1. Case Name: N.Y. State Psychiatric Ass’n, Inc. v. Unitedhealth Grp., United States Court of Appeals, Second Circuit

 2. Type of Treatment Services Denied: Not provided.

 3. Lawyers:

  • Plaintiff: D. Brian Hufford, Jason S. Cowart, Conor B. O’Croinin, Zuckerman Spaeder, LLP; Meiram Bendat, Psych-Appeal, Inc.; Anthony F. Maul, The Maul Firm
  • Defendant: Catherine E. Stetson, Mary Helen Wimberly, Hogan Lovells U.S. LLP; Richard H. Silberberg, Steven P. Lucke, Andrew Holly, Dorsey & Whitney, LLP

 4. Format: Second Circuit Appellate Decision

 5. Outline:

  • ERISA Claim? Yes
  • Class Action or Individual Action? Class Action
  • Defendant? Insurer or subsidiary
  • Type of Insurance Plan? Employer sponsored health plan and one non-ERISA plan offered by the State of New York
  • Type of Coverage Denial? Not provided

 6. Legal Pointer: None.

 7. Legal Issues and Causes of Action: Plaintiffs sued UnitedHealth Group, UHC Insurance Company, United Healthcare Insurance Company of New York, and United Behavioral Health (collectively, “United”), claiming that United had violated its fiduciary duties under ERISA, the terms of ERISA-governed health insurance plans administered by United, and the Mental Health Parity and Addiction Equity Act of 2008 (the Parity Act), which requires group health plans and health insurance issuers to ensure that the financial requirements (deductibles, copays, etc.) and treatment limitations applied to mental health benefits be no more restrictive than the predominant financial requirements and treatment limitations applied to substantially all medical and surgical benefits covered by the plan or insurance NYSPA also brought three additional counts under New York State law.

  • Ruling: United moved to dismiss the amended complaint, arguing that NYSPA did not have associational standing to sue on behalf of its members, that United could not be sued under § 502(a)(3) for alleged violations of the Parity Act or under § 502(a)(1)(B), and that in any event it would not be “appropriate” for the plaintiffs to obtain relief under § 502(a)(3) if § 502(a)(1)(B) offered an adequate remedy. The United States District Court for the Southern District of New York granted United’s motion to dismiss. The Appellate Court concluded that NYSPA had standing and that Denbo’s claims, but not Dr. Menolascino’s claims, should be permitted to proceed. As such, the lower court’s decision was affirmed in part and vacated and remanded in part.

 8. Narrative Case Description: Please see N.Y. State Psychiatric Ass’n, Inc. v. Unitedhealth Grp (2013) for background on the lower court’s holding.

NYSPA’s Standing

An association has standing to bring suit on behalf of its members when (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization’s purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit. NYSPA alleges, and there is no serious dispute on appeal, that its members have standing to sue United in their own right, both as assignees of ERISA benefits and to prevent interference with their provision of mental health treatment. There is also no serious dispute that this action implicates interests germane to NYSPA’s purpose. The parties dispute only whether at the motion to dismiss stage NYSPA has plausibly alleged that its claims do not require individualized proof. It has. NYSPA challenges United’s systemic policies and practices insofar as they violate ERISA and the Parity Act, and it seeks only injunctive and declaratory relief. At this stage in the litigation, it remains plausible that the participation of a limited number of NYSPA members will allow NYSPA to prove that United’s practices violate the relevant statutes.

Denbo’s Claims

Denbo claims that United breached the terms of the CBS Plan and violated its fiduciary duty to Denbo by, first, applying preauthorization and concurrent review policies to mental health claims but not to medical claims, and, second, determining the medical necessity of mental health care using guidelines that were more restrictive than those used by either the mental health community or United when it determined the medical necessity of medical claims.

The only question as to these claims is whether United may be held liable in its capacity as an ERISA claims administrator. The Court ultimately rejected United’s argument that it cannot be sued under in its capacity as a claims administrator. When a claims administrator exercises total control over claims for benefits under the terms of the plan, that administrator is a logical defendant in the type of suit contemplated by § 502(a)(1)(B). Here, United appeared to have exercised total control over the CBS Plan’s benefits denial process. It enjoyed “sole and absolute discretion” to deny benefits and make “final and binding” decisions as to appeals of those denials. And assuming that United’s actions violated Denbo’s rights under ERISA, United is the only entity capable of providing direct relief to Denbo. The Court therefore held that where the claims administrator has “sole and absolute discretion” to deny benefits and makes “final and binding” decisions as to appeals of those denials, the claims administrator exercises total control over claims for benefits and is an appropriate defendant in a § 502(a)(1)(B) action for benefits.

United also argued that it cannot be held liable under § 502(a)(3) for violations of the Parity Act because it is the claims administrator of a self-funded plan. United argued that the Parity Act does not apply directly to it, because it is not a “group health plan” and did not offer health insurance coverage to Denbo. Denbo responded that United’s Parity Act obligation is imposed on it not by the Parity Act itself, but rather by § 502(a)(3). § 502(a)(3) may impose a fiduciary duty arising indirectly from the Parity Act even if the Parity Act does not directly impose such a duty. For that reason, the Court held that United was a proper defendant for Denbo’s Parity Act claim under § 502(a)(3). For these reasons, The Court vacated the District Court’s dismissal of Denbo’s claims and remanded it to the lower court.

 9. Additional Comments: The Court affirmed the District Court’s dismissal of Dr. Menolascino’s claims because the amended complaint’s allegations relating to those claims fail to satisfy the Twombly pleading standard. In particular, the amended complaint fails to specifically allege how United treated evaluation and management services for medical/surgical care, fails plausibly to allege that United’s treatment of such services for mental health care violated the Parity Act, fails to identify her patients’ plans of the terms of their plans, and fails to allege facts making it plausible that United reduced or denied benefits for medically necessary services without any basis under the terms of those plans.

 10. Website: https://caselaw.findlaw.com/us-2nd-circuit/1711078.html

 11. Practical Implications and Lessons Learned: The lower court’s strict construction of ERISA was found to be improper by the Appellate Court

 12. All Legal Theories Presented in Case: Violation of ERISA and Federal Parity Law

 13. Successful Legal Theories in Case: All (except for Plaintiff Menolascino’s claims)



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