1. Case Name: Devito et al. v. Aetna, Inc. et al., United States District Court for the District of New Jersey, February 25, 2008. 536 F. Supp. 2d 523

2. Lawyers:

  • Counsel for Plaintiff: Bruce Heller Nagel, Randee M. Matloff, Nagel Rice, LLP
  • Counsel for Defendant:
    • Edward S. Wardell, Kelley, Wardell, Craig, Annin & Baxter, LLP
    • Liza M. Walsh, Michael Xavier McBride
    • Tricia B. O’Reilly, Patricia A. Lee, Connell Foley, LLP

3. Format: Published order and opinion

4. Outline:

  • Type of Treatment Services Denied: Plaintiffs DeVito and Meiskin have daughters who suffer from eating disorders. Plaintiff Meiskin’s daughter’s coverage was cut off when it exceeded the contractual limitations for coverage of non-biologically based mental illness.
  • ERISA Claim? Yes, Plaintiffs argue Defendant breached their contracts in violation of ERISA.
  • Class Action/or Individual Action: Class action
  • Defendant: Defendant Aetna insures both Plaintiffs.
  • Type of Insurance Plan: It is unclear whether the type of plan is large or small group, or individual.
  • Type of Coverage Denial: Both. Plaintiff Meiskin had coverage terminated after hitting the contractual limitation, an administrative denial. Plaintiff DeVito had coverage denied on at least one occasion as not medically necessary.
  • Causes of Action: Plaintiffs challenge Defendant’s handing of their benefit claims under the contractual terms of their insurance policies. Count 1 alleges that Defendant breached its contract and Count 2 alleges that Defendant’s failure to provide coverage pertaining to eating disorders that Defendant also breached their contracts with plaintiffs and the class in violation of ERISA.

5. Legal Pointer: The two Plaintiffs are suing their insurance company, Aetna, for failing to cover treatment for an eating disorder. Defendant Aetna includes the same clause for coverage of Biologically-Based Mental Illnesses and both of Plaintiffs’ policies include the same definition of Non-Biologically-Based Illness. The Plaintiffs argue that by failing to cover an eating disorder based upon the Defendant classifying it as a non-biologically-based mental illness that the Defendants have breached their contractual duties in violation of ERISA. The Plaintiffs do not challenge whether the limitation violates New Jersey’s Parity Law.

6. Legal Issues and Causes of Action: The Plaintiffs argue that Defendant’s failure to provide coverage for eating disorders, based upon Defendant’s classification of eating disorders as a non-biologically-based mental illness, violates their contract with Plaintiffs in violation of ERISA. Defendants argue that the Court should abstain from considering Plaintiff’s claims based upon the holding in Burford. Additionally, Defendants argue that Plaintiff’s claims under the New Jersey Parity Law should be dismissed as preempted for ERISA. Defendants also argue that the claims should be dismissed based upon Plaintiff’s failure to exhaust their administrative remedies and for failure to state a claim upon which relief can be granted.

  • Ruling: The Defendant’s motion to dismiss was granted as to the Parity Law claim and the punitive damages claim but otherwise denied.

7. Narrative Case Description: The two Plaintiffs are parents of two children suffering from an eating disorder. Both Plaintiffs are insured by Defendant Aetna. Aetna classified eating disorders as non-biologically-based mental illness and limits coverage to 20 outpatient visits for calendar year and up to 30 days of inpatient visits. Neither Plaintiff exhausted their administrative appeals.

Defendants argue that the Court should abstain from considering Plaintiff’s claims based upon the holding in Burford. Additionally, Defendants argue that Plaintiff’s claims under the New Jersey Parity Law should be dismissed as preempted for ERISA. Defendants also argue that the claims should be dismissed based upon Plaintiff’s failure to exhaust their administrative remedies and for failure to state a claim upon which relief can be granted.

In considering the Burford abstention argument, the Court finds this argument unpersuasive. Under Burford, the Court considers whether timely and adequate state-court review is available, whether the “particular regulatory scheme involves a matter of substantial public concern,” whether “it is the sort of complex, technical regulatory scheme to which the Burford abstention doctrine is typically applied, and whether federal review of a party’s claims would interfere with the state’s efforts to establish and maintain a coherent regulatory policy.” The Court finds that the case before it asks whether an insurer’s denials of coverage were arbitrary and capricious and that abstention is not appropriate.

Defendants also argue that Plaintiffs state law claims are preempted under ERISA § 502(a) and §514(a). The Court notes that Plaintiffs appear to allege a private right of action under the NJ Parity Act. In finding that the claims are, in fact, preempted by ERISA, the Court states that the savings clause does not preclude preemption and that because Plaintiffs could have brought their claim under ERISA and there is no other independent legal duty implicated by the Defendants actions that the claims are properly preempted.

The Court also considers Defendant’s arguments that the Plaintiffs’ claims should be preempted based upon their failure to exhaust internal grievance procedures. However, Plaintiffs argue that appealing through the internal grievance process would be futile as the process is controlled by Defendants and designed to implement their corporate policy. The Court finds this argument persuasive and does not grant the motion to dismiss on this ground.

Finally, the Court considers whether to dismiss the Plaintiffs claims for breach of fiduciary duty. Defendants argue that this claim is duplicative of their ERISA §502(a)(1)(B). However, the Court finds the holding in Varity Corp persuasive. In Varity Corp., the court held that a plaintiff may pursue claims for benefits under §502(a)(1)(B) and §502(a)(3) and that dismissal at the motion to dismiss stage is not always proper. In other words, there is no bright line rule that these claims must be dismissed at the motion to dismiss stage. Thus, the Plaintiffs here may move forward under both claims, however the Court notes that the motion to dismiss may be renewed by Defendants at the motion for summary judgment phase.

8. Additional Comments: None

9.Websitehttp://www.leagle.com/decision/20081059536FSupp2d523_11008/DeVITO%20v.%20AETNA,%20INC.

10. Practical Implications and Lessons Learned: In this case, Plaintiffs challenged the denial of benefits under the contractual terms rather than as a violation of the NJ Parity Law. It may be beneficial to proceed under both the contractual terms and allege a violation of the Parity Law.

11. All Legal Theories Presented in Case: Violation of contractual terms, violation of ERISA.

12. Successful Legal Theories in Case: Defendant successfully argued that the Plaintiffs claims were preempted by ERISA

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