvoni medical policy and removed the requirement that a patient have

a specific contraindication to Viekira Pak and ribavirin therapy. Defs.’ Mtn. to

Dismiss, at 5. This communication also came less than a month before Blue Shield

purportedly sent notice letters to its current members and their providers whose


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requests for Harvoni had been previously denied because they had not demonstrated

a specific contraindication to Viekira Pak. Id.

The CVS representative indicated that Dr. Phoung Nguyen had approved

Viekira Pak for Mr. Bartels. At no point between Mr. Bartels December 2014

diagnosis of Hepatitis C to the present has he or his treating provider requested

Viekira Pak for his treatment. Decl. of John Bartels at ¶ 4. Dr. Troung informed

Mr. Bartels that he had no communication or connection with Dr. Nguyen. Id., at

¶ 7. The implication here would be that Defendants made an end run around Mr.

Bartels’ treating provider and encouraged Mr. Bartels to take Viekira Pak even

during the course of this lawsuit. Id. Plaintiff Bartels gave up on his efforts to

obtain coverage for Harvoni and instead resorted to taking Viekira Pak beginning

on May 7, 2016. Id., at ¶ 9.

On June 23, 2016, Mr. Bartels received a letter from Blue Shield informing

him that he had been denied for a third month of the Viekira Pak regimen on the

inexplicable ground that “[r]eauthorizations for Viekira Pak for the treatment of the

hepatitis C virus is only covered for patients that have responded to therapy as

evidenced by a documented undetectable hepatitis C viral load.” Id., at ¶ 12; See

Exhibit A to Decl. of John Bartels, Blue Shield June 23, 2016 Letter to Mr. Bartels

Denying Further Authorization for Viekira Pak.

Despite all of the efforts that have been made, Mr. Bartels has never received

authorization for Viekira Pak. Id., at ¶ 14.

2. Defendants’ Relied Upon Authorities Are Either

Distinguishable or Inapposite

As explained above, Defendants overlook the core principles and controlling

authorities regarding the issue of mootness. Defendants further ignore the fact that

even if the Court assumed that Plaintiffs’ (and the putative class members’)

§ 1132(a)(1)(B) claims have been satisified, Plaintiffs’ claims for clarification of


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future rights and for breach of fidicuiary duty under § 1132(a)(3) remain intact and

unresolved.

Defendants’ reliance on Silk v. Metro. Life Ins. Co., 310 Fed. App’x. 138

(9th Cir. 2009), actually supports denial of its Motion to Dismiss. In Silk, plaintiff’s

disability policy had two disability definitions, one that related to his “own

occupation” and the other relating to “any occupation.” After Silk filed suit,

MetLife paid the benefits to which he was entitled under the “own occupation”

standard. The district court, and later the Ninth Circuit, agreed that plaintiff’s claim

for “own occupation” LTD benefits was rendered moot. Silk v. Metro. Life Ins. Co.,

477 F. Supp. 2d 1088, 1092 (C.D. Cal. 2007), aff’d, 310 F. App’x 138 (9th Cir.

2009) (“In light of defendants’ approval of ‘own occupation’ LTD benefits and

submission of payment thereon, no triable issues of material fact remain as to

plaintiff’s causes of action based on ‘own occupation’ LTD benefits.”) However,

plaintiffs’ legal rights to challenge MetLife’s denial of “any occupation” LTD

benefits were left intact because he had not exhausted his ongoing administrative

remedies. Silk, 310 F. App’x at 139.

Similarly, here, the benefit claims of Plaintiff Bartels and Plaintiff Naka have

not been paid and, in addition, Plaintiffs have alleged that Defendants were unjustly

enriched by wrongfully withholding Harvoni drug benefits from insureds between

October 10, 2014 to the present. Defendants’ amendments to its Harvoni medical

policy still leave room to deny the claims of putative class members whose requests

for Harvoni are medically necessary, and do not resolve Plaintiffs’ § 1132(a)(3)

claims.

Defendants also rely upon this Court’s decision in Kirk v. Lockheed Martin

Grp. Benefits Plan No. 594, No. 15-cv-00842-WHO, 2015 WL 4638243, *1

(N.D. Cal. Aug. 4, 2015), for the same proposition that paying a benefit claim in the

ERISA context moots a plaintiff’s claims. However, that is not precisely what the

Court said in Kirk. Rather, the Court held that Kirk’s § 1132(a)(1)(B) claim was


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moot after Lockheed paid his disability benefits. However, the Court did not hold

that Kirk’s § 1132(a)(3) claim was moot, but rather was duplicative of his (a)(1)(B)

claim. Kirk, 2015 WL 6438243 at *4 (“To the extent that Kirk’s second claim

pleads a cause of action for equitable relief, it is not moot.”) Defendants ignore this

careful distinction regarding the mootness and legal merits of Kirk’s claims.

Here, Plaintiffs’ and the putative class members’ (a)(3) claims cannot be

considered moot because they are not duplicative of their (a)(1)(B) claims.

Additionally, Plaintiff Bartels’ and Plaintiff Naka’s (a)(1)(B) claims (as well as the

claims of many class plaintiffs) remain unsatisfied, and therefore neither their

(a)(1)(B) nor (a)(3) claims can be considered moot. Therefore, Kirk is

distinguishable.

Defendants’ reliance on Keir v. Unumprovident Corp. No. 02 CIV. 8781

(DLC), 2010 WL 356878 (S.D.N.Y. Sept. 14, 2010), is also misplaced, especially

when one compares Unum’s conduct to that of the Blue Shield Defendants. Defs.’

Mtn. to Dismiss, at 7. In Keir, the putative class alleged that Unum wrongfully

denied or terminated benefits pursuant to a scheme involving the use of budgets and

targets to meet financial expectations. 2010 WL 3566878, at *1. The Plaintiffs

sought injunctive and equitable relief.

In 2003, Unum’s motion to dismiss was denied and the case was transferred

by the Multi-District Litigation (MDL) Panel to the United States District Court for

the District of Tennessee for consolidation with six other lawsuits. On November

18, 2004, while the MDL proceedings were ongoing, Unum entered into a

Regulatory Settlement Agreement (the “RSA”) with the United States Department

of Labor (DOL). Id. at *2. The RSA required Unum to make significant changes to

its corporate governance and management. The RSA further required Unum to pay

a $15 million fine. The RSA also provided for a $100,000 per day fine in the event

that Unum failed to implement the changes to its corporate governance, claims


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reassessment process, claims organization and procedures, or if Unum failed to

conduct the required training within the time specified in the RSA.

On January 19, 2010, the MDL court granted in part, and otherwise declined

to rule on, Defendants’ motion for summary judgment on Plaintiffs’ remaining

individual claims. In re UnumProvident Corp. ERISA Benefits Denial Actions, No.

03 Civ. 1000, MDL No. 03 Md. 1552, 2010 WL 323191 (E.D.Tenn. Jan.19, 2010)

(the “January 2010 Opinion”). With respect to Plaintiffs’ ERISA § 502(a)(3) claim,

the MDL court concluded that “Plaintiffs’ claim for injunctive relief in the form of

court-supervised reformation of Defendants’ nationwide claim-handling procedures

has been rendered moot by the RSA.” Id. at *3. The MDL court found that the

RSA “requires and implements new practices and procedures to ensure Defendants

are compliant with ERISA” and “creates internal and external oversight mechanisms

to ensure these policies are created and implemented correctly.” Id. , at *4.

Here, Defendants’ amendments to the Harvoni medical policy were not made

in response to any regulatory action. Furthermore, they still fall short of removing

all barriers to Harvoni coverage. In fact, unless certain conditions are met, all

insureds diagnosed as F0 will still be denied access to Harvoni. In addition,

Defendants’ actions have done nothing to address the predicament of insureds who

received Viekira Pak in lieu of Harvoni, despite the presence of numerous side

effects associated with the consumption of Viekira Pak.

Defendants next rely on Chorosevic v. MetLife Choices, No. 4:05-cv-2394

CAS, 2009 WL 723352 (E.D. Mo. Mar. 17, 2009), in which the plaintiffs, on behalf

of a putative class, challenged the method by which MetLife calculated secondary

medical benefits under a benefit plan. After the lawsuit was filed, effective January

1, 2006, the plan was amended to change its method of coordinating secondary

benefits from a come-out-whole method, with a benefits reserve, to what the parties

referred to as a “non-duplication” method, without a benefit reserve. 2009 WL

723352 at *1. The court found that MetLife’s changes to the plan mooted


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plaintiff’s requests for prospective injunctive relief. Id. The plaintiffs’ secondary

benefits under the plan were no longer calculated using the come-out-whole method

of coordinating benefits, and plaintiffs did not further allege that MetLife continued

to miscalculate benefits under the new non-duplication method. Accordingly, the

court held that is the plantiffs were no longer under the threat of future injury that

could be remedied by the injunctions plaintiffs were seeking. Id.

Here, Plaintiffs’ claims for equitable relief under § 1132(a)(3) are still intact

and unresolved because Defendants’ policies do not foreclose the possibility of

continued unlawful benefit denials. Furthermore, no actions taken by Defendants to

this point can render moot the claims of putative class members who were forced to

take Viekira Pak in lieu of Harvoni, or who resigned themselves to no treatment due

to Defendants’ systematic and wrongful denials of their claims for Harvoni.

B. Blue Shield and Blue Shield Life Are Both Proper Defendants

Defendants argue that Blue Shield and Blue Shield Life are distinct entities.

Plaintiffs do not dispute this point. Defendants do not explicitly state, but appear to

imply, that Plaintiffs have no standing to sue Blue Shield Life because they were

not insured under any Blue Shield Life plans.

Defendants are incorrect. Plaintiffs have included Blue Shield Life as a

defendant in this lawsuit due to the tight-knit relationship between Blue Shield and

Blue Shield Life in the context of a corporation-wide practice of restricting access

to Harvoni. Plaintiffs’ allegations derive from the language found in the four

corners of Blue Shield’s internal coverage guidelines for Harvoni.

Plaintiffs have alleged that the Blue Shield Pharmacy and Therapeutics

Committee (“P&T Committee) develops prescription drug coverage guidelines for

the company, Blue Shield of California. SAC, at ¶ 91. These guidelines are

allegedly updated and reviewed to reflect current standards of practice. Id.

Following FDA approval of Harvoni for the treatment of Hepatitis C, the P&T


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Committee adopted a position of categorically denying Harvoni treatment to

individuals without fibrosis staging scores of F3 or F4. SAC, at ¶ 93.

However, as part of this centralized process, both Blue Shield and Blue

Shield Life chose AbbVie’s Viekira Pak as their formularies’ preferred drug for the

treatment of Hepatitis C. SAC, at ¶ 94. Blue Shield and Blue Shield Life adopted

and applied artificially restrictive internal clinical guidelines to restrict access to

Harvoni to all individuals with Hepatitis C who did not meet narrow, profit motive-

based clinical indications, as defined in the guidelines.

In addition, Blue Shield and Blue Shield Life pressured its insured members

who had requested Harvoni to instead seek authorization for Viekira Pak. SAC, at

¶ 122. Even during the course of these proceedings, Blue Shield sent letters to

Mr. Homampour and Mr. Bartels encouraging them to seek authorization for

Viekira Pak rather than Harvoni. Id.

In fact, in December 2015 and January 2016, Blue Shield sent

Mr. Homampour letters in which it claimed that he had submitted a request for an

expedited appeal of Blue Shield’s denial of Harvoni. SAC, at ¶ 28-35.

Mr. Homampour made no such request but Blue Shield inexplicably began this

action in order to unilaterally initiate an independent medical review by the

independent review organization called Advanced Medical Reviews (AMR). See

Exhibit E to SAC, Blue Shield’s January 11, 2016 Letter to Mr. Homampour

Regarding An Expedited Appeal Request.

On February 2, 2016, AMR sent Mr. Homampour its Peer Reviewer Final

Report in which it upheld Blue Shield’s decision to deny Harvoni in part on the

following rationale: “For non-cirrhosis patients, there is need for contraindication to

Viekira with ribavirin therapy that is not also expected with Harvoni including drug

interactions where affected drug therapy cannot be safely reduced or discontinued

due to risk of patient decompensation.” See Exhibit F to SAC, February 2, 2016

AMR Final Peer Reviewer Report.


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The AMR Report confirms that there was no clinical or medical basis for any

communications to Plaintiffs encouraging them to apply for Viekira Pak. Mr.

Homampour was specifically not prescribed Viekira Pak by his treating physicians

due to the medical complications and side effects he would experience if he was

treated with Viekira Pak. Id.

As Harvoni prices continued to fall over the course of 2015 and 2016, Blue

Shield and Blue Shield Life reaped profits from evading its responsibility to cover

medically necessary prescription drug treatment via two avenues: (1) pressuring its

insureds to request authorization for Viekira Pak, a cheaper and side-effect laden

alternative to Harvoni, and (2) continuing its categorical denials of Harvoni to

individuals with liver fibrosis staging scores of F0, F1 or F2 while market forces

continue to reduce the cost of Harvoni. SAC, at ¶ 125.

Although Blue Shield Life does not act as an ERISA fiduciary with respect to

the named Plaintiffs’ claims, Plaintiffs have standing to sue Blue Shield Life as a

defendant engaged in a common practice with Blue Shield, namely the application

and use of an unlawfully restrictive Harvoni medical policy to restrict access to

Harvoni. In the ERISA context, individual plaintiffs have been found to have

standing to sue other defendant health plans to challenge an unlawful common

practice even if they were not insureds or participants in the other plans.

In fact, the Supreme Court identifies the elements which are necessary to

establishing standing as it relates to a particular defendant. “[T]here must be a

causal connection between” the injury to the plaintiff “and the conduct complained

of – i.e., plaintiff’s alleged injury must be “traceable to defendants actions or

omissions.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). In Lujan,

the Court confirmed the three elements required by a plaintiff to establish an

“irreducible constitutional minimum of standing”: (1) an injury in fact;

(2) causation; and (3) redressability. 504 U.S. at 560-61.


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In Fallick v. Nationwide Mut. Ins. Co., 162 F.3d 410 (6th Cir. 1998), the

Sixth Circuit applied the Lujan criteria to an ERISA class action. Fallick was a

participant in a Nationwide employee medical benefit plan governed by ERISA.

Nationwide also acted as the administrator or provided medical benefits to other

ERISA-governed plans of which Fallick was not a member. Id. at 411. All of the

plans included an exclusion limiting medical coverage to reimbursement for

medical charges to a “reasonable and customary” rate. Id. Fallick alleged that all

of the plans improperly denied benefits by implementing a methodology for

computing reasonable and customary limitations that was at odds with the

provisions of the plan. Id. at 411-12.

The district court held that Fallick lacked standing with respect to other plans

administered or insured by Nationwide as to which Fallick was not a participant or

beneficiary. The Sixth Circuit disagreed, and reversed:

The district court’s analysis is fundamentally flawed in two important respects. First, conceptually, it confuses the issue of a plaintiff’s standing under Article III vis-a-vis a defendant with the relationship between a potential class representative and absent class members, which is governed by Rule 23 of the Federal Rules of Civil Procedure. See Goodman v. Lukens Steel Co., 777 F.2d 113 (3d Cir.1985), aff’d, 482 U.S. 656, 107 S.Ct. 2617, 96 L.Ed.2d 572 (1987); Cooper v. University of Texas at Dallas, 482 F.Supp. 187 (N.D.Tex.1979), aff’d, 648 F.2d 1039 (5th Cir.1981). Second, the district court overlooks several apposite decisions of courts both in this Circuit and others that hold that an individual in one ERISA benefit plan can represent a class of participants in numerous plans other than his own, if the gravamen of the plaintiff’s challenge is to the general practices which affect all of the plans. See Forbush v. J.C. Penney Co., Inc., 994 F.2d 1101 (5th Cir.1993); Misch v. Community Mut. Ins. Co., 1995 U.S. Dist. LEXIS 5059 (S.D.Ohio Feb. 15, 1995); Sutton v. Medical Serv. Assoc. of Pennsylvania, 1993 WL 273429 (E.D.Pa.1993); Doe I v. Guardian Life Ins. Co. of Am., 145 F.R.D. 466 (N.D.Ill.1992).

Id. at 422 (emphasis added).

The Sixth Circuit specifically rejected the contention that in order to establish

standing Fallick was required to allege an injury caused by each of the defendants,

or that the injuries was traceable to the acts or omissions of those defendants.

“Where, as here, the crux of an ERISA plaintiff’s complaint concerns the

methodology used to determine benefits, courts have recognized that the standing-


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related provisions of ERISA were not intended to limit a claimant’s right to proceed

under Rule 23 on behalf of all individuals affected by the challenged conduct,

regardless of the representative’s lack of participation in all the ERISA-governed

plans involved.” Id. at 423; see also Sutton, 1993 WL 273429, at *5 (“[T]he issue

in this action concerns only the manner in which a claim was processed once it was

received by Pennsylvania Blue Shield. The issue, thus, concerns whether

Defendants have violated their duties as fiduciaries under ERISA through the

formulation and implementation of the claims procedure which they have admitted

they have applied uniformly to the claims of the members of the class.”) (emphasis

added); id. (“[E]ach class member in this action alleges the same injury, which

injury each member of the class alleges arose from defendants’ method of response

to claims submitted to Pennsylvania Blue Shield.”) (emphasis added).

Federal courts within the Ninth Circuit have adopted the reasoning in Fallick.

For example, in Santomenno v. Transamerica Life Ins. Co., 310 F.R.D. 451

(C.D. Cal. 2015), reconsideration denied, motion to certify appeal granted,

No. CV1202782DDPMANX, 2016 WL 2851289 (C.D. Cal. May 13, 2016), the

court analyzed and rejected the argument that the named plaintiffs in an ERISA

class could not “adequately represent other class members because they were not all

participants in the same plans.”

To the extent that this is an argument about standing, the Court agrees with the analysis in Fallick v. Nationwide Mut. Ins. Co.: Threshold individual standing is a prerequisite for all actions, including class actions .... [H]owever, once an individual has alleged a distinct and palpable injury to himself he has standing to challenge a practice even if the injury is of a sort shared by a large class of possible litigants .... [O]nce a potential ERISA class representative establishes his individual standing to sue his own ERISA-governed plan, there is no additional constitutional standing requirement related to his suitability to represent the putative class of members of other plans to which he does not belong. 162 F.3d 410, 423 (6th Cir.1998).

310 F.R.D. at 463 (emphasis added); accord Ralston v. Mortgage Inv'rs Grp., Inc.,

No. 5:08-CV-00536-JF PSG, 2011 WL 4081696, at *3 (N.D. Cal. Sept. 12, 2011)


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(“Ralston alleges in detail how, as a result of this scheme, he was deceived into

obtaining an Option ARM loan that was certain to result in negative amortization.

Ralston’s injury would be redressed by a favorable decision on his claims. Ralston

thus has Article III standing to bring the instant lawsuit.”); Buus v. WAMU Pension

Plan, No. C07-0903 MJP, 2007 WL 4510311, at *5 (W.D. Wash. Dec. 18, 2007);

Davis v. Bailey, No. CIVA05CV00042 WYD-OES, 2005 WL 3527286, at *2-3

(D. Colo. Dec. 22, 2005); Alves v. Harvard Pilgrim Health Care, Inc., 204

F.Supp.2d 198, 205 (D. Mass. 2002); Payton v. County of Kane, 308 F.3d 673, 681-

82 (7th Cir. 2002) (finding standing valid where plaintiffs sought to represent a

class of persons subjected to allegedly unconstitutional bail fees in all Illinois

counties even though the named plaintiffs had contacts with only four counties),

cert. denied, 540 U.S. 812 (2003).

Cady v. Anthem Blue Cross Life & Health Ins. Co., 583 F. Supp. 2d 1102

(N.D. Cal. 2008), also supports Plaintiff’s position. The Cady court found that the

plaintiff did not have standing with respect to defendants where there was no

allegation of a financial or other relationship among those defendants. However,

the Court noted:

“[a] different conclusion might be warranted if, . . ., Defendants shared some relationship such that they should be treated as a single entity. For instance, Plaintiff might be able to proceed against Defendants other than Anthem if the decision not to cover [the] treatment was made as the result of a centralized process involving all Defendants, and operated to deny . . . coverage to all members of Defendants’ plans. However, even though most of Defendants’ names are based on some variation of “Blue Cross” and “Blue Shield,” the complaint does not identify any relationship among them. Nor does the complaint allege any relationship between the denial of Plaintiff’s claim for . . .coverage and the denial of claims for…coverage by other Defendants.

Id. (emphasis added).

Here, on the contrary, Plaintiffs have specifically identified a common

scheme or practice adopted by Blue Shield and Blue Shield Life whereby they

restricted Harvoni coverage based upon unlawful coverage restrictions contained


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within their identical internal Harvoni medical policies. Thus, for the purposes of

this action, Blue Shield Life is a proper defendant and both Defendants should be

treated as a single entity.

C. Plaintiffs Have Properly Pleaded That They Are Entitled to

Disgorgement of Profits Under ERISA § 1132(a)(3)

Defendants contend that a footnote in the recent Supreme Court case of

Montanile v. Board of Trustees of the Nat’l Elevator Industry Health Benefit Plan,

136 S. Ct. 651 (Jan. 20, 2016), has affirmatively determined “that monetary relief

under Section 1132(a)(3) is extraordinarily limited.” Defs.’ Mtn. to Dismiss, at 10.

This contention misinterprets Montanile. In fact, Montanile’s footnote 3 does not

offer any new perspective or position on the issue of what constitutes appropriate

equitable relief. The Supreme Court has already addressed the issue of

disgorgement of profits as appropriate equitable relief as dicta in the earlier case of

Cigna Corp. v. Amara, 563 U.S. 421 (2011). In Amara, the Supreme Court did not

attempt to dictate what the lower courts must or could consider as appropriate

equitable relief, but merely offered persuasive guidance. Federal courts have

followed and applied Amara when reviewing disgorgement of profits as a form of

equitable relief. On May 20, 2016, the Ninth Circuit, stated:

The [Amara] Court…held that plan reformation was available under § 1132(a)(3) as an equitable remedy, stating that the power to reform contracts is a traditional power of an equity court. Id. at 1879–80. Therefore, once the plan was reformed under § 1132(a)(3) to reflect the terms of the old plan, it could be enforced under § 1132(a)(1)(B). The fact that this relief takes a monetary form does not remove it from the category of equitable relief.

Moyle v. Liberty Mut. Ret. Ben. Plan, No. 13-56330, 2016 WL 2946271, at *9

(9th Cir. May 20, 2016) (emphasis added). In doing so, the Ninth Circuit relied on

Amara’s statement that “[e]quity courts possessed the power to provide relief in the

form of monetary ’compensation‘ for a loss resulting from a trustee’s breach of

duty, or to prevent the trustee’s unjust enrichment . . . In sum, contrary to the

District Court’s fears, the types of remedies the court entered here fall within the


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scope of the term ’appropriate equitable relief‘ in § 502(a)(3).” 563 U.S. at 441-42.

The Eighth Circuit is in agreement: “Indeed, prior to the merger of law and

equity this kind of monetary remedy against a trustee, sometimes called a

’surcharge,’ was ’exclusively equitable.’” Silva v. Metro. Life Ins. Co., 762 F.3d

711, 722 (8th Cir. 2014).

Thus, contrary to Defendants’ suggestion, the Supreme Court has not

frowned on surcharge as an equitable remedy under section 1132(a)(3). The Second

Circuit has best summed up the circuit courts’ various positions on appropriate

equitable relief:

We add that where, as here, a plan participant brings suit against a “plan fiduciary (whom ERISA typically treats as a trustee)” for breach of fiduciary duty relating to the terms of a plan, any resulting injunction coupled with “surcharge”—“monetary ‘compensation’ for a loss resulting from a [fiduciary’s] breach of duty, or to prevent the [fiduciary's] unjust enrichment”—constitutes equitable relief under § 502(a)(3). CIGNA Corp. v. Amara, 563 U.S. 421, 131 S.Ct. 1866, 1879–80, 179 L.Ed.2d 843 (2011). Every sister circuit that has considered the issue is in accord. See Gabriel v. Alaska Elec. Pension Fund, 773 F.3d 945, 963 (9th Cir.2014); Silva v. Metro. Life Ins. Co., 762 F.3d 711, 724–25 (8th Cir.2014); Kenseth v. Dean Health Plan, Inc., 722 F.3d 869, 882 (7th Cir.2013); Gearlds v. Entergy Servs., Inc., 709 F.3d 448, 452 (5th Cir.2013); McCravy v. Metro. Life Ins. Co., 690 F.3d 176, 181–82 (4th Cir.2012). And so we hold that to the extent Denbo seeks redress for United’s past breaches of fiduciary duty or seeks to enjoin United from committing future breaches, the relief sought would count as “equitable relief” under § 502(a)(3).

New York State Psychiatric Ass’n, Inc. v. UnitedHealth Grp., 798 F.3d 125, 134-35

(2d Cir. 2015) (emphasis added).This robust case law supercedes Defendants’

reliance on Sheet Metal Workers Pension Trust of Northern Cal. v. Trayer

Engineer Corp., 2016 WL 1745676 (N.D. Cal. May 3, 2016), and the other two

pre-Amara cases Defendants cite.

Furthermore, the Ninth Circuit has clearly held that it is premature to

determine whether requested equitable relief is an appropriate or viable claim at this

stage of litigation. Plaintiffs counter any implication by Defendants that they may

not simultaneously seeks remedies under both 29 U.S.C § 1132(a)(1)(B) and (a)(3).

In fact, Moyle affirms the position that plaintiffs are permitted to present


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§ 1132(a)(1)(B) and § 1132(a)(3) as alternative—rather than duplicative—theories

of liability. The Court held in pertinent part that “[t]his approach is an accurate

application of Amara …because it allows plaintiffs to plead alternate theories of

relief without obtaining double recoveries.” Moyle, 2016 WL 2946271 at *10.

Here, Count II seeks distinct remedies and will be especially important to

those putative class members who may not have been able to receive coverage for

Harvoni. These members may not have a 29 U.S.C. § 1132(a)(1)(B) claim, but

would be entitled to the following equitable remedies that could be awarded under

29 U.S.C. § 1132(a)(3):

Reconsideration by Defendants of all claims for Harvoni treatment

(Prayer, ¶ 2);

Disgorgement of all profits unjustly retained by Defendants as the

result of its wrongful denials of authorizations or delaying of

authorization for Harvoni treatment (Prayer, ¶ 4);

See Englert v. Prudential Ins. Co., 2016 WL 2770526 (N.D. Cal. 2016) (denying

defendant’s motion to dismiss plaintiff’s request for disgorgement of profits,

surcharge and other make-whole relief under 29 U.S.C. § 1132(a)(3), finding that

this request was not duplicative of his 29 U.S.C. § 1132(a)(1)(B) claim); Mullin v.

Scottsdale Healthcare Corp. Long Term Disability Plan, 2016 WL 107838 (D.

Ariz. 2016) (denying defendant’s motion to dismiss plaintiff’s request for surcharge

under 29 U.S.C. § 1132(a)(3), finding that this request was not duplicative of his

29 U.S.C. § 1132(a)(1)(B) claim).

Under Amara and Moyle, Plaintiff’s requests for equitable relief under

29 U.S.C. § 1132(a)(3) are proper. At the very least, it would be premature for the

Court to grant Defendants’ Motion to Dismiss as to Count II at this time because “it

is not clear at the motion-to-dismiss stage of the litigation that monetary benefits

under § 502(a)(1)(B) alone will provide [Plaintiffs] a sufficient remedy.”

UnitedHealth Group, 798 F.3d at 134.


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IV. CONCLUSION

Under the liberal pleading rules governing motions to dismiss, Defendants

have not met their burden. Defendants’ motion should be dismissed in its entirety,

and this action should proceed against both named Defendants.

Dated: July 13, 2016 KANTOR & KANTOR LLP

By: /s/ Glenn R. Kantor

Glenn R. Kantor Timothy J. Rozelle Attorneys for Plaintiff ARAM HOMAMPOUR, JOHN BARTELS and JON NAKA on behalf of themselves and all others similarly situated


homampour - 16-07-13 - opposition to mtd re …files.courthousenews.com/2016/08/11/harvoni dismiss...

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