United States District Court, C.D. California
LUIS ESCALANTE, on behalf of himself and all others similarly situated, Plaintiff,
CALIFORNIA PHYSICIANS' SERVICE dba BLUE SHIELD OF CALIFORNIA, Defendants.
ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY
JUDGMENT IN PART AND DENYING MOTION IN PART
D. PREGERSON United States District Judge.
described in this court’s earlier Orders, Plaintiff
Luis Escalante (“Plaintiff”) was covered by a
group health insurance policy issued by Defendant Blue Shield
of California (“Defendant” or “Blue
Shield”). (Decl. Michael C. Godino, Ex. 1 at 2.)
Plaintiff alleges that he suffers from degenerative disc
disease (“DDD”) and that his doctor recommended
he undergo artificial disc replacement (“ADR”)
surgery instead of a more traditional lumbar fusion. (Compl.
at ¶ 16-17.) Plaintiff requested authorization from Blue
Shield to undergo ADR surgery, but Blue Shield denied
Plaintiff’s request after finding ADR surgery was
excluded from coverage as investigational because “the
efficacy of [ADR] has not been validated by the peer reviewed
literature.” (Decl. Godino, Ex. 28 at 484.) Plaintiff
appealed the decision to both Blue Shield and the California
Department of Managed Health Care, and was again denied.
(Id., Ex. 30 at 494.) Plaintiff brought suit, on
behalf of a now certified class, challenging Blue
Shield’s ADR policy under the Employee Retirement
Security Act of 1974 (“ERISA”). Blue Shield now
moves for summary judgment.
judgment is appropriate where the pleadings, depositions,
answers to interrogatories, and admissions on file, together
with the affidavits, if any, show “that there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a). A party seeking summary judgment bears the initial
burden of informing the court of the basis for its motion and
of identifying those portions of the pleadings and discovery
responses that demonstrate the absence of a genuine issue of
material fact. See Celotex Corp. v. Catrett, 477
U.S. 317, 323 (1986). All reasonable inferences from the
evidence must be drawn in favor of the nonmoving party.
See Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
242 (1986). If the moving party does not bear the burden of
proof at trial, it is entitled to summary judgment if it can
demonstrate that “there is an absence of evidence to
support the nonmoving party's case."
Celotex, 477 U.S. at 323.
the moving party meets its burden, the burden shifts to the
nonmoving party opposing the motion, who must "set forth
specific facts showing that there is a genuine issue for
trial." Anderson, 477 U.S. at 256. Summary
judgment is warranted if a party "fails to make a
showing sufficient to establish the existence of an element
essential to that party's case, and on which that party
will bear the burden of proof at trial."
Celotex, 477 U.S. at 322. A genuine issue exists if
"the evidence is such that a reasonable jury could
return a verdict for the nonmoving party, " and material
facts are those "that might affect the outcome of the
suit under the governing law." Anderson, 477
U.S. at 248. There is no genuine issue of fact "[w]here
the record taken as a whole could not lead a rational trier
of fact to find for the nonmoving party." Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
not the court's task "to scour the record in search
of a genuine issue of triable fact." Keenan v.
Allan, 91 F.3d 1275, 1278 (9th Cir.1996). Counsel has an
obligation to lay out their support clearly. Carmen v.
San Francisco Sch. Dist., 237 F.3d 1026, 1031 (9th
Cir.2001). The court "need not examine the entire file
for evidence establishing a genuine issue of fact, where the
evidence is not set forth in the opposition papers with
adequate references so that it could conveniently be
Standard of Review
is no dispute that the plan at issue here is governed by the
Employee Retirement Security Act of 1974 ("ERISA").
ERISA “permits a person denied benefits under an
employee benefit plan to challenge that denial in federal
court.” 29 U.S.C.A. § 1132(a)(1)(B);
Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105
(2008). “In determining the appropriate standard of
review for actions under [ERISA], we are guided by principles
of trust law.” Firestone Tire & Rubber Co. v.
Bruch, 489 U.S. 101, 115 (1989). Courts should
“analogize a plan administrator to the trustee of a
common-law trust” and “consider a benefit
determination to be a fiduciary act (i.e., an act in which
the administrator owes a special duty of loyalty to the plan
beneficiaries).” Metropolitan Life Ins. Co. v.
Glenn, 554 U.S. 105, 111 (2008).
of trust law require courts to review a denial of plan
benefits ‘under a de novo standard’
unless the plan provides to the contrary, ” in which
case a more deferential standard of review is appropriate.
Id. at 111 (quoting Firestone, 489 U.S. at
115). Therefore, the “starting point” in
determining the applicable standard of review is whether the
terms of the ERISA plan “unambiguously grant discretion
to the administrator.” Abatie v. Alta Health &
Life Ins. Co., 458 F.3d 955, 962-63 (9th Cir. 2006).
When the plan does not confer discretionary authority to the
plan administrator to determine benefit eligibility or
interpret the terms of the plan, a court must review the
denial of benefits de novo (the default standard of review).
Id. at 963; see Metropolitan Life Ins. Co.,
554 U.S. at 111. “But if the plan does confer
discretionary authority as a matter of contractual agreement,
then the standard of review shifts to abuse of
discretion.” Abatie, 458 F.3d at 963.
the plan “Contract” is defined as the contract
between Blue Shield and Plaintiff’s employer, Provident
Health. (Decl. Godino, Ex. 1 at 6, 8; see generally decl.
Leslie Crawford, Ex. 3 at 17.) That contract expressly
incorporates the plan's Evidences of Coverage
(“EOC”). (Decl. Crawford, Ex. 3 at 21.) The
“Plan Interpretation” section of Plaintiff's
plan's EOC provides that “Blue Shield shall have
the power and discretionary authority to construe and
interpret the provisions of the contract, to determine the
benefits of the Contract, and determine eligibility to
receive Benefits under the Contract.” (Decl. Godino,
Ex. 1 at 5.) All of the class members’ EOCs include
this provision. (Id.; Decl. Joan Russo, Ex. 4 ¶
alleges that the Summary Plan Description (“SDP”)
contradicts the “Plan Interpretation” section of
the EOC by designating Plaintiff’s employer, not Blue
Shield, as the “Plan Administrator” with sole
fiduciary discretionary authority over the plan. (Opp. at
14:19-24; decl. Luis Escalante, Ex. 1 at 11.) At the same
time, however, the SDP’s “Welfare Plan
Information” section states that Blue Shield has
discretionary authority over all Health Maintenance
Organization medical plans in California, such as
Plaintiff’s. The section provides:
Blue Shield of California is the named claims fiduciary for
the Health Maintenance Organization medical plans in
California, as defined in ERISA. Blue Shield . . . has
discretionary authority to make decisions on claim appeals
and to interpret the terms of the Health Maintenance plans.
(Supp’l. Decl. Godino, Ex. 34 at 546.)
the SDP, upon which Plaintiff relies, itself provides that
“[i]f any conflicts arise between this summary and the
Plan documents and contracts, the Plan documents and contract
as interpreted by the Plan Administrator and
fiduciaries will govern.” (Decl. Escalante, Ex. 1 at 10
(emphasis in original).) “Plan documents and
contract” refers to the contract between
Plaintiff’s employer and Blue Shield. That contract
expressly incorporates the EOC, which identifies Blue Shield,
by name, as having the discretionary authority to interpret
the contract and make benefits determinations. Accordingly,
this court will review Blue Shield’s denial of benefits
for abuse of discretion.
Scope of Review and Level of Skepticism
Shield argues that this court should review Blue
Shield’s coverage decision for abuse of discretion,
tempered by a low degree of skepticism or no skepticism at
all. The manner in which a court applies the abuse of
discretion standard of review depends on whether the plan
administrator is operating under a conflict of interest.
Montour v. Hartford Life & Accident Ins. Co.,
588 F.3d 623, 629 (9th Cir. 2009). Where there is no
conflict, “judicial review of a plan
administrator’s benefits determination involves a
straightforward application of the abuse of discretion
standard” and the plan administrator’s decision
can be upheld if it is “grounded on any reasonable
basis.” Id. at 629. “In other words,
where there is no risk of bias on the part of the
administrator, the existence of a ‘single persuasive
medical opinion’ supporting the administrator’s
decisions can be sufficient to affirm, so long as the
administrator does not construe the language of the plan
unreasonably or render its decision without
explanation.” Id. at 629-30 (quoting Boyd
v. Bert Bell/Pete Rozelle NFL Players Ret. Plan, 410
F.3d 1173, 1179 (9th Cir. 2005)); see Conkright v.
Frommert, 559 U.S. 506, 130 (2010).
however, the plan administrator operates under a conflict of
interest, the abuse of discretion standard “requires a
more complex analysis, ” in which the reviewing court
must weigh the conflict as one factor in determining whether
there was an abuse of discretion. Id. at 629-630,
632. An insurer that acts as both the plan administrator and
the funding source for benefits operates under a structural
conflict of interest. Abatie, 458 F.3d at 965
(citing Tremain v. Bell Indus. Inc., 196 F.3d 970,
976 (9th Cir. 1999)). A structural conflict of interest
exists because, where the plan administrator is also the
insurer, “benefits are paid out of the
administrator’s own pocket, so by denying benefits, the
administrator retains money for itself.”
Montour, 588 F.3d at 630. Blue Shield acknowledges
that a structural conflict of interest exists here.
conflict exists, abuse of discretion review must be informed
by the nature, extent and effect the conflict has on the
decision-making process, discounting the deference given to
the plan administrator’s decision accordingly.
Abatie, 458 F.3d at 967; Salomaa v. Honda Long
Term Disability Plan, 642 F.3d 666, 674 (9th Cir. 2011).
This review requires “a case-by-case balance, ”
in which “[a] district court, when faced with all the
facts and circumstances, must decide . . . how much or how
little to credit the plan ...