Ilwu-Pma Welfare Plan Board of Trustees et al v. Connecticut General Life Insurance Company et al

MOTION for Summary Judgment or Parial Summary Judgment

N.D. Cal.January 12, 2017

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA ILWU-PMA WELFARE PLAN BOARD OF TRUSTEES and ILWU-PMA WELFARE PLAN, Plaintiffs, v. CONNECTICUT GENERAL LIFE INSURANCE COMPANY, GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY, and CAREWISE HEALTH, INC., f/k/a SHPS HEALTH MANAGEMENT SOLUTIONS, INC., Defendants. No. 3: I 5-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, AND MEMORANDUM OF POINTS AND AUTHORITIES [FILED CONCURRENTLY WITH DECLARATIONS OF ELISE D. KLEIN AND J. MARK ABERNATHY AND [PROPOSED] ORDER] Judge: Honorable William H. Alsup Courtroom: 8 Date: February 16, 2017 Time: 8:00 a.m. LEWIS BRISBOIS BISGAARD & SMITH LLP ELISE D. KLEIN (State Bar No. 111712) Electronic Mail: Elise.Klein@lewisbrisbois.com JOSEPH K. HEGEDUS (State Bar No. 93858) Electronic Mail: Joseph.Hegedus@lewisbrisbois.com CHRISTOPHER J. GREENLEAF (State Bar No. 170514) Electronic Mail: Christopher.Greenleaf@lewisbrisbois.com 633 West 5th Street, Suite 4000 Los Angeles, California 90071 Telephone: (213) 250-1800 Facsimile- (213) 250-7900 Attorneys for CAREWISE HEALTH, INC. (Formerly Known as "SHPS HEALTH MANAGEMENT SOLUTIONS, INC.") PLEASE TAKE NOTICE that on February 16, 2017, at 8:00 a.m., or as soon thereafter as this matter may be heard in Courtroom 8 of the above-entitled court, located at 450 Golden Gate Avenue, San Francisco, California, defendant Carewise Health, Inc. (formerly known as "SHPS Health Management Solutions, Inc." and hereinafter, "Carewise"), by its attorneys and in accordance with rule 56 of the Federal Rules of Civil Procedure and other applicable law, will 4846-4451-2320.2 1 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGAARD &StVEH LLP A1TORNEYS AT LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 1 of 36 move and hereby moves this Court for an order granting summary judgment, or in the alternative partial summary judgment. The motion for summary judgment is based upon the following grounds: 1. The first through third claims by plaintiff ILWU-PMA Welfare Plan Board of Trustees (hereinafter, "Board") against Carewise for breach of fiduciary duty under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1101 et seq. (hereinafter, "ERISA"), fail, because Carewise had no fiduciary duty under ERISA, as a de facto fiduciary or otherwise.' 2. Alternatively, the Board's first through third Claims against Carewise fail, because Carewise did not breach any fiduciary duty under ERISA. 3. The Board's fourth through sixth claims against Carewise for prohibited transactions fail, because Carewise did not engage in any prohibited transaction under ERISA. 4. Plaintiffs' ninth claim against Carewise for breach of contract fails, because Carewise did not breach any contact with either plaintiff If, for any reason, summary judgment cannot be granted, Carewise will move and hereby moves for partial summary judgment as follows: 1. The Board's first through third claims against Carewise for breach of fiduciary duty under ERISA fail, because Carewise had no fiduciary duty under ERISA, as a de facto fiduciary or otherwise. 2. Alternatively, the Board's first through third Claims against Carewise fail, because Carewise did not breach any fiduciary duty under ERISA. 3. The Board's fourth through sixth claims against Carewise for prohibited transactions fail, because Carewise did not engage in any prohibited transaction under ERISA. 1 Byits order of December 22, 2015, this Court held that plaintiff ILWU-PMA Welfare Plan (hereinafter, "Plan") "lacks standing to sue under ERISA, . . . so those claims are DISMISSED without leave to amend." Order at 23:3-5 (Dec. 22, 2015). Thus, at this juncture it is only the Board that remains to assert claims under ERISA. 4846-4451-2320.2 2 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGAARD &SWIM LLP ATTORNEYS AT LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 2 of 36 4. Plaintiffs' ninth claim against Carewise for breach of contract fails, because Carewise did not breach any contact with either plaintiff. 5. Carewise should be awarded its reasonable attorneys' fees under ERISA. This motion is based on this notice, the attached memorandum of points and authorities, the declarations of Elise D. Klein and J. Mark Abernathy, and the exhibits thereto; prior orders of this Court; the transcripts of the depositions taken in this action of John Cisnero, Phil Davidson, Craig Kellar, Kate McClure, Stephanie Muoy, George Romero, Elizabeth Sharpe, and Gwen Slack; all pleadings, documents, and records on file in this action; and on such oral argument as may be presented at the hearing on this matter. Dated: January 12, 2017 LEWIS BRISBOIS BISGAARD & SMITH LLP By /s/Elise D. Klein ELISE D. KLEIN By /s/Joseph K. Hegedus JOSEPH K. HEGEDUS Attorneys for CAREWISE HEALTH, INC. (Formerly Known as "SHPS HEALTH MANAGEMENT SOLUTIONS, INC.") 4846-4451-2320.2 3 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGAARD &SMIH LLF' ATTORNEYS AT LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 3 of 36 TABLE OF CONTENTS Page I. INTRODUCTION 1 II. MATERIAL FACTS ARE NOT GENUINELY IN DISPUTE. 2 A. The Plan 2 B. The Coastal Indemnity Plan. 2 C. The Plan's Agreements with Vendors 3 1. The Plan Entered into an Agreement with CENTRA for Negotiation Services, and Carewise Assumed That Function and Arrangement. 3 2. Board's Administrative Services Contract with Great West and CG. 4 D. Fee Negotiations with Out-of-Network Providers Prior to 2010 4 E. When the Board Changed Its Policy (but Did Not Change the Terms of the Plan) and Decided to Pay All Out-of-Network Claims with Reference to UCR Rates, It Did Not Notify Carewise of that Change in Policy. 6 1. The Board's October 4, 2008 Directive to CG Was Not Given to Carewise. 7 2. Plaintiffs' Alleged Discovery of CG's Failure to Implement the October 4, 2008 Directive. 8 3. CG First Communicated the UCR Decision to Carewise in 2010. 9 F. The Plan's Separate Medical Necessity Review Agreement with Carewise 9 III. ALL CAUSES OF ACTION IN WHICH PLAINTIFFS ASSERT CAREWISE SHOULD HAVE NEGOTIATED USING UCR RATES ARE BARRED AS A MATTER OF LAW. 9 IV. BECAUSE CAREWISE IS NOT A FIDUCIARY UNDER ERISA, THIS COURT SHOULD GRANT SUMMARY JUDGMENT AGAINST PLAINTIFFS ON THE FIRST, SECOND, AND THIRD CLAIMS. 10 A. Carewise Did Not Have or Exercise Discretionary Authority or Control Over Management of the Plan 11 B. Carewise Did Not Have or Exercise Discretion over Assets of the Plan. 11 C. The Discounts Carewise Was Able to Negotiate With Were Not Plan Assets. 16 D. Alternatively, Carewise Is Entitled to Summary Judgment on the First Three Counts of the SAC, Because No Breach of Any Fiduciary Duties Occurred. 18 1. Carewise Did Not Breach the Duty of Loyalty. 18 4846-4451-2320.2 j 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGAARD SrvIi1-1 UP ATTORNEYS AT LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 4 of 36 2. Carewise Did Not Breach the Duty of Prudence 19 3. Carewise Did Not Breach the Duty to Follow Plan Terms. 20 E. The Board Cannot Show that Carewise Engaged in Prohibited Transactions. 21 F. Carewise Did Not Knowingly or Otherwise Violate ERISA § 406(b)(1) 21 G. Carewise Did Not Knowingly or Otherwise Violate ERISA § 406(b)(3) 23 H. Carewise Did Not Receive Unreasonable Compensation. 24 V. THIS COURT SHOULD GRANT SUMMARY JUDGMENT TO CAREWISE ON PLAINTIFFS' STATE-LAW CLAIM OF BREACH OF CONTRACT 24 VI. CAREWISE SHOULD BE AWARDED REASONABLE ATTORNEYS' FEES UNDER ERISA 25 VII. CONCLUSION 25 4846-4451-2320.2 11 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS LEWIS BRISBOIS BISGAARD &MN LIP ATTORNEYS AT LAW 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 5 of 36 LEWIS BRISBOIS BISGAARD & SIV111-1 UP ATTORNEYS AT LAW 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Federal Cases Acosta v. Pacific Enterprises, 950 F.2d 611 (9th Cir. 1991) 17 Alves v. Harvard Pilgrim Health Care, Inc., 204 F. Supp. 2d 198 (D.Mass. 2002) 22 Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) 10 Burke v. Latrobe Steel Co., 775 F.2d 88 (3d Cir. 1985) 20 Bussian v. RJR Nabisco, Inc., 223 F.3d 286 (5th Cir. 2000) 18 Celotex Corp. v. Catrett, 477 U.S. 317 (1986) 10 Chicago Dist. Council of Carpenters Welfare Fund v. Caremark, Inc., 474 F.3d 463 (7th Cir. 2007) 13 CIGNA Corp. v. Amara, 563 U.S. 421 (2011) 10, 21 Colleton Reg. Hosp. v. MRS Med. Review Sys., Inc., 866 F. Supp. 896 (D.S.C. 1994) 15 DeFazio v. Hollister Employee Share Ownership Trust, 2015 U.S. App. LEXIS 8048 (9th Cir. 2015) 15 DeFazio v. Hollister, Inc., 854 F.Supp.2d 770 (E.D.Cal. 2012) 15 Deluca v. Blue Cross Blue Shield of Michigan, 628 F.3d 743 (6th Cir. 2010) 16 Donald I. Galen, MD., Inc. v. McAllister, 833 F. Supp. 761 (N.D. Cal. 1992) 12 Erlandson v. Liberty Life Assurance Co. of Boston, 320 F. Supp. 2d 501 (N.D.Tex. 2004) 13 Fritcher v. Health Care Service Corp., 301 F.3d 811 (7th Cir. 2002) 13 Gabriel v. Alaska Elec. Pension Fund, 773 F.3d 945 (9th Cir. 2014) 12 Gartenberg v. Merrill Lynch Asset Mgmt., 694 F.2d 923 (2d Cir. 1982) 24 48464451-2320.2 j j 1 3 :15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 6 of 36 Goldenberg v. Indel, 741 F. Supp. 2d 618 (D.N.J. 2010) 24 Haddock v. Nationwide Fin. Servs., Inc., 419 F.Supp.2d 156 (D.Conn. 2006), vacated on other grounds, 460 Fed.App. 26 (2d Cir. 2012) 22 Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242 (2010) 25 Harris Trust & Say. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238 (2000) 21 Hecker v. Deere & Co., 556 F.3d 575 (7th Cir. 2009) 13 Hummell v. S.E. Rykoff & Co., 634 F.2d 446 (9th Cir. 1980) 25 IT Corp. v. Gen. Am. Life Ins. Co., 107 F.3d 1415 (9th Cir. 1997) 12, 17 Johnson v. Couturier, 572 F.3d 1067 (9th Cir. 2009) 16 Kayes v. Pacific Lumber Co., 51 F.3d 1449 (9th Cir. 1995) 17 Klosterman v. Western Gen. Mngtt, Inc., 32 F.3d 1119 (7th Cir. 1994) 12 Kyle Railways., Inc. v. Pacific Admin. Servs., Inc., 990 F.2d 513 (9th Cir. 1993) 15 L&W Assocs. Welfare Benefit Plan v. Estate of Wines, 2014 U.S. Dist. LEXIS 3512 (E.D. Mich. Jan. 13, 2014) 14 Local 56, United Food & Community Workers Union v. Campbell Soup Co., 898 F. Supp. 1118 (D.N.J. 1995) 13 Loomis v. Exelon Corp., 658 F.3d 667 (7th Cir. 2011) 24 Mertens v. Hewitt Associates, 948 F.2d 607 (9th Cir. 1991), 508 U.S. 248 (1993) 13 Mirick v. Prudential Ins. Co. of America, 100 F.Supp.3d 1094 (W.D.Wash. 2015) 14 Moeckel v. Caremark, Inc., 622 F. Supp. 2d 663 (M.D. Tenn. 2007) 13, 17, 22 Mulder v. PCS Health Systems, Inc., 432 F.Supp.2d 450 (D.N.J. 2006) 15, 18 4846-4451-2320.2 iv 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS LEWIS BRISBOIS BISGAARD &SIVBH LIP ATTORNEYS AT LAW 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 7 of 36 Nieto v. Ecker, 845 F.2d 868 (9th Cir. 1988) 14 Patelco Credit Union v. Sahni, 262 F.3d 897 (9th Cir. 2001) 22 Place v. Abbott Labs., Inc., 938 F.Supp. 1373 (N.D.I11. 1996) 14 Plan v. Pension Prof, Inc., 195 F.3d 1135 (9th Cir. 1999) 14 Plan v. Pension Profs., Inc., 195 F.3d 1135 (9th Cir. 1999) 10, 11, 15, 16 Prete v. Magellan Behavioral Health, Inc., 112 F.Supp.3d 942 (N.D.Cal. 2015) 12 Rutledge v. Seyfarth, Shaw, Fairweather & Geraldson, 201 F.3d 1212 (9th Cir. 2000) 21 S.M. v. Oxford Health Plans (NY), Inc., 94 F.Supp.3d 481 (S.D.N.Y. 2015), aft d, 644 Fed.App. 81 (2d Cir. 2016) 15 Santomenno ex rel. John Hancock Trust v. John Hancock Life Ins. Co. (U.S.A.), 768 F.3d 284 (3d Cir. 2014) 12, 16, 19 SEC v. Capital Consultants, LLC, 397 F.3d 733 (9th Cir. 2005) 18 Sidlo v. Kaiser Permanente Ins. Co., 2016 U.S. Dist. LEXIS 150768 (D.Haw. Oct. 31, 2016) 19 Smith v. CMTA-IAM Pension Trust, 746 F.2d 587 (9th Cir. 1984) 25 Srein v. Soft Drink Workers' Union, Local 812, 93 F.3d 1088 (2d Cir. 1996) 16 Tibble v. Edison Intl, 2010 U.S. Dist. LEXIS 69119 (C.D.Cal. July 8, 2010), aff'd, 711 F.3d 1061 (9th Cir. 2013) 18, 19, 23 Tomkins v. United Healthcare of New England, Inc., 203 F.3d 90 (1st Cir. 2000) 13 Varity Corp. v. Howe, 516 U.S. 489 (1996) 21 White v. Chevron Corp., 2016 U.S. Dist. LEXIS 115875 (N.D.Cal. Aug. 29, 2016) 18, 19 Wright v. Oregon Metallurgical Corp., 360 F.3d 1090 (9th Cir. 2004) 11 4846-4451-2320.2 v 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGAARD &SMIH LLP ATTORNEYS AT LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 8 of 36 Yeseta v. Baima, 837 F.2d 380 (9th Cir. 1988) 14 Federal Statutes 29 U.S.C. § 1002(14)(B) 21 29 U.S.C. § 1002(21)(A) 11, 13 29 U.S.C. § 1102(a) 11 29 U.S.C. § 1102(a)(1) 12 29 U.S.C. § 1104(a)(1)(A) 10, 18 29 U.S.C. § 1104(a)(1)(B) 19 29 U.S.C. § 1104(a)(1)(D) 12, 20 29 U.S.C. § 1105(c)(1)(B) 11 29 U.S.C. §§ 1106(a) 21 29 U.S.C. § 1332(g)(1) 25 Federal Rules and Regulations 29 C.F.R. § 2509.75-8, FR-16 (2005) 11 29 C.F.R. § 2509.75-8.D-2 13, 14 29 C.F.R. §§ 2510.3-101(a)(2), 2510.3-102(a) 17 29 C.F.R. § 2550.408b-2(e)(3) 23 F.R.Civ.P. 8(a) 9 F.R.Civ.P. 56(a) 10 Additional Authorities DOL Adv. Op. 93-14A (Sept. 9, 2011). 17 DOL Tech. Release No. 2011-04 (Jan. 24, 2011). 17 4846-4451-2320.2 vi 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGAARD &SVEN UP ATTORNEYS AT lAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 9 of 36 MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION In this action, Carewise's sole role was a narrow one: It negotiated discounts of invoices submitted by out-of-network medical providers, i.e., those providers that had no contract with any party to this action, for medical services rendered to members of the Plan and their dependents. Carewise did not enter into any written or oral agreement with the Plan or with the Board. Rather, "[Carewise] assumed certain contractual obligations to perfoiin certain services of the [Coastwise Indemnity Plan]." SAC, ¶ 133.2 In 2003, Carewise assumed the invoice-negotiation services which had been performed by its predecessor, CENTRA Healthcare Administrative Services (hereinafter, "CENTRA"). As consideration for providing such negotiation services, Carewise accepted the same compensation plaintiffs had previously agreed to pay to CENTRA, i.e., twenty- three percent (23%) of the reduction to which the out-of-network (non-contracted) medical provider agreed to accept. Carewise had absolutely no control or discretion to decide how much of a reduction - if any - such an out-of-network provider may accept. Carewise never paid medical claims, never paid monies to the medical providers, and never had control of Plan assets, monies, or management. Therefore, Carewise never became an ERISA fiduciary, de facto or otherwise. At all times, the functions of deciding eligibility of Plan members and paying their medical bills were performed by two successive third-party administrators (or "TPAs"), at first by defendant Great-West Life Insurance Company (hereinafter, "Great-West") and later by defendant Connecticut General Life Insurance Company (hereinafter, "CG"), both as Plan fiduciaries.3 Carewise negotiated with out-of-network providers only those invoices which in amount exceeded a monetary threshold prescribed by the Plan, and Carewise was required to perform that service only when instructed to do so by the TPA. 2 "SAC" is an abbreviation for plaintiffs' second amended complaint, the operative pleading. 3 Both TPAs have settled with plaintiffs. 4846-4451-2320.2 1 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGAARD & SMITH UP ATTORNEYS At LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 10 of 36 LEWIS BRISBOIS BISGMRD & SIAN LIP ATTORNEYS AT LAW 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The Plan states that the Board is the named fiduciary and administrator, the sole interpreter of the Plan's terms, and the final arbiter of all decisions to pay claims. II. MATERIAL FACTS ARE NOT GENUINELY IN DISPUTE. A. The Plan The Plan provides medical and other benefits to eligible union-represented longshore workers and their dependents. See the Plan, Exh. 1. Claims for benefits under the Plan are submitted to and initially decided by the Board "or a contractor or insurer with which the Trustees have contracted to provide or administer Benefits." Id., § 5.4. (Neither the Plan nor the Board has ever entered into any contract with Carewise "to provide or administer Benefits.") Participants may appeal any adverse benefit decision to the Board's Benefits Subcommittee, whose decision is final. Id., §§ 5.41-.45; see also Slack depo., p. 69. The Board has the "sole and exclusive power and discretion" "to interpret, construe, and apply the terms of the Agreement and to decide all issues of fact arising thereunder." Plan, § 5.11 (emphasis added). This includes, "without limitation, the power to determine whether Eligibility to participate in the Plan or to qualify for a Benefit has been established in accordance with the Agreement and the amount of Benefits (if any) that may have become payable." Id. The Plan has no provision whatsoever that would limit the amount of benefits payable to members for out-of-network medical services to usual, customary, and reasonable (hereinafter, "UCR") rates, as plaintiffs contend (SAC, ¶ 15). B. The Coastal Indemnity Plan. Through the Plan, the Board offers several benefit programs, including the Coastal Indemnity Plan ("CIP"). See SSPD, Exh. 2. The CIP, which is self-funded, permits Plan members to participate in a preferred provider organization ("PPO"), where they can obtain medical services from physicians, hospitals, and other providers that have contracts with the Plan to accept agreed rates for designated services. There providers are described as in-network (or "INET") providers. A member who is treated by an in-network provider has no obligation to pay any portion of a medical provider's invoice, other than the member's co-payments and deductible. See SAC, ¶ 13. 4846-4451-2320.2 2 3: 15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 11 of 36 Under the CIP, members can also obtain services from medical providers that have no contract with the Plan (described as out-of-network or "ONET" providers). SAC, ¶¶ 14-15. Having no contract prescribing the amounts payable for its medical services, an out-of-network provider may elect to "balance bill" the member, i.e., bill a member for the balance of the bill that the Plan (acting through a TPA) elects not to pay. See SAC, ¶ 15; McClure depo., p. 234. As such, a member who obtains treatment from an out-of-network provider is liable for any amount "balance billed," in addition to the member's co-payment or deductible. See SAC, ¶¶ 14, 15. C. The Plan's Agreements with Vendors. 1. The Plan Entered into an Agreement with CENTRA for Negotiation Services, and Carewise Assumed That Function and Arrangement. On October 21, 1997, the Board entered into a letter-agreement with CENTRA for negotiation services. Exh. 316. Under that agreement, CENTRA negotiated with out-of-network providers to try to convince them to accept discounts of their invoices. /d.4 The compensation to plaintiffs agreed to pay CENTRA was 23% of the savings negotiated below billed charges. Exh. 309, see also McClure depo. pp. 211-12, 224-25, Exh. 260, 290, 307; Davidson depo., pp. 209, 230, Exh. 246; Kellar depo., pp. 164-65; Muoy depo., pp. 78, 150, 192-95, 210, 358-59, Exh. 158. If CENTRA could not convince a provider to accept a discount, CENTRA got paid nothing. In 2003, Carewise assumed the invoice-negotiation services which had been performed by CENTRA,5 although plaintiffs and Carewise entered into no written agreement.6 The Board knew of this arrangement, because (1) the Plan was audited annually; (2) the Board received quarterly spreadsheets from Carewise reflecting that its compensation was based 4 CENTRA and the Plan agreed that CENTRA was intended to negotiated from the out-of- network medical providers' billed charges, and not, for example, from UCR rates. Exhs. 310, 312. 5 According to plaintiffs' allegations, which Carewise accepts as true for the purpose of the present motion, Carewise assumed CENTRA's contractual obligations in or around 2003. SAC, ¶ 30. 6 Plaintiffs admit Carewise presented a draft of a written agreement for negotiation services to plaintiffs' consultant and agent, Milliman, but plaintiffs never signed it. SAC, ¶ 31. 48464451-2320 2 3 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGAARD & SMIH LLP ATTORNEYS AT LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 12 of 36 on savings from billed charges; and (3) Phil Davidson of Milliman (plaintiffs' agent and consultant) reaffirmed that compensation several times on behalf of the Plan, and did not ask for a reduction. Muoy depo., pp. 78, 150, 192-95, 210, 358-59, Exh. 158; Davidson depo., p. 114; McClure depo., pp. 64, 67; Sharp depo., p. 222, Exh. 124; Davidson depo., pp. 170-71, Exh 236. The Board's contractual relationship with Carewise was similar to its arrangement with TC3, another vendor which performed fee negotiation services for the Plan. Kellar depo., pp. 78, 206-207. The Board compensated TC3 25% (more than Carewise's 23% rate) of the savings that it negotiated, also off of billed charges. Id.; see also Sharpe depo., p. 233; Davidson depo., pp. 95, 215-17, Exh. 253; Gorton depo., pp. 101-03, 106. 2. Board's Administrative Services Contract with Great West and CG. Beginning in 1999, pursuant to an Administrative Services Contract with the Board, Great- West (the initial TPA) established a dedicated office, the Coastwise Claims Office ("CCO"), to process and pay claims submitted under the CIP. See SSPD, p. 31; Kellar depo., p. 70; see ASC, Doc. 30-1, §§ 2, 112 and App. A; see also Kellar depo., pp. 20-21; McClure depo., p. 25. In April 2008, CG acquired the Coastwise Claims Office and assumed all of Great-West's duties and obligations under the contract. Kellar depo., p. 21; Romero depo., pp. 94-95. According to the terms of that contract with the Board, CG performed "purely non- discretionary and ministerial functions for [the Plan] within a framework of policies, interpretations, rules, practices and procedures made by the [Board]." See ASC, Doc. 30-1, at §§ 2, ¶ 2 and App. A; see also Kellar depo., p. 20; McClure depo., p. 25. Among its functions, CG referred out-of-network claims to Carewise for negotiation of discounts, if the out-of-network providers agreed to discounts, of their invoices. Kellar depo., p. 126; Muoy depo., pp. 62-65, 80- 81, 84-85, 88-96, 99-101, 103-05. D. Fee Negotiations with Out-of-Network Providers Prior to 2010 Carewise followed specific procedures prescribed by CG when negotiating discounts with out-of-network providers. Kellar depo., pp. 51, 89, 127-28; Muoy depo., pp. 62-65, 80-81, 84-85, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 4846-4451-2320.2 4 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS LEWIS 28 BRISBOIS BISGAARD &SMTH LLP ATTORNEYS AT LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 13 of 36 88-96, 99-101, 103-05.7 Ms. Muoy was permitted to reach a preliminary agreement on a discount only if the out-of-network provider agreed not to balance bill the members. Id., pp. 77-78, 110-12, 111, 119, 222-23. If the provider agreed to the discount agreement negotiated by Carewise, CG on behalf of the Plan, issued a check to the provider, and Carewise agreed it would not audit the providers' claims. Muoy depo., pp. pp. 77-78, 110-12, 150-52, 222-23. It is crucial to note that Carewise had no control or discretion as to whether an out-of- network provider with no contract with the Plan would ever accept any discount of the provider's bill for medical services provided to the Plan's member. Moreover, Carewise had no discretion, authority, or ability to approve or pay any claims. Several out-of-network providers, who had treated a significant number of Plan members, complained to Ms. Muoy about receiving so many FAXs, and asked Carewise to agree to a fixed percentage of discounts, a so-called "auto-discount" agreement. Muoy depo., pp. 68-69, 210, 213, 223, 226, 233.) Ms. Muoy on occasion did so, but only with the CCO's knowledge and approval - and occasional instruction that she do so! Id , pp. 127, 147, 215-18, 220, 230-32, 238, 240-41, 313-14, 330. Despite these "auto-discount" agreements, Ms. Muoy still reviewed each individual claim, generated individual letter-agreements to the providers, obtained signatures on them, and forwarded the letter-agreements letters to Ms. James (at the CCO) for approval, processing, and payment. Muoy depo., pp. 212-15, 231-32. Either party to the auto-discount agreement could - and did - deviate from the "auto-discount" agreement to negotiate a different (usually deeper) 7 A representative of CG (usually Ruth James) sent to a representative of Carewise (usually Stephanie Muoy) a stack of claims containing basic information (e.g., the patient's name, the provider's name and contact information, and the billed charges), but no medical records. Muoy depo., pp. 62-65, 80-81, 84-85, 88-96, 99-101, 103-05, 118-19, 154-56. Carewise reviewed that information and then contacted each medical provider to negotiate to convince them to accept a discount from billed charges. Muoy depo., pp. 106-13. If the provider agreed to a discount, Carewise confirmed that agreement and asked the provider to sign a letter-agreement. Id., pp. 79, 125, 146, 150-51, 252-54, Exh. 163; Kellar depo., pp. 104-05, 221-222. If the provider signed the letter-agreement, Carewise forwarded a copy to CG for CG 's approval and payment of the discounted invoice. Muoy depo., pp. 127, 165. Carewise did not and could not approve or pay any claims. Kellar depo., p. 217. 4846-4451-2320.2 5 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGAARD &SNEH ATTORNEYS AT LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 14 of 36 discount. Muoy depo., p. 231-232; Abernathy Decl., ¶ 6, exhs. B & C. Again, because the out-of- network providers had no agreement with the Plan, those providers were not obligated to accept the "auto-discount," any particular amount or percentage of discount, or any discount at all. E. When the Board Changed Its Policy (but Did Not Change the Terms of the Plan) and Decided to Pay All Out-of-Network Claims with Reference to UCR Rates, It Did Not Notify Carewise of that Change in Policy. First and foremost, in dereliction of their fiduciary duties, the trustees on the Board decided that the benefits payable under the Plan should be limited to UCR rates, but they never amended the Plan to provide for this limitation. Moreover, that decision had the corollary effect of exposing the Plan's members to balance-billing by the providers. Significantly, it bears repeating that an out-of-network medical provider had no obligation whatsoever to accept UCR rates or anything other than the face amount of its invoice. As noted, the Board knew that the CCO (i.e., CG) historically had processed most out-of- network claims based on billed amounts rather than at UCR rates. Kellar depo., p. 93; Romero depo., p. 35.) In 2007, the Board sought to change this process. Second, as of September 1, 2007, the Board executed a document (the "UCR Stipulation") purporting to mandate the application of UCR rates for all out-of-network claims. See Romero depo., p. 35, Exh. 2; McClure depo., pp. 128, 230-31; Davidson depo., p. 97. The use of the word "stipulation" implies that it is an agreement between or among different parties. When examined, however, it is clear the "UCR Stipulation" is between union-appointed trustees and management- appointed trustees, all sitting on the same Board. No other person, and certainly not Carewise, is a party to the UCR Stipulation. Hence, it is not binding on anyone other than the Board trustees. It is not even binding on the Plan's members, because it is not a part of the Plan. The significance of the UCR Stipulation for present purposes is that it articulates the Board's prime directive: Negotiate the bills of out-of-network providers to avoid balance-billing of the members. It states that the CCO "shall continue its present practice of referring large claims to an outside company for attempted fee negotiations and settlement of the claims without balance billing to the beneficiaries." Romero Depo., Exh. 2. 4846-4451-2320.2 6 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGMRD & SVIIH LIP ATTORNEYS AT lAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 15 of 36 In the UCR Stipulation, the Board expressly recited that, in the past, it had not applied UCR rates except to claims submitted by surgeons, assistant surgeons and anesthesiologists. Davidson depo., pp. 97-98; Exh. 2 to Romero depo. Demonstrating that the UCR Stipulation was a sea-change in how the Plan would be administered, the Board sent a letter to members in August 2007 advising that the UCR language in the SSPD (but not in the Plan) would be enforced on future claims. Davidson depo., Exh. 212, 221. The Board did not inform Carewise about the UCR Stipulation. Davidson depo., pp. 222, 227.8 Nor did the Board implement the UCR Stipulation promptly. Kellar depo., Exh. 139; McClure depo., pp. 188-91, and Exh. 283, 290.9 1. The Board's October 4, 2008 Directive to CG Was Not Given to Carewise. On October 4, 2008, the Board for the first time instructed CG (but not Carewise) to obtain UCR rates for out-of-network claims from another vendor, Medical Review Institute of America ("MRIoA"), and to pay the claim if it was at or below UCR rates; otherwise, CG was instructed to continue referring the claim to Carewise for fee negotiations. Kellar depo., pp. 86-89, 106, 111- 12, 116-24, 134-35, 204-05, and Exh. 139; Davidson depo., Exh. 236; Sharpe depo., p. 142; McClure depo., p. 178 and Exh. 283. In response to this October 4, 2008 directive, CG informed the Board that, in lieu of referring claims to MRIoA, it would purchase a database so that it could implement the UCR Stipulation. Kellar depo., pp. 67, 94-97. CG did not purchase that database, however. Kellar depo., pp. 67, 100. Neither CG nor the Plan communicated to Carewise the Board's October 4, 2008 decision. 8 The Board had several opportunities to notify Carewise of the UCR Stipulation. For example, by e-mail dated May 23, 2008, the Plan's consultant, Phil Davidson of Milliman, Inc., advised Carewise that the Board "approved guidelines for how they will be handling claims that are in excess of UCR." Davidson depo., pp. 221-22, Exh. 257. But nothing in his email advised Carewise of the UCR Stipulation, or otherwise directed Carewise to try to negotiate discounts to amounts below UCR rates, or even to provide UCR rates to Carewise to use. (See id., Exh. 257.) 9 The Board delayed implementation until October 4, 2008 because it first wanted to evaluate the CCO claims handling process, and also because CG also did not have access to UCR rates. Kellar depo., pp. 67, 81-82, 86-90, 94-97, 128, Exh. 139; Davidson depo., p. 170. 4846-4451-2320.2 7 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGAARD & SIVITH LLP ATTORNEYS AT LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 16 of 36 Davidson depo., pp. 222, 227. Indeed, on November 13, 2008, CG communicated precisely the opposite to Carewise: "If no Primary or Secondary PPO discounts available, refer to [Carewise] for possible Prompt Pay Discount. . . . If [Carewise] reaches agreement with provider, UCR does not apply (so if discounted rate is higher than UCR, it doesn't matter)." Kellar depo., Exh. 137 (boldface emphasis added). Nor did CG or the Plan furnish Carewise with a database of UCR rates, even though they knew that Carewise did not have that information. Davidson depo., pp. 223-24, 227; Kellar depo., p. 128. Thus, Carewise, unaware that the Plan then wanted discount negotiations to be from UCR rates, continued to negotiate from billed charges. Muoy depo., pp. 101, 137, 140-43; Kellar depo., pp. 116-24, 128-29, 134-35; McClure depo., pp. 230-31.1° 2. Plaintiffs' Alleged Discovery of CG's Failure to Implement the October 4, 2008 Directive. Plaintiffs periodically retained an auditing firm, Miller Kaplan, to audit the performance of the CCO. Cistaro depo., pp. 93, 120; McClure depo., pp. 64, 67. By e-mail dated January 25, 2008, Miller Kaplan expressed "concern" to Plan consultant Davidson that "when a non PPO claim is sent to [Carewise] the discount they receive is generally allowing the claim to be paid more than it would be if they just applied U&C[.]" Davidson depo., p. 149, Exh. 229. That concern, however, did not result in any instruction to Carewise. Davidson depo., p. 227. In or around December, 2009, Miller Kaplan again advised plaintiffs of concern about whether Carewise was negotiating from billed charges or from UCR rates. SAC, ¶ 54. Kate McClure, then the head of the Plan's Benefit Plan Office, tried several times to contact the CCO (specifically, Craig Kellar of CG) to ask about the status of the UCR database that CG had agreed to purchase. See McClure depo., pp. 295-96, Exh. 294; Kellar depo., pp. 105-09, 111-12, 120, Exh. 28, 29. On December 18, 2009, Kellar advised McClure that CG, despite its prior assurances to the Board, had not purchased the UCR database. McClure depo., pp. 180-81, 192, Exh. 295; 10 After the October 4, 2008 directive, CG prepared a document to show Carewise how the CCO processed claims. Kellar depo., pp. 61-68, Exh. 137. In that document, however, CG failed to instruct Carewise to negotiate discounts from UCR. Id., Exh. 137. 4846-4451-2320.2 8 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGMRD & SMITH LIP ATTORNEYS AT LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 17 of 36 Kellar depo., pp. 67, 98-99, 116-20, Exh. 30, 31, 139; Exh. 126 to Sharpe depo.; Davidson depo., pp. 170, 186, Exh. 236, 240; SAC ¶ 53. Kellar promised McClure that CG will immediately forward all claims to MRIoA, as it originally had been directed in accordance with the Board's October 4, 2008 directive. Kellar depo., pp. 120-22, Exh. 29, 31. But CG did not keep the promise. (See d., pp. 122-25, 128. 3. CG First Communicated the UCR Decision to Carewise in 2010. CG did not start to send out-of-network claims to MRIoA until January 12, 2010. Kellar depo., pp. 122-25, 128. On January 14, 2010, CG, for the first time, instructed Carewise to discontinue negotiating facility fees from billed charges. (Id., pp. 123-24, 128-29, Exh. 141, 142.)11 On March 4, 2010, CG instructed Carewise to discontinue negotiating physicians' fees off billed charges. Id., pp. 143-444; Muoy depo., pp. 303-05, Exh. 168. F. The Plan's Separate Medical Necessity Review Agreement with Carewise Effective October 1, 2008, Carewise entered into a separate written agreement with the Plan to provide, inter alia, medical necessity reviews for claims referred by the CCO. See 2008 Agreement, App. A-3. Notably, plaintiffs have not alleged that Carewise breached that agreement nor have they made any allegation relating to that agreement. See F.R.Civ.P. 8(a). III. ALL CAUSES OF ACTION IN WHICH PLAINTIFFS ASSERT CAREWISE SHOULD HAVE NEGOTIATED USING UCR RATES ARE BARRED AS A MATTER OF LAW. It is indisputable that the Plan makes no reference to UCR rates. Exh. 1 passim. Rather, only the Supplemental Summary Plan Description ("SSPD") makes bare references to UCR rates. Exh. 2, pp. 16, 34. Even those bare references do not provide the UCR rates, any source for those rates, or how to implement them. The Supreme Court of the United States holds that a summary plan description does not 11 CG's "instruction" came in the form of a vague e-mail from Ms. James to Ms. Muoy. Muoy depo., pp. 62, 280-84, Exh. 166; see also Kellar depo, p. 224, Exh. 142. 4846-4451-2320.2 9 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGMRD &MTH W3 ATTORNEYS AT LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 18 of 36 constitute a part of the Plan. Nor can we accept the Solicitor General's alternative rationale seeking to justify the use of this provision. The Solicitor General says that the District Court did enforce the plan's terms as written, adding that the "plan" includes the disclosures that constituted the summary plan descriptions. In other words, in the view of the Solicitor General, the terms of the summaries are terms of the plan. . . . [W]e cannot agree that the terms of statutorily required plan summaries (or summaries of plan modifications) necessarily may be enforced (under § 502(a)(1)(B)) as the terms of the plan itself. CIGNA Corp. v. Amara, 563 U.S. 421, 436 (2011). Therefore, this Court must reject the Board's attempts to enforce anything said about UCR rates in the SSPD, because UCR rates are nowhere mentioned in the Plan. The Board cannot, as a matter of law, hold Carewise liable under ERISA or under any contract (which also does not mention UCR rates) on UCR rates. IV. BECAUSE CAREWISE IS NOT A FIDUCIARY UNDER ERISA, THIS COURT SHOULD GRANT SUMMARY JUDGMENT AGAINST PLAINTIFFS ON THE FIRST, SECOND, AND THIRD CLAIMS. The Court shall grant a motion for summary judgment if, as here, "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." F.R.Civ.P. 56(a); •accord, Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Because there is no evidence "on which the jury could reasonably find for the [non-moving party]," Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986), this Court should grant Carewise's motion. The Board alleges three claims against Carewise based on fiduciary duty under ERISA.12 As a matter of law, a party can be held liable only if it is either an expressly designated or de facto fiduciary under ERISA. Accord CSA 401(k) Plan v. Pension Profs., Inc., 195 F.3d 1135, 1138 (9th Cir. 1999). Carewise was neither. First, an ERISA plan may designate an entity (such as the Plan designated the Board) as a 12 Plaintiffs' ERISA fiduciary claims are alleged under 29 U.S.C. § 1104(a)(1)(A), (B), and (D). SAC, in 80-98. 4846-4451-2320.2 1 0 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS LEWIS BRISBOIS BISGAARD &SMIHUP ATTORNEYS AT LAW 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 19 of 36 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGAARD & SEEN UP ATTORNEYS AT LAW named fiduciary. 29 U.S.C. § 1102(a). Plaintiffs do not allege that Carewise was ever designated by the Plan to be a named fiduciary; certainly, Carewise was not. Second, an entity may be a de facto fiduciary, depending on the conduct in which it engaged, the functions it performed, or the duties it assumed, but only as set forth in ERISA. It is not enough for the [A] person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan. Such -Lean includes any person designated under section 405(c)(1)(B).[13] 29 U.S.C. § 1002(21)(A); 29 C.F.R. § 2509.75-8, FR-16 (2005); Wright v. Oregon Metallurgical Corp., 360 F.3d 1090, 1101 (9th Cir. 2004). The facts not genuinely in dispute establish that Carewise was not such a de facto fiduciary. Carewise had no discretion or control over management of the Plan and none over assets of the Plan, and it certainly was never retained to provide investment advice. management or Plan assets. Even the Plan's consultant and agent testified that Carewise was not a fiduciary because it had no discretionary authority. Davidson depo., p. 240. A. Carewise Did Not Have or Exercise Discretionary Authority or Control Over Management of the Plan. Neither the Board's allegations in the SAC nor any set of facts remotely suggests that Carewise had any role, function, authority, or discretion in the management of the Plan. Rather, that was the Board's responsibility. B. Carewise Did Not Have or Exercise Discretion over Assets of the Plan. First, to have de facto discretionary authority over management or assets of the Plan, a 13 Section 405(c)(1)(B) of ERISA, 29 U.S.C. § 1105(c)(1)(B), deals with liability of a co- fiduciary. It is inapplicable. If Carewise was not a fiduciary, it cannot be a co-fiduciary. 4846-4451-2320.2 1 1 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 20 of 36 LEWIS BRISBOIS BISGAARD & SMIH UP ATTORNEYS AT LAW 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 person must have or exercise actual power to make binding decisions with respect to the Plan. IT Corp. v. Gen. Am. Life Ins. Co., 107 F.3d 1415, 1420 (9th Cir. 1997); accord, Donald I. Galen, MD., Inc. v. McAllister, 833 F. Supp. 761, 764 (N.D. Cal. 1992) (de facto fiduciary must have "actual decision-making power regarding the management, control or administration of the plan") (emphasis added). The plain and unambiguous language in the Plan, which conferred sole and exclusive discretion upon the Board to render final decisions with respect to approval and payment of claims, is dispositive of the fact that Carewise was not (and legally could not be) a de facto fiduciary under ERISA. See 29 U.S.C. § 1104(a)(1)(D) (fiduciaries must act "in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of ERISA); Gabriel v. Alaska Elec. Pension Fund, 773 F.3d 945, 956 (9th Cir. 2014) (plaintiff may not seek equitable relief under ERISA where, as here, such conclusion "would be inconsistent with the written plan," or would "result in an amendment or modification of a plan" in violation of 29 U.S.C. §§ 1102(a)(1) and (b)(3)) (citation omitted). In this case, the TPAs (Great-West and CG) made claim decisions concerning payment of members' claims. Prete v. Magellan Behavioral Health, Inc., 112 F.Supp.3d 942, 946-47 (N.D.Cal. 2015) (claim reviewer whose decisions (unlike Carewise's here) were final and binding on the plan was properly alleged to be a fiduciary for purposes of motion to dismiss). Carewise had no such function, authority, or ability. It simply negotiated only those invoices submitted by out-of-network medical providers that Great-West and CG sent to Carewise for the sole and single purpose of negotiating to try to convince the providers to discount their invoices. Second, nothing in the Plan or the 1997 CENTRA agreement supports the notion that Carewise had actual decision-making power to bind the Plan such that Carewise could be considered to be a fiduciary. See Santomenno ex rel. John Hancock Trust v. John Hancock Life Ins. Co. (U.S.A.), 768 F.3d 284, 293 (3d Cir. 2014) ("[A] service provider owes no fiduciary duty to a plan with respect to the terms of its service agreement if the plan trustee exercised final authority in deciding whether to accept or reject those terms"); Klosterman v. Western Gen. Mngtt, Inc., 32 F.3d 1119, 1124 (7th Cir. 1994) (claims administrator responsible for initial claims determinations was not a fiduciary because "[the employer], not [claims administrator], retained 4846-4451-2320.2 1 2 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 21 of 36 LEWIS BRISBOIS BISGAARD & SIAM UP ATTORNEYS AT LAW 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 the authority to make the ultimate decisions in all doubtful or contested claims and all claims in which legal actions were proceeding"); Tomkins v. United Healthcare of New England, Inc., 203 F.3d 90, 94 (1st Cir. 2000) (court review must focus on determinations of the final decision- maker); Hecker v. Deere & Co., 556 F.3d 575, 583 (7th Cir. 2009) (defendant "[did] not act as a fiduciary with respect to the terms in the service agreement if it did not control the named fiduciary's negotiation and approval of those terms."); Chicago Dist. Council of Carpenters Welfare Fund v. Caremark, Inc., 474 F.3d 463, 472-73 n.4 (7th Cir. 2007) (defendant not a fiduciary with respect to fixed fee set by agreement negotiated at arm's length). Even a person who has fiduciary duties to a client, such as an attorney or an accountant, is not necessarily an ERISA fiduciary. "A party rendering professional services to a plan is not a fiduciary so long as he does not exercise any authority over the plan in a manner other than by usual professional functions." Mertens v. Hewitt Associates, 948 F.2d 607, 610 (9th Cir. 1991) (internal quotations omitted), aff'd in part, rev 'd on other grounds, 508 U.S. 248 (1993). See also 29 C.F.R. § 2509.75-8.D-2 ("a person who performs purely ministerial functions" is not a fiduciary under 29 U.S.C. § 1002(21)(A)). The reason is that service agreements with vendors are not parts of an ERISA Plan; they do not provide participants with benefits or rights but rather, merely memorialize the obligations that the vendor and the trustees owe each other. See, generally, Erlandson v. Liberty Life Assurance Co. of Boston, 320 F. Supp. 2d 501, 509 (N.D.Tex. 2004) (administrative service contracts which, like the 1997 CENTRA Agreement, were not provided to ERISA plan participants were not "a part of an ERISA plan," citing Fritcher v. Health Care Service Corp., 301 F.3d 811, 817 (7th Cir. 2002) (administrative services agreement between employer and ERISA claims administrator was "not a 'plan document' for purposes of holding its terms against a plan participant or beneficiary") and Local 56, United Food & Community Workers Union v. Campbell Soup Co., 898 F. Supp. 1118, 1136 (D.N.J. 1995) ("A formal plan document is one which a plan participant could read to determine his or her rights or obligations under the plan.")); Moeckel v. Caremark, Inc., 622 F. Supp. 2d 663, 692 (M.D. Tenn. 2007) (third party service contract not part of ERISA plan) (citations omitted); Citibank, 125 F.3d at 722 ("Having to make a decision in the exercise of a ministerial duty does not rise to the level of 48464451-2320.2 13 3 : 15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 22 of 36 LEWIS BRISBOIS BISGAARD & SIVEH UP ATTORNEYS AT LAW 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 discretion required to be an ERISA fiduciary.") (citation omitted); Place v. Abbott Labs., Inc., 938 F.Supp. 1373, 1378 (N.D.Ill. 1996) (utilization reviewer who examined patients and but lacked power to make decisions regarding benefits was not an ERISA fiduciary). TPAs retained merely to apply "rules determining eligibility for participation or benefits," to "process[] claims," or to make "recommendations to others for decisions with respect to plan administration" - functions far more extensive than the negotiation services Carewise performed - still are not de facto fiduciaries when they perform these roles "within a framework of policies, interpretations, rules, practices and procedures made by other persons." 29 C.F.R. § 2509.75-8.D- 2. See also Nieto v. Ecker, 845 F.2d 868, 870-71 (9th Cir. 1988) (attorney who gave professional advice to a plan is not ERISA fiduciary); Yeseta v. Baima, 837 F.2d 380, 385 (9th Cir. 1988) (neither attorney who reviewed Plan's compliance with law nor accountant who prepared tax returns and financial statements was ERISA fiduciary). Any other conclusion automatically would render a wide variety of professionals' fiduciaries under ERISA. See CSA 401(k) Plan v. Pension Prof, Inc., 195 F.3d 1135, 1139 (9th Cir. 1999) ("The policy behind this exception to fiduciary status is to encourage professionals to provide their necessary services without fear of incurring fiduciary liability or feeling the need to charge a higher price to compensate for such risk"). The modest role that Carewise had of simply negotiating some invoices submitted by out- of-network medical providers, i.e., only those invoices sent by the TPAs to Carewise, is far less than the roles of professionals. Carewise had absolutely no discretion or ability to force those providers to accept any discounts to their invoices, and Carewise similarly had absolutely no discretion or ability to pay the invoices. Thus, it had no discretion over assets of the Plan. Third, the 1997 CENTRA Agreement and Carewise's assumption of negotiation services from CENTRA are not part of any ERISA plan. Nothing in either described health benefits or otherwise informed members about their rights under the Plan. See, Mirick v. Prudential Ins. Co. of America, 100 F.Supp.3d 1094, 1097 (W.D.Wash. 2015) (services agreement not part of ERISA plan); L&W Assocs. Welfare Benefit Plan v. Estate of Wines, 2014 U.S. Dist. LEXIS 3512, *28 (E.D. Mich. Jan. 13, 2014) ("The ASC is a contract between BCBSM and L&W that governs the 4846-4451-2320.2 14 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 23 of 36 relationship between those parties. It contains no benefit-defining language, does nothing to apprise plan participants of their benefits or rights under the Plan and is not a Plan document"). Because the agreement and negotiation services are not governed by ERISA, Carewise did not assume de facto fiduciary status in performing those services. Rather, any decision by Carewise in negotiating discounts with out-of-network providers served merely to assert Carewise's "control over its own engagement, and not to exercise discretionary authority or control over the Plan's management or administration." CSA 401(k) Plan, supra, at 1139; see also Mulder v. PCS Health Systems, Inc., 432 F.Supp.2d 450, 458 (D.N.J. 2006) ("the fact that PCS operated independently in negotiating contracts with drug manufacturers does not make PCS an ERISA fiduciary"); Colleton Reg. Hosp. v. MRS Med. Review Sys., Inc., 866 F. Supp. 896, 900 (D.S.C. 1994) (utilization review company is not ERISA fiduciary simply because it reviewed claims for reasonableness of charges and advised plan administrators the amount to pay); DeFazio v. Hollister, Inc., 854 F.Supp.2d 770, 803 (E.D.Cal. 2012) ("While JDS may have proposed the price and been reluctant to negotiate for a higher price, it was acting as a corporation making business decisions in doing so, not a fiduciary to HolliShare"), aff'd sub nom., DeFazio v. Hollister Employee Share Ownership Trust, 2015 U.S. App. LEXIS 8048 (9th Cir. 2015). Finally, any alleged breach of the CENTRA agreement assumed by Carewise or even poor performance of the negotiation services is not tantamount to an exercise of discretion of an ERISA fiduciary. In a case involving improper payment of claims (a function which Carewise did not perform, but the TPAs did), the Ninth Circuit held in Kyle Railways., Inc. v. Pacific Admin. Servs., Inc., 990 F.2d 513 (9th Cir. 1993), The Agreement does not make Pacific a fiduciary over the Plan. . . . [If] Further, Pacific's actions in administrating the Plan do not make Pacific a fiduciary. Kyle claims that Pacific 'exercised discretion not conferred by the Agreement' when it improperly and untimely paid claims. 'Kyle claims that Pacific "exercised discretion . . ." when it improperly and untimely paid claims. However, Pacific's alleged negligence in following the Plan does not change the fact that Pacific was still obligated to follow the Plan." Id. at 516; accord, S.M. v. Oxford Health Plans (NY), Inc., 94 F.Supp.3d 481, 513 (S.D.N.Y. 2015) ("allegations regarding the negligent and even the intentionally poor performance of administrative tasks cannot suffice to constitute breaches of fiduciary duties"), aff'd, 644 Fed.App. 48464451-2320.2 1 5 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGAARD &StvE1-1 LLP ATTORNEYS AT LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 24 of 36 81 (2d Cir. 2016). That Carewise's actions alleged in the SAC purportedly allowed it to "maximize[] its profits while minimizing its work" (SAC, ¶ 84) does not change the analysis. Carewise did not have a fiduciary duty to act in the best interests of the Plan in performing its ministerial duties under the 1997 CENTRA Agreement or Carewise's assumption of negotiation services. See, generally, Johnson v. Couturier, 572 F.3d 1067, 1077 (9th Cir. 2009) ("[A]n individual that has both fiduciary and business functions does not act as an ERISA fiduciary just because its business decisions affect the value of an ERISA plan's assets."); Deluca v. Blue Cross Blue Shield of Michigan, 628 F.3d 743, 747 (6th Cir. 2010) (service provider did not act as fiduciary when it negotiated hospital rates on behalf of Plan and made business decisions about how to allocate its market influence between lines of business); cf. Srein v. Soft Drink Workers' Union, Local 812, 93 F.3d 1088, 1096 (2d Cir. 1996) ("CG was free to negotiate its premium charges with an eye to its profits, its transaction costs (including Srein's commission), and the competition," and had "no fiduciary duty under ERISA at that point to negotiate a premium favorable to the Trust Fund"). C. The Discounts Carewise Was Able to Negotiate With Were Not Plan Assets. Alternatively, plaintiffs present the somewhat convoluted assertion that because Carewise did its ministerial job of being able to get out-of-network medical providers to accept discounts of their invoices, the discounts themselves are Plan assets over which Carewise exercised control, and thereby ipso facto became a de facto ERISA fiduciary. SAC, TT 29-30. As a matter of fact and of law, Plaintiffs are wrong. First, Carewise had no control whatsoever over out-of-network medical providers, which by definition had no contract with the Plan to accept any pre-determined fee for their services. And Carewise had no control over the amount of discount such providers may accept, or whether they would accept any discount at all. It is wholly implausible, and contrary to law and fact, for plaintiffs to suggest that a Plan asset can be something, i.e., the "discount," which may never come into existence at all. Despite that, plaintiffs allege that because a "discount" may come into existence if an out-of-network provider agrees to one, such an ephemeral "discount" automatically makes Carewise a de facto fiduciary of Plan assets. 4846-4451-2320.2 1 6 3 :15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGMRD & SMIH ATTORNEYS AT LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 25 of 36 Second, ERISA does not expressly define "plan assets."14 The Ninth Circuit has thus adopted a "twofold functional test" to determine whether something is an asset of an ERISA plan. Kayes v. Pacific Lumber Co., 51 F.3d 1449, 1466-67 (9th Cir. 1995); Acosta v. Pacific Enterprises, 950 F.2d 611, 620 (9th Cir. 1991). Specifically, "an item in question constitutes an `asset of the plan' if: "(1) ... the item in question may be used to the benefit (financial or otherwise) of the fiduciary, and (2) ... such use is at the expense of the plan participants or beneficiaries." Kayes, supra, at 1467 (citing Acosta, supra, at 620) (emphasis added). An unknown and unknowable discount that may come into existence only upon the agreement or the caprice of an out-of-network medical provider is neither an item that may be a "benefit" nor is it "at the expense" of a Plan member. The discount is simply a reduction of the provider's bill. The discount itself is not an amount of money that can be used to pay a claim, reflected on a balance sheet, or deposited into a bank account. It is simply a construct of negotiation used to reduce a provider's invoice, and can come into existence if and only if the provider agrees to such a reduction. Even assuming arguendo that the unknown, potential discounts were considered to be Plan assets (which they are not), Plaintiffs cannot show that Carewise ever had authority or control over them. Ms. Muoy's uncontroverted testimony reflects that Carewise merely negotiated to obtain the medical providers' agreement to accept discounts. Carewise could not and did not possibly control the outcome of such negotiations, and thus, even if discounts were viewed as assets, Carewise had no control over such purported assets. Consequently, it was not a de facto fiduciary. See, e.g., IT Corp., supra, 107 F.3d at 1422 ("Authority over a plan's money is not the same thing as being a depository of the money. If the plan's money is deposited in a bank, that does not ipso facto make the bank a fiduciary"); Moeckel, supra, at 692 ("Even assuming that the evidence adduced by the plaintiff sufficiently supported his contention that plan assets were used to pay 14 The United States Department of Labor has provided non-exhaustive definitions of the term in other situations. See, e.g., 29 C.F.R. §§ 2510.3-101(a)(2), 2510.3-102(a), and 2580.412-5(b)(2); DOL Adv. Op. 93-14A (Sept. 9, 1994); DOL Tech. Release No. 2011-04 (Jan. 24, 2011). 4846-4451-2320.2 1 7 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGAARD & SMIH UP ATTORNEYS AT LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 26 of 36 Caremark, Caremark exercised no control or authority over such assets; Caremark would have simply received and possessed them. . . . [T]hat is insufficient to convey fiduciary status."); Mulder, supra, at 455, 561 (vendor is not ERISA fiduciary where its formulary and drug switching programs, its negotiation of contracts with drug manufacturers, and its receipt of rebates thereunder, did not constitute control over plan assets). D. Alternatively, Carewise Is Entitled to Summary Judgment on the First Three Counts of the SAC, Because No Breach of Any Fiduciary Duties Occurred. Even if this Court determines that Carewise was a de facto fiduciary, the Court still should grant summary judgment on the first three claims for breach of fiduciary in the SAC. 1. Carewise Did Not Breach the Duty of Loyalty. In the first claim, plaintiffs allege that defendants breached their duty of loyalty under 29 U.S.C. § 1104(a)(1)(A) by entering into the prompt pay (or "auto-discount") agreements. SAC, ¶ 83. On allegations of a breach of ERISA's duty of loyalty, courts primarily are concerned with whether a fiduciary's decision was motivated by a desire to serve its interests over those of the Plan participants and beneficiaries. Tibble v. Edison Int I, 2010 U.S. Dist. LEXIS 69119, *76-78 n. 19 (C.D.Cal. July 8, 2010), aff'd, 711 F.3d 1061 (9th Cir. 2013). "[T]he proper inquiry" into whether a fiduciary breached its duty of loyalty "has as its central concern the extent to which the fiduciary's conduct reflects a subordination of beneficiaries' and participants' interests to those of a third party." Bussian v. RJR Nabisco, Inc., 223 F.3d 286, 298 (5th Cir. 2000). By doing its job of negotiating discounts, Carewise clearly acted in the best interests of the Plan and its members, especially when a prime directive to Carewise was to negotiate discounts such that the members would not be balance-billed. Please note that if Carewise got not convince a provider to accept a discount, Carewise got no fee. Thus, Carewise did not breach any general duty of loyalty it may have owed to Plaintiffs. That Carewise's actions may have caused the Plan to incur unreasonable expenses (if that even occurred), without more, does not change this analysis. See White v. Chevron Corp., 2016 U.S. Dist. LEXIS 115875, *12 (N.D.Cal. Aug. 29, 2016) (rejecting argument that causing ERISA Plan to incur unreasonable expenses breached duty of loyalty); SEC v. Capital Consultants, LLC, 4846-4451-2320.2 18 3 :15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGMRD SMITH LLP ATTORNEYS AT LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 27 of 36 397 F.3d 733, 741-42 (9th Cir. 2005) (rejecting beneficiaries' challenge that receiver's change in distribution formula that increased distributions to some clients and reduced distributions to others per se breached fiduciary duty of loyalty). 2. Carewise Did Not Breach the Duty of Prudence. In the second claim of the SAC, the Board maintains that "defendants" violated 29 U.S.C. § 1104(a)(1)(B) by causing the Plan to pay invoices in amounts that violated the Plan's terms, ignoring the directions of the Board regarding UCR rates, failing to make competent medical necessity deteiminations or to make them at all, and failing to follow the teims of the Plan in negotiating or approving the Carewise auto-discount agreements. SAC, ¶ 90. Plaintiff is wrong. Plaintiffs cannot plausibly claim or demonstrate that when Carewise negotiated to get the best discount it could on out-of-network medical providers' invoices, when the providers had no contract with the Plan to accept any discount at all, its actions can be characterized as imprudent. See Muoy depo., passim. Although it is conceivable that Carewise perhaps in some claims could hypothetically have conviced the providers to accept a deeper discount, that is pure speculation. Moreover, "hindsight is the wrong metric for evaluating [the] fiduciary duty" of prudence. Tibble, 711 F.3d at 1085. "A fiduciary's actions are judged 'based upon information available to the fiduciary at the time of each investment decision and not from the vantage point of hindsight.'" White, 2016 U.S. Dist. LEXIS 115875, at *24. The same conclusion holds true with respect to the auto-discount agreements. The record is undisputed that such agreements did not cost Plan members benefits or coverage. See Sidlo v. Kaiser Permanente Ins. Co., 2016 U.S. Dist. LEXIS 150768, *57-58 (D.Haw. Oct. 31, 2016) (no breach of prudence when fiduciary adopted policy "that ask[ed] nothing of the member from a cost standpoint"). The utter absence of evidence that Carewise was told to negotiate discounts from UCR rates, rather than from billed charges, before January 14, 2010 further negates the contention that Carewise (if it were a fiduciary, which it was not) violated any duty of prudence. To the contrary, Carewise's entering into "auto-discount" agreements with certain out-of- network medical provides is entirely consistent with any duty of prudence. That was simply one method Carewise employed to get the providers to accept the deepest discount they would agree. 4846-4451-2320.2 19 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGMRD & WITH UP ATTORNEYS AT LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 28 of 36 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 3. Carewise Did Not Breach the Duty to Follow Plan Terms. In the third claim of the SAC, the Board alleges "defendants failed to act in accordance with the Plan" in a number of ways, including performing medical necessity determinations and entering into prompt pay discounts that resulted in payment of claims above UCR rates. SAC, ¶ 96. First, these allegations summarily fail because (as discussed above) neither the 1997 CENTRA. Agreement nor Carewise's assumption of the agreement was part of an ERISA plan.15 Second, even assuming arguendo that this agreement was part of the Plan, the Board's allegations still fail. Notwithstanding ERISA's requirement that fiduciaries act "in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of ERISA, 29 U.S.C. § 1104(a)(1)(D); "a plaintiff does not establish a violation of fiduciary duty simply by showing that the [trustee] did not follow the terms of the plan." Burke v. Latrobe Steel Co., 775 F.2d 88, 91 (3d Cir. 1985). Rather "[t]o establish liability, willful or bad faith conduct must be proved." Id. The Board cannot show bad faith on the part of Carewise with respect to the auto-discount agreements. As set forth above, the communications between CENTRA and the Board in 1997 clarified that Carewise negotiated discounts from billed charges and not from UCR rates. There is no evidence whatsoever that CENTRA, or Carewise as its successor, was ever instructed to do otherwise until Ruth James' cryptic email of January 14, 2010. The fact that CG approved each and every discount negotiated by Carewise - and was indisputably aware of the "auto-discount" agreements - further belies any finding of bad faith for purposes of 29 U.S.C. § 1104(a)(1)(D). See Burke, 775 F.2d at 91 (if fiduciary's "action is undertaken pursuant to a good faith, albeit erroneous, interpretation, ERISA's fiduciary provisions are not violated"); McDaniel, 817 F.2d at 1373 ("[T]he direct question we face is not whether we believe section 2.10 applies in these circumstances, but instead whether the trustees have adopted a reasonable interpretation of that 15 As noted above, plaintiffs have not alleged breach by Carewise of the 2008 agreement relating to medical necessity reviews. LEWIS 28 BRISBOIS BISGAARD & SWIM LIP ATTORNEYS AT LAW 48464451-2320.2 20 3:15-cv-02965-WFIA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 29 of 36 provision."). (TC3 also negotiated discounts for Plan members above UCR rates.) Finally, under Amara cannot hold Carewise liable on UCR rates, because the subject is not mentioned in the Plan. E. The Board Cannot Show that Carewise Engaged in Prohibited Transactions. In the fourth through sixth claims of the SAC, the Board alleges Carewise engaged in prohibited transactions under ERISA in violation of 29 U.S.C. §§ 1106(a), (b)(1), and (b)(3). These statutes "supplement[] the fiduciary's general duty of loyalty to the plan's beneficiaries . . . by categorically barring certain transactions deemed 'likely to injure the pension plan.' Harris Trust & Say. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238, 241-42 (2000). ERISA does not expressly provide a cause of action against a nonfiduciary "party in interest" (i.e., one who "provides services" to an ERISA plan, 29 U.S.C. § 1002(14)(B)) for participating in an act prohibited by ERISA § 406. Courts, however, have interpreted ERISA as attaching liability to those non-fiduciary "parties in interest" who knowingly participate in a fiduciary's violations of ERISA § 406. See, e.g., Rutledge v. Seyfarth, Shaw, Fairweather & Geraldson, 201 F.3d 1212, 1221 (9th Cir. 2000) (nonfiduciary party in interest may be sued for knowingly participating in prohibited transaction involving fiduciary). The Board, as the named fiduciary of the Plan, participated in every challenged transaction alleged against Carewise in the SAC. Yet, the Board, by predicating part of its claims on ERISA § 502(a)(3), necessarily seeks individual relief. See, generally, Varity Corp. v. Howe, 516 U.S. 489, 151 (1996) (relief on behalf of plan is sought under ERISA § 502(a)(2), whereas individual relief comes under ERISA § 502(a)(3)). The Board may not do this. Harris Trust & Say. Bank, 530 U.S. at 252. Carewise is entitled to judgment on these claims to the extent the Board seeks such individual relief. F. Carewise Did Not Knowingly or Otherwise Violate ERISA 406(b)(1). In their fourth claim, the Board alleges that Carewise, in violation of ERISA § 406(b)(1), improperly dealt with the assets of the Plan in its own interest when entering into and receiving compensation in connection the prompt pay discount agreements. However, because none of the auto-discount agreements denied coverage to any Plan member, but rather prevented plan 4846-4451-2320.2 21 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS LEWIS BRISBOIS BISGAARD & SMI1-1 LIP ATTORNEYS AT LAW 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 30 of 36 members from being balance billed, the challenged transactions did not involve "plan assets." See Patelco Credit Union v. Sahni, 262 F.3d 897, 908 (9th Cir. 2001) (plan assets include "item[s that may] . . . be used to the benefit (financial or otherwise) of the fiduciary at the expense of the plan participants or beneficiaries") (emphasis added); Haddock v. Nationwide Fin. Servs., Inc., 419 F.Supp.2d 156, 168 (D.Conn. 2006) (applying "functional approach" to determine that revenue sharing payments constitute plan assets because they were received by the defendant "as a result of its status as a fiduciary" and "at the expense of plan participants or beneficiaries"), vacated on other grounds, 460 Fed.App. 26 (2d Cir. 2012). Hence, Carewise, as a matter of law, did not violate ERISA § 406(b)(1). But even assuming that Plan assets were involved in these transactions (which they were not), the evidence still belies that Carewise knowingly engaged in any prohibited transaction. The 1997 CENTRA Agreement documents that CENTRA would negotiate discounts from billed charges, not from UCR. Plaintiffs cannot show that Carewise was instructed to do otherwise before January 14, 2010. This is especially so given that (1) the Board was aware prior to and including 2007 that Carewise routinely negotiated out-of-network provider fees off of billed charges rather than at UCR rates; (2) the Board, while executing a UCR Stipulation purportedly to change the manner in which out-of-network claims were paid, but made no effort to ensure that Carewise was aware of the change; (3) none of plaintiffs' witnesses refuted that Carewise was first made aware of the UCR Stipulation prior to January 2010; (4) TC3's discounts often resulted in out-of-network payments above UCR rates; and (5) most importantly, out-of-network, no-contract medical providers had no obligation to accept UCR rates. The absence of any evidence showing that Carewise knowingly sought any personal advantage - even indirectly - from the auto-discount agreements further bolsters that no self- dealing occurred. See Alves v. Harvard Pilgrim Health Care, Inc., 204 F. Supp. 2d 198, 210 (D.Mass. 2002) ("even if the HMOs had some discretion in implementation, the fact that the copayment sometimes exceeded the defendants' per-unit cost does not, per se, constitute a breach of fiduciary duty. The named plaintiffs actually came out ahead in the copayment plan.") (internal footnote omitted), aff'd, 316 F.3d 290 (1st Cir. 2003); Moeckel, 622 F. Supp. 2d at 682 (no self- 4846-4451-2320.2 22 3 :15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGAARD & SHAH LLP ATTORNEYS AT LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 31 of 36 dealing occurred where Caremark conducted fee negotiations and derived compensation in accordance with administrative services contract negotiated at arm's length). G. Carewise Did Not Knowingly or Otherwise Violate ERISA 4 406(b)(3). In the fifth claim, the Board alleges that the "auto-discount" agreements caused Carewise to receive consideration for its own account from out-of-network providers in connection with assets of the Plan and in violation of ERISA § 406(b)(3). SAC ¶¶ 104, 105. To the contrary, no Plan assets were involved in these alleged transactions, and Carewise did not act as a de facto fiduciary when it engaged in them. Seaway Food Town, Inc., 347 F.3d at 619 (service provider's retention of funds as compensation for services rendered with respect to an ERISA plan in accordance with arm's length administrative agreement negotiated with plan, without more, does not give rise to ERISA fiduciary status); DOL Adv. Op. 97-23A (Sept. 26, 1997) (fiduciary does not violate ERISA § 406(b)(3) by receiving a fee or other consideration from a party dealing with a plan unless the fiduciary, unlike here, "causes" itself to receive the fee by exercising discretion as a fiduciary in connection with a related plan transaction). Carewise's predecessor CENTRA freely contracted with the Board in 1997 for a pre- determined commission based on savings achieved through its fee negotiations with out-of- network providers. Carewise would not have been entitled to those commissions had it not provided the services to the Plan, and did not receive any commission when its negotiations were unsuccessful. Simply put, no self-dealing occurred. See, generally, Tibble, 711 F.3d at 1080-81 (rendering professional services to an ERISA plan in exchange for reasonable compensation, by itself, does not constitute self-dealing); 29 C.F.R. § 2550.408b-2(e)(3) ("If a fiduciary provides services to a plan without the receipt of compensation or other consideration (other than reimbursement of direct expenses properly and actually incurred in the performance of such services ..., the provision of such services does not, in and of itself, constitute an act described in section 406(b) of the Act.").16 16 The fact that a different Plan service provider, TC3, received commissions for its services in a (footnote continued) 4846-4451-2320.2 23 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGAARD & SVITH UP ATTORNEYS AT LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 32 of 36 H. Carewise Did Not Receive Unreasonable Compensation. In the sixth claim, the Board alleges that Carewise violated ERISA § 406(a)(1)(C) by receiving excessive compensation. SAC, ¶ 110. The facts demonstrate that there was nothing unreasonable about Carewise's compensation: (1) the 1997 CENTRA Agreement was negotiated at arm's length between the parties; (2) the Plan consultant reaffirmed Carewise's 23% fee several times; and (3) the Plan paid another service provider, TC3, a higher, 25%, commission based the savings from billed charges that were achieved with the use of the TC3 "wraparound" network. Also, (4) the Board agreed to pay Carewise at the rate of 23% that was identical to the rate CENTRA received on the contract Carewise assumed; and (5) if Carewise got no discount from the provider, Carewise got no fee. In short, no prohibited transaction under ERISA § 406(a)(1)(C) occurred. See, generally, Gartenberg v. Merrill Lynch Asset Mgmt., 694 F.2d 923, 928 (2d Cir. 1982) (to support excessive fees claim "the [service provider] must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm's- length bargaining"); Loomis v. Exelon Corp., 658 F.3d 667, 670-71 (7th Cir. 2011) (dismissing excessive fee claim comparing expenses charged for institutional and retail funds); Renfro, 671 F.3d at 327 (same); Goldenberg v. Indel, 741 F. Supp. 2d 618, 631 (D.N.J. 2010) (dismissing excessive fee claim based on comparison of fees between asset managers of different investment funds since "the Court has no way to gauge the reasonableness of the fee without knowing the cost of providers for the same service"). V. THIS COURT SHOULD GRANT SUMMARY JUDGMENT TO CAREWISE ON PLAINTIFFS' STATE-LAW CLAIM OF BREACH OF CONTRACT. In the ninth claim, plaintiffs allege that "alternatively, such conduct by [Carewise] constituted a breach of its contract with the Plan and the Board." SAC, ¶ 132. Plaintiffs do not, however, point to any term of the 1997 CENTRA Agreement (or Carewise's assumption of that similar fashion further undercuts that Carewise knowingly engaged in any prohibited transaction. 4846-4451-2320.2 24 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGAARD &SIVIIH LIP ATTORNEYS AT LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 33 of 36 agreement) that was breached VI. CAREWISE SHOULD BE AWARDED REASONABLE ATTORNEYS' FEES UNDER ERISA. Under 29 U.S.C. § 1332(g)(1), "the court in its discretion may allow a reasonable attorney's fee and costs of action to either party" who shows "some degree of success on the merits" in an ERISA suit. Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 255 (2010); see also Hummell v. S.E. Rykoff & Co., 634 F.2d 446, 653 (9th Cir. 1980) (enumerating five additional factors that can support an award of attorney fees under ERISA). Consequently, if the Court grants summary judgment in favor of Carewise on any of the Board's ERISA claims, then it should award Carewise fees under ERISA. See also Smith v. CMTA-IAM Pension Trust, 746 F.2d 587, 589 (9th Cir. 1984) (successful ERISA party "should ordinarily recover an attorney's fee unless special circumstances would render such an award unjust"). VII. CONCLUSION For all the foregoing reasons, the Court should grant summary judgment, or partial summary judgment, in favor of Carewise, and award it reasonable attorneys' fees under ERISA. Dated: January 12, 2017 LEWIS BRISBOIS BISGAARD & SMITH LLP By: /s/Elise D. Klein Elise D. Klein By: /s/Joseph K. Hegedus JOSEPH K. HEGEDUS Attorneys for CAREWISE HEALTH, INC. (Formerly Known as "SHPS Health Management Solutions, Inc.") 4846-4451-2320.2 25 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGAARD & &vlTH LLP ATTORNEYS AT LAW Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 34 of 36 FEDERAL COURT PROOF OF SERVICE ILWU-PMA Welfare Plan Board of Trustees, et al. v. Connecticut General Life Insurance Company, et al. - Case No. Case No.: 3:15-cv-02965-CRB At the time of service, I was over 18 years of age and not a party to the action. My business address is 633 West 5th Street, Suite 4000, Los Angeles, CA 90071. I am employed in the office of a member of the bar of this Court at whose direction the service was made. On January 12, 2017, I served the following document(s): DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, AND MEMORANDUM OF POINTS AND AUTHORITIES; DECLARATIONS OF ELISE D. KLEIN AND J. MARK ABERNATHY AND [PROPOSED] ORDER] I served the documents on the following persons at the following addresses (including fax numbers and e-mail addresses, if applicable): SEE ATTACHED SERVICE LIST The documents were served by the following means: El (BY COURT'S CM/ECF SYSTEM) Pursuant to Local Rule, I electronically filed the documents with the Clerk of the Court using the CM/ECF system, which sent notification of that filing to the persons listed above. I declare under penalty of perjury under the laws of the United States of America and the State of California that the foregoing is true and correct. Executed on January 12, 2017, at Los Angeles, California. /s/Sarah Medina Sarah Medina 48464451-2320.2 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS LEWIS BRISBOIS BISGMRD & WITH UP ATTORNEYS AT LAW 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 35 of 36 SERVICE LIST ILWU-PMA Welfare Plan Board of Trustees, et al. v. Connecticut General Life Insurance Company, et al. Case No.: 3:15-cv-02965-CRB D. Ward Kallstrom Kevin J. Lesinski Eric M. Steinert Jonathan A. Braunstein SEYFARTH SHAW LLP 560 Mission Street, Suite 3100 San Francisco, CA 94105 wkallstrom seyfarth.corn klesinski seyfarth.corn esteinert seyfarth.com jbraunstem seyfarth.com Tel: 415 97-2823 Fax (415 397-8549 Douglas R. Schwartz Petra M. Reinecke SCHWARTZ & CERA LLP 201 California Street, Suite 450 San Francisco, CA 94104 doug schwartz-cera.com Petra ,schwartz-cera.com el: (415) 956-2600 Fax: (4151438-2655 Peter W. Saltzman Christine S. Hwang Lindsay R. Nicholas Sara B. Tosdal Nicole Teixeira LEONARD CARDER LLP 1188 Franklin Street Suite 201 San Francisco, CA 94109 pwsaltzman leonardcarder.com chwang@leonardcarder.com lnicho as leonardcarder.com Tel: (41 771-6400 Fax: (41 1771-7010 4846-4451-2320.2 3:15-cv-02965-WHA DEFENDANT CAREWISE HEALTH, INC.'S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT OR PARTIAL SUMMARY JUDGMENT, MEMORANDUM, AND DECLARATIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 LEWIS 28 BRISBOIS BISGAARD &SIAM LLP ATTORNEYS AT LAW Attorneys for Plaintiffs ILWU-PMA Welfare Plan Employer Trustees and ILWU-PMA Welfare Plan Attorneys for Plaintiffs ILWU-PMA Welfare Plan Employer Trustees and ILWU-PMA Welfare Plan Attorneys for Plaintiffs ILWU-PMA Welfare Plan Employer Trustees and ILWU-PMA Welfare Plan Case 3:15-cv-02965-WHA Document 90 Filed 01/12/17 Page 36 of 36