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Wit v. United Behavioral Health

United States District Court, N.D. California

March 9, 2017

DAVID WIT, et al., Plaintiffs,


          JOSEPH C. SPERO Chief Magistrate Judge


         On September 19, 2016, the Court granted Plaintiffs' Motion for Class Certification in these related cases, [1] certifying two classes in the Wit case and one in Alexander. Subsequently, the Court denied Defendant UBH's request to reconsider its order or to certify the order for interlocutory review. On October 26, 2016, UBH filed with the Ninth Circuit Court of Appeals a petition for leave to appeal pursuant to Rule 23(f) of the Federal Rules of Civil Procedure (“the Rule 23(f) Petition”). The Ninth Circuit denied the Rule 23(f) Petition on March 2, 2017. Presently before the Court is the parties' Joint Motion for Approval of Notice Plan and to Amend Class Definitions (“Motion”). A hearing on the Motion was held on February 3, 2017 at 9:30 a.m. and the parties submitted supplemental briefs following the hearing.[2]


         A. The Motion

         The parties have agreed to a Notice Plan that provides for notice to be mailed to each class member. Motion at 2 & Ex. A (Notice Plan). Under that plan, notices are to be mailed by June 16, 2017 and the deadline to opt out is July 27, 2017 (40 days after the notices are mailed and one day before the current dispositive motions date). The Notice Plan provides that no new class members will be added after June 1, 2017 and the parties have stipulated to amend the class definitions consistent with that limitation. Therefore, the Court GRANTS the motion to amend the class definitions. The parties disagree as to the form of notice, however. See Motion Exs. B-D (Plaintiffs' proposed notices) & Exs. E-G (UBH's proposed notices).

         There are three primary disputes. First, UBH has added the words “was owed benefits” to Paragraph 2(a), summarizing Plaintiffs' claims. See Motion, Exs. H-J (redline versions of notices). Plaintiffs contend these words improperly suggest that they must prove that each class member was owed benefits. Conversely, UBH contends this language accurately conveys the nature of Plaintiffs' claims, which “require a showing that UBH's conduct caused absent class members actual harm by denying them benefits to which they were otherwise entitled.” Motion at 6-7, 9.

         Second, Plaintiffs assert UBH's proposed notices are complicated and confusing to the extent that they attempt to draw “claim-by-claim” and “remedy-by-remedy” distinctions in Paragraph 2(a). Motion at 7. In addition, Plaintiffs assert, UBH mistakenly states that the surcharge remedy is sought only as to Claim One when in fact, it is sought as to both Claim One and Claim Two.[3] UBH argues that under Rule 23(b)(3), it is important to “clarify” the remedies Plaintiffs are seeking for each alleged wrong so that class members will have enough information to make an informed decision as to whether to opt out or remain in the class. Id. at 9-10.

         Finally, Plaintiffs object to language proposed by Defendants addressing the practical and preclusive effects of both remaining in the class and opting out. Plaintiffs particularly object to proposed language at the end of Paragraph 2(a) stating that if UBH is ordered to reprocess Plaintiffs' denied claims it might also revisit claims that were previously approved and reduce benefits on those claims. Plaintiffs contend it is improper to give notice of this possibility when it has not been addressed or approved by the Court. Furthermore, they assert, the notice is intended to inform class members of what remedies Plaintiffs are seeking, not what Defendants are seeking. Id. at 7. Defendants counter that due process requires Plaintiffs be informed of this risk. Id. at 11.

         Plaintiffs also object to the statement in Paragraph 6, proposed by Defendants, that a class member who opts out will still be bound by the outcome of the litigation to the extent the Guidelines are changed. Motion at 7. According to Plaintiffs, that statement is contrary to the law and will confuse class members. Id. at 6-7. UBH, on the other hand, contends it is undeniable that some of the injunctive and declaratory relief sought on the Breach of Fiduciary Duty Claim would apply to all class members regardless of whether they opt out of the class; UBH argues class members should be informed of this fact. Id. at 12-13.

         Also incorrect, according to Plaintiffs, is language proposed by Defendants informing class members that they may be precluded from asserting other claims that are not being pursued by the class, under the doctrine of res judicata. Id. at 8. That statement is contrary to current law, Plaintiffs assert. Id. at 8 n. 4 (citing Akootchook v. United States, 271 F.3d 1160, 1165 n. 24 (9th Cir. 2001)). UBH argues that the res judicata effect of participating in this lawsuit may be broader than suggested in Plaintiffs' proposed notice. Id. at 11 (citing Brown v. Ticor Title Ins. Co., 982 F.2d 386, 390 (9th Cir. 1992)).

         B. The Supplemental Briefs

         At the February 3, 2017 hearing, the Court opined that some of the disputes regarding the proposed notices turn on the specific nature of the relief Plaintiffs intend to seek and the related question of what claims or remedies, if any, class members should be permitted to opt out of. The parties filed supplemental briefs addressing these questions following the hearing.

         In Plaintiffs' supplemental briefs, they suggest that the Court could drop the Rule 23(b)(3) certification because none of the remedies they seek requires individualized inquiries and all can be awarded under Rule 23(b)(1) and (2). Were the Court to decertify the classes under Rule 23(b)(3), notice could be dispenses with altogether, they contend. In the alternative, Plaintiffs propose that to the extent the Court finds that the surcharge and reprocessing remedies are forms of relief that may be awarded only under Rule 23(b)(3), class members should be permitted to opt out of the action altogether ˗ an approach they contend will be more easily understood by class members than permitting them to opt out of specific remedies. Plaintiffs agree with UBH, however, that any declaratory judgment and prospective injunctive relief will apply to all future claims, regardless of whether or not an individual opted out of the Wit or Alexander classes.

         Defendants reject Plaintiffs' assertion that the surcharge and reprocessing remedies can be awarded under Rule 23(b)(1) or (2), arguing that both require individualized inquiries and that class members must be given an opportunity to opt out of them. They agree with Plaintiffs that the declaratory relief they seek, and any prospective injunctive relief awarded, will be binding on all class members regardless of whether or not they opt out.

         III. ANALYSIS

         A. Legal Standards

         Pursuant to Rule 23, “[f]or any class certified under Rule 23(b)(1) or (b)(2), the court may direct appropriate notice to the class.” Fed.R.Civ.P. 23(c)(2)(A). In addition, where a class has been certified under Rule 23(b)(3), “the court must direct to class members the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort.” Fed.R.Civ.P. 23(c)(2)(B) (emphasis added). The ...

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