Richard K. v. United Behavioral Health

Full title: RICHARD K. and JULIE K., individually and as guardians of K.K., a minor…

Court: UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

Date published: Jun 28, 2019

18-CV-6318 (GHW) (BCM) (S.D.N.Y. Jun. 28, 2019)

Opinion

18-CV-6318 (GHW) (BCM)

06-28-2019

RICHARD K. and JULIE K., individually and as guardians of K.K., a minor, Plaintiffs, v. UNITED BEHAVIORAL HEALTH and OXFORD HEALTH INSURANCE OF NEW YORK / PPO, Defendants.

BARBARA MOSES, United States Magistrate Judge.

REPORT & RECOMMENDATION TO THE HON. GREGORY H. WOODS

BARBARA MOSES, United States Magistrate Judge.

Plaintiffs Richard K. and Julie K., suing individually and on behalf of their minor daughter K.K., allege that Oxford Health Insurance, Inc., sued herein as "Oxford Health Insurance of New York/PPO" (Oxford), and United Behavioral Health (UBH), which administers mental health claims on Oxford's behalf, improperly denied benefits for approximately four and a half months of sub-acute residential mental health treatment provided to K.K. in 2015 at the Sedona Sky Academy (Sedona Sky). Before me for report and recommendation is defendants' motion (Dkt. No. 33) to dismiss this action in its entirety or, in the alternative, to stay the case pending the outcome of a class action entitled Wit v. United Behavioral Health, No. 3:14-CV-02346-JCS (N.D. Cal.) (Wit), in which K.K. is a member of a certified plaintiff class. In Wit, as here, the plaintiffs claim that UBH improperly denied benefits for sub-acute residential mental health treatment, thereby violating the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001 et seq. For the reasons that follow, I respectfully recommend that this action be stayed until the earlier of (i) final judgment in Wit, or (ii) an order from the Wit court excluding K.K. from the class or decertifying that class.

I. BACKGROUND

A. Procedural Background

Plaintiffs filed their initial Complaint on July 12, 2018, asserting two claims for recovery of benefits pursuant to ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B). Compl. (Dkt. No. 4) ¶¶ 9, 62-65, 66-75. On July 13, 2018, the Honorable Gregory H. Woods, United States District Judge, referred this action to me for general pretrial management. (Dkt. No. 3.) On September 17, 2018, defendants answered the Complaint (Dkt. No. 27), and on October 1, 2018, I held an initial case management conference, at which I set October 22, 2018 as the deadline for plaintiffs to amend their Complaint and November 12, 2018 as the deadline for defendants to answer or move in response to the amended pleading. See Initial Case Mgmt. Order (Dkt. No. 31) ¶¶ 1, 2. In addition, I set October 26, 2018 as the deadline for the parties to exchange automatic disclosures under Fed. R. Civ. P. 26(a)(1), but otherwise deferred discovery pending defendants' anticipated motion to dismiss. Id. ¶ 3.

On October 22, 2018, plaintiffs timely filed their Amended Complaint. (Dkt. No. 32.) As described in more detail below, plaintiffs assert one claim for recovery of benefits for K.K.'s treatment at Sedona Sky, pursuant to 29 U.S.C. § 1132(a)(1)(B), on the theory that defendants denied those benefits in violation of their fiduciary duties under ERISA § 404(a)(1)(B), 29 U.S.C. § 1104(a)(1)(B), id. ¶¶ 65-71, and a second claim for "appropriate equitable relief" pursuant to ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), including but not limited to "surcharge, estoppel, restitution, disgorgement, injunction, accounting, constructive trust, equitable lien, declaratory relief, unjust enrichment, and specific performance," on the theory that defendants violated the Mental Health Parity and Addiction Equity Act of 2008 (Parity Act), as amended, now codified within ERISA at 29 U.S.C. § 1185a, by imposing limitations on benefits for mental health and substance abuse treatment provided in sub-acute residential settings (such as the treatment provided to K.K. at Sedona Sky) that are more restrictive than the limitations applied to medical and surgical treatment provided in sub-acute inpatient settings "such as skilled nursing facilities, inpatient hospice care, and rehabilitation facilities." Id. ¶¶ 72-80.

On November 12, 2018, defendants moved to dismiss the Amended Complaint, arguing - among other things - that this action "should be dismissed in its entirety and with prejudice," or, in the alternative, stayed, "because it is well-established in this Circuit that members of a certified plaintiff class in a class action lawsuit are not entitled to bring separate individual actions premised on the same grounds as the pending class action." Def. Mem. (Dkt. No. 35) at 2. In addition, defendants contend that plaintiffs have failed to state a cognizable claim under the Parity Act, id. at 13, and that Richard and Julie K. lack standing to sue in their individual capacities. Id. at 18. On November 13, 2018, the district judge referred the motion to me for report and recommendation. (Dkt. No. 37.) Plaintiffs filed their opposition memorandum on December 10, 2018 (Dkt. No. 42), and defendants filed a reply memorandum on December 21, 2018. (Dkt. No. 45.) On March 29, 2019, I directed the parties to file additional letter-briefs addressing "the extent to which the Wit Action bars plaintiffs' claims here, including whether plaintiffs opted out, or made any effort to opt out, of any certified class in the Wit Action." (Dkt. No. 48.) The parties filed those letter-briefs on April 12, 2019. (Dkt. Nos. 49, 50.)

B. Plaintiffs' Allegations

1. K.K.'s Treatment at Sedona Sky

Plaintiffs allege that K.K. "started to self-harm" in 2013, while attending middle school in Phoenix, Arizona. Am. Compl. ¶¶ 15-16. In May 2014, she was admitted to an "adolescent treatment center for depression and substance abuse," where she was treated for six weeks. Id. ¶¶ 19-21. K.K. was discharged in June 2014, id. ¶ 22, with a recommendation that she continue individual therapy. Two of her physicians "strongly recommended" that K.K. "participate in a long-term residential program" so that she could "receive therapeutic and psychiatric services in a highly structured setting." Id. ¶ 24. Notwithstanding that recommendation, K.K. received only outpatient therapy until January 2015, when her parents realized that she "needed further help," as well as "protection" from a 15-year-old boy who had sexually and physically abused her and introduced her to drugs and alcohol. Id. ¶¶ 28-30. At around this time, K.K. "threatened suicide," id. ¶ 30, and on January 6, 2015, she was admitted to Sedona Sky, id. ¶ 31, which is a residential treatment facility in Phoenix, Arizona, providing mental health care to teenaged girls. Id. ¶ 5.

At the time of her admission to Sedona Sky, K.K. was diagnosed with mood disorder NOS (not otherwise specified), oppositional defiant disorder, "parent-child relational problem," and "problems with primary support group," and given a global assessment (GAF) score of 45.¹ Am. Compl. ¶ 33. In February 2015, K.K. "drank cleaning solution and was hospitalized at Quail Run Behavioral Treatment Hospital." Id. ¶ 32. On her return to Sedona Sky, K.K. "committed to her treatment plan and her condition slowly improved." Id. ¶ 34. She "worked on coping with her mood disorder, anxiety, impulsive behaviors, and family relational problems," and "was not observed engaging in additional self-harm." Id. ¶ 35.

1 "GAF rates overall psychological functioning on a scale of 0-100 that takes into account psychological, social, and occupational functioning." Zabala v. Astrue, 595 F.3d 402, 405 n.1 (2d Cir. 2010) (citing American Psychiatric Association, Diagnostic and Statistical Manual of Mental Disorders, at 34 (4th ed. rev. 2000) (DSM IV)). "There is a separate scale utilized when the patient is a child or adolescent," Am. Compl. ¶ 33 n.1, usually referred to as the Children's Global Assessment Scale (CGAS). A CGAS score of 41 to 50 indicates a "[m]oderate degree of interference in functioning in most social areas or severe impairment of functioning in one area, such as might result from, for example, suicidal preoccupations and ruminations, school refusal and other forms of anxiety, obsessive rituals, major conversion symptoms, frequent anxiety attacks, poor to inappropriate social skills, frequent episodes of aggressive or other antisocial behavior with some preservation of meaningful social relationships." Vargas ex rel. B.L.D.T.V. v. Colvin, 2013 WL 6231267, at *4 (E.D. Pa. Dec. 2, 2013) (quoting David Shaffer, et al., A children's global assessment scale (CGAS), 40 Archives of General Psychiatry 1228-31 (1983)).

Despite these positive developments, plaintiffs "made a decision to discontinue" K.K.'s treatment at Sedona Sky, before she "completed the final phase of the program," in favor of a new start at a boarding school in California. Am. Compl. ¶ 37. K.K. was discharged from Sedona Sky on August 4, 2015, at which point she was diagnosed with mood disorder (by history), oppositional defiant disorder (in remission), parent-child relational problem, attention-deficit/hyperactivity disorder, combined type, and problems with primary support group, and once again given a GAF score of 45. Id. ¶ 38. Her discharge summary recommended "further outpatient treatment." Id. ¶ 39.

2. Defendants' Denial of Benefits

Richard K. was a "participant" in, and K.K. was a beneficiary of, an employee welfare benefits plan (the Plan) issued by Oxford and subject to ERISA. Am. Compl. ¶ 2. The Plan provided coverage for "medically necessary treatment of mental health and substance use disorders" in accordance with "generally-accepted standards of medical practice." Id. ¶ 40. Its certificate of coverage (Certificate) stated, "We cover inpatient mental health care services relating to the diagnoses and treatment of mental, nervous, and emotional disorders compared to similar Hospital, medical, and surgical coverage provided under this Certificate." Id. ¶ 41.²

2 Plaintiffs do not otherwise describe the Plan, and did not attach the Certificate (or any other Plan documents) to their pleadings. However, defendants have filed the Declaration of Jamie Ciletti (Dkt. No. 34), attaching a true copy of the Preferred Provider Organization Certificate of Coverage issued by Oxford for the group policy covering employees of Kris Fuchs International. Id. ¶ 3 & Ex. A. Defendants assert - and plaintiffs do not contest - that this is the Plan under which plaintiffs sought benefits for K.K.'s treatment at Sedona Sky. See Def. Mem. at 1, 6. Although plaintiffs lived in Arizona at the time of the events underling this action, a mandatory venue provision in the Certificate required them to bring this action "in a court located in the State of New York." See Cert. (Dkt. No. 34-1) at ECF page 133.

UBH "administers and processes claims for the Plan in connection with mental health treatment provided to Plan participants and beneficiaries." Am. Compl. ¶ 4. Plaintiffs submitted claims for benefits to UBH for K.K.'s stay at Sedona Sky. Id. ¶ 42. UBH approved those claims for K.K.'s treatment from January 6 through March 18, 2015, but denied benefits for her treatment from March 19 to August 4, 2015. Id. In UBH's "initial adverse benefit determination letter" dated March 20, 2015, a medical reviewer wrote:

I have reviewed the plan for your child's admission to Sedona Sky Academy. Based on my review of the available documentation and all information received to date, I have determined that coverage is not available under your child's benefit plan for the following reason(s):

I based the decision on the clinical information provided and UBH Level of Care Guidelines for Mental Health Residential care. The care is not medically necessary. Your child is better able to work on her recovery. She seems to be working better with others and on her recovery goals so that residential care is no longer needed. She does not appear to be at risk of harming yourself [sic] or others. She has no serious medical problems needing 24 hour care.

Id. ¶ 43. The letter stated that UBH's determination "was based on clinical guidelines" (presumably the Level of Care Guidelines mentioned in the decision), but did not attach those guidelines. Id. ¶ 44.

On September 14, 2015, plaintiffs appealed the initial adverse benefit determination. Am. Compl. ¶¶ 45-52. On October 15, 2015, UBH maintained its denial of coverage, writing:

After reviewing the available information, it is noted that [K.K.] had made progress and that her condition no longer met guidelines for further coverage of treatment in the setting. She had no medical issues. She was not a danger to self or others. She was active in treatment. Symptoms were better. Family was supportive. Care could have continued [sic] Mental Health Partial Hospitalization setting.

Id. ¶ 53. UBH once again stated that its review was based on (among other things) its Level of Care Guidelines for Mental Health Residential Level Care (LOC Guidelines). Id.³

3 The Amended Complaint does not describe or attach copies of the LOC Guidelines.

On January 20, 2016, plaintiffs requested an external review of the denied claim. Am. Compl. ¶ 57. On February 25, 2016, Medical Care Management Cost (MCMC), "an organization certified and authorized by the State of New York to conduct external reviews," agreed with UBH's denial of coverage. Id. ¶ 59. MCMC wrote:

The documentation does not reflect acting out behaviors which presented an ongoing significant danger to self or others, which required 24-hour structure and observation for the safety of the patient or others, or which could not have been managed equally safely and effectively in a less restrictive setting in the patient's community with appropriately intensive family involvement.

Id. ¶ 60. The denial of benefits for K.K.'s treatment from March 19 through August 4, 2015, caused her parents to incur "medical expenses . . . in an amount exceeding $100,000." Id. ¶ 64.

3. Plaintiffs' Claims

In their First Cause of Action, plaintiffs allege that the denial of benefits for the remainder of K.K.'s treatment at Sedona Sky violated defendants' fiduciary duty under 29 U.S.C. § 1104(a)(1)(B) to "act solely in [K.K.'s] interest," as well as their obligation under 29 U.S.C. § 1133(2) to provide a "full and fair review" of their claim. Am. Compl. ¶ 67. In particular, plaintiffs complain that UBH improperly applied "acute inpatient medical necessity criteria to the treatment [K.K.] was provided in a sub-acute inpatient setting," which violated "generally accepted standards of medical practice," as well as "UBH's medical necessity criteria," and thereby violated "the terms of the Plan." Id. ¶¶ 67-69. Plaintiffs also allege that defendants improperly failed to examine K.K. personally before "countermanding" the treatment recommendations of her treating physicians. Id. ¶ 70.

In their Second Cause of Action, plaintiffs note that the Parity Act generally "requires ERISA plans to provide no less generous coverage for treatment of mental health and substance use disorders than they provide for treatment of medical/surgical disorders," Am. Compl. ¶ 73, and allege that defendants violated the statute by excluding benefits for K.K.'s treatment at Sedona Sky while offering "comparable benefits" for analogous "medical/surgical treatment" provided in "sub-acute inpatient treatment centers" such as "skilled nursing facilities, inpatient hospice care, and rehabilitation facilities." Id. ¶ 76. Alternatively, plaintiffs allege that defendants' "medical necessity criteria," either "as written or in operation," use "processes, strategies, standards, or other factors to limit coverage for mental health or substance use disorder treatment in a way that is inconsistent with, or more stringently applied, than the processes, strategies, standards, or other factors used to limit coverage for medical/surgical treatment in the same classification." Id. ¶ 77. Plaintiffs seek "[j]udgment in the total amount that is owed for [K.K.'s] medically necessary treatment" at Sedona Sky, plus interest; "[a]ppropriate" equitable relief; and attorneys' fees and costs. Id. at 15.

C. The Wit Action

On May 21, 2014 - more than four years before plaintiffs filed this action - a group of plaintiffs led by David Wit filed a class action against UBH in the Northern District of California. (Wit Dkt. No. 1.) In their First Amended Class Action Complaint (FAC) (Wit Dkt. No. 32), Wit and his co-plaintiffs note that UBH administers claims for mental health benefits for many of its corporate affiliates - including Oxford - and allege that in so doing it violates ERISA by restricting "coverage for mental health and substance abuse related residential treatment" in a manner that is inconsistent with "generally accepted standards of mental healthcare" and therefore "inconsistent with the terms of the relevant insurance plans," which incorporate those standards. Id. at 1.

Generally accepted standards of care, according to the Wit plaintiffs, recognize that residential mental health treatment is "an intermediate level of care between acute in-patient hospitalization (which is generally required when a patient is at risk to themselves or others) and outpatient treatment (which is generally appropriate when the patient is capable of monitoring their own condition)." Wit FAC ¶ 11. Residential treatment is appropriate "when the patient's condition may be chronic in nature (i.e., non-acute) and expected to last several months." Id. However, the Wit plaintiffs alleged, UBH improperly developed a set of internal guidelines, including the LOC Guidelines, that "restrict coverage for residential treatment to 'acute' situations that can be addressed quickly." Id. ¶ 12. In addition to promulgating "improperly restrictive benefit determination guidelines," UBH allegedly denied plaintiffs' claims "even when they satisfied UBH's restrictive residential treatment guidelines" based on its "systematic practice" of applying criteria found in its guidelines for "acute inpatient treatment (such as whether the patient was a risk to themselves or others, or whether the patient necessitated 24-hour care - as opposed to 24-hour structure) to claims for residential treatment, even though UBH's [guidelines] for residential treatment did not list these criteria." Id. ¶ 15.

The Wit plaintiffs assert two substantive claims against UBH, both on behalf of themselves and all others similarly situated. In their Breach of Fiduciary Duty Claim, they assert that by promulgating overly restrictive guidelines for coverage of residential mental health treatment, UBH violated its fiduciary duty under 29 U.S.C. § 1104(a)(1)(B) to act "solely in the interests of the participants and beneficiaries" of the relevant plans and in accordance with their terms. Wit FAC ¶¶ 194-202. In their Denial of Benefits Claim, the Wit plaintiffs assert that UBH improperly denied their claims for mental health treatment "based, in part, on its restrictive internal guidelines" and in part on its "systematic practice" of improperly applying "acute inpatient treatment criteria to residential treatment claims." Id. ¶¶ 203-07.

The Wit plaintiffs seek declaratory and injunctive relief pursuant to 29 U.S.C. §§ 1132(a)(1)(B) and/or 1132(a)(3)(A), including orders directing UBH to "reprocess claims for residential treatment that it previously denied (in whole or in part)," and in so doing to "faithfully apply" guidelines that are consistent with generally accepted standards of care. Id. at 65-66. Additionally, they propose that UBH pay a "surcharge" equal to the revenue it earned for administering the mental health claims of the putative class. Id. at 66.

On September 19, 2016 - twenty-two months before plaintiffs filed this action - the Honorable Joseph C. Spero, United States Magistrate Judge, certified two classes in Wit pursuant to Fed. R. Civ. P. 23(b)(1), (b)(2), and (b)(3). The "Wit Guideline Class" consists of:

Any member of a health benefit plan governed by ERISA whose request for coverage of residential treatment services for a mental illness or substance use disorder was denied by UBH, in whole or in part, on or after May 22, 2011, based upon UBH's Level of Care Guidelines or UBH's Coverage Determination Guidelines.

See Wit Class Cert. Order (Wit Dkt. No. 174) at 12-13. As plaintiffs concede, "the K. Family falls within the defined class." Pl. Ltr. dated April 12, 2019, at 3.

Judge Spero set a deadline of June 23, 2017 for the Wit class administrator to mail out notices to class members, and July 27, 2017 for members to exclude themselves from the class. (Wit Dkt. No. 263 at 2-3.) According to UBH's counsel in Wit, the notices were timely mailed to class members, including K.K. - who was listed as "a member of the Wit Guideline class" - on or about June 23, 2017, in the form approved by Judge Spero. Declaration of April N. Ross (Dkt. No. 46) ¶ 7 & Ex. A (Notice of Pendency - Wit Guideline Class). "[T]here is no record that K.K. elected to opt out" of the class, either before or after July 27, 2017. Id. ¶ 8.

In October 2017 - nine months before plaintiffs filed this action - Judge Spero conducted a bench trial in Wit. On February 28, 2019, he issued detailed Findings of Fact and Conclusions of Law (Wit Findings) (Wit Dkt. No. 418), determining that UBH was liable to the plaintiff classes on both of their claims. Specifically, Judge Spero found that UBH "breached its fiduciary duty," including its "duty to comply with plan terms," by "adopting Guidelines that are unreasonable and do not reflect generally accepted standards of care," thereby causing harm to plaintiffs by denying their "right to fair adjudication of their claims for coverage." Wit Findings ¶¶ 203-04. In addition, the Wit court found that UBH improperly "denied Plaintiffs' requests for coverage of . . . residential treatment based in whole or in part on UBH's Guidelines." Id. ¶¶ 212-14. Judge Spero did not determine what remedies are available to the class, see id. ¶¶ 47 n.7, 205, 215, leaving that for later briefing.

By Order dated April 1, 2019 (Wit Dkt. No. 423), Judge Spero set a May 3, 2019 deadline for the Wit plaintiffs to file a motion regarding available remedies and for UBH to file a motion to decertify the Wit Guidelines Class. Those motions were timely filed (See Wit Dkt. Nos. 425, 426) but are not yet fully briefed.

II. ANALYSIS

In their motion to dismiss, defendants advance three principal arguments. First, they contend that the Court should dismiss this action with prejudice - or, in the alternative, stay it "pending the disposition of the previously filed Wit Case" - because K.K. is a member of the Wit Guideline Class. Def. Mem. at 11-13. Second, they argue that the Court should dismiss plaintiffs' second cause of action under the Parity Act for failure to state a claim. Id. 13-17. Third, they assert that Richard and Julie K. lack standing to sue in their individual capacities (as opposed to their capacities as the parents and guardians of K.K.). Id. at 18-20.

A. This Action Should be Stayed

Defendants are correct that "members of a certified plaintiff class in a class action lawsuit are not entitled to bring separate individual actions premised on the same grounds as the pending class action." Def. Mem. at 2. Permitting such actions to proceed would "contravene[ ] the general principle that a party has no right to maintain two separate actions involving the same subject matter at the same time . . . against the same defendant." Walker v. Long Island R.R., 1982 WL 180, at *1 (S.D.N.Y. Jan. 13, 1982) (internal quotation marks and citation omitted). Permitting class members to pursue individual claims in parallel with the class action would also undermine the efficiency goals of class litigation: "avoiding a multiplicity of actions," "enabling claim processing through representatives," and "preventing inconsistent adjudications." 1 Newberg on Class Actions § 1:9 (5th ed.).

However, defendants point to no authority - and I have found none - for their contention that this Court can or should dismiss plaintiffs' claims "with prejudice" based on the pendency of an earlier-filed class action that has been certified but not concluded. "[R]es judicata takes effect only 'when a final judgment has been entered on the merits of a case.'" Contichem LPG v. Parsons Shipping Ltd., 170 F. Supp. 2d 416, 419 (S.D.N.Y. 2001) (quoting Interoceanica Corp. v. Sound Pilots, Inc., 107 F.3d 86, 90 (2d. Cir. 1997)). See also Sheinbrot v. Pfeffer, 954 F. Supp. 555, 558 (E.D.N.Y. 1997) ("The doctrine of res judicata bars relitigation of a claim only after a final judgment has been rendered."). No judgment has been entered in Wit. Thus, as defendants concede, "its res judicata effect cannot be predetermined." Def. Mem. at 12. By the same token, the pending Wit action cannot be the basis for a premature dismissal, with prejudice, of plaintiffs' claims here. Moreover, UBH has filed a motion in the Northern District of California for decertification of the Wit Guideline Class. If this Court were to dismiss plaintiffs' claims with prejudice, and if UBH were then successful in its effort to decertify the class, plaintiffs could be left with no ability to challenge UBH's denial of benefits to K.K. in any forum. Defendants' motion should therefore be denied insofar as it seeks the dismissal of plaintiffs' claims with prejudice based on the pendency of Wit.

Defendants' alternative request - for a stay of this action pending the outcome of Wit - is on sounder footing. "As part of its general power to administer its docket," a federal district court has the authority to stay - or to dismiss without prejudice - any action "that is duplicative of another federal court suit." James v. AT & T Corp., 334 F. Supp. 2d 410, 411 (S.D.N.Y. 2004) (quoting Curtis v. Citibank, N.A., 226 F.3d 133, 138 (2nd Cir. 2000)). These remedies are routinely found appropriate where, as here, the claims made in an individual lawsuit overlap with the claims being pursued by a certified class of which the individual plaintiff is a member. See Mackey v. Bd. of Educ. for Arlington Cent. Sch. Dist., 112 F. App'x 89, 91 (2d Cir. 2004) (affirming dismissal without prejudice "based on the rule against duplicative litigation" where plaintiff's allegations "duplicated claims that had been included in separate class actions" against the defendant, and plaintiffs "were members of those classes"); Walker, 1982 WL 180, at *2 (dismissing individual claim of race discrimination "without prejudice" to plaintiff's ability "to pursue his rights as a member of the plaintiff class in [the earlier-filed certified class action]"); Taunton Gardens Co. v. Hills, 557 F.2d 877, 879 (1st Cir. 1977) (affirming stay of individual proceedings pending resolution of related class action proceeding).⁴

4 Under different circumstances, courts have additional procedural options for curtailing duplicative actions. See Curtis, 226 F.3d at 138 ("Because of the obvious difficulties of anticipating the claim or issue-preclusion effects of a case that is still pending, a court faced with a duplicative suit will commonly stay the second suit, dismiss it without prejudice, enjoin the parties from proceeding with it, or consolidate the two actions."). If Wit were pending in this district, the Court could consolidate the cases, see Naula v. Rite Aid of New York, 2010 WL 2399364, at *4 (S.D.N.Y. Mar. 23, 2010) ("[h]ere, consolidation rather than dismissal or a stay is appropriate"), or enjoin plaintiffs from prosecuting their individual action pending the resolution of the class action. See Robertson v. Nat'l Basketball Ass'n, 413 F. Supp. 88, 90 (S.D.N.Y. 1976) (enjoining a member of the class certified in this district from pursuing a parallel action, individually, in another federal jurisdiction). In this case, however, consolidation is not available - because Wit is pending in the Northern District of California - and there is no need for an injunction, because the Court can simply dismiss (without prejudice) or stay the K. family's individual action.

"Multiple courts of appeal[]" have approved the practice of staying a case, or dismissing it without prejudice, "on the ground that the plaintiff is a member of a parallel class action." Jiaming Hu v. United States Dep't of Homeland Sec., 2018 WL 1251911, at *4 (E.D. Mo. Mar. 12, 2018) (collecting cases and opting to stay rather than dismiss). "The standard in such circumstances does not require that the parties be identical, only that . . . there be overlapping issues and parties." Id.; see also Ali v. Wells Fargo Bank, N.A., 2014 WL 819385, at *3 (W.D. Okla. Mar. 3, 2014) ("[c]ourts routinely exercise this power and grant stays" when a pending class action settlement could impact the claims in the case before them) (collecting cases).

This action is "duplicative of another federal court suit," James, 334 F. Supp. 2d at 411, because K.K. is a member of the Wit Guideline Class, which includes "[a]ny member of a health benefit plan governed by ERISA whose request for coverage of residential treatment services for a mental illness or substance use disorder was denied by UBH, in whole or in part, on or after May 22, 2011, based upon UBH's Level of Care Guidelines or UBH's Coverage Determination Guidelines." Wit Class Cert. Order at 12-13. As plaintiffs acknowledge, see Pl. Ltr. dated April 12, 2019, at 3, K.K. falls squarely within the class definition. Moreover, plaintiffs here, as in Wit, allege that UBH violated its fiduciary duty under 29 U.S.C. § 1104(a)(1)(B) by improperly applying acute inpatient medical necessity criteria to a claim for sub-acute residential mental health treatment, and seek remedies under 29 U.S.C. §§ 1132(a)(1)(B) and 1132(a)(3). Thus, absent decertification of (or K.K.'s successful exclusion from) the Wit Guideline Class, final judgment or settlement in Wit will be res judicata as to (or collaterally estop) at least some of plaintiffs' claims in this case.⁵

5 Whether res judicata applies depends on whether "1) the prior decision was a final judgment on the merits, 2) the litigants were the same parties, 3) the prior court was of competent jurisdiction, and 4) the causes of action were the same." Corbett v. MacDonald Moving Servs., Inc., 124 F.3d 82, 88 (2d Cir. 1997). Whether the causes of action are "the same" will in turn depend "in part on (1) whether the same transaction or connected series of transactions is at issue, (2) whether the same evidence is needed to support both claims, and (3) whether the facts essential to the second were present in the first." Gonzalez v. City of New York, 396 F. Supp. 2d 411, 418 (S.D.N.Y. 2005) (citing Saud v. Bank of New York, 929 F.2d 916, 919 (2d Cir. 1991)).

The decision whether to stay plaintiffs' individual claims or dismiss them without prejudice rests within this Court's discretion. Naula, 2010 WL 2399364, at *3 (quoting Adam v. Jacobs, 950 F.2d 89, 92 (2d Cir. 1991)). I conclude that a stay is the better course here.

First, as noted above, the res judicata effect of a final judgment or settlement in Wit "cannot be predetermined." Def. Mem. at 12. Plaintiffs contend that this action will never be entirely barred by a judgment in Wit, because the Wit action does not "include[] any claims for violation of" the Parity Act, Pl. Opp. Mem. at 4-5, and even as to the parallel breach of fiduciary duty claims, the "grounds for relief and legal theories" asserted here differ in some respects from those asserted in Wit. Pl. Ltr. dated April 12, 2019, at 2. However, "even if it should not dispose of all the questions involved," a final judgment in Wit "would certainly narrow the issues in the pending cas[e] and assist in the determination of the questions of law involved." Taunton Gardens Co., 557 F.2d at 879 (quoting Landis v. N. Am. Co., 299 U.S. 248, 253-4 (1936)). A stay rather than a dismissal of this action will permit this Court to address those issues based on a full record.

Second, dismissal presents the risk that plaintiffs' claims, even if not resolved by the judgment in Wit, will become time-barred. See Hu, 2018 WL 1251911, at *4-5 (quoting Ritchie Capital Mgmt., L.L.C. v. BMO Harris Bank, N.A., 868 F.3d 661, 666 (8th Cir. 2017)) ("[R]ather than dismiss Plaintiff's complaint, the Court will stay this case pending a resolution of the [pending] class action" in part to "'to preserve any claims that might not be resolved by the parallel proceedings.'"); Thakkar v. United States, 2019 WL 1993782, at *6 (D. Mass. May 6, 2019) ("Federal courts have cautioned against dismissing a case outright due to the pendency of a related case, given the prejudice that may result.") (collecting cases).

Third, a stay accommodates the possibilities that the Wit court could (i) grant UBH's pending motion to decertify the class in which K.K. is a member (see Wit Dkt. No. 426) or (ii) grant a future motion by K.K. for exclusion from that class.⁶ In either event, plaintiffs could return to this Court and request that the stay be lifted.

6 Plaintiffs assert that Richard K. did not receive the Notice of Pendency of Class Action (Dkt. No. 46-1) that was mailed to members of the Wit Guideline Class by the claims administrator in Wit. See Pl. Opp. Mem. at 5-6; Richard K. Decl. (Dkt. No. 42-1) ¶ 5. On that basis, plaintiffs argue that their "failure to timely opt out [from the Wit Guideline Class] was not within their control," Pl. Opp. Mem. at 7, and that they "still have the ability to file a motion for late opt out." Pl. Ltr. dated April 12, 2019, at 4. It appears, however, that plaintiffs have never filed that motion, much less obtained an order from the Wit court permitting K.K. to opt out. Until and unless such an order issues (or the class is decertified), K.K. remains a member of the Wit Guideline Class, making plaintiffs' contentions regarding actual notice irrelevant to the motion before me. See Gonzalez, 396 F. Supp. 2d at 417 ("[A]ctual notice is not required for individuals to be deemed members of a class certified under Rule 23(b)(3) if proper notification procedures were followed."); Yan Won Liao v. Holder, 691 F. Supp. 2d 344, 353 (E.D.N.Y. 2010) ("Plaintiffs' argument fails because they were never required to receive such notice.").

Finally, I note the factors traditionally used in this district to evaluate stay applications weigh in favor of a stay here. Those factors are: "(1) the private interests of the plaintiffs in proceeding expeditiously with the civil litigation as balanced against the prejudice to the plaintiffs if delayed; (2) the private interests of and burden on the defendants; (3) the interests of the courts; (4) the interests of persons not parties to the civil litigation; and (5) the public interest." Volmar Distributors, Inc. v. New York Post Co., 152 F.R.D. 36, 39 (S.D.N.Y. 1993).

The first Volmar factor is at most neutral, since in her capacity as a class member in Wit plaintiff K.K. is "proceeding expeditiously" with her claims in that forum. Each of factors two through four weigh strongly in favor of a stay, which will avoid prejudice to defendants "through the imposition of premature and potentially duplicative discovery burdens"; avoid the additional burden on the courts following from maintaining "duplicative proceedings, each having a different schedule"; and protect the interests of other members of the certified class in Wit, by not "providing an incentive for individual members to break from the putative class to seek an individual resolution of their claims." Finn v. Barney, 2008 WL 5215699, at *3 (S.D.N.Y. Dec. 8, 2008). The fifth factor points the same direction. "By conserving judicial resources, a stay will serve not only the interest of the courts, but also the interests of the Parties, the nonparties, and the public in 'an orderly and efficient use of judicial resources.'" Catskill Mountains Chapter of Trout Unlimited, Inc. v. U.S. E.P.A., 630 F. Supp. 2d 295, 306 (S.D.N.Y. 2009) (quoting Riverkeeper, Inc. v. U.S. Envtl. Prot. Agency, 2007 WL 4208757, at *2 (S.D.N.Y. Nov. 26, 2007)).

I therefore recommend, respectfully, that this action be stayed until the earlier of (i) final judgment in Wit, at which time its res judicata and/or collateral estoppel effect on this action can be determined, or (ii) an order from the Wit court either decertifying or excluding K.K. from the Wit Guideline Class. I also recommend that that the parties be directed to file a status letter every six months, as well as a letter within fourteen days of the happening of either of those events, updating the Court on the Wit proceedings and informing the Court of their respective positions about whether and how this action should proceed.

B. In the Alternative, Plaintiffs' Parity Act Claim, and Julie K's Individual Claims, Should be Dismissed

In the event this action is not stayed, I recommend that plaintiffs' second cause of action - brought under the Parity Act - be dismissed for failure to state a claim, and that Julie K.'s claims be dismissed to the extent they are brought in her individual capacity.

1. The Parity Act

Congress enacted the Parity Act to "end discrimination in the provision of insurance coverage for mental health and substance use disorders as compared to coverage for medical and surgical conditions in employer-sponsored group health plans." Am. Psychiatric Ass'n v. Anthem Health Plans, Inc., 821 F.3d 352, 356 (2d Cir. 2016) (citing Coalition for Parity, Inc. v. Sebelius, 709 F. Supp. 2d 10, 13 (D.D.C. 2010)). "Essentially, the Parity Act requires ERISA plans to treat sicknesses of the mind in the same way that they would a broken bone." Munnelly v. Fordham Univ. Faculty, 316 F. Supp. 3d 714, 728 (S.D.N.Y. 2018) (internal quotation marks and citation omitted). "Although there is no private right of action under the Parity Act, portions of the law are incorporated into ERISA and may be enforced using the civil enforcement provisions in ERISA." Id. (internal quotation marks and citation omitted).

The Parity Act "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." New York State Psychiatric Ass'n, Inc. v. UnitedHealth Grp., 798 F.3d 125, 128 (2d Cir. 2015) (citing 29 U.S.C. § 1185a(a)(3)(A)). "The Parity Act also prohibits 'separate cost sharing requirements' and 'separate treatment limitations that are only applicable with respect to mental health or substance use disorder benefits.'" Munnelly, 316 F. Supp. 3d at 728 (citing 29 U.S.C. § 1185a(a)(3)(A)(i)-(ii)).

Under the Parity Act, the term "treatment limitation" includes "'limits on the frequency of treatment, number of visits, days of coverage, or other similar limits on the scope or duration of treatment.'" C.M. v. Fletcher Allen Health Care, Inc., 2013 WL 4453754, at *2 (D. Vt. Apr. 30, 2013) (quoting 29 U.S.C. § 1185a(a)(3)(B)(iii)). "The regulations promulgated pursuant to the Parity Act expand on this definition by breaking it down into two categories: quantitative treatment limitations and nonquantitative treatment limitations." Bushell v. UnitedHealth Grp. Inc., 2018 WL 1578167, at *4 (S.D.N.Y. Mar. 27, 2018). "Quantitative limitations 'are expressed numerically (such as 50 outpatient visits per year).'" Id. (quoting 29 C.F.R. § 2590.712(a)). "Nonquantitative treatment limitations . . . 'otherwise limit the scope or duration of benefits for treatment,'" id. (quoting 29 C.F.R. § 2590.712(a)), and "include . . . '[r]estrictions based on geographic location, facility type, provider specialty, and other criteria that limit the scope or duration of benefits for services provided.'" Id. (quoting 29 C.F.R. § 2590.712(c)). With respect to non-quantitative limitations, the Department of Labor's implementing regulations mandate that "any processes, strategies, evidentiary standards, or other factors used in applying the nonquantitative treatment limitation to mental health . . . benefits in the classification are comparable to, and are applied no more stringently than, the processes, strategies, evidentiary standards, or other facts used in applying the limitation with respect to medical/surgical benefits in the same classification." 29 C.F.R. § 2590.712(c)(4)(i).

Plaintiffs here do not allege that defendants applied different "financial requirements" to mental health claims, nor that they imposed disadvantageous "quantitative treatment limitations" on such claims. Rather, plaintiffs allege that Oxford and UBH imposed "[i]mpermissible nonquantitative treatment limitations" on mental health claims, Am. Compl. ¶ 75, including by "failing to apply generally accepted standards of medical practice for evaluating medical necessity of treatment of . . . mental health disorders in the same manner that they applied generally accepted standards of medical practice in evaluating the medical necessity of treatment provide to individuals being treated on an inpatient sub-acute setting for medical/surgical conditions." Id. ¶ 78.

2. Motion to Dismiss Standard

Fed. R. Civ. P. 8(a)(2) requires that a complaint contain "a short and plain statement of the claim showing that the pleader is entitled to relief." If that "short and plain statement" fails to present "sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face," the deficient claims may be dismissed pursuant to Fed. R. Civ. P. 12(b)(6). Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60, 65 (2d Cir. 2012) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. If the plaintiff has not "nudged [his] claims across the line from conceivable to plausible, [the] complaint must be dismissed." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007).

When faced with a motion to dismiss made under Rule 12(b)(6), the trial court must "accept as true all factual statements alleged in the complaint and draw all reasonable inferences in favor of the non-moving party." McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007). However, those factual allegations "must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. Moreover, the court may not credit "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). "As the Court held in Twombly, the pleading standard Rule 8 announces does not require 'detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Geldzahler v. New York Med. Coll., 663 F. Supp. 2d 379, 385 (S.D.N.Y. 2009).

To state a claim alleging a Parity Act violation, a plaintiff must allege facts showing that:

(1) the insurance plan is of the type covered by the Parity Act; (2) the insurance plan provides both medical benefits and mental-health benefits; (3) the plan has a treatment limitation - either quantitative or nonquantitative - for one of those benefits that is more restrictive for mental-health treatment than it is for medical treatment; and (4) the mental-health treatment is in the same classification as the medical treatment to which it is being compared.

Gallagher v. Empire HealthChoice Assurance, Inc., 339 F. Supp. 3d 248, 256 (S.D.N.Y. 2018) (quoting Bushell, 2018 WL 1578167, at *5).

3. Application to Plaintiffs' Parity Act Claim

The Amended Complaint fails to plausibly allege a violation of the Parity Act, because it contains no non-conclusory factual allegations which, if true, would demonstrate that defendants' denial of benefits for the remainder of K.K.'s treatment at Sedona Sky was based on a treatment limitation "more restrictive for mental-health treatment than it is for medical treatment." Rather, plaintiffs make a series of formulaic assertions that do little more than recite the elements of a Parity Act claim, often in the precise language of the relevant statute or regulation:

• "Defendants failed to provide coverage for [K.K's] mental health treatment in a manner that was comparable to inpatient treatment for medical/surgical conditions covered by the Plan." Am. Compl. ¶ 71.

• "Comparable benefits offered by the Plan for medical/surgical treatment analogous to the benefits the Plan excluded for [K.K.'s] treatment at Sedona include sub-acute inpatient treatment settings such as skilled nursing facilities, inpatient hospice care, and rehabilitation facilities. For none of these types of treatment does UBH exclude coverage for medically necessary care of medical/surgical conditions based on geographic location, facility type, provider specialty, or other criteria in the manner UBH excluded coverage of treatment for K at Sedona." Id. ¶ 76.

• "Defendants violate 29 C.F.R. § 2590.712(c)(4)(i) because the terms of the Plan and the medical necessity criteria utilized by the Plan and UBH, as written or in operation, use processes, strategies, standards, or other factors to limit coverage for mental health or substance use disorder treatment in a way that is inconsistent with, and more stringently applied, than the processes, strategies, standards or other factors used to limit coverage for medical/surgical treatment in the same classification." Id. ¶ 77.

• Defendants "violated MHPAEA by failing to apply generally accepted standards of medical practice for evaluating medical necessity of treatment of [K.K's] mental health disorders in the same manner that they applied generally accepted standards of medical practice in evaluating the medical

necessity of treatment provide to individuals being treated on an inpatient sub-acute setting for medical/surgical conditions. Specifically, the Defendants improperly utilized acute care medical necessity criteria for K.'s treatment rather than sub-acute care medical necessity criteria and invalidated the treatment recommendations of K.'s treating physicians without examining K." Id. ¶ 78.

These allegations fail to assert any supporting facts that would plausibly suggest that defendants imposed more stringent limitations on inpatient mental health treatment than those imposed on comparable inpatient treatment for medical/surgical conditions. See Anne M. v. United Behavioral Health, 2019 WL 1989644, at *3 (D. Utah May 6, 2019) (dismissing Parity Act claim where a complaint pled "merely conclusory allegations devoid of factual support" in support of that claim); H.H. v. Aetna Ins. Co., 342 F. Supp. 3d 1311, 1320 (S.D. Fla. 2018) (dismissing Parity Act claim where plaintiffs alleged that Aetna used more stringent criteria to evaluate residential mental health treatment centers than it used to evaluate skilled nursing facilities, but failed to state "what criteria Aetna requires of skilled nursing facilities").

Indeed, while ¶ 76 identifies what plaintiffs contend to be "analogous" claims for medical/surgical treatment (at "sub-acute inpatient treatment settings such as skilled nursing facilities, inpatient hospice care, and rehabilitation facilities") for which defendants do not "exclude coverage," id., it is apparent from the face of the Amended Complaint that defendants did not "exclude coverage" for, nor apply a "categorical limitation" on, mental health treatment at sub-acute residential treatment facilities such as Sedona Sky. Rather, they covered K.K.'s treatment for approximately two and a half months, see id. ¶¶ 31, 42, after which UBH denied further benefits based on its determination that K.K.'s condition had improved such that residential treatment was no longer medically necessary. See id. ¶ 43 ("She seems to be working better with others and on her recovery goals so that residential care is no longer needed."), ¶ 53 ("[K.K] had made progress and that her condition no longer met guidelines for further coverage of treatment in the setting."). Similarly, while ¶¶ 77 and 78 allege in broad terms that defendants' evaluation of mental health claims and medical/surgical claims was "inconsistent," and that defendants did not apply their "medical necessity" standards "in the same manner" to mental health claims, they do not offer a single factual allegation as to how or by what standards defendants evaluated comparable medical/surgical claims. They do not even allege - apparently because they cannot - that defendant UBH played any role in administering non-mental health claims for Oxford. See Am. Compl. ¶ 4 (UBH "administers and processes claims for the Plan in connection with mental health treatment") (emphasis added).

Plaintiffs draw the Court's attention to a long list of cases upholding Parity Act claims where a plaintiff plausibly alleged that a defendant imposed a categorical limitation on mental health treatment that it did not impose on comparable medical treatment - commonly, by categorically excluding coverage for "wilderness therapy" or residential mental health treatment altogether. See, e.g., Gallagher, 339 F. Supp. 3d at 258 ("Plaintiff has alleged that Empire's 'blanket exclusion for services rendered at wilderness treatment centers is a separate treatment limitation applicable only to mental health benefits' [], and Plaintiff has identified skilled nursing and rehabilitation facilities as the relevant analogue in the medical/surgical context."); Bushell, 2018 WL 1578167, at *6 (referring to the question as a "close call," but concluding that "the case law, meager though it is, comports with the notion that it is enough to plausibly plead that there is a categorical exclusion for mental health benefits but not for medical benefits"); Vorpahl v. Harvard Pilgrim Health Ins. Co., 2018 WL 3518511, at *3 (D. Mass. July 20, 2018) ("Although it may be a 'close call,' it appears sufficient to allege, as Plaintiffs have, 'that a mental-health treatment is categorically excluded while a corresponding medical treatment is not' to state a Parity Act claim.") (quoting Bushell); A.Z. by & through E.Z. v. Regence Blueshield, 333 F. Supp. 3d 1069, 1081-82 (W.D. Wash. 2018) ("it is enough to allege a 'categorical' mental-health exclusion without specifying the processes and factors used by a defendant to apply that exclusion"); V. v. Health Care Serv. Corp., 2016 WL 4765709, at *8 (N.D. Ill. Sept. 13, 2016) ("Viewed from that perspective, the complaint adequately alleges . . . that HCSC failed to apply comparable standards when it decided not to cover residential treatment centers for mental illnesses."). In this case, by way of contrast, the Amended Complaint reveals that defendants did not categorically exclude coverage for sub-acute residential mental health treatment, see Am. Compl. ¶¶ 43, 53, making these cases inapposite.

Apparently recognizing the insufficiency of their Parity Act claim as pleaded, plaintiffs argue that they need discovery to develop the necessary facts:

Richard and Julie's MHPAEA claim requires discovery to evaluate whether there is a disparity between how UBH reviewed medical necessity for sub-acute inpatient treatment of mental health and substance use disorders, and how it determined medical necessity for sub-acute inpatient treatment of medical/surgical conditions. They need to obtain the medical necessity criteria UBH utilized when it evaluated the medical necessity of sub-acute inpatient treatment for medical/surgical patients. . . . Discovery would show whether UBH's improper application of the requisite clinical criteria resulted in the de facto exclusion of residential level of care, MHPAEA is intended to prevent.

Pl. Opp. Mem. at 10. Assertions that discovery would show "whether" a disparity between defendants' treatment of mental health and medical/surgical conditions exists, however, are insufficient to "raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. See Bristol-Myers Squibb Co. v. Matrix Labs. Ltd., 2015 WL 4430614, at *8 (S.D.N.Y. July 20, 2015) ("it is axiomatic that a plaintiff must state a claim before he is entitled to discovery") (collecting cases). Put another way: "The fact that Plaintiff needs discovery to adequately state a claim [under the Parity Act] is tantamount to an admission that he has, thus far, failed to state a [Parity Act] claim." Vail v. City of New York, 68 F. Supp. 3d 412, 431 (S.D.N.Y. 2014).

Because the Amended Complaint "fails to provide a sufficient factual basis in support of their claim that there was disparate treatment" in the way defendants "handled, processed, or evaluated" K.K.'s claim for mental health treatment in comparison to the way they "handle[d], processe[d], or evaluate[d] claims for treatment at skilled nursing facilities and inpatient rehabilitation facilities," Kerry W. v. Anthem Blue Cross & Blue Shield, 2019 WL 2393802, at *5 (D. Utah June 6, 2019), plaintiffs' Parity Act claim should be dismissed. Id.; see also Anne M., 2019 WL 1989644, at *3 (dismissing Parity Act claim where plaintiffs failed to "adequately allege[] facts to support their claim that UBH applied less rigorous standards when evaluating analogous medical/surgical claims"); H.H., 342 F. Supp. 3d at 1320 (dismissing Parity Act claim where plaintiff H.H. offered only conclusory allegations, without any factual support).

Plaintiffs have requested leave to further amend their pleadings, "to clarify the nature of the [Parity Act] allegations they are asserting." See Pl. Opp. Mem. at 12. Leave should be denied, for three reasons. First, plaintiffs have already amended once, after the Court pointedly advised them, during the October 22, 2018 initial case management conference, that their original Complaint appeared to lack factual allegations supporting their Parity Act claim. Yet they have still failed to allege sufficient facts in support of that claim. Second, plaintiffs concede that defendants provided coverage for two and a half months of K.K.'s stay at Sedona Sky, dooming any argument that defendants categorically excluded inpatient mental health treatment. Indeed, as noted above, the Amended Complaint suggests that the reasons defendants denied benefits to K.K. after that time period were not based on a categorical limitation in plaintiffs' Plan, but on an individual analysis of K.K.'s case. See Am. Compl. ¶¶ 42, 43, 53. Third, plaintiffs all but concede that they have no "access" to the "sort of information" they would need to successfully amend their Parity Act claim without discovery, Pl. Opp. Mem. at 15, which amounts to a concession that they cannot state a claim based on the information they now possess.

I therefore conclude that further amendment would be futile. See Ellis v. Chao, 336 F.3d 114, 126 (2d Cir. 2003) ("[I]t is well established that leave to amend a complaint need not be granted when amendment would be futile."); McBeth v. Porges, 171 F. Supp. 3d 216, 235 (S.D.N.Y. 2016) ("The fact that Plaintiff already amended his complaint in an attempt to cure the deficiencies raised in Defendants' initial motion to dismiss . . . underscores the futility of further amendment."). See also B.R. v. Beacon Health Options, 2017 WL 5665667, at *6-8 (N.D. Cal. Nov. 27, 2017) (dismissing without leave to amend where plaintiffs had twice failed to allege a plausible factual basis for their Parity Act claims).

4. Julie K. Lacks Standing to Sue In Her Individual Capacity

Defendants argue that "all of Richard K. and Julie K.'s individual causes of action must be dismissed as a matter of law because they lack statutory and constitutional standing to prosecute any of the claims asserted in this action." Def. Mem. at 18. Plaintiffs respond that Richard K. has statutory standing as a "participant" in the Plan, that Julie K. has statutory standing as a "beneficiary," and that both have constitutional standing because they are the legal guardians of K.K. and "paid out a significant amount of money" for her care as a result of their "moral and legal responsibility" to provide that care. Pl. Opp. Mem. at 17-22; see also Am. Compl. ¶ 64 (Richard and Julie K. incurred more than $100,000 in "medical expenses that should have been paid by the Plan" for K.K.'s care).

Defendants' standing argument implicates two doctrines: constitutional standing and what was formerly referred to as "statutory standing." "Constitutional standing refers to the requirement that parties suing in federal court establish that a 'Case' or 'Controversy' exists within the meaning of Article III of the United States Constitution." Am. Psychiatric Ass'n, 821 F.3d at 358. "Constitutional standing requires (1) that the plaintiff have suffered an 'injury in fact' - that is, 'an invasion of a legally protected interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical'; (2) that there is 'a causal connection between the injury and the conduct' of which the plaintiff complains; and (3) that it is 'likely . . . that the injury will be redressed by a favorable decision.'" Id. (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)).

"Statutory standing" is a misnomer: as the Supreme Court and Second Circuit have made clear, what was formerly referred to as "statutory sanding" is in fact a requirement that a plaintiff "have a cause of action under the applicable statute," an inquiry which "'does not belong' to the family of standing inquiries [], because the 'absence of a valid . . . cause of action does not implicate subject-matter jurisdiction, i.e., the court's statutory or constitutional power to adjudicate the case." Am. Psychiatric Ass'n, 821 F.3d 352 at 358 (quoting Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 129 n.4 (2014)) (emphasis in the original).

Both Richard K. and Julie K. - who allege plausibly that they were required to and did pay for K.K.'s uncovered medical expenses - have constitutional standing to bring suit in their individual capacities. See Am. Psychiatric Ass'n, 821 F.3d at 359 (agreeing that a group of psychiatrists had constitutional standing because "the psychiatrists' personal financial stakes in the suit (as a result of 'dramatically reduced' reimbursement rates) meet the constitutional requirements of injury in fact, causation, and redressability."); accord Anne M., 2019 WL 1989644, at *3-4; Lisa O. v. Blue Cross of Idaho Health Serv. Inc., 2014 WL 585710, at *3 (D. Idaho Feb. 14, 2014). That leaves the question of "statutory standing," which in this case turns on whether Richard and Julie K. can "identify a statutory endorsement" to sue in their individual capacities. Am. Psychiatric Ass'n, 821 F.3d 352, at 359 (quoting Kendall v. Employees Ret. Plan of Avon Prod., 561 F.3d 112, 118 (2d Cir. 2009)).⁷ I conclude that Richard K. may proceed with his ERISA claim in his individual capacity, but Julie K. may not.

7 While defendants' challenge to plaintiffs' constitutional standing is plainly made pursuant to Fed. R. Civ. P. 12(b)(1), their challenge to plaintiffs' identification of a statutory endorsement to sue is better conceived of as part of their motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6). See Griffin v. Gen. Mills, Inc., 634 F. App'x 281, 284 (11th Cir. 2015) (in light of Lexmark, interpreting a district court's decision that a party lacked statutory standing to be a determination "that she failed to state a claim under [Rule] 12(b)(6)"). See also Lavandeira v. Infuse, LLC, 2009 WL 10697463, at *5 (S.D.N.Y. Nov. 24, 2009) ("Where, as here, statutory standing is closely bound to the merits, courts have analyzed statutory standing pursuant to Rule 12(b)(6).") (collecting cases).

Richard K. has "a statutory endorsement" to bring suit under ERISA in his individual capacity because 29 U.S.C. § 1132(a)(1) provides that a civil action under that provision may be brought "by a participant or beneficiary (A) for the relief provided for in subsection (c) of this section, or (B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." Id. (emphasis added). Defendants argue that the benefits in this case, if "due to" anyone, would be "due to" K.K. rather than either Richard or Julie K. Def. Mem. at 18-20. I disagree as to Richard K. He is a plan "participant" who seeks to recover benefits for care provided to his minor child, designated by him as a beneficiary of "his plan." On those facts, I have no trouble concluding that he seeks to recover benefits "due to him" under the terms of that plan. See Anne M., 2019 WL 1989644, at *3-4 (plan participant who sued in her individual capacity, after the denial of benefits to her minor child, had statutory standing to do so); accord Lisa O., 2014 WL 585710, at *3; Potter v. Blue Shield of California Life & Health Ins. Co., 2014 WL 6910498, at *7 (C.D. Cal. Nov. 26, 2014); Wills v. Regence Bluecross Blueshield of Utah, 2008 WL 4693581, at *7 (D. Utah Oct. 23, 2008).

Julie K, however, is differently situated. Plaintiffs assert in their brief that she is a "beneficiary" of the Plan, Pl. Opp. Mem. at 18, but the Amended Complaint contains no such allegation, stating only that Julie K. is K.K.'s parent and guardian. Am Compl. ¶ 1. The Court cannot rely on a factual statement made only in plaintiffs' brief to conclude that Julie K. has the capacity to sue as a Plan beneficiary. See Griffin v. Sheeran, 2019 WL 1750921, at *2 (2d Cir. Apr. 16, 2019) (quoting Kulhawik v. Holder, 571 F.3d 296, 298 (2d Cir. 2009) (per curiam)) ("[a]n attorney's unsworn statements in a brief are not evidence"). See also Anne M., 2019 WL 1989644, at *3 (dismissing parent's claims brought in his individual capacity where there were "no allegations that [he was] a plan participant, beneficiary, or fiduciary.").

Even assuming, arguendo, that Julie K. is - like K.K. - a beneficiary of the Plan, see 29 U.S.C. § 1002(8) (a beneficiary is a "a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder"), it is by no means clear that this status would give her a "statutory endorsement" to sue, in her individual capacity, for benefits allegedly due for the care of a co-beneficiary pursuant to 29 U.S.C. § 1132(a)(1)(B).⁸ Julie K.'s claims should therefore be dismissed to the extent they are brought in her individual capacity. Defendants raise no objections to the capacity of either Richard or Julie K. to sue as the parents and guardians of their minor daughter.

8 To read 29 U.S.C. § 1132(a)(1)(B) to permit any beneficiary of a plan to bring an individual suit to recover benefits due to another beneficiary would seemingly stretch the language of the statute too far - permitting minor children, for example, to sue for benefits denied to their siblings. Because plaintiffs here failed to allege that Julie K. is a beneficiary at all, the Court need not reach that question.

III. CONCLUSION

For the reasons stated above, I respectfully recommend that this action be STAYED until the earlier of (i) final judgment in Wit, or (ii) an order from the Wit court either decertifying or excluding K.K. from the Wit Guideline Class. I further recommend that the parties be directed to file a status letter every six months, as well as a letter within fourteen days of the happening of either of those events, updating the Court on the Wit proceedings and informing the Court of the parties' respective positions on whether and how this action should proceed. In the event this action is not stayed, I recommend that plaintiffs' Parity Act claim be DISMISSED, with prejudice, and that the claims of plaintiff Julie K. be DISMISSED to the extent they are brought in her individual capacity. Dated: New York, New York

June 28, 2019

/s/ _________

BARBARA MOSES

United States Magistrate Judge

NOTICE OF PROCEDURE FOR FILING OBJECTIONS

TO THIS REPORT AND RECOMMENDATION

The parties shall have fourteen days from this date to file written objections to this Report and Recommendation pursuant to 28 U.S.C. § 636(b)(1) and Fed. R. Civ. P. 72(b). See also Fed. R. Civ. P. 6(a) and (d). Any such objections shall be filed with the Clerk of the Court, with courtesy copies delivered to the Hon. Gregory H. Woods at 500 Pearl Street, New York, New York 10007, and to the chambers of the undersigned magistrate judge. Any request for an extension of time to file objections must be directed to Judge Woods. Failure to file timely objections will result in a waiver of such objections and will preclude appellate review. See Thomas v. Arn, 474 U.S. 140 (1985); Frydman v. Experian Info. Sols., Inc., 743 F. App'x, 486, 487 (2d Cir. 2018); Wagner & Wagner, LLP v. Atkinson, Haskins, Nellis, Brittingham, Gladd & Carwile, P.C., 596 F.3d 84, 92 (2d Cir. 2010).